Investable Themes Seminar - May 5, 2015

INVESTABLE THEMES
SEMINAR
_______________________________________________________________________________________________
The Union League
of Philadelphia
Tuesday, May 5, 2015
610-993-9100
www.stanleylaman.com
1235 Westlakes Drive
Suite 295, Berwyn, PA

William G. Stanley, MSFS
President
Phone: 610-993-9100
E-mail: bills@stanleylaman.com
Twitter: @StanleyLaman
Education
• Bill earned the Chartered Financial Consultant (CHFC) and Chartered Life Underwriter (CLU) designations from the American
College in Bryn Mawr, PA; he also holds a Master's Degree in Financial Sciences from the American College.
Experience
• 1976 - 1979 Regional Field Auditor - General Electric Credit Corporation
• 1979 - 1991 Capital Analysts, Inc. a National Wealth Advisory Firm representing high net worth individuals. Served on the
Advisory and Leadership Board for 8 years
• 1991 - Current: Founded The Stanley-Laman Group, Ltd., an early adopter of the fee-only Registered Investment Advisor
Model
• 2003 - Current: Founded Stanley-Laman Securities, a Broker-Dealer Registered with FINRA
Boards
• American Realty Capital Trust, Inc. (ARCT; NASDQ) - Independent Director 2007 – 2012
• New York REIT (NYRT; NYSE) - Director & Lead Independent Director 2009 - 2014
• Business Development Company of America - Independent Director 2009 - 2014
• American Realty Capital Properties Retail Centers of America – Independent Director 2011 - 2014
• American Realty Capital Properties, IV - Lead Independent Director 2013 - 2014
• American Realty Capital Properties, Inc. (ARCP; NYSE)
• Independent Director 2014 - Current
• Lead Independent Director 2014 - Current
• Interim Chairman and CEO 2014 - 2015
• Matrix Biology Institute - Trustee 2008 - Current
• CeeLite, Inc., - Director 2008 - Current

Robert A. Kindler
Vice Chairman - Global Head of Mergers & Acquisitions
E-mail: robert.kindler@morganstanley.com Phone: 212-761-7895
Education / Affiliations
• Rob received a B.A. from Colgate University in 1976 and a J.D. from New York University School of Law in 1980
• He is Vice Chair on the Board of Trustees of Colgate University, the Board of Trustees of New York University School of Law,
the Board of Directors of March of Dimes (NY Div), and the Board of Trustees of The Levin Institute
Banking Experience
• Rob joined Morgan Stanley in 2006 . He is Vice Chairman, Global Head of Mergers and Acquisitions and a member of the
Management Committee. Prior to joining Morgan Stanley, he was global head of mergers and acquisitions at JPMorgan for six
years and a senior partner at the law firm of Cravath, Swaine & Moore, where he specialized in mergers and acquisitions for
over 20 years
Selected M&A Transactions
• Time Warner Cable: $70B acquisition by
Comcast following unsolicited bid by Charter
• Verizon: $130B acquisition of Vodafone’s
interest in Verizon Wireless
• Sanofi: $23.5B unsolicited acquisition of
Genzyme
• CF Industries: $5B unsolicited acquisition of
Terra Industries
• Comcast: $72B unsolicited acquisition of AT&T
Broadband
• Modelo: $20B acquisition by InBev
• Continental Airlines: $12.9B merger with United
Airlines
• Qwest: $23B merger with CenturyLink
• Direct TV: $15B merger with Liberty Media
• Dresser Rand: $7.7B proposed acquisition by
Siemens
• The Pepsi Bottling Group: $15B acquisition by
PepsiCo
• HMA: $7.7B sale to Community Health Systems
• Time Warner Cable: $42.1B spin-off from Time
Warner
• Burger King: $4B sale to 3G
Selected Activism / Defense Transactions
• GM: Shareholder activism advice regarding group led by Harry Wilson
• Family Dollar: Shareholder activism advice regarding investment by Icahn
• Sony: Advised on shareholder relations with Third Point
• Agrium: Advised on shareholder relations and successful proxy fight with
JANA
• Transocean: Advised on shareholder relations and successful proxy fight
with Icahn
• CF Industries: Successful defense against an unsolicited offer from
Agrium
• Family Dollar: Shareholder activism advice regarding investment and bid
by Trian
• Prestige Brands: Successful defense against unsolicited offer by
Genomma
• Digital Global: Successful defense against unsolicited offer by GeoEye
• NYSE Euronext: Successful defense against hostile bid by NASDAQ /
ICE
• Office Depot: Shareholder activism advice regarding investment by
Starbaoard
• Sandridge Energy: Shareholder activism advice regarding investment by
TPG-Axion
• BMC Software: Shareholder activism advice regarding investment by
Elliott Associates
• Atmel: Successful defense against an unsolicited offer by Microchip
• CenturyTel: Successful defense against an unsolicited offer by Alltel
• Barnes & Noble: Successful defense against proxy fight by Ron Burkle
Selected Special Committee
Assignments
• Special Committee of Pepsico Bottling Group
in go-private with Pepsico
• Special Committee of DirectTV on its merger
with Liberty Entertainment
• Special Committee of Titanium Metals in sale
to Precision Cast Parts
• Special Committee of Crown Media in
restructuring with Hallmark, its controlling
stockholder
• Special Committee of Hearst Argyle in go-
private transaction with Hearst
• Special Committee of Burger King in go-
private transaction
• Special Committee of Laureate Education in
go-private transaction
• Special Committee of Kerzner International in
go-private transaction
• Special Committee of Wiltel in go-private
with Leucadia

