Cory Gilchrist, CFA, Portfolio Manager
July through September 2008
The 21st Century Fund posted a total return of -11.42% during the third calendar quarter. That result trailed the S&P 500 Index, the Fund's primary comparative benchmark, which had a total quarterly return of -8.37%. The Russell 3000 Index, which is a proxy for the performance of the entire publicly-traded US equity market including large- and smaller-capitalization companies (and which, therefore, can be a useful reflection of the Fund's ability to invest across the entire market capitalization spectrum), produced a total quarterly return of -8.73%.
The table below provides the Fund's longer-term investment results through September 30, 2008, as compared to the S&P 500 Index:
| Average Annual Returns | ||||
| One Year | Five Years | Since Inception (2/1/2000) | Total Annual Operating Expenses1 | |
| 21st Century Fund | -25.77% | 9.14% | 3.55% | 1.33% |
| S&P 500 Index | -21.98% | 5.17% | -0.36% | |
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.2
This commentary highlights Fund performance over a single calendar quarter. 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.3
It was a rugged quarter, to say the least – especially during September when it felt like we were starting to see a "capitulation phase" in the equity markets as the macroeconomic environment deteriorated rapidly, volatility soared, investor risk aversion increased dramatically, and selling became rampant as investors fled for perceived safety. The Fund's quarterly performance was impacted adversely by many of its holdings that might be considered more economically-sensitive in nature, particularly those that may be associated with global economic growth and consumer discretionary spending. These negative factors were offset to some extent, albeit not completely, through holdings in the Financials sector and certain sector- and industry-level positioning. More detail is provided below.
On the positive side:
The Fund's performance benefitted substantially as a result of stock selection within the Financials sector. During the quarter, we increased the Fund's holdings in this sector, through a combination of adding to existing holdings and initiating new positions, with an emphasis on banks. Wells Fargo & Co. (+60%), U.S. Bancorp (+44%), brokerage company Jefferies Group, Inc. (+30%), real estate developer The St. Joe Co. (+13%), bond rating agency Duff & Phelps Corp.-Class A (+27%), and People's United Financial, Inc. (+17%) were among the Fund's top-performing individual equities.
Performance was also enhanced by underweighted postures (as compared to the Fund's benchmark index) in several areas that performed rather poorly during the quarter including: Energy, Utilities, Materials, and Semiconductors & Semiconductor Equipment.
Another individual holding that was a material positive contributor to performance was concert promoter Live Nation, Inc., which rose 54% during the third calendar quarter of 2008. Cash and cash equivalents, which averaged about 9% of the Fund's net assets during the quarter, provided a modest degree of capital preservation for the Fund.
The main performance detractors during the quarter included a variety of holdings in the Industrials, Information Technology, and Consumer Discretionary sectors:
- Industrials – Holdings in wind turbine manufacturer Vestas Wind Systems A/S (-35%), engineer and construction contractor The Shaw Group Inc. (-51%), and Brazil-based railroad operator All America Latina Logistica SA (-48%) hurt results.
- Information Technology – Credit card processors MasterCard Inc.-Class A (-34%) and Visa Inc. (-25%) plunged, as did Apple Inc. (-32%).
- Consumer Discretionary – Lodging and entertainment companies took it on the chin in the third quarter, hampered by worries regarding global economic growth and consumer spending. Las Vegas Sands Corp. (-24%), Starwood Hotels & Resorts Worldwide, Inc. (-29% prior to being sold), and Vail Resorts, Inc. (-18%) struggled. In the Retailing industry, Saks Inc. and The Home Depot, Inc. sank by -16% and -13%, respectively.
During the third calendar quarter, we made a few changes to the Fund. From a sector perspective, as noted above, we increased holdings in the Financials sector, while trimming Information Technology, Health Care, and Energy. As of quarter-end, the Fund's largest sector-level allocations were Financials, Industrials, Consumer Discretionary, Information Technology, and Consumer Staples. The Fund continued to have little or no exposure to the Telecommunication Services and Utilities sectors.
Thank you for being an investor in the Fund.
Sincerely,
Corydon J. Gilchrist, CFA
Portfolio Manager
1The 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.
2Total returns are based on net change in NAV assuming reinvestment of distributions. For the period prior to March 31, 2004, the performance returns for the 21st Century Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would have been reduced. For the period beginning April 1, 2004 through January 2005, performance returns for the Fund would have been higher but for the reimbursement of fees waived previously. 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.
3On September 30, 2008, the following securities comprised these percentages of the net assets of the Marsico 21st Century Fund: Wells Fargo & Co. (6.58%); U.S. Bancorp (2.35%); Jefferies Group, Inc. (1.96%); The St. Joe Co. (2.23%); Duff & Phelps Corp.-Class A (0.95%); People's United Financial, Inc. (1.58%); Live Nation, Inc. (1.41%); Vestas Wind Systems A/S (3.60%); The Shaw Group Inc. (1.60%); All America Latina Logistica SA (0.37%); MasterCard Inc. - Class A (5.62%); Visa Inc. (2.51%); Apple Inc. (2.43%); Las Vegas Sands Corp. (2.82%); Starwood Hotels & Resorts Worldwide, Inc. (0.00%); Vail Resorts, Inc. (1.71%); Saks Inc. (1.79%); The Home Depot, Inc. (2.50%); Amylin Pharmaceuticals, Inc. (1.18%); Gilead Sciences, Inc. (0.98%); Heineken N.V. (2.85%); and Costco Wholesale Corp. (6.90%).
2Total returns are based on net change in NAV assuming reinvestment of distributions. For the period prior to March 31, 2004, the performance returns for the 21st Century Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would have been reduced. For the period beginning April 1, 2004 through January 2005, performance returns for the Fund would have been higher but for the reimbursement of fees waived previously. 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.
3On September 30, 2008, the following securities comprised these percentages of the net assets of the Marsico 21st Century Fund: Wells Fargo & Co. (6.58%); U.S. Bancorp (2.35%); Jefferies Group, Inc. (1.96%); The St. Joe Co. (2.23%); Duff & Phelps Corp.-Class A (0.95%); People's United Financial, Inc. (1.58%); Live Nation, Inc. (1.41%); Vestas Wind Systems A/S (3.60%); The Shaw Group Inc. (1.60%); All America Latina Logistica SA (0.37%); MasterCard Inc. - Class A (5.62%); Visa Inc. (2.51%); Apple Inc. (2.43%); Las Vegas Sands Corp. (2.82%); Starwood Hotels & Resorts Worldwide, Inc. (0.00%); Vail Resorts, Inc. (1.71%); Saks Inc. (1.79%); The Home Depot, Inc. (2.50%); Amylin Pharmaceuticals, Inc. (1.18%); Gilead Sciences, Inc. (0.98%); Heineken N.V. (2.85%); and Costco Wholesale Corp. (6.90%).
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.
