Jim Gendelman, Portfolio Manager
January through March 2008
The International Opportunities Fund had a total return of (US$) -11.55% in the first calendar quarter 2008. The Fund underperformed its primary benchmark index, the MSCI EAFE Index ("EAFE Index"), which had a total quarterly return of (US$) -8.91% over the same three-month period.
The table below provides the Fund's longer-term investment results through March 31, 2008 as compared to the EAFE Index:
| Average Annualized Returns | ||||
| One Year | Five Years | Since Inception (6/30/2000) | Total Annual Operating Expenses1 | |
| International Opportunities Fund | 6.11% | 22.68% | 9.05% | 1.38% |
| MSCI EAFE Index | -2.70% | 21.40% | 4.72% | |
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
International equities, including developed and emerging markets, experienced much of the same macroeconomic uncertainty, investor risk aversion, and volatility that characterized the US equity investment backdrop in the first calendar quarter of 2008. Weakness abounded and there were no true investment "safe havens", other than owning cash equivalents. All ten GICS economic sectors in the Fund's benchmark index posted negative quarterly returns, with the steepest declines absorbed by Telecommunication Services (-15%), Information Technology (-14%), Energy (-11%), Financials (-11%), Consumer Discretionary (-10%), and Industrials (-8%).
There were many factors at work during the quarter that influenced the Fund's return. Performance was buoyed by holdings in the Pharmaceuticals, Biotechnology & Life Sciences industry. These positions gained nearly 10% in aggregate during the quarter, led by Lonza Group AG (which provides customized manufacturing of biopharmaceuticals), Actelion Ltd. (whose products include a drug for pulmonary arterial hypertension), CSL, Ltd. (whose products include blood plasma, vaccines and antivenom medications), and Roche Holding AG (a pharmaceutical and medical diagnostic company). In addition, a number of individual holdings–spanning a variety of sectors and industries–contributed positively to investment results. These included: Samsung Electronics Co., Ltd. (+7%), Nestle SA (+9%), and America Movil S.A.B de C.V., a mobile telecommunications services provider headquartered in Mexico (+4%).
Detractors for the quarter, unfortunately, more than offset those positive factors. The most prolific "negative" for the Fund's quarterly performance included a variety of holdings in the Consumer Discretionary sector. This sector, similar to the US experience, was very treacherous, with widespread sell-offs encompassing every industry group. The Fund's holdings fell by
-17% in aggregate, substantially underperforming the benchmark index's sector return of -10%. Specific Fund performance "culprits" during the quarter included Continental AG (-21%), Las Vegas Sands Corp. (-29%), JC Decaux SA
(-25%), and Yamada Denki Co., Ltd. (-24%). The Fund's performance was also singed by the following:
- Utilities: The Fund's holdings in this sector skidded -25% in aggregate during the first quarter. Electricite de France SA, the main electricity generation and distribution company in France; Veolia Environnement, a water, waste management, energy, and transportation services company; and Public Power Corp. SA, an electric power company based in Greece, were all down sharply. Both Electricite de France SA and Public Power Corp. SA were sold during the period.
- Financials: The investment experience in this sector internationally more or less paralleled what transpired in the US, i.e., there were a lot of "banana peels" that were best avoided during the quarter. The Fund's holdings in this sector sank by -18% collectively during the quarter. ICICI Bank Ltd. (one of India's largest commercial banks), Bovespa Holding S.A. (the largest stock exchange in Latin America, based in Sao Paulo, Brazil), Credit Suisse Group, and Julius Baer Holding Ltd. all suffered steep price declines.
- Tesco PLC, a United Kingdom-based supermarket operator, sank -21%.
