Annual Report - David Eccles School of Business - University of Utah

Letter from Fund Advisor,Dr. Elizabeth TashjianThis academic year, the Student InvestmentFund entered its second decade as a class. Thelast twelve months have been a challengingtime for investors as uncertainty persists as tothe timing of the end of the recession and thespeed of the recovery. Unemployment hasremained high while interest rates remainunusually low. Major news stories included theEuropean debt crisis, swings in consumerconfidence, the Gulf oil spill, and a strong antiincumbentpolitical climate.research program. In 2013, we will move intothe Trading Room in the new business building.Congratulations to the 2009-2010 managers ona very successful year.For the fourth consecutive year, the fund hasoutperformed the S&P. Despite the tight jobmarket, SIF alumni have continued to receivehighly competitive job offers both in Utah andaround the country. SIF members have beenleaders on campus in ASUU, Top Jobs, UVF, inthe President’s office, in the Bennion Center,and in the MUSS. Five SIF students (fourcurrent students and one alumna) participatedin the first CFA International ResearchChallenge in the state of Utah, narrowly losingto BYU’s MBA team, which went on to win thechallenge for the Americas.When the fund began as a club in 1998, therewere no experiential undergraduate classes inthe business school and no special programs fortop business students. The Student InvestmentFund has helped to precipitate many changes.A few years after the Fund’s inception, MikeLemmon and I launched the Finance Honorsprogram as it became clear that our strongundergraduate students sought a stronger set ofclasses. That program has grown to be one ofthe most successful honors programs oncampus, and the business school now offershonors in all areas. We now have a wide arrayof experiential classes. SIF alumni continue toget excellent jobs. Many have gone on tograduate programs in business, law, andmedicine.I anticipate more exciting changes in oursecond decade. Next year, we will incorporatethe Capital IQ platform into our SIF investment7 | P age

What We Hold & What We SoldThe Davidson PortfolioHighlightsSince August 25, 2009, when the new fundmanagers took over the Davidson Portfolio, theDavidson portfolio has returned 20.99%compared to 16.18% and 21.23% for the S&P500 and NASDAQ indices, respectively. Duringthis time period the fund managers purchasedSales Force (CRM), Under Armour (UA), Celgene(CELG), and additional shares of Cerner (CERN);they agreed to sell Aldila (ALDA), WilliamsCompanies (WMB), Research in Motion (RIMM),and General Electric (GE).Over the 2009-2010 academic school year onlytwo stocks in the Davidson Portfolio decreasedin value, while ten out of thirteenoutperformed the S&P 500. The best performerin the portfolio was Williams Companies (WMB),which had a compounded eight month return of92.58%.This was largely due to the steadyincrease in the price of oil as well as theoverall improvement in the economy sinceAugust 2009.As of April 9, 2010, the Davidson Portfolio had avalue of $61,504.70. It is most heavily weightedin healthcare, with 35% of its holdings in thissector.StrategyThe Davidson portfolio is subsidized by D.A.Davidson, so that the fund is replenished if itsvalue drops below $50,000. When the fundexperiences gains over 5%, the fund splits thegains in half with D.A. Davidson. The fundstrategy for the Davidson Portfolio is to investin high growth stocks which are often small capstocks of relatively new companies that maycarry considerable risk.Individual Holdings (prices as of April 9):Celgene PharmaceuticalsTicker: CELGPurchased: Feb 24, 2010Purchase Price: $59.20Current Price: $61.89Analyst: February GroupCelgene is a bio-pharmaceutical companyfocused on developing drugs which target bloodcancers including multiple myeloma,myelodysplastic syndrome, non-Hodgkin’slymphoma, and chronic lymphocytic leukemia.Celgene also specializes in finding treatmentsfor ADHD, solid tumors, and inflammatorydiseases. Celgene was founded in 1986 andcompleted its initial public offering in 1987. Itcurrently operates in more than 65 countriesincluding Eastern Europe, Japan, Australia,Southeast Asia, and Latin America.The fund purchased CELG to take advantage ofthe stock growth we anticipate should thecompany’s key drug, Revlimid, be approved forfirst line treatment of multiple myeloma. Firstline treatment status for Revlimid means thatthe company’s drug would be the first drugprescribed to newly diagnosed patients, leadingto a dramatic increase in market share. Aftercareful analysis of the drug’s quality andefficacy compared to the competition, thelikelihood of passing the FDA first linetreatment approval process is quite high.Through a discounted cash flow analysis, wehave approximated Celgene’s stock price valueat $75. Once Revlimid is approved and thestock price reflects the gain in value, werecommend that the fund should sell the stock.Cerner Corp.Ticker: CERNPurchased: Feb 10, 2006, Oct 7, 2009Purchase Price: $42.10, $75.76Inherited Price: $64.27Current Price: $88.19Analyst: Travis GiguereCerner Corporation provides healthcare ITsoftware solutions that combine clinical,financial, and management informationsystems. Cerner’s largest customers include8 | P age

hospitals, laboratories, blood banks,pharmacies, and public health organizations. Itsflagship product, the Cerner MillenniumSystem, provides access to an individual’selectronic medical records at the point of care.The system organizes and delivers informationfor healthcare professionals as well asconsumers.Previous fund managers held this stock becausenet income and cash flow have increased yearover year, sales and employees have increased,and it belongs in a strong sector. All of thesepoints still hold true today, however there wasa decrease in cash flow during 2009. During2009, Cerner purchased $169 million of shortterm government bonds. If Cerner had notinvested this cash in government bonds, cashflow would have doubled from 2008. Theeconomic stimulus package has set aside $19.5billion for healthcare IT during the next tenyears. Congress is hoping the money willinfluence hospitals and doctors to start usingelectronic heath records, which is Cerner’sprimary focus. Cerner has low long-term debtto-equitylevels and high profit margins relativeto the industry.CyberSource CorporationTicker: CYBSPurchased: Nov 27, 2007Purchase Price: $15.81Inherited Price: $15.81Current Price: $18.52Analyst: Chris BartonCyberSource was founded in 1996 at thebeginning of the E-commerce boom, and isconsidered to be the first online paymentprocessor. CyberSource started by creatingelectronic payment and fraud detectiontechnology. Products and services offered byCyberSource are designed to assist merchantsin managing transactions including paymentprocessing services, enterprise software, andprofessional services. Online retailers, whichlargely started with the acceptance of creditcards as a form of payment, have successfullyadapted to new forms of payment includingdebit cards, electronic checks, gift cards,PayPal, and Bill Me Later® for customersatisfaction and security purposes. As E-commerce grows and expands, more merchantsare going global with their online services. In2007, online retail transactions wereforecasted to nearly double by 2012.The current fund managers elected to hold allshares of CyberSource Corporation for theduration of the academic year and realized aholding period return of 27.10%, or a monetaryincrease of $499.20 for the Davidson portfolio.With its reputation and the anticipated growthin online retail transactions, the current fundmanagers anticipate the price of CyberSource’sstock to increase to $22.00.Icon PLCTicker: ICLRPurchased: Feb 3, 2005Purchase price: $8.48*Inherited price: $22.76Current price: $26.60Analyst: Kristina Rodriguez*Split adjustedIcon PLC is a contract research organizationbased in Ireland. The company is listed as anADR on the New York Stock Exchange. ICONprovides global outsourced developmentservices to pharmaceutical, biotechnology, andmedical device industries. The companyprimarily services the United States, Ireland,and Europe. ICON focuses on conductingclinical trials, and development projects fromcompound selection to Phase I and IV clinicalstudies.ICON continues to outperform the S&P 500index. Additionally, the company experienced39.60% net income growth at the end of the2008. We believe the company’s efficientoperations will result in continued steadygrowth.9 | P age

