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Selector US Large Cap CoreGrowth Fundamental Analysis

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Selector US Large Cap CoreGrowth Fundamental Analysis Powered By Docstoc
					    Selector US Large Cap Core/Growth
0       Managed by Smith Asset Management
The Case for Smith

     Organization
         100% employee owned
         Based in Dallas (Texas) – managing 5,8 bn USD (as of June ’08)
         Investment professionals average 20 years industry experience

     Robust Investment Approach
        Consistent methodology and portfolio characteristics since 1987
        Disciplined, low-risk investment process
        Return pattern has participated in the market’s upside while offering downside protection

     Pioneered Earnings Surprise investing
         25 year history investing in positive earnings surprise stocks
         Six investment professionals focused on single stock selection discipline




 1
Investment Philosophy

“Straight-forward philosophy that has been
     consistently applied for over 25 years”



                    We apply an engineering approach…


                      Leveraging technology and fundamental research

                      To identify companies with undiscovered growth
                      potential

                      Creating risk-controlled portfolios

                      That produce attractive return patterns


 2
Portfolio Management Process

  “We believe superior returns can be
achieved without subjecting the portfolio
         to unnecessary risk. ”

                                                                         Sell
                                                                      Discipline

                                                                  ►
                                                    Portfolio
                                                   Construction
                                               ►
                                 Fundamental
                                   Analysis

                             ►
      Quantitative Screens




  3
Quantitative Screens

“The purpose of quantitative screening                                    Risk Reduction
 is to identify candidates for potential                                  Investable Universe      Risk Control
           portfolio inclusion.”                                           Market Capitalization    Volatility
                                                                           Minimum Liquidity        Valuation
                                                                           Minimum Price            Corporate Governance
                                                                Sell
                                                             Discipline
                                                         ►
                                           Portfolio                      Improving Business Fundamentals
                                          Construction
                                                                          Earnings Quality         Earnings Outlook
                                      ►
                                                                           Accruals                 Rising Growth Expectations
                        Fundamental
                          Analysis                                         Asset Utilization           Estimate Revisions
                    ►                                                      Cash Flow                   Analyst Accuracy
     Quantitative                                                          Non Operating Items      Normalized v. Expected
      Screens
                                                                                                    High Forward Growth




 4
Fundamental Analysis

“We identify high quality growth companies                                Validate Quantitative Screens    Fundamental Analysis

    while avoiding stocks with inferior
                                                                          Valuation                        Management
   fundamentals and unattractive risk                                      Operating Earnings/             Products
              characteristics.”                                              Enterprise Value               Competition
                                                                           Earnings Cyclicality            Profitability
                                                                Sell       Price Earnings/Growth & Yield   Historical Growth Rates
                                                             Discipline
                                                                          Corporate Governance             Historical Valuation
                                                         ►
                                                                           Management Entrenchment         Earnings Life Cycle
                                           Portfolio
                                                                           Board Structure
                                          Construction
                                      ►                                    Compensation Policies
                                                                           Qualitative Factors
                        Fundamental
                          Analysis                                        Earnings Quality
                    ►                                                      Dynamic Look into Financials
     Quantitative                                                          Conservative Accounting
      Screens
                                                                           Improving Asset Turnover
                                                                           Free Cash Flow Growth
                                                                          Growth Outlook
                                                                           Understand Growth Drivers




 5
Portfolio Construction

“Ensures alignment to fundamental factors
and risk control measures responsible for an                              Diversification
         attractive return pattern”                                        Sector/Industry
                                                                           Position Weights



                                                                Sell      Factor Alignment
                                                             Discipline    Growth Outlook
                                                         ►
                                                                           Quality Measures
                                           Portfolio                       Relative Valuation
                                          Construction
                                      ►
                        Fundamental
                                                                          Risk Model
                          Analysis                                         Pre-Trade Risk Analysis
                    ►
                                                                           Relative Risk Exposures
     Quantitative
      Screens




 6
Sell Discipline

“A well-defined sell discipline prevents two                                   Negative Earnings Surprise
  common mistakes: 1) rationalizing bad                                         Predicted by the Process
 investment decisions; and 2) holding onto                                        Deteriorating Business Fundamentals
            winners too long.”                                                    Deteriorating Growth Outlook
                                                                                Management Guidance
                                                             Sell Discipline    Actually Reported

                                                         ►
                                                                               Corporate Buyout
                                           Portfolio
                                          Construction                          Buyout Announcement
                                      ►
                        Fundamental                                            Over-Valuation
                          Analysis
                                                                                Valuation Level Too High
                    ►
     Quantitative
      Screens




 7
Components of Governance Evaluation

Incorporates both quantitative tools                                                     APPENDIX
     and fundamental analysis

           Board of Directors Analysis           Compensation Policies
            Board Structure/Size                 Cost of Option Plans
            Board Independence/Supermajority     Shareholder Approval of Options Plan
            Response to Shareholder Proposals    Director Compensation
            Governance/Compensation Committee    Option Re-pricing Plans
            Stock Ownership Guidelines           Low Option Burn Rate
            Mandatory Retirement for Directors   Management Stock Ownership Guidelines




           Management Entrenchment               Qualitative Factors
            Unequal Voting Rights                Chairman/CEO Separation
            Golden/Silver/Pension Parachutes     Board Reviews
            Director Indemnification Rules       Audit Policies
            Classified/Staggered Boards          CEO Succession Plan
            Blank Check/Poison Pill Policies     Cumulative Voting



 8
Components of Earnings Quality Analysis

Incorporates both quantitative tools                                                 APPENDIX

     and fundamental analysis
            Valuation Quality                      Management Effectiveness
            Operating Income/Enterprise Value      Inventories
            Free Cash Flow/Price                   Receivables
            Cash/Price                             Payables
            Price-Fwd. 12M EPS /L-T growth/Yield   Margin Stability
            Earnings Cyclicality (multi-factor)    Net operating assets (accruals)



