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Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
2nd Quarter 2018 Webcast
Smead Value Fund
This material is provided for informational purposes only and should not be construed as investment advice Forecasts and opinions reflect the personal
judgments of the presenter and may not reflect those of Smead Capital Management Statements and opinions are subject to change
2
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Institutional Shares were renamed I1 shares on 11212014 with a new ticker SVFFX
Investor Shares Gross Expense Ratio 129A Shares Gross Expense Ratio 130I1 Shares Gross Expense Ratio 103
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 investorrsquos 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 (wload) reflects maximum sales charge of 575 Performance for SVFAX does not reflect maximum sales charge of 575 If reflected the load would reduce the performance amount quoted SVFAX appliesa maximum Deferred Sales Charge on Class A shares only to purchases of $1000000 or more that are redeemed within 18 months ofpurchase 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
Performance data is annualized for periods longer than one year Performance data is cumulative for periods shorter than one year3
Quarter-End PerformanceTotal Returns () as of June 30 2018
Qtr YTD 1 Year 3 Year 5 Year 10 YearSince
Inception
Smead Value Fund Investor Class (SMVLX) 230 -180 1123 776 1107 1139 822
Smead Value Fund A Share w load (SVFAX) -352 -737 498 571 975 1059 747
Smead Value Fund A Share wo load (SVFAX) 236 -173 1138 782 1106 1125 808
Smead Value Fund I1 Share Class (SVFFX) 242 -161 1159 807 1138 1164 845
Russell 1000 Value Index 118 -169 677 826 1034 849 658
SampP 500 Index 343 265 1437 1193 1342 1017 835
Past performance does not guarantee future results PE Price to earnings ratio4
Smead Value FundKey Facts and Characteristics as of June 30 2018
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security 5
Smead Value FundTop Ten Holdings as of June 30 2018
446
453
463
485
515
543
547
557
620
667
000 100 200 300 400 500 600 700 800
Bank of America Corporation
JPMorgan Chase amp Co
Walgreens Boots Alliance Inc
Aflac Inc
NVR Inc
Target Corp
Berkshire Hathaway Inc B
American Express Co
Amgen Inc
Discovery Inc Class A
Percentage of Fund
2
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Institutional Shares were renamed I1 shares on 11212014 with a new ticker SVFFX
Investor Shares Gross Expense Ratio 129A Shares Gross Expense Ratio 130I1 Shares Gross Expense Ratio 103
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 investorrsquos 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 (wload) reflects maximum sales charge of 575 Performance for SVFAX does not reflect maximum sales charge of 575 If reflected the load would reduce the performance amount quoted SVFAX appliesa maximum Deferred Sales Charge on Class A shares only to purchases of $1000000 or more that are redeemed within 18 months ofpurchase 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
Performance data is annualized for periods longer than one year Performance data is cumulative for periods shorter than one year3
Quarter-End PerformanceTotal Returns () as of June 30 2018
Qtr YTD 1 Year 3 Year 5 Year 10 YearSince
Inception
Smead Value Fund Investor Class (SMVLX) 230 -180 1123 776 1107 1139 822
Smead Value Fund A Share w load (SVFAX) -352 -737 498 571 975 1059 747
Smead Value Fund A Share wo load (SVFAX) 236 -173 1138 782 1106 1125 808
Smead Value Fund I1 Share Class (SVFFX) 242 -161 1159 807 1138 1164 845
Russell 1000 Value Index 118 -169 677 826 1034 849 658
SampP 500 Index 343 265 1437 1193 1342 1017 835
Past performance does not guarantee future results PE Price to earnings ratio4
Smead Value FundKey Facts and Characteristics as of June 30 2018
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security 5
Smead Value FundTop Ten Holdings as of June 30 2018
446
453
463
485
515
543
547
557
620
667
000 100 200 300 400 500 600 700 800
Bank of America Corporation
JPMorgan Chase amp Co
Walgreens Boots Alliance Inc
Aflac Inc
NVR Inc
Target Corp
Berkshire Hathaway Inc B
American Express Co
Amgen Inc
Discovery Inc Class A
Percentage of Fund
Institutional Shares were renamed I1 shares on 11212014 with a new ticker SVFFX
Investor Shares Gross Expense Ratio 129A Shares Gross Expense Ratio 130I1 Shares Gross Expense Ratio 103
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 investorrsquos 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 (wload) reflects maximum sales charge of 575 Performance for SVFAX does not reflect maximum sales charge of 575 If reflected the load would reduce the performance amount quoted SVFAX appliesa maximum Deferred Sales Charge on Class A shares only to purchases of $1000000 or more that are redeemed within 18 months ofpurchase 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
Performance data is annualized for periods longer than one year Performance data is cumulative for periods shorter than one year3
Quarter-End PerformanceTotal Returns () as of June 30 2018
Qtr YTD 1 Year 3 Year 5 Year 10 YearSince
Inception
Smead Value Fund Investor Class (SMVLX) 230 -180 1123 776 1107 1139 822
Smead Value Fund A Share w load (SVFAX) -352 -737 498 571 975 1059 747
Smead Value Fund A Share wo load (SVFAX) 236 -173 1138 782 1106 1125 808
Smead Value Fund I1 Share Class (SVFFX) 242 -161 1159 807 1138 1164 845
Russell 1000 Value Index 118 -169 677 826 1034 849 658
SampP 500 Index 343 265 1437 1193 1342 1017 835
Past performance does not guarantee future results PE Price to earnings ratio4
