edgewood citywire vienna 2012 (alexmarch2012) update book

Edgewood Management LLC

Citywire Vienna March 2012 Presentation

Alexander M. Farman-Farmaian Vice-Chairman, Portfolio Manager

Firm Update & Overview (for 4Q 2011)

• Approximately $6.9 billion under management (as of 2/29/12)

• 9 owners / partners

• Privately Owned

Edgewood Management LLC 1

Edgewood Approach

Portfolio Construction

• 22 high quality growth companies

• Diversified across sectors

• Diversified across growth rates

• Largest weightings represent biggest upside

potential



About Us Process Performance Team

Company Lifecycle.

Mature Edgewood

Invests

Here

Large Cap

Mid Cap

Small Cap

$5bn

VC

IPO

Source: Edgewood Management

This illustration is provided for informational purposes only. All investments are subject to the risk of loss and the earnings may not appreciate as reflected in the chart.

Past performance is no guarantee of future earnings results.


Edgewood Valuation Discipline

Price

P/E Ratio

Earnings

per share

Sell

Buy

XYZ X

ABC X

$

Today 5 years

Portfolio

This illustration is provided for informational purposes only. All investments are subject to the risk of loss and may not appreciate in price as demonstrated. Edgewood’s valuation

discipline may not always have positive results. Past performance is no guarantee of future results.


-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Edgewood Portfolio Earnings vs. S&P 500 Operating Earnings Year over Year

Edgewood S&P 500

5 Year EPS CAGR (2008-2012): Edgewood LCG +23.1%*

Past performance is no guarantee of future results. Edgewood’s valuation discipline may not always have positive results and the earnings may not appreciate as reflected in the

chart.

Multiples based on 12/31/2011 Prices & EPS Surprise Most Recent 2012 PE Edgewood Est. Edgewood Est

Weightings Portfolio as a % of Quarter YoY Edgewood 2011-2012 5 Year

COMPANY NAME Ticker Weighting Estimate Reported Surprise EPS EPS Growth Estimates Growth Rate Growth Rate