            Earnings Quality                       Balance Sheet Evaluation
            Cash earnings/Net Income               Cash/share
            Change in non-current assets           L-T Debt/share
            Change in working capital              Capital expenditures
            Return on total capital                Depreciation
            Exclusions                             Debt Retirement
            S&P Equity Rating                      Share Repurchase




  9
Portfolio Managers


       Stephen S. Smith, CFA                                John D. Brim,
       CEO and Chief Investment Officer                     CFA
                                                            Portfolio Manager
       Stephen Smith founded Smith Group Asset
       Management in 1995. Since then, he has served as     John Brim is a partner and senior portfolio manager.
       both chief executive officer and chief investment    Prior to joining Smith Group in 1998, he was a
       officer.                                             manager in the institutional investment consulting
                                                            group of Deloitte & Touche, LLP. He also held
       Mr. Smith began his investment management            several positions with NationsBank Asset
       career as a portfolio manager at Wachovia Bank in    Management in Dallas, including senior client
       1976. In 1983, he joined the predecessor to Bank     manager.
       of America where he held senior investment
       management positions. He also was an aerospace       Mr. Brim received a bachelor of science degree in
       engineer with NASA.                                  economics from Texas A&M University and is a
                                                            CFA charter holder. He is a member of the CFA
       Mr. Smith earned a master’s degree in business       Institute and the Dallas Society of Financial
       administration and a bachelor of science degree      Analysts.
       with honors in industrial engineering from the
       University of Alabama. A CFA charter holder, he is
       a member of the CFA Institute and the Dallas
       Society of Financial Analysts where he is a member
       of the strategic advisory board. Mr. Smith is a
       trustee of the Dallas Lighthouse for the Blind.




10
Performance
                                                                                                                                                                                            As of December 31, 2008
                                                                                                                                                                                                Smit h Large Cap
                                                                                                Annualized Returns                                                                              S&P 500
                                                                                                                                                                                                Russell 1000 Growt h
                                                                                                                   3 .6
                                                                                                                          2 .4   1.4
                                                                                                                                       -0 .3                                                                 0 .4


                                                                                                -1.7 -2 .2                                     -1.5         -1.5                    -0 .7                           -1.4
                                                                                                           -3 .4                                  -3 .4            -2 .9                    -3 .6
                                                                             -5.0   -5.2-5.7                                                                           -5.7                                                -4 .3
                                                             -8 .4                                                                                                                                  -7.7
                                                     -9 .8           -9 .1


                             -17.7 -18 .5   -17.0




               -3 7.0
                   -3 8 .4
     -4 0 .2

          1 Year                2 Years               3 Years                 4 Years            5 Years            6 Years             7 Years                 8 Years              9 Years                     10 Years



                                                                                                               Excess Returns

                                                                                                                                                                                    7.0



                                                                                                                                                                                                           4.6
                                                                                                                                                                4.2

                                                                                                                                             3.1                              2.9
                                                                                                                          2.2
                                                                                                           1.7                                                                                  1.7
                                                                                                                     1.3               1.2                1.4
                                             0.7                                          0.7
                                                                                    0.2              0.4



                                                    -0.7           -0.7
                                                                -1.4
                               -1.8

                         -3.2
                             1 Year         2 Years             3 Years             4 Years         5 Years         6 Years            7 Years            8 Years         9 Years              10 Years


11
Peer Group Comparison




12
Important Legal Information

     Selector Management Fund (“Selector”), with an address at 14 Boulevard Royal, L-2449 Luxembourg, is organized in Luxembourg as a
     multiple compartment investment company with variable share capital (“SICAV”) under Part I of the Luxembourg Law of December 20, 2002
     relating to undertakings for collective investment. Selector qualifies as an undertaking for collective investment in transferable securities (a
     “UCITS”) and has obtained recognition under EC Council Directive 85/611 for marketing in certain Member States of the European Union.
     The information pertaining to the Selector SICAV funds (the “Funds”) is not directed at, nor is it intended for distribution to, or use by,
     persons in any jurisdiction in which the Funds are not authorized for distribution or in which the dissemination of information regarding the
     Funds is not permitted.
     The information or opinions contained herein should not be construed as an offer to sell or the solicitation of an offer to buy any security, nor
     shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful
     under the securities laws of such jurisdiction.
     Please be advised that trading in securities involves the possibilities of both positive returns as well as significant exposures to risks. Should
     you decide to invest in the Funds, the value of any shares or units you purchase can go up or down and you may not get back all you have
     invested. Changes in currency rates of exchange may have an adverse effect on your investment or any resulting income. You may also be
     exposed to additional specific risk in relation to each of the Funds, and you should review the risk factors specified in each prospectus very
     carefully.
     Information that is provided by Selector or Rogerscasey constitutes neither investment advice nor any recommendation; and it is provided for
     informational purposes only. You should not construe any information on return estimates and past performance as a guarantee of future
     performance. Any opinions and estimates provided by Selector are subject to change without notice. As a prospective investor, you should
     consult with your own professional advisers on the tax implications of investing in the Funds. Levels and bases of taxation are subject to
     change and will depend on your personal circumstances. Any decision to participate in the Funds should not be made solely on the basis of
     the information provided by Selector or Rogerscasey. Any decision you make using any such information is made at your own risk.
     Information displayed is accurate as of the date of publication; however, neither Selector nor Rogerscasey makes any warranty as to the
     accuracy, suitability or completeness of any such information. Selector also excludes any liability in respect of any errors or omission by
     Selector and any other relevant third party.



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