Q3 2014 FPA Crescent Fund Conference

Mark H.:

2014 third quarter webcast. It is our goal during these calls to give you,
our stakeholders, a clear understanding of our current views as the team
discusses the portfolio, the market, and the economy.
It is our expectation that, with the appropriate consents, the audio,
transcript, and visual aspects of todays call will be posted on our website,
fpafunds.com, over the coming few days.
Momentarily you will hear from Steven Romick, Brian Selmo, and
Mark Landecker, the portfolio managers of our Contrarian Value Strategy,
which includes the FPA Crescent Fund. Steven has managed the FPA
Crescent Fund since its inception in 1993, with Brian and Mark joining
Steven as portfolio managers in 2013. Its my pleasure to hand it over to
Steven Romick.

Steven:

Thank you, Mark. As always, we just start the slide of our philosophy just
to highlight. And not to read every word on the page, but our goal is to
provide equity rates of return over time and to do so by avoiding
permanent impairments to capital.
If you look how weve accomplished that going back to our
inception, youll note that we actually have outperformed the market by a
reasonable margin. So weve actually exceeded our goal, and weve done
so, you can note here as well, with about a third less volatility.

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If you look at the performance through the end of the most recent
quarter, it shouldnt be any great surprise that we are consistent with what
we always say that were going to do. And we will generally lag in bull
markets and generally outperform in bear markets, and its exactly what
you see here, although again over time our goal is to do as well as
equities and do so while avoiding that permanent impairment in capital.
If you look whats actually happened in the most recent quarter,
youll note that there were top five winners and losers youll see on this
chart. And for the first time ever theyve exactly offset each other. We
didnt plan that98 basis points up and 98 basis points down. There
wasnt much news in any of these securities. Some of the winners were
out or ahead of Wall Street expectations, while some of the losers were
behind. (2:01) Nevertheless thee was really nothing of note that caused
us to deviate from our longer-term view in any of these companies, and
this quarterly price movement is nothing more than noise.
Within our broad charter, we have an ability to go long and short.
And sometimes a public company owns part of another, and we have the
ability to short these businesses out. So Ill give you an example from the
past. We were long Renault and short Nissan. Renault owned 44% of
Nissan and some other companies as well. In this case, we see a long

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a winner and a loser on opposite sides of the metrics that you see here,
and Naspers and Tencent Holdings. Thats one of these sub-investments
trades that we habitually make. The fact that it shows on both sides of the
tables misleading however because the Tencent gain, which was a short,
was entirely offset by the Naspers loss, which was a long. One really
needs to look at the net, which has detrimental impact of just five basis
points.
Just a couple words on Naspersits a South African Holding
company with a global portfolio of media and tech investments. Naspers
has a 34% stake in Tencent, which is a Chinese internet company. The
market values Nasperss stake in Tencent at $48 billion, but then only
value the entire parent company at $45 billion. So by going long Naspers
and shorting a proportionate number of Tencent shares, it effectively
allows us to create a stub at a negative $3 billion valuation. Now that
means that the market is effectively paying us to own Naspers exTencent, and we feel that Nasperss media assets are worth substantially
more than negative $3 billion.
If you look at our portfolio characteristics at the end of the third
quarter, nothing stands out as particularly different from the second
quarter, and we continue to have a portfolio that is somewhat larger cap

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than our historic average probably due to where the relative value is in the
marketplace, and you also note that our balance sheets are on average
far better. (4:02) Thats the most significant difference of this versus the
Index of the S&P 500 is that the debt-to-capitals a negative number.
The negative number basically means our portfolio of companies on
average have net cash. It doesnt mean every company; thats looking
across the portfolio.
Our allocations havent changed much. Exposure is running about
54% net. And within the portfolio, there have been some changes
however. Weve eliminated six long positions in the last year, and this
year to date weve added seven new long positions, which averaged
about 7% capital commitment.
What we see out there in the world today is nothing much different
than what we talked about in the prior few quarters. Were beginning to
sound repetitive we realize, but there isnt a lot new that we have. And
stocks dont look particularly cheap, and things were going our way for a
few moments. But that was, as it turns out, nothing more than ephemeral,
at least for the moment.
Im going to turn it over to Mark Landecker, whos going to talk
about an industry that we have some exposure to, and we felt that these

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kinds of conversations on a period basis would be helpful to you to help

you understand how we invest your capital and we think about businesses
in general. Mark?
Mark L.:

Thanks, Steve. So as Steven mentioned, were always trying to make

these calls more informative for our investor base, and we definitely
encourage feedback. Last time we profiled something in some depthI
think it was Oracleand the feedback that Mark received was, yeah, we
wouldnt mind you doing something like that again occasionally. But we
like to try and mix things up a little. So today rather than profiling a
company, as Steven said, were going to talk about the beer industry.
Now the beer industry is somewhat unique in that it combines the
personality of a consumer staple with the brute force of manufacturing
and logistics. And we like the industry because it benefits from many
favorable characteristics, including a high level of concentration,
economies of scale, (6:01) high return on invested capital, strong brands,
low private label penetration, volume growth on a global basis, and lastly
the businesses are very cash-generative, which allows for M&A or the
support of reasonable levels of debt.
Now when we talk about the beer industry, we should really clarify
were talking about four companies: AB InBev, Heineken, SABMiller, and

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Carlsberg, two of which we obviously own. Now before I get into more
details about the industry, Id like to set the stage to illustrate the
dominance of the Big 4, which in aggregate, as you can see form the top
of this pyramid, account for a whopping 50% of global volume.
Now if that wasnt impressive enough, you can see from this pie
chart that these same Big 4 companies account for a staggering 80% plus
of the global profit pool. So across all the world, these four companies
account for one out of very two beers that are drunk at weddings,
corporate functions, sporting events, who knows whereat home
watching the football game on the weekend. But given that they account
for more than three-quarters of the global profit pool, we think its not a
bad collection of companies to keep your eye on.
Now I mentioned earlier that the Big 4 benefit from tremendous
economies of scale, and the easiest way to observe this dynamic is by
looking at how the trend on return on tangible invested capitalthose are
the bars in blackhave increased from 17% in 2000 all the way up to
49% on average for the Big 4 in 2013.
Now the disparity between return on tangible invested capital in
black and total invested capital in green relates to goodwill that was
attributed to M&A. Now this goodwill was largely generated over the last

