Robert Rodriguez
First Pacific Advisors, Inc.
11400 West Olympic Blvd., Suite 1200
Los Angeles, CA 90064

Bob Rodriguez is the portfolio manager responsible for the portion of the Fund’s assets managed by First Pacific Advisors, LLC (“FPA”). Rodriguez, who joined FPA in 1983, manages equity separate accounts and the FPA Capital Fund in the small/mid-cap absolute value equity style, along with his team members Dennis Bryan, Rikard Ekstrand and Steven Romick. Rodriguez is also a portfolio manager of FPA New Income, a bond fund. Rodriguez has been an investment manager to Masters’ Select Smaller Companies Fund since its inception in June 2003.

Rodriguez is responsible for managing approximately 20% of the Fund’s assets. The general objective of Rodriguez’s stock research is to identify stocks from a variety of sources that are cheap relative to their peer group and are characterized by strong balance sheets, solid or improving fundamentals and have a strong competitive position in their industry. In addition, he focuses on companies that exhibit strong free cash flow, quality management and understandable business strategies. Rodriguez also emphasizes above-average return-on-capital though he tends not to focus on rapidly growing companies that generate very high returns on assets because these companies rarely meet his valuation criteria.

Statistical screens that generate research ideas include “new low” lists and various value-oriented measures. In addition to quantitative screens, Rodriguez also looks at insider transactions, management changes and spin-offs. Big-picture trends or developments may also lead Rodriguez and the FPA team to look at certain stocks or industries.

Specific company research is intensive and involves finding as much information as possible from as many sources as possible. The first step is an in-depth look at the financials to gain an understanding of the operating history, trends and the financial health of the company. Following that, research focuses on gaining an understanding of the company’s business model, management quality, growth potential, strength and weaknesses and competitive position. Because there is a preference for out-of-favor companies there is a particular focus on assessing whether profits are down because of issues that are transitory or permanent. As part of the research process there is usually contact with management (to assess the quality of the people), competitors, customers and other potential sources of information.

The overall assessment of fundamentals is not measured against a standard set of criteria; rather, each is relative to the specific type of business or industry. In general, Rodriguez is looking for situations where certainty is high; thus, a business that has strong long-term fundamentals but is temporarily out of favor is typical of a new buy. Since there is a preference for companies with strong free cash flow, it is also important to have confidence in management’s ability to add value through the deployment of excess cash.

Valuation is critical to the assessment of each stock-picking opportunity. Valuation assessments usually involve looking at a variety of valuation measures including price-to-earnings, price-to-cash flow, price-to-book value, price-to-sales and enterprise value and market capitalization to total revenue. The valuation measures that are applicable to any particular stock depend on company-specific facts and circumstances as well as broader valuation trends in the industry. In assessing valuations, the FPA team is cognizant of factoring in where the company is in its earnings cycle, its normalized earnings, and how the cycle has played out in the past. In assessing multiples they study what multiple levels were in past cycles and consider whether this information is relevant to assessing the potential for future multiples. The valuation assessment then often becomes a function of the expected profitability recovery and multiple expansion from current levels.

Rodriguez usually sells stocks for one of four reasons: (1) the stock reaches full valuation; (2) there has been a full profit recovery; (3) a superior alternative value appears; or (4) the company does not perform as expected.

References to other mutual funds should not be deemed an offer to sell or solicitation of an offer to buy shares of such funds.