ave Rust, ’05 MBA, has noregrets about his career path—even though he joined Northwest

Airlines only four months before it wentinto bankruptcy. In fact, a challengingenvironment was just what he wanted.

“I thought that it would be more inter-esting to extend my finance knowledgeworking for a company in a distressedenvironment, rather than one in a steady-state operation,” Rust says of his decisionto accept a position of financial analyst infinancial planning and analysis atNorthwest Airlines. “I was excited by theopportunity to work in an interesting,dynamic industry where there is lots ofdata to analyze.”

The job offer came during his secondyear in the Carlson Funds Enterprise. Hewas one of eight ’05 students managingthe growth fund—and one of four whojoined Northwest after graduation fromthe Carlson School that spring.

When Northwest filed for bankruptcy,Rust never feared losing his job. On thecontrary, major restructuring made Rustand Northwest’s other financial profes-sionals even more crucial to the company.His workload increased, and his knowl-edge base rose dramatically. After only

10 months, he was promoted to seniorfinancial analyst.

Northwest emerged from bankruptcyin late May ’07. This success changes theway that Rust sees his job and the com-pany’s future. “We’re going from playingdefense to offense,” he says. Rust willsupport the company’s goal to build thetop line, while also controlling costs.

Rust credits his Funds Enterpriseexperience with helping him succeed inthe world of corporate finance. He says,“The Enterprise enabled me to internal-ize finance instruction by modeling acompany’s financial future when I pre-pared to recommend a new stock to thementors.” In addition, Rust was one ofthe first students to use a travel grantfrom State Farm Insurance, which allowsFunds Enterprise students to visit com-panies across the country to assess theirmanagement and operations. Rust andGreg Nelson (now also a financial analystat Northwest) visited Costa Mesa, Cal.-based Ceradyne, a developer and manu-facturer of advanced technical ceramicproducts and components for defense,industrial, automotive, electronic, andmedical markets. In part thanks to thefirst-hand knowledge gathered on their

visit, Rust and Nelson successfully madea “buy” recommendation to the CarlsonFunds Enterprise mentors.

These days, Rust maintains a closeconnection to the Funds Enterprise. Hehas been a regular financial contributorsince his graduation. And in spring 2007,Rust and his Northwest Airlines mentorand recruiter Jack Malone returned to theCarlson School to lead Funds Enterprisestudents in a discussion about Northwest’sdecision to modify 757 aircraft to be ableto fly to Europe. In the class, Rust builtthe framework of a DCF (discountedcash flow) model, presented assumptionsinvolving project finance, bankruptcylaw, and marketing, and then challengedthe students to fill in the missing piecesto determine if Northwest should modifythe 757 aircraft. Rust and other class of’05 growth fund analysts will present thiscase study to the class of ’08 studentsthis coming fall term.

If Rust could do it again, would hehave participated in the Funds Enterpriseand joined Northwest Airlines aftergraduation? He says, “It was hard, butI’ve learned a lot. I wouldn’t do anythingdifferently!”

D

Summer 2007

A newsletter of the Carlson School Enterprises

Allianz Life invests $2 million

High-FlierAirline industry turmoil puts financial analysts on top

The Carlson Funds Enterprise is pleased to announce thatAllianz Life Insurance Company of North America has invested$2 million in the fixed income fund. This is the first newinvestment since the fixed income fund’s inception in March2003, and Allianz is the seventh investor in the fund. Allianzmanages over $40 billion in primarily medium term invest-ment grade bonds through a sizable investment operation inthe Twin Cities.

The new relationship came together thanks to Allianz

board member and former Carlson School interim dean JimCampbell’s efforts. He and Carlson Funds Enterprise directorJoe Barsky worked to build relationships with ChiefInvestment Officer Dr. Volker Stuven and Senior VicePresident and Treasurer Ty Campbell. The commitment wascemented by a presentation by three members of the Class of2007. In addition to the investment, Allianz posted MBA-levelinternships for Carlson students, providing opportunities forcurrent students to begin to experience work at Allianz.

Annual Client Review

Celebrate good times!

ike any investment management firm, the CarlsonFunds Enterprise conducts annual client reviews.Because of the difficulty of reaching each client indi-

vidually, each year the Enterprise invites clients, alumni, andothers to a student presentation on the performance of thetwo funds.

The March 2007 client review focused on the performanceof the fixed income fund and the recent changes in the fund’sbenchmark index. Students also discussed the fund’s invest-ment policy, bond selection process, and strategy. The fundnow consists primarily of investment grade corporate bonds,treasury, and agency securities. Exchange traded funds are also

used to allow the fund’s duration and sector composition tomore effectively match the Lehman IntermediateGovernment Credit Index.

