Q: What's your investment philosophy?

A: We are a multi-manager fund seeking long-term capital appreciation primarily through investments in equity securities of issuers based outside the United States.

We employ a bottom-up, value-driven process to identify stocks of companies with below average price-to-earnings or price-to-cash-flow ratios, below-average price-to-book value ratios, above-average dividend yields, and above-average return on equity or earnings growth potential.

Q: How does this philosophy translate into an investment process?

A: There are four sub-advisors who select securities based upon the security's valuation and investment growth rate relative to its country and industry. The sub-advisors each have a core value philosophy but each looks at things a little differently.

To determine a company's growth prospects, each of the sub-advisors uses proprietary methods based upon a combination of internal and external research and analysis of changing economic trends.

First, the sub-advisors screen the stock universe and select potential companies to invest based on valuation, stock by stock. Then they conduct research to discover reasons for undervaluation and potential catalysts for stock appreciation.

The fund mainly invests in countries comprising the Morgan Stanley Capital International Europe Australasia Far East Index (MSCI EAFE).

Q: How do you go about finding the appropriate managers? How is your research process organized?

A: We are not a fund that churns through managers. Performance gets managers looked at, but we spend most of our time understanding their investment process and reviewing their team.

We do a lot of work upfront in our analysis and research so that we can have a long-term relationship with these managers. We get a lot of correspondence from managers and we also utilize the PSN database (Plan Sponsor Network) which summarizes hundreds of managers with information regarding their performance, process and team. My role is searching, identifying, hiring and monitoring our managers.

We'll take a look at managers that, from a three- to five-year perspective, would have added value to our fund. So performance is the very first step and gets you looked at. From that point forward we'll have a list of managers to work from. We will review each manager's investment process to see if it fits with our bottom-up value philosophy. We are also looking at the stability of the investment team and the organization.

Once we whittle our universe to a more manageable number, usually high single digits, we'll send out a request for more specific information from the managers. We would ask for more detail on the investment process and the team, asset growth of the product, country/sector weightings, turnover, portfolio characteristics and attribution for their portfolio over the past three and five years. We want to make sure we are very clear on how they go about picking their securities and where they add value.

Once we receive and review the information, we participate on a conference call with the managers to review the material and address any questions we may have. From that point we work it down to three or four managers that we'll then ask them to complete a more detailed RFP. This will be a longer document with more questions and it'll get into the history of their firm, their trading area, their compliance area, their disaster recovery area and more detail on the people managing the account.

We are also going to give them our guidelines which basically say how much you can have in any one country, sector, industry and stock as well as other restrictions/ directives on the mandate. We expect them to provide us with monthly and quarterly reporting and we give them a template of what is expected. We will also give them our contract and negotiate fees to insure there won't be anybody that's getting a better deal fee-wise than we are.

Once we review the RFP internally, we set up in-person presentations with the managers we feel most comfortable with.

Q: Can you give us any breakdown of these four sub-advisors?

A: Let's start with Templeton. They have more than 30 members on their team. They are going to have around 100 stocks and they are going to be the least focused on investment screens. Their team has industry responsibilities but they also have analysts responsible for certain countries. They do analysis on more companies than you would see with the other firms. They also have the lowest turnover amongst our four managers.

They're looking at five year projections and they are trying to come up with a valuation for a company five years from now. They compare that to where that company is currently priced at. They're probably the least focused on screens but looking for stocks that are trading at the greatest discount to their value five years out in the future. They are constructing their portfolio from the bottom up, one stock at a time.

The second manager is Causeway Capital. Their main focus is on yield. They are looking for companies whose dividend payout yield is higher than the local market average. They are looking for stocks with price to cash flow ratio that is below the industry for that stock.