Global Value Strategy

Investment Philosophy

The Global Value team believes there is a persistent market failure to recognize companies’ intrinsic value – a failure it attempts to exploit through a bottom-up, fundamental, benchmark-agnostic investment approach.

Investment Process

The fundamental basis of the investment process has remained constant since the formation of the Global Value team. The team looks for opportunities in companies that have temporarily disappointed investors; industries in turmoil or out of favor; and countries in economic downturns or overlooked by the market.

Analyze, Understand Business Models

Thoroughly understand a company and the market in which it operates. The team's document-driven analysis examines:

  • A company's market share
  • The nature of its products and its business contingencies
  • Other critical factors.

Recast Financial Statements

Financial statements are recast because:

  • Conservative accounting practices can mask the true earnings power of a company
  • Likewise, accounting practices are sometimes too liberal

Goal: to uncover a company's true economic earnings using only demonstrated results.

Calculate Intrinsic Value

The team places great emphasis on:

  • Balance sheet valuation (such as Enterprise Value to Asset Replacement Value)
  • Cash flow valuation (such as EV/EBIT)

Investments are made based on significant discounts to what is believed to be a company's intrinsic value.

Typically Invest for Long Term

The team typically seeks at least a 30% discount to what they believe is a company's intrinsic value

  • They seek further protection by determining a margin of safety in each holding
  • Viewed as a form of protection against uncertainty in a fundamentally unknowable future.
 

The Global Value strategy may also invest in non-equity securities in an attempt to help preserve capital. These include:

Competitive Advantages

Global Value Performance

Global Value Annual Returns (%) - as of 3/31/12

Global Value Annual Returns (%)

■ Global Value — Gross of Fees
■ Global Value — Net of Fees


Global Value Trailing Returns (%)

Period: 1/1979 – 3/2012 YTD 1 Year 3 Year 5 Year 10 Year Since Inception
Global Value - Gross 8.97 6.12 20.91 7.04 13.42 15.78
Global Value - Net 8.77 5.33 20.01 6.24 12.52 14.92
MSCI World Index (Net) 11.56 0.56 20.24 (0.70) 4.72 9.59
Excess Gross Return (2.59) 5.56 0.67 7.73 8.70 6.19
MSCI World Value (Net) 9.97 (2.00) 19.46 (2.85) 4.57 10.27
Excess Net Return (2.80) 4.77 (0.23) 6.94 7.80 5.33



Global Value Disclosures

  Composite Assets Annual Performance Results
Year End Total Firm Assets (millions) USD (millions) Number of Accounts Composite Gross Composite Net MSCI World (net) Composite Dispersion
2011 59,646 33,806 8 0.95% 0.19% (5.54) N.A.
2010 51,961 27,297 Five or Fewer 18.88% 18.00% 11.76% N.A.
2009 38,910 20,139 Five or Fewer 24.31% 23.38% 29.99% N.A.
2008 31,605 16,897 Five or Fewer (20.17%) (20.77%) (40.71%) N.A.
2007 43,879 21,517 Five or Fewer 11.14% 10.31% 9.04% N.A.
2006 43,089 20,345 Five or Fewer 21.87% 20.96% 20.07% N.A.
2005 35,210 16,049 Five or Fewer 16.30% 15.43% 9.49% N.A.
2004 26,315 10,686 Five or Fewer 19.85% 18.95% 14.72% N.A.
2003 15,481 4,860 Five or Fewer 39.47% 38.43% 33.11% N.A.
2002 6,703 2,224 Five or Fewer 11.72% 10.89% (19.89%) N.A.
2001 5,274 1,671 Five or Fewer 11.76% 10.93% (16.82%) N.A.
2000 5,944 1,680 Five or Fewer 11.22% 10.39% (13.18%) N.A.
1999 7,101 1,924 Five or Fewer 21.04% 20.14% 24.93% N.A.
1998 3,354 2,647 Five or Fewer 0.93% 0.18% 24.34% N.A.

N.A. — Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.

Global Value Composite contains fully discretionary accounts invested in a range of asset classes from markets in the United States and throughout the world. To achieve its objective, management will normally invest in common stocks (and securities convertible into common stocks) of U.S. and foreign companies. For comparison purposes, the composite is measured against the MSCI World Equity (Net) Index. Returns include the effect of foreign currency exchange rates. The exchange rate source of the composite is Bloomberg 4 pm EST. The exchange rate source of the benchmark is Reuters 4 pm GMT. The asset mix of the accounts in the composite may not be comparable to the MSCI World Equity (Net) Index. Indices do not incur management fees or other operating expenses. Investments cannot be made directly into an index.

Prior to December 7, 2009, First Eagle Investment Management, LLC was known as Arnhold and S. Bleichroeder Advisers, LLC.

First Eagle Investment Management, LLC has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). First Eagle Investment Management, LLC has been independently verified for the periods January 1, 1996 through December 31, 2011.

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 firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Global Value Composite has been examined for the periods January 1, 2000 through December 31, 2011. The verification and performance examination reports are available upon request.

First Eagle Investment Management, LLC is an independent SEC registered investment adviser. The firm maintains a complete list and description of composites, which is available upon request.

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Total returns of the composite and benchmark are presented net of estimated foreign withholding taxes on dividends, interest, and capital gains. Withholding taxes may vary according to the investor’s domicile.

Derivatives may make up a material part of the composite strategy. The composite may invest in structured notes, the value of which is linked to the price of gold or silver, to hedge against market conditions.

Structured notes are purchased through large commercial banks with strong credit rankings. MSCI uses withholding tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rate. Past performance is not indicative of future results.

The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Net of fee performance was calculated using the highest applicable management fee of 0.75% applied monthly. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The investment management fee schedule is 0.75% on assets. Actual investment advisory fees incurred by clients may vary. The three-year annualized ex-post standard deviation as of December 31, 2011 for the Global Value Composite is 13.87% and 20.15% for the MSCI World Index (Net).

The collection of fees produces a compounding effect on the total rate of return net of management fees. As an example, the effect of investment management fees on the total value of a client’s portfolio assuming a) quarterly fee assessment, b) $1,000,000 investment, c) portfolio return of 8% a year, and d) 1.00% annual investment advisory fee would be $10,416 in the first year, and cumulative effects of $59,816 over five years and $143,430 over ten years. Actual investment advisory fees incurred by clients may vary. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

The Global Value Composite was created January 1, 1979. Performance presented prior to January 1, 2000, is for a U.S. mutual fund that was managed by Jean-Marie Eveillard while he was affiliated with another firm and had portfolio management responsibility. First Eagle Investment Management, LLC acquired this prior firm and became investment adviser to the U.S. mutual fund on December 31, 1999. On March 27, 2009, Mr. Eveillard transitioned from having portfolio management responsibilities to a senior advisory role to First Eagle Investment Management, LLC, a position he also held from January 1, 2005 to March 23, 2007.