IMS Capital Value Strategy Capturing the Benefits of Mid Cap Stocks

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IMS Capital Value Strategy Capturing the
Benefits of Mid Cap Stocks
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IMS Capital Management Firm Overview

• Founded in 1988, 20th year in business
• Northwest-based, offices in Portland, Oregon,
  Eugene Oregon and Seattle, Washington
• Staff of 15 professionals, 7 investment team
  members
• Independently-owned and operated boutique
  investment manager
• Professional credentials
• CFA (Chartered Financial Analyst) charter
  members 3
• Certified Market Technician
• Master of Business Administration 2
• Certified Public Accountant
• Master of Science

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Experienced Investment Team
CARL W. MARKER 21 years industry
experience Carl W. Marker, 46, is the founder and
president of IMS Capital Management. Mr. Marker
received a Bachelor of Science degree from the
University of Oregon and has managed the IMS
family of no-load mutual funds since inception.
He is a member of the Portland Society of
Financial Analysts and is frequently interviewed
by the national television and print media.
ARTHUR G. NUNES, CMT 26 years industry
experience Mr. Nunes is market strategist,
portfolio manager and principal of IMS Capital
Management. He co-manages the IMS Strategic
Allocation Fund and performs research and
technical analysis for the other IMS strategies.
He earned a Bachelor of Science degree from Ohio
State University. Prior to joining IMS, Mr.
Nunes managed fee-based portfolios at RBC Dain
Rauscher and Salomon Smith Barney. JOSEPH M.
LEDGERWOOD, CFA 7 years industry
experience Joseph M. Ledgerwood is a portfolio
manager and senior research analyst specializing
in equities. Prior to joining IMS, Mr.
Ledgerwood gained financial services and
investment experience working at a bank and full
service brokerage firm. Mr. Ledgerwood graduated
from the University of Portland, where he earned
a Bachelor of Business Administration degree in
Finance. He is member of the Portland Society of
Financial Analysts.
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Experienced Investment Team
DON A. SHUTE, CFA 19 years industry
experience Don Shute is portfolio manager and
senior research analyst specializing in fixed
income. He previously worked for Bear Stearns
Asset Management, GT Capital Management, and
Wells Fargo Asset Management performing all
aspects of fixed income analysis and portfolio
management. His experience includes quantitative
risk analysis and modeling, credit analysis, and
international market research. A member of the
Portland Society of Financial Analysts, Mr. Shute
has a Bachelor of Arts degree from the University
of Illinois and a Master of Science degree from
Utah State University. STEPHEN WENDELL, CPA 26
years industry experience Mr. Wendell is the lead
portfolio manager for the Focus 30 Strategy and
is former president and founder of Juniper
Capital, a Eugene-based RIA with 65 million in
assets. With 25 years investment management
experience, Mr. Wendell has served as a senior
financial executive and director of several
Oregon-based companies in the public and private
sector, including Bohemia, Inc., International
Kings Table, Inc., Obie Media, and Umpqua Feather
Merchants. Currently Mr. Wendell serves on the
Board of Directors of Agate Resources Inc., a
Eugene based company developing technology driven
solutions for healthcare management. Mr. Wendell
received a Bachelor of Science degree in Business
Administration from Portland State University and
a Master of Business Administration in Finance
and Accounting from the University of
Oregon. REID WEAVER 7 years industry
experience Reid Weaver is research analyst and
trader for the Focus 30 Strategy. He has been
working with Mr. Wendell for the past six years.
A Level III CFA candidate, Mr. Weaver has a
Bachelor of Science degree from the University of
Oregon. CAMERON K. MARTIN 13 years industry
experience Cameron Martin is a portfolio manager.
Prior to joining IMS in 2008, Mr. Martin worked
at Smith Barney where he managed discretionary
portfolios since 1999 and served as a Financial
Advisor since 1996. With 12 years experience in
the financial services industry, Mr. Martin
graduated from the University of Oregon in 1993.
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Mid Cap Stocks have Improved the Risk/Return
Profile of Domestic Equity Portfolios
When mid cap stocks were added to hypothetical
portfolios having equal weights of large cap
value, large cap growth, small cap value and
small cap growth stocks (also known as the
4corners), the portfolios demonstrated higher
Sharpe Ratios, higher alpha and higher up capture
returns than the same hypothetical portfolios
without mid cap stocks over the last 3, 5, 10 and
20-year periods ending 2007, as illustrated below.
Data above represents past performance, which
does not guarantee future results. The 4
Corners are represented by equal weights of the
Russell 2000 Growth Index (small cap growth), the
Russell 2000 Value index (small cap value), the
Russell 1000 Growth Index (large cap growth), the
Russell 1000 Value Index (large cap value),
rebalanced annually. Mid cap stocks are
represented by the Russell Mid Cap Index. Alpha
and up and down capture figures are calculated
relative to the Russell 3000 index, which is
considered representative of the entire equity
market. Calculations by IMS Capital Management.
The Sharpe ratio measures risk adjusted return by
subtracting the risk-free rate (3-month Treasury
bill) from the rate of return of a portfolio and
dividing the result by the standard deviation.
Alpha is a measure of excess return in an
investment. A positive alpha is the extra return
realized by taking additional risk rather than
accepting the market return. Up and down capture
is a measure of how well a portfolio is able to
replicate or improve upon positive index returns
and how badly a portfolio is affected by negative
index returns, respectively.
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IMS Capital Value Strategy Unique Features

