The STAR monthly updates provide you with a straightforward structured approach to share selection and equity portfolio management. By means of the regularly updated share ranking lists you have the choice of either closely following the signals given for model portfolios comprising 10 and 20 shares or of devising your own preferred strategies.

In essence the STAR approach is based on the results derived from a simple process that regularly reassesses the relative share values of the largest 300 quoted UK companies. By taking account of expected corporate growth rates and also the latest stock market valuations of each company's shares STAR delivers a regular framework for investment decision making.

There is no magic or guarantee to the methods used. What the regular updates do is to sort out each month those companies that combine the highest expected rates of earnings growth with the lowest prospective price earnings ratios. The approach tends towards that of value investing by selecting shares that are temporarily out of favour with investors. Provided that their lack of support is not due to deteriorating profits growth such companies frequently prove to be successful investments. One of the keys to this is to check the trend in earnings forecasts and avoid, where possible, those equities where the share price fall is preceding a significant reduction in earnings estimates.

The basic share ranking methods have been developed by testing a large number of forward estimates, such as dividends, earnings and cash flow, since 1985 and selecting those that have proved to be successful over the longer term.

However, it must be stressed that there are bound to be periods, especially during a bear market, when these structured methods result in returns that are below the market average. Despite this there have only been four years, 1990,1996,1997 and 1998, over the past seventeen when the STAR selections underperformed the market and then only by a marginal amount.

Background to STAR

The methods of share selection that form the basis of the STAR monthly online updates were developed by John Mulligan, the Managing Director of MD Management, in order to provide him with an objective approach for managing his own portfolio of UK quoted shares. In the absence of any regular data source that he could use to select and subsequently manage his shares he devised this structured approach to share selection and management. It is a rigorously researched method of regularly re-rating leading shares according to a number of key fundamental criteria.

These methods have been developed by MD Management Limited over the past 17 years and are backed by more than 4000 hours research. This has involved a detailed study into the relationship between monthly equity earnings and dividend forecasts, since 1985, and the subsequent movement in prices of the relevant shares. The most consistently successful combinations of factors have now been selected for use in STAR

The STAR updates provide a regular monthly investment evaluation on 300 of the largest UK quoted companies. They employ methods of evaluating and rating leading UK shares that enable you to select and manage your own share portfolios to suit your own investment objectives and preferences. They do all this with the minimum cost and effort.

The STAR updates combine three sets of share selection indicators. One is primarily for growth, one for growth combined with a higher level of income and one selected for growth from the 100 largest companies. The monthly STAR updates are specifically designed to help in the management of ISA share portfolios and self-invested personal pension plans as well as conventional portfolios.

The methods, which are used to provide regular investment signals for the STAR updates, have been back-tested on a monthly basis since 1985. During this period annual selected lists of ten shares would have grown in value, before deducting costs, more than three times as fast as the FTSE All Share Index. Remember however, that past performance on any investment management programme or selection process is no guarantee to future success.

One of the main advantages of the methods used for selecting growth shares is that in most years, since 1985, relatively few share switches have been signalled during the course of the year. The records indicate that on average less than one half of the shares in each portfolio were switched in each year between 1985 and 2003.

Each monthly update usually contains a short commentary on the latest movements and trends in the UK stock market as well as charts and editorial on both the fundamental and technical background to current equity markets. The monthly updates also provide the latest share selections for growth and income portfolios as well as updates on each of the 300 shares regularly monitored.

More specifically the bulletins are usually set out as follows:-

· A regular commentary "comment and Analysis" section that includes a resume of domestic and international equity markets. The progress of the UK equity market is also featured in a regularly updated chart, with plots of both long term and short term moving average lines, generated from MD Management's database.

· There are separate files listing the latest shares selections for each of the two portfolio types:-

"The TOP 20 Capital Growth List",
and "The Top 20 High Income Selections".

Each of these files has a list of the current highest rated shares. The same pages also comment on the progress of the year's benchmark share selections and detail changes in the current month's purchase and sale lists.

The "Full Ranking List" classifies all 300 companies by sector and indicates the current price, dividend yield, borrowing level, ranking position and action rating.

· For those investors wishing to construct and manage portfolios with more than 20 shares the "Top 100 Ranking List" tabulates the top 100 shares with their latest ranking and rating values.

To check on those shares that are currently flagged as sales STAR subscribers may check on "The sales List" which contains all shares that are presently flagged for disposal.

The STAR updates may be used in any of the following ways:-

a) To set up and manage share portfolio selections from scratch using cash

b) To manage part or all of an existing portfolio

c) To select shares for self-managed ISAs and Pensions

STAR subscribers are provided with detailed explanatory notes which show, in detail, how STAR can be used to set up and manage share portfolios starting from cash funds as well as from existing fully invested portfolios.

Scope and Limitations

Because the STAR updates concentrate on the three hundred largest UK quoted companies you are unlikely to encounter any practical dealing difficulties unless the overall portfolio size is really massive. In essence the STAR approach therefore offers you an extremely low cost and simple way in which you can manage your equity investments.

Although the methods used in the bulletins have been back tested on a monthly basis since 1985 and in most years have provided results vastly better than the main indices, there have been periods when the annual and monthly selections have significantly underperformed the general market. It is therefore important that the STAR methods are viewed over the long term and not used as investment trading signals. This means that you should really allow the approach to work for at least two years before making a judgement on its overall effectiveness.

General Notes and Warning

Before using the STAR updates you should carefully consider the likely dealing and transaction costs as well as all taxation implications and, if in any doubt, you should seek professional financial advice. The information contained within the STAR updates is provided strictly on the basis that subscribers make their own investment decisions. Users of the STAR updates must accept that the value of their investments can go down as well as up and past performance is no guarantee of future income, earnings or capital growth.

STAR bulletin is a publication that features certain securities and comments on them, based on a number of factors. These factors are prepared by MD Management Limited, which is regulated by the Financial Services Authority. MD Management Limited is not obliged to disclose the basis on which the STAR factors have been prepared. These factors may vary and are subject to change from time to time without notice.

The information contained within the STAR updates will be prepared with all reasonable care. No responsibility is accepted for errors and omissions. MD Management Limited cannot be held responsible for any losses (including, without limitation, consequential loss) which may be incurred by you acting on any information contained within the publication.

The contents of the STAR updates do not constitute, nor should they be taken as, a recommendation to buy, sell or otherwise maintain any particular investment or share holding and take no account of whether a particular investment is best suited to an investor's individual circumstances at any time.

MD Management Limited cannot give, nor should the communication of any information given within the STAR updates be taken as being investment or taxation advice. MD Management Limited is only the publisher of the STAR updates and, in this context, is not acting as a financial adviser.

If you need investment or taxation advice you should consult a duly authorised financial adviser.

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