smvlx 3q09 webcast · 2014-08-07 · december 18, 2009. ... 2014 q1) return on assets (1999 q3 –...

© 2014 Smead Capital Management, All Rights Reserved. Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

Managed by

www.smeadcap.com

2nd Quarter 2014 Webcast

Today’s Agenda Performance, Characteristics and Top 10 Holdings Featured Stock: Bank of America

Tony A. Scherrer, CFA Co-Portfolio Manager

Your Portfolio’s Enemies Bill Smead Lead Portfolio Manager

Your Portfolio’s Enemies

Quarter-End Performance

Quarter YTD 1 Year 3 Year 5 Year Since Incept.

Smead Value Fund A Share (SVFAX) w/ load -3.58% -0.36% 21.23% 22.12% 21.93% 7.73%

Smead Value Fund A Share (SVFAX) w/o load 2.30% 5.73% 21.23% 22.12% 21.93% 7.73%

Smead Value Fund Investor Share Class (SMVLX) 2.33% 5.75% 21.40% 22.38% 22.21% 7.98%

Smead Value Fund Institutional Share Class (SMVMX) 2.41% 5.89% 21.71% 22.67% 22.49% 8.16%

Russell 1000 Value Index 5.10% 8.28% 23.81% 16.92% 19.23% 6.43%

S&P 500 Index 5.23% 7.14% 24.61% 16.58% 18.83% 7.11%

Average Annualized Total Returns as of June 30, 2014

A Shares Gross Expense Ratio 1.54% Investor Shares Gross Expense Ratio 1.29% Institutional Shares Gross Expense Ratio 1.04% Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 877-807-4122. Performance for SVFAX (w/load) reflects maximum sales charge of 5.75%. Performance for SVFAX does not reflect maximum sales charge of 5.75%. If reflected, the load would reduce the performance amount quoted. SVFAX imposes a 1.00% redemption fee on purchases of $1,000,000 or more that are redeemed within 18months of purchases. Performance data does not reflect the redemption fee. If it had, returns would be reduced. Investor Class shares of the Fund commenced operations on January 2, 2008. Institutional Class shares of the Fund commenced operations on December 18, 2009. Performance shown for Institutional Class shares prior to its inception reflects the performance of Investor Class shares. Class A shares of the Fund commenced operations on January 24, 2014. Performance shown for Class A shares prior to its inception reflects the performance of Investor Class shares, adjusted to reflect Class A expenses.

(01/02/2008)

Smead Value Fund Key Facts & Characteristics (as of 6/30/2014)

Past Performance does not Guarantee Future Returns

Top Ten Holdings (as of 6/30/2014)

Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security.

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Bank of America Berkshire Hathaway

Disney (Walt) Amgen

Wells Fargo Ebay

Merck & Co. Cabela's

Walgreen Gannett

Percentage

Smead Value Fund

Portfolio Additions / Deletions Second Quarter, 2014

New Buys: SLM Navient

Additions: Franklin Resources NVR


Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security.


Our Eight Criteria

1. Meets an economic need

2. Strong competitive advantage (wide moats or barriers to entry)

3. Long history of profitability and strong operating metrics

4. Generates high levels of free cash flow

5. Available at a low price in relation to intrinsic value

6. Management’s history of shareholder friendliness

7. Strong balance sheet

May also relate to timing/portfolio weighting

For companies that don’t meet one of these, we believe our required criteria will ultimately correct

or overwhelm

Favored, but not required

8. Strong insider ownership (preferably with recent purchases)

Required over entire holding period

Note: Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security

Bank of America: Meets a Strong Need

Source: Trefis


Past performance does not guarantee future results.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=RtdJphCvNA0q0M&tbnid=CoSirauPZ8BlZM:&ved=0CAUQjRw&url=http://www.nvrinc.com/FindNewHome_FoxRidge.aspx&ei=cwS-Uoe3GMPooASA3YLwBw&bvm=bv.58187178,d.cGU&psig=AFQjCNE1RDK73SI6CTs9yn_lVSqSpfcgGQ&ust=1388271070962824

Bank of America: Meets a Need & Strong Competitive Advantage


Source: “10 Biggest Banks by Deposit” by John Maxfield, October 2, 2013; UBS report April 17, 2014 “Q1 doesn’t change investment thesis

Bank of America: Strong Moat


Source: http://problembanklist.com/failed-bank-list/ ; http://www.ilsr.org/rule/market-share-caps/

http://www.ilsr.org/chart-share-deposits-held-top-5-banks/

Bank of America: Long History of Profitability & Operating Metrics


Net Interest Margin (1999 Q3 – 2014 Q1)

Return on Assets (1999 Q3 – 2014 Q1)


Source: Bloomberg

Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets.

