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HomeMy WebLinkAbout2009 02 17 Regular 600 DGHM PresentationDate: February 17, 2009 ATTACHED PRESENTATION WAS EMAILED AND MAILED TO THE BOARD MEMBERS PRIOR TO THE MEETING '~r .~ ~~ Dalton, G~eine~, Hartman, Maher & Co., LLC Al1Cap Value A Presentation To The: ~~ a _ s. Feh~uary ~ 7, 2009 .T~ff~~~~~~: c~~ Chief Iyu~e.~tmet~t Offi~e~~ ? 72-557- ~~ 95 363 I~itth ~~-enue, Suite 2101 Neu ~ ork, N~ 10017 212-337-2-~-~3 »'n'n ~. d~h~n. coin 3001 Tamiami Trail North, Suite 206 Naples, FL 3-103 239-261-3333 ~»» ~. ~1,h7~z. ~~o~a L7 G .~, Quarter Century oflnvestment Success - Fundamental, value-driven style since 1982 with $937 Million AUM - Autonomous subsidiary of Boston Private Financial Holdings (BPFH) - Two-thirds of our employees own equity in DGHM; Innovative equity recycling - Significantly invested alongside our clients MidCap $36MM Alternatives $86MM Representative Clients ~xneric~ui Ezpress '~~~xneriprise ~celor~Iittal George ~'asl~igton L~ni~ ersit~- Emerson °Hi1Yon Foundation i"Huht~miaki rIntersYate Br~uids New Fork City- Police Sacr~unento CounnT ERS *Al1Cap Value Cliente Dalton, Greiner; Har?morn, 11laber c~ Co., LLC ? L7 G .~, Fundamental Building Blocks: People, Process, Incentives - Peo le ~ Ele~Ten sector specialists a~-eraging o~Ter t~~enty years experience; 22 total employees - Philoso~vh v and Process ~ 13uv ~ ery good companies at attracti~re prices ~ Intensi~ e fundamental analysis ~ Empower sector specialists within team structure - Incentives ~ Compensation tied to in~restment performance ~ Rroad distribution of otivnership is critical to our corporate culture (14 employee shareholders) ~ Decision making authority enhances job satisfaction Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 3 L7 G .~, Investment Professionals Professional ~ Bruce Geller, CFA ~ Jeff Baker, CFA ~ Tim Dalton, CFA 0 Ken Greiner, CFA 0 Peter Gulli, CFA 0 Adriano Almeida, CFA 0 Dave Dusenbury, CFA ~ Joshua Waltuch ~ Randall Watsek, CFA Ed Turville, CFA Donald Porter, CFA Harry LeVay 0 Barbara Kirby 0 Kate Schwartz ~ Tom Gibson, CFA, CPA Yrs. Yrs. Ex~verience / a t DGHM 17 / 16 19/8 46/26 40 / 25 16/9 9/4 17/3 13/1 12/4 40 / 18 4/3 50 / 13 20 / 20 13/8 21/3 1'OSI t1012 Sector Specialist, CEO Sector Specialist, CIO Sector Specialist, Chairman Sector Specialist, Vice-Chairman Sector Specialist Sector Specialist Sector Specialist Sector Specialist Sector Specialist Sector Specialist Sector Specialist Analyst Senior Trader Trader CFO, CCO (Compliance) 0 Sbcrr eZ~ol~ler~ SLuxrehol~lea; Illaraa~emerat committee Dalton, Greiner; Har?morn, 11laber c~ Co., LLC -~ L7 G .~, AIICap at DGHM - Active capitalization management (Range: $1 Billion+) - 35-40 stock portfolio diversified by sector - Investment objective is to achieve superior risk-adjusted returns over the long-run - Consistent value style of investing - Time-tested valuation approach - Product capacity of $2.5 Billion Active Capitalization Management 0 w 0 ^.~ w 0 0 Dalton, Greiner; Hai?man, 11laber c~ Co., LLC 15"„ 10" 5" 0°„ -5° ~~ -10" ~~ -15" „ -20°~ -25" ~~ -30°„ -35°~ -~0" ~~ Annualized Returns 12. C,°~ 12.9'1°.,. 1 Dear .i Dears 5 Dears 10 Dears 15 Dears 20 Dears 25l~ears Since Inception 1/83- 12/08 DGHM ~11CapFalue ~ Russe113000I'alue ~Russe113000 Standard Deviation Since Inception: ~16.#°/u 15.3% © 1G.7°/, \otes: Pe~for~azance thror~~h DeiertaUer37, 2008. Please gee Ea~lanatiaa of Pei for~aaan~e. eSmall<$~A BN ^n11d 51 BN-$10 BN eLaige ~~x10BN L7 G .~, Key Takeaways The heart of our process is In-depth fundamental research. As a frm, we believe our core competency is Individual stockplcking. We place our active weights In a manner to derive alpha from stock selection, as opposed to making large sector rotation/market timing bets. Our team of Sector specialists are empowered to make thelrfnalstockselectlon decisions. How we accomplish this... Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 6 DG2 -~ Proprietary Valuation Model Drives Idea Generation - Multi -Factor Model "MFM" purpose: Enhance probability of picking the right stock Factors: ^ ti~aluation ^ Capital Etticienc~ ^ Protitabilit~ Outperform 1 a~ U c~ 4~ 4~ .~ c~ 4~ w Underperform -~ Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 7 Undervalued ~~OmpOSite SCOre Overvalued 1 -+ DG2 -~ Fundamental Criteria - Market leader with strong position in its business - Stable to impro~-ing industr~r fundamentals - Abo~re a~re~age profitability and asset utilization characteristics - Free cash fl'owgeneration -Empowers management to enhance shareholder value - Strong balance sheet - Proven management team acting in shareholder's best iizterests - High insider ownership /Insiders bu~~ing Searching for Value • SEC Filings • Comp~ui~-~,isits • ~ I~uaageinent Inteiti iews • Intern~~l ~ Iodels • upside/Downside ~~n~~lvsis • ~~al~=st Reports Potential Catalysts to Drive Value • Earnings acceleration • Restructuru~gs/ Spin-offs • ~ Ianagement Chu~ge • acquisition/LBO C~u~didate • Hidden asset ~Ts~lue Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 8 DG2 -~ Team Structure is our Key Strength Investment Team Review: Benefits ofDecision Making Process: - Develops in-depth industry- laio~~-ledge - Fosters diversity- of perspectives as~d breadth of eiperience - Provides incentive of decision mal~ing responsibility- - Eliminates key person risk - Enhances client responsiveness Dalton, Greiner; Har?morn, 11laber c~ Co., LLC ~ Formal report on stock idea ~ Present at committee meeting ~ Vetted by team ~ Final decision by sector specialist Ke questions: - ~~o is responsible for making the final u~~Testment decisions - ~'ho o~=ersees the entire portfolios - How do ~rou pre~rent turf batfles o~rer sector ~llocationr - How are die Sector Specialists compensatedr 9 L7 G .~, Portfolio Construction - Portfolio Construction ~ 35-40 names; initial position 2.5%; max weight = 6% ~ Remain within 75-125% band of benchmark sector weights ~ Sector Specialists responsible for buv/sell decisions within their sector ~ Product overseen by Team Leader Qeff baker) ~ Seek to remain fuller invested (cash < 3%) Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 10 L7 G~ Risk Con tool ~ Sell Dls clplln e: Multiple Layers of Ove~slgh t Sell Discipline Di~~ersification by stock Di~Tersification by sector Di~~ersification by sector specialist (eliminates keys person risk) Daily o~~ersight by Team Leader Qeff Baker) Monthly rem ie~r by entire team DGI-IM ~Taluation model 1. 2. ~. 4. 5. 6. 7. 8. Deteriorating fundamentals Eliminate ~~alue traps Poli~y~ Guidelz~ne~: DGHM Inonitor.~ fire t7Z7Zh11~ ~-?9Z011t~7 p1Zt'~ p~7f077?ZG7nC~ Of ~l'~7y' ~ec~urrty~. Any' .rto~Ie in the lo~re~t (-~`~'~ quar7ile for nao~ e than 3 naotath~ i.~~ autonaatir:ally~ ~ ol~l Yields Consistent Long-Term Results Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 11 L7 G .~, Att~actiVe Valuation/Quality Tradeoff Ca~nitalization Weighted Average Market Cap Valuation Enterprise Value/EBITDA FCF Yield 2008 Estimated P/E Profitability & Growth 2008 Estimated ROE 5-Year EBITDA ROA (excluding cash) 5-Year CAGR EBITDA/SHR Financial Strength EBITDA/Interest Expense Al1Cap Value $17,881MM 6.4x 8.2% 10.Ox 17.3% 17.3% 9.8% 8.9x Russell 3000 Value $79,604MM 6.9x 8.3% 10.5x 14.8% 18.6% 11.0% 13.1x Russell 3000 $66,629MM 7.3x 7.6% 11.7x 19.0% 20.2% 12.5% 14.8x _~s of De~ember39, 2008 Dalton, Greiner; Har?man, 11laber c~ Co., LLC L L7 G .