Q:  What is the history of the fund? A : Huntington Bancshares Incorporated is a $52-billion regional bank holding company headquartered in Columbus, Ohio. In 2001, Huntington expanded its mutual fund family with the addition of the Dividend Capture Fund, New Economy Fund, Mid Corp America Fund, International Equity Fund, and Rotating Index Fund. The Mid Corp America Fund was designed to provide investors with exposure to mid-cap equities. Q:  What core beliefs guide your investment philosophy? A : We look for companies that are showing consistent earnings growth above the broader market while excluding companies that have high valuations to that of the market. Our conviction is that owning high-quality, steadily growing companies provides the opportunity to build wealth for investors over the long term. Q:  How does your philosophy translate into the investment strategy? A : The fund seeks long-term capital appreciation by investing primarily in mid-cap companies. The fund invests at least 80% of assets in common stocks of mid cap companies with market capitalizations in the range of companies in the Russell Midcap index or the Standard & Poor’s 400 Index. Our initial screen is the market cap followed by quantitative screens with twelve different factors to identify and evaluate investment opportunities and eliminate some of the weaker candidates. We rank on a scale of one to ten for each of the twelve factors. Our goal in the initial screening is to look for companies that meet our purchase and basic business strength criteria. After the quantitative modeling has been done and effectively brought down to a manageable level, the management team carries out a fundamental review of each opportunity. We look at the company products and service portfolio to analyze the durability of the business franchise. We also evaluate the business strategy, competitive dynamics and management track record in expanding business and generating steady returns. Q:  What analytical steps are involved in the research process? A : The research process involves several different steps. A rigorous selection process combining qualitative, quantitative and technical analyses guides the search for companies with superior growth characteristics and a strong earnings outlook, and steers the timing of buying and selling decisions. First, our quantitative analysis involves analyzing earnings growth, cash flows, book value growth, price to earnings ratios and stock price momentum. We screen both for value and growth. Second, an internally developed financial strength model is useful for picking bonds. The mid caps are stocks that have opportunities of growth, but sometimes there are limited niche industries and product lines that can go through a quick failure. This model helps us to get out of companies when they were going through a downside and protect the portfolio and acts as a risk control. Third, we also employ a patent research screen that evaluates a company’s investment potential based on their research and development as it relates to the quantity, quality, timeliness, growth trends and the science of patent. It actually serves as an additional screen that really highlights an opportunity. Mid cap companies really can have some real attractiveness if they have products that are protected from others. Next, our analysts look at what product and services the company has and frame a competitive strategy to deploy. We also have an outside service that looks at management’s effectiveness. We think that management has a very strong ability to turn the company and their ability to execute on the competitive strategies and to fully utilize the product or service they are trying to deploy. We also have an additional service that looks at the political events taking place and then we use that to some determination. Additionally, we do technical analysis of the money flow and investor sentiment to decide the entry price. We also look for companies with a management with a proven track record and who are responsive to shareholders. They should have strong balance sheets, consistent earnings histories and positive growth in historical and estimated earnings, revenues and cash flow. Q:  Could you illustrate the process with a few examples? A : A relevant example would be L-3 Communications Holdings, Inc., a company that supplies command, control, communications, intelligence, surveillance and reconnaissance systems and products. This company has a wide range of surveillance, communications and training products both from the government and the commercial side of the business. It is very strongly tied to what the government is spending, especially on advanced defense systems and homeland security. Recently, sales have been flat but even as they have been slowing just slightly, margins and profits have increased. It is important to note that even though they have well-defined niche product and services, they still have little competition. In fact, the company enjoys a strong market share in each of its product lines. L-3 Communications enjoys stable revenues and cash flows from airport systems. Meanwhile, they continue to develop intelligence, surveillance and reconnaissance systems for the government as a consistent contract winner in these sectors. Thus, we decided to invest in the company because of this steady businesses and competitive advantages. Another example of our holdings would be Cummins Inc., which is engaged in the designing, manufacturing, distributing and servicing diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration and exhaust after treatment, fuel systems, controls and air handling systems. This is a domestic company that has a lot of international opportunities. Cummins is a strong player within the truck market and especially within the emerging markets like Brazil, India, and China. Truck sales in China surged 84% followed by a rise in Brazil of 64% and in India with 41% in the last one year. We believe that good positive macroeconomic forces are driving the emerging market business and also some secular growth within that and we felt this could be a very long term growth story and quite sustainable. Q:  How do you go about building your portfolio? A : We build our portfolio with the help of a top-down investment approach. Our sector or equity strategists determine stock selection and sector allocation, and the portfolio would be underweighted or overweighted relative to our outlook against the S&P MidCap benchmark. Typically, there are 120 to 160 names in the portfolio. The rationale behind such a diversified list is derived from the risk standpoint concerning the volatility within the mid-cap market. We certainly do not want the portfolio to have a lot of wide swings to it. We build our portfolio as we find new ideas and eliminate some older ones. About 80% of the portfolio is in 80 names and the other 80 potentials are budding ideas that get in as we build the portfolio. We also use a Vector Autoregression analysis model that allows us to look ahead as far as six quarters and see where strengths in certain industries could be in the economic cycle. This helps us to pinpoint some better strength, not just from a sector standpoint but also from an industry standpoint and build the portfolio from that standpoint. The average turnover in the fund is about 20% to 25%. The benchmark for the fund is the S&P 400 MidCap Index. To sum up, the fund provides investors with diversification across two levels. First, it focuses on stocks that have the potential for price appreciation on the back of significant earnings growth. Second, the fund offers a high level of security diversification as the portfolio holds approximately 140 stocks. Q:  What is your sell strategy? A : There are probably three different approaches to our sell strategy. The first of them is the quantitative modeling. If a stock scores weak in key quantitative metrics, it is put under our review and becomes a probable candidate for elimination from the portfolio. A second reason to sell a position might be a continued deterioration in a company’s business model. Third, from a qualitative point of view, if something has materially changed in the product or service, management, or competitive strategy, the stock is placed under a review. When we are ready to reorient the portfolio, based on our revised view on the economic outlook and if we determine that we want to have a sector change, we review the ratings and eliminate the weakest players within a sector and look to where we want to add new positions in another sector. Q:  What is your definition of “growth”? A : Our earnings models suggest what the expected earnings growth of a stock is. We primarily focus on the forecasted earnings growth and cash flows. We examine not only the growth of earnings but also growth of cash flow, as some of these companies can spend a lot more cash out of their portfolio of assets. We seek organic growth in earnings and cash flows and other strategic elements that support the drivers of earnings. Q:  What sources of risk do you look for and how do you mitigate them? A : There are various sources of risk inherent in the portfolio. A volatility measure is one of the chief factors of risk that we measure and actively control. We mitigate risk in the following ways - by using a lot of attribution analysis to identify the different types of tracking error on the portfolio and assess what the sources and magnitudes of volatility are.