October 4 th , 2013

1. Consumer Discretionary Fall 2013 Buy/Sell Presentation October 4th, 2013 Group Members Max FarringtonSarah Beth Hampton David Williams T.J. Redmond

2. Consumer Discretionary Holdings Overview • The consumer discretionary sector of the economy consists of businesses that sell nonessential goods and services and relies on consumers to spend that part of their paycheck that is disposable on things they do not absolutely need to survive. • Areas of focus in CD include: • Emerging Markets • Consumer Confidence • E-Commerce • Trends in Wealth • Macroeconomic trends affecting CD include: • Global economic woes, including consumer confidence, slow recovery in unemployment, rising interest rates and the potential conflict in Syria • US budget conflicts and slow growth

3. Performance verse Benchmarks Returns from 2/13/13 to 10/3/13 ―Index: DIS, COH, IGT, TJX, DLTR ―The Select Sector SPDR Trust – The Consumer Discretionary Select Sector SPDR ETF ― S&P 500 Index

4. International Game Technology (IGT) Company Description: • IGT is a global gaming company • Market Cap: $4.96B • Specializes in the design, development, manufacture and marketing of casino games, gaming equipment, and systems technology for land-based and online social gaming and wagering markets • Leading supplier to gaming entertainment products and services at competitive prices, designed to enhance the player’s experience • Two segments: • North America • International • Three revenue divisions: • Gaming operations • Product Sales • Interactive Recent News & Financial Update: • Q3: • Revenues up 9% to $579mm, primarily due to N.A. product sales and social gaming • EPS from continuing operation up 56% • Adjusted EPS up 43% Hold Rational: • Trend towards state legalization of gambling • Delaware legalized online gambling, more states are in talks to do the same. • Dividend growth • IGT recently announced a 67% increase in its dividend payout

5. Coach (COH) Company Description: • COH is a designer and manufacturer of accessories and gifts • Market Cap: $15.29B • Two segments • North America • International: Japan, Hong Kong, Macau, and mainland China • Products: • Women’s handbags • Women’s Accessories • Men’s • Other Products (footwear, wearables, jewelry, travel bags, sunwear, watches, and fragrance) Recent News & Financial Update: • Q4: • Net sales up 6% to $1.22 billion • FY13 (ended June 29, 2013) • Acquisition of its retail businesses in Korea and Malaysia • 50% growth in Men’s business • 40% sales growth in China • NA sales flat compared to FY12 Hold Rational: • Positive international exposure • Growth in China of 40% last year • See this continuing • High margins • 20.38 gross profit margins • Sales increasing steadily • Dividend yield of 2.5% or $1.35 per share annually

6. TJX Companies (TJX) Company Description: • TJX is an off-price apparel and home fashions retailer • Market Cap: $40.19B • Four segments: • Marmaxx – operates T.J. Maxx and Marshalls in the United States • HomeGoods – operates HomeGoods stores in the United States • TJX Canada – operates Winners, HomeSense and Marshalls in Canada • TJC Europe – operates T.K. Maxx and HomeSense in Europe • Competes on price through strategic inventory management • Generally sells products at a 20% - 60% discount from retail price Recent News & Financial Update: • Q2: • Diluted EPS up 18% ($0.66 from $0.56) • Net sales up 87% to $6.45 billion • Raised guidance – company expects EPS to be between $0.69 and $0.72 for Q3 and between $2.74 and $2.80 for FY14 • Elected Dawn Lepore to Board of Directors in June Hold Rational: • Poised for success in bull or bear market • Outperform in case of further economic downturn • Benefits from upward economic trends • Diversification • Geographical exposure • Exposure to consumers of various economic statuses

7. Walt Disney Co. (DIS) Company Description: • DIS is a diversified entertainment company • Market Cap: $114.37B • Five segments: • Media Networks (cable networks, broadcasting, radio, etc.) • Parks and Resorts (owns and operates Disney Land, Disney World and various other resorts) • Studio Entertainment (produces and acquires motion pictures, musical recordings, etc.) • Consumer Products (design, development, promotion and sale of products based on Disney’s intellectual property) • Interactive (console and handheld games, as well as online games and games for smartphone platforms) Recent News & Financial Update: • Q3: • Diluted EPS same as prior-year quarter at $1.01 • Revenues up 4%, Parks & Resorts revenues up 7% • Studio Entertainment segment took a hit with income down 36% • Announced new cash investment of $750mm in Hulu together with joint owners 21st Century Fox and NBCUniversal Hold Rational: • Consistent performance • High demand for Disney’s television content and industry trend towards online streaming • Leader in several industries; diversified company with many revenue streams

8. Sell Recommendation • Thesis: Although we believe Dollar Tree will remain a strong company, we believe that our investment thesis has largely played out and there are better opportunities. Market saturation, lack of areas for growth, and the current overvalued price lead us to believe that it is the right time to sell.

