MICHAEL F. PRICE STUDENT

INVESTMENT FUND

" The MPSIF Fund "

Inaugural Advisory Committee MeetingNovember 17, 1999Dean's Conference Room - 11th Floor KMEC 3:45 p.m.

Expected:

Michael PriceDean George DalyDeputy Dean Avijit GhoshAssociate Dean Paul AffusoProfessor Martin GruberProfessor Michael Keenan

Patrick Adams President of MPSIFColin Clark, CFA Portfolio Manager of the Growth Plus Income FundAndre R. Mazzella, CFA Portfolio Manager for the Value FundMitchell Williams, CFA Portfolio Manager of the Small Cap Fund

Contents:

1. Organizational Issues 22. Growth Plus Income Fund 43. Value Fund 104. Small Cap Fund 145. Operating Issues 196. Appendices 20

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I. Michael F. Price Student Investment Fund Organizational Structure

The Michael F. Price Student Investment Fund (MPSIF) consists of three diverse andseparately managed portfolios with unique objectives and strategies. Each portfolio will beallocated $600,000 in principal. Twenty-nine second-year MBA students of NYU’s SternSchool of Business are members of the organization. Each investment team has approximately10 participating students.

The organizational structure of MPSIF is designed to allow all participating students theopportunity to experience two roles within a fund management organization. First andforemost, every student is a research analyst and sector specialist. Every student participates inthe portfolio construction, security analysis, and security selection process. Each of the threefunds has agreed on a consensus investment decision-making process.

Secondly, each student has a functional role within his/her respective fund. There are fivefunctional roles within each Fund:

Portfolio / General Manager:� Overseas all aspects of his/her respective fund� Coordinates portfolio construction and risk management� Participates as a member of the Management Committee

Director of Fund Services:� Serves as Compliance Officer� Issues all fund reports including Quarterly and Annual Reports� Markets the fund’s performance, proprietary views

Director of Research:� Coordinates research effort for the fund by allocating industry and security research

assignments� Provides recommendations for equity and fixed income investments� Maintains database of research (internal and external research)

Trader:� Executes all trades� Serves as broker liaison� Monitors short-term market movements

Market Strategist:� Analyzes macroeconomic conditions and trends in order to recommend market strategies

and asset allocation� Provides weekly macroeconomic updates to Fund team

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MPSIF ORGANIZATION CHART

Dated: November 1, 1999

The matrix structure of MPSIF supports the creation of functional teams and investmentdecision-making teams. In the start-up phase of the organization, each functional team isresponsible for establishing standards of operation across all three funds. For example, theTrading Team, which is made up of the Traders from each fund, investigated all possiblealternatives for trade execution whether it be on-line discount brokers, full-service traditionalbrokers, or via ECNs. The Trading Team will also establish uniform procedures for executionand position maintenance for all three funds.

The MPSIF Management Committee consists of the President and each of the three PortfolioManagers. The Management Committee will be responsible for the consolidated riskmanagement of the MPSIF funds.

Directors of ResearchShachar Gonen

Neil LevyThomas O'Shea

Market StrategistsSheldon BrandauDawisee Sukarom

Director of Fund ServicesRay Averna

Beth Gunning

TraderRonaldo Patah

Value FundPortfolio Manager

Andre Mazzella

Directors of ResearchJim Giannakouros

Ellen Huang

Market StrategistsRaymond LamAdam Wilson

Dmitry Zabarko

Director of Fund ServicesBrian MeringoloHalie Weissman

TradersKen Corwen

Seth GreenfieldErika Gutherz

Small Cap FundPortfolio ManagerMitchell Williams

Directors of ResearchEsther ChweiMark Rieder

Market StrategiststEric Cha

Neil SamuelsNico Bonelli

Director of Fund ServicesSean Kron

TraderVishal Bhutani

Growth+Income FundPortfolio Manager

Colin Clark

PresidentPatrick Adams

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II. MPSIF Fund Descriptions: Objective, Management Team, Strategy,Investment Process

In this section we will describe for each fund its objective, the management team thatmakes up this fund, the strategy and investment process each team expects to follow.

MPSIF PresidentMr. Patrick Adams currently serves as the President of MPSIF. Prior to joining MPSIF, Mr.Adams was associated with Goldman Sachs in London where he was a Trader, the Marc RichGroup in Switzerland where he was an Assistant Hedge Fund Manager and Alex Brown &Sons in Baltimore where he was an assistant NASDAQ Trader. He holds a B.A. fromClaremont McKenna College.

MPSIF Growth Plus Income Fund

Objective

The Growth Plus Income Fund seeks long term growth of capital with a limited emphasis onincome. The Fund primarily invests in common stocks of U.S. companies with attractivegrowth opportunities, but also has the flexibility to invest in other types of securities includingforeign equity securities and convertible securities. The Fund’s core investments are in highgrowth sectors including technology and health care. Approximately 25% of the fund’s totalassets are invested in fixed income securities to produce a consistent level of income.

Management Team

Mr. Colin Clark, CFA currently serves as the Portfolio Manager of the Growth Plus IncomeFund. Prior to joining MPSIF, Mr. Clark was associated with Salomon Smith Barney where hewas an Analyst in the Equity Research Division and Fidelity Investments where he was a FundAnalyst. He holds a B.A. from Bard College.

Mr. Vishal Bhutani currently serves as the Trader for the Growth Plus Income Fund. Prior tojoining MPSIF, Mr. Bhutani was associated with Standard & Poors Corporation where he wasan Equity Research Associate and Climax Engineering where he was a Finance Manager. Heholds a B.S. and M.S. from the University of Delhi.

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Mr. Sean D. Kron, CPA currently serves as the Director of Fund Services for the Growth PlusIncome Fund. Prior to joining MPSIF, Mr. Kron was associated with Refco Group, Ltd. wherehe was a Manager in the Finance Department, Lehman Brothers Inc. where he was a SeniorAccountant and Deloitte & Touche LLP where he was a Senior Auditor. He holds a B.A. fromLafayette College.

Mr. Eric H. Cha currently serves as a Market Strategist for the Growth Plus Income Fund.Prior to joining MPSIF, Mr. Cha was associated with Sanford C. Bernstein & Co. where he wasan Associate in the Institutional Research Division and Cha Brothers, Inc. where he wasPresident. He holds a B.A. from the University of Virginia, and is a candidate for the Level IIChartered Financial Analyst exam.

Mr. Neil S. Samuels currently serves as a Market Strategist for the Growth Plus Income Fund.In conjunction with the MPSIF, Mr. Samuels is the Vice President of Marketing for the UrbanBusiness Assistance Corporation. He was associated with Associates First Capital where hewas a District Sales Vice President and Heartsavers where he was the co-founder. He holds aB.A. from the State University of New York.

Mr. Nicola Bonelli currently serves a Market Strategist for the Growth Plus Income Fund.Prior to joining MPSIF, Mr. Bonelli was associated with Morgan Stanley Dean Witter where hewas an Associate, Banco di Napoli in Italy where he was an Italian Government Bonds traderand Consob in Italy where he was a stock market supervisor and regulator. He attended theL.U.I.S.S. in Rome and holds a B.A. from the Universita’ di Napoli, and is a Certified PublicAccountant in Italy.

Ms. Esther Chwei currently serves as a Director of Research for the Growth Plus Income Fund.Prior to joining MPSIF, Ms. Chwei was associated with Henry Kaufman & Company whereshe was a research associate and Price Waterhouse Coopers where she was an actuarialconsultant. She holds a B.A. from the University of Nebraska-Lincoln.

Mr. Mark Rieder, CPA currently serves as a Director of Research for the Growth Plus IncomeFund. In conjunction with the MPSIF, Mr. Rieder is associated with Deloitte & Touche LLPwhere he is a senior accountant. He holds a B.S. from Binghamton University.

StrategyThe strategy of the fund consists of asset allocation, security selection, and portfolioconstruction.

Asset Allocation:The Fund will be diversified across stocks, bonds, and short-term money market instruments.The fund will pursue a strategic asset allocation policy consisting of a neutral mix of stocks andfixed income securities over the long-term. The mix may vary over the short-term as the fund’sholdings are adjusted and opportunities arise in the marketplace.

