Constitution Preamble

We, the members of The Carolina Fund, to fully realize our purpose, do hereby adopt and establish this

constitution as the guiding instrument of our organization.

Article I

The Carolina Fund

Section 1: The Carolina Fund, hereafter called The Fund, strives to create the most realistic, engrossing

and educational experience possible for undergraduate business students. We take full advantage of the

abundance of resources provided to us by the Darla Moore School of Business here at the University of

South Carolina to screen, pitch, and manage equities and other financial instruments for our portfolio.

The Carolina Fund strives to educate our members on the importance of value investing and

determining the intrinsic values of the equities we screen. We encourage financial literacy and

emphasize the need for professionalism as we work to build our own reputation and to establish the

Darla Moore School of Business as one of the premier institutions for financial education in the country.

Our investment philosophy for our fund is quite simple – we invest in securities that we believe are

trading at a discount to intrinsic value. We believe that the market is not completely efficient and we

strive to exploit these inefficiencies when the opportunity presents itself. In our experience, stock prices

will typically revert back to their intrinsic value within a time horizon of one to three years. We are a

global fund with a focus on United States equities across the market cap spectrum. In accordance with

our absolute return mindset, we seek to achieve mid-teens returns regardless of how the overall market

is performing. We conduct bottom-up fundamental research and use a set of value investing screens to

generate investment ideas. We incorporate both relative valuation and a discounted cash flow analysis

to arrive at what we believe is a security’s intrinsic value. We typically look to invest in securities with a

margin of safety of at least twenty percent. Our initial position size will typically not exceed five percent

of the portfolio but will be no less than two and a half percent. Typically, we will hold anywhere from 10

to 20 ideas in the portfolio. We define risk as the possibility of a permanent loss of capital. We make no

attempts to try to control volatility in the portfolio because we believe over the long run our returns

should be unaffected by the volatility in our portfolio.

Article II

Membership

Section 1: Membership in The Fund shall be limited to persons officially connected with the University

of South Carolina – Columbia as faculty, staff, or students. Students enrolled in the spring semester

under the above conditions who have pre-registered for the fall semester, as well as students enrolled in

summer classes, are eligible for summer membership.

Section 2: The University of South Carolina, and therefore The Carolina Fund, does not discriminate in

educational or employment opportunities or decisions for qualified persons on the basis of race, color,

religion, sex, national origin, age, disability, sexual orientation or veteran status.

Section 3: The Carolina Fund is composed of a diverse group of undergraduate students with differing

majors and areas of expertise. Our group prides itself on its unique ability to compensate for all these

differences with effective communication strategies in order to turn our liabilities into assets for The

Fund. We pitch various stocks throughout the week in person and also digitally using a wealth of online

resources. We select equities for our portfolio democratically, and our portfolio management team

balances and reports on the performance of our selection of stocks for the benefit of the whole fund.

Section 4: Active membership in The Fund shall be conferred upon those members who, in addition to

the above requirements, contribute value to the Fund in any and all aspects, including but not limited

to; research, modeling, presentation, and attendance. Members will be allowed to miss two meetings a

semester. Upon missing a third meeting, the member in question will be automatically subject to

disciplinary action without the need for a written complaint to be submitted. Members brought up for

disciplinary action for causes relating to attendance will be given the opportunity to defend themselves,

and leniency will and must be demonstrated for members who notify their superiors of absences before

they occur. Again, the Board will decide by simple majority whether or not to administer disciplinary

action, but disciplinary action in these cases will not exceed suspension for the rest of the current

semester.

Section 5: Membership is open to anyone at the University who meet requirements spelled out in

Sections 1 through 4 in this Article. Membership can be conferred on anyone in any class (Freshman,

Sophomore, Junior, Senior), and in any major. There will be a one-month window at the beginning of

each semester (mid-August until mid-September in the Fall and January in the Spring) when we will be

registering members for the semester. We will not accept new members outside that time. Membership

dues are detailed further in Article V, Section 1

Article III

Organization, Leadership, and Roles

Section 1: The Fund will have a democratically elected Executive Board, hereafter referred to as the

Board. The Board will consist of a Chief Executive Officer (President), Chief Marketing Officer (Secretary),

Chief Research Officer, Chief Investment Officer (Vice Presidents), and Chief Financial Officer

(Treasurer). The term of a board member will last for two semesters, and there will be no limit to the

number of terms a board member can serve. Officers exiting positions via graduation or at the end of

the spring semester will not be responsible for Fund activities from that point on out. Incoming officers

must be elected before Fund business concludes for the summer to manage the Fund over the summer.