prototype template (5428278)screen library_new_final.ppt 4/28/2015
State of the Global M&A Market
$902
$2,422
$2,285 $2,288 $2,218 $2,185
$3,095 $3,324
0
250
500
750
1,000
1,250
0
1,000
2,000
3,000
4,000
2010 2011 2012 2013 2014 2015
Dollar Volume (1)
($Bn)
Source:
Thomson Reuters as of April 9, 2015
(1) Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions. Future
terminations of pending transactions will reduce totals shown.
Average Transaction Size
($MM)
Avg. Volume 10-14: $2.4Tn
728
895 864
0
250
500
750
1,000
2013 YTD 2014 YTD 2015 YTD
# of Deals – $100MM+
92
126
144
0
40
80
120
160
2013 YTD 2014 YTD 2015 YTD
# of Deals – $1Bn+
6
20
31
0
10
20
30
40
2013 YTD 2014 YTD 2015 YTD
+7%
+55%
+14%-3%
Actual Annualized Avg. Transaction Size
1
+23%
+37%
+233%

prototype template (5428278)screen library_new_final.ppt 4/28/2015
State of the M&A Market by Region(1) (2)
Source:
Thomson Reuters as of April 10, 2015
(1) Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions. Future
terminations of pending transactions will reduce totals shown.
(2) M&A activity based on participation.
(3) As of April 9
$415
$1,575
$1,318
$1,449
$1,266
$1,363
$1,989
$521
0
700
1,400
2,100
2010 2011 2012 2013 2014 2015
YTD
1,601 1,644 1,720 1,694 2,009 401
Americas M&A Dollar Volume
($Bn)
$258
$914
$987
$898
$1,103
$893
$1,172
$337
2010 2011 2012 2013 2014 2015
YTD
1,263 1,306 1,284 1,197 1,433 288
EMEA M&A Dollar Volume
$217
$558
$625 $621
$577 $559
$774
$278
2010 2011 2012 2013 2014 2015
YTD
1,077 1,077 1,080 1,170 1,567 410
Asia M&A Dollar Volume
+31%
Number
of Deals
+26%
+28%
Avg. Volume 10-14: $1,477Bn Avg. Volume 10-14: $1,011Bn Avg. Volume 10-14: $631Bn
2
2014 YTD(3)
(3) (3) (3)
/ 467(3) / 310(3) / 331(3)

3
$216
$711
$847 $794 $837
$667
$1,135
$927
37%
35%
38%
31%
37%
31%
20%
30%
40%
50%
60%
0
300
600
900
1,200
1,500
2010 2011 2012 2013 2014 2015
Cross-Border Activity Remains Above Historical Levels(1)
Source: Thomson Reuters as of March 26, 2015
(1) Includes announced transactions, each with an aggregate value of $100MM or more.
Dollar Volume
($Bn)
Avg. Volume 10-14: $856Bn
% of Total Volume
(%)
Actual Annualized % Volume Avg. Volume 2010-2014

4
Financial Sponsor M&A Activity
$138
$447
$361
$416 $410 $400
$579 $585
0
200
400
600
800
2010 2011 2012 2013 2014 2015
Dollar Volume – Financial Sponsor Involvement(1) (2)
($Bn)
Source: Thomson Reuters as of March 27, 2015
(1) Includes worldwide announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions.
Future terminations of pending transactions will reduce totals shown.
(2) Financial Sponsor activity includes transactions where a sponsor was involved as the acquiror and / or the seller.
Actual Annualized
% of M&A Market
147
477
629
847
624
0
250
500
750
1,000
2013 2014 2015
# of Deals – $100MM+
23
75
78
144
98
0
50
100
150
200
2013 2014 2015
4
13
53
35
17
0
20
40
60
2013 2014 2015
# of Deals – P2Ps
+1%
+35%
+85%
-51%
-26%
-32%
-34%
15.8% 18.2% 18.5% 18.3% 18.6% 19.7%

5
Source:
Capital IQ
(1) S&P 500 EPS per Morgan Stanley Equity Research. 2015 forecast as of March 2015.
The Boardroom Conundrum
12%
0%
13%
30%
11%
0%
20%
40%
2010 2011 2012 2013 2014 2015
S&P 500 Annual Return (%)
Yet Market Returns Have Been Robust…
14.2
12.5 13.5
16.7 16.9 16.9
0.0
10.0
20.0
2010 2011 2012 2013 2014 2015 YTD
Year End NTM P/E (x)
…As P/E Multiples Expand
9% 10%
4% 3% 4% 3%
0%
10%
20%
2010 2011 2012 2013 2014 2015E
S&P 500 Revenue Growth (%)
Revenue Growth is Slowing…
19% 19% 19% 19% 19% 20%
0%
20%
40%
2010 2011 2012 2013 2014 2015E
S&P 500 EBITDA Margin (%)
…EBITDA Margins are Plateauing...
38%
15%
6% 7% 7% 4%
0%
25%
50%
2010 2011 2012 2013 2014 2015E
S&P 500 EPS Growth (%) (1)
…Earnings Growth Stalling
Is Shareholder Return at Risk?
?