Smead Value FundKey Facts and Characteristics as of June 30 2018
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security 5
Smead Value FundTop Ten Holdings as of June 30 2018
446
453
463
485
515
543
547
557
620
667
000 100 200 300 400 500 600 700 800
Bank of America Corporation
JPMorgan Chase amp Co
Walgreens Boots Alliance Inc
Aflac Inc
NVR Inc
Target Corp
Berkshire Hathaway Inc B
American Express Co
Amgen Inc
Discovery Inc Class A
Percentage of Fund
Past performance does not guarantee future results PE Price to earnings ratio4
Smead Value FundKey Facts and Characteristics as of June 30 2018
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security 5
Smead Value FundTop Ten Holdings as of June 30 2018
446
453
463
485
515
543
547
557
620
667
000 100 200 300 400 500 600 700 800
Bank of America Corporation
JPMorgan Chase amp Co
Walgreens Boots Alliance Inc
Aflac Inc
NVR Inc
Target Corp
Berkshire Hathaway Inc B
American Express Co
Amgen Inc
Discovery Inc Class A
Percentage of Fund
Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security 5
Smead Value FundTop Ten Holdings as of June 30 2018
446
453
463
485
515
543
547
557
620
667
000 100 200 300 400 500 600 700 800
Bank of America Corporation
JPMorgan Chase amp Co
Walgreens Boots Alliance Inc
Aflac Inc
NVR Inc
Target Corp
Berkshire Hathaway Inc B
American Express Co
Amgen Inc
Discovery Inc Class A
Percentage of Fund
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
| Investment | Consumer Discretionary | Financials | Healthcare | Information Technology | Consumer Staples | Industrials | Energy | Basic Materials | Real Estate | Telecom Services | Utilities | ||||||||||||||
| Smead Value Fund | 3535 | 3101 | 1584 | 955 | 702 | 123 | 000 | 000 | 000 | 000 | 0 | 10000 | |||||||||||||
| Russell 1000 Value TR Index | 676 | 2710 | 1364 | 926 | 809 | 823 | 1072 | 292 | 457 | 2866 | 5855 | 10000 | |||||||||||||
| SampP 500 TR Index | 1267 | 1473 | 1371 | 2487 | 765 | 1021 | 574 | 286 | 278 | 192 | 286 | 10000 |
| Ticker | Weighting | SampP GICS Sector | ||||||||||
| Discovery Inc Class A | DISCA | 667 | Consumer Discretionary | Bank of America Corporation | 44614 | |||||||
| Amgen Inc | AMGN | 620 | Health Care | JPMorgan Chase amp Co | 45308 | |||||||
| American Express Co | AXP | 557 | Financials | Walgreens Boots Alliance Inc | 46331 | |||||||
| Berkshire Hathaway Inc B | BRKB | 547 | Financials | Aflac Inc | 48494 | |||||||
| Target Corp | TGT | 543 | Consumer Discretionary | NVR Inc | 51485 | |||||||
| NVR Inc | NVR | 515 | Consumer Discretionary | Target Corp | 54297 | |||||||
| Aflac Inc | AFL | 485 | Financials | Berkshire Hathaway Inc B | 54663 | |||||||
| Walgreens Boots Alliance Inc | WBA | 463 | Consumer Staples | American Express Co | 55686 | |||||||
| JPMorgan Chase amp Co | JPM | 453 | Financials | Amgen Inc | 62019 | |||||||
| Bank of America Corporation | BAC | 446 | Financials | Discovery Inc Class A | 66719 | |||||||
| The Home Depot Inc | HD | 440 | Consumer Discretionary | |||||||||
| Lennar Corp | LEN | 416 | Consumer Discretionary | |||||||||
| Walt Disney Co | DIS | 363 | Consumer Discretionary | |||||||||
| Wells Fargo amp Co | WFC | 351 | Financials | |||||||||
| eBay Inc | EBAY | 346 | Information Technology | |||||||||
| Accenture PLC A | ACN | 334 | Information Technology | |||||||||
| Pfizer Inc | PFE | 298 | Health Care | |||||||||
| Merck amp Co Inc | MRK | 295 | Health Care | |||||||||
| Comcast Corp Class A | CMCSA | 278 | Consumer Discretionary | |||||||||
| The Kroger Co | KR | 248 | Consumer Staples | |||||||||
| PayPal Holdings Inc | PYPL | 211 | Information Technology | |||||||||
| Nordstrom Inc | JWN | 207 | Consumer Discretionary | |||||||||
| AmerisourceBergen Corp | ABC | 173 | Health Care | |||||||||
| Johnson amp Johnson | JNJ | 165 | Health Care | |||||||||
| Tegna Inc | TGNA | 163 | Consumer Discretionary | |||||||||
| Starbucks Corp | SBUX | 078 | Consumer Discretionary |
| Bank of America Corporation | |
| JPMorgan Chase amp Co | |
| Walgreens Boots Alliance Inc | |
| Aflac Inc | |
| NVR Inc | |
| Target Corp | |
| Berkshire Hathaway Inc B | |
| American Express Co | |
| Amgen Inc | |
| Discovery Inc Class A |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
| Investment | Consumer Discretionary | Financials | Healthcare | Information Technology | Consumer Staples | Industrials | Energy | Basic Materials | Real Estate | Telecom Services | Utilities | ||||||||||||||
| Smead Value Fund | 3535 | 3101 | 1584 | 955 | 702 | 123 | 000 | 000 | 000 | 000 | 0 | 10000 | |||||||||||||
| Russell 1000 Value TR Index | 676 | 2710 | 1364 | 926 | 809 | 823 | 1072 | 292 | 457 | 2866 | 5855 | 10000 | |||||||||||||
| SampP 500 TR Index | 1267 | 1473 | 1371 | 2487 | 765 | 1021 | 574 | 286 | 278 | 192 | 286 | 10000 |
| Ticker | Weighting | SampP GICS Sector | ||||||||||
| Discovery Inc Class A | DISCA | 667 | Consumer Discretionary | Bank of America Corporation | 44614 | |||||||
| Amgen Inc | AMGN | 620 | Health Care | JPMorgan Chase amp Co | 45308 | |||||||
| American Express Co | AXP | 557 | Financials | Walgreens Boots Alliance Inc | 46331 | |||||||
| Berkshire Hathaway Inc B | BRKB | 547 | Financials | Aflac Inc | 48494 | |||||||
| Target Corp | TGT | 543 | Consumer Discretionary | NVR Inc | 51485 | |||||||
| NVR Inc | NVR | 515 | Consumer Discretionary | Target Corp | 54297 | |||||||
| Aflac Inc | AFL | 485 | Financials | Berkshire Hathaway Inc B | 54663 | |||||||
| Walgreens Boots Alliance Inc | WBA | 463 | Consumer Staples | American Express Co | 55686 | |||||||
| JPMorgan Chase amp Co | JPM | 453 | Financials | Amgen Inc | 62019 | |||||||
