Q: In 2000 you took the fund under your management. What changes did you introduce since you took over – in terms of strategy, research, and so on?

A: We viewed it as a clean sheet of paper. This fund was managed by Connecticut Mutual Insurance Company. After that it was managed with a quantitative strategy. When we took over in November 2000, we completely changed it to fit our investment process and we did it in about 30 days.

Q: What is your investment process?

A: Our whole process is geared around producing consistent out-performance against the value universe. That is why we focus so much on picking the best stocks in each sector. So far, our process has delivered on a consistent basis. We think there is an interesting proof statement about that. Let us look at the Lipper numbers measuring the performance of this fund during the down market and the up market. To us, the nature of consistency would be a fund that can demonstrate compelling performance in both kinds of periods. If you look at our performance “since manager inception,” in November 2000, until the markets bottomed, which we define as September 2002, the fund was down 10.2% on an annualized basis, which puts it in the 12th percentile of the Lipper value universe. In the up market, which we define as September 2002 through November 2003, there our total return was 32.68%, which put it in the 6th percentile of the Lipper large-cap value world. To us, that is really the fruit of our stock selection strategy, but also our portfolio construction strategy. We seek to find cheap stocks that will produce significant earnings gains over the next few years.

Q: Your prospectus says that you look for “good future earnings.” How do you estimate future earnings?

A: Basically, we look at three things. We try to assess revenue growth prospects, potential margin changes, and capital management opportunities – what will the management do with the free cash flow.

Q: How many research people do you have on staff internally? Do you rely on Wall Street research or in-house research?

A: We have seven investment professionals on the Value Team. This is a combination of portfolio managers who take a leading role with other products on the value team, as well as research analysts who specialize in particular sectors.

Q: So, do you start your process by looking at sectors? Is it a top-down approach

A: Our main goal is producing consistent out-performance against the large-cap value asset class. Because consistency is part of our goal, we think the easiest thing to do on a consistent basis is pick the best stocks in each sector. Then we will overweight or underweight sectors to a modest extent. If you were to look at our performance attribution since we took over the fund, about 84% of the out-performance has been generated by picking the best value stocks in each sector and about 16% of the out-performance has come from making the correct overweight and underweight decisions about the sectors.

Q: So, you tend to hover around certain sectors?

A: We have no perpetual biases about which sectors we tend to overweight or underweight. The degree of the overweights and underweights tends to be modest, so that if we were wrong about these decisions, hopefully, the fund will still perform well by picking the best stocks in each sector.

Q: How does your screening process work and how do you narrow the stocks down to the ones that make it to your portfolio?

A: The first thing that we do is to identify the value universe of stocks. We start with the whole stock market and we recognize that our job is to pick the best value stocks. So, the first thing that we do is identify the value universe. There we look at the price of stocks in relationship to current earnings, future earnings power and also current book value.

Q: Do you use software screens for that purpose?

A: It’s a mixture. We use quantitative tools to help us identify which stocks represent the value asset class. There is also some subjective judgment that is part of that process. But again, how we pick stocks within the value asset class is the essence of what we do.

Once we have identified what the value stocks are, we spend our time trying to assess the long-term earnings power of each company. That is a dynamic process that we do all the time. All seven investment professionals on the team perform fundamental analysis.

We view the value universe as the cheaper half of the market. If there are about 300 to 400 large-cap stocks, then the value universe is somewhere between 150 to 200 companies, depending on where you draw the line. Frankly, we feel that we know those companies pretty well and we tend to own about 50 of them. The real key to success is assessing the long-term earnings power of each of these companies. We try to focus on the companies that have the most compelling earnings and cash flow prospects.

Q: Why then was your fund classified as a blend fund?

A: Conceptually, we manage this fund to pick good value stocks, so we expect this fund to be in the value style box most of the time.