SMVLX 3Q09 Webcast...Source: Pfizer Analyst / Investor Day presentation March 26, 2014, page 53, 62...

© 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

4th Quarter 2014 Webcast

Will Millennials Drive in 2-0-1-5?

Today’s Agenda Performance, Characteristics and Top 10 Holdings

Cole Smead, CFA, Portfolio Manager

Featured Stock: Pfizer Tony A. Scherrer, CFA, Co-Portfolio Manager

Will Millennials Drive in 2-0-1-5? Bill Smead, Lead Portfolio Manager

Quarter-End Performance

Qtr 1 Year 3 Year 5 Year Since Incept.

Smead Value Fund Investor Class (SMVLX) 7.26% 14.43% 26.24% 18.80% 8.60%

Smead Value Fund A Share w/ load (SVFAX) 1.10% 7.79% 23.55% 17.15% 7.45%

Smead Value Fund A Share w/o load (SVFAX) 7.26% 14.36% 26.00% 18.55% 8.36%

Smead Value Fund I1 Share Class (SVFFX) 7.36% 14.75% 26.55% 19.09% 8.79%

Russell 1000 Value Index 4.98% 13.45% 20.89% 15.42% 6.45%

S&P 500 Index 4.93% 13.68% 20.41% 15.45% 7.27%

Average Annualized Total Returns as of December 31, 2014

Investor Shares Gross Expense Ratio 1.46% A Shares Gross Expense Ratio 1.46% I1 Shares Gross Expense Ratio 1.19% 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 applies a maximum Deferred Sales Charge on Class A shares only to purchases of $1,000,000 or more that are redeemed within 18 months of purchase. 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. I1 Class shares of the Fund commenced operations on December 18, 2009. Performance shown for I1 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 12/31/2014)

Past Performance does not Guarantee Future Returns

Top Ten Holdings (as of 12/31/2014)

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

4.2% 4.3%

4.6% 4.7% 4.7%

5.0% 5.1% 5.2%

6.4% 6.7%

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

Nordstrom JPMorgan Chase & Co.

Aflac Cabela's

Wells Fargo Amgen

Berkshire Hathaway B Bank of America

Ebay Gannett

Percentage of Fund

Smead Value Fund

Portfolio Additions / Deletions Fourth Quarter, 2014

Additions: Aflac Cabela’s EBAY (twice) NVR Pfizer


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

Trims: Abbvie Abbott Laboratories Accenture Amgen Merck & Co. Walgreen

Today’s Agenda


Performance, Characteristics and Top 10 Holdings





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

Pfizer: Meets an Economic Need


Source: Pfizer Investor Relations presentation December 2014

Over 250 Research &

Development Partner

Institutions

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

Pfizer: Strong Competitive Advantage



Pfizer: Strong Competitive Advantage (cont.)



Pfizer: Long History of Profitability & Operating Metrics


Past performance does not guarantee future results.

Source: Bloomberg

Operating Margin

Return On Equity

Percentage

Pfizer: High Levels of Free Cash Flow


Source: Bloomberg

Cash From Operations to Sales


Percentage

Pfizer: High Levels of Free Cash Flow



Source: Bloomberg

Free Cash Flow per Annum

In Billions

Pfizer: Low Price in relation to Intrinsic Value


PFE = Pfizer 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 Cash Flow Price to Cash Flow =

Current Price / most recent Cash Flow for the last 4 Quarter EPS

Price to Earnings (P/E) Price of a stock as

numerator, with the Earnings as a denominator. This metric shows how expensive the price is relative to the earnings of a company

Pfizer: History of Shareholder Friendliness



Pfizer: History of Shareholder Friendliness


Past performance does not guarantee future results. Source: Pfizer Investor Relations presentation December 2014

Pfizer: Strong Balance Sheet


Source: Pfizer Analyst / Investor Day presentation March 26, 2014, page 53, 62

Debt / Equity ratio: Total Debt to Total Equity is calculated as the sum of Short and Long Term Borrowings divided by Total Shareholder's Equity, multiplied by 100. Total Shareholders' equity is calculated using the following formula: Preferred Equity + Minority Interest + Total Common Equity Debt / Total Cap ratio: Net Debt to Total Capitalization measures a company's financial risk by determining how much of the company's assets have been financed by debt. Short Term Debt + Long Term Debt - Cash & Equivalents / (Long Term Debt + Stockholders Equity) FCF (Free Cash Flow): Amount of disposable cash available to a firm after it has met its discretionary expenditures “ps”: nomenclature for “per share”

Pfizer: Insider Ownership


Source: The Washington Service, Bloomberg, Yahoo! Finance

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.

