EOY Presentation

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(No Transcript)
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• Class of 2007
• End-of-Year Presentation

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Agenda

• Introductions
• Mayer Fund
• Objectives
• Investment Approach
• Market and Economic Environment
• Investment Holdings and Key Decisions
• Mayer Fund Performance
• Relative Performance
• Risk Adjusted Performance
• Performance Attribution Analysis
• Sector Allocation and Security Selection
  Decisions
• Looking Ahead
• Market Outlook
• Portfolio Update Since Fiscal Year End
• Senbet Fund Performance Presentation
• Questions Answers
• Reception 3rd Floor Atrium

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Mayer Fund Team 2007

• Akinola Dosunmu Portfolio Manager
• Tray Spilker Portfolio Manager
• Sachin Agarwal Energy Utilities Analyst
• Michael Alessi Technology Analyst
• Mauricio Klecky Industrials Materials Analyst
• Avi Lerner Healthcare Materials Analyst
• Chris Mandozzi Healthcare Analyst
• Pablo Ortega Telecommunications Financials
  Analyst
• Johannes Thorsteinsson Technology Analyst
• Chris Van Horn Consumer Discretionary Analyst
• Eun Mi Yu Consumer Staples Analyst
• Sherwood Zhang Financials Analyst

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Mayer Fund Team 2008

• Eric Olesh Portfolio Manager
• Bill Song Portfolio Manager
• Alex Obaza Energy Utilities Analyst
• Rahul Prabhu Technology Analyst
• Qi Guo (Alex) Industrials Materials Analyst
• Denny Chu Healthcare Analyst
• Siddharth Mathur Telecommunications Analyst
• Chananate Niyamosot (Fai) Consumer
  Discretionary Analyst
• Fang Fang Consumer Staples Analyst
• Jonathan Steele Financials Analyst

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Performance Summary
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Mayer Fund Objectives

• Achieve long-term growth of capital
• Maximize risk adjusted return
• Provide a 5 annual dividend to Smith School
• Educational benefits for members
• Experiential learning model - real world
  application of stock selection, equity analysis
  and portfolio management
• Enhance the reputation of the Smith School
• Meetings with Wall Street and local finance
  professionals
• Employment with world-class companies

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Investment Approach

• Modern portfolio theory
• Benefits of diversification
• Top Down approach
• Economy, Industry, and Company framework (EIC)
• Fundamental equity research
• Qualitative analysis
• Detailed financial statement and red flag
  analysis
• Discounted cash flow valuation
• Comparable company valuation
• Growth at a reasonable price
• Risk Adjusted Return

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Why GARP?

• Why Growth at a Reasonable Price?
• Investment discipline balancing risk and return
• Why GARP instead of pure growth?
• Valuation concerns about pure growth stocks
• Less downside risk in declining market
• Why GARP instead of pure value?
• Imperfect information and market efficiency
• Time frame for market recognition of intrinsic
  value

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Portfolio Allocation Approach

• Guidelines
• No more than 25 in any one sector
• Representation and diversification across sectors
• Considerations for Sector Weightings
• Economic outlook
• Input from sector analysts
• SP 500 allocations

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Security Selection Approach

• Guidelines
• No more than 5 in any one security
• Presence across SP economic sectors
• At year end we held 45 securities
• Selection Criteria
• Choose strong industry players with minimum 100M
  market cap
• Security must be covered by minimum of 3 Wall
  Street analysts
• Opportunities for Extra Diversification
• International Exposure (mutual funds and
  individual securities)

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Market Economic Environment
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Recap of Key Fiscal Year Issues

• Liquidity and Growth in U.S. and Global Markets
• Fueling Private Equity and MA Activity
• Stock Market Appreciation/ Housing Weakening
• Imbalances
• Sub-prime Lending
• Household Spending
• Current Account
• Fiscal Deficit
• Dollar Depreciation
• Inflation Concerns Rates increased through Aug
  06
• Geopolitical Concerns
• Record Company Earnings

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The Economy

• Growing Trade Deficits and Rising Oil Prices

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The Economy

• Inflation (CPI) - Interest Rates - GDP -
  Unemployment

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Market Performance
SP 500 Performance Timeline FY07
Democrats take control of Congress
Fed Pauses
Oil Prices Over 75/barrel
Mayer Fund members ring opening bell at NYSE
Chinese stock market drops 9
Dow breaks through 12,000 for the first time
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What Drove the SP 500
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Mayer Fund Performance
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Performance Summary
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Relative Performance
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Relative Performance
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Relative Performance
Mayer Fund vs. Comparable Mutual Funds
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Risk Adjusted Performance

• Treynor Ratio
• Ratio of portfolio excess return to beta
• Adjusts for systematic risk
• Jensens Alpha
• Measures return over and above that predicted by
  CAPM
• Sharpe Ratio
• Ratio of portfolio excess return to standard
  deviation
• Adjusts return for total risk
• M Squared
• Adjusts for total volatility and is easy to
  interpret

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Risk Adjusted Performance
Mayer Fund vs. Comparable Mutual Funds Relative
Basis Year ended March 31, 2007
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Risk Adjusted Performance
Mayer Fund vs. Comparable Mutual Funds Relative
Basis Three Years ended March 31, 2007
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Performance Attribution Analysis
Sector Performances vs. SP 500
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Performance Attribution Analysis
Key Holdings
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Performance Attribution Analysis
Key Purchases
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Investment Holdings Key Decisions
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Mayer Fund Top Ten Holdings
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Portfolio Allocation Strategies

• Summer 2006
• Spike in market volatility
• Key concerns were direction of oil prices and
  interest rates
• Decided to go overweight in energy and
  underweight in financials
• Fall 2006
• Reviewed impact of a pause in interest rate hikes
  to the portfolio
• Winter 2006-2007
• Optimized/rebalanced portfolio
• Spring 2007
• Transitioned to 2008 team including portfolio
  rebalancing
• Increased exposure to financials

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Security Selection Strategies

• Fundamentals driven
• Market Leadership
• GameStop, Coach, McDonalds
• Strong Financials
• Organic growth vs. acquisitive growth
• Optimal use of leverage
• Strong Growth Potential
• America Movil
• Quality driven
• Proctor Gamble
• American Express
• Anixter International
• Waste Management Inc.

