Finance & Investment Club September 12 th , 2012

1. First General Meeting Finance & Investment Club September 12th, 2012

2. Introduction of the 2012-2013 Executive Board Christopher Kovalik President Stefan Bell VP - Corporate Relations Knut Kirchoff VP - Operations Joseph McNiff VP - Investment Research AshwinTelukuntla VP - Investment Management Andrei Tapliga VP - Technology Xun Yao Chen VP - Investment Research

3. Introduction to the Finance Club at Boston University Long-term Goals Education • To offer an educational, real-life opportunity for aspiring investment professionals Community • To foster lasting relationships amongst our membership in Boston University and beyond Alpha • To continue professional procedures to maintain an alpha generating process Growth • Personal, career and fund growth

4. Introduction to the Finance Club at Boston University (Cont’d) Talk to Anyone Within the Club! Executive Board Members President, VP Corporate Relations, VP Investment Management, VP Investment Research, VP Operations, VP Technology Responsible for planning and executing strategic direction of the club Investment Management Focused Industries: Materials, Industrials, Energy, Real Estate, Healthcare, Technology, Telecommunications & Media, Consumer Products, and Fixed Income Sector Heads Responsible for managing the Undergraduate Investment Fund, and its performance. Investment Associates Responsible for finding investment opportunities across several industries within teams. Investment Research Focused Industries: Materials, Industrials, Energy, Real Estate, Healthcare, Technology, Telecommunications & Media, and Consumer Products Senior Analysts Responsible for engaging and training junior analysts in creating quality investment research and presentations. Junior Analysts Responsible for researching and analyzing industries and companies, working side by side with other junior analysts and senior analysts.

5. Introduction to the Finance Club at Boston University (Cont’d) “A Week in the Club” IR Sector Meetings IM Team Meeting E-Board Meeting SAs schedule meeting to work on presentation deliverables and focus on JA research & education. VP IM, SHs and IAs discuss sector developments, potential investments and current portfolio holdings. SAs schedule meeting to work on presentation deliverables and focus on JA research & education. (Every day) Tuesday Wednesday Thursday Friday Saturday Sunday Monday Senior Analyst Forum General Club Events Note: Periodically each semester there are various conferences and networking events open to all members of club. General Club Meeting VPs of IR hold meeting with SAs to teach core valuation and financial research concepts with sector presentation updates. Meeting of all members focused on senior member presentations, discussions led by E-Board, guest speakers and portfolio updates.

6. Introduction to the Finance Club at Boston University (Cont’d) Semester Schedule

7. Introduction to the Finance Club at Boston University (Cont’d) Typical General Meeting Agenda • Opening remarks from Executive Board • Portfolio performance update • Overview of deliverables for IR team • Stock pitch and sector update • Guest speaker Garrett Bauer on insider trading General Meeting Agenda September 12th, 2012 SMG 105 6:00pm – 7:10pm

8. Our new Faculty Advisor Steven Segal BU Executive-in-Residence Faculty Advisor • Teaches graduate and undergraduate Private Equity and Leveraged Buyouts courses • Special Limited Partner of J.W. Childs Associates • Over 20 years of private equity investment experience • Board memberships: • Trustee, Combined Jewish Philanthropies • W/S Packaging Group, Inc. • Trustee, Temple Emanuel; Chair, Endowment Committee • The NutraSweet Company, Inc. • Trustee, Hebrew College; Chair, Finance Committee • Round Grill Inc. (d/b/a FiRE + iCE) • Fitness Quest, Inc.

9. Investment Management: Summer Investment Management Program 2012-2013 Investment Management Division Goals: • Increase the BUFC Investment Fund through strategic investments, S.H & Associate collaboration and constant fund adjustments to maximize alpha. • Create a summer program that generates new investment ideas and recommendations on current investments to ultimately strengthen the investment fund. Investment Management Focused Industries: Materials, Industrials, Energy, Real Estate, Healthcare, Technology, Telecommunications & Media, and Consumer Products Sector Heads Responsible for covering current investment positions in each sector as well as identifying possible micro-sectors for investment opportunities. Associates Responsible for making investment recommendations in certain sectors and micro-industries identified by Sector Heads. Summer Investment Management Assignment: • S.H Deliverable: Research and present stock pitches for the investment management team. • Associate Deliverable: Research and report on current positions in the fund and make recommendations on increasing/decreasing/exiting current investments.

