Cory Gilchrist, CFA, Portfolio Manager
January through March 2008
In what might euphemistically be called a "challenging" market environment, the 21st Century Fund posted a disappointing total return of -14.11% during the first calendar quarter of 2008. That result trailed the S&P 500 Index, the Fund's primary comparative benchmark, which had a total quarterly return of -9.44%. 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-cap spectrum), had a total quarterly return of -9.52% for the first calendar quarter of 2008.
The table below provides the Fund's longer-term investment results through March 31, 2008, as compared to the S&P 500 Index:
| Average Annualized Returns | ||||
| One Year | Five Years | Since Inception (2/1/2000) | Total Annual Operating Expenses1 | |
| 21st Century Fund | 1.38% | 19.22% | 5.73% | 1.33% |
| S&P 500 Index | -5.08% | 11.31% | 1.04% | |
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
The sources of performance pain for the Fund were widespread last quarter. They included (in order of magnitude):
- Holdings in the Consumer Discretionary Sector: Amidst mounting worries about consumers and their ability and willingness to spend, a variety of the Fund's positions in this sector adversely impacted performance. Companies such as retailer Saks Inc., hotel/casino operators Las Vegas Sands Corp., MGM MIRAGE (sold by the Fund prior to March 31, 2008), and Wynn Resorts, Ltd., athletic apparel manufacturer lululemon athletica inc., and Chipotle Mexican Grill, Inc. were all down sharply during the quarter.
- Stock Selection and Positioning in the Financials Sector: The Fund's performance suffered as a result of several financial services holdings, including Washington Mutual Inc. (-46% prior to being sold), Jefferies Group, Inc. (-29%), and Bovespa Holding S.A. (-30%), the Sao Paulo, Brazil stock exchange. At the end of the reporting period, the Fund had a mildly higher allocation to this sector than its benchmark index, as we moved during the quarter to modestly increase positions in the sector. That also served to detract from performance results, as Financials were among the weakest-performing sectors during the first calendar quarter.
- Stock Selection and Positioning in the Energy Sector: Although oil and gasoline prices reached record levels during the first calendar quarter of 2008, a number of companies in the Energy sector struggled, including the Fund's positions in Brazil-headquartered oil exploration company Petroleo Brasileiro S.A. (-11%) and oil services company Diamond Offshore Drilling, Inc. (-21% prior to being sold). The Fund's performance also was hurt by our decision to maintain, on average, an underweighted posture in the Energy sector, which – despite sinking -7% – was one of the better-performing sectors during the first calendar quarter.
- Stock Selection in the Health Care Sector: The notion that health care-related companies might provide some measure of downside protection in a volatile equity market was more or less dashed during the first calendar quarter, as many companies in the sector succumbed to lower profit estimates, higher costs, disappointing new product pipelines, and/or worries about the impact of potential legislative changes. The Fund's positions in health services provider UnitedHealth Group Inc. (-41%) and drug developers Amylin Pharmaceuticals, Inc. (-21%) and Onyx Pharmaceuticals, Inc. (-44% prior to being sold) were significantly detrimental to performance.
- Stock Selection in the Consumer Staples Sector: The Fund's holdings in Heineken Holding N.V. (-11%) and retailer Costco Wholesale Corp. (-7%) weighed on investment results during the quarter.
As of March 31, 2008, the Fund's primary economic sector allocations were in the following areas: Financials, Consumer Discretionary, Industrials, Consumer Staples and Information Technology. During the first calendar quarter, we increased holdings in Industrials and Financials, while trimming positions in Energy, Health Care, Information Technology and Materials. The Fund had no exposure to the Telecommunication Services and Utilities sectors. Cash equivalent holdings represented about 14% of Fund assets at quarter-end. We view these cash positions primarily as a "buying reserve"–a means for us to invest quickly in new opportunities without having to necessarily pare back existing holdings in which we have a high degree of conviction–and also, in times of extreme market conditions, as one means of preserving shareholder assets.
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 be reduced. For the period beginning April 1, 2004 through January 2005, performance returns for the Fund would be 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 March 31, 2008, the following securities comprised these percentages of the net assets of the Marsico 21st Century Fund: Saks Inc. (1.9%); Las Vegas Sands Corp. (3.8%); MGM MIRAGE (0.0%); Wynn Resorts, Ltd. (2.3%); lululemon athletica inc. (0.5%); Chipotle Mexican Grill, Inc. (0.6%); Washington Mutual Inc. (0.0%); Jefferies Group Inc. (1.8%); Bovespa Holding S.A. (1.7%); Petroleo Brasileiro S.A. (3.4%); Diamond Offshore Drilling, Inc. (0.0%); UnitedHealth Group Inc. (1.9%); Amylin Pharmaceuticals Inc. (2.8%); Onyx Pharmaceuticals, Inc. (0.0%); Heineken Holding N.V. (3.9%); Costco Wholesale Corp. (7.4%); MasterCard Inc. (7.0%); The St. Joe Company (2.9%); Raytheon Co. (5.2%); and Genentech Inc. (0.0%).
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 be reduced. For the period beginning April 1, 2004 through January 2005, performance returns for the Fund would be 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 March 31, 2008, the following securities comprised these percentages of the net assets of the Marsico 21st Century Fund: Saks Inc. (1.9%); Las Vegas Sands Corp. (3.8%); MGM MIRAGE (0.0%); Wynn Resorts, Ltd. (2.3%); lululemon athletica inc. (0.5%); Chipotle Mexican Grill, Inc. (0.6%); Washington Mutual Inc. (0.0%); Jefferies Group Inc. (1.8%); Bovespa Holding S.A. (1.7%); Petroleo Brasileiro S.A. (3.4%); Diamond Offshore Drilling, Inc. (0.0%); UnitedHealth Group Inc. (1.9%); Amylin Pharmaceuticals Inc. (2.8%); Onyx Pharmaceuticals, Inc. (0.0%); Heineken Holding N.V. (3.9%); Costco Wholesale Corp. (7.4%); MasterCard Inc. (7.0%); The St. Joe Company (2.9%); Raytheon Co. (5.2%); and Genentech Inc. (0.0%).
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.