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15 years when the industry underwent significant consolidation. If one

goes back to 2001, you can see from this slide that the industry was
relatively fragmented, (8:03) such that the top four brewers only
accounted for 21% of global volume. But move forward to 2013 and those
same Big 4 brewers account for the aforementioned 49/50% where we
are today.
Now this concentration is important because, if one looks deeper
into individual markets, youll find that theres a high correlation between
market concentration and operating margin, such that highly concentrated
market, as you see on this slide can generate EBIT margins as high as
50%. Duopolies and large-scale businesses generally do about 2040%.
And lastly, as you can see on the right, even relatively fragmented
markets still do about 10%, which is not awful in and of itself.
Now these profits are of course supported by strong brands that we
like to describe as moats for your throat, and they take years of brand
development to reach critical mass. As an example, for us in the United
States, Im going to assume that almost all of you are familiar with both
Blue Moon and Stella Artois, both of which appear on this chart. Now as
you can hopefully see, the rise in popularity of each was not a case of

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overnight success but rather over-decade success, or actually multidecade success to be exact.
Those strong brand positions are nicely complemented by modest
private label penetration compared to other FMCG categories. And just to
be clear, FMCG stands for fast-moving consumer goods. Now I cant tell
you scientifically why private label beer share is low, but generally
speaking beer is drunk in a social setting, and its an emotional purchase.
And many people often identify themselves with the beer they drink.
So within the audience listening to this call today, Im going to
suggest that the wannabe Harley Davidson rider amongst us drinks Bud,
the young professional that wants to show that hes a man of the world
might drink Heineken, the actual man of the world who wants to show
everyone else he has money to burn drinks Stella, and the wannabe
surfers like myself and Steven drink Corona. (10:03) Now even if we didnt
personally manage to offend you with our stereotyping, our point is:
nobody wants to be the guy caught drinking cheap no-name beer
amongst friends.
Lastly, it also doesnt hurt that, unlike the typical FMCG product like
say toothpaste or mustard, beer actually changes the way you feel when
you consumer it.

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Now thinking back to that 50% average tangible return on invested capital for the Big 4,
its not just the income statement and high operating margins that drive
this result, but also the ability to sweat the assets on the balance sheet.
In fact, the beer industrys rather remarkable in that the majority of
market participants have negative working capital or on their way there.
Its actually pretty simple if you think about it: turn the inventory quickly,
get paid in 30 days or less by a fragmented group of customers, and
squeeze your suppliers, most of whom are selling you commodity inputs
of bottles, barley, and labels.
Now as for fixed assets, the industry has relatively modest CapEx
requirements at about 8% of sales on average, though this figures
demonstrably less for cash cow mature markets about 5% versus 1011%
for faster emerging markets.
Lastly, while volume growth is modest to nonexistent in mature
markets, much like other FMCG categories, its still positive on a global
basis due to the contribution from emerging markets. In fact, even mature
markets offer opportunities for favorable price mix movement. Looking at
Western Europe as a poster child for mature market, you can from the
chart on the left the volumes of the past decade or so have been
negative. However in looking at the chart on the right, you can see that the

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retail value of beer has still increased over the same period. Furthermore,
looking out over the past decade or so starting in 2005, you can see that,
for those members of the big four who separately report their Western
European EBIT margins, theyve actually risen in all instances, and some
cases quite materially.
(12:03) Now moving to specific names, weve owned AB InBev at
FPA since 2010, and we obviously continue to own the stock. We think
the company has a lot of attractive characteristics with a great CEO, great
cap allocation, and the largest market share and the worlds largest profit
pool. Now we bought the name at a very reasonable multiple, but its rerated with the market over the past few years. So when we looked for
additional exposure to the sector, we recently bought Carlsberg, which
well admit is not as qualitatively attractive as AB InBev, but it trades at a
demonstrably lower multiple and has its own attractions.
Ill now turn it back to Mark Hancock or Steven for Q&A.
Steven:

So as always, the program for Q&A is to take the calls that were
submitted in advance, and Ill pass it around between Mark, Brian, and
myself, and then take the calls that come over the transom that you can
send in via email real-time.

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So just to begin, first question and also just please understand

that there will be at times companies that will be asked about, and we
arent going to respond to every company because we may be doing
something with that company. So if theres some question you feel that
you would like the answer that we did not get to, please call Mark
Hancock subsequent to this call; hell make sure that he or one of the
members of this team will respond in fairly short order.
So the first question is: though impossible to predict, can you talk
about if you think interest rates will rise and what various factors might
cause this that or something else, and your best guess as to when and
how fast that you think rates will rise? Were not going to predict interest
rates here today or ever. We have no skill in that regard, and therefore
were not going to hazard a guess as to their direction, let alone their
magnitude.
There was a question that was asked about litigation facing AIG at
this moment. Im going to turn that one over to Brian.
Brian:

(14:00) So Im going to assume AIG is involved in tons of litigation all

the time, but Im assuming that this question relates to the Hank
Greenberg case against the government, which will ultimately potentially

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impact AIG because AIG has indemnified the government for the terms of
the investment that the government made back in 2008.
In terms of how concerned are we, we are not terribly concerned,
but thats not to say that we dont think the arguments promulgated by
Greenbergs attorneys are without economic merit. But I would observe
that litigations difficult. I think AIG, when they decided not to participate in
the litigation, got an opinion from counsel that the case had a 20%
probability of success. You can assume that they hired counsel who
would give them a low estimate. So probably the probability of success is
slightly higher than that. But importantly there is an out for AIG in terms of
the indemnification theyve given to the government, and its an out that
relates to willful negligence or misconduct. And it would seem logical,
although certainly not a slam-dunk that, if Greenberg were to prevail, the
government would be found to be something in the way of either negligent
or willfully committing conduct.
So I think that theres two steps to the litigation, and its not
something thats overly concerning to us at this time.
Steven:

Theres a question on the current stake in the economies of Russia and

China and how we view their impact on the Funds investments. Well, this
answers not terribly dissimilar from our interest rate answer, so our

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apologies in advance. But our view of the economies of Russia and China
are admittedly less clear than our view of the U.S. economy. But thats
only a relative statement. We understand economics well enough well
enough not to make predictions. (16:00) We built our earnings models of
all the companies were looking at mindful that bad things can happen.
And when we invest, we generally believe that, should the worst occur, we
believe that we still wouldnt lose money over time. And Marks going to
come back to, a little bit later on the call, some of the specific Russia
investments that we have.
Im going to combine a couple of question here that relate to cash.
What is the range cash the Fund held through 2014? Whats the highest
level of cash the Fund has held since inception? When was the last time
you held this much cash and why?
So Crescent hit a peak liquidity at quarter-end in March 2006. That
was at almost 46%. And long-time shareholders will recall that we were
quite concerned at the time about the leverage in the financial system, the
aberrant use of derivatives, and irresponsibly lax lending standards. We
maintained at that time higher-than-average amounts of liquidity until the
2008/9 downturn when we were able to successfully recycle that cash into
new investments.

