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Lipper Fund Awards USA 2009

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1Lipper Fund Awards U.S. 2009


Table of Contents

InsideAnnual Lipper Fund Awards Methodology 2

2009 Lipper Fund Awards U.S. Fund Family Winners 3

Taking a Broad View 4American Century’s success benefi ts investors, medical research

Sticking with the Program 5Waddell & Reed culture values input of experts

Value of Integration 7Janus studies equity, credit sides of companies

2009 U.S. Lipper Three-Year Fund Classifi cation Winners35 Largest Classifi cations 8

The Strength of Their Convictions 10American Funds gives analysts the power to act on their research

Across the Board 12Rainier seeks equity winners in every sector

The Conservative Approach 13HighMark works to weed out risk in its fi xed-income funds

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2 Lipper Fund Awards U.S. 2009


Annual Lipper Fund AwardsMethodology

T L F A

presented annually in the United States

and 20 other countries. % e methodology

for deciding the award winners includes:

Criteria (Cumulative)• Funds registered for sale in the respec-

tive country as of the end of the evalu-

ation year.

• At least 36 months of performance his-

tory as of the end of the evaluation year.

• Lipper Global classifi cations with at

least 10 distinct portfolios based on the

primary share class defi nition, exclud-

ing residual classifi cations, institutional,

private, closed-end, exchange-traded

and insurance funds as well as absolute

return funds.

• Asset classes: equity, bond and

mixed-asset.

Fund classifi cation awards% e currency for the calculation corre-

sponds to the currency of the country

for which the awards are calculated and

relies on monthly data. Classifi cation

averages are calculated with all eligible

share classes for each eligible classifi ca-

tion. % e calculation periods extend

over 36, 60 and 120 months. % e high-

est Lipper Leader for Consistent Re-

turn (Eff ective Return) value within

each eligible classifi cation determines

the fund classifi cation winner over

three, fi ve or 10 years. For a detailed

explanation, please review the Lipper

Leaders methodology documents on

www.lipperweb.com/research/leaders.asp

Asset class group awardsFund groups with at least fi ve equity, fi ve

bond or three mixed-asset portfolios in

the respective asset classes are eligible for

a group award. % e lowest average decile1

rank of the three years, Consistent Return

measure of the eligible funds per asset

class and group will determine the asset

class group award winner over the three-

year period. In cases of identical results,

the lower average percentile rank will de-

termine the winner.

Asset class group awards will be given to

the best large and small groups separately.

Small groups will need to have at least

three distinct portfolios in one of the asset

classes: equity, bond or mixed-asset.

Overall group awardFund groups with at least fi ve equity, fi ve

bond and three mixed-asset funds are eli-

gible for an overall group award. An over-

all group award will be given to the group

with the lowest average decile1 ranking of

its respective asset class results based on

the methodology described above. In cases

of identical results, the lower average per-

centile rank will determine the winner.

An overall group award will be given to

the best large and small group separately.

Small groups will need to have at least

three equity, three bond and three mixed-

asset funds.

1. % e decile ranking is obtained by the percentile ranking

according to the formula: INT((((Percentile Rank 1 ) * (

1 4.3.21 )) / 10 ) +1 ) in order to eliminate the percentile

ranking bias within very small and very large sectors by

number of funds.

Methodology


2009 Lipper Fund AwardsU.S. Fund Family Winners

U.S. Fund Family Winners

Management Company Name Award Firm Size

American Century Investment Management, Inc. Overall Large

Waddell & Reed Investment Management Company Overall Small

American Funds Equity Large

Rainier Investment Management, Inc. Equity Small

Janus Capital Management LLC Fixed Income Large

HighMark Capital Management, Inc. Fixed Income Small

Janus Capital Management LLC Mixed Assets Large

Waddell & Reed Investment Management Company Mixed Assets Small



Taking a Broad ViewAmerican Century’s success benefi ts investors, medical research

I

who benefi t from the performance of the

funds managed by American Century In-

vestments. ' e Kansas City, Mo.-based

fi rm also is a major supporter of a medical

research facility dedicated to fi nding a cure

for gene-based diseases. And both inves-

tors and the research facility have been do-

ing well recently: American Century was

the 2009 overall Lipper Award fund fam-

ily winner among large companies.

' e fi rm has about 80 total funds, with

about $70.1 billion in assets under man-

agement as of Dec. 31, 2008. About 40%

of the funds are in fi xed-income, and the

remaining 60% are equity funds. In ad-

dition to its Kansas City headquarters,

American Century has offi ces in London,

New York and Mountain View, Calif.

Jonathan ' omas, president and chief

executive offi cer of American Century,

attributes much of the fi rm’s success to

what he calls “the four Ps.” ' e fi rst is

performance.

