Q:  Can you give a brief overview of the fund? A : We launched the ICON Europe Fund in 1997. Geographically, we primarily track twenty-two countries from the MSCI Europe Index, our core universe coverage. But we do cover the Global Depository Receipts in Russia and have a significant exposure there and some of the more peripheral Eastern European countries. We are not reaching into Romania and some of the Baltic countries. Our selection is mostly in core advanced nations in the region with an exposure to peripheral euro zone countries. Q:  What is your investment process? A : The ICON Europe Fund uses a quantitative methodology to identify securities that we believe are underpriced relative to value. The fund normally invests at least 80% of its net assets in foreign equity securities in Europe. Our value based investment model tracks about 800 stocks in our European universe split up among the 10 sectors and 154 industries. We try to identify the best bargains out there that are starting to show signs of leadership within the market and also have the best amount of upside. From the top level, we seek out the best opportunities. Value is the overall barometer that steers us to the best industries. Within those industries we are led to what we believe are the best companies. Our country allocation is a natural byproduct of what we invest in based on our process, rather than making conscious country choices. Q:  What is your concept of value and what other metrics determine your evaluation process? A : We define value quantitatively and try to first and foremost come up with an estimate of intrinsic value for the stock that we are investing in. In essence, trying to determine what is the true worth of a company. We are looking at current and future earnings and the capacity to grow those earnings. On the other side of the equation, we take into account market risk as well as prevailing bond yields across the different regions and countries to counterbalance these earnings. We see credit risk as well as liquidity risk within the overall market and each specific company. We integrate these four elements together to come out with our estimate of intrinsic value for that stock and divide that by market price to come up with the value-to-price ratio. We are trying to find companies, industries and sectors that show the best amount of upside relative to their intrinsic value. In addition, we also look at margin of safety. If the stock price is below our estimated intrinsic value and is trading at a discount, then we are more comfortable considering that stock for inclusion in the Fund. We regularly review companies and look for the best opportunities. Q:  How do you deal with the disparate accounting systems? A : Currently accounting differentials aren’t so much of an issue in Europe. Within Asia or some of the emerging markets and certainly in the frontier markets where we don’t have any investments or analyst coverage, that could be an issue. We have to have a lot more confidence in those numbers. But when we are looking at Europe, we are still looking at the core of overall operating earnings per share standardized by the databases that we are using. Q:  What is your research process? A : The whole screening process is a bottom-up process. We are taking the value-to-price ratios across all the companies in our investable universe and then grouping those to the industry, sector and country level and generating an overall overview. We first look at these aggregated numbers at the top level to see where the best opportunities are from a sector and industry basis and that is where the start of the idea generation comes from. We are looking for well-run, well-managed companies and that gives us more confidence that price can move up to our estimate of fair value rather than fair value deteriorating down towards a lower price. That’s an additional layer at the company level in terms of the margin of safety. We are not making our decisions from those top-line numbers but, nonetheless, we are seeing our best opportunities in areas like healthcare, consumer staples, and telecommunication services, our three top overweight sectors.. The notable underweight, and again, this is all driven by companies grouped out to the industry and then up to the sector level, we see our best bargains there. Higher value-to-price ratios are evident and apparent in those sectors. We then identify what industries within those look attractive. A good counter to that over the last 12 months has been the financial sector. The Financial sector is currently the lowest value-to-price sector within the European region. Despite being the largest sector weight within the region (about 21% in the benchmark), we have zero exposure to financials.. Q:  How do you time market situations? A : We try to identify market themes that ideally would last one-to-two years. We try to make sure that the theme in which we are investing has some weight to it, and we use value as our barometer. A little uptick and signs of leadership and relative strength in the market do not justify investment. I think financials are the perfect example. There will be times when financials will go on a quick shot and move up 20%.Many times these quick spikes have been a drag to the overall portfolio. We are observing in the last two to three years a bunch of false signals in that sector where we see brief signs of leadership for a month or two, only to see it deteriorate. That is not what we try to do; we are trying to capture longer lasting and more sustainable themes rather than short-term market timing trading. Q:  Does macroeconomic view play any role in your security selection process? A : The macroeconomic view is not an explicit factor. We are quantitative, look at the numbers, and discuss everything and build our overall thesis and view of the market by tracking the 800 stocks in our universe. Nevertheless, we do have a view on the macroeconomic environment, though it is driven from our bottom-up process.. Last year from a top-down macro perspective we favored the core Western Europe countries because, from our viewpoint, we found the best opportunities there from an industry and sector basis. The macro effect certainly trickles down to the individual element in our stock selection when we consider sector and country selection. Our macro views affect our sector and region or country selection, but then we let individual company performance dictate the final selection. Q:  Have you pursued any themes in Europe? A : Last year was certainly more of a defensive theme and our portfolio was able to lead its benchmark by over 300 basis points with a smoother ride, in other words higher returns and lower risk than the market. Right now, we are starting to see a thematic shift of sorts from the defensive areas into a little more of the cyclical space. It is causing us to take some profits in some of those slow-moving staples and healthcare areas and move a little more to some of the more cyclical-type markets. At ICON, we employ a systematic approach across our entire family of funds. The best example of that right now has been the move to the energy sector. The sector is looking more and more attractive and, specifically, not as much in the large cap integrated oil and gas companies, but more of the secondary ancillary-type support industries like oil and gas equipment and services. Last year we had the out of favor contrarian view, but it is looking a lot more attractive right now. So, we are putting our money to work within that industry and sector. Q:  How do you build your portfolio? A : The fund holds about 50 to 80 securities. We typically have about 40 to 50 industries represented and we concentrate our industry bets to about one-third of the market. That is where we make our allocation decisions. As far as company weights, we don’t take huge company bets. Most likely we will never see a holding or an individual stock at 10% plus. Most likely the maximum position is about 4% to 5% of an individual name within the fund, the low side of that maybe 40 to 50 basis points. Using sector and industry rotation as our guide, the country can be more of a secondary byproduct of where we see the best opportunity. For example, Norway and energy are looking attractive right now, and that leads to finding better opportunities from that smaller region for oil and gas companies. Our portfolio benchmark is the MSCI Europe Index. Q:  How do you define risk? What do you do to mitigate it? A : We look for companies that have the best margin of safety and are likely to return to fair value. We look at credit risk for each company and within each specific country we look at how credit spreads are trending in overall credit markets to keep an eye on the company we have selected. From a portfolio standpoint, maintaining a diversified portfolio by not taking huge company bets is a prominent risk control factor. We follow industry and sector rotation and look at the best risk/return tradeoff within those companies. Last year we had a lower beta within the fund that was a lot smoother ride than the overall European market. This was a byproduct of better opportunities in the slower and more stable industries and companies.