Sample new presentation for Chicago Equity Partners

1
Historical Bear Market Characteristics (1936 -
Present)
2
Peak-to-Recovery Time
vs.
Decline Severity (1936-Present)
100
80
60
2
R
0.8638
40
20
0
-20
-60.00
-50.00
-40.00
-30.00
-20.00
-10.00
0.00
Market Decline
3
Accessor Growth FundJuly 17, 2001Presented
byChicago Equity Partners
Michael P. Wagner Director Client Service
David C. Coughenour, CFA Managing
Director Research
4
Facts About Chicago Equity Partners
Assets Under Management March 31, 2001 7.2
Billion Clients Assets (M)
No. Corporate 2,524.3 35 Foundations
Endowments 1,008.5 31 Funds 2,258.6
4 High Net Worth 169.4 17 Public
1,021.1 12 Taft-Hartley 194.6 8
Total 7,176.5 107
Products Assets (M) Large Cap Equity
5,167.4 Mid Cap Equity 648.2 Small Cap
Equity 305.4 Customized Balanced
Accounts 986.2 Fixed Income
69.3 Total 7,176.5
People Portfolio Managers/Trading 16 Client
Service/Sales/Marketing 15
Compliance/Operations/Technology 6
Administrative 6 Total 43
5
Investment Philosophy

• Balance investment returns against client
  benchmark with explicit risk parameters
• Remain sector neutral
• Maintain fully invested portfolios
• Employ proprietary quantitative methods to
  analyze fundamental information and identify
  value in efficient markets

6
Strategy

• Goal is to add incremental value (alpha) over
  benchmark by being
• Disciplined
• Objective
• Consistent

Performance results are gross of fees.
7
Stock Selection
Stock Universe

• Sort by Industries

11 proprietary model factors

• Momentum factors
• Estimate momentum
• Earnings surprise
• Downward earnings revision
• Upward earnings revision
• Earnings Change

• Value factors
• P/E ratio
• Price/book ratio
• Cash flow
• Dividend discount model

• Quality factors
• Forecasted earnings dispersion
• Leverage

Model Output
Stock Ranking by alpha
8
Stock Ranking within Industry by Forecasted Return
Highest
Buy
30
30
Sell
Lowest
9

• Market has been dominated by sharply higher
  volatility and violent factor rotation over the
  past six months.

Accessor Growth fund 105 stocks
CEP inception w/Accessor fund 70 stocks
10
Active Risk

• If an investment manager is being compared to a
  performance benchmark, then the difference in
  return between his portfolio return and the
  benchmarks return is of crucial importance, the
  difference is active return.
• The Active Risk is defined as the standard
  deviation of the active return. Active Risk is
  also known as Tracking Error, since it
  describes how well the portfolio can track the
  benchmark.

11
Portfolio Construction/Risk Control

• Goal Make sure we get consistent returns for
  the risk we take
• Understand Benchmark Characteristics
• Set Tracking Error Constraint
• Target Excess Return
• Build Portfolios

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Portfolio Construction
Eliminate
Neutralize
Capitalization Variance
Emphasize
Stock Selection
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Sector Weightings
As of 5/31/01
14
Accessor Growth Fund
as of 05/31/01
15
Example-American Home Products (AHP)
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Why Not Sector/Size/Style Bets?

• Over a long time frame a diversified portfolio
  substantially outperforms the various sector
  components on a risk-adjusted basis.
• The long-term winning sectors in terms of return
  are nearly impossible to identify--even after the
  fact!
• On a short-term basis, there is substantial
  evidence against the efficacy of market timing --
  whether this is measured in size and style terms,
  or in sector terms.

17
Source Ibbotson Associates
18
Source PSN
19
Source PSN
20
Large Cap Core Universe (1995-99)
Excess Annualized Return
vs.
Annualized Tracking Error
Percentage Outperforming lt 3 Tracking Error
57 gt 3 Tracking Error 31
10
Average -2.0
5
0
Annualized Excess Return ()
-5
-10
-15
0
1
2
3
4
5
6
7
8
9
10
Source PSN
Annualized Tracking Error ()
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Why a Risk-Controlled Approach?

• Empirical evidence supports the contention that
  active management can consistently add value over
  3-5 years, if it is pursued in a risk-controlled
  fashion.
• Broad evidence of negative value-added stems from
  analysis of broad segments, rather than focusing
  on specific sub-segments of investment approach
  or tracking error.
• Most managers detract value because of the
  excessive impact of market timing elements that
  are negative on average, overwhelming the impact
  of positive average security selection.
• Higher tracking error approaches can beat the
  benchmark by a larger amount, but have a higher
  probability of underperforming and by a greater
  amount. This is because efficiency is lost as
  tracking error increases. The trade-off between
  return and tracking error is not uniform, largely
  due to the constraint of a long-only portfolio.

