Peak Resources & Energy Composite
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12.31.2009
Peak Resources & Energy Composite
Leeb Capital Management
Employs a disciplined investment process which seeks to produce superior returns over a complete market cycle. Provides service tailored to individual client requirements as well as sector specific investment strategies. Offers regular communications from our investment and client service professionals regarding our current market outlook and individual portfolio holdings.
Top Ten Portfolio Holdings
SPDR Gold Trust U.S. Treasury Strips 0.0% NovaGold Resources Silver Wheaton ASA Ltd. Chevron Corp. Schlumberger iShares Silver Trust Newcrest Mining ADR Petroleo Brasileiro ADR
Portfolio holdings are based on a model portfolio and are supplemental information to the compliant presentation.
Investment Philosophy and Approach
LCM’s Peak Resources & Energy strategy seeks to identify: Sectors whose revenues are growing faster then the economy Companies in those sectors with consistent earnings growth Quality stocks with: Dominant industry position Operational leverage and a visible growth profile Superior operating record Reasonable price: defined as having a PEG ratio less than that of the market (where appropriate)
9.7% 6.2% 5.1% 4.7% 4.5% 4.5% 4.4% 4.4% 4.1% 4.0%
Since Inception (7/31/05) through 12/31/09
$2,000 1,800 1,600 1,400 34.6% 1,200 1,000 800 7/05 12/05 10/06 3/07 8/07 1/08 7/08 3/09
Leeb Peak Resources & Energy, Gross Leeb Peak Resources & Energy, Net Blended Benchmark*
45.3%
23.2 %
12/09
* Please see reverse for benchmark composition
Investment Process
LCM believes that superior long-term results are best achieved by selecting stocks that, through a combination of growth potential and balance sheet strength, have fundamental value that is not reflected in current prices.
LCM’s fundamental research process seeks to identify companies with the following characteristics: Business Analysis
Dominant market position Companies largely immune to competitive threats
Growth Factors
Growth expectations for sector Growth expectations versus peers Reasonable PEG ratio
Company Analysis
Overall financial strength Above average earnings growth estimates Profitability Sales growth by market segments
Management Strength
Strategic vision Stability Reputation Experience Track record
Macro-Economic Sector Analysis
Investment Universe 75-100 Stocks Watch List
Screening Process
Barriers to entry
History Lesson: A Decade of Stagflation
In a period of hyperinflation, both oil and gold dramatically outperformed U.S. large-cap stocks as represented by the Dow Jones Industrial Average.
Fundamental Research
Portfolio 30 - 40 Stocks
25
Portfolio Construction
Relative Returns (Indexed to 1)
20 Oil Gold Dow Jones Industrial Average 10
Oil 19.12x
Gold 16.09x
15
LCM’s investment process employs a top-down analysis to identify macroeconomic mega-trends that represent growth opportunities in the Energy & Materials sectors. This process defines the firm’s stock universe, which is then screened by: Market Capitalization > $250 million Forward PEG < S&P 500
BPRE1209
5
DJIA 1.15x
0 Jan-70
Jul-72
Jan-74
Jul-75
Jan-77
Jul-78
Jan-80
Leeb Capital Management (LCM) Performance Results: Peak Resources and Energy Composite August 1, 2005 through December 31, 2009
S&P 500 GICS Energy Sector Number of Accounts Composite Assets (US$ mil) Total Power Assets in (US$ mil) % of Power Assets in Composite Composite Assets as % of Firm assets Total Firm Assets (US$ mil)
Year
Total Return (Gross)
Total Return (Net of Fees)
Composite Dispersion
2005 12 2006 2007 2008 2009
8.7% 12.3% 45.6% -44.9% 37.5%
7.8% 10.1% 42.8% -46.1% 34.8%
3.60% 24.2% 34.4% -33.6% 26.7%
17 38 42 33 39
0.5% 0.7% 0.6% 0.4%
$4.6 $7.7 $11.6 $5.9 $7.4
$4.6 $7.8 $11.6 $8.0 $8.3
100.0% 99.0% 100.0% 73.8% 90.0%
3.1% 5.2% 7.4% 5.4% 6.3%
$148.2 $148.0 $157.1 $110.4 $117.3
Leeb Capital Management (“LCM”) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
1) Leeb Capital Management ("LCM") is a registered investment advisor with the Securities Exchange Commission. Prior to 2001, the firm was doing business as Money Growth Institute. Leeb Capital Management provides equity money management to retail and institutional investors. LCM’s Peak Resources and Energy Composite (“Composite”) represents fee-paying accounts with assets greater than $100,000 that are managed in accordance with LCM's Peak Resources and Energy Portfolio (P.R.E.P.). This strategy invests in securities and is managed with an emphasis on total return. The P.R.E.P. strategy offers clients a diversified portfolio of energy-related companies and hedges. The portfolio will include investments in the following: oil, natural gas, coal, shale/tar sands as well as alternative/renewable energies, i.e. wind, solar, and