~, Secular Play on Mope Complex Testing, Quest Diagnostics, Inc. (DGX) - Fundamentals ~ DGX is the largest diagnostic testing compantir in the li.S. ~ Industry growth is mid single digits. ~ New non-traditional (esoteric) tests are ~Tolume and price dri~~ers. ~ DGX has an excellent balance sheet, generates good return and uses its FCF to buy back stock and pay down debt. - T~alua tlon ~ DGX trades at 13z '09 earnings, tivhich is at the lotive~ end of its historical range. QLTESTDL~GNOSTICS INC. (DC,l) s60 sss sso x~~ sus st~- sao ti°~ ti~~ °~ ~~ °~~ °~~ °~ ~~~ ~~ti ~~yti ti~~~ ~~~ti ~~~ti ~~~ti Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 13 L7 G .~, Time To Get Off the Stage Coach Wells Fargo & Co. (WFC) ._ - ,, ~~_._ Fundamentals ~- ~ The 4th largest li .S. bank with mostly a western retail branch network. ~ Strong sales culture and di~-ersittr of businesses produced consistent, abo~~e-a~rerage growth and profitability. T~alua tlon ~ Premium multiple to peers at time of sale ~ MFM score is a Sell What Ha~pe ~ Deteriorating industry conditions will challenge e~ en the best operators. Our maim concern is mortgage and consumer finance. ~ Home mortgage and home equity (19°'0 of rep enues) is experiencing lower originations and risinng delinquencies. ~YTells is the nation's 2nd largest mortgage originator. ~ ~~ells' consumer finance busiiaess (7°,/0 of re~renues) is under pressure from rising delinquencies. ~ Industry multiples tivill compress in a worsening credit environment ~ Deteriorating MFM score at time of sale. R'II,LS ERGO ~ C'O. (R'FC) s~o II,L ~~, R30 Bill" s25 szs sao si9 ~~~ ooh o°~` oo~ ooh ooh oo^ oo~ oo~' ~~~`~ ~~~~ti ~~~~ti ~o~~~ti ~ti°~ti ~~°~ti ~~`'~ti ~~°~ti Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 1-~ L7 G .~, Risk Management Though DiVe~sification AllCap Value Top Ten Holdings Utilities Financial Non-Cyclicals Technology Consumer Cyclicals Industrial Cyclicals 0.0% ~A% 10.0% 1~.0% 20.0% 2~.0% 30.0% 3~.0% ^ DGHM AllCap Value ^ Russe113000 Value ^ Russell 3000 _AsofDe~emUer39, 2)08 TDS Telephone & Data S~-stems Inc. ~.6°'0 OZ~ Occidental Petroleum Corp. ~3°'0 STJ St Jude Medical Inc. 3.6°'0 i~ ST i~ ST_~R 3. (°io TRti~ Tra~relers Cos. Inc. 3.~"% h hello~,~; Co. 3.~°'0 1I~1~I ~1I Co. 3.~°%0 DGZ Quest Dia~iostics Inc. 3.~°'0 CAN CittrNational Corp. 3.~°~0 PEG ~ Public Ser~~ice Enterprise Group Inc. 3.-~°'o 1' Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 1~ Economic Sector Weighting Comparison L7 G .~, Why Select DGHM,~ - Peo le ~ Focused, cohesi~ e team with tremendous experience ~ Ownership centric culture rewards indi~ idual and group achie~~ement ~ Significant infrastructure in place to support growth - Process ~ Intensi~Te fundamental analysis across product line ~ Disciplined approach which is time-tested ~ Empower sector specialists within team structure - Results ~ Consistent alpha generation across product line ~ superior long-term results ~ Client service designed for y our needs ^ Transparenc~r and access to intiTestment team ^ Clients dating back to firm's uaception - ire in~Tite ~rou to speak to them Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 16 L7 G .~, Fee Schedule Asset Based Fees Assets Fee First $25MM 75 bps Next $75MM 50 bps Portion> $100MM 25 bps e.~;. $50i~IM $75MM $150M~I 62.5 bps 58.3 bps 45.8 bps Performance Based Fees: Negoti~rble upon request Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 17 L7 G .