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This document does not consider the specific investment objective, financial situation or particular needs of any investor and an investment in a Fund is not suitable for all investors. This investment is intended for sale only to investors who are capable of understanding the risk of loss of all or a substantial part of their investment. An investment in the Fund entails substantial risks, and a prospective investor who expresses an interest in investing in the Fund will be provided with the PPM and Subscription Agreement (together, the “Fund Documents”) and should carefully read the “Risk Factors” section of the Fund's PPM in determining whether an investment in the Fund is suitable. Prospective investors should not rely upon this document for tax, accounting or legal advice. Prospective investors should consult their own tax, legal accounting or other advisors about the issues discussed herein.

Perlus Investment Management LLP is the investment manager the Perlus Microcap Fund L.P. (the “Fund”) and is authorised and regulated by the Financial Conduct Authority.

as amended. Whilst every effort has been made to ensure the accuracy of the information herein, Perlus Limited and Perlus Investment Management LLP Limited accept no responsibility for its accuracy, nor the reasonableness of the conclusions based upon such information. The contents of this document are subject to change without prior notification.

The PPM of the Fund is the only authorised documents for offering of interests in the Fund. The PPM may only be distributed in accordance with the laws and regulations of each appropriate jurisdiction in which any potential investor resides.

Investors are also reminded that past performance is not an indication or a guarantee of future performance and that they might not get back the amount that they originally invested. It should not be assumed that investments made in the future into the Fund will be profitable. Investing in financial markets involves a substantial degree of risk. Nothing described herein is intended to imply that an investment in a Fund is “safe”, “conservative”, “risk free” or “risk averse”.

Issued by Perlus Investment Management LLP for private circulation only, published solely for information purposes and does not constitute an offer to sell or an invitation to buy any of the securities or Funds mentioned herein. Subscriptions will only be received and units or shares issued on the basis of the current Private Placement Memorandum (the PPM) for the Fund and prospective investors should carefully consider the risk warnings and disclosures for the Fund set out therein. Investors should also consider any other factors that may be relevant to their circumstances, including tax considerations, before making any investment.

Interests in the Fund are not for sale in any jurisdiction in which such sale would be prohibited. Without limiting the generality of the previous statement, with particular reference to the UK, this document may only be distributed to and acted upon by those persons in the UK pursuant to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001

The Perlus Microcap Fund is defined as an Unregulated Collective Investment Scheme (UCIS) and as such its distribution is severely limited. The Fund is only suitable for Professional clients and Eligible counterparties.

introducing perlus
  • Perlus
    • Is a long only equity fund specializing in small (<$250m) public companies
    • Has a North American focus
    • Adheres to a disciplined value philosophy overlaid with secular thematics
  • Perlus aims
    • To maintain a diversified portfolio of 25-40 investments
    • To have no single investment exceeding 10% of NAV (at cost)
  • Perlus background
      • Commenced operations in August 2008 and is management-owned
      • Has a wide investor base of high net-worth individuals and blue chip institutions
  • Portfolio Managers
      • Jim Boucherat and David LaSalle
why invest in perlus
  • The optimal asset class (small/micro cap) at the optimal time
  • Experience, depth and stability of investment team, high profile advisory board
  • Blue-chip, long term institutional investor base
  • Investing style:
    • Value: provides downside protection
    • Secular growth: generates returns even in a poor economic environment
    • Comprehensive ground level due diligence emphasizing proprietary research
  • Excellent track record
    • Perlus: up 16.03% for the current calendar year of 2013, (as of August end, 2013)
    • Perlus: 45.6% ahead of benchmark since inception, low volatility (as of August end, 2013)
    • Pre-Perlus 23% return per annum since 1988
core strategy and objective

Valuation inefficiencies within the small/micro cap (<$250m) universe allow for optimal risk / reward opportunities

To invest in these companies at a low relative valuation, with expectations of significant returns

Focusing on companies supported by secular thematics, which support long term sustainable growth, irrespective of the economic environment, resulting in a higher return on investment

To achieve superior returns within the small/micro cap sector over the mid to long term time horizon (2-5 years)

Our Belief

Our Strategy

Our Objective

small microcap asset class
  • Huge universe of companies - 98% of listed companies have market cap of less than $250m
  • Value inefficiencies amplified in microcap asset class:
    • Lack of analyst coverage
    • Lack of investor awareness/limited institutional ownership
    • Limited fund manager competition
  • Much greater access to management
  • Optimal risk/reward ratios available
    • Compelling valuations and
    • Faster growth
    • Opportunity for superior and sustainable dividend streams
  • Hence Perlus has the opportunity to significantly outperform on a sustainable basis
  • We aim to outperform in all markets, but current conditions are ideal because:
    • The economic backdrop is low growth
    • Growing companies will become scarce
    • The market will give a significant premium for growth
    • The growth drivers of our companies are outside the general economy, so they should continue to grow (circa 20%)
    • Eventually the market will recognize this growth driving up its value and our returns
    • Current market dislocation driving increased corporate M&A and rising dividendcommitments
  • In a low growth environment, Perlus’s returns should rise.
investment team

Jim Boucherat - Portfolio Manager

Jim has over 23 years experience in investing in North American Microcap equities. The first part of his career was with blue chip intuitions such as Shell and Norwich Union, since then he has run his own highly successful funds, based in both the US and UK. Jim’s track record is exemplary and he has run funds up to $300m, much from his previous employers, and under both US and European registrations.

