MUTUAL INVESTMENT CLUB OF CORNELL

Semester Report Spring 2011

Dear Fellow Shareholders,
The past semester for the Mutual Investment Club of Cornell has seen the fund continue to
grow after our merger with the Cornell Investment Club at this time last year. Despite all of
the unexpected worldwide events over the past few months, including unrest in MENA and
the devastating earthquake in Japan, the fund has seen positive returns, only slightly underper-
forming the S&P which was more a result of the large amount of cash the club held at the start
of 2011.

In addition to the fund being able to navigate effectively through period of volatility, MICC has
seen progress in activities outside of the management of our fund. We’ve released two issues
of our newsletter, with articles covering a variety of different topics and three MICC members
have been published in the London School of Economics’ Finance Society’s publication “The
Analyst.” Our website, cornell-micc.com, has continued to grow in terms of content and the
portfolio is now available for viewing.

Look forward to the next academic year, MICC expects to continue growing financially and
seeking investment opportunities that are primed to outperform the market. In preparing for
the influx of a new class of Cornell freshmen, we are preparing for ways to continue getting
more students involved and building the organization’s presence on campus. The newsletter
and website will continue to expand. We are currently in the planning process of an inter-uni-
versity undergraduate stock pitch completion that will be held at Cornell. Lastly, the executive
board is working on establishing professional relationships with various companies to open up
recruiting opportunities and possibly to sponsor mentorship or workshop programs.

This semester report is the first step towards standardizing the reporting of the portfolio’s per-
formance as well as updates on and changes to the organization itself, especially as we further
our position as Cornell’s premier undergraduate investment club. An annual report, with more
details about the organization’s structure, goals, and members in addition to the expected port-
folio analytics, will be released at the end of the upcoming fall semester and 2011.

With graduation less than a month away, much credit must be given to some of the graduating
seniors who have been instrumental in guiding the new MICC, especially former president Jef-
frey Hau and former vice president Daniel Sherry. I would like to additionally thank all of the
senior and junior analysts who have spent hours and hours on conducting research and analyz-
ing our investments and possible opportunities. Building on the success of this past semester,
we look forward to the exciting start of the 2011-2012 academic year.

Best Regards,
John Yoshida
President and Chief Executive Officer

2
About the Mutual Investment Club Of Cornell
The Mutual Investment Club of Cornell is
first and foremost an educational experience
for all of its members.We strive to teach both
basic and advanced investing techniques t
prepare undergraduates for futures involv-
ing finance, whether that be on Wall Street
or just in managing a retirement portfolio.
In order to accomplish our goal of educat-
ing our members, I run a weekly lecture se-
ries featuring hour long presentations from
myself, along with guest lecturers from sev-
eral Senior Analysts. These education series
cover a broad spectrum of topics, from the
basics of accounting and financial state-
ments to DCF modeling and options trad-
ing. At the end of the education process,
students have the opportunity to present
mock pitches to the entire Executive Board,
in order to receive feedback from some of
the most experienced members of the club.
The club is also structured to allow younger
members to gain exposure to a variety of
investing styles and ideas through our use of
Senior and Junior Analysts. The Senior Ana-
lysts typically have several years of investing
experience and cover one particular sector.
Three or four Junior Analysts, usually newer
members of the club, work closely with any
given Senior Analyst to monitor any stocks
in our portfolio for that given sector. Addi-
tionally, the Senior and Junior Analysts gen
erate stock pitch ideas for the club, with each
industry having the chance to pitch once
or twice a semester. This allows the Junior
3
Analysts to put the skills they have learned
from the education series to use, ensur-
ing that the concepts are fully understood.
Analysts in the club take a bottom-up ap-
proach to investing within their individual
industries, looking for companies that may
have been passed over or written off by
others. The companies pitched also al-
most always have several catalysts within
a year that the analysts believe will cause
significant appreciation in the value of that
company’s stock price. Once a company
has been selected, the Senior Analyst from
that industry will present a condensed ver-
sion of the pitch to the Executive Board
for comments and feedback. After revising
his or her initial pitch, with the help of Ju-
nior Analysts, the pitch will be presented
before the entire club, where invested
members vote yes or no to the proposal.
Through this process of teaching and
hands on experience, the Mutual Invest-
ment Club of Cornell hopes to help pre-
pare its members for wherever their fu-
tures endeavors take them. By passing on
the knowledge and experience of older
members, the club continues to grow and
flourish, both in terms of active members
and total funds under management. We
hope to continue this trend upwards, pro-
viding a venue to channel members’ pas-
sions for investing and the financial markets.
Introduction to Portfolio Overview: Portfolio Manager
Terence Hu
Assistant PM
Abhishek Shah

Starting this semester, MICC’s student managers have made significant strides towards more active portfolio
management. And we will continue the process of developing MICC into a more professional and well
management student fund from a portfolio management perspective.