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Asset Allocation

Asset Category Neutral Target RangeEquity 75% 60%-90%Bonds 25% 10%-30%Short-term money-market instruments 0% 0%-10%

Equity Security Selection:

Investment Process The overall investment process of the G+I Fund is outlined below.

Investment Process

Start with stocks exceeding $1 billion in market capitalization

Screen stocks based on key fundamental characteristics

Fundamental research by sector analysts

Weekly investment team review

Portfolio construction considerations

Security selection

The investment team screens securities by key fundamental characteristics to provide aconsistent process for identifying attractively-priced growth companies (see table below).Screening on strong earnings/sales growth and strong relative strength will usually lead tovaluation ratios that are above the market averages. Each of the characteristics below may beweighted differently among sectors to accommodate the specific circumstances of that sector.

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Screening Criteria

Factors Fundamental CharacteristicsGrowth Stimulus • Above-average forecasted EPS growth in industry

• Above-average forecasted sales growth in industry

Price Performance • Strong one-year relative strength vs. industry average

Reasonable Valuations • Forecasted P/E Ratio• Forecasted P/S Ratio• Forecasted P/E-to-Growth

Sell DisciplineWhile any single event may not warrant the sale of a security, we use the following criteria toevaluate sell candidates within the portfolio:

• Change in company fundamentals.• More attractive opportunities identified.• Price appreciation causes security to exceed portfolio constraints (i.e. no security

can represent more than 7% of the fund’s net asset value).

Investment Characteristics

• Equity Investment Style – Long-term growth oriented style with $1 billion marketcapitalization constraint. The investment team focuses on identifying companies withabove-average growth in revenues or earnings in their respective industry.

• Analytical Process – Bottom-up and top-down

• Diversification

� Portfolio Holdings – Approximately 30-50 securities.

� Sector Concentration – The fund’s equity sector weights (as a percentage of fund’sequity assets) are required to stay within ±10% of its equity benchmark sector weights.

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� Security Concentration – Initial investments in a single security can not exceed 5% ofthe fund’s assets. Additionally, no single security can exceed 7% of the fund’s totalassets (mutual fund investments are exempt from individual security constraints).

• Investment Restrictions – No derivative positions

Benchmarking

• Equity Benchmark – Russell 3000 Growth Index.

The Russell 3000® Growth Index measures the performance of those Russell 3000 Indexcompanies with higher price-to-book and higher forecasted growth values. (the largest 3000companies represent approximately 98% of the investable US equity market). The stocks in thisindex are also members of either the Russell 1000 Growth or the Russell 2000 Growth indexes.

Equity Benchmark Sector Weights as of 8/31/99

Characteristics Russell Mid-CapGrowth Index

G+I SectorConstraints

Technology 35% 25%-45%Health Care 18% 8%-28%ConsumerDiscretionary

16% 6%-26%

Consumer Staples 9% 0%-19%Other 7% 0%-17%Financial Services 5% 0%-15%Utilities 5% 0%-15%Other Energy 1% 0%-11%Autos &Transportation

1% 0%-11%

Integrated Oils 0% 0%-10%Source: Russell Company

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• Fixed Income Benchmark – Lehman Brother Aggregate Bond Index

The LB Aggregate Bond Index is a diversified intermediate-term bond index that provides agood representation of the bond market.

Fixed Income Benchmark Composition

Composition LB Aggregate BondIndex

Corporates 21%MBS 35%ABS 1%Agencies 8%Duration 4.9 yearsAAA 80%AA 9%A 7%

The fixed income component of the G+I Fund will consist of a portfolio of bond funds.

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MPSIF Value Fund

Objective

The Value Fund seeks to obtain maximum long-term capital appreciation while protecting theendowment from undue risk to principal. Additionally, the asset allocation of the fund will bestructured to accommodate a 5% annual distribution to the external beneficiaries. The fundinvests mainly in the common stock of companies, which the fund's management considers tobe undervalued compared to their true worth. The fund's management searches for companiesthroughout the world whose stocks are attractively priced and poised for a positive change. Asmall component of the portfolio is also invested in bonds in order to reduce the volatility ofthe portfolio and provide a consistent income stream to fund the objectives of the endowment.The fund typically holds approximately 75% of its assets in common stocks and 25% in fixedincome securities. At all times the fund seeks to be fully invested.

Management TeamMr. Andre R. Mazzella, CFA currently serves as the Portfolio Manager for the Value Fund.Prior to joining MPSIF, Mr. Mazzella was associated with Lehman Brothers where he was anAssociate Analyst in the Equity Research Department and Putnam Investments where he wasan Associate Analyst in the High Yield Group. He holds a B.A. from Montclair StateUniversity, and is a holder of the Series 7 and 63 licenses.

Mr. Ronaldo Patah currently serves as the Trader for the Value Fund. Prior to joining MPSIF,Mr. Patah was associated with Deutsche Bank where he worked on the Latin American ForeignExchange Trading and Structured Product Desk and Unibanco Asset Management where hewas a Fund Manager. He holds a B.A. from Fundacao Getulio Vargas.

Mr. Raymond J. Averna, Esq. currently serves as a Director of Fund Services for the ValueFund. Prior to joining MPSIF, Mr. Averna was associated with Bongiorno, Averna &Bongiorno, Esqs. where he was an attorney and managing partner. He holds a J.D. from St.John’s University School of Law and a B.S. from St. John’s University, and is a holder of theSeries 7 and 63 licenses.

Ms. Elizabeth J. Gunning currently serves as a Director of Fund Services for the Value Fund.Prior to joining MPSIF, Ms. Gunning was associated with TIAA-CREF where she was a FixedIncome Research Associate, First Union National Bank where she was a Commercial Lenderand First Fidelity Bank where she was an Auditor. She holds a B.A. from Rutgers College.

Mr. Sheldon C. Brandau, CFA currently serves as a Market Strategist for the Value Fund. Priorto joining MPSIF, Mr. Brandau was associated with Sanford C. Bernstein & Co. where he wasa Senior Investment-Planning Analyst. He holds a B.S. from Purdue University.

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Ms. Dawisee Sukarom currently serves as an Market Strategist for the Value Fund. Prior tojoining MPSIF, Ms. Sukarom was associated with HCL Investment Management where shewas a Research Associate and Phatra Merrill Lynch in Thailand where she was a Junior MarketStrategist. She holds a degree from Chulalongkorn University.

Mr. Shacher Gonen, CPA currently serves as a Director of Research for the Value Fund. Priorto joining MPSIF, Mr. Gonen was associated with CIBC World Markets where he was anAssociate in the Credit Capital Markets Group and Price Waterhouse where he was a SystemsImplementation Consultant and Auditor. He holds a B.S. from Binghamton University, and is acandidate for the Level II Chartered Financial Analyst exam.

Mr. Neil A. Levy, CPA currently serves as a Director of Research for the Value Fund. Prior tojoining MPSIF, Mr. Levy was associated with Bridgeast Management where he was a FinancialAnalyst, A.R. Schmeidler & Co. where he was the CFO and Goldstein, Golub, Kessler wherehe was a Senior Auditor. He holds a B.S. from Lehigh University, and is a holder of the Series7 and 63 licenses.

Mr. Thomas O’Shea currently serves as a Director of Research for the Value Fund. Inconjunction with the MPSIF, Mr. O’Shea is associated with Value Line, Inc. where he is anEquity Analyst. He was associated with Institutional Investor where he was a ManagingEditor. He holds a B.A. from the University of Virginia.

Value PhilosophyThe Value Fund believes that above average returns can be earned through active managementof equity securities. We believe that market inefficiencies can be exploited for the benefit ofour clients by identifying undervalued securities across industries. We place our emphasis onthe valuation of the company in relation to its prospects for financial success.

Fixed Income PhilosophyThe fixed income portion of the portfolio is intended to provide current income and diversifyportfolio risk. We believe that high quality government and corporate securities are best suitedto achieve this goal. The fixed income portion of the fund may be constructed either byinvesting in individual securities or purchasing bond mutual funds.

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StrategyThe strategy of the fund consists of asset allocation, security selection, and portfolioconstruction.

Asset Allocation:The fund will be diversified across stocks, bonds, and short-term money market instruments.The fund will pursue a strategic asset allocation policy consisting of a neutral mix of stocks andfixed income securities over the long-term set at approximately 25% fixed income and 75%equities. Asset allocation shifts will be strategic in nature and will be consistent with themacro-economic evaluation of the fund's economists. This mix may also vary over the short-term as the fund’s holdings are adjusted and as opportunities arise in the marketplace.

