hamilton fund i a knowledge industry sector distressed fund limited partner presentation

Hamilton Fund I

A Knowledge Industry Sector Distressed Fund

Limited Partner Presentation

Hamilton White Group, LLC

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy private investment fund interests in Hamilton Fund II (the “Fund”) or any other securities. Such interests will be offered and sold pursuant to a confidential offering memorandum (the “Memorandum”), which will include information pertaining to risk factors, fees and expenses. The Memorandum for the Fund has not yet been finalized, and as such all terms and conditions outlined in this presentation are subject to change pending completion of the Memorandum.

CONFIDENTIAL – FOR USE BY INTENDED RECIPIENT ONLY

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Draft - for discussion purposes only

Hamilton White Group, LLC.11967028

Statement of Confidentiality and Disclaimer

All information contained in this presentation is proprietary, strictly confidential and the property of Hamilton White GroupLLC and should not be reproduced or redistributed. The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy private investment fund interests or any other securities. The information contained in this presentation is qualified in its entirety by reference to the more detailed discussion contained in the Memorandum, which should be read carefully before investing. The information contained herein is as of the date referenced and Hamilton White Groupdoes not undertake an obligation to update such information. In the event any information contained herein or in the Memorandum conflicts with information set forth in the limited partnership agreement of the Fund or any other definitive documentation relating to the investment manager or the general partner, such definitive documentation shall control.

Any person subscribing for an investment must be able to bear the risks associated with the Fund and must meet the Fund’s suitability requirements. The Fund is speculative and involves a substantial degree of risk. Some or all alternative investment programs may not be suitable for certain investors. No assurance can be given that the Fund’s investment objectives will be achieved. Any investment in a private investment fund involves significant risks not associated with more conventional investment alternatives. The Fund’s risks include, but are not limited to, the following: there most likely will be little or no near-term cash flow available to the partners; the Fund may make investments that may not be advantageously disposed of prior to the date the fund will be dissolved; if a limited partner fails to pay installments of its commitment to the Fund when due, and if the contributions made by the non-defaulting limited partners and borrowings made by the Fund are inadequate to cover the defaulted contribution, the Fund may be unable to pay its obligations when due and may be subjected to significant penalties that could adversely affect the return to the limited partners; the Fund may be leveraged and engage in other speculative investment practices that may increase the risk of investment loss; past results of the Fund and the investment manager are not necessarily indicative of future performance of the Fund, and the Fund’s performance may be volatile; an investor could lose all or a substantial amount of his or her investment; the investment manager has total control of the assets of the Fund and the Fund is dependent upon the services of the investment manager; the Fund is subject to conflicts of interest; the Fund is highly illiquid; there is no secondary market for the investors’ interest in the Fund and none is expected to develop; there are significant restrictions on transferring interests in the Fund; the Fund’s fees and expenses may offset the Fund’s profits; the Fund is not subject to the same regulatory oversight as mutual funds; the Fund is not required to provide periodic pricing or valuation information to investors with respect to its individual investments; the instruments in which the Fund invests may involve complex structures and there may be delays in distributing important tax information.

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Hamilton Fund I – Opportunity Highlights

• Hamilton White Group LLC. is seeking to raise additional funds for the Hamilton Fund I, L.P. (the “Fund”), a fund focusing on distressed properties in the knowledge and education industries.

• The Fund should provide superior returns as a result of competitive advantages it will enjoy in the acquisition, management and disposition of portfolio companies.

• The Fund is founded and managed by former CEOs and investment and business executives, experienced in the knowledge and education industries.

• Hamilton White Group LLC. believes that over the next ten years superior investment returns in the knowledge and education sectors will be created through strategic and operating excellence, not by financial engineering.

• The Fund will seek to generate superior results through:

•Identifying attractively priced assets through proprietary market intelligence

•Identifying and closing deals in a non-auctioned environment

•Operating expertise and proficiency for turnaround

•Strategically executing dispositions

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Source: Bank of America

Education Market Summary

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Hamilton Fund I - Highlights

• $50 million distressed private equity fund focused on the knowledge sector. Initial investments have been made in a syndicated fashion. To date, $20MM has been placed.

• Opportunistic time to invest in counter-cyclical sector experiencing substantial demand growth.

• Diversified asset accumulation strategy. Ability to invest on a deal by deal basis.

• Summary of contemplated transaction types include majority ownership, unleveraged transactions. Leverage will be considered and employed when companies reach profitability.

