(PUB) Investing 2015

14

Fund News

Fund Manager Changes

Calamos Growth CVGRX Change: Negative Date: 09/01/2015 Co-CIO Gary Black left Calamos three years after joining the firm. The situation is similar to that of Janus where Black arrived to fix a problem firm but left after a few years as both sides were ready to move on. Black was one of five comanagers listed on the fund. Calamos added Michael Roesler to replace Black as the fifth manager. Our Take: It isn’t pretty. Performance was mediocre over Black’s tenure, and his departure leaves a void in upper management. Date: 03/14/2016 Chuck Myers will take a six-month leave of absence. Derek Jansen will fill in while he is gone. Jansen runs Fidelity Small Cap Value FCPVX, where he worked with Myers before replacing Myers there. Our Take: For a low-turnover fund, we don’t see much risk in Myers taking six months off. We will watch closely, though, to be sure he comes back on time. Usually managers come back after leaves of absence and pick up right where they left off, but occasionally they decide not to come back. Change: Negative Date: 09/09/2015 Comanager In-Bok Song left to work as an analyst at Thornburg. This follows Richard Gao’s departure in July 2015. Our Take: Although Song was not the lead, her departure along with Gao’s led us to lower the fund’s rating to • . As the rating implies, we still think the fund is in good hands. Sharat Shroff has experience and a track record at Matthews that inspires confidence. The fund recently reopened because of outflows seen at most Asia funds. Change: Positive Date: 09/09/2015 John Lech was added as a comanager for Justin Leverenz. Lech has been with Oppenheimer since 2008. Our Take: Leverenz is still very much in charge, but Oppenheimer is trying to make supporting managers and possible successors more visible to quell concerns about key-man risk. We’ll be interested to see how much authority Lech has over the portfolio, but in the meantime we are maintaining our • rating. Date: 08/28/2015 USAA has hired Lazard Asset Management and Wellington Management and given them 15% each to manage. MFS managers Marcus Smith and Daniel Ling will still guide 70% of the fund. Our Take: This is only a slight negative as Wellington and Lazard are solid managers. MFS has done such a good job that we’d rather not see them diluted, but they are still having quite an impact at 70%. We are maintaining our ´ rating. Change: Negative Date: 01/01/2016 Longtime lead manager James Barrow will retire. Comanagers Jeff Fahrenbruch and David Ganucheau will replace him. The two have been comanagers since 2013, and eight years ago Vanguard had said they would eventually succeed Barrow. Barrow will continue to manage Vanguard Selected Value VASVX. Our Take : We knew Barrow would retire in the relatively near future, so this is not a surprise. Still, Barrow’s outstanding record makes this a real loss. His replacements are seasoned but do not have long track records of their own. We have lowered our rating to ´ from • . Date: 02/01/2016 Jeff Cardon will step down as lead portfolio manager of this fund and CEO of Wasatch Advisors. He will remain a comanager on the fund. JB Taylor will take over Cardon’s role as both CEO and lead manager on the fund at that time. Our Take: This looks like a gradual evolution. We are maintaining our Œ rating but will watch closely to see how involved Cardon is. On the plus side, Taylor has a strong record, too. Fidelity Small Cap Discovery FSCRX Change: Neutral Matthews Pacific Tiger MAPTX Oppenheimer Developing Markets ODMAX USAA International USIFX Change: Change: Neutral Vanguard Windsor II VWNFX Wasatch Small Cap Growth WAAEX Change: Neutral

FPA US Value Makes Huge Payout We knew that FPA US Value FPPFX was going to make a big capital gains payout, but at $38 /share and 79% of net asset value, it was even bigger than we expected. The fund changed strategies and managers, and it had a huge potential capital gains exposure because it hadn’t had much in inflows in years. FPA signaled the tax bill was coming by shutting the fund to new investors, a shareholder-friendly move to avoid having new shareholders get hit with a tax bill. The fund was formerly named FPA Perennial. Here’s what Dan Culloton wrote in June: “Wholesale changes to this fund triggered its downgrade from Silver (to Neutral): It’s getting a new, unproven manager, an expanded strategy, and a new name. The changes are likely to trigger big portfolio moves and capital gains distributions. It’s too early to tell how it will work out.” SEC Fines First Eagle The SEC fined First Eagle funds nearly $40 million for “improperly using mutual fund assets to pay for the marketing and distribution of fund shares.” “An SEC investigation found that First Eagle and FEF unlawfully caused the First Eagle Funds to pay nearly $25 million for distribution-related services, rather than making the payments out of the firms’ own assets (known as ‘revenue sharing’). Such payments can only come from fund assets pursuant to a written Rule 12 b- 1 plan that is approved by a fund’s board.” As a result, we lowered our parent rating of First Eagle to Neutral from Positive. Here is Greg Carlson’s take: “Two issues have led to a downgrade of First Eagle’s Parent rating to Neutral. First, on Sept. 21 , 2015 , the SEC said the firm would pay nearly $40 million to settle charges that First Eagle improperly used fund assets to pay for distribution and marketing. Second, the majority of the firm is set to be acquired by two