Q:  How did the fund evolve? A : The fund has been around since August 1, 1997. In the mid-late-nineties, investors were looking for international exposure when we first conceived the fund. At the time, the dollar was fairly strong and no one was interested in looking abroad because the U.S. markets were doing well. Our focus was to provide international exposure across market cap and provide exposure to developed and emerging markets. The fund currently manages about $365 million. Q:  What core beliefs guide your investment philosophy? A : We are looking for companies that are growing and are located outside the U.S. Our primary focus is developed markets but we are open to searching for opportunities in the emerging markets as well. We strongly believe that stock prices are driven by earnings growth. That means we are buying companies that exhibit sustainable and accelerating earnings growth that have high quality balance sheets and are managed by strong management teams that have a clearly defined growth strategy. We use a top-down country allocation framework and are looking for growth stocks within markets that have certain characteristics. Q:  What is your investment process? A : It is the intersection of our bottom-up security screening growth orientation combined with our top-down country allocation approach. First, we run a country allocation model on a monthly basis. This framework looks at factors such as valuation, risk, economic growth, and momentum and identifies those countries that will outperform. We score 23 developed markets to decide country exposure. So for example, we have buckets of Japan, UK, Singapore, Hong Kong, and other countries. The second part of our process is filling those buckets using a security factor screening model that helps us identify companies that have strong earnings growth and balance sheets. Moreover, additional research helps us to uncover management teams that have a clearly defined growth strategy. Identification of these companies corresponds directly with our investment philosophy. This static screen identifies companies with the right growth characteristics and helps us generate the ideas to fill those buckets for the country selection piece. We then fill those buckets with those growth names that we can find first using the screening tool and then when our team gets to work to identify those companies that fulfill the investment philosophy. Q:  What is the country allocation process? A : We use four broad areas that include valuation, risk, economic growth and momentum factors. There are about 20 plus macroeconomic and market factors that we look at. Valuation is a very important one. We look at current and forward price-to-earnings ratios for all of the markets around the world. We are also looking at dividend yield. Then we look at the economic growth measured by the gross domestic product and other forward looking economic indicators. Lastly, we look at the price momentum which is measured by year-over-year price change. But the one that really differentiates ourselves is the risk component and here we are looking at the markets that have a current account surplus to gross domestic product. This is really a measure of a country’s ability to compete in the global marketplace. The higher the surplus, the better the country’s ability is to trade and to compete globally. This also has the direct effect on the currency value. We look for markets with stable or compelling currency exchange rates. We are specifically looking for markets that have either very compelling cases from a currency perspective that are undervalued or staying away from ones that demonstrate the potential risks of having a major current account deficits or weakening economic growth rates. Again, this is something we do on a monthly basis. The model is trend-oriented and guides us directionally. Q:  How do you go about selecting securities after your country allocation? A : We use the security factor screen to find the companies that correspond with our growth oriented investment philosophy. It a tool that examines growth, profitability and momentum. Those are the three main factors, but it is heavily weighted toward growth, so looking at forecasted earnings and sales as well as historical revenue numbers underscores sustainability and execution prowess. We are looking at operating earnings/EBIT margins, return on capital employed and then relative strength and money flow factors as well. And what this screen does is identifies those companies that correspond directly with our investment philosophy of investing in companies with sustainable and accelerating earnings growth, strong balance sheets, and management that is obviously focused on longer term strategic growth. We look at about 10,000 international companies but we knock that down to about 500 to 600 names. We spend most of our time on the 150 names where we are focused on not only our holdings but also the potential replacements. Our team meets management, digs down into the financials and comes up with a focused view on earnings, growth, sustainability and then, and this is important, management’s ability to sustain the growth in earnings. We are obviously comparing each of the companies in local markets but also comparing them to global peers. The companies that we are focused on must have a growth bias, enjoy structural growth tailwinds and have a management style focused on growth and can continue to deliver earnings. Q:  Is there any specific market cap that you focus on? A : We focus on the mid-to-large market cap. Our average weighted market cap is about $30 billion. The goal is to find companies in that large or midcap arena, so the weighted average market cap is about $42 billion and the median market cap is about $10 billion. We find growth in the mid-tier more exciting and are generally drawn to longer term growth structural stories. Q:  How do you build your portfolio? What is your buy and sell discipline? A : From a portfolio construction standpoint, we have between 75 and 85 securities and average portfolio turnover is between 40% and 55%. We are looking for companies that we expect to hold in the portfolio from three to five years. Our benchmark is the MSCI EAFE Growth Index. We are benchmark aware but we are not benchmark focused. Both industry as well as country constraints are dependent on the size of country or the industries. For example, in case of Japan and the UK, the two largest constituents of the MSCI EAFE index, there are some constraints as to how high or low one can go but every other country and sector we can go all the way down to zero or triple weight the index weight as long as it does not exceed 10%. The construction process is taking the best of the bottom-up stock picking candidates and coupling that with the recommended framework for country allocation. We are looking for those best growth companies in different countries that are best positioned to grow. Our sell discipline is the reverse of our buy discipline. The reasons for selling a company include weakening fundamentals from a structural perspective, a declining trend within our selection screen, a change in the top down country allocation framework, or companies that underperform expectations. Q:  Do you set any target price for any of your holdings? A : While we do not set specific target prices, we revisit on a monthly basis every holding at a team meeting to determine if anything has changed fundamentally and again from a relative valuation perspective. But when a company is overextended we look at technicals at that point. We don’t have price targets per se but we do make sure that we are fully cognizant of the environment in which that particular stock finds itself both from a competitive as well as from a technical perspective. Q:  What do you consider risk? How do you control or manage it? A : We do have internal guidelines where we have upper and lower limits at the stock, country and sector levels. For example, we cannot allocate more than 5% to one stock and have constraints on country and sector levels to ensure proper risk management. In addition, we will not invest more than 20% of the portfolio into the non-EAFE countries such as Canada and South Korea and China. Q:  How is your research team organized? A : We are actually organized by geography, so we have a team of three investment professionals in Cleveland, Ohio. We also have a team of five people in Boston focused on the value stocks. We feel sector specialization is important but for particular regions we feel it is important to be focused at the broader level too. Calvin Zhang covers Asia to include Japan, Singapore, India, Hong Kong and China and looks at companies from a regional perspective. Scott Camp reviews all companies in the United Kingdom.