The Fund's most significant sector allocations as of the end of the first calendar quarter of 2008 included Consumer Discretionary, Financials, Consumer Staples, and Telecommunication Services. The Fund's largest country weights included Switzerland, France, the United Kingdom, and Brazil. The Fund also had several significant investments in Mexico. With regard to investments in the United Kingdom, we have been focused on owning companies that we consider to be more defensive in nature. We believe that maintaining a more defensive posture makes sense, at least until more clarity emerges regarding the health of British financial institutions-many of which are beginning to address the same issues, e.g., subprime, that their US counterparts have faced. We also are monitoring the United Kingdom's ability to finance its budget. We continued to have a relatively low allocation to Japan during the quarter, based on our view that the combination of weak government leadership, lower rates of consumer discretionary spending, a generally stagnant pricing environment (which creates considerable earnings uncertainty), and relatively low levels of corporate innovation combine to, in general, create an unfavorable backdrop for owning Japanese equities. As we have mentioned in earlier shareholder commentaries, country-level weightings, in general, are a residual of the Fund's "bottom-up" stock selection process.
Sincerely,
James G. Gendelman
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 September 30, 2004, the performance returns for the International Opportunities Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would be reduced. For the period beginning October 1, 2004 through December 31, 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.
The MSCI EAFE Index tracks the stocks of about 1,000 companies in Europe, Australasia, and the Far East (together referred to as "EAFE"). You cannot invest directly in an index. Foreign investments may present additional risks due to currency fluctuations, economic and political factors, lower liquidity, government regulations, differences in securities regulations and accounting standards, possible changes in taxation, limited public information, and other factors. These risks are magnified in countries with emerging markets, since certain of these countries may have relatively unstable governments and less established markets and economies.
3On March 31, 2008, the following securities comprised these percentages of the net assets of the Marsico International Opportunities Fund: Lonza Group AG (2.8%); Actelion Ltd. (1.0%); CSL, Ltd. (1.5%); Roche Holding AG (1.2%); Samsung Electronics Co., Ltd. (2.5%); Nestle SA (2.7%); America Movil S.A.B. de C.V. (4.3%); Continental AG (3.7%); Las Vegas Sands Corp. (1.4%); JC Decaux SA (1.3%); Yamada Denki Co., Ltd. (0.8%); Electricite de France SA (0.0%); Veolia Environnement (3.3%); Public Power Corp. SA (0.0%); ICICI Bank Ltd. (1.3%); Bovespa Holding S.A. (2.0%); Credit Suisse Group (3.3%); Julius Baer Holding Ltd. (1.9%); and Tesco PLC (2.9%).
2Total returns are based on net change in NAV assuming reinvestment of distributions. For the period prior to September 30, 2004, the performance returns for the International Opportunities Fund reflect a fee waiver in effect; in the absence of such a waiver, the returns would be reduced. For the period beginning October 1, 2004 through December 31, 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.
The MSCI EAFE Index tracks the stocks of about 1,000 companies in Europe, Australasia, and the Far East (together referred to as "EAFE"). You cannot invest directly in an index. Foreign investments may present additional risks due to currency fluctuations, economic and political factors, lower liquidity, government regulations, differences in securities regulations and accounting standards, possible changes in taxation, limited public information, and other factors. These risks are magnified in countries with emerging markets, since certain of these countries may have relatively unstable governments and less established markets and economies.
3On March 31, 2008, the following securities comprised these percentages of the net assets of the Marsico International Opportunities Fund: Lonza Group AG (2.8%); Actelion Ltd. (1.0%); CSL, Ltd. (1.5%); Roche Holding AG (1.2%); Samsung Electronics Co., Ltd. (2.5%); Nestle SA (2.7%); America Movil S.A.B. de C.V. (4.3%); Continental AG (3.7%); Las Vegas Sands Corp. (1.4%); JC Decaux SA (1.3%); Yamada Denki Co., Ltd. (0.8%); Electricite de France SA (0.0%); Veolia Environnement (3.3%); Public Power Corp. SA (0.0%); ICICI Bank Ltd. (1.3%); Bovespa Holding S.A. (2.0%); Credit Suisse Group (3.3%); Julius Baer Holding Ltd. (1.9%); and Tesco PLC (2.9%).
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.