9. Dollar Tree Company Overview Products Description • Operates discount variety stores in 47 states and 5 Canadian provinces • Headquartered in Chesapeake, VA • 82,000 worldwide employees • Offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, and frozen and refrigerated food • Unique concept of “everything’s $1.00 or less” and encourage the “Thrill of the Hunt” • Primary growth drivers are same-store sales (sales results for stores open for over one year) and new store openings • Target market is low income individuals. 40% of their customer base uses government assistance vs. Stores • 4,671 stores between the U.S. and Canada • Average store size is approx. 10-12 thousand square feet • Located near “big box” discounters

10. Dollar Tree Competitors Dollar General Corp. Family Dollar Stores, Inc. • U.S. chain of variety stores headquartered in Goodlettsville, TN • Founded in 1939 • Most of its products are priced at more than $1.00 • However, goods are usually sold at set price points from penny items up to $50 • Currently operates 10,600 domestic stores • Regional chain of variety stores headquartered in Matthews, NC • Founded in 1959 • Family Dollar is also not a true "dollar store" in the strict sense • However, approximately 90% of its products cost less than $10 • Currently operates 7,500 domestic stores

11. Dollar Tree Competitors Cont. Dollarama, Inc. Store Locations • Canadian chain of variety stores headquartered in Montreal • Founded in 1992 • The majority of items are priced at $1.00 or less although in early 2009 Dollaramaintroduced items priced up to $2.00 • Now the company has items at the $3.00 price point as well • Currently operates 785 stores in Canada and is looking to expand into Central America

12. Sell News September 25th, 2013 – Goldman Sachs Removes DLTR from Conviction Buy List • Still maintained the view that DLTR was well positioned to benefit from consumers’ increasing focus on value • “With only 12% upside to our price target following the stock’s relative outperformance vs. the S&P 500, we believe a place on the conviction list is no longer warranted.” September 17th, 2013 - $2 billion Share Repurchase Plan Announced • Board of Directors authorized the repurchase of up to $2bn of common stock from shareholders • A private placement of $750mm of senior notes along with $250mm of cash will fund the first $1bn through an accelerated share repurchase June 10th - COO Adds Role As President • Dollar Tree promoted Gary Philbin to President and COO • Philbin has served as COO since 2007

13. Sell Rationale Market Saturation Lack of Room for Innovation • Same store sales growth decreasing significantly • moving towards US GDP of 2% • Dollar Tree believes it has passed 66% market saturation • New competition: • Five Below • Wal-Mart’s new <50,000 square foot stores • Business model of dollar stores is limited • Limited to inventory that can be sold for $1 • Ideas for innovation include frozen foods and strategic placement of impulse buy items Graph of comparable same store sales here

14. Sell Rationale Cont. Lack of Pricing Power Business Model Does Not Carry Over to E-Commerce • E-commerce is an increasingly vital aspect of retail • Dollar Tree has not been able to successfully translate its business to an online platform • Existing website has been a flop so far • Minimum order sizes require customers to spend much more than $1 on things they most likely would not want more than 1 of • Everything is $1 • Today’s inflation at 2% and long term average inflation over the past 100 years at 3.22% • Company may have to increase price, lower margins, or supply lower quality products • Stores under new brand name “Deals” • Recognition that $1 model may not be sustainable in the long run

15. Sell Rationale Cont. Buy Rational has Played Out Lack of International Exposure (and No Plans to Change) • Operates in the US and Canada • Management has not mentioned any plans to expand the company into any other markets • Europe has been less receptive to dollar store model • Larger opportunities for growth may be in markets outside the United States • We bought Dollar Tree heading into the recession, believing that the economic downturn would be beneficial for the company’s growth • 250% return on our investment • The U.S. economy is improving and we are not longer in a recession

16. Sell Risks Frozen Products and “Impulse Buys” Strong Recent Growth • Over half of Dollar Tree stores have added freezers to sell frozen foods • Increases foot traffic • Could lead to an increase in sales • Company also working on strategic placement of “impulse buys” • We do not believe these will be a large revenue drivers • Increased sales, operating margin, return on shareholder’s equity and EPS • Increasing dividend, share buybacks, and new store openings • Management thinks there is room for 2,000 more stores in the US and 500 in Canada Global Economic Difficulties • Deep discounters greatly benefitted from the recession • 40% of dollar-store customers rely on some for of government assistance • Uncertainty about the economy – Fed tapering?

