Finding sector value since 2002

Investor Class: VICEX
Class A: VICAX
Class C: VICCX
www.USAMutuals.com
www.ViceFund.com
S...
Vice Fund History
 The Vice Fund, formed in 2002, was created as a result of historical analysis comparing
share price pe...
Process Backed by Empirical Studies


“Sin Stock Returns” by Fabozzi, Ma and Oliphant (Fall 2008).
The authors identified...
Vice Fund Investment Strategy
Equity Universe
(5,000 US Traded Stocks)
Quantitative
Screen

GIC Codes for Tobacco, Alcohol...
Process Behind the Vice Fund
 The Investment Strategy deployed by the Vice Fund maintains a portfolio of equity
investmen...
Holdings You Can Identify
 Here are the types of companies you may own with the Vice Fund:

Tobacco

Gaming

Defense

Alc...
Performance – Vice Fund Investor Class (VICEX)
Annualized Average Total Return (through 09-30-13)
VICEX
27.44%
1 Year
29.1...
Performance – Vice Fund Investor Class (VICEX)

1

 Since the Vice Fund’s inception on 8/30/02, the Fund has outperformed...
Performance – VICEX Upside/Downside capture

9
Performance - through 9/30/2013

This chart illustrates the performance of a hypothetical $10,000 investment made in the F...
Performance – Vice Fund Investor Class (VICEX)

Past performance is not a guarantee of future results. Index performance i...
People
Gerry Sullivan – Senior Portfolio Manager
Gerry received a BA from Columbia University in 1982, and graduated from ...
Disclosures
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before
investing. T...
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Vice Investing; Invest and profit from other peoples bad habits

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Vice Investing; Invest and profit from other peoples bad habits. Bottom line, some of the best companies in the world to invest in actually make vices that many of us around the world consume; alcohol, tobacco, gaming/gambling, defense/weapons, etc.. Vice investing has outperformed broad indices; active investment management can outperform passive with the right investment approach. Low turnover and lower Beta make this fund appealing to many investors. The companies owned in these portfolios are large, well capitalized, value oriented, and have moats around their businesses as Warren Buffet would often times suggest.

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Vice Investing; Invest and profit from other peoples bad habits