~, DGHM Mission and Values DGHM, LLC has a quarter century record of Value Investing across the entire spectrum of market capltahzatlon. Our overriding goal is to be a leading practitioner of fundamental analyses, constructing a lineup of specialty products with along-term orientation that achieve highly competitive risk-adjusted returns for our clients. We have an ownership centric, team-oriented corporate culture that thrives upon a high level of employee Interaction and provides every employee opportunities for growth and development. We employ dedicated, passionate 1ndlVlduals who are IncentiVlzed to achieve outstanding performance and make significant contributions to the team's efforts. Our cheats and other constituents well remain well Informed of our activities through an elevated level of responsiveness, transparency, and access to all team members. All of our activities well be conducted with the highest degree oflntegrlty and professional standards. Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 18 L7 G .~, AIICap TUalue Pe~fo~mance Though 12/31/08 Annualized Returns (1/83 -12/08) ~ .. 33.6~~~, ~ i~~ -_~6._~~~~, ~ iii -~ .~~~~, 10~'R S. ~"'0 1.7"'. -0. c5'0'o 30~'R ll.d° ~~ 9.L°~i~ 8.d° o 3J~'R 13.6"~0 1(l.~"/0 9.~~~% Inceprion L.9"/n ll.l";n 1(l.O"/n Value of a $ ~~5.00 $30A0 $25A0 $20.00 $15.00 $10.00 $5.00 i.15 .59 81 $0.00 ~ tia ,~a tia ,~a tia ,~a tia ,~a tia ,~a tia ,~a tia ,~a tia ,~a tia ,~a -DGHM Al1Cap Value ~Russe113000 Value Russe113000 _AsofDe~ember3l, 2))8 Annual Returns 3008 -33.6~~0 -36.3~~0 -3z3e o 3007 ~.~~ ~ -1.0~~0 ~.3~0 3006 16.7°%0 33.3°%0 1~.7°'0 300 7.7"'0 6.9'0 6.1°'0 300 31.6°,0 16.9°,o L.0°'o 3003 38.8°'0 3L1°'o 3L1°'o 3003 -33.L°'o -1~.3°'0 -3L~°'o 3001 16.9°'0 -~.3°;'0 -ll. ~°'o 3000 33.1°0 8.0°,-0 -Z~°-o 1999 18.6°'0 6.7°'v 30.9°'v 1996 9.~°,'n li.~°'n ?-x.34.0 1997 36.6°%0 3~.8°%0 31.8°'0 1996 17.8°%0 31.6°%0 31.8°'0 199 36.9~,~ 37.0~,~ 36.8°,0 199 -3.340 -3.04'0 0.0'0 1993 16.300 18.7°'0 1094`0 1993 13.~r"o 1-1.9~4~ 9.6"'„ 1991 30.3° n 33.E° n 33.7°-0 1990 -7.04/0 -8.9"~0 -~.1°,'0 1989 19.3°'0 3~.3°'0 39.3°,'0 1988 19.9°'0 33.6°'0 17.8°,'0 1987 9.7°'0 -0.14 o L94'o 1986 18.6°,~ 18.8°,~ 16.7°'0 1985 36.8°~~ 3L5°~~ 33.3°'0 198 13.3°'0 9.34 0 3.4'0 1983 19.9° n 39.3° n 33.7°,-0 See the prodded Explanation of Performance. Please note all references to flee Russell 3000 and Russell 3000 ~Talue are trademarked b~T Frank Russell Company-. Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 19 L7 G .~, AIICap Value Portfolio Industrial Cyclical ~L~~I 3~I Co. 3. DOLT Doer Corp. 2. EC ~ EnC~uia Corp. 3. GD General D~-n~unics Corp. 3. LZ Lubrizol Corp. 2. OZ~ Occidental Petroleum Corp. ~. P~ZI~ Pioneer Nah~ral Resources Co. 2. PPG PPG Industries Inc. 3. ~~,'~Li ~~'aste ~Iuiagement Inc. ?. IT'LL ~Clutin~ Petroletun Corp. 3. Utilities NST NST_~R 3.6 PEG Public Service Enterprise Group Inc. 3.-I TDS Telephone ~ Data Systems Inc. =~.6 TOTAL 11.6 Non Cyclical D~T~ Da~itaInc. 3.1 h hello~~ Co. 3.~ I~Z hroger Co. 33 DGZ Quest Di~t~iostics Inc. 3.~ STT St. Tude Medical Inc. ~.6 TFZ Telefle~ Inc. 3.-~ TOTAL 20.4 _~~ of De~ember-31, 2)08 Consumer Cyclical PSS Collective Brands Inc. 3.3 EB ~~ eBa~ Inc. 2.7 GPS Gap Inc. 2.~1 T~~ Time ~'amer Inc. 2.8 Financials C~1~ Cit~National Corp. 3.~ I~~Z IN~TESCO Ltd. 2.6 1P~I TP~Iorg~ui Chase & Co. 2.4 ONB Old Narional Buicorp 2.6 PBCT People's United Fiii~u~cial Inc. 3.1 RG ~ Reinsur~mce Group of ~tnerica Inc. 2.9 TRT~ Travelers Cos. Inc. 3.~ ~ i~O ~'ornado Realty Tn~st 3.3 TOTAL 23.8 ethnology IB~I International Business ~Iachiiies Corp. L9 TDC Teradata Cori. 2.~ TOTAL 4.3 Dalton, Greiner; Hnr?morn, 11laber c~ Co., LLC 30 L7 G DGHM Professionals Brace H. Geller, CFA Mr. Geller joined DGHM in 1992 and is Chief Executive Officer and a Shareholder. He is also a Member of the firm's Management Committee. Pre«ously, he worked as an Analyst in the Public Finance Department at Bear, Steams & Co., Inc. He is a Summa Cnm Laude graduate from the State LJniyersity of New Fork at Albany, where he received his B.S. in Business Administration in 1991. Mr. Geller is enrr•ently Chairman of the Ach~sory Board for the Center for Institutional Im-eshnent Management (CIIM), bused in Albany, NI . Jeffrey C. Baker, CFA Mr. Baker joined DGHM in 2000 and is Chief Investment Officer and a Shareholder. He is also a Member of the firm's Management Committee. From 1998 to Jnly 2000, he was a Vice President and Equity Analyst at Prudential Investments. Pre~~iously he worked as an Analyst at Merrill L~1rch Asset Management. He graduated from Princeton University in 1988 and received his MBA in 1994 from Ne« Vork University. Timothy G. Dalton, Jr., CFA Mr. Dalton has been DGHM's Chairman since 1990, and is a Shareholder. He is also a Member of the firm's Management Committee. From April 1990 until October 2006 he was Chief Investment Officer, and was Chief Executive Officer from April 1990 to December 2000. From November 1982 to April 1990, he was President and CEO of Dillon, Read Capital Inc. From 1976 until October 1982, he was Senior Vice President of Oppenheimer Capital Corp. and a partner of its parent, Oppenheimer & Co. At Oppenheimer Capital, he personally managed substantial pension account assets and also served as Director of Research and Co-Chairman of the firm's Investment Policy Committee. He pre~~ionsly sen-ed as Senior Vice President and Director of The Robinson Hnmplue} Company and as Managing Partner of Franklin Capital Investors. He gracluatecl from Nortlr~yestern University in 1960, and received an M.A. degree in Economics from Princeton University in 1962. Mr. Dalton is a former Director of the New I-ork Society of Security Anal~3ts. Kenneth J. Greiner, CFA Mr. Greiner is DGHM's Vice Chairman. He was Chief Executive Officer from 2001-2006, and is a Shurehokler. From May 1990 to Januarti 2005 he was President. From Jnne 1983 to April 1990, he was a Senior Vice President of Dillon, Read Capital Inc. Pre«onsly, he was with the College Retirement Equities Fund for eleven years, where he was a Senior Portfolio Manager, Analyst and Member of the Investment Committee. From 1968 to 1972, he was associated R~ith Chemical Bank as an Analyst and Portfolio Manager. He gr°adnated from Bueknell University in 1967, and received his M.B.A. from Baruch College in 1969. Peter A. Gulli, CFA Mr. Gulli joined DGHM in 1999 and is a Senior Vice President and Shareholder. From 1994 to 1999 he was a Vice President and Equity Analyst at the Chase Manhattan Bank. Previously, he sen-ed as a Financial Analyst in the Private Baal: Financial Management group at Chase. Mr. Gulli received a B.B.A. in Finance from the University of Notre Dame in 1992, and a M.B.A. from New Forli University in 1999. Adri:mo F. Almeida, CFA Mr. Almeida joined DGHM in 2004 and is a Senior Vice President and Shareholder. From 1999 to 2004 he was an Equity Analyst at The Dreyfus Corporation, where he covered the Antos, Transportation, Telecom Sen~iees, and Utilities sectors. Pre~~ionsly, he worked at Physical Acoustics Corporation as a Research Engineer. He received a MS in Aerospace Engineering from Embry Riddle Aeronautical University in 1994, and an MBA fiom Columbia University in 1999. Da«d S. Dusenbnry, CFA Mr. Dnsenburj-joined DGHM in 2005 and is a Vice President and Shareholder. From 2002-2005 he was an Egnity Analyst at Dionis Management, a fiord focused solely on financial services companies. Pre~~ionsly, Da~~id worked in equity- research at Credit Suisse First Boston (1994-2002) and Salomon Brothers (1991-199$) where he was responsible for companies in the mortgage finance sector. From 1988 to 1991 David ~yorlced in the investment consulting group of yX'illiam Mercer. He graduated from The Lniversity of Massachusetts in 1988 and received his MBA in Finance in 1994 from Nea I-orli University. Joshua A. AX altuch Mr. Waltuch joined DGHM in 2007 and is a Vice President and Shareholder. From 2005-2007 he was a Senior Research Aualvst c«th The Boston Company. Pre«ously, he worked as an equity analyst at The Dreyfirs Corporation fiom 1999-2005. From 1994-1997 he worked as an investment banking financial analyst first for PaineWebber and then for Donaldson Luflcin & Jenrette. He graduated from I eshi~°a University Sy Sens School of Business in 1994 and received an MBA from Columbia Business School in 1999. Dalton, Greiner; Har?morn, 11laber c~ Co., LLC ? 