Under ArmourTicker: UAPurchased: Dec 9, 2009Purchase Price: $26.13Current Price: $32.28Analyst: Jonathan BowenThe company develops, markets and distributesperformance apparel, footwear and accessoriesfor men, women and youth worldwide. Thesignature product for Under Armour iscompression clothing made from syntheticmoisture-wicking fabrics designed to regulatebody temperature and improve performance ofthe user. The company has done well inestablishing the mentality among athletes thatthey will not perform as well without usingUnder Armour products. Recently, it hasentered into the running market to competedirectly with Nike and Adidas. Under Armour,Inc. was inherited by the 2009-2010 StudentInvestment Fund as part of the Milner Fund.Prior to reporting quarterly earnings in Q42009, the Student Investment Fund decided topurchase 100 additional shares for the Davidsonportfolio in anticipation of a rise in stock price.Despite contending against vastly largercompetitors such as Nike and Adidas,management has historically exceededprojections as the company continues to gainmarket share in both clothing and footwear.Thus, the Student Investment Fund believesthat holding Under Armour stock long-term willbe beneficial to both portfolios.Westinghouse Air Brake TechnologiesTicker: WABPurchased: Nov 8, 2006Purchase Price: $31.47Inherited Price: $36.18Current Price: $42.60Analyst: Daniel SmartThe 2009-2010 Student Investment Fundinherited WAB from the 2008-2009 class.Westinghouse provides original equipmentmanufacturing and aftermarket services for therail industry worldwide. Its business has twomain segments: freight and transit. Its freightgroup manufactures and services componentsfor new and existing freight cars andlocomotives. Its transit group manufactures andservice components for passenger transitvehicles, primarily subway cars and buses.WAB was previously held for a few key reasonsthat are still applicable in the current year.WAB continued to acquire new contracts and itsbacklog was high with projects guaranteedthrough 2016. There is currently a large pushfor new rail lines, including high speedpassenger lines in states such as California. Thisdrive towards greener transportation will alsopromote growth within this industry.This company is expected to have consistentgrowth, and was thus held to provide stabilityand diversification to the portfolio.Divested Holdings:AldilaTicker: ALDAPurchased: Apr 4, 2007Purchase Price: $15.93Inherited Price: $3.64Sell date: Oct 7, 2009Sell Price: $3.41Analyst: Paul BurninghamAldila Inc. was inherited from the previous fundmanagers. Aldila designs, manufactures, andmarkets high performance graphite golf shafts.The company sells its graphite shafts to golfclub manufactures, distributors, custom clubshops, pro shops, and repair shops. Most ofAldila’s revenue comes from selling to largegolf club manufactures such as Callaway golf,Taylormade, and Titleist.12 | P age

In recent years Aldila has seen a significantdecline in sales. For the first half of 2009,Aldila lost $675,000 and had a decrease of 21%in shafts sales compared to 2008. The decisionto sell was based on the company’s continueddrop in sales and the poor long-term outlook ofthe golf industry. Aldila management predictedthe industry would contract by another 15 to20% in the coming year.On January 19, 2010, Aldila Board of Directorsunanimously approved a plan to voluntarilydelist its stock from the NASDAQ. The delistingis consistent with a continued effort to reduceexpenses. Since the delisting the stock hasclimbed from $3.93 to $5.50 as of April 15,2010.General Electric CompanyTicker: GEPurchased: Nov 12, 2008Purchase Price: $17.15Inherited Price: $14.30Sell Date: Oct 21, 2009Sell Price: $15.78Analyst: Kimyen NguyenThe fund chose to sell General Electric due tothe poor performance since purchase. The keyreasons for the sale of all shares included1. Disappointing and unpredictableperformance of GE Capital, which GEfailed to spin off or sell,2. Concerns about the recovery time ofthe financial sector and GE Capital, and3. Management’s proposal of a drasticchange in the company’s operationsand marketing in emerging markets.Research in MotionTicker: RIMMPurchased: Nov 14, 2007Purchase Price: $115.53Inherited Price: $75.56Sell Date: Oct 29, 2009Sell Price: $61.24Analyst: Daniel SmartRIM’s technology facilitates wireless access toinformation such as e-mail, telephone, shortmessaging service, Internet, and Intranet-basedapplications. The company is most famous forits BlackBerry wireless platform, the RIMWireless Handhelds product line, radiomodems,and other software and hardwaresolutions. Research in Motion is headquarteredin Waterloo, Canada and has additional officesin North America, Europe and Asia Pacific. Inearly 2009, RIM completed the acquisition ofChalk Media Corp. and Certicom Corp.This year’s fund managers sold RIM due to adecline in sales and new users combined withsignificant gains with rival, Apple’s iPhone. Webelieve that RIM will continue to lose marketshare, especially as the iphone is expected todebut on numerous wireless providers duringthe summer of 2010.Williams Companies, Inc.Ticker: WMBPurchased: Nov 5, 2008, Feb 20, 2009Purchase price: $19.37, $11.09Inherited price: $17.35Sell Date: Oct 21, 2009Sale price: $20.27Analyst: Kelly BartonThe current fund managers inherited WMB fromthe previous year’s class. Williams CompaniesIncorporated is an integrated natural gascompany. It locates, produces, gathers,processes, and transports clean-burning naturalgas to heat homes and generate electric poweracross the country. Williams’ operations areconcentrated in the Pacific Northwest, RockyMountains, Gulf coast and the easternseaboard. The previous fund managerspurchased this stock to gain access to themarket potential of natural gas. Natural gas isan extremely important source of energy forreducing pollution and maintaining a clean andhealthy environment. It is also a domestically13 | P age

abundant and secure source of energy.Environmental policies had begun to shift,making natural gas a viable source of energyand energy generation.The stock was sold due to falling natural gasprices and the unusually high amounts of gasstorage. During the month of the sale, gasstorage was approximately 15% higher than theyear before, indicating to the fund managersthat natural gas prices were prone to fall evenlower. Additionally, research showed thatnatural gas consumption was down considerablyfrom the year before, which had the highestnatural gas prices in a number of years. Thisindicated to the fund managers that natural gaswas not a good market to be in at that time.14 | P age

Milner PortfolioHighlightsSince taking over the fund in August 2009, theMilner portfolio has consistently outperformedthe S&P 500.Akamai Technologies (AKAM), WilliamsCompanies (WMB), and Nu Skin Enterprises(NUS) were the top performers, with holdingperiod returns of 82.27%, 81.37%, and 66.59%,respectively. WMB was sold in October of 2009,while the managers continue to hold onto AKAMand NUS. The biggest losers were Aldila (ALDA),Research in Motion (RIMM), and MaxwellTechnologies (MXWL), with holding periodreturns of -78.47%, -47.06%, and -6.77%,respectively.StrategyAs in the Davidson portfolio, we share the gainsin excess of 5% on the Milner portfolio.Therefore, we pursue a similar strategy ofinvesting in high-growth stocks in this portfolio.Individual Holdings:ABB Ltd.Ticker: ABBPurchased: Mar 24, 2009Purchase Price: $14.22Inherited Price: $19.59Current Price: $22.33Analyst: Kristina RodriguezABB Ltd. is an international company based inSwitzerland. It is listed as an ADR in the NewYork Stock Exchange. ABB is in the industrialelectrical equipment industry. The companyprovides power and automation technologies toutility and industrial customers. It providessystems for grid systems, power generation,and substations. Furthermore, the companyoffers alternating current transmission systemsand high-voltage direct current systems.Additionally, it provides products and servicesfor the renewable solar and wind sectors.We inherited ABB from the 2008-2009 managersat a price of $13.94. Despite the negative netprofit growth, we believe ABB Ltd has thepotential to recover from the economicdownturn and realize greater profits. Also, ABBhas yet to realize revenues from unfinishedprojects domestically and internationally.These projects come in light of the stimuluspackaged released by governments worldwideto improve infrastructure.Activision Blizzard, Inc.Ticker: ATVIPurchased: Oct 20, 2008Purchase Price: $12.41Inherited Price: $11.87Current Price: $12.48Analyst: Shandra CorbittActivision Blizzard is a leading online andconsole game developer and publisher. Thecompany was formed through a mergerbetween Activision and a subsidiary of VivendiS.A. in July 2007. Activision Blizzard isheadquartered in Santa Monica, California. Thecompany produces game software that isutilized on the Xbox, Playstation, and Nintendoconsoles as well as other portable devices andpersonal computers. The merger betweenActivision and Vivendi was a strategy tocombine “trendy” games with the consistentand “dedicated” games, of each company. Thecompany strategy includes purchasing andpartnering with smaller leading developers andintellectual property right owners. PopularActivision Blizzard game titles include Call ofDuty, World of Warcraft, StarCraft, GuitarHero, and various expansion packs andvariations therein.Although the stock has experienced turmoilover the holding period, the fund decided notto sell the stock. Activision Blizzard hasexperienced record breaking sales with therelease of Call of Duty 2: Modern Warfare andwe anticipate future gains in the gamingindustry, even though sales projections for the2009 holiday season were fairly low due tolimited consumer discretionary income. The15 | P age

