Q:  You mentioned that four areas where the Internet is having the most impact - media, commerce, infrastructure and communications. Do you see different characteristics in how internet is touching in these areas?

A: There isn’t a lot of activity on the commerce side, but that’s one of the areas where the traditional companies have done a very good job in creating an online presence, much better than the traditional media companies. On the media side, there are a handful of companies consolidating a lot of power. On the commerce side, the market is becoming more fragmented and specialized. One of the biggest success stories on the ecommerce side, Amazon, has had a very difficult time generating sustainable margins, because the traditional players are competing strongly.

We have been heavier weighted in the media side in our investments, and out of the four areas we have been heavier weighted in media and infrastructure, and probably lighter weighted in commerce and communications. But we don’t underestimate those areas.

Q:  A shift is going on with IAC/InteractiveCorp owing Ask.com. They are having difficulty gaining market share against Google, but they still keep trying. At the same time, Dow Jones has the best content, but they are not able to leverage their content on the internet in the revenue side. How do you leverage these situations?

A: We actually owned Market Watch that was acquired by Dow Jones. On the print side, I’ve been surprised to see companies like The New York Times buying About.com, Scripps buying Shopzilla but they understand that it’s adapt or die, so they are all making the effort.

One of our holdings is NewsCorp. They have been very aggressive in internet acquisitions over the last couple of years, and when they acquired MySpace, they really became a player and they own other internet properties. People sometimes are surprised we own NewsCorp, but we think it’s a very reasonable investment with a lot of upside and a lot of that upside is clearly internetrelated.

Q:  Do you invest within the U.S. or you also look for opportunities outside the U.S.?

A: Both. We invest up to 25% of the fund’s assets outside the U.S. Right now it’s a bit under 20% and a vast majority of that are in Chinese companies. A lot of them were listed between 1999 and 2001. And then they just languished. In the last couple of years, their advertising businesses, actually first the wireless businesses, perked up. Then, in the last year or two, the advertising business has really picked up. Advertising businesses are growing around 40% year over year.

What is interesting about the Chinese companies, obviously, is that it really is a broader player on the Chinese economy, which is growing at double digits. Internet is gaining share, so is advertising. One of the reasons why we are inclined to increase our positions in China is that there is going to be a lot of spending in anticipation of next year’s Olympics in Beijing and there is a lot more advertiser activity that is going to be picking up later this year and early in the next year.

Q:  How many stocks do you have in the portfolio? How do you build your positions?

A: We generally own somewhere between 40 and 50 positions. The position sizes range from very small to roughly 5.5%.

Q:  Do you measure yourself against any benchmarks?

A: Ultimately we look at the NASDAQ, but we break it down. We look at seven other Internet indices, just because each of them tends to be a little quirky. I’ll use an average of the seven, just to give us an idea of where we stand. The NASDAQ is really the benchmark we are going to be judged against. Within the internet related technology investments, we look at this basket of very small indices, to give us an idea of where we stand.

Q:  What is the turnover in the portfolio?

A: The turnover, historically, has been very high. One of the mistakes we made back in the late 1990s, is that our turnover was too low. We were just not inclined to let positions ride to do that. I’d like to trade more, not less. I’d like to take profits a little more aggressively, and cut losses. Right now our turnover is probably between 120% and 150%, annually. But we have had some years where our turnover has been over 1,000%.

You do have a choice. You can just say you like the company and you would let it ride through any volatility. Or you can say it is dangerous and it’s not really necessary. You are a steward of the portfolio. We are not managing the portfolio on a week-to-week basis for returns. But we are not going to be oblivious if we think a company is way above where we think fair value is, we are going to cut back the position.

We won’t let a top position get to be 10% or 12% of the fund though many managers are willing to do that. In our opinion, no matter how much you like a company, or no matter how much you like the valuation, once you let a position size get into the double digits, I think you are taking undue risk.

Q:  What other kinds of risks do you monitor and what do you do to mitigate them?

A: We look at the macro risks in terms of the general economy. If the economy slows down and we go into a mild recession, that is going to affect advertising or consumer spending. But we try not to manage the portfolio based on general macroeconomic forecasts, because they are very unpredictable.

On a portfolio basis we manage risk by having that value and growth component. We are not inclined to make market calls. We don’t want our opinions on the market to influence the performance of the portfolio. We’d be more inclined to look at things in sector orientation, and a more company-specific orientation.