Equity Security Selection:

Value Fund Buy DisciplineThe Value buy discipline is intended to provide the basis for a consistent process for equitysecurity selection, while maintaining the flexibility to accommodate the special circumstancesof specific economic sectors.

When investing in value equities, we look for companies with the following characteristics:• Selling at a significant discount to peers or the market on a Price/Earnings,

Price/Book, Price/FCF, Enterprise Value/EBITDA, or P/E/Growth basis.• Strong cash flows from operations.• Stable or improving profitability measures.• Identifiable catalyst to drive improved valuation.

Sell DisciplineWe believe that a well-defined and consistently applied sell discipline is crucial to the effectivemanagement of our equity portfolio. While any single event may not warrant the sale of asecurity, we use the following criteria to evaluate sell candidates within the portfolio:

• Change in company fundamentals.• Change in industry fundamentals.• Change in market conditions.• More attractive opportunities identified.• Price appreciation causes stock value to meet our expectations.

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BenchmarkingBalanced Portfolio: Russell 3000 Value and Lehman Intermediate Government/Corporateindexes.Equities: Russell 3000 ValueFixed Income: Lehman Intermediate Government/Corporate (LBIGC)

Investment Characteristics

• Capitalization Range – The fund will target companies with equity market capitalizationsgreater than $1 billion at the time of purchase, but may also invest in smaller companieswhere opportunities for uncovering value arise.

• Equity Investment Style – A value investing style will be employed.

• Analytical Process – Top down asset allocation process. Bottom-up security selectionprocess.

• Diversification

� Portfolio Holdings – Approximately 30-60 securities.

� Sector Concentration – Individual industry sectors may be weighted at 0% of thefund's assets, but no one industry sector can exceed 40% of the fund's assets. Theportfolio will be re-balanced quarterly for the purpose of maintaining acceptableconcentration levels.

� Security Concentration – Investment in a single equity security will not exceed 10%of the fund’s total equity assets at the time of purchase. The portfolio will be re-balanced quarterly for the purpose of maintaining acceptable concentration levels.

Investment Restrictions – Derivatives are limited to SPDRs and other index trackingsecurities

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MPSIF Small Cap Fund

ObjectiveThe Small Cap Fund seeks to achieve long-term capital appreciation through investing in U.S.domestic and ADR equity securities and investment grade fixed income securities. Assetallocation will be structured to accommodate a goal of 5% annual income distribution, whileproviding for real long-term appreciation of investment principal. The fund seeks opportunitiesfor above market returns through the consistent application of a disciplined investment strategy.The goal of the fund is to outperform the market on a risk-adjusted basis over the course of amarket cycle, which is typically 5 years.

Management TeamMr. Mitchell Williams, CFA currently serves as the Portfolio Manager for the Small Cap Fund.Mr. Williams is an Associate in Equity Research with the Credit Suisse First BostonTechnology Group. Previously, Mr. Williams was associated with Deutsche Banc Alex. Brownwhere he was an Equity Research Associate and Barnett Capital Advisors, Inc. where he wasthe Vice President of Investment Communications. He holds a B.A. from the University ofFlorida.

Mr. Ken Corwen currently serves as a Trader for the Small Cap Fund. Prior to joining MPSIF,Mr. Corwen is associated with John Mullins & Sons where he serves as a Vice President. Heholds a B.A. from Dartmouth College.

Mr. Seth T. Greenfield, CPA currently serves as a Trader for the Small Cap Fund. Prior tojoining MPSIF, Mr. Greenfield was associated with Lehman Brothers where he was a SeniorFinancial Analyst in Regulatory Reporting and Coopers & Lybrand where he was a SeniorAccountant. He holds a B.S. from Rutgers College.

Ms. Erika Gutherz currently serves as a Trader for the Small Cap Fund. Prior to joiningMPSIF, Ms. Gutherz was associated with Morgan Stanly Dean Witter where she was anAssociate and Dresdner Kleinwort where she was a Senior Accountant. She holds a B.A. fromQueens College.

Mr. Brian Meringolo currently serves a Director of Fund Services for the Small Cap Fund.Prior to joining MPSIF, Mr. Meringolo was associated with Bear, Stearns & Co. where he wasan Equity Research Assistant and May Department Stores Company where he was a SeniorBusiness Analyst. He holds a B.S. and B.A. from the State University of New York at Albany.

Ms. Halie Weissman currently serves as a Director of Fund Services for the Small Cap Fund.Prior to joining MPSIF, Ms. Weissman was associated with Sanford C. Bernstein & Companywhere she was an Associate in the Institutional Equity Research Division and with Standard &Poor’s where she was an Associate Editor. She holds a B.S. in journalism from NorthwesternUniversity.

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Mr. Raymond Lam, CFA currently serves as an Market Strategist for the Small Cap Fund.Prior to joining MPSIF, Mr. Lam was associated with LibertyView Capital where he was anInvestment Analyst and Standard & Poors Corporation where he was an Equity Analyst. Heholds a B.S. from Columbia University.

Mr. Adam Wilson currently serves as a Market Strategist for the Small Cap Fund. Prior tojoining MPSIF, Mr. Wilson was associated with Mercer Consulting Group where he was aConsultant and Harcourt Brace & Co. where he was an Assistant Editor. He holds a B.A. fromCornell University.

Mr. Dmitry Zabarko currently serves as a Market Strategist for the Small Cap Fund. Prior tojoining MPSIF, Mr. Zabarko was associated with De;potte & Tpicje Cpmsi;tomg Group wherehe was a consultant and business analyst. He holds a B.S. from the Stern School of Businesshere at New York University.

Mr. James Giannakouros currently serves as a Director of Research for the Small Cap Fund.Prior to joining MPSIF, Mr. Giannakouros was associated with Price Waterhouse Coopers LLPwhere he was an Actuarial Pension Consultant. He holds a B.A. from Rutgers College.

Ms. Ellen Huang currently serves as a Director of Research for the Small Cap Fund. Prior tojoining MPSIF, Ms. Huang was associated with Nomura Securities International. She holds aM.S. from the University of Nebraska and a B.S. from the University of Science andTechnology of China.

Small Cap Equity PhilosophyThe Small Cap Fund believes that above average returns can be earned through activemanagement of equity securities. We believe that market inefficiencies can be exploited for thebenefit of our clients by identifying undervalued securities across industries and style biaseswithin the small cap universe. We place our emphasis on the valuation of the company inrelation to its prospects for financial success. Consequently, we may invest both in companiesthat are dramatically undervalued due to market disfavor and companies whose growthpotential has been underestimated.

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Fixed Income PhilosophyThe fixed income portion of the portfolio is intended to provide current income and diversifyportfolio risk. We believe that high quality government and corporate securities are best suitedto achieve this goal. The fixed income portion of the fund will follow a duration-basedstrategy, whereby the portfolio duration will generally fall with in the range of up to +/- 30% ofbenchmark duration. This strategy may be implemented either through the use of individualsecurities, or by combining bond mutual funds of varying durations. For fixed income amountsunder $1 million, the fixed income portion of the portfolio will held in mutual funds in order toprovide for proper fixed income diversification and trading efficiency.

StrategyThe strategy of the fund consists of asset allocation, security selection, and portfolioconstruction.

Asset Allocation:In order to balance the income needs of the fund with the need for capital appreciation, the fundwill maintain an asset allocation with a minimum of 20% fixed income and a maximum of 60%fixed income. Asset allocation shifts will be strategic in nature and will be consistent with themacro-economic evaluation of the fund's Market Strategists.

Equity Security Selection:

Small Cap Buy DisciplineThe Small Cap buy discipline is intended to provide the basis for a consistent process for equitysecurity selection, while maintaining the flexibility to accommodate the special circumstancesof specific economic sectors. The fund maintains a separate buy discipline for growth and forvalue equities.

When investing in growth equities, we look for companies with the following characteristics:• Strong expected revenue growth in the near-term.• Stable or improving profitability measures.• Rising near-term earnings growth.• Sound prospects for sustainable long-term earnings growth, with a demonstrated

ability to finance future growth internally.Each of these characteristics may be weighted differently among sectors to accommodate thespecific circumstances of that sector.