Experience: MicroCapital (Portfolio Manager) 2005 – 2008 Shell (Portfolio Manager) 1993 -1996

Pre-Perlus: Avocet (Partner) 1996 - 2005 Norwich Union (Portfolio Manager) 1986 -1993

David LaSalle - Portfolio Manager

David has a master’s degree in finance with a similar investment background to Jim, focused on investing in North American Microcap equities. They worked together at MicroCapital LLP. As well as investing, David also has experience in trading and market psychology.

Experience:MicroCapital (Analyst) 2004 – 2008 B. Riley and Co. (Trader) 1999 - 2001

Pre-Perlus: Parnassus Capital (Analyst) 2003 – 2004 Wedbush Morgan Securities (Credit Manager) 1998 – 1999

  • Extensive experience in microcap investment
  • Blue chip backgrounds
  • Excellent track record in Investing and running investment companies
  • Supported by strong advisory board
value investing with thematic growth
  • Value Investing
    • Provides a margin of safety for downside protection,
    • but may not give significant upside potential (value traps)
  • Thematic Growth
    • Provides insulation from the vicissitudes of the macro economic cycle,
    • Underpins the generation of superior, sustainable earnings and revenue growth
    • Generates significant upside potential
  • Our target criteria*
    • Value metrics, 0.5x enterprise value to sales, 10x P/E, 6x enterprise value to free cash flow, little or no debt and less than book value
    • Growth metrics, 15%+ sales growth, rising margins and 20% earnings growth

*Note: these are illustrative targets, investments are unlikely to fit all targets and will be effected by the opportunities available in the market

our portfolio vs the market

Perlus’s portfolio (July 2013) compared to the market

investment process
  • Thematic Identification
    • Highly philosophically focused
    • Review of trade publications
    • Review of proposed changes to legislation
  • Company Selection
    • Proprietary database with over 30,000 public companies in 50 countries
    • Review all companies within a theme including hidden subsidiaries
    • Review value chain including customers and suppliers – often far cheaper but still benefiting from the theme
  • Due Diligence
    • Quantitative analysis supported by cash flow return on investment metrics
    • Company meeting – at their office
    • Channel checks, customers, suppliers, distributors and competition
    • Extensive reference network within the small/micro cap arena
perlus track record since inception

Less volatile than broader index

Source: Perlus

  • The optimal asset class (small/micro cap) at the optimal time
  • Experience, depth and stability of investment team, high profile advisory board
  • Blue-chip, long term institutional investor base
  • Investing style:
    • Value: provides downside protection
    • Secular growth: generates returns even in a poor economic environment
    • Comprehensive ground level due diligence emphasizing proprietary research
  • Excellent track record
    • Perlus: up 16.3% for the current calendar year of 2013, (as of August end, 2013)
    • Perlus: 45.6% ahead of benchmark since inception, low volatility (as of August end, 2013)
    • Pre-Perlus23% return per annum since 1988
summary of key terms

Management Fee 0.375% of Net Assets quarterly in advance (1.5% per annum).

Incentive Fee 15% of profits, paid annually in arrears

High Water Mark Yes there is a cumulative high watermark. No incentive fee is paid unless NAV increases.

Initial Lock Up 1 year

Withdrawals Semi annual with 6 months notice

Minimum Investment $1,000,000

Currency of Fund US$

Feeder Structure Via a Jersey Reporting Company for UK residents, a Jersey feeder for other non-US tax payments and directly into the Jersey fund for US tax payers

Reporting Quarterly valuations in the PPM, but we are reporting on a monthly basis.

Annual audited accounts.

Designated Investment limit There are no designated investments, side funds and no gate.

Advisers Accountants BDO Alto Limited

Custodian BTIG - Goldman Sachs

Administrator Volaw Trust & Corporate Services

Regulations The Investment Manager is regulated by the FSA in the United Kingdom and the General Partner (Perlus Ltd) and the fund are regulated by the Jersey Financial Services Commission.

summary of investment strategy

Objectives To provide significant long term absolute capital returns.

Investments Global small/microcap, long only (except for hedging purposes) with a North American bias.