17. “We don’t find bargains around but we don’t think things are way overvalued either. We’re having a hard time finding things to buy”. -Warren Buffet Screening What We Looked For Status of Current Holdings • Companies engaged in entertainment, media, clothing, accessories, home decoration, and gaming • Sufficient diversification to reduce unsystematic risk • Reasonable trading multiples • Insider buying activity • History of high ROE • Market leaders • Strong barriers to entry • Strong pricing power • Exposure to currently untapped industries such as” • Autos • Lodging and hotels Other Top Choices • Pros: growth potential in international markets and franchising model • Cons: cyclical nature of the hotel industry and possibility of technological advances hurting companies focused on the business traveler • Pros: rising interest rates would benefit financing arm, high average age of American cars, superior management of its pension obligation • Cons: cyclical nature of the auto industry and questions about some of Ford’s product lines Who We Spoke To • Our alumni advisor • Encouraged us to think about the core of what makes a good investment: growth potential and appropriate margin of safety • Emphasized the importance of understanding how a company works, discussing various business models • Several other contacts in the finance industry • Gave us a few potential companies

18. Buy Recommendation • Thesis: Polaris is a strong company with market leadership, barriers to entry, high returns on equity and a growing portfolio of exciting brands. The company has a proven track record of performance and we believe the company is positioned for continued growth.

19. Polaris Company Overview Description Sales by Market • Polaris Industries Inc. is a Minnesota corporation that was formed in 1994 • Designs, engineers and manufactures Off-Road Vehicles including ATVs and side-by side vehicles, snowmobiles, motorcycles and Small Vehicles, together with the related replacement Parts, Garments and Accessories • Founded as a company that sold snow mobiles the company has expanded to become the industry leader in ATVs and side-by-side vehicles • Assembles its products at facilities in Spirit Lake Iowa, Oscelola, Wisconsin, Monterrey, Mexico, and Bourran, France • Products are sold through a network of approximately 1,650 independent dealers in North America through 15 subsidiaries and 80 distributors in over 100 countries outside of North America • Has approximately 4,500 full-time employees Stores Sales by Region

20. Polaris Competitors – Large Cap Competitors with Strong Brands Deere and Co. – Gator Utility Vehicles Harley Davidson, Inc. • John Deere is $31 billion company that manufactures and distributes agriculture and turf equipment, and construction and forestry equipment worldwide • Sells Gators in four styles: Recreational, Crossover, Traditional and Military • Deere leverages its strong brand name to appeal to the rural markets where off road vehicles are sold • Previous industry leader in the off road vehicle market • Deere & Company was founded in 1837 and is headquartered in Moline, Illinois • Harley Davidson is a $14 billion company that manufactures heavyweight cruiser and touring motorcycles • The company operates through two segments: the Motorcycles segment and the Financial Services segment • It is a global brand with sales in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America • Listed as the third “coolest” brand name and the ninety sixth most recognizable • Clear market leader in motor cycle sales

21. Polaris Competitors Cont. Arctic Cat Our thoughts • Arctic Cat is $3.1 billion company that designs, engineers, manufactures and markets snowmobiles and all-terrain vehicles and recreational off-highway vehicles under the Arctic Cat brand name, as well as related parts, garments and accessories • The Company’s primary line of business is its Snowmobiles product segment • The Company operates in three segments: Snowmobile; Off-road; and Parts, Garments and Accessories • Sales of $672mm in 2012 • Polaris’ closest competitor but not a similar comparable • Products are of a lesser quality than Polaris Products Geography where ACAT makes sales

22. Buy News August 27th, 2013- Construction Begins on Polaris’ European Factory • 355,000 sq. ft. factory will be located in Opole, Poland • The factory will produce ATVs and side-by-sides for the European market. Limited production is expected to begin in the 2nd half of 2014 August 5th, 2013 - Indian Motorcycle Announces New “Chief” Line • Composed of 3 models: Chief Vintage, Chief Classic, and the Chieftain • MSRPs range from $18,999-22,999 April 11th, 2013 - Polaris Acquires Aixam Mega • Adds to the company’s small vehicle platform • Aixam had approximately $110mm in sales in 2012 through a distribution network of more than 400 European dealers • Paid for with cash in hand January 31st, 2013 - Polaris Names CEO as Chairman • Acting CEO Scott Wine is elevated to Chairman of the Board • Succeeded Greg Palen who held the role since 2002

