Doug Rao, Portfolio Manager
July through September 2008
The Flexible Capital Fund produced a total return of -13.21% during the third calendar quarter of 2008. That result substantially underperformed the Fund's primary benchmark, the S&P 500 Index, which had a total quarterly return of -8.37%. Pursuant to a fee waiver agreement with Marsico Capital Management, LLC, the total annual operating expenses for the Flexible Capital Fund are capped at 0.75%.1 This fee waiver may be terminated at any time after December 31, 2008.
The table below provides the Flexible Capital Fund's longer-term investment results through September 30, 2008, as compared to the S&P 500 Index:
| Average Annual Returns | ||||
| One Year | Since Inception (12/29/2006)2 | Total Annual Operating Expenses | ||
| (Gross) | (Net) | |||
| Flexible Capital Fund | -17.10% | -3.57% | 2.47%1 3 | 1.22%1 3 |
| S&P 500 Index | -21.98% | -8.79% | ||
The performance data quoted represent past performance, and past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted above. To obtain performance information current to the most recent month end, please call 888-860-8686 or click here.4
This commentary highlights Fund performance over a single calendar quarter, and the Fund had only 21 months of operating history as of September 30, 2008. Shareholders should keep in mind that the Fund is intended for long-term investors who hold their shares for substantially longer periods of time. You should also keep in mind that our views on all securities and investments discussed in this commentary are subject to change at any time. References to specific securities, sectors, and industries discussed in this commentary are not recommendations to buy or sell the securities or investments, and the Fund may not necessarily hold these securities or investments today.5
The Fund's quarterly performance was driven by sub-par stock selection in a number of economic sectors and industries, including the following (references to sectors and industries reflect Global Industry Classification Standard ("GICS") classifications):
- Consumer Staples – This sector held up well amidst the market turbulence during the third quarter, but our stock selection was off-target. Three holdings in this sector weighed heavily on the Fund's quarterly performance: CVS Caremark Corp. (-15%), sugarcane ethanol producer Cosan S/A Industria e Comercio (-17% prior to being sold), and Heineken N.V. (-17%) prior to being sold.
- Information Technology – MasterCard Inc. (Class A), one of the Fund's largest holdings during the third quarter, weighed down the Fund's technology-related holdings by a significant amount, skidding -34%.
- Energy – National-Oilwell Varco, Inc. (-43%), an oil services company, and Petrohawk Energy Corp. (-36% prior to being sold), which focuses on exploration and development of oil and natural gas properties in North America, were among the Fund's weakest-performing individual holdings.
- Industrials – A variety of the Fund's holdings in this sector struggled during the quarter, perhaps in response to rapidly-mounting concerns regarding a global economic growth slowdown. These included wind turbine manufacturer Vestas Wind Systems A/S (-35%), infrastructure technical services provider AECOM Technology Corp. (-25%), alternative energy services provider Energy Conversion Devices, Inc. (-19%), and Brazilian railroad operator All America Latina Logistica SA (-24% ).
- Financials – Although the Fund owned some strong-performing financial services stocks (discussed below), it also held positions in several companies in this sector that sold off sharply during the quarter. These included Meta Financial Group, Inc. (-35%), which focuses on providing a variety of financial services products in Iowa and South Dakota, Lehman Brothers Holding Preferred 7.25% (-37% prior to being sold), and Julius Baer Holding AG (-13% prior to being sold).
The main changes to the Fund's investment "complexion" during the quarter were to initiate several new positions in the Financials sector, with an emphasis on national banks. We also allowed cash positions to build, believing that the market turbulence could present a variety of new investment opportunities at some point in the future.
Thank you for being an investor in the Fund.
