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					Portfolio Management Project




         Group 7:

        Roni Arjang

         Jeff Fogel

    Barrington Edwards

      Zabel Momdjian




Finance 437, Section 23057

        Spring 2003
Contents

    Style of Fund                           3
         Description
         Investment Objectives
         Return Requirements
         Risk Tolerance
    Constraints                             4
         Liquidity
         Time Horizon
         Tax Considerations
         Legal
         Unique Circumstances
    Economic Analysis                        5
    Asset Allocation                         8
    Performance                              9
    Investment Strategies & Selection       10

    Monitoring & Rebalancing                11
    Conclusions                             14
    References                              16
    Appendix and Attachments                16




                                        2
Style of Fund

Description
The fund seeks to provide reasonable high current income and maximum long-term total return
while incurring less market risk than a pure equity fund. Our portfolio combines elements of an
aggressive growth fund in order to maximize our profits, and an income or blend fund in order to
minimize risk. There is a strong emphasis on capital appreciation because of the time horizon
and the risks involved. The key in reducing the unsystematic risk is by creating a diversified
portfolio. Therefore, we created a diversified portfolio across several major sectors. As a group
of young money hungry investors, we have been seeking to increase our investments immensely
by taking many risks within certain limits. We attempted to purchase various investments in order
to obtain the highest intrinsic value for our portfolio.



Investment Objectives

1. Return Requirement


Based on the Consumer Price Index over the previous one-year period, there has been 2% in
excess of inflation. The total return of our portfolio, which continued to show strong growth within
the short time horizon, included dividends, interest, capital appreciation, and overall less
transaction costs as well as management fees. The funds annual management fees are
approximately 1% of the average net asset value for the entire year. Where as current inflation,
as measured by the US Consumer Price Index, is approximately 2%.


2. Risk Tolerance


Considering our short time horizon of only 2 months, it was apparent in order to increase our
investments immensely we need to be aggressive and take certain risks. Even though the stock
market appeared to be at a volatile stage because of inflation, interest rates, and War, we still
decided to pursue various aggressive strategies. As young investors we all had a high level of
risk tolerance, however by creating a diversified portfolio we minimized our risks and reduced the
level of volatility that could have impacted our portfolio negatively. Due to the immense liquidity
needs, our fund required an above average amount of cash and short-term investments. Overall,
our level of risk was between medium and high.



                                                    3
Constraints

Liquidity
Because of our company’s risk adverse nature we maintained at least 31% of our assets in cash.
There were not any special circumstances that prevented us from investing in any illiquid assets
such as Real Estate or Artwork other than the fact that it was out side the scope of this project.

Time horizon
From 6 February 2003 to 11 April 2003, a period over which are only 46 trading sessions,
represented our most limiting constraint. Our goal, HPR > 2% for all invested assets within this
narrow trading period mandated vigorous asset management such that speculative gain
comprised a large part of our strategy. Throughout the time horizon, while our motivation was not
to plunge blindly into the market, we favored risky action to no action: better to swing hard at a
low fastball than to let it fly past when you’ve only got one chance at bat!


Tax Considerations
Our investment company realizes that any capital gain on any non-exempt asset is subject to
federal tax laws. Long-term capital gains on investments held over one year may be taxed
between 10%-20%. Short-term capital gains are considered ordinary income and may be taxed
at a higher income tax rate. Therefore, while the investor’s best interest to hold profitable
securities longer than one year, our time constraint demanded less passivity, with the associated
capital gains tax.



Legal and Regulatory
SEC guidelines represent the only conditions under which our management of assets is bound.
This means that we will pursue any and all profitable opportunities that are not inconsistent with
SEC rules.

Unique Circumstances
On March 20th 2003, the United States declared War on Iraq. In the days leading up to the war,
the stock market was apprehensive to the thought of long term investing in the U.S. economy. It
all depended on whether or not the War on Iraq would last longer than expected or suffer large
fatalities, which would determine if the U.S. economy would spiral into a deep recession. But as
the U.S. war started, the market actually rose; the Down Jones Industrial Average jumped 8.43%



                                                  4
from the week before and the price on crude Oil dropped from $38 to $29. This was an indication
of investors’ expectations that the war would have a favorable outcome. And indeed it did, lasting
only a couple of weeks the U.S. economy came out of the Iraq conflict with only minor cuts and
bruises.



Economic Analysis

MARKET EVENT ANALYSIS



Two indexes were used in doing the market analysis, these were: The S&P500 Index and
NASDAQ.


WEEK 1: 2/06 – 2/07

During the first week S&P500 was at 838.15 points and towards the end of the week it closed at
829.69 points. This means that S&P500 went down –8.46 points. NASDAQ was at 1,301.73
points and then went down to 1,282.47 points at the end of the week, a drop of –19.26 points.


WEEK 2: 2/10 – 2/14

At the beginning of the second week S&P500 closed at 835.97 points, and at the end of the week
it went down to 834.89 points, a drop of –1.08 points. NASDAQ closed at 1296.68 points at the
beginning of the week and then went up and closed at 1,310.17 points at the end of the second
week; a rise of +13.49 points.


WEEK 3: 2/17 – 2/21

During the beginning of the third week the S&P500 closed at 851.17, at the end of the third week
it went down and closed at 848.17 points; a decline of -3.00 points. At the beginning of this week
NASDAQ closed at 1,346.54 points and then it increased to 1,349.02 points, an increase of
+2.48 points.


