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Small Cap Value

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

Portfolio Benchmark: Russell 2000 Value Index

Portfolio Assets: $412 million as of March 31, 2008

Investment Process
We believe small cap stocks provide an opportunity for investors to achieve superior long-term capital appreciation. Our philosophy employs a relative value perspective whereby we invest in sectors and companies that have attractive valuations as well as potential catalysts, which are expected to lead to an acceleration in earnings and cash flow growth. We expect to achieve superior investment performance as these visible and quantifiable catalysts are recognized over our investment horizon. FMA utilizes both a macroeconomic approach to identify broad themes and trends that can be exploited through portfolio construction as well as rigorous company-level fundamental research to discover firms that are best positioned to take advantage of impending catalysts and trends. The FMA Small Cap Value Equity product is team managed. We utilize an experienced investment team with dedicated analysts focused on specific sectors and industries. Each team member is responsible for continuous observation of dynamics and themes that impact their sectors and industries, implementation of sector strategies, and generation of company-specific ideas. We believe a focused and experienced team greatly enhances and differentiates the performance of our product through value-added individual stock selection.

The entire FMA investment team meets on a regular basis. We analyze and evaluate broad macroeconomic themes, the potential implications of economic indicators and sector trends, portfolio construction, and industry-level strategy. The small cap value equity team utilizes this top-down approach as a basis to implement its portfolio strategy. The team then employs rigorous fundamental analysis which includes the utilization of third-party analytical software and screening tools, industry analyses and management meetings to identify potential investment candidates from a universe of companies between $200 million and $2 billion in market capitalization. We seek to identify companies with attractive relative valuations, strong earnings and cash flow growth prospects, healthy balance sheets, and excess cash flow. Our investment process incorporates contacting company management, formulating earnings and cash flow projections, identifying potential catalysts and assessing both macro and company-specific risks for the firm under consideration. Once a security is recommended for investment, the team decides whether or not to add the security to the portfolio. Before including a stock in a portfolio, the team consults with our in-house trading desk to ascertain whether adequate liquidity exists for the equity. Our policy requires the ability to buy or sell a 1% equity position within a two-week period. We consider our investment process to be fluid and iterative, therefore, once a company is added to the portfolio it is continuously monitored and its price target is updated as necessary.

Stocks are reviewed and may be sold when:

• Price targets are met
• Significant changes occur in company fundamentals
• A security holding reaches 5% of the portfolio
• The security underperforms relative to the market
• The security declines by 25% from cost on an absolute basis

The FMA Small Cap Value Equity product is well diversified and portfolios generally hold 50 to 70 stocks. Portfolio characteristics will typically incorporate valuation metrics that are representative of our benchmark, while possessing cash flow and earnings growth profiles that are generally superior to the Russell 2000 Value Index. Eighty percent of the companies in the portfolios must have market capitalizations below $2 billion. To ensure proper diversification, no holding can be greater than 5% of the portfolio, with initial purchases representing 1% to 3% of portfolio value. FMA’s small cap portfolios are generally fully invested, except in extraordinary circumstances. We believe our philosophy, process and sell disciplines can lead to superior investment returns over an investment cycle while yielding a lower risk profile relative to our benchmark.