The Malthusian Growth Fund

Frank Hollowell, Jason Langton, Molly McPherson, Lisa Schaefer

Investing in essential industries for growing populations.

Agenda

Strategy

Mission Statement

Approach

Investor Portfolio

Stocks

Food Production and Retail

Healthcare

Clothing

Utilities

Oil & Gas

Transportation

Telecommunications

Portfolio

Covariance

Efficient Portfolio Frontier

Weights

Benchmarks

Essential Good, noun:

A physical item required by a consumer in order to sustain health or life. Some essential good types that are produced by business operators include food, water, gasoline and heating fuel, as well as residential building materials that can be used to construct homes for shelter.

Source: BusinessDictionary.com

Approach

INDUSTRYEssential, Recession-Tolerant Goods

COMPANYP/E, Beta, Return on Capital (3 years of fundamentals)

COUNTRYLocated in or exporting to high-population growth area

Hybrid Bottom-Up Approach:

Weighting:

Equities Only • Growth-focused fund• Included stocks with low variance to

stabilize fund

125/25 Strategy• Allows more efficient diversification of

active management risk

Mission Statement

• The essential goods and services provided by our set of industries are well positioned to take advantage of global trends in demand – population, globalization and resource scarcity.

• Demand for the essential goods in our portfolio are expected to be both recession tolerant and diversified over a variety of stable and growing sectors.

• Our fund provides investors with a way to capitalize on this growth through strategically chosen companies with consistently successful strategies in their respective markets.

Investor Profile

High Risk Tolerance

Global Outlook

Long Investment

Horizon

• This is a strategy for investors with high risk tolerance, looking for high risk and return potential. The objective of this strategy is to seek high capital appreciation.

• Fluctuations in portfolio value can be high, and is ideal for investors 20-30 years from withdrawals.

• The focus on diversifying internationally and on essential goods in emerging markets will appeal to investors with a global awareness and familiarity.

Food Production

AMC PM

• Philippines• Expected

Return: 5.09%• Expected

Variance: 1.03%

• P/E Ratio 18.77

• Beta YTD: 0.441

• Market Cap US$496 m

PR TB

• Thailand• Expected

Return: 4.68% • Expected

Variance: 0.57%

• P/E Ratio 18.75

• Beta YTD: 0.56

• Market Cap US$208 m

Alaska Milk Corporation: Produces Milk and Dairy goods for export and immediate consumption.

President Rice Products Ltd: Manufactures and exports instant rice and noodle to the U.S., Middle East, and Pacific Rim countries.

Food Retail

Booker Group PLC

• United Kingdom

• Expected Return: 3.16%

• Expected Variance: 0.32%

• P/E Ratio: 18.69

• Beta YTD: 0.71

• Market Cap: US$ 2 bn

AVT Natural Products Ltd.

• India• Expected

Return:5.31%• Expected

Variance: 4.40%

• P/E Ratio: 23.53

• Beta YTD: 0.76

• Market Cap: US$ 50 m

Booker Group, PLC is an internet-enabled grocery wholesaler for the independent sector utilizing a just-in-time distribution system, and also operates cash and carry outlets.

AVT Natural Products Ltd. Operates plantations of tea, coffee, and vanilla; extracts colors and flavors from natural sources; and supplies its products to the food industries in India and elsewhere throughout the world.

Clothing

Lululemon Athletica Inc

• Canada• Exp Return:

7.91%• Exp

Variance: 2.49%

• P/E Ratio: 58.27

• Beta YTD: 1.26

• Market Cap: US$ 10.8 bn

Pacific Textile Holdings Ltd

• Hong Kong• Exp Return:

5.49%• Exp

Variance: 2.86%

• P/E Ratio: 6.56

• Beta YTD: 0.47

• Market Cap: US$ 951 m

Lululemon Athletica Inc: Produces athletic clothing including fitness pants, shorts, tops and jackets for yoga, dance, running, and general fitness.

Pacific Textile Holdings: manufactures customized knitted fabrics used in a broad range of fabrics, including men's, women's, and children's clothing.

Health Care

TRP IN

• India• Expected

Return: 4.30%

• Expected Variance: 0.71%

• P/E Ratio 20.89

• Beta YTD: 0.426

• Market Cap US$1.1 bn

MERK IJ

• Indonesia• Expected

Return: 3.76%

• Expected Variance: 0.50%

• P/E Ratio 14.4

• Beta YTD: 0.303

• Market Cap US$333 m

Torrent Pharmaceuticals Ltd: manufactures bulk drugs and pharmaceutical formulations. Focus: cardio-vascular, psychotropic, antibiotic. Subsidiaries in many international markets.

Merck Tbk PT: manufactures pharmaceutical products; distributes pharmaceutical raw materials, chemicals reagents, and medical instruments.