WEEK 4: 2/24 – 2/28

At the beginning of the forth week the S&P500 closed at 832.58 points, at the end of this week it
went up and closed at 841.15 points; a rise of +8.57 points. At the beginning of the week
NASDAQ closed at 1,322.38 points and at the end of the week it closed at 1,337.52 points, an
increase of +15.14 points.

Anxiety over the possible war weighted on Wall Street. Worries about Iraq have largely eclipsed
other economic news in recent weeks, and are expected to keep the market on edge.




                                                5
WEEK 5: 3/03 – 3/07

During the fifth week the S&P500 closed at 834.81 on the first day of this week, and at the end of
the week it closed at 828.89 points; it went down by –5.92 points. At the beginning of the week
NASDAQ closed at 1320.29 points and then went down to 1305.29 points at the end of the fifth
week; a decline of –15.00 points in one week.

Stocks continue to slip day-by-day because war is on its way with almost 200,000 troops poised
to invade Iraq and some intelligence analysts saying the initial attack could come as soon as this
weekend. Because of this, consumer confidence is at a 9-year-low, suggesting heightened fear
of terrorism. Companies are stalling on business expenditure decisions, and investors are selling
stocks.


WEEK 6: 3/10 – 3/14

At the beginning of the sixth week the SAP500 closed at 807.48 points, and then towards the end
of the week it went up and closed at 833.27 points; an increase of +25.79 points. During the
beginning of this week the NASDAQ closed at 1,278.37 points and then went up and closed at
1,340.33 points at the end of the week; a rise of +61.96 points.

Even though the S&P500 and NASDAQ ended up positive at the end of the week, stocks ended
mostly flat after talk from the White House which persuaded investors that a war in Iraq is
imminent even without broad international backing. Wall Streets flat finish on Friday was from
Thursday’s rally from hopes for a short war in Iraq, or no war at all.


WEEK 7: 3/17 – 3/21

During week seven S&P500 closed at 862.79 points at the beginning of the week, and then it
went up to 895.79 point at the end of the week; a rise of +33.00 points. The NASDAQ closed at
1,392.27 point at the beginning of the week, and then went up and closed at 1,421.84 points at
the end of the week; NASDAQ went up by +29.57 points.

Shares on Wall Street were set to head lower on Monday in light volume as fears of an imminent
US-led war in Iraq kept investors at large. However, as war with Iraq intensified on Friday, stock
prices went sharply higher because this seemed to ease doubts about the course of action and
allowed investors to begin looking past the war’s eventual end. Stocks rose strongly when it was
thought that the war would end swiftly; and, rumors that Saddam was dead sent investors pouring
their cash into stocks.


WEEK 8: 3/24 – 3/28
During week number eight, both S&p500 and NASDAQ went down. At the beginning of this week
S&P500 closed at 864.23 points, and towards the end of the week it went down and closed at
860.50 points; a decline of –3.73 points. NASDAQ closed at 1,369.78 points at the beginning of
the week, and then slightly went down to 1369.60 point at the end; a minimal decline of –0.18
points.




                                                6
On Monday stocks plunged on fears of long war. Many investors chose to cash in profits
following a stunning eight-day rally by Dow and S&P500 index. Dow Jones Industrials gave back
more than 300 points following its best week in two decades with its worst day of the year.
Gainers included defense companies on expectations of greater demand for their products.



WEEK 9: 3/31 – 4/04
During the ninth week both S&P500 and NASDAQ had increased. At the beginning of the week
S&P500 closed at 848.18 points, and at the end of this week it has risen to 878.85 points; an
increase of +30.67 points. NASDAQ closed at 1,341.17 points at the beginning of the week, and
then went up and closed at 1,383.51 points; a rise of +42.34 points.

A warning from the Iraqi government that it might take nonconventional action against U.S. forces
who had seized the capital’s main airport worried stock investors, who largely shrugged off a
large drop in March’s payrolls.


WEEK 10: 4/07 – 4/11

During the tenth and last week of trading, both S&P500 and NASDAQ had declined from the
previous week. At the beginning of this week S&P500 closed at 879.93 points, and towards the
end of the week it went down and closed at 868.30 points; a decline of
-11.63 points. At the beginning of this week, NASDAQ closed at 1,389.51 points and by the end
of the week it closed at 1,358.85 points; down by –30.66 points.

Wall Street was set to soar at the opening of Monday, amid perceptions that the U.S.-led war
against Iraq is entering its final phase after troops entered central Baghdad.
The market had discounted success in Iraq ahead of time. Initial enthusiasm had waned, and
investors were wrestling with the economy’s poor health and consumer confidence. Companies
had been hesitant to increase capital spending, which is the cornerstone of economic growth.

At the closing of Friday, investors deemed the worst of the fighting to be over and drew comfort
from the upbeat economic news. Even though at this time there was a sharp rise in consumer
confidence the stocks were hurt because many dealers had expected an even bigger increase
then there was.




