Q:  What kind of investment services does ICON Advisers provide? A : The ICON International Equity Fund is one of the 17 funds managed by ICON Advisers Inc, an investment management firm founded in 1986. Using a proprietary Benjamin Graham-based value model, the firm invests globally using a multicap, sector rotation strategy. ICON has about $2.2 billion of assets under management as of August 31, 2010, of which roughly $100 million of assets are managed by the ICON International Equity Fund. Q:  What is the main investment methodology of the fund? A : The fund seeks long-term capital appreciation using a value-based methodology to identify securities that ICON believes are underpriced relative to value. The fund normally invests at least 80% of its net assets, in addition to any borrowings for investments, in foreign equity securities that are listed or traded on a recognized stock exchange or over-the-counter market outside the United States. Equity securities include common and preferred stocks of companies of any market capitalization. Q:  How does the fund achieve this investment methodology? A : The fund relies on ICON’s proprietary investment model focusing on valuation, relative strength, and industry rotation to capture changing market themes. This disciplined methodology is designed to remove emotions from the investing process. Q:  What are the main steps of this methodology? A : The process is designed to compute value-to-price ratios or V/P, utilizing the financial fundamentals of earnings, projected growth, beta, and bond yield. Then, the process identifies industries within sectors that show leadership compared to the broader market as calculated by our system. ICON’s methodology allows us to rotate among undervalued and overvalued industries, buying those believed to be on sale and selling those that are seen as overpriced. Q:  How has the investment methodology evolved? A : We started with the investment methodology advocated by Benjamin Graham to arrive at intrinsic value and adapted it to meet today’s market conditions. Our process incorporates an earnings component, a growth component, a company-specific discount rate, and a market risk measure. Q:  What are the steps that you follow once the intrinsic value is found? A : After determining the intrinsic value, we consider the current market price and create a value-to-price ratio. This tells us whether a sector, industry, or security is under- or overpriced relative to our estimate of intrinsic value. Typically, we look for industries that are priced below our estimates of intrinsic value while demonstrating relative strength during the prior six-month period. As themes develop or change, industries can migrate in market capitalization and style. Since we are a multicap manager, we have the flexibility to go anywhere in the market-cap grid to find value and identify changing themes. Our methodology is analytical, quantitative, and unemotional; therefore, we neither rely on outside research findings, nor visit companies or management. What we do instead is use data from leading industry experts and compute value as part of our proprietary investment methodology. Q:  Why do you look at six months of relative strength and not at shorter or longer periods? A : We have found that any period of fewer than six months does not give a correct view of the strength in the industry, while anything more than six months may leave us with no time to take advantage of the growth. We continually examine our research—this process and our practical experience indicate that a six-month timeframe is ideal. Q:  How do you construct your portfolio? A : We screen approximately 2,000 securities from more than 30 foreign countries. We project earnings growth into the future and then discount those back to their present value according to risk and interest rates. ICON requires both value-to-price ratios and relative strength ratios to make investment decisions. By computing equal-weight value-to-price averages for all stocks to develop valuations across the 154 industries in the Standard & Poor’s Index and the MSCI Barra Global Industry Classification Standard, we determine the V/P ratio for each of the 154 industries. This approach of finding V/P ratios for the industries is based on the belief that random risk is highest at the individual stock level. By stressing industry exposure and holding a selected number of stocks within an industry, we try to reduce the random risk associated with individual securities. In addition, in order to avoid buying stocks and industries before they are ready to move upward, we employ a relative strength calculation. Given that relative strength is computed continually using the trailing 26-week period performance, our calculations are generally insulated from short-term dips or surges. Q:  What is your sell discipline? A : ICON’s buy and sell disciplines are determined at the industry level first. Once industry decisions are made, our buy and sell disciplines are applied at the security level. We generally sell when an industry drops to the bottom 10% of a V/P ranking set, which indicates that it has become extremely overpriced relative to other industries. Additionally, when the industry falls below the bottom 20% of the relative-strength scale it indicates poor performance, in which case we may also sell the industry. Q:  What is the benchmark index for this fund? A : We invest at least 80% of the assets in the international markets. The fund’s benchmark is the MSCI All Country World Index ex-U.S. Q:  How many names do you typically have in the portfolio? A : We typically have representation in 45 to 55 industries with some 90 to 120 holdings. The number of countries represented will vary depending on the market conditions. Q:  What is the turnover in the fund? A : In general, we do not use fund turnover to measure performance or make investment decisions. Q:  What would you consider as primary sources of risk and how do you measure and control them? A : The primary sources of risk are foreign investment risk, small and mid-size company risk, and general stock market risk. Our belief is that random risk is highest at the individual stock level. By stressing industry exposure and holding a selected number of stocks within an industry, we hope to reduce the random risk associated with individual securities. Moreover, although we tilt our portfolios toward favored industries, we tend to limit the portfolios exposure to any one stock.