“We truly have been focused on per-

formance for 50 years,” since the fi rm

was founded by Jim Stowers, Jr., in 1958,

' omas says. “We measure our success

by our clients’ success, and we know that

when they entrust us with their assets,

these are assets that they have sacrifi ced

and gone without so that they could invest.

It’s a big deal to us.”

' omas says the fi rm produces perfor-

mance by focusing on securities selection

in its major asset classes: growth, value,

fi xed-income, international, asset alloca-

tion and quantitative. ' e quantitative

funds use only computer analysis of fi nan-

cial data for stock selection, but the rest of

the funds have analysts who look at that

data and then add their own insights and

expertise.

' e fi rm’s analysts do proprietary re-

search on both the fi xed-income and the

equity side, and the two groups share re-

search, ' omas says. For example, a few

years ago the fi xed-income analysts decid-

ed that risk was not being properly priced

into the fi xed-income market, and they

pulled back from some areas. ' ey shared

this belief with the equity managers, who

also pulled back. As a result, the fi rm’s

funds were able to sidestep some of the

market’s current problems, ' omas says.

American Century has so much confi -

dence in its strategy that the fi rm’s manag-

ers rarely keep money on the sidelines in

cash, ' omas says. Instead, they are fully

invested in the style of each individual

fund. “Clients are not paying us to man-

age cash,” he says. “' ey are paying us to

be actively invested in the fund they have

chosen.”

After performance, the next “P” is pure

play. ' e company was founded as an asset

manager, and it has not strayed into other

areas. “' is is all we do – we only do asset

management,” ' omas says. “All of our re-

sources, all of our focus, go into managing

money.”

He says this is particularly important

because asset management should be

judged by performance over the long haul.

“If you’re in a business that has multiple

channels and some of them can yield re-

sults in a much shorter period of time,

people have a tendency to cheat toward

the shorter returns,” ' omas says. “But the

truth of the matter is that being pure play

in the money management space allows us

to have a very long-term horizon.”

' e third “P” is that the fi rm is privately

held. ' omas believes the fi rm benefi ts

from not having to meet the continuing

fi nancial expectations of stockholders or

industry analysts. Instead, it can stick to its

long-term approach

“Clearly in today’s environment, where

short-term pressures and market volatility

are causing so many people to take short-

term action, being private and indepen-

dent has been a real asset for us,” he says.

“Being pure and privately held gives us a

lot of fl exibility and allows us to continue

to manage the business for the long term.”

' e fi nal “P” is what American Centu-

ry calls “Profi ts with a Purpose,” and it is

where the medical research facility comes

in. Jim Stower, the fi rm’s founder, and his

wife, Virginia, are both cancer survivors.

' eir experience moved them in 1994 to

found the Stowers Institute for Medical

Research, also located in Kansas City. ' e

600,000-square-foot, $300 million facility

conducts research into gene-based diseas-

es such as cancer, diabetes and dementia.

More than 40% of American Cen-

tury Investments’ profi ts go to benefi t the

Stowers Institute. In addition, the fi rm

has a relationship with Lance Armstrong’s

LIVESTRONG foundation; its target-

date asset allocation funds are called

LIVESTRONG Funds.

“' is is something that no one else in

the industry really does,” ' omas says.

“It really gives people a higher purpose

and motivation, and I think it is part of

what makes this fi rm such a special place

to work.”

“ � is is all we do – we only do asset management.”

Jonathan Thomaspresident and chief executive offi cerAmerican Century Investments

American Century



Sticking with the ProgramWaddell & Reed culture values input of experts

Waddell & Reed

W R I Man-

agement Co. believes in sticking with what

works, and that approach has landed the

company at the top of the Lipper Awards

for the second year in a row.

+ e Overland Park, Kan.-based fi rm

was the overall fund family winner in

2009 among small companies. It also was

the small-fi rm fund family winner among

mixed-asset funds.

“+ is fi rm does not have a culture in

which every year we say, ‘Well, let’s try this

way,’ and then another year goes by and we

say, ‘Well, let’s try this way,’ ” says Michael

Avery, who is executive vice president and

chief investment offi cer of Waddell &

Reed Investment Management Co.

“I’ve been with Waddell & Reed for

well over 30 years, and the way we manage

money has not changed in that period of

time,” he says. “We do the same thing over

and over again, sticking with that process

and applying it every day.”

Waddell & Reed Investment Manage-

ment advises the Waddell & Reed Advi-

sors Funds, a total of 21 funds including

international and domestic equity funds;

fi xed-income funds; specialty funds such

as balanced funds and sector funds; and a

money market fund. As of Dec. 31, 2008,

the Advisors Funds had a total of about

$23 billion in assets under management.

