Large Cap Value Equity

Performance Update:
During the fourth quarter, the Russell 1000 Value Index returned 4.22%, underperforming its growth equivalent, (Russell 1000 Growth Index), which returned 7.94% for the quarter. The RidgeWorth Large Cap Value Equity Fund I Shares appreciated 5.47% during the quarter, outperforming the Russell 1000 Value Index benchmark by 1.25%.

Contributors:
During the fourth quarter, Industrials were the largest contributor to outperformance relative to the benchmark which benefited primarily from stock selection. Deere & Co. outperformed as a result of a change in sentiment towards the oversold agriculture industry. General Electric Co. outperformed as investor fears of a necessary capital raise waned with the sale of NBCU. United Technologies Corp. traded up as the stock benefited from upward earnings revisions in the quarter. In Consumer Staples, Estee Lauder Cos. outperformed because of the new management's successful efforts to improve the sales execution and profitability of the company. Safeway Inc. outperformed as the market realized the stock had been discounting a permanent impairment to the company's profitability that was unrealistic in view of the company's investments in store remodels and better competitive pricing in addition to a recovering consumer spending environment. In Consumer Discretionary, Lowe's Cos. outperformed as a result of the market beginning to discount the company's aggressive return of capital program as well as the benefit to the company from an improving housing market. This is further supported by current and potential future government assistance. In Financials, Franklin Resources Inc. outperformed as strong fund performance drove market share gains and growth in AUM while the company's focus on costs benefited operating margins.

Detractors:
During the quarter, Materials underperformed relative to the market as a result of stock selection. In Materials, Vulcan Materials Co. underperformed as commercial construction trends remained weak causing limited improvement in the stock price. In Energy, Valero Energy Co. lagged due to weakness in refining margins during the quarter. Baker Hughes Inc. underperformed as the company missed earnings expectations due to higher costs in their international business as well as duplicate costs from their corporate reorganization. In Health Care, our underweight in Pfizer detracted from performance, as the company benefited from the acquisition of Wyeth and the announcement of raising the dividend 12.5% following a cut earlier in the year.

Strategy and Outlook:
During the quarter, the equity markets continued to show resiliency despite discouraging data points and credit concerns in Dubai. Early in the quarter, fears relating to strength and sustainability in the economy weighed heavily on equities despite better than expected third quarter earnings reports. By December, those fears were muted when the economy showed signs of recovery as industrial production and retail sales showed healthy gains. We remain cautious as we still see headwinds for the economy, such as high consumer debt levels, ballooning federal deficits, and potentially higher taxes.

During unprecedented times in financial markets, it's very important that fearful events in the market do not disrupt the execution of a disciplined investment strategy. Our process was designed to do just that. We will take advantage of market dislocations as they present themselves but only if an investment meets our rigid criteria. We continue to look for low expectation stocks where we believe expectations are too low and will improve in the near future.

We feel comfortable owning high-quality, easier to understand companies with good products and management teams. We remain underweight in Financials, Telecommunications, and Utilities and are overweight in Industrials, Energy, and Materials.

Securities mentioned (% of portfolio): Citigroup Incorporated (No longer in portfolio), Deere & Company (1.76), Estee lauder Companies (CI A) (No longer in portfolio), General Electric Company (1.65), Lowe's Companies (1.99), Valero Energy Corporation (1.00), Nokia Corporation (ADR) (1.21), Charles Schwab Corporation (No longer in portfolio), Northern Trust Corporation (2.18), BB&T Corporation (1.99), Franklin Resources (1.39), United Technologies (1.83), Safeway (0.79), Vulcan (1.13), Pfizer (1.95), Baker Hughes (1.86).

Stocks are more volatile and carry more risk and return potential than other forms of investments. Mutual fund investing involves risk,including the possible loss of principal.

Beta is a means of measuring the volatility of a security or portfolio of securities in comparison with the market as a whole. A beta of 1 indicates that the security will move with the market; greater than 1 indicates that it’s more volatile than the market, and less than 1 indicates that it’s less volatile than the market.

The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. Investors cannot invest directly in an index. The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. Investors cannot invest directly in an index.

The views expressed by the Fund’s managers are as of the quarter-end specified. This information is subject to change without notice as market conditions change, and is not intended to predict the performance of any individual security, market sector, or RidgeWorth Fund.

Past performance does not guarantee future results.