Q:  What is the history of the firm? A : Chase Investment Counsel Corporation is an independent investment adviser managing retirement, endowment, foundation, personal, trust, and family accounts domiciled in Virginia. The firm manages over $3 billion in assets for a limited group of clients throughout the United States and Canada. The Large Cap Growth Fund was launched in December 1997 with the objective to provide capital appreciation while maintaining a prudent risk profile. Q:  What core beliefs guide your investment philosophy for the large cap strategy? A : The Chase Growth Fund employs an investment philosophy that is based on owning financially sound companies with a history of success and growth without paying too much for that record of growth. We believe companies that have been successful in the past are the ones most likely to be successful in the future. Still, we are willing to pay for consistent growth as long as the price is reasonable. We use a process that combines fundamental, quantitative, and technical research as our belief is that we can rapidly respond to changing market conditions and invest in a broader group of large-cap growth companies. Q:  How does your philosophy translate into the fund’s investment strategy? A : Our investment process starts with the screening and ends with fundamental and technical evaluations. We are stock pickers who look for growth at a reasonable price by combining fundamental, quantitative and technical research. We start with a broad list of stocks and look for companies with a consistent earnings growth of 10% in the five years and increase in earnings in the last seven of the ten years. Additional screens refine the universe to a smaller number of stocks using various quantitative and fundamental measures such as positive earnings revision, relative strength, improving profitability and strong reinvestment rates. We live in dynamic world and we focus on what is likely to be the company’s earnings in the next one or two years and not next five years. Q:  What analytical steps are conducted as part of your research process? A : Our research process begins by methodically screening about 6,000 public companies. We seek to identify companies with market capitalization greater than $1 billion and a history of consistent earnings per share growth. We generally end up with less than 600 companies. Then, the companies are scrutinized by examining them three different ways. First, we analyze them fundamentally as a business to understand earnings drivers and can these companies continue to maintain their earnings growth in the future. Second, we focus on the technical characteristics of the stock. For instance, are the insiders buying or selling? Is the stock and its industry gaining relative strength or attracting more investors? Next, what are investors paying for the company's growth relative to history and how does that compare to their estimated growth in the future. Are all of the positive factors already fully reflected in the price of the stock? In the end, we set appropriate buy and sell target prices for the 40 to 60 best candidates. At that stage two senior analysts review the data and pore over balance sheets. They do on-site research of companies, too, looking for evidence that suggests strong fundamentals and rising stock prices. We are contrarians in the sense that our process is designed to remove the ego and emotion from the decision making and give some quantifiable objective ways of looking at the world. Investment decision processes can become subjective and emotional and could develop its biases and we are very conscious of that. Our process controls and removes as many biases as we can. We are looking for profitable companies with good return on equity. We seek companies that reinvest a large amount of their profits and have strong balance sheets. We never owned any of the pure Internet companies or some of the big name financial companies because they simply didn’t come through the initial parts of our process. Q:  Can you give a few names of companies that you would identify as consistent earners? A : We are looking for companies that have stable customer base, growing product line and business model that allows them to grow their sales and earnings. McDonald’s, Wal-Mart and Johnson & Johnson or tech companies like Microsoft or Cisco would in our opinion fall into that group. Visa Inc is another company that has shown an ability to generate consistent earnings growth. Our belief is companies that have something special can deliver growth regardless of the economic conditions or economic growth or lack of it. Q:  Would you give an example that highlights your research process? A : The TJX Companies, Inc., the leading off-price apparel and home fashions retailer in the U.S. and worldwide. T.J.Maxx and Marshalls comprise the bulk of their business. We purchased the stock in February 2009 as the economy weakened and unemployment surged consumers traded down and looked for bargains at discount stores, TJX was benefiting from this trend. In addition, the retailer was benefiting on the costs as well. Apparel designers were facing slower sales and rising inventories which they liquidated at lower than average prices. The reason we bought the stocks was relative to the rest of the retail world they were doing very well and the stock began showing strength in certain technical characteristics that we look for. We’ve had the stock in the portfolio as one of our larger positions but of late have trimmed the position a little bit. Q:  What is your buy-and-sell discipline? A : If the company and the stock meet our initial criteria then our analysts conduct fundamental research, talk to management and conduct a deeper review of financial statements. They also refer to independent research and Wall Street research and look for sources of risks to business models of the company and earnings and business drivers. As a growth at a reasonable price manager, one of the things we hope to avoid is to overpay for the stock and want to make sure we’re purchasing a stock at a price where the risk to reward is compelling. We stay disciplined on the buy side but once the stock has made its way through all those hurdles we set our price targets. We sell stocks for two reasons. One, if we find another stock that meets our criteria and has better business fundamentals and is trading at a price that we find attractive. Second, if the stock we purchased fails to live up to our original investment thesis or expectations. If the company or industry fundamentals deteriorate then we sell the stock. Q:  What is your portfolio construction method? A : We manage a portfolio of relatively concentrated holdings that are diversified along sectors and industries. Our initial position in a stock can be as small as 0.5% and a single holding will usually never be larger than 5%. The portfolio holds 30 to 45 stocks diversified by both sector and industry group. Our benchmarks are the Russell 1000 Growth Index and the S&P 500 Index and the average turnover in the fund has been in the neighborhood of 100%. The companies that we seek to invest and hold are the ones that we believe have a long term futures. We are not simply holders of the stock and we hope to see improvement in company performance and a reflection of that in the stock price. We hope that we can capture the bulk of the company improvement and investment gains in the period we hold the stock. Q:  What risks do you perceive in the marketplace and how do you contain them? A : We practice risk control in many ways, first and foremost the stocks that we buy have a consistent earnings and avoid stocks that do not have earnings track record or we do not understand. This discipline helped us to avoid the tech stock bust and the recent collapse in banks and financial services stocks. Moreover, the combination of the technical and fundamental components of our process also prevents us from buying or holding stocks of the companies that may have a higher risk profile than we prefer. Our diversification along sector and industry lines and our position limits also prevent us from taking undue risks. We also do not try to trade every financial or company crisis. Historically, if a crisis produces ten candidates for a bankruptcy or a failure less than three end up out of business. But, we are not trying to capture those trades. Q:  How do you take advantage of fast growing economies around the world? A : Our process generally selects companies that have above average earnings growth. We hold many multinational companies that generate earnings around the world. A significant number of multinationals that we invest in generate more than 40% of revenues outside the U.S. If we find a company that generates significant earnings from China, India, Indonesia or anywhere else for that matter we will consider them as long as they meet our investment criteria. Q:  Do you hold cash in the fund? A : The guidelines in most of our institutional equity accounts require us to be fully invested between 95% and 100%.