Towle employs a systematic security-selection process that combines disciplined valuation screening, proprietary market-validation signals and fundamental research.

Towle’s process generally consists of three stages:

• Valuation and quantitative screening. Towle screens the investment universe based on valuation, liquidity and other fundamental and market characteristics to identify potentially undervalued companies. Enterprise value-to-sales is an important valuation measure used by Towle. When appropriate for a particular company, industry or investment opportunity, they also consider other measures, such as earnings, price-to-book value or cash flow.

• VALT™ ranking system. Towle uses its proprietary Value with Traction (“VALT”™) framework to rank investment candidates using valuation and market-validation measures, which may include price trends, momentum and downside-volatility measures. VALT™ helps prioritize and evaluate investment candidates but does not by itself determine whether a security is purchased or sold.

• Fundamental analysis and portfolio review. Investment candidates are subject to fundamental analysis that may include balance-sheet strength, leverage, liquidity, operating history, industry conditions, earnings capacity, cash-flow generation, capital structure and potential business or valuation catalysts.

Towle believes, together, these disciplines are designed to identify significantly undervalued small-cap companies showing evidence of fundamental improvement, while seeking to distinguish temporary valuation dislocations from structural impairment or persistent market neglect. The Fund generally holds 30 to 100 securities.