See accompanying notes to financial statements.
See accompanying notes to financial statements.
See accompanying notes to financial statements.
| C O M M O N W E A L T H | | |
| INTERNATIONAL SERIES TRUST | | SEMI-ANNUAL REPORT 2015 |
|
| STATEMENTS OF CHANGES IN NET ASSETS |
| | | | Commonwealth
Australia/New Zealand Fund | | | | Africa Fund | |
| | | Six Months Ended
April 30, 2015
(Unaudited) | | Year Ended
October 31, 2014 | | Six Months Ended
April 30, 2015
(Unaudited) | | Year Ended
October 31, 2014 |
| OPERATIONS: | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 157,587 | | | $ | 242,206 | | | $ | 14,923 | | | $ | 2,512 | |
| Net realized gain (loss) | | | 240,633 | | | | 1,226,497 | | | | 3,971 | | | | (23,326 | ) |
| Net change in unrealized appreciation (depreciation) | | | (321,094 | ) | | | (1,883,684 | ) | | | 23,524 | | | | (35,139 | ) |
| Change in net assets resulting from operations | | | 77,126 | | | | (414,981 | ) | | | 42,418 | | | | (55,953 | ) |
| |
| DISTRIBUTIONS TO SHAREHOLDERS: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | (173,913 | ) | | | (386,365 | ) | | | — | | | | (28,879 | ) |
| Return of Capital | | | — | | | | — | | | | — | | | | (7,221 | ) |
| Net realized gains | | | (1,265,872 | ) | | | (409,419 | ) | | | — | | | | — | |
| Change in net assets from distributions | | | (1,439,785 | ) | | | (795,784 | ) | | | — | | | | (36,100 | ) |
| |
| CAPITAL TRANSACTIONS: | | | | | | | | | | | | | | | | |
| Proceeds from shares issued | | | 1,545,522 | | | | 2,241,082 | | | | 272,841 | | | | 703,722 | |
| Dividends reinvested | | | 1,396,390 | | | | 749,628 | | | | — | | | | 35,996 | |
| Cost of shares redeemed | | | (2,129,399 | ) | | | (5,045,507 | ) | | | (238,726 | ) | | | (268,584 | ) |
| Redemption fees | | | — | | | | 245 | | | | — | | | | 236 | |
| Change in net assets resulting from shares of beneficial | | | | | | | | | | | | | | | | |
| interest transactions | | | 812,513 | | | | (2,054,552 | ) | | | 34,115 | | | | 471,370 | |
| Net increase (decrease) in net assets | | | (550,146 | ) | | | (3,265,317 | ) | | | 76,533 | | | | 379,317 | |
| |
| NET ASSETS: | | | | | | | | | | | | | | | | |
| Beginning of period | | | 20,501,038 | | | | 23,766,355 | | | | 2,478,075 | | | | 2,098,758 | |
| End of period | | $ | 19,950,892 | | | $ | 20,501,038 | | | $ | 2,554,608 | | | $ | 2,478,075 | |
| Accumulated net investment income (loss) | | $ | 137,973 | | | $ | 154,299 | | | $ | 9,493 | | | $ | (5,430 | ) |
| |
| SHARE TRANSACTIONS: | | | | | | | | | | | | | | | | |
| Issued | | | 132,115 | | | | 176,045 | | | | 28,369 | | | | 69,689 | |
| Reinvested | | | 123,030 | | | | 62,365 | | | | — | | | | 3,670 | |
| Redeemed | | | (185,519 | ) | | | (397,451 | ) | | | (25,356 | ) | | | (26,699 | ) |
| Change in shares | | | 69,626 | | | | (159,041 | ) | | | 3,013 | | | | 46,660 | |
|
| See accompanying notes to financial statements. |
| |
| 14 |
| C O M M O N W E A L T H | | |
| INTERNATIONAL SERIES TRUST | | SEMI-ANNUAL REPORT 2015 |
| STATEMENTS OF CHANGES IN NET ASSETS |
| | | Commonwealth
Japan Fund | | | | | Commonwealth
Global Fund | | | | | Commonwealth
Real Estate Securities Fund | |
| | | Six Months Ended
April 30, 2015
(Unaudited) | | | | Year Ended
October 31, 2014 | | | | Six Months Ended
April 30, 2015
(Unaudited) | | | | | Year Ended
October 31, 2014 | | | | Six Months Ended
April 30, 2015
(Unaudited) | | | | Year Ended
October 31, 2014 |
| |
| | $ | (49,155 | ) | | | $ | (97,542 | ) | | | $ | (40,896 | ) | | | $ | (85,209 | ) | | | $ | (46,924 | ) | | | $ | 8,602 | |
| | | 7,819 | | | | | 58,566 | | | | | 787,017 | | | | | 1,290,092 | | | | | 130,250 | | | | | 288,299 | |
| | | 482,024 | | | | | 17,157 | | | | | (26,499 | ) | | | | (799,305 | ) | | | | 243,802 | | | | | 886,173 | |
| | | 440,688 | | | | | (21,819 | ) | | | | 719,622 | | | | | 405,578 | | | | | 327,128 | | | | | 1,183,074 | |
| |
| | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
| | | — | | | | | — | | | | | — | | | | | — | | | | | — | | | | | — | |
| | | — | | | | | — | | | | | (1,312,418 | ) | | | | (598,622 | ) | | | | — | | | | | — | |
| | | — | | | | | — | | | | | (1,312,418 | ) | | | | (598,622 | ) | | | | — | | | | | — | |
| |
| | | 764,547 | | | | | 1,265,724 | | | | | 991,942 | | | | | 1,316,104 | | | | | 182,035 | | | | | 623,072 | |
| | | — | | | | | — | | | | | 1,296,249 | | | | | 577,724 | | | | | — | | | | | — | |
| | | (1,097,253 | ) | | | | (785,620 | ) | | | | (517,987 | ) | | | | (1,023,056 | ) | | | | (221,074 | ) | | | | (630,837 | ) |
| | | — | | | | | 10 | | | | | — | | | | | — | | | | | — | | | | | — | |
| |
| | | (332,706 | ) | | | | 480,114 | | | | | 1,770,204 | | | | | 870,772 | | | | | (39,039 | ) | | | | (7,765 | ) |
| | | 107,982 | | | | | 458,295 | | | | | 1,177,408 | | | | | 677,728 | | | | | 288,089 | | | | | 1,175,309 | |
| |
| | | 4,902,344 | | | | | 4,444,049 | | | | | 16,636,756 | | | | | 15,959,028 | | | | | 9,537,220 | | | | | 8,361,911 | |
| | $ | 5,010,326 | | | | $ | 4,902,344 | | | | $ | 17,814,164 | | | | $ | 16,636,756 | | | | $ | 9,825,309 | | | | $ | 9,537,220 | |
| | $ | (150,472 | ) | | | $ | (101,317 | ) | | | $ | (100,734 | ) | | | $ | (59,838 | ) | | | $ | (58,860 | ) | | | $ | (11,936 | ) |
| |
| |
| | | 238,901 | | | | | 417,833 | | | | | 61,892 | | | | | 77,621 | | | | | 12,340 | | | | | 46,687 | |
| | | — | | | | | — | | | | | 86,996 | | | | | 35,184 | | | | | — | | | | | — | |
| | | (350,293 | ) | | | | (253,193 | ) | | | | (32,176 | ) | | | | (60,074 | ) | | | | (14,886 | ) | | | | (48,243 | ) |
| | | (111,392 | ) | | | | 164,640 | | | | | 116,712 | | | | | 52,731 | | | | | (2,546 | ) | | | | (1,556 | ) |
| See accompanying notes to financial statements. |
| |
| 15 |
| C O M M O N W E A L T H | | |
| INTERNATIONAL SERIES TRUST | | SEMI-ANNUAL REPORT 2015 |
| FINANCIAL HIGHLIGHTS |
| Commonwealth Australia/New Zealand Fund |
Selected data for a share outstanding throughout the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the six
months ended
4/30/15
(Unaudited) | | For the year
ended
10/31/14 | | For the year
ended
10/31/13 | | For the year
ended
10/31/12 | | For the year
ended
10/31/11 | | For the year
ended
10/31/10 |
| Net Asset Value, Beginning of Period | | | $ | 12.54 | | | | $ | 13.25 | | | | $ | 12.05 | | | | $ | 10.76 | | | | $ | 10.74 | | | | $ | 9.84 | |
| |
| Change in net assets from operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | | 0.10 | | | | | 0.15 | | | | | 0.21 | | | | | 0.14 | | | | | 0.12 | | | | | 0.08 | |
| Net realized and unrealized gain | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (loss) from investments | | | | (0.05 | ) | | | | (0.40 | ) | | | | 1.15 | | | | | 1.27 | | | | | 0.07 | (a) | | | | 0.82 | |
| Total from investment activities | | | | 0.05 | | | | | (0.25 | ) | | | | 1.36 | | | | | 1.41 | | | | | 0.19 | | | | | 0.90 | |
| |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | | (0.11 | ) | | | | (0.22 | ) | | | | (0.16 | ) | | | | (0.12 | ) | | | | (0.17 | ) | | | | — | |
| Net realized gains | | | | (0.77 | ) | | | | (0.24 | ) | | | | — | | | | | — | | | | | — | | | | | — | |
| Total distributions | | | | (0.88 | ) | | | | (0.46 | ) | | | | (0.16 | ) | | | | (0.12 | ) | | | | (0.17 | ) | | | | — | |
| Redemption fees | | | | — | | | | | — | (b) | | | | — | (b) | | | | — | (b) | | | | — | (b) | | | | — | |
| Net Asset Value, End of Period | | | $ | 11.71 | | | | $ | 12.54 | | | | $ | 13.25 | | | | $ | 12.05 | | | | $ | 10.76 | | | | $ | 10.74 | |
| |
| Total return | | | | 0.59 | %(c) | | | | (1.74 | )% | | | | 11.40 | % | | | | 13.31 | % | | | | 1.85 | % | | | | 9.15 | % |
| Net assets at end of period (000’s) | | | $ | 19,951 | | | | $ | 20,501 | | | | $ | 23,766 | | | | $ | 22,347 | | | | $ | 21,412 | | | | $ | 24,975 | |
| |
| Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of net expenses to average | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| net assets | | | | 3.21 | %(d) | | | | 3.08 | % | | | | 3.17 | % | | | | 3.32 | % | | | | 3.08 | % | | | | 3.24 | % |
| Ratio of net investment income to | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| average net assets | | | | 1.59 | %(d) | | | | 1.11 | % | | | | 1.59 | % | | | | 1.26 | % | | | | 1.20 | % | | | | 1.05 | % |
| Portfolio turnover rate | | | | 6 | %(c) | | | | 16 | % | | | | 18 | % | | | | 8 | % | | | | 22 | % | | | | 12 | % |
| (a) | | The amount of net gain from securities (both realized and unrealized) per share, does not accord with the amounts reported in the Statements of Operations due to the timing of purchases and redemptions of Fund shares during the year. |
| (b) | | Value is less than $0.005 per share. |
| (c) | | Not annualized for periods less than one year. |
| (d) | | Annualized for periods less than one year. |
|
| See accompanying notes to financial statements. |
| |
| 16 |
| C O M M O N W E A L T H | | |
| INTERNATIONAL SERIES TRUST | | SEMI-ANNUAL REPORT 2015 |
| FINANCIAL HIGHLIGHTS |
| Africa Fund |
Selected data for a share outstanding throughout the periods indicated:
| | | | For the six
months ended
4/30/15
(Unaudited) | | | For the year
ended
10/31/14 | | | For the year
ended
10/31/13 | | | For the period
ended
10/31/12(a) |
| Net Asset Value, Beginning of Period | | | $ | 9.96 | | | | $ | 10.38 | | | | $ | 10.23 | | | | $ | 10.00 | |
| |
| Change in net assets from operations: | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | | 0.06 | | | | | 0.01 | | | | | 0.22 | | | | | 0.08 | |
| Net realized and unrealized gain (loss) from investments | | | | 0.12 | | | | | (0.25 | ) | | | | 0.09 | | | | | 0.15 | |
| Total from investment activities | | | | 0.18 | | | | | (0.24 | ) | | | | 0.31 | | | | | 0.23 | |
| |
| Distributions: | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | | — | | | | | (0.14 | ) | | | | (0.16 | ) | | | | — | |
| Return of capital | | | | — | | | | | (0.04 | ) | | | | — | | | | | — | |
| Total distributions | | | | — | | | | | (0.18 | ) | | | | (0.16 | ) | | | | — | |
| Redemption fees | | | | — | | | | | — | (b) | | | | — | (b) | | | | — | |
| Net Asset Value, End of Period | | | $ | 10.14 | | | | $ | 9.96 | | | | $ | 10.38 | | | | $ | 10.23 | |
| |
| Total return | | | | 1.81 | %(c) | | | | (2.32 | )% | | | | 3.02 | % | | | | 2.30 | %(c) |
