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Subject: APM Q2 2006 News
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      <TABLE height=3D"15%" cellSpacing=3D0 cellPadding=3D0 =
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      border=3D0>
        <TBODY>
        <TR>
          <TD class=3Dtopleft width=3D"22%"><A=20
            href=3D"http://www2.business.ku.edu/apm/amp_frontpage"><IMG =
height=3D85=20
            =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/apm_resources=
/apm_logo.gif"=20
            width=3D108 border=3D0></A></TD>
          <TD class=3Dtopright vAlign=3Dtop align=3Dleft width=3D"78%">
            <P><!-- InstanceBeginEditable name=3D"Date" --><SPAN =
class=3Dtitle1>APM=20
            Quarterly<BR>2nd Quarter=20
            2006</SPAN><!-- InstanceEndEditable --><BR><SPAN =
class=3Dheadingsub>a=20
            publication of Applied Portfolio Management, KU School of=20
            Business</SPAN></P></TD></TR></TBODY></TABLE></TD>
    <TD><IMG height=3D85 alt=3D""=20
      =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
      width=3D1 border=3D0></TD></TR>
  <TR>
    <TD class=3Dleftpane vAlign=3Dtop align=3Dleft bgColor=3D#ffffff>
      <TABLE width=3D"100%" border=3D0>
        <TBODY>
        <TR>
          <TD class=3Dleftnewsheading>Inside This Issue:</TD></TR>
        <TR><!-- InstanceBeginEditable name=3D"Story List" -->
          <TD class=3Dleftsubheading>
            <UL>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Golf">APM=20
              Golf Returns </A>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#speakers">Guest=20
              Speakers </A>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#capfed">CapFed=20
              CEO Visit </A>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#rupp">Joanna=20
              Rupp, UChicago Endowment</A>=20
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#lton">Linktone=20
              on Sale! </A>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#mrh">Stock=20
              Update - MRH</A>=20
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#sgms">Stock=20
              Update - SGMS </A>
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#donors">Donors</A>=20

              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#alums">Alumni=20
              News </A></LI></UL></TD><!-- InstanceEndEditable --></TR>
        <TR>
          <TD class=3Dleftnewsheading>Links:</TD></TR>
        <TR>
          <TD class=3Dleftsubheading>
            <UL>
              <LI><A href=3D"http://www2.business.ku.edu/apm" =
target=3D_blank>APM=20
              Website</A>=20
              <LI><A=20
              =
href=3D"http://www2.business.ku.edu/apm/portfolio/portfoliotyped.shtml"=20
              target=3D_blank>APM Portfolio</A>=20
              <LI><A class=3Dleftsubheading =
href=3D"http://www.business.ku.edu/"=20
              target=3D_blank>KU Business</A>=20
              <LI><A href=3D"http://www.ku.edu/" target=3D_blank>KU Home =
</A>
              <LI><A href=3D"http://www.ku.edu/home/cshenoy" =
target=3D_blank>Prof.=20
              Shenoy's Homepage</A> </LI></UL></TD></TR></TBODY></TABLE>
    <TD vAlign=3Dtop align=3Dleft bgColor=3D#ffffff>
      <TABLE width=3D"100%" border=3D0>
        <TBODY>
        <TR>
          <TD vAlign=3Dtop align=3Dleft><!-- InstanceBeginEditable =
name=3D"Beginning" -->
            <P class=3DmainHeading>Portfolio Performance Report<SPAN=20
            class=3Dstyle1></SPAN></P><!-- InstanceEndEditable -->
            <TABLE class=3Dperformancefulltable cellSpacing=3D0 =
width=3D"100%"=20
            bgColor=3D#cccccc border=3D0><!--DWLayoutTable--><!-- =
InstanceBeginEditable name=3D"Performance Table" -->
              <TBODY>
              <TR>
                <TD class=3Dperformancetotal width=3D107>&nbsp;</TD>
                <TD class=3Dperformancetotal width=3D108>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>Total=20
                  Return YTD</STRONG></A></DIV></TD>
                <TD class=3Dperformancetotal width=3D106>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>2nd=20
                  Q Return</STRONG></A></DIV></TD>
                <TD class=3Dperformancetotal width=3D111>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>Latest=20
