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HAZELTON CAPITAL PARTNERS Letters to Partners Q3 2014 Page 1 of 5

HAZELTON CAPITAL PARTNERS
Simplicity is The Ultimate Sophistication


To: Hazelton Capital Partners, LLC
From: Barry Pasikov, Managing Member
Date: October 26, 2014
Re: 3rd Quarter 2014 Letter to Investors


Dear Partner,

Hazelton Capital Partners, LLC (the Fund) gained 0.5% from July 1, 2014 through
September 30, 2014, declined 2.3% year-to-date, and has returned 87% since its inception in
August 2009. By comparison, the S&P 500 gained 1.1% in the same quarter, increased
8.3% year-to-date and has returned 105.3% since the Funds inception.

The Funds Performance The Quarter in Review
Hazelton Capital Partners ended the 3rd quarter with a portfolio of 18 equity positions and
a cash level equivalent to 26% of assets under management. The Funds top five portfolio
holdings, which are equal to 35% of the Funds net assets, are: Western Digital (WDC),
Xerox Corp (XRX), DreamWorks Animation (DWA), Apple Inc (AAPL), and Northern Tier
Energy LP (NTI). During the quarter, Hazelton Capital Partners eliminated one position,
continued to reduce a handful of holdings, and began investing in two new positions.

Just as you can not judge a book by its cover, you can not determine a companys value by
its current stock price. The price of a stock only signals where one can purchase or sell an
investment today; it does not indicate if it will be profitable tomorrow. The recent market
volatility is causing many to look for ways to protect their portfolios. In the past, Hazelton
Capital Partners has used options to provide short-term protection for its portfolio and may
use them, again, in the future but will only do so when the price paid for the insurance is
commensurate with the protection it provides. The Funds strongest defense will always be
its portfolio of high quality companies priced at a significant discount to their fair value,
with cash that stands ready to be deployed. Given that our investing time frame is years
instead of months, market declines often provide the best opportunities to acquire new
holdings or add to existing positions.


Apple Inc (AAPL) Current Holding
Even though Apple recently became a Hazelton Capital Partners top five holding, it is not a
new position. The Fund began acquiring shares of Apple starting in March of 2013 and
continued to add to the position over the next few months. Apple garners a tremendous
amount of attention from Wall Street analysts, tech gurus, and consumers, all who have a
fervent connection with the company and its devices. If one wants to set the
Twittersphere ablaze, then comment on Apple or one of its products, sit back and observe
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HAZELTON CAPITAL PARTNERS Letters to Partners Q3 2014 Page 2 of 5
the firestorm that erupts. But it is this same passionate connection with the company and
its products that make Apple so unique. Just shy of 40 years old, Apple is the patriarch of
the tech industry. For a company to survive 40 years is an accomplishment unto itself,
especially given the tumultuous economy. But for a tech company to endure for 40 years is
the equivalent of immortality. Even more remarkable, Apple has done more than just
survive. Instead of sitting back in a beach chair, sipping an umbrella drink and
reminiscing about yesteryear, Apple remains not only on the cutting edge of technology, but
sets the tone for the consumer market.

Over the last 10 years, Apple has grown its revenues from $8.2 billion to $180 billion which
equates to a 36% compounded annual growth rate. During that same period, gross margins
have improved from the low 20s to nearly 40%, total operating expenses declined from the
mid 20s down to just shy of 10%, and net profit margins have risen from the single digits
into the low 20%. All of this was achieved while the company accumulated more than $170
billion in cash/securities on its balance sheet. By any metric, Apples recent growth has
been extraordinary. With the introduction of the iPhone, representing $95 billion in sales
and 70% gross margins, in addition to products like the iPad, Apple has transitioned from a
computer manufacture into a consumer technology brand. It is unusual for a technology
company, or any company for that matter, to be able to maintain such high gross margins
for an extended period of time, especially in the highly competitive smartphone market.
But Apples unique ability to fuse design and function into its products has created a
powerful ecosystem, differentiating itself from its competitors, and allowing the company to
charge a premium for its products. In October, it took just 3 days for Apple to presale over
10 million iPhone units. Factoring in the current 2-3 week backorder for its iPhone 6 & 6
Plus, it appears that the Apple brand is not only intact but growing in both size and scope.

It is very unlikely that Apple will be able to maintain its breakneck growth witnessed over
the last number of years. However, with only 18% of the global mobile market, there is still
room to expand. Even though the price of Apples stock has had a strong appreciation year-
to-date, there still remains a meaningful gap between price and value.