| Net assets at end of period (000’s) | | | $ | 2,555 | | | | $ | 2,478 | | | | $ | 2,099 | | | | $ | 1,356 | |
| |
| Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
| Ratio of net expenses to average net assets | | | | 1.92 | %(e)(h) | | | | 2.00 | %(g) | | | | — | %(d) | | | | 0.70 | %(e)(f) |
| Ratio of gross expenses before reimbursement | | | | 5.84 | %(e) | | | | 5.69 | % | | | | 6.13 | % | | | | 8.32 | %(e) |
| Ratio of net investment income to average net assets | | | | 1.25 | %(e) | | | | 0.11 | % | | | | 2.28 | % | | | | 1.32 | %(e) |
| Portfolio turnover rate | | | | — | %(b)(c) | | | | 4 | % | | | | 7 | % | | | | — | %(c) |
| (a) | | Reflects operations for the period from November 7, 2011 (inception date) to October 31, 2012. |
| (b) | | Value is less than $0.005 per share. |
| (c) | | Not annualized for periods less than one year. |
| (d) | | The ratio of net expenses are the combined result of $22,542 in contractual waivers representing (1.25)% and $88,266 in voluntary reimbursements representing (4.88)%. Please refer to Note 4, Related Party Transactions and Other Arrangements, in the Notes to Financial Statements. |
| (e) | | Annualized for periods less than one year. |
| (f) | | The ratio of net expenses are the combined result of $9,801 in contractual waivers representing (1.25)% and $49,962 in voluntary reimbursements representing (6.37)%. Please refer to Note 4, Related Party Transactions and Other Arrangements, in the Notes to Financial Statements. |
| (g) | | The ratio of net expenses are the combined result of $28,775 in contractual waivers representing (1.25)% and $56,265 in voluntary reimbursements representing (2.44)%. Please refer to Note 4, Related Party Transactions and Other Arrangements, in the Notes to Financial Statements. |
| (h) | | On February 20, 2015, by unanimous written consent, the Fund’s Board approved a fee reduction agreement between the Trust and FCA Corp. that limits fund expenses to 1.50% of average net assets, exclusive of the 0.25% distribution fee, effective March 1, 2015 through February 29, 2016. The ratio of net expenses are the combined result of $28,963 in contractual waivers representing (2.42)%, and $18,022 in voluntary reimbursements representing (1.50)%. Please refer to Note 4, Related Party Transactions and Other Arrangements in the Notes to Financial Statements. |
|
| See accompanying notes to financial statements. |
| |
| 17 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | | | | | | | | | | | |
| Commonwealth Japan Fund | | | | | | | | | | | | | | | | | | | | | | |
| |
| Selected data for a share outstanding throughout the periods indicated: | | | | | | | | | | | | | | | | |
| |
| | For the six
months ended
4/30/15
(Unaudited) | | | | | | | | | | | | | | | | | | | | |
| | | For the year
ended
10/31/14 | | For the year
ended
10/31/13 | | For the year
ended
10/31/12 | | For the year
ended
10/31/11 | | For the year
ended
10/31/10 |
| | | | | | |
| | | | | | |
| Net Asset Value, Beginning of Period | | $ | 3.05 | | | $ | 3.08 | | | $ | 2.54 | | | $ | 2.70 | | | $ | 2.80 | | | $ | 2.69 | |
| | | | | | | | | | | | | | | | | | | |
| |
| Change in net assets from operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | | (0.04 | ) | | | (0.05 | ) | | | (0.10 | ) | | | (0.07 | ) | | | (0.09 | ) | | | (0.07 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net realized and unrealized gain (loss) from investments | | | 0.34 | | | | 0.02 | | | | 0.64 | | | | (0.09 | ) | | | (0.01 | )(a) | | | 0.18 | |
| Total from investment activities | | | 0.30 | | | | (0.03 | ) | | | 0.54 | | | | (0.16 | ) | | | (0.10 | ) | | | 0.11 | |
| Redemption fees | | | — | | | | — | (b) | | | — | (b) | | | — | (b) | | | — | (b) | | | — | (b) |
| Net Asset Value, End of Period | | $ | 3.35 | | | $ | 3.05 | | | $ | 3.08 | | | $ | 2.54 | | | $ | 2.70 | | | $ | 2.80 | |
| |
| Total return | | | 9.84 | %(c) | | | (0.97 | )% | | | 21.26 | % | | | (5.93 | )% | | | (3.57 | )% | | | 4.09 | % |
| Net assets at end of period (000’s) | | $ | 5,010 | | | $ | 4,902 | | | $ | 4,444 | | | $ | 4,017 | | | $ | 3,794 | | | $ | 4,017 | |
| |
| Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of net expenses to average net assets | | | 3.49 | %(d)(f) | | | 3.49 | %(e) | | | 4.40 | % | | | 4.84 | % | | | 3.91 | % | | | 4.24 | % |
| Ratio of gross expenses before reimbursement | | | 4.24 | %(d) | | | 4.24 | % | | | 4.40 | % | | | 4.84 | % | | | 3.91 | % | | | 4.24 | % |
| Ratio of net investment loss to average net assets | | | (2.05 | )%(d) | | | (2.22 | )% | | | (3.03 | )% | | | (3.01 | )% | | | (2.52 | )% | | | (2.45 | )% |
| Portfolio turnover rate | | | 5 | %(c) | | | 9 | % | | | 23 | % | | | 20 | % | | | 62 | % | | | 10 | % |
| (a) | | The amount of net gain from securities (both realized and unrealized) per share, does not accord with the amounts reported in the Statements of Operations due to the timing of purchases and redemptions of Fund shares during the year. |
| (b) | | Value is less than $0.005 per share. |
| (c) | | Not annualized for periods less than one year. |
| (d) | | Annualized for periods less than one year. |
| (e) | | The ratio of net expenses are the result of $32,954 in voluntary waivers representing (0.75)%. Please refer to Note 4, Related Party Transactions and Other Arrangements, in the Notes to Financial Statements. |
| (f) | | On February 20, 2015, by unanimous written consent, the Fund’s Board approved a fee reduction agreement between the Trust and FCA Corp. that reduces the Advisory Fee, effective March 1, 2015, through February 29, 2016, in contractual waivers representing (0.75)%. The ratio of net expenses are the combined result of $11,437 in voluntary waivers from November 1, 2014, through February 28, 2015, and $6,559 in contractual waivers from March 1, 2015 through April 30, 2015, collectively representing (0.75)%. Please refer to Note 4, Related Party Transactions and Other Arrangements in the Notes to Financial Statements. |
| See accompanying notes to financial statements. |
| 18 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | | | | | | | | | | | |
| Commonwealth Global Fund | | | | | | | | | | | | | | | | | | | | | |
| |
| Selected data for a share outstanding throughout the periods indicated: | | | | | | | | | | | | | | | | | |
| | | For the six
months ended
4/30/15
(Unaudited) | | | | | | | | | | | | | | | | | | | | |
| | | | For the year
ended
10/31/14 | | For the year
ended
10/31/13 | | For the year
ended
10/31/12 | | For the year
ended
10/31/11 | | For the year
ended
10/31/10 |
| | | | | | | |
| | | | | | | |
| Net Asset Value, Beginning of Period | | $ | 16.78 | | | $ | 17.00 | | | $ | 14.13 | | | $ | 15.24 | | | $ | 15.44 | | | $ | 13.40 | |
| | | | | | | | | | | | | | | | | | | |
| Change in net assets from operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment loss | | | (0.03 | ) | | | (0.08 | ) | | | (0.12 | ) | | | (0.12 | ) | | | (0.07 | ) | | | (0.12 | ) |
| Net realized and unrealized gain | | | | | | | | | | | | | | | | | | | | | | | | |
| (loss) from investments | | | 0.66 | | | | 0.50 | | | | 2.99 | | | | 0.54 | | | | (0.13 | )(a) | | | 2.16 | |
| Total from investment activities | | | 0.63 | | | | 0.42 | | | | 2.87 | | | | 0.42 | | | | (0.20 | ) | | | 2.04 | |
| |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net realized gains | | | (1.33 | ) | | | (0.64 | ) | | | — | | | | (1.53 | ) | | | — | | | | — | |
| Total distributions | | | (1.33 | ) | | | (0.64 | ) | | | — | | | | (1.53 | ) | | | — | | | | — | |
| Redemption fees | | | — | | | | — | | | | — | (b) | | | — | (b) | | | — | (b) | | | — | (b) |
| Net Asset Value, End of Period | | $ | 16.08 | | | $ | 16.78 | | | $ | 17.00 | | | $ | 14.13 | | | $ | 15.24 | | | $ | 15.44 | |
| |
| Total return | | | 4.41 | %(c) | | | 2.56 | % | | | 20.31 | % | | | 3.47 | % | | | (1.30 | )% | | | 15.22 | % |
| Net assets at end of period (000’s) | | $ | 17,814 | | | $ | 16,637 | | | $ | 15,959 | | | $ | 13,311 | | | $ | 13,285 | | | $ | 16,574 | |
| Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of net expenses to average | | | | | | | | | | | | | | | | | | | | | | | | |
| net assets | | | 3.12 | %(d) | | | 3.08 | % | | | 3.12 | % | | | 3.31 | % | | | 3.05 | % | | | 3.02 | % |
| Ratio of net investment loss to average | | | | | | | | | | | | | | | | | | | | | | | | |
| net assets | | | (0.50 | )%(d) | | | (0.52 | )% | | | (0.81 | )% | | | (0.85 | )% | | | (0.38 | )% | | | (0.85 | )% |
| Portfolio turnover rate | | | 17 | %(c) | | | 27 | % | | | 14 | % | | | 11 | % | | | 18 | % | | | 10 | % |
| (a) | The amount of net gain from securities (both realized and unrealized) per share, does not accord with the amounts reported in the Statements of Operations due to the timing of purchases and redemptions of Fund shares during the year. |
| (b) | Value is less than $0.005 per share. |
| (c) | Not annualized for periods less than one year. |
| (d) | Annualized for periods less than one year. |
| See accompanying notes to financial statements. |
| 19 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | | | | | | | | | | | |
| Commonwealth Real Estate Securities Fund | | | | | | | | | | | | | | | | | |
| |
| Selected data for a share outstanding throughout the periods indicated: | | | | | | | | | | | | | | | | | |
| |
| | | For the six
months ended
4/30/15
(Unaudited) | | | | | | | | | | | | | | | | | | | | |
| | | | For the year
ended
10/31/14 | | For the year
ended
10/31/13 | | For the year
ended
10/31/12 | | For the year
ended
10/31/11 | | For the year
ended
10/31/10 |
| | | | | | | |
| | | | | | | |
| Net Asset Value, Beginning of Period | | $ | 14.35 | | | $ | 12.55 | | | $ | 11.27 | | | $ | 9.72 | | | $ | 10.09 | | | $ | 8.42 | |
| |
| Change in net assets from operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income (loss) | | | (0.07 | )(b) | | | 0.02 | | | | (0.02 | ) | | | (0.13 | ) | | | (0.16 | ) | | | (0.09 | ) |
| Net realized and unrealized gain (loss) from investments | | | 0.56 | | | | 1.78 | | | | 1.30 | | | | 1.68 | | | | (0.21 | )(a) | | | 1.76 | |
| Total from investment activities | | | 0.49 | | | | 1.80 | | | | 1.28 | | | | 1.55 | | | | (0.37 | ) | | | 1.67 | |
| Redemption fees | | | — | | | | — | | | | — | (b) | | | — | (b) | | | — | (b) | | | — | |
