1. 1
Small Cap Focused Growth
Portfolio Manager Commentary
3rd Quarter 2015
The third quarter was a difficult one for small cap stocks broadly as well as for the GIM Focused
Growth strategy. The Russell 2000 Growth benchmark was down 13.1% and the GIM Small Cap
Focused Growth strategy composite was down 13.6%. Below I discuss performance for the third
quarter and share our view of the portfolio's positioning going forward.
Third Quarter Performance
As noted above, the portfolio fell 13.6% in Q3, underperforming the benchmark by 0.57%. While
the margin of underperformance in the quarter is not huge, it is disappointing. This is particularly
so since the portfolio benefitted from a 1.23% tailwind in Healthcare, as biotechs reversed their
long period of outperformance toward the end of Q3. Recall that we don't typically own biotech or
med-device stocks in the Focused Growth strategy, as they fall outside the philosophy of the
product: We believe that by investing in sustainable growth companies within my areas of
expertise, we can generate strong absolute, relative, and risk-adjusted returns.
In the quarter, the main cause of the portfolio's underperformance relative to the benchmark was a
difficult Q2 earnings report season for a number of our portfolio companies in several sectors
(companies typically report Q2 between mid-July and mid-August). Every earnings season
inevitably carries its share of surprises. This one, however, saw an unusually high number of
portfolio companies reporting negative surprises, and they came in the midst of a stock market
environment in which misses of any kind were severely punished. For example, within Producer
Durables, Power Solutions (PSIX, a manufacturer of natural gas and other alternative engines) fell
58%, as weak demand led the company to miss Q2 results and significantly cut forward estimates.
While the demand drivers for Power Solutions are in flux short-term, we continue to hold PSIX
shares, as the intermediate and long-term outlook and risk/reward appear favorable. Taser
International shares (TASR - Smart Weapons and On-officer video cameras, and its related
Evidence.com software platform) fell 34% in the wake of good Q2 results but lower-than-
consensus Q3 guidance. Taser's business has its natural ebbs and flows, but we believe the
company is well-positioned to sustain 15%+ growth; we purchased shares in TASR on the
weakness. In Consumer Staples, FreshPet Inc. (FRPT - all natural fresh and refrigerated pet food)
saw its stock drop 43% as the company revealed that the number of fridge-additions/stores would
be below expectations in 2015. This in turn led to estimate cuts and investor concerns about the
company's consumer appeal and ultimate market opportunity. Similar to the circumstance at Taser,
we believe these issues are part of the normal course of paving the way in a new product category,
and we used the price weakness to add to our position in FRPT shares. In Financial Services,
Affiliated Managers Group (AMG - a holding company for boutique asset managers) fell 22%, as
investors anticipate lower forward earnings following the stock market's decline.

2. 2
Offsetting some of these headwinds was strong performance in Consumer Discretionary. In the
sector, 2U, Inc (TWOU - provides a comprehensive platform enabling traditional colleges and
universities to offer online graduate degrees) climbed 12% on the heels of strong Q2 earnings and
the company's announcement of a new multiple degree program relationship with NYU. Also
within Consumer Discretionary, the shares of restaurant chain Buffalo Wild Wings (BWLD) rose
23% after reporting good Q2 results and a good start to same-store-sales in Q3.
Perspective and Outlook
Today, despite an environment with much macro uncertainty, we believe the underlying secular
growth prospects of the Focused Growth's portfolio companies remain robust. The portfolio has
underperformed the benchmark in 2014 and year-to-date in 2015. While some of this is a function
of poor stock selection, much has to do with the outsized appreciation in the portfolio in prior
years (particularly in 2013) – gains meaningfully above trend line and above the inherent growth
of the Focused Growth's portfolio companies. Net, the basic math of continued 15%+ enterprise
growth, together with the contraction we have seen in multiples, finds the portfolio's inherent
risk/reward improved.
While we consider macro information with respect to specific holdings, we do not spend a lot of
time trying to forecast macro events. This is in part because we don't believe we have a particular
edge in doing so, but even more because we don't believe it is necessary for us to generate good
returns over time. Rather we seek to identify companies capable of sustaining healthy growth
(typically 15%+) for many years to come. We call these "desert island" companies as we believe
they are companies which, if we went away to a desert island for 5-7 years, we'd come back and
find they'd have experienced significant enterprise growth.