WellPoint Inc (WLP) Closed Position +150% Gain
WellPoint is one of the largest nationwide managed-care organizations (MCO) in the United
States operating primarily under the Blue Cross/Blue Shield brand. In 2003, $1.4 trillion
was spent in the United States on healthcare. By 2009, that number rose to $2.0 trillion
and by 2018, healthcare spending is expected to breach $3.2 trillion. The MCO industry is
a mature industry, dominated by a handful of companies, organically growing between 6
and 9%, and whose operations are highly scalable the greater the membership, the lower
the costs per member. Achieving market share is crucial for WellPoint, as it gives them a
competitive cost advantage. Operating in 14 states, WLP averages about a 34% market
share. In late 2008 and well into 2009, WellPoints stock price came under pressure due to
the uncertainty surrounding the impact of the Affordable Care Act (Obamacare). Even
though the size of the healthcare membership pie would be growing, it was not clear how
the introduction of new members would impact profitability.

In October of 2009, Hazelton Capital Partners began accumulating shares of WellPoint at a
cost basis of $46.36/share. Well aware of the ambiguity surrounding the company, the
Fund felt comfortable that WLPs downside was limited while providing a significant upside
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HAZELTON CAPITAL PARTNERS Letters to Partners Q3 2014 Page 3 of 5
opportunity. In 2010, Hazelton Capital Partners added to the position as management
proved themselves not only to be good operators but good stewards of its capital through
share repurchases and a newly issued dividend yielding 3%. Between 2009 and 2013,
WellPoint was able to repurchase 40% of its float at an average price of $59.25. By late
July 2014, Hazelton Capital Partners decided that much of WLPs diligent work was now
fairly reflected in its $115/share stock price and exited the position.

If It Were So Easy, Everyone Would Be Doing It.
In his recent book, Zero to One: Notes on Startups, or How to Build the Future, Peter Thiel
draws upon his experience as a serial entrepreneur in defining the key elements needed to
create a successful and sustainable startup business. Thiels approach is very simple:
Avoid competition. This advice appears to be in direct conflict with the precepts of
capitalism, where competition amongst private companies operating within free markets
determines the clearing price. Competition is generally considered good for business
because it shakes off complacency, spurs innovation, expands the scope of the field and gets
businesses to focus on their customers. But what Thiel is suggesting is that competing for
the sake of competition is a fools errand. Instead, when evaluating a business, Thiel
searches for two key elements: Does the company provide a unique solution to a problem,
contributing to the overall growth or progress of an industry, and is the company focusing
on a niche segment of the industry before it expands its reach?

Apple is a legendary startup company with a strong history steeped in entrepreneurship,
including the tradition of beginning in a garage. At nearly 40 years old, Apple defies
convention by continuing to judge each new and existing opportunity through an
entrepreneurial prism. Apple did not create the smartphone or the smartphone market,
but its decision to manufacture the iPhone was driven by the belief that the Blackberry (the
default smartphone of the time) was ignoring the needs of the consumer market. Before
2007, smartphones were purely a business tool, complete with a keyboard to keep up to
date with emails when out of the office. When Apple decided to launch the iPhone, it did so
with the primary focus on what would benefit consumers. Additionally, Apple limited the
size and scope of its iPhone release. Instead of producing multiple models, Apple began
with its one size fits all. Instead of releasing the phone to all mobile carriers, AT&T was
given the exclusive right to distribute the phone. And instead of blanketing every country,
Apple has moved methodically over the years to expand into foreign markets.

In 1994, Jeff Bezos, keenly aware of the hidden potential of the burgeoning internet, began
searching for a way to leverage its power. After months of investigation, Bezos determined
that the best opportunity available was in retail. He further refined his focus to selling
books over the internet and Amazon.com was born. Amazons initial purpose was to
provide book buyers with 7 times the selection of a brick and mortar store at prices that
were 30% cheaper. At first, like most entrepreneurial ventures, the established booksellers
disregarded the internet upstart and continued to operate in the same manner it had for
over half a century. Soon, the national booksellers could no longer ignore Amazons
competitive advantages and began their own online operation. But, it was too little too late
for businesses like Borders, which could not compete with Amazons low overhead costs,
robust logistics system, and improving relations with book publishers. After its initial
success in online book retailing, Amazon expanded its offerings to include DVDs, CDs,
video games, electronics, apparel, furniture, food, toys and jewelry. With each new
expansion and increase in sales, Amazon has been able to continually exploit its
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HAZELTON CAPITAL PARTNERS Letters to Partners Q3 2014 Page 4 of 5
sophisticated and improving logistics system. Cost savings from economies of scale were
funneled back to their customer in the form of lower prices in order to build greater market
share and customer loyalty. Well aware of the negative impact these choices were having
on net profit margins, Amazon addressed its business strategy in a 2009 Letter to
Shareholders:

Our pricing objective is to earn customer trust, not to optimize short-term
profit dollars. We take it as an article of faith that pricing in this manner is
the best way to grow our aggregate profit dollars over the long term. We may
make less per item, but by consistently earning trust we will sell many more
items. Therefore, we offer low prices across our entire product range.