nuclear. Further, the portfolio aims to hedge against both inflation and deflation through investment in precious metals, including: gold, silver, and platinum. The Composite was created as of July 31, 2005 which coincides with the inception of this strategy. A complete list and description of LCM’s composites is available upon request. For the period of April 1, 1999 through September 30, 2007, results have been verified by Ashland Partners and Company LLP. For the period October 1, 2007 through December 31, 2009, LCM has been verified by Beacon Verification Services. A copy of the verification report is available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is also available upon request. Prior to April 1, 2008 the Composite was known as the Global Power and Energy Composite. The change in name was due to the evolution of the strategy, as precious metals are now part of the investable universe as of April 1, 2008. From inception through March 31, 2008, the composite returns are compared to the S&P 500 GICS Energy Sector, the volatility and holdings of which may be materially different from that of the composite. The S&P 500 GICS Energy Sector is widely used as the representative benchmark for energy strategies. The S&P 500 GICS Energy Sector is a subset of the S&P 500 and represents only those companies that meet S&P’s definition of energy companies. For period April 1, 2008 through December 31, 2008, a static blended benchmark which consists of 80% the aforementioned S&P 500 GICS Energy Sector, and 20% the Philadelphia Stock Exchange Gold and Silver Index (XAU), is used. The mix was adjusted to 50/50 for periods after January 1, 2009. The XAU is a capitalization-weighted index which includes leading companies involved in the mining of gold and silver. The changes in benchmark coincide with an evolution of the strategy to include precious metals. Valuations are computed and performance is reported in U.S. dollars. Composite returns are calculated using the aggregate method. This methodology has been applied consistently for all periods. Other methods may produce different results. Composite returns are presented gross and net of management fees and include the reinvestment of all dividends and income. All returns are gross of withholding taxes. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net of fee performance was calculated using the highest management fee known, which at this time is the 2% flat fee, which is stated below. Performance fees for clients that opt for this fee structure are accrued on a quarterly basis. Final allocations for the performance fee will be calculated once per year. LCM’s clients have a choice between a flat fee or a performance based fee: * Flat fee of 2% on all assets * Flat fee of 1% on all assets plus a performance fee of 20% above a high water mark 8) 9) Quarterly and annual rates of return for the portfolio are computed by compounding the monthly rates of return over the applicable number of months. Total PREP Assets refers to all assets in the PREP strategy, including those which fall below the composite inclusion minimum of $100,000. This figure is provided for comparison purposes.
2)
3) 4)
5) 6) 7)
10) LCM utilizes neither leverage nor derivative instruments as a material component of its investment strategies. 11) Composite dispersion is calculated using the asset-weighted standard deviation of all portfolios that were included in the composite for the entire year. 12) Performance periods of less then 12 months are not annualized. Year 2005 results are for the period August 1, 2005 through December 31, 2005. 13) LCM defines a significant cash flow as an external flow of cash or securities (capital additions or withdrawals) that is client initiated. An external flow of at least 10% of the portfolio market value is considered significant. A significant cash flow into or out of an account is considered a temporary loss of discretion and as such, an account would be removed from the composite in the month before the cash flow arises. An account which is removed from the composite due to the occurrence of a significant cash flow is to be included back in the composite once the account returns to fully-invested status. Additional information regarding the treatment of significant cash flows is available upon request. 14) Actual performance of client accounts may differ substantially. 15) Past performance is not indicative of future results. Index returns shown in the performance comparisons where provided by Standard & Poor's and Bloomberg. All of this information comes from sources believed by LCM to be reliable. LCM, however, cannot guarantee the accuracy of the comparative returns and therefore shall not be held liable for inaccurate information obtained from data providers.