Utilities

AmeriGas Partners LP

• United States• Exp Return:

1.00%• Exp Variance:

0.20%• P/E Ratio:

33.90• Beta YTD:

0.54• Market Cap:

US$3.7 bn

Severomoravska Plynarenska A.S.

• Czech Republic

• Exp Return: 1.65%

• Exp Variance: 0.33%

• P/E Ratio: 8.26

• Beta YTD: 0.33

• Market Cap: US$97 m

Severomoravska Plynarenska A.S. distributes gas from domestic transfer stations to the North Moravia region. The Company also builds gas facilities including pipeline systems.

AmeriGas operates an extensive storage and distribution network, using pipelines, barges, rail cars, and tanker trucks to transport propane to local-market distribution locations.

Oil and Gas

Attock Petroleum Ltd

• Pakistan• Exp Return:

1.89%• Exp Variance:

0.40%• P/E Ratio:

7.28• Beta YTD:

0.74• Market Cap:

US$341 m

Hankook Shell Oil Co Ltd

• South Korea• Exp Return:

2.98%• Exp Variance:

0.45%• P/E Ratio:

10.75• Beta YTD:

0.34• Market Cap:

US$253 m

Attock Petroleum Ltd: Operates gasoline filling stations in Pakistan and Afghanistan

Hankook Shell Oil Co Ltd: Manufactures and markets lubricants, grease, and other petroleum products used for cars, vessels, industrial machinery, and cutting tools.

TransportationHan Express Co. Ltd. provides land transportation services. The Company specializes in transporting petroleum and frozen products.

Wilson Sons Ltd.

• Brazil• Exp Return:

3.28%• Exp Variance:

1.27%• P/E Ratio:

32.57• Beta YTD: .47• Market Cap:

US$1.08 billion

Han Express Co., Ltd.

• South Korea• Exp Return:

3.72%• Exp Variance:

3.19%• P/E Ratio:

4.36• Beta YTD:

0.32• Market Cap:

US$21 million

Wilson Sons has its principal operations divided into six business segments: port terminals, towage, logistics, shipping agency, offshore, and non-segmented activities.

Telecommunications

Turk Telekomunikasyon

A.S.

• Turkey• Exp Return:

1.93%• Exp

Variance: 0.64%

• P/E Ratio: 12.08

• Beta YTD: 0.85

• Market Cap: US$ 15.3 billion

City Telecom, Ltd.

• Hong Kong• Exp Return:

4.24%• Exp

Variance: 1.63%

• P/E Ratio: 12.55

• Beta YTD: 0.43

• Market Cap: US$ 456 million

Turk Telekomunikasyon A.S. is an integrated telecommunications services provider for businesses and individuals.

City Telecom, Ltd. provides international telecommunications services and fixed telecommunication network services.

Portfolio Covariance

WSON11 BZ

014130 KS

PLYK CP APU US TRP IN MERK IJ

AMC PM PR TB APL PA

002960 KS

LULU US

1382 HK

BOK LN AVTH IN

TTKOM TI

1137 HK

WSON11 BZ 0.0123

014130 KS 0.0122 0.0310

PLYK CP 0.0024 0.0034 0.0032

APU US 0.0021 0.0024 0.0005 0.0020

TRP IN 0.0059 0.0079 0.0013 0.0002 0.0096

MERK IJ 0.0049 0.0062 0.0011 0.0013 0.0026 0.0069

AMC PM -0.0003 0.0013 -0.0001 -0.0018 0.0039 -0.0007 0.0096

PR TB 0.0050 0.0052 0.0008 0.0005 0.0032 0.0014 0.0010 0.0063

APL PA 0.0025 0.0037 0.0011 0.0009 0.0014 0.0005 0.0000 -0.0003 0.0041

002960 KS 0.0047 0.0074 0.0011 0.0007 0.0037 0.0035 0.0010 0.0029 0.0002 0.0067

LULU US 0.0042 0.0004 0.0024 0.0007 0.0077 0.0038 0.0018 0.0002 0.0027 0.0015 0.0242

1382 HK 0.0093 0.0149 0.0013 0.0023 0.0081 0.0046 0.0030 0.0026 0.0026 0.0012 0.0039 0.0278

BOK LN 0.0038 0.0046 0.0005 0.0006 0.0025 0.0031 0.0012 0.0014 0.0010 0.0020 0.0016 0.0061 0.0048

AVTH IN 0.0038 0.0125 0.0032 -0.0010 0.0074 0.0058 0.0017 -0.0001 0.0034 0.0063 0.0074 0.0046 0.0044 0.0486

TTKOM TI 0.0025 0.0037 0.0021 0.0009 0.0016 0.0028 0.0000 -0.0009 0.0016 0.0018 0.0041 0.0020 0.0003 0.0043 0.0094

1137 HK 0.0045 0.0060 -0.0011 0.0008 0.0064 0.0031 0.0027 0.0033 0.0010 0.0039 0.0050 0.0048 0.0023 -0.0029 0.0000 0.0158