• Hamilton White Group will seek to implement deal-level structures intended to mitigate the undesirable tax and other consequences of investment by non-U.S. investors, including ECI, FIRPTA and U.S. withholding taxes on payments to non-U.S. investors. Such structures may include:

Use of parallel fund vehicle for non-U.S. investors. Capitalization of corporate blockers with certain debt to equity ratios intended to

offset some of the corporate US tax impact of the blocker.

• No assurance can be given that the Fund’s tax-mitigation objectives will be achieved. Any investment in a private investment fund involves significant tax implications for both US and Non-US Investors. Prospective investors should not construe the contents of this presentation or the Memorandum as legal, tax, investment or other advice. Each prospective investor should make its own inquiries and consult its advisors as to any legal, tax, financial and other relevant matters concerning an investment in the Fund and the suitability of the investment for such investor.

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Hamilton Fund I - Investment Terms

Fund Size: $50 million

Per Deal Target: $1 - 15 million of equity capital

Deal Level Return Objective: 20%

Investment Concentration: No more than 30% of committed capital in any one investment

Investment Period: Five Years

Term of Holding Period: Ten Years, subject to extension

Set Aside for Follow on Investments: Up to 15%

Investment Profile: Common Equity, Preferred Equity, Debt

Co-invest: Ability to co-invest on larger deals

Carried Interest: 20% over an 6% preferred return

Management Fee: 2.0% of aggregate capital commitments during the investment period and 2.0% of investment capital thereafter

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The Knowledge and Education Sector: Characteristics and Drivers of Value

• The global knowledge industry sector is a multi-trillion dollar, top US export business, second only to the healthcare sector in market size.

• Superior growth rates in the sector are anticipated to exceed 6% on an annualized basis, with some submarkets as high as 10% over three years.

• The demographic and workforce characteristics of the sector converge to create global, counter-cyclical / non-cyclical investment opportunities. Traditional, billion-dollar private equity funds generally do not participate in the large middle market, resulting in a highly inefficient market for educational transactions.

• The application of new technologies already present in other business-services sectors to the knowledge and education sector is likely to create competitive opportunities.

• The highly regulated nature of the industry creates barriers to entry and limits operating strategies for investors that are inexperienced in the sector, giving the Fund’s experienced and proficient team a significant advantage.

• The potential for knowledge transfer on a global scale is a key opportunity in this industry, as the US sector continues to dominate innovation.

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Fund Investment Strategy

• Hamilton White Group brings a unique investment strategy that should appeal to both middle-market owner-operators and investors who seek innovative investment strategies designed for the middle market.

• An investment team with deep and diversified operating experience that can be brought to bear on younger investments.

• An ability to augment the core team with a wide range of affiliate partners.

• A willingness to create strong management incentives for performance.

• An ability to leverage innovations generated from the fund’s US portfolio assets to global markets for both value creation and exit opportunities.

• An investment team with the talent and fortitude necessary to invest in deals requiring intimate involvement from Fund management in order to create momentum and ensure security of the investment.

• Hamilton White Group believes that its investment strategy is a core differentiator and will be an important component in seeking to provide

above-average returns for educational investors.

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Investment Target Characteristics

The investment strategy will focus on new and distressed educational business models that address market gaps and growth opportunities. Specific target characteristics are likely to include one or more of the following:

• Early stage investments with two to five years of operating experience.

Approximate minimum revenue size of $2 MM.

• Will consider investments that are currently unprofitable if profitability can be achieved within a two year period.

• Established and proven annuity business model grounded in specific organic or acquisition-led growth initiatives with predictable, recurring revenue.

• Strong and experienced management team in place or identified with aligned interests.

• Strong market share with defensible niches, a defined competitive advantage and differentiated service/product offering.

• Manageable capital requirements and low technology risk.

• Add-on acquisitions for current portfolio companies.

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Investment Sector Diversification

1. Direct Educational Delivery Pre-K Education and Early Childhood

Sector Kindergarten through Twelfth Grade Vocation Schools in high demand

niche programs (Health care, security / IT, compliance / accounting)

Post Secondary School – Higher degree granting school with sustainable competitive advantage (international, nursing, health etc.)