AMAZON AMZN 5.3% $0.19 $0.38 $0.19 100% -58% 58x 100% 25%

APPLE COMPUTER AAPL 4.0% $10.08 $13.87 $3.79 38% 116% 10x 40% 14%

ILLUMINA ILMN 3.9% $0.30 $0.35 $0.05 17% 21% 20x 15% 25%

QUANTA SERVICES PWR 3.3% $0.25 $0.29 $0.04 16% -3% 18x 46% 18%

INTUITIVE SURGICAL ISRG 4.0% $3.35 $3.75 $0.40 12% 24% 31x 25% 25%

QUALCOMM QCOM 6.6% $0.90 $0.97 $0.07 8% 18% 14x 19% 15%

T ROWE PRICE TROW 5.8% $0.69 $0.73 $0.04 6% 1% 17x 17% 17%

NATIONAL OILWELL VARCO NOV 4.3% $1.30 $1.37 $0.07 5% 30% 12x 31% 17%

VISA V 6.1% $1.45 $1.49 $0.04 3% 21% 17x 19% 18%

COACH COH 4.9% $1.15 $1.18 $0.03 3% 18% 16x 23% 17%

MEAD JOHNSON MJN 3.1% $0.51 $0.52 $0.01 2% -9% 21x 15% 15%

AMERICAN TOWER + AMT 4.3% $0.60 $0.61 $0.01 2% 5% 19x 22% 12%

YUM BRANDS YUM 4.0% $0.74 $0.75 $0.01 1% 19% 18x 14% 13%

COGNIZANT TECH SOLUTIONS CTSH 6.2% $0.77 $0.78 $0.01 1% 18% 18x 26% 20%

VIACOM VIAB 3.4% $1.05 $1.06 $0.01 1% 4% 10x 18% 21%

ALLERGAN AGN 2.8% $1.00 $1.00 $0.00 0% 14% 21x 15% 16%

ECOLAB ECL 2.1% $0.75 $0.75 $0.00 0% 14% 19x 20% 16%

PRAXAIR PX 3.5% $1.37 $1.36 -$0.01 -1% 9% 18x 10% 16%

CELGENE CELG 7.1% $1.06 $1.05 -$0.01 -1% 44% 14x 25% 24%

CME GROUP CME 4.8% $3.64 $3.55 -$0.09 -2% -6% 12x 8% 15%

ORACLE ORCL 4.5% $0.57 $0.54 -$0.03 -5% 6% 10x 11% 16%

GOOGLE GOOG 5.1% $10.49 $9.50 -$0.99 -9% 9% 15x 16% 16%

WEIGHTED PORTFOLIO AVERAGE 14% 18x 25% 18%

S&P 500 * 14% 12x 10% 8%#DIV/0!

Russell 1000 Growth * 8% 13x 12% 10%

Most Recent Reported Quarter

Portfolio Profile and Results – December 31, 2011

+ American Tower's EPS figures are actually Free Cash Flow per share figures as Edgewood’s Investment Committee believes they are the most relevant valuation metric.

2012 and 2013 earnings estimates for the S&P 500 ($105.44 and $117.78, respectively) and the Russell 1000 Growth ($43.06 and $48.98, respectively) are provided by Bloomberg.

The 5yr CAGR is an Edgewood Management estimate.

Supplemental information to the Annual Disclosure Presentation.

No recommendation is made, positive or otherwise, regarding individual securities mentioned.


Performance – As of December 31, 2011

Net

4Q 2011

Net

6-Month

Net

2011

Edgewood Large Cap Growth 8.2% -3.6% 3.7%

S&P 500 Index 11.8% -3.9% 2.1%

Past performance does not guarantee future results. Returns are rounded to nearest tenth. Refer to attached footnotes for the Edgewood Large Cap Growth

Composite.

S&P 500 Index performance produced by Standard & Poor’s.


Attribution - Top 5 Contributors by Holding 4Q 2011

Average

Portfolio

Weighting

Quarterly

Portfolio

Return

Portfolio

Contribution

Intuitive Surgical 5.2% 27.1% 1.3%

Visa Inc. 6.9% 18.7% 1.2%

National Oilwell Varco 4.3% 33.0% 1.2%

T. Rowe Price 5.8% 19.9% 1.1%

Google Inc. 4.8% 25.4% 1.1%

Produced by Capital IQ.

Rounded to nearest tenth.

Past performance does not guarantee future results.


Attribution - Bottom 5 Contributors by Holding 4Q 2011

Average

Portfolio

Weighting

Quarterly

Portfolio

Return

Portfolio

Contribution

Illumina Inc. 3.2% -25.5% -1.1%

Amazon.com Inc. 4.4% -20.0% -0.9%

Oracle Corp. 5.4% -10.6% -0.5%

Mead Johnson Nutrition 0.7% -5.0% -0.2%

Southwestern Energy 3.3% -4.2% -0.1%


Produced by Capital IQ.

Rounded to nearest tenth.

Past performance does not guarantee future results.

Purchases & Sales – 4Q11

Bought Sold

Mead Johnson: 2.0% Position

Weighting First Solar: 1.0% Position Weighting

Ecolab: 2.0% Position Weighting Expeditors: 3.2% Position Weighting



Mead Johnson Nutrition - MJN

• # 1 infant nutrition company in the world, and # 2

in Child’s nutrition behind Nestle. Stated goal: to

be best nutrition company for babies & children.

Research driven. Enfamil Brand.

• Over 60% of revenues in Asia/Latin America

growing in the high teens. China market is

biggest for MJN, and revenues have grown +26%

cagr since 2001. Global infant nutrition end-

market estimated to grow high single digits.

• Future growth opportunities in India, Russia,

Malaysia and Vietnam as they have just started to

penetrate those large markets.

• Health scares and long-term safety record are

significant barriers to entry and franchise /brand

enhancers.

• Highly profitable business with ROC of 46% and

ROA of 21%. Pays dividend yield of 1.5%

• December 2011 had Cronobacter scare in U.S.

allowed us to buy stock in mid $60’s.


Source: Baseline


Ecolab - ECL

• Global leader providing products and

services for the hospitality, food service,

health care, retail, textile, government,

education, and industrial sectors.