                  4 Quarters</STRONG></A></DIV></TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Dperformancetotal><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>SP500</STRONG></A></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">1.8%</A>=20
                  </DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">-1.9%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">6.6%</A></DIV></TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Dperformancetotal><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>SP600</STRONG></A></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">7.2%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">-4.8%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">12.9%</A></DIV></TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Dperformancetotal><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>NASDAQ</STRONG></A></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">-1.5%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">-7.2%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">5.6%</A></DIV></TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Dperformancetotal><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"><STRONG>APM=20
                  </STRONG></A></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">3.6%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">-2.0%</A></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance">20.7%</A></DIV></TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Dperformancetotal><A=20
                  =
href=3D"http://www2.business.ku.edu/apm/newsletter/q2-06/apmnews_q2-06.ht=
m#Performance"></A></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter></DIV></TD>
                <TD class=3Dperformancetotal>
                  <DIV align=3Dcenter></DIV></TD></TR><!-- =
InstanceEndEditable -->
              <TR>
                <TD height=3D3><IMG height=3D1 alt=3D""=20
                  =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
                  width=3D107></TD>
                <TD><IMG height=3D1 alt=3D""=20
                  =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
                  width=3D108></TD>
                <TD><IMG height=3D1 alt=3D""=20
                  =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
                  width=3D106></TD>
                <TD><IMG height=3D1 alt=3D""=20
                  =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
                  width=3D111></TD></TR></TBODY></TABLE><!-- =
InstanceBeginEditable name=3D"Main" -->
            <P class=3DmainHeadingBlue align=3Dleft><A =
name=3Dgolf></A>APM Golf=20
            Tournament Sept 22 - <SPAN class=3Dstyle2>Make plans to =
attend!=20
            </SPAN></P>
            <P class=3DmainParagraph align=3Dleft>The <IMG height=3D96=20
            =
src=3D"http://www2.business.ku.edu/apm/images/q2-06/bench_fade.jpg"=20
            width=3D282 align=3Dright>2nd Annual APM Golf Tournment will =
be held=20
            September 22 at 1 p.m. at Alvamar Public Golf Course. Get =
your=20
            foursome together or just come and we'll pair you with a =
great group=20
            of APM friends and alums. We'll have drinks, awards, and a =
drawring=20
            for an autographed basketball at Alvamar Country Club =
immediately=20
            following golf. The cost per player is $90 or $350 per =
foursome.=20
            Don't miss a fun time with a chance to reconnect. <A=20
            =
href=3D"http://www2.business.ku.edu/apm/golf/golfannouncement.htm">More=20
            info</A> </P>
            <P class=3DmainParagraph align=3Dleft>Don't forget about the =
football=20
            game on Saturday. KU plays South Florida at 6 p.m. Let us =
know if=20
            you plan to attend at apm@ku.edu.</P>
            <P class=3DmainParagraph align=3Dleft>Registration forms and =
payment=20
            instructions are available on the APM website. <A=20
            =
href=3D"http://www2.business.ku.edu/apm/golf/2006registration.pdf"=20
            target=3D_blank>Click here to download a form</A>. </P>
            <P class=3DmainHeading><A name=3Dspeakers></A>Another Great =
Semester of=20
            APM Speakers=20
            <P class=3DmainParagraph align=3Dcenter>Thanks to our =
outstanding=20
            speakers during the 2006 Spring Semester. We have featured =
just a=20
            few in this quarter's newsletter. We hope to have all of you =
back=20
            soon.<BR><BR><SPAN class=3Dlist>Mark Fleischhauer - VP =
Jayhawk Capital=20