Continuing Education Training and Self Improvement

2. Educational and Learner Support Services Tutoring Testing and Assessment Services Disabled / Gifted Services Educational Travel and ESL Alumni and Learner Lifestyle services Learner Equipment and Tools

3. Corporate & Professional Services Corporate Training Licensing, Professional Certification

and Testing Seminar Business

4. Edu-tainment / Recreational Education

Traditional, new and online media

Categorized by age

5. Content, Publishing and New Media

Publishing & Distribution of Textbooks

Library & Reference books

Supplementary Materials

New Media

Research

6. Outsourcing, Infrastructure and Educational Services

Financial aid Services and Software

Admissions Management

Student / Customer Management

Back Office and Records

Distance Education and Learning Software

IT services and ASP services

Information Databases

Real Estate Management

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Asset Diversification Strategy Enhances ROI

Opportunistic Development

Distressed Value Add

Education Delivery

Support Services

Corporate & Professional

Content & Publishing

Outsource & Infrastructure

Investment Stage Investment Sector

10%

70%

10% 10%

60%

10%

5%

15%

10%

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Fund Competitive Advantages – Why Us?

• Education is a political industry. HWG has the ability to leverage existing business, political, and social relationships with leaders to identify, manage and exit deals.

• Availability of targeted, non-auction sourcing of transactions through long-standing, proprietary relationships, deal expertise and strategic market knowledge.

• Demonstrated, line-level operating expertise and turn-around experience which should facilitate superior transaction execution for strong portfolio returns.

• Expertise in developing a diversified asset portfolio, capital markets expertise and other risk- management tools designed to protect investor returns.

• Unparalleled international experience provides opportunities for portfolio diversification rarely available through other domestic funds.

HWG

Deep international experience

Leveraging Political and Business Relationships

Non-auction sourcing targets

Operating and turnaround expertise

Investment expertise

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Fund I Track Record

• The Hamilton Fund 1 a distressed asset fund focusing in the knowledge and education industries. To date, Hamilton I has invested in three education deals that are continuing to be managed.

Brookline College

•Acquired July 2007 in non-auction mode from NFP; converted to for profit.

•Investment thesis – intersection of health care demand with growing Hispanic market

•900 students 4 campuses, 2 states

•Losing $2MM per year

Brookline College Today

•Q2 2011- 3000 students, 5 campuses, 3 states

• Profitable, and funding acquisitions out of cash flow

•Fielded three inquiries for purchase

Potomac College

• Acquired April 2008 in auction mode. Won on strategy despite not highest bid.

•Investment thesis – regionally accredited school valuable and rare asset that can be leveraged for return

•>300 students 2 campuses, 2 states

•Losing $.6MM per year

Potomac College Today

• Q2 2011 forecast - 500 students, 2 campuses, 2 states

•Profitable

•Declined one written offer to buy

Univ. of Bus. & Intl. Studies

•Acquired February 2008 in non-auction mode from syndicate.

•Investment thesis – visa restrictions in U.S. will increase demand for European models

•Pre-launch, no students, temporary license.

•Loss undetermined.

UBIS Today

• Q2 2011 forecast - 75 students, permanent license obtained

•Profitable by end of 2010

•In merger discussions with foreign institutions

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Hamilton Fund I- IIA College - Investment Thesis

IIA is focused on an attractive, high-growth industry educational sector – Health Care

Health care is the fastest growing field with the demand for workers outstripping the supply

There is a premium paid in the market for health care schools

IIA is targeted on a fast growing market segment; the addressable market is large

IIA’s existing student population is 74% minority; 43% Hispanic, 21% African American, 10% Tribal

By 2050 approximately 25% of all Americans will be of Latino origin. With a college completion rate of less than 12%, this represents a significantly underserved population.

IIA has a competitive advantage in market knowledge and customer service in this segment that can be leveraged.

Diversified, multi-location institution with existing footprint in fast growing markets

The Student ROI makes vocational education a compelling financial choice thus improving demand

Many of IIA’s acquired students make minimum wage before attending; $7 – 8 dollars per hour

The cost of paying back student loans equates to approximately $1 dollar per hour

Many of the students earn salaries of $13 – 15 dollars per hour post graduation; a significant ROI

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IIA Investment Thesis

• IIA was acquired at a significant discount to market comparables

• The IIA purchase price is $250K to the foundation and for payment of government penalties. Additionally we are funding $2.0 during a first close with an additional $2,250 slated for future expansion

• Low threshold of return of 20% on current revenues would yield $3MM of EBITDA . This would create a payback scenario of less than 18 months.

• 6x EBITDA = Broken, 8x EBITDA = Average, 10x EBITDA = special / unique

• Underutilized asset at 50% of capacity creates profit opportunity with no expansion

• The IIA future strategy is to provide• Locally based programs to serve the Southwest’s underserved population.

