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Five Money Managers examine portfolio management strategies in this 24-page Investing Strategies Report from The Wall Street Transcript, available at (212/952-7433) or www.twst.com.

TWST: This is a good time for small cap stocks. Can you tell us how performance has been so far this year and what the outlook is going forward?

Mr. Knight: In general, small cap stocks are well ahead of large cap stocks and small growth has beaten small cap value. We use the Russell 2000 Growth Index as a bogey for the small cap growth funds, but most people use the Russell 2000 as a proxy for small cap performance. Through the end of July, the Russell 2000 was up 25.3%, compared to a gain of 13.7% for the S&P 500. As a comparison, the Russell 2000 Growth Index, which contains the growth-type stocks out of the Russell 2000 Index, was up 28.4% for this period, higher than the standard Russell 2000 Index. You can see that there is a big difference between large caps and small caps, and I think historically that you would expect this. Normally when you come out of a recession, after an initial period of large cap outperformance (large caps are really the generals that have to lead the rest of the troops up), you would expect the small caps to start to outperform. There are several reasons for this. Number one, we believe that smaller company earnings are going to be coming through at a higher rate than large company earnings, and that’s been happening. I’m very big on top-line revenue growth, because I think if you run a growth fund, you really have to pay attention to that. We think that the revenue growth from small caps has been coming in so far this quarter at 10% over the same period a year ago versus probably no more than 2% for large caps in the S&P 500. We think there’s a definite advantage toward the earnings and the revenue growth from small caps at this time in the economic recovery. By the way, we should define small caps since there are many definitions and interpretations of this asset class. We define it as any stock from 100 million to 2 billion in market capitalization. Number two, the other thing you would expect is that because there is less liquidity and less of an efficient market in small caps, the stocks perform much better when investors get interested in them. This is what we have been seeing so far this year. Actually, it is the lowest of the small cap universe that is performing the best, probably due to their lack of liquidity.

TWST: Tell us about some of the companies in health care, telecom, IT and homebuilding.

Mr. Knight: In the generic drug area, we have Taro Pharmaceutical (TARO), which is a major generic manufacturer. We think Taro is an interesting generic company. Obviously, our current Administration is trying to get as much in the way of savings as they can out of the generic companies. We’re seeing huge revenue growth here, 45%-46% or so, and probably ought to have more companies in this industry. The company also markets over the counter products. Taro also manufactures drugs in Canada and these are sold all over the world. Taro is an Israeli company, but it trades here in the United States over the counter.

This Invesing Strategies Report includes:

1) Outlook for International Equity Markets - Peter Harrison, Managing Director for JPMorgan Fleming Asset Management, examines portfolio management strategies in this timely and deeply informative 4,500-word interview from The Wall Street Transcript.

2) Investing in Small Cap Growth Stocks - H. Giles Knight, a Managing Director at MTB Investment Advisors, examines portfolio management strategies in this timely and deeply informative 4,400-word interview from The Wall Street Transcript.

3) Active Bond Management - Richard J. Huxley, head of the Clover Capital Management and Joseph P. Cerqua, a Portfolio Manager & Analyst for Clover Capital Management, examine portfolio management strategies in this timely and deeply informative 3,700-word interview from The Wall Street Transcript.

4) Managing Private Assets & Trust Services - Stephen J. Cohen, the President & Founder of Private Asset Management, examines portfolio management strategies in this timely and deeply informative 4,700-word interview from The Wall Street Transcript.