| Bank of America Corporation | BAC | 446 | Financials | Discovery Inc Class A | 66719 | |||||||
| The Home Depot Inc | HD | 440 | Consumer Discretionary | |||||||||
| Lennar Corp | LEN | 416 | Consumer Discretionary | |||||||||
| Walt Disney Co | DIS | 363 | Consumer Discretionary | |||||||||
| Wells Fargo amp Co | WFC | 351 | Financials | |||||||||
| eBay Inc | EBAY | 346 | Information Technology | |||||||||
| Accenture PLC A | ACN | 334 | Information Technology | |||||||||
| Pfizer Inc | PFE | 298 | Health Care | |||||||||
| Merck amp Co Inc | MRK | 295 | Health Care | |||||||||
| Comcast Corp Class A | CMCSA | 278 | Consumer Discretionary | |||||||||
| The Kroger Co | KR | 248 | Consumer Staples | |||||||||
| PayPal Holdings Inc | PYPL | 211 | Information Technology | |||||||||
| Nordstrom Inc | JWN | 207 | Consumer Discretionary | |||||||||
| AmerisourceBergen Corp | ABC | 173 | Health Care | |||||||||
| Johnson amp Johnson | JNJ | 165 | Health Care | |||||||||
| Tegna Inc | TGNA | 163 | Consumer Discretionary | |||||||||
| Starbucks Corp | SBUX | 078 | Consumer Discretionary |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
| Investment | Consumer Discretionary | Financials | Healthcare | Information Technology | Consumer Staples | Industrials | Energy | Basic Materials | Real Estate | Telecom Services | Utilities | ||||||||||||||
| Smead Value Fund | 3535 | 3101 | 1584 | 955 | 702 | 123 | 000 | 000 | 000 | 000 | 0 | 10000 | |||||||||||||
| Russell 1000 Value TR Index | 676 | 2710 | 1364 | 926 | 809 | 823 | 1072 | 292 | 457 | 2866 | 5855 | 10000 | |||||||||||||
| SampP 500 TR Index | 1267 | 1473 | 1371 | 2487 | 765 | 1021 | 574 | 286 | 278 | 192 | 286 | 10000 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
| Investment | Consumer Discretionary | Financials | Healthcare | Information Technology | Consumer Staples | Industrials | Energy | Basic Materials | Real Estate | Telecom Services | Utilities | ||||||||||||||
| Smead Value Fund | 3535 | 3101 | 1584 | 955 | 702 | 123 | 000 | 000 | 000 | 000 | 0 | 10000 | |||||||||||||
| Russell 1000 Value TR Index | 676 | 2710 | 1364 | 926 | 809 | 823 | 1072 | 292 | 457 | 2866 | 5855 | 10000 | |||||||||||||
| SampP 500 TR Index | 1267 | 1473 | 1371 | 2487 | 765 | 1021 | 574 | 286 | 278 | 192 | 286 | 10000 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
| Stock 966 | 966 | 966 | |||
| Cash 34 | 34 | 34 | |||
| Total | 1000 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
| Investment | Q2 2018 | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (312008) | ||||||||
| Smead Capital Appreciation - Gross of Fees | 265 | -114 | 1260 | 902 | 1236 | 1251 | 1102 | ||||||||
| Capital Appreciation Composite - Net of Fees | 240 | -161 | 1150 | 811 | 1147 | 1172 | 1026 | ||||||||
| Russell 1000 Value TR Index | 118 | -169 | 677 | 721 | 1034 | 849 | 756 | ||||||||
| SampP 500 TR Index | 343 | 265 | 1437 | 1193 | 1342 | 1017 | 949 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
| Investment | Q2 2018 | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception (122008) | |||||||
| Investor Share Class | 230 | 1123 | 776 | 1107 | 1139 | 822 | |||||||
| Russell 1000 Value TR Index | 118 | 677 | 826 | 1034 | 849 | 658 | |||||||
| SampP 500 TR Index | 343 | 1437 | 1193 | 1342 | 1017 | 835 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 534 | 3465 | 534 | 1078 | 482 | 370 | 033 | -144 | 216 | 072 | ||||||||||||
| Consumer Staples | 330 | 788 | 331 | 789 | 257 | 587 | 010 | 049 | 020 | -013 | 007 | ||||||||||||
| Energy | 000 | 1226 | 000 | 1226 | -150 | 000 | -015 | 160 | 000 | 160 | |||||||||||||
| Financials | 2945 | 2530 | 2948 | 2533 | 1327 | 1342 | 439 | 360 | 050 | -007 | 042 | ||||||||||||
| Health Care | 1770 | 1255 | 1771 | 1256 | 393 | 975 | 084 | 126 | 019 | -131 | -112 | ||||||||||||
| Industrials | 078 | 992 | 078 | 990 | 824 | 1026 | 007 | 104 | -026 | -003 | -029 | ||||||||||||
| Information Technology | 1090 | 988 | 1091 | 987 | 2227 | 1252 | 259 | 125 | 021 | 112 | 133 | ||||||||||||
| Materials | 000 | 279 | 000 | 279 | 1376 | 000 | 041 | -018 | 000 | -018 | |||||||||||||
| Real Estate | 000 | 474 | 000 | 475 | 394 | 000 | 019 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 296 | 000 | 296 | 820 | 000 | 018 | 014 | 000 | 014 | |||||||||||||
| Utilities | 000 | 636 | 000 | 636 | 760 | 000 | 050 | 005 | 000 | 005 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -020 | 000 | -020 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 854 | 1089 | 854 | 109 | 173 | 283 | ||||||||||||
| Excluded | 000 | 000 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 854 | |||||||||||||||||||
| Reported Total | 1068 | 865 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 012 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 568 | 3437 | 568 | 1795 | 1257 | 716 | 105 | 017 | 175 | 192 | ||||||||||||
| Consumer Staples | 378 | 724 | 378 | 724 | 1834 | 1163 | 107 | 108 | 008 | 065 | 073 | ||||||||||||
| Energy | 000 | 1294 | 000 | 1295 | 039 | 000 | 016 | 306 | 000 | 306 | |||||||||||||
| Financials | 2817 | 2473 | 2818 | 2476 | 1731 | 1696 | 639 | 529 | 019 | -010 | 009 | ||||||||||||
| Health Care | 2001 | 1261 | 2002 | 1261 | 1434 | 1558 | 392 | 251 | 047 | -059 | -012 | ||||||||||||
| Industrials | 047 | 979 | 047 | 977 | 824 | 1437 | 007 | 179 | -033 | -003 | -036 | ||||||||||||
| Information Technology | 993 | 914 | 993 | 913 | 1701 | 2109 | 285 | 230 | 030 | -066 | -037 | ||||||||||||
| Materials | 000 | 284 | 000 | 284 | 1211 | 000 | 049 | 008 | 000 | 008 | |||||||||||||
| Real Estate | 000 | 433 | 000 | 434 | 762 | 000 | 044 | 042 | 000 | 042 | |||||||||||||