Today’s Agenda






© 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

Will Millennials Drive in 2-0-1-5? American Demographics Housing: Bargain of a Lifetime Why is this so Contentious? Mean Reversions Where Does This Take Us?



Source: http://www.sec.gov/Archives/edgar/data/1524313/000104746911006627/a2204856zex-99_1.htm

American Demographics: Meet the ‘Echo-Boomers’


Source: Business Insider “Meet the ‘Echo-Boom’”, Feb 6, 2013 by Rob Wile

American Demographics: Meet the ‘Echo-Boomers’


Source: Joint Center for Housing Studies, Harvard University, July 2009, George S. Masnick and Eric S. Belsky, Figure 4

American Demographics: Economics and Household Formation


American Demographics: Homeownership Rate

Source: Bloomberg

Percentage




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.

Housing: Very Affordable

Source: Bloomberg

Num

ber of new housing units started in the U

.S., annually, In Thousands


Housing: Starts Near Historic Lows

Will Millennials Drive in 2-0-1-5? Housing: Building Permits Rebounding

Source: Bloomberg


Num

ber of Permits


Source: Bloomberg

Housing: Gasoline “Tax Cut” Effect

Price of Gasoline

Will Millennials Drive in 2-0-1-5? Housing: Mortgage Applications are Troughing

Source: Bloomberg Past performance does not guarantee future results.



Why is this so Contentious?: Coming off a Deep Recession


Source: Bloomberg, Bureau of Economic Analysis

Percent


Why is this so Contentious?: Unemployment

Source: Thomson Reuters Baseline


Source: http://www.trulia.com/trends/2014/09/millennials-leaving-nest/

Why is this so Contentious?: Paltry Household Formation

Through 6/30/2014

Pe

rcen

t

Pe

rcen

t



Will Millennials Drive in 2-0-1-5? Mean Reversions? Household Debt Service Ratio

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: Bloomberg

Mean Reversions: The U.S. Trade Weighted Dollar Price

The trade-weighted US dollar index, also known as the broad index, is a measure of the value of the United States dollar relative to other world currencies



Source: BCA Research 2015, Chart 11

Mean Reversions: Job Openings


R

atio

Will Millennials Drive in 2-0-1-5? Mean Reversions: Consumers

Past performance does not guarantee future results. Source: Thomson Reuters Baseline

Will Millennials Drive in 2-0-1-5? Mean Reversions: Oil Rig Counts at Peak Levels

Source: Bloomberg


Num

ber of Rigs

Will Millennials Drive in 2-0-1-5? Mean Reversions: Residential Real Estate





Past Performance is not a guarantee of future results

Where Does This Take Us? To a Place Far Away From Thomas R. Malthus

Source: BCA Report “The Coming Baby Boom in Developed Economies” Chart II-17

Chart through 12/31/2013

Inde

x Va

lue


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

Where Does This Take Us?: Efficient U.S. Economy

(British Thermal Units)



Where Does This Take Us? Fertility Choices Less Determined by Economics




Where Does This Take Us? Fertility Choices Less Determined by Higher Education


Pe

rcen

t



Where Does This Take Us?


Through Nov 2014

Pe

rcen

t

Will Millennials Drive in 2-0-1-5? Where Does This Take Us?: Valuation Gaps Close


Source: Thomson Reuters Baseline

EPS = Earnings Per Share Forward P/E = the Price of a stock vs. the next 12 months of expected Earnings


Where Does This Take Us?: Mis-Allocation Misses it Again

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

NACUBO = National Association of College and University Business Officers




Today’s Agenda






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. 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. 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. Russell Microcap (“RMICRO Index”): The Russell Microcap Index measures the performance of the microcap segment of the U.S. equity market. It makes up less than 3% of the U.S. equity market. It includes 1,000 of the smallest securities in the small-cap Russell 2000 Index based on the combination of their market cap and current membership.

Disclosures

The fund's investment objectives, risks, charges and Housing: Bargain of a Lifetime 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 ALPS Distributors, Inc. ALPS Distributors, Inc. and Smead Capital Management are not affiliated.

Questions & Answers Questions for the Portfolio Managers?

Email questions to [email protected] Sales desk 877.701.2883

SVF000142 Exp. 07/31/2015

mailto:[email protected]

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SMVLX 3Q09 Webcast...Source: Pfizer Analyst / Investor Day presentation March 26, 2014, page 53, 62...

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