Q:  What is the investment philosophy of the fund? A: The ICON Asia-Pacific Region Fund invests in industries that are expected to lead the market for one to two years. Our investment philosophy is clearly industry-focused. We invest in industries with stocks that are selling at a discount to intrinsic valuation. In addition to that, we invest in companies that are in the early stages of investors’ attention. We employ a relative strength metric, a measure of investor interest. Combined, we look for situations where the entire industry is (1) trading at a discount and (2) still at an early stage of stock valuation acceleration. We have recently seen that international investing has become less of country investing and more of industry investing. Q:  How many industries do you track? A: We are generally tracking 147 industries in the international markets. We also look for industry and country themes. Sometimes the industries will move altogether in different countries, but sometimes you can see certain pockets where certain countries are moving in tandem. A leading example of that is the diversified banks industry. There are many banks internationally. We’re tracking over one hundred within our international database, banks in one country could be leading the market and in another country they could be lagging. We can picks banks that are trading at a discount to the intrinsic value of the company. Q:  What is the thinking behind that industry-focused approach? A: As the stock market goes through time it experiences themes. By a theme, I mean certain industries lead for one to two years. The key to beating the broad market benchmark is to be in the stronger than average industries. The stocks within the industries tend to move to the beat of the same drummer. When we construct the portfolio within each favored industry, oftentimes we’re not putting our entire industry allocation to one or two names. Hypothetically, if we had a 5% position in an industry, it would be typical to populate that 5% with five names at 1% each rather than holding 5% in one company. Q:  How do you compare the relative merits of the players in the same industry even though they are in different countries? A:We invest in companies that are trading at a discount to the intrinsic value, growing at an above average rate to their peers in the industry and companies that are run by management that has a track record of delivering earnings growth. Within a particular industry, we rank companies for their investment merits on quality of earnings, management track record and market valuation. We look for companies that are likely to grow earnings and are at an early stage on investors’ radar. Q:  How do you put this philosophy of sector focus into place? A: ICON employs a quantitative system and we require historical data to run our models which are hard to come by in emerging markets. In the Asia-Pacific region we’re currently tracking eleven countries and over 930 companies. The countries that we track include Taiwan, Japan, Singapore, South Korea, Hong Kong, China, Thailand, Malaysia, Australia, Indonesia and New Zealand. We benchmark the fund against the MSCI All Country Pacific Index. It’s a list of diversified countries. Asia is more tech-heavy than Europe, so one would be more comfortable holding more technology names in Asia. We are benchmark- aware but we are not benchmark- centric. We have our active bets in place, yet we still have our eye on the market and on the benchmark to know what’s prudent. Q:  How do you find ideas and then how does the idea turn into a holding? A: It’s a quantitative process, so every night for all 930 Asian stocks, we calculate the intrinsic value and compare it to the latest market price, so if anything changes we’re going to dynamically capture the change. We run the same fourhour computational process for the U.S. stocks as well as for all of our international stocks. Then we have a series of reports and screens to group and segment the individual companies. When it’s time to make a portfolio decision, we still look at industry level. For example, the steel industry, the global cyclical theme, has been in place for over three and a half years and is still going strong. We’ve had some recent pullback, yet the Asian steel industry looks as an attractive place to be and we are tracking fifteen steel companies. Our intrinsic value-to-price ratio for the sector is 1.47, and that means the stocks, on average, are worth 47% more than they’re currently trading at. The higher the value-to-price ratio, the bigger the discount in the market. We also like to look at technical factors affecting the stock and investor sentiment driving demand in the marketplace. To measure that we look at a relative strength measure on a moving six-month average basis. We buy industries that have two traits: prices below our estimate of intrinsic value and prices showing above average strength. Currently we are holding 54 industries in the fund. We will identify the ones we favor and then we’ll go down to the company level and find the companies to populate each industry. How much we’re going to invest in one industry is all dependent on how attractive it is relative to other opportunities. If it is a larger industry within the benchmark, we’ll feel more comfortable holding a larger position. Once we identify names in a specific industry we look at companies in each country that look attractive to us, and then look to the individual companies to initiate buying. When we get down to the company level, we’re going to look for companies that are trading at a discount to value. Once we get down to the individual stock level there might be eight names within an industry and we’re not going to add all the names in the portfolio. We have a quality metric we use to view the management quality of the company over time. We look at seven years of financial data to select companies to invest. We’re inherently going to be tilted towards companies with higher profitability, high level of cash, and low level of debt. We want the stock price to reflect our fair value estimate over a period of time. There is no guarantee that will happen as value can always deteriorate down towards price, so the quality metric helps us to identify an individual company that will hold its value or better increase over a period of time. Q:  How would you describe your sell discipline? A: Since we are looking at value and relative strength in the market, we take profit when an industry gets overextended and becomes too expensive. We sell an industry when its value/price ratio drops into the lower decile of the 147 industries. We also sell based on diminished relative strength when an industry drops into the lower 20 percentile of the 147 industries. In that case we take our profit or loss and reinvest these funds in other industries that meet our value/ price and relative strength criteria. Q:  You mentioned that there are about 54 industries in the fund. At this time, how many specific names do you have in the fund? A: We have around 100 stocks right now. A large position on an individual stock would be about 2.5%, as our holdings typically range from a 0.3% to a high of 2.5%. We like diversification at the individual stock level to reduce the potential for any surprise event with one stock to have a negative impact on the overall portfolio. Q:  What is the fund turnover in names and also in dollar terms? A: Our latest 12 month annual turnover was at 186% (as of 9/30/05). Industry themes typically last one to two years, which matches our typical holding period. Turnover the last few years has been higher than normal due to geopolitical events, turbulence and quicker than normal commodityrelated themes. Q:  How do you handle the currency- related risks or macro economic risks? A: We do not hedge currency risk in the fund. Within a multicurrency portfolio you get some diversification across different currencies, but we’re not hedging away the currency risk either. We do not perform top-down macro economic forecasting. We perform value based, bottom-up industry rotation. Regarding risk, we believe international macro economic differences are what contribute to low correlation which is one reason why investors add international stocks to their portfolio. Q:  What region do you see being undervalued most right now? A: We believe that the Pacific region is still undervalued by 36% and there may be a greater upside in the region in the next three years.