industry would outperform the market duringdifficult and uncertain economic times goingforward. As of April 13, 2010, the company istrading at $71.59 per share, which represents a12.74% holding period return since August 25,2009.EMC Corp.Ticker: EMCPurchased: Dec. 9, 2009Purchase Price: $16.75Current Price: $18.54Analyst: Ian DonaldsonEMC Corp. provides products and services forexternal data storage and server virtualization.EMC produces systems infrastructure, storagesoftware, virtualization, and provides openconsulting services. 2010 should be a good yearfor EMC with a recovering economy translatinginto increased corporate IT budgets.As the open source leader in networkedstorage, EMC appears well positioned to takeadvantage of growth in information storage.This market is being driven by the growing needfor firms to back up every bit of data such asdigital MRIs and corporate records. EMC’sinorganic growth strategy has been successfulin keeping the firm ahead of the technologicalcurve through the strategic acquisitions ofsmall, but quickly growing IT specialty firmssuch as VMware and Data Domain. VMware isused by all Fortune 100 companies and has 84%of the total market for virtualization servicesand software.EMC has a strong brand and position in thestorage devices market and is well positionedto take advantage of the shift to cloudcomputing with its ownership of VMware. EMC’sshares appear to be headed back towards thepre-recession price of $25. We believe themarket has not fully capitalized on EMC’sfuture opportunities, and project the EMCshare price to be fairly valued at $22. Wewould recommend selling the stock if it hitsthis target within the next year.Hess CorporationTicker: HESPurchased: Jan 23, 2009Purchase price: $52.28Inherited price: $51.48Current Price: $64.75Analyst: Brad ShumpertHess Corporation engages in the exploration,development, production, purchase,transportation, and sale of crude oil andnatural gas worldwide. It operates in twosegments: exploration and production, andmarketing and refining. The exploration andproduction segment explores for, develops,produces, purchases, transports, and sellscrude oil and natural gas. Its exploration andproduction activities take place principally inAlgeria, Australia, Azerbaijan, Brazil, Denmark,Egypt, Equatorial Guinea, Ghana, Indonesia,Libya, Malaysia, Norway, Peru, Russia,Thailand, the United Kingdom, and the UnitedStates. The marketing and refining segmentmanufactures, purchases, transports, trades,and markets refined petroleum products,natural gas, and electricity. As of December 31,2009, the company operated 1,357 HESSgasoline stations. The company was founded in1920 and is based in New York, New York.The key to earnings growth for Hess issuccessful exploration for and production ofcrude oil, liquefied natural gas, and natural gasand their respective market prices. Overallproduction increased about 7% in 2009 and103% of production was replaced by additionsto reserves. Natural gas prices have beenstagnant but crude oil prices have more thandoubled since January 2009. Revenues declinedmore than 25% in 2009, from $ 41 million in2008 to about $30 million, due to the steep falland slow recovery of oil and natural gas prices.However, since the shares were purchased forthe Milner fund in January 2009 quarterlyrevenue has grown at a compound annualgrowth rate near 8%. Hess increased its cashreserves by 50% in 2009 with the issue of newdebt, though its debt to total capital ratioremained stable at close to 25%. Hess holds17 | P age

core acreage in the Bakken shale fields ofNorth Dakota and saw stronger than expectedperformance from its Shenzi field in thedeepwater Gulf of Mexico in 2009. TheCompany expects production from its Bakkenfield to provide growth of about 17% of currentoverall production levels over the next fiveyears. The Company’s success is highlydependent on oil prices, and it is a strongrecovery play for 2010.Icon PLCTicker: ICLRPurchased: Feb 3, 2005Purchase price: $8.48*Inherited price: $22.76Current price: $26.60Analyst: Kristina Rodriguez*Split adjustedSee the Davidson portfolio section of this reportfor additional information on Icon.iShares S&P 500 Value IndexTicker: IVEPurchased: Mar 14, 2007Purchase price: $75.49Inherited price: $50.18Current price: $57.88Analyst: Matt SimonsenIVE is an exchange traded fund of S&P 500value stocks. In 2008, the proportion of cash inthe Milner portfolio exceeded the proportion ofcash in the Davidson portfolio. To keep therelative weighting and performance of the twoportfolios equal, the 2007-08 fund managersneeded to find place for the excess cash. IVEbalanced the cash in the two portfolios in 2008and gave current managers exposure to themarket without creating an advantage foreither portfolio.In 2009-10, fund managers decided to maintaintheir position in the IVE fund to remain exposedto the broader market. IVE is weighted heavilyin financials with 17.1% of all holdings in thefinancial service sector. This has contributed tothe steady rise in the current performance ofthe ETF.Maxwell Technologies, Inc.Ticker: MXWLPurchased: November 18, 2009Purchase Price: $17.456Current Price: $12.71Analyst: Kimyen NguyenMXWL is an energy storage company based inSan Diego, CA. The company engages primarilyin developing, manufacturing, and marketing ofenergy storage and power delivery products.The company’s most popular product, theBOOSTCAP ultracapacitor, is used in variousindustries including transportation, automotive,telecommunications, energy, consumer, andindustrial electronics. The ultracapacitor iscapable of storing exceptionally large amountsof energy for its size and quickly discharges theenergy electrochemically with zero emission.The company also has the CONDIS high-voltagecapacitors comprising grading and couplingcapacitors, and capacitive voltage dividers usedin the electric utility industry to ensure thesafety and reliability of electric infrastructureand other applications concerning transport,distribution, and measurement of high-voltageelectrical energy. Lastly, the company alsooffers radiation-mitigated microelectronics,including power modules, memory modules,and single board computer and componentsused in the aerospace industry.Maxwell Technologies is involved in anextremely competitive market with hugepotential for growth. The company’s focus is onits ultracapacitor products, which has goals ofreplacing traditional batteries in the long-runand supplementing them in the short-run.Although the company is in a competitiveemerging market, it has several advantagesthat merit a conservative investment. Theresearch and development costs forultracapacitors are extensive; however,18 | P age

