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INVESTMENT OPPORTUNITY PRESENTATION

3rd Dec 2013

Table of Contents
Investment Team
Investment Philosophy

3-4
5

Methodology & Investment Process

6-8

Representative Portfolio

9-15

Operations

Q&A
Appendix

16-17

18
19-27

Organizational Structure
Brian Garcia,
CFA

Harsh Sharma
Portfolio Manager

Portfolio Manager

David Tao

Walter Hyde
Accounting Manager

Client Service Officer

Investment
Team

Philosophy

Process

Portfolio

Operations

Louis Civitarese
Compliance Officer

Investment Team
John Menke
Consumer
Staples, Utilities
Ian Melonuk,
CPA
Consumer
Discretionary,
Materials

Investment
Committee

Xiakai Cheng,
MD
Health Care,
Financials

Investment
Team

Philosophy

Process

Shantong Zhang
IT, Telecom

Lifan Yang, CFA


Energy,
Industrials

Portfolio

Operations

Investment Philosophy
Growth orientation, but at a reasonable price
Diversified portfolio of 30-50 stocks
Go anywhere style

Flexible market capitalization restrictions


Process-driven
Utilize fundamental research to verify quality of financial

statements
Risk management through Northfield Risk Modeling

Investment
Team

Philosophy

Process

Portfolio

Operations

Methodology & Investment Process


Create Investment Policy Statement
Universe Screen
Fundamental Research & Risk Management
Decision-making & Construction of the portfolio
Ongoing Monitoring

Investment
Team

Philosophy

Process

Portfolio

Operations

Methodology & Investment Process


Universe: United States Stocks

13,000 Stocks

Market cap >$1B


ROE>20%
350-400 Stocks
5 year annualized sales
growth > 10%
80 - 120 stocks, to be
researched by analysts
Investment
Team

Philosophy

Process

Portfolio

Operations

Risk Management
Northfield Risk Modeling
Standard Deviation
Information Ratio

Operations
Asset Allocation
Rebalancing

Comply with guidelines and objectives set forth in RFP


Adhere to CFA Code of Ethics and Standards of

Professional Conduct
Investment
Team

Philosophy

Process

Portfolio

Operations

Strategy Backtest
Backtest S&P 500
1-Year
3-Year
5-Year
10-Year
Since Incept
(Feb 2002)

41.2%
19.1%
20.8%
11.6%
11.2%

27.2%
16.6%
15.2%
7.5%
5.9%

Std
Dev

Backtest
S&P 500

R-Sq

Tracking Sharpe Info Positive Negative Up


Down
Error Ratio Ratio Months Months Market Market

Beta

18.80

0.82

1.09

8.0%

0.55

0.96

61.8%

38.2% 129.7% 96.4%

15.27

1.00

1.00

0.0%

0.35

0.00

64.5%

35.5% 100.0% 100.0%

Growth of $10,000
$45,000

$40,000
$35,000

$30,000
$25,000

$20,000
$15,000
$10,000
$5,000

Backtest

Investment
Team

Philosophy

Process

Portfolio

Operations

S&P 500

2013

2013

2012

2012

2011

2011

2010

2010

2009

2009

2008

2008

2007

2007

2006

2006

2005

2005

2004

2004

2003

2003

2002

2002

2001

$0
2001

25.3%
16.0%
2.1%
15.1%
26.5%
-37.0%
5.5%
15.8%
4.9%
10.9%
28.7%
-20.9%

2000

34.1%
14.0%
0.7%
26.6%
43.8%
-44.1%
17.0%
13.0%
16.3%
20.5%
39.5%
-7.4%

2000

YTD
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002

10

Representative Portfolio
3,080

0.74

8.15

23.86

3-Yr EPS
Net
Portfolio
Growth
Margin
Weight
(%)
TTM (%)
(%)
26.62
19.74
10.63
5.00

467,684

1.38

15.59

32.11

45.49

37.92

21.67

2.78

3,176

1.84

30.44

24.15

11.17

26.87

10.08

5.00

Healthcare

67,303

1.12

19.33

25.79

31.40

23.30

24.23

2.78

Chipotle Mexican Grill, Inc. Class A

Consumer Discretionary

16,632

1.97

34.06

22.30

20.26

30.33

10.07

1.39

Cirrus Logic, Inc.

