The Mission of the Student Managed Investment FundPortfolio ManagersLetter of IntroductionExecutive SummaryStudent Managed Investment Fund 2001-2002 ReviewSMIF’s Investment ApproachEconomic OutlookGross Domestic Product (GDP)Consumer Price Index (CPI)Unemployment RateConsumer Confidence IndexInterest RatesSector AnalysisTechnologyEnergyUtilitiesConsumer/Non-CyclicalHealthcareTransportationServicesFinancialIndustry SummaryMedical Equipment & SuppliesBiotech & DrugsTobaccoWater UtilitiesNatural Gas UtilityConsumer FinanceSavings and LoansAsset AllocationEvaluation of Fixed Income SecuritiesFixed Income Purchase RationalePurchased Fixed IncomeHousehold FinanceFlorida Power and LightFixed Income PresentedGeneral MotorsEli LillyAmgenFordFleetBoston Financial CorporationLockheed Martin CorporationUS BancorpPhilip Morris CompanyEvaluation of EquitiesEquities PurchasedAmerican International Group, Inc. – NYSE: AIGHot Topic, Inc. – NASDAQ: HOTTForest Laboratories, Inc. – NYSE: FRXCentex Corporation – NYSE: CTXEquities Not PurchasedSunrise Assisted Living, Inc. – NYSE: SRZPharmaceutical Product Development, Inc. – NASDAQ: PPDICovance Inc. – NYSE: CVDStarbucks Corporation – NASDAQ: SBUXSyncor International Corporation – NASDAQ: SCORCallaway Golf Company – NYSE: ELYH&R Block, Inc. – NYSE: HRBThe BenchmarksThe Standard and Poor’s 500 IndexLehman Intermediate Credit Index AThree-month Treasury BillPortfolio PerformanceWeighted Portfolio ReturnsEquity SecuritiesFixed Income SecuritiesLearning ExperienceReal Dollar PortfolioNetworkingApplying classroom learned techniques and theory to real worldPresentationPresentation GuidelinesTechnical Analysis ToolsAcknowledgementsAppendix AInvestment Fund ObjectivesModerate and Steady GrowthAppendix BAppendix CAppendix DSourcesStudent Managed Investment Fund 2001 – 2002The Mission of the Student Managed Investment FundTo provide students of the Student Managed Investment Fund (SMIF) real-world experience inapplying the skills and concepts of security analysis and portfolio management that have beentaught in the classroom toward the management of a real-money portfolio from the foundationaccount of the Department of Finance, Real Estate and Law.Student Managed Investment FundPortfolio Managers2001-2001From Left to Right Front Row: Alaleh Khosrowpour (Team 1), Basak Ozduzen (Team 2), Garrett Budd (Team 2),Giao Nguyen (Team 3), Michael Vielma (Team 2), Wen-Li Chang (Team 4) Middle Row: Mike Prewett (Team 3), Tony Clark (Team 3), Jones Widjaja (Team 4), Jason Wang (Team 2)Last Row: Jose Rios-Lazo (Team 1), Ryan Clark (Team 3), Ryan Van Otterloo (Team 1),Mark Goecke (Team 1), Jason Anderson (Team 4), Dave Yessmann (Team 4)iiiLetter of IntroductionExecutive SummaryThe Student Managed Investment Fund (SMIF) Program is both an honors-level course offeredat California State University, Long Beach (CSULB), and a $50,000 portfolio that the studentsmanage. Over the 2001-2002 academic year, the class was comprised of twelve undergraduateand four graduate business students. The asset classes in which the students are allowed to invest include equities, fixed incomesecurities, and money-market instruments. The asset allocation among these classes isdetermined principally from a review of the investment climate and the relative amount of riskthe student portfolio managers are willing to assume. The investment climate for the 2001-2002academic year was marked by large amounts of international unrest, in part due to the terroristevents of September 11, 2001, and in part swing to the economic downturn that was alreadymaterializing. Based on these factors, the SMIF managers chose a target asset allocation of 70%invested in equities and the remaining 30% in fixed income securities and money-market funds.The events of September 11 not only caused untold amounts of human suffering but also createdan economic environment that was quite problematic to forecast, an environment essentiallyunparalleled in American history. The Federal Reserve’s monetary policy was characterized byfrequent, large interest rate reductions, while the international equity markets fluctuated widely. At the beginning of the course, the student portfolio managers chose a top-down method foranalyzing their investments. Over the following weeks, participants gathered data and expertforecasts for the United States economy, surveyed the data and information to formulate acomposite economic forecast, and then selected sectors and finally the industries within thosesectors that were expected to perform the best. For the fixed income portion of the portfolio, twoissues were selected, one issue from Florida Power and Light and the other from HouseholdFinance. These bonds were selected based on their durations, yields to maturity, and creditquality. In addition, both companies represent defensive industries, which are appropriate for theforecasted economic environment. The expected interest rate climate was deemed favorable toeach bond’s duration, and the credit quality was a moderately strong “A”, rated on the S&P scale.For the equity portion of the portfolio, the class chose four issues: Hot Topic, a trendy clothingand novelty retailer, American International Group, a large insurance company, Centex, a largehome-building company, and Forest Laboratories, a large capitalization pharmaceuticalcompany. Based in part on their forecasted earnings and price-to-earnings multiples, these four,companies represented potential value plays within their industries.Over the period from August 28, 2001 to April 30, 2002, the portfolio’s equities had a total,return of -2.75%, while the S & P 500, our equity benchmark, had a total return of -7.28%.Over the same period, the Lehman Intermediate Credit A index lost 0.28%, while our fixedincome securities had a total return of -4.75%. The remainder of the portfolio, the cash portion,yielded a return that was essentially consistent with the 3-month T-bill return.iiiCONTENTSThe Mission of the Student Managed Investment Fund................................iPortfolio Managers..............................................................................................iLetter of Introduction.............................................................................................iiExecutive