            <BR>Tony Shelby - CFO LSB Industries<BR>Jessica Reuss - =
Kornitzer=20
            Capital<BR>Mark Seferovich - Sr. VP Waddell &amp; Reed =
<BR>Kevin=20
            Rauckman - CFO Garmin<BR>Tom Hyde - Sr. VP Wal-mart<BR>Scott =
Jones -=20
            Prairie Wind Capital<BR>Todd Preheim - Campanile =
Capital<BR>John=20
            Dicus - CEO, Kent Townsend - CFO Capitol Federal <BR>Bill =
Dondlinger=20
            - NASD<BR>Joanna Rupp - COO University of Chicago Endowment =
<BR>Jeff=20
            Davis, Dale Seuferling - KUEA<BR>Gene Diederich - AG =
Edwards, St.=20
            Louis visit <BR>Jack Gaumnitz - Professor Emeritus =
<BR></SPAN>
            <P class=3DmainHeading><A name=3Dcapfed></A>Capitol Federal =
- Beating a=20
            Flat Yield Curve <IMG height=3D79=20
            =
src=3D"http://www2.business.ku.edu/apm/images/q2-06/cap_fed.jpg"=20
            width=3D280 align=3Dright>=20
            <P class=3Dauthor>By Group 6 - Jordan Alsys, Kyle Brandt, =
Joseph=20
            Ledbetter, Patrick Nehls, and Ross Norris</P>
            <P class=3DmainParagraph>On April 5th, the APM class had the =
pleasure=20
            of a visit from John Dicus, Kent Townsend, and Jim Wempe =
from=20
            Capitol Federal Financial of Topeka, KS. Mr. Dicus, a KU =
graduate,=20
            is CEO, Mr. Townsend is CFO of the company, and Jim Wempe is =

            Director of IR. Most notable of the issues they shared was =
the=20
            future of many financial institutions. Mr. Dicus explained =
how the=20
            recent flattening trend in the yield curve has made it =
difficult for=20
            banks to make money, because these institutions make their =
profit on=20
            the spread between short and long term interest rates. </P>
            <P class=3DmainParagraph>Also on the agenda was an =
explanation of=20
            Capitol Federal=92s corporate structure, which is quite =
different from=20
            most financial companies. This structure includes a separate =
mutual=20
            holding company which holds 70% of Capitol Federal=92s =
outstanding=20
            shares. The public holds 30%. To evaluate Capitol =
Federal=92s P/E,=20
            dividend yield and ROE properly shareholders equity should =
be=20
            adjusted. The earnings per share are calculated on the total =
number=20
            (100%) of shares outstanding, but the dividend is paid only =
on the=20
            30% of shares owned by the public. This may create a =
misperception=20
            by potential investors that the company is paying more in =
dividends=20
            than it earns, and this may deter many. However, to those =
who=20
            understand the company=92s structure, Capital Federal=92s =
current=20
            dividend yield of 6 percent is very attractive.</P>
            <P class=3DmainParagraph><SPAN class=3DmainParagraph>APM =
thinks that the=20
            $2.00 per share annual dividend adds significant value to =
our=20
            holding. After meeting with Mr. Dicus and Mr. Townsend, the =
future=20
            for Capital Federal looks to be in good hands and hopefully =
their=20
            leadership will generate outstanding results for the rest of =
2006.=20
            </SPAN><BR></P>
            <P class=3DmainHeading><A name=3Drupp></A>University of =
Chicago=20
            Endowment Fund COO Joanna Rupp visits APM Class<BR><SPAN=20
            class=3Dauthor>byGroup 3- Graham Ballard, Jim Bridges, Matt =
Ferguson,=20
            Jared Klenda, Erin Koksal, Adam Ryan</SPAN>=20
            <P><SPAN class=3DmainParagraph>Joanna Rupp, Chief Operating =
Officer of=20
            the University of Chicago=92s Investment Office, spoke to =
the Applied=20
            Portfolio Management Class this spring semester. She<IMG =
height=3D148=20
            =
src=3D"http://www2.business.ku.edu/apm/images/q2-06/nyse.jpg"=20
            width=3D196 align=3Dright> talked about the purity of her =
area of=20
            investment management, since endowments have clear, =
straightforward=20
            investment objectives and a long time horizon. She discussed =
the=20
            operations of the endowment, which is a multi-asset class =
portfolio=20
            that seeks an 8% real return to keep up with about 5% =
spending plus=20
            inflation in order to fund approximately 15% of the =
university=92s=20
