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(WMVIF)
Fund Description
The Fund aims to compound capital by maintaining lower downside absorption (during down markets), while layering in higher than average dividend yields, covered call option
premiums, and principal upside potential from long equity positions. The Fund is structured to generate attractive risk-adjusted returns across most market performance
environments. Absent positions being called, equity turnover is modest; however, option turnover may be significant in volatile market environments in an effort to maintain the
targeted delta-adjusted position. The Fund invests in a diversified (65+ holdings) portfolio of U.S.-traded common equities with covered call options written against 90% or more
of underlying equities. Holdings are generally higher quality, attractively priced large caps, carrying lower betas and higher dividend yields than the S&P 500 average. Loss
mitigation is managed primarily through the portfolios lower downside beta profile and a diversified options portfolio (by expiry and strike). The strategy targets an average
delta-adjusted position of 0.55 - 0.65 with a beta-adjusted exposure of 0.50. The Fund maintains sector weights roughly equivalent to the S&P 500 to the extent that dividend
thresholds are maintained and option alternatives permit. The Fund does not employ leverage or short equities.
Commentary
The Fund returned 15.96% (net) in 2013, capturing 49% of the total return of the S&P 500 index (+32.41% YTD). Since inception, the Fund has returned 10.12% annualized (net).
Calendar 2013 witnessed another year of particularly low stock market volatility, with no peak to trough declines greater than 7%. As a result, the Fund's upside capture ratio
was below our normalized expectation range. As was the case in 2012, the Fund's OTM position hovered between 1%-5% throughout the year, below the 5%-11% levels seen in
2010 and 2011. During periods of lower volatility, we generally have to write new covered call positions closer to the money in order to have sufficient downside protection. At
year-end, the Fund was positioned defensively with an OTM posture of 1.51% and a delta adjusted position of 0.55.
Year
2011
2012
2013
Jan
1.16%
2.13%
3.40%
Feb
1.87%
2.25%
0.56%
Mar
0.97%
2.09%
2.82%
Fund return data is net of fees; risk metrics are gross of fees.
Fund
10.12%
33.47%
7.81%
-4.75%
69%
10.78
1.01
1.40
S&P 500
0.92%
0.62
0.96
0.91
S&P 500
15.77%
55.04%
10.93%
-7.03%
69%
16.58
0.97
1.37
12/31/13
65
210
$94,325
95%
1/3/2011
$1,000,000
1.00%
None
Monthly
U.S. Dollar
Jan
Feb
Mar
0.01%
1.90%
3.24%
1.94%
2.48%
0.57%
1.04%
1.83%
2.90%
Nov
0.72%
-0.26%
0.96%
Dec
1.80%
0.65%
1.49%
YTD
7.36%
7.21%
15.96%
0.0%
-3.36%
-5.15%
-6.27%
-10.0%
-20.0%
2/18/11 3/16/11
$115.3
n/a
None
Monthly
Monthly
None
-4.01%
-8.45%
-18.64%
Fund Profile *
AUM ($mm)
High Water Mark
Lockup
Redemption
Redemption Notice
Redemption Fee
-6.41%
-9.60%
-10.61%
Oct
7.81%
-0.86%
2.63%
3 Mo.
5.16%
10.52%
7.12%
Auditor/TPA
Legal
Domicile
Structure
Custodian
Prime Broker Services
Oct
2.37%
8.20%
-0.84%
2.76%
Nov
-1.06%
0.44%
-0.41%
0.93%
6 Mo.
7.64%
16.32%
8.00%
-7.31%
9/14/12 11/15/12
Inception
33.47%
55.04%
25.24%
Dec
3.83%
2.08%
0.71%
1.52%
* The "Fund" that applies this strategy began 1/3/11; the "Composite" that applies this strategy on a separately managed basis began 7/31/10 and is GIPS-verified.