Also as of Dec. 31, 2008, the Waddell &

Reed Advisors Funds had approximately

$3.1 billion in assets under management

in the mixed-asset category, within three

funds: Advisors Asset Strategy Fund, Ad-

visors Continental Income Fund and Ad-

visors Retirement Shares.

Central to Waddell & Reed’s time-test-

ed approach to managing money is a daily

meeting of its Investment Management

Division. + ere are 62 portfolio managers

and analysts in the Investment Manage-

ment Division, and every day they meet

as a group from 8:45 to about 10 a.m. On

any given day, more than half the portfolio

managers and analysts are able to attend.

“+ e design of the meeting is to be an

around-the-room discussion in rapid fash-

ion, starting with major macroeconomic,

social and political developments and

drilling down to the implications for major

asset classes, to sectors, to industries to in-

dividual companies,” Avery says.

+ e meeting is chaired by Chief Execu-

tive Offi cer Hank Herrmann, which is an

indication of the importance the company

puts on this sharing of ideas. “+ e way

Hank runs the meeting is that everybody

contributes,” Avery says. “He says, don’t

hold anything back, and let’s use it as the

platform for healthy discussions when we

leave the room.”

+ is frank and honest input helps

managers to better understand the huge

amounts of information that they receive

every day. “+ is is a business where there’s

no lack of information,” Avery says. “But

you need people to help you sort out the

relevant pieces of information.”

He adds, “It’s like a family jigsaw puzzle.”

Everyone has some of the pieces, and the

idea is to work together to combine those

pieces into a whole.

In addition to being executive vice presi-

dent and chief investment offi cer, Avery is

a co-portfolio manager of the Lipper-hon-

ored Asset Strategy Fund. He says he of-

ten fi nds inspiration in the daily meeting.

“We listen to people who are smart and

focused on one area,” he says. “If you listen

to all those people and ask them ques-

tions, you take away a broad overview of

where you think the world is headed and

how you think investments should be al-

located.”

And, he says, “If you do it that same way,

day in and day out, every day, it works.”

Avery also notes that the daily meeting

is successful not just because people have

good ideas, but because the structure of

the fi rm encourages them to share those

ideas. “We don’t have teams siloed in a

way where teams don’t talk to one an-

other,” he says. In addition, compensation

is not based on how well the funds do in

competition with each other, which could

discourage information-sharing. Rather,

Avery says, compensation is based in part

on how much individual analysts and port-

folio managers contribute to the overall

success of all the fi rm’s funds.

Avery says that the fi rm’s culture con-

tributes to long tenure among its profes-

sionals. Avery has 30-plus years with the

fi rm, and CEO Herrmann has 40 years.

“+ at is not only unique, but it probably

also adds to the success of the system,” Av-

ery says.

He believes this commitment to a time-

tested process will guide the fi rm through

the current economic crisis. “Having peo-

ple who have been in the business and have

been doing things successfully for a long

time has to help,” he says.

“ If you do it that same way, day in and day out, every day, it works.”

Michael Averyexecutive vice president and chief investment offi cerWaddell & Reed Investment Management Co.



Value of IntegrationJanus studies equity, credit sides of companies

Janus Capital Management

J C M LLC

won Lipper Awards in two categories:

large company fi xed-income fund family

and large company mixed-asset fund fam-

ily. According to Gibson Smith, co-chief

investment offi cer of Janus, the combina-

tion of awards is a testament to the fi rm’s

investment model, which integrates fi xed-

income and equity research.

In conducting research on a company,

Smith says, Janus looks at how that com-

pany manages both its equity and its debt.

“Companies can use debt or leverage to

turn little profi ts into big profi ts in good

times, so having that additional leverage

within your capital structure can really en-

hance returns,” he says. “At the same time,

having a lot of leverage in your capital

structure can be detrimental to returns

in diffi cult economic times. So when we

approach a company, we’re looking at the

business from a fundamental standpoint,

and we’re also analyzing the balance sheet

of the company to make sure we are buy-

ing into a business that is being managed

properly on the capital structure side, with

a balance between debt and equity.”

7 is kind of fundamental research is a

cornerstone of Janus, according to Smith.

”We’re looking at companies from the bot-

tom up, trying to understand the key driv-

ers of those businesses,” he says. “We have

a deep focus on return on invested capital,

the free cash fl ow generation ability of the

businesses, and how management is set-

ting the business up for long-term success.”

7 e fi rm’s analysis includes detailed

modeling, but analysts also hit the road to

meet with management and talk to suppli-

ers, competitors and employees. “We focus

on getting as close to the business as we

possibly can, thinking about it as being an

owner,” Smith says.