1 L7 G .~, DGHMProfessionals Randall F. yX'atsek III, CFA Mr. D~atsek first joined DGHM in 2002 and is a Vice President and Shareholder. From 2006 to 2007, he was a consultant to DGHM, focusing on quantitative analysis. From 2002 to 2005 he was a Research Analyst at DGHM. From 2001 to 2002 he was a Research Analyst at Ruby-Gottlieb Investments, adeep-value microcap fund. From 1996 to 2000 he was a Vice Resident -Portfolio Manager in the high-yield syndicated loans group at City National Bank. Mr. yVatsek received an M.B.A. from the University of Chicago Graduate School of Business yvith concentrations in Analytical Finance and Accounting in 2002 and a B.A. from Claremont McKenna College yvith a deal major in Economics and Histoc~- in 1996. Donald S. Porter, CFA Mr. Porter joined DGHM in 2005 as an Investment Aualvst. Prior to joining DGHM, Mr. Porter was an Associate for TQA Investors; a Stamford based nnclti-strategy hedge fimd. He began his career as a Legislative Correspondent for U.S. Congressman George Radano«ch of California. Mr. Porter received a B.A. in Economics from Bucknell University in 2002. Barbara M. Kirby Ms. Ifirby is a Senior Vice President, Head of Trading, and a Shareholder. She is responsible for the firm's trading aeti«ties. Ms. Ifirby joined Dillon Read Capital in November 1988 and in February 1989 became a member of the trading department. She is a member of Trader Forum, an inclnstry organization. Kate B. Schwartz Ms. Schwartz joined DGHM in 2000 and is a Vice President, Trader, and a Shareholder. Prey~iously, she worked on the High Field trading desk at Bear, Stearns & Co. Inc. Ms. Schwartz is a graduate of Lafayette College, where she received a B.A. in Economics and Spanish in 1995. Thomas F. Gibson, CFA, CPA Mr. Gibson joined DGHM in 2005 and is Chief Financial Officer, Chief Compliance Officer, and a Shareholder. He is also a Member of the firm's Management Committee. From 1999 to 2005 he was the Chief Compliance Officer and Chief Financial Officer of Bingham Legg Adc~sers LLC. Prey~ionsly he worked as a Finance Manager with Investors Bank & Trust Company. Mr. Gibson received a B.S.B.A from Suffolk LTniversity in 1986, an M.B.A from Suffolk LTniversity in 1990, and an M.S.F. in Finance fiom Bentley College in 1999. Dolores A. Casaletto Ms. Casaletto has been with DGHM since 1990 and is currently a Shareholder and Senior Vice President in charge of Finance and Human Resources. From December 1984 to April 1990 and ]annaiy 1981 to November 198$, she worked in Marketing at Dillon, Read Capital and Oppenheimer Capital respectively. From ]nly 1971 to December 1980, she was a Senior Mortgage Consultant in the Personal Financial Ser~~iees Diy~ision of Chase Manhattan Bank. Erika B. Donalds, CPA Ms. Donalds joined DGHM in 2002 and is currently the Company's Controller and a Shareholder. She prey~iously held the positions of Senior Accountant and Portfolio Administrator at DGHM. Ms. Donalds graduated Magna Cum Laude fi•om the Florida State LTniversity, where she received a B.S. in Accounting. She also holds a Masters of Accounting from Florida Atlantic University and is a Certified Public Accountant. Edyvard ~; .Tun ille, CFA Mr. Tmville is an Industry Consultant to DGHM and has been associated with the firm since 1990. Mr. Tuiville's background includes 19 years etpeiienee in investment