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Its important to note that we have actually averaged 26% in cash

since 1996. And can you pull up this one chart? We have chart on cash
that its good to remind you of. This shows the flexible approach of the
Crescent Fund, the chart that youre looking at. And for those of you who
arent able to look at this, the chart just depicts our cash moving up and
down over time. And it shows the high points and the low points going
back to 1996 and at least compares relative to ourselves that, when
liquiditys at a peak, that our returns on average are lower than when
liquiditys at a trough. So what were saying is that we know a good thing
when we see it, and were going to go and put capital at those points in
time.
So our average liquidity going back to 1996 is about 27%. The
average liquidity at peaks is 34%. The returns in the subsequent two
years were about 6%. And the average liquidity at troughs were 9%, with
the subsequent two years being 15% returns over those two years.
(18:01) So this is what we tend to do time and time again over the last two
decades nowtwo decades plusand what we expect to continue to do
in the future.
Mark, what was that Coco Chanel quote? It actually scares us that
Mark can quote Coco Chanel. But what was that quote?

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Mark L.:

If I have it correctly it was, Fashions may change, but style endures.

Steven:

If you knew Mark Landecker at all, the fact that hes quoting a very
expensive female clothing brand, you would find that incredibly amusing,
as we do. Nevertheless its incredibly accurate. We do what we do year-in,
year-out.
Again Im going to combine a couple of questions. To what extent
will you be using cash to buy equity that are Im not sure what its saying
here, but that were in the current downturn, its going to shorten it.
Given the significant cash position, are there any plans to deploy those
funds in the foreseeable future?
Now we look for good businesses trading at attractive valuations,
and attractive valuation takes into account the downside case. The
prospective investment always looks better if one avoids consideration of
the downside. As reasonably conservative and skeptical people, we just
cant do that. When we purchased our aluminum companies, for example,
we didnt count on aluminum returning to 2,700 bucks a ton. Instead we
asked ourselves what happens to the cash flow of the business if
aluminum remained mired at 1,700 dollars. So when the market was
going down, I think theres still wasnt consideration of the downside that
exists. We certainly were out there maintaining our exposures to the

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market. Our exposures did increase somewhat at that point in time, but it
isnt any kind of dramatic increase. And the market, as you know did not
stay down very long.
There is a question Im going to turn over to
Brian

Five days does not a downturn make. So we certainly added in names; we

bought some stuff. But a 5% hiccup is not I think what we would (20:04)
we wouldnt necessarily describe that as a market dislocation or downturn.
Steven:

Five days a downturn can make, right, but just not at 5%. Its

not terribly 1887. So, Mark, just talking about the U.S. dollar Im sorry,
Im going to skip this question because I actually dont understand the
question. My apologies.
Could you discuss your investment in Farmland? How do you do it?
Do you think Farmland is currently fairly valued allocation percentage?
Farmlands a really small investment. We parted with the group back in
2010 to buy a geographically diverse portfolio. At less than 30 basis
points, its hardly worth discussion, and Farmlands gone up a lot since
then. And its certainly more expensive than it was, although I would point
out one does need to look the values originally. And I think thats really all
were going to talk about Farmland given its negligible exposure in the
Fund.

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Are you beginning to consider climate change and water resource

issues in your investment decision-making process? If not, why not? If you
have, how? I assume youre talking about global warming. We dont know
how to incorporate climate change into our investment thesis. Its clear the
planet has been getting warmer; it doesnt mean its going to not starting
cooler for the next five years. We have no idea because, I mean, its not
going to be is it going to be warmer in 20 years, 30 years, 40 years? We
just dont know whats going to happen and when. How much warmer it
might be in the future is impossible to determine. Thats well beyond our
investment horizon.
Mark, question for you: how do the managers view the
strengthening U.S. dollar? What is the impact of the current portfolio? Any
thoughts on the dollar trend?
Mark L.:

Im just going to say no.

Steven:

More things we dont know. How have your Russian investments held up
over the past weeks in light of market declines? Since I wasnt able to
attend your Investment Day and I havent looked at transcripts or slides,
could you discuss your thesis and the balance of stocks purchased? Have
you actually done any company visits there?

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So although we did discuss this Russian thesis in our Q2 letter and

we dont want to spend a whole lot of time repeating it and repeating that
here. But, Mark, do you want to add anything?
Mark L.:

Say no again.

Steven:

Okay. When you make a decision to purchase something, what are the
steps involved in determining the amount of that purchase? What are the
factors that lead you to choose between a small, medium, or large
purchase? Well, theres a number of factors obviously that go into sizing a
position, and its so far from being an exact science. Business, quality,
valuation, downside risk, conviction, and upside all contribution to position
sizing. The better each of those is, the larger the position.
Heres another question asking about Crescents performance and
asking or stating that Crescents performance has declined why has
Crescents performance declined so drastically this year, drastically
underlinedthird quartile, well below its category average per
Morningstar? Morningstar has us in the moderate allocation group where
our peers generally have several bond portfolios. And, yes, were slightly
below average year-to-date with rates hitting new lows and bonds are
higher. We dont have this kind of bond portfolio and therefore we

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wouldnt benefit. But I should make clear that that made that prior
statement without having analyzed any of the portfolios of our peers.
More importantly, we never consider performance over such a
short timeframe. Thatll be a complete mismatch with our own investment
horizon for the investments we make. A partial year is totally irrelevant in
our view. If you think this year-to-date performance delta is drastic, I
suggest you just go back and look to see how we did in 98 and 99 when
we were more than 50 points behind the S&P 500 and mining the
cellarrelative to our peers for two consecutive years.
But if you have the confidenceIm not suggesting it was easy to
have maintained that confidence at that point in time but if you had that
confidence and stuck with us, you wouldve looked back three years later
and seen that we were more than 40 heads of the Index, (24:08) ahead of
the pack over the prior five years even including those two hideous
underperformance years of 98 and 99.
And Id like to direct you to our investment policy statement on our
website to ensure that you understand what we do and how we execute it.
We spent a lot of time writing this a number of years back so that
investors can understand exactly what theyre getting into when they
partner with us.