Type of security Securities of public companies only

Borrowing Not intended

Expected number of holdings 25-40

Estimated maximum

size of any single holding Holdings will normally be up to 5% of Net Assets, but the GP intends to use its discretion to invest up to 10% of Net Assets into a single investment.

Target fund raising $100m

advisory board

Michael Andrew: Michael has spent more than 35 years in the investment banking industry, the first decade with Merrill Lynch's private client business where he became the head of sales in London. Subsequently he created the high net worth department at Salomon Brothers in London prior to transferring to the institutional equity area, where he managed US equity sales in Europe. Michael also managed the US equity sales at ING'Barings and was the Chairman of the Association of NYSE companies in UK.

Charles Hale: Mr. Charles M. Hale serves as an Executive Chairman of Polar Capital Partners Limited. Mr. Hale served as the Managing Director of AG Becker International. Prior to 1984, Mr. Hale was a general partner of Lehman Brothers Kuhn Loeb. He serves as the Chairman of Donaldson, Lufkin & Jenrette International, the London based subsidiary of Donaldson Lufkin & Jenrette Inc., until its acquisition by Credit Suisse First Boston in November 2000. He served as Non-Executive Chairman of Polar Capital Holdings Plc. Prior to 2002, he served as Vice Chairman of CSFB Europe Limited. He served as a Director of Polar Capital Holdings Plc since 2002 until September 19, 2010. He served as a Director of Innospec Inc. (Octel Corp.) from May 7, 1998 to May 6,2008. Mr. Hale is a graduate of Stanford University and Harvard Business School.

Jamie Cayzer-Colvin: Jamie has a career spanning the Armed Forces, corporate banking, business development in several blue chip public companies. He has spent the past decade as an Executive Director of Caledonia Investments Plc. A renowned long term investment company based in the UK.

Adrian Jarvis: Adrian has spent two decades in the investment management industry, primarily specializing in global asset allocation. He is currently Investment Strategy Director at Aviva Investors, one of the largest 20 global managers with over $400bn of assets. His experience includes strategic and tactical asset allocation, managing quantitative and derivative based investments, and he is the former Chief Investment Officer of Morley Fund Management. Adrian has spent 12 years heading asset allocation at Aviva, with significant value added on over $50bn of client assets, and gains recorded in 11 of the 12 years.

past example of thematics
  • Outsourced Hospital Nursing and Management
  • Outsourced Pharmaceutical Sales and Product Commercialization
  • Energy Efficiency
  • Oil Sands Infrastructure
  • Natural Gas Substitution
  • Deep Subsea Exploration
  • Panama Canal Expansion
outsourced pharmaceutical sales and product commercialization

Stalling Revenue pushes Pharma to Reduce Fixed Commercial Infrastructure

Source: PDI Inc. March 2012 Presentation (PDI Inc. is a Perlus Portfolio Company)

outsourced pharmaceutical sales and product commercialization continued

Ongoing Reductions in Internal Field Forces Driving Need for Cost-Effective Alternatives to Drive Top-Line

Estimated US Pharma Field Force Size (000s) 2004-2013

*Based on field force sizes of Top 40 companies by detail volume SOURCE: Verispan/SDI & PDI estimates

Source: PDI Inc. March 2012 Presentation (PDI Inc. is a Perlus Portfolio Company)

nursing and hospital management trends

Projected Employment Growth from 2008 to 2018

  • Long-term macro growth drivers:
  • Increasing life expectancy
  • Aging Baby Boomers
  • Technology advances
  • Healthcare reform

Projected Employment Growth from 2008 to 2018

  • Healthcare labor shortage in 2025:
  • Physician shortage: 130,000
  • Registered nurse shortage: 260,000

Source: Bureau of Labor Statistics, October 2011; Association of American Medical Colleges, October 2010; Buerhaus, Peter, Health Affairs June 2009

energy efficiency
  • President Obama’s Better Building Initiative has allocated $4B to public and private building energy retrofits
  • ARRA (American Renewable Recovery Act) includes $40B to be allocated to energy efficiency and renewable energy programs
  • DOE estimates buildings account for 39% of total energy use in US and 38% of total indirect CO2 emissions
  • Climate experts advising 60-90% cut in GHG emission by 2050
  • McKinsey & Co estimates energy efficiency can achieve half of that reduction goal with total energy savings of $1.2 trillion through 2020
  • Bipartisan political support for energy efficiency with states taking regulatory lead
  • 26 states have enacted EERS, with more pending
  • Utility ratepayer-funded energy efficiency program budgets totaled $4.4 billion in 2009
  • Pike Research estimates companies providing EE services to U.S. commercial building owners expected to make $5.6 billion a year growing 250% to $19.9 billion by 2020
  • The American Counsel for an Energy-Efficient Economy (“ACEEE”) estimated $300 billion was invested in energy efficiency technologies in 2004; total additional investments may grow to $700 billion in 2030