Return On Assets (ROA) An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at

using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment“.

“BAC US Equity” = Bank of America “JPM US Equity” = JP Morgan “C US Equity” = Citigroup

Bank of America: High Levels of Cash Flow


Source: Bloomberg

Bank of America: Low Price in relation to Intrinsic Value (Sentiment!)


Source: “It’s Official, Bank of America has the Worst Reputation in the Banking Industry” by John Maxfield, June 25, 2013

Bank of America: Low Price in relation to Intrinsic Value


BAC = Bank of America Source: ThomsonReuters Baseline This is not a forecast of the Fund’s future performance. Earnings growth for a Fund holding does not guarantee a corresponding increase in the market value of the holding or the Fund.

Price to Book Ratio of the stock price to

the book value per share. Calculated as:

Price to Book Ratio = Last

Price / Book Value Per Share

Bank of America: History of Shareholder Friendliness


Source: Bloomberg

Tangible Book Value per Share (1998 Q3 – 2014 Q1)

Net Charge-Off’s to Average Loans (1999 Q1 – 2014 Q1)


Tangible Book Value Per Share (TBV / Sh) is the portion of tangible assets on a company's balance sheet attributable to each share of common stock. Tangible book value excludes goodwill and items classified as "Intangible Assets" on the balance sheet. Tangible Book Value Per Share is used to illustrate how under/overvalued a company is.

Net Charge Offs (NCO) to Average Loans is a financial metric used to measure the percentage of bad debt that a company has outstanding over a specific

period. A company's net charge off is the amount of debt that they have deemed uncollectible less any collections from loans that were previously charged-off. In this sense, net charge offs to average loans can help to determine what percentage of a companies loans can be expected to be collectible

Bank of America: Strong Balance Sheet


Tier 1 common and Tier 1 common equity is a measurement of a bank's core equity capital compared with its total risk-weighted assets. This is the measure of a bank's financial strength. The Tier 1 common capital ratio excludes any preferred shares or non-controlling interests when determining the calculation. Basel III is a comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. The anticipated Tier 1 common equity under Basel III is preliminary and will require approval by regulatory authorities. Source: Bloomberg

Bank of America: Insider Ownership


Source: Dealbook “Buffett Invests $5Bn in Bank of America” August 25, 2011

“Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it”

“I am impressed with the profit-generating abilities of

this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”

- Warren Buffett

Opinions expressed represent the opinion of the individual quoted, and are subject to change at any time, are not guaranteed and should not be considered investment advice.

Bank of America: Insider Ownership


Source: https://ezinsider.washingtonservice.com/CompanyActivity.aspx

Black line represents price, whereas green and red bars represent insider activity

© 2014 Smead Capital Management, All Rights Reserved. Opinions expressed are those of Smead Capital Management, are subject to change, are not guaranteed, and should not be considered recommendations to buy or sell any security.

Managed by

www.smeadcap.com


Presented by:

Lead Portfolio Manager Bill Smead

Source: The Warren Buffett Way

“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”

- Warren Buffett



Your Portfolio’s Enemies Excitement Expenses Market Timing Greed Fear


Source: CNN Money article “Buffett: Real estate slowdown ahead” by Jason Zweig of May 8, 2006

“Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.”

- Warren Buffett

Your Portfolio’s Enemies Excitement:



Source: http://inflationdata.com/articles/charts/inflation-adjusted-annual-average-gold-prices/

Excitement: Oil, Gold and Bonds, early 1980’s

Blue line represents nominal price, whereas Red line represents price, inflation adjusted to 2013 dollars

Source: Redfin Seattle Sweet Digs “Case-Shiller: Seasonal Home Price Bump Turns Flat in May” July 28, 2009

Excitement: Real-Estate / Credit Bubble 2003-2010



Case-Shiller Home Price Index An index which tracks changes in home prices throughout the United States. The index is based on a constant level of data on properties that have undergone at least two arm's length transactions. Case-Shiller produces indexes representing certain metropolitan statistical areas (MSA) as well as a national index.