• Seeks undervalued mid cap stocks demonstrating
  signs of positive momentum
• Utilizes a seasoned, patient approach to stock
  selection
• Utilizes concentrated diversification
• Concentrates on companies that fall into at least
  one strategic focus area technology,
  healthcare, financial services, consumer,
  communications/entertainment, defensive
  industries, consolidating industries.
• Sell discipline allows a company to remain in the
  portfolio as long as its core business is still
  experiencing positive momentum
• Veteran portfolio managers with 28 years combined
  experience backed by five other investment
  professionals.

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SP 500 Sector Returns over the 10 years ending
2008
Annualized returns for the last 10 years ended
12/31/08
Annualized returns for the last 10 years ended
12/31/08
Source Standard Poors. Past returns are no
guarantee of future results.
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Stock Selection Overview--IMS Capital Value
Strategy
Stocks in Russell universe with adequate
coverage, liquidity 3,000 Names
Stocks that are mid cap Generally 1.5 to 9.5
billion in market cap
Stocks that have 2 years or more of
seasoning, are down 30 or more from their
highs, have strong value and momentum
characteristics, and fit into at least one of our
strategic focus areas 150 Names


IMS Proprietary Research Business
Characteristics Fundamental Value
Characteristics Momentum Characteristics Seasoning
Apply 37-Factor Scoring Model
Resulting portfolio of 40 to 60 Names
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The IMS Proprietary Scoring Model

• Business characteristics considered
• Low capital intensity
• Long product cycle
• Decreasing capital expenditures
• Short consumer repurchase cycle
• High barriers to entry
• Immunity to product obsolescence
• Organic growth

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The IMS Proprietary Scoring Model

• Fundamental value characteristics considered
• Stocks trading at low price-to-earnings on a
  historical basis
• Stocks trading at low price-to-book on a
  historical basis
• Stocks trading at low price-to-sales on a
  historical basis
• Stocks trading at low price-to-cash flow on a
  historical basis
• Low P/E, P/B, P/S, P/CF vs. industry
• Low debt-to-equity (less than 60)
• Improving margins
• Asset turn improvement
• Decreasing debt-to-asset
• Companies trading significantly below historical
  price levels
• Companies trading significantly below intrinsic
  value

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The IMS Proprietary Scoring Model

• Momentum characteristics considered
• Positive quarterly earnings surprises
• Positive earnings revision trends
• Positive relative strength vs. market
• Positive new development /catalyst

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The Value of Seasoning

• Stocks that are seasoned have been flat to down
  for a minimum of 2 years.
• Companies need time to season or recuperate
  they need to mend and begin recovering from
  whatever caused the decline.
• Our internal research determined that 80 of the
  time, after a significant loss of market cap, a
  company will not begin to outperform the market
  on a relative basis -- until at least 2 years on
  average. Often it takes much longer. We have
  chosen to implement a minimum seasoning period of
  2 years before we will consider buying.
• The seasoning discipline helps reduce the chances
  of being too early and sitting on dead money or
  worse, incurring significant losses after
  purchase.
• Even small and mid cap companies need time to
  settle shareholder lawsuits, handle product
  litigation, restate earnings and deal with
  accounting scandals. Often new management is
  brought in, legislation is passed to assist an
  entire industry, or new products need to be
  developed. These things can take years, not
  months.

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Portfolio Construction and Risk Controls

• Remain broadly diversified in all ten major S P
  industry sectors
• Initial purchase is in the 1 to 3 range based
  on scoring model
• Allow effective research to have its impact.
  Practice concentrated diversification, holding
  no more than 40 to 60 names
• Stay fully invested (90)
• Written investment policy statement governs
  management of each account
• Sell targets are set and monitored daily
• Momentum characteristics are monitored weekly
• Positions exceeding 10 of portfolio due to
  appreciation are reduced within 60 days
• Two individuals are involved in every trade
• Broad industry and sector diversification is
  maintained
• Sectors making up more than 10 of the Index will
  generally carry no more than a 150 weighting in
  the Portfolio.

