April 15, 2013

For the first quarter of 2013 the S&P 500® Index performance was 10.61%. The net-of-fees performance for the Symons Value strategy was 9.52%and for the Symons Small Cap strategy was 6.87%. The enclosed Performance Statistics pages provide detailed additional information. For our flagshipValue strategy, since our Chief Investment Officer, Colin Symons, was given responsibility for the Value strategy on January 1, 2000, $1 invested in Valueis now worth $3.64 before fees (generating performance in the top 2% of peer value managers), while $1 invested in the benchmark Russell 3000®

Value Index is now worth $2.04. Likewise, $1 invested in Small Cap at its inception on October 1, 2006 is now worth $1.59 before fees (generatingperformance in the top 15% of peer small cap managers), while $1 invested in the benchmark Russell 2000® Index is now worth $1.43.*

THE BIG PICTURE Does the tangled sovereign debt and bank crisis in Cyprus matter? Yes, for at least two basic reasons. First is the endless sense of confusion anduncertainty about what the rules are as Eurozone financial problems appear in yet another country. You could call this an absence of the rule oflaw, where each country’s financial problems will be decided on an ad hoc basis. Eurozone actions in Cyprus are not confidence inspiring to eitherEuropean citizens or foreign participants in Eurozone countries. How will actions in Cyprus affect people and businesses with bank accounts inPortugal, Italy, Greece and Spain? How safe will they feel about their deposits? And what happens to those countries if deposit funds are movedto Switzerland, the Cayman Islands, Singapore or elsewhere?

The second, and more important, reason that Cyprus matters is the idea of complexity. No one can ever identify and control all of the variablesthat matter, the chain reaction of unintended, escalating consequences. Eurozone leaders appear to be uniquely unable to look forward toidentify possible follow-on consequences of their actions, to see problems coming. It is already clear in Cyprus that much of the bank depositsthat were to be taxed or levied escaped that fate through withdrawals at Cypriot bank branches in other countries.

With complexity, it is hard to know what event will cause a situation to start spiraling out of control, which is often described as the“grains-of-sand” problem. Before Lehman Brothers failed in the fall of 2008 Bear Stearns had failed, Countrywide Credit had failed and otherfinancial services firms had failed. The point is that most of the grains of sand added to a pile won’t cause anything to happen. But the pile steadilybecomes more and more unstable. Some grains of sand create little spills. Some grains of sand cause big landslides, and it is very hard to knowin advance which grains will cause the big one.

As we have been discussing for years, it is worth looking at the size of the unsustainable debt pile throughout the world. While Cyprus is a verysmall number of grains of sand, it adds to the complexity of an increasingly unstable situation. And while it probably won’t create a largelandslide, it looks like it already has created a small landslide.

The main lesson of Cyprus is that for five years seemingly nothing important has changed in the worldwide range of excessive debt problems, asone crisis after another arises. It is easier to see the complex macro debt situation than it is to pick out precisely which grains of sand ultimatelywill cause a significant landslide. Perhaps the end is slowly drawing near for constantly trying to allocate the risk of excessive debt to someoneother than those who hold the debt. It reminds us of a similar game of risk shifting that the politician Huey Long of Louisiana is claimed to havedescribed, “Don’t tax you, don’t tax me; tax the man behind that tree.”

THE ECONOMY AND INVESTMENT MARKETS Looking back to 1998 through early 2000, before the tech bubble burst, it seemed that investors had not learned much from prior bubble-burstingexperiences, except to keep buying as if the good times would continue forever. The tech party continued into early 2000 even though tech stockslooked a lot like the sure-thing “Nifty Fifty” stocks of the 1960s and early 1970s, the name given to the high-flyer stocks that ultimately took thebrunt of the fifty percent market correction of 1973-74.

Add in the financial services/housing collapse of 2008, and it is fair to say that, if we pay attention, the past can give us some useful insights aboutwhat can happen today. But for the past to be useful, investors have to think carefully about those events and experiences. It seems that manyinvestors have difficulty remembering the past as it actually happened, and so history isn’t really helpful for them. Do you remember that themarket had a 19% downturn during the third quarter of 2011? We believe the year 2013 isn’t unfolding in a vacuum.

The key point is that we won’t buy or sell just because everyone else is doing it and we are afraid of being left behind. We have to have our owndeveloped reasoning for every action we take – that is more important than going along with the crowd. The last two times the market was thishigh were in 1998-2000 and 2007-08. The run-up to 2000 was brutal for Symons Capital as we watched clearly overvalued tech, media andtelecom stocks become more and more overvalued. Mathematically it didn’t make any sense, but stocks kept going up. Clients were unhappy. Butwhat we were doing made total sense to us, even if it wasn’t working immediately. We stuck to our considered judgment because we could notfind an error in our reasoning. While we looked spectacularly wrong for quite a while, the lesson we took away from the tech bubble was to stickto what made fundamental sense. When the correction came, vindication was powerful and lasting.