| Net Asset Value, End of Period | | $ | 14.84 | | | $ | 14.35 | | | $ | 12.55 | | | $ | 11.27 | | | $ | 9.72 | | | $ | 10.09 | |
| |
| Total return | | | 3.41 | %(c) | | | 14.34 | % | | | 11.36 | % | | | 15.95 | % | | | (3.67 | )% | | | 19.83 | % |
| Net assets at end of period (000’s) | | $ | 9,825 | | | $ | 9,537 | | | $ | 8,362 | | | $ | 7,824 | | | $ | 7,294 | | | $ | 9,063 | |
| |
| Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of net expenses to average net assets | | | 3.30 | %(d) | | | 3.20 | % | | | 3.33 | % | | | 3.53 | % | | | 3.29 | % | | | 3.22 | % |
| Ratio of net investment income (loss) to average net assets | | | (0.95 | )%(d) | | | 0.10 | % | | | (0.18 | )% | | | (1.20 | )% | | | (1.48 | )% | | | (0.89 | )% |
| Portfolio turnover rate | | | 2 | %(c) | | | 16 | % | | | 4 | % | | | 5 | % | | | 7 | % | | | 21 | % |
| (a) | | The amount of net gain from securities (both realized and unrealized) per share, does not accord with the amounts reported in the Statements of Operations due to the timing of purchases and redemptions of Fund shares during the year. |
| (b) | | Value is less than $0.005 per share. |
| (c) | | Not annualized for periods less than one year. |
| (d) | | Annualized for periods less than one year. |
| See accompanying notes to financial statements. |
| 20 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS - April 30, 2015 (Unaudited) |
Note 1 – Organization
Commonwealth International Series Trust (the “Trust”) was organized as a Massachusetts business trust on May 8, 1986, and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The Trust currently consists of five diversified series: the Commonwealth Australia/New Zealand Fund (the “Australia/New Zealand Fund”), the Africa Fund (the “Africa Fund”), the Commonwealth Japan Fund (the “Japan Fund”), the Commonwealth Global Fund (the “Global Fund”) and the Commonwealth Real Estate Securities Fund (the “Real Estate Securities Fund”) (each a “Fund” and collectively the “Funds”).
Note 2 – Investment Objectives
Each Fund’s investment objective is to provide long-term capital appreciation and current income. Under normal market conditions, each Fund (other than the Global Fund) invests at least 80% of its assets in the country or asset class specified in its name (i.e. Australia/New Zealand, Africa, Japan or Real Estate).
Note 3 – Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Trust in the preparation of the financial statements for the Funds. The Funds are investment companies, as such, these financial statements have applied the guidance set forth in the Accounting Standards Codification (ASC) 946, Financial Services-Investment Companies. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
A) Valuation of Securities – Each Fund’s assets and liabilities are valued normally on the basis of market quotations or official closing prices or, if there is no recent last sales price available, reference is made to the last mean quotation in the principal market in which the securities are normally traded. Equity securities that are traded on the NASDAQ National Market System, for which quotations are readily available, are valued at the official closing price. Options are valued at the last quoted sales price. If there is no such reported sale on the valuation date, long positions are valued at the most recent bid price, and short positions are valued at the most recent ask price. Debt securities are priced either by using a market quotation or an independent pricing service. The pricing service may use one or more pricing models. Generally, debt instruments with maturities of less than 60 days (short-term debt) are valued at amortized cost or original cost plus interest, which approximates current value. Investments in open-end investment companies are valued at net asset value. If Fund management determines that market quotations or official closing prices are not readily available or do not accurately reflect the fair value for a security, the fair value of the security or securities will be determined in accordance with procedures established by the Board of Trustees (the “Board”). Fair value prices are generally provided by an independent fair value pricing service. The Funds have instituted a policy whereby the value of certain equity securities listed or traded on foreign security exchanges may be valued by an independent fair value pricing service on any day when certain conditions are met. The Australia/New Zealand Fund, Africa Fund and Japan Fund have retained an independent fair value pricing service to assist in the fair valuing of these foreign securities. The service utilizes statistical data based on historical performance of securities, markets, and other data in developing factors used to estimate a fair value. In the Australia/New Zealand Fund and Japan Fund, the measure is based on a comparison between the S&P 500 Futures, Tokyo close to New York close. In the Africa Fund, the measure is based on a comparison between the S&P 500 Futures, London close to New York close.
B) Fair Value Measurements – The Funds’ investments have been categorized by tiers dependent upon the various “inputs” used to determine the fair value of the Funds’ investments. These inputs are summarized in the three broad levels listed below:
| • | | Level 1 – | | quoted prices in active markets for identical assets. |
| • | | Level 2 – | | other significant observable inputs (including quoted prices for similar securities, interest rates, prepayments speeds, credit risk, etc.). |
| • | | Level 3 – | | significant unobservable inputs (including management’s own assumptions in determining the fair value of investments). |
A description of the valuation techniques applied to the Funds’ major categories of assets and liabilities measured at fair value on a recurring basis follows:
Common stocks, preferred stocks, exchange traded funds and short term investments. Securities traded on a national exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are generally categorized in Level 1 of the fair value hierarchy. Investments in other open-end registered
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
investment companies are valued at net asset value. Short term investments may be valued using amortized cost which approximates fair value. Securities traded on inactive markets, valued by reference to similar instruments or whose inputs are observable and timely would be categorized in Level 2 of the fair value hierarchy.
Corporate and Sovereign Bonds. The fair value of corporate bonds may be estimated using recently executed transactions, market price quotations (where observable), bond spreads, and/or credit default swap spreads adjusted for any basis difference between cash and derivative instruments. Domestically held corporate bonds are generally categorized in Level 2 of the fair value hierarchy; in instances where prices, spreads, or any of the other aforementioned key inputs are unobservable, they would be categorized in Level 3 of the fair value hierarchy.
Written/Purchased options. Listed derivatives that are actively traded are valued based on quoted prices from the exchange and are generally categorized in Level 1 of the fair value hierarchy.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Funds’ net assets as of April 30, 2015:
| | | | | | | | | | | | | |
| | Australia/New Zealand Fund |
| | | | Level 1 | | | Level 2 | | Level 3 | | | Total |
| Security Type | | | | | | | | | | | | |
| Common Stocks* | | $ | — | | $ | 19,034,891 | | $ | — | | $ | 19,034,891 |
| Corporate Bonds | | | 516,936 | | | — | | | — | | | 516,936 |
| Short Term Investments | | | 27,719 | | | — | | | — | | | 27,719 |
| Total | | $ | 544,655 | | $ | 19,034,891 | | $ | — | | $ | 19,579,546 |
| |
| | Africa Fund |
| | | | Level 1 | | | Level 2 | | Level 3** | | | Total |
| Security Type | | | | | | | | | | | | |
| Common Stocks | | $ | 387,271 | | $ | 1,446,550 | | $ | — | | $ | 1,833,821 |
| Exchange Traded Funds | | | 636,364 | | | — | | | — | | | 636,364 |
| Sovereign Bonds | | | 17,226 | | | — | | | — | | | 17,226 |
| Short Term Investments | | | 102,089 | | | — | | | — | | | 102,089 |
| Total | | $ | 1,142,950 | | $ | 1,446,550 | | $ | — | | $ | 2,589,500 |
| |
| | Japan Fund |
| | | | Level 1 | | | Level 2 | | Level 3 | | | Total |
| Security Type | | | | | | | | | | | | |
| Common Stocks* | | $ | 69,510 | | $ | 4,635,538 | | $ | — | | $ | 4,705,048 |
| Exchange Traded Funds | | | 257,200 | | | — | | | — | | | 257,200 |
| Total | | $ | 326,710 | | $ | 4,635,538 | | $ | — | | $ | 4,962,248 |
| |
| | Global Fund |
| | | | Level 1 | | | Level 2 | | Level 3 | | | Total |
| Security Type | | | | | | | | | | | | |
| Common Stocks* | | $ | 16,518,662 | | $ | 173,100 | | $ | — | | $ | 16,691,762 |
| Preferred Stocks* | | | 663,760 | | | — | | | — | | | 663,760 |
| Exchange Traded Funds | | | 272,440 | | | — | | | — | | | 272,440 |
| Call Options | | | 88,425 | | | 49,140 | | | — | | | 137,565 |
| Short Term Investments | | | 495,179 | | | — | | | — | | | 495,179 |
| Total | | $ | 18,038,466 | | $ | 222,240 | | $ | — | | $ | 18,260,706 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
| | | | | | | | | | | | |
| | Real Estate Securities Fund |
| | | | Level 1 | | | Level 2 | | Level 3 | | | Total |
| Security Type | | | | | | | | | | | | |
| Common Stocks* | | $ | 9,135,503 | | $ | 451,892 | | $ | — | | $ | 9,587,395 |
| Exchange Traded Funds | | | 215,560 | | | — | | | — | | | 215,560 |
| Short Term Investments | | | 86,974 | | | — | | | — | | | 86,974 |
| Total | | $ | 9,438,037 | | $ | 451,892 | | $ | — | | $ | 9,889,929 |
| * | All sub-categories within Common Stocks and Preferred Stocks represent Level 1 or Level 2 evaluation status. For a detailed breakout by industry or country, please refer to the Schedules of Investments. |
| ** | Due to the halt in trading of the South Africa Bank security held in the Africa Fund, management has determined the fair value of this holding to be $0 resulting in a Level 3 security held as of April 30, 2015. |
The following is a summary of other financial instruments that are derivative instruments not reflected in the Schedules of Investments, such as futures, written options, forwards and swap contracts. Please refer to Note 7 – Financial Instruments with Off-Balance Sheet Risk for additional information.