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When investing in value equities, we look for companies with the following characteristics:• Selling at a significant discount to peers or the market on a Price/Earnings,

Price/Book, Price/Sales, or Price/Free Cash Flow basis.• Strong cash flows from operations.• Identifiable catalyst to drive improved valuation.

Each of these characteristics may be weighted differently among sectors to accommodate thespecific circumstances of that sector.

Sell DisciplineWe believe that a well-defined and consistently applied sell discipline is crucial to the effectivemanagement of our equity portfolio. While any single event may not warrant the sale of asecurity, we use the following criteria to evaluate sell candidates within the portfolio:

• Change in company fundamentals• More attractive opportunities identified• Price appreciation causes stock value to meet our expectations

BenchmarkingBalanced Portfolio: Weighted Index Blend of S&P SmallCap 600 Index and LehmanIntermediate Government/Corporate indexes.Equities: S&P SmallCap 600Fixed Income: Lehman Intermediate Government/Corporate (LBIGC)

Investment Characteristics• Capitalization Range – The fund will invest in stock ranging from $100 million to $3

billion at the time of purchase. After purchase, stocks may be held in the portfolio untilthey reach $10 billion.

• Equity Investment Style – Blend of growth and value. The portfolio may be weighted upto +20% in favor of growth stocks or value stocks, as opportunities arise in the marketplace.

• Analytical Process – Top down asset allocation process. Bottom-up security selectionprocess.

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• Diversification� Portfolio Holdings – Approximately 30-60 securities.

� Sector Concentration – Sector concentration will not exceed benchmark weight bymore than 25 percentage points at the time of purchase. Individual sectors may beweighted at 0% of the fund's assets. The portfolio will be re-balanced quarterly for thepurpose of maintaining acceptable sector concentration levels.

� Security Concentration – Investment in a single equity security will not exceed 10%of the fund’s total equity assets at the time of purchase. The portfolio will be re-balanced quarterly for the purpose of maintaining acceptable concentration levels.

• Investment Restrictions – No non-ADR international securities. Derivatives are limited toSPDRs and other index tracking securities. Leverage will not be employed.

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III. MPSIF Operations

Brokerage Recommendation

After careful consideration, the members of MPSIF recommend that we retain Merrill Lynch asour primary broker while opening an account with Vanguard to buy mutual or index fundswhich Merrill does not offer. This recommendation is based on several factors:

1. Merrill Lynch’s well-known reputation.

2. Merrill offers online trading and the use of a live broker. This will give our Tradersconvenience in executing trades. An assigned broker will be available if we haveany questions or problems with the account.

3. Price. As one can see from the accompanying pricing comparison, Merrill Lynchoffers a flexible pricing strategy based on our needs. MPSIF can elect to use theinstitutional rate of 6 cents per share, or the flat rate based on assets undermanagement. DLJ Direct’s pricing schedule is presented to illustrate that, for ourpurposes, online trading is not significantly cheaper (see attached). Depending oneach Fund’s turnover rate, $20 per trade may be more expensive than 6 cents ashare.

4. Research. Merrill Lynch’s research, available online, is much more comprehensivethan the research advertised by online firms. Additionally, MPSIF will be givenaccess to Merrill Lynch’s research analysts (who have been ranked #1 byInstitutional Investor magazine for the past five years running).

5. The ability to set up one main account with three sub accounts provides addedconvenience for the fund.

6. Extending trades hours will be offered by the end of the year.

7. While Merrill offers over 4,000 funds, they do not offer Vanguard or Fidelity funds.They do offer comparable funds, but MPSIF members have expressed an interest inusing Vanguard Index Funds at certain times. An account can be opened up withVanguard (who also offers online trading) in order to buy these funds. They do notcharge a fee for zero balances, but do charge a $2.50 maintenance fee for thosebalances under $3000.

Website Development

The members of MPSIF are in the process of a building a website which will be used primarilyas a means of internal communication, but secondarily as means of marketing the organization,its proprietary views, and the performance of the funds. This will be the first stage of a longerterm strategy to market MPSIF as an educational opportunity to students here at Stern and to abroader public of alumni, students, and faculty at other universities.

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APPENDICES

PricingComparison

Merrill Lynch: Flat FeeBased on investing $900,000 in December, 1999 and the remaining $900,000 in March, 2000.

Basis Points Quarter Assets Under Management Quarterly Fee0.0059 1 $ 900,000.00 $1,327.500.0053 2 $1,800,000.00 $2,385.000.0053 3 $1,800,000.00 $2,385.000.0053 4 $1,800,000.00 $2,385.00

$8,482.50 Annual Fee

Merrill Lynch: Institutional Rate - 6 cents per shareBased on investing in 75% equities.Each fund owns approximately 30 companies, 90 total.Average share price is $45.Varying annual turnover rates.

First year fully invested:Total Investment: $1,350,000.00Avg Share Price: $ 45.00# of shares purchased 30000Cost per share $ 0.06Commission paid $ 1,800.00

Turnover rate: Total Commission Paid in year 10.3 $ 1,080.00 $2,880.000.4 $ 1,440.00 $3,240.000.5 $ 1,800.00 $3,600.000.6 $ 2,160.00 $3,960.000.7 $ 2,520.00 $4,320.000.8 $ 2,880.00 $4,680.000.9 $ 3,240.00 $5,040.00

1 $ 3,600.00 $5,400.001.1 $ 3,960.00 $5,760.001.2 $ 4,320.00 $6,120.001.3 $ 4,680.00 $6,480.001.4 $ 5,040.00 $6,840.001.5 $ 5,400.00 $7,200.001.6 $ 5,760.00 $7,560.001.7 $ 6,120.00 $7,920.001.8 $ 6,480.00 $8,280.001.9 $ 6,840.00 $8,640.00

2 $ 7,200.00 $9,000.00

*After year 1, total commissions paid should approximate those caused by turnover.

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Online Pricing: DLJ DirectTrades are less than 5000 shares.Approximately 30 companies per fund, 90 total.$20 pertradeVarying turnover rates

First year:Number of trades: 90Cost per trade: $ 20.00Commission paid: $ 1,800.00

Additional trades: Total commissions paid year 110 $ 200.00 $2,000.0020 $ 400.00 $2,200.0030 $ 600.00 $2,400.0040 $ 800.00 $2,600.0050 $ 1,000.00 $2,800.0060 $ 1,200.00 $3,000.0070 $ 1,400.00 $3,200.0080 $ 1,600.00 $3,400.0090 $ 1,800.00 $3,600.00

100 $ 2,000.00 $3,800.00110 $ 2,200.00 $4,000.00120 $ 2,400.00 $4,200.00130 $ 2,600.00 $4,400.00140 $ 2,800.00 $4,600.00150 $ 3,000.00 $4,800.00160 $ 3,200.00 $5,000.00170 $ 3,400.00 $5,200.00180 $ 3,600.00 $5,400.00190 $ 3,800.00 $5,600.00200 $ 4,000.00 $5,800.00

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PATRICK S. ADAMS69 Fifth Ave., Apt.3GNew York, NY 10003

212-627-9788psa204@stern.nyu.edu

Education: NEW YORK UNIVERSITY New York, NYLeonard N. Stern School of BusinessMaster of Business Administration, May, 2000Emphasis in Finance/International Business• Trustee Scholar, awarded merit based scholarship equal to one full year’s tuition• Officer, Association of Investment Management• Founding Member, Michael Price Student Investment Fund

CLAREMONT McKENNA COLLEGE Claremont, CABachelor of Arts, Economics/International Relations, May, 1994• Co-Captain Varsity Soccer, Four-year varsity letterman and SCIAC Champion, All-America Nominee,

All-Far-West, All-Conference, and Most Inspirational Player

Experience: GOLDMAN SACHS London /New YorkSummer 1999 Associate, Equities Division

• Participated in intensive ten-week training program for European sales, trading, and private clientservices.

• Rotated daily on equity, equity derivative, and convertible trading and sales desks.• Recommended short-term trading and long-term investment ideas.• Researched and presented on the likelihood of a global market correction.