Risk Breakdown - US View

 

Local Market Risk FX Risk Total Risk

WSON11 BZ Equity (Wilson Sons Ltd) 8.51% 4.95% 11.26%

014130 KS Equity (Hanexpress Co Ltd) 16.26% 3.43% 17.86%

PLYK CP Equity (Severomoravska Plynarenska) 3.39% 4.49% 5.72%

APU US Equity (AmeriGas Partners LP) 4.51% 0.00% 4.51%

TRP IN Equity (Torrent Pharmaceuticals Ltd) 8.46% 2.99% 9.91%

MERK IJ Equity (Merck Tbk PT) 7.05% 2.26% 8.41%

AMC PM Equity (Alaska Milk Corp) 10.14% 1.81% 9.96%

PR TB Equity (President Rice Products PCL) 7.53% 1.62% 8.03%

APL PA Equity (Attock Petroleum Ltd) 6.35% 0.81% 6.48%

002960 KS Equity (Hankook Shell Oil Co Ltd) 6.72% 3.43% 8.28%

LULU US Equity (Lululemon Athletica Inc) 15.78% 0.00% 15.78%

1382 HK Equity (Pacific Textile Holdings Ltd) 16.91% 0.13% 16.92%

BOK LN Equity (Booker Group PLC) 5.68% 2.92% 7.01%

AVTH IN Equity (AVT Natural Products Ltd) 20.99% 2.99% 22.37%

TTKOM TI Equity (Turk Telekomunikasyon AS) 8.01% 3.52% 9.84%

1137 HK Equity (City Telecom HK Ltd) 12.76% 0.13% 12.76%

Efficient Portfolio: 125/25

0 0.02 0.04 0.06 0.08 0.1 0.12 0.140

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

Efficiency Portfolio Frontier

Standard Deviation

Expected Monthly Return

Expected Annual Return: 48%

Sharpe Ratio: 1.039

Expected Standard Deviation, Annualized: 12.3%

WSO

N11 B

Z

0141

30 K

S

PLYK C

P

APU U

S

TRP IN

MERK IJ

AMC PM

PR T

B

APL PA

0029

60 K

S

LULU US

1382

HK

BOK LN

AVTH IN

TTKOM T

I

1137

HK

-30.000%

-20.000%

-10.000%

0.000%

10.000%

20.000%

30.000%

40.000%

50.000%

-19.019%

-2.709%

0.086%

20.032%

-3.199%

15.807%17.377%

36.688%

16.876%

0.000%

8.126%

2.156%4.433%

1.180%2.240%

-0.073%

Portfolio Weights 125/25

%

Industry Composition

Utilities13%

Transporta-tion4%

Health Care12%

Telecom-munication

14%

Food Production35%

Retail4%

Oil & Gas11%

Household Goods

7%

Country Composition

Czech Republic

0.01%

United States14%

Indonesia11%

Philippines11%

Thailand23%

Pakistan12%

South Korea2%

Canada6%

Hong Kong4%

United Kingdom3%

India3%

Turkey2%

Brazil12%

Benchmark: S&P 500

StatisticMalthusian

Growth FundExpected

S&P 500

Return 48.00% 12.11%

Max 12mo Return 84.9% 23.41%

Min 12mo Return 11.1% -48.59%

Sharpe Ratio 1.039 0.62

Volatility 12.30% 18.88%

S&P Summary based on data from Jan 2009 to Jan 2012.

Recap

• Food prices, water scarcity, and aging populations are in the news on a daily basis

• Your money will be supporting the growth of the firms that are leading the future in essential industriesRelevance

• Globally diversified, across uncorrelated industries, countries, and companies

• Investment in companies that produce essential, recession-tolerant goods, decreasing volatilityStability

• Significantly higher growth than comparable risk-targeted portfolios

• Efficient risk management through 125/25 strategy• Firms with a track record of exemplary

performance• Goods that are subject to increasing scarcity and

demand through population growthGrowth

Bibliography

• Bloomberg LP Terminal, accessed April 2012.• “Daily Treasury Bill Rates,” U.S. Department of the Treasury

<http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=billrates>.

• Elton, Gruber, et al, Modern Portfolio Theory and Investment Analysis, 8th ed., Wiley, 2009.

• Portfolio Research, <http://www.portfolioresearchllc.com>.• Solnik & McLeavey, Global Investments, 6th ed., Pearson Addison

Wesley, 2009.