Technology

1,231

0.41

-0.62

26.28

18.55

50.52

17.18

2.78

Cognizant Technology Solutions Corporation Class A

Technology

28,169

1.07

22.60

24.22

28.03

24.60

14.02

2.78

Continental Resources Inc

Energy

20,840

0.63

43.66

22.64

34.60

118.03

25.63

2.78

Credit Acceptance Corporation

Financial Services

2,898

0.61

10.01

39.34

20.49

23.02

37.10

5.00

CVR Energy, Inc.

Energy

3,181

1.00

23.58

46.40

23.63

76.08

5.13

2.78

Erie Indemnity Company Class A

Financial Services

3,250

2.14

15.97

22.93

37.24

14.00

2.64

5.00

Gilead Sciences Inc

Healthcare

113,882

0.81

17.00

30.72

18.06

-0.56

28.55

2.78

HollyFrontier Corp

Energy

9,233

0.74

24.65

27.30

33.20

345.51

5.20

2.78

InterDigital Inc

Communication Services

1,355

0.89

20.57

53.80

23.14

46.05

12.49

2.78

Intuitive Surgical, Inc.

Healthcare

14,834

2.01

34.26

20.73

29.39

41.33

29.58

2.78

IPG Photonics Corporation

Technology

3,755

1.17

45.65

20.76

24.42

199.10

24.57

2.78

Joy Global, Inc.

Industrials

5,858

0.95

11.92

26.15

17.32

18.79

13.26

2.78

Las Vegas Sands Corp

Consumer Discretionary

57,800

1.43

26.44

23.10

30.41

62.76

19.00

1.39

Marathon Petroleum Corp

Energy

24,157

1.33

12.30

29.82

21.80

2.64

10.52

2.78

Monster Beverage Corp

Consumer Staples

9,611

1.47

25.84

31.75

17.90

17.67

15.18

5.00

Myriad Genetics, Inc.

Healthcare

2,152

1.14

20.92

21.57

25.85

-1.14

25.28

2.78

NIC, Inc.

Technology

1,501

1.52

35.29

39.11

19.75

23.61

14.03

2.78

O'Reilly Automotive Inc

Consumer Discretionary

13,495

1.09

19.73

27.00

19.64

23.96

9.99

1.39

Outerwall Inc

Consumer Discretionary

1,874

1.03

24.81

29.43

32.15

40.96

7.67

1.39

Portfolio Recovery Associates, Inc.

Industrials

2,875

1.18

14.05

21.23

21.84

41.90

23.50

2.78

Priceline.com, Inc.

Consumer Discretionary

59,604

1.02

24.84

35.67

30.14

42.61

27.99

1.39

Questcor Pharmaceuticals, Inc.

Healthcare

3,593

0.31

19.68

104.32

59.22

95.07

36.92

2.78

Raven Industries, Inc.

Industrials

1,406

2.43

19.79

26.20

11.89

22.70

12.90

2.78

SolarWinds, Inc.

Technology

2,472

1.00

28.20

22.19

34.22

40.20

29.20

2.78

Steven Madden Ltd

Consumer Discretionary

2,652

2.26

15.15

20.57

23.27

33.65

10.05

1.39

Sturm, Ruger & Company

Industrials

1,487

0.46

11.95

62.42

25.74

36.94

16.12

2.78

Tractor Supply

Consumer Discretionary

10,216

1.38

20.28

26.88

10.61

32.17

6.19

1.39

TransDigm Group Inc

Industrials

7,821

1.62

21.97

24.16

23.46

22.82

6.19

2.78

Ubiquiti Networks Inc

Technology

3,676

1.00

32.80

70.83

32.80

54.33

27.80

2.78

Ulta Salon Cosmetics & Fragrances, Inc.