| | | | | | | | | | | | | | | |
| | Other Financial Instruments at Value |
| Fund | | | Level 1 | | | Level 2 | | Level 3 | | | Total | |
| Global Fund | | | | | | | | | | | | | | | |
| Written Options | | $ | (13,200 | ) | | $ | (138,000 | ) | | $ | — | | $ | (151,200 | ) |
| Real Estate Securities Fund | | | | | | | | | | | | | | | |
| Written Options | | $ | — | | | $ | (66,500 | ) | | $ | — | | $ | (66,500 | ) |
It is the Funds’ policy to recognize transfers into and out of all Levels at the end of the reporting period. As described in Note 3 – Significant Accounting Policies under A) Valuation of Securities, certain equity securities listed or traded on foreign exchanges may be valued by an independent fair value pricing service on any day when certain conditions are met. During the period ended April 30, 2015, there were several instances where these conditions were met, and as a result, foreign securities in the Australia/New Zealand Fund, Africa Fund and the Japan Fund were fair valued.
The Australia/New Zealand Fund, Africa Fund, and Japan Fund held certain equity or fixed income securities on October 31, 2014 which received an exchange traded closing price and were categorized in Level 1. Due to either the absence of trading activity, or receipt of a fair valued price, these securities were valued at either the last close price or an evaluated price on April 30, 2015 and categorized in Level 2. The Commonwealth Global Fund held an equity security at October 31, 2014, that due to the absence of trading activity, was valued at the mean between the bid and ask price and categorized in Level 2. On April 30, 2015 that security was valued based on an exchange traded closing price and was classified in Level 1. On October 31, 2014 Commonwealth Global also held a written option and an equity security that were both valued based on exchange traded closing prices and were classified in Level 1. On April 30, 2015, due to the absence of trading activity, the option was valued using the bid price, and the equity was valued at the mean between the bid and the ask price, both in Level 2. The Commonwealth Real Estate Securities Fund held an equity security at October 31, 2014, that due to the absence of trading activity, was valued at the mean between the bid and ask price and categorized in Level 2. On April 30, 2015 that security was valued based on an exchange traded closing price and was classified in Level 1. The following is a reconciliation of transfers between category levels from October 31, 2014 to April 30, 2015:
| | | | | | | | | | | | | | | | | | | | |
| | | Australia/
New Zealand
Fund | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Real Estate
Securities Fund |
| | | | Africa Fund | | Japan Fund | | Global Fund | |
| Transfers into Level 1 | | $ | — | | | $ | — | | | $ | — | | | $ | 377,738 | | | $ | 75,180 | |
| Transfers out of Level 1 | | $ | (18,543,500 | ) | | $ | (1,446,550 | ) | | $ | (4,635,538 | ) | | $ | (198,540 | ) | | $ | — | |
| Net Transfers in (out) of Level 1 | | $ | (18,543,500 | ) | | $ | (1,446,550 | ) | | $ | (4,635,538 | ) | | $ | 179,198 | | | $ | 75,180 | |
| Transfers into Level 2 | | $ | 18,543,500 | | | $ | 1,446,550 | | | $ | 4,635,538 | | | $ | 198,540 | | | $ | — | |
| Transfers out of Level 2 | | $ | — | | | $ | — | | | $ | — | | | $ | (377,738 | ) | | $ | (75,180 | ) |
| Net Transfers in (out) of Level 2 | | $ | 18,543,500 | | | $ | 1,446,550 | | | $ | 4,635,538 | | | $ | (179,198 | ) | | $ | (75,180 | ) |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
C) Currency Translation – For purposes of determining each Fund’s net asset value, all assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the prevailing market rate on each U.S. business day. The cost of securities is determined by using an exchange rate provided by an independent third party. Income is translated at approximate rates prevailing when accrued. The Funds do not isolate that portion of gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in the market prices of the investments. Such fluctuations are included with the net realized and unrealized gains and losses from investments.
D) Allocations of Expenses – Expenses directly attributable to a Fund are charged directly to that Fund, while expenses which are attributable to more than one Fund, or the Trust, are allocated among the respective Funds based upon relative net assets or some other reasonable method.
E) Accounting for Investments – Security transactions are accounted for on the trade date. Realized gains and losses on security transactions are based on the identified cost basis for both financial statement and Federal income tax purposes. Dividend income and distributions to shareholders are recorded on the ex-dividend date or as soon as known if after the ex-dividend date. Discounts and premiums on bonds purchased are amortized over the life of the bonds (which may include maturity or call date). Interest income and estimated expenses are accrued daily.
F) Federal Income Taxes – It is each Fund’s policy to comply with the requirements of Subchapter M of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all investment company taxable income and net capital gain to shareholders in a manner which results in no tax cost to the Funds. Therefore, no federal income tax provision is required.
Dividends or interest on foreign securities may be subject to the withholding of the country of domicile’s income tax by tax treaty provisions or otherwise. Generally, there are no foreign taxes applicable to the Funds’ capital gains realized on foreign securities in their country of domicile.
Accounting for Uncertainty in Income Taxes (the “Income Tax Statement”) requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations.
The Income Tax Statement requires management of the Funds to analyze all open tax years, fiscal years 2011 – 2013, as defined by IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the period ended October 31, 2014, the Funds did not have a liability for any unrecognized tax benefits. The Funds have no examinations in progress and are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
G) Distributions to Shareholders – The Funds distribute net investment income, if any, and net realized gains (net of any capital loss carryovers) annually. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from GAAP. These differences are primarily due to differing treatments for foreign currency transactions and deferrals of certain losses.
H) Redemption Fees – Redemption fees are applicable to certain redemptions of shares within fourteen calendar days of purchase. The redemption fee is imposed to discourage abusive trading activity, which can have disruptive effects on the Funds’ portfolio management and can increase the Funds’ expenses. The redemption fees are intended to offset, at least partially, portfolio transaction and administrative costs associated with short-term trading. The shareholder will be charged a fee equal to 2.00% of the amount redeemed and will be charged when shares are sold, exchanged or involuntarily redeemed. In determining the applicability of the redemption fee, shares held for the longest period of time will be treated as being sold first and shares held for the shortest period of time as being sold last. For the period ended April 30, 2015, there were no redemption fees in any of the Commonwealth Funds.
I) Option Accounting Principles – A Fund may purchase or write put or call options on futures contracts, individual securities, currencies or stock indices to hedge against fluctuations in securities prices and currency exchange rates and to adjust its risk exposure relative to the benchmark. The Fund may use these derivatives for any purpose consistent with its investment objective, such as hedging, obtaining market exposure, and generating premium income.
When a Fund writes an option, the premium received is recorded as a liability. Each day the option contract liability is valued in accordance with the procedures for security valuation discussed above. When an offsetting option is purchased (a closing transaction) or the option contract expires, the Fund realizes a gain or loss and the liability related to such option contract is eliminated. When a call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and the proceeds of the sale are increased by the premiums originally received.
When a Fund purchases an option, the premium paid is recorded as an asset. Each day the option contract is valued in accordance with the procedures for security valuation discussed above. When an offsetting option is written (a closing transaction) or the option contract expires, the Fund realizes
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
a gain or loss and the asset representing such option contract is eliminated. When a call option is exercised, the Fund purchases the underlying security and the cost basis of such purchase is increased by the premium originally paid.
J) Forward Currency Contracts – Forward currency transactions may be undertaken to hedge against possible variations in the foreign exchange rates between the U.S. dollar and foreign currencies. A forward currency contract is an agreement between two parties to buy or sell a currency at a set price on a future date. Forward contracts are marked-to-market daily and the change in the market value is recorded by the Fund as an unrealized gain or loss. When a contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Funds could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably. Other risks of forward currency transactions include failing to achieve expected benefit, markets moving in a direction that the Funds did not expect, a Fund’s ability to close out its position in the hedging instrument, and political and social unrest and the possibility of negative governmental actions. During and as of the period ended April 30, 2015, the Funds held no foreign currency contracts.
K) Use of Estimates – The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and these differences could be material.
Note 4 – Related Party Transactions and Other Arrangements
A) Investment Advisor – The Trust, on behalf of each Fund, has retained FCA Corp. as the Funds’ investment advisor (the “Advisor”). Under each Fund’s Investment Advisory Agreement, the Advisor is paid a monthly fee (the “Management Fee”), calculated daily and payable monthly, equal to an annual rate of 0.75% of the average net assets of each Fund, other than the Africa Fund, for which it receives 1.25% of the average daily net assets of the Fund. Effective March 1, 2015, The Advisor entered into an expense limitation agreement through February 29, 2016, under which it has agreed to limit the total expenses of the Africa Fund (exclusive of interest, distribution fees pursuant to Rule 12b-1 Plans, taxes, acquired fund fees and expenses, brokerage commissions, extraordinary expenses and dividend expense on short sales) to an annual rate of 1.50% of the average daily net assets of the Fund. The Advisor may not terminate this arrangement prior to February 29, 2016 unless the investment advisory agreement is terminated. The Africa Fund has agreed to repay the Advisor for amounts waived by the Advisor pursuant to the fee waiver agreement to the extent that such repayment occurs within three years of the date of any such waiver and such repayment does not cause the Africa Fund to exceed the expense limitation in place at the time the fee was waived. For the period ended April 30, 2015, the Advisor waived a total of $38,851 in the Africa Fund which is subject to recoupment as well as $8,134 that is not subject to recoupment. As of April 30, 2015, the Africa Fund has $9,801 subject to recoupment through October 31, 2015, $22,542 subject to recoupment through October 31, 2016 and $28,775 through October 31, 2017. Effective March 1, 2015, the Advisor contractually agreed to waive the Management Fee of 0.75% for the Japan Fund through February 29, 2016. The Advisor may not terminate this arrangement prior to February 29, 2016 unless the investment advisory agreement is terminated. There is no recoupment agreement in place for the Management Fee waiver in the Japan Fund.