• Core focus on cleaning and sanitizing.

• Recent Nalco acquisition provides a pure

play on the water industry and opens up a

large and growing opportunity in the energy

sector.

• As an example, Nalco recently signed a

single contract for North American ‘fracking’

that will possibly add nearly 2 percentage

points of revenue growth for the whole

company in 2012.

• At 17x 2012 consensus estimates, with a 6%

FCF yield and an announced buyback of $1

billion in 2012 – we believe the business is

nearly 40% undervalued.


Source: Baseline


• Resurgence in U.S. manufacturing

– Relatively low labor costs + devalued $ + cheap & abundant energy =

attractive scenario for global manufacturers.

• Mobile computing

– Explosion in data & video over the airwaves.

• Emerging market consumer spending

– Rapid expansion in global middle class + more disposable income

per capita = big opportunity for consumer products.


Three Major Investment Themes


Theme: Mobile Computing

Source: Strategas, Cisco VNI 2011

Source: Nokia Siemens Network

+83% CAGR


Theme: U.S. Manufacturing Resurgence

“Real” labor costs virtually

unchanged for over 20 years

Cheap natural gas

powering more &

more manufacturing

Source: Strategas

Source: Strategas


Theme: Emerging Markets Consumer Spending

Source: Goldman Sachs, US$ in Purchasing Power Parity

Massive & rapid growth in “middle class” and their disposable income


U.S. Consumers Gaining Confidence

Source: Strategas

Strong

rebound


Personal Saving Rate

SA, %

11100908070605

Source: Bureau of Economic Analysis

7

6

5

4

3

2

1

7

6

5

4

3

2

1

Homeowning Households Consumer Financial Obligation Ratio

SA, %

11100908070605

Source: Federal Reserve Board

6.8

6.4

6.0

5.6

5.2

4.8

6.8

6.4

6.0

5.6

5.2

4.8

U.S. Households Feeling More Confident After Strengthening Balance Sheet.

Improved balance

sheet

Less savings as more confident

of future


Consumer Credit Outstanding

EOP, SA, Bil.$

11100908070605Source: Federal Reserve Board

2625

2550

2475

2400

2325

2250

2175

2625

2550

2475

2400

2325

2250

2175

U.S. Consumer Confidence Returning… Fueling Steady Economic Growth.

3 years after

paying down

debt and

saving…

… now

spending again.


Newly Originated Installment Mortgage Loans

EOP, Bil.$

11100908070605

Source: Federal Reserve Bank of New York

800

700

600

500

400

300

200

800

700

600

500

400

300

200

Newly Originated Installment Auto Loans

EOP, Bil.$

11100908070605

Source: Federal Reserve Bank of New York

140

120

100

80

60

40

140

120

100

80

60

40

U.S. Consumer: Still Mostly Avoiding Big Debt… But Buying Again…

Buying no… but renting yes…

…and replacing old car…


U.S. Corporate Profits Very Strong… Employment Picking Up

Pick up in

jobs will

likely

pressure

margins

Source: Strategas

Cheaper labor

due to:

i) devaluation

ii) productivity

Giving U.S.

manufacturing a

long-term

advantage.

U.S Labor/Wage Roles Becoming Dramatically More Competitive

Source: Labor Department

-10%

10%

30%

50%

70%

90%

110%

130%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09

Change Since 2000 in Mfg Hourly Compensation Costs, in US$

U.S.

Canada

OECD*

China**

* A 34-nation economic cooperation group/ ** Reflects Avg wage , % chg from 2002, in yuan Source: U.S. Labor Department


Source: Strategas

60

70

80

90

100

110

120

130

140

'97 '99 '01 '03 '05 '07 '09 '11

S&P 500 High Quality Rankings Index Rel Low Quality Rankings Index


High

quality

still

overly

cheap


20

30

40

50

60

70

80

90

100

110

120

130

140

150

1

2

3

4

5

6

7

'98 '00 '02 '04 '06 '08 '10 '12

10-Year Treasury Yield vs. Consumer Confidence

Consumer Confidence, RHS

Treasury Yield, LHS

Source: Strategas

U.S. Consumer Confidence Rebound… Risk of Rising Bond Yields…

Diverging

paths…

… how

long?