2007 was not quite as difficult. We had earned credibility in 2000 and we had done reasonably well in the run-up from 2003 through 2006. Buteventually the pressure grew again as we sold out of financial stocks with risky assets and excessive leverage, even as they too kept increasing inprice. The lesson from 2007-08? Eventually, fundamentals still matter.

Now it appears that we are facing the third risky market in the last 15 years. How do the three experiences match up? In 2000, fundamentalvaluations were insane in the tech, media and telecom stocks, but pretty cheap in the “old economy” stocks that were deemed to be irrelevant in the“new economy.” In 2007, most of the market seemed expensive and financial services stocks seemed to have additional problems of high leverage

Quarterly Investment Letterfirst QUARTER 2013

and low quality assets. In 2013, the market appears to us to be closer to 2007 in terms of most everything being overvalued to some extent. Stocksthat are down today are down for good reasons, such as mining shares where business has been poor and likely will continue that way. While eachtime can be seen as somewhat different, all three times the market mood has been that nothing bad can happen because nothing bad has happened.

In our judgment, the central concern today is that we have unprecedented market support from the Federal Reserve and a resulting mood whichseems to be that Fed support of asset prices can continue forever. It is hard to know when something will break, particularly when an entity aspowerful as the Fed is involved, but history suggests that something will break, just as happened in 2000 and 2008. The bottom line is that if youliked what we did in 2000 and 2008 to protect and ultimately to preserve wealth, you should like what we are doing today.

EQUITY STRATEGIES AND PORTFOLIO MANAGEMENTU.S. markets are not completely immune from the growing Eurozone problems. And while stock market indices are touching all-time highs, the U.S.economy is nowhere close to an all-time high in terms of critical factors such as employment and consumer disposable income. Long-term thinkingseems to mean little to many active investors, but our considered, and reconsidered, judgment is that any aggressive reaching for additional short-termgains in this market carries too great of a risk of eventually turning into another bitter experience. A downturn that provides us with lower price pointsshould put us in a situation of being able to generate higher prospective returns going forward, while at the same time facing lower prospective risks.

The present investment environment evidences many, often unquantifiable, concerns. We believe that the great majority of stocks are overvaluedbased on their long-term earnings potential, that at some point we will face a rising interest rate environment, that employment is weak andconsumer disposable income weaker, that Japan has exceptionally high fiscal risks with its massive sovereign debt, that Europe is in recession withexcessive sovereign debt and an unstable banking system that is being protected by imposing losses on depositors, and that the U.S. continues toavoid facing up to the growing debt problems we have been writing about for over four years. We do not view having complete faith in the Fed(and other central banks) as a solution to the world’s economic problems or as a permanent protection of investors from downside risk. Economicgrowth in the supposed current economic recovery has been weak because of the continuing burden of the unprecedented amounts ofunserviceable debt that has not been restructured or destroyed, and so has continued to burden the real economy and consumers.

We always would like our stance in the market to be immediately correct. But our principal focus is on having a correct long-term stance based onidentifying whether we face good investment opportunities or poor investment opportunities. No market condition is permanent, and believing in the currentmarket trend as the probable market future has no basis in experience. We will be bullish when the evidence indicates that we ought to be bullish. We arelooking for situations where companies can actually deliver to their shareholders the critical stream of long-term cash flows that generate sensible valuationswith limited downside risk based on predictable revenue, sustainable return on capital, and a durable competitive advantage.

Discipline is a key component of long-term success. Current economic and market data are not pretty, and we continue to view our cash anddefensive portfolio as the appropriate market stance.

CONCLUSIONPeople often have a fear of missing out on a short-term up market, particularly when the market is hitting new highs. But over a full market cycle,investing for short-term comfort can cost investors great long-term discomfort. About half of most bull market advances are frequently lost in thesubsequent downturn.

Investors seem to abhor uncertainty, even when it is an unavoidable part of investment management, and so tend to ignore risks that are hard toquantify even if those risks pose the greatest threats. Computer-based data analysis can be useful, particularly in forecasting systems that abideby fairly simple and well understood rules, but that describes neither economies nor the stock market. There are unquantifiable risks out there thatwill blow up any investment “system.”

As part of risk management we look at both quantitative and qualitative risk analysis. They are complementary. Given the love affair with quantresearch in securities analysis over the past 20 years, it is important not to get lulled by the false precision of numbers. Quantitative risk measurementtends to involve models of a limited number of variables whose importance can change as circumstances change. As a result, investment models areonly fragile projections of limited data sets. Used properly, quantitative risk assessment is a valuable building block in our stock selection work.