6
Market Valuations: Is There a Value Gap?
S&P 500 P/E Multiples Expand (1)
S&P FY+1 P/E Multiple
Source: Capital IQ
7.0
10.0
13.0
16.0
19.0
22.0
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Mar-15
(x)
S&P 500 Index
2005 – 2015 YTD Average: 15.5x
17.5x
(1) As of March 26, 2015
(2) As of March 26, 2015
…Driving Acquirors To Use Their
Currency (2)
Dollar Volume
(%)
66
71 73 73
55 52
15
17
19 16
33
32
19
12
9 11 11 16
0
20
40
60
80
100
2010 2011 2012 2013 2014 2015YTD
All Cash Hybrid Cash / Securities All Securities
Source: Thomson Reuters
…With the Top Quartiles
Increasingly Expensive (1)
S&P FY+1 P/E Multiple
12.9x
17.0x 20.5x
29.9x
0.0
10.0
20.0
30.0
40.0
Middle of
4th
Quartile
Middle of
3rd
Quartile
Middle of
2nd
Quartile
Middle of
1st
Quartile
Median: 18.7x
(x)
Source: Capital IQ

7
(4)
(2)
0
2
4
6
8
10
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
2014
Q4
2015
Q1
25th Percentile Median 75th Percentile
Market Receptivity to M&A at An All Time High
Strategic M&A Should be a High Corporate Priority Today
Distribution of Acquiror Stock Price Performance (1)(2)
Source: Thomson Reuters, Morgan Stanley
(1) As of 3/25/2015; based on +$1Bn takeover transactions by public U.S. corporate acquirors with market data available
(2) Stock Price Performance defined as price movement between 1 day prior to announcement through 1 day post date of latest
terms
Drivers of Share Performance
 Investors suffering from acute
scarcity of growth
 Need to maintain stock price
momentum (+11% S&P500 in
2014)
 Investors embracing use of dry
powder from balance sheets
 Desire to lock-in highly attractive
borrowing costs
 Bullish signal about core
business
%
Acquiror Stock
Price Up in
63% of Deals
Between
1/1/2015 and
3/25/2015
Average
Reaction: +4.5%

8
The Time is Now for Dream Deals
Competitive Actions Spur Deals Within Active Sectors
Acquiror Share Prices Rising Following Strategic Acquisitions
Activism Continuing to Drive Strategic Deals
Hostile / Unsolicited Approaches
Cross-Border Activity Remains Robust
Regulatory Environment is Challenging
2015 Outlook for Americas M&A Activity
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Bradford W. Stanley, CFA
Senior Portfolio Manager
Phone: 610-993-9100
E-mail: brads@stanleylaman.com
Twitter: @BradStanley3
Education / Affiliations
• Brad attended Carnegie Mellon University in Pittsburgh, Pennsylvania. He graduated in 2003 with a Bachelor of Science in
Computer Science and a minor in Psychology, with focus in Cognitive Psychology. Brad was awarded the Carnegie Mellon Senior
Leadership Award for his contributions to the university community.
• Brad is a CFA Charterholder, which he received in 2009. He passed all three CFA examinations on the first attempt and actively
participates in the CFA Institute Continuing Education Program. Brad is a member of the American Finance Association and the
CFA Society of Philadelphia.
Investment Experience
• Brad joined SLG in 2003. He is a portfolio manager with direct oversight over several strategies, which he developed, including
High Growth, High Dividend & Value, Micro Cap, Europe Equity, Japan Equity, Global Blend, U.S. Blend, and U.S. Mega-Cap.
• Brad is the creator & architect behind SLG's trademarked Ad-Star® System, a complex financial model used to evaluate publically-
traded companies through comprehensive analysis of over ten thousand historical financial metrics & proprietary formulas.
• Brad’s portfolios have received numerous performance awards, including PSN Top Guns for High growth and PSN Bull and Bear
Master for High Dividend & Value.
M&AActivity in Brad’s Portfolios
Target Action Suitor Value
Pace Plc Acquired ARRIS Group Inc $2.1 Billion
Informatica Corp Acquired Permira $5.3 Billion
Cyberonics Inc Merged Sorin Spa $2.7 Billion
Aruba Networks Inc Acquired Hewlett-Packard Co $3.0 Billion
Hittite Microwave Corp Acquired Analog Devices Inc $2.5 Billion
XING AG Offer Burda Digital $311 Million
SCB Life Assurance Acquired Siam Comm Bank $2.5 Billion
Hi-Tech Pharmacal Acquired Akorn, Inc. $640 Million
Riverbed Technology Acquired Thoma Bravo, LLC $3.6 Billion
Wimm-Bill-Dann Acquired PepsiCo Inc $5.4 Billion
True Religion Apparel Acquired TowerBrook Capital $835 Million
Ebix Inc Offer Goldman Sachs $820 Million
ICU Medical Inc Offer Multiple Parties $1.1 Billion
Shire Plc Offer AbbVie Inc $55 Billion
Covidien Plc Acquired Medtronic PLC $50 Billion
Meda AB Offer Sun Pharma $6.0 Billion
M&AActivity (cont.)
Capella Microsystems Acquired Vishay Intertechnology $205 Million
Transcend Services Acquired Nuance Comm $313 Million
Omniture Software Acquired Adobe Systems Inc $1.8 Billion
Enterprise Systems Inc Acquired Open Text Corp $310 Million
Kentz Corp Ltd Acquired SNC-Lavalin $2.0 Billion
Illumina Inc. Offer Roche Holding AG $6.2 Billion
AstraZeneca Plc Offer Pfizer Inc $118 Billion
Dragon Oil PLC Offer Emirates National Oil Co $4.7 Billion
NetLogic Microsystems Acquired Broadcom Corp $3.7 Billion
Cubist Pharmaceuticals Acquired Merck & Co Inc $9.5 Billion
Concur Technologies Acquired SAP SE $8.3 Billion
rue21 Inc Acquired Apax Partners LLP $1.1 Billion
Acme Packet Inc Acquired Oracle Corp $2.1 Billion
Harbin Electric, Inc Acquired Tech Full Electric Co $800 Million
GSI Commerce, Inc Acquired eBay Inc $2.4 Billion