YTD
11.66%
9.41%
8.27%
16.32%
Risk Metrics
December 2013
0.61
0.59
0.97
2013 YTD
0.54
0.54
1.00
-1.13
0.39
0.92
(6)
1.49%
2.05.%
2.53%
-0.57%
1.01%
0.83
0.59
0.49
Return Metrics
WMVIF, net
BXM Index (7)
3.00
2.04
1.52
2.64
1.36
1.51%
3.05
4.50
5.08
1.75
1.80
Q1/11
Q2/11
Q3/11
2.19
1.77
Q4/11
Q1/12
Q2/12
WMVIF (gross)
3.86
2.27
1.01 0.97
0.87
-0.18 -0.06
-0.49 -0.60
Investment Team
3.18
0.59
-1.41
-1.60
-3.00
0.51
10.12%
7.81%
15.77%
3.31%
-2.12%
Sector Weights
4.26 4.16
0.09
0.00
0.60
(10)
Sharpe Ratio
WMVIF
S&P 500
0.85
15.96%
13.25%
32.41%
-2.02%
10.87%
3.39%
7.22%
0.85
0.57
0.48
Q3/12
Q4/12
S&P 500
Q1/13
Q2/13
Q3/13
Q4/13
Since
Inception
(1)
Consumer Discretionary
Consumer Staples
Financial Services
Health Care
Materials
Industrials
Technology
Utilities
Energy
Telecom
Cash
Total
WMVIF
12%
12%
10%
12%
4%
10%
13%
6%
14%
5%
1%
100%
% AUM
1.7%
1.7%
1.6%
1.5%
1.5%
1.4%
1.3%
1.3%
1.3%
1.2%
S&P 500
13%
10%
16%
13%
3%
11%
19%
3%
10%
2%
0%
100%
Div. Yield
3.3%
3.8%
3.7%
2.9%
3.0%
2.8%
3.0%
2.7%
3.2%
4.3%
James J. Kilroy, Portfolio Manager, is responsible for fundamental analysis and stock selection for the Fund. Mr. Kilroy was an analyst with Abingdon Capital Management, a long/short hedge fund, for
seven years. Mr. Kilroy's tenure at Abingdon Capital Management was preceded by two years as an equity research analyst at Bear, Stearns & Co. covering the multi-industrials sector. Mr. Kilroy holds a
bachelor of science degree in Business Administration from the Kenan-Flagler School of Business at the University of North Carolina at Chapel Hill, and an MBA from the Kellogg School of Management at
Northwestern University.
Peter D. Miller, Portfolio Manager, is largely responsible for portfolio construction, option strategy and trading execution of the Fund. Mr. Miller was Regional CEO of Regions Financial (NYSE: RF) and
President of First National Bancorp Georgia (acquired by Regions in 1996). Mr. Miller served in a variety of positions at Regions and First National Bancorp, including security analyst, portfolio manager,
and trust department head. Mr. Miller currently chairs the Brenau University Board of Trustees and chairs the investment committee for the Georgia State University Foundation. Mr. Miller holds a business
degree in finance from Georgia State University.
Brett M. Slattery, CFA, Portfolio Manager, is responsible for fundamental analysis and stock selection for the Fund. Mr. Slattery was a senior portfolio manager at Harris SBSB (a unit of BMO Financial
Group) for three years, and an analyst at Abingdon Capital Management for seven years. Mr. Slattery is a CFA charter holder, holds an MBA from the McDonough School of Business at Georgetown
University, and a bachelor of business administration degree from the University of Wisconsin at Whitewater.
Robert T. Willis, Jr., CFA, Chief Investment Officer, oversees the portfolio construction of the Fund and also participates in stock selection and fundamental analysis. Prior to founding WIC in 1979, Mr.
Willis was a tax accountant in the Atlanta office of Arthur Andersen & Co. Mr. Willis is a CFA charter holder, and holds a bachelor of business administration degree, with high distinction, from Emory
University's Goizueta Business School. Mr. Willis is a former trustee and investment committee member of the State of Georgia Employee Pension Fund.
WMVIF return data is derived from WIC's Advent software and is preliminary data pending auditor verification. Other data provided by Wells Fargo Prime Services.
See attached information for GIPS compliance, regulatory disclosures and for further information and disclosures visit our website at www.wicinvest.com.
Regulatory Disclosures
Willis Investment Counsel (WIC) is an independent investment management firm founded in 1979 and registered
with the U.S. Securities and Exchange Commission. WIC employs a multi-cap core equity methodology with a value
orientation, an investment grade fixed income methodology, and a blend of the two for balanced portfolios.