Consumer Discretionary

8,182

1.81

35.18

25.25

18.66

63.67

7.74

1.39

United Therapeutics Corporation

Healthcare

4,688

1.03

35.18

24.83

34.14

150.10

26.90

2.78

Name

Sector

AmTrust Financial Services, Inc.

Financial Services

Apple Inc

Technology

Boston Beer Company, Inc. Class A

Consumer Staples

Celgene Corporation

Investment
Team

Philosophy

Process

Market Cap
($mil)

Portfolio

PEG Ratio

P/E Ratio
5 Yr Avg

Operations

ROE TTM
(%)

5-Yr Rev
Growth (%)

11

Representative Portfolio
0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Consumer Discretionary

12.0%

14.0%

16.0%

11.1%

Consumer Staples

10.7%

Energy

10.5%

Financial Services

17.1%

Health Care

12.9%

Industrials

10.8%

Information Technology

16.7%

Materials

3.5%

Telecom

3.7%

Utilities

Sample Portfolio

S&P 500

3.1%

Materials, 0%

Telecom, 3%

Information
Technology,
19%

Industrials,
14%

Health Care,
17%
Investment
Team

18.0%

Philosophy

Utilities, 0%

Consumer
Discretionary,
11%
Consumer
Staples, 10%

Energy, 11%

Financials,
15%

Process

Portfolio

Value

Core

Growth

Large

15

Mid

21

23

Small

12

23

Operations

20.0%

12

Questcor Pharmaceuticals, Inc. (QCOR)


Current Price: $56.53
Sector: Healthcare

Screen:
Market Cap
ROE
5 yr Rev Growth

Performance Versus Industry

$3.4B
104.32%
59.22%

Stock Price Performance - 5 year period

Investment
Team

Philosophy

Process

Portfolio

5 yr growth estimate (consensus)


Margins:
Gross
Operating
Pre-tax
5 year average ROE
PEG Ratio
Forward P/E
P/E
EV/EBITDA

Operations

QCOR Industry
31%

22%

94%
58%
58%
106%
0.35
8.54
13.03
7.95

74%
19%
10%
19%
2.18
24.87
54.47
30.23

13

Questcor Pharmaceuticals, Inc. (QCOR)


Biopharmaceutical company that markets two major drugs- H.P.

Acthar Gel and Doral, to treat serious autoimmune conditions and


insomnia, respectively.
Acthar shipments have grown on average 42% over the past 4 years
and shipments are projected to 15% in 2013 YoY.
Fundamentals are very attractive, as seen by average operating
margin of over 51% in the last 6 years, and the company operates on
very little debt outstanding.
June 2013, acquired the drug Synacthen from Novartis. The drug is
not currently FDA approved for distribution in U.S. but provides
growth opportunity in international markets.
Investment
Team

Philosophy

Process

Portfolio

Operations

14

Las Vegas Sands Corp (LVS)


Current Price: $70.77
Screen:
Market Cap
ROE
5 yr Rev Growth

Sector: Consumer Discretionary

$57.8B
23.10%
30.41%

Performance Versus Industry

Stock Price Performance - 5 year period

Investment
Team

Philosophy

Process

Portfolio

LVS

5 yr growth estimate (consensus) 17%


Margins:
Gross
45%
Operating
22%
Pre-tax
19%
5 year average ROE
21%
PEG Ratio
1.43
Forward P/E
19.66
P/E
26.44
EV/EBITDA
15.73

Operations

Industry
11%
54%
15%
8%
15%
4.01
25.99
23.88
14.16

15

Las Vegas Sands Corp (LVS)