  1. 1. Finding sector value since 2002 Investor Class: VICEX Class A: VICAX Class C: VICCX www.USAMutuals.com www.ViceFund.com September 2013 866-264-8783 For Professional Use Only
  2. 2. Vice Fund History  The Vice Fund, formed in 2002, was created as a result of historical analysis comparing share price performance of various sectors against the S&P 500.  Historical analysis lead us to believe that a portfolio comprised of stocks found in the Defense, Tobacco, Alcohol and Gaming sectors tended to outperform the S&P 500.  These sectors were selected based on their ability to demonstrate one or more of these compelling and distinctive investment characteristics:      Potential Demand regardless of economic conditions Potentially high profit margins Ability to generate excess cash flow Tendency to pay and increase dividends Natural barriers to new competition  The Vice Fund is also the basis of the 2004 published book by Dan Aherns “Investing in Vice: The Recession-Proof Portfolio of Booze, Bets, Bombs & Butts”.1 1Dan Aherns, co-created and managed the Vice fund from 8/2002 to 9/2005 For Professional Use Only 2
  3. 3. Process Backed by Empirical Studies  “Sin Stock Returns” by Fabozzi, Ma and Oliphant (Fall 2008). The authors identified unambiguously better returns of a portfolio of “sin” stocks versus the S&P 500 (from 1970 to 2007). Monopolistic pricing was proposed as a major reason for the performance differential.  “The Price of Sin: The Effects of Social Norms on Markets” Kacperczyk and Hong (September 2008). The authors identified that there is a significant price effect coming from large institutional investors shunning sin stocks. They found that sin stocks have higher expected returns than otherwise comparable stocks, consistent with being neglected by norm-constrained investors.  “The Wages of Social Responsibility”, Statman and Glushkov (December 2008). The authors concluded that the ideal portfolio was derived from owning the best of breed of all industries as determined by a socially responsible metric, no matter the industry (that should include tobacco, alcohol, gaming and defense). Avoiding these four industries had a negative result on the performance of the socially responsible portfolio. For Professional Use Only 3
  4. 4. Vice Fund Investment Strategy Equity Universe (5,000 US Traded Stocks) Quantitative Screen GIC Codes for Tobacco, Alcohol, Aerospace Defense, and Gaming Screen for Quality, Large Cap companies Rank on Two Metrics: • Mkt Capitalization • Dividend Yield • Growth potential • Brand leadership Qualitative Analysis Diversify • Select diversified portfolio across four sectors Invest in 35-50 companies, writing covered calls on select positions to reduce volatility and generate premium income For Professional Use Only 4
  5. 5. Process Behind the Vice Fund  The Investment Strategy deployed by the Vice Fund maintains a portfolio of equity investments across 4 distinct industry groups: Tobacco, Gaming, Aerospace Defense and Alcohol.  Individual company exposure is targeted to be less than 5% of the total portfolio. Industry total weights are each desired to be greater than 20% of the portfolio.  Reallocation is monthly, the Portfolio Strategy utilized is distinctly disciplined, often trimming positions of stocks that have performed well while increasing positions of weaker performers.  Options are utilized strategically to rebalance the portfolio and take advantage of volatility pricing to generate premium income. For Professional Use Only 5
  6. 6. Holdings You Can Identify  Here are the types of companies you may own with the Vice Fund: Tobacco Gaming Defense Alcohol Altria Group Las Vegas Sands Honeywell Diageo PLC Lorillard Wynn Resorts General Dynamics Anheuser-Busch InBev NV Philip Morris Int'l Galaxy Entertainment Raytheon Companhia de Bebidas das Americas Ambev ADR Note: Company names are illustrative of industry leaders in each of the four sectors. The Vice Fund may or may not have positions in these companies at a given time. Portfolio holdings are subject to change. 6 For Professional Use Only
  7. 7. Performance – Vice Fund Investor Class (VICEX) Annualized Average Total Return (through 09-30-13) VICEX 27.44% 1 Year 29.11% 2 Years 20.76% 3 Years 18.30% 4 Years 11.69% 5 Years 3.71% 6 Years 7.54% 7 Years 8.14% 8 Years 9.59% 9 Years 10.83% 10 Years Since Inception 8-31-02 to 09-30-13 10.68% S&P 500 19.34% 24.65% 16.27% 14.71% 10.02% 3.89% 5.60% 6.23% 6.89% 7.57% 7.80% Performance represents aggregate total returns, not annualized. The Fund’s maximum sales charge for Class “A” shares is 5.75%. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. As of 09/30/13 Annualized returns are net of fees with dividends reinvested. Source: Bloomberg For Professional Use Only 7
  8. 8. Performance – Vice Fund Investor Class (VICEX) 1  Since the Vice Fund’s inception on 8/30/02, the Fund has outperformed the S&P 500 by an annualized 2.88% per annum1.  For the 10-year period ending September 30, 2013 the Vice Fund ranked #6 of 777 Large Cap Blend Funds based on Total Return, categorized by Morningstar.  Overall 5 Star rating from Morningstar2  10 year 1st percentile (out of 777 funds), 5 year 8th percentile (out of 1,231 funds), 3 year 1st percentile (out of 1,370 funds), and 1 year 25th percentile (out of 1,544 funds) in the Large Blend Category  Standard Deviation of 13.76 (trailing 3 years) Vs. S&P 500 12.41  Beta of 0.98 (trailing 3 years) 1As  Adjusted R Squared of 77.47 (trailing 3 years) of 9/30/2013. Annualized returns are net of fees with dividends reinvested. 2As of 9/30/2013. The Overall Morningstar Rating is based on risk-adjusted returns, derived from a weighted average of the three-, five-, and ten-year (if applicable) Morningstar metrics. The performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate thus an investor's shares, when redeemed, may be worth more or less than their original cost. Source: Bloomberg & Morningstar For Professional Use Only 8
  9. 9. Performance – VICEX Upside/Downside capture 9
  10. 10. Performance - through 9/30/2013 This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund ten years ago. Assumes reinvestment of dividends and capital gains, but does not reflect the effect of any applicable sales charge or redemption fees. This chart does not imply any future performance. 10 Source: Morningstar
  11. 11. Performance – Vice Fund Investor Class (VICEX) Past performance is not a guarantee of future results. Index performance is not illustrative of fund performance. One cannot invest directly in an index. See the disclosure page for performance returns for each index cited. 11 As of 9/30/2013. Source: Bloomberg For Professional Use Only
  12. 12. People Gerry Sullivan – Senior Portfolio Manager Gerry received a BA from Columbia University in 1982, and graduated from the University of Chicago in 1986 with an MBA in Finance and Accounting. Gerry’s past experience has covered many areas of finance such as being a Financial analyst at Salomon Brothers, an Options Trader at O’Connor & Associates and as a Senior Management Analyst he developed the financial forecasting model for the Atlanta Olympic Games. Gerry’s strong quantitative background has produced a US Patent for a fundamentally weighted index portfolio strategy and he has managed public mutual funds for the past 15 years. Jerry Szilagyi – President, CFA Jerry brings over 25 years of mutual fund industry experience to USA Mutuals and the Vice Fund. Mr. Szilagyi received a MBA in Finance from New York University and a BS in Engineering from Rensselaer Polytechnic Institute. For Professional Use Only 12
  13. 13. Disclosures The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other information about the investment company, and they may be obtained by contacting 866.264.8783 or go to www.vicefund.com. Read it carefully before investing. The Vice Fund is distributed by Quasar. Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund’s portfolio. The Fund is non-diversified and may invest a greater percentage of its assets in a particular issue and may own fewer securities than other mutual funds. The Fund may be subject to substantial short-term changes. These factors may affect the value of your investment. Diversification does not assure a profit or protect against a loss in a declining market. Morningstar: For each fund with at least a 3-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its 3-, 5- and 10-year (if applicable) Morningstar Rating metrics. The 1 year, 3 year, 5 year, 10 year and since Vice fund inception (8/30/2002) performance returns for each index cited are as follows. MSCI: 24.29%, 8.97%, 6.85%, 8.50%, 8.82%; Russell 1000 Value: 22.30%, 16.25%, 8.86%, 7.99%, 8.15%; Russell 1000 Growth: 19.27%, 16.94%, 12.07%, 7.82%, 8.21%; Russell 2000 Value: 27.04%, 16.57%, 9.13%, 9.29%, 10.33%; Russell 2000 Growth: 33.07%, 19.96%, 13.17%, 9.64%, 11.57%; Russell 2000: 30.06, 18.29%, 11.15%, 9.64%, 11.00%; Russell 3000: 21.60%, 16.79%, 10.58%, 8.11%, 8.45%; DIJA: 15.59%, 14.94%, 9.93%, 7.74%, 7.86%; NASDAQ 100 16.71%, 18.61%, 16.22%, 10.23%, 12.44%; and S&P 500 19.34%, 16.27%, 10.02%, 7.57%, 7.80%. For Professional Use Only 13

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