• Career partnerships with the local health care system employers to provide career opportunities post graduation

• Orientation to females and Hispanics• Nationally based, on-line program

• Focusing on targeting females and Hispanics• Leverages infrastructure and improves returns

• Additional growth strategies include:• Increase penetration within current customer markets through partnerships with local foundations,

employers, existing students word-of-mouth and alumni marketing campaigns• Selectively and strategically broaden the customer base through expanded business development

activity targeting the Hispanic and female population• Build state-of-the-art online capability increasing utilization rate and broadening market potential• Expand into high-growth, attractive new geographies organically or through strategic acquisitions• Expand and invest in infrastructure and processes to support growth

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Hamilton Fund I - University of Business and International Studies, Geneva - Investment Thesis

There is a high demand, but low supply, for career-oriented US and European degrees outside of the United States

US education remains a premium export but US visa restrictions create a natural barrier to supply; a US school operating in multiple European countries has a competitive supply / visa advantage

Limited competition, extremely fragmented market with only one established competitor, Laureate, with current revenue of $800MM / Market Cap of $3 Billion / PE of 41

UBIS is reasonably priced and returns are forecasted above the 25% typical private equity [IRR] target Opportunity to get in on ground floor of new business for

Premium for “international” schools

UBIS can be quickly leveraged for growth. Highly desirable Geneva location; great destination site Suite of competitive Bachelor and Master degree and certificates programs with

curriculum development and expansion underway; online program in launch phase Business development / partnership expansion demonstrating early momentum with

domestic and international partner strategy Executing an aggressive marketing development and admissions program in first quarter

for both online and land-based programs

New programs to target rapidly growing fields that leverage UBIS’ international orientation

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International Education Industry – Landscape

Local / Other Players

Laureate

Western International University

Apollo – Germany, Mexico

Career Ed. – London, France, Dubai

World Sage / Whitney etc.

The Demand for International Education far Exceeds the Supply.

For-ProfitsU.S. Not-for-Profits

Webster University

Univ. of Maryland - military

Thunderbird

Georgetown

Johns Hopkins

Ivy’s

Local Universities

Study Abroad companies

The international market is comprised of:

Local universities in the local geographies around the world,

American (and other nationalities) not-for-profit study abroad branch in global markets,

For-profit institution branch expansion,

Study abroad companies who focus on creating a transfer credit network and assisting in logistical management, and

A few players (e.g. Laureate) that are uniquely focused on building a global franchise.

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Hamilton Fund I - Potomac College - Investment Thesis

Potomac College is a rare asset. Of 7,000 schools recognized by the Department of Education, only 86 are regionally

accredited for-profit colleges. Potomac is accredited by Middle States Higher Education Commission along with schools like Princeton, Georgetown, Cornell and NYU.

Regional accreditation is the highest valued accreditation with the maximum utility for transfer credits between schools and acceptance at the Master’s level, maximizes employer benefit pay programs and desired by domestic and international partnerships.

Potomac is reasonably priced and returns are forecasted above the 25% typical private equity [IRR] target. [As an example, in one recent acquisition to gain a regionally accredited school a very

well known and knowledgeable private equity player paid $5MM for a shell with NO students].

Potomac can be quickly leveraged for growth. Suite of 12 competitive Bachelors and Associates degree and certificates programs. Online and international program launched in March Business development / partnership expansion demonstrating early momentum with

domestic and international partner strategy Executing an aggressive marketing development and admissions program in first quarter

for both online and land-based programs The ability to leverage a strong, pristine educational reputation. Knowledgeable Board

assembled with historical track records, deep industry and regulatory relationships and leadership positions.

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Potomac College - Value Proposition

• Business Mission

• To be the regional educational institution of choice for working adults who desire a career-centric education in international business, health care and technology fields.

• To be the educational partner of choice for other high quality institutions and study abroad programs seeking a regionally accredited partner. The objective of this mission is to expand Potomac’s market footprint into areas that it currently does not serve.

• The strategy is to provide a:

• A Washington DC based program to serve government and international students

• Regionally based program to serve the Mid-Atlantic’s working adult population

• A focused international effort that initially is partner-centric

• An online program to extend Potomac’s geographic reach domestically and internationally

• A partnership program to leverage Potomac’s assets domestically and internationally

A Real World International Experience and an Accelerated Degree.

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Firm Track Record, Lineage, Resource Experience and Team Biographies

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Lineage and Origins of Hamilton White Group

• The Hamilton White Group was founded in 2003 to bring investment and consulting to the business-services marketplace.

