Q:  What is your investment philosophy? A: The Fund’s investment philosophy is to be invested at all times across a variety of investment styles, with the goal of generating steady returns in different market environments. The Fund’s goal is not to be boxed into one aspect of the market, but to be opportunistic and flexible. The Fund is managed by five managers who each have different and complementary investment styles. By putting them together, shareholders get a Fund that should be able to operate in a wide range of market environments. The Fund is anchored in domestic stocks and exposed to international markets. It is a kind of ‘Best of the Best’ strategy with the investment team consisting of: a growth manager, a value team, an international manager, and two capital appreciation investors. Thus, we have the flexibility to provide investors with investment ideas – domestic, international, small cap, mid cap, large cap, growth and value. The goal is to always be diversified among investment styles and asset classes. The Fund will generally have less than 5% in cash. Q:  What is the asset allocation ratio among these five sleeves of the fund? A: Right now, the ‘Opportunistic Growth’ sleeve is 30%, the “Contrarian Value” sleeve is 30%, the ‘Concentrated Global’ sleeve is 20%, ‘Go Anywhere’ is 10%, and ‘Special Situations’ is 10%. We have the flexibility to change these numbers within a 10% range, but we have not changed the allocation since the Fund’s inception. Q:  What do the portfolio managers of the contrarian-value sleeve look for? A: The contrarian-value sleeve of the Fund looks for earnings-based valuations. Their first screen is to look for stocks with low price-to-earnings ratios that are trading at a 25% discount to the market. The team then uses the discounted-cash-flow model to determine what their earnings potential could be. The contrarian-value sleeve team has the flexibility to invest up to 20% in non-US stocks. Q:  How about your capital appreciation sleeve? A: The two portfolio managers of the capital appreciation sleeves of the Fund are multi-style and multi-cap managers. Saul Pannell considers himself as having a blank canvas and without any predispositions as to whether a stock is a value stock, growth stock, domestic, international, large cap mid cap, or small cap. Going from a pure bottom-up standpoint, he identifies companies are that are most attractive to him; the metrics he uses vary based on the industry. Frank Catrickes tends to be a little more thematic. He tends to have two or three themes that he sees as long-term moneymakers, and these themes drive his stock selections. That is why we refer to his sleeve as being a ‘Special Situations’ type of sleeve. The fifth sleeve is managed by Nicholas Choumenkovitch who runs the ’Concentrated Global’ portfolio. He is more of a core manager focusing on large-cap stocks globally. When selecting companies, he will look at different metrics depending on the particular industry. Q:  What is your benchmark? A: The benchmark for the overall Fund is the Russell 3000, and for the Opportunistic Growth sleeve it is the Russell 3000 Growth Index. Q:  What kinds of risks do you monitor and what do you do to mitigate them? A: Overall, the portfolio managers of the Fund maintain diversification across various market caps, investment classes, and equity markets around the world. This diversification helps us during volatile periods in markets. However, to limit our stock-specific risk, we limit our investment in sectors and stocks to no more than two times the allocation in the index. This provides us with another layer of protection against bad stock picks, a surprise from management, or from a sudden change in business operations. We control risk by having price targets, really understanding what we are paying for and what we think these companies are worth, and understanding the companies’ fundamentals. Q:  Is there any process in place that looks at the overall portfolio for its risk control? A: We have a product management group that works closely with each of the portfolio managers of the Fund to monitor the amount of risk that each one takes in their individual sleeves. For example, every portfolio manager meets frequently with a product manager so that he understands where the sources of risk are—whether it is at the industry level or at the company level. This also serves as a reality check to make sure that fund managers are staying within the mandate given to them by clients. Aside from that, there aren’t a lot of restrictions on the five portfolio managers. We have a proprietary-manager trading system that checks for violations of specific guidelines every time a trade is entered. So if the overall portfolio has a 35% non-U.S. allocation threshold, and all five managers at the same time decide to buy non-U.S. holdings, the system will trigger a flag to let all five managers know that we have already reached the 35% limit, and each manager would then have to identify ways to lower their non-U.S. exposure. Q:  What is your growth-investing philosophy? A: I work under a philosophy that I call ‘Accelerating Tangible Operating Momentum’. I am looking for companies that are going to show accelerating revenue growth and improving operating margins, that will lead to stronger-than-expected earnings or freecash- flow growth in the near future. I am trying to identify companies that have drivers and catalysts that are going to drive better quantitative-operating performance. The key is to be early in that process, and identify these companies