Fund name: Fort Pitt Capital Total Return (FPCGX)

Objective: Fort Pitt invests for long-term capital appreciation and income, primarily in mid- to large-cap U.S. stocks and secondarily in high grade bonds.

Adviser: Fort Pitt Capital Group of Pittsburgh. Fort Pitt manages approximately $1.2 billion, of which approximately $700 million is invested in equity securities as of December 31, 2006. As of that date, they had about 1,100 clients, including high net worth individuals, foundations and other organizations.

Manager: Charles A. Smith and Douglas W. Kreps. Mr. Smith is Executive Vice President, Chief Investment Officer, a director, a shareholder and a founder of the Advisor. Mr. Kreps is a Managing Director for Fort Pitt and has served as the Fund’s Portfolio Manager since its inception in December of 2001, and, according to the prospectus, "his main role is to ensure that the Fund’s investments are consistent with Prospectus disclosure." Smith and Kreps own Fort Pitt Capital and have substantial investments in their fund, over $1 million for Smith and between $100,000 and $500,000 for Kreps.

Opening date: December 31, 2001.

Minimum investment: $2500 for both regular accounts and IRAs, $2000 for education savings accounts, and $1000 for accounts with an automatic investing plan.

Expense ratio: 1.25% on assets of $50 million. There is a 2% redemption fee for shares held less than six months.

Comments: Probably Pittsburgh’s most famous, most successful and most maligned mutual fund is Muhlenkamp fund (MUHLX), run by Ron Muhlenkamp and family out of (formerly) rural Wexford, just north of Pittsburgh. Muhlenkamp is notable for his tremendous long-term success, tax efficiency and curmudgeonly refusal to care what you (or the rest of the market) thinks. Despite a wretched performance over the past 18 months or so (basically he’s placed in the bottom 1% of his peer group), the fund’s 10 and 15 records remain an awe-inspiring top 2%. There are only four no-load US stock funds which can make that claim: Dodge & Cox, Longleaf, Muhlenkamp, and Weitz.

Fort Pitt Total Return, with a far shorter track record, shows some striking similarities to Muhlenkamp. Like Muhlenkamp, it:

• Measures company value by return on equity and stock valuation by price/earnings ratio
• Buys companies whose p/e ratio about matches their ROE
• Has a very low turnover ratio (about 11% in each case)
• Has very modest yield (around 0.8%)
• Is highly tax-efficient
• Invests across market caps and valuations and has a median market cap a bit above $20 billion
• Offers little foreign exposure (in the mid single digits) and
• Holds a reasonably compact portfolio of about 50 names.

Those similarities might be driven by the easy availability of Iron City Beer and Terrible Towels for the managers, though the fact that Mr. Smith co-managed the Muhlenkamp fund for the first three years of its existence also might have something to do with it.

And Fort Pitt has breathtaking returns. Since inception (through 6/30/07), it has returned 13.42% annually, about double the return of the S&P500. Over shorter periods (3- and 5-year periods), it has led the S&P by 3% and 4% annually, respectively. It has top quartile returns in four of its first five years of existence. Over the past five years (pretty much its lifetime), it has top 5% returns for a large core fund. That has earned it a five-star rating from Morningstar (which the fund publicizes in an ad featuring five cute little kids wearing star costumes). Morningstar’s "most similar funds" screen for Fort Pitt puts it good company: it’s matched with Croft-Leominster Value, Master's Select Equity and Select Value, Manning & Napier Equity, and Excelsior Blended Equity – all four- and five-star funds themselves.

Fort Pitt clearly is more willing to pay for growth than is Muhlenkamp, so it sports a noticeably average high p/e among its holdings. While it doesn’t carry the same sector biases as Muhlenkamp (which probably explains its far-stronger record of late), Fort Pitt is willing to dramatically deviate from its typical peer’s profile. The latest portfolio shows a 4:1 overweight in telecomm but underweights of between 2:1 and 30:1 in other sectors.

Bottom line: Fort Pitt doesn’t offer any particular downside protection, despite the "total return" label. Historically, its risk has about matched the market’s. But its managers have shown both considerable skill and patience, which translates to substantial gains delivered with admirable tax efficiency.

Company website: Fort Pitt Capital

August 1, 2007