22

• Value-based rally began as typical earnings-based
  factors drove a sector-oriented rally
• This was followed by a focus on P/E, Downward
  Revisions and Earnings Dispersion across sectors
• This has been followed by an emphasis on
  non-earnings value metrics like Dividend Yield
  and P/B

23
Our Factor Approach

• Our model represents a balance of estimate
  momentum, quality and value factors. This
  weighting is determined based upon the long-term
  average preferences of the market.
• In the growth universe, the value metrics keep us
  out of the tails and drive us toward the center
  of the distribution. However, the primary
  drivers of the growth stocks over the past decade
  have been earnings growth related factors.
• Value factors as primary drivers of relative
  growth stock performance, which we have seen over
  the past six months, are anomalous and signal
  broader market and economic uncertainty, which is
  likely to be temporary.

24
Our Factor Approach

• Our models factor weights will adjust
  dynamically if there is a persistent trend
  movement in the markets preferences for
  particular factors in the way that it values
  securities. This moderated approach prevents
  getting burned by factor shifts and subsequent
  reversals.
• If sharp factor rotation continues we dont want
  to chase the market by shifting weightings to
  factors that the market has most recently
  favored.

25

• Historical market averages are above long-term
  average P/E of 14 (measured from 1926-present)
• Current SP 500 trading at both trailing and
  forward P/E of 21
• Before bubble burst, SP Tech sector trading at
  twice P/E multiple of any other growth sector,
  like Healthcare or Consumer Staples
• Today, Tech sector trades at a similar multiple,
  of around 30, with other growth sectors
• Value sectors trading in high teens to low-mid 20
  multiples, which are high relative to historical
  standards
• All sectors high relative to historical ranges,
  though we dont see any disconnect between
  sectors that we saw previously.

26

• Market is probably telling us that this is a
  cyclical downturn
• Above -average earnings growth path should return
  to an above average earnings growth path with the
  catalyst being an underlying improvement in
  economic structural productivity

27

• Model incorporates upward and downward revisions
  in analyst estimates for earnings in the current
  and next fiscal years.
• Model also incorporates the magnitude of the
  change in estimates over the last one and three
  months.
• We dont use long-term growth rates, which are
  always highly inflated, our research shows this
  factor has no reliable bearing on stock price
  movements.
• We dont use price targets and we dont forecast
  multiples.
• We compare one stock versus another, given
  current multiples and the analyst consensus
  earnings expectations.
• We use information that is relevant in
  forecasting near and intermediate-term stock
  moves-are the earnings expectations moving up or
  down and by how much.

28
SP/BARRA Growth - SP/BARRA Value Performance
History
Growth Outperformed Value
Value Outperformed Growth
Source Ibbotson Associates
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Footnotes
Information on Accessor Funds, Inc. may not be
distributed to the public unless it is preceded
or accompanied by the prospectuses of Accessor
Funds, Inc. which describe in detail the
investment policies, management fees, and other
matters of interest to the prospective investor.
Through separate prospectuses, the Fund offers
two classes of shares, the Investor Class Shares
and the Advisor Class Shares, shown here. Each
class has different expenses that would affect
performance. Alloset is proprietary asset
allocation software of Accessor Capital
Management LP. Please contact Accessor Funds at
800-759-3504 for a free copy of the current
prospectus. PLEASE READ THE PROSPECTUSES
CAREFULLY BEFORE YOU INVEST OR SEND MONEY. The
performance data quoted represents past
performance of the Advisor Class shares and is
not indicative of future results. The investment
return and principal value of an investment will
fluctuate so that an investors shares, when
redeemed, may be worth more or less than their
original cost. The benchmark comparative
indices represent unmanaged returns on various
financial assets and does not reflect fees or
expenses. You cannot invest in an index. Past
performance is not a predictor of future results.
Except as otherwise indicated, the information
set forth herein has been extracted from various
public and private sources. Accessor makes no
representations as to the accuracy of the
information, nor has Accessor attempted
independently to verify it. All trademarks are
the property of their respective organizations.
The prospectuses of Accessor Funds, Inc.
describe in detail the Funds investment
policies, all fees and expenses and other matters
of interest to the prospective investor. Alloset
is the proprietary asset allocation software of
Accessor Capital Management LP. Alloset and
Accessor are registered trademarks of Accessor
Capital Management. 1. a. Effective March 16,
2000, Chicago Equity Partners Corp. manages the
Growth Fund (formerly managed by State Street
Bank and Trust Company from inception to July 20,
1997 and Geewax Terker and Company from July 21,
1997 to March 15, 2000). 2. The SP 500 Index is
an unmanaged index of 500 common stocks chosen to
reflect the industries in the U.S. economy. The
SP 500/BARRA Growth Index is an unmanaged index
of growth stocks in the SP 500 Index. Large
capitalization growth stocks are the stocks
within the SP 500 that generally have high
expected earnings growth and higher than average
price-to-book ratios. The SP 500/BARRA Value
Index is an unmanaged index of value stocks in
the SP 500. Large capitalization value stocks
are the stocks within the SP 500 that generally
are priced below the market average based on
earnings and lower than average price-to-book
ratios. The indices represent unmanaged returns
on various financial assets. Investments cannot
be made directly in an index. Past performance is
not a predictor of future results. Except as
otherwise indicated, the information set forth
herein has been extracted from various public and
private sources. Accessor makes no
representations as to the accuracy of the
information, nor has Accessor attempted to
independently verify it. All trademarks are the
property if their respective organizations.