Section 2: Member Duties:

• Chief Executive Officer (CEO) (President) –The President is responsible for all implications of the

Constitution and its enforcement, and must have a burning desire for a successful and

fundamentally sound fund that will continue to be profitable even after their graduation, or leaving

of The Fund. He or she will be responsible for the overall vision of the Fund, and will communicate

directly with the faculty advisor and the faculty of the Darla Moore School of Business. He or she is

to get directly involved at every level of the organization, and will plan, lead, and schedule all

meetings for the Fund, both official and unofficial. He or she will also be responsible for organizing

events not directly related to the Fund’s business, such as professional events and workshops,

networking events, and social events.

• Chief Investment Officer (CIO) (Vice President) – The CIO executes all approved trades and

participates in investment decisions for The Fund’s portfolio. As Additionally, the CIO is responsible

for publicly reporting the about the stature, financial health, and overall risk involved with the

Fund’s invested positions.

• Chief Research Officer (CRO) (Vice President) – The CRO is responsible for accurate research for The

Fund, which includes helping members understand how to correctly research. Responsible for

organizing pitch teams with analysts, scheduling those pitches with the CEO, maintaining all model

templates inside The Fund, and for overseeing the screening of securities.

• Chief Financial Officer (CFO) (Treasurer) – The CFO is responsible for the overall financial health of

The Fund. Has the sole ability to charge and collect dues, and manage them for The Fund. The

Treasurer will also be responsible for any solicitation of funds from outside organizations, such as

corporate partners, student government, the university trust, or the Business School. Further details

about the Fund’s finances will be detailed in Article V. Functionally, the CFO will assist the CEO in

serving as liaisons between the University’s faculty and staff and the Fund, and will also be

responsible for collaborating with both vice-presidents in functional work associated with pitching

and managing the Fund.

• Chief Marketing Officer (Secretary) – Responsible for updating of The Fund website, marketing, and

ensuring open and active lines of communication throughout the organization. The CMO

collaborates with the CIO and CEO to generate a monthly newsletter and to keep members up to

date on the Fund’s positions and research. The CMO is responsible for helping members to post

their security analysis online, and also will collaborate

• Associate: Associate is a purely functional title given to senior members of The Fund who do not

hold positions on the Board. Associates serve in functional roles by directing industry sectors, groups

of analysts focused on one specific industry for investment. Associates will lead pitch teams,

maintain models, and serve as the primary contact point for analysts with questions or concerns.

They are ultimately the connector between general members and elected officers. There is no term

limit for this position; it is a purely functional role. Any board members who are not reelected will

automatically assume the title of associate.

• Analyst: Analysts are the unelected members of the Fund, and are primarily responsible for

completing tasks assigned to them by associates and officers. Tasks could include functional work

such as pitching, managing, researching, or modeling securities, or non-functional tasks such as

marketing work, maintaining models, or working for organizational purposes such as taking

attendance, or assisting an elected officer. Members will enter the Fund as analysts.

• Senior Analyst: Senior analysts are analysts who have served one year as analysts without being

promoted to the role of associate. Because of their experience in tasks related to Fund operation,

the Board will depend upon Senior Analysts heavily to assist in the general function of the Fund.

Section 3: The Board reserves the right to administer disciplinary action on general members of the

Fund. A member of The Fund must submit a formal written complaint that details conduct deliberately

undertaken by a member of The Fund that is detrimental to the image, organization, and/or operation

of The Fund. Such conduct includes but is not limited to; placing trades without consent or authority,

insubordination, egregious dress code or ethics violations, failing to meet assigned deadlines, failure to

adhere to standards, or for matters related to attendance, have been referred to in Article II, Section 4.

The member in question will be given an opportunity to defend their actions in front of The Fund and

the Board. The Board will then decide by simple majority whether or not to pursue disciplinary action.

Disciplinary action will include suspension for a length of time up to but no more than the rest of the

current semester, or permanent expulsion from The Fund.

Section 4: The members of the board will be elected democratically as in the way described in Section 8

of this article. Any student seeking to hold or holding office must maintain the cumulative GPA

requirement for graduation, and remain in good standing in their respective college. In addition,

financial officers must also maintain a minimum of a 3.3 GPA.

Section 5: Analysts interested in a purely functional leadership position in portfolio management, or as

an associate, must make themselves known to the Board. As these are purely functional roles, the

appointment of associates will be completely discretionary and on an as-needed basis. As far as the

hierarchy of The Fund, new members will be initiated as analysts for their first semester. After at least

one full semester, analysts will be eligible for consideration in a functional leadership role. The Board

will make an announcement to the Fund about a need to fill a functional leadership role, and interested

members will submit resumes for consideration. If the Board deems it necessary, they will be allowed to

conduct interviews before making a decision about filling a position.