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Thoughts from our analysts
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Security Selection Decisions
Consumer Discretionary Sector GameStop (GME)

• Industry Dynamics
• Video game industry sales at all time high
• New consoles coming to market
• Minimal competition for a stand alone video game
  retailer
• Demographic expansion and consumer spending
  increases
• Industry defensive to slowdown
• Industry Position
• Industry leader/pioneer in used video game sales
• Created virtual monopoly in stand alone retailer
  of video game products

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Security Selection Decisions
Consumer Discretionary Sector GameStop (GME)

• Fundamental Analysis
• Industry high operating margin of 5.81 compared
  to industry average of 0.48
• Unique video game retailing model
• Company Performance
• 37 appreciation from purchase date through
  3/31/07
• FY 2006 Sales and NI increased 95.83 and 58.80
  over 2 years
• Strong balance sheet
• Strong same store sales growth of 27
• Beat EPS estimates

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Security Selection Decisions
Consumer Discretionary Sector GME vs. Best Buy
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Portfolio Issues
How do we add Alpha in a stagnant market?

• Covered call program
• Write out-of-money calls for incremental return
• Choose securities that have been beaten down by
  the market
• Timing based around information dates
• - Earnings reports
• - Analyst calls
• Candidates within portfolio
• Pfizer
• General Electric
• Qualcomm

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Security Selection Decisions
The Case for Pfizer

• Overlooked in the market
• Low P/E relative to industry with strong cash
  flow
• Market leader with strong product pipeline
• Reasons for recent stock decline
• Torcetrapib pulled from market
• Loss on patent protection on major drugs
• Divestiture of consumer products division
• 12 drop in price

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Pfizer vs. Pfizer Option

• Wrote PFEAY on 12/7/06 for income of 202.79
• Expired 1/19/07 unexercised

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Looking Ahead
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Market Outlook

• We have positioned the portfolio for the future
  based on
• Economic outlook Neutral
• Slow economic growth between 2 to 2.5
• Persistent inflationary pressures with CPI above
  2
• Lower year-over-year earnings for Q3 and Q4
  because of recent declines in CAPEX spending
• Concerns
• Stagflation which will delay FOMC rate cut
• Decrease in liquidity
• Geopolitical tensions in Iran, Venezuela and
  emerging markets
• Conundrum
• High asset prices
• Global economic boom
• Increased wealth

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Class of 2008 Objectives

• Dont Lose Money (Eric)
• Beat the SP 500 benchmark (Bill)
• Improve ability to effectively pitch and defend
  investment ideas (Alex)
• Learn the art of market analysis and fundamental
  valuation (Rahul)
• Replace performance model with portfolio
  management software package (Eric)
• Pinpoint how companies are exploiting new
  opportunities in mature industries (Fang)
• Meet alumni and network with those on Wall Street
  (Bill)
• Make lifelong friends and future partners
  (Siddharth)

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Performance Update
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Closing Remarks
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Lessons Learned

• In reality, even the experts cant accurately
  predict oil prices.or the market for that
  matter. (Sachin)
• Emerging markets offer excellent growth
  opportunities. However, a thorough analysis of
  the companys fundamentals along with
  geopolitical factors is a must in order to make
  an investment that fits the risk adjusted return
  pursued by the Mayer Fund. (Pablo)
• Models dont generate precise outcomes, but
  rather force you to analyze all inputs that
  affect a firms value. (Mike)
• Keep a long-term view and put short-term
  volatility in perspective. Be calm and evaluate
  whether long-term fundamentals have changed.
  (Mauricio)
• Dont worry about trying to time the market,
  itll give you gray (or no) hair. (Tray)
• Stick to your discipline and sell stocks when
  targeted gain has been realized. (Van Horn)
• Good investments can still be found in a frothy
  market environment. (Johannes)

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Educational Milestones

• First time money managers in a summer selloff!
• First reports with much room to grow
• New research report template
• Senbet Fund Recruiting
• New MF/SF Office
• Synergies in stock selections and mentorship
• Executed first covered call positive result
• NYC Trek Lehman Brothers, RockView Capital, Park
  Avenue Equity Partners, and a successful combined
  reception
• NYSE Tour and Opening Bell January 19th, 2007
• Recruited class of 2008
• Developed new brand logo for Mayer Fund
• Rolled out new Mayer Fund Newsletter (Thanks to
  Class of 2008)

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Special Thank You
Time and Advice Contributions
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Special Thank You
Time and Advice Contributions
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Special Appreciation

• We wish to thank
• Sarah Kroncke
• Our Faculty Advisor and Mayer Fund Alumni

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QA
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Mayer Fund Backup Slides
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Mayer Fund Ratios vs. SP 500
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Sell Transactions
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Non-SP 500 Mayer Fund Holdings
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Transactions since 3/31/07
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Portfolio Turnover
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Performance Attribution Analysis