                                                7
Asset Allocation

             General Allocation                                               By Class
Asset         Value                 Percent             Asset                       Value     Percent
Equity        $217,112.75                 42.99%        Stocks (US)                209,812.75 41.54%
Debt            28,597.40                   5.66%       Stocks (Foreign)             7,300.00   1.45%
Cash           259,410.34                 51.36%        Mutual Fund                 28,597.40   5.66%
                                                        Cash                       259,410.34 51.36%


             Equity   Debt   Cash                               Stocks (US)      Stocks (Foreign)
                                                                Mutual Fund      Cash


                                        43%                                                         41.54%


51%                                                 51.36%

                                                                                         1.45%
                             6%
                                                                                    5.66%




Allocation by Specific Holdings


Cash         51.24%
QQQ          10.20%
MRK           5.48%
MMM           5.70%
FNM           5.48%
MRO           3.89%
HD            2.57%
FDX           2.28%
G             0.63%
LAB           1.80%
NDN           0.84%
NOK           1.45%
PG            1.68%
PRULX         6.76%

            100.00%




                                                    8
Allocation by Sector

Sector                                         Value       Percent
    Industry
Conglomerates                                 $28,708.56    5.68%
         3M                                   $28,708.56    5.68%
Consumer, Noncyclical                          11,664.59    2.31%
    Personal&Hosehold Products
         Gillette                               3,190.59    0.63%
         Procter&Gamble                         8,474.00    1.68%
Energy                                         19,584.00    3.88%
    Oil and Gas
         Marathon Oil                          19,584.00    3.88%
Financial                                      18,100.00    7.26%
    Investment Services
         LaBranche & Co.                        9,050.00    1.79%
    Consumer Financial Services
         Fannie Mae                            27,604.00    5.46%
Technology                                      7,300.00    1.45%
    Communications Equipment
         Nokia ADR                              7,300.00    1.45%
Health Care                                    33,529.10    6.64%
    Major Drugs
         Merck                                 33,529.10    6.64%
Services
    Retail (Specialty)
         $.99 Only Stores                       4,210.50    0.83%
    Retail (Home Improvement)
         Home Depot                            12,950.00    2.56%
Transportation                                 11,492.00    2.28%
    Air Courier
         Fedex Corp.                           11,492.00    2.28%     166,092.75   32.88%

Other                                         339,027.74 67.12%
Mutual Funds
    T. Rowe Price US Treasury Long Term        28,597.40    5.66%
Stock Trust (ETP)
    Nasdaq-100                                 51,020.00 10.10%
Cash                                          259,410.34 51.36%       339,027.74 67.12%
    Total:                                                           $505,120.49 100.00%


Performance
                        YTD
                   (as of 4/18/03)
Portfolio Fin437           3.12%
S&P 500                    1.56%




                                          9
Investment Strategies and Selection of Securities

Fundamental security analysis reveals a domain of intermediate to long-term investment
possibilities, not a domain of possible short-term gains in price appreciation, which depend largely
on aggressive speculation. While technical strategies are dangerous and often doubtful as to their
validity, they can provide guidelines which, when moderated with prudent and fundamental
financial principles, often produce desired results in the way of successful price predictions. To
accomplish this, we’ve chosen to employ technical (aggressive) strategies with which to manage
assets that have been initially selected according to criteria reflecting established principles from
fundamental analysis.


This combined strategy –aggressive management of passively selected assets -- allows for broad
parameters, unique to our fund, and under which a solid and well-diversified portfolio of securities
is chosen and aggressively managed without the level of risk typical of funds that depend only on
price speculation for short-term gains. The Intrinsic value of an asset, while relegated somewhat
behind timing and speculation strategies, is not supplanted by, but rather combined with,
aggressive but disciplined price speculation. Our selection of assets is according to 10 general
criteria that reflect fundamental principles:

   1.      For all equity investments, each of the last 2-years’
           -   Rate of earnings increase ≥ 20%
           -   ROE ≥ 15%
           -   Sales rate (for the last 3 quarters) increasing

   2.      Net income for last quarter up at least 20%
   3.      Stock price ≥ $12/share
   4.      Sell all holdings for which loss equals or exceeds cost by 8%.
   5.      Buy only in sectors or industries that show an increasing trend as indicated by sustained volume
           increases.
   6.      Management ownership of stock
   7.      Improving after tax profit margins,
   8.      Earnings, ROE, and sales growth are preferred to P/E as indicators.
   9.      Stock repurchases greater than 7%, or new management warrant purchase considerations.
   10.     For mutual funds: no-load, passively managed, with beta less than 1.02.
   11.     Diversification across sectors.


The result is aggressive management of mostly low risk assets –a style designed to achieve our
goal of superior returns within a short time horizon. Most equity holdings (74%) fall within a low
risk category defined as any security having a value for beta less one. A large cash balance
(50.7%) was maintained for two reasons: low stock-market performance and the possibility of
foreign funds flowing into U.S. dollars after the war in Iraq. High to medium risk securities
constitute the remainder such that our target proportions were as follows:



                                                         10
Security                          Beta   Percent of Portfolio   Period Return (2/6/03 –4/11/03)
LabRanche                         2.24       1.79 %              -7.46
Nokia                             2.04       1.45                  .14
.$99 cent stores                  1.46        .83                19.97
Home Depot                        1.37       2.56                19.69
Nasdaq-100 Trust                     1       10.1                -2.62
FedEx                              .79       2.28                 1.52
Marathon Oil                       .72       3.88                 -.21
3M                                 .53       5.68                 2.72
Gillette                           .47        .63                 6.54
Merck                              .46       6.64                 1.31
Fannie Mae                         .26       5.46                 4.66
T-Rowe Price (Long US Treasury)   0.00       5.66                -1.06
Procter & Gamble                  0.00       1.68                 -.24
Cash                                        51.36

Portfolio Monitoring and Rebalancing

After initial selection based on the criteria discussed above, all assets were subdivided evenly;
50% of the value of each holding was designated for aggressive speculation while the other half
was reserved for holding over the time entire time horizon horizon. But we disposed entirely of
those few assets for which price declines were decreasing at an increasing rate for a
predetermined time limit of 10 days, or when depreciation in price exceeded 10% of cost.