Sincerely,
A. Douglas Rao
Portfolio Manager
1Prior to June 1, 2007, the written expense limitation agreement relating to the Flexible Capital Fund limited total expenses of the Fund (excluding interest, taxes, acquired fund fees and expenses, litigation, brokerage and extraordinary expenses) to an annual rate of 1.60% of the Fund's average net assets. Effective June 1, 2007, the expense limitation agreement was amended so that the total expenses of the Fund (excluding interest, taxes, acquired fund fees and expenses, litigation, brokerage and extraordinary expenses) will not exceed 0.75% of its average daily net assets. This agreement may be terminated at any time after December 31, 2008. Please see the prospectus dated February 1, 2008 for more information.
2The Flexible Capital Fund may invest in initial public offerings ("IPOs") of common stock or other equity or debt securities issued by a corporate issuer. A significant portion of the Fund's "since inception" return may be attributable to its investments in IPOs. There can be no assurance that similar contributions to the Fund's performance from IPOs will continue in the future.
3The total annual operating expenses are reflective of the information disclosed in the Fund's prospectus dated February 1, 2008. Please see the prospectus for more information.
4Total returns are based on net change in NAV assuming reinvestment of distributions. The performance returns for the Flexible Capital Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would be reduced. A redemption fee of 2% may be imposed on redemptions or exchanges of Fund shares owned for 30 days or less. Please see the prospectus for more information.
5On September 30, 2008, the following securities comprised these percentages of the net assets of the Marsico Flexible Capital Fund: CVS Caremark Corp. (3.57%); Cosan S/A Industria e Comercio (0.00%); Heineken N.V. (0.00%); MasterCard Inc. - Class A (5.46%); National-Oilwell Varco, Inc. (1.71%); Petrohawk Energy Corp. (0.00%); Vestas Wind Systems A/S (1.71%); AECOM Technology Corp. (1.17%); Energy Conversion Devices (1.16%%); All America Latina Logistica SA (1.35%); Meta Financial Group, Inc. (3.42%); Lehman Brothers Holding Preferred 7.25% (0.0%); Julius Baer Holding AG (0.00%); U.S. Bancorp (2.29%); JPMorgan Chase & Co. (2.79%); Industrial & Commercial Bank of China (2.96%); Bank of America Corporation (2.55%); McDonald's Corporation (4.52%); and J. Crew Group, Inc. (2.50%).
2The Flexible Capital Fund may invest in initial public offerings ("IPOs") of common stock or other equity or debt securities issued by a corporate issuer. A significant portion of the Fund's "since inception" return may be attributable to its investments in IPOs. There can be no assurance that similar contributions to the Fund's performance from IPOs will continue in the future.
3The total annual operating expenses are reflective of the information disclosed in the Fund's prospectus dated February 1, 2008. Please see the prospectus for more information.
4Total returns are based on net change in NAV assuming reinvestment of distributions. The performance returns for the Flexible Capital Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would be reduced. A redemption fee of 2% may be imposed on redemptions or exchanges of Fund shares owned for 30 days or less. Please see the prospectus for more information.
5On September 30, 2008, the following securities comprised these percentages of the net assets of the Marsico Flexible Capital Fund: CVS Caremark Corp. (3.57%); Cosan S/A Industria e Comercio (0.00%); Heineken N.V. (0.00%); MasterCard Inc. - Class A (5.46%); National-Oilwell Varco, Inc. (1.71%); Petrohawk Energy Corp. (0.00%); Vestas Wind Systems A/S (1.71%); AECOM Technology Corp. (1.17%); Energy Conversion Devices (1.16%%); All America Latina Logistica SA (1.35%); Meta Financial Group, Inc. (3.42%); Lehman Brothers Holding Preferred 7.25% (0.0%); Julius Baer Holding AG (0.00%); U.S. Bancorp (2.29%); JPMorgan Chase & Co. (2.79%); Industrial & Commercial Bank of China (2.96%); Bank of America Corporation (2.55%); McDonald's Corporation (4.52%); and J. Crew Group, Inc. (2.50%).
Not authorized for distribution unless preceded or accompanied by a current Marsico Funds prospectus.
The distributor of the Marsico Funds is UMB Distribution Services, LLC.