Excitement: Small-Caps Trading Historically Rich

Source: Merrill Lynch “(Mid-) Year Ahead in Pictures”, page 92

Blue line represents ratio of P/E between Russell 2000 and Russell 1000, whereas orange lines represent historically high and low threshold points Past performance does not guarantee future results.


Source: http://online.wsj.com/news/article_email/private-equity-has-more-than-it-can-spend-1402670650-lMyQjAxMTA0MDEwODExNDgyWj

Keeping Your Powder Dry!


Excitement: Oil Drilling Frenzy

Past Performance does not Guarantee Future Returns Source: Fidelity Investments Institutional – Investment Themes for 2014, page 12

Source: Common Sense on Mutual Funds – 10th Anniversary Edition, John C. Bogle, pg. 35


Expenses: High turnover increases trading costs Equity Mutual Fund Portfolio Turnover (1946 – 2009)

Source: WSJ “The Hidden Costs of Mutual Funds”, March 1st 2010

Expenses: High turnover increases trading costs

The Center for Retirement Research at Boston College study on Fees and Trading Costs of Equity Mutual Funds used in 401(k) plans:

A universe of thousands of U.S. stock funds average trading costs of 1.44% of total assets

Average of 0.14% in the bottom quintile Average of 2.96% in the top quintile These real costs are not reported in expense ratios


Source: Financial Analyst Journal Jan/Feb 2013 “Shedding Light on “Invisible” Costs: Trading Costs and Mutual Fund Performance”, by Roger Edelen, Richard Evans, and Gregory Kadlec

Expenses: High turnover increases trading costs Financial Analyst Journal, Jan / Feb 2013


Source: Blackrock

Market Timing: Market Returns vs. Investor Returns


Past performance does not guarantee future results. The above chart is not illustrative of Smead Value Fund performance, or how the Smead Value Fund might compare on a relative basis to any categories in the chart. All investments involve risk and may lose value. Stocks, bonds, oil, gold and other asset classes have different risk profiles, which should be considered when investing.

Sources: BlackRock; Bloomberg; Informa Investment Solutions; Dalbar. Past performance is no guarantee of future results. It is not possible to directly invest in an index. Oil is represented by the change in price of the NYMEX Light Sweet Crude Future contract. Contract size is 1,000 barrels with a contract price quoted in US Dollars and Cents per barrel. Delivery dates take place every month of the year. Gold is represented by the change in the spot price of gold in USD per ounce. Homes are represented by the National Association of Realtors’ (NAR) Existing One Family Home Sales Median Price Index. Stocks are represented by the S&P 500 Index, an unmanaged index that consists of the common stocks of 500 large-capitalization companies, within various industrial sectors, most of which are listed on the New York Stock Exchange. Bonds are represented by the Barclays US Aggregate Bond Index, an unmanaged market-weighted index that consists of investment-grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency issues with at least 1 year to maturity. International Stocks are represented by the MSCI EAFE Index, a broad-based measure of international stock performance. Inflation is represented by the Consumer Price Index. Average Investor is represented by Dalbar’s average asset allocation investor return, which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/13 to match Dalbar’s most recent analysis.

Past Performance does not Guarantee Future Returns Source: Standard & Poor’s

Market Timing: Best Days Missed in S&P 500 1994-2013


Missing the market's top-performing days can prove costly.

This chart illustrates the

performance of a hypothetical $10,000 investment made in the S&P 500 from 1/1/1994 – 12/31/13. This chart represents index performance and does not represent fund performance. This chart does not imply any future performance. You cannot invest directly in an index.

