1

An investor's goals, preferences and constraints are identified and specified to develop explicit investment policies.
2

Strategies are developed and implemented through the selection of optimal combinations of assets in the marketplace.
3

Expectations are derived and the investment environment is defined.
4

Market conditions, relative asset values and the investor's circumstances are monitored; and
5

Portfolio adjustments are made as appropriate to reflect significant change in any or all of the relevant variables.

Specification & Quantification of Investor Objectives, Constraints & Preferences

Prior to implementing an investment program, careful consideration must be given to the investor’s specific objective and constraints. Each investor’s investment program objectives are goals that are generally defined in terms of return requirements and risk tolerance. The constraints are the investors limitations, such as liquidity, time horizon, taxes and legal matters, imposed on the portfolio manager within which the investor or his advisor must operate to achieve the program’s objectives. The investor’s individual preferences are constraints that are self-imposed and may be unique to the investor.

At Delta Capital Management, we believe that when we combine objectives and constraints we are able to develop a set of investment policies that are specific to our individual investors. In other words, behind all investment portfolios lay flesh-and-blood investors, each of whom is unique. We attempt to use this uniqueness along with a strict portfolio discipline to tailor your investments to your needs. Many portfolio investment considerations are qualitative, but all lead to a quantification of risk and return and ultimately to the development of an efficient portfolio geared to the specific needs and objectives of the investor.

Portfolio Types and Portfolio Construction

Four Primary Types of Portfolios
Delta Capital Management manages assets under four primary portfolio shells. The following are a list of the types and a brief description of their characteristics:

Income

Income portfolio policies arise from the traditional notion that only income can be spent and capital gains must be reinvested. Portfolios resulting from this notion can range from safe, high yields in bonds and money market instruments (though with some inflation risk) to a portfolio having some high-yielding stocks (such as utilities) and real estate (such as real estate investment trusts), in which the potential risk (dividends or other payment cuts) and reward (growth in income) can be greater.

Income & Growth

Income and growth portfolio policies generally refer to both fixed-income and equity portions of the portfolios. However, because of the "income" component, the stock portions of the portfolio tend to have a conservative income bias. The thinking behind this policy is that investors who want to spend only income but who have a long time horizon can have a blend of usable income and still have the potential for modest growth in income or assets (as opposed to a more fixed-income orientation that seeks only to maximize current yield).

Balanced Portfolio

The balanced portfolio is suited for investors seeking relatively stable growth offset by a moderate level of income. The investor will have a longer time horizon and a higher risk tolerance, willing to accept limited volatility in exchange for moderate wealth enhancement. Balanced portfolios are mixed with 50% of the allocation in bonds and fixed income equivalents and 50% in growth (stock) investments.

Growth & Income

Growth & Income oriented policies tend to show fixed income as a smaller factor in the portfolio, and focus instead on growth instruments including foreign stocks, and real estate. These are typically favored by younger or wealthier investors who do not need income, and therefore have a longer-term horizon and are able to weather the setbacks of bear markets. Historically, most studies suggest that such equity oriented policies offer the highest return in the long run, but also involve more risk, or standard deviation of return.

Growth

Growth policies are simply a higher risk, potentially higher return variant of a growth and income policy. They are appropriate for those investors most emotionally able to endure risk and volatility of return. Such portfolios are built on some combination of high beta, aggressive equity-based positions.

*Please note that all forms of traditional policy approaches will offer diversification within the chosen asset class in order to reduce the potential for specific or unsystematic risk.

Portfolio Construction –
The "Planet and Satellite" approach

The portfolio construction process at Delta Capital Management is defined by what is termed the "Planet and Satellite" approach to asset management. This particular style is a hybrid approach which takes aspects of the traditional passive investment management (the planet) and combines it with a more active style (the satellites).

The Planet

The "Planet" portion of the portfolio refers to the long-term cornerstone of the portfolio. This particular area of the portfolio will consist of mostly established core holdings, whether equity or debt instruments. We look to this particular part of our portfolio as the unchanging quality in the market. We anticipate holding onto this core group of stock well into the future and feel that the securities used in this particular portion of the portfolio come from the highest quality companies in the world.

There are five broad criteria that we use when qualifying our core securities. Please keep in mind that a company meeting all of these criteria is not in any way assured of being used as a core position. These are simply criteria that give us a foundation, or starting point, from which to pick the cream for our portfolios. The criteria are:

Ownership

The size of the float available to the public is our first criteria. We attempt to ensure that a sufficient amount of stock is available to investors and that the stock is not likely to be manipulated by one or two institutions. In most cases, this will remove small-cap issues from consideration. However, we can gain small-cap exposure thru the active portion of the portfolio.

Fundamental Analysis

We use