UVA Value Investment Pitch Competition Sponsored by Blue Ridge Capital Fall 2009

Overview and Instructions

The UVA Value Investment Pitch Competition is open to undergraduate and graduate UVA students. The competition will be coordinated by the McIntire Investment Institute, the Oceanus Alternative Investment Club, Kappa Psi, and the McIntire School finance faculty at the undergraduate level, and by Darden Capital Management and the Darden School finance faculty at the graduate level.

Either individual students or teams of two students can enter the Competition. Each individual or team will develop a value investing idea and submit a memo in support of this idea. A template for the investment memo and guidelines for evaluation are attached to this document. The Competition will involve three rounds; the first two rounds will be conducted independently at the McIntire School and the Darden School, and the final round will be conducted at the conclusion of the Value Investing Conference on Friday, October 23:

1. Participants will submit an investment memo, and this memo must follow the structure provided in the attached template. The memo will first be evaluated by a faculty panel within each school. The investment idea may be a long or a , and should focus on a company with a market cap of at least $500 million, preferably greater than $1 billion. Market caps above $250 million are permitted if the idea is a short with the potential of going to zero. The investment should have a return potential of 50% to 100% over two to five years. Support for the investment idea should be based on (not ). Participants should focus on the quality of the idea, the research, and the presentation of the idea.

For undergraduates and McIntire graduate students to enter the competition, three hardcopies of the memo must be submitted to Maria Salazar in the McIntire School Dean’s Office (top floor in Rouss Hall) no later than Monday, October 12. On a cover page, the memo should include the name, e-mail address, class, and school of each team member. The faculty panel will review these memos and select up to ten individuals or teams to participate in the second round. These second round participants will be selected by Friday, October 16.

2. The second round will be conducted on Thursday afternoon, October 22 from 1:30 to 4:00 p.m., immediately prior to the Value Investing Conference. Within each school, each of the participants will present the value investment idea through a seven-minute pitch, followed by three minutes for discussion and questions, to a panel of judges consisting of three alumni of the respective schools and one faculty member from each school. Each school will select the alumni and faculty judges. Each participant also should provide the judges with its investment memo. At the conclusion of these pitches, the judge panels will select two individuals or teams from each school as finalists for the third round.

3. The final round, involving the four finalists (two undergraduate and two graduate), will be held as the concluding session of the Value Investing Conference on Friday, October 23 from 11:30 a.m. to 12:30 p.m. Once again, each individual or team participant will pitch the value investment idea to a panel of judges consisting of alumni and participants in the previous panel discussion. Each team will have seven minutes to pitch its idea followed by seven minutes of questions and discussion. The overall winner will be selected at the end of the session.

4. The winning individual or team receives a trip to and lunch with John Griffin, , and other successful investors.

UVA Value Investment Pitch Competition Sponsored by Blue Ridge Capital Fall 2009

Investment Memo and Guidelines for Evaluation

Memo (see template on following page) ¾ 3 pages maximum (2 page memo max + 1 optional appendix) ¾ Appendix examples include: o Additional numerical / valuation support (ROIC, unit economics, cost structure, DCF, Sum of Parts, etc) o Visual (company product vs. competitors) o Probability tree of outcomes (convey risk / reward) o Industry value chain, cost structure o Value added research (VAR) log (comments from key conversations) o Other creative options

Guidelines for evaluation ¾ Research Quality / Depth o Understanding of company, industry, competitive advantages (or lack of), management, secular drivers o Quality (creativity, depth, breadth) of value-added research (VAR) ƒ Conversations with key individuals that will help understand opportunity ¾ Memo / Idea o Attractiveness of opportunity (risk / reward, variant perception), must fit within 2-5 year time horizon ƒ Think about risk / return as how much you can make in your upside vs. how much you can lose in your downside scenario (and the probabilities of each). It is important to quantify your research to understand the size of your variant perception and whether the potential return justifies the risk. o Strong understanding and conveyance of key points / drivers (and supportive research) o Simple and effective pitch ¾ Financial Analysis o Accurate financial model / valuation ƒ Consider multiple of EBITDA or FCF / Earnings per share, DCF, Sum of Parts, etc o Strong understanding of key valuation drivers ¾ Presentation o Strength of verbal pitch, how well you “tell the story” o Ability to handle Q&A (often results from anticipating questions) o Creativity

Questions ¾ Clarification questions can be sent to Professor David C. Smith ([email protected]). Professor Smith will forward questions to organizers at Blue Ridge Capital, if necessary. Company Name (Ticker) Date: Analysts:

Share Price (date) 30.00 FYE: Nov‐31 2007 2008 2009E 2010E 2011E 2012E Diluted Shares Outstanding (mm) 250 Revenue 105 110 116 122 128 134 Market Capitalization ($US mm) 7,500 y/y growth 5% 5% 5% 5% 5% 5%

Total Cash 40 EBITDA 32 34 36 38 40 43 Total Debt 300 Margin 30% 31% 31% 31% 31% 32% Minorities / Preferred 10 y/y growth 6% 6% 6% 6% 6% 6% Enterprise Value ($US mm) 7,770 EPS 111213151618 52 Week Range ($US) 15.01 ‐ 65.37 y/y growth 10% 10% 10% 10% 10% 10% % of 52‐Week High 46% FCF 131415171820 Avg Daily Value (3 months) 100 y/y growth 8% 8% 9% 9% 9% 9% as a % of Market Cap 1% EV / EBITDA 11.0x 11.0x 11.0x 11.0x P / E 15.0x 15.0x 15.0x 15.0x FCF Yield 5.6%5.6%5.6%5.6%

Thesis / Key Points ¾ X (brief sentence) ¾ X ¾ X

Misperception

Most Compelling VAR Point

How It Plays Out

Risks / What Signs Would Indicate We Are Wrong? ¾ X (brief sentence) ¾ X

Signposts / Follow‐Up Company Description ¾ X (short phrases fine) [Ticker] is… ¾ X