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Large Cap Value

Asset Class/Style: U.S. Equity / Value

Portfolio Benchmark: Russell 1000 Value Index

Portfolio Assets: $300 million as of March 31, 2008

Investment Process
We believe the key attributes to valuing companies are earnings and cash flow generation capabilities. Our investment philosophy seeks to identify stocks we believe are undervalued relative to their intrinsic value based on the company’s earnings and cash flow predictability and growth. In addition, we incorporate our overall economic and market expectations into our portfolio strategy emphasizing a relative value approach within sectors and industries.

FMA’s large cap value equity product is team managed. All team members have significant investment experience as well as strong academic backgrounds. The investment team meets regularly to discuss strategy, portfolio holdings and buy/sell candidates. The firm’s size facilitates constant interaction among team members. Each member of the large cap equity team is assigned analytical responsibility for several industries within the Russell 1000 Value Index. As such, each team member takes the lead in sector recommendations as well as idea generation. Each team member is responsible for staying abreast of the dynamics impacting their designated sectors, industries and companies.

A distinguishing factor of the stock selection process is our use of both top-down and bottom-up methodologies to construct portfolios. The team incorporates geopolitical, economic, currency and interest rate expectations into its strategy and decision making. Using in-house research in cooperation with Wall Street, each team member builds an investment case for sector weight proposals as well as specific stock recommendations. The analysts base their rationale on relative valuation levels and their expectations for catalysts, which should positively impact earnings and cash flow growth. Furthermore, the analyst determines a price target for the stock and the team—as a whole—decides whether or not to include the security in the portfolio. Stock price deterioration exceeding 25% from cost may trigger an elimination of the entire position. The team leader has final discretion over the portfolio’s holdings.

We construct a well-diversified large cap value portfolio that includes 50 to 70 stocks. Portfolio characteristics typically incorporate relative valuation metrics comparable to the Russell 1000 Value Index while exhibiting higher earnings growth expectations. We invest large cap value portfolios in equity securities with market capitalizations in excess of $2 billion. To ensure diversification, no holding exceeds a 5% portfolio weighting with initial purchases in the 1% to 3% range.