Return on Invested Capital:
What do High ROICs tell us about
Companies and why do they make
such Attractive Targets?
Bradford Stanley, CFA

Two Basic Investing Approaches
1) TRADERS  Short-term focus
2) INVESTORS  Long-term focus
“In the short run, the market is a voting machine but in the
long run, it is a weighing machine” (Benjamin Graham)
For us, it is easier and more predictable to understand the science behind “weighing”
than it is to understand the (often irrational) psychology behind “voting”
From day one, we have always approached Equity Markets as Investors and viewed
corporations as businesses to own rather than stocks to buy
2

Charlie Munger (Vice Chairman, Berkshire Hathaway)
“It's far better to buy a wonderful company at a fair
price than a fair company at a wonderful price.”
“Over the long term, it’s hard for a stock to earn a much
better return than the business which underlies.
If the business earns 6% on capital and you hold it for that 40 years, you’re not going to make much
different than a 6% return, even if you originally buy it at a huge discount.
Conversely, if a business earns 18% on capital, even if you overpay, you’ll end up with a fine result.”
“If you buy something because it’s undervalued, then you have to think about selling it when it
approaches your calculation of it’s intrinsic value. That’s hard.
But, if you can buy a few great companies, then you can sit on your ass.”
3
 E.g. (1) Buy stock 50% overvalued with ROC of 15% vs. (2) at 50% discount with ROC of 4%
 Return after 20 years +850% vs. +321%

2008 Financial Crisis
 Fear Creates Opportunity
 During times of crisis, investors typically deleverage,
which causes:
1) Increased Correlations between securities
2) Lack of Liquidity
3) Enormous Risk Premiums (Systematic & Idiosyncratic)
 Many Companies were being priced as if they were going out of business
 We knew that many would but there would be others that not only survived but
actually grew stronger (Creative Destruction, e.g. Red Hat - Enterprise Virtualization)
 How do we find these companies?
 Old Methods Failed during crisis (Quant Models & Stock Screening)
4

Ad-Star® (Financial Analytics & Evaluation)
Analyze Company’s historical operating
Performance (e.g. ROC vs. WACC)
Focus on Cash (economic) profitability
rather than Accounting (accrual) earnings
Financial Health, Leverage, Debt Coverage, Dividend Sustainability, etc.
Expectations for Future Growth, Recent Trends, Risk-adjusted Performance
Valuation, Current Fair Market Price, Margin of Safety
5

Pace Plc Acquired ARRIS Group Inc $2.1 Billion
Informatica Corp Acquired Permira $5.3 Billion
Cyberonics Inc Merged Sorin Spa $2.7 Billion
Aruba Networks Inc Acquired Hewlett-Packard Co $3.0 Billion
Hittite Microwave Corp Acquired Analog Devices Inc $2.5 Billion
XING AG Offer Burda Digital $311 Million
SCB Life Assurance Acquired Siam Comm Bank $2.5 Billion
Hi-Tech Pharmacal Acquired Akorn, Inc. $640 Million
Riverbed Technology Acquired Thoma Bravo, LLC $3.6 Billion
Wimm-Bill-Dann Acquired PepsiCo Inc $5.4 Billion
True Religion Apparel Acquired TowerBrook Capital $835 Million
Ebix Inc Offer Goldman Sachs $820 Million
ICU Medical Inc Offer Multiple Parties $1.1 Billion
Shire Plc Offer AbbVie Inc $55 Billion
Covidien Plc Acquired Medtronic PLC $50 Billion
Meda AB Offer Sun Pharma $6.0 Billion
Capella Microsystems Acquired Vishay Intertechnology $205 Million
Transcend Services Acquired Nuance Comm $313 Million
Omniture Software Acquired Adobe Systems Inc $1.8 Billion
Enterprise Systems Inc Acquired Open Text Corp $310 Million
Kentz Corp Ltd Acquired SNC-Lavalin $2.0 Billion
Illumina Inc. Offer Roche Holding AG $6.2 Billion
AstraZeneca Plc Offer Pfizer Inc $118 Billion
Dragon Oil PLC Offer Emirates National Oil Co $4.7 Billion
NetLogic Microsystems Acquired Broadcom Corp $3.7 Billion
Cubist Pharmaceuticals Acquired Merck & Co Inc $9.5 Billion
Concur Technologies Acquired SAP SE $8.3 Billion
rue21 Inc Acquired Apax Partners LLP $1.1 Billion
Acme Packet Inc Acquired Oracle Corp $2.1 Billion
Harbin Electric, Inc Acquired Tech Full Electric Co $800 Million
GSI Commerce, Inc Acquired eBay Inc $2.4 Billion
6
M&AActivity in SLG Portfolios
10 deals in the last six months
 All Mid-Cap  $2-10 Billion
 7 were positions in High Growth Strategy
 Average deal premium +32%
 ROICs reveal critical Big-Picture things about Firm & Industry
 Like What?  Attractiveness (e.g. Porter’s 5 Forces)
 There is good reason for Takeover Defense Mechanisms!!