7 is approach applies to all the funds

managed by Janus – a total of 33 strategies

with $64.1 billion in assets under manage-

ment. 7 ere are three fi xed-income strate-

gies with $3.2 billion in assets under man-

agement, and fi ve mixed-asset strategies

with $4.8 billion in AUM. (Figures are as

of Dec. 31, 2008.)

7 e fi xed-income funds draw on the

work of 12 fi xed-income analysts and

three portfolio managers, and the mixed-

asset funds use that team as well as 33

equity analysts and 19 portfolio managers.

On the fi xed-income side, Smith says

that, especially after recent federal govern-

ment eff orts to prop up Fannie Mae and

Freddie Mac, there are really only two

parts to the market – government bonds

and corporate bonds. Janus focuses on cor-

porate bonds, where its deep understand-

ing of companies comes into play.

“From the debt side of the equation,

we have to look at what the management

team is doing to change the valuation on

the equity side,” Smith says, noting that

most company management teams are

compensated based on the equity side

of their business. “As credit investors, it’s

very important that we think like equity

investors,” he says. “Looking at a business

through both the debt and the equity is so

important in terms of driving conclusions

around the business.”

For the most part, Smith says, “We’re

looking for … management teams that

realize they have taken on too much debt

and that they have to use the free cash fl ow

of their business to de-leverage.”

In managing its mixed-asset funds,

Janus takes the same approach to under-

standing companies. But it also weighs the

overall asset mix of the funds and adjusts it

to meet the conditions of the market.

For example, Smith says, the Balanced

Fund, which Smith helps manage, has

a default allocation that is 60% equities.

However, over the last four years, he and

the fund’s other manager have looked hard

at the risk/reward profi le of the equity and

fi xed-income components, and they have

taken steps to reduce the amount of risk

in the fund.

“We have a core philosophy that risk

can be viewed as a permanent loss of capi-

tal,” he says. As a result, they have adjusted

the allocation to about 50% equity and

50% fi xed-income.

Smith believes that Janus’ focus on un-

derstanding individual companies works

especially well in this market. “We are in a

market that is focused on individual secu-

rity selection, so the ability to diff erentiate

ourselves in this market will come down

to our in-depth fundamental research and

being stock and bond pickers in this dif-

fi cult market,” he says.

“7 ere are companies that are going to

do extremely well in this tough environ-

ment and are going to come out of this

very strong. 7 ere are other companies

that are going to go away,” Smith says.

And, he adds, the key to success, both

now and going forward, is being able to

tell the diff erence.

“ We’re looking at companies from the bottom up, trying to understand the key drivers of those businesses.”

Gibson Smithco-chief investment offi cerJanus Capital Management LLC



Management Company Lipper Classifi cation Fund NameTicker Symbol Load Type

Boston Trust Investment Management Inc Phone 800-282-8782

Mixed-Asset Target Allocation Growth Funds

Boston Trust Balanced Fund BTBFX No Load

RidgeWorth Funds Phone 888-784-3863

Intermediate Investment Grade Debt Funds

RidgeWorth Investment Grade Bond Fund, I

STIGX Institutional Load

MassMutual Life Insurance Company Phone 888-309-3539

Large-Cap Value Funds MassMutual Select Fundamental Value Fund, S

MVUSX Institutional Load

Schwartz Investment Counsel Inc Phone 888-726-9331

Multi-Cap Core Funds Ave Maria Growth Fund AVEGX Level Load

Markman Capital Management Inc Phone 800-707-2771

Large-Cap Growth Funds Markman Core Growth Fund, I MTRPX No Load

Saturna Capital Corporation Phone 800-728-8762

Multi-Cap Growth Funds Amana Growth Fund AMAGX No Load

Brown Brothers Harriman Phone 800-625-5759

Large-Cap Core Funds BBH Core Select Fund, N BBTEX No Load

Janus Capital Management LLC Phone 800-525-0020

International Multi-Cap Growth Funds

Janus Adviser International Growth Fund, I

JIGFX Institutional Load

Natixis Asset Management Advisors LP Phone 800-225-5478

Small-Cap Core Funds Natixis Vaughan Nelson Small Cap Value Fund, A

NEFJX Front-End Load

HighMark Capital Management Inc Phone 800-433-6884

International Multi-Cap Core Funds

HighMark International Opportunities Fund, M

HIOMX No Load

BB&T Asset Management Inc Phone 800-228-1872

Equity Income Funds BB&T Equity Income Fund, B BEIBX Back-End Load

MFS Investment Management Phone 800-225-2606

Mixed-Asset Target Allocation Moderate Funds

MFS Global Total Return Fund, I MFWIX Institutional Load

Dimensional Fund Advisors LP Phone 310-395-8005

Emerging Markets Funds DFA Emerging Markets Value Portfolio, Institutional

DFEVX Institutional Load

Needham Investment Management LLC Phone 800-625-7071

Mid-Cap Growth Funds Needham Aggressive Growth Fund NEAGX No Load

Heartland Advisors Inc Phone 800-432-7856

Multi-Cap Value Funds Heartland Select Value Fund, Investor

HRSVX No Load

Epoch Investment Partners Inc Phone 800-527-9525

Global Multi-Cap Value Funds Epoch Global Equity Shareholder Yield Fund, Institutional