Because of the popularity of quant research, its methods mostly just get you to where everyone else has gotten. Quantitative research might keep you upwith consensus, but you are in a crowded space. The harder work is qualitative, fundamental risk assessment, which has more potential long-term value.The financial issues that surfaced for us in early 2007 were qualitative concerns, and they took quite a while to become relevant in the eyes of most investors.

Our principal path to long-term outperformance is fundamental, qualitative analysis, seeking to avoid risk when we are not getting paid for it. Withqualitative methods as well, it is important to be aware that you may be wrong, and to be aware of how much being wrong could hurt. We cannot afford tobe reluctant to change our judgments as events, information and insights change. Putting the quantitative and qualitative together, quantitative riskassessments help inform our judgment of when it makes sense to act on qualitative conclusions of what the market offers in terms of opportunities or concerns.

Overall, the false certainty of numbers can cause fundamental qualitative research to take a back seat to the illusion of being well-informed withprecise data. The illusion feeds the desire to understand the market environment and to be “in the know,” to be part of a knowledgeable groupof savvy investors. It takes considerable willpower to keep from following the crowd, the herd instinct. At Symons Capital, constant attention tointellectually independent risk management enables us to do precisely that.

Yours sincerely,

Ed Symons Colin SymonsChairman & Founder Chief Investment Officer

Please remember that past performance may not be indicative of future results. Performance includes reinvestment of all dividends. Different types of investments involvevarying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directlyor indirectly in this newsletter, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to variousfactors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that anydiscussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Symons CapitalManagement, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she isencouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees isavailable for review upon request. *Please see Value and Small Cap Performance Statistics pages for supporting information & disclosures.

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Schedule of Comparative Performance Statistics (03-31-13)

Composite Notes

* Performance represents a partial period return for this year.** n/a — Annual Dispersion and/or 3 Year Ex-Post Standard Deviation not applicable for this period.*** Zephyr creates domestic equity universes based on investment style / fund behavior using the Morningstar, Mobius, Nelson’s, PSN, and eVestment Alliance databases. Ratings were presented by Zephyr StyleADVISOR as the result of surveys created andconducted by Zephyr. SCM did not pay a fee to participate in these surveys. Composites consist of all portfolios that meet the adviser's criteria for inclusion. Investment results for individual accounts may vary from the composite.

1. The Symons Value Composite was created in October 1986 and consists of all fully discretionary portfolios that are managed in the

Value style. The Symons Value investment discipline seeks to invest in securities of companies with established, sustainable businesses

whose current prices provide the prospect of long-term appreciation with limited downside price risk. From October 1, 2005 to January 1,

2009, the composite was named the Symons Alpha Value Composite. Prior to October 1, 2005, the composite was named the Symons

Value Composite.

2. For comparison purposes the composite is measured against the S&P 500® and Russell 3000® Value indices. Effective October 1,2005, Symons Capital Management, Inc. substituted the Russell 3000® Value Index for the Russell 2000® Index because the Russell 3000®

Value Index provides a superior representation of our portfolio management and stock selection style, being a broad-based index thatincludes large-, mid-, and small-capitalization stocks, in contrast to the Russell 2000® Index, which primarily encompasses only small-capitalization stocks. Russell 3000® Value is shown for the entire history. The minimum account size for this composite is $50,000.

3. Results are based on fully discretionary accounts under management, including those accounts no longer managed by the firm.Composite performance is presented net of foreign withholding taxes on dividends, interest income, and capital gains. The U.S. Dollar is thecurrency used to express performance. Returns include the effect of foreign currency exchange rates. Returns are presented gross and netof management fees and include the reinvestment of all income. Net of fee performance was calculated using actual management fees. Pastperformance is not indicative of future results.

4. The investment management fee is: 1.25% on the first $1 million; 1.00% on the next $4 million; 0.90% on the next $5 million; 0.80% onthe next $15 million; 0.70% on the next $25 million; and 0.60% above $50 million. Actual investment advisory fees incurred by clients mayvary.

5. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year.Three-year annualized ex-post standard deviation of the composite and benchmark are not presented prior to 2012, because 36 monthlycomposite returns were not available until December 31, 2012.

6. Securities purchased by Symons Capital Management, Inc. are listed on a major exchange with published values. Month-end valuationsas shown on custodian account statements are used to calculate portfolio assets and returns. Any cash flow equal to or greater than 5% of aportfolio’s market value would cause the portfolio to be revalued and accounted for properly so as not to distort performance. Additionalinformation regarding the policies for valuing portfolios, calculating performance and preparing compliant presentations is available uponrequest.