Why do Ad-Star® Companies
Make Attractive Targets?
Omniture - Web Analytics & Behavioral Targeting
 SLG High Growth Holding (purchased March 2009)
 20%+ ROC and growing (Marginal ROC > ROC)
 Acquired by Adobe in Oct. 2009 for $1.8 Billion
+67% Gain in six months (24% premium to prior close)
Good Result? ...... Yes and No
Current SLG High Growth holdings purchased in March 2009
F5 Networks (FFIV) Unrealized gain +566%
Ctrip.com Intl (CTRP) Unrealized gain +519%
Akamai Tech (AKAM) Unrealized gain +362%
7

Education
• David received a B.A. from the University of California, Berkeley, a J.D. from the University of California, Davis where
he earned Order of the Coif honors and an M.B.A. from Stanford University's Graduate School of Business.
Affiliations:
• David has served as a director of Helios Capital LLC's Helios Strategic Fund since its inception in 2005. The Helios fund
invests primarily in Indian listed securities. Mr. Gong is also a director of American Realty Capital –Retail Centers of
America, Inc., a non-traded REIT. He has also previously served as a director of Alliance Capital Management, LLC's
Turkish Growth Fund and India Liberalization Fund.
Experience:
• David joined The Stanley-Laman Group as a senior portfolio manager in May, 2011 and focuses on management of an
international portfolio focusing on stocks of emerging companies many of which are not traded on U.S. Exchanges.
• Mr. Gong has over 25 years of experience in global asset management including nine years spent in Hong Kong and
Singapore.
• In 1981 Mr. Gong joined T. Rowe Price Associates as an equity portfolio manager. He later served as an executive vice
president of Rowe Price-Fleming International, the international investment joint venture formed by T. Rowe Price and
Robert Fleming Holdings, a London-based merchant bank. Mr. Gong helped establish the firm's Hong Kong office, and
from 1985-1989 managed Asian equity portfolios from the Hong Kong offices. In 1989 he initiated portfolio management
responsibilities for Latin American equities. In 1991 Mr. Gong accepted a partnership position with Ardsley Partners, a
Stamford, Connecticut based investment advisory firm. At Ardsley, he served as senior international portfolio manager,
and managed hedge funds dedicated to investments in Asian, Latin American and Eastern European securities.
• In 2003 Mr. Gong became a managing director of Ankar Capital Management, a New York based investment advisory
firm, and managed the firm's private equity group in Singapore.
• Prior to his investment career, Mr. Gong practiced law, initially as a staff attorney with the Securities and Exchange
Commission in Washington, D.C., and later as an associate attorney with O'Melveny and Myers, a private law firm in
their Los Angeles offices.
David Gong, JD, MBA
Phone: 610-993-9100
E-mail: davidg@stanleylaman.com

Mark R. Painter, CFA
Phone: 610-993-9100
E-mail: markp@stanleylaman.com
Education
• Mark attended Carnegie Mellon University in Pittsburgh, Pennsylvania. He graduated in 2004 with a Bachelor
of Science in Business Administration and a focus in finance. Mark was awarded the Carnegie Mellon Senior
Leadership Award for his contributions to the university community.
• Mark is a CFA Charterholder, which he received in 2009. He actively participates in the CFA Philadelphia
chapter along with the CFA Institute Continuing Education Program.
• Mark also participates in the Carnegie Mellon CMAC admission council since 2014.
• Beginning in 2015 Mark participates in the Carnegie Mellon student-athlete mentoring program.
Experience:
• Mark joined SLG in 2004. He is a portfolio manager on several different portfolios, including High
Growth, Dividend and Value, Core equity, Fixed Income, Unconstrained Income, and Risk Managed
Equities.
• Mark has receive numerous performance awards including PSN Top Guns for High growth and PSN
Bull and Bear Master for High Dividend and Value.
• Mark has primary responsibilities for trading and foreign exchange with the International Opportunities
portfolio and has completed over 250 million dollars worth of transactions in over 22 countries.
• Along with being a Senior Manager at SLG he is lead manager for two Public Mutual Funds focusing
on Dividend and Value equities and Real Estate which affiliate SEL Capital advises.
• The real estate mutual fund has been ranked #1 in its peer group since inception.
• Mark has presented investment ideas at several conferences for FA Magazine and AIR American
Investment Roundtable.