Maxwell produces two other product lines:high-voltage capacitors and radiation-mitigatedproducts, which help to offset current costs.The majority of research predictsultracapacitor sales to grow significantly in thefollowing years worldwide as more countriesare adopting stricter environmental regulationsand ultracapacitors serve as a clean, safe, anddurable substitute to traditional batteries.In Q4 2009, Maxwell Technologies experienceda 22% increase in sales over the same period in2008, with sales of ultracapacitors increasingby 52%. Despite the increased revenue, MaxwellTechnologies was required by GAAP to record a$9.3M accrual for the potential settlement ofFCPA violations in China made by their Swisssubsidiary. The management team believesthat the payments in question were immaterialin all periods involved. Internal investigationsare ongoing and the company is voluntarilysharing information related to the review withthe SEC and DOJ. News of the potentialsettlement has been the driving factor of thedecrease in stock value since the purchase bythe fund.NuSkin EnterprisesTicker: NUSPurchased: Nov 25, 2009Purchase Price: $27.30Current Price: $29.04Analyst: Clay AndrusNuSkin is a billion dollar consumer devicemanufacturer located in Provo, UT. Thecompany focuses its products in anti-aging andskin care, as well as nutrition, cosmetics andgeneral toiletries. The company uses a multilevelmarketing distribution strategy with over750,000 active distributors selling product inover 48 countries. The current market cap isabout $2 billion, with annual revenues of over$1 billion in 2009.NUS was purchased on three general premises:the aging population and tidal wave of demandfor anti-aging products, recovering recessionand the recognized trend of counter-cyclicaldistributor growth, and to add exposure to thissector in the investment fund portfolio. With abuy price of $27.30, analysis proved thecompany was undervalued with an impliedshare price of $30.95. Within five months thestock price rose to over $31.00, representing areturn of greater than 14%, and beating theS&P by over 5%.Powershares QQQTicker: QQQQPurchased: Apr 29, 2009Purchase Price: $34.029Inherited Price: $40.27Current Price: $49.03Analyst: Ian DonaldsonPowershares QQQ is an exchange traded fundthat seeks to mimic the NASDAQ 100, an indexthat holds shares of the 100 largest domesticand international companies listed on theNASDAQ, excluding financial companies. TheETF is most commonly referred to as “TheCubes,” “The Quad-Qs,” and “The Qs.” The2008-2009 fund managers had excess cash thatwas not being utilized, so they invested thecash in QQQQ.The 2009 -2010 fund managers decided tomaintain their current position in QQQQ to gainadditional returns, as the broader market wasexpected to continue to recover. The NASDAQhas outperformed the S&P 500 over the pastyear, thus contributing to the positiveperformance of the ETF during the currentmanagers’ tenure.Tata Motors Ltd.Ticker: TATAPurchased: Apr 22, 2009Purchase Price: $7.05Inherited Price: $11.98Current Price: $19.34Analyst: Shandra Corbitt19 | P age

Tata Motors Ltd. (TATA) is an internationalconsumer retail and commercial vehiclemanufacturer based in India. The companyproduced its first vehicle in 1954 and has beengrowing since then. Tata Motors is listed onthe Bombay Stock Exchange Limited (BSE),National Stock Exchange of India Limited (NSE),and the NYSE. Tata Motors specializes in themanufacture of small consumer vehiclesinternationally, but also competes in thecommercial vehicle industry regionally.Over the past ten years, the company hasexperienced international product and brandgrowth. Tata Motors has a stake in Jaguar, LandRover, Daewoo, Carrocera (Spanish busmanufacturer), and joint ventures in bothBrazil and Thailand.The fund purchased TATA in anticipation ofincreased sales. The company recentlyintroduced a new, five passenger inexpensivecar in India. The stock has experiencedsignificant appreciation over the past year,especially in relation to other carmanufacturers. The fund has continued to holdTata Motors due to its strong growth andbusiness model.Current Price: $42.60Analyst: Daniel SmartSee the Davidson portfolio section of this reportfor additional information on Wabtec.Divested Holdings:AldilaTicker: ALDAPurchased: Apr 4, 2007Purchase Price: $15.93Inherited Price: $3.64Sell date: Oct 7, 2009Sell Price: $3.41Analyst: Paul BurninghamSee the Davidson portfolio section of this reportfor additional information on Aldila.Under ArmourTicker: UAPurchased: Dec 5, 2008Purchase Price: $23.00Inherited Price: $23.28Current Price: $32.28Analyst: Jonathan BowenSee the Davidson portfolio section of this reportfor additional information on Under Armour.Research in MotionTicker: RIMMPurchased: Nov 14, 2007Purchase Price: $115.53Inherited Price: $75.56Sell Date: Oct 29, 2009Sell Price: $61.16Analyst: Daniel SmartSee the Davidson portfolio section of this reportfor additional information on Research inMotion.Westinghouse Air Brake TechnologiesTicker: WABPurchased: Nov 8, 2006Purchase Price: $31.4788Inherited Price: $36.18Williams Companies, Inc.Ticker: WMBPurchased: Nov 5, 2008, Feb 20, 2009Purchase price: $19.488, $11.06Inherited price: $17.3520 | P age

Sell Date: Oct 21, 2009Sell price: $19.951Analyst: Kelly BartonSee the Davidson portfolio section of this reportfor additional information on WilliamsCompanies.School FundHighlightsFrom the beginning of our management onAugust 26, 2009, to April 9, 2010, the Schoolportfolio increased by 20.64%. This is comparedto 16.18% and 21.23% for the S&P 500 and theNASDAQ indices, respectively.Over the course of the academic year, theSchool portfolio has consisted of 11 stocks. Theportfolio included three energy stocks, twotechnology stocks, two service stocks, oneindustrial stock, one consumer goods stock, onefinancial sector stock, and one foreign ETF.Reflecting the behavior in the market, 10 ofthe 11 stocks in the School portfolioexperienced gains over our managementperiod. The only stock to experience a negativereturn over this period was SunPowerCorporation (SPWRA), which declined from$23.27 at our December purchase date to$18.18 in April. The most notable gains for theportfolio were realized by Guess? (GES), Deere& Co. (DE), and Anadarko Corporation (APC).Throughout our management period, theconsumer goods sector experienced significantgains as consumers began to spend again. Theenergy sector experienced great shifts inpricing as well, reflected in our gain of 35.76%by Anadarko (APC) and our loss of 21.87% bySunPower (SPWRA). The fund held on to all butone of the inherited stocks due to anticipatedincreases in many of these sectors. The fundmanagers expected many stable firms torecover from significant losses in the previousyear.StrategyThe School portfolio has been funded bydonations to the Student Investment Fund. Thecapital belongs to the school; therefore, thefund bears any losses and enjoys any gains. Thisportfolio is governed by the Student InvestmentFund bylaws. The investment objective for theSchool portfolio is long-term, steady growth.Therefore, the stocks found in this portfolio aregenerally more mature, stable companies thanwill be found in the Davidson and Milnerportfolios.Individual Holdings:Activision Blizzard, Inc.Ticker: ATVIPurchased: Mar 7, 2008Purchase Price: $13.50Inherited Price: $11.87Current Price: $12.48Analyst: Shandra CorbittSee the Milner portfolio section of this reportfor additional information on ActivisionBlizzard.Anadarko Petroleum CorporationTicker: APCPurchased: Dec 3, 2008Purchase Price: $36.33Inherited Price: $54.01Current Price: $73.30Analyst: Nate PattersonAnadarko Petroleum Corporation focuses onfinding and producing oil and gas. Most of thecompany’s operations are in the deep water ofthe Gulf of Mexico and in Algeria. In addition,the company operates in Brazil, China, Ghana,and Indonesia. Anadarko Petroleum Corporationhas significant upside potential associated withits West Africa and Gulf of Mexico explorationprograms. It also has significant upsidepotential associated with around 30 of its deepwaterexploration and development wells.21 | P age

Lastly, Wahoo, Anadarko’s next mega project,might be able to double Anadarko’s productionwithin the next five to seven years. Anadarkorecently performed a successful test on thesite. The results suggested that Anadarko couldreasonably pull oil out of this site by 2014.Bank of New York Mellon, Corp.Ticker: BKPurchased: Mar 5, 2008Purchase Price: $45.19Inherited Price: $29.39Current Price: $31.95Analyst: Christopher BartonThe Bank of New York Mellon Corporationprovides a wide range of financial services,including wealth and asset management, assetservicing, issuer services, and clearing andexecution services. The Bank of New YorkMellon Corporation was purchased by the 2007-08 fund managers as a long-term investment inthe School portfolio. The investment thesis wasthat the financial services industry was hitparticularly hard by the financial crisis and thatmany firms were trading at a discount, despitethe fact that many firms had limited exposureto the subprime mortgage meltdown. The Bankof New York Mellon Corporation was thought tobe an institution with limited exposure to thesubprime mortgages and would offer anattractive opportunity to diversify into thefinancial sector. The 2008-09 fund managerselected to hold this stock in hopes that in thelong term, the School portfolio would benefitfrom this holding as the financial servicessector began to recover from the lossesexperienced during the financial crisis.The current fund managers also elected to holdThe Bank of New York Mellon Corporation forthe duration of the academic year and realizeda holding period return of 8.14% or a monetaryincrease of $161.47 to the School fund. It isimportant to note that the current fundmanagers are currently discussing theelimination of their entire position in The Bankof New York Mellon Corporation for a moreattractive financial sector investment.ComcastTicker: CMCSAPurchased: Jan 17, 2007Purchase Price: $29.99*Inherited Price: $15.21Current Price: $18.50Analyst: Paul Burningham*Split AdjustedThe current fund managers inherited Comcastfrom the previous year’s class. Comcast is thelargest cable provider in the United States. Itoffers a variety of entertainment, informationand communications services to over 51.2million residential and commercial customers.Comcast operates in an intensely competitiveenvironment with increased competition fromsatellite providers and digital delivery ofentertainment services. A significant portion ofComcast’s revenue comes from residentialcustomers and thus is subject to prevailingeconomic conditions. Through the recenteconomic downturn, and with increasedcompetition, Comcast has continued to growand increase its net income. In the last sixquarters Comcast has beaten analyst earningsexpectations. We believe Comcast is wellpositioned in the industry to continue tosucceed in the long run.Deere & CompanyTicker: DEPurchased: Nov 30, 2005Purchase Price: $34.63*Inherited Price: $46.31Current Price: $61.68Analyst: Jonny Murdock*Split adjustedDeere & Company’s operations are divided intothree main business segments: Agricultural andTurf, Construction and Forestry, and Credit.The Agriculture and Turf segment is responsiblefor the manufacturing and distribution of farm22 | P age