10. Investment Research: Summer Senior Analyst Program 2012-2013 Investment Research Division Goals: • Strengthen BUFC Brand through top notch investment research, SA leadership and JA retention, ultimately developing the future leaders of the club. • Create a summer program that strengthens the leadership skills of our Senior Analysts as well as gives them the opportunity to explore and prepare skills necessary to enhance their investment research and analysis. Investment Research Focused Industries: Materials, Industrials, Energy, Real Estate, Healthcare, Technology, Telecommunications & Media, and Consumer Products Senior Analysts Responsible for engaging and training junior analysts in creating quality investment research and presentations. Junior Analysts Responsible for researching and analyzing industries and companies, working side by side with other junior analysts and senior analysts. Summer Senior Analyst Assignment: • First Deliverable: Reading of multiple HBR case studies to understand effective leadership and management while providing reflections and recommendations of Finance Club. • Second Deliverable: An 8 minute PowerPoint industry analysis presentation focused upon a micro-sector of 6-8 companies within Senior Analyst Industry. • Industry breakdown / trends / risks / outlook /recommendation

11. Home Building Industry Sector: Real Estate Senior Analyst: Kento Okamoto

12. Industry Summary RatingNeutral/Overweight Industry Revenue ($MM) Upside Potential Downside Risk • Indication of modest recovery • Potentially undervalued due to skepticism • Possibility of another economic disaster • High elasticity due to uncertainty Action Statement • Housing market seems to be on its path for recovery with mixed factors that can potentially shift the market outcome in different directions. Some major factors are: • Signs of recovery in residential home price • Housing price increased for the first time since Sep-2010. Some concrete signs of modest recovery. • 30 year mortgage interest rate at all time low • Golden opportunity for financing real estate purchases. Increase in prime mortgage to support future growth of the market. • Subliminal risk of high demand elasticity • Still concerned market may over-react to negative market news. Case-Shiller Index 20-city composite

13. Industry Definition – House Construction • Firms in this industry are primarily engaged in construction and remodeling of single-family houses and residential buildings. These firms may also hold their own financial services arm to provide clients with customized financial solution. Firms in this industry operate in multiple states, yet tend to hold strong position in their indigenous states. NYSE: PHM NYSE: DHI NYSE: LEN NYSE: RYL NYSE: TOL NYSE: KBH

14. Industry Breakdowns Industry breakdown by region Industry breakdown by market cap ($MM)

15. General Business Model Home Builders Home Building Supplier Customer Material Cost Construction Base Material Mortgage Banking Land Mortgage Loans Purchase Payments + Interest + (Collateral)

16. Economic Landscape “Supply Side” “Demand Side” Home Builders New Residences Consumers Demand Housing Market Financial Entities Foreclosed Properties Collateral Financing

17. Absorption of Existing Inventory Existing Home Sales and Remaining Inventory What does this trend tell us? • Steady decrease in existing house inventory • Government support to prevent foreclosure • Recovering consumer appetite for real estate purchase Projected demand surplus, leading to opportunity for new home building Foreclosure rate down 2.99% in June v.PY

18. 30-yr Mortgage rate and New Home Sales Mortgage rate movement and New home sales With low home price, what matters to potential purchaser is the interest payment • Current 30-yr mortgage rate down to approx. 3.5% v. 8.3% pre – 2008 crash • Significant decrease in total interest payment for property purchases • Signs of increasing demand in second home purchase by retired population • Projected increase in prime mortgage, which could support the recovery of the real estate market as a whole Golden opportunity to purchase a superior property in minimum sunk-cost and interest payment

19. Future Outlook $MM Time-series analysis on total revenue, orders, and profitability General Outlook Industry to experience organic recovery/growth • Strong projected growth in total industry revenue and company orders • Profitability to recover with less loss from depreciated property/options value Risks to Consider • Sizable negative market news • As the market begins its process to recovery, a sizable negative news on the market could scare out potential demand. • Loss of federal support or/and continuous over-regulation in lending standard • Loss of federal lending support or overly strict lending policy could take away the golden opportunity for financing real estate purchase.