            operating budget. As COO, she is especially concerned with =
managing=20
            the risk of the fund and choosing the managers for each =
asset class,=20
            as it is the managers who actually select the investments. =
She also=20
            genuinely enjoys the academic research and the goal of =
earning=20
            higher investment returns to support the university=92s =
mission.=20
            </SPAN></P>
            <P class=3DmainParagraph>Joanna grew up in Salina, Kansas, =
and=20
            attended KU for her undergraduate degree in Business. As an=20
            undergrad Joanna particularly enjoyed the subject of =
macroeconomics.=20
            After KU, she went on to the US Central Credit Union where =
she honed=20
            her skills in fixed income portfolio management. After =
earning her=20
            MBA at the University of Chicago, she went to Wall Street to =
work=20
            for Goldman Sachs in their municipal finance group. As a =
woman from=20
            a relatively small town in Kansas, she quickly learned that =
it is=20
            tough to be a woman in business, especially in finance. =
However, as=20
            a motivated, fiercely competitive, and successful woman in =
the=20
            field, she didn=92t let that hold her back. </P>
            <P class=3DmainParagraph>Joanna provided the class with good =
advice=20
            for developing a career in finance. She discussed the =
importance of=20
            experience actually investing=97=93pulling the trigger=94 on =
an investment=20
            decision and monitoring the consequences. She explained that =
her=20
            experience as a fixed income portfolio manager has made it =
easier to=20
            communicate with the endowment=92s investment managers, =
because=20
            investing is =93not just science; there=92s always a bit of =
art. The art=20
            is difficult to describe, and people who have not managed a=20
            portfolio have difficulty appreciating the art.=94 She =
talked of the=20
            importance of understanding how potential managers react =
under=20
            stress, and pointed out that she always asks potential =
managers to=20
            discuss their biggest mistakes and what they have learned =
from them.=20
            From her visit to the class, students learned about an =
interesting=20
            and academically challenging area within finance, and an =
inspiring=20
            example of a Kansas-born woman succeeding in the field.</P>
            <P></P>
            <P class=3DmainHeading>Stock Updates=20
            <P class=3Dsubtitle>Linktone<A name=3Dlton></A> - Time to =
Load Up!(LTON)=20
            <IMG height=3D62=20
            =
src=3D"http://www2.business.ku.edu/apm/images/q2-06/linktone.gif"=20
            width=3D163 align=3Dright></P>
            <P class=3Dauthor>By Joan Huber</P>
            <P class=3DmainParagraph>Linktone, Ltd. (LTON) is a leading =
provider=20
            of wireless media, entertainment and communication services =
to=20
            mobile phone users in the People=92s Republic of China. The =
company=20
            has been undergoing restructuring and in April filled its =
vacant CEO=20
            position with Michael Guangxin Li, who had been LTON=92s COO =
since=20
            March 2003. </P>
            <P class=3DmainParagraph>On May 17th LTON reported first =
quarter=20
            revenues of $23.0 M or a 12% QoQ and a 52% YoY increase. =
GAAP net=20
            income was $2.3 M or +59% QoQ and -27% YoY. These results =
reflected=20
            $0.9 M in restructuring expenses that are now complete, yet =
the=20
            company had a positive operating cash flow for the quarter. =
The=20
            company has no long term debt. According to Zacks, the =
company=20
            trades at a lower current FY P/E and P/CF than the industry =
mean and=20
            median, and also that of its Chinese competitors.</P>
            <P class=3DmainParagraph>The cash and cash equivalents as of =
March=20
            31st were $65.4 M, or approximately $2.70 per share. LTON =
recently=20
            completed a $15 M stock repurchase program, leaving about =
22.5 M=20
            ADRs and $60 M in cash. On July 12 Linkton announced plans =
to=20
            repurchase an additional $20M in ADRS. </P>
            <P class=3DmainParagraph>LTON comprises about 4.5% of the =
