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2
MBA Fund Managers
Christophe Pane
Luis Prandini
Stephen Petretto
Igor Lemagic
Rajiv Iyer
Jie Wan
Ashley Martella
Yun Cai
Amit Kumar
Sampita Ray
Gabriel Joanes
3
Performance Highlights (Sept 24,2004 thru April 15,2005)
SMF PORTFOLIO
S & P 500
Portfolio Value (9/24/04) $410,918.25 1,110.11
Portfolio Value (4/15/05)$918,060.79(*
)1,142.62
Holding PeriodReturn (9/24/04 thru 4/15/05)
4.82% 2.93%
Annualized Return (%) 8.67% 5.27%
Beta 1 1
Annualized Standard Deviation
11.87% 11.19%
Sharpe Ratio** 0.37 0.09
Treynor Index** 4.43 1.02
Alpha 3.38%
*An additional $500,000 was added to the portfolio as of Jan,19 2005.
**Based on risk-free rate of
4.23%.
4
Agenda
Economic Review
Investment Philosophy &
Methodology
Portfolio Performance & Attribution Analysis
Lessons
5
• The global economy should continue to expand at a brisk pace in 2005, but has become too reliant on demand in the U.S. and is increasingly vulnerable to damage from high oil prices.
• The global economic growth this year to be 4.3%, down from 5.1% in 2004. For 2006, the IMF predicted output would rise 4.4%.
• Oil prices would average $46.50 a barrel for 2005, up 23.2% from the prior year, and $43.75 in 2006.
• U.S. growth to 3.6% for both 2005 and 2006, an increase of 0.1 percentage point for both years.
• Possibility of a jump in U.S. interest rates and a drop in U.S. consumption, sparked either by inflation fears or an abrupt reversal of foreign capital flows to the U.S.
• The U.S. current account deficit - 5.7% of GDP in 2004 - probably won't improve much over the next couple of years, despite dollar depreciation.
Economic Review
IMF Global Outlook 2005
6
• The sudden shift in mood and economic outlook – the market is riskier than thought.
• The Dow Jones Industrial Average last week recorded its steepest decline since 2003, dropping 3.6%.
• Investors finally seem to believe that high crude oil and gasoline prices are curtailing consumer spending, slowing economic growth and cutting into corporate earnings.
• Recent economic reports from the U.S. government portrayed sluggish job growth, weaker retail sales and a widening trade deficit only exacerbated by slowing American exports.
• Fed policy makers at their last meeting talked of solid economic conditions and feared that overstimulated growth could stoke inflation.
• The dollar rose in Europe as Asian stock markets slumped on signs of slower global growth.
Economic Review
U.S. Last Two Week
7
Investment Philosophy
Benchmark: S&P500 Index
Long-term (3-5 year) investment horizon
Fundamental analysis Business models Historical performance Future Prospects Valuation models
8
Top Down Approach
Blend Strategy Combination of value and growth
Multi-Cap Fund
Investment Strategy and Style
Mid Caps
5 stocks
Small Caps1 stock
Large Caps
23 stocks
Primarily investments in large-cap stocks
Number of holdings as of 02/25/05: 29
Market Capitalization
9
Investment Methodology
Sector Allocation
Valuation Models
•PEG and P/E Models•Dividend Discount Model •Free Cash Flow Model
Stock Selection
Fundamental Analysis
•Business Model Analysis•Ratio Analysis•Future Prospects
Top Down Approach
10
Management Style
Active Management Report presentation and voting
Performance Monitoring Stop Loss Measures (15%) Appreciation Reevaluation (20%) Continuous Monitoring & Dynamic Response
11
Sector Allocation (as of 04/15/2005)
Top 5 sectors:
FinancialsIndustrials
Consumer Disc.IT
Health Care
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%SMF S&P
12
Detailed Sector Allocation (as of 04/15/2005)
* Best Performeruntil 02/11
TICKERTRADE DATE
# SHARE
S
PURCHA
SE PRICE
CURRENT
PRICE
CURRENT VALUE
TOTAL %
RETURN
% OF PORTFOLIO as
of 4/15
CONSUMER DICRETIONARY
CMCSA
10/15/2004 875 $30.13 $32.45 $28,393.75 7.57% 3.10%
HET04/14/200
5 500 $71.20 $67.61 $33,805.00 -5.08% 3.68%
HPOL03/17/200
5 8000 $4.65 $4.26 $34,080.00 -8.44% 3.71%
HOT12/28/200
4 650 $58.24 $56.40 $36,660.00 -3.24% 3.99%
LGF02/11/200
5 3000 $10.42 $9.59 $28,770.00 -8.00% 3.13%
PNRA04/16/200
5 345 $56.00 $54.69 $18,868.05 -2.40% 2.06%
VIAB10/06/200
4 500 $35.21 $34.12 $17,060.00 -3.22% 1.85%
CONSUMER STAPLES
KO09/22/200
4 300 $40.46 $41.29 $12,387.00 1.88% 1.35%