and turf equipment, as well as their relatedservice parts. The Construction and Forestrysegment is responsible for the manufacturingand distribution of machines and relatedservice parts used in construction, earthmoving, material handling, and timberharvesting. The Credit segment is responsiblefor financing the sales and leases of new andused equipment manufactured by the other twosegments. Fund managers believe that Deere isa strong long-term investment because of itsglobal exposure to agriculture as well as well asinfrastructure construction in developing anddeveloped nations. The stock price has risensignificantly over the past year due to arebounding global economy and increasingdemand for agricultural and constructionequipment.Guess?, Inc.Ticker: GESPurchased: Apr 29, 2009Purchase Price: $25.05Inherited: 31.40Current Price: $47.00Analyst: Crystal WilliamsGuess produces and sells clothing, accessories,and footwear. Guess is best known for itspremium jeans, targeted primarily towardyoung women. It operates 432 retail and outletstores throughout the US, 84 stores in Europe,and 13 stores in Mexico. The stock was at a sixmonthhigh when the 2008-2009 fund managerspurchased the stock. Consumer confidence hadbegun to rise after a drastic stock marketdecline in the previous months. They believedGuess was a strong brand that would thrive offgrowing retail sales as consumer confidenceincreased. With a holding period return of87.6%, the current fund managers wanted tohold the stock because of its strong growth.iShares MSCI South Africa IndexTicker: EZAPurchased: March 3, 2010Purchase Price: $56.44Current Price: $62.19Analyst: Trang NguyeniShares MSCI South Africa Index is an ETFcomprised of South African companies. Thefund is concentrated in industrial materialcompanies, comprising 31.58% of the fund, andfinancial services, 27.15%. Other major sectorsinclude telecommunications (11.07%), energy(10.33%), and media (6.96%). The decision topurchase this fund is a play on the ongoingdevelopment of South Africa. South Africancompanies are expected to have an EPS of 38%in 2010. GDP is expected to continue to grow in2010, as it grew 2.6% in the 4th quarter of2009. In addition, this ETF purchase is also abet on The World Cup 2010, which is being heldin South Africa. The coverage will attract over200 million viewers and countless tourists,bringing much attention to the country andtheir continued improvements. South Africa hasthe potential to become the next China or Indiaas a booming, emerging market.Microsoft CorporationTicker: MSFTPurchased: Mar 15, 2004Purchase Price: $25.23Inherited Price: $24.64Current Price: $30.34Analyst: Trang NguyenMicrosoft Corporation develops, manufactures,licenses, and markets various types of softwareproducts and services for computers andcomputing devices. The company is responsiblefor the most popular operating system forpersonal computers. The latest upgrade,Windows 7, has been received warmly since itsrelease on October 22, 2009. On March 4, 2010,23 | P age

Microsoft announced they have sold 90 millionWindows 7 licenses. Due to the success ofWindows 7, Microsoft’s shares have reboundedconsiderably from their 52-week low of $18.47.The fund managers decided to hold Microsoftdue to the company’s rebound in the OS marketas well as for the general stability of thecompany.SunPower CorporationTicker: SPWRAPurchased: Dec 9, 2009Purchase price: $23.27Current price: $18.18Analyst: Matt SimonsenSunPower Corporation engages in the design,manufacture, and marketing of solar electricpower technologies. It operates in twosegments: components and systems. Thecomponents segment sells solar powerproducts, including solar cells, solar panels,and inverters, which convert sunlight toelectricity for the utility networks servinginstallers and resellers for use in residentialand commercial applications. The systemssegment offers power systems and systemtechnologies, which include development,engineering, and procurement of permits andequipment, as well as constructionmanagement, access to financing, monitoring,and maintenance services. The company offersits products and services through a network ofdealers primarily in North America, Europe,Asia, and Australia.The solar power industry has grownsignificantly over the past decade as the needfor alternative energy sources has increasedaround the world. Various macroeconomicfactors, including fossil fuel constraints, globalwarming and the necessity of reducing carbonemissions, political factors and technicalfactors affect the volatility of risk within thisindustry. SunPower competes with companiesincluding First Solar, Suntech and Q-Cells onprice, quality and efficiencies generated fromvarious solar products. The company’sreputation is excellent and its managementteam has a record of continually beatingearnings estimates, improving manufacturingprocesses and efficiencies, and acting in thebest interest of its shareholders. By focusing ondeveloping better cells for solar concentratortechnology, SunPower has created adifferentiated type of solar cell in which themetal contacts and grids are located on theback side of the cell. This design has improvedefficiency tremendously, and has helpedSunPower dominate the industry in solarconversion efficiency output. SunPower iscurrently mass-producing some of the highestefficiency solar panels available on the market.SunPower is a competitive leader within itsindustry. Its intrinsic value was calculated to beroughly $40 per share. At the time, thecompany’s current share price was $22.76,producing an undervalued amount of nearly$18.Divested Holdings:Williams Companies, Inc.Ticker: WMBPurchased: Nov 5, 2008Purchase price: $19.52Inherited price: $17.35Sell Date: Oct 21, 2009Sell price: $20.00Analyst: Kelly BartonSee the Davidson portfolio section of this reportfor additional information on WilliamsCompanies.Luxottica Group S.p.ATicker: LUXPurchased: Feb 14, 2007Purchase Price: $31.65Inherited Price: $24.40Sell Date: April 21, 201024 | P age

