Equity Decision Process

First Fiduciary invests in large capitalization, asset rich companies that are leaders in their industry and have an above average dividend yield. We select almost all of our investments from a Basic Universe of approximately 150 stocks. To be a part of this universe a company must have the following characteristics:

Large Capitalization: A company’s stock must provide enough liquidity for us to trade without impacting its price. The vast majority of stocks in our universe have a market capitalization in excess of $7 billion.

Industry Leader: A company we select must have a sizable market position in most of its business lines. Controlling a large portion of its markets reduces the likelihood that its position will erode significantly over our investment horizon (generally 3 - 5 years). Many of these companies have international exposure and quite often are leaders in the countries where they compete.

Industries Essential to the Economy: Investment fads come and go. Recent market events show us that when an investment sector becomes popular, the appreciation can be substantial. However, the past few years demonstrates that while vision and ideas are vital, eventually economic reality must set in. Buying into industries that are necessary to the economy may not be as glamorous as buying into the hottest investment trend, but it helps ensure that our companies will be around for years to come.

Strong Consumer Franchise or Low Cost Leader: Companies with strong brand names can garner superior pricing power and profit margins. This insulates them from the pressures of competing on price alone. Companies with superior low cost structures also wield a competitive advantage, which can discourage the entry of debilitating competition.

Stock Selection

First Fiduciary's investment professionals use a team approach when analyzing each stock that we select for our portfolios. We make purchases from our Basic Universe of stocks when we feel they are significantly undervalued. Often times, we may purchase a security when it is temporarily out of favor. Consistent with our long-term investment horizon, we analyze past market and economic cycles to measure how a stock has traded relative to its fundamentals such as earnings, book value, cash flow and dividend yield. Because of our long term investment horizon, our portfolios tend to have a relatively low turnover rate each year.

We screen candidates to eliminate companies that possess volatile trading histories. We also eliminate companies in industries that have excessively high expectations for growth. The downside of these high expectation stocks can be significant if they fail to meet the high hurdles investors have established for them.

We then compare the stock price in the current cycle relative to its fundamentals making adjustments for the level of interest rates, changes in the makeup of the corporation’s businesses or the industries in which it competes and any other factors that may affect a company’s long-term intrinsic value. In screening for value it is too simplistic to use strict guidelines such as considering only companies selling below a certain price-earnings ratio. Changes inside a company, in its competitive environment, in the economic/political climate and in the financial markets can all have an impact on valuation.

Once a stock has passed our rigorous screening methodology, fundamental analysis is performed. This includes the examination of financial documents such as annual reports, 10Ks, 10Qs and corporate press releases. We will also supplement this information with outside research and direct contact with a company’s management.

The stock is then brought before the investment committee where the merits and risks of a company are discussed among all the portfolio managers. In order for a stock to be added to our portfolios, it must be approved by the investment committee.

Monitoring Our Positions

After a security has been purchased for our portfolios, we continuously monitor the company through largely the same information sources that were used in making the buy decision. As events transpire at a company and in the market, we will periodically re-evaluate our target price in response. If conditions warrant, we will implement our sell discipline and exit the position for a variety of reasons.

A security will be partially or completely sold out of our portfolios for several reasons:

• It has, through appreciation, become an excessively large position in the portfolio

• The security has met or exceeded our target price based on our valuation methodology

• Other more attractively valued securities become available

• If a company’s fundamentals deteriorate, we will re-evaluate the security and may decide to exit the position.

• There is a need for cash in a specific portfolio