Q:  Would you provide some information about the company? A : In 1975, Mr. Scharar founded FCA’s predecessor entity in Massachusetts. In 1979, FCA’s predecessor entity opened its business in Texas. Since that time, FCA Corp has provided financial planning and investment advisory services to individuals from various professions and to closely held businesses. FCA Corp is a registered investment advisor with just under thirty employees and approximately $320 million in assets under management. The Trust consists of four mutual funds - Commonwealth Australia/New Zealand Fund, Commonwealth Global Fund, Commonwealth Japan Fund, and Commonwealth Real Estate Securities Fund. The Commonwealth Australia/New Zealand Fund was launched on November 25, 1991 and remained exclusive to investing in New Zealand up until 2001, but was later expanded to include Australia. The fund invests primarily in Australian and New Zealand securities. The Commonwealth Japan Fund invests primarily in Japanese securities. The Commonwealth Global Fund invests in U.S. and foreign securities in developed countries or in countries considered to have developing or "emerging" markets, whereas the Commonwealth Real Estate Securities Fund invests in publicly-traded companies, both U.S. and foreign involved in real estate related activities and industries. Q:  What are the core principles of your investment philosophy? A : They are what we refer to as the three R’s. We seek to own “real” companies with “real” products and “real” financials. Our philosophy is derived from a persistent drive to research, select and invest for the long term in quality companies with strong fundamentals and attractive valuations. We seek out small and medium size companies in the region that are not well researched and offer tremendous opportunities. Q:  Why should one consider investing in Australia and New Zealand? A : We believe Australia and New Zealand are well positioned to support the Asian growth story in many ways. For example, New Zealand is a virtual exporter of water, having a wealth of natural water resources. They are able to have a sustainable agricultural program that basically converts that water along with the grass that has grown there, for example, into dairy products that can be exported. The demand for New Zealand agro-export is growing as the middle class keeps expanding in emerging economies. One of the first things that people start spending on when they have money is food. Another factor worth considering is that fast-developing nations in Asia need commodities and Australia, in particular, is well positioned to be a supplier of those for the foreseeable future. The continued expansion in Asian economies and the urbanization of emerging markets are driving the demand of basic commodities and food products. Therefore, Australia and New Zealand are probably the best geographically positioned economies to play that story with regards to Asia. On a broader basis, there is another reason to turn one’s eyes to the region. The Australian debt is only about 10% of the country’s GDP. Not only have these countries been fiscally responsible and are not overburdened with debt at this stage but they also have great growth prospects and relatively low unemployment. In addition, corporate laws in Australia and New Zealand work in a similar way to the United States, the tax regimes are understandable, and investors can benefit from the security and safety of their investment in a fairly business supportive environment. Last but not least, both countries have had stock markets for a very long time. That provides an opportunity to invest in the marketplace in Asia from a much safer standpoint. Q:  How do you convert your investment philosophy into a consistent investment strategy? A : We start with some basic approaches. The first step is based on reading and talking with people in those local marketplaces and visiting to get a sense of what opportunities are there. We generally run screens to identify candidates in two different ways. We have our own guidelines on what we are looking for, starting with something as simple as price-to-book or free cash flow analysis or dividend yield. We may take a couple of these measurements and search for companies that we evaluate as ranking high in all those categories. But in addition to that, we also try to learn more about under-researched companies by monitoring news articles or talking to people. We review for companies that have products that we like and we identify companies that appear to be real companies. Our goal is to determine whether they pay a dividend or other indications of substance and to see if there are opportunities in their financials that may have not yet been recognized by the market. We take on ground trips, make phone calls to people, and build friendships and links as part of our extensive research. Q:  Would you discuss some examples to illustrate your research process? A : We are certainly bottom-up stock investors. Still, that does not mean that we do not consider some of the macroeconomic conditions. When looking at a security we try to make an estimate of what the value of the company is. An example of our process would be Eastern Star Gas Limited, an Australia-based company focused on exploration, development and production of coal seam gas. We first recognized that the demand for liquefied natural gas was going to be growing more and more as Asia kept developing. Then, we concluded that Eastern Star Gas had a tremendous amount of reserves in prime locations. Santos Ltd announced a takeover offer for Easter Star Gas in July 2011. Another example would be a company called South Port New Zealand Limited, which is a commercial port in New Zealand. As a long-term investor in South Port, we know that it was not followed by most investors in the New Zealand when we first invested. There were several favorable aspects that attracted us to the company. First of all, the largest shareholder essentially was the regional council. Here we found a stakeholder who had a lot of incentives, to our way of thinking, to run this company for the long-term growth of the community. After talking to management, we got a sense that they were not focused on short-term earnings and profits but on growing their business in a prudent manner. After delving more into the company, we began to learn there were some very interesting things about this business. For example, they had a long-term contract with an aluminum facility. Then we also realized it was a great export opportunity for timber and all kinds of agricultural products. We basically looked at accounting fundamentals and we thought it had a very cheap price-to-book ratio, a decent dividend yield, a low price-to-earnings ratio, and over time we just kept accumulating the shares of the stock. Q:  How would you describe the educational services of Australia as an export? A : We see education as a legitimate export product. For example, New Zealand has a number of universities and a lot of people come here to study in what are legitimate university programs. More importantly, the links between those young students who often times go back to the country they came from and the New Zealanders lead to future business relationships. Actually, New Zealand is ahead of Australia on that note in a lot of ways, as Australians had a more restrictive immigration policy. This is changing. Q:  What kind of investment opportunities do you avoid? A : We tend to shun companies that are too much in the embryonic stage. We would rather look for companies that are in production stage and generating earnings from the sale of their products as opposed to other sources. Q:  How do you construct your portfolio? A : We generally have around 40 to 50 positions on average in the Commonwealth Australia/New Zealand Fund, including stocks and bonds. The portfolio turnover is generally in the 20% range on average. For benchmarking purposes we use the two country’s primary indices – the NZX50 Index and the Australia All Ordinaries Index. Quite often, when we are not contribute with the outlook for stocks, we may allocate more funds in fixed income markets, so at times we may be 20% to 30% invested in bonds to be more defensive. Q:  What do you consider risk and how do you contain it? A : Our long-term approach compels us to buy companies that we think will perform well over reasonable time periods. For a more defensive stance, we manage risk in part by our cash positions, fixed income positions, diversity by industry, and dividend yield. We may also use covered calls in certain cases on a limited basis to protect a position. We generally do not hedge the currency risk.