CALIFORNIA STATE UNIVERSITY LONG BEACH 2009 First Quarter

CALIFORNIA STATE UNIVERSITY LONG BEACH 2009 First Quarter Performance Review Presented April 17, 2009 To: The Chartered Financial Analysts Society of Orange County Foundation On Behalf Of: The Student Managed Investment Fund of California State University Long Beach

Introductions Presenting on behalf of The Student Managed Investment Fund: Wayne Brown Tien Do Gregory Strand

Presentation Outline • • • Summarize 2008 Annual Report Contents Review SMIF Intentions as Outlined in 2009 RFP Analysis of First Quarter Market Environment Transaction Record & Current Holdings Portfolio Performance – Performance vs. 100% Fixed Income Benchmark – Performance vs. IPS Benchmark • Review of Analysis Performed in the First Quarter • SMIF Expectations for the Second and Subsequent Quarters

2008 Asset Allocation CFAOCF-CSULB Portfolio Equity 27% Fixed Income 73% IPS Total Return Benchmark Fixed Income 30% Fixed Income Benchmark NBBITR - NASD Bloomberg Active Investment Grade US Corporate Bond Total Return Index Equity Benchmark S&P 500 Index Equity 70%

2008 CSULB Portfolio Performance 10. 00% 5. 00% 3. 67% 0. 58% 0. 00% -5. 00% -1. 33% -10. 00% -15. 05% -20. 00% -25. 66% -30. 00% -35. 00% -36. 91% -40. 00% -45. 00% Portfolio Benchmark Fixed Income Portfolio Benchmark Equity Portfolio Benchmark Total Return

SMIF Intentions Under RFP Maintain 0% Equity Allocation Until: • Analysis of Macroeconomic Triggers Suggests Improvement in Capital Market Environment • Government Interventions are Substantially Implemented and Market Reaction can be Better Anticipated • CBOE Volatility Index (VIX) 30 -Day Simple Moving Average Falls Below 30

Macroeconomic Analysis Key Factors Considered: • • • GDP – Business Cycle Bearings Unemployment – Rampant and Distressing Energy – Stagnant Demand Housing Prices – Inventory & Price Momentum Inflation – Pending Acceleration of Inflation Consumer Confidence – Historic Lows

Government Interventions • • TARP & Eligibility Geithner’s Focus on Banks Bernanke & The Depression Limping Auto Manufacturers Our analysis continues to be heavily influenced by market perception and reaction to developments.

Volatility Index (VIX)

S&P 500 First Quarter Performance

NBBITR First Quarter Performance

Transaction Record & Current Holdings Allocation $34, 163. 34 34. 19% Fidelity Cash Reserves (FDRXX) $65, 770. 66 65. 81% Q 1 Transactions Date FSLXX FCASH WACH CD Total Beginning Balances 1/1/2009 $ - $ 34, 056. 69 $ 17, 609. 81 $ 53, 000. 00 $ 104, 666. 50 Cd Maturity 1/16/2009 $ - $ 54, 317. 74 $ (53, 000. 00) $ - Interest 1/27/2009 $ - $ 1. 82 $ - Purchased FDRXX 1/27/2009 $ 71, 929. 37 $ - $ (71, 929. 37) $ - Dividend 1/30/2009 $ 10. 86 $ 47. 24 $ - $ - 2/6/2009 $ (6, 280. 00) $ - $ - Cash Withdrawal FDRXX Fidelity Select Money Market (FSLXX) Dividend 2/27/2009 $ 57. 54 $ 29. 88 $ - $ - Dividend 3/31/2009 $ 52. 89 $ 29. 53 $ - $ - Q 1 Ending Balance 3/31/2009 $ 65, 770. 66 $ 34, 163. 34 $ - $ 99, 934. 00