The securities and data described and discussed in the foregoing materials are for informational purposes only and
do not constitute recommendations to purchase or sell specific securities. Prior performance data and information
7.82% for more disclosures.
are not predictive of future returns or results. See www.wicinvest.com
Except as otherwise noted (i.e., net), the WIC Managed Volatility and Income Composite yield and return data
include all transaction costs but exclude management fees. The yields and returns presented stipulated are total
return data, including reinvested income, and some years will incur losses. The WIC Managed Volatility and
Income strategy involves judgment in selecting securities, is applied differently in varying economic and market
conditions, and cannot be mechanically applied.
WIC Managed Volatility and Income Strategy Composite (not WMVIF)
Year
Composite Number of
Total AUM
Assets
Accounts
Composite
S&P 500
Composite
Gross
Net Returns
Returns
(gross/net)
Barclays
Aggregate
Internal
Dispersion*
*
(gross/net)
7/31/10-12/31/10*
930,573
116,010
11.76
11.67
15.20/14.20
0.08/-0.42
2011
1,007,356
422,073
9.78
9.42
2.11/1.11
7.84/7.34
2012
1,148,138
571,868
8.67
8.27
16.00/15.00
4.22/3.72
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 firms policies and procedures are designed to calculate and
present performance in compliance with the GIPS standards. The WIC Managed Volatility and Income Strategy
composite has been examined for the periods of August 1, 2010 through September 30, 2013. The verification and
performance examination reports are available upon request.
The WIC Managed Volatility and Income Strategy Composite includes all fully-discretionary equity clients that
invest in our managed volatility and income strategy, that are valued over $10,000,000, and that are fully invested
in accordance with the strategy. This strategy focuses on high quality, dividend yielding stocks and utilizes
covered call option writing. The composite seeks to generate compelling annualized returns with a stable cash flow
component and relatively low portfolio downside volatility. Cash flow yield is achieved by investing in stocks of
high quality companies with an above-average dividend yield and a high probability of future dividend growth.
Yield is enhanced, and portfolio volatility is reduced, by selling out of the money covered call options against
portfolio holdings. This composite also includes the WIC Managed Volatility and Income Fund, LP. This composite
was created on July 31, 2010. A complete list of WIC composite descriptions is available upon request. Valuations
are in U.S. dollars, and return calculations are generated by Advent/Axys software (TWR). The comparative
benchmarks for this composite are the S&P 500 and the Barclays Aggregate Bond Index.
All returns are total returns. All gross returns exclude management fees. Composite Returns Gross include cash
and are net of custodian and transaction costs. S&P 500 and Barclays Aggregate Returns Gross exclude all costs
and do not include cash. Composite Net Returns are net of all costs, including custodian fees, transaction cost
and the actual management fee applied quarterly. For comparison consistency, S&P 500 and Barclays
Aggregate Returns Net are also net of a 1.00% and 0.50% cost estimate, respectively. WICs management fee
schedule for stand-alone portfolios in this composite is as follows: 1.43% on the first $750,000, 1.1% on the next
$250,000, .65% on the next million and .5% on that portion over $2 million. WICs management fee schedule for
the partner accounts in the WIC Managed Volatility and Income Fund, LP is as follows: 1.0% on the first
$2,000,000, 0.80% on the next $1,000,000 and 0.65 on that portion over $3,000,000. Returns are account
size-weighted. For the last three years, WICs fees in all client accounts averaged less than 1.00%.
Internal Dispersion is calculated using the asset-weighted standard deviation of all portfolios that were included
in the composite for each entire year.
Composite Asset Size, shown in thousands, is the market value of the client portfolios comprising this composite.
Total WIC Client Assets, shown in thousands, are total client assets managed and advised by WIC (discretionary
and non-discretionary). For years prior to 2006, non-discretionary assets were immaterial. For 2006, 2007,
2008, 2009, 2010, 2011 and 2012 client assets that were part management and part advisory approximated
66%, 23%, 40%, 11%, 11%, 11% and 10% respectively, of total client assets.
For years 1982-1996, WIC returns were not presented in conformity with current GIPS standards due to the
impracticality of calculating internal dispersion, composite asset size, and total client assets for those years. Past
performance is not predictive of future results. Additional information regarding the firms policies for valuing
portfolios, calculating performance, preparing compliant presentations, fees, and our regulatory disclosures are
available upon request and at www.wicinvest.com.