• In 2003, HWG was contacted by a leading University to turnaround a highly publicized problem; HWG was successful.

• In 2006, Hamilton White Group established the current distressed asset approach launching the Hamilton Fund I, in 2007. Fund I is an education-asset portfolio with approximately $35MM of assets under management.

• Hamilton White Group brings together a highly experienced team, many of whom have worked together for decades, with extensive experience in multiple industries that can be brought to bear on the fund.

• Educational Investing

• Financial Services Investing

• Global Business Services

• Educational Services

• Direct Education Delivery Management

• Marketing & Media Services

• Alternative Distribution Services

• Consumer & Corporate Financial Services

• Political and Regulatory Experience

• Customer Delivery Services

• Health Care Services

• Technology Services

• Business Process Outsourcing

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C. Cathleen Raffaeli Founder and Managing Partner, Hamilton White Group

• President and Managing Director of The Hamilton White Group. Ms. Raffaeli has successfully raised over $300MM in capital in her private equity career. Over the last two years, all investment activity has been focused on the knowledge sector referred to as Hamilton Fund 1.

• Former Chief Executive Officer of Cardean Learning and President of Cardean University. Increased revenues from $2.3MM to $40MM run rate with student growth from 500 to over 3,500 students. Engaged in substantive M&A activity of over 25 deals ranging in size from $5MM to $200MM.

• Founder of ProAct, an enterprise software technology firm focused on financial, health and e-learning software applications. Valued during capital raising at $400 Million; firm appraised by industry analysts as one of the three top winners in the emerging Human Capital Management space.

• Former CEO of Consumer Financial Network. Grew business from revenues of $200K to $20 MM in 2½ years. Expanded Corporate Business from 75 customers to 600 customers (including 110 Fortune 500 companies) selling multiple “bank-at-work” financial products, voluntary benefits and enterprise software.

• Held executive positions at Citigroup, including the head of the Global Commercial Card business ($2 billion portfolio / $500MM contract business up from $100MM in 18 months), Global Marketing Executive – Commercial Bank ($3.2 Billion, 98-country banking franchise) and the SVP of the Mortgage Business leading the turnaround that resulted in generating $1.2 billion in production volume.

• Served as SVP at Chase/ Chemical Bank where she launched a direct mortgage business ($0 to $1.3B in production in 2 years) and held executive roles at Merrill Lynch, Emory Worldwide and Continental Group.

• Currently serves on the Board of E*Trade, the Federal Home Loan Bank of New York, where she is a Washington public service appointee, Indecomm Global Services (an offshore outsourcer) and the Boards of several Educational Institutions.

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Dr. Oksana Malysheva, Ph.DManaging Partner, Hamilton White Group

• Oksana Malysheva joined Hamilton White Group as a Managing Director and Investment Partner in 2008. She is currently leading the acquisition of a regionally accredited school.

• Dr. Malysheva is also a President and CEO of the Agrius Group LLC, an advisory firm focusing on marketing strategy, new business growth and investment. Clients of Agrius Group are “blue chip” names in media, technology, internet, and fashion industries

• Dr. Malysheva is a former Head of Marketing Strategy and Operations for Motorola’s Mobile Devices Business. In this capacity she oversaw the launch and roll-out of RAZR, positioned Motorola as # 1 cell phone brand in Americas, played a key role in Motorola’s CMO capturing “Marketer of the Year” award in 2005. She also and re-shaped Motorola’s approach to marketing investment resulting in 85% increase in marketing budget and 70% increase in marketing ROI. Her team’s marketing effectiveness work was considered a cross-industry benchmark.

• Dr. Malysheva was a strategy consultant with McKinsey & Company and Mitchell Madison group. In this role, she had advised Fortune 50 companies on business growth, new business entry, turn around, and cost containment. On average, every four months engagement led to $30-150 Mn in annual net income improvements, with roughly 10% of improvements captured in the first 6 months through “quick hit” initiatives.

• Dr. Malysheva has a proven track record of building, training and retaining high performing teams in industry and academia. Alumni of her team range from principle in Private Equity to the COO of the leading Middle Eastern University, Assistant Professors in prestigious Universities.

• Dr. Malysheva holds Ph.D in physics from the University of Pennsylvania and BS/MS from Moscow Institute of Physics and Technology. She had eight years of years of college teaching and tutoring experience, and won “Best Women in Science” fellowship for her graduate research.

hamilton fund i a knowledge industry sector distressed fund limited partner presentation

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