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Five money managers examine portfolio management strategies in the latest issue of The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info545.htm

TWST: In technology, you mentioned semiconductor and semiconductor equipment. Are there any companies there that come to mind?

Mr. Lee: Yes, there are some companies. Novellus (Nasdaq:NVLS) has consistently been one of our larger holdings. It has done very well for us. They are a major supplier of the new generation of semiconductor equipment, which allows manufacturers to use copper as opposed to aluminum. That is a major shift that’s going on right now.

TWST: What differentiates you from other mid-cap investors and managers? What are the competitive differences that you bring to the table?

Mr. Lee: Number one is our focus on stock selection and our use of a multifactor model that helps us to quickly identify sectors and individual stocks that are producing above-average growth. That is a critical factor. Number two is being small enough and having a small enough fund to be able to react quickly and move into new ideas. Number three is having a high-quality analytical staff that can analyze and recommend quickly new ideas that we can use. I stress the word “quickly.” We are not burdened with an investment committee or a drawn-out process that keeps us from using ideas quickly. Once we have identified a new idea, we find it is critical to get it into the portfolio because the market is so good at exploiting these good ideas. If you had to wait a week or so to go through a committee approval process, you would lose a good bit of the stock’s appreciation potential. So I think identifying new ideas quickly and being flexible enough to use them quickly has helped us gain an advantage over the competition. I think the last thing is basically having solid risk controls. For example, over the last year when mid-cap growth funds were hit pretty hard, our risk controls have helped prevent us from suffering large losses on the overall portfolio.

TWST: Is there anything else that you would like to add about your multifactor model of screening stocks?

Mr. Lee: As I mentioned earlier, we run a screen to identify new ideas from a fairly large universe. I also do that on an ongoing basis. Every day, I re-rank the holdings that we already own against each other. That provides me with a steady source of ideas. I am constantly considering trimming the names that rank near the bottom of the list, and adding to the names that rank at the top of the list. That keeps refreshing the portfolio and keeps moving us into those areas that are the most attractive based on a combination of earnings growth and valuation. So I would stress that not only does this multifactor model help us identify new ideas, but it also helps us to continue to upgrade the portfolio.

TWST: What would you say are the challenges that you are grappling with at the moment?

Mr. Lee: I think the toughest challenge right now — and I think every portfolio manager would say this — is the rapid sector rotation. It’s almost like we’ll have one or two months where a particular group or industry will be in favor, and then that move will be over and it will be on to something completely different. You see the market lurching from one hot area to the next. There has been no real trend or theme, except for what I mentioned earlier: the general area of consumer spending has held up better than business spending. Even within the consumer sector there have been some areas that have done well for brief spurts, and then suddenly those have burned out as well. So I think that has been the toughest thing — trying not to get whipsawed, i.e., you move into a new area at just the wrong time and then watch it move against you. For the most part, I think we have been able to do that.

This special Investing Strategies Report includes:

1) Alexander L. Muromcew, International Equity Portfolio Manager and a Vice President at Loomis, Sayles & Company, L.P., examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

2) Robert L. Lee, Senior Vice President of Sentinel Advisors Company, examines portfolio management strategies in this timely and deeply informative 4,400-word interview from The Wall Street Transcript.

3) Martha Kimball Pomerantz, Investment Principal at Lowry Hill, examines portfolio management strategies in this timely and deeply informative 3,900-word interview from The Wall Street Transcript.

4) Lawrence Auriana, Portfolio co-Manager of Federated Kaufmann Fund, examines portfolio management strategies in this timely and deeply informative 3,700-word interview from The Wall Street Transcript.

5) Paul A. Magnuson, Principal, Senior Research Analyst and Portfolio Manager with NFJ Investment Group, examines portfolio management strategies in this timely and deeply informative 3,500-word interview from The Wall Street Transcript.