Market Timing: Consensus View is that Rates will Rise

Source: http://online.barrons.com/news/articles/SB50001424053111903409104579517663810941986


THE BIG MONEY POLL is conducted twice yearly by Barron's, in the spring and fall, with the help of Beta Research of Syosset, N.Y. Barron’s latest survey, e-mailed at the end of March 2014, drew responses from 152 portfolio chiefs nationwide, representing some of the largest asset managers in America, as well as smaller firms. Barron's has been conducting the Big Money survey for more than 20 years to get professional investors' read on the financial markets and the economy.

Past Performance does not Guarantee Future Returns Source: Merrill Lynch report “Just in case rates don’t rise…”, chart 1

Market Timing: Money Flows into Hard-Assets


Keynes on Greed and Fear

“It [investing] is the one sphere of life and activity where victory, security and success is always to the minority and never to the majority. When you find any one agreeing with you, change your mind. When I can persuade the Board of my Insurance Company to buy a share, that, I am learning from experience, is the right moment for selling it.”

- John Maynard Keynes

Source: http://www.maynardkeynes.org/keynes-the-investor.html




Greed: Emerging Markets Treated as a Must Own

Past Performance does not Guarantee Future Returns Source: White Paper “Asset Allocation at Barclays”, March 2013, Page 14


Source: Stifel Nicolaus / Barry Bannister April 2, 2014 Past Performance is not a guarantee of future results

-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%

1805

1815

1825

1835

1845

1855

1865

1875

1885

1895

1905

1915

1925

1935

1945

1955

1965

1975

1985

1995

2005

2015

E

2025

E

PPI All Commodities (Up to 1956) and CRB Commodity Futures (1957-now) Linked Commodity Prices Y/Y % Change, 10-Yr. Moving Average

War of 1812 & Napoleonic Wars

(1814 peak)

U.S.Civil War (1864 peak)

World War 1 (1920 peak)

Cold War (1980 peak)

U.S.$ debasement, EM growth

10-year smoothed commodity price growth maybe peaking within widening amplitude

Data 1795 to Apr-2, 2014 (TTM), 10-yr. M.A.

World War 2, Korean Conflict

Source: Commodities 1795 to 1890 are the Warren & Pearson index constructed with farm products, foods, hides & leather, textiles, fuel & lighting, metals & metal products, building materials, chemicals & drugs, household furnishing goods, spirits and other commodities. 1891 to 1913 is the Wholesale Commodities Price Index from the BLS and other agencies.

1914 to 1956 is the PPI for All Commodities, and 1957 to present is the CRB CCI Index.

Data going back to 1795, with first data point 12/31/1805 – through April 2, 2014

Greed: Riding the Commodity Train


Greed: Private Investments in Mining & Oilfield Near Highs

Past Performance does not Guarantee Future Returns Source: ThomsonReuters Baseline

Your Portfolio’s Enemies Greed: Emerging Market Outperformance

Source: Bloomberg

MSCI EM (Ticker MXEF) Index: The Morgan Stanley Capital Emerging Markets Index is a free float weighted equity index.

MSCI EAFE (Ticker MXEA) Index: The MSCI EAFE

Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.

S&P 500 (Ticker SPX) Index: Standard and Poor's

500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941- 43 base period.

Past performance does not guarantee future results. One cannot invest directly in an index.

Your Portfolio’s Enemies Fear: Housing is Affordable…

Source: Bloomberg

To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.

Fear: …but Housing Starts/Supply is Near Record Lows

Source: Bloomberg

Num

ber of new housing units started in the U

.S., annually, In Thousands


Source: http://video.cnbc.com/gallery/?video=3000099730

Fear: The Ideology of the U.S. being Unattractive




Fear: The New Normal/Neutral

Source: http://www.pewresearch.org/fact-tank/2013/10/18/millennials-still-lag-in-forming-their-own-households/

Fear: New Era of Regulation and Litigation for Banks

Source: WSJ article “BofA in Talks to Pay At Least $12 Billion to Settle Probes”, June 5, 2014


Fear: Wide Diversification

Note: alternative strategies include private equity (LBOs, mezzanine, M&A funds and international private equity); marketable alternatives (hedge funds, absolute return, market neutral, long/short, 130/30, event-driven and derivatives); venture capital; private equity real estate (non-campus); energy and natural resources (oil, gas, timber, commodities and managed futures); and distressed debt

Source: NACUBO-Commonfund public NCSE information


Past performance does not guarantee future results. Diversification does not assure a profit nor protect against loss in a declining market.