More active management includes keeping records of daily NAV share price, portfolio performance statistics, and
portfolio risk metrics. As a result, we have become more responsible and accountable for MICC’s returns; in
addition, analyzing our performance will lead MICC’s student manager’s to deliver greater risk adjusted returns in
the future. As a result of our efforts, we have been able to produce the detailed analysis of MICC’s performance
for this past semester you see in this report.

Past Three Month Portfolio Performance

106%

104%

102%

100%

98%
NAV
96% S&P

94%
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3-Month Return P/E (TTM)

MICC Fund 3.55% 20.87

S&P 500 Index 4.33% 17.02

Key Statistics

Portfolio Beta 0.787

Portfolio Alpha 0.14%

4
Portfolio Analysis
Over this past semester we have achieved a return of 3.55% compared to a return of the S&P 500 index of 4.33%
over a similar time period. From the portfolio performance chart, you can see that we trailed the market and the
main reason for this underperformance is due to having a large cash balance in our portfolio at the beginning of
the semester due to post merger integration issues between the old MICC and CIC investment clubs. Around
the end of March, we had solved our merger integration issues and used our cash to buy securities on the market.
Our improved portfolio management is shown in our NAV performance, as our NAV was able to outperform the
market during certain periods after March.

A bright spot in MICC performance is our risk adjusted return, represented by an Alpha of 0.14%. An Alpha of
0.14% means that we were able to achieve excess returns of 0.14% over what our portfolio should have achieved
given our risk profile. However, our ability to achieve Alpha is mainly due to a low beta of 0.787 as a result of
have a large cash balance. We will continue to strive towards achieving Alpha as we decrease our cash balance
and increase our risk profile in the future.

MICC is also focusing on diversification and portfolio hedging strategies as we wrap up our semester and head
into the summer. In order to diversify our investments away from the equity markets, we have recently used the
majority of our left over cash to go long in the Chinese Yuan through purchase of a pure play Chinese Yuan ETF
(CYB). Furthermore, in order to hedge against any market volatility over the summer, we have also allocated
3.5% of our portfolio into the VIX through purchasing an ETF (VXX) that tracks the Chicago Board Options
Exchange Market Volatility Index. We now have a cash balance of around $5000, which we plan to maintain into
the future to prevent keeping too much of our assets in non-return generating cash.

MICC Portfolio Sector Analysis

Distribution of Holdings

$70,000

$60,000

$50,000 Cash

Macro

$40,000
Consumer

Energy

$30,000
Healthcare

$20,000 Industrial

Media

$10,000
Tech

$0
Real Estate

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5
MICC Holdings as of 4/29/2011

Current 3 - Month Market Performance

Sectors MICC Holdings Symbol Weight
Price Performance Value Since Purchase
Archer Daniels Midland
Consumer ADM $37.02 N/A2 $3,405.84 1.98% 5.97%
Company
Philip Morris
PM $69.44 19.47% $2,083.20 69.82% 3.65%
International Inc.
The Procter & Gamble
PG $64.90 -3.18% $1,362.90 5.68% 2.39%
Company
Financials Visa Inc. V $78.12 N/A2 $1,171.80 0.49% 2.05%
Boardwalk Pipeline
Energy BWP $33.47 1.59% $2,342.90 20.57% 4.11%
Partners, LP
Occidental Petroleum
OXY $114.29 2.30% $1,503.45 19.15% 2.64%
Corporation
VESTAS WIND SYS
VWDRY $11.84 N/A2 $2,567.23 -16.52% 4.50%
UNSP/ADR
Emdeon Inc. Class A
Healthcare EM $15.66 6.97% $1,409.40 12.42% 2.47%
Common Stock
Gilead Sciences, Inc. GILD $38.84 N/A2 $1,398.24 -8.66% 2.45%
Industrial and Basic Union Pacific
UNP $103.47 -1.27% $3,724.92 44.03% 6.53%
Materials Corporation
Macro The Brink's Company BCO $33.01 22.85% $2,310.70 46.84% 4.05%
ProShares Short 20+
TBF $45.18 -2.34% $1,813.20 -0.33% 3.18%
Year Treasury ETF