before they start to show visible earnings progress. This requires a great deal of interaction with a company’s management team, talking with Wellington Management’s 51 global industry analysts, talking with my team of five analysts, and visiting and meeting with more than 30 companies a month. I take the philosophy that growth is where I find it. There are numerous instances in which companies that I own in the growth area are outside of traditional growth sectors. I look at growth companies globally, not just in the US. Overall, the Hartford Capital Appreciation II Fund can invest 35% in non-US stocks, and each manager will vary that allocation by sleeve. Q:  How is your research process organized? A: My team’s research process in managing my sleeve of the Fund involves looking at the company’s earnings, and understanding what drives the earnings. Once my team and I identify specific catalysts and drivers of earnings, we develop our models of future earnings and free cash flow. These models help us to discover companies that are likely to generate superior earnings through improving sales and operating margins. The next stage is to determine what we think this company is worth based on the level of free cash flow, the quality and sustainability of the earnings, the quality of management, and the attractiveness of the industry. That is how we determine the right earnings multiple to pay for this business. We are looking to invest in companies that are trading at a discount of 30% or more to our estimate of the company’s intrinsic value. We generally hold between 40 or 50 stocks in the opportunistic growth sleeve of the Fund, and the overall Fund has about 250 stocks. The top 10 holdings in the Fund range between 1% and 2% of assets. Q:  Do you look at the historical earnings growth and then define the forward- looking earnings growth? A: It is nice to see a company that has sustainable growth, but in my sleeve of the Fund, we really focus on future earnings capacity. We have a 24-month horizon, and we try to arrive at our estimates based on our understanding of historical earnings and their sustainability. The holding periods for these stocks vary depending on the velocity of change in the stock’s price, and our view of the near-term outlook. Q:  Could you give us one or two historical examples of how you identified some stocks, and then how they ended up in the portfolio, and when and why you decided to harvest the gains? A: I will talk about a stock that is currently in my sleeve of the Fund. Schering Plough, the pharmaceutical company, is a company that I bought a couple of years ago. First, they had a change in management. Fred Hassan, who had been a very successful manager at a couple of other pharmaceutical companies, was appointed as CEO of the company, and we had invested successfully with Fred when he was with Upjohn. His prior track record and management reorganization at Schering Plough attracted our interest. We were also very excited about one of their drugs—a cholesterol lowering drug called Zetia. There was a joint venture between Schering Plough and Merck that markets Zetia and combination pill Vytorin. The combination pill combines Zetia and Zocor, which lost its patent protection in mid-2006. Knowing the data from pharmaceutical analysts, we were able to conclude that the drug is likely to increase market share in the coming quarters. The company was also undergoing a coststructure reorganization, and taking a lot of cost out of the business, which we felt was going to have a positive impact on the operating margin. Finally, we were very excited about the pipeline of drugs. Several drugs are through phase two, a couple of them are going into phase three, and we didn’t feel that investors fully recognized the value of drugs in the pipeline. This is typically where we get a big advantage in pharmaceuticals. A lot of investors are too short-sighted in terms of how they view the industry, and pharmaceutical companies, and we have been able to make a lot of successful calls by being longer-term thinkers, and thinking about the possibilities of drugs that are in the pipeline. Q:  Can you give us another example? A: Another company that I have invested in my sleeve of the Fund is Activision, a video game software company. Some of the games are licensed products of films such as Shrek, Spiderman, and their hottest game of late is Guitar Hero—a game in which you mimic a guitar player to get to different levels. The company actually did very poorly in 2006 because there was no Shrek sequel, there was no Spiderman sequel, and so they faced very tough growth comparisons, but we felt that there were a few solid catalysts for 2007. There will be a new game for Spiderman, a new game for Shrek, and there’s a movie coming out this summer called Transformers, which we think will do well at the box office. This usually translates into better sales for computer game. Last year, their acquisition of Guitar Hero was not well known, but our analyst was very excited about it, and felt that the company could take this game to the next level. So we felt that this was going to be a big driver to the top-line and bottom-line earnings in 2007, and into 2008. We started buying the stock in the low teens late last year, and as they put out better-than- expected results this year, the stock reacted positively. It’s the combination of accelerating trends and increasing expectations. When you get the accelerating trends when investors are not anticipating them, that’s when you get the really big gains in the stock.