EPSYX No Load

J.P. Morgan Funds Phone 800-480-4111

Mid-Cap Value Funds JPMorgan Mid Cap Value Fund, Institutional

FLMVX Institutional Load

Wells Fargo Funds Management LLC Phone 800-222-8222

High Current Yield Funds Wells Fargo Advantage Short-Term High Yield Bond Fund, Investor

STHBX No Load

2009 U.S. Lipper Three-Year Fund Classifi cation Winners35 Largest Classifi cations



Management Company Lipper Classifi cation Fund NameTicker Symbol Load Type

BlackRock Inc Phone 800-441-7762

Mid-Cap Core Funds BlackRock US Opportunities Portfolio, Institutional

BMCIX Institutional Load

Bessemer Investment Management LLC Phone 800-607-2200

General Municipal Debt Funds Old Westbury Municipal Bond Fund OWMBX No Load

American Beacon Advisors Inc Phone 800-345-2345

International Large-Cap Value Funds

American Beacon International Equity Fund, AMR

AAIAX No Load

American Century Investment Management Inc Phone 800-345-3533

Corporate Debt A-Rated Funds

American Century Diversifi ed Bond Fund, Institutional

ACBPX Institutional Load

Vanguard Group Inc Phone 800-662-7447

Short Investment Grade Debt Funds

Vanguard Short-Term Bond Index Fund, Admiral

VBIRX No Load


Global Flexible Port Funds BlackRock Global Allocation Fund, Institutional

MALOX Institutional Load

Harbor Capital Advisors Inc Phone 800-422-1050

International Large-Cap Core Funds

Harbor International Fund, Institutional

HAINX No Load

Robert W Baird & Company Inc Phone 866-442-2473

Intermediate Municipal Debt Funds

Baird Intermediate Municipal Bond Fund, Institutional

BMBIX Institutional Load

Van Kampen Asset Management Phone 800-847-2424

Small-Cap Growth Funds Van Kampen Small Cap Growth Fund, A

VASCX Front-End Load


GNMA Funds BlackRock GNMA Portfolio, BlackRock

BBGPX Institutional Load

Waddell & Reed Investment Management Company Phone 888-923-3355

Flexible Portfolio Funds Waddell & Reed Asset Strategy Fund, Y

WYASX Institutional Load


Treasury Infl ation Protected Securities Funds

BlackRock Infl ation Protected Bond Portfolio, BlackRock

BPLBX Institutional Load

Delaware Management Company Phone 800-362-7500

Multi-Sector Income Funds Delaware Diversifi ed Income Fund, Institutional

DPFFX Institutional Load

Hussman Econometrics Advisors Inc Phone 800-487-7626

Mixed-Asset Target Allocation Conservative Funds

Hussman Strategic Total Return Fund

HSTRX No Load

Calvert Funds Phone 800-368-2745

Corporate Debt BBB-Rated Funds

Calvert Long Term Income Fund, A CLDAX Front-End Load

Intrepid Capital Management Inc Phone 866-996-3863

Small-Cap Value Funds Intrepid Small Cap Fund ICMAX No Load

American Funds Phone 800-421-0180

Global Large-Cap Core Funds New Perspective Fund, R-5 RNPFX Institutional Load


The Strength of Their ConvictionsAmerican Funds gives analysts the power to act on their research

For American Funds, success is about

fundamentals and empowerment. Ameri-

can Funds, which was the 2009 Lipper

Award winner in the large-company equi-

ty fund family category, relies heavily on its

analysts to provide insight into companies

whose strong fundamentals make them

market leaders. And it gives those analysts

the power to act on their insights.

" e fi rm has focused on fundamentals

since it was founded in Los Angeles in

1913. Dale Hanks, vice president of Capi-

tal Research and Management Company,

the investment adviser to American Funds,

explains, “" e company was a pioneer in

what would today be called fundamental

analysis, meaning truly looking at busi-

nesses and company fundamentals, and

investing in the equities when you felt that

the valuation the market was providing on

those company fundamentals was advanta-

geous to a long-term investment horizon.”

American Funds has a total of 31

funds, with about $830 billion in assets

under management as of Dec. 31, 2008.

In the equity category, it has 16 funds,

which had about $570 billion in AUM at

the end of 2008.