Fear: Lower Domestic Exposure

Source: http://www.top1000funds.com/news/2011/09/28/harvard-favours-emerging-markets-and-absolute-returns-over-fixed-income/


The Harvard Endowment Asset Allocation Policy


Source: MarketWatch / Howard Gold article “Not even a bull market can interest people in stocks”, June 8, 2014

Fear: Investors are Underinvested & Risk-Averse

Your Portfolio’s Enemies Fear: Risk Taking is Irrationally Distributed

Source: Merrill Lynch “(Mid-) Year Ahead in Pictures”, page 87


We believe stocks with stable earnings are still inexpensive

QE = Quantitative Easing LTRO = Long-term refinancing option Ratings source is Standard & Poors

Q: Responding to Your Portfolio’s Enemies? A: Friendly Acts!


Your Portfolio’s Enemies Friendly Acts: Recognize the Health of the Consumer

Source: Bloomberg

% (Percent)

Federal Reserve US Financial Obligations Ratio - An estimate of the ratio of debt payments to disposable income. The types of debt included in the financial obligation ratio include mortgage payments, credit cards, property tax and lease payments.


Source: Business Insider – Markets Chart Of The Day “Here Come America’s 23-Year-Olds, June 18, 2014

Friendly Acts: See the Demographic Opportunity

Age:


Friendly Acts: Recognize the U.S.’s Gorgeous Demographics

Source: The Bank Credit Analyst, September 2013 “The Coming Baby Boom in Developed Economies”

Developed economies are about to experience a baby boom that will be bigger and longer-lasting than even the one that followed the Second World War.

The entry of the Millennial generation into their prime childbearing years, along with the recouping of births that were postponed both due to the recession and by the decision of many women to delay having children until their thirties, will drive the first leg of this new baby boom

Continued progress in creating more family-friendly labor market institutions in developed economies, increased gender equality, rising incomes, as well as cultural and possibly genetically-driven shifts in the composition of populations towards more fecund individuals will all power the second leg of the baby boom.

Faster population growth implies stronger aggregate demand in the near term and more rapid supply growth over the long haul. Equities, housing, and commodities should benefit.

Properly measured, U.S. fertility rates are already well above the baseline used by the government in projecting future fiscal trends. Our estimates imply a fiscal surplus of 4% of Gross Domestic Product by the end of the century, even if current entitlement programs are not scaled back.

- The Bank Credit Analyst, September 2013


Your Portfolio’s Enemies Friendly Acts: Housing has Leverage to the Economy

Source: http://www.bespokeinvest.com/thinkbig/2014/4/23/housing-and-economic-growth.html

Residential fixed investment includes the construction of new single-family and multi-family houses, manufactured housing (or mobile homes) and home improvements. Also included in residential fixed investment are the brokers’ commissions on sales, net purchases of used structures and residential equipment.

Friendly Acts: Trust the Facts - U.S. Banks at Historically Low Stress Levels

Source: Bloomberg

St Louis Fed Financial Stress Index (Ticker: STLFSI / SLF FSI):

This Index measures the degree

of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Values below zero suggest below-average financial market stress, while values above zero suggest above-average financial market stress.



Your Portfolio’s Enemies Friendly Acts: Consider Buying Capitulation and Fear

Source: Bloomberg

Past performance does not guarantee future results. One cannot invest directly in an index.


Source: http://mjperry.blogspot.com/2012/04/2011-most-energy-efficient-economy-in.html

Friendly Acts: Recognize an Efficient Economy

(British Thermal Units)


