Northwest-based, offices in Portland, Oregon, Eugene Oregon and Seattle, Washington
Staff of 15 professionals, 7 investment team members
Independently-owned and operated boutique investment manager
CFA ® (Chartered Financial Analyst) charter members – 3
Certified Market Technician
Master of Business Administration – 2
Certified Public Accountant
Master of Science
Experienced Investment Team CARL W. MARKER – 21 years industry experience Carl W. Marker, 46, is the founder and president of IMS Capital Management. Mr. Marker received a Bachelor of Science degree from the University of Oregon and has managed the IMS family of no-load mutual funds since inception. He is a member of the Portland Society of Financial Analysts and is frequently interviewed by the national television and print media. ARTHUR G. NUNES, CMT – 26 years industry experience Mr. Nunes is market strategist, portfolio manager and principal of IMS Capital Management. He co-manages the IMS Strategic Allocation Fund and performs research and technical analysis for the other IMS strategies. He earned a Bachelor of Science degree from Ohio State University. Prior to joining IMS, Mr. Nunes managed fee-based portfolios at RBC Dain Rauscher and Salomon Smith Barney. JOSEPH M. LEDGERWOOD, CFA – 7 years industry experience Joseph M. Ledgerwood is a portfolio manager and senior research analyst specializing in equities. Prior to joining IMS, Mr. Ledgerwood gained financial services and investment experience working at a bank and full service brokerage firm. Mr. Ledgerwood graduated from the University of Portland, where he earned a Bachelor of Business Administration degree in Finance. He is member of the Portland Society of Financial Analysts.
Experienced Investment Team DON A. SHUTE, CFA – 19 years industry experience Don Shute is portfolio manager and senior research analyst specializing in fixed income. He previously worked for Bear Stearns Asset Management, GT Capital Management, and Wells Fargo Asset Management performing all aspects of fixed income analysis and portfolio management. His experience includes quantitative risk analysis and modeling, credit analysis, and international market research. A member of the Portland Society of Financial Analysts, Mr. Shute has a Bachelor of Arts degree from the University of Illinois and a Master of Science degree from Utah State University. STEPHEN WENDELL, CPA – 26 years industry experience Mr. Wendell is the lead portfolio manager for the Focus 30 Strategy and is former president and founder of Juniper Capital, a Eugene-based RIA with $65 million in assets. With 25 years investment management experience, Mr. Wendell has served as a senior financial executive and director of several Oregon-based companies in the public and private sector, including Bohemia, Inc., International Kings Table, Inc., Obie Media, and Umpqua Feather Merchants. Currently Mr. Wendell serves on the Board of Directors of Agate Resources Inc., a Eugene based company developing technology driven solutions for healthcare management. Mr. Wendell received a Bachelor of Science degree in Business Administration from Portland State University and a Master of Business Administration in Finance and Accounting from the University of Oregon. REID WEAVER – 7 years industry experience Reid Weaver is research analyst and trader for the Focus 30 Strategy. He has been working with Mr. Wendell for the past six years. A Level III CFA candidate, Mr. Weaver has a Bachelor of Science degree from the University of Oregon . CAMERON K. MARTIN – 13 years industry experience Cameron Martin is a portfolio manager. Prior to joining IMS in 2008, Mr. Martin worked at Smith Barney where he managed discretionary portfolios since 1999 and served as a Financial Advisor since 1996. With 12 years experience in the financial services industry, Mr. Martin graduated from the University of Oregon in 1993 .