Analysts are the cornerstone of the

American Funds strategy. " e fi rm has

analysts worldwide, working out of its of-

fi ces in Los Angeles, New York, Washing-

ton, D.C., San Francisco, Geneva, London,

Hong Kong and Tokyo.

“Analysts are given the assignment to

get out and understand the industries that

they are asked to cover, and the compa-

nies within those industries,” Hanks says.

“" ey are given the tools that they need,

and they go out and kick the tires, visit

companies and try to understand them

from the bottom up.”

Some analysts work with a single in-

dustry, while others work with more than

one industry. Some focus on an industry

worldwide, while others look at an indus-

try either regionally or within an individ-

ual company. “The decision is based on

what our investment professionals feel is

really the best way to understand the com-

panies and the opportunities,” Hanks says.

" e analysts have a signifi cant impact

on the makeup of portfolios in two ways.

First, their research weighs heavily in the

decisions made by portfolio managers.

“ Analysts in our organization actually make investment decisions.”

American Funds


But American Funds also allows its

analysts to put their money where their

mouth is. Each portfolio includes a Re-

search Portfolio, in which the decisions on

what stocks to buy or sell are made by the

analysts.

“Analysts in our organization actually

make investment decisions,” Hanks says.

“% ey manage shareholder assets in the

fund. % ey are not just making recom-

mendations, like now is a good time to

buy XYZ Corp.; they actually are making

those decisions.”

% e Research Portfolio is about 20% to

25% of each portfolio. % at percentage is

then divided among the analysts, who are

able to choose – or reject –equities in their

area of expertise. “An analyst may have

only a small piece of a particular fund, but

he or she may have a small piece of many

funds,” Hanks says.

% e rest of the portfolio decisions are

made by the portfolio managers, whom

American Funds calls portfolio counsel-

ors; they rely heavily on input from the an-

alysts. % ere can be as many as 11 portfo-

lio counselors on each fund, which means,

“You could have 40 or 50 people making

decisions in a fund,” Hanks says. American

Funds sees this as a strength, Hanks says,

because the fi rm can draw on the opinions

of so many experts.

% e value American Funds places on its

analysts is evident in the fact that analysts

often make as much in compensation as

portfolio counselors. An analyst can be-

come a portfolio counselor, but he or she

also can choose to remain an analyst, with-

out any loss of status or compensation,

Hanks says.

He believes that because of the au-

tonomy and respect that the fi rm gives to

both analysts and portfolio counselors, its

professionals tend to stay with the fi rm.

Portfolio counselors, for example, have an

average of more than 20 years with Ameri-

can Funds.

Hanks says the value of this approach

becomes even more evident in tough eco-

nomic times. “Clearly in the investment

business, you don’t get it right 100%. But

we focus on understanding a business and

its fundamentals, and on the long term,

and that’s where we really think that we

are going to add value,” he says.

“% ere are going to be companies that

are not going to survive, and there are

going to be other companies that are not

only going to survive, but are going to ben-

efi t from the weakness of others,” he says.

“Our approach is very conducive to identi-

fying the winners over the long haul, and

hopefully avoiding those companies that

are not going to survive.”

“ We focus on understanding a business and its fundamentals, and on the long term.”

We proudly congratulate Greg Habeeb, Calvert Senior Vice President

and Lead Portfolio Manager,and his taxable bond fund team on earning

a fifth annual Lipper award in the past six years.For more information visit calvert.com.

Lipper Fund Awards are granted annually to the funds ineach Lipper classification that achieve the highest score forConsistent Return, a measure of funds' historical risk-adjusted returns, measured in local currency, relative topeers. Funds registered for sale in a given country areselected, then scores for Consistent Return are computedfor all Lipper global classifications with five or more dis-tinct portfolios. The scores are subject to change everymonth and are calculated for the following periods: three-year, five-year, ten-year, and overall. The highest 20% offunds in each classification are named Lipper Leaders forConsistent Return. The highest Lipper Leader forConsistent Return within each eligible classification deter-mines the fund classification winner over three,five,or tenyears. Source: Lipper Inc.

Past performance is no guarantee of future results.

Please keep in mind, investment in mutual fundsinvolves risk, including possible loss of principal invested.Bond funds are subject to credit risk, inflation risk, andinterest rate risk. When interest rates rise, the value offixed-income securities generally fall.

For more information on any Calvert mutualfund, please call Calvert at 800.818.8397 for afree prospectus. An investor should considerthe investment objectives, risks, charges, andexpenses of an investment carefully beforeinvesting. The prospectus contains this andother information. Read it carefully before youinvest or send money.Calvert mutual funds are underwritten and distributed by CalvertDistributors, Inc . , a member of FINRA and subsidiary of CalvertGroup, Ltd. #8866 (3/09)

L I P P E R F U N D AWA R D W I N N E R

Calvert Long Term Income Fund (CLDAX)

Best Corporate Debt Fund BBB-Rated

Based on risk-adjusted performance among 116 funds in the Corporate Debt Fund BBB-Rated classification

over three years ending December 31, 2008.