Safe Bulkers, Inc. SB $8.15 N/A2 $2,974.75 -8.47% 5.22%

Media and
Telefonica S.A. (ADR) TEF $26.96 7.40% $1,617.60 -1.92% 2.84%
Telecommunication
s The Walt Disney
DIS $43.10 N/A2 $3,146.30 0.68% 5.52%
Company
Real Estate and Homex Development
HXM $28.23 -15.06% $1,693.80 8.37% 2.97%
Infrastructure Corp. (ADR)
Otter Tail Corporation OTTR $23.38 N/A2 $3,319.96 4.31% 5.82%

SCANA Corporation SCG $39.22 N/A2 $1,215.82 0.30% 2.13%

Technology Cisco Systems, Inc. CSCO $17.52 -18.64% $1,454.16 -24.45% 2.55%
Entropic
ENTR $8.75 N/A2 $2,196.25 11.37% 3.85%
Communications, Inc.
Hewlett-Packard
HPQ $40.37 -11.51% $3,189.23 -5.90% 5.59%
Company
iGo, Inc. IGOI $2.95 -24.21% $876.15 86.71% 1.54%
TeleCommunication
TSYS $4.61 -8.09% $1,014.20 -16.49% 1.78%
Systems, Inc.
Cash $9,243.94 16.21%
Portfolio
57035.94
AUM

1
The above chart of portfolio holdings does not reflect several recent portfolio transactions: On April 29th, we sold our position in
SCG, and TBG, we sold half our investment in VWDRY and allocated the cash from that sale in adding to our position in OXY, and
we purchased a Yuan ETF (CYB) and an VIX ETF (VXX).
2
We purchased these investments after January 29th; therefore, no 3-month return figures are available.

6
Sector Review: Financials Senior Analyst
Ali Yazdi

Junior Analysts
Real Estate Sector Returns
Abhishek Sharh
Ilyas Kuzembayev
113%
Peter Cui
Real Estate/Utilities
Sector Roneal Desai
108%

103%

98%

93%
1/19/2011 1/29/2011 2/8/2011 2/18/2011 2/28/2011 3/10/2011 3/20/2011 3/30/2011 4/9/2011 4/19/2011

3 - month Performance Statistics

Return
Dividend Yield

MICC Real Estate Sector
13.16%
0%

iShares Real Estate Index
7.79%
0.00%

iShares Utilities Index
1.37%
0%

S&P
4.33%
N/A

Real Estate Sector Forecast

Analyst Rating: Hold; Moderately Overvalued

While there has been a considerable recovery from XHB’s yearly lows in August with
over 30% growth, much of this growth is based on expectations in a future turn-
around rather than a real reversal in real estate’s fortunes. The Case-Shiller Index
has in fact since January 2010 decreased 3.22 points, and with this lack of growth in
housing it is very hard nay impossible to find any growth or valuation opportunities
in the market. Real Estate investing in homebuilders can thus be said to be purely a
prospect of investing 5-10 years down the road than in a more conventional say 1-2
year time frame. This large timescale of investing combined with the apparent over-
valuation of homebuilders has made our Real Estate group prescribe a general Hold
on the entire American homebuilder sector, and furthermore we would not encour-
age any new investments within the sector as it is Moderately Overvalued.

While we generally have a consensus that the Case-Shiller index will rebound and
certainly not head down to another 152 level, we think growth will be small and hard
to come by, with much sideways movement. This lack of growth contributes once
again to our Hold prescription.

On the commercial real estate side, we’re seeing variance by markets and also by the
category of office space. While Grade A office space in prime locations seems to be
doing quite well as people upgrade with the depreciation in Grade A pricing, the tiers
below Grade A are having a tough time recovering from the general economic condi-
tions. Thus commercial Real Estate is a tricky avenue to tread down, and our Real Es-
tate group encourages minimal investment in the sector unless significant homework
is done beforehand.

7
Real Estate Sector Forecast (continued)

In emerging markets, there is also an alarming trend of rampant real estate price in-
creases that have given rise to much talk of a bubble. While the Chinese government
is trying to curb much of the real estate pricing with rising interest rates, there are still
many indications that much of the Asian Market has become saturated and overprice
in Real Estate. One market that we may encourage would be the Brazilian market for
the next year, as even though prices have jumped significantly, the Olympics and World
Cup create a sense of optimism that should continue until the Olympics at the very
least. Other emerging markets though do not have a proper explanation for opti-
mism other than growth and this is troubling as we see emerging market growth has
had slowdowns recently.

