Interim Report

Student Managed Fund MBA class of 2004

March 11, 2004

2

MBA Fund Managers

Anjana Radhakrishnan

Christopher Bodnar

Ganesh Padmanabhan

Geoffrey Munger

Heather Utter

Jessie LeBlanc

Michael Appell

Saipriya Menon

Tanzhuo Liu

Wiebke Wanner- Borchardt

3

Agenda

Investment Philosophy & Approach

Investment Criteria

Portfolio Performance

Attribution Analysis

Retrospection and Self-Analysis

Economic Outlook

4

Investment Philosophy

Outperform the S&P500 Strategic sector allocation Selection of stocks with strong growth potential Close monitoring of the portfolio

Fundamental analysis Historical performance Business models Economic outlook for the industry

Valuation Undervalued stocks

Long-term (3-5 year) investment horizon

5

Investment Approach

Sector Allocation

Constant Portfolio Performance Monitoring

Valuation•PEG and P/E Models•Discounted Cash Flow•Economic Profit

Fundamental Analysis•Historical Growth•Free Cash Flow•Profit Margin

Investment Criteria

6

Investment Criteria

Quantitative Qualitative

ROA Industry Growth

ROE Company Market Share

ROIC Corporate Governance

Growth in EPS Institutional Ownership

Free Cash Flow/Net Income Insider Trading

Gross Margin Market PowerProduct Differentiation Low-cost ProducerCustomer Relationship

Retention Ratio

Economic Profit

Debt/Equity

Beta

Quantitative

& qualitative

factors

checked

across

industries

Qualitative Investment Criteria - Portfolio

OCR EBAY JEC INTU

Industry Growth 19.42% 27.20% 12.7% 18.5%

Company Market Share

2.29% 17.62% 12.00% 3.38%

Market Power

Product Differentiation

Low-cost Producer

Customer Relationship

Medium

High

High

Low

High

High

Medium

Medium

High

High

Low

Medium

Corporate Governance

6/12 6/13 6/9 5/8

Institutional Ownership

95% 67.44% 65.50% 83.38%

Insider Trading 7.70% -0.5% 0.01% -0.30%

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  OCR EBAY JEC INTU

ROA 6.18% 9.10% 7.86% 10.27%

ROE 13.12% 10.50% 16.35% 14.70%

ROIC 7.37% 10.18% 13.10% 14.55%

Cost of Capital 6.80% 8.74% 8.12% 7.81%

Economic Profit 15M 62M 49M 159M

EPS Growth 28.30% 84.6% 34.53% 96.86%

FCF/NI 1.30 1.03 0.73 1.56

Debt/Equity 0.68 0.02 0 0.01

Beta 0.85 1.55 0.95 1.20

Quantitative Investment Criteria - Portfolio

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Portfolio Monitoring - Sell Criteria

Stock reaches its price objective

Industry-sector weighting exceeds predetermined limits

Risk/reward profile deteriorates

Earnings figures lower than estimates

Stop loss on all positions

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SMF Holdings – 12/26/03

Our sector

allocation closely

tracks the S&P500

with exceptions

based on

economic outlook

Ticker Equity Weight

CONSUMER DISCRETIONARY 31.46%

ALV 4.21%

EBAY 6.12%

HOTT 5.85%

MAT 5.86%

WSM 4.42%

YCC 5.00%

HEALTHCARE 29.28%

GILD 6.56%

HSIC 5.78%

OCR 5.27%

UNH 5.77%

ZMH 5.89%

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SMF Holdings – 12/26/03

Ticker Equity Weight

INFORMATION TECHNOLOGY 18.77%

COGN 3.36%

FDC 4.17%

INTU 5.68%

MSFT 5.56%

INDUSTRIALS 9.15%

CD 5.62%

JEC 3.53%

FINANCIALS 5.38%

WFC 5.38%

CONSUMER STAPLES 5.97%

MO 5.97%

Our sector

allocation closely

tracks the S&P500

with exceptions

based on

economic outlook

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SMF Holdings - Adjustments

Sold COGN and ALV

Initiated positions in:

Materials: Newmont Mining (NEM)

IT: Intel (INTC)