| Telecommunication Services | 000 | 276 | 000 | 277 | 681 | 000 | 022 | 041 | 000 | 041 | |||||||||||||
| Utilities | 000 | 620 | 000 | 620 | 1170 | 000 | 098 | 011 | 000 | 011 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -068 | 000 | -068 | |||||||||||||
| Attribution Total | 10000 | 9828 | 10000 | 9830 | 1706 | 1278 | 1706 | 1327 | 420 | 102 | 522 | ||||||||||||
| Other | 000 | 000 | |||||||||||||||||||||
| Excluded | 000 | 002 | |||||||||||||||||||||
| Total | 10000 | 9830 | 1706 | 1327 | |||||||||||||||||||
| Reported Total | 1692 | 1404 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 126 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3470 | 1238 | 3465 | 1237 | 1078 | 1300 | 370 | 170 | 049 | -132 | -082 | ||||||||||||
| Consumer Staples | 330 | 957 | 331 | 957 | 257 | 839 | 010 | 084 | 016 | -026 | -010 | ||||||||||||
| Energy | 000 | 702 | 000 | 702 | -024 | 000 | -002 | 109 | 000 | 109 | |||||||||||||
| Financials | 2945 | 1382 | 2948 | 1383 | 1327 | 1309 | 439 | 208 | 058 | 004 | 063 | ||||||||||||
| Health Care | 1770 | 1468 | 1771 | 1468 | 393 | 832 | 084 | 132 | -001 | -098 | -099 | ||||||||||||
| Industrials | 078 | 1017 | 078 | 1017 | 824 | 1168 | 007 | 131 | -001 | -009 | -010 | ||||||||||||
| Information Technology | 1090 | 2104 | 1091 | 2106 | 2227 | 1856 | 259 | 419 | -081 | 039 | -042 | ||||||||||||
| Materials | 000 | 289 | 000 | 288 | 1005 | 000 | 033 | 005 | 000 | 005 | |||||||||||||
| Real Estate | 000 | 282 | 000 | 282 | 625 | 000 | 020 | 019 | 000 | 019 | |||||||||||||
| Telecommunication Services | 000 | 242 | 000 | 242 | 804 | 000 | 020 | 009 | 000 | 009 | |||||||||||||
| Utilities | 000 | 317 | 000 | 318 | 751 | 000 | 026 | 014 | 000 | 014 | |||||||||||||
| Cash | 317 | 000 | 317 | 000 | 053 | 002 | 000 | -035 | 000 | -035 | |||||||||||||
| Attribution Total | 10000 | 9998 | 10000 | 10000 | 1089 | 1137 | 1089 | 1137 | 162 | -222 | -060 | ||||||||||||
| Other | 000 | 002 | |||||||||||||||||||||
| Missing Performance | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1089 | 1137 | |||||||||||||||||||
| Reported Total | 1068 | 1141 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -020 | 004 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Portfolio Weights | Benchmark Weights | Portfolio Rescaled Weights | Benchmark Rescaled Weights | Portfolio Return | Benchmark Return | Portfolio Contribution | Benchmark Contribution | Allocation Effect | Selection Effect | Active Return | |||||||||||||
| Consumer Discretionary | 3439 | 1215 | 3437 | 1215 | 1795 | 1776 | 716 | 271 | 091 | -017 | 074 | ||||||||||||
| Consumer Staples | 378 | 977 | 378 | 976 | 1834 | 1326 | 107 | 167 | 017 | 068 | 085 | ||||||||||||
| Energy | 000 | 838 | 000 | 838 | 274 | 000 | 033 | 210 | 000 | 210 | |||||||||||||
| Financials | 2817 | 1392 | 2818 | 1394 | 1731 | 1825 | 639 | 331 | 080 | -040 | 040 | ||||||||||||
| Health Care | 2001 | 1417 | 2002 | 1417 | 1434 | 1753 | 392 | 292 | 070 | -101 | -030 | ||||||||||||
| Industrials | 047 | 1028 | 047 | 1028 | 824 | 1665 | 007 | 222 | -014 | -009 | -023 | ||||||||||||
| Information Technology | 993 | 2004 | 993 | 2005 | 1701 | 2088 | 285 | 541 | -093 | -047 | -140 | ||||||||||||
| Materials | 000 | 309 | 000 | 308 | 1227 | 000 | 054 | 022 | 000 | 022 | |||||||||||||
| Real Estate | 000 | 258 | 000 | 258 | 980 | 000 | 035 | 029 | 000 | 029 | |||||||||||||
| Telecommunication Services | 000 | 245 | 000 | 245 | 748 | 000 | 026 | 036 | 000 | 036 | |||||||||||||
| Utilities | 000 | 316 | 000 | 316 | 1246 | 000 | 053 | 019 | 000 | 019 | |||||||||||||
| Cash | 325 | 000 | 325 | 000 | 035 | 002 | 000 | -085 | 000 | -085 | |||||||||||||
| Attribution Total | 10000 | 9999 | 10000 | 10000 | 1706 | 1577 | 1706 | 1577 | 382 | -146 | 236 | ||||||||||||
| Other | 000 | 001 | |||||||||||||||||||||
| Total | 10000 | 10000 | 1706 | 1577 | |||||||||||||||||||
| Reported Total | 1692 | 1579 | |||||||||||||||||||||
| Residual (Reported - Attribution Total) | -014 | 002 |
Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 6
Portfolio Additions DeletionsSecond Quarter 2018
gt Adds to position weightingsndash Discovery Inc (DISCA)ndash Home Depot Inc (HD)ndash Walgreens Boots Alliance Inc (WBA)
gt Sellsndash Alaska Air Group Inc (ALK)
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
7
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
CFA is a registered trademark owned by the CFA Institute
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Past performance is no guarantee of future results Current and future holdings are subject to change at any time and are not recommendations to buy or sell any security 8
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 (FCF)
5 Available at a low price in relation to intrinsic value
Featured Stock Bank of America
Our Eight Criteria
Favored but not required
Required over entire holding period
May also relate to timingportfolio weighting
For companies that donrsquot meet one of these we believe our required criteria will ultimately correct or overwhelm
6 Managementrsquos history of shareholder friendliness
7 Strong balance sheet
8 Strong insider ownership(preferably with recent purchases)
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
9
Featured Stock Bank of AmericaMeets an Economic Need
Past performance is no guarantee of future results Source 2018 Annual Meeting of Stockholders
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Past performance is no guarantee of future results Source httpswwwbankingstrategistcomcommunity-bank-trends Data for the time period 111990 ndash 331201810
Featured Stock Bank of AmericaStrong Competitive Advantage
Num
ber o
f ban
ks
Num
ber o
f De
Nov
o Ba
nk C
hart
ers