23. Buy Rational Buy Risks • Superior Products – Market Leader • Strong Return on Equity • Stayed Profitable through the recession • International Growth • Indian Motorcycle • Small Vehicle Sales Growth • Aggressive management • Increasing Operating Cash Flows • Highly Exposed in Economic downturns • Susceptible to Changes in EPA and Safety Regulations • Strong Competition

24. Superior Products – Market Leader Off Road Vehicles Market Leading Products • Polaris is number one in North American side-by-side vehicle sales. RANGER brand. • Introduced in 1998 • They are number one in North American recreational vehicle sales. RZR Brand. • Introduced in 2007 • They also have the best selling ATV in the Industry. SPORTSMAN. • Introduced in 1996 • Off road now accounts for 69% of the companies sales Consolidated PowerSports Market Share in Units (with total motorcycle industry) Snowmobiles • Polaris was initially founded as a Snowmobile company • Name is still synonymous with snowmobiles • They are the clear number one in selling snowmobiles in North America • Snowmobiles account for 9% of the companies 2012 revenue

25. Growth in Motorcycle Sales Motorcycles 2013 Growth • Polaris owns two Motorcycle Brands • Victory and Indian Motorcycles • Victory is the #2 North American motorcycle in the North American segment • Sales grew ~60% to $240mm in 2012 • Indian Motorcycles was acquired by Polaris in 2011 • Oldest motorcycle brand in the U.S. • Bringing an iconic brand back to the market • Released new line up of 2014 bikes in August Segments Captured

26. International and Small Vehicle Segment Growth Description Description • Polaris owns three small vehicle companies • All companies have been acquired in the previous two years • $4 billion industry with a lot of room for growth • Leveraging technology from their other segments to take the brands they buy to the next level • Growth in this segment expected in the European market • Expected growth of well over 100% for 2013 • Accounted for 2% of the company’s 2012 sales • Building new manufacturing plants in both Poland and India • International sales account for 14% of sales • Company projections have International sales accounting for 33% of sales by 2018 • Joint venture with Eicher Motors to develop and market vehicles for India and emerging markets • Company sees Small Vehicle segment as primed for growth in new markets Production Facilities Sales by Geography Future Growth Projections

27. Stayed Profitable Through the Recession Inherent Risks Results • Polaris sells highly discretionary items • Products of this nature tend to be very difficult to sell during economic downturns • Polaris showed that their business model is capable of weathering through economic conditions • Polaris saw sales drop 20% in 2009 • 2008 sales = $1.95bn • 2009 sales = $1.57bn • Despite this tremendous drop in sales, Polaris was able to stay out the red • The Company’s flexible manufacturing platform allowed it to quickly and dramatically reduce COGS and manage attrition to the bottom line

28. Financial Successes ROE Cash Flows • Cash is king • Polaris has been able to consistently increase its operating cash flows since the recession • Being able to increase operating cash flows consistently is vital to running a company efficiently • Being able to consistently produce cash flows helps the company pay its dividend (which Dollar Tree does not do) • ROE measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested • Shows they have consistent earnings and an advantage in their market • Polaris has a relatively low historic payout ration of 38% • They maintain the majority of its income and are able to use it effective Return on Equity Operating Cash Flows ($mm)

29. Buy Risks EPA and Safety Regulations Highly Exposed to Economic Downturns • Due to sheer nature of its business, Polaris is constantly exposed to changes in safety, use, and emission regulations • In 1988, the Consumer Product Safety Commission (CPSC) attempted to force an industry-wide recall of ATVs sold that could be used by youth under the age of 18 • Settled out of court • In 2006, the CPSC issued a Notice of Proposed Rulemaking to establish mandatory standards for ATVs and to ban all three-wheel ATVs. • Never passed • The Environmental Protection Agency and the California Air Resources Board have adopted emissions regulations that are applicable to Polaris and may continue to enact stricter regulations as time goes on • Polaris is currently in full compliance of these regulations • Polaris’ products are archetypal discretionary purchases which clearly leaves them immune to severe economic downturns • FY 2009 resulted in a 20% decline in sales but the Company was still able to grow ROE to 59% • We are encouraged by Polaris’ resiliency during the financial crisis but still acknowledge its inherent susceptibility to the macro-environment Strong Competition • While Polaris is the market leader in many of its segments, it faces intense competition from large rivals with strong brand names • Yamaha and John Deere are both larger than Polaris by market cap and compete with Polaris’s main products: ATVs and side-by-sides • The motorcycle market has long been dominated by Harley Davidson and a head to head battle could end poorly for Polaris

30. Pricing Power Competitive Advantages Market Leader Barriers to Entry Room for Growth