EMERGING MARKETS:
Avoiding the Herd and
Investing Off the Beaten Path
_______________________________________________________________________________________________
SLG International Opportunities, L.P.
David Gong, JD, MBA

Background
David Gong, JD, MBA
 Among earliest and most successful emerging markets managers
 30 years experience in global asset management
 Former Asian Markets Manager for Hong Kong office of Rowe-Price Fleming
 Former Head of Emerging Markets and Asian Equities for Ardsley Partners
 Former Compliance Attorney for the U.S. Securities and Exchange Commission
 M.B.A. from Stanford University’s Graduate School of Business
 J.D. from the University of California, Davis
 B.A. from the University of California, Berkeley
 Director of Helios Capital LLC, Helios Strategic Fund
 Extensive Global contact base of investors, analysts, accountants, and families
in target markets
1

Emerging Market Realities
 86% of the World’s Population ~ 6.07 Billion People
 Younger  EM’s Median Age is 28.4 years vs. 41 years in Developed
Economies
 China Overtook the U.S. as the World’s Largest Economy in real terms in
2014 ($17.6 Trillion vs. $17.4 Trillion)
 China is now a larger market for Automobiles, Smartphones & Online
Shopping
 Thousands of fast growing and highly profitable companies
 Offer much higher expected 5- and 10- year returns than U.S. Equities
2

Emerging Markets: Multi-Nationals vs. Local Companies
 Local Small Businesses, not large Multinational Corporations, will
continue to be the biggest beneficiaries of this growth. Why?
 Multinationals mistakenly believe that EMs are years behind developed
nations and that they will eventually look and behave very similarly.
 They assume it’s merely a matter of time before their existing business
models and value propositions start delivering results. But this won’t work
(Yahoo, L’Oréal, Best Buy and others recently left China altogether).
 Entrepreneurship has exploded in most developing countries because of
internal reforms. New start-ups are soaring as Governments have slashed
red tape and capital is cheaper and more accessible than ever.
4

5

 Local Businesses are not constrained by existing products & legacy costs,
corporate bureaucracy, or by pre-conceived notions about customer needs.
 They understand their customers intimately and know how to appeal to
them.
 They customize their products and services by identifying new trends,
unmet needs, and local habits that foreign companies do not recognize.
 They keep operating costs low by leveraging globalization, deploying the
latest technologies, and utilizing online marketing and social media
platforms.
 They react rapidly and operate with remarkable agility due to wide scale
digitization and the dominance of online sales.
6

Emerging Markets: Differentiation
 Emerging Economies and their local markets are incredibly diverse and
often drastically different than those of Developed Countries.
 China has 56 different ethnic groups, who speak 292 distinct languages.
 India embraces about 20 official languages, hundreds of dialects, and four
major religions.
 The residents of Africa’s 53 countries speak an estimated 2,000 different
languages and dialects.
7

8

9

Emerging Markets: The Consumer Class
 By 2025, Annual Consumption in Emerging Markets will more than
double to $30 trillion, up from $12 trillion, and account for nearly 50% of
the world’s total, up from 32%.
 In 15 years’ time, almost 60% of the roughly one billion households with
earnings greater than $20,000 a year will live in the developing world.
 More than half of all current global Internet users are in emerging markets.
 A recent survey of urban Africans in ten different countries found that
60% owned Internet-capable phones or smartphones.
 The population of EM cities grows by 65 million people a year - the
equivalent of seven cities the size of Chicago.
10

11

12

 Over the next five years, nearly 700 million more Asians will start using
the Internet.
 By 2020, per-household disposable income of urban consumers in China
will double, from about $4,000 to about $8,000.
 An aging China means the total population will have 5% more people age
65+ years, an extra 126.5 million citizens.
 The Elderly Chinese Consumer of 2020 will behave much differently than
today’s senior citizens and will have spending patterns much more similar
to modern day 34- to 45-year olds.
13

14

Emerging Markets: Returns
 Emerging Markets Indices & ETFs have done terribly the last two years 
2013: -3.72% 2014: -3.96%
 Why? Because they are dominated by poorly run, inefficient State-Owned
Enterprises (SOEs) and have large concentrations in volatile Commodity
and Energy Sectors.
 But the poor performance has not been uniform. There have been pockets
of enormous returns driven by a plethora of exceptional small-cap
companies and investable themes (Example: Indian Air Coolers, African
Technology Infrastructure, Chinese Baby Formula).
15

Emerging Markets: Index Flaws
16

Emerging Markets: Opportunities
 The Most Attractive Investment Opportunities in Emerging Markets are
Small-Cap Companies.
 The problem for Investors is that in most cases, these stocks are too small
or too thinly-traded for Large Institutional Managers such as Mutual Funds
and Hedge Funds.
 For funds that are able to hold these companies, the amount allocated
usually represents a very small percentage of total assets so the effect on
performance is insignificant.
17