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Okay, if mid-cap stocks become bargain price down the road, will
FPA Crescent be too large to buy them? I can inequivocally [sic] state that
we absolutely retain the ability to buy mid-cap stocks. Its just something
we are able to do.
Mark L.:

And Id loop it into the previous question, which is around what weve
been doing recently. Most of the stocks weve bought an added to this
year are mid-cap stocks, and that certainly has been true in the last 30 or
60 days. And I think its

Brian:

It was just a question about some of the questions that came in. Were not
going to read it out loud, but were

Mark L.:

But we appreciate the humor of some of the callers here typing in

questions. Well leave it at that. The point, though, is we have a number of
mid-cap stocks that are in the on-deck circle, too, and we would expect to
be actively involved with them if or when they reach our buy prices.

Steven:

What is our current view on spending on Tesco given the structural

changes in the U.K. grocery market? And if $89 is enough of a margin of
safety given the unknowns, what kind of range do we see two years out.
What kind of multiple do we put on it? And the last question, which is
probably the most relevant one: does FPA own it? Mark?

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Mark L.:

So we dont own Tesco. (26:00) It was sold back in the second quarter,
and were generally not in the business of commenting on names we dont
own. But as for why we sold it, weve shared with the audience in the past,
we do low-base high cases. It was clear Tesco was trending to our low
case and actually probably more even below that to be honest. And so
when that became apparent, we sold it. The catalyst for that was probably
a meeting that Brian and I attended with the CEO, Phil Clarke where we
talked about what the economics of the business were going to be going
forward. And while we thought he was doing the right things, we generally
came to the conclusion amongst the group of us: your guess is as good
as mine. We thought that made us

Mark L.:

Yeah. And Phil included in that, I should say, the former CEO. So
between that, it just made it tough. We said we needed a larger margin of
safety to be able to stick around. It wasnt there.

Brian:

Id also point out to people that Tesco was not a successful investment for
us. At a very similar point in time we decided to exit the remaining stake
we had in Walmart. So you can thank that we tried to take some learnings
from one name and applied them across the portfolio.

Steven:

And despite being unsuccessful, I would point out that one should expect
unsuccessful investments in our portfolio. I mean, its part of investing. If it

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was easy, everything went up, then a lot of people would be able to do it.
We have things that dont work out, and well have our mea culpas along
the way. But as Mark stated, we build low cases, base cases, and high
cases, and we try and handicap them and hope and expect that theyll get
to that high case. We hope theyre at least be attractive in the base case,
but sometimes that low case does end up taking place. So its not entirely
outside the realm of expectations.
Mark, did you want to add something? Okay. There was a question
just in general about Alcoa and Im going to broaden the question out and
pass it off to you, Brian, and maybe just talk about the give an update
about the aluminum investment.
Brian:

(28:02) So I think Steve mentioned the for everyone to know, we own

Alcoa and Norsk Hydro, both sensitive to aluminum. Steve mentioned that
aluminum prices recovered dramatically in the last 12 months. We went
into those investments at a time when a quarter to half of the industry was
losing money on a cost base. Given the price of aluminum, we didnt think
that that was sustainable long term. We not necessarily well, we
wouldnt have predicted that it would reverse itself in 12 months. It has.
The stocks have gone up, and we are reevaluating given the change in
price.

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Steven:

One individual listed a number of questions and theres a recent

commodities correction is reflected in the Crescent Fund portfolio. Do you
think the Crescent Fund is overexposed to commodities, thus limiting your
ability to currently average down on those positions? What is the Funds
percentage of exposure to commodities companies?
Im not sure what you mean by overexposure. Crescents net
exposure to commodities is just around 7% I gross and 6.5% netabout
one third of that in aluminum; most of the balance in energy. That also
includes a 1% and change in our Russian basket thats mostly energy. I
mean, Russian baskets probably higher than that, but the energy
exposure of that. So compare that 6.5% net exposure in all of these
commodities including the energy to the what the S&P 500 has. I dont
know what the S&P 500s total commodity exposure is, but in energy
along its about 10%. So we dont see our position as overexposed or
limiting in any way.
Charlie Munger had a question. Charlie Munger said oil is
absolutely certain to become incredibly short in supply and very high
priced. In the long run do you share Mungers views on oil? And, well, first
Id say it tends to be the cure for high commodity price is generally a high
commodity price and vice versa. (30:02) Weve read a lot on the topic of

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peak oil, and Mr. Munger may very well be correct. Far be it from me to
correct anything that hes saying. Hes obviously had terrific investment
success over many, many decades. However we prefer to develop an
investment thesis agnostic to the price of the underlying commodity. In
other words, the underlying security should be inexpensive even at current
commodity prices. So we prefer an increase in that price of the commodity
to be a free or at the very least inexpensive option.
A few other questions here as it relates to Russian commodities
basket continued to decline in the quarter. For how many months or years
are you willing to hold this basket of stock and endure the pain of a
decline? I think that statement, that question be made over any basket or
any company that is declining. But Im going to turn it over to Mark.
Mark L.:

So if you look at Crescent, its been around 20-plus years, our average
holding period circa 45 years. You shouldnt expect our patience or
holding period to be any different on the Russian names. We didnt buy
them because we thought we were going to make a quick trade next
quarter. I dont think weve actually ever bought anything thinking that
were going to make a quick trade. Its definitely better to be lucky than
smart. If we get lucky, thats fantastic, but thats not how we go about
managing the capital.

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Steven:

Microsoft represents 3.4% of the funds portfolio. What are your thoughts
on the new CEOs first steps in strategy? And theres a yeah, so Ill turn
it back over to you, Mark, as well.

Mark L.:

So we talked a little bit about this at the Investor Day and I think on some
other call. We view Satya favorably. Theres a lot of things we like. We
like the fact that hes on the public conference calls, which Ballmer maybe
hadnt been on for a decade from what I can recall. We like the fact
theyre talking about return on invested capital internally. We like the fact
that theyre embracing having a Microsoft ecosystem that enables
productivity for their users regardless of whether theyre working off of the
iOS Apple platform (32:08) Windows, etc., what type of device theyre on.
So we think hes doing a lot of good things. Were probably not unique in
that thought. Thats why you see the stock is doing a little better than a
few years ago when we were told we were idiots on these calls for owning
it. So now its a little well see how he delivers over the next few years,
but hes definitely enjoying a honeymoon period. And Id say were fans of
his from what weve read from afar at the moment.