research with securities finny in Dallas, New Fork, and Atlanta. From 1981 to 1989, Mr. Tucc~lle was Senior Vice President of Research at Jolmson, Lane, Space, Smith & Co. Prior to that Mr. Turville was Vice President of research at the Robinson Humphrey Company. Mr. Tuiville is a graduate of Rice LTniversityR'ith an advanced degree in Accounting. Hanv A. LeVav Mr. LeVav has been a Consultant to DGHM since 1995. He began his career as an Analyst in the research offices of Fiduciary Twist Co. of New Fork and has held senior analyst positions with Cowen & Co., and Laird, Inc. He retired fiom Paine ~'ebber in 1994 at which time he was an Assistant Vice President. Mr. LeVay received his B.S. in Finance and Economics fiom New Fork LTniversity in 1957 ufier serving four years in the U.S. Na~°v. Dalton, Greiner; Har?morn, 11laber c~ Co., LLC 3? L7 G Explanation ofPerformance: AIICap Value ESPL-1\ ~TIUS OP PERPURNLiVCE Th_ LGHf,f _11 ~'1 ::,1„~ n.h Ir ,: ~~ ~ n-1: nx,u L {~- ra,t, tl _rtIaLo t t11--plir; ,Inn of ym.mh r 3 Fss-.-t >hI }iI 1-,IUwu; ll ,1Ir1,~ih- I IuI -c Tli .11 3F -: ibl n.l .,ir ,. I. I It-l ui i IIUI, 1 _'. I It ~I~, ~F = ~ . I-Lutniul, I,f lI i ~ ~ -„ LL: -I-.GHf,f' hI l I_}.Ir l uI l l I s=rat-l tlu i_y s~It m mllian .Ifl-I tlr ~1 I d In stns-It I It m..u~e tu. hl-V ';,II'r Etiati i. m,~rl_•1,1 ,' LGHRP -rlln.~a_~~II _~mpli_uet Th uII_ 19to e_1~I-as 1 t m,a~_ I. rl ' Lllar;. 3IF~ ~~ 'I fI LLP17~.E FE ~SIIFEhfE17T~: L I "Hl f a u .i rt II n. , ~ nn rat > hri nnn n u_ i u a Lu rat L Llabilir. nl .,rat tLL.=~. I .;H1fI II.Lot LIIlnr_F I, Iil H_l lil ,ham, ILa111 1{u _conl ..t _ - ltl n rat do n;h l II It Full-,uI u.l n., -°nn llt uI l -n_.l l fl. r ll_~~ ~ v; I -.H1 f 1 I ru Ink, Pun L -1h~tl, hI ~ ~ I, F~nu ll I, i~rir 111-,, F=t S,ilh, A.-Li u~ r_lIn Ili I ant L I ilLvr„ i 1~ , : slhicll, F ullillR xt L I,tiani III Tl._~ma= ~il Iy L-~l~.s~ ,1 tr_, IL,r lI .mt, uii Enl , Lei F.l: The Finn u t re.-l mtl. t11 __ ulih ma E ~dnm~a - ..1 1~ -.sle u~ ,nn_nr _, s-lrt2 nen-~ I tr L -dust I I ucd .ul _t,-a1,Ia- _. I u m I, il ,il,t { usL tl~til I-hit I Ire ~nman u-I l I l-: tl-Ie I u.. ~nn-rat t L,e i n:is ui{ 4. I HIIn- a_ 1 ~ ~u.tina. _. P,t , t Fehinl a nIn- c . J.t i, ..ith -; l I-Ih ~n , a~ x -l L, I,ut~ ., d ~ _metnc L il I~ ~t l~en _~:{ i-hlula. 6. ill , 11 .u1.-l ::, lI ~u ,lenr, uI l n, _.l inc m ,Inh~s t II u_ u-I 1,I L=.-l u. tlt t tIl I~h~m ~ ~i tl-I_ mF~,ae -ills l I-u>r,, il I n~aulk•} tt L sal-ul ll-t-..Lln atlc.It I n.l~a_ir_. I Ir u z nl,ll ifoml II uI{ {-,_, II tuI lu,l- su.il,t L~I m.-{ 11 rtr Lee ,. InL I l Iil 1 am L ,-ilu l I , -L il-- I rmF~ Ir_ I hurt. aI Il ,IL,r_.-l L t : ,ahtn>j LILn{nil 1. _~rtr L I mn,s I _~IUU f lIr -rE,I .. The LL, n.l s,r_ I nul, u~ then n. tn_il1-lulL=a 1J. I ,HLf .i4~~ I. hilly .-h= h n ; peat h h~ th n.l sir It t11_ nst Hill ncnth ,m.-L=I rat 11_ I Hl.f _cLI.{ t nnuut=_.{ 1 Itr h s ir~ rl, ~In~ ~~ It_ irter the l,.t nIll month tl i_ iuI_l-r nt. L' I .~Hl f t -s I, t I- eIr rh~l t ~mnn~ I ,ilr nr a u~ nl .a_ mllc I, shun t- tl-m timz's _Iti a~ 13 F r _I-II rp m.IFl- 11- I Hlf ~ In t}-n~ n I_p~ It l,r}-i t1-I- l fiI n ~n ~~rl 1 --ul:{ th ItIUI,2.-tiaras t kT r1 IE m. m_ I I 1-Ir Lltt I Ht-l hI n-n~H lu 1. rtmui - . Irtr-~l ~ LI ~Li~HIlf i IHu 11-~.-luer ,n t .{,~ilr I n rde{u r { Ifunoa.. I~tt , u I. I tilh l 2nL 3mI'aIt II of F I. L:'Tlu lu IuL,L le 1 Iu .~ISSt. 1~- I c.Hlf11_s=rat 1 t m.ul-~h nIm _ptiolt .lu_hsm ~; oP d-m l- 1 l1 ~ I.. hL9i]E T ~F_~ LISA L: SIIF,ES~ L n.l l t_ list m t h -iil_do I t tlr LGHI f n.l -site I -u1xbL= g I I guest Tl _m-It ok z -t u __ nl ite pus ~I Il f., the mm~l I t lcatiaL ., th 1 =rr-rat - of the tlnn's t nl ,~ ~ n th= nl It rag I_ -nn and I FHl f', _r~nll It .h.pel II r_u the I- 1 h- l.enods, l I . ~{ui t_un, t rui.