1996-1998 MARC RICH GROUPAssistant Hedge Fund/ Portfolio Manager Zug, Switzerland• Researched and analyzed investments in Russian equities for firm’s $60m Russia specific portfolio.• Advised Chairman on portfolio strategy and recommended changes in weightings of blue chips and

second/third tier companies.• Traded short-term positions in equities and options (given $6m exposure limit).• Initiated in-house research of Hungarian and other Eastern European companies.• Produced and updated financial data reports for metal and mining portfolio manager ($50m capital

invested).• Executed all equity trades and handled settlement of trades for portfolio managers.

1995-1996 Junior Trader/Traffic New York, NY/ Zug, Switzerland• Negotiated copper concentrate and blister purchase and sale contracts (long-term and spot deals) with

counterparts in Europe, Latin America, China, Japan, South Africa, and India.• Executed LME futures hedge transactions for approximately 15,000 tons copper metal each month.• Administered contract writing, freight booking, letter of credit negotiation, metallurgical analysis,

invoicing, and accounting for copper shipments originating from and discharging in ports worldwide.• Proposed and implemented control system for physical metal trades resulting in cost saving and

improved inter-office coordination.• Trained new personnel in company risk management system for futures positions.

1994-1995 ALEX BROWN & SONS, INC. Baltimore, MDAssistant NASDAQ Trader• Made markets in thirty NASDAQ equities together with senior principal trader.• Assessed proprietary trading opportunities based on technical analysis.

Additional: • Proficient in German; knowledge of Spanish.• Co-President Stern Soccer Club.

- 23 -

COLIN CLARK, CFA422 East 14th Street, Apt. 4B

New York, NY 10009Tel: 212-995-8912

Email: cgc212@stern.nyu.edu

Education: NEW YORK UNIVERSITY New York, NYLeonard N. Stern School of BusinessMaster of Business Administration, May 2000Emphasis in Finance and Information Technology• Association of Investment Management (officer), Technology Club (member), Soccer Club (co-president)• Recipient of the Stern Fellowship

BARD COLLEGE Annandale, NYBachelor of Arts, Economics, May 1991• Cumulative G.P.A.: 3.9 of 4.0• Captain of Varsity Soccer/Volleyball teams and Coach of Women’s Varsity Soccer team• Honors included the All-American Soccer Scholar/Athlete of the Year, Stumthal Prize (economics),

Amicus Award (economics), Rose Award (economics), Lockwood Prize (academics), and Honor’s List

Experience: SALOMON SMITH BARNEY New York, NYSummer 1999 Associate – Equity Research Division

• Analyzed and built earnings models on companies in the brokerage industry• Assisted in the IPO launch of TD Waterhouse and LaBranche and the initial coverage launch of Schwab• Researched and wrote an industry report on Electronic Communication Networks (ECNs)

1996 - 1998 FIDELITY INVESTMENTS Boston, MAFund Analyst - Strategic Advisers, Inc.• Analyzed Fidelity and non-Fidelity funds focusing on small-cap and mid-cap growth investment strategies.Wrote internal research reports and rated funds based on quantitative and qualitative analysis, including meetings with fund managers.• Recommended funds to portfolio managers handling $8.5 billion in 13,000 high net worth client accounts.• Developed proprietary ratings model used to rank mutual funds based on returns, volatility, and consistency.

1995 - 1996Business Analyst - Fidelity Management & Research Company• Assisted in the development of a mutual fund database and software application to support internal and

external business needs. Increased the availability of mutual fund data to enhance in-house portfolioanalytic capabilities.

• Researched and made policy recommendations to senior management on the use and dissemination of mutualfund data. Wrote quarterly publication to communicate corporate-wide data distribution policies.

1993 - 1995 Senior Financial Representative/Brokerage Trader – Fidelity Retail Brokerage Services, Inc.•••• Executed trades in stocks, options, bonds, and mutual funds for retail brokerage customers.•••• Analyzed client objectives, advised clients on selection of financial products, monitored market trends, executed transactions, and provided clients with information for improved risk-adjusted performance.

1992 - 1993 NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY Boston, MA Registered Representative/Performance Analyst - Annuity Department

• Serviced annuity accounts and executed mutual fund trades for customers.

1990-1992 JEROME LEVY ECONOMICS INSTITUTE Annandale, NY Economic Research Assistant

• Provided economic research support to economists conducting macroeconomic research.• Researched the efficiency of the financial markets, primarily “the January effect.”

Additional: • Chartered Financial Analyst designation (1998); NASD Series 7 and Series 63 registered (1992)• Computers: BARRA, Baseline, Bloomberg, FactSet, Lipper, Morningstar, Minitab, MPI Stylus, Zephyr• Enjoy mountain biking, skiing, soccer, tennis, and volleyball.

- 24 -

ANDRE R. MAZZELLA, CFA73 Garden Street #3LHoboken, NJ 07030Tel: (201) 386-9447

E-mail: arm225@stern.nyu.edu

Education: NEW YORK UNIVERSITY New York, NYLeonard N. Stern School of BusinessMaster of Business Administration, May 2000Emphasis in Finance and Management• Co-President, Association of Investment Management.• Member, Graduate Finance Association and Sales and Trading Club.• Selected as an advisor to manage $2 million for the Michael Price Student Investment Fund.• Designated Stern Scholar for outstanding academic performance by obtaining a 3.72 GPA.

MONTCLAIR STATE UNIVERSITY Upper Montclair, NJBachelor of Science, Business Administration, August 1993• Graduated Cum Laude.• Financed 100% of college costs and living expenses through full-time employment.

Experience: LEHMAN BROTHERS New York, NYSummer 1999 Summer Associate, Equity Research – Wireline Telecommunications Equipment Group

• Prepared a coverage initiation report of a stock based on discussions with senior management, visits ofplant and facilities, industry fundamentals, financial projections, and company valuation.

• Researched recent CBOs/CLOs and prepared a database to facilitate the sales of this product.• Conducted a study of investment in telecommunications by traditionally non-telecom companies.• Listened to company earnings release conference calls and prepared notes for senior analyst.

1996-1998 PUTNAM INVESTMENTS Boston, MAInvestment Associate, High Yield Group• Performed fundamental and credit analysis on corporate bonds in the cable television, outdoor advertising,

motion picture exhibition, health care, shipping, metals and mining sectors.• Prepared internal research reports based on discussions with senior management of companies, visits of

plant and facilities, financial models and industry comparables.• Presented research and recommendations to portfolio managers that resulted in the rebalance of Putnam's

$1.5 billion position in high yield cable television holdings.• Assumed the lead analyst role for the motion picture exhibition sector and made recommendations that

resulted in a $40 million purchase order.• Led a bondholder group and successfully negotiated the terms of a consent solicitation and tender offer

which resulted in additional value to bondholders.• Evaluated equity instruments in search of opportunities to enhance returns in bond portfolios.

1994-1996 Supervisor, Mutual Fund Accounting, Multi-Strategy and Asset Allocation Funds• Managed a staff of ten portfolio accountants in the administration of diversified mutual funds that invested

in foreign and domestic equities, fixed income, emerging markets, and derivatives.• Supervised the construction of financial statements and authorized their release to shareholders.• Selected by senior managers and review committee for Putnam’s Supervisor Internship Program and

nominated by peers for Putnam’s Guiding Principles Award.• Promoted within 18 months from staff portfolio accountant to senior accountant to supervisor.

1994 BANKERS TRUST COMPANY Jersey City, NJClass Action/Reorganization Specialist• Apprised investment advisors, traders, and account representatives of corporate actions issues.

Additional: • Chartered Financial Analyst (CFA).• Registered Series 7 and Series 63.• Member, Association for Investment Management and Research (AIMR), BSAS• Volunteered to teach inner city high school students basic concepts in business and economics.• Enjoy cooking, reading, fishing, skiing, roller-blading, golf, and playing cards.

- 25 -

MITCHELL Y. WILLIAMS, CFA211-2N Thompson Street

New York, NY 10012-1367Tel: 212-982-9677

Email: myw203@stern.nyu.edu

Education: NEW YORK UNIVERSITY New York, NYLeonard N. Stern School of BusinessMaster of Business Administration, Emphasis in Finance, May 2000• Awarded Stern Fellowship• VP of Education, Association of Investment Management• Portfolio Manager/General Manager, Michael Price Student Investment Fund

ASSOCIATION FOR INVESTMENT MANAGEMENT AND RESEARCH (AIMR)Chartered Financial Analyst (CFA) designation, September 1998• Member of New York Society of Security Analysts (NYSSA)

UNIVERSITY OF FLORIDA Gainesville, FLBachelor of Arts, English, 1992, GPA 3.9• Semester abroad in Moscow, USSR, Summer 1988

Experience: CREDIT SUISSE FIRST BOSTON CORPORATION New York, NYFall 1999- Equity Research Technology Group, E-CommercePresent • Perform research for quarterly Online Brokerage industry report and weekly E-Commerce report.