Across the BoardRainier seeks equity winners in every sector

R I M,

Inc. believes in specialization: Its focus is

almost exclusively on U.S. growth stocks.

At the same time, though, it believes in tak-

ing a broad look at those stocks across all

sectors. . at approach has earned Rainier

the 2009 Lipper Award for the top equity

fund family among small fi rms.

. e fi rm, which is headquartered in

Seattle and also has offi ces in New York,

had $12.5 billion in assets under manage-

ment as of Dec. 31, 2008, including insti-

tutional assets and mutual funds. It has

fi ve funds, representing about 35% of its

assets under management. . e vast ma-

jority of these assets – about 95% – are in

its three equity portfolios; Rainier also has

a balanced fund and a fi xed-income fund.

“We are primarily an equity shop, and

for us, that really means U.S. growth

stocks,” says Len Brennan, president and

chief executive offi cer of Rainier.

. e fi rm has a large-cap, a mid-cap and

a small/mid-cap fund. . e small/mid-cap

and the large-cap funds were launched in

1994, and the mid-cap fund was launched

after the small/mid-cap fund was closed to

new investors at the end of 2005.

Brennan says the fi rm’s philosophy is

simple: “We believe that earnings growth

drives stock prices.” As a result of this

philosophy, Rainier seeks to identify com-

panies “that have a sound economic foun-

dation with regard to their business, their

ability to get market share, the strength of

the organization versus their peers in terms

of, for example, new product off erings.”

At the same time, Brennan says, “We

identify growth, but there has to be a rea-

sonable or a sensible price paid for that

growth.”

Another critical part of Rainier’s ap-

proach to picking stocks is the belief that

growth can occur in any sector of the mar-

ket. In fact, Brennan says, the fi rm partici-

pates in all sectors of the S&P 500 – even

those that may not traditionally be consid-

ered growth sectors.

“. is ensures that our clients are partic-

ipating across the broad spectrum of eco-

nomic sectors and industry sectors,” Bren-

nan says. “Our responsibility is to identify

growth opportunities within each sector.”

One obvious advantage of this approach

is that it provides automatic diversifi cation

for investors. But more than that, Brennan

says, it puts them in a good position when

a sector begins to pick up speed.

“It’s a recognition that, as you go through

market cycles, there is always diff erent lead-

ership,” he says. “We don’t want our clients

to miss an opportunity because the leader-

ship of a cycle was an industry sector that

was not defi ned as a growth sector.”

For example, he says, at the end of 2001

or 2002, most benchmarks put energy in

the value rather than growth category. But

Rainier included in its portfolios those

stocks that its experts thought off ered the

best growth in the energy sector.

“Two years into the cycle, energy stocks

are now categorized as growth stocks. But

it would have been too late by then for cli-

ents to have participated in that growth,”

Brennan says.

In choosing stocks for its portfolios,

Rainier starts with a broad screening of a

wide range of companies, looking for those

that have an industry consensus forecast

for high earnings growth. . is screen-

ing process whittles 3,000 or more stocks

down to about 500 to 600.

At that point, Rainier’s portfolio man-

agers begin to dig deeper. . e fi rm’s nine

portfolio managers are broken into sector

teams with two to three portfolio manag-

ers on each team. . ey are responsible for

doing additional research to identify what

stocks should be bought – or sold.

No single holding can make up more

than 5% of any portfolio, and the top hold-

ing in a portfolio usually is closer to 3% of

the total. “We defi nitely believe in gener-

ating returns in small amounts on a large

number of stocks, rather than having the

philosophy that we’re going to bet it all on

one company or sector,” Brennan says.

“We fundamentally believe in diversity,

and we believe in our ability to identify com-

panies across a spectrum of industry groups.

We want to have enough names represented

so that our insight into those companies

adds value to the portfolio,” he says.

Brennan is confi dent that Rainier’s un-

derlying philosophy will continue to serve

investors well even in these tough econom-

ic times.

“We’ve been in business for a long time,

and we believe that our clients have not

hired us to have a knee-jerk reaction to an

economic environment in terms of chang-

ing the way we run money,” Brennan says.

“Is this cycle diff erent? Every cycle is

diff erent. Clearly this one is deep and dra-

matic and has structural and foundational

changes. But we view it as incumbent upon

us to stick to our philosophy, and let the

clients decide whether it is appropriate for

their portfolio.”

“ We believe that earnings growth drives stock prices.”