7. Symons Capital Management, Inc. is an independent investment management firm, not affiliated with any parent organization,established in 1983 and registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Prior toOctober 1, 2001, the firm was known as Dollins Symons Management, Inc. The firm maintains a complete list and description of composites,which is available upon request.

8. Symons Capital Management, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has preparedand presented this report in compliance with the GIPS standards. Symons Capital Management, Inc. has been independently verified for theperiods January 1, 1996 through December 31, 2012 by Ashland Partners & Company, LLP. Verification assesses whether (1) the firm hascomplied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies andprocedures are designed to calculate and present performance in compliance with the GIPS standards.

9. The Symons Value composite has been examined for the periods July 1, 1998 through December 31, 2012 by Ashland Partners &Company, LLP. In addition, a Level II performance exam was conducted by Deloitte & Touche for the period from January 1, 1993 throughJune 30, 1998, in accordance with the AIMR PPS standards in effect at that time. The verification and performance examination reports areavailable upon request.

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Schedule of Comparative Performance Statistics (03-31-13)

Composite Notes

* Performance represents a partial period return for this year.** n/a — Annual Dispersion and/or 3 Year Ex-Post Standard Deviation not applicable for this period.*** Zephyr creates domestic equity universes based on investment style / fund behavior using the Morningstar, Mobius, Nelson’s, PSN, and eVestment Alliance databases. Ratings were presented by Zephyr StyleADVISOR as the result of surveys created andconducted by Zephyr. SCM did not pay a fee to participate in these surveys. Composites consist of all portfolios that meet the adviser's criteria for inclusion. Investment results for individual accounts may vary from the composite.

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1. The Symons Small Cap Composite was created in October 2006 and consists of all fully discretionaryportfolios that are managed in the Small Cap style. The investment objective for the Symons Small Capinvestment discipline is long-term capital appreciation achieved by investing in both value and growth companieswith market capitalizations of two billion dollars or less, that can be purchased at attractive valuations.

2. For comparison purposes the composite is measured against the Russell 2000®, and secondarily, the Russell2000® Value indices. The Russell 2000® Index primarily encompasses small-capitalization stocks. EffectiveOctober 1, 2012, Symons Capital Management, Inc. substituted the Russell 2000® Value Index for the S&P 500®

Index because the Russell 2000® Value Index provides a better secondary representation of our portfoliomanagement and stock selection style that includes primarily small-capitalization stocks, in contrast to the S&P500® Index, which primarily encompasses only large-capitalization stocks. Russell 2000® Value is shown for theentire history. The minimum account size for initial inclusion in this composite is $250,000.

3. Results are based on fully discretionary accounts under management, including those accounts no longermanaged by the firm. Composite performance is presented net of foreign withholding taxes on dividends, interestincome, and capital gains. The U.S. Dollar is the currency used to express performance. Returns include theeffect of foreign currency exchange rates. Returns are presented gross and net of management fees and includethe reinvestment of all income. Net of fee performance was calculated using actual management fees. Pastperformance is not indicative of future results.

4. The investment management fee is: 1.25% on the first $1 million; 1.00% on the next $9 million; 0.90% on thenext $15 million; 0.80% on the next $25 million; and 0.70% above $50 million. Actual investment advisory feesincurred by clients may vary.

5. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in thecomposite the entire year. Three-year annualized ex-post standard deviation of the composite and benchmark arenot presented prior to 2012, because 36 monthly composite returns were not available until December 31, 2012.

6. Securities purchased by Symons Capital Management, Inc. are listed on a major exchange with published values.Month-end valuations as shown on custodian account statements are used to calculate portfolio assets and returns.Any cash flow equal to or greater than 5% of a portfolio’s market value would cause the portfolio to be revalued andaccounted for properly so as not to distort performance. Additional information regarding the policies for valuingportfolios, calculating performance and preparing compliant presentations is available upon request.

7. Symons Capital Management, Inc. is an independent investment management firm, not affiliated with any parentorganization, established in 1983 and registered with the U.S. Securities and Exchange Commission under theInvestment Advisers Act of 1940. Prior to October 1, 2001, the firm was known as Dollins Symons Management, Inc.The firm maintains a complete list and description of composites, which is available upon request.

8. Symons Capital Management, Inc. claims compliance with the Global Investment Performance Standards(GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Symons CapitalManagement, Inc. has been independently verified for the periods January 1, 1996 through December 31, 2012 byAshland Partners & Company, LLP. Verification assesses whether (1) the firm has complied with all the compositeconstruction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures aredesigned to calculate and present performance in compliance with the GIPS standards.

9. The Symons Small Cap composite has been examined for the periods from October 1, 2006 through December31, 2012 by Ashland Partners & Company, LLP. The verification and performance examination reports are availableupon request.