A decision to sell was also based on an increasing rate of price increase of at least 50%
persisting for five or more days. Conversely, a decision to either increase an existing position or
purchase a new asset was based on a sustained price appreciation of 50%, with the rate of
change increasing, over at least 10 days. Certain anticipatory decisions based on favorable
company news or economic events outside the stock exchange were also made and occasionally
would supersede the more rigid monitoring rules. Our purchase of Marathon oil on news of the
war in Iraq is an example.


A flaw in this algorithm, however, is indicated by the retention of certain assets for which prices,
on average, had been decreasing at a decreasing rate; such assets produced negative holding
period returns without falling in value by more the drop-off 10% of cost. Our retention of
LaBranche Investment Services and T. Rowe Price U.S. Treasury fund are examples.


The general rebalancing formula was based on 50%, cash 40% equity, and 10% debt.
Accordingly, $200,000 was allocated stocks, $50,000 to bonds, and the remaining $250,000 was
kept out of the market and held as cash. These proportions were roughly maintained by either



                                                 11
buying (selling) a security for which a price decrease (increase) brought the value below (above)
the appropriate weight. Similar sub-weights were assigned to individual assets within the three
classes and maintained according to the same procedure. So, are rebalancing method
represented a composition of several functions: (1) a 50-40-10 ratio of cash-equity-debt; (2) equal
division of each equity asset between a holding base and a speculative base; (3) closing of any
position for which a loss exceeds 10% of that positions cost; (4) purchase of assets showing an
increasing rate of price increase over 10 days and exceeding 50%, on average, over that period.




This uncomplicated rebalancing formula was chosen for several reasons. First, it has the
advantage of simplicity and flexibility; it can be applied with minimal calculations to any
combination of different assets and under all market conditions. Second, the formula is
responsive and quickly gives unequivocal results. Rapidity and understandability are essential to
portfolio management when constrained by a short time horizon and outweigh any advantages in
using more sophisticated analyses that require involved and time consuming calculations. Market
efficiency in the classical (Markowitz or Sharpe) was rejected in favor of a more responsive and
practical asset allocation strategy.


While more complex models produce proportional asset allocation weights that depend on
minimizing the covariance among all assets of a portfolio, the composition and management style
of our portfolio produce equivalent or superior returns. Diversification across major sectors with
stocks whose distribution of betas is roughly 50% greater than 1 and 50% less than 1 will protect
against unsystematic risk, while attentive management will protest against systematic risk.


A weekly evaluation, a summary of which appears below, was used to approximate the
magnitude and direction of any deviations from our established weights.




                                                  12
Weekley Activity
                                     Values gross of $25 Commission Fee for equity trades. A negative value indicates an initial short position or a sale.


Security                   Price     Shares        2/3 - 2/7 2/10 - 2/14 2/17 - 2/21 2/24 - 2/28 3/3 - 3/7 3/10 - 3/14 3/17 - 3/21 3/24 - 3/28 3/31 - 4/4


AOL/Time Warner             $11.06         -100                                                                  -1081
                             10.96          100                                                                                            1121


Citigroup                    33.74          100                                                                  3399
                             34.51         -100                                                                               3426


Fannie Mae                   65.81          750                                                                                        49382.5
                             68.80         -350                                                                                                     -24055


FedEx Corp.                  51.52          750                  38665
                             50.95          572                                        -29118.4
                             56.10          200                                                                                                      11245
                             51.39         -178                                                                           -9122.42


FSAGX                        23.43     1920.61                               45000
                             20.89       -57.44                                                                              -1200
                             19.27     -1863.16                                                                                          -35903


Gilette                      28.66          200       5757
                             30.44          481                                       14666.64
                             31.17          580                                                              -18053.6


Home Depot                   21.59          500      10820


International Game Tech.     76.31            25                                        1932.75
                             78.95          120                                                      9499
                             79.13         -145                                                             -11448.85


LabRanche                    19.51          500                                                                               9780




VWINX                        19.43     2135.87                   41500
                             19.66     -2135.87                                                                                      -41991.25


PRULX                        12.28     2442.99                               30000
                             12.42        81.15                                                                  1008
                             12.16        -8.14                                              -99


MMM                         126.86          141                           17936.96
                            133.47            25                                                                                                  10035.25


NDN                          28.23          150




                                                                    13
QQQ                      24.65   1200                             29605                    -32015
                         26.70   -1200
                         26.16   2000                                                                 52345


PALM                     10.05   -2000                                            -20075
                          9.72   2000


PG                       83.69    100                                               8394
                         88.10     -80                                                      -7023
                         87.57   1000                                                                 87595
                         89.80    -600                                                                         -53855
                         89.78    -165
                         89.01    -160


Maathon Oil              22.32     50                                               1141
                         22.97   2000                                                       45965
                         23.40   -1200                                                                -28055


Merck                    54.62   1000                                                                 54645
                         55.56    -395


Verizon                  34.88    -100                                             -3463
                         35.65    100                                                        3590


NOK (x-div 3/28, $.25)   14.53   1700                                                                 24726
                         15.04   -1200                                                                         -18023




Conclusions

The desire for constant action irrespective of underlying conditions is responsible for most losses
in any portfolio strategy; portfolio management is not a job in which the investor is working for
wages and must take home some money, or realize gains, everyday. A passive but structured
and attentive management style is therefore superior to an active or aggressive strategy.


