Investment Process

Stock Selection Process

Our goal is to provide superior performance that rewards our clients in rising markets. We do this by investing for the long term, without undue emphasis on day-to-day market movements. We use a five-step process to analyze and select companies for investment.

The investment team at Kopp Investment Advisors is led by seasoned veterans with decades of experience uncovering and analyzing emerging growth companies. We believe that level of experience, combined with an excellent network of corporate executives, analysts, and other investment contacts, gives Kopp Investment Advisors an edge in the search for new investment ideas.

STEP 1:  Gather Ideas

Our investment process begins with over 55 research sources. We receive research from national brokerage firms as well as smaller regional firms. Diversity of coverage is essential. We further qualify prospective investments with information from corporate contacts, trade shows, and most importantly, company visits.

STEP 2:  Review Financial Data

Once we have identified a list of potential companies, we review company financial data and analysts' estimates, and conduct our own quantitative analysis. We look for companies that currently generate or have the capacity to generate excess cash.

STEP 3:  Study Management

Our investment style reflects a bottom-up approach. In addition to reviewing a company's financial data, we believe it is important to look closely at its business plan and assess its managers for their experience and expertise as well as their personal integrity. We incorporate on-site meetings with corporate managements, reviews of product lines and trends, as well as regular contacts with industry sources.

STEP 4:  Monitor 125-150 Companies

When it comes to selecting companies for ongoing evaluation, we look at four major criteria:

	Superior earnings growth or earnings potential
	Price/Earnings Ratio versus Market/Group Multiple
	Price/Sales Ratio versus Market/Group Multiple
	R&D Spending — above average for comparable companies

STEP 5:  Buy 30-50 Companies

The decision to buy stocks or hold positions is determined by a variety of factors, the bottom line of which is appreciation potential. Once in the portfolio, the stocks are reviewed on an ongoing basis.

Portfolio Construction

A portfolio is constructed from the "Buy List."

	The "Buy List" is established by the senior members of the portfolio management group.
	Stocks are purchased when their price is within an acceptable range. If the price moves above the range, buying stops.
	At the initial purchase, each stock is given an approximate target weight of 2% to 5% of the portfolio's total value.
	Portfolios generally contain 30-50 stocks, depending on the size of the account.
	Portfolio construction is normally completed within 30-45 days of receiving funds.
	Stocks are monitored for variations from expectations.

03/20/06