Steven:

Brian, what are the catalysts in Owens Illinois? Are you in touch with their
board of directors? Would we go into more activist role?

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Q3 2014 FPA Crescent Fund Conference

Brian:

So Im going to split this up in terms of a more general question about our

willingness to be active and engage with boards of directors. So I want to
be clear this in no way reflects what we may or may not be doing with
Owens Illinois. But, yes, we are and are willing to be engaged in active
and constructive dialog with companies. I think our preference would be to
be what we would call a constructivist, so helping people who we think
were largely in line with. But that said, we could play a little bit more
hostile role from time to time in order to protect our and your capital when
we find management teams or boards acting inappropriately.
So separating that, now specifically with regard to catalysts in
Owens Illinois, I dont know there are a handful of things that could
happen that could help Owens Illinois and maybe make the investment
work out. The most important would be fundamental, and those would be
around beer volumes and glass volumes in their various markets and then
a number of their cost initiatives. (34:01) But other than that, I wouldnt
say there are any hard catalysts in Owens Illinois.

Steven:

Thanks, Brian. Question this is really to you, Mark Hancock to get back
to people can call you on this, but do you expect large capital gain
distribution this year and in the future? Well, we certainly hope that well

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Q3 2014 FPA Crescent Fund Conference

have large capital gain distributions in the future, so I can say that with
great expectation anyway.
All right, whats going to happen this year I think is I dont know
I cant I dont know the answer today. Its an answer that well be able to
get sometime over the course of November, early December third week
of November. So if you check back in with Client Service at that point in
time, theyll be able to give you some idea of that.
Can you discuss the investment in Meggitt and risk of the
aerospace cycle?
Mark L:

So were spending time on the aerospace cycle. We left a couple names

in the portfolioone thats not disclosed, one that is. Were working on
another name. I think generally speaking we prefer to keep our cards
close to our vest for the moment. Were not trying to be evasive. But once
we get to full position I think wed be more than happy to discuss.
The question though relating to Meggitt was the risk of the
aerospace cycle. You should assume that in typical contrarian fashion
were looking at companies with a large embedded aftermarket, such as
they have resiliency in their earnings base over time regardless of whether
the aerospace cycle is moving up or down. And in fact, this sounds
somewhat perverse but some companies actually can even have higher

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Q3 2014 FPA Crescent Fund Conference

margins when the cycle turns down because theyre giving away less
spare parts for free.
But that aside, if we look at something in the aerospace cycle or
any industry with a bit of cyclicality you should assume were not getting
involved because were more bullish than the bulls. Its probably because
were a little less bearish than the bears.
Steven:

Theres a couple questions on our short position at REITs, which are

admittedly a very, very small position. It is a basket. (36:03) It is a
negative expression of REIT values, and theyre partly a function of low
interest rates that have driven people to higher yielding assets, whether it
be REITs or MLPs. And it just a basket short against our longs. We dont
have very many shorts in the portfolio today, and were a long fund that
does periodically short. And we wouldnt expect to see much in the short
side until such point as we actually have a lot more on the long side. And
at that point by the way, if things are so cheap on the long side then we
wont have many shorts. So thats the short answer to REITs.
Brian, the question above that?

Brian:

So question is: would be interested in your renewed confidence in Bank of

America as it appears you have increased the weighting significantly. We
have increased the weighting or position in Bank of America. I dont know

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that it is in increased confidence but maybe in observation of the

attractiveness of the security, the earnings power of the underlying
business, and a lot of the water that has gone under the bridge in terms of
regulatory and legal costs, which I guess I say Ill hope, but appear to be
largely behind the company at this point.
And so when we think about that kind of a leak in the bucket going
out the other side for legal and if that starts to shut down, I think the
earnings power of the franchise starts to be apparent. And I think at the
price we were paying for the stock, we thought that was a more
compelling value than some other things.
Steven:

Theres a question about the Theres a question Bob Rodriguez was

recently interviewed and warned about the stock market declining by 25%
to 35% before 2018. Are you finding any value among equities, and do
you share this sentiment? I mean, market will probably decline 25%
before 2016. I dont know. Its going to decline at some point. (38:06) Im
not going to go out there and make that call. Mark and BrianI can speak
for themarent going to make that call.
Its important to know that Bob doesnt actually manage any portion
of this portfolio. We have a view as to what we understand opportunity is
and how to value businesses. And, I mean, suffice it to say, if we saw a

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terrific opportunity, wed be significantly more invested. I mean, we dont

know what the markets going to do in any short period of time.
Brian.:

Ill speak for Ill speak for all of us. We dont talk to Bob about these things
at all.

Mark L.:

The other thing to say is we generally if you think about the derivative of
why were holding cash, its not because weve got a view of the world and
what the markets going to do. It really always comes to the ability to find
bottom-up fundamental investments that also have some margin of safety
of purchase. So if we can find those, were going to get invested
regardless of what the pundits are saying about the global economy and
the macro. And if we cant find them and everyone says the worlds great
with rose-tinted glasses, the valuations are really expensive, youre going
to see cash just be higher as the nature of the fact cant buy things with a
margin of safety.

Steven:

Theres a question: if the goal of quantitative easing was to stimulate

inflation, creating wealth effects on the balance sheet of investors and
banks that as QE is ending, wouldnt that create asset price deflation? I
will say two things.
(1) If QE is endingwe have no idea if it actually is; we dont have
any kind of pipeline into the Fed I think its going to be kind of

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Q3 2014 FPA Crescent Fund Conference

challenging to actually make that happen but would that have an effect
on asset prices? Yeah, probably. I mean, I dont mean to be terribly
equivocal. But if you go look at the short that we just put on this slide here,
you can see going back to from the markets downturn, you see the
S&P 500 plotted against what the Fed has put on its balance sheet.
(40:00) And you can see that asset prices have been lifted alongside
anyway in this examplealongside with the Feds balance sheet
ballooning. And this is just the S&P 500, but you can draw the same chart
and replace the S&P 500 with commercial real estate prices and a host of
other things in there as wellall kinds of asset prices. So, look, a higher
interest rate in and of them it depends on how you get there and why
youre getting there. But higher interest rates in and of themselves may
not be bad, but it could be.
Whats next, guys? Want to take two and three up there, Mark?
Mark L.:

Sure. Let me say these are questions about Russia. Were doing more
things have traded off, so on and so forth. So the Russian investments
account for about 1.5% of the portfolio, and our cost we are down high
single digit. I think the maximum weve spoken internally, and maybe
weve share thisI cant recallon conference calls probably dont see
Russia really being more than probably 3% of the portfolio in a similar

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Q3 2014 FPA Crescent Fund Conference

type environment to this. To increase our exposure to the names, were

probably not looking for a single-digit drawdown. Wed be looking for
something much more significant, and thats when we might add to the
names. So at the moment, maybe on edges theres a little bit going on,
but theres been no mass movement.
Someone asked: are you looking to buy Saudi market? Im just
going to say, no, we just havent been were aware of a couple
companies there that are more consumer-oriented, quality. We still trade
at pretty rich multiples.
Someone asked: would you use a higher discount rate when you
look at markets like Russia? We dont really run DCFs with high discount
rates and and things like that. But it goes without saying we want to get
things at a larger margin of safety or trading at a greater valuation
disparity on a typical multiple compared to, say, a market like the U.S.
(42:04) So if the Russian stock trades at, call it, two to four times
earnings, yeah, thats sort of interesting for us. If it was trading at 1012,
thats probably wouldnt be. Just as a guide investings as much an art
than a science. So I think it would be pretty silly to go dive head-first into
some emerging market and have a big percentage of your exposure

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Q3 2014 FPA Crescent Fund Conference

simply because you said, oh, based on the WACC these things look
cheap.
Steven:

Hey, Brian, there are a couple questions in front of us on Citi Group and
Bank of America. One is #11. I dont know where the Bank of American
question went. It was

Brian:

I think maybe Ill just talk in generalities about the general financial thesis,
which is sort of the question is at. But the companies balance sheet that
we own, the balance sheets are very strong relative I think on an
absolute basis and certainly relative to any of those companies history, I
think they are all working through some challenges from the financial
crisis. As those challenges start to dissipate, we would see the earnings
power and return on tangible capital of those businesses shine through.
And as that happens, we would expect to receive some of the rewards as
shareholders, whether in the form of dividends or buybacks. And thats
our thesis on them.

Steven:

Theres a question: given the drop in oil prices, have you looked at any
companies in the energy sector, and do any appear attractive? And we
had at one point, as many of you know, much greater exposure to the
energy sector. And we dont have much exposure today relatively
speaking to energy companies, although a little bit.

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Q3 2014 FPA Crescent Fund Conference

With the oil prices going down, I mean, obviously the stocks have
come down. (44:01) But theyre not to the levels where they reflect to
the statement that I had made earlier as to we want to be agnostic as to
the commodity price, there are a couple of companies that we have on the
list that were looking at. Theres one company thats active that is part of
another business and is going to be spun off. But there isnt a lot that that
were doing at these prices.
That actually leads to a larger question about the spinoff that was
asked. I mean, if you can scroll down please. Theres q question about
spinoffs and do spinoffs there is a trend towards company spinoff.
Madison Square Garden, Ferrari, do you believe that spinoff unleashes
companys value. I mean, look, companies have bigger companies
have spun off smaller companies for many, many decades, and at points
in time they can be somewhat orphaned. But theres a lot of smart people
looking at a lot of businesses, and theres people that run screen just on
spinoffs. Yes, value can be unleashed without question. But just like every
company we look at, we look at the opportunities discretely and make it a
determination. I wouldnt look at spinoffs and just say this is a category
that needs considered above all others.

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Q3 2014 FPA Crescent Fund Conference

Mark L.:

I was just going to go back to the energy. Some of you may not have
heard us talk about E&Ps or the drillers on prior calls, but Ill say were
probably of the viewpoint these arent better-than-average businesses. If
anything, theyre maybe lower-than-average businesses over a cycle. And
because of that, we pay attention to them. We get involved, but its more
driven by price. Of the three of us, none of us has some strong affinity that
we feel we love them, need them, have to have them.
E&Ps generally dont earn their cost of capital over a cycle. Driller
generally earn about an average return on capital over a cycle. So if you
want to make a better-than-average return, you probably have to buy at a
lower-than-average price. And thats really where we might get interested,
but its really because theres a distress in the price. We dont have any
real need. Its not like a go head, Brian.

Brian:

(46:05) No, go ahead. I was going to say I think the intellectual

frameworks going to be the same that we talked about using for
aluminum or any other commodity assets. We dont have any special
affinity for energy commodity assets.

Steven:

I mean, but to Marks point, I just want to highlight just to put a finer point
on that as well. I mean, if you have a business that has lower-thanaverage returns on capital and youre only getting ajust to keep the

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Q3 2014 FPA Crescent Fund Conference

math simple and youre getting a 6% return at 50% of book, you get a
12% return. A 12% returns more attractive than a 6% return.
Do you guys have any thoughts on the craft beer industry? I guess
that dovetails with your questions on the your presentation on beer.
Brian:

I mean, its not craft is a bit more of a U.S. phenomenonhigh single

digit percentage of the overall U.S. market growing at low double digit.
Like Sam Adams is a large, one of the better known public craft beer
companies. If you think about what we own in the portfolio, we own global
beer companies. Again craft is largely a U.S. phenomenon. It doesnt
really have a large impact on our investment thesis. Were sort of aware of
it. Were aware that theres a little bit of share shift to craft beers, but its
so relatively small proportion of the industry, albeit growing quicker than
the market in general. But if you think about the name we own, Carlsberg
for example doesnt even have any U.S. exposure (full stop? @ 47:36) of
any significance. So its there, but if you look at SABMiller, majority of their
business is not North American; you look at Heineken, majority of the
business is not North American. So its not as though one has to have a
real thesis on the craft beer industry to get involved in the Big 4.

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Q3 2014 FPA Crescent Fund Conference

Steven:

You mentioned in your letter that due to correction FPA analysts were
excited to come to work again. Can you elaborate on the opportunity you
lacked till currently? (48:02) This is

Brian:

Im depressed again.

Steven:

Yeah. Were excited to come in there were five days that we were
excited at coming in. And theyve come back up, and nobodys excited
anymore, sadly. But that said, and then not to be too flip, we come in
everyday. Theres always something to work on. We need to be educated
on companies and industries and regions, and we spend our time reading.
If you were to walk through our office on any given day, youd see a lot of
people just sitting on their desks, in their chairs, on the floor, standing up
now as it turns out, and theres were like a library. We just like to read;
we like to learn. And I hope we at some point in time, when opportunities
present themselves as a function of price, were able to capitalize on that,
as we have been able to do in the past.

