Sandfly

Partners, Ltd.

Fund Investment Objectives

Fundamentally value oriented and using an opportunistic approach, Sandfly Partners, Ltd. seeks to invest in companies that are within the portfolio team's circle of competence, have strong business franchises and that are trading at a discount to a proprietary estimate of intrinsic value. The investment process emphasizes companies that have demonstrated an ability to earn high returns on invested capital and generate consistently positive free cash flow. The process also emphasizes owner oriented management teams that have histories of value enhancing capital allocation decisions. High insider ownership is another factor the process emphasizes. The portfolio has a long bias and typically holds 30 to 40 positions, including both long and short positions. The Fund also utilizes options to hedge existing positions and to generate income. Short selling, stock specific hedging and macro hedging are also tools the Fund uses to manage risk. When evaluating short sale candidates, the process emphasizes companies that are dramatically overvalued relative to a proprietary estimate of intrinsic value. The portfolio management team also searches for companies where the market has not yet fully recognized the deteriorating fundamentals of the underlying business and companies with excessively leveraged capital structures experiencing a cyclical or structural downturn in operating fundamentals. Although the majority of the fund's holdings are equities, the Fund also will invest in attractively valued fixed-income and hybrid securities.