Applied Portfolio Management Program. End-Year Presentation. Team Members

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1 Applied Portfolio Management Program End-Year Presentation Karissa Baker Justin Brown Xueqian Chen Brett Engelhardt Jane Kliakhandler Nick Markham Mike Scott Weite Zhang Team Members 1

2 Outline Economic Conditions Investment Objectives Asset Allocation Equity Strategy & Performance Fixed Income Strategy & Performance Portfolio Performance Treasury Yield Curve 2

3 Source: 3

4 Gross Domestic Product Source: 4

Consumer Confidence Source http://www.conference-board.

5 Consumer Confidence Source Investment Objectives Preserve the principal balance for future student management Generate sufficient income to meet program expenses Provide investment returns comparable to benchmark indices 5

Actual Asset Allocation Fixed Income - $53,628.13 Equities $102,552.

6 Target Asset Allocation Portfolio Allocations 70-75% 75% Equity 25-30% Fixed Income Dual Equity Management Approach Passively manage large-cap stocks Actively manage small and mid-cap stocks Actual Asset Allocation Fixed Income - $53, Equities $102, Fixed Income 27% Equity Depository Receipts - $42, Equity Depository Receipts 22% Equities 51% Total Portfolio Value $199,

Equity Strategy Sectors Exposure across sectors through depository receipts Limit exposure to 25% in any given sector Blend Approach Look for undervalued companies Technical Analysis

7 Equity Strategy Sectors Exposure across sectors through depository receipts Limit exposure to 25% in any given sector Blend Approach Look for undervalued companies Technical Analysis i.e. 200 day moving average Equity Performance Goals Equities Beat benchmark (S&P 1500) by 3 % Develop a portfolio that meets our investment objectives with long term goals in mind 7

8 Equity Performance October 2003 March2004 Month by Month Return 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% Oct-03 Nov- 03 Dec- 03 Jan- 04 Feb- 04 Mar- 04 S&P1500 Return APMP Equity Return Equity Performance October 2003 March % 20% 22.98% 15% 10% 13.81% 5% Total 0% S&P1500 Return S&P1500 Return APMP Equity Return APMP Equity Return Risk adjusted return = Return / STD DEV = 6.64% 8

9 25% 20% 15% 10% 5% 0% Sector Weights (as of 03/31/2004) APMP S&P 1500 Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Sector Allocation Contribution 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Overall Sector Allocation = 0.79% 9

Equity Statistics Weighted Avg Beta 0.833 Weighted Avg P/E 12.

15% Weighted Avg Market Cap $15B Equity Transactions - Sold Performance Since

10 Equity Statistics Weighted Avg Beta Weighted Avg P/E Weighted Avg Dividend Yield 1.15% Weighted Avg Market Cap $15B Equity Transactions - Sold Performance Since Transaction Security Date Price (As of 03/31/04) Sell (75 shares) S&P Dep. (SPY) 02/26 $ % Sell ISHARES Healthcare (IYH) 03/30 $ % 10

71 0% Fixed Income Strategy Dual management approach Actively manage up to 50% of fixed income Select bonds

11 Equity Transactions - Bought Performance Since Transaction Security Date Price (As of 03/31/04) Buy Brinker International (EAT) 03/02 $ % Buy Pharmaceutical Product Development Inc. (PPDI) 03/30 $ % Fixed Income Strategy Dual management approach Actively manage up to 50% of fixed income Select bonds with most profit potential Short term bonds International bonds may comprise up to 15% of fixed income portfolio 11

Fixed Income Performance Goal Fixed Income Beat benchmark (Lehman Brothers U.S. Universal) by 1% Source: http://www.lehman.com/fi/indices/global.

12 Fixed Income Performance Goal Fixed Income Beat benchmark (Lehman Brothers U.S. Universal) by 1% Source: Fixed Income Performance October 2003 March % 5.37% 5% 0% % APMP Bond Lehman Index -5% -10% Risk adjusted return = Return / STD DEV = % 12

13 What happened there? We didn t invest in any high yield bonds Benchmark has high yield components Poor investment timing Interest rates rose (flattening of the yield curve) Fixed Income Allocations 28% 1% 38% Corp Bond Corp Bond Index Govt MM 33% 13

Fixed Income Holdings (excluding corporate bond fund) $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 Corporate Government $4,000 $2,000 $0 0-3 years 4-6 years 7-10 years 10+ years APMP Lehman US

14 Fixed Income Holdings (excluding corporate bond fund) $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 Corporate Government $4,000 $2,000 $0 0-3 years 4-6 years 7-10 years 10+ years APMP Lehman US Universal Bond Fund Duration Portfolio Performance October 2003 March % 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 9.71% Benchmark Return 19.34% S1 Portfolio Return Risk adjusted return = Return / STD DEV = 6.84% Benchmark consists of 70% S&P 1500 and 30% Lehman Brothers U.S. Universal 14

Growth of $10,000 13,000.00 12,000.00 11,000.00 10,000.

15 Growth of $10,000 13, , , , APMP Black Portfolio APMP Black Equity S&P1500 9, , September October November December January February March Guest speakers Joe Dancy Steve Mattson Mike Morgan Dean Junkins 15

16 7 th place (competition based on return ONLY) Keynote speakers Top industry leaders Interaction with other student portfolio programs Put Michigan Tech s name out into the finance world R.I.S.E. Symposium 16

17 Benefits of the APMP Develop Real-Life Portfolio Management Skills Gain Insight on Career Opportunities Interact with Finance Professionals Experience of working in a team 17

Advice to next year s s team Function like a team Read the

options Fixed income side Start your first buy report early

mistake Special thanks Dean, we would like to thank you very

commitment; Many thanks to the advisory board for your input

18 Advice to next year s s team Function like a team Read the course materials Closely monitor your portfolio Look into options Fixed income side Start your first buy report early Set your goals and stick to them Don t be afraid to make a mistake Special thanks Dean, we would like to thank you very much for all your input, your sacrifice, your knowledge and commitment; Many thanks to the advisory board for your input and support along the way, and for your very valuable questions 18

19 Thank You! 19

A MOMENTUM STRATEGY FOR BEATING THE MARKET and A NEW EQUALLY WEIGHTED S&P 500 INDEX

A MOMENTUM STRATEGY FOR BEATING THE MARKET and A NEW EQUALLY WEIGHTED S&P 500 INDEX Presented December 28, 2004 at NYC QWAFAFEW by Stanley Levine QED International Associates, Inc. 300 Central Park West