Q:  Would you provide some details about your company and the Concentrated Growth Equity Fund? A : Turner Investment Partners, which was founded in Berwyn, Pennsylvania in 1990, is an investment firm that manages more than $17.4 billion in assets in separately managed accounts and mutual funds for individuals and institutions (as of 9/30/09). At Turner Investment Partners we have a number of funds and the Turner Concentrated Growth Equity is a product specifically designed to reflect our best ideas regardless of market cap. This particular fund has three managers including myself handling small, mid and large cap products. Q:  What is your investment philosophy? A : We always believe in the philosophy that plays to the strength of the stock market by staying fully invested and buying stocks of companies that increase their earnings over time. We have fine tuned that philosophy in this product by focusing on our best ideas. We firmly believe that current earnings and expected earnings are the two main factors which drive the stock prices. If a company has great products and also makes great acquisitions, expands distribution both geographically and product wise they can expand margins and accelerate earnings. These are the companies that are rewarded in the marketplace. We seek out those stocks in different sectors and capitalization ranges that we believe have strong earnings growth. These represent the company’s best equity investment ideas. This fund is a concentrated growth fund and may have fewer positions than other normal funds but will have more return potential. Q:  What is your investment research process? A : Our research work is very fundamentally driven. We have an investment team of 24 professionals who maintain a sector focus. They are looking for companies that fit our investment philosophy from the available investment universe. This includes meeting with management teams – we met with about 1,100 companies last year and probably will meet with around 1,300 this year - including international companies. We are looking to invest in companies that have market capitalization of at least $2 billion. We have a proprietary quantitative model to screen companies according to earnings growth and valuations and other macro-factors like inventory levels, margin and profitability trends, consumer spending trends and production trends. We combine this with the fundamental work that is done by our sector teams who analyze all these details in depth on a daily basis. Companies are ranked in decreasing order and the top 35% of the companies in our quantitative screens are of interest to us. Additionally, we have extensive contacts in all of our sectors and spend a lot of time talking to them to find out the relevant information that we need to make decisions. Q:  Can you give some examples? A : Our main focus is on sectors where companies are growing sales and earnings. We have exposure right now in the technology sector, since our analysis leads us to believe that the semiconductor and telecom equipment areas are expected to have a fair amount of growth. In the consumer discretionary sector we have two names in the fund, the online distributor Amazon.com Inc and International Game Technology, a maker of slot machines. Amazon.com is a leading player in the on-line distribution of books, music and video. We were attracted to the company for its abilities to expand beyond core online retailing. Apart from selling products on-line they are facilitating third party merchants to sell products to their customers – which is another way for AMZN to monetize their tremendous traffic. In addition, there are other features under the surface that are effectively bringing in more customers. The beginning of Amazon Prime is one such event that effectively increased the velocity of the traffic on their site. They were able to deliver products in two days effectively from the date of ordering for a nominal membership fee. Even though this was not profitable in the beginning it enabled them to effectively increase sales in the non-holiday periods and also increase the traffic. Now they are introducing the concept of same day delivery which is a step in the right direction. By effectively having inventory in their warehouses they hope to do this effectively and achieve breakeven in a short period of time. In the case of International Game Technologies the demand for casino slot machines all over the country and around the world is growing. More than 35 U.S. states have casinos or gambling parlors and the new casino project City Center in Las Vegas will sustain the demand for slot machines. In Macau, China, casinos are expanding and new ones are added as the U.S. and Australia invests in new casino based entertainment complexes. Q:  Do you have any sector preference and do you follow any benchmark? A : Unlike our capitalization-specific growth products, the Concentrated Growth Fund is not sector-neutral, and we invest in fewer securities than in a diversified fund – roughly around 20 stocks. For performance purposes, the product benchmark is the Russell 1000 Growth Index, and our primary investment objective is to produce a total return after fees exceeding that of the Russell 1000 Growth Index over a full market cycle. Q:  What type of earnings growth do you look for? A : We follow every sector and we do not have the same threshold of revenue and earnings growth for every sector. Each sector is unique and has its own set of factors affecting revenue and growth. So, one has to measure the company in a sector against the peer group. Every sector will have its own set of metrics for earnings growth and other parameters. In the case of energy stocks we look at the growth of true reserves which is what the market pays for. The reserves may not be in actual use but it is the total amount of these proved reserves that can often drive the valuation of the company. In this case we look at the reserves and the inventory growth as a true differentiator. Every sector has its own unique differentiator which may make the earnings growth of a particular stock in that sector exciting. Q:  So, essentially, you look for a differentiator or a catalyst? A : Yes. Let us take the case of Lowe’s Companies Inc which we held in the fund. This is not a company that is aggressively growing revenues or expanding margins. However, history has shown that the performance of Lowe’s stock is correlated with the fundamentals of the housing market – which we believe is in the process of bottoming. In addition, we believe that they had better square footage growth opportunities than Home Depot. We acquired Lowe’s because we felt that there is a room for expansion. In the case of Genworth Financial, even though their life insurance business is challenging right now, we found their mortgage business was the differentiator that was going to help them grow. We see the cyclical companies like steel makers have set the stage for a strong recovery in their earnings profile. They have already whittled down their inventories and with expected increase in demand they should see an increase in steel prices and higher earnings growth. Q:  How many names do you hold in your portfolio? A : The portfolio holds generally around 20 companies with average weighting of 5% but the number of companies can vary anywhere between 15 to 30. Q:  How high can you go in your position weightings? A : It normally ranges around the 5% mark and never reaches a 10% position. The smallest positions that we take are about 2% to 3% and may go as high as 7%. We have Qualcomm Inc with over 6% holding which is our largest position and Taiwan Semiconductor is just under 6%. When we start a position around 2% we may grow the weighting if the prospects are good but whenever the position reaches beyond the 6-7% mark we generally trim that position down to a normal level. Q:  Do you have any sector limits? A : No, there is no sector limit at this fund. Two thirds of the portfolio tends to be in technology and consumer products. Gilead Sciences is the only position that we have in the healthcare sector. It is quite possible that this sector may find more names in our portfolio in the near term especially considering the government reforms that are in the works. Q:  What are the risks that you perceive and how do you manage them? A : Because of the concentrated nature of the portfolio there are bound to be some downside risks especially in markets like the one we had in 2008. Being non-diversified the fund maybe susceptible to a single adverse economic or regulatory occurrence and may lead to increased volatility. The fund also participates in initial public offerings. Some successful IPOs may have a significant impact on the fund’s performance. We try to keep the investors informed of the inherent risks of the portfolio and that while it may do very well in good markets it may not do quite so well in depressed markets. We are nearly fully invested, so our goal is to hang in on a relative basis in challenging markets, but generate significant excess returns in good markets.