But successful price speculation, given a narrow time horizon, excludes total passivity and
demands regular monitoring and rebalancing, which in turn is not a function daily price
movements, for this ignores general principals that determine price behavior. Instead of placing
bets on what the next few quotations might be, the investor should anticipate the direction of the
entire market or some segment: If the market is bearish, for example, then don’t act bullish!
Hence, speculative gains depend mostly on the main movements of the market, not on the
individual price fluctuations



                                                 14
Therefore, it is not within changes of an individual stock price that determines the behavior of that
stock; this is a fallacy according to which gamblers, not investors, try to play the market. The
market as a whole must be evaluated.


“Price momentum” of individual stocks then, is a statistical illusion; it is appropriate only for short-
term speculations (one month or even a few days). A passive strategy will outperform
aggressive or speculative strategies in the long run.


It is impossible to predict prices. For any price quote, there are just as many buyers, who believe
that the price will increase, as sellers, who anticipate a price decrease. It is not reasonable to
suppose that one group knows more about the future that the other, and so, as their opinions
about price fluctuations diverge, the aggregate of traders in the market at any instant in time
should expect that the probability of a correct prediction is zero. (In other words, my
observations over the last 4 months have shown that it is equally likely for a price to increase or
decrease.)


Insider manipulation must be responsible for some of Wall Street’s biggest losses. I’ve seen
certain stocks, LAB, for example, just prior to a sharp dive, fluctuate for weeks within a tight range
on low trading volume but with the average rate of change increasing, implying a large number of
small investors going long on that stock. It is my conjecture that large brokerages and others with
significant holdings manipulate prices in this way just long enough to get customers in and then
wipe them out.


Large transactions are a necessary condition of profitable price speculation. A one point, several
assets we held enjoyed a $5/share or better price gain over a three-week period (FedEx and 99
Cents only Stores). But the dollar gain to our portfolio from selling these holdings was less than
spectacular since it was limited to a small number of shares. Instead of, say, selling 80 shares for
a $5/share gain ($400), we should have been in the position to sell 20000, for a total gain of
$100000.


As ranking in the top 4 groups, we were able to play the market as a true experienced investor
who knew went to come out and when not to. We continued buying different securities and
allocated our assets in different investments such as bonds, stocks, and mutual funds to reduce



                                                   15
our risks and increase our total return. However, as we became more knowledgeable in our
investing we realized that by diversifying we have not alleviated our entire risk factor because
systematic risk (market risk) still exists. We gained an understanding that systematic risk is the
only risk that we have no control over because the market can be affected by various
uncontrollable factors such as War, inflation, depression, recession, and interest rates. These
are all factors that can cause an individual’s portfolio to decline immensely. Therefore, by
investing in stocks, bonds, and mutual funds we took upon these unavoidable risks in order to
increase our total return substantially.



References

Historical price and Balance Sheet data provided by Yahoo.com
Daily Prices from The Wall Street Journal
Weekly Market Analysis constructed from various sources: The Wall Street Journal, Yahoo.com, and
the Los Angeles Times, each for the relevant dates.

Appendix



Balance Sheet
For Year Ended 2002    ($Millions)     HD       NOK      FNM       NDN      FDX      G       MRK      PG      MRO      MMM      LAB
         Assets                      30011.00 25369.20 887515.00 439.90 13812.00 9863.00 47561.20 40776.00 17812.00 15329.00 1912.8
         Liabilities                 10209.00 9838.00 871227.00 43.30 7267.00 7603.00 29360.70 27070.00 12730.00 9336.00 923.1
         Equity                      19802.00 15531.20 16288.00 396.60 6545.00 2260.00 18200.50 13706.00 5082.00 5993.00 989.70