APM=20
            portfolio.</P>
            <P class=3DmainParagraph>News Flash: <STRONG>Linktone is on =
sale!=20
            </STRONG>On July 7th several of the major Chinese telecoms =
through=20
            which LTON distributes its services announced new policies =
affecting=20
            LTON and other industry providers. The company preliminarily =

            perceives that these policies will have a material negative =
impact=20
            on its reported results for the remainder of the year, =
including=20
            fewer new subscriptions, increasing cancellation rates by =
existing=20
            subscribers, and increased user acquisition costs. The =
company will=20
            issue further information as specifics are clarified, but =
believes=20
            in the long term these policies will =93create a more =
efficient and=20
            healthy industry environment.=94</P>
            <P><SPAN class=3Dsubtitle><A name=3Dmrh></A>Montpelier Re =
Holdings (MRH)=20
            </SPAN><BR><SPAN class=3Dauthor>by Group 5 - Chris Bennett, =
Carolyn=20
            Cornett, Kevin Knipp and Anthony Marnell</SPAN>=20
            <P class=3DmainParagraph>Montpelier Re is a Bermuda-based =
reinsurance=20
            company that has three product areas: property specialty, =
property=20
            catastrophe for earthquakes and hurricanes, and specialty=20
            reinsurance for aviation, sabotage, and marine risks. On the =

            year-end recommendation by an APM group, the APM portfolio =
purchased=20
            400 shares of MRH on December 5, 2005 for $17.04 per share, =
thinking=20
            the bad news was already priced in the =
stock.<BR><BR>However, the=20
            share price began to decline around the end of January 2006, =
due to=20
            a reported net loss of $61 million in 4Q 2005. The losses =
were=20
            caused by the numerous hurricanes that blasted the gulf =
coast in=20
            2005, as it was the most costly year ever for catastrophe =
losses to=20
            the insurance and reinsurance industry. The total net loss =
for 2005=20
            was $752.9 million compared to net income of $240.3 million =
in 2004.=20
            MRH announced Q1 2006 earnings on April 28, 2006 and =
reported=20
            comprehensive income of $48.5 million compared to $38 =
million from=20
            the same quarter last year. MRH also paid a quarterly =
dividend of=20
            $0.075 per common share on April 17, 2006. As of May 8, =
2006, the=20
            stock was trading at $15.82 per share. MRH is working to =
reduce its=20
            risk exposure to such catastrophes, and the APM portfolio =
hopes it=20
            can regain its 52-week high of $36.35.</P>
            <P class=3DmainParagraph>Recent news indicates that the =
reinsurers=20
            have considerable pricing power now as we begin the hurrican =
season.=20
            </P>
            <P><SPAN class=3Dsubtitle><A name=3Dsgms></A>Scientific =
Games=20
            (SGMS)</SPAN><IMG height=3D86=20
            =
src=3D"http://www2.business.ku.edu/apm/images/q2-06/sgms.gif"=20
            width=3D181 align=3Dright><BR><SPAN class=3Dauthor>by Group =
5 - Chris=20
            Bennett, Carolyn Cornett, Kevin Knipp and Anthony =
Marnell</SPAN></P>
            <P class=3DmainParagraph>Scientific Games is a global =
supplier of=20
            instant lottery tickets, systems and services to lotteries, =
and=20
            systems and management services to pari-mutual wagering =
facilities.=20
            Its revenues come from three major business groups: Printed=20
            Products, Diversified Gaming, and Lottery Systems. On the =
year-end=20
            recommendation by an APM group, the Portfolio purchased 1000 =
shares=20
            of SGMS on December 9, 2005 at $27.11/share.<BR><BR>By May =
9, 2006=20
            the stock was trading at $40.36. This was due in part to =
very=20
            favorable first quarter revenue of $208 million, up 13% from =
the=20
            2005 first quarter. EBITDA for Q1 2006 was $56.2 million, up =
from=20
            $51 million in 2005. Cost reductions implemented in the =
second half=20
            of 2005 have led to increased margins for many of their =
segments,=20
            and have contributed too much of the bottom-line growth in =
the first=20