Sell Price: $29.04Analyst: Ben FruinThe Luxottica Group is the world’s largestconsumer eye-ware company. It specializes inthe production, manufacturing, and distributionof both corrective and UV protective eyewear,and owns the rights to prestigious brands suchas Ray-Ban (1999) and Oakley (2007). Inaddition, the Milan based Luxottica owns therights to Sunglass Hut and Lens Crafters storeswhich operate in a variety of internationalmarkets. The company’s business channelsinclude manufacturing and wholesaledistribution, as well as retail distribution. It hasgarnered licensing deals with well-knowndesigners such as Prada and Ralph Lauren,among others.Fund managers purchased LUX on the basis thatit would provide international exposure for theportfolio given its strong market position andgrowth opportunities. The success of this stockis contingent upon relatively high levels ofconsumer discretionary income, which is onereason why the stock has underperformed inrecent years. In 2009, LUX nearly matched itsrecord sales year of 2008, although thecompany’s stock price remained relativelystagnant. The stock was sold upon the newsthat company executives projected low salesgrowth in 2010 for America and Europe, whichaccount for 90% of the company’s retail salesand 60% of the company’s total business. Inaddition, the fund managers expressed concernwith regard to the lack of concrete objectivespresented by Luxottica management. Theacquisition of Oakley has not been nearly asaccretive to EPS as originally anticipated,which is disappointing given the fact that it hasbeen three years since Luxottica’s purchase ofthe sporting eye-ware leader. The devaluationof the Euro and the state of the Europeaneconomy was the final reason the fundmanagers decided to exit the position in LUX.Why we soldAs Student Investment Fund managers, we wereresponsible not only for purchasing stocks, butalso for selling stocks whose future prospectswere weak. Throughout the course of the year,we sold five of the stocks that we had inheritedfrom the 2008-2009 Fund. In some cases, thesestocks were sold on the basis of long termconcerns, while in other cases the researchanalyst covering a particular stock decided tosell based on seasonal factors. The followinganalysis of the Fund’s sell decisions includeslost gains (or avoided losses) based on thecurrent price for these stocks as of April 15,2010. The ratio of the current stock price tothe price at which we sold is a measure of theoverall quality of our sell decisions: a ratioabove 1 indicates that the stock would havebeen worth more had we held it until April anda ratio below 1 indicates we avoided a loss wewould have incurred had we continued to holdthe stock. The ratio does not take into accountthe movement of the overall market, nor doesit consider the performance of the stocks webought in place of the stocks we sold.The analysis of the sales decisions for the fivestocks sold during the fund’s current fiscal yearis presented in chronological order based onearliest sale date.Aldila (ALDA)Sell Date: Oct 7, 2009Sell Price: $3.41Current Price (Apr 15, 2010): $5.40Ratio of Current Price to Sell Price: 1.58The Fund purchased 250 shares of Aldila on Apr4, 2007, at a price of $15.93 per share.Analyst: Paul BurninghamAldila was sold amidst concern regardingconsolidation in the golf industry, as well as theincreased market share of club manufacturersthat do not use Aldila shafts, such as TaylorMade-Adidas. Fund managers further believedthat the decline in consumer discretionaryspending over the past two years had taken itstoll on the golf industry as a whole. Aldila’sgraphite club shaft sales to manufacturers andpro-shops were down for a significant period oftime prior to the sell decision. In retrospect,the Fund should have held onto Aldila as theprice on April 15 was $5.40 per share.25 | P age

Williams Companies, Inc. (WMB)Sell Date: Oct 21, 2009Sell Price: $20.27Current Price (Apr 15, 2010): $24.30Ratio of Current Price to Sell Price: 1.20Analyst:The Fund invested in WMB shares on twoseparate dates. The first lot of 220 shares waspurchased on Nov 5, 2008, at a price of $19.37per share. The second lot of 200 shares waspurchased on Feb 20, 2009, at a price of $11.09per share.The fund exited its Williams positions in the fallafter learning that US natural gas reserves weremuch higher than the common reserves for thistime of year. We expected that natural gasprices would fall in the winter leading to adecline in the price of WMB shares. In addition,several managers believed the Fund was overinvestedin energy stocks and came to thedecision that companies such as AnadarkoPetroleum possessed more upside potentialthan WMB. The current price of WMB (as of Apr15, 2010) is $24.30. Although the WMB salegenerated fairly significant profit, the Fundmay have been better served by holding thestock or at least a portion of the stock until alater date.General Electric (GE)Sell Date: Oct 21, 2009Sell Price: $15.78Current Price (Apr 15, 2010): $19.57Ratio of Current Price to Sell Price: 1.24Analyst: Kimyen NguyenThe Fund initially purchased 330 shares of GEat a price of $17.16 on November 12, 2008.After GE cut its dividend, the previous Fundmanagers sold 230 shares, and retained 100shares which we inherited. Our decision to sellGE centered on the fact that GE’s earnings hadbeen stagnant for several quarters. In addition,the firm’s capital position had beencompromised by the economic recession. Thereduction of GE’s credit rating also had anegative impact on GE’s stock price. Fundmanagers believed there were betteropportunities in the market and hoped to usethe sale proceeds to invest in a stock with moreupside potential. The current price of GE (as ofApr 15, 2010) is $19.57 per share.Research in Motion (RIMM)Sell Date: Oct 29, 2009Sell Price: $61.24Current Price (Apr 15, 2010): $73.93Ratio of Current Price to Sell Price: 1.21Analyst: Daniel SmartThe Fund held stock in RIMM for almost twoyears after making its purchase of 65 shares onNov 14, 2007, at a price of $115.53 per share.The Fund decided to exit its position in RIMMafter analyzing the company’s growth model incomparison to that of Apple (AAPL), RIMM’sprimary competitor in the smart phonesegment. Sales of RIMM’s Blackberry Storm,which was positioned as a touch-screencompetitor next to Apple’s iPhone were muchlower than anticipated. In addition, Blackberryproducts had not evolved as much as currentproducts in the market and softwaredevelopers had grown tired of designingapplications for RIMM’s archaic interface.RIMM’s market share had been declining andFund managers believed the iPhone would soonovertake RIMM’s Blackberry line due to thepopularity of its applications, many of whichcan be downloaded for free in a matter ofseconds. RIMM is currently trading at a price of$73.93 per share.Luxottica Group (LUX)Sell Date: Apr 21, 2010Sell Price: $29.04Current Price (Apr 15, 2010): $28.7326 | P age

What We DidGuest SpeakersDaniel Robinson, Alix Weiss, and Huan YuanAugust 25, 2009Topic: Introduction to Student InvestmentFund/Lessons LearnedMr. Robinson, Ms. Yuan, and Ms. Weiss wereamong the 2008-2009 managers of the StudentInvestment Fund. They came to speak abouttheir experience as fund managers, identifyingimportant investment strategies and stressingthe benefits of team collaboration. Theyemphasized the importance of researchingindustries with which we are familiar and whichinterest us. Finally, they stressed theimportance of having a clear thesis in makinginvestment decisions.Meeting with Fund Alumni organized byStephen Jeffries, Wells Fargo CenterSeptember 10, 2010Topic: Getting the most out of SIF; currentmarket trendsOn September 10, we joined Stephen Jeffriesand other SIF alumni at the Wells Fargo Centerin downtown Salt Lake. The alumni sharedtheir experiences since graduating, spoke aboutwhat they had learned as SIF managers, andshared their thoughts on attractive investmentopportunities.Ryan Snow, PortfolioManager for WasatchAdvisorsSeptember 15, 2009Topic: StockSelection/InvestmentPhilosophyMr. Snow came to speak about WasatchAdvisors’ investment philosophy. He stressedthat the keys to greatness are confidence, hardwork, deliberate practice, and passion. Mr.Snow elaborated on Wasatch Advisors’philosophy investment, ABGC (America’s BestGrowth Companies). He stated that an ABGCstock can be found by analyzing its businessmodel, testing for economic excellence andgrowth potential, investigating management,looking for a sustainable competitiveadvantage, performing a careful valuation, andby identifying big picture trends. Finally, heleft the fund managers with critical advice,“You must resist the temptation to stray fromyour guidelines: if you aren’t willing to own astock for ten years, don’t even think aboutowning it for ten minutes.”Fred DixonSenior Vice President & Chief MarketStrategist, D.A Davidson &Co.February 16, 2010Topic: Smart InvestingMr. Dixon lectured on economic effects oninvestment strategies. He opened with anintense video presentation describing themassive changes in the dynamics of the worldwithin in a few years. Next, Mr. Dixon touchedon the psychological profile of a market cycle,leading economic indicators, market metrics,and forecasting market reactions. In the end,he related his topics to D.A Davidson’s focuslist of stocks. Mr. Dixon left the fund managerswith the advice to constantly analyze themarkets, consider the economic climate, and toprepare for the future.Hal MilnerApril 27, 2010Topic: Business EthicsHal Milner spoke to the class about how to beethical and still be a winner. He opened upwith a quote from his Uncle Les, “They came tobeat me; I just make sure I beat them.” Hestated that the combination of luck, being ofaware of change, and doing unpleasant (legal)things may be necessary to succeed. Finally,28 | P age