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IMS Capital Value Sector Weightings As of March
31, 2009
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Portfolio holdings are subject to change at any
time.
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Top Ten HoldingsAs of March 31, 2009
Portfolio holdings are subject to change at any
time.
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Sell Discipline Most Value Managers Sell Too
Early
WHY WE SELL

• Generally sell after two conditions have been met
• Company exceeds its target sell price and
• Company demonstrates a loss of momentum

OTHER SELL TRIGGERS

• When a stock reaches our price target and is 10
  off its 52 week high (unless the market is also
  down 10 or more)
• Company reaches unsustainable valuations
• Industry-wide negative legislation or litigation
• A significant change in the companys management
  or direction
• Company is involved in a merger or acquisition
• The emergence of a better opportunity within the
  same industry
• Positions that exceed 10 of the portfolio due to
  appreciation are lightened within 60 days

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IMS Capital Value Trading History of Cephalon,
Inc. (CEPH)
Sold 35,000 shares _at_ 77.44
Bought 35,000 shares _at_ 48.60 after a 3-year
seasoning period
Past performance is no guarantee of future
results. This example should not be considered a
recommendation to purchase or trade the stock
illustrated. Not all securities in the IMS
Capital Value portfolio have gone up in value and
some may lose money.
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Portfolio Characteristics As of March 31, 2009
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Annualized Average Total ReturnsAs of March 31,
2009
1.52 - Total Gross Expense Ratio as of August
31, 2008
Past performance above does not guarantee future
results. Investment return and principal value
will fluctuate so that your return, when
redeemed, may be worth more or less than original
cost. Figures include change in principal value,
reinvested dividends and capital gain
distributions. Current performance may be lower
or higher than that above. Monthly performance is
available by calling 1-800-408-8014. The SP 500
Index is a widely accepted index of large cap
stocks and is not available for direct
investment. The SP 400 is a widely recognized
unmanaged indices of common stock prices and is
representative of a broader market and a broader
range of securities than are found in the Fund's
portfolio. Individuals cannot invest directly in
the Index. Performance figures reflect the
change in value of the stocks in the index and
reinvestment of dividends..
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Calendar Year Returns As of December 31, 2008
1.52 - Total Gross Expense Ratio as of August
31, 2008
Past performance does not guarantee future
results. Investment return and principal value
will fluctuate so that your shares, when
redeemed, may be worth more or less than original
cost. Figures include change in principal value,
reinvested dividends and capital gain
distributions. Current performance may be lower
or higher than that above and is available by
calling 1-800-408-8014. The SP 400 is a widely
recognized unmanaged index of mid cap stocks. The
Standard Poors 500 is a widely accepted index
of large cap stocks. Individuals cannot invest
directly in an Index. The indices are
representative of a broader market and range of
securities than are found in the Fund.
Performance figures reflect the change in the
value of stocks in the Index and reinvestment of
dividends.
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Why IMS Capital Management?

• 21 years in business
• Highly focused and skilled investment team,
  experienced in both up and down markets
• Independently owned and operated investment
  boutique
• Highly entrepreneurial culture
• Commitment to constantly improving investment
  process
• Recognized in major publications and national
  media such as Barrons, Forbes, The Washington
  Post, The Wall Street Journal, New York Times,
  Business Week, USA Today, Smart Money and CNBC.

Mission Deliver exceptional client service,
outstanding investment counsel and superior
investment returns.
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Representative Institutional Client List
Relief Nursery Ron Tonkin Auto Dealer (401k
plan) Serenity Lane Health Services Sky Lakes
Medical Center WorkFirst Casualty Company
Allergy Asthma Center PC FreedomWorks
Foundation Friends of the Children of Klamath
Basin Intrepid Marble and Granite (401k plan)
Lathing, Acoustical and Drywall Systems Local
1144 McClenahan Bruer Communications

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Important Disclosure

• Investing in mid caps may be more risky and
  volatile than investing in large cap stocks.
  Also, value stocks may underperform other types
  of stocks during a given period.
• Past performance of the IMS Capital Value Fund
  does not guarantee future results. Investment
  return and principal value of an investment will
  fluctuate so that an investor's return, when
  redeemed, may be worth more or less than original
  cost. Figures include change in principal value,
  reinvested dividends and capital gain
  distributions. Current performance may be lower
  or higher than that quoted herein. Monthly
  performance is available by calling
  1-800-408-8014 or by visiting www.imscapital.com.
  
• The Funds investment objectives, risks, charges
  and expenses must be considered carefully before
  investing. The prospectus contains this and other
  information about the investment company. Please
  read it carefully before investing. The
  prospectus is available by calling 503-788-4200
  or by visiting www.imscapital.com. Foreside
  Distribution Services, LP

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