The biggest challenge facing any business is remaining true to its roots while replicating its
initial success. Twenty years after its founding, Apple was on the verge of bankruptcy.
Instead of focusing on what made the company successful, its creativity and design, Apple
allowed itself to become preoccupied with gaining share from the personal computer
market. This competition negatively impacted the company as its once cutting-edge
products lacked innovation and became commoditized. In 1997, Steve Jobs returned to
Apple and revitalized the dormant entrepreneurial culture. He slashed the number of
products by 70%, reminding Apple employees that Deciding what not to do is as important
as deciding what to do. By 1998, Apple regained its creative footing with the release of the
iMac and began a streak of innovative products that once again married design with
function.

Entrepreneurs are often portrayed as disrupters of industry, the underdog willing to
assume great financial risk in order to challenge the conventional wisdom of the time. The
truth is just the opposite. Entrepreneurs create businesses because they are able to
narrowly focus their scope to address a specific need unmet within the marketplace. The
disruption that occurs is the byproduct of their success. Apple began its journey by
following an entrepreneurial path, but over time it diverged from the initial route that
made it unique and successful. By returning to its entrepreneurial roots, Apple has not
only been able to regain its bearings but has developed an uncanny insight and vision into
what currently is lacking in the marketplace. Even more remarkable is how Apple was able
to ascend from near bankruptcy to a robust market capitalization in excess of $600 billion
with over $170 billion in cash/securities in less than 20 years.

Even though Amazon has been able to create one of the strongest and best known retail
brands, its future remains uncertain. By providing exceptional customer service and
competitive pricing, the company has left a growing sea of bankrupt and failed businesses
in its disruptive wake. But to what end? Unlike Apple, whose near death experience has
shaped its view on competition, Amazon is committed to gaining market share solely on
service and price. But do these two fundamentals create customer loyalty? Recently,
Alibaba, a Chinese online retailer and a business to business portal, went public on the
New York Stock Exchange. In an interview with its chairman, Jack Ma repeatedly talked
about his priority: To build a world class online commerce company that is focused on its
customers first. With companies like Alibaba, it is hard to imagine a time when Amazon
will not be forced to compete on price. I love using Amazon; it is so easy. It is the first
place I go when shopping both on and off line. But I am sure, over time, I could learn to
love Alibaba, as well. The question is what problem is Amazon currently solving? Although
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HAZELTON CAPITAL PARTNERS Letters to Partners Q3 2014 Page 5 of 5
I do not see the companys competitive behavior leading to its ultimate demise, I also do not
see the company able to leverage its growing sales into greater profitability.

Thiels book can be distilled down to a singular idea: Success comes from solving
unaddressed needs while avoiding competition. The roadmap to become a successful
entrepreneur is easy to follow but remains a challenging journey. Just like investing, an
entrepreneur must be courageous enough to swim against the conventional tide while he
waits for his idea to gain acceptance, which can be lonely at first and overtime appear to be
madness. Of course, the difference between madness and genius is timing. In 2004, Peter
Thiel invested $500,000 in Facebook for 10% of the company. He was the first outside
investor, but not the first potential investor as many individual and venture capital firms
passed on the idea. With less than 1 million users, Thiel believed that Facebook would be
the social platform for users of all ages which, up to this point, did not exist. In May of
2012, Facebook went public and currently has a market capitalization over $200 billion.
Today, with over 1.2 billion users, Thiels prophecy has come true. But the question is:
Would you have been courageous enough in 2004 to have made the investment when the
rest of the market was sidestepping the deal? The prevailing maxim: If it is such a great
idea, why isnt anyone else doing it? should be rephrased to say: If it were so easy, everyone
would be doing it.

Administrative
Investing in Hazelton Capital Partners
Hazelton Capital Partners was created as an investment vehicle, allowing those interested
in long-term exposure to the equity market to invest along-side me. With a substantial
portion of my own capital in the fund, I manage Hazelton Capital Partners assets in the
same manner in which I manage my own capital. The best source of introduction to
potential investors in the Fund has come from those that have invested or followed
Hazelton Capital Partners progress over the years. Introductions are both welcome and
appreciated.

If you are interested in making or increasing your contribution to Hazelton Capital
Partners or just learning more about The Fund, please feel free to contact me.

Please do not hesitate to call me at (312) 970-9202 or email me
bpasikov@hazeltoncapital.com with any of your questions or concerns.


Warm Regards,



Barry Pasikov
Managing Member