         P/E (TTM)                      17.55    20.35     13.74 36.10       22.72   27.62    17.79   25.64    13.42    26.03 16.76
         Beta:                           1.37     2.04      0.26     1.46     0.79    0.47     0.46    0.00     0.72     0.53   2.24
Ratios
Leverage
         Assets/Equity(TTM)              1.52     1.63     54.49     1.11     2.11    4.36    2.61     2.98    3.50      2.56   1.93
         LT.Debt/LT.Equity (MRQ)         0.07     0.01      0.07     0.00     0.22    1.09    0.27     0.78    0.87      0.36 NMF
         Tot.Debt/Tot.Equity(MRQ)        0.07     0.04   NMF         0.00     0.29    1.62    0.47     1.01    0.90      0.56 NMF
Liquidly
         CrntRatio (MRQ)                 1.48     1.91   NMF         6.38     1.04    1.09    1.20     1.12    1.22      1.36 NMF
         Quick(MRQ)                      0.28     1.66   NMF         4.11     0.80    0.66    0.84     0.67    0.64      0.71 NMF
         Working Cap.(TTM)            3882.00 9976.00    NMF       206.50   723.00 309.00 2458.70 (538.00)    820.00 1602.00 NMF
Operating Efficiency
         ROE (TTM), %                   18.82    26.56     34.37 16.85       11.75   51.73   39.16    36.16   10.75     31.73   6.51
         ROA (TTM).%                    12.24    15.41      0.64 15.13        5.55   12.11   11.84    11.84    3.11     13.59   5.76
         Total asset T/O(TTM)            1.95     1.30   NMF         1.83     1.56            1.01     1.01    1.84      1.09 NMF
Profitability (%)
         G/M (TTM)                      31.09    38.91   NMF        40.14    26.55   58.46   48.61    48.61   11.25     47.98 NMF
         Operating Margin(TTM)          10.01    16.51     11.43 12.68        6.32   21.40   17.86    17.86    4.31     16.68 30.45




                                                                   16
Overview of Performance – Selected Holdings

                  Citigroup                                 Fannie Mae                                                  FedEx
Transaction History                           Transaction History                           Transaction History


                Buy      Sell       Price                   Buy      Sell     Price                       Buy       Sell         Price
         3/14 100.00               $ 33.74    3/25          750                    65.81
         3/18             100.00      34.51   4/4                           350    68.80    2/11                  750                51.52
                                                                                            2/24                           572       50.95
                                                                                            3/18                           178       51.39
                       3/14-3/18 2/3/-4/11                                                  4/4                   200                56.10
                                                                  3/25 - 4/11 2/3 - 4/11
AvgPrice                 34.2267    34.1941
MaxPrice                 34.7300    37.6100   AvgPrice               67.1936      64.6841                 2/11-3/18 4/4-4/11 2/3/-4/11
MinPrice                 33.7500    31.4200   MaxPrice               69.0100      69.0100
Spread                    0.9800     6.1900   MinPrice               65.3500      58.9300   AvgPrice       50.8164 56.2050         52.9588
PricStDv                  0.4905     1.8570   Spread                  3.6600      10.0800   MaxPrice       52.3500 57.4600         57.4600
Avg%Chg.                  1.3204              PricStDv                1.0479       2.2567   MinPrice       49.0000 55.6100         49.0000
Av%Ret                    1.4424              Avg%Chg.                0.3261       0.1088   Spread          3.3500      1.8500       8.4600
$Gain/Share               1.4600              Av%Ret                  2.1024                PricStDv        0.9223      0.6501       2.6158
                                              $Gain/Share             3.0200                Avg%Chg.       -0.0071      0.4108       0.1857
                                              HPR:                                          Avg$Cng        -0.0100      0.2300       0.0935
                                                                                            Av%Ret         -1.3657      0.1872
                                                                                            $Gain/Share   -17.5900      0.6300
                                                                                            HPR:                        11.28%
                      Gillette                                              Home Depot                                        International Game Tech.
Transaction History                                                                                             Transaction History
                                                  Transaction History
                                     Avg.Price
          Buy      Sell     Price    Net Comsn.                                                                                                              Avg.Price
                                                                                                                              Buy     Sell      Price        Net Comsn.
2/6        200               28.66                           Buy         Sell         Price
2/24       481               30.44      29.924
3/14                  580    31.17                                                                              2/24                25                   76.31
                                                  2/6              500                    21.59
                                                                                                                3/3                 120                  78.95   78.5012
                                                                                                                3/14                         145         79.13
                 2/6-2/23 2/24-4/11 2/3-4/11

                                                                         2/6-4/11                 2/3-4/11                            2/24-3/2 3/3-3/14      3/3-4/11
AvgPrice         29.2536    31.1577     30.6110
MaxPrice         30.5400    32.3500     32.3500   AvgPrice                      23.4937               23.3573   AvgPrice                  76.8180   76.9500        78.8212
MinPrice         28.0800    29.8400     28.0800                                                                 MaxPrice                  78.5800   78.9800        87.2000
                                                  MaxPrice                      26.4300               26.4300
Spread            2.4600     2.5100      4.2700
                                                                                                                MinPrice                  75.0700   74.8000        74.0700
PricStDv          0.8287     0.5875      1.0746   MinPrice                      20.7000               20.7000
Avg%Chg.          0.5130     0.1058      0.1486                                                                 Spread                     3.5100       4.1800     13.1300
                                                  Spread                         5.7300                5.7300
Avg$Cng           0.1491     0.0300      0.0425                                                                 PricStDv                   1.3485       1.2858      3.3371
Av%Ret            2.0713     4.0538               PricStDv                       1.7474                1.7761
                                                                                                                Avg%Chg.                   0.5973       0.1622      0.0354
$Gain/Share       6.5300    43.1870               Avg%Chg.                       0.4486                0.4234   Avg$Cng                    0.4560    -0.0570        0.0158
HPR:
                                                  Avg$Cng                        0.0998                0.0942   Av%Ret                     0.6657    -1.9760
                                                  Av%Ret                         8.8175                         $Gain/Share                2.5400   -15.5120
                                                  $Gain/Share                   87.5700                                  HPR: 2.25%
                                                        HPR:   19.96%