Sands is best positioned to exploit growth opportunities in the

attractive Asia casino market, with a dominant position in Singapore


(about 50% share) and a strong competitive position in China (above
20% share).
Sands current operations positions it well to receive licenses in
countries that are expected to legalize casino gambling in the next
several years, including Japan, Taiwan, and South Korea.
The company has a strong economic moat, thanks to its possession of
one of only two licenses to operate casinos in Singapore and one of
six licenses to operate casinos in China.
Investment
Team

Philosophy

Process

Portfolio

Operations

16

Operations
Daily flash report
Weekly performance update
Monthly detailed performance

and attribution analysis


Quarterly client service meeting
CFA Institute Code of Ethics and Standards of Professional

Conduct
Xiakai Compliance Officer
Custodian and broker/dealer State Street Bank
Investment
Team

Philosophy

Process

Portfolio

Operations

17

The Right Team


Client focused meeting the Endowments needs

Bottom-up approach, well-defined strategy


Diverse and experienced team

18

19

Appendix

20

Market Commentary
Dow above 16,000!
U.S. central bank has repeated it will not taper until the economy can stand on

its own
Interest rates will remain low in the near term.

There is now some possibility of Fed scaling back its $85 billion a month in

quantitative easing.
Inflation is well controlled considering the scale of money printing, and real
GDP growth advances.
Unemployment statistics continues to present a bullish case.
Investors are cautious - this round of the bull market likely has not reached its
end.

21

Market Commentary
Unemployment Rate

Steadily decreasing at 0.7%/yr


since 2010 October.
Total nonfarm payroll
employment rose by 204,000 in
October.
Unemployment rate currently at
7.3%.

Employment increased in a
majority of industries.
Room to grow & potential
concern.

22

Market Commentary
Inflation & Real GDP Growth

Historically low inflation


Increasing GDP

Fed looking to taper

23

Sample of Statement of Account

24

Research Example

25

Ubiquiti Networks
ROE: 70.83%
Revenue Growth(3 year average):
Ubiquiti Networks is a technology company
39.94
started in 2005. Based in San Jose,
Net income Growth(3 year
California they are a manufacturer of
average): 54.33
wireless products whose primary focus is on Net Margin: 27.8%
under-served and emerging markets.
P/E: 34.8
Higher growth rate and net margin
ratio than the industry average.
Wins Product of the Year for airFiber
Platform
High growth stock to boost portfolio
performance

Source: Morningstar

Year

2011-06

2012-06

2013-06

TTM

EPS

0.48

-0.12

0.89

1.21

26

Celgene Corp
ROE:25.8%
Celgene Corp is a global biopharmaceutical Revenue Growth(3 year average):
27.0%
corporation focusing on the discovery, the
Net income Growth(3 year
development, and the commercialization of
average): 23.3%
products for the treatment of cancer and other
Net Margin: 24.2%
severe, immune, inflammatory conditions.
P/E: 46.9
Higher growth rate and net margin
than industry average.
Pipeline consists of more than 25
unique compounds addressing more
than 30 disease areas ranging from
multiple myeloma to solid tumor.
Strong cash flow to support future
acquisitions.
Source: Morningstar, Celgene website

Year

2008

2009

2010

2011

2012

EPS

(3.46)

1.66

1.88

2.85

3.30

27

Raven Industries
Raven Industries is a conglomerate with
divisions that manufacture high-precision
agricultural electronics, specialty plastic
sheeting, tethered aerostats, high-altitude
balloons, surveillance equipment, and radar
systems.
Higher than industry average sales
and EPS growth
Strong cash flow
Clean balance sheet
Increasing dividends (payout rate
~30%)

Source: Standard and Poors, Raven Industries

ROE: 26.2%
Revenue Growth(3 year): 19.7%
Net income Growth(3 year): 22.7%
Net Margin: 12.9%
P/E: 26.9

Year

2008

2009

2010

2011

2013

Sales(M)

280

238

315

382

406

EPS

0.85

0.79

1.12

1.39

1.44