Source: Strategas

-34.2

351.3

-200

0

200

400

600

800

1000

'59 '69 '79 '89 '99 '09

10-Year U.S. Treasury Yield minus S&P 500 Dividend Yield (Basis Points)

565

16

-500

-300

-100

100

300

500

700

'62 '65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10

S&P 500 Earnings Yield less 10-Year U.S. Treasury Yield (bps)

Quality Businesses Trade at Attractive Valuations


Dividends now equal 10 year

U.S. Treasury yields and…

P/Es are lowest in decades

-5%

0%

5%

10%

15%

20%

25%

'35 '40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10

S&P 500 Rolling 10-Year Returns

Source: Strategas

Secular Low Secular Low?

Secular Low

Compound Annual Growth Rates: Will History Repeat Itself?

If history is

a guide…

We should

see a

rebound

Past performance is no guarantee of future results. All investments are subject to the risk of loss and may not appreciate in price.



Accommodative European Central Bank (ECB)

New ECB

Boss, Mr.

Draghi,

pumping in

liquidity…

• Economy is getting better.

• Interest rates will remain low.

• Corporate balance sheets are in excellent condition.

• Earnings have been strong and are projected to stay healthy.

• With over one half of the world’s GDP holding elections or leadership

transition we expect little to no major change in government policy.

• Markets remain extremely cheap relative to interest rates.


Conclusion & Outlook for 2012

Gross Quarterly Performance - Large Cap Growth Composite as of December 31, 2011

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual S&P 500 Russell 1000

Growth

1997 -0.59 19.06 6.94 7.89 36.56 33.37 30.49

1998 13.21 1.38 -10.83 30.53 33.59 28.58 38.71

1999 3.41 8.28 -3.68 16.23 25.36 21.04 33.16

2000 6.27 -4.53 0.60 -4.79 -2.82 -9.11 -22.42

2001 -14.41 6.39 -18.16 13.44 -15.47 -11.88 -20.42

2002 -4.07 -18.24 -15.08 9.83 -26.85 -22.10 -27.88

2003 -1.61 15.98 3.18 12.70 32.69 28.69 29.75

2004 -0.76 0.66 -3.14 9.19 5.65 10.87 6.30

2005 -5.63 2.69 6.05 2.36 5.20 4.91 5.26

2006 4.91 -3.87 8.90 5.00 15.31 15.79 9.07

2007 4.69 8.28 7.67 1.76 24.20 5.49 11.81

2008 -7.57 5.38 -14.55 -26.28 -38.64 -37.00 -38.44

2009 1.54 18.11 8.30 1.50 31.84 26.46 37.21

*2010 0.73 -13.17 18.43 9.03 12.93 15.06 16.71

*2011 7.28 0.63 -10.70 8.44 4.53 2.11 2.64

Past performance does not guarantee future results. Refer to attached footnotes for Edgewood Large Cap Growth Composite.

*Not yet examined by Ashland Partners.


Net Quarterly Performance - Large Cap Growth Composite as of December 31, 2011

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual S&P 500 Russell 1000

Growth

1997 -0.74 18.91 6.79 7.74 36.01 33.37 30.49

1998 13.07 1.27 -10.93 30.44 33.04 28.58 38.71

1999 3.26 8.12 -3.83 16.07 24.62 21.04 33.16

2000 6.23 -4.58 0.57 -4.86 -3.00 -9.11 -22.42

2001 -14.57 6.22 -18.31 13.44 -15.91 -11.88 -20.42

2002 -4.25 -18.41 -15.25 9.66 -27.40 -22.10 -27.88

2003 -1.80 15.79 2.98 12.50 31.72 28.69 29.75

2004 -0.95 0.47 -3.34 8.99 4.85 10.87 6.30

2005 -5.81 2.50 5.86 2.18 4.43 4.91 5.26

2006 4.73 -4.06 8.68 4.80 14.43 15.79 9.07

2007 4.49 8.09 7.45 1.58 23.28 5.49 11.81

2008 -7.77 5.19 -14.71 -26.49 -39.18 -37.00 -38.44

2009 1.32 17.91 8.08 1.27 30.76 26.46 37.21

*2010 0.49 -13.37 18.19 8.82 11.97 15.06 16.71

*2011 7.07 0.42 -10.89 8.23 3.70 2.11 2.64






Edgewood Management LLC’s Composite Presentations received prior to July 1, 2011 included misstatements in regards to the number of portfolios, dispersion, percentage of