Investment Philosophy and Process
 We search for and invest in high growth companies in Emerging Markets.
We target companies that (1) are too small for mutual funds & institutional
investors and (2) have high levels of insider & local ownership.
 We Identify and Invest in Companies that (1) Create Shareholder Value
and (2) are Undervalued:
 Does the firm create value for investors in excess of its cost of
financing?
 Does the firm’s stock trade at a discount to intrinsic value?
 We aim to produce active return (alpha) through stock selection with
materially lower risk (beta 0.68) than the benchmark.
18

AD-STAR® SYSTEM
 Quantitative Analysis; Development 10+ Years in Bloomberg Framework
 Screens and Evaluates every publicly traded corporation - All global stock
exchanges
 600+ Financial and Operating Metrics
 Growth (Modified Free Cash Flow)
 Data Standardization (risk-adjust past performance, determine required growth rate
unique to each company)
 True Profitability (Economic/Cash profitability not Accrual Accounting profitability)
 Value Generation (Modified Free Cash Flow, ROC Greater than Cost of Funding)
 Trend Analysis
 Valuation (Eliminate companies trading at less than a 20% discount to Fair Market
Value)
 Dividend Sustainability
 Corporate Governance
19

20

21

SLG Portfolio Manager Team
Portfolio Managers
David Gong, JD, MBA
Brad Stanley, CFA
 CFA Charterholder; 10 years’ Investment Experience
 B.S. in Computer Science, Carnegie Mellon University
Mark Painter, CFA
 CFA Charterholder; 10 years’ Investment Experience
 B.S. in Business Administration, Carnegie Mellon University
Anthony Bruno, CFA
 CFA Charterholder;
 B.S. in Economics, Carnegie Mellon University
Joenuel Ortiz
 CFA Level III Candidate
 B.S. in Finance, Carnegie Mellon University
22

SLG Int’l Opportunities Portfolio Performance
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2012 2013 2014 2015
SLG IOP
MSCI
EEM ETF
2012 2013 2014 2015
SLG International Opportunities, L.P. 8.00% 3.10% 11.28% 12.78%
Emerging Market Index ETF (EEM) 4.95% -3.72% -3.96% 9.14%
• Data as of 04/13/2015. Estimates are used for March and April 2015. 2012 Period measured 2/1/2012 through 12/31/2012.
• Portfolio returns measured net of fees. Benchmark returns measured with reinvested distributions.
• SLG International Opportunities, L.P. is a private offering available by prospectus only to accredited investors.
• A complete list of composite definitions and GIPS® compliant presentations are available upon request.
23

• Company Nice Information & Telecommunication Inc
• Industry Data Processing
• Country SOUTH KOREA
• Market Cap $270 Million (47% Closely Held Shares)
• 5-yr Sales Growth 20.8%
• 5-yr Profit Growth 34.6%
• Dividend Yield 0.91%
• P/E (Est.) 6.19
• Description Provides credit card authorization processing services and Internet electronic
payment software. It also manufactures point of sale credit card terminals and
offers check verification services.
Current Holdings
24

• Company Jintian Pharmaceutical Group
• Industry Health Care Distributors
• Country CHINA
• Market Cap $1.16 Billion (51% Closely Held Shares)
• P/E (Est.) 9.13
• Description Engaged in the retail as well as wholesale of pharmaceuticals, including over-the
counter drugs, prescription drugs, & a variety of private labeled healthcare
products. The Company operates its businesses mainly in Northeast China,
including second- and third-tier cities of Jilin, Heilongjiang and Liaoning provinces.
Current Holdings
25

• Company Howden Africa Holdings Ltd
• Industry Industrial Machinery
• Country SOUTH AFRICA
• P/E (Est.) 7.67
• Description Designs and manufactures specialized air, gas and liquid handling equipment for a
wide range of industries. The Co is divided into three segments: fans &
heat exchangers, air & gas cleaning products, and pumps & refrigeration systems.
Current Holdings
26

• Company Hindustan Media Ventures Ltd
• Industry Publishing
• Country INDIA
• P/E (Est.) 10.53
• Description Publishes newspapers and periodicals, covering across the entire spectrum of
international, national and local news. The flagship newspaper ranks as the
second largest-read daily in the country.
Current Holdings
27

• Company Hua Yang Bhd
• Industry Real Estate Development
• Country MALAYSIA
• P/E (Est.) 4.35
• Description Constructs and develops residential and commercial properties, including office
complexes, hotels, and condominiums. It has the largest exposure to affordable
housing among all Malaysian developers.
Current Holdings
28

• Company NagaCorp Ltd
• Industry Casinos & Gaming
• Country CAMBODIA
• P/E (Est.) 9.82
• Description A Leisure and tourism company with casino operations in Phnom Penh, the capital
city of Cambodia. The Company also offers hotel accommodation, food & beverage
outlets, recreational facilities, and entertainment & retail operations.
Current Holdings
29

• Company Gubre Fabrikalari TAS
• Industry Fertilizers & Agricultural Chemicals
• Country TURKEY
• P/E (Est.) 7.48
• Description Manufactures chemical fertilizers, including solid, liquid, powder-based, and
organic fertilizers. It also provides soil analysis services to farmers.
Current Holdings
30

• Company SCB Life Assurance PCL
• Industry Life & Health Insurance
• Country THAILAND
• P/E (Est.) 8.89
• Description Offers life insurance, including whole life, term, and endowment. It also
offers group life insurance, which is primarily provided for both public and private
companies as employee benefit plans.
Current Holdings
31