Mark L.:

We have free lunches every Tuesdays/Thursdays, so personally Im

excited on Tuesdays/Thursdays.

Steven:

Oh, and by the way, Mark is not inviting you and Tuesday and Thursday.

Brian:

Theres a question on 3-D printing. We dont have anything useful to say

on 3-D printing.

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Q3 2014 FPA Crescent Fund Conference

Ill do the ADR. Theres a question: do you invest foreign securities in the
local market or ADR? Some of it just depends. There is a slight charge to
hold ADRs. Its not demonstrable, but youd maybe like to avoid it if you
can. However, if you think about some securities, it might just be when
you want to start buying it the local market opened, the ADR isnt, vice
versa. We dont have any hard and fast rules. So thats the extent of it.
Steven:

We get these questions every quarter, it seems could you please

recommend a recent book or press article you likeand well just go
around the table. And sometimes we have things; sometimes we dont.
But one book that I actually thought was very interesting and quite
apropos to investingI was recommended by an acquaintance in the
investment industryis a book actually written as a series of essays in the
1980s by and for the CIA, (50:10) and it was compiled in a small volume
in the late 90s and is available as a PDF online. And its called The
Psychology of Intelligence Investing. And its a behavioral book, right, and
its a very good read I found because the connections between picking
and imperfect information and trying to draw a conclusion, how one
does could do that better, there is some lessons learned for me, and I
thought it was interesting.

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Q3 2014 FPA Crescent Fund Conference

I dont know if Brian and Mark have any books that were of
particular interest in the prior quarter.
Mark L.:

There were some questions earlier on Tesco. We appreciated The

Everything Store, something thats been read around here.
There was a question, I think we just sort of addressed this. Were
going to knock that off. The question you guys talked to Chuck and
Charles from IVA about Russia, we just dont chat to them regularly, and
we havent (chatted to them?). We hold them in high regard. Theyre
smart guys, but different strokes for different folks.

Brian:

I dont know what their thoughts are.

Mark L.:

So well skip that. Question about Microsoft and Oracle, two of your
largest holdings. Theres a question about divergent performance.
Microsoft and Oracle, they do compete a little bit directly on databases,
but its not a large portion of Microsoft business. Brian and I were actually
chatting to the CFO of Oracle yesterday. And I mean, she even said they
actually view Or its actually sorry, shes now the Co-CEO, yeah. They
view themselves as much as sort of partners than anything else. And if
you go back and for example you listen to Larry Ellison at OracleWorld,
one of the few peers he had positive things to say about was Microsoft
where he said Satyas doing the right things and making progress.

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Q3 2014 FPA Crescent Fund Conference

(52:04) So what is our view? Look, we like Microsoft; we like

Oracle. Theyre both two of our larger positions. We added Oracle and a
little sell-off a couple weeks ago, so its probably the second first
Steven:

I think its the largest.

Mark L.:

maybe the largest what we can disclose. So, look, we like Oracle. And
if youd like to see an in-depth discussion, I believe we went through it
several quarters ago, and you could find the quarterly transcript that takes
one through the investment thesis, which largely hasnt changed.

Steven:

What didnt come clear in the discussion of the question was the premise
was that Microsoft was taking share from Oracle. And thats why Mark
was saying its not relevant.

Mark L.:

Right. Theres a question: are we finding opportunities in small-cap U.S.

equities? Weve not been seeing anything in

Brian:

I mean, I think a point worth noting is that were aware and our research
reflects the fact that smaller companies and mid-cap companies have
been underperforming on a mark-to-market basis. And I think that,
different from two or three years ago, a much greater focus of the
research efforts are on small- and mid-cap companies. It has not yet been
reflected in the portfolio, but it is in the work process.

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Q3 2014 FPA Crescent Fund Conference

Mark L.:

We actually have some names that have been added would be smallcap companiesnot within the U.S., so these would be international. But
theres been additions year-to-date in that category, and even adding
most recently yeah, and mid as well.

Steven:

Theyre asking about for for-profit education companies. We dont have a

view. You can have the next one too; its a comment and the one above is
a comment.

Brian:

Steve can answer the CNQ.

Steve:

(54:07) Yeah, we shorted (XLE and XLP), when you comment on what
makes our cap allocation strategy superior, first off in the (XLE the XLP?),
we shorted out awhile back the Oxy in particular is in the midst of a
major restructuring. Youve seen they have a lot of different kinds of
assets around the world, and youve seen them sell off the domestic
assets. Theyre spinning off their California nonconventional assets. You
have them they owned a general partnership interest GP interest in
Plains All American Pipeline, and they sold a chunk of that. They have
more to sell there that they said that they would sell. Theyre going to sell
off a portion in the Middle East. Theres a bunch of capital theres a
bunch of M&A thats coming there. And so when that happens, we felt

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Q3 2014 FPA Crescent Fund Conference

with the view that there should be some capital value creation as a result
of that versus these indices.
And CNQ weve owned for quite some time, and its also not a
terribly large position. It actually has worked out, and its about incredible
depths of reserves. And (what admittedly needs @ 55:28) for CNQ, one
needs higher oil prices out there for that to continue to work.
Mark L.:

So theres a question here about the research library of high quality stock.
How many companies do you have on the shelf today? Ill say generally
theres several hundred companies that we follow, if not more than that.
Theres different degrees of research thats been done on each. Some
have been fully worked up over time. Some we might meet with on a
regular basis once a year, were reading the transcripts four times a year,
were reading the transcripts of competitors on a regular basis, annual
reports, initiation (56:06). So there is some disparity between ones Ill say
that were about a week away on and some where we might need a little
bit longer to make sure we dot the Is and cross the Ts. But in the total
universe, Ill call it, of high quality stocks that we think wed be ready to go
in a fairly short order, it would be in the hundreds.
And then theres a question: was there high-quality stock that
dropped in price, then you updated your research in response to the price

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Q3 2014 FPA Crescent Fund Conference

change, and you didnt buy as the fundamentals changed? I think Tesco
is probably Im not going to say we thought it was a compounded sort
of straddle as higher-quality. We (inaudible @ 56:42) sort of definitely
higher-quality than it was. We thought there was maybe value in the
(excess?) real estate, so on and so forth. And without a doubt our
assessment of the situation changed, and we actually didnt really buy
Tesco down even when it first started dropping Christmas ago or sorry,
January two years two, three years ago two years ago?
Brian:

Yeah, two 12. It was early 12 when it

Mark L.:

So thats a name in response to the pricing. It had a weak Christmas. We

just immediately sort of said the low case looks like its playing out. Lets
reassess the situation. As we then reassessed. We then add. And then
ultimately, as we mentioned earlier, we exited.
Whats your view on defense companies? We actually looked at
defense companies in some depth back in

Brian:

Deep regret is our view on defense companies.

