Peak Resources & Energy Portfolio

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8 West 40th Street, 19th Floor, New York, NY 10018 • 800.524.LEEB (5332) •
Peak Resources & Energy Composite
Leeb Capital Management
Has demonstrated “Thought Leadership” in the identification of critical mega-trends and translation into investment performance. Boasts a reputable Investment Committee with extensive experience and established methodologies. Offers attentive customer service with regular communication regarding our current market outlook and portfolio holdings.
Investment Philosophy and Approach
Top-down macroeconomic overlay concentrates fundamental analytical efforts into outperforming economic sectors and focuses the portfolio construction process. Disciplined security selection based on bottom-up fundamental research with qualitative and quantitative techniques. Invests in dominant companies in rapidly growing industries that are undervalued relative to their growth prospects.
Top Ten Portfolio Holdings
SPDR Gold Trust iShares Silver Trust Vanguard Ext. Duration Treasury ETF Enterprise Product Partners LP Williams Partners LP Schlumberger Freeport McMoRan Copper & Gold Lynas Potash Corp. of Sasketchewan National Oilwell Varco 13.1% 7.0% 5.0% 4.1% 4.1% 3.7% 3.6% 3.5% 3.5% 3.3%
Strategy Thesis
Energy and Materials
The continued growth of the Developing World (China, India, Brazil, etc.) is straining resource markets:
Economic growth (esp. industrialization) is energy intensive – driving global oil demand. Little meaningful production increase to meet rising energy needs. Major infrastructure projects taking place around the world are causing demand for base metals to outstrip supply. This includes copper, iron ore, zinc, and many other minerals. Growing populations /rising income levels in developing nations strain global food supplies, hastening demand for fertilizer.
Portfolio holdings are based on a model portfolio and are supplemental information to the compliant presentation.
Growth of $1000 Since Inception (7/31/05 – 9/30/11)
Leeb Peak Resources & Energy, Gross
+58.6% +46.8%
Leeb Peak Resources & Energy, Net Blended Benchmark*
The Developed World is furthering the strain as new initiatives to combat higher energy prices affect other resource markets:
Solar energy technology requires vast quantities of silver. Hybrid cars require more copper than conventional vehicles. Wind energy technology requires rare earth elements.
* See reverse for benchmark composition
Precious Metals
Accommodative Fiscal and Monetary policy from governments and central banks around the developed world debase the value of paper currencies:
Specifically, record debt and spending levels by the US Government (and its proxies) have raised questions about the US dollar’s standing as the world reserve currency. Central banks have added to gold positions as real value hedge.
Portfolio Construction
LCM’s fundamental research process seeks to identify companies with the following characteristics and attractive valuation. Business Analysis
Dominant market position Companies largely immune to competitive threats Barriers to entry
Growth Analysis
Expectations for sector Expectations versus peers Visible growth profile Sales growth by market segments
Quality Analysis
Balance sheet and financial strength Profitability (when applicable)
Management Analysis
Operational track record Reputation and experience Strategic vision Stability
Gold and other precious metals thrive in times of economic turbulence, whether it be inflation, stagflation, or deflation. Rising material prices will find their way into finished goods, stoking inflationary forces, further adding to devaluation of paper currencies, and hastening the rise in precious metal prices.
Decades of Turbulence: A Foreshadow of What’s to Come?
25 6
Relative Returns (Indexed to 1)
20 Oil Gold Dow Jones Industrial Average 10 15
Gold 16.09x
Relative Returns (Indexed to 1)
4 3 2 1 0
S&P 500 Gold Oil Silver Copper
Oil 19.12x
DJIA 1.15x
0 Jan-70
In the 1970s, sharply rising energy costs led to stagflation: high unemployment, high inflation, and economic recession. Both oil and gold dramatically outperformed U.S. large-cap stocks. In the 2000s, we saw the beginnings of a similar phenomenon. However, now scarcity (rather than political forces) will likely cause resource prices to rise inexorably, hampering real economic growth, and making materials one of the last true wealth creators.
Leeb Capital Management (LCM) Performance Results: Peak Resources and Energy Composite August 1, 2005 through September 30, 2011
Composite 3-Yr St Dev 14 Benchmark 3-Yr St Dev 14 Number of Accounts Composite Assets (US$ mil) Total P.R.E.P. Assets (US$ mil) % of P.R.E.P. Assets in Composite Composite Assets as % of Firm assets Total Firm Assets (US$ mil)
Total Return (Gross)
Total Return (Net of Fees)
Benchmark Return4
Composite Dispersion
2005 12 2006 2007 2008 2009 2010 2011 12
8.7% 12.3% 45.6% -44.9% 37.5% 42.7% -23.6%
7.8% 10.1% 42.8% -46.1% 34.8% 39.9% -24.7%
3.6% 24.2% 34.4% -33.6% 37.5% 23.9% -18.9%
28.9% 31.5% 33.0% -
25.0% 27.1% 28.8% -
17 38 42 33 39 34 33
0.5% 0.7% 0.6% 0.4% 0.4% -
$4.6 $7.7 $11.6 $5.9 $7.4 $7.4 $5.7
$4.6 $7.8 $11.6 $8.0 $8.3 $8.1 $7.5
100.0% 99.0% 100.0% 73.8% 90.0% 90.9% 76.0%
3.1% 5.2% 7.4% 5.4% 6.3% 6.2% 5.8%
$148.2 $148.0 $157.1 $110.4 $117.3 $119.4 $98.0
Leeb Capital Management (“LCM”) claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared this report in compliance with the GIPS Standards. LCM has been independently verified for the periods 4/1/99 through 9/30/112. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The P .R.E.P Composite has been examined for the periods 8/1/05 - 9/30/11. The verification and performance examination reports are available . upon request. 1.) Leeb Capital Management ("LCM") is a registered investment advisor with the Securities and 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 all 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 capital appreciation. 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. 2.) 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 September 30, 2011, LCM has been verified by ACA Verification Services, . LLC. A copy of the verification report is available upon request. Additional information regarding the firm's policies and procedures for valuing portfolios, calculating and reporting performance results as well as preparing compliant presentations are available upon request. 3.) 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. 4.) 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 XAU is a capitalization-weighted index which includes leading companies involved in the mining of gold and silver. For periods after January 1, 2009, the portfolio became more balanced between energy and materials (including precious metals). As such, the benchmark was changed to the S&P North American Natural Resources Sector Index, a market-weighted index that includes energy, materials, and precious metals. The changes in benchmark coincide with an evolution of the strategy to include precious metals. 5.) Valuations are computed and performance is reported in U.S. dollars. 6.) Composite returns are calculated using the aggregate method. This methodology has been applied consistently for all periods. Other methods may produce different results. 7.) Composite returns are presented gross and net. Gross returns are net of transaction fees and other expenses that may be incurred in the management of the account but gross of all investment management fees. Net returns are net of all investment management fees, transaction fees, and other expenses and include the reinvestment of all dividends and income. 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.) Quarterly and annual rates of return for the portfolio are computed by compounding the monthly rates of return over the applicable number of months. 9.) 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. 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. 2005 results are for the period Aug. 1, 2005 through Dec. 31, 2005. 2011 results are for the period Jan. 1, 2011 through September 30, 2011. 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. This policy has been effective since the inception of the composite on July 31, 2005. 14.) The 3-year annualized standard deviation measures variability of the (gross) composite and the benchmark returns over the preceding 36-month period. 15.) Actual performance of client accounts may differ substantially. 16.) Past performance is not indicative of future results. The content presented in this document is for informational purposes and should not be taken as a recommendation to purchase any individual securities. 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.