SYY02/14/200
5 1000 $35.16 $35.00 $35,000.00 -0.49% 3.81%
WAG11/22/200
4 400 $37.93 $43.07 $17,228.00 13.42% 1.88%
ENERGY
APA02/22/200
5 700 $59.77 $55.57 $38,899.00 -7.06% 4.24%
PTR02/22/200
5 500 $60.20 $60.33 $30,165.00 0.13% 3.28%
VLO10/27/200
4 500 $44.00 $67.61 $33,805.00 53.52% 3.68%
XTO03/17/200
5 800 $33.50 $29.36 $23,488.00 -
12.42% 2.56%
13
Detailed Sector Allocation (as of 04/15/2005)
TICKER
TRADE DATE
# SHARE
S
PURCHA
SE PRICE
CURRENT
PRICE
CURRENT VALUE
TOTAL %
RETURN
% OF PORTFOLIO as
of 4/15
FINANCIALS
AMTD02/14/200
5 1000 $11.59 $11.11 $11,110.00 -4.32% 1.21%
C10/22/200
4 500 $42.80 $45.75 $22,875.00 6.79% 2.49%
CBH12/22/200
4 1200 $30.02 $29.14 $34,968.00 -3.01% 3.80%
ING11/09/200
4 650 $28.43 $29.36 $19,084.00 3.10% 2.08%
KRB02/16/200
5 1525 $26.01 $23.45 $35,761.25 -9.89% 3.90%
HEALTHCARE
AET10/27/200
4 400 $44.71 $70.67 $28,268.00 57.90% 3.08%
IVGN02/14/200
5 550 $71.37 $70.21 $38,615.50 -1.65% 4.20%
INDUSTRIALS
DNB02/15/200
5 700 $59.91 $61.53 $43,071.00 2.67% 4.69%
MAS12/22/200
4 500 $36.46 $32.65 $16,325.00 -
10.55% 1.78%
MMM11/15/200
4 200 $82.64 $80.86 $16,172.00 -2.27% 1.76%
TYC02/23/200
5 1200 $33.57 $31.33 $37,596.00 -6.70% 4.10%
14
Detailed Sector Allocation (as of 04/15/2005)
TICKER
TRADE DATE
# SHARE
S
PURCHA
SE PRICE
CURRENT
PRICE
CURRENT VALUE
TOTAL %
RETURN
% OF PORTFOLIO as
of 4/15
INFORMATION TECHNOLOGY
CSCO
12/03/2004 1000 $19.50 $17.20 $17,200.00
-11.89% 1.87%
SAP02/08/200
5 750 $39.24 $36.96 $27,720.00 -5.85% 3.02%
MATERIALS
PKX03/02/200
5 400 $52.40 $45.58 $18,232.00 -
13.07% 1.99%
UTILITIES
D 11/23/200
4 150 $66.71 $73.58 $11,037.00 10.08% 1.20%
FPL02/22/200
5 1000 $39.11 $39.94 $39,940.00 2.10% 4.35%
CASH $111,477.24
15
Performance Highlights (Sept 24,2004 thru April 15,2005)
SMF PORTFOLIO
S & P 500
Portfolio Value (9/24/04) $410,918.25 1,110.11
Portfolio Value (2/11/05)$918,060.79(*
)1,142.62
Holding PeriodReturn (9/24/04 thru 4/15/05)
4.82% 2.93%
Annualized Return (%) 8.67% 5.27%
Beta 1 1
Annualized Standard Deviation
11.87% 11.19%
Sharpe Ratio** 0.37 0.09
Treynor Index** 4.43 1.02
Alpha 3.38%
*An additional $500,000 was added to the portfolio as of Jan,19 2005.
**Based on risk-free rate of
4.23%.
16
Portfolio Performance AttributionPeriod: September 24, 2004 to April 15, 2005
-50
0
50
100
150
200
250
Basi
s P
oints
StockSelectionAttribution
SectorAllocationAttribution
CashPosition
Attribution
189 209
13 -33
=
+ +
17Performance Comparison – Phased (Sept 24,2004 thru April 15,2005)
*An additional $500,000 was added to the portfolio as of Jan,19 2005.
PERFORMANCE HIGHLIGHTS
Dec 2004 Feb 2005 April 2005
Portfolio Value (9/24/04)
$410,918.25 $410,918.25 $410,918.25
Portfolio Value $443,404.42 $958,082.81 $918,060.79
Holding PeriodReturn
7.91% 11.48% 4.82%
S&P Holding Period Return
7.30% 8.57% 2.93%
Alpha 5.77% 4.67% 3.38%
Beta 0.95 0.89 1.00
18Performance Comparison – Phased (Sept 24,2004 thru April 15,2005)
*An additional $500,000 was added to the portfolio as of Jan,19 2005.
Cumulative return SMF vs. S&P
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
9/24/04
10/24/04
11/24/04
12/24/041/24/05
2/24/053/24/05
SMF Portfolio S&P
Alpha0.25%
Alpha4.67%
Alpha3.38%
19Performance - Last Six Weeks
•Outperformed during upturn
•Slightly underperformed during downturn
Six Week Return
-8.00%
-7.00%
-6.00%
-5.00%
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
4-Mar 11-Mar 18-Mar 25-Mar 1-Apr 8-Apr 15-Apr
Time
Ret
urn
SMF S&P
20Sector Allocation - Last Six Weeks
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Feb-05
Apr-05
•Energy and consumer discretionary took a hit amidst concerns of economic instability and falling crude oil prices•Beta in last six weeks > 1. Averages to 1 over a longer period of time
21
Lessons Learned and Takeaways
Stop losses can sometimes work against
youPFE, CACI
Have patienceMarket tends to overreact when it incorporates
new information
VLO
Stick with your strategy and convictions
Don’t get emotional about stocks
Teamwork
Don’t forget Qualitative factors and be careful with assumptions
22
Lessons learned and Takeaways (cont)
Know what drives the stock
Masco, Fedex
Accept the unexpectedPfizer, Lion’s Gate
Enjoy the opportunity while it lasts!