32
• Company BreadTalk Group Ltd
• Industry Food Retail
• Country SINGAPORE
• P/E (Est.) 10.63
• Description Manufactures and retails a variety of food, bakery, and confectionery products.
The Company operates food and drinks sale outlets, eating houses, and
restaurants.
Current Holdings

• Company Pakuwon Jati Tbk PT
• Industry Real Estate Development
• Country INDONESIA
• P/E (Est.) 5.19
• Description The largest retail mall owner in Indonesia. The Company manages and develops
office & shopping centers, industrial parks, hotels, residential houses, townhouses, and
condominiums.
Current Holdings
33

• Company CETIP SA - Mercados Organizados
• Industry Asset Management & Custody
• Country BRAZIL
• P/E (Est.) 11.10
• Description Latin America's largest central depository for over-the-counter (OTC) and private
securities & derivatives. Organizes the OTC markets in Brazil and offers an
electronic platform for online trading for government & corporate bonds.
Current Holdings
34

• Company Shandong Luoxin Pharmaceutical
• Industry Pharmaceuticals
• Country CHINA
• P/E (Est.) 11.75
• Description Engaged in the research, development, production and sale of pharmaceutical
products, including antibiotics, anti-viral medicines, and system specific medicines.
The Company has over 250 products approved in the People's Republic of China.
Current Holdings
35

• Company Avanti Feeds Ltd
• Industry Packaged Foods & Meats
• Country INDIA
• P/E (Est.) 4.89
• Description India's leading manufacturer of Prawn & Fish Feeds and Shrimp Processor. It
has a joint venture with Thai Union Frozen Products PCL, the world's largest
seafood processor.
Current Holdings
36

• Company TAV Havalimanlari Holding AS
• Industry Airport Services
• Country TURKEY
• Market Cap $3 Billion (60% Closely Held Shares)
• P/E (Est.) 2.28
• Description Operates in airports in Turkey, Georgia, Tunisia, Macedonia, Saudi Arabia and
Latvia. TAV Havalimanlari provides service in all areas of airport operations such as
duty-free, food and beverage, ground handling, IT, security and operations.
Current Holdings
37

• Company Grape King Bio Ltd
• Industry Personal Products
• Country TAIWAN
• P/E (Est.) 9.32
• Description Manufactures health & nutrition products including food, beverages & supplements.
Its products focus on Probiotics and Antimicrobial Compounds. It also produces
Animal Feed Supplements, Biological Pesticides, and Microbial Fertilizers.
Current Holdings
38

• Company Woolworths Holdings Ltd
• Industry Department Stores
• Country SOUTH AFRICA
• P/E (Est.) 11.75
• Description Operates a chain of retail stores in in selected African countries and the Middle
East, offering a selected range of clothing, food, cleaning supplies, home
essentials, and beauty & lifestyle products.
Current Holdings
39

• Company Sarana Menara Nusantara Tbk PT
• Industry Wireless Telecommunication Services
• P/E (Est.) 6.03
• Description The Largest independent owner and operator of wireless telecommunication towers
in Indonesia. Leases space under long-term agreements to all the major wireless
operators in the country.
Current Holdings
40

• Company Ruentex Engineering & Construction Co
• Industry Construction & Engineering
• Country TAIWAN
• P/E (Est.) 8.17
• Description Engaged in construction operations, civil engineering contracting, equipment
installation, and project planning & consulting. It also manufactures and distributes
precast concrete products and other construction materials.
Current Holdings
41

• Company Sawit Sumbermas Sarana Tbk P
• Industry Agricultural Products
• P/E (Est.) 16.84
• Description Manages palm plantations and operates palm oil mills & palm kernel processing
plants. Its products include crude palm oil, palm kernels and palm kernel oil.
Current Holdings
42

• Company Gujarat Fluorochemicals Ltd
• Industry Specialty Chemicals
• Country INDIA
• P/E (Est.) 9.05
• Description India’s largest and most competitive producer of refrigerant gases. GFL also
produces Synthetic Polymers and Fluoro-speciality Chemicals.
Current Holdings
43

• Company Medy-Tox
• Industry Biotechnology
• Country South Korea
• P/E (Est.) 36.0
• Description Medy-Tox mainly produces Neuronox, which is botulinum toxin type A injection
used as a remedy for blepharospasms, hemifacial spasms, eye wrinkles,
hyperhidrosis diseases and infantile cerebral palsy.
• Realized Gain +321% (sold)
Exited Positions
44

• Company Symphony
• Industry Household Appliances
• Country India
• P/E (Est.) 44.2
• Description Manufactures a wide range of air coolers. The Company's products include
evaporative air coolers, air conditioners, and water heaters. Symphony has a 50
per cent market share in the branded air cooler market in India.
Exited Positions
45

• Company Tower Bersama
• Industry Telecomm Infrastructure
• Country Indonesia
• Market Cap $3.63 Billion (59% Insider Ownership)
• P/E (Est.) 24.5
• Description Leases space for wireless signal transmission equipment at tower sites. The
Company also provides access to its distributed antenna system (DAS) networks in
shopping malls and office buildings in major urban areas.
Exited Positions
46

Investable Themes Seminar - May 5, 2015

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