Q&A with Amit Wadhwaney 2006

Sub-advisor to the Masters’ Select International Fund

The opinions and conclusions expressed herein are those of Litman/Gregory Fund Advisors, LLC and Amit Wadhwaney at the time the material is written and may not be reflective of current conditions.

Amit Wadhwaney is the portfolio manager for the segment of the Fund’s assets managed by Third Avenue Management, LLC (“Third Avenue”). Wadhwaney has more than 20 years experience in the investment business. Earlier in his career, he was a securities analyst and, subsequently, Director of Research for MJ Whitman, Inc., an affiliate of Third Avenue. Prior to joining Third Avenue in 1999 as a foreign securities analyst, Wadhwaney was portfolio manager of the Carl Marks Global Value Fund, L.P. He has been the manager of the Third Avenue International Value Fund since the fund’s inception in 2001.

What first attracted you to the investment business?

I was attracted to the intellectual challenge presented by discovering and developing an understanding of a new business, upon which is superimposed a constantly changing business environment--be it at the industry or macroeconomic level. Having grown up in a variety of geographic and political environments, this had considerable appeal for me.

How did your investment philosophy develop?

Prior to attending business school, I read a copy of Marty Whitman’s first book, "The Aggressive Conservative Investor." Although the book was interesting, I did not have the accounting background necessary to fully appreciate all of the ideas it contained. Subsequently, while pursuing my MBA degree at the University of Chicago, where I took my first accounting courses, my finance classes exposed me to efficient market theory – which I found somewhat more easily digestible. After business school, I picked up "The Aggressive Conservative Investor" again and suddenly everything clicked. I felt that most everything in the book was common sense – invest in well-capitalized companies, with competent managements and sound business plans, when you can obtain the securities at a significant discount to the intrinsic value of the underlying businesses and/or assets. The only question left in my head was, “Why doesn’t everyone invest this way?”

What factors have been most important to your success?

Of course, I believe that the ability to understand and analyze a balance sheet is very important in understanding a company. However, I think that our investment success is primarily due to the fact that we do not compromise our investment discipline. We are incredibly averse to investment risk – if a security does not meet our “safe and cheap” investment criteria, we will not buy it. Period. Our emphasis is on the safety of each investment – the company must be well capitalized, have a competent management team and a sound business plan. Once a security has met those three criteria, it must also be available to us at a significant discount to its intrinsic value.

As you and your team research companies, what are the most important sources of information?

Our important sources of information include financial statements and regulatory disclosures. We do not expect these documents to give us the whole truth about a company; however, we rely upon them as objective benchmarks and use them in conjunction with study of peer companies, suppliers and customers to understand how the company makes money, and importantly what circumstances might have an adverse impact on its profitability.

How does running a very concentrated portfolio that is part of a diversified fund differ from running a more broadly diversified portfolio? How do you choose the 8 to 15 stocks you hold for Masters’ Select from your more diversified portfolios?

The securities selected for inclusion in a concentrated portfolio such as Masters Select would have to be unusually attractive at the time of the purchase. Among the factors that would be weighed in this decision would be safety, valuation and attractiveness of the business being purchased. While these factors always play a role in our security selection, generally there is a heightened attention to these characteristics in a more concentrated portfolio.

The fund invests in foreign securities, which exposes investors to economic, political and market risks and fluctuations in foreign currencies.

Neither the information contained herein or the opinions expressed shall be construed as an offer to sell or a solicitation to buy any securities mentioned herein. Click here to view the most recent portfolio holdings of the fund.

To obtain a current prospectus for the Masters’ Select Funds at no charge, please click here or call 1-800-960-0188. The prospectus contains more complete information with respect to the risks, costs and expenses of investing in the Funds. Please read it carefully before investing.

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