Section 6: The board shall nominate one or several Faculty/Staff Advisor(s), hereafter the Advisor, to the

Fund. In order to be selected as an advisor, candidates must be full-time faculty or administrative staff

members at the University . The Advisor shall serve as a liaison with the University, and help in the

transition period between officers. The Advisor must be invited to and notified of all the Fund meetings

and activities.

Section 7: Election to a position on the Board will occur periodically when a Board member’s term ends,

when a Board member graduates, or in an occasion of the Board member’s removal from office. At the

conclusion of a regular meeting, all members of the Fund will be given the opportunity to nominate

fellow members or themselves for a position on the board. They will be allowed to campaign for the

position for one week. At the meeting one week following the nomination meeting, time will be allotted

to allow all nominees to present a brief speech on their behalf, and then a vote will be taken to fill the

board position. The nominee with the most votes wins, and any ties will result in additional rounds of

voting until one candidate wins a majority.

Article IV

Function and Operation

Section 1: This Fund uses relative valuation in our screening to select securities for either our idea bench

or to add to the portfolio itself. When screening for securities, we have a set of soft guidelines that can

help as a starting point for selecting securities. No single set of guidelines will apply universally to a

security, as some metrics of valuation will be higher or lower from industry to industry, but listed below

are some features shared by many securities in our portfolio:

• P/E, P/B, and/or P/S ratios that are lower than industry averages.

• ROE, ROI, and/or ROA ratios that higher than industry averages.

• An FCF yield higher than 13%

• A dividend yield higher than 2.5%

• A ROIC greater than 20% • D/E, EV/Sales, Debt/EBITDA, and/or P/FCF ratios lower than industry

averages.

• Trading price within 30% of the security’s 52-week low.

When selecting securities for the portfolio, we are looking for at least a 20% upside over a one to two

year window. We want to use our reserves of cash to invest in the best available idea, and investments

without at least this margin of safety are not worth the investment. We want to be exhaustive in our

scanning of the market for value opportunities in order to beat the market on a consistent basis as we

intend to.

Section 2: Following a pitch, the Fund as a whole will be given an opportunity to purchase the security

within a certain period of time. However, in certain situations where the vote is decided by a 55%-45%

margin, where grievous factual errors occur in a pitch, a significant change in the price of the security

between the time of the pitch and the purchase of the security, the Board will have the power to veto a

purchase decision made by the Fund. This veto will be enacted based on a majority vote made by the

Board. This is a functional decision, and as the Board is the group with the most experience inside of the

Fund, and will often have valid complaints with the majority’s decision.

Section 3: Members of the board, specifically the CIO, CRO, CFO, and CEO, will make all decisions made

regarding the balancing of the portfolio. Such decisions should be made with rationale, advice from

faculty, associates, and analysts, and must be documented by the CMO. Such balancing decisions can

include buying more of an existing security, selling any or all shares in an existing security, purchasing a

security that has been sold off previously,

Article V

Dues and Finance

Section 1: The Fund will collect a due of $20.00 per semester from its members with the intention of

funding social events, food for events, fund attire, and other purposes.

Article VI

Meetings

Section 1: The first meeting of both the fall and spring semester shall be held within two weeks after

classes start.

Section 2: Regular meetings shall be held at least once a month during the school year at time set by the

organization.

Section 3: The basic agenda at regular meetings shall be as follows:

a) Networking

b) Current Market Trends

c) Portfolio Update

d) Pitches

e) Q and A

f) Announcements

g) Closing Networking

Section 4: Any official decisions made in pitch meetings, including voting to add securities to the

portfolio, selection of officers, and disciplinary action, require a quorum of active members. A quorum is

at least 50% of active members in attendance.

Article VI

Removal from Office

Section 1: Officers are held to the same standards as their members, referencing Article II.

Section 2: Officers that devalues the Fund’s image or quality will be up for consideration for expulsion,

or demotion. Such reasons are detailed in Article III, Section 3.

Section 3: A member of the Board has to initiate the motion for removal from office via a written

complaint.

Section 4: Post-initiation of the motion, all officers not initiated will meet to discuss the future of the

said officer.

Section 5: A subsequent meeting will be held with all initiated Board members to conduct a hearing and

make a decision about discipline and punishment, if it is deemed necessary.

Section 6: Following the last meeting, if not already decided upon a solution then a decision will be

made at a following meeting.

Section 7: Officers may be removed from office and be made associates, or may be subject to a

punishment up to and including expulsion.

Article VII

Constitutional Amendments

Section 1: The Constitution is binding to all members of the Fund but is not binding unto itself.

Section 2: Any and all proposed amendments to the Constitution must be put forward in writing by an

active member of The Fund. Amendments must be ratified by a 2/3rds majority of active members.

Article VIII

Ratification

Section 1: The under signed students(s) of the University of South Carolina, after a three-fourths (3/4)

affirmative vote of active members, do hereby agree to follow the guidelines of this Constitution.