CSULB Performance v. Fixed Income Benchmark 2% 1% 0% -1% -2% -3% -4% -5% First Quarter Return CFAOCF-CSULB Portfolio: 0. 30% Fixed Income Benchmark: -2. 30% CFAOCF-CSULB Portfolio Fixed Income Benchmark 9 6/2 00 3/2 3/1 9/2 00 9 9 2/2 00 3/1 /20 09 3/5 9 6/2 00 2/2 2/1 9/2 00 9 9 2/2 00 2/1 /20 09 2/5 9 9/2 00 1/2 9 2/2 00 1/2 9 5/2 00 1/1 /20 09 1/8 1/1 /20 09 -6%

CSULB Performance v. IPS Benchmark 2% 0% -2% -4% -6% -8% -10% -12% -14% -16% -18% First Quarter Return CFAOCF-CSULB Portfolio: 0. 30% Total Return Benchmark: -8. 86% CFAOCF-CSULB Portfolio Total Return Benchmark 9 6/2 00 3/2 9 9/2 00 3/1 9 2/2 00 3/1 09 /20 3/5 9 6/2 00 2/2 9 9/2 00 2/1 9 2/2 00 2/1 09 /20 2/5 9 9/2 00 1/2 2/2 00 9 9 5/2 00 1/1 09 /20 1/8 1/1 /20 09 -20%

First Quarter Analytical Work Topics covered during the First Quarter: • Macroeconomic Market Triggers • Yield Curve (Credit Spread) Analysis • Fixed Income Security Analysis • Individual Equity Security Analysis • Equity Screening Procedures • Equity Valuation Models and Practices

First Quarter Analytical Work Yield Curve Analysis (Credit Spreads) • A Wall Street Journal Survey of top economists reported that credit spreads are the primary predictor of recovery being monitored by economists. • As such, SMIF spent significant time and effort analyzing the credit spreads for their power to predict the sustainability of equity market rallies. • Flattening or widening credit spreads were observed during false (unsustained) equity market rallies. • Rallies accompanied by significant narrowing of credit spreads showed much greater sustainability. Class analysis correctly predicted the fleeting nature of the January rally, and sees the current market rally as unsustainable as well.

First Quarter Analytical Work Several equities were analyzed in the first quarter. None were selected for inclusion in the portfolio. Among the equities analyzed: • Apollo Group (APOL) • Cal-Maine Foods (CALM) • Johnson & Johnson (JNJ) See attached handouts for detailed analyses of these securities. Example: Johnson & Johnson

First Quarter Analytical Work Fixed Income Several Alternatives Were Considered: Certificates of Deposit Money Market Mutual Funds Bond Index Exchange Traded Funds Ultimately, Money Market Mutual Funds were most attractive vehicle. Currently they provide the best liquidity-adjusted rate of return.

Example: i. Shares Barclay’s Agency Bond ETF (AGZ) • Federal Reserve Actions • Rationale • Risk • Conclusion – Now committing an additional $750 billion to agency MBS (Total = $1. 25 Trillion) – Additional $100 billion for agency debt (Total = $200 billion) – $300 billion to purchase long-term Treasuries – Federal Reserve actions will place an implicit ceiling on interest rates – Provide a better return than treasuries with only minimal risk – Interest-rate risk – Liquidity risk – Political risk – ETF transaction costs will offset the potential rewards – ETF has 20% exposure to long end of yield curve increasing interest rate risk

Equity Market Expectations Observations and Expectations: Volatility showing signs of abatement Current rally feels more substantive Macroeconomic factors becoming “less bad” However, sector performance relationships are inconsistent with typical early bull markets • Expectations of another potential correction prior to a sustainable rally beginning mid to late second quarter • •

Anticipated Future Actions Moving Forward: • Continue to monitor market developments – – Volatility Macroeconomic Data Credit Spreads Government Policy • Search for securities with potential for inclusion in the CFAOCF Portfolio • Perform due diligence, gaining experience and insight into professional security analysis

Presentation Summary • • • 2008 Performance RFP Investment Criteria First Quarter Market Environment First Quarter Performance First Quarter Analysis Anticipated Future Actions

Our Sincerest Appreciation On behalf of the students of the CSULB Student Managed Investment Fund, please accept our sincere appreciation for your valuable time and input. Thank You!