                                                                                              18
                            Merck                                                        3M                                                      NASDAQ 100 Trust
Transaction History                                      Transaction History                                                     Transaction History
                                                                                                                  Avg.Price                                                      Avg.Price
                      Buy      Sell       Price                              Buy       Sell            Price      Net Comsn.                   Buy      Sell     Price           Net Comsn.
                                                                     2/24 141                          126.86                    2/27          1200                      24.65
           3/25         1000                 54.62                     4/4     75                      133.47      129.1551      3/20                      1200          26.70
           4/11                     395      55.56                                                                               3/25          2000                      26.16
                                                                                   2/24-4/3        4/4-4/11       2/3-4/11

               3/25-4/11              2/3-4/11
                                                         AvgPrice                      127.6234        132.8867       127.2614                       2/27-3/20   3/25-4/11       2/3-4/11

AvgPrice               55.80                 53.95       MaxPrice                      134.3700        133.9800       134.3700

MaxPrice               57.20                 57.20       MinPrice                      121.0100        131.6100       121.0100   AvgPrice               25.1906          25.9929      25.2157
MinPrice               54.47                 50.77       Spread                         13.3600          2.3700        13.3600   MaxPrice               26.9300          26.5600      27.1700
Spread                  2.73                     6.43    PricStDv                        3.8688          0.8119         4.0529   MinPrice               23.8000          25.2500      23.8000

PricStDv                0.82                     1.76    Avg%Chg.                        0.1439          0.1393         0.1366   Spread                  3.1300           1.3100       3.3700
Avg%Chg.                0.11                     -0.01   Avg$Cng                         0.1724          0.1767         0.1650   PricStDv                1.0612           0.4340       0.9824
Avg$Cng                 0.06                     -0.01   Av%Ret                          0.6018          4.0739                  Avg%Chg.                0.6534          -0.1332       0.1013
Av%Ret                  2.16                             $Gain/Share                    22.1400         22.3894                  Avg$Cng                 0.1613          -0.0379       0.0213
                                                                         Total $ Gain/Share                            44.5294   Av%Ret                  2.1932           5.1627
$Gain/Share            16.49
                                                                                                                                 $Gain/Share             8.6500          18.8000
                                                                                                                                 HPR: (%)                8.3164          -2.4847




                                                                                              19
                      Procter Gamble                                        Labranche & Co.                                             S&P 500
Transaction History                                       Transaction History                                       920.00
                                             Avg.Price
                                                                                                                    900.00
               Buy       Sell        Price                                       Buy        Sell    Price
3/14            100                  83.69                3/18                      500              19.51          880.00
3/20                            80   88.10                                                                          860.00
3/25           1000                  87.57        87.49                     3/18-4/11              2/3-4/11         840.00
4/3                         600      89.80
                                                                                                                    820.00
                                                          AvgPrice              18.8547              19.4037
                      3/14-3/24 3/25-4/11                 MaxPrice              20.8500              24.3000        800.00
HPR: (%)                  4.62        1.86                MinPrice              17.3900              15.5100        780.00
AvgPrice                86.8429      89.1871              Spread                 3.4600               8.7900              1/19    2/8      2/28    3/20    4/9   4/29
MaxPrice                88.9000      90.1500              PricStDv               1.1922               2.1024
MinPrice                83.4000      88.0200              Avg%Chg.               -0.0138              -0.5202
Spread                   5.5000       2.1300              Avg$Cng                -0.0132              -0.1292        For 1 Share Purchased 2/6
PricStDv                 1.8687       0.6382              Av%Ret                 -3.3586                              Price Vs. Date
Avg%Chg.                 0.8225       0.1343              $Gain/Share           -12.4500                             RSQ: PvsDate              0.4638837
Avg$Cng                  1.0586       0.1171
Av%Ret                   3.7673       1.9398                                                                          Mean         847.836
$Gain/Share             22.0700      23.7600                                                                     Standard Error        3.477
                                                                                                                     Median        843.140


                                                                                                                Standard Deviation 23.580
                                                                                                                Sample Variance 555.999
                                                                                                                    Kurtosis       -0.950
                                                                                                                   Skewness        -0.015
                                                                                                                     Range         95.060
                                                                                                                    Minimum        800.730
                                                                                                                    Maximum        895.790


                                                                                                                   Avg %Ret        1.18%




                                                                                       20
Market Comparison For Time Horizon
                                                                        2/10 -        2/17 -         2/24 -              3/10 -   3/17 -                        3/24 -
                                                       2/3 - 2/7         2/14          2/21           2/28    3/3 - 3/7   3/14     3/21                          3/28        3/31 - 4/4 4/7 - 4/11
                                                                                                             Market Value Week End
Down Jones Industry Average        0                      1               2             3              4          5         6        7                            8             9                10
Close                       8,053.81                    7864.23          7908.8       8018.11        7891.08 7740.03 7859.71 8521.97                            8145.77       8277.15          8203.41
Change previous week                                    -189.58           44.57        109.31        -127.03 -151.05      119.68   662.26                       -376.20        131.38            -73.74
Percentage Change                                        -2.35%          0.57%         1.38%          -1.58%    -1.91%     1.55%    8.43%                        -4.41%        1.61%            -0.89%

                          P/E Ratio
                      Earning yield
                     Dividend Yield