12.31.2009
Peak Resources & Energy Composite
Leeb Capital Management
Employs a disciplined investment process which seeks to produce superior returns over a complete market cycle. Provides service tailored to individual client requirements as well as sector specific investment strategies. Offers regular communications from our investment and client service professionals regarding our current market outlook and individual portfolio holdings.
Top Ten Portfolio Holdings
SPDR Gold Trust U.S. Treasury Strips 0.0% NovaGold Resources Silver Wheaton ASA Ltd. Chevron Corp. Schlumberger iShares Silver Trust Newcrest Mining ADR Petroleo Brasileiro ADR
Portfolio holdings are based on a model portfolio and are supplemental information to the compliant presentation.
Investment Philosophy and Approach
LCM’s Peak Resources & Energy strategy seeks to identify: Sectors whose revenues are growing faster then the economy Companies in those sectors with consistent earnings growth Quality stocks with: Dominant industry position Operational leverage and a visible growth profile Superior operating record Reasonable price: defined as having a PEG ratio less than that of the market (where appropriate)
9.7% 6.2% 5.1% 4.7% 4.5% 4.5% 4.4% 4.4% 4.1% 4.0%
Since Inception (7/31/05) through 12/31/09
$2,000 1,800 1,600 1,400 34.6% 1,200 1,000 800 7/05 12/05 10/06 3/07 8/07 1/08 7/08 3/09
Leeb Peak Resources & Energy, Gross Leeb Peak Resources & Energy, Net Blended Benchmark*
45.3%
23.2 %
12/09
* Please see reverse for benchmark composition
Investment Process
LCM believes that superior long-term results are best achieved by selecting stocks that, through a combination of growth potential and balance sheet strength, have fundamental value that is not reflected in current prices.
LCM’s fundamental research process seeks to identify companies with the following characteristics: Business Analysis
Dominant market position Companies largely immune to competitive threats
Growth Factors
Growth expectations for sector Growth expectations versus peers Reasonable PEG ratio
Company Analysis
Overall financial strength Above average earnings growth estimates Profitability Sales growth by market segments
Management Strength
Strategic vision Stability Reputation Experience Track record
Macro-Economic Sector Analysis
Investment Universe 75-100 Stocks Watch List
Screening Process
Barriers to entry
History Lesson: A Decade of Stagflation
In a period of hyperinflation, both oil and gold dramatically outperformed U.S. large-cap stocks as represented by the Dow Jones Industrial Average.
Fundamental Research
Portfolio 30 - 40 Stocks
25
Portfolio Construction
Relative Returns (Indexed to 1)
20 Oil Gold Dow Jones Industrial Average 10
Oil 19.12x
Gold 16.09x
15
LCM’s investment process employs a top-down analysis to identify macroeconomic mega-trends that represent growth opportunities in the Energy & Materials sectors. This process defines the firm’s stock universe, which is then screened by: Market Capitalization > $250 million Forward PEG < S&P 500
BPRE1209
5
DJIA 1.15x
0 Jan-70
Jul-72
Jan-74
Jul-75
Jan-77
Jul-78
Jan-80
Leeb Capital Management (LCM) Performance Results: Peak Resources and Energy Composite August 1, 2005 through December 31, 2009
S&P 500 GICS Energy Sector Number of Accounts Composite Assets (US$ mil) Total Power Assets in (US$ mil) % of Power Assets in Composite Composite Assets as % of Firm assets Total Firm Assets (US$ mil)
Year
Total Return (Gross)
Total Return (Net of Fees)
Composite Dispersion
2005 12 2006 2007 2008 2009
8.7% 12.3% 45.6% -44.9% 37.5%
7.8% 10.1% 42.8% -46.1% 34.8%
3.60% 24.2% 34.4% -33.6% 26.7%
17 38 42 33 39
0.5% 0.7% 0.6% 0.4%
$4.6 $7.7 $11.6 $5.9 $7.4
$4.6 $7.8 $11.6 $8.0 $8.3
100.0% 99.0% 100.0% 73.8% 90.0%
3.1% 5.2% 7.4% 5.4% 6.3%
$148.2 $148.0 $157.1 $110.4 $117.3
Leeb Capital Management (“LCM”) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®).