            quarter. Also, SG&amp;A expenses in the first quarter fell =
from=20
            11.4% of revenues in 2005 to 9.7% of revenue in 2006.=20
            <BR><BR>Scientific Games has been able to sign important =
state=20
            contracts to supply tickets and systems to Illinois, West =
Virginia,=20
            New York, and Washington State. Part of what gives =
Scientific Games=20
            an advantage in the lottery segment is their licensing =
agreements=20
            and design of the lottery tickets. In Q1 2006, Scientific =
Games=20
            completed a licensing contract to develop and sell team =
themed games=20
            which will be customized and sold in multiple lotteries =
around the=20
            country.</P>
            <P class=3Dsubtitle><SPAN class=3DmainHeading><A =
name=3Dnasd></A>KC NASD=20
            Representative Bill Dondlinger Visits with APM</SPAN><SPAN=20
            class=3DmainParagraph><BR></SPAN><SPAN class=3Dauthor>Group =
7-Aaron=20
            Arnett0, Brian Lall, Drew Limbocker, Jason Lindshield, and =
Tyrone=20
            Marin</SPAN> </P>
            <P><SPAN class=3DmainParagraph>On April 12, Bill Dondlinger, =
KU MBA=20
            alum and Supervisor of Examiners in the Kansas City NASD =
District=20
            Office, came to class to discuss the regulatory environment =
under=20
            which financial services firms and brokers operate. In =
accordance=20
            with federal law, securities firms doing business with the =
US public=20
            must be a member of NASD. A private regulatory organization, =
NASD=20
            plays a vital role in the securities industry by insuring=20
            firm/operator compliance with SEC and NASD formulated =
regulations.=20
            In this function, NASD serves a basic need in an efficient =
market by=20
            protecting investors from being =93taken.=94</SPAN>=20
            <P><SPAN class=3DmainParagraph>Mr. Dondlinger spoke about =
the recent=20
            industry trend toward self-regulation, whereby firms =
themselves=20
            actively monitor their employee=92s actions. This is =
effectively=20
            serving as a first line of defense against regulation =
violations=20
            because when a given firm finds an internal problem and =
immediately=20
            takes action to remedy it, the penalties, if any, are likely =
to be=20
            less severe. On the other hand, repercussions for firms =
externally=20
            found in noncompliance can range from various financial =
penalties to=20
            a possible loss of NASD accreditation. </SPAN>
            <P><SPAN class=3DmainParagraph>Much of Mr. Dondlinger=92s =
presentation=20
            centered on the importance of public disclosure, because =
=93you as an=20
            investor should have the information that allows you to make =
an=20
            affirmative decision.=94 This was Mr. Dondlinger=92s first =
time back in=20
            Summerfield Hall since his MBA days and he mentioned that =
the=20
            building seemed much different, as it had been renovated =
since then.=20
            But also, Mr. Dondlinger was impressed this semester=92s APM =
students=20
            with their high level of preparation and keen, direct =
questions=85as=20
            he commented, =93this is an astute bunch.=94<BR></SPAN>
            <P class=3DmainHeading><A name=3Dalums></A>Alumni News </P>
            <P class=3DmainParagraph><STRONG>Jason Lindshied =
</STRONG>(APM S06)=20
            accepted a position as a Commercial (Corporate) Property =
Underwriter=20
            at Liberty Mutual; Overland Park.</P>
            <P class=3DmainParagraph><STRONG>Hunter Davis </STRONG>(APM =
F05)=20
            accepted a position as an analyst with Bear Stearns in =
NY.</P>
            <P class=3DmainParagraph><STRONG>Daniel Sailors =
</STRONG>(APM F05)=20
            accepted a position as an analyst with CSFB in NY.</P>
            <P class=3DmainParagraph><STRONG>Adam Ryan </STRONG>and =
<STRONG>Brian=20
            Lall</STRONG>, both S06 will be attending the ASAP MBA =
program at=20
            the University of Wisconsin.</P>
            <P class=3DmainParagraph><STRONG>Jim Bridges </STRONG>(S06) =
has=20
            accepted a position at KPMG in Dallas in the consulting =
area. </P>
            <P class=3DmainParagraph><STRONG>Jason Mitchell =
</STRONG>(APM S04)=20