Source: Lime Energy Roth Conf. Presentation (Lime Energy is NOT a Perlus Portfolio Company)

oil sands trends
  • New project capex in the region could exceed $100B thru 2015
  • Accommodation remains a key factor in attracting and retaining personnel as labour market tightens
  • Currently ~58,000 beds in the Ft. McMurray/Conklin region
  • ~33,000 producer owned beds; ~10% of these beds are greater than 15 years in age
  • ~25,000 3rd party owned beds; operated primarily as open camps
  • Future additions could total up to 26,000+ new beds
  • Primarily required to support construction projects, as well as ongoing operations, maintenance and turnarounds. Includes replacement of old infrastructure
  • Demand for new beds will be met by mix of permanent and temporary accommodations
  • Provides future sale, rental, open camp and catering/camp management opportunities

Source: Horizon North Logistics December 2011 Presentation. (Horizon is currently a Perlus Portfolio Company)

natural gas substitution


Annual Fuel usage/truck: 15,000 DGEs (= 17,500 GGEs)

Fuel Savings/DGE: $0.50 $0.75 $1.00 $1.25 $1.50

Monthly Savings: $625 $937 $1,250 $1,562 $1,875

Savings over 5 years: $37,500 $50,000 $62,500 $75,000 $112,800

Savings over 7 years $52,500 $70,000 $87,500 $105,000 $157,500

Source: Market Oracle Website. (


Investment Theme: Horizontal and Directional Drilling

  • Company: Wenzel Downhole Tools is the second largest and only pure play directional drilling motor supplier in the industry. The company holds roughly 30% of the North American Market share. Wenzel has massively benefited from the proliferation of directional/horizontal drilling throughout the N.A.. 80% of all wells, whether it be directional or vertical wells are now being drilled utilizing directional motor technology, up from 30% of all wells in 2005. We believe this trend will continue as directional drilling technologies are more precise and efficient than that of traditional vertical well equipment.
  • Financials: The company grew revenue by 48% in 2011 and trades at and an EV/EBITDA multiple of less than 3x our forward estimates.

Initial Position

Continued to purchase


Investment Theme: Outpatient Healthcare Facility Management (In Vitro Fertilization as well as Vein Care clinics)

  • Company: IntegraMed encompasses two distinct divisions, each with significant barriers to entry as well as being leaders in fragmented industries. The company’s Attain Fertilization division comprises 14 partner centers with 66 locations with the next single largest competitor representing only 4 centers. Integramed makes up 25% of the 150K IVF procedures conducted annually in the U.S., in a field that is historically counter cyclical. The company’s Vein Care division comprises 44 units, each unit generating $2M in annualized revenue at maturity with a 25% contribution margin. Integramed is adding roughly 10 de novo units per annum, each with an 18 month pay back cycle. The company believes they can reach a total of 150 units before a deceleration in new unit addition growth.
  • Financials: The company grew blended revenue by 12.5% in 2011 and EBITDA by 16.5% for the year and trades at a 12 month forward EV/EBITDA multiple of 4x. This is even after a 70% move in the stock since the beginning of 2012.

Initially Purchased Stock

Initial Position

Continued to purchase

Additional Purchase


Investment Theme: Aesthetic Laser Treatments

  • Company: Cynosure develops and markets non-invasive and minimally invasive aesthetic laser treatment systems for hair removal and pigmented lesions as well as cellulite reduction and removal. The company has been utilizing its massive cash reserves to consolidate the industry by purchasing high quality technologies and applications and then leveraging these additional products through its existing direct and third party distribution infrastructure.
  • Financials: The company grew revenue by 35% in 2011 and EBITDA by 150% in the same year. There is significant operating leverage in the business model. The company recently received FDA approval on a patented treatment system called Cellulaze, a minimally invasive long lasting cellulite reduction unit. The company consummated two acquisitions in 2011 but continues to boast a cash rich balance sheet, with 30% of its current $220M market cap equating to cash.

Making Sales



Investment Theme: Canadian Governmental Facility Construction Management

  • Company: Bird Construction is one of the leading national general contractors in Canada, providing construction services to three areas of the market. Institutional, which includes government buildings on both the Federal and Provincial levels. Commercial infrastructure such as retail and office buildings, including skyscrapers. And Industrial, that consists of traditional roads, bridges, schools, hospitals and water treatment facilities. The company has recently entered the “Oil Sands” construction market with its 2011 acquisition of HJ O’Connell, a heavy equipment truck fleet company that focuses on “Earth Works”, such as the moving of aggregates.
  • Financials: Bird has not lost money in any quarter since 1993 and boasts a management team that is widely considered to be the best and most conservative in the industry. We purchased the company when it had a running dividend yield of 6.8%, a forward EV/EBITDA multiple of 2.7x. This was at a time when margins were beginning to expand off of historically low levels due.

Purchased Stock