Len Brennanpresident and chief executive offi cerRainier Investment Management, Inc.

Rainier Investment Management



The Conservative ApproachHighMark works to weed out risk in its fi xed-income funds

HighMark Capital Management

T

HighMark Capital Management, Inc. “We

are a conservative investment manager,”

says Greg Knopf, managing director of

mutual funds for the San Francisco-based

company. Following that conservative phi-

losophy made HighMark the 2009 Lip-

per Award winner among small company

fi xed-income fund families.

Knopf says the company, which is

owned by Union Bank of California, has

followed this approach since it began

managing money more than 90 years ago.

In addition to its San Francisco headquar-

ters, the fi rm has offi ces in Los Angeles,

Seattle, San Diego, Portland, Ore., and

Irvine, Calif.

As of Dec. 31, 2008, HighMark had 24

funds with a total of $8.5 billion in assets

under management. Four of those were

fi xed-income funds, with about $600 mil-

lion in assets.

H e fi rm’s fi xed-income family consists

of two taxable bond funds: the Short-

Term Bond Fund, which began retail sales

in 2004; and the Bond Fund, an interme-

diate-term fund that went retail in 1994.

In addition, it has two tax-exempt bond

funds: the National Intermediate Tax-Free

Fund, available since 2003; and the Cali-

fornia Intermediate Tax-Free Fund, which

opened in 1994.

Signifi cant assets for all four bond funds

come from the clients of Union Bank’s

Trust Department, which makes the con-

servative philosophy of the funds even

more valued, Knopf says.

“We’re very credit conscious; we’re very

aware of the entity that is issuing the

bonds,” he says. “Especially in the area of

our tax-exempt bonds, we’ve never relied

on the insurance wrapper as the rating.

We always look through the insurance and

make sure the credit standing on its own

has an appropriate rating.”

In order to look beyond the insurance

rating, the fi rm’s analysts take the position

that, “We’re just plain conservative, so if

there’s any hint of issues, we’re just not go-

ing to own a bond,” Knopf says.

HighMark’s fi xed-income analysis is an-

chored by the two men who manage the

fi xed-income funds — Robert Bigelow for

tax-exempt funds and Jack Montgomery

on the taxable side.

Knopf says that Bigelow has a deep un-

derstanding of the municipalities and oth-

er bond issuers he deals with. He not only

studies existing research, but he also visits

the cities and examines their fi nancial sta-

bility. He is not averse to holding cash until

he fi nds the right investment opportunity,

Knopf says, adding, “He’s very picky in

what he buys.”

Montgomery leads a similar eff ort in

taxable bonds. Knopf notes that there is a

lot of research available on taxable bonds

and the companies that off er them. “But if

you look in this environment, that hasn’t

always helped,” he says.

Knopf says that the best analysts can see

beyond the conventional ways of looking at

the data. “What separates some managers

from others is that they are just better at

interpreting the available research,” he says.

In the case of HighMark’s analysts, he

says, they fi rst ask whether the underlying

fi nancial reality of the entity issuing the

bond is suffi cient to merit the rating given

to the bond.

“H en we also ask ourselves whether

there is an event that could take place that

could change the rating positively,” he says.

In other words, they not only try to elimi-

nate bonds that are rated too high; they

also look for bonds that might be poised

to improve their rating.

Knopf says this approach is especially

welcome in the current economic envi-

ronment. “Obviously, in this environment

– which has gone on for quite some time

now, where there is an aversion to risk –

that has served us very well in the types of

securities we’ve bought,” he says.

But for HighMark, this is not a phi-

losophy driven by the current markets. In-

stead, it is the fi rm’s approach to investing,

no matter what the markets. “We know

that there will be periods of time when

the market is rewarding risk more,” Knopf

says. “But we believe that, over time, taking

that risk is not worth it.”

Knopf notes that this approach to

risk comes naturally to the fi rm, which

is owned by a conservative bank. Union

Bank, owned by the Japanese fi rm Mit-

subishi UFJ Financial Group, Inc., avoided

the fi nancial upheaval that has affl icted

many banks, Knopf says, explaining that

the parent company, like HighMark, is

philosophically opposed to too much risk.

“H e idea of being conservative comes

from the top down,” he says.

Knopf notes that HighMark funds fi ll a

niche for investors looking for more-con-

servative vehicles. HighMark clients un-

derstand the fi rm’s investment philosophy

and are comfortable with it.

“Clients buy our funds because they ap-

preciate our sensitivity to credit and our

aversion to risk,” he says. And, true to the

fi rm’s underlying philosophy, it does not

intend to change.

“ Clients buy our funds because they appreciate our sensitivity to credit and our aversion to risk.”

Greg Knopfmanaging director of mutual fundsHighMark Capital Management, Inc.

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