DEUTSCHE BANC ALEX. BROWN New York, NYSummer 1999 Equity Research Summer Associate, E-Commerce Group

• Performed primary research on E-Commerce financial institutions through contact with seniormanagement and evaluation of financial statements, SEC filings, and trade publications.

• Constructed financial model to evaluate internet firm for initial public offering.• Developed weekly E-Commerce report, tracking technical, fundamental, and capital events.

Summer 1998 BANNER INVESTMENT RESEARCH AND CONSULTING Jacksonville, FLPrincipal• Established firm to assist former colleagues with Registered Investment Advisor start-up.• Created spreadsheet applications to calculate synthetic indices and retrieve data on portfolio

holdings from Bloomberg and Compustat.

1996-1998 BARNETT BANKS ASSET MANAGEMENT Jacksonville, FLVice President, Investment Communications. Barnett Capital Advisors, Inc.• Founded and managed department, which grew to 6 team members.• Created spreadsheet applications to analyze portfolio and market index data.• Collaborated with Sales Manager to create presentations and proposals under tight deadlines.• Supervised performance measurement and AIMR compliance for $11.2 billion in assets.• Partnered with Head of Quantitative Research to complete comprehensive asset allocation study.

1995-1996 Financial Analyst, Institutional Trust Division. Barnett Banks Trust Company, N.A.• Created automated system of linked databases to calculate AIMR compliant performance

measurement composites, track firm assets, and maintain portfolio characteristics.• Performed attribution and analysis on client portfolios, mutual funds, and composites.• Increased request for proposal (RFP) success rate from 10% to 33%.

1994-1995 THE TRAVELERS GROUP Orlando, FLResidual Market Specialist• Managed high-risk $60 million portfolio of insurance policies, generating $4.5 million in revenue.• Evaluated companies through financial analysis and direct contact with senior management.• Surpassed annual revenue maximization goal after only four months.

Additional: • Interests include WW II history, computers, golf, hiking, and financial markets.

- 26 -

Market Strategy Special: Q4 Market OutlookNovember 15, 1999

US Interest Rate OutlookThe Federal Reserve has stated that it will monitor several key areas of the economy inconsidering rate policy. Developments within those areas and their likely impact on Feddecision-making are outlined below. Comparisons are based on year ago reports.

Table 1. Areas the Fed Monitors.

Area Latest report Estimated rate impactEquity prices Near all-time highs NegativeLabor markettightness

Upcoming N/A

ECI Up moderately NeutralPPI Up sharply NegativeCPI Up moderately NeutralGDP price deflator Up moderately NeutralGDP Up sharply NegativeConclusion Up moderately – sharply Neutral – negative

FOMC MonitorBased on our review above, we conclude that the FOMC is likely to raise rates at its Nov. 16meeting, but then likely to keep them at that level, pending further economic data. Table 2summarizes Fed actions over the past year. In Table 3, we have created a scenario matrix ofthe four most possible outcomes for the November 16 meeting to help guide us thereafter.

Table 2. 1999 Fed Actions.

Date Federal Funds Rate Official BiasNovember 16 5.5%* Neutral*October 5 5.25% TighteningAugust 24 5.25% NeutralJune 29-30 5.00% NeutralMay 18 4.75% TighteningMarch 30 4.75% NeutralFebruary 2-3 4.75% Neutral

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Table 3. Fed Action Scenario Matrix.

Fed Action Official Bias Outlook CommentRaise Tightening Bearish Worst Case Scenario. At least one more

undiscounted Hike likely.Raise* Neutral* Bullish Expected Action. Loosened Bias. Discounted

Hike over with, clear sailing from here. Notlikely to be more in near future.

No Action Tightening Neutral toBullish

Neutral Case: Continuation of Current Policy,Uncertainty remains, especially with regard tohow many more Hikes could be made.Bullish Case: Hike already discounted thereforeMarket Undervalued.

No Action Neutral ExtremelyBullish

Loosened Bias. Already Discounted Hikecreates Undervalued Situation.

*Projected

Bond Yields vs. Earnings YieldsIncreasing bond yields would suggest that P/E ratios could be headed downward if current trends continue.

Chart 1.

Source: Bloomberg

Earnings yield vs. bond yield

2.000%3.000%4.000%5.000%6.000%7.000%8.000%9.000%

10.000%

S&P500 E/P 10YR NOTE

- 28 -

Economic Indicators

We expect inflation, as measured by CPI, to be in the range of 2.0% to 2.4% (annualized). Such low inflationexpectations, coupled with 6% plus long-term nominal interest rates, leads to 4% plus real rates. We considerthis low inflation environment to be ideal for the U.S. stock market in the next 12 –18 months.

There are three main sources of inflation: cost-push, demand-pull, excessive money supply growth. At this time,we believe all three are unlikely to cause higher than expected inflation.

The 4.2% unemployment rate is the lowest in over 30 years. Some believe that such low unemployment willtighten labor markets and ultimate lead to cost-push inflation. However, we believe that strong productivity gainswill more than offset the higher projected labor costs.

Imports of goods and services continue to be strong and will keep a lid on demand-pull inflation. With the U.Seconomy at full capacity, imports are soaking up excess demand. Import prices, particularly commodities,remain near historical lows. The increased free trade and globalization of worldwide economies have allowedcountries with excess capacity to sell their goods to the U.S. at low prices.

The third source of inflation of excessive money supply is the most unlikely. With the Fed keeping a close eyeon money supply, it is doubtful that the money supply will grow faster than the economy and cause inflation.

With near-term inflation expected to be stable and low, we expect that the next Fed tightening may be its last fora while.We agree with the consensus real GDP growth forecast of 3.8% in 1999 and 2.7% in 2000, as measured by theNational Association for Business Economics survey of 37 forecasters. We believe that the Fed’s latest series ofrate hikes will work its way into the economy over the next year. We see both consumer spending and businessinvestment slowing.

Consumer confidence has been on a downtrend since June, probably reflecting higher mortgage rates. Businessactivity as measured by National Association of Purchasing Managers Index and private construction spendinghas declined in recent months. We expect these declines to be partly offset by higher expected exports as theworld economy recovers. Faster export growth will not keep the trade deficit from widening, as imports keepgaining ground. However, the trade gap’s drag on the economy will be smaller in 2000 compared with 1999.

Finally, we should keep in mind that GDP calculations were revised going forward beginning with the 1999 thirdquarter. The most significant change was that business spending on computer software will now be treated asinvestment and count toward GDP. Previously, it had been treated as the equivalent of a raw material purchase.We do not see this change significantly affecting future GDP since all historical numbers have also been revised.

International markets

Europe (EMU)

We consider Europe a very strong investment case for the following reasons:

• Economic growth is accelerating in Europe, while it seems to be decelerating (just a little bit, though) in theUS, as most of the latest sentiment indicators and economic data show:

- third-quarter GDP rose by about 1% q/q, the fastest gain since 2Q97 and well above the region’s trendpace of about 0.6% q/q;

- the IFO business survey in Germany, a closely observed indicator, is confirming that the path ofeconomic activity is accelerating;

- final domestic demand is growing on a 2.5/3.0% y/y pace, which is slightly above its long-run average;

• There are absolutely no signs of inflation;

- 29 -

• The hawkish comments by the European Central Bank (ECB) may push the market to perceive that theECB is getting ahead of the curve, in a moment when the markets are fearing that the Fed is getting beyondthe curve.

- Nov. 4 decision to increase the European official rates by 50 basis points confirms that perception;- A recent study by BIS suggests that the neutral real short-term rate for the Euro area might be about

3.5%. The expected rising trend in the official rates would fit the recent pattern by which central banksgradually return real short term interest rated to normal as the output gap closes, rather than leavingthem low until inflation starts picking up and then have to hike sharply.