-L,r.l t z_itian Period ~Ilcap Gross Rehun Russe113000 4alue Lkdes Ne#Rehirn dssets IIndet~ Inane°~nant ($mm) =oY Portfolios °~°oY Totnl sets Composite Uispek aion ?OOB -'3.6°-0 -363°n -?1-1°~° y;16? - 13°-° 010°~° X00' ; s°ro -lA°° 1S°ro $264 3 1'Oa 01?°.° '_006 16'°,~ 1V°.n $;~; P 1;0.° 0,;o:L 1005 ? 6°a 6.9°n 6. C,°n {;330 11 10°n 0 0'O-o ?001 ?1.6°0 16.9°0 ?01°° $?d? 0?jOo 200± +SS°a ;1.1°a $P( 1 (°:,, N! 2011? ~~ 1°0 -15 ~°.o '_?.9°0 9;1;1 6 S°o 0 ss°o ?001 16.9°~° -430:° 15.-0:° 9',191 s 9°-0 0.11°-0 1000 '_ll°ro 8-0°° 30 9°a $166 1 13°a NiL 1999 13.6°° 6'OO 1'1°b $113 d 19°o NId 1998 9 5°0 13 a°o 31°0 $13S 1 11°° NtH 199' ?6.6°a 318°a $'19 19°° 1.15°-0 1996 1'S°o s16oo 166°~~ '~'t- 11 19°0 0.11°-n 1995 '6.9°0 3'.0°.0 $1,'B 6S°n 01jOa 1994 -IA°a 9;1,999 031°0 1993 162°0 1S'Oro 15.1°o y',1,811 0`,8°~° I: ,Hl f ~ xm-.p~ .It l . not uI L14 I .il_zn_e l1 ht L I=rats. L ~Hl f 1„s :h . II t 1 Ia_ t 1 It ~nnu« ~i n I-rat r -. L~~HLP. tuI L,I.-t ie= sal b4-t rtlds l~I hl_tL; ls_ FBI alc~r-t~nnari,~II~IIt _he9ril-.111 .eeL LHl,f's Fenn r1 Inrt II. NnIil I-nlnu -.IllL ITu_{l. ~nn_nt lz I. t~s nl thi _F tlut mI L=uluur_d m tl- r_nt t t11 , __smt T11 ,ll=,n I, t k- ; pr, { -~mp m lul, uat .II tlr t~tl r.,t t I him I t t I - Lt t e._ I -_un}1 , rl rPst t uI sm1_nt rat r-: II t11= tetl IbI r I ~li ti. 1 _rttrLs ~ 1 ut Il. r=:v . nt. ~b~ ~1 -amI rat ~portr L I him of - ml l 1 :_ I iluI -.,hn, It llz I to -~ illl ~r).1T u. th nht,-u, u..l wi il,h rr-t-. ot~ ;} =rt I_.u,.-t X11 _._I t_II - Tl _ m tsi-._ r uI hslon m HI- ml asir L ~Hl f,I ; txa t L,t -iluxtion Far nnul :k~~. II tucba:L=_i ,ul~ dutl n,t t11 u.e~ rl - Felt n..ul -.-il~ I, ruchr9a.II. II nr_F,.uI 1 Irr Lau F`-t rllt 1 t L ~Hl f I u. vI. n IIr Lentil , I rlur m -ear 1 nnnly uI L I ,-=-l e_Euna;. III. I IS,1~71_~ T 2F_i HIST FI'~L I YS~,L "l lF.Es 1. All 1 u H this 1 I _zeml-el 1, _, .,ur_ LHHhf I_ a ~ sets m tlu hl , ar- m _._n.l Lu,_-. - I":'. IERF'GF1.f 17.E LI:'~L .,llgEy. L Li tl r„mi2ne _ rurt tmhu-a ra ilt. t1 II F~.-I nthlt u. Le t I rill net la I- *_.t ral Itll Th p~u I. I~ -L rs 1 I Irt i In tlu- I 1 rt Ie1~I nr tlti {urt I t Z I~,itr m L Iuaa4 Totil F t,mi of -m ,hn_nt in d. '11 L_xLle I .CHI f lortr L m l l-scnl ,4ts £aI th- m G ,r.-l 1_cht h ~ ~.=R7Li t,r the f,Ill 1 II l I port-h I ,ilt. k~r l m -=}=II t 1 I. =-l _~_ uIt n bI to the , 1, fl m I 1 t Imn, o£ , ;nna-Ir n., 1. - a slrl -L, .III Irhe r_ 1 h ~-,nlt u.l 1 t=s 1 I l t_ LGHI f m, ~r:L . edi .ippLc 11 r _~ -n. IIt I rr-n allm r r:, ~ u~LL GHhf. _ L ~Hlf -.I _- nnl: a~natl rl tfll-}.n I rat rnl, _sn t n - rat yea. L Hl,f nIl ~-~at I nlm. -1_~ n rI fl r1~h n n t,-pa, t I ,I r.hil r-~. 1. Tlu I 1 _~rt Is i~ ,t m.ancaul 1 Il .. oId I, t 1 -~ u_t I,;tih~r vI tk cot s~ uIn ,nil ~s nl uu_4I-; ilI_ LGHf,f F II -1 :.use I In ~~nns t I f In .I ._nr m_nrn tl _ ,.._ I 1~= r I ' hurt - ml~. Th=, l ._nrt I, I -Irt l rI-~m tun- n_~ n,n-- Tl u ; „tl Ir m _ ~ r~r lh I-u-I i_ Ir mills }1~ II L uI LI _allt u ~ nilir_.-L _nnmtL tlu l I .h~tl ,utll-1_ _ail_ t I rlilih=:Lu.L Ifiuls tltxttlll. ,u.l_ntu.{H. n,I~ot ..u 1 , l rtfi,Lo- -iI m toi sh il l I i_~ tl n dd s the In hn~nt t,f .rat ', Inert. -~. IiSLE° L: EZCFSFTP._'~i P.).: Tlc- F I. ll ~ ~ _-_]1 y IIL-L i. nIl -.-L ct d --I~ lu t slnp_i u I u-i s~I t tal ms~et ~pitili-: h n Th= E,a 11 - ~~ ~ _lll_ Il doe Ir~l i _s tl 1 It ~nnan: t d. se F I ll ~ ~ -_ll- yz con.l uu .Tldi 1, 1111 e-r,-I 1 Im-~s oral 1 r r<_. t { I ~Tth vil,I s. Th_ LIl l I 1 bilti<ap Iabr In l nu r cr ilI hl far nuI{. t,-_,;g_ l I : Llpp=r In r1,Ir u= as I,rd .vld~' 41-' r-.-Ls. T11 ;e ui h -. - . l -u-a{ l I t 2wna- z l I. I sI tx I, , hoi 1 =1 n, .. In.-l_ 1 It nnul-= lntu; scu lrl~m Ile lr h--1,acr q I>rian.u1l dl :xll Srl-ri,unlil, Iel heel,. Dalton, Greiner; Har?morn, 11Ia1~er c~ Co., I_I_C 33