1) Leeb Capital Management ("LCM") is a registered investment advisor with the Securities Exchange Commission. Prior to 2001, the firm was doing business as Money Growth Institute. Leeb Capital Management provides equity money management to retail and institutional investors. LCM’s Peak Resources and Energy Composite (“Composite”) represents fee-paying accounts with assets greater than $100,000 that are managed in accordance with LCM's Peak Resources and Energy Portfolio (P.R.E.P.). This strategy invests in securities and is managed with an emphasis on total return. The P.R.E.P. strategy offers clients a diversified portfolio of energy-related companies and hedges. The portfolio will include investments in the following: oil, natural gas, coal, shale/tar sands as well as alternative/renewable energies, i.e. wind, solar, and nuclear. Further, the portfolio aims to hedge against both inflation and deflation through investment in precious metals, including: gold, silver, and platinum. The Composite was created as of July 31, 2005 which coincides with the inception of this strategy. A complete list and description of LCM’s composites is available upon request. For the period of April 1, 1999 through September 30, 2007, results have been verified by Ashland Partners and Company LLP. For the period October 1, 2007 through December 31, 2009, LCM has been verified by Beacon Verification Services. A copy of the verification report is available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is also available upon request. Prior to April 1, 2008 the Composite was known as the Global Power and Energy Composite. The change in name was due to the evolution of the strategy, as precious metals are now part of the investable universe as of April 1, 2008. From inception through March 31, 2008, the composite returns are compared to the S&P 500 GICS Energy Sector, the volatility and holdings of which may be materially different from that of the composite. The S&P 500 GICS Energy Sector is widely used as the representative benchmark for energy strategies. The S&P 500 GICS Energy Sector is a subset of the S&P 500 and represents only those companies that meet S&P’s definition of energy companies. For period April 1, 2008 through December 31, 2008, a static blended benchmark which consists of 80% the aforementioned S&P 500 GICS Energy Sector, and 20% the Philadelphia Stock Exchange Gold and Silver Index (XAU), is used. The mix was adjusted to 50/50 for periods after January 1, 2009. The XAU is a capitalization-weighted index which includes leading companies involved in the mining of gold and silver. The changes in benchmark coincide with an evolution of the strategy to include precious metals. Valuations are computed and performance is reported in U.S. dollars. Composite returns are calculated using the aggregate method. This methodology has been applied consistently for all periods. Other methods may produce different results. Composite returns are presented gross and net of management fees and include the reinvestment of all dividends and income. All returns are gross of withholding taxes. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net of fee performance was calculated using the highest management fee known, which at this time is the 2% flat fee, which is stated below. Performance fees for clients that opt for this fee structure are accrued on a quarterly basis. Final allocations for the performance fee will be calculated once per year. LCM’s clients have a choice between a flat fee or a performance based fee: * Flat fee of 2% on all assets * Flat fee of 1% on all assets plus a performance fee of 20% above a high water mark 8) 9) Quarterly and annual rates of return for the portfolio are computed by compounding the monthly rates of return over the applicable number of months. Total PREP Assets refers to all assets in the PREP strategy, including those which fall below the composite inclusion minimum of $100,000. This figure is provided for comparison purposes.
2)
3) 4)
5) 6) 7)
10) LCM utilizes neither leverage nor derivative instruments as a material component of its investment strategies. 11) Composite dispersion is calculated using the asset-weighted standard deviation of all portfolios that were included in the composite for the entire year. 12) Performance periods of less then 12 months are not annualized. Year 2005 results are for the period August 1, 2005 through December 31, 2005. 13) LCM defines a significant cash flow as an external flow of cash or securities (capital additions or withdrawals) that is client initiated. An external flow of at least 10% of the portfolio market value is considered significant. A significant cash flow into or out of an account is considered a temporary loss of discretion and as such, an account would be removed from the composite in the month before the cash flow arises. An account which is removed from the composite due to the occurrence of a significant cash flow is to be included back in the composite once the account returns to fully-invested status. Additional information regarding the treatment of significant cash flows is available upon request. 14) Actual performance of client accounts may differ substantially. 15) Past performance is not indicative of future results. Index returns shown in the performance comparisons where provided by Standard & Poor's and Bloomberg. All of this information comes from sources believed by LCM to be reliable. LCM, however, cannot guarantee the accuracy of the comparative returns and therefore shall not be held liable for inaccurate information obtained from data providers.