• Intra-Europe M&A activity is extremely strong, exceeding by dollar value the M&A activity in the US;

• Capital flows are very strong as the “equitization” process (i.e. the big shift from the traditional fixed-income investment strategies to more innovative equity-oriented strategies) has only recently started (last 2years) and has a lot to go further.

The only risk investing in Europe would be a serious market correction in the US. Historically, Europe has neverbeen able to de-couple from the American market, but, given the aforementioned bullets, we think that there isroom for Europe to outperform the US market.

In our view, the best investment opportunities are in the core Europe (France, Germany and Italy) and in thefinancial and telecommunication sectors.

Japan

We have a bullish stance toward Japan too as restructuring story seems to be real and will result in substantial,continuing earning gains for Japanese companies, notwithstanding a still weak economic outlook.

• If the economic activity strongly recovers in the next year, earnings will receive a further boost; the strongflow of international capitals to Japan could remain strong, giving a dollar-based investor a double kick interms of a stronger yen and higher stock prices.

• Restructuring has also increased the wealth of households holding equities; it is estimated that the marketvalue of households financial assets rose the equivalent of 6% of the GDP; the equity holdings are mostlyconcentrated among the upper-class, which has already benefited from the reduction of the top marginal ratefrom 65% to 50%. The “wealth effect” enjoyed by this part of the population will help pushing higher theoverall consumer demand.

• The Government seems to pay increasingly more attention on economic issues; the perception is that it willintervene again with a new fiscal package in case of need, while the Bank of Japan has already adopted aneasy monetary policy in the attempt to boost economic activity.

The Japanese economy seems to be invigorated by technology; digital cellular technology is booming andpenetration has now reached 40% of the population, well above the 8% level in the US. We thus have a positivestance toward the telecommunication/technology sectors; additionally, the consolidation process just started inthe financial industry is the reason why we would suggest some picks in the financial/banking sector. On theother side, an eventual rise of the yen could adversely affect the bottom line of the mayor Japanese exporters

- 30 -

Global Market Indexes

Ever since the market depths of October 1998, global indexes have been consistently following the lead of theUnited States. Primarily because the world looked to the U.S. Federal Reserve to provide leadership during theeconomic crises that befell Asia from late 1997 through 1998. Though Asia has not fully recovered, there areindications a recovery is underway. Looking at the graph below, it is easy to observe that the Hang Seng, theindex hit hardest by the Asian economic crisis, has been the best relative performer. The graph also revealsanother notable fact: other than the Hang Seng, the major global indexes have been moving in virtual lock-stepwith each other. We believe that the rest of the world continues to look to the U.S. Federal Reserve forleadership. As the world looked the Fed and a strong U.S. economy to lead it out of the Asian Economic Crisis,it is also expecting it to lead it through a global economic recovery. So whenever the Fed makes a policy moveor takes a position the world markets react as the U.S. markets do.

As long as the globe continues to look to the U.S. for policy leadership, we do not expect a decoupling betweenthe U.S. and global markets any time soon.

Chart 2.

Relative Performance of Global Markets

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S&P 500

DAX

FTSE 100

Nikkei

Hang Seng

Hang Seng

As mentioned earlier, given what we feel is a benign inflationary environment, the outlook is quite bullish forstocks. Earnings growth continues to be strong, signaling a robust economy. The Fed, through its rate hikes,may be trying to engineer a soft landing in anticipation of a recession. Though this may be unnecessary.

The markets have been trading in a narrow range for much of the year because of the uncertainty regarding Fedpolicy. Most of the uncertainty, however, revolves around when the rate hikes will occur and how many, not if.We believe that markets have already priced in one rate hike, being the forward-looking creature that it is. Onthe other hand, we must still be aware of any actions that could taint this rosy outlook. Therefore we must bemindful of the bias that the Fed takes, because further rate hikes might not be already discounted in the markets(refer back to Table 3.)

- 31 -

Commodity Outlook

Precious Metals

The probability of synchronous economic growth in the three key economies including North America, Europeand Asia will contribute to the rise of global metal demand growth through 2000 and beyond.

The biggest risk for precious metals is a demand slowdown in China, which is one of the most crucial preciousmetal markets.

Pulp & Paper

Pulp & Paper is very economically sensitive and cyclical. From the beginning of this year, Pulp & Paperproducts have recovered as the result of firming economic activity in Europe & Asia. However, a low inflationenvironment could put a major damper on pulp & paper prices.

This cyclical commodity can be very good for the portfolio during an economic upswing and can also be a keydefensive holding strategy when it appears that inflation is on the horizon.

DRAM

The price of DRAM has been moving up in the past quarter due to exceptionally strong growth in demand forcomputers.

The rising in DRAM price could raise the following questions:

1. Will these price increases be absorbed by OEMs or passed on to customers?2. Rather than pay these higher prices, will OEMs feature products with 64 and 96 megabytes of DRAM in

stead of today's standard business configuration of 128 megabyte and let customers decide whether to payfor the premium for greater memory?

We believe that the continued recovery of the European and Asian economies will support the current strongdemand for DRAMs.However, the rising in price of DRAM with elastic demand will possibly put pressure on DRAM price in 2000unless the global demand market is exceptionally high.

Crude Oil

Venezuela, Mexico and Saudi Arabia are scheduled to meet November 17 to discuss crude oilpolicy for the remainder of the year. In addition, Venezuela is calling for a meeting inDecember to discuss the key issues that will be addressed in March 2000.

Major producers remain reluctant to address production cuts as they try to exploit the rapid price rise in crude oilover the past year.The outlook for Crude Oil in the year 2000 is slightly bearish due to the possibility of increased production fromOPEC nations, which have had a history of overproducing. The current price of oil makes this an even moretempting option.

Steel

US steel consumption is expected to remain strong throughout year 2000. The increase in global industrialproduction and improving global economy will raise the demand for Steel. Asian consumption has accounted for40% of steel consumption worldwide. In the second half of 1998, production declined at a faster rate thandemand, signaling the onset of a steel price recovery. Nevertheless, the increase in industrial productionworldwide in 1999 is supporting the growth in steel industry. In term of Domestic demand in US, theconsumption remains strong. This trend is expected to continue throughout the year 2000. The recoveries in bothEuropean and Asian countries are expected to be the main support for steel demand through year 2000

- 32 -

After four consecutive years of underperforming the S&P 500, the steel stocks appear relatively inexpensive.Steel is an especially useful indicator of the recovery of global industrial production in the near future. However,there are some risks related to steel industry in term of international trade practices including anti-dumping

The following table summarizes our commodity view and outlook:

Table 4. Commodity Outlook.

Commodity Outlook ReasonPrecious Metal Bullish Global DemandPulp & Paper Slightly Bullish Global Demand vs. Low inflationDRAM Slightly Bearish Slowdown in Demand due to higher priceCrude Oil Neutral to Bearish Higher Production level in 2000Steel Bullish Recovery of Global industrial Production

Currencies

The currencies show a different view of the US economy. Overall expectations indicate that the globaleconomies are recovering while the US economy could possibly cool down. This means a bearish outlook forthe dollar. The dollar index has already shown weakness in response to this increased overseas economicoptimism.

Investor sentiment supports this view. A recent poll conducted by Barrons indicates that investors expect thedollar to continue to fall. This sentiment combined with any signs of capital flow to foreign investments willfurther exacerbate the dollar's slide.

This is especially the case for the Yen, which has shown recent signs of a rebound based mostly on optimismwithout strong empirical evidence of a Japanese recovery yet. The Euro will continue to show strong promise asinterest rates move further in line with favorable expectations.

It is important to note that the recent drivers have not been so much economic as market driven in nature. This isprecisely the reason for the rebounding Yen based on expectations of increased investments. In this case the Yenserves as a good bellwether for currency sensitivity to investment flow since it is known for its high correlationto the Nikkei and real estate market.

Investment flow related Dollar erosion will continue to occur as international money returns home with signs ofeconomic growth and away from the safe haven of the greenback where it had sought refuge.

Expert Opinion

Noted investment experts tend to view the following as notable trends:

Earnings should be strong, with double-digit growth across sectors over the next 12 months. Many feel that thistrend will continue through the year 2000.

- 33 -

Inflationary pressures are thought to be stronger than are readily apparent from popular indicators. Real GDPgrowth is expected to continue. This combined with decreases in unemployment should prompt the FED to hikein November. However, not all experts do accept this view and some are predicting minimal inflationarypressures.

