Wealth Asset Management

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Wealth Asset Management Hedge Long/Short Equity
Strategy Long Only Strategy Prepared For
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Table of Contents

• Firm Overview (p. 2)
• Investment Philosophy (p. 3-4)
• Investment Approach (p. 5)
• Valuation example for Long Dated Calls Why we
  own Coke (KO) in-the-money calls (p. 6-9)
• Performance (p. 10)
• Saddle Peak vs. SP Index (p. 11)
• Performance Distribution (p. 12)
• VAMI Chart (p. 13)
• The Hedge Fund (p. 14)
• Performance History (p. 15)
• Top Ten Holdings (p. 16)
• Asset Allocation (p. 17)
• Long Only (p. 18)
• Performance History (p. 19)
• Top Ten Holdings (p. 20)
• Sector Weightings (p. 21)
• Firm Organization (p. 22)
• Biography (p. 23)
• Contact Information (p. 25)

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Firmwide Overview

• Saddle Peak Asset Management was founded by
  Douglas Grey in 2005
• Financial - Wall Street Experience
• Douglas Grey 20 Years
• Saddle Peak Asset Management is involved in Two
  Investment Strategies which includes the
  following
• Hedge Fund
• Traditional Long-Only

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Investment Philosophy

• We are long term fundamental value investors. We
  purchase equities from all market capitalizations
  (multi-cap manager). We concentrate our
  investments on our best ideas. The relationship
  between price and intrinsic value is the primary
  factor in determining weightings for portfolio
  construction. Our hedging strategy is
  straightforward. We buy put options on overvalued
  companies and or indices. We do not like to lose
  money. We are opportunistic investors not
  traders. Likewise, we purchase long term call
  options (which are priced on volatility) when
  they are cheap relative to their intrinsic value.
  
• The accompanying presentation package
  communicates our views on risk. As investors our
  value added is a function of our return relative
  to our stock picking risk. This long term risk is
  small as long as we buy a dollar of intrinsic
  value at a discount. The market risk is always
  present, but is reduced through the use of put
  options.

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Investment Philosophy
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• Our package details the funds performance during
  down markets (market risk on a monthly basis).
  The cumulative return in these periods is a
  function of our ability to preserve capital when
  the market is declining. However, unlike some
  value investors we are optimists at heart so we
  stay more fully invested. It is the efficiency of
  our put options which allow a more fully invested
  position. From inception, our fund has grown as
  our investments have appreciated. The rate of
  growth in the future will be most affected be our
  value added stock picking.
• In Summary Saddle Peaks fund is unique in the
  hedge fund world for its combination of
  fundamental long term value investing while
  controlling market risk. Our results to date show
  a glimpse of our value added.

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Investment Approach

• Classic Value Equity Style
• Buy with a Margin of Safety
• Sell at Intrinsic Value
• Concentrate on Best Ideas
• Hedge Fund Put Options / Cash Buffer
• Long term call options
• Long Only Cash Buffer

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Coke Valuation Example

• LONG DATED CALLS
• WHY WE OWN COKE (KO) IN-THE-MONEY CALLS
• In todays turbulent market, we at Saddle Peak
  wanted to give you a live look at our valuation
  of Cokes long dated in-the-money calls, which we
  own.  Attached is our Dividend Discount Cash Flow
  Model (Coca-Cola DDM).  With our terminal P/E at
  17, we are in line with the graph below,
  highlighting P/Es dating back to 2002.  With a
  terminal P/E at 17, we feel it is justified given
  the history above 20. 
•                 We have also attached our DDM
  analysis legend for your reference (DDM Legend).

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Coke Valuation Example
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• Conclusions
• Coke is cheap, given any realistic assumption. 
  The company says the price is irrationally cheap
• Coke is Buffetts largest position
• New huge insider purchase of 20 million of stock
  by Barry Diller, Board of Directors
• New share repurchase plan soon to be announced. 
  Historically, the company paid 50 more than
  current stock price
• Regardless of your market feelings, the rational
  conclusion is own Coke
• In closing, we hope you find this analysis both
  useful and informative.  Saddle Peak prides
  itself on determining intrinsic value for each of
  our stocks within our portfolio, thus, utilizing
  the aforementioned DDM. 