If we are able to successfully identify such desert island companies, and remain disciplined in
executing our process which seeks to own the stocks of such sustainable growers when
risk/reward is good, and not own them when risk/reward is bad, we believe that the Granahan
Small Cap Focused Growth strategy can continue to deliver good returns for its investors in the
intermediate and long-term.
As an example of a desert island company, consider a recent addition to the 100-name desert
island monitored list, MindBody, Inc. (MB). MindBody provides cloud-based business
management and payment processing solutions to the health and wellness services industry. The
company started in yoga where it became the market leader, and has since expanded into health
and fitness, salon/spa, fine arts/instruction, children's activities and corporate wellness. The market
is large (there are 4.2 million wellness businesses worldwide, Mindbody has 42,000 subscribers,
or roughly 1% penetration) and the company's value proposition for such small businesses is
compelling. Beyond a comprehensive platform for scheduling, online booking, staff management,
customer relationship management, analytics, and point-of-sale and payments, MindBody’s
mobile app and other marketing tools help these small businesses attract and retain customers.
MindBody has the characteristics we seek in a desert island company: strong value proposition to
the customer, large market potential, solid management team and a strong balance sheet with the
capability to fund growth. With respect to the stock, as with all companies on our desert island
monitored list of about 100 companies, we utilize a strict expected-return methodology to guide us
to buy the stock for the portfolio when risk/reward is attractive.

3. 3
Lastly, I'm excited to share two recent additions to the Granahan Investment Team. Jeff Harrison,
a seasoned portfolio manager most recently with Wells Fargo, joined in July as one of the sleeve
PMs on the Granahan Small Cap and SMID Cap strategies; Jeff is already making a solid positive
impact. And in early October, David Dineen brought his very successful Small Cap International
strategy to Granahan from his prior firm, Pinnacle. Both Jeff and David are terrific additions to our
firm.
Thank you for your interest and, as always, please don't hesitate to reach out if you have questions
or comments.
Sincerely,
Andrew L. Beja, CFA
dbeja@granahan.com
(781) 902-1409

4. GIM Small Cap Focused Growth Russell 2000 Growth
Product Assets: $204 Million
Minimum Investment : $3 Million
Status: Open
Inception Date: August 1, 2007
Benchmark: Russell 2000 Growth
Capitalization: Typically, $200 Mil - $2 Bil at purchase
Portfolio Manager: Andrew L. Beja, CFA
Typical Number of Holdings: ± 40
• By investing in businesses with sustainable growth,
we reduce the risk of significant capital loss.
• We invest in exceptional businesses – those with
solid balance sheets, high incremental margins and
strong customer value propositions.
• Our expected return methodology is a mechanism
for mispricing and has proven successful over the
course of several investment cycles.
• We believe conviction leads to outperformance,
60%-80% portfolio held in top 15 holdings.
Granahan Investment Management (GIM) believes that
small dynamic companies provide excellent potential for
superior long-term performance. GIM’s Focused Growth
strategy is grounded in the belief that superior long term
returns are best achieved through a select portfolio of
smaller companies poised to grow at 15% or more.
Within this philosophy we seek to own companies with
large open ended opportunities, a favorable competitive
landscape, products or services providing a significant
value proposition to the customer, and that have clean
balance sheets.
This company analysis is combined with a rigorous
valuation discipline centered on a stock's expected
return and risk/reward. The net result is a portfolio of 40-
50 attractively priced stocks of some of the most exciting
and innovative companies in the economy, and a
portfolio that has generated consistent, strong risk-
adjusted returns over time.
Founded in 1985, Granahan Investment Management,
Inc. is a 100% employee-owned firm specializing in
smaller cap equity investments for large institutions and
wealthy individuals. The firm utilizes fundamental,
bottom-up research to uncover and invest in fast
growing companies under $6 billion in market cap. The
firm manages over $3 billion in institutional assets and
the founding principals are part of an investment team
which now totals ten professionals.