20. Recommendation Reiterate a Neutral/Overweight rating: • Promising signs of modest market recovery seen in various key statistics and indicators • Possibility of significantly outperforming the total real estate market as shortage in supply may become more imminent • Contains subliminal risk of high demand elasticity as market confidence is still under repair Good potential for outstanding performance, yet with recognizable risk of disappointing outcome

21. Appendix

22. Company Comparable

23. Generic Pharmaceuticals Finance & Investment Club Healthcare SectorSummer 2012 Senior Analyst: Roy Tong

24. Executive Summary – Generic Pharmaceutical Manufacturing

25. Industry Definition – Generic Pharmaceutical Manufacturing • Generic pharmaceutical and medicine manufacturers develop prescription drug products that are used to prevent or treat illnesses in humans or animals • Generic drugs are produced, marketed and distributed without patent protection, yet at the same time comparable to brand listed drug products (if existent) in dosage, strength, administration, quality, performance and intended use • Firms are allowed to manufacture generics of brand name drugs AFTER the expiration of patents protecting the branded drugs, and are able to do so at a much lower cost due to the bypassing of discovery costs Ligand Pharmaceuticals NASDAQ: (LGND) Avanir Pharmaceuticals NASDAQ: (AVNR) Catalyst Pharmaceuticals NASDAQ: (CPRX) Sagent Pharmaceuticals NASDAQ: (SGNT) Hi Tech Pharmaceuticals NASDAQ: (HITK) Source: Yahoo Finance Industry Center, Various Firms’ 10K & IBISWorld Analysis

26. Health Care Sector Breakdown Industry Breakdown by Market Cap ($BLN) Breakdown by Market Cap Selected Companies Market Cap Source: Yahoo Finance Industry Center & Various Firms’ 10K Analysis

27. Industry at a Glance Breakdown by LTM Revenue (Total: $427.28M) Product Segmentation Source: Yahoo Finance Industry Center, Various Firms’ 10K and IBISworld Analysis

28. Generic Drug Manufacturers Revenue Generation Research and Development Partners Manufacturers Pipeline Pre Clinical Trials Pass Pass Pass Stage I Stage II Stage III FDA Approval Pass New Drug Application (NDA) Marketed and Sold FDA Review Royalties or Licenses Institutions Through Partner Sales Team or Retailers Direct through Sales Team Retailers End User 3rd Party Source: Various Firms’ 10K and Firms’ Website Analysis

29. Geographical Distribution of Generic Pharma Manufacturers • Mid-Atlantic and West regions with most manufacturers but sales branches typically located close to end market • Advantage of locating near other manufacturers include local specialize workforce, experienced business services & availability of facilities that are specialized and expensive to build • Sales of generics follow population trends – Southeast, home to significant portion of elderly, accounts for largest region in terms of revenue Source: IBISworld Analysis

30. 2011 Revenue Generation Breakdown by Segments Source: Various Firms’ 10K Analysis

31. Time Series Analysis • Revenue – Medicare Spending Correlation: 0.98 • Revenue – Medicaid Spending Correlation: 0.86 • Based off anticipated US government spending on Medicare and Medicaid (which can be found from records and projections from the US Government Office of Budget and Administration), we can reason that a comparable growth rate will be found in projected revenue of the generic drugs industry • Projected Revenue (Billion $) = 6.601 + 0.112*Medicare – 0.68*Medicaid Spending (Billion $) • Accurate within +/- 3 Billion $ Source: Office of Management and Budget, IBISworld & BUFC Analysis

32. Trend 1 – Growth of Generics Revenue > GDP Growth Generics Revenue • Generic pharmaceutical manufacturing shows key features of an industry in its Growth stage • The value that industry (revenue) adds to the US economy is growing at a much faster pace than US GDP • Rapid introduction of products and brands coincides with growing customer acceptance of products • This is seen in how market share has grown substantially at CAGR of 5.4% for past 15 years compared to brand name drugs’ decline US GDP % Distribution of Brand vs Generic Sales Mix CAGR: 5.4% Source: US Census Bureau, Mintel & IBISworld Analysis

33. Trend 2 – Competitive Edge in Low Costs Average Retail Prices of Brands vs Generic ($) • Lure of generics are obvious, with a 74% difference in average retail prices as of 2010 • Virtually all major pharmacy chains offer generics at extremely inexpensive prices, leading to price wars • Result of this has been an increase in sales of generics, often at the expense of brand names • In 2010, 93% of physicians prescribed generics when they were available – compared to 83% in 2003 • Some 75% of prescriptions dispensed in 2011 were generic drugs – compared to 40% in 2000 Source: US Census Bureau, Mintel & IBISworld Analysis

34. Trend 3 – Government and Private Insurance Coverage • Of the pool of respondents in a Mintel study, 90% of the total indicated that their insurance covers prescription drugs • Furthermore, close to 60% of respondents indicated that their insurance would not pay for Brand Name drugs should a Generic be available Source: Mintel & IBISworld Analysis

