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Investment Philosophy 
Earnings growth drives stock
prices over time. The National City Investment Management small capitalization
growth equity investment team believes that superior returns can be achieved
by selecting stocks with above average, improving earnings growth rates
at reasonable valuations. This philosophy is approached with an active,
rigorous, and disciplined process. The Investment Management Company's
bottom-up investment process is focused on a company's earnings growth,
profitability, risk/return, and valuation parameters of
securities within a market capitalization range of $100 million - $3.0
billion. Securities may exceed $3.0 billion market capitalization if they
are represented in the style's benchmark comparison, the Russell 2000
Growth Index.
Investment
Process
The equity purchase investment process begins with the
Baseline universe. Initially, the universe is screened for stock issues
with a market capitalization in excess of $100 million. These remaining
issues are screened for:
| 1 |
Earnings growth
greater than that of the Russell 2000 Growth Index on a three and
five year historical basis or on an expected future earnings growth
basis. |
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| 2 |
Revenue growth,
as a validation of strong earnings, in excess of the benchmark comparison
rate. |
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| 3 |
Earnings growth
sustainability and predictability. |
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| 4 |
Positive earnings
revisions and surprises. |
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| 5 |
Valuation
tests focused on price/earnings, price/sales, price/book value,
and price/cash flow ratios. |
Portfolio
Construction
| While the investment
process of the National City Investment Management Company is a bottom-up
method, consideration is given to industry sector weightings. Specific
industry weightings reflect fundamental growth prospects and current
valuation. If a sector represents 10% or more of the Russell 2000
Growth Index comparison, the normal maximum portfolio allocation will
be the lesser of 2.0X the benchmark's allocation or 50%. The normal
minimum portfolio allocation will be 0.5X index weighting. If the
comparison index sector weighting is 10% or less, the normal maximum
portfolio sector allocation will be the index sector weight plus 10%
with a minimum 0% allocation. Individual issues are limited to 3%
of total asset at time of purchase. The portfolio will normally hold
80 - 120 securities, with a 5% maximum cash limitation. |
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Not to be reproduced or shown publicly.
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