Industries to watch over the next 12 months include the communications industry (esp. MCI Worldcom) andsectors that have performed poorly over the last 12 months (homebuilders, supermarkets, HMOs etc.).Enthusiasm regarding some industries, such as the financial services sector, might prove short-lived wheninvestors find that benefits are achieved from recent consolidation

On the international front, approximately 64% of fund managers surveyed think that the Euro will be thewinning currency over the next 12 months.

Sectors

Two market strategists opinions are summarized in the Table 4A below regarding how sector allocations meettheir optimal targets (headings labeled ‘Goldman Sachs’, ‘Morgan Stanley’). Also included in this table are howthese two firms and Lehman actively manage their select portfolios. As clearly shown, portfolio managers atthese various firms do not necessarily conform to what their firm’s market strategy teams would recommend.Please note that all firms do not use the same sector definitions and actual points of time may vary across firms.

Using Morningstar mutual fund screening, Table 4-B, summarizes how a sample of major mutual funds usingvarious investment styles (Large Value, Large Growth and Small/Mid-Cap Blend) diversity across sectors. Forboth Large Value and Large Growth, only funds with 5-Star ratings were used. For the Small-Mid Cap Blend,some 4-Star ratings were used. In all cases, no data prior to 6/30/99 were used.

Table 5-A. Wall Street Sector Weightings (figures in % except P/E).

Goldman Goldman Lehman MorganSachs Portfolio S&P 500 Portfolio S&P 500 Stanley S&P 500

Financials 18 15 14 Utilities 0 3 Utilities 3 2Basic Mtls 4 1 3 Energy 2 6 Energy 6 6Energy 7 12 6 Financials 11 14 Financials 12 15Telecom 9 12 9 Cap Good 9 8 Cap Good 6 8Transports 1 0 1 Basic Mtl 2 3 Basic Mtl 10 4Cons Cycl 9 12 9 Cons Cycl 7 9 Cons Dur 3 2Tech 24 24 24 Cons Stap 2 12 Cons Stap 3 8Cons Stap 11 10 12 Telecom 16 8 Telecom 7 9Health 9 5 10 Transport 0 1 Cons Non-

Dur16 12

Cap Good 7 6 8 Health 7 11 Transport 5 1Utilities 1 3 3 Tech 44 25 Health 11 11

Tech 18 22P/E 32 24 P/E 40 26

- 34 -

Table 5-B. Sector Weightings and Investment Styles (figures in % except P/E, P/B)

MORNINGSTARMUTUAL FUND HOLDINGSLg Growth Lg Value Sm/Mid Agg S&P 500 Russell

2000Utilities 0 1 1 2 4Energy 3 5 2 6 3Financials 10 24 11 15 20Ind Cycl 8 9 7 12 17Cons Dur 1 4 3 2 5Cons Stap 2 7 1 8 3Services 24 15 29 15 18Retail 8 7 4 6 5Health 11 11 9 11 8Tech 34 18 32 22 17

P/E 43 30 35 34 24P/B 11 7 8 8 4

Y2K

For the most part, the markets seem to have paid little attention to the Y2K issue. A fewcompanies, notably IBM, have been affected by Y2K concerns. While such concerns areprudent, they will have a very short-term impact. We expect that the second the calendarturns to 2000, these concerns will be proven to be unwarranted. If for some unlikely reason,there is sudden panic selling later this year because of rebornY2K concerns, we would takefull advantage of that opportunity.

For additional information, please contact:

Economic Indicators: Ray Lam (rwl201); International Markets: Nico Bonelli (nb314);Global Market Indexes: Eric Cha (hsc210); Currencies: Dmitry Zbarko (dqz6692);Commodities: Poon Sukarom (ds497); Interest Rates/Fed Watch: Adam Wilson (adw209);Sector Watch: Sheldon Brandau (scb231); Expert Overview: Neil Samuels (nss205)

- 35 -

INDIVIDUAL FUND OUTLOOK STATEMENTS

Growth Plus Income Fund

When the Fed convenes on November 16, we believe that the Fed will raise rates 25 basis points, but

then assume a neutral bias, a loosening from its current tightening bias. We view this as bullish. The

markets have already priced in this next cut, and will interpret a neutral bias as the final cut, at least

in the near term. This bodes well for growth stocks in particular. We are prepared to invest in

growth companies in order to take advantage of this opportunity. In particular, we plan to be

overweight in high growth sectors, namely technology and healthcare. The three pillars of this bull

market will remain in place—low interest rates, earnings, and liquidity. Despite the recent rise in

interest rates, they remain at historically low levels. The strong US economy will produce continued

strong earnings performances by growth companies. Finally, there is plenty of cash on the sidelines,

choosing to avoid the uncertainty that the Fed has deftly engineered, yet waiting to pounce once the

Fed’s actions indicate a clear market direction. The bond market will also respond positively. It will

be buoyed by two factors: 1) the historically high real rates that bonds are earning given today’s low

inflationary environment; and 2) confidence in a Fed ever vigilant to fight inflation.

Value Fund

The objective of the Value Fund is to position itself to benefit from the anticipated recovery of

individual companies and certain depressed economies worldwide. As global economic production

expands, it will boost those companies in more capital-intensive industries. Further enhancing the

attractiveness of these companies is the strong recovery of commodity prices. Our fund also intends

on retaining some exposure to foreign currencies, as we would like to take advantage of the

appreciation of foreign currencies relative to the US$. This would be accomplished not by active

currency investing, but by rather through the purchase of international mutual funds or individual

foreign stocks. Domestically, we believe there are many investment opportunities, especially for

sectors that have not participated in the overall market’s recent performance. Our fund’s value

strategy will emphasize the identification of those firms that have had their performance hindered by

fears of rising interest rates,

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inflation and overreaction of investors to temporary underperformance. These firms will typically

have P/B, P/E ratios lower than their peers or are better positioned within their respective industries

to benefit from a recovery.

Small Cap Fund

Our outlook for long-term investing in the small-cap arena is bullish. This is based on several

assumptions, outlined below, which we will continually monitor with respect to our investment

objectives.

We consider the FOMC’s most likely near-term course of action to be a 25 basis point increase in the

Fed Funds target rate on November 16, with the adoption of a neutral bias. Following this rate hike,

we do not see the Fed raising rates again in the near future. We have already seen indications that the

previous rate hikes over the past few months have already slowed the economy’s growth.

Although we feel that higher rates are likely to have a negative impact on high P/E growth stocks, the

small cap growth stocks should be somewhat protected from this since they are generally trading at

lower multiples to earnings than large-cap growth stocks. Further, a silver lining could materialize if

the market perceives an increase to be the last one for a while, clearing the way for future growth. An

increase could be indirectly beneficial for value stocks, as well, if a rotation out of higher-P/E growth

and/or large-cap stocks takes place as investors begin to place more emphasis on current intrinsic

value.

We consider continued low inflation to be the most likely near-term scenario, though we do see some

threat from a falling dollar. Low inflation is a positive for all stocks, and for growth stocks in

particular.

We don’t know whether large cap stocks will continue to outperform small cap stocks. Partly because

of that under-performance, however, we are quite bullish on the small-cap sector in general. We see

value in small cap stocks, and since we are long-term investors and careful stock-pickers, we’re

prepared to be

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patient as the value in excellent, mispriced small companies is realized. We also believe that the

relationship between small and large cap performance will tend toward its historical norm, which

would push small cap returns higher in relation to large caps.

We see a few potential catalysts for increases in overall small cap valuations, some or all of which

may be interrelated:

• Large cap growth stocks, which have been driving the market indexes, become less attractive or

fall out of favor

• The economy slows, leading to widespread earnings disappointments and a decrease in

expectations of future growth

• Investors refocus on fundamental, intrinsic current valuations, as opposed to projections of future

growth

• Institutional investors place less emphasis on asset liquidity, as memories of recent crises fade

• Liquidity and safety-obsessed foreign investors withdraw capital from U.S. large cap growth

stocks as overseas economies improve.

It may be that none of these catalysts develop in the near-term. There are, however, a number of

things —including the recent under-performance of small cap stocks as a whole, the historical better

performance of small caps vs. large caps, the opportunity to add value as stock pickers in a less

efficient market, and the positive economic environment— that lead us to be excited about

opportunities in the small cap arena.