The investment process used in managing the Westport Funds has been in place since the establishment of the firm. Our investment philosophy is a modified form of bottom-up value investing that combines classic value investment with forward-looking business analysis. This approach combines low valuation, a value attribute, with improving earnings and cash flow, a growth attribute. This variation of value investing may reduce downside risk while offering the potential for capital appreciation as a stock gains favor among other investors as its price increases.

The firm's investment focus is on companies selling at a substantial discount to their intrinsic value. These companies are often out of favor with Wall Street due to transitory problems. The investment process begins with the identification of change in a company's products, operations, and management. In small to mid capitalization companies, dynamic change of this type tends to be material and may create misunderstanding in the marketplace and result in the company's stock becoming undervalued.

Once change is identified, the portfolio managers evaluate the company from a number of perspectives including what the market is willing to pay for stock of comparable companies or what a strategic buyer would pay for the entire company. The investment evaluation process also includes fundamental research, company visits and management assessment. In the overall assessment, the portfolio managers try to identify stocks that have greater upside potential than risk over an 18 to 24 month holding period.

The portfolio managers will generally sell a security when one of the following events occurs: a) if a negative change in the company's fundamentals has occurred since the initial analysis, or b) upon re-analysis when a stock reaches a pre-determined price objective.