1. US Value Equity The Renaissance of Conservatism September 2007 Edwin Walczak Portfolio Manager

2. Slide 2 The market has been risk-seeking the last several years and “Riskier” assets have outperformed “conservative assets”  Risk seeking precipitated by numerous Fed rate cuts post the Tech bubble collapse provided excess liquidity  Evidence that speculative assets have done the best recently: a)Small caps did very well b)LBOs of many very poor quality companies c)Subprime lending crisis (lax underwriting) d)Commodities boom e)Emerging markets (or is it a new world, this time)

3. Slide 3 Industrial Capital Goods Stocks 1 Profit Margins 1953 Through Early-June 2007

4. Slide 4 Global Cyclicals 1 Return on Equity 1952 Through Early-June 2007

5. Slide 5 Industrial Capital Goods 1 ROEs

6. Slide 6 Industrial Capital Goods Stocks 1 Year-over-Year Capital Spending Growth 1960 Through April 2007

7. Slide 7 The Subprime Crisis and its impact on our financial holdings  Generally, credit costs are normalizing from unsustainably low levels. We had already factored higher credit loss provisioning into normalized earnings forecasts  The financial companies in our portfolio have good track records of conservative underwriting  Much of subprime industry lending over the past 3-4 years has been based on lax underwriting  None of our financial holdings has a heavy exposure to subprime - Wachovia, Bank of America and Fifth Third Bank have virtually no subprime exposure - Freddie Mac has 18% of its retained portfolio in AAA tranches of subprime mortgage pools, which are protected by significant subordination - Well’s Fargo subprime mortgages represent 7% of total loans. Wells is a AAA-rated bank. And has a long history of skillful underwriting -AIG may have about 2% of their book value exposed to subprime related losses  Many financials have already sold off well in excess of potential future credit problems (Baby thrown out with bathwater) and may present attractive investment opportunities

8. Slide 8 Source: Factset

9. Slide 9 FRE Portfolio by FICO Score as of March, 2007 Source: US Mortgage Finance, August 22, 2007

10. Slide 10 FRE Average Current LTV Source: US Mortgage Finance, August 22, 2007

11. Slide 11

12. Slide 12 Exxon  Exxon’s 35% return on equity today is 2x its historical norm  We would expect this to trend down as the cost of doing business keeps rising, even if high oil prices were to persist. Source: FactSet The risk in commodities:

13. Slide 13  Most companies in commodity businesses do not earn their cost of capital over time  In real terms, over long periods, returns on commodities have been modest  Commodity companies generally are not differentiated and have no unique competitive advantage  Few can regularly, successfully forecast future commodity prices  But, commodities have been “where the action is” for 3 years Commodities really do not fit a Buffett-like approach

14. Slide 14 Source: Page 6  Small Caps have outperformed since 2003 because 40% of small cap earnings come from global cyclical sectors, such as energy, industrial commodities, and capital goods (emerging markets beneficiaries).  Many strategists believe large cap high quality U.S. stocks are very attractively priced; Large Cap P/E ratios are below historic average relative to the market. The Opportunity in Large Cap Quality Today

15. Slide 15  The largest stocks today have higher than usual ROEs relative to the market

16. Slide 16 Altria Group Inc.  Leading consumer products company and largest tobacco company in the U.S.  Major segments: domestic and international tobacco  Parent company Philip Morris International and Philip Morris USA  Produces 7 of the top 20 global cigarette brands (Top global brand Marlboro)  Enjoys a 50% share of the US cigarette market and about a 14.5% share of the overseas market  Owns 28.7% of SABMiller plc., the world’s second-largest brewer  Good position with Marlboro in important growth markets such as China and Indonesia (licensing with most important government owned Chinese company)  History of dividend increases  EPS 15 year compound annual growth rate 9.7%  Market capitalization USD 158.6bn, Estimated 2007 P/E Ratio 13.5 Large Cap, High ROE Companies are well represented in our portfolio

17. Slide 17 Procter & Gamble  Leading global household product manufacturer  Provides products in the laundry and cleaning, paper, beauty care, food and beverage, and health care segments  Becoming the largest beauty company in the world; beauty categories have global appeal, faster growth and higher margins  Well exposed in emerging economies with rising per capita income, as consumers trade-up from local to global brands  New product pipeline looks robust  Business mix is shifting towards faster-growing and higher margin categories and regions  Gillette integration is on track, integration of systems, sales forces and distribution networks in 31 countries (acquired in 2005)  EPS 15 year CAGR 10.1%  Market capitalization USD 195.7bn, Estimated 6/2007 P/E Ratio 20.5

18. Slide 18 Representative portfolio Source: Vestek US Value Equity - Sector and Industry Weights as of August 2007 Food & Beverage19.40%Banks 8.56%Consumer Staples20.28% Coca Cola3.00%Bank of America1.50%Altria Group Inc.5.00% Diageo3.00%British American Tobacco ADR4.50% General Mills2.70% Fifth Third Bancorp 2.06% Procter & Gamble5.23% Kellogg Co.3.50% Wachovia Corp.2.50% Colgate-Palmolive Co.3.50% Nestle SA2.70% Wells Fargo & Co.2.50% Walgreen Co.2.05% PepsiCo Inc.4.50% Government Agencies5.50%Multi-Sector Holdings2.00% Retail6.95% Federal National Mort. Assn.2.00%Berkshire Hathaway Inc.2.00% Bed Bath & Beyond Inc.1.47%Federal Home Loan Mortgage3.50% Signet Group1.08% Consumer Discretionary1.53% TJX Co.2.00% Health Care7.70% H & R Block1.53% Wal-Mart Stores2.40%Johnson & Johnson4.00% United Healthcare3.70% Media3.66% Industrials2.40% Entercom Communications1.50% United Parcel Service2.40% Property & Casualty Insurance8.40% Gannett Co.1.00% American International Group Inc.6.40%Saga Communications1.16% Ambac Financial Group Inc.2.00% Cash13.50% Cash13.50% TOTAL100.00%

19. Slide 19 Advantages of Style  Our style of investing tends to protect our clients’ capital in down markets while it lets it participate in up markets  Beta of the fund is one half that of the market Since 2003, we have seen only an aggressively rising market