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Coke Valuation Example
Dividend Discount Model
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Coca Cola Company (KO)
Long Term Growth Rate
Value
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Coke Valuation Example
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• DDM
• Dividend Discount Model Cash Flow Analysis
  Legend
• IBES 2009 Earnings estimate by Wall Street
• Base Year EPS Our interpretation of what they
  will earn with analyst input
• EPS Earning Per Share
• Base Year DPS Years pay out of Dividend Per
  Share
• DPS Dividend Per Share, the company will pay
  out 50 of what they earn, which is why growth is
  so important
• Current Yield Dividend divided by share price
• Risk Free Rate long term treasury bond rate
• Equity Risk Premium Individual companies risks
  for growth
• 2.5 is the best the higher the worse
• Discount Rate Risk Free Rate plus Equity Risk
  Premium
• The rate in which we discount cash flow
• Current Fed P/E Earnings multiple from current
  to future (the beauty factor of company)
• Terminal P/E Earning ten years from now
  (projected EPS growth)
• Projected EPS Growth Our estimate along with
  the company and analyst estimate
• Price/Value Current price divided by total
  value

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Performance / Fund Statistics
Table provided by Cogent Hedge reports
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Saddle Peak vs. SP Index
Change of Saddle Peak Fund vs. SP Index
Saddle Peak Investments L.P. Inception date
01.20.06 Most current performance data 6.30.09
Graph provided by Cogent Hedge reports
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Performance Distribution
Performance Graph
Hedge Strategy Inception date 01.2006 Most
current performance data 6.30.09
Graph provided by Cogent Hedge reports
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Saddle Peak Fund Performance
The Value of 1,000 Invested from Inception
through June 30, 2009
Hedge Strategy Inception date 01.2006 Most
current performance data 6.30.09
Graph provided by Cogent Hedge reports
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The Hedge Fund

• The Hedge is a long/short equity fund. Its
  principal investments are U.S. common stocks,
  options and options on broad-based securities
  indices. The investment process is a
  concentrated multi-cap value strategy and biased
  toward long positions. The strategy seeks to
  acquire positions in undervalued companies where
  the value of the companys assets and/or earning
  power are not accurately reflected by the
  companys current market price. In declining
  markets or as otherwise deemed appropriate, the
  Fund may engage in short selling and purchase put
  options on individual stocks, market indices and
  industries to offset long equity positions.

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The Hedge Fund
Performance History June 30, 2009
(1)
(2)
Management and Performance Allocation
Annualized Return, Inception Date January 3, 2006
(1)
(2)
The SP 500 Index is an unmanaged,
capitalization-weighted index of the common
stocks of 500 major US corporations. The
performance information provided herein is
historic and should not be taken as any
indication of future performance. Future
investments will be made under different economic
conditions and may be made in different
securities using different investment strategies.
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The Hedge Fund
Top Ten Holdings June 30, 2009
Note Portfolio holdings are subject to change
without notice.
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Asset Allocation
Saddle Peak (the Fund) Quarterly Asset
Allocation (June 30, 2009)
Note ( ) states we were on margin
Calls are generally In The Money. They are
contracts that have one or more years until
expiration at purchase.
Saddle Peak (the Fund) is a separately managed
fund of Saddle Peak Asset Management, LLC.
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Long-Only
The principal investment for the Long-Only
strategy is U.S. common stocks. The investment
process is a concentrated multi-cap strategy.
The strategy seeks to acquire positions in
undervalued companies where, in the Advisers
opinion, the value of the companys assets and/or
earning power are not accurately reflected by the
companys current market price.
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Long-Only
Composite Performance History June 30, 2009
(1)
(2)
Results shown for the year 2006 represent partial
period performance from February 1, 2006 to
December 31, 2006. In addition, the returns for
this period have been revised due to a change in
performance calculation methodology regarding the
treatment of cash flows. Additional information
regarding the change is available upon
request. Annualized Return, Inception Date
February 1, 2006
(1)
(2)
The SP 500 Index is an unmanaged,
capitalization-weighted index of the common
stocks of 500 major US corporations. The Russell
3000 Value Index offers investors access to the
broad value segment of US equity value universe.
The Russell 3000 Value Index is constructed to
provide a comprehensive and unbiased barometer of
the broad value market. The performance
information provided herein is historic and
should not be taken as any indication of future
performance. Future investments will be made
under different economic conditions and may be
made in different securities using different
investment strategies. Please refer to the full
disclosure presentation found at the end of this
presentation.
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Long-Only
Composite Top Ten Equity Holdings June 30, 2009
Note Portfolio holdings are subject to change
without notice. The holdings above are shown as
supplemental information and complement the full
disclosure presentation found at the end of this
presentation.
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Long-Only
Composite Sector Weightings June 30, 2009
Based on GICS (Global Industry Classification
Standard). Portfolio holdings are subject to
change without notice.
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Firm Organization
Saddle Peak Executive Management
Partner / Portfolio Manager
Partner
Douglas W. Grey
Scott H. Morris
Investment Research / Operations
Trading / Client Accounting
Research Analyst
Rad Nakama
Josh Lipman
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Biography