firm assets and/or composite assets for years 2003 through 2010 due to the inclusion of some accounts that were not appropriate for the composite. While these statistics

were found to be material there were no material changes to Edgewood’s performance.

Large Cap Growth Composite

Gross Annual

Return

Net Annual

Return S&P 500

Russell 1000

Growth

Number of

Portfolios

Composite

Dispersion

Total Assets in

Composite (MM)

% of

Firm Assets

1997 36.56 35.80 33.37 30.49 9 2.53 38.7 3.2

1998 33.59 33.04 28.58 38.71 12 8.53 120.6 7.8

1999 25.36 24.62 21.04 33.16 16 5.67 229.2 11.4

2000 -2.82 -3.00 -9.11 -22.42 19 2.54 242.5 10.7

2001 -15.47 -15.91 -11.88 -20.42 133 3.46 238.8 13.1

2002 -26.85 -27.40 -22.10 -27.88 121 3.29 181.5 11.6

2003 32.69 31.72 28.69 29.75 116 2.73 371.5 19.1

2004 5.65 4.85 10.87 6.30 118 1.02 414.6 18.2

2005 5.20 4.42 4.91 5.26 181 1.00 637.7 27.0

2006 15.31 14.43 15.79 9.07 240 0.91 1,022.3 32.4

2007 24.20 23.28 5.49 11.81 345 1.06 1,636.1 29.7

2008 -38.64 -39.18 -37.00 -38.44 360 0.61 1,182.3 27.7

2009 31.84 30.76 26.46 37.21 352 1.19 2,564.1 36.7

2010 12.93 11.97 15.06 16.71 300 0.60 2,648.6 42.6

*2011 4.53 3.70 2.11 2.64 306 0.45 2,616.9 41.6


Footnotes for Large Cap Growth Composite

Edgewood Management LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance

with the GIPS standards. Edgewood Management LLC has been independently verified for the periods January 1, 1992 through December 31, 2009. 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. The Edgewood Large Cap Growth composite has been

examined for the periods January 1, 1992 through December 31, 2009. The verification and performance examination reports are available upon request. Edgewood

Management LLC is an SEC registered investment advisor. Past performance is no guarantee of future results. The performance data presented here should not be

taken as any guarantee or other assurance as to future results. The value of any investment may increase or decrease over time. Performance results are expressed

and calculated in U.S. dollars. Gross performance results are calculated before deduction of management fees. Net performance results are calculated after all trading

and management expenses. Returns are calculated after the deduction of actual trading expenses. Trading expenses comprise of trading commissions. The

management fee as disclosed in Part 2A of Edgewood’s Form ADV is 1.5% for accounts up to $5 million and 1% for accounts above $5 million. Actual investment

advisory fees incurred by clients may vary.

The Large Cap Growth Composite is comprised of accounts that invest in Edgewood’s Large Cap Growth portfolio of 22 stocks. The composite was created in January

2001. Composites are valued monthly and portfolio returns have been weighted by using beginning of quarter market values plus weighted cash flows. Performance

results reflect the reinvestment of dividends and other earnings. Trade date accounting has always been used. No alteration of composites as presented here has

occurred because of changes in personnel. A complete list and description of the Firm’s composites is available upon request . Annual composite dispersion presented

is an asset-weighted standard deviation calculated for accounts in composite the entire year. Edgewood shows performance net of withholding taxes on dividends,

interest and capital gains.