In March 2006, the presentations focused on the Carlsongrowth fund. Students discussed investment strategy, reportedon annual and longer term performance, and showed a com-parison of the growth fund’s performance versus both thebenchmark index and the universe of domestic, small capital-ization growth stock mutual fund managers. Over its nine-year-long history, the Carlson growth fund has ranked in orvery close to the top quartile of managers for all time periods.

The Class of 2007 marked a Carlson Funds Enterprise mile-stone: the 10th graduating class since its inception in 1998.The Funds Enterprise now has over 200 alumni working indiverse firms . In May 2008, the growth fund will have a ten-year-long performance record, an occasion that we will cele-brate by hosting an alumni reunion scheduled for Thursday,May 1, 2008. Please mark your calendar now and plan to comeback to the Carlson School for this event, and watch for moreinformation as the date draws nearer.

CFE Employers - Corporate3M • Ameriprise • Best Buy • Cummins • Ecolab • General Mills • Marriott • Northwest Airlines • Target •Thrivent • United Health Group

CFE Employers - InvestmentAlliance Bernstein • Bear Stearns • Black River •Canaccord Adams • Cherry Tree • Citigroup •Galliard Investment Management • GE Financial Services •Goldman Sachs • Houlihan Lokey • ING Group • Key Bank •Lehman Brothers • Liberty Mutual •Mason Street Investment Advisors •Montana Board of Investments • Moody’s • Morningstar •Oppenheimer Funds • Piper Jaffrey • RBC Dain Rauscher •Riverbridge Partners • Shoreview Capital • TD Ameritrade •The Clifton Group • The Leuthold Group • Travelers •Triple Tree • US Bank • UBS • Voyageur Funds •Wachovia Securities • Waycrosse •Wayzata Investment Partners

Performance Against the BenchmarkGrowth of $10,000

$9,000

$9,500

$10,000

$10,500

$11,000

$11,500

$12,000

Feb 0

3

May 03

Aug 03

Nov 03

Feb 0

4

May 04

Aug 04

Nov 04

Feb 0

5

May 05

Aug 05

Nov 05

Feb 0

6

May 06

Aug 06

Nov 06

Feb 0

7

Lehman Intermediate Agg - Gov/Credit Index Carlson School Fixed Income Fund (Gross)

Carlson School Fixed Income Fund (Net)

$11,093

$11,486

$11,332

L

$3,000$6,000$9,000$12,000$15,000$18,000$21,000$24,000$27,000$30,000

5-98

12-98

8-99

4-00

12-00

9-01

4-02

12-02

8-03

4-04

12-04

8-05

4-06

12-06

$13,924$13,924

$25,215 $25,215

Cumulative PerformanceCarlson Growth Fund

Cumulative PerformanceCarlson Fixed Income Fund

Inception date is 5/1/98. Performance data is through May 2007. Inception date is 3/1/03. Performance data is through May 2007.

CGF

Russell 2000 Growth

n spring 2006, Arin Kornchankul,then a first-year MBA candidate anda new participant in the Carlson

Funds Enterprise, was paired with men-tor Mike Cox, ’03 MBA. “As an alum ofthe Carlson School and the Enterprise,it’s great to be able to give back,” saysCox. “I value being a part of the mentorcommunity, because it allows me tomeet other analysts.”

The mentors are analysts, portfoliomanagers, and bankers from many TwinCities financial institutions. They advisestudents on networking and career plans.They also play the role of an advisoryboard. Twice a year, students in theFunds Enterprise present their carefulevaluations of companies and theirrecommendations—buy, don’t buy, orhold—to the assembled mentors.

Mike Cox was in a good position toadvise Kornchankul. After graduating,he parlayed his growth fund experienceinto a job at Piper Jaffray as a junioranalyst following hard-line retailers.After a year, Cox was promoted to senioranalyst and hired an associate to workfor him. Early in 2007, Cox changedindustries and began following smaller,relatively under-followed industrialgrowth companies.

Kornchankul came to the CarlsonSchool from Bangkok, Thailand, whereshe and her brother had started a lube oilbusiness. She hoped to find a job in theinvestment industry upon graduation

in May 2007.In the fall of 2006, Kornchankul and

her research partner Ila Mittal beganscreening for a company to research.She met with Cox to discuss stockselection, and he offered observationsand asked questions about the compa-nies under consideration. Ultimately,Kornchankul and Mittal decided toresearch and model Ambassador Group,

an educational travel company focusedon students.