• Douglas W. Grey
• Founder / Partner
• Before founding Saddle Peak Asset Management,
  LLC, Mr. Grey was a Portfolio Manager at Pacific
  Financial Research. He was one of the
  co-managers of the Clipper Focus Fund with the
  responsibility for rebalancing the portfolio. At
  his departure the fund had grown to 17.7
  billion. In the year 2000, he shared Morningstar
  Manager of the Year honors with the other Clipper
  Funds portfolio managers. His institutional
  accounts varied from major US corporations to
  college endowments to private families. The
  accounts had a long duration with Pacific
  Financial Research and inception dates back to
  1990 and the late eighties. The accounts varied
  from discretionary balanced accounts to fully
  invested all equity accounts. Mr. Grey is known
  for his passion for value investing and has
  taught the Investment course at Pepperdine
  University. From his start at Pacific Financial
  Research in 1986 until his departure in 2005,
  Pacific Financial Research had grown from just
  over 1 billion to 17.7 billion. He believes
  clients absolute return is the foundation of
  success. Mr. Greys educational background
  includes an MBA from the University of Chicago
  and undergraduate majors in Mechanical and
  Materials Engineering and Economics (Vanderbilt
  University).

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SADDLE PEAK ASSET MANAGEMENT, LLC LONG-ONLY
COMPOSITE FULL DISCLOSURE PRESENTATION
The Long-Only Composite is comprised of
discretionary, fee paying, equity only accounts.
The principal investments for the Long-Only
strategy are U.S. common stocks. The investment
process is a concentrated multi-cap strategy.
The strategy seeks to acquire positions in
undervalued companies where, in the Advisers
opinion, the value of the companys assets and/or
earning power are not accurately reflected by the
companys current market price. The composite is
measured against the SP 500 (Total Return) and
the Russell 3000 Value Indices. Saddle Peak
Asset Management, LLC has prepared and presented
this report in compliance with the Global
Investment Performance Standards (GIPS). Saddle
Peak Asset Management, LLC is an independent
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.
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. Prior to 06/30/08,
gross returns are shown net of all wrap fees and
gross of the investment management fee. Wrap
fees are based upon assets under management in
accordance with the respective wrap sponsor. In
addition to brokerage commissions the wrap fee
also includes portfolio monitoring, custodial and
administrative services. Net returns are reduced
by all fees (including the investment management
fee as detailed herein) and transaction cost
incurred. The annual composite dispersion
presented is an asset-weighted standard deviation
calculated for the accounts in the composite the
entire year. Additional information regarding
the policies for calculating and reporting
returns is available upon request. The
investment management fee schedule for the
composite is 1 on the first 5,000,000, 0.90 on
the next 5,000,000, 0.80 on the next
5,000,000, and 0.70 on the remainder. Actual
investment advisory fees incurred by clients may
vary. The Long-Only Composite was created
February 1, 2006. Saddle Peak Asset Management,
LLCs compliance with the GIPS standards has been
verified for the period January 1, 2006 through
December 31, 2008 by Ashland Partners Company
LLP. In addition, a performance examination was
conducted on the Long-Only Composite beginning
February 1, 2006. A copy of the verification
report is available upon request.
(1) Results shown for the year 2006 represent
partial period performance from February 1, 2006
through December 31, 2006. (2) Information is not
statistically meaningful due to an insufficient
number of portfolios in the composite for the
entire year.
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SADDLE PEAK ASSET MANAGEMENT, LLC
1299 Ocean Avenue, Suite 313 Santa Monica, CA
90401 Tel [phone] Fax (310)
656-7601 For additional information please
contact Scott Morris smorris_at_saddlepeakam.com
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