Mid Cap Stocks have Improved the Risk/Return Profile of Domestic Equity Portfolios Data above represents past performance, which does not guarantee future results. The “4 Corners” are represented by equal weights of the Russell 2000 Growth Index (small cap growth), the Russell 2000 Value index (small cap value), the Russell 1000 Growth Index (large cap growth), the Russell 1000 Value Index (large cap value), rebalanced annually. Mid cap stocks are represented by the Russell Mid Cap Index. Alpha and up and down capture figures are calculated relative to the Russell 3000 index, which is considered representative of the entire equity market. Calculations by IMS Capital Management . The Sharpe ratio measures risk adjusted return by subtracting the risk-free rate (3-month Treasury bill) from the rate of return of a portfolio and dividing the result by the standard deviation. Alpha is a measure of “excess return” in an investment. A positive alpha is the extra return realized by taking additional risk rather than accepting the market return. Up a nd down capture is a measure of how well a portfolio is able to replicate or improve upon positive index returns and how badly a portfolio is affected by negative index returns, respectively. When mid cap stocks were added to hypothetical portfolios having equal weights of large cap value, large cap growth, small cap value and small cap growth stocks (also known as the “4—corners”), the portfolios demonstrated higher Sharpe Ratios, higher alpha and higher up capture returns than the same hypothetical portfolios without mid cap stocks over the last 3, 5, 10 and 20-year periods ending 2007, as illustrated below. 136 144 93 92 -1.83 -2.45 .17 .04 6.18 4.58 3 Years 126 134 102 101 -0.66 -1.35 .92 .86 14.01 12.73 5 Years 102 103 108 104 1.27 0.63 .20 .14 6.81 5.86 10 Years 102 103 105 99 .35 -0.12 .50 .46 11.96 11.31 20 Years 4-Corners + Mid Cap 4-Corners 4-Corners + Mid Cap 4- Corners 4-Corners +Mid Cap 4- Corners 4-Corners + Mid Caps 4- Corners 4-Corners +Mid Cap 4- Corners 2007 Down Capture (%)* Up Capture (%)* Alpha (%)* Sharpe Ratio Average Annual Total Return (%) Year Ending
Seeks undervalued mid cap stocks demonstrating signs of positive momentum
Utilizes a “seasoned,” patient approach to stock selection
Utilizes “concentrated diversification”
Concentrates on companies that fall into at least one strategic focus area: technology, healthcare, financial services, consumer, communications/entertainment, defensive industries, consolidating industries.
Sell discipline allows a company to remain in the portfolio as long as its core business is still experiencing positive momentum
Veteran portfolio managers with 28 years combined experience backed by five other investment professionals.
S&P 500 Sector Returns over the 10 years ending 2008 Annualized returns for the last 10 years ended 12/31/08 Source: Standard & Poor’s. Past returns are no guarantee of future results. Annualized returns for the last 10 years ended 12/31/08 Telecomm – 6.97% Info Tech -6.26% Financials – 4.62% Healthcare – 0.85% Industrials 0.17% Consumer Discretionary 1.18% Consumer Staples 1.32% Utilities 1.68% Materials 2.22% Energy 9.42%
Stock Selection Overview--IMS Capital Value Strategy IMS Proprietary Research Business Characteristics Fundamental Value Characteristics Momentum Characteristics Seasoning Apply 37-Factor Scoring Model Stocks in Russell universe with adequate coverage, liquidity – 3,000 Names Stocks that are mid cap Generally $1.5 to $9.5 billion in market cap Stocks that have 2 years or more of “seasoning,” are down 30% or more from their highs, have strong value and momentum characteristics, and fit into at least one of our strategic focus areas 150 Names Resulting portfolio of 40 to 60 Names
Stocks that are seasoned have been flat to down for a minimum of 2 years.
Companies need time to season or recuperate – they need to mend and begin recovering from whatever caused the decline.
Our internal research determined that 80% of the time, after a significant loss of market cap, a company will not begin to outperform the market on a relative basis -- until at least 2 years on average. Often it takes much longer. We have chosen to implement a minimum seasoning period of 2 years before we will consider buying.
The seasoning discipline helps reduce the chances of being too early and sitting on “dead” money or worse, incurring significant losses after purchase.
Even small and mid cap companies need time to settle shareholder lawsuits, handle product litigation, restate earnings and deal with accounting scandals. Often new management is brought in, legislation is passed to assist an entire industry, or new products need to be developed. These things can take years, not months.
Remain broadly diversified in all ten major S & P industry sectors
Initial purchase is in the 1% to 3% range based on scoring model
Allow effective research to have its impact. Practice “concentrated diversification,” holding no more than 40 to 60 names
Stay fully invested (90%+)
Written investment policy statement governs management of each account
Sell targets are set and monitored daily
Momentum characteristics are monitored weekly
Positions exceeding 10% of portfolio due to appreciation are reduced within 60 days
Two individuals are involved in every trade
Broad industry and sector diversification is maintained
Sectors making up more than 10% of the Index will generally carry no more than a 150% weighting in the Portfolio.