Throughout the fall 2006 semester,Kornchankul and Cox met to discussthe company. At the same time, Coxsuggested questions that mentors mightask when the team presented their rec-ommendation in December, an eventthat is the climax of the term.

A panel of mentors questioned thestudent analysts on their recommenda-tions, then voted whether to accept oralter the team’s recommendation to buy,don’t buy, or hold. Kornchankul and

Mittal successfully pitched a recom-mendation to buy. (A pitch is successfulwhen the mentors agree with the rec-ommendation made by the students, nomatter what this recommendation is).

For their spring 2007 project,Kornchankul and Mittal identifiedLiquidity Services, an operator of anon-line wholesale marketplace for sur-plus product liquidation, as a new stockidea. Cox suggested questions thatKornchankul might ask when she visitedcompany management in March, as wellas challenging Kornchankul to contactthe Department of Defense, with whichLiquidity had a significant contract.Kornchankul took his advice, calling theDepartment of Defense to find someoneto answer her questions. Kornchankulthen shared a draft of the report with Cox,who was impressed. He says, “They hitall of the key points in the recommen-dation in the first couple of pages.”

While all of this was going on,Kornchankul was searching for a post-graduation job. Lightning struck inFebruary when she learned thatOppenheimer Funds in Boston sought ahigh-yield bond analyst. In early April,Kornchankul was offered and acceptedthe position.

For both Kornchankul and Cox, thiswas a fantastic finish to a great year.Kornchankul is thrilled with her new jobat Oppenheimer, and Cox has alreadybegun mentoring a new student.

Mentor and menteeMike Cox, ’03 MBA and Arin Kornchankul, ’07 MBA

I

“As an alum of theCarlson School and theEnterprise, it’s great tobe able to give back.”

—Mike Cox’03 MBA

Message from the Director

Carlson Funds EnterpriseCarlson School of ManagementUniversity of Minnesota321 Nineteenth Avenue South, Suite 3-306Minneapolis, Minnesota 55455-0438

It has been an exciting year for theCarlson Funds Enterprise. The 10thclass of Funds Enterprise analysts gradu-ated, and our alumni now number morethan 200. Please mark your calendarsfor a reunion event on May 1, 2008.

Assets under management exceeded$10 million for the growth fund and $14million for the fixed income fund. InMarch the students conducted our sec-ond annual client review. In May wewelcomed Allianz Life as our newestfund participant. A gift from State Farmcontinued to support student travel tomeet with company managers, for thepurpose of investigating potential rec-ommendations.

The advisory board met three times,offering guidance on many issues thataffect the funds. We enjoyed extraordi-nary support from our mentors, as theygave an enormous amount of their timemeeting with students, dissecting stockand bond recommendations, andapproving new holdings for both funds.

In fall 2006, Jeannette Parr joined theEnterprise as professional advisor to thefixed income fund. Over the course ofthe school year, she helped to implementchanges to the benchmark index, a newteaching curriculum, and new tradingrelationships. Emily Dombeck, programcoordinator, worked diligently to buildthe alumni and friends database, as wellas revamped the website (take a look atcsom.umn.edu/funds). And ProfessorTim Nantell, our academic advisor andmember of the Department of Finance,was everywhere!

Linda Henderson, for three yearsthe professional advisor to the growthfund, has decided to pursue otherinterests. During Linda’s time at thefund, the quality of the students’research reports improved enormouslyand relationships between students andmentors were solidified. Linda did agreat job, and we will miss her. I willsucceed Linda as the advisor to thegrowth fund. I will also continue in my

role as the program director.This fall our largest class yet will

return from summer internships. TheEnterprise will have 30 students, with 15 in each fund. Over the last few years,we have admitted select undergraduateswho plan to pursue careers in the invest-ment business. In 2008, 11 undergraduatestudents will work alongside 19 graduatestudents.

I invite you to keep in touch with us.We are always looking for additionalinvestors (our goal is to double theassets under management), mentors,speakers, and student internships.Please contact either me atjbarsky@umn.edu or Emily Dombeck atedombeck@umn.edu with any questions,comments, or help you can provide.

Best wishes,

Joe BarskyDirector of the Funds Enterprisejbarsky@umn.edu

NONPROFIT ORG. U.S. POSTAGE

PAIDMPLS, MN

PERMIT NO. 155

Inside this Edition> Financial analyst at Northwest Airlines> Mentor and mentee> Allianz invests $2 million in Enterprise