Reviewing positions in: JEC, INTU, WSM, EBAY, and OCR

Seeking positions in Energy and Telecom Sectors

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SMF Holdings – 02/17/04

Ticker Quantity Purchase PriceMarket Value

(02/17/04)HPR

ALV* 300 $32.43 $11,337 16.53%

CD 700 $21.05 $16,051 8.92%

COGN* 300 $34.80 $9,042 -13.39%

EBAY 260 $56.49 $17,997 22.55%

FDC 280 $35.96 $11,312 12.35%

GILD 300 $53.32 $17,412 8.85%

HOTT 550 $27.43 $16,159 6.82%

HSIC 230 $66.06 $16,505 8.63%

INTC 420 $30.75 $12,949 0.26%

INTU 290 $51.87 $14,370 -4.48%

JEC 200 $47.86 $8,712 -9.27%

* SOLD

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SMF Holdings – 02/17/04

Ticker Quantity Purchase PriceMarket Value

(02/17/04)HPR

MAT 830 $19.19 $15,770 -0.97%

MO 300 $51.87 $16,518 6.15%

MSFT 550 $26.56 $14,900 1.98%

NEM 215 $42.41 $9,729 6.7%

OCR 350 $36.93 $16,328 26.03%

UNH 275 $54.63 $16,657 10.88%

WFC 250 $55.23 $14,480 4.64%

WSM 350 $33.84 $14,403 -3.9%

YCC 500 $27.71 $14,180 2.35%

ZMH 230 $69.74 $17,848 11.27%

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SMF Holdings – Performance

SMF S&P 500

Return 11.28% 11.96%

Annualized Return 23.47% 24.97%

Beta 1.014 1.00

Annualized Standard Deviation

7.67% 7.46%

Sharpe Ratio 2.67 2.93

Treynor Index 20.19% 21.87%

Period: Sep 4, 2003 – Feb 17, 2004

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Attribution Analysis

Analyze determinants of portfolio performance

Sector allocation decisions

Equity selection decisions

Sector Allocation and Equity Selection Effect Determinants

Sector-wise weights and returns of the Portfolio

Sector-wise weights and returns of the S&P 500 index

Overall holding period returns of the S&P500

Analysis Period: Dec 26, 2003 – Feb 17, 2004

S&P 500 holding period return: 5.58%

Portfolio holding period return: 3.27%

Total value added: -2.31%

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Sector Allocation Effect

Sectors Wai - Wpi Rpi - Rp{(Wai - Wpi)* (Rpi

- Rp)}

Consumer Disc. 20.17% -2.1386% -0.4314%

Consumer Staples -5.03% -0.4047% 0.0203%

Energy -5.79% 0.8799% -0.0510%

Financials -15.25% 2.2509% -0.3433%

Health Care 15.97% 1.1151% 0.1780%

Industrials -1.82% -2.4278% 0.0441%

IT 1.04% -0.8548% -0.0089%

Materials -3.05% -5.1317% 0.1565%

Telecomm Services -3.38% 7.6488% -0.2587%

Utilities -2.85% -2.1540% 0.0615%

   

Sector Allocation Effect -0.6328%

LEGEND

Wai -- MBA Wts As of Dec 26 2003

Wpi -- S&P Wts as of Dec 26 2003

Rpi -- S&P Sector returns {12/26 to 2/17}

Rp -- S&P Overall Return {12/26 to 2/17}

{(Wai - Wpi)* (Rpi - Rp)} -- Sector Allocation Effect

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Equity Selection Effect

Sectors Wai Rai - Rpi Wai * Rai - Rpi

Consumer Disc. 31.46% 0.873% 0.27%

Consumer Staples 5.97% -2.375% -0.14%

Energy 0.00% -6.455% 0.00%

Financials 5.38% -8.724% -0.47%

Health Care 29.28% 0.757% 0.22%

Industrials 9.15% -2.932% -0.27%

IT 18.77% -7.833% -1.47%

Materials 0.00% 6.726% 0.00%

Telecomm Services 0.00% -13.224% 0.00%

Utilities 0.00% -3.421% 0.00%

    Selection Effect -1.85%

LEGEND

Wai -- MBA Wts As of Dec 26 2003

Rai -- MBA SMF Sector Returns {12/26 to 2/17}

Rpi -- S&P Sector returns {12/26 to 2/17}

Rp -- S&P Overall Return {12/26 to 2/17}

{(Wai - Wpi)* (Rpi - Rp)} -- Sector Allocation Effect

Total Value Added = Sector Allocation Effect + Equity Selection Effect = - 2.48%

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Attribution Analysis

Observations from Analysis

Impact of allocation effect more favorable than that of the selection effect

Review both allocation & selection strategies

Benefit from future investments in un-invested sectors

Over-weighted Sectors

Consumer Discretionary, Health Care, IT

Under-weighted Sectors

Consumer Staples, Financials, Industrials, Materials

Un-invested Sectors

Utilities, Energy, Telecom

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Retrospection and Self-Analysis

Sector Allocation

Use S&P 500 Sector Allocation as a guide

Make adjustments based on Industry Research

Stock Selection

Growth vs. Value Stocks

Cyclical vs. Non-Cyclical Stocks

Benchmark Risk

Underperforming Stocks

Sound Fundamentals vs. Poor Price Momentum

Hold, Add, or Sell

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Outlook

Continued economic strength

Growth at a more moderate pace

Continued stock market strength

Modest interest rate increase

22

Impact

Overweight IT and Healthcare

Be aware of interest rate sensitivity of holdings

Select stocks leveraged to the current economic environment

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Activity Update As of Mar 05, 2004

Received additional $150,000 from the Foundation

Initiated positions in: WAG, NXTL, CTSH

Stock selection process underway

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Thank you

University of Connecticut Foundation Inc.

Investment Advisory Board

Dr. Chinmoy Ghosh

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Questions?