Overall the Real Estate group generally prescribes one to stay away in Real Estate in
general as many repercussions and volatility remain from the housing crash and the
growth in emerging markets.

Real Estate Secotor Holdings

Scana Corporation (NYSE:SCG)

As an energy provider in Georgia, South Carolina, and North Carolina, Scana has been
an industry leader in electrical generation in the Southeast for decades now. After the
9.0 earthquake in Japan, Scana hit an 8-month low of 38.08 along with an accumulated
short position of ~30%. However, early fears of Scana’s recently approved nuclear
project being shut down were quickly quenched, and the stock has emerged in an
upward trend with a series of higher highs and higher lows. If this trend continues,
the large short interest may cause a systematic covering that will create a significant
jump in share price. (Short interest is 40x daily volume). We are slightly positive in this
position, and invested in this equity to give our portfolio a stable but solid avenue of
growth.

Otter Tail Corporation (NASDAQ: OTTR)

OTTR is an electrical power provider that holds a utilities monopoly in its area of
operation, Minnesota, North Dakota, and South Dakota. Recent renewable energy
regulation has created a large demand for wind energy in the region, which OTTR is
well-positioned to capitalize on. Furthermore, as a mature utilities company, OTTR has
been able to continuously increase its dividend for over 70 years. As a company that
can utilize its stable base to expand into other industries we are very bullish on OTTR
going into the future. We hold OTTR for its stability and market-tracking growth in
addition to the very generous dividend yields it has.

8
Real Estate Secotor Holdings (continued)

Homex (NYSE: HXM)

Homex operates as a vertically integrated home developing company principally
focused on the promotion, design, development, construction, and sale of entry level
and middle income housing in Mexico. It also operates a new division focused on the
promotion, design, construction, and sale of upper-income tourism housing.
The company operates as a geographically diverse homebuilder in the country, and
has a position in the four principal markets of Mexico comprising Mexico City metro-
politan area, Monterrey, Guadalajara, and Tijuana. It is planning to invest 1.7bln pesos
versus 885mln pesos invested year ago to buy land in Mexico and Brazil to expand
into the booming Brazilian market and has seen a stable 12% yoy growth in EBITDA.
Technical analysis suggests the recent sell off was overdone and we are now in a good
buying opportunity.

9
Sector Review: Energy Senior Analyst
Mihir Patel

Junior Analysts
Cathy Xue
Joseph Ning
Energy Sector Returns
111% Rangarajan Kanthadai
Richard Sutton

106%

101%

96%
MICC Energy Sector

S&P Index

91%
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3 - month Performance Statistics
Return
Dividend Yield

MICC Energy Sector
-5.88%
0.70%

iShares Energy Index
10.31%
0.00%

S&P
4.33%
N/A

Energy Sector Forecast

Japan was struck with disaster as a 9.0 magnitude earthquake and an ensuing tsunami
devastated the region. Amidst the destruction, the Fukushima nuclear plant, one of the
world’s largest, suffered immense damage. As a result, the future tenability of nuclear
power in Japan and across the world has been brought into serious consideration. Yet,
the net impact of the disaster on Japanese oil demand is likely to be positive on ac-
count of its sufficient capacity.

Furthermore, instability in the MENA region tightened an already tightening oil market.
Furthermore, unrest in Tunisia and Egypt led to the deposition of presidents Ben Ali
and Mubarak further contributing towards the volatility within the oil sector. However,
it was the civil war in Libya that had a tangible impact on the oil sector; while Libya
produced 1.6mb/d, approximately 1.8% of global supply in the world, in January, a
majority of this supply was inaccessible during February and March. With no solution
to the civil unrest in Libya, oil prices elevated to above $110/barrel.

Overall as MENA unrest and uncertainty over nuclear power continues, it is likely that
oil prices will continue rising. This may open up the chance for changed energy policy
for oil in terms of how developed countries may seek to reduce the price as consum-
ers suffer higher prices.

10
Energy Secotor Holdings

Occidental Petroleum Corporation (NYSE: OXY)

Occidental Petroleum Corporation is an oil and gas exploration and production
company that announced core income of $1.6 billion ($1.96 per diluted share) for
the first quarter of 2011, compared with $1.1 billion ($1.35 per diluted share) for the
first quarter of 2010. Net income for the first quarter of 2011 was $1.5 billion ($1.90
per diluted share), compared with $1.1 billion ($1.31 per diluted share) for the first
quarter of 2010. In announcing the results, Dr. Ray R. Irani, Chairman and Chief Execu-
tive Officer, said, “The first quarter of 2011 core income of $1.6 billion was 45-per-