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
11
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source Bloomberg Bank of America 2018 Annual Meeting of Stockholders Return of average tangible common equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders equity Efficiency ratios measure a companys ability to use its assets and manage its liabilities effectively GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting
Data as of 3312017
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
12
Featured Stock Bank of AmericaLong History of Profitability amp Operating Metrics
Past performance is no guarantee of future results Source UBS research report Jan 2017
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
13
Featured Stock Bank of AmericaHigh Levels of Free Cash Flow
Past performance is no guarantee of future results Source Bloomberg Factset Data as of 6302018 Dividends are not guaranteed and a companys future abilities to pay dividends may be limited A company currently paying dividends may cease paying dividends at any time
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
14
Featured Stock Bank of AmericaLow Price in Relation to Intrinsic Value
Past performance is no guarantee of future results Source Bloomberg Data for the bottom three charts is for the time period 712015-6302018
Pric
eShort Interest
RatioShort
InterestVolum
e
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
15
Featured Stock Bank of AmericaHistory of Shareholder Friendliness
Past performance is no guarantee of future results Source Bloomberg Data for the time period 112008 - 12312017
Tang
ible
Boo
k Va
lue
Shar
e
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
16
Featured Stock Bank of AmericaBank of America Strong Balance Sheet
Past performance is no guarantee of future results Source Bank of America 2018 Dodd-Frank Act Annual Stress Test Results June 21 2018 BAC Bank of America See important disclosures at the end of this presentation for definitions
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Past performance is no guarantee of future results Source Keefe Bruyette amp Woods Equity Research June 14 2018 The Washington Service17
Featured Stock Bank of AmericaBank of America Insider Ownership
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
18
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Opinions are subject to change are not guaranteed and should not be considered recommendations to buy or sell any security
copy 2018 Smead Capital Management (SCM) All Rights Reservedwwwsmeadcapcom
Presented byLead Portfolio Manager Bill Smead
The Jim Carrey Parable
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
20
Agenda
What is going on
What to do
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
21
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwbroadwayworldcombwwtvarticleCNBC-Transcript-Kynikos-Associates-Founder-and-President-Jim-Chanos-on-CNBCs-CLOSING-BELL-Today-20180613
What if everyone had to tell the truth for 24 hours
CHANOS WELL I MEAN ONE OF THE THINGS WE TALKED ABOUT TODAY AT THE CONFERENCE WHICH I THOUGHT WAS INTERESTING AND WE HAD THE AUTHOR OF BAD BLOOD JOHN CARREYROU FROM THE WALL STREET JOURNAL TO TALK ABOUT THERANOS IS THE CULTURE IN SILICON VALLEY AND THIS TIES A LITTLE BIT IN WITH TESLA AND WHY SOME OF THESE THINGS APPEAR TO BE GROWING OUT IN SILICON VALLEY THE WILLINGNESS TO SORT OF SAY ANYTHING BY CEOs THERE WAS - THERE WAS AN EXPOSE OR VICE MEDIA TALKING A LITTLE ABOUT THE SAME THING AND THE LACK OF DUE DILIGENCE ON BEHALF OF BOTH THE BOARDS AND THE INVESTORS IN BELIEVING A LOT OF THESE THINGS AND IS IT INCREASING AS THE MARKET GOES ON AS I THINK YOU KNOW JEFF SONIFELD WHO RUNS THIS CONFERENCE IS ALSO ONE OF MY BOSSES UP AT YALE WHERE I TEACH A COURSE ON THE HISTORY OF FINANCIAL FRAUD AND ONE OF THE CENTRAL TENETS OF THE COURSE IS THAT THE FRAUD CYCLE FOLLOWS THE FINANCIAL AND BUSINESS CYCLE WITH A LEG AND THAT IS AS BULL MARKETS GO ON PEOPLES SENSE OF DISBELIEF IS REDUCED AND THEY BEGIN TO BELIEVE THINGS THAT ARE TOO GOOD TO BE TRUE ITS HUMAN NATURE AND BAD PEOPLE TAKE ADVANTAGE OF THAT AND I THINK WERE GOING TO SEE AN INCREASE IN THESE KINDS OF REVELATIONS AS TIME GOES ON PARTICULARLY OUT IN SILICON VALLEY I AGREE WITH JOHN CARREYROU ON THAT - THAT THERE SEEMS TO BE A CULTURE WHERE YOURE ALLOWED TO SAY THINGS THAT IN ANY OTHER TIME PEOPLE WOULD SAY IS ILLEGAL YOU CANT LIE TO INVESTORS AND THIS IS THE PROBLEM ndash
-Jim Chanos Kynikos AssociatesCNBC Closing Bell June 13 2018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
22
What is going onLiar Liar
Truth about grocery delivery
Past performance is no guarantee of future results Source httpwwwbusinessinsidercomon-demand-delivery-failed-in-the-90s-2014-9 Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages salaries and tips (for which Form W-2 is used instead) Data as of 12312013
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
23
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data for bottom chart is for the time period 112018 ndash 12312019 YOY Year-over-year EPS Earnings Per Share
Truth about Free-Cash Flow (Netflixrsquos most recent quarter)
ARD
Prog
ram
Bro
adca
st R
ight
s
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
24
What is going onLiar Liar
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Truth about Hollywoodcontent
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
25
What is going onLiar Liar
Past performance is no guarantee of future results Source Causeway Capital May 2018 Newsletter PE Price-to-Earnings Cannot invest directly in an index FamandashFrench three-factor model is a model designed by Eugene Fama and Kenneth French to describe stock returns