Certain officers of the Trust are also officers of FCA.
B) Administration, Fund Accounting and Transfer Agent – UMB Fund Services, Inc. (“UMB”) serves as the administrator, transfer agent and fund accountant to the Funds. For these services UMB receives fees computed at an annual rate of the daily net assets of the Funds, subject to a minimum annual contractual fee. An officer of the Trust also is an employee of UMB, but is paid no fees directly by the Funds for serving as an officer of the Trust.
C) Distribution – UMB Distribution Services, LLC, serves as the principal underwriter for the shares of each Fund of the Trust and receives an annual contractual fee. UMB Distribution Services, LLC is an affiliate of UMB.
Each Fund has adopted a Service and Distribution Plan (each a “Plan”) pursuant to Rule 12b-1 under the Act, whereby up to 0.35% of the Fund’s assets may be used to reimburse the Distributor for costs and expenses incurred in connection with the distribution and marketing of shares of the Fund and the servicing of Fund shareholders. Distribution and marketing expenses include, among other things, printing of prospectuses, marketing literature, and costs of personnel involved with the promotion and distribution of the Fund’s shares. These amounts are disclosed on the Statements of Operations under Distribution fees. While the plans permit each Fund to pay up to 0.35% of its average daily net assets to reimburse for certain expenses in connection with the distribution of its shares, the Board of Trustees has currently authorized each Fund to pay out only 0.25% under its Plan. If the Trustees’ intention changes on this matter, the Funds will amend or supplement their prospectus. Out of the foregoing amount, each Fund is permitted to pay up to an aggregate of 0.25% of its average daily net assets to reimburse for certain shareholder services.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
D) Legal Counsel – The Law Offices of John H. Lively and Associates, Inc., a member firm of The 1940 Act Law GroupTM, serves as legal counsel to the Trust. John H. Lively, Secretary of the Trust, is the owner of the Law Offices of John H. Lively & Associates, Inc., but he receives no special compensation from the Trust or the Funds for serving as an officer of the Trust.
Note 5 – Investments in Affiliated Issuers
A company is considered an affiliate of a Fund under the 1940 Act if the Fund’s holdings in that company represent 5% or more of the outstanding voting shares of that company. The Australia/New Zealand Fund’s holding below is shown in its Schedule of Investments. Further detail on this holding during the period ended April 30, 2015 appears below:
| | | Percentage
of Ownership | | | Shares
10/31/14 | | Shares
4/30/15 | | | Value
10/31/14 | | | Cost of
Purchases | | Cost of
Sales | | | Change in
Appreciation/
Depreciation | | | | Value
4/30/15 | | | Dividend
Income | | | Realized
Gain
(Loss) |
| Security Held | | | | | | | | | | | | | | | | | | |
| Mowbray | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Collectables Ltd. | | 8.01% | | | 1,021,593 | | 1,021,593 | | | $338,434 | | | — | | — | | | $(213,678) | | | | $124,756 | | | $ — | | | $ — |
| Note 6 – Purchases and Sales of Securities |
| Purchases and sales of investment securities (excluding short-term securities) by the Funds for the period ended April 30, 2015 were as follows: |
| | | | Purchases | | | Sales | |
| Australia/New Zealand Fund | | | $1,219,925 | | | $1,458,867 | |
| Africa Fund | | | 46,571 | | | 3,119 | |
| Japan Fund | | | 237,942 | | | 234,283 | |
| Global Fund | | | 3,725,898 | | | 2,814,648 | |
| Real Estate Securities Fund | | | 364,362 | | | 231,555 | |
Note 7 – Financial Instruments with Off-Balance Sheet Risk
In the ordinary course of trading activities, certain of the Funds trade and hold certain fair-valued derivative contracts. Such contracts include forward currency contracts, where the Funds would be obligated to buy currency at specified prices, and written put and call options, where the Funds would be obligated to purchase or sell securities at specified prices (i.e., the options are exercised by the counterparties). The maximum payout for the put option contracts is limited to the number of contracts written and the related strike prices, respectively. The maximum payout for uncovered written call option contracts is limited only by how high the underlying rises above the strike price. Maximum payout amounts could be offset by the subsequent sale, if any, of assets obtained via the execution of a payout event.
The financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value of securities underlying the financial instruments may be in excess of the amounts recognized in the Statements of Assets and Liabilities. A Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, each Fund bears the risk of loss of premium and change in market value should the counterparty not perform under the contract. A call option gives the holder the right to buy the underlying stock from the writer at a specified price within a fixed period of time. Therefore, the securities held by the Fund against which options are written may not be traded and are held in escrow by the custodian.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
| | | | | | | | | | | | | | |
| The following is a summary of the written option activity: | | | | | | | | | | | | |
| | |
| | | Commonwealth Global | | | Real Estate Securities Fund | |
| | | Number of
Contracts | | Premiums
Received | | Number of
Contracts | | Premiums
Received |
| Contracts | | | | |
| Outstanding @ 10/31/2014 | | 115 | | | $ | 31,129 | | | 50 | | | $ | 24,899 | |
| Call options written | | 620 | | | | 67,533 | | | 91 | | | | 31,428 | |
| Call options expired | | — | | | | — | | | — | | | | — | |
| Call options exercised | | (65 | ) | | | (19,220 | ) | | — | | | | — | |
| Call options closed | | (250 | ) | | | (26,509 | ) | | — | | | | — | |
| Outstanding @ 4/30/2015 | | 420 | | | $ | 49,933 | | | 141 | | | $ | 56,327 | |
| | |
| At April 30, 2015, the Global Fund had the following outstanding written options: | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | Unrealized
Appreciation
(Depreciation) |
| | | | | | | | Expiration | | Exercise
Price | | Number of
Contracts | | | | |
| Contracts | | Type | | Date | | | Value | | |
| JC Penney Co., Inc. | | | Call | | | | 8/21/2015 | | | $ | 9.00 | | | | | 220 | | | $ | 13,200 | | | $ | 3,984 | |
| Momenta Pharmaceuticals, Inc. | | | Call | | | | 9/18/2015 | | | | 13.00 | | | | | 200 | | | | 138,000 | | | | (105,251) | |
| Total | | | | | | | | | | | | | | | | 420 | | | $ | 151,200 | | | $ | (101,267) | |
| |
| At April 30, 2015, the Real Estate Securities Fund had the following outstanding written options: |
| | | | | | | | | | | | | | | | | | | | | | | Unrealized
Appreciation
(Depreciation) |
| | | | | | | Expiration
Date | | Exercise
Price | | | Number of
Contracts | | | | | |
| Contracts | | Type | | | | | | | Value | |
| Equity Residential | | | Call | | | 10/16/2015 | | | $ | 75.00 | | | | | 32 | | | $ | 11,520 | | $ | 1,556 | | |
| Essex Property Trust, Inc. | | | Call | | | 10/16/2015 | | | | 220.00 | | | | | 4 | | | | 4,880 | | | 632 | | |
| Essex Property Trust, Inc. | | | Call | | | | 10/16/2015 | | | | 230.00 | | | | | 5 | | | | 3,850 | | | 390 | |
| Marriott International, Inc. | | | Call | | | | 1/15/2016 | | | | 77.50 | | | | | 50 | | | | 39,500 | | | (14,601) | |
| MDC Holdings, Inc. | | | Call | | | | 1/15/2016 | | | | 30.00 | | | | | 50 | | | | 6,750 | | | 1,850 | |
| Total | | | | | | | | | | | | | | | | 141 | | | $ | 66,500 | | $ | (10,173) | |
Note 8 – Derivatives
The Funds’ use of derivatives for the period ended April 30, 2015 was limited to options. The derivative instruments outstanding as of April 30, 2015, as disclosed in the Statements of Assets and Liabilities, and the amounts of realized and changes in unrealized gains and losses on derivative instruments during the year, as disclosed in the Statements of Operations, serve as indicators of the volume of derivative activity for the Funds. Following is a summary of how these derivatives are treated in the financial statements and their impact on the Funds.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
| | | | | | | | | | | | | | | | | |
| | | | Statements of Assets and Liabilities | | | Statements of Operations | | | | | |
| | | | Location of
Asset/Liability
Derivatives | | | | | | | | | Amount of
Realized
Gain (Loss) | | | Amount of
Unrealized
Gain (Loss) | |
Fund/Financial
Instrument Type | | | | | | | | Location of Gain (Loss) on
Derivatives Recognized | | | | | |
| | | | Value | | | | | | | |
| Global Fund | | | Unaffiliated investments at | | | | | | Net realized loss from | | | | | | | | |
| Equity Contracts | | | value (purchased options) | | | $ 137,565 | | | purchased option contracts | | | $(16,891) | | | $ | — | |
| | | | Payable for options | | | | | | Net realized gain from | | | | | | | | |
| Equity Contracts | | | written (written options) | | | (151,200) | | | written option contracts | | | 16,809 | | | | — | |
| | | | | | | | | | Net change in unrealized | | | | | | | | |
| | | | | | | | | | appreciation (depreciation) | | | | | | | | |
| Equity Contracts | | | | | | | | | on purchased option contracts | | | — | | | | 31,881 | |
| | | | | | | | | | Net change in unrealized | | | | | | | | |
| | | | | | | | | | appreciation (depreciation) on | | | | | | | | |
| Equity Contracts | | | | | | | | | written option contracts | | | — | | | | (29,471) | |
| Real Estate | | | | | | | | | Net change in unrealized | | | | | | | | |
| Securities Fund | | | Payable for options | | | | | | appreciation (depreciation) on | | | | | | | | |
| Equity Contracts | | | written (written options) | | | (66,500) | | | written option contracts | | | — | | | | 428 | |
Disclosures about Offsetting Assets and Liabilities requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented. As of April 30, 2015, there are no master netting arrangements related to the Funds. The Funds’ Statements of Assets and Liabilities (“SAL”) presents derivative instruments on a gross basis, therefore there are no net amounts and no offset amounts within the SAL to present below. Gross amounts of the derivative instruments, amounts related to financial instruments/cash collateral not offset in the SAL and net amounts are presented below:
| | | Gross Amounts
Presented in
Statements of
Assets and
Liabilities | | | | | | | | |
| | | | | Amounts not Offset in Statements
of Assets and Liabilities | | | | | |
| | | | | | | | | | | | | | |
| | | | Financial
Instruments | | Cash
Collateral | | Net
Amount |
| Fund/Financial Instrument/Statements of Assets and Liabilities Category | | | | |
| | |
| Global Fund | | | | | | | | | | | | | | | | |
| Payable for options written | | | $(151,200) | | | | $151,200 | | | | — | | | | — | |
| | |
| Real Estate Securities Fund | | | | | | | | | | | | | | | | |
| Payable for options written | | | (66,500) | | | | 66,500 | | | | — | | | | — | |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| NOTES TO FINANCIAL STATEMENTS - April 30, 2015 (Unaudited) (Continued) |
Note 9 – Tax Matters
As of October 31, 2014, the components of accumulated earnings (deficit) on a tax basis were as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | Australia/
New Zealand
Fund | | | | | | | | | | | | | | | | |
| | | | | Africa Fund | | | | | | | | | | Real Estate
Securities Fund |
| | | | | | Japan Fund | | Global Fund | |
| Undistributed ordinary income | | | $ | 173,913 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Undistributed long-term capital gains | | | | 1,265,821 | | | | — | | | | — | | | | 1,312,335 | | | | — | |
| Tax accumulated earnings | | | | 1,439,734 | | | | — | | | | — | | | | 1,312,335 | | | | — | |
| Accumulated capital and other losses | | | | — | | | | (28,867 | ) | | | (775,546 | ) | | | (59,838 | ) | | | (496,411 | ) |
| Unrealized appreciation (depreciation) on | | | | | | | | | | | | | | | | | | | | | |
| investments | | | | 4,486,935 | | | | 14,723 | | | | 1,303,999 | | | | 4,479,502 | | | | 2,924,783 | |
| Unrealized appreciation (depreciation) on | | | | | | | | | | | | | | | | | | | | | |
| options written | | | | — | | | | — | | | | — | | | | (71,796 | ) | | | (10,601 | ) |
| Unrealized appreciation (depreciation) on | | | | | | | | | | | | | | | | | | | | | |
| foreign currency translations | | | | (10,422 | ) | | | 1,121 | | | | (2,125 | ) | | | — | | | | — | |
| Total accumulated earnings (deficit) | | | $ | 5,916,247 | | | $ | (13,023 | ) | | $ | 526,328 | | | $ | 5,660,203 | | | $ | 2,417,771 | |
At October 31, 2014, the gross unrealized appreciation (depreciation) on investments, foreign currency translations and cost of securities on a tax basis for federal income tax purposes were as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | Australia/
New Zealand
Fund | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Real Estate
Securities Fund |
| | | | | Africa Fund | | Japan Fund | | Global Fund | |
| Gross unrealized appreciation | | | $ | 6,646,967 | | | $ | 254,966 | | | $ | 1,430,392 | | | $ | 4,784,663 | | | $ | 3,294,547 | |
| Gross unrealized depreciation | | | | (2,160,032 | ) | | | (240,243 | ) | | | (126,393 | ) | | | (305,161 | ) | | | (369,764 | ) |
| Net unrealized appreciation on investments | | | $ | 4,486,935 | | | $ | 14,723 | | | $ | 1,303,999 | | | $ | 4,479,502 | | | $ | 2,924,783 | |
| Tax cost of investments | | | $ | 15,528,422 | | | $ | 2,459,602 | | | $ | 3,579,732 | | | $ | 12,060,360 | | | $ | 6,673,065 | |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to wash sale loss deferrals, foreign currency translations and passive foreign investment companies (“PFICs”).
