Equity Market Neutral

As of 6/30/08

Objective

The strategy employs a systematic process to build a portfolio of over- and undervalued companies selected from the 1,500 largest U.S. stocks. Offsetting positions in the long and short portfolios immunize the overall portfolio to market direction, industry and sector exposures, beta, size and other unpredictable risks that can drive the price of stocks.
Inception January 1, 1991
Benchmark U.S. T-bills
Targeted excess return 3% - 4%
Estimated tracking error 4% - 6%
Assets in strategy $364 million
Number of clients 4
Minimum investment

$10 million - separate accounts

$  1 million - commingled fund

Fees 1.00% of invested capital plus 20% of profits

Characteristics

Long Positions Short Positions
Average price to earnings (forward) 10.7x 18.4x
Average price to book 2.1x 1.8x
Average price to cash flow 6.3x 19.1x
Average dividend yield 1.5% 2.4%
Earnings growth rate 15.6% 9.3%
ROE (trailing) 13.7% 7.9%
Market capitalization (weighted median) $ 3.4B $ 2.7B
Number of positions 168 176
Turnover (avg. last 3 years) 159%
Beta:  neutral at portfolio level

Disclosures

Information regarding characteristics is from a representative account that reflects the current management for this strategy. It relates to the portfolio at a particular point in time and should not be regarded as predictive. Martingale Asset Management is the source of data presented. Calculations are derived using current available data from independent research sources that are believed to be accurate. Characteristics of this account may differ from those of other accounts in the same strategy. The targeted excess return and tracking error objectives are relative to the strategy’s benchmark over a full market cycle.

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