35. Trend 3 (Con’t) – Federal Health Care Spending & Reform Federal Medicare & Medicaid Spending • When Medicare and Medicaid receive more funding from the government, more consumers gain prescription drug coverage • As a result, industry demand increases with the population’s ability to afford the industry’s products • Coverage by these government aids usually will not cover the cost of brand name drugs if generics are available • Health Care reform in 2010 expected to benefit generic pharmaceutical manufacturers - PPACA CAGR: 6.7% CAGR: 8.7% Source: Office of Management and Budget, Mintel & IBISworld Analysis

36. Trend 4 – Aging Population • American population is an aging one, with Americans aged 65-74 estimated to see the greatest hike from 2011-2016, followed by 55-64s • This means that the 2 fastest growing demographics are at or approaching the age when the aging process will place them at greater risk for a variety of age-related ailments • The elderly are more vulnerable to certain diseases, including Alzheimer’s, heart disease, diabetes, cancer etc, which require preventive or treatment measures provided by pharmaceuticals Source: Mintel & IBISworld Analysis

37. Comps Financials *does not include industry values Source: Yahoo Finance Industry Center, Google Finance, MacroAxis & Various Firms’ 10K Analysis

38. Conclusion and Recommendation

39. Investment Research: Summer Senior Analyst Program 2012-2013 Investment Research Division Goals: • Strengthen BUFC Brand through top notch investment research, SA leadership and JA retention, ultimately developing the future leaders of the club. • Create a summer program that strengthens the leadership skills of our Senior Analysts as well as gives them the opportunity to explore and prepare skills necessary to enhance their investment research and analysis. Investment Research Focused Industries: Materials, Industrials, Energy, Real Estate, Healthcare, Technology, Telecommunications & Media, and Consumer Products Senior Analysts Responsible for engaging and training junior analysts in creating quality investment research and presentations. Junior Analysts Responsible for researching and analyzing industries and companies, working side by side with other junior analysts and senior analysts. Summer Senior Analyst Assignment: • First Deliverable: Reading of multiple HBR case studies to understand effective leadership and management while providing reflections and recommendations of Finance Club. • Second Deliverable: An 8 minute PowerPoint industry analysis presentation focused upon a micro-sector of 6-8 companies within Senior Analyst Industry. • Industry breakdown / trends / risks / outlook /recommendation

40. Your Future in Finance Our Biggest Event of the Fall Semester – Start Networking Now When: Saturday, September 29th from 8:15am to 4:15pm Block 1: Exploring a Career in Finance, Managing your Career Progression, Global Career Perspectives Block 2: Valuation Analysis, How to Pitch a Stock, Techniques in Microsoft Excel Block 3: Retail & Finance, Credit Analysis, and Networking Etiquette Mock Interviews will also be held during Block 1 – first come first served Register at BUinvest.com TONIGHT! We will send you an email! Formal deadline 9/21/2012, but spots are limited

41. Enjoy pizza with us and learn about our firm, and the field of Investment Management. • Meet our recruiters, and learn about our recruitment process for the Equity Research Associate Program • Hear from post-undergrad associates about entry into the field • Talk to post-MBA analysts about their stock-picking process • Listen to experiences from Portfolio Managers • Network with BU alums at MFS • Learn more about our culture ahead of recruitment • 11:00-11:30am: Welcome with Managers of the Equity Research Associate Program • 11:30-12:00pm: Q+A with BU Alumni at MFS • 12:00-12:45pm: Lunch Panel with Equity Research Associates Day on the Job With the Equity Department @ MFS Investment Management Friday, September 28 – 11am to 1pm • Who we are: • Boston-based global asset manager with $285 Billion in assets under management • 20 global offices • Our Equity Research Associate Program • Working on a sector team, our equity research associates assist analysts in recommending stocks to portfolio managers. Associates assist heavily with building models, project-oriented proprietary research, and in meetings with company management teams. We have opportunities to work in multiple sectors and gain knowledge on stock-picking across industries, in an academic environment that encourages constant learning.

42. To Participate… You must… register! (Also available at BUinvest.com) • Information required: • Name, contact information, class, school, concentration / major (if decided) • Also provide which position you would like to apply for; positions available: • Junior Analyst • Senior Analyst • Investment Associate

43. Today’s dinner spot: Scoozi Next Meeting: Wednesday, 9/19 in PHO 206 Come in business casual; we have a speaker! Next Steps E-mail (BUinvest@bu.edu) with any questions Come talk to us!