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Barrington Asset Management

The goal of our portfolio management process is to achieve long-term, risk-adjusted returns that exceed our relevant benchmarks. Accomplishing this goal requires disciplined decision making. Whether the decision is to buy, sell, or hold a stock, it must be guided by clearly established criteria and grounded in reason and objectivity. The decision to buy a stock must be continually evaluated in light of emerging facts and circumstances to ensure the rationale for its purchase remains intact. Each company must continually earn its position in our portfolios.

Active Management by a Team of Experience Portfolio Managers

The portfolio management process is largely a team effort. Seasoned investment professionals actively manage each account selecting individual positions to build a portfolio in light of a particular client’s objectives. This team approach helps to broaden the investment perspective by incorporating the expertise and experience of the entire group on each investment decision. Team members present individual investment recommendations to the Investment Committee stating the investment thesis and valuation rationale. The merits of these recommendations are reviewed and assessed in the context of our economic outlook, market strategy, sector weighting and the investment’s size. Approved investments may then be added to our model portfolios or approved list.

Regular Portfolio Review With Strict Buy and Sell Disciplines

Our staff meets daily to share developments within portfolio companies and the broad market and to contemplate any necessary portfolio decisions in light of these developments. Our Investment Committee meets formally at least once each week to set investment strategy, assess sector allocations and recommendations. Accounts are reviewed more formally on a quarterly basis reviewing factors such as the overall account performance and the client investment objectives and guidelines.

We typically structure our client portfolios for growth by selecting positions through our research process guided by our defined buy criteria. In order to help protect client profits and limit potential losses we adhere to a strict sell discipline as well. Any of the following occurrences would lead us to consider selling a stock: the stock price rises to our price target; the position becomes overweighted in the portfolio; the company’s outlook or fundamentals deteriorate; the company’s management fails to execute against their business plan; the stock price deteriorates relative to its sector; there is significant insider selling; or more attractive opportunities for investment are identified.

Attention to Risk Management

Successful long-term portfolio results require not only attention to potential returns, but also an appreciation for associated risk. In addition to being explicitly considered in the portfolio review process, risk management is inherent in our investment philosophy and our approach to stock selection. Our focus on finding “good businesses” helps to limit company-specific risk. Top-down analysis helps limit sector and market risk. Our stock selection process explicitly considers company valuation relative to intrinsic value, which helps provide an initial margin of safety. By operating under a team approach, we foster critical thinking and mitigate risk by challenging one another’s investment ideas.

Copyright 2006 Barrington Research Associates, Inc. All rights reserved.