Trailing 5-years through September 30, 2015
Quarterly Returns - Gross of Fees
Annualized Alpha 6.30%
Upside Capture 113.68%
Downside Capture 71.46%
Tracking Error 7.57
Information Ratio 0.91
Beta 1.02
Source: Informais

5. Characteristic Portfolio
Russell 2000
Growth
Median Market Cap $1,400.5 mil $760.7 mil
Weighted Avg. Market Cap $2,468.0 mil $1,956.0 mil
Active Share 97.22% 0.00%
Est 3-5 Yr EPS Growth 22.5% 15.5%
Forward P/E Ratio 34.6x 21.2x
Dividend Yield 0.11% 0.72%
Price to Book 5.31x 3.97x
Source: FactSet
September 30, 2015Top Ten Holdings
Security Life Cycle Category
Percent of
Portfolio
SPS COMMERCE Pioneer 7.5%
2U, INC Pioneer 6.7%
ADVISORY BOARD Core Growth 6.3%
COSTAR CORP Core Growth 5.9%
ULTIMATE SOFTWARE GROUP Core Growth 5.8%
AFFILIATED MANAGERS
GROUP
Core Growth 5.7%
DEMANDWARE Pioneer 4.9%
BUFFALO WILD WINGS Core Growth 4.6%
IMAX CORP Pioneer 4.5%
CONSTANT CONTACT Pioneer 4.2%
Granahan Investment Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in
compliance with the GIPS standards. Granahan Investment Management has been independently verified for the periods January 1, 1993 through December 31, 2014.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s
policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. GIM is an independent, SEC- registered investment
firm that oversees small and mid-cap equity portfolios for large institutions and wealthy individuals. The Small Cap Focused Growth product utilizes fundamental, bottom-
up research and analysis to invest in companies in the small cap sector of the market that exhibit sustainable high earnings growth, with a focus on the technology
services, internet, consumer, and business services sectors. The benchmark for the Small Cap Focused Growth product is the Russell 2000 Growth. The composite,
created in December 2011, is calculated by asset-weighting the performance of each account on a monthly basis. The composite includes returns from the portfolio
manager’s prior firm, from inception of August 1, 2007 through December 31, 2011. Accounts are included beginning with the first full month under management and
terminated accounts are included in the composite. Performance calculations, expressed in U.S. dollars, produce a total return including cash and the reinvestment of
dividends and interest. The dispersion is a standard deviation using equal-weighted total returns for accounts in the composite the entire year. The three-year annualized
standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. Leverage is not utilized. Policies for valuing
portfolios, calculating performance, and preparing compliant presentations are available upon request. Returns are gross of investment management fees, which when
included, reduce investment returns. Beginning 10/31/2012, net returns are total returns reduced by actual investment management fees. Prior to 10/31/12 and for
accounts which pay no management fee, the standard management fee applicable is applied to calculate the net return. The standard fee for accounts managed in the
Small Cap Focused Growth style is payable quarterly in arrears and is calculated by applying the ANNUAL rate of 1.00% times the average value of the assets in the
account on the last day of each month in the quarter. Fees are collected quarterly, which produces a compounding effect on the total rate of return net of management
fees. Market value is based on trade date and security pricing is supplied by Telemet. A complete list and description of all of the firm's composites is available upon
request. Past performance is no guarantee of future results.
September 30, 2015
Date
Small Cap Focused Growth Composite
Composite
Gross Return
Russell 2000
Growth
Return
Composite
Assets
$ Mil
Composite
# Accts
Composite
3-Yr.
Std. Dev.
Russell 2000
Growth
3-Yr.
Std. Dev.
Composite
Dispersion
Composite
Net Return
Non-Fee
Assets
Firm
Assets
$ Mil
YTD
2015
-10.67% -5.47% $204.4 5 17.35 14.49 NA -11.05% 0.4% $3,347.0
2014 2.17% 5.60% $211.8 6 15.87 13.82 NA 1.61% 0.4% $3,516.6
2013 65.19% 43.30% $93.0 <5 16.73 17.27 NA 64.49% 1% $4,056.7
2012 24.55% 14.59% $26.5 <5 21.23 20.72 NA 23.36% 2% $3,049.4
2011 13.19% -2.91% $0.4 <5 23.12 24.31 NA 12.07% 100% $2,741.5
2010 30.06% 29.08% $5.4 8 29.56 27.70 0.15 28.81% 7%
2009 53.80% 34.47% $4.2 8 NA 24.85 0.06 52.33% 10%
2008 -46.34% -38.54% $1.9 6 NA 21.26 NA -46.91% 10%
2007* 18.24% 3.27% $.4 <5 NA 14.23 NA 17.76% 100%
NA – Dispersion information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year; Standard
deviation information has fewer than three years’ data. *Partial year performance: August 1, 2007 through December 31, 2007