The tax character of distributions paid during the tax periods ended October 31, 2014 and 2013 were as follows:
| | | | Australia/
New Zealand
Fund | | | Africa Fund | | Global Fund |
| | | Year Ended
October 31,
2014 | | | Year Ended
October 31,
2013 | | | Year Ended
October 31,
2014 | | Period
Ended
October 31,
2013 | | Year Ended
October 31,
2014 | | Year Ended
October 31,
2013 |
| Distributions paid from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Income | | $ | 386,365 | | | $ | 310,746 | | | $ | 28,879 | | | $ | 23,882 | | | $ | — | | | | $ | — |
| Net long-term capital gains | | $ | 409,419 | | | $ | — | | | $ | — | | | $ | — | | | $ | 598,622 | | | | $ | — |
| Tax return of capital | | $ | — | | | $ | — | | | $ | 7,221 | | | $ | — | | | $ | — | | | | $ | — |
| Total distributions paid | | $ | 795,784 | | | $ | 310,746 | | | $ | 36,100 | | | $ | 23,882 | | | $ | 598,622 | | | | $ | — |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
For the tax years ended October 31, 2014 and 2013, the Japan and Real Estate Securities Funds did not pay any distributions.
As of October 31, 2014, the following Funds had net capital loss carryforwards which are available to offset future net capital gains, if any:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Real Estate | |
| | | | Africa Fund | | | | Japan Fund | | | | | Securities Fund | |
| | | ST | | LT | | ST | | LT | | ST | | LT |
| For losses expiring October 31, | | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | $ | — | | | $ | — | | | $ | 698,340 | | | $ | — | | | $ | — | | | $ | — | |
| 2018 | | | — | | | | — | | | | — | | | | — | | | | 484,475 | | | | — | |
| Non-Expiring | | | 9,140 | | | | 14,297 | | | | — | | | | — | | | | — | | | | — | |
| | | $ | 9,140 | | | $ | 14,297 | | | $ | 698,340 | | | $ | — | | | $ | 484,475 | | | $ | — | |
Capital loss carryovers are available to offset future realized capital gains and thereby reduce further taxable gain distributions. During the year ended October 31, 2014, the Japan Fund and Real Estate Securities Fund utilized $67,632 and $261,090, respectively, of their capital loss carryovers.
As of October 31, 2014, the Africa, Japan, Global and Real Estate Securities Funds, respectively, had $5,430, $77,206, $59,838 and $11,936 of qualified late-year ordinary losses, which are deferred until fiscal year 2014 for tax purposes. Net late-year losses incurred after December 31, and within the taxable year are deemed to arise on the first day of the Funds’ next taxable year.
Note 10 –- Revolving Credit Agreement
The Trust has in place an Amended and Restated Revolving Credit Agreement (the “Agreement”) with its custodian, Fifth Third Bank N.A. (the “Bank”). Pursuant to the terms of the Agreement, the Bank makes available to the Trust, a line of credit facility under which the Bank may make loans to the Trust, on behalf of the Funds, from time to time. The Agreement provides a line of credit in an amount of up to $3,500,000 (the “Committed Amount”) for the Trust with respect to all of the Funds. The Agreement further limits the amount that any Fund may borrow subject to the requirements specified by the Investment Company Act of 1940, as amended (the “1940 Act”), which generally permits a fund to borrow and pledge its shares to secure such borrowing, provided, that immediately thereafter there is asset coverage of at least 300% for all borrowings by a fund from a bank. If borrowings exceed this 300% asset coverage requirement by reason of a decline in net assets of a fund, the fund will reduce its borrowings within three days to the extent necessary to comply with the 300% asset coverage requirement. The 1940 Act also permits a fund to borrow for temporary purposes only in an amount not exceeding 5% of the value of its total assets at the time when the loan is made. The terms of the agreement include a non-refundable commitment fee annually in an amount equal to $3,500. Any principal balance outstanding bears interest at the London Interbank Offered Rate (LIBOR) in effect at that time plus 1.90% and any amounts not drawn will be assessed unused fees at the rate 0.40%.
The average amount of borrowings for the days which the Funds borrowed and the average interest rate on those borrowings by the Funds during the period ended April 30, 2015 were as follows:
| | | | |
| | | Average Principal | Average Interest Rate | |
| Australia/New Zealand Fund | | $190,290 | 2.07% | |
| Japan Fund | | $116,904 | 2.06% | |
During the period ended April 30, 2015 the Australia/New Zealand Fund and Japan fund paid $186 and $47 in interest on borrowings, respectively. There were no borrowings outstanding under the Agreement as of April 30, 2015. It is the Custodian’s policy to utilize the line of credit for draws greater than $50,000.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
Note 11 – Contractual Obligations
Under the Funds’ organizational documents, its Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In the normal course of business, the Funds enter into contracts that contain various representations and warranties and provide general indemnifications. The Funds’ maximum exposure under these arrangements is dependent on future claims against the Funds and is presently unknown. Currently however, the Funds expect the risk of loss to be remote.
Note 12 – Concentration of Market Risk
The Australia/New Zealand Fund has a majority of its investments in securities issued by Australian and New Zealand issuers, the Africa Fund invests primarily in securities issued by African issuers and the Japan Fund invests primarily in securities of Japanese issuers. Investing in companies from specific geographic regions, such as Australia, New Zealand, Africa or Japan, may pose additional risks inherent to a region’s economic and political situation. These events will not necessarily affect the U.S. economy or similar issuers located in the U.S. In addition, many of the investments in Australia, New Zealand, Africa or Japan are denominated in foreign currencies. As a result, changes in the values of these currencies compared to the U.S. dollar may affect (positively or negatively) the value of the Funds’ investments. These events may happen separately from, and in response to, events that do not otherwise affect the values of the securities in the issuers’ home countries.
The Africa Fund may be exposed to additional risks by focusing its investments on issuers in African countries that other funds invested in securities of issuers in a broader region may not be exposed to. The Fund is highly dependent on the state of economics of countries throughout Africa and, in particular Sub-Saharan countries. Changes in economics, tax policies, inflation rates, governmental instability, war or other political or economic factors may affect (positively or negatively) the Fund’s investments.
A large portion of investments held by the Real Estate Securities Fund are considered investments in the real estate sector of the market, which may include REITs. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified, are subject to heavy cashflow dependency, default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax-free pass through of income and maintaining their exemption from registration under the 1940 Act. Investing in a single market sector may be riskier than investing in a variety of market sectors.
Note 13 – Legal Matters
On October 22, 2010, Edward S.Weisfelner, as Trustee of the LB Creditor Trust (the “Creditor Trustee Plaintiff”), filed a suit in the Supreme Court of the State of New York in the County of New York (the “Creditor Trust Action”) against, among numerous other defendants, the Trust’s custodian (the”Custodian”) as a record holder of shares of Lyondell Chemical Company (“Lyondell”). The action was removed to the United States District Court for the Southern District of New York and then referred to the United States Bankruptcy Court for the Southern District of New York. Among the shares alleged to have been held by the Custodian were 10,000 shares for which the Commonwealth Global Fund (the “Global Fund”) was a beneficial shareholder. On December 19, 2011, the Creditor Trustee Plaintiff filed a Second Amended Complaint in the U.S. Bankruptcy Court, Southern District of NewYork, naming the Global Fund as a defendant. Generally, the Creditor Trustee Plaintiff’s claim alleges that a merger transaction, which closed on December 20, 2007, in which the Global Fund and the other shareholders of Lyondell disposed of their positions in Lyondell which caused Lyondell to be insolvent and ultimately resulted in Lyondell filing for bankruptcy protection. Lyondell sought bankruptcy protection in cases filed on January 6, 2009 and April 24, 2009. The Creditor Trustee Plaintiff’s claim further alleges that, under various theories under state law, the transaction constituted a fraudulent transfer. The Creditor Trustee Plaintiff is seeking to set aside and recover the entire amount of the transfer, which is alleged to be approximately $5.9 billion. The Global Fund’s proceeds from the transaction amounted to $479,700. As of this date, the suit has only involved preliminary procedural filings, including a Motion to Dismiss the Creditor Trustee Plaintiff’s Complaint filed on January 11, 2011. The Global Fund has joined in the response with several other defendants in the case seeking to dismiss the Creditor Trustee Plaintiff’s claims.