Mark L.:

We looked at them in depth 2009/10.

Brian:

10, yeah.

Steven:

(inaudible @ 57:45).

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Q3 2014 FPA Crescent Fund Conference

Brian:

Yeah, deep regret is what I would say. We owned some exposure to

defense through a couple of aerospace companies. But in terms of
outright the primes, the integrated defense primes, I would say that we
just didnt pull the trigger, and it was a mistake.

Mark L.:

(58:04) Theres a question: what is the quickest from idea generation to

pulling the trigger? It really depends on our familiarity with the company,
with the industry, so on and so forth. Generally speaking, you shouldnt
think of us as quick trigger-pullers. Were a little more pragmatic in going
about

Brian:

And I think its important to give the idea, or get at the concept, most ideas
are not generated spontaneously or something. We dont walk down the
stairs and all of a sudden, hey, Ive never heard of this company or this
industry. What happened? Its a new idea. I think theyre almost all at this
point things that weve thought about in one form or anotherwhether the
specific business, the industry, or the commodity. And so from seeing
something that is cheap to pulling the trigger can be very, very quick, but
its not kind of a de novo idea.

Steven:

I think, Mark, weve reached the hour mark. So any other questions that
theres just a few left If there are any other questions that havent been
answered that you want to get a response, then give Mark Hancock a call.

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Q3 2014 FPA Crescent Fund Conference

Hell certainly get those answers to you, get you in touch with the right
person. So, Mark?
Brian:

Ill say just the one thing. So there is a question here, probably the person
who asked who made a comment about a question. Someone asked:
can you give an example of a good question? What insightful question
would like to see or suggest listeners should ask? I probably will just say
we do see a lot of questions about the economy. Generally speaking, we
dont have a house view on these issues. We dont spend more than five
minutes a quarter discussing these issues, and unfortunately we dont
have much we can do to help you when you do have these questions. We
can offer our thoughts, but theyre not worth the air that sort of comes out
of our mouth. Were really bottom-up investors at heart.
So I think another way to say it is: anything that helps you that is
not about the economy or an inherently unknown an unknowable is a
good question.

Steven:

(60:00) We try and answer all of these questions. We try and bring
everything back to philosophy and process. And so any question that
allows us to do that, that would be advantageous, we believe, to educate
our shareholders. Since we dont since analyzing the economy, for
example, is not part of our process, we just dont have a lot to say.

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Q3 2014 FPA Crescent Fund Conference

Mark L.:

And the other thing we Brian and I were in New York this past week,
and we saw one of our peers at a very well known shop we hold in high
regard. Ill say Mr. Buffet holds in high regard and has in the past as well.
Thats a hint. And we both were commiserating that theres these public
conference calls, and people want you to open your kimono and talk
about why you love a company. And were all here hoping we get to add
to these companies on weakness, so the last thing we want to do is shine
a spotlight as to why we like a company because it may make it more
difficult for us to average down in the future.
That said, what were always trying to do in an intelligent manner
and to help you do your jobs to understand how your capital is being
managed is explain to you why we own what we do. Now were much
more comfortable doing that when we have full positions in a name. And
at that point, weve bought so much that all we really want to do is pray it
goes up not more than down. I think thats when were most amenable to
sharing. Its not that were trying to be evasive or dodge your questions.
Its just that really we wake up each day hoping these companies go down
rather than up. And I think because were a larger fund, maybe there are
some people who read these calls or listen to them (inaudible @ 61:29).

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Q3 2014 FPA Crescent Fund Conference

Mark H.:

And with that, we will conclude todays conference call because the rest
could be dangerous. (62:00) Thank you all for listening today and
participating in our third quarter Crescent 2014 webcast. We invite you,
your colleagues, and clients to listen to the playback and review the slides
from todays webcast, which will be available on our website. I will
reiterate weve had a number of people ask us if slides will be available.
The audio and the visual aspects of day will be available on our website in
a few days. So you dont need to ask the question. They will be on
fpafunds.com in the days to come.
Following todays webcast, youll have the opportunity to provide
your feedback. We highly encourage you to complete this portion of
webcast, as we take into consideration your constructive criticism. Its
important to us to know what our clients think.
Please visit fpafunds.com in the future for webcast information
including our replays. We will post the date and time of the prospective
webcast during the latter part of each quarter and expect the calls, as is
the case today, to be held three to four weeks following each quarter end.
We hope that our shareholder letters, commentaries, and these
conference calls will help you keep you, our investors and advisors to our
underlying investors, appropriately updated about the Fund.

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Q3 2014 FPA Crescent Fund Conference

We do want to make sure that you understand that the views

expressed on this call are as of today, October 29th, 2014, and are
subject to change based on market or other conditions. These views may
differ from other portfolio managers and analysts of the firm as a whole,
and are not intended to be a forecast of future events, a guarantee of
future results, or investment advice. Any mention of individual securities or
sectors should not be construed as a recommendation to purchase or sell
such securities, and any information provided is not a sufficient basis
upon which to make an investment decision. The information provided
does not constitute nor should not be construed as an offer or solicitation
with respect to any securities, products, or services discussed.
Past performance is not a guarantee of future results. It should not
be assumed that the recommendations made in the future will be
profitable or will equal the past performance of the security examples
discussed. Any statistics have been obtained from sources believed to be
reliable, but the accuracy and completeness cannot be guaranteed.
(64:02) You may request a prospectus directly from the Funds
distributor, UMB Distribution Services LLC, or from our website,
fpafunds.com. Please read the prospectus and the Contrarian Value

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Q3 2014 FPA Crescent Fund Conference

Policy Statement carefully before investing. FPA Crescent Fund is offered

by UMB Distribution Services LLC.
Again thank you for your participation in todays webcast. This
concludes the webcast.
[END FILE]

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