For investors seeking long-term capital growth in small-size companies. Emphasizes stocks with a market cap up to $2 billion (at cost).

As of June 30, 2008

*BancTec, Inc.; CastlePoint Holdings, Ltd.; and First American Financial Holdings were eliminated. Due to high non-cash charges, these securities are valued primarily on cash flows as opposed to earnings.

Small-Cap stocks represent ownership in smaller companies, defined as those with market capitalizations less than $2 billion. Market values in the U.S. equity market are extremely concentrated; a small number of companies account for a large portion of the total. Twenty-five percent of the largest companies account for approximately 85% of the total market value of the U.S. financial markets. In terms of numbers of stocks, however, most are distributed in much smaller companies. Thousands of companies have market values well below $2 billion.

With thousands of companies from which to choose in the small-cap arena, new opportunities constantly present themselves. By screening a larger universe, we can maintain a portfolio in which earnings are growing faster than those of the average company, without extreme valuations.

Many excellent small companies are unknown to investors. Of the thousands of publicly traded small companies, relatively few are thoroughly followed by Wall Street analysts. We exploit this inefficiency by buying underfollowed companies trading at significant discounts to their intrinsic values.

A large valuation disparity exists between some of the large, slower-growing, consumer-oriented companies, like the Coca-Colas and Gillettes of the world, and many faster-growing, small-cap names. Many small companies are selling at half or less of the valuations of their larger-cap brethren, yet currently are growing and have growth potential far greater than that of many large-cap companies.

The Small-Cap Equity Portfolio is managed with the same bottom-up investment philosophy as all KING products. Through disciplined, bottom-up research, KING looks for companies that appear to be selling for less than their true intrinsic value. Our portfolio will primarily invest in companies with a market cap up to $2 billion (at cost).

The portfolio characteristics presented in the KING Small-Cap Equity Portfolio are representative of all of the portfolios managed in the small-cap style, and are not specific to any individual portfolio. Individual portfolios may vary.

Small-Cap Portfolio Brochure (PDF 693kb)