FPA International Value Fund Q2 letter to shareholders:

 We added two key members to the International Value Team during this quarter. As highlighted in our last quarterly commentary, Victor Liu joined the Firm from Causeway Capital Management on January 30, 2013. Jason Dempsey joined FPA as Senior Vice President on March 18, 2013. Jason was previously Research Analyst at Artisan Partners and prior to that, he was Analyst at Deccan Value Advisors. Similar to Victor, Jason is a seasoned long-term value investor with a strong bias towards business quality, and a high caliber individual with a unique background. We expect him to play an important role in the management of the Fund going forward.

Steven Romick FPA

While we deployed some capital over the course of the quarter in a manner that is consistent with our investment philosophy, we found ourselves unable to move forward with many of the new ideas that we had identified in the past few months. Within the top ten research priorities from our mid-January trip to the Nordics, only one company traded down over the remainder of the quarter. The other nine were up on average 15%, with five of them up between 15% and 33%. The continued rise in prices we have experienced is making it increasingly difficult for us to find new compelling investment opportunities.

The curse of absolute investors is to be confronted daily with their failure to find ideas in an increasingly expensive market. As we cannot rest on a fully invested approach, we feel challenged to look further and dig deeper to unearth elusive new bargains. In times like these, we are like artists confronted with creative block. Unlike them however, what we don’t put on the canvas says much about our art. Our paralysis is a testament to our discipline and a reflection of how strong we feel about not investing at any cost. If we don’t invest, it means all potential candidates we have encountered simply fail to meet our full set of investment criteria.

FPA International Value Fund 1Q13 commentary