Additionally, on December 23, 2010, Edward S.Weisfelner, as Trustee of the LB Litigation Trust (the “Litigation Trustee Plaintiff”), filed an adversary complaint (the “Litigation Trust Action”) in the U.S. Bankruptcy Court, Southern District of New York against numerous defendants as record holders of shares of Lyondell. Generally, the Litigation Trust Action is identical to the Creditor Trust Action, with the exception that the Litigation Trustee Plaintiff’s claim for intentional fraudulent transfers are based on federal law, whereas the Creditor Trustee Plaintiff’s claims are based on state law. The Litigation Trustee Plaintiff is seeking to set aside the same transfers sought to be avoided by the Creditor Trustee Plaintiff in the Creditor Trust Action. On April 7, 2011, several defendants filed a Motion to Dismiss the complaint filed by the Litigation Trustee Plaintiff. On April 20, 2011, the Litigation Trustee Plaintiff filed an Amended Complaint in the Litigation Trust Action.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
|
| NOTES TO FINANCIAL STATEMENTS – April 30, 2015 (Unaudited) (Continued) |
On January 14, 2014, the Bankruptcy Court issued a Decision and Order on Motions to Dismiss which granted, in part, and denied, in part, the Motion to Dismiss. Specifically, the Court denied the Motion to Dismiss as to the Creditor Trustee Plaintiff’s constructive fraudulent transfer claim and granted the Motion as to the Creditor Trustee Plaintiff’s intentional fraudulent transfer claim, but granted the Creditor Trustee Plaintiff the right to re-plead such claim. On April 9, 2014, the Creditor Trustee Plaintiff filed a Third Amended Complaint whereby it re-pled its intentional fraudulent transfer claim against the defendants. The Order entered by the Court on January 14, 2014 also granted the defendants’ Motion to Dismiss the Litigation Trustee Plaintiff’s intentional fraudulent transfer claim, but granted the Litigation Trustee Plaintiff the right to re-plead such claim. On April 9, 2014, the Litigation Trustee Plaintiff filed a Second Amended Complaint whereby it re-pled its intentional fraudulent transfer claim.
The Global Fund has not been named as a defendant in the Litigation Trust Action. However, in the Second Amended Complaint, the Litigation Trustee Plaintiff alleges a class under Federal Rule of Civil Procedure 23(a), 23(b)(1)(B) and 23(b)(3) consisting of all persons or entities who directly, or indirectly through one or more mediate transferors, received payments on account of their shares of Lyondell in connection with the merger transaction. On May 8, 2014, the Litigation Trustee Plaintiff filed a Motion for Class Certification (the “Class Certification Motion”), whereby it is seeking to certify a non-opt-out defendant class, or in the alternative, an opt-out class.
On July 30, 2014, the shareholder defendants filed their omnibus motion to dismiss the Plaintiffs’ amended complaints. The motion to dismiss was deemed filed on behalf of all defendants. On September 15, 2014, the Plaintiffs filed their opposition brief to the omnibus motion to dismiss. On October 22, 2014, the shareholder defendants filed their reply brief in support of the motion to dismiss.
On November 24, 2014, the shareholder defendants filed their opposition to the Litigation Trustee Plaintiff’s Class Certification Motion. The Litigation Trustee’s reply brief in support of the Class Certification Motion is due December 29, 2014. Oral argument on the motion to dismiss and Class Certification Motion is scheduled for January 14 and 15, 2015. All discovery in the Creditor and Litigation Trust Actions is stayed until briefing of the Class Certification Motion has concluded. Discovery shall begin after the completion of all briefing on the Class Certification Motion. The parties shall meet and confer regarding a discovery schedule during the week of January 5, 2015. The Global Fund expects to continue participating in the defense of the aforementioned cases.
No estimate of the effect, if any, of these pending lawsuits on the Fund can be made at this time.
Note 14 - Subsequent Events
Within the financial statements, the Funds are required to recognize the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statements of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Funds are required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made.
The Trust provided written notice of termination to UMB Fund Services, Inc., provider of administration, transfer agency and fund accounting services to the Funds on June 16, 2015. The notice also extends to UMB Distribution Services, LLC, an affiliate of UMB and the principal underwriter for the shares of each Fund. The transition of services is expected to occur late in the third quarter of the 2015 calendar year. Huntington Asset Services , Inc. will become the provider of administration, transfer agency and fund accounting services to the Trust. Unified Financial Securities, Inc., an affiliate of Huntington Asset Services, Inc., will assume the role of principal underwriter of the shares of each Fund.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| ADDITIONAL INFORMATION - April 30, 2015 (Unaudited) |
Table of Shareholder Expenses
As a shareholder of the Funds, you incur ongoing costs, including management fees, distribution and service fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from November 1, 2014 through April 30, 2015.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
| | | Beginning
Account Value
11/1/14 | | Ending
Account Value
4/30/15 | | Expense Paid
During Period*
11/1/14 – 4/30/15 | | Expense Ratio
During Period*
11/1/14 – 4/30/15 |
| | | | | |
| | | | | |
| Australia/New Zealand Fund | | $ | 1,000.00 | | | $ | 1,005.90 | | | $ | 15.97 | | | | 3.21 | % |
| Africa Fund | | | 1,000.00 | | | | 1,018.10 | | | | 9.61 | | | | 1.92 | %** |
| Japan Fund | | | 1,000.00 | | | | 1,098.40 | | | | 18.16 | | | | 3.49 | % |
| Global Fund | | | 1,000.00 | | | | 1,044.10 | | | | 15.81 | | | | 3.12 | % |
| Real Estate Securities Fund | | | 1,000.00 | | | | 1,034.10 | | | | 16.64 | | | | 3.30 | % |
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | Beginning
Account Value
11/1/14 | | Ending
Account Value
4/30/15 | | Expense Paid
During Period*
11/1/14 – 4/30/15 | | Expense Ratio
During Period*
11/1/14 – 4/30/15 |
| | | | | |
| | | | | |
| Australia/New Zealand Fund | | $ | 1,000.00 | | | $ | 1,009.10 | | | $ | 15.99 | | | | 3.21 | % |
| Africa Fund | | | 1,000.00 | | | | 1,015.50 | | | | 9.59 | | | | 1.92 | %** |
| Japan Fund | | | 1,000.00 | | | | 1,007.70 | | | | 17.37 | | | | 3.49 | % |
| Global Fund | | | 1,000.00 | | | | 1009.50 | | | | 15.55 | | | | 3.12 | % |
| Real Estate Securities Fund | | | 1,000.00 | | | | 1,008.60 | | | | 16.43 | | | | 3.30 | % |
| * | Expenses are equal to the average account value times the Fund’s annualized expense ratio multiplied by 181 (the number of days in the most recent fiscal half-year) divided by 365 (the number of days in the fiscal year) to reflect the one-half year period. |
| ** | The Board of Trustees approved a reduction in the Africa Fund’s annualized expense ratio from 2.00% to 1.50% (exclusive of interest, distribution fees pursuant to Rule 12b-1 Plans, taxes, acquired fund fees and expenses, brokerage commissions, extraordinary expenses and dividend expense on short sales) by unanimous decision and later ratified the reduction at the March 18, 2015 Board of Trustees meeting. The reduction went into effect March 1, 2015. |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| |
| ADDITIONAL INFORMATION – April 30, 2015 (Unaudited) (Continued) |
Disclosure of Portfolio Holdings
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Commission’s Public Reference Room may be obtained by calling 800-SEC-0330.
Proxy Voting
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 888-345-1898, and on the Commissions website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 888-345-1898, and on the Commission’s website at http://www.sec.gov.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| APPROVAL OF THE RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT – April 30, 2015 (Unaudited) |
FCA Corp (“FCA” or “Advisor”) supervises the investments of the following series portfolios (each may be referred to herein as a “Fund” or collectively as the “Funds”) of the Commonwealth International Series Trust (the “Trust”): the Commonwealth Australia/New Zealand Fund (the “Australia/New Zealand Fund”), the Africa Fund, (the “Africa Fund”) the Commonwealth Japan Fund (the “Japan Fund”), The Commonwealth Global Fund (the “Global Fund”) and the Commonwealth Real Estate Securities Fund (the “Real Estate Fund”) pursuant to the Investment Advisory Agreements (each an “Agreement” and collectively, the “Agreements”) between the Advisor and the Trust with respect to each Fund. At the quarterly meeting of the Board of Trustees (the “Board”) of the Trust that was held on March 18-19, 2015, the Trustees, including a majority of the trustees who are not parties to the Agreements or interested persons of any party to any of the Agreements (the “Independent Trustees”), unanimously approved the renewal of the Agreements for another one year term.
Legal Counsel reviewed with the Board a memorandum from Counsel dated March 4, 2015 and summarized to the Trustees, among other things, the fiduciary duties and responsibilities of the Board in reviewing and approving the renewal of each Agreement. Counsel discussed with the Trustees the types of information and factors that should be considered by the Board in order to make an informed decision regarding the approval of the continuation of each Agreement, including the following material factors with respect to each of the Funds: (i) the nature, extent, and quality of the services provided by FCA; (ii) the investment performance of the Funds; (iii) the costs of the services to be provided and profits to be realized by FCA from the relationship with the Funds; (iv) the extent to which economies of scale would be realized if the Funds grow and whether advisory fee levels refeect those economies of scale for the benefit of the Funds’ investors; and (v) FCA’s practices regarding possible confeicts of interest. Counsel noted that the continuation of the Agreements were discussed in yesterday’s Governance, Nomination and Compensation Committee (“GNC”) meeting, in a luncheon pre-meeting prior to yesterday’s GNC meeting, at a special meeting of the GNC held on January 29, 2015, and in preliminary discussions with FCA at the Board’s December 2014 quarterly meeting. Counsel and the Board recapped the discussions that had occurred in these earlier meetings.
In assessing these factors and reaching its decisions, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board meetings, as well as information specifically prepared and/or presented in connection with the annual renewal process. It was noted that in addition to the original request letter to FCA, the GNC had requested supplemental information from FCA and that a revised request letter was sent to FCA. The Board, acting directly or through its committees, requested and was provided with information and reports relevant to the annual renewal of each Agreement, including: (i) reports regarding the services and support provided to the Funds and their shareholders by FCA; (ii) quarterly assessments of the investment performance of the Funds by personnel of FCA; (iii) commentary on the reasons for the performance; (iv) presentations by the Funds’ portfolio managers addressing FCA’s investment philosophy, investment strategy, personnel and operations; (v) compliance and audit reports concerning the Funds and FCA; (vi) disclosure information contained in the registration statement of the Trust and the Form ADV of FCA; and (vii) a memorandum from Counsel, that summarized the fiduciary duties and responsibilities of the Board in reviewing and approving each of the Agreements, including the material factors set forth above and the types of information included in each factor that should be considered by the Board in order to make an informed decision. The Board also requested and received various informational materials including, without limitation: (i) documents containing information about FCA, including financial information on FCA and the parent company of FCA (First Commonwealth Holdings), a description of personnel and the services provided to each Fund, information on investment advice, performance, summaries of fund expenses, compliance program, current legal matters, insurance coverages and other general information; (ii) comparative expense and performance information for other mutual funds with strategies similar to the Funds; (iii) the effect of size on the Funds’ performance and expenses; (iv) FCA’s efforts to promote the Funds; and (v) benefits to be realized by FCA from its relationship with the Funds.