            accepted a position in GE Capitals' FMDP program. Jason was =
married=20
            in June to Katie Armstrong. </P>
            <P class=3DmainParagraph><STRONG>Alums send us your =
news!</STRONG></P>
            <P class=3DmainParagraph><SPAN class=3DmainHeading><A=20
            name=3Ddonors></A>Thanks to all our Recent =
Donors!</SPAN></P>
            <TABLE cellSpacing=3D2 width=3D400 border=3D0>
              <TBODY>
              <TR class=3Dstyle1>
                <TD class=3Ddonor>Jonathan Berkley </TD>
                <TD class=3Ddonor>Jeff Morrison </TD></TR>
              <TR class=3Dperformancetotal>
                <TD class=3Ddonor>Charles D. and Marie McCarthy</TD>
                <TD>Harry Falk </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Andrew Steinbach</TD>
                <TD><SPAN class=3Ddonor>Teal Dakan</SPAN></TD></TR>
              <TR class=3Dperformancetotal>
                <TD><SPAN class=3Ddonor>Greg Baugh </SPAN></TD>
                <TD class=3Ddonor>Jon Blumb</TD></TR>
              <TR class=3Dperformancetotal>
                <TD><SPAN class=3Ddonor>Scott F. Jones </SPAN></TD>
                <TD class=3Ddonor>Todd and Colleen Preheim</TD></TR>
              <TR class=3Dperformancetotal>
                <TD><SPAN class=3Ddonor>Jim MacMurray</SPAN></TD>
                <TD>Amos Smith </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Simon Michael </TD>
                <TD>John Katzer </TD></TR>
              <TR class=3Dperformancetotal>
                <TD><SPAN class=3Ddonor>Brianna Kelly </SPAN></TD>
                <TD><SPAN class=3Ddonor>Brandon Turner </SPAN></TD></TR>
              <TR class=3Dperformancetotal>
                <TD>David Reynoldson </TD>
                <TD>Gene Diederich </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Jade Shopp </TD>
                <TD>Megan Wood </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Jason Mitchell </TD>
                <TD>
                  <P>Jamie Melzer</P></TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Stephen Lane </TD>
                <TD>Chuck and Kathleen Heath </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>William Hannen </TD>
                <TD>Fred Coulson </TD></TR>
              <TR class=3Dperformancetotal>
                <TD>Tim Burger </TD>
                <TD>Bart Baldwin </TD></TR></TBODY></TABLE>
            <P class=3DmainParagraph><A name=3Dcontribute></A>If you =
would like to=20
            donate, Kent is matching alumni donations 2:1 and all other =
1:1.=20
            Send your contributions to <BR><BR><SPAN =
class=3Dsmalltext>School of=20
            Business Endowment<BR>Applied Portfolio Management<BR>c/o =
Gregory J.=20
            Lamb <BR>KU School of Business<BR>1300 Sunnyside =
Avenue<BR>Lawrence,=20
            Kansas 66045-7585</SPAN></P>
            <P class=3DmainParagraph>&nbsp;</P>
            <P=20
        class=3DmainParagraph><BR></P><!-- InstanceEndEditable =
--></TD></TR></TBODY></TABLE>
      <TABLE width=3D"100%" border=3D0>
        <TBODY>
        <TR>
          <TD class=3Dcopyright vAlign=3Dcenter align=3Dmiddle>Copyright =
2004,=20
            Applied Portfolio Management Program<BR>University of Kansas =
School=20
            of Business</TD></TR></TBODY></TABLE></TD>
    <TD class=3Drightpane vAlign=3Dtop align=3Dleft>
      <P>&nbsp;</P></TD>
    <TD><IMG height=3D167 alt=3D""=20
      =
src=3D"http://www2.business.ku.edu/apm/newsletter/templates/spacer.gif"=20
      width=3D1 border=3D0></TD></TR></TBODY></TABLE><!-- InstanceEnd =
--></BODY></HTML>

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	FONT-WEIGHT: bold; FONT-SIZE: x-large; TEXT-TRANSFORM: capitalize; =
COLOR: #000066; FONT-STYLE: normal; FONT-FAMILY: Verdana, Tahoma, Arial, =
sans-serif; TEXT-ALIGN: center; FONT-VARIANT: normal
}
.golfsubheader {
	FONT-WEIGHT: normal; FONT-SIZE: large; TEXT-TRANSFORM: capitalize; =
COLOR: #970f1d; FONT-STYLE: normal; FONT-FAMILY: Verdana, Tahoma, Arial, =
sans-serif; TEXT-ALIGN: center; FONT-VARIANT: normal
}
.golfmain {
	FONT-WEIGHT: bold; FONT-SIZE: 14px; WORD-SPACING: 7px; COLOR: #000066; =
BORDER-BOTTOM: #999999 thin; FONT-FAMILY: Verdana, Tahoma, Arial; =
LETTER-SPACING: 4px; TEXT-ALIGN: center
}
.researchlist {
	FONT-SIZE: small; COLOR: #000033; FONT-STYLE: normal; FONT-FAMILY: =
Verdana, Tahoma, Arial, sans-serif; HEIGHT: auto; TEXT-ALIGN: left
}

------=_NextPart_000_003F_01C7EBBF.54A440C0--