Mr. Milner closed with four guidelines to followto be successful: 1) be bold 2) know the rulesof the game 3) make change work for you, andpersevere.R.I.S.E. X GLOBAL STUDENTINVESTMENT FORUMFive of the portfolio managers and a memberTop Jobs had the opportunity to represent theUniversity of Utah at the 2010 RISE Forum fromMarch 18-20 in Dayton, Ohio. The RedefiningInvestment Strategy Education Forum, which isco-sponsored by the University of Dayton andthe United Nations Global Compact, has amission to bring together the best leaders -academic, business, political, financial, mediaand top global finance students – to participatein panel discussions and informal presentations.In addition, a primary focus of RISE is to fosteran interactive dialogue between the best andbrightest on Wall Street and the students whowill soon be their colleagues.The first day of the forum included paneldiscussions from a variety of internationallyprominent market experts and industry leaders.A keynote speaker took the floor for fiveminutes to start a debate related to the panel’sspecialty. After each member of the panel hadexpressed an opinion, students were then giventhe chance to lead the forum’s directionthrough a series of ideas and questions. Thepanels discussed topics such as markets,corporate governance, risk management,energy and sustainability. Nicholas Sargen, arenowned international economist had thisadvice for the finance industry’s futureleaders, “Know what you don’t know, be openmindedto possible scenarios, and get thetrends right, then and only then, will you getthe underlying idea right.” Wise investors29 | P age

conduct extensive due diligence beforejumping into any investment.On the second day of RISE, students attended amyriad of workshops with panel discussionsfrom professionals in various financialindustries. The professional panels discussedtopics such as investing in private capital, riskmanagement, real estate, financing newventures, and credit default swaps.Furthermore, students had the opportunity toattend workshops such as a futures tradingsimulation, where one participant made 900trades in an hour. Following four breakoutsessions, student participants attended afarewell dinner where winners of anintercollegiate portfolio performancecompetition were recognized for superiorperformance.On the final day, conference attendeesparticipated in two career strategies forums oftheir choice covering topics including hedgefunds, equity analysis, regulatory banking,financial journalism, graduate school, and CFAcertification. The RISE conference is highlyrecommended to enthusiastic students who areinterested in networking, career paths, andinsight into financial markets.Presentations to Business ProfessionalsTom StringhamRamona StromnessGreg ThorntonRex ThorntonDevin ThorpePaul ThurstonAlix WeissUniversity Venture FundRichard T PrattDA DavidsonDA DavidsonMona VieFirst InterstateFund AlumnaCelgene specializes in the development,manufacturing, and distribution of drugs aimedat treating blood and lung cancers. Thecompany was formed in 1986 when Celgene wasspun off from Celanese. The company wentpublic in 1987. Celgene is listed on the NYSEunder the ticker CELG.Celgene distributes most of its drugs from itsmanufacturing facility in Boudry, Switzerland.In the U.S., these products are primarily soldand distributed to large wholesale distributorsand specialty pharmacies. In 2008, the firmhad $1.58 billion in revenue from the U.S.,$657.9 million in revenue from Europe and$14.9 million from all other countries.The following table details Celgene’s mostprominent products.NameTreatmentPatentExp.2009RevenueRevlimid MSD*, MM** 2026 $1.71BCelgene (CELG)On February 16, 2010, the University of UtahStudent Investment Fund held a presentationrecommending a buy for Celgene Corp. Thefollowing community members attended thepresentation.Matt CrouseJack GertinoFred FaircloughBrad HeitmannStephen JeffriesHal MilnerNate PackerGreg SchowSeth ShanerWestern InvestmentFirst InterstateBonneville MortgageGranada CapitalJR MillerKesingtonIvory HomesLunt CapitalSterling FinancialThalomid MM, ENL*** 2013 $487MVidaza MSD 2011* $387M*MSD=Mylodystplastic Syndrome**MM=Multiple Myeloma***ENL= Erythema Nodosum LeprosumIn addition to these drugs, Celgene also has astem-cell banking business, LifebankUSA,designed to extract and store stem-cells fromnewborns for possible future use by the child orfamily members. Celgene also has 9 drugs invarious phases of the FDA approval process.Several of these drugs have already beenapproved by the FDA for the treatment ofcertain diseases, but are still undergoing the30 | P age

approval process for the treatment of otherdiseases.Devin ThorpePaul ThurstonMona VieFirst Interstate Int’lThe fund managers value Celgene at $73.48,above the price of $54.77 at the time. Thisvaluation, achieved through thoroughDiscounted Cash Flow analysis, is reflecting thepotential of Revlimid, a drug set to pass FDAapproval for first-line Cancer treatment. Thisapproval is projected to triple Revlimid’srevenue by 2016. In addition, the currentundervaluation of the company is due tomarket overreaction to healthcare reform, inwhich the entire healthcare industry has beenperforming poorly. The fund managers believethat with the immanent FDA approval ofRevlimid as well as forthcoming healthcareindustry stability, Celgene is in a perfectposition for sustainable growth.MYR Group, Inc. (MYRG)On March 30, 2010, the University of UtahStudent Investment Fund presented arecommendation to buy MYR Group, Inc.The following community members attendedthe presentation.Buzz WelchBrad BaldwinNick BapisDavid BroadbentPhil ClingerLynn DouganJoseph EricksonBrett HaymondStephen JeffriesHal MilnerRich PotashnerDick PrattDon RandsSeth ShanerRyan SnowGreg ThorntonRex ThorntonUniversity of UtahCommerce CRGHightower AdvisorsIvory HomesMerrill LynchDougan & AssociatesErickson AdvisoryZions BankJR Miller CorporationKensington CorporationMerrill LynchRichard T. Pratt Assoc.Zions BankSterling Financial GroupWasatch AdvisorsD.A. DavidsonD.A. DavidsonMYR Group, Inc. is a leader in the electricalcontractor industry. Founded in 1891 by L.E.Myers, who worked with Thomas Edison in thelate 1800s, MYR Group constructs power lines,alternative energy infrastructure, commercialand industrial electrical services, and performsstorm restoration, telecommunicationsservices, and traffic signalization through its sixsubsidiaries. With approximately 3,000subsidiary employees, MYR Group offers itsservices across the contiguous United Stateswith business offices in 19 states. Thecompany’s operations are divided into twosegments: Transmission and Distribution, andCommercial and Industrial contracting services.In a highly fragmented industry, MYR Group hasapproximately 8% market share for transmissionand distribution. MYR Group is the fourthlargest company in the industry. The majorityof the companies in this industry have verylittle market share as they are small firmsoperating in local markets. MYR group hasnational reach in its T&D segment, whileconcentrating in the Southwest for itsCommercial & Industrial (C&I) segment, whereit has gained significant market share.At the end of Q4 2009, MYR Group had totaldebt of $30 million and a total debt to capitalratio of about 9%. Approximately 20 percent to40 percent of the annual volume of businessrequires performance bonds or other means offinancial assurance to secure contractualperformance. Such bonding is typically issuedat the face value of the contract awarded. Thecompany’s low leverage and flexibility give itan advantage relative to its competitors. MYRGroup’s valuation should improve as majortransmission projects are started, which couldlead to excess demand for services and provideopportunities for margin expansion. Based on adiscounted cash flow and multiples analysis,fund managers derived a one-year target priceof $20.72, which at the time was above thetrading price of $16.93.31 | P age