                                                                                                                  Market Value Week End
S & P 500                                        0         1              2              3             4              5         6                  7               8             9              10
Close                                        855.7       829.69          834.89         848.17        841.15         828.89    833.27             895.79           863.5        878.85           868.3
Change previous week                                      -26.01            5.2          13.28          -7.02        -12.26       4.38             62.52          -32.29         15.35          -10.55
Percentage Change                                        -3.04%          0.63%          1.59%         -0.83%        -1.46%     0.53%              7.50%          -3.60%         1.78%          -1.20%

                          P/E Ratio
                      Earning yield
                     Dividend Yield




Market Value Week End
                     2/3 - 2/7        2/10 - 2/14      2/17 - 2/21      2/24 - 2/28      3/3 - 3/7          3/10 - 3/14       3/17 - 3/21      3/24 - 3/28      3/31 - 4/4        4/7 - 4/11
Cash Balance           500,000.00       483,423.00       403,258.00        328,258.00      293,234.75            283,744.65     325,970.10        319,421.52       156,945.87       231,598.62
(Purchase)/Sale         (16,577.00)      (80,165.00)      (75,000.00)      (35,023.25)         (9,499.00)         42,195.45       (6,548.58)     (162,905.75)       74,652.75        27,152.00
Dividend/ Interest                                                                       8.9                30                                 430.1
Net Cash             483,423.00       403,258.00       328,258.00       293,234.75       283,744.65         325,970.10        319,421.52       156,945.87       231,598.62        258,750.62




                                                                                                 21
 Sector Performance For Selected Dates
       BasicMaterials           ConsCyc           ConsNonCyc           Energy           Financial           HealthCare           Industrial           Technology           Telecomm
2/5                     -0.25             -0.25            -0.49                -0.96               -0.67                -0.58                -0.15                -0.46   -0.47
2/7
2/14
2/21
2/28                    0.10              0.94             -0.42                0.31                0.27                 0.40                 0.29                 1.48    -0.41
3/3                     -0.63             -1.01            -0.73                0.61                -0.60                -0.79                -0.49                -1.58   -0.32
3/4                     -2.20             -2.74            -1.23                -0.47               -1.36                -1.25                -1.63                -1.20   -1.51
3/5                     0.32              0.80             -0.44                1.10                1.10                 1.37                 0.53                 0.93    0.91
3/7
3/11                    -0.78             -1.09                0.74             -0.57               -1.46                -1.03                -1.40                -0.39   -1.01
3/12                    0.20              0.29                 0.60             -1.56               -0.17                0.35                 0.66                 0.95    2.11
3/13                    4.46              4.46                 1.91             0.83                3.91                 1.53                 3.48                 5.44    4.79
3/14                    0.83              0.22                 0.12             -0.17               0.29                 -0.90                0.93                 -0.13   1.18
3/21                    3.68              3.34                 2.04             -0.33               2.43                 2.48                 3.02                 1.40    1.82
3/24                    -4.00             -4.59            -2.76                -1.77               -3.28                -2.88                -3.60                -4.23   -3.86
3/25                    0.61              1.87                 0.54             1.12                0.66                 2.17                 0.86                 1.30    1.45
3/26                    -0.81             -0.37            -0.42                -0.04               -0.37                -1.15                -0.86                -0.57   0.53
3/27                    -1.33             -0.19                0.19             0.86                -0.44                0.58                 -0.24                -0.71   -0.46
4/4
4/9                     -1.49             -1.29            -0.66      UNCH                          -1.30                -1.25                -1.50                -2.33   -1.95
4/10                    0.35              1.19                 0.31             1.10                0.66                 -0.08                0.39                 0.65    0.65
4/11                    -0.10             -0.56                0.31             -0.70               0.02                 -0.55                -0.24                -0.58   -0.89


sum                     -1.04             1.02             -0.39                -0.64               -0.31                -1.58                0.05                 -0.03   2.56
av                      -0.06             0.06             -0.02                -0.04               -0.02                -0.09                0.00                 0.00    0.15
std                     1.96              2.10                 1.12             0.94                1.60                 1.40                 1.67                 2.04    1.92




                                                                                  22
Risk Analysis (Using beta)

S&P500               1.00      0.0156           Beta                           Return
           Beta         Return
FDX           0.80          0.0200      Mean                 1.038     Mean                 0.032
FNM           0.30          0.0760      Standard Error       0.205     Standard Error       0.026
G             0.50          0.0400      Median               0.800     Median               0.025
HD            1.30          0.2650      Mode                 0.500     Mode                 0.020
LAB           2.20          -0.1570     Standard Deviation   0.740     Standard Deviation   0.093
MMM           0.50          0.0040      Sample Variance      0.548     Sample Variance      0.009
MRK           0.50          0.0200      Kurtosis             -1.042    Kurtosis             3.924
MRO           0.70          0.0140      Skewness             0.509     Skewness             0.630
NDN           1.50          0.0540      Range                2.200     Range                0.422
NOK           2.00          0.0730      Minimum              0.000     Minimum              -0.157
PG            0.00          0.0250      Maximum              2.200     Maximum              0.265
PRULX         2.20          -0.0600     Sum                  13.500    Sum                  0.419
QQQ           1.00          0.0450      Count                13.000    Count                13.000
IGT           0.50


Slope       -0.0327839
TotalRet          0.4190




                                                                      23

				
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