Source: Bloomberg

Friendly Acts: Recognize A Cheap U.S. Dollar

Price

Friendly Acts: Show Immense Patience


Source: ThomsonReuters Baseline

Definitions S&P 500 Index: A market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation. Russell 1000 Value Index (R 1000 Value): A measure of the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. One cannot invest directly in an index. Free Cash Flow (FCF): measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. Book Value: is the net asset value of a company, calculated by subtracting total liabilities from total assets. Price / Book ratio: current price / most recent book value per share. Long Term Debt (L/T Debt): Loans with obligations of over one year on which interest is paid. Basis point (bps): A unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument. Earnings Stability (R2): R2 measures the deviation of a company's earnings from its historical earnings growth rate. Earnings per share (EPS): is calculated by taking the total earnings divided by the number of shares outstanding. Return on Equity (ROE): ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. Cash Flow: A revenue or expense stream that changes a cash account over a given period. Net Profit Margin (NPM): Earnings divided by revenue. Earnings Stability: The complement of the standard deviation of annual earnings from those which would be plotted on reconstructed regression slope lines determined by the stock's annual rate of growth of earnings. P/E Rel to 10 Year Average: The price/earnings ratio of the trailing 12-month period, compared to the average price/earnings ratio of the last 10-years for a security MSCI Emerging Markets Index (notated as “EM”): An index created by Morgan Stanley Capital International (MSCI) that is designed to measure equity market performance in global emerging markets. MSCI All World Index: An index created by Morgan Stanley Capital International (MSCI) that is designed to measure broad global equity benchmarks.

Definitions (cont.) Russell 2000 Index: The Russell 2000 serves as a benchmark for small-cap stocks in the United States. Beta: A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns. Sharpe Ratio: A risk-adjusted measure developed by William F. Sharpe, calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the fund's historical risk-adjusted performance. Debt / Equity Ratio: A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. $ Average Market Cap: the average Market Capitalization of a portfolio/universe, weighted by the dollars invested in the respective companies; Market Capitalization is the total dollar market value of all of a company’s outstanding shares, calculated by multiplying a company’s shares outstanding by the current market price of one share Household Debt Service Ratio: the Household Debt Service Ratio is an estimate of the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt. “Nasdaq” is Nasdaq Composite: A market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. Brazil Bovespa Index: The Bovespa Index (IBovespa) is the main indicator of the average performance of the BM&FBovespa exchange. The IBovespa covers more than 80% of the trades and approximately 70% of the market capitalization of the exchange. Russian RTS Index: The Russian RTS Index is a capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange in Moscow, Russia. The list of stocks is reviewed every three months by the RTS Information Committee. India BSE Sensex Index: The S&P BSE Sensex Index is a cap-weighted index. The index members have been selected on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. Sensex has a base date and value of 100 in 1978-1979.

Definitions (cont.) Shanghai SE Comp Index: The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listedon the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. CRB Index: The CRB Index is a measure of price movements of 22 sensitive basic commodities whose markets are presumed to be among the first to be influenced by changes in economic conditions. indu Dow Jones 30 Index (Dow Jones Industrial Average): The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928. NASDAQ Biotech Index: The NASDAQ Biotechnology Index is a modified market capitalization-weighted index designed to measure the performance of all NASDAQ stocks in the biotechnology sector. Price/Earnings (Trailing): the ratio of a firm’s closing stock price & its trailing 12 months’ earnings/share. Price/Earnings (Forward): the ratio of a firm’s closing stock price & its forward expected 12 months’ earnings/share. Enterprise Value: The sum of Market Capitalization, Preferred Equity, and short- and long-term interest-bearing debt, less cash and equivalents. Used as a proxy for the takeover value of a firm. EBITDA: Used as a proxy for Operating Earnings. EBITDA is earnings before taxes, depreciation, and amortization Ent Value / Ebitda: A ratio with Enterprise Value as numerator, and EBITDA as denominator. Alpha: Alpha is the excess return of a fund relative to the return of its benchmark. Standard Deviation: A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance. Russell 1000: An index of approximately 1,000 of the largest companies in the U.S. equity markets, the Russell 1000 is a subset of the Russell 3000 Index.

Disclosures

The fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the investment company, and it may be obtained by calling 877-807-4122 or visiting www.smeadfunds.com. Read it carefully before investing. Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the fund is more exposed to individual stock volatility than a diversified fund. The Smead Value Fund is distributed by Quasar Distributors, LLC.

Questions & Answers Questions for the Portfolio Managers?

Email questions to [email protected] Sales desk 877.701.2883

mailto:[email protected]

smvlx 3q09 webcast · 2014-08-07 · december 18, 2009. ... 2014 q1) return on assets (1999 q3 –...

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