Lessons LearnedDuring the course of the 2009-2010 academicyear, the S&P 500 has returned over 16%. Allthree portfolios within the Student Investmentfund have outperformed this benchmark,though the NASDAQ has outperformed theSchool and Davidson portfolios. Stocks havetrended upward steadily since March 9, 2009,when the S&P hit its low of 676. It has sincerisen nearly 80% to about 1,200. This is roughlyequal to where it stood in December of 1998,and where it again passed in 2005 on its way toa high of 1,550 in 2007. Bullish sentiment hasreturned in force, though valuations suggestthat the market could be slightly overpriced inanticipation of earnings growth in 2010.An investment decision involves much morethan the recent financials of a company and aconsensus of growth opportunity. The variety ofquestions asked by the professionals thatattended our presentation demonstrated thewide range of issues that need to be consideredwhen making an investment.Valuation is the key to investing in stocks.However promising or dismal the prospects of acompany appear to be, it is most important toevaluate whether or not that sentiment hasalready been priced in. If it appears that themarket is exhibiting some degree ofinefficiency, then an effective investment pitchmust include identification of the catalyst thatwill lead to the correction of that inefficiency.In hindsight, it appears that we sold severalstocks prematurely. These sales werepredicated on the belief that the future growthprospects of these companies were limited.The long term outcome of these transactions isunknown. Famous American financier BernardBaruch once said, “I made my money by sellingtoo soon.” These sales definitely appear to bebad decisions, but in six months they may notbe. The following is a summarization of lessonslearned this year in the portfolio:Williams Companies (WMB) was sold because ofthe unusually high reserves of natural gas in theUnited States and the downward consumptionof said resource. However, if the fund hadretained the stock, it would have gained 26%had we not sold it in November of 2009.Adila, remained at a solid low for quite a fewmonths and the fund felt its money would beput to better use elsewhere. However, Aldilawould have gained 56% had we not sold it inOctober of 2009.With lackluster sales of its Blackberry Storm incomparison with Apple’s iPhone, the fund feltResearch in Motion’s (RIMM) products had notevolved as much as current products in themarket. However, RIMM would have gained20% had we not sold it in October of 2009.The fund sold General Electric (GE) and felt itsmoney could be put to better use elsewhere.However, GE would have gained 26% had wenot sold it in November of 2009.Update: August 20, 2010As of August 20, 2010, during the time wemanaged the SIF portfolios, the S&P gained4.25%, the NASDAQ index gained 7.68%, and theoverall return on the SIF portfolios was 14.66%.The only transaction over the summer was thecash acquisition of Cybersouce for $26 pershare.The tables below compare the total grossreturn (including dividends) for each stock weheld throughout the year to the return on theS&P 500 during the same holding period. Wemeasure both the individual stock returns andthe S&P returns from the day we inherited oracquired the stock until either the day we soldthe stock or August 20, 2010. Overall, 30 ofour 49 positions outperformed the S&P (weinvested in some stocks in more than oneportfolio).GrossReturnS&PreturnDavidson PortfolioCRM 89.53% 0.83%UA 40.76% -1.56%ICLR -1.19% 4.25%WMB 17.46% 6.78%C -25.30% -11.27%CERN 17.22% 4.25%CELG -9.34% -2.88%GE 10.35% 6.78%WAB 18.08% 4.25%32 | P age

TBT -32.87% 4.25%OIL -12.86% 4.25%ALDA -6.32% 2.50%URE 50.79% 4.25%RIMM -18.95% 3.40%CYBS 64.45% 4.05%SPY 6.28% 4.25%GrossReturnMilner PortfolioS&PreturnNUS 0.62% -3.49%EMC 11.58% -1.56%ICLR -1.19% 4.25%WMB 15.63% 6.81%LVS 20.55% -10.94%CERN 17.22% 4.25%ATVI -5.56% 4.25%WAB 18.08% 4.25%IVE 5.11% 4.25%ALDA -5.73% 2.50%HES 0.31% 4.25%DEO 9.61% 4.25%AKAM 168.27% 4.25%RIMM -19.06% 3.40%ABB 0.28% 4.25%CYBS 64.45% 4.05%MXWL -28.41% -3.09%UA 57.99% 4.25%TTM 90.01% 4.25%QQQQ 11.91% 4.25%GrossReturnSchool PortfolioS&PreturnMSFT 0.45% 6.81%WMB 15.91% 6.81%SPWRA -53.20% -1.56%EZA 4.16% -4.21%DE 43.10% 4.25%APC -9.16% 4.25%PMD 15.39% -10.94%PG -3.69% -11.27%GES 27.01% 4.25%CMCSA 19.40% 4.25%LUX 20.00% 17.49%BK -14.90% 4.25%ATVI -5.56% 4.25%Our performance in each portfolio and ouroverall performance, along with theperformance of the S&P and NASDAQ indices isshown in the chart below. Overall, weoutperformed both of these major indeces.25.00%Milner20.00%15.00%10.00%5.00%S&P 500NASDAQDavidsonSchoolSIF overall0.00%33 | P age

Other InformationBYLAWS1. PurposeThe Student Investment Fund (Fund) provides students in the David Eccles School of Business (DESB) atthe University of Utah with “hands on” investment experience. Students participating in the Fund willlearn how to evaluate potential investments and how to structure a portfolio.The focus of the Fund will be on growth, with a three-to-five year investment horizon.The Fund will operate as a not-for-profit organization.2. Types of InvestmentsInvestments are limited to securities listed on US exchanges, including NASDAQ or other majorinternational exchanges. Fund investments are limited to common and preferred stock, including ADRsand other exchange-traded collateralized equity instruments, exchange-listed corporate bonds, mutualfunds and money market accounts, and US Treasury instruments. Margin purchases, short sales, andinvestment in derivatives are not permitted.3. Annual ReportEach year, the students will prepare an Annual Report of the Fund’s activities. The report will bedistributed to the Dean of the DESB, the Finance Department Chair, and to other interested parties.4. Annual AuditThe Fund will be audited annually by a group of students from the accounting society Beta Alpha Psiunder the supervision of their faculty advisor.5. Support for the FundThe Finance Department and the DESB will provide reasonable support for the Fund, including the typeof support offered for regular departmental classes such as photocopying, computer support, etc.6. Faculty AdvisorAn advisor to the Fund will be selected each Spring for the following academic year. Students will beconsulted formally in choosing the advisor and every reasonable effort will be made to accommodatethe students’ recommendation. The faculty advisor will be a faculty member of the FinanceDepartment. The advisor will be responsible for ensuring that the fund offers an appropriate learningexperience for students possibly including an investment class, speakers, and appropriate projects. TheAdvisor and the Chair of the Finance Department will designate two faculty members of the DESB whoare authorized to make trades if the Faculty Advisor is unavailable. The Advisor is responsible formaintaining complete records of all transactions made on behalf of the Fund, as well as originalstatements from the Fund’s brokers. These records shall be made available to the Fund’s auditors, theFinance Department Chair, and the Dean of the DESB on request. The Advisor is responsible forsupervising the students in preparing an annual report of the Fund’s activities.7. Investment DecisionsRecommendations to buy or sell a security will be decided by a simple majority of students present at aregularly scheduled Fund meeting, after careful consideration of the investment decision’s contributionto the investment goals of the Fund. In addition, a member of the group may move to recommendselling a security or increasing the quantity of a security currently in the portfolio at any time by

notifying the group electronically. The motion shall remain open for the minimum of either (a) thetime required for a majority of participants of vote “for” or “against” or (b) for 24 hours. If the motionhas not carried within 24 hours, the motion will die. The Faculty Advisor retains the right not to carryout student recommendations if, in his or her considered opinion, the recommendations are grosslyinconsistent with the investment philosophy of the Fund. The Faculty Advisor, or, in his or her absence,the designated alternative, will place trades through a registered broker.8. Distribution of FundsThe Fund shall operate on an annual period from May 1 to April 30. In general, earnings andappreciation will remain invested in the Fund, subject to the following. If, on April 30, the value of theFund net of new contributions exceeds the value of the Fund the previous year, the excess, defined asthe increase in Fund value net of new contributions, will be distributed as follows.Fifty percent of the excess will be remain in the Fund. The remaining 50 percent may be reinvested inthe Fund, used to purchase materials or services used by the students for research or for Fundmanagement, used to support student scholarships, or used to support student organizations in theDESB. Student participants shall make a recommendation on the distribution of any excess at the endof each fund year. The final decision on any distributions will lie with the Faculty Advisor, the DESBDean, and the Finance Department Chair, although there should be a strong presumption that arecommendation by a majority of the student participants is in the best interest of the Fund.9. AmendmentsAmendments to the Student Investment Funds by-laws will be at the recommendation of a two-thirdsmajority of student members.10. DissolutionShould a majority of the student members of the Fund, the Fund’s advisor, the Finance DepartmentChair, and the DESB Dean decide to dissolve the Fund, the cash and securities in the Fund would revertto a Finance Endowment Fund.Approved October 26, 1999Amended September 25, 200035 | P age