Floyd J. Carl

Church Capital Management (CCM) offers equity, fixed-income and balanced portfolios for their clients, starting with a top-down assessment of the economy and a bottom-up approach to each company. CCM's equity strategy favors growth at a reasonable price (GARP). They seek capital appreciation through the identification of medium and large-cap companies in undervalued sectors of the market. CCM looks for stocks with superior growth prospects and adequate capital to realize their growth potential. A macro assessment of the economy provides guidance as to sectors that have the greatest potential and industries that are undervalued in light of economic opportunity. Catalysts for examination of stock valuations may be industries undergoing structural changes, economic realignments or consolidation. Price revisions in these sectors can provide opportunities for stock appreciation going forward. Their approach to individual stock selection involves a thorough examination of financial details. CCM examines companies relative to competitors and to their peer group. In each industry or economic sector, they seek those participants with the strongest franchises and most promising prospects trading at reasonable valuations. Equity candidates must have strong balance sheets, sufficient liquidity and sustainable cash flows. Financial ratios, particularly balance sheet leverage, are considered in the context of the industry in which a company operates. Portfolio construction for fixed-income also flows from CCM's macro-economic call and is reflected in maturity and duration weightings. The overall duration of fixed-income portfolios is monitored relative to interest rate exposure. Their fixed-income investment strategy is designed to achieve a positive real rate of return along with current income. Fixed-income portfolios are either stand-alone or may be used in conjunction with equities as part of an overall asset allocation strategy. CCM's fixed-income investment style is characterized by high quality instruments. Credit risk is mitigated through the use of investment grade vehicles. Corporate obligations, US Treasury and Agency paper and municipals (when appropriate) are utilized in fixed-income portfolios. Investment grade preferred stocks and trust preferreds are used to enhance yield. Junk bonds are not purchased. The firm's fixed-income portfolio construction process begins with an assessment of global economic forces, monetary policy and inflation expectations. CCM utilizes fundamental economic and market analyses to identify sectors meeting their investment criteria. Maturity and duration weightings are determined relative to overall portfolio interest rate exposure. To minimize the impact of taxes, the highest quality municipal bonds are used. Credit quality is addressed through the use of insured issues in sectors of the economy and in regions of the country that are deemed to be secure. At times, zero coupon bonds may be used to take advantage of a declining interest rate environment. Zeros may also be used to lock in reinvestment rate and extend the duration of a portfolio. CCM's balanced investment strategy is designed to merge the goal of capital appreciation in equities with that of current returns and to reduce volatility. This is accomplished through allocation to different asset classes including equities, fixed-income and cash. Balanced portfolios are constructed with the equity component as the primary growth vehicle. The firm's value equity style is employed to construct a core group of stock holdings, diversified across economic sectors. Driven by the principle of GARP, these stocks are managed in the same way as all-equity account utilizing industry themes, relative valuation and capital commitment guidelines. The fixed-income investments utilized in balanced portfolios reflect an emphasis on quality. These instruments consist of investment grade corporate bonds, US Treasury and Agency obligations, municipal bonds (when appropriate) and preferred stocks. The portfolio construction methodology is reflective of CCM's fixed-income investment process.