Truth about PE ratios
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
26
What is going onLiar Liar
Past performance is no guarantee of future results Source Hays Market Outlook July 5 2018
Truth about 10-year rolling Fama-French Factor
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
27
What is going onLiar Liar
Past performance is no guarantee of future results
History of concentrated popularity
ldquoNothing is more dangerous than an idea when it is the only one we haverdquo
ndash Alain 1868-1951 French philosopher
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
28
What is going onLiar Liar
Past performance is no guarantee of future results Source httpswwwmarketwatchcomstorythis-chart-shows-how-the-stock-market-is-smack-dab-at-the-heart-of-bubble-territory-2017-09-21
1929 1972 1999 today
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
29
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpsprotonmailcomblogprivacy-under-attack
Everyone is watching you
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
30
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpfortunecom20180407sheryl-sandberg-says-facebook-users-would-have-to-pay-for-total-privacy As of April 7 2018
Someone is getting paid
ldquoThatrsquos not true we donrsquot sell data ever We do not give personal data to advertisersrdquo
ldquoWe donrsquot have an opt-out at the highest level That would be a paid productrdquo
- Sheryl Sandberg April 7 2018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
31
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwfoolcominvesting20180624the-hidden-index-bubbleaspx Data as of 12312017 Cannot invest directly in an index
Itrsquos not you
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
32
What is going onThe Truman Show
Past performance is no guarantee of future results Source The Guardian Margrethe Vestager is a Danish politician who is currently serving as the European Commissioner for Competition Quote is about tax avoidance and the [European] council
Regulation coming
ldquoWe are doing this because people are angryrdquo
- Margrethe Vestager
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
33
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwwashingtonpostcomtechnology20180627california-is-verge-passing-sweeping-new-online-privacy-law-targeting-facebook-google-other-tech-giantsnoredirect=onamputm_term=079f0809bc49
Regulation coming
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
34
What is going onThe Truman Show
Past performance is no guarantee of future results Source httpswwwftcomcontenta3ea16f6-7edd-11e8-bc55-50daf11b720d Article written on July 6 2018
Regulation coming
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
35
What is going onThe Truman Show
Past performance is no guarantee of future results Source Stifel Equity Research June 22 2018 BOJ Bank of Japan ECB European Central Bank FED Federal Reserve System
Easy money in the rear-view mirror
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
36
What is going onBruce Almighty
Past performance is no guarantee of future results Source Bloomberg Data as of 6302018
Small g gods
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
37
What is going onBruce Almighty
Past performance is no guarantee of future results Source Goldman Sachs Equity Research June 4 2018 GDP Gross Domestic Product
Small g gods
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
38
What is going onBruce Almighty
Past performance is no guarantee of future results Source httpsseekingalphacomarticle4176041-margin-debt-market Data for the time period 111980 ndash 5312018
What is idolatry
SampP
Mon
thly
Clo
se
Cred
it Ba
lanc
e
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
39
What is going onBruce Almighty
Past performance is no guarantee of future results Source A Short History of Financial Euphoria John Kenneth Galbraith Published 1990
Listen to Galbraith
ldquoThe second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligencerdquo
ldquothere is a strong tendency to believe that the more money either as income or assets of which an individual is possessed or with which he is associated the deeper and more compelling his economic and social perception the more astute and penetrating his mental processes Money is the measure of capitalist achievement The more money the greater the achievement and the intelligence that supports itrdquo
-John Kenneth Galbraith
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
40
What is going onBruce Almighty
Past performance is no guarantee of future results Images of properties shown are not owned by the fund
Tower of Babel
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
41
What is going onBruce Almighty
Past performance is no guarantee of future results Source Google Images of properties shown are not owned by the fund
Historically and today
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
42
Agenda
What is going on
What to do
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
43
What to doStaples look cheap
Past performance is no guarantee of future results Source httpswwwwsjcomarticlesinvestors-double-down-on-faang-in-rocky-quarter-for-stocks-1530264600 A defensive stock is a stock that provides a constant dividend and stable earnings regardless of the state of the overall stock market Data for the time period 111990 ndash 12312017
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
44
What to doStaples look cheap
Past performance is no guarantee of future results Source Bloomberg Data for the time period 111998 ndash 6302018