The Board did not identify any particular information that was relevant to its consideration to approve the Agreements and each Trustee may have afforded different weight to the various factors that are specically required to be considered for purposes of disclosure in the Funds’ next set of financial statements.
Nature, Extent and Quality of the Services Provided by FCA
In considering the nature, extent, and quality of the services provided by FCA, the Trustees reviewed the responsibilities of FCA under each Agreement. The Trustees reviewed the services being provided by FCA to each Fund including, without limitation: (i) the quality of its investment advisory services (including research and recommendations with respect to portfolio securities); (ii) its process for formulating investment recommendations and assuring compliance with each Fund’s investment objectives and limitations, as well as for ensuring compliance with regulatory requirements; (iii) its coordination of services for the Funds among the service providers and the Independent Trustees; (iv) and its efforts to promote the Funds and grow each Fund’s assets. The Trustees noted FCA’s continuity of, and commitment to retain, qualified personnel and FCA’s commitment to maintain and enhance its resources and systems; the commitment of FCA’s personnel to finding alternatives and options that allow the Funds to maintain their goals; and FCA’s continued cooperation with the Independent Trustees, the chief compliance officer and Counsel for the Funds. The Trustees evaluated FCA’s personnel, including the education and experience of FCA’s personnel. The Trustees noted that several of the officers
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| APPROVAL OF THE RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT – April 30, 2015 (Unaudited) (Continued) |
of the Trust, including the principal executive officer and president for the Trust were employees of FCA, and they served the Trust without additional compensation. The Trustees noted the continued efforts of FCA in marketing the Funds. After reviewing the foregoing information and further information in the materials provided by FCA (including FCA’s Form ADV), the Board concluded that, in light of all the facts and circumstances, the nature, extent, and quality of the services provided by FCA were satisfactory and adequate for the Funds.
Investment Performance of the Funds and FCA
In considering the investment performance of the Funds and FCA, the Trustees compared the short and long-term performance of each Fund with the performance of funds with similar objectives managed by other investment advisors, as well as with aggregated peer group data. The Trustees also considered the consistency of FCA’s management of the Funds with the investment objectives and policies. The Trustees considered that FCA did not have other accounts that were managed in a manner similar to any of the Funds. With respect to the Australia/New Zealand Fund, the Trustees indicated their belief that the investment strategy of the Australia/New Zealand Fund made it difficult to compare the investment performance of the Australia/New Zealand Fund to other mutual funds. The Trustees noted that there were no other registered investment companies that FCA was able to identify that had the same investment objective and strategies as the Australia/New Zealand Fund. Nonetheless, the Trustees noted the overall relative performance that the Australia/New Zealand Fund had experienced on a short and long-term basis in comparison to three different indices. The Trustees observed that the Australia/New Zealand Fund outperformed one of the indices for the quarter and six-month period and underperformed two of the indices for the 1-year period and outperformed one of the indices for the 3-year, 5-year and 10-year periods. With respect to the Japan Fund, the Trustees noted that the Japan Fund had outperformed its comparative index for the shorter-term but not the longer-term. It was noted that the Japan Fund underperformed its Morningstar Category average for the short and longer-term periods. With respect to the Global Fund, the Trustees noted that the Fund had underperformed its category in both the short-term and longer-term periods. It was noted that the Global Fund underperformed its Morningstar Category average for the short and longer-term periods. With respect to the Real Estate Fund, the Trustees noted that the Real Estate Fund had underperformed its comparative index both the shorter-term and longer-term. It was noted that the Real Estate Fund underperformed its Morningstar Category average for the short and longer-term periods. With respect to the Africa Fund, the Trustees noted that the Africa Fund did not have a comparative peer group category. The Trustees noted that the Africa Fund underperformed its comparative indices for the short-term but outperformed one of its comparative indices for the 3-year period. It was noted that the Africa Fund slightly trailed both comparative indices since its inception period. After reviewing and discussing the short and long-term investment performance of the Funds further, FCA’s experience managing the Funds, FCA’s historical investment performance, and other relevant factors, the Board concluded, in light of all the facts and circumstances, that the investment performance of each of the Funds and FCA was satisfactory.
Costs of the Services to be Provided and Profits to be Realized by FCA
In considering the costs of the services to be provided and profits to be realized by FCA from the relationship with the Funds, the Trustees considered: (1) FCA’s financial condition (as reflected in the financial statements of its parent company) and the level of commitment to the Funds and FCA by the principals of FCA; (2) the asset level of the Funds; (3) the overall expenses of the Funds; and (4) the nature and frequency of advisory fee payments. The Trustees reviewed information provided by FCA regarding its profits associated with managing the Funds. The Trustees also considered potential benefits for FCA in managing the Funds. The Trustees noted that FCA continues not to be profitable with regard to its relationship with the Funds. It was noted, however, that FCA will lose less money this fiscal year than in prior years with regard to certain of the Funds. The Trustees then compared the fees and expenses of the Funds (including the management fee) to other comparable mutual funds. The Trustees noted that while the Funds’ advisory fees were in line with other funds (in all cases lower or equal to the respective category average), the Funds’ total expenses were above the expense levels of the other identified comparable funds (each of the Funds other than the Africa Fund having the highest or near the highest expenses identified in their respective peer groups). The Trustees noted that the relatively smaller asset levels of the Funds limited meaningful comparisons with other funds. The Trustees noted that while the Africa Fund’s management fee was above the category average (and was actually toward the higher end of the category), the overall expense ratio was lower than the category averages as a result of management fee waivers and certain contractual expense limitations that FCA had instituted since the Fund’s inception. The Trustees also noted that FCA recently instituted a contractual fee waiver with regard to each of the Africa Fund and Japan Fund. The Trustees concluded that given the very small asset levels of the Funds, it would be difficult for any adviser to operate the Funds at average cost levels and that FCA had put forth significant and reasonable efforts to control the operating expenses of the Funds. The Trustees noted FCA’s efforts to manage the expenses of the Funds. The Board concluded that although Fund expenses were higher than peer averages, such expenses were justified and unavoidable given the complex regulatory requirements, the unique composition of the Funds, and most importantly, the relatively small levels of assets in each of the Funds. Based on the foregoing, the Board concluded that the fees to be paid to FCA by the Funds and the profits to be realized by FCA, in light of all the facts and circumstances, were fair and reasonable in relation to the nature and quality of the services provided by FCA.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
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| APPROVAL OF THE RENEWAL OF THE INVESTMENT ADVISORY AGREEMENT - April 30, 2015 (Unaudited) (Continued) |
Economies of Scale
The Board next considered the impact of economies of scale on the Funds’ size and whether advisory fee levels reflect those economies of scale for the benefit of the Funds’ investors. The Trustees noted that while the management fee for the Funds would remain the same at all asset levels, the Funds’ shareholders could benefit from economies of scale under the Funds’ agreements with service providers other than FCA if applicable asset levels are attained by the Funds. The Trustees recognized that FCA put in place a contractual fee waiver for the Africa Fund and the Japan Fund. The Trustees recognized FCA’s prior negotiations with service providers to the Trust to reduce fees in the previous fiscal year had expired and that such reductions would not be carried forward into the current fiscal year without further negotiations. In light of its ongoing consideration of the Funds’ asset levels, expectations for growth in the Funds, and fee levels, the Board determined that the Funds’ fee arrangements, in light of all the facts and circumstances, were fair and reasonable in relation to the nature and quality of the services provided by FCA.
Advisor’s Practices Regarding Possible
In considering FCA’s practices regarding conflicts of interest, the Trustees evaluated the potential for conflicts of interest and considered such matters as follows: (i) the experience and ability of the advisory personnel assigned to the Funds; (ii) the basis for soft dollar payments with broker-dealers; (iii) the basis of decisions to buy or sell securities for the Funds and/or FCA’s other accounts, including other accounts that may invest in similar geographic areas in which the Funds invest; (iv) and the substance and administration of FCA’s code of ethics. The Trustees also considered disclosure in the registration statement of the Trust related to FCA’s potential conflicts of interest. The Trustees considered that FCA may assess a fee to its separate account clients that invest a portion of the assets of such separate accounts into the Fund in addition to the management fees that are assessed at the Fund level. The Trustees expressed the view that the services rendered to the separate accounts were distinct from those rendered to the Funds. The Trustees also noted that FCA may enjoy some enhanced status as an investment adviser to a family of registered mutual funds. Based on the foregoing, the Board determined that FCA’s standards and practices relating to the identification and mitigation of possible conflicts of interest were satisfactory.
Based upon all of the foregoing considerations, the Board, including a majority of the Independent Trustees, approved the renewal of the Agreements for the Funds.
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
C O M M O N W E A L T H
INTERNATIONAL SERIES TRUST | SEMI-ANNUAL REPORT 2015 |
| | | Item 2. Code of Ethics. |
| | Not applicable. |
| | Item 3. Audit Committee Financial Expert. |
| | Not applicable. |
| | Item 4. Principal Accountant Fees and Services. |
| | Not applicable. |
| | Item 5. Audit Committee of Listed Registrants. |
| | Not applicable. |
| | Item 6. Schedule of Investments. |
| (a) | | Included as part of the report to shareholders filed under Item 1 of this Form N-CSR. |
| (b) | | Not applicable. |
| Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
| | Not applicable. |
| | Item 8. Portfolio Managers of Closed-End Management Investment Companies. |
| | Not applicable. |
| | Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
| | Not applicable. |
| | Item 10. Submission of Matters to a Vote of Security Holders. |
| | Not applicable. |
Item 11. Controls and Procedures.
| (a) | | The Registrant’s principal executive officer and principal financial officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended, (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act. Based on their review, such officers have concluded that the disclosure controls and procedures were effective in ensuring that information required to be disclosed in this report was appropriately recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. |
| | | |
| (b) | | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that materially affected, or were reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| Item 12. Exhibits. |
| | | |
| (a) (1) | | Not applicable. |
| | | |
| (a) (2) | | Certifications required pursuant to Section 30a-2(a) of the Act are attached hereto. |
| | | |
| (a) (3) | | Not applicable to open-end management investment companies. |
| | | |
| (b) | | Certifications pursuant to Section 30a-2(b) of the Act are furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Commonwealth International Series Trust
| /s/ Robert W. Scharar | |
| | |
| By: Robert W. Scharar | |
| President | |
| June 23, 2015 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| /s/ Robert W. Scharar | |
| | |
| By: Robert W. Scharar | |
| President | |
| (Principal Executive Officer) |
| June 23, 2015 | |
| /s/ Terrance P. Gallagher | |
| | |
| By: Terrance P. Gallagher | |
| Treasurer | |
| (Principal Financial Officer) |
| June 23, 2015 | |