Only discretionary accounts are included in the Large Cap Growth Composite. Effective January 1, 2008, Edgewood increased the minimum portfolio size for inclusion

in the composite from $50,000 to $500,000. From inception to December 31, 2000, the performance results shown represent the Institutional Large Cap Growth

Composite, which has the same strategy as the Large Cap Growth Composite, but it only includes tax exempt accounts. This composite is presented because taxable

portfolios prior to 2001 typically held restrictions and legacy holdings that were not representative of the strategy. As of January 1, 2001, the results shown include

taxable and tax exempt accounts that follow the composite strategy. The composite represents approximately 43% of the firm’s assets under management as of

December 31, 2011.

From January 1, 1992 to December 31, 1997 accounts were included in the composite the first full month after opening. From January 1, 1998 to December 31, 2004

accounts were included in the composite at the end of its second quarter after opening. As of January 1, 2005 accounts are included in the relevant composite the first

full quarter after their opening. Additional information regarding policies for calculating and reporting returns and valuing portfolios is available upon request.

The composite returns are benchmarked to the Standard & Poor's 500 Index (“S&P 500”) and the Russell 1000® Growth Index (“R1000 Growth”). The benchmarks are

used for comparative purposes only and generally reflects the risk or investment style of the investments reported on the schedules of investment performance.

Investments made for the portfolios Edgewood manages according to its Large Cap Growth strategy may differ significantly in terms of security holdings, industry

weightings, and asset allocation from those of the aforementioned indices. Accordingly, investment results and volatility wil l differ from those of the benchmarks. The

S&P 500 is an unmanaged index with no expenses, which covers 500 industrial, utility, transportation and financial companies of US markets. It is a capitalization-

weighted index calculated on a total return basis with dividends reinvested. The R1000 Growth measures the performance of those Russell 1000 companies with higher

price-to-book ratios and higher forecasted growth rates.


Footnotes for L Select – US Select Growth

L Select – US Select Growth is a Societe d’Investissement a capital variable whose registered address is 33, Rue de Gasperich, L-5826 Hesperange R.C.S.

Luxembourg B 57.507. The L Select – US Select Growth fund is not included in Edgewood Management LLC’s Large Cap Growth Composite. Edgewood Management

LLC is the investment manager of L Select – US Select Growth.

Investors should carefully read the prospectus and all other relevant documentation before investing in the fund. Past performance is no guarantee of future results. The

performance data presented here should not be taken as any guarantee or other assurance as to future results. The value of any investment may increase or decrease

over time. Performance results are expressed and calculated in U.S. dollars. Net performance results are calculated after all applicable trading, management fees and

operational costs. Holdings shown were current as of the date indicated on this piece, and represent the ten largest holdings in the Fund by assets. These holdings are

for informational purposes only and do not constitute a recommendation to buy, hold or sell securities. No recommendation is made, positive or otherwise, regarding

individual securities mentioned. Performance results reflect the reinvestment of dividends and other earnings. The Fund’s returns are benchmarked to the total returns

of the Standard & Poor’s 500 index (“S&P500”). Benchmarks are used for comparative purposes only and generally reflect the risk or investment style of the

investments reported on the schedules of investment performance. Investments made for the Fund according to its Large Cap Growth strategy may differ significantly in

terms of security holdings, industry weightings, and asset allocation from those of the benchmarks. Accordingly, investment results and volatility will differ from those of

the benchmarks. The S&P 500 is an unmanaged index with no expenses, which covers 500 industrial, utility, transportation and financial companies of US markets. It is

a capitalization weighted index calculated on a total return basis with dividends reinvested. This document is for information purposes only. The contents of this

document are not and should not be construed as an offer to sell any investment, financial instrument or service. Furthermore, this document does not constitute the

solicitation of an offer to purchase or subscribe for any investment, financial instrument or service in any jurisdiction where such a solicitation of an offer is unlawful. The

Fund is only available for investment by non-US citizens who are not residents of the US. The Fund is not offered for sale or sold in the US, its territories or possessions.

The Fund is not registered for sale to the public in all jurisdictions. The information contained within this document has not been reviewed in light of your personal

circumstances. Movements in exchange rates can impact the value of an investment in the Fund. Subscriptions will only be received and shares issued on the basis of

the current prospectus for the Fund, the most recent financial report and the simplified prospectus. Holdings are available upon request.


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