Walgreens Boots Alliance (WBA) Johnson amp Johnson (JNJ) and Starbucks (SBUX)
Best
Pric
e to
Ear
ning
s (P
E) R
atio
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
45
What to doCorrections donrsquot last forever
Past performance is no guarantee of future results Source Bloomberg Data for the time period 12302016 ndash 6292018
Bank of America (BAC) JPMorgan Chase (JPM) NVR Inc (NVR) Lennar (LEN) Wells Fargo (WFC)
Stoc
k pr
ice
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
46
What to doWhich hen house is the FOX in
Past performance is no guarantee of future results Source httpswwwthestreetcomstory144148661fox-value-rises-comcast-reportedly-joins-biddinghtml Article written December 7 2017
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
47
Agenda
What is going on
What to do
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
48
Todayrsquos Agenda
Performance Characteristics and Top 10 HoldingsCole Smead CFA Portfolio Manager
Featured Stock Bank of AmericaTony A Scherrer CFA Portfolio Manager
The Jim Carrey ParableBill Smead Lead Portfolio Manager
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
12 Month Yield is the sum of a funds total trailing 12-month interest and dividend payments divided by the last months ending share price (NAV) plus any capital gains distributed over the same period Under Basel III the minimum capital adequacy ratio that banks must maintain is 8 The capital adequacy ratio measures a banks capital in relation to its risk-weighted assets The capital-to-risk-weighted-assets ratio promotes financial stability and efficiency in economic systems throughout the worldBasis point A basis point is one hundredth of one percent used chiefly in expressing differences of interest ratesBond Ratings All fund securities have been rated by a Nationally Recognized Statistical Ratings Organization such as Moodyrsquos Standard amp Poorrsquos or Fitch When a bond is rated by more than one organization Smead Value Fund uses the highest rating available Credit quality ratings pertain to the underlying securities of the fund and not to the fund itself Book Value A companys common stock equity as it appears on a balance sheet equal to total assets minus liabilities preferred stock and intangible assets such as goodwillCapital expenditure or CapEx are funds used by a company to acquire or upgrade physical assets such as property industrial buildings or equipmentCash Flow A revenue or expense stream that changes a cash account over a given periodCash Flow From Operating Activities (CFO) Cash flow from operating activities is reported on the cash flow statement in a companys quarterly and annual reportsCDS Spread The buyer of the protection in a credit default swap pays a premium to the seller and this premium is called the CDS spreadCash dividend coverage ratio a ratio that helps in estimating the companyrsquos ability to meet its dividend payouts using only operating cash flowsDebtEquity A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equityDebtTotal Capital A companys debt-to-capital ratio or DC ratio is the ratio of its total debt to its total capital its debt and equity combinedDividend yield is represented as a percentage and can be calculated by dividing the dollar value of dividends paid in a given year per share of stock held by the dollar value of one share of stockEarnings before interest tax depreciation and amortization (EBITDA) is a measure of a companys operating performance Earnings per share (EPS) is the portion of a companys profit allocated to each outstanding share of common stock Fixed-charge coverage ratio A measure of a firms ability to meet its fixed-charge obligationsFree Cash flow measures the cash generating capability of a company by adding non-cash charges (eg depreciation) and interest expense to pretax income Free cash flow per share is a measure of a companys financial flexibility that is determined by dividing free cash flow by the total number of sharesoutstanding Free cash flow to sales (FCF Sales) is a valuation ratio that measures a companys surplus cash flow against sales revenuesFree cash flow yield is an overall return evaluation ratio of a stock which standardizes the free cash flow per share a company is expected to earn against its market price per share
49
Definitions
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Gross national product (GNP) is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a countrys residentsGross margin A companys total sales revenue minus its cost of goods sold (COGS) divided by total sales revenueThe indicated yield is a way to forecast a stocks annual dividend yield Leverage The relationship of debt to equityThe Mortgage Credit Availability Index (MBA Index) provides the only standardized quantitative index that is solely focused on mortgage credit It is calculated using several factors related to borrower eligibility (credit score loan type loan-to-value ratio etc) These metrics and underwriting criteria for over 95 lendersinvestors are combined by MBA using data made available via the AllRegsreg Market Clarityreg product and a proprietary formula derived by MBA to calculate the MCAI a summary measure which indicates the availability of mortgage credit at a point in timeMSCI World ex US Index A market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the worldIntrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business in terms of both tangible and intangible factorsMutual Fund Portfolio Turnover A measure of the trading activity in the funds portfolio of investments In other words how often securities are bought and soldNet margin is the percentage of revenue remaining after all operating expenses interest taxes and preferred stock dividends (but not common stock dividends) have been deducted from a companys total revenueNASDAQ-100 is a stock market index made up of 104 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ It is a modified capitalization-weighted indexNasdaq Composite Index is the market capitalization-weighted index of approximately 3000 common equities listed on the Nasdaq stock exchangeNifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks or Blue-chip stocks Operating Cash Flow (OCF) refers to the amount of cash a company generates from the revenues it brings in excluding costs associated with long-term investment on capital items or investment in securitiesOperating margin a margin ratio used to measure a companys pricing strategy and operating efficiencyThe price-to-cash-flow ratio is the ratio of a stocks price to its cash flow per share The price-to-book ratio (PB Ratio) is a ratio used to compare a stocks market value to its book valuePriceEarnings (PE) the ratio of a firmrsquos closing stock price amp its trailing 12 monthsrsquo earningsshare Price to tangible book value (PTBV) is a valuation ratio expressing the price of a security compared to its hard or tangible book value as reported in the companys balance sheet
50
Definitions
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Pretax profit margin a companys earnings before tax as a percentage of total sales or revenues A REIT or Real Estate Investment Trust is a company that owns or finances income-producing real estateReturn on assets (ROA) is an indicator of how profitable a company is relative to its total assets Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equityReturn on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capitalReturn on invested capital (ROIC) is a profitability ratio It measures the return that an investment generates for those who have provided capital ie bondholders and stockholders Russell 1000 Index is an index that represents the highest-ranking 1000 stocks in the Russell 3000 Index which represents about 90 of the total market capitalization of that indexRussell 1000 Growth Index refers to a composite that includes large and mid-cap companies located in the United States that also exhibit a growth probability Russell 1000 Value Index refers to a composite of large and mid-cap companies located in the United States that also exhibit a value probability SampP 500 Index A market-value weighted index consisting of 500 stocks chosen for market size liquidity and industry group representationStandard deviation is a measure of the dispersion of a set of data from its meanThe supplementary leverage ratio is the ratio of a banking organizations tier 1 capital to its total leverage exposure which includes all on-balance-sheet assets and many off-balance-sheet exposuresThe US 10 Year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturityThe Wilshire 5000 Total Market Index A market-capitalization-weighted index of the market value of all stocks actively traded in the USTier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthThe Tier 1 leverage ratio is the relationship between a banking organizations core capital and its total assets The Tier 1 capital ratio is the ratio of a banks core equity capital to its total risk-weighted assets (RWA)Tier 1 common capital ratio is a measurement of a banks core equity capital compared with its total risk-weighted assets that signifies a banks financial strengthTotal Capital Ratio is the ratio of total capital to risk weighted assets (RWAs)
51
Definitions
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
Past performance is no guarantee of future results
Consider the investment objectives risks charges and expenses of the Fund carefully before investing The statutory and summary prospectuses contain this and other information about the Fund and is available at wwwsmeadcapcom or by calling 877-807-4122 Read carefully before investing
Mutual fund investing involves risk 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
Information provided does not constitute investment advice and no investment decisions should be made based on any information provided Information reflects the views of Smead Capital Management as of a particular time Such views are subject to change without notice Information regarding holdings allocations and other allocations are for illustrative purposes only and may not be representative of current or future investments or allocations This information is not a recommendation to purchase or sell a security or follow any strategy or allocation Any forward-looking statements or forecasts are based on assumptions and actual results may vary from any statements or forecasts While Smead Capital Management has used reasonable efforts to obtain information from reliable sources no representations or warranties are made as to the accuracyreliability or completeness of Fourth-party information presented in this material This material is not to be duplicated or recreated without prior written consent of Smead Capital Management
Frank Russell Company is the Source and owner of the trademarks service marks and copyrights related to the Russell Indexes Russellreg is a trademark of Russell Investment Group
The Smead Value Fund is distributed by ALPS Distributors Inc ALPS Distributors Inc and Smead Capital Management are not affiliated
Disclosures
52
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
| Questions amp Answers
Email infosmeadcapcom or call 8777012883
| SMEAD CAPITAL MANAGEMENT600 University Street Suite 2412Seattle WA 98101
SVF000365 Exp 10312018