IMS Capital Value Sector Weightings As of March 31, 2009 Portfolio holdings are subject to change at any time. 24%
Top Ten Holdings As of March 31, 2009 Portfolio holdings are subject to change at any time. 3.40% Check Point Software 3.53% Intuit 3.33% Safeway Inc. 2.94% Tyson 2.99% Aon Corp. 3.14% Toll Brothers 3.34% CenturyTel 3.73% Watson Pharmaceuticals, Inc 2.83% H&R Block 3. 01% Biogen PERCENTAGE OF PORTFOLIO STOCK
Sell Discipline: Most Value Managers Sell Too Early
When a stock reaches our price target and is 10% off its 52 week high (unless the market is also down 10% or more)
Company reaches unsustainable valuations
Industry-wide negative legislation or litigation
A significant change in the company’s management or direction
Company is involved in a merger or acquisition
The emergence of a better opportunity within the same industry
Positions that exceed 10% of the portfolio due to appreciation are lightened within 60 days
Generally sell after two conditions have been met
Company exceeds its target sell price and
Company demonstrates a loss of momentum
OTHER SELL TRIGGERS WHY WE SELL
Bought 35,000 shares @ $48.60 after a 3-year seasoning period Sold 35,000 shares @ $77.44 IMS Capital Value Trading History of Cephalon, Inc. (CEPH ) Past performance is no guarantee of future results. This example should not be considered a recommendation to purchase or trade the stock illustrated. Not all securities in the IMS Capital Value portfolio have gone up in value and some may lose money.
Portfolio Characteristics As of March 31, 2009 1.1x Price to Book Value (P/B) 12.27x Forward Price/Earnings Ratio (P/E) $2.36 bil. Weighted Average Market Cap 48 Number of Issues 46% Annual Turnover as of 6/30/08 PORTFOLIO CHARACTERISTICS IMS CAPITAL VALUE PORTFOLIO
Annualized Average Total Returns As of March 31, 2009 Past performance above does not guarantee future results. Investment return and principal value will fluctuate so that your return, when redeemed, may be worth more or less than original cost. Figures include change in principal value, reinvested dividends and capital gain distributions. Current performance may be lower or higher than that above. Monthly performance is available by calling 1-800-408-8014. The S&P 500 Index is a widely accepted index of large cap stocks and is not available for direct investment. The S&P 400 is a widely recognized unmanaged indices of common stock prices and is representative of a broader market and a broader range of securities than are found in the Fund's portfolio. Individuals cannot invest directly in the Index. Performance figures reflect the change in value of the stocks in the index and reinvestment of dividends. . 1.52% - Total Gross Expense Ratio as of August 31, 2008
Calendar Year Returns As of December 31, 2008 Past performance does not guarantee future results. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than original cost. Figures include change in principal value, reinvested dividends and capital gain distributions. Current performance may be lower or higher than that above and is available by calling 1-800-408-8014. The S&P 400 is a widely recognized unmanaged index of mid cap stocks. The Standard & Poor’s 500 is a widely accepted index of large cap stocks. Individuals cannot invest directly in an Index. The indices are representative of a broader market and range of securities than are found in the Fund. Performance figures reflect the change in the value of stocks in the Index and reinvestment of dividends. 1.52% - Total Gross Expense Ratio as of August 31, 2008
Representative Institutional Client List Allergy & Asthma Center PC FreedomWorks Foundation Friends of the Children of Klamath Basin Intrepid Marble and Granite (401k plan) Lathing, Acoustical and Drywall Systems Local 1144 McClenahan Bruer Communications Relief Nursery Ron Tonkin Auto Dealer (401k plan) Serenity Lane Health Services Sky Lakes Medical Center WorkFirst Casualty Company
Investing in mid caps may be more risky and volatile than investing in large cap stocks. Also, value stocks may underperform other types of stocks during a given period.
Past performance of the IMS Capital Value Fund does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's return, when redeemed, may be worth more or less than original cost. Figures include change in principal value, reinvested dividends and capital gain distributions. Current performance may be lower or higher than that quoted herein. Monthly performance is available by calling 1-800-408-8014 or by visiting www.imscapital.com .
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other information about the investment company. Please read it carefully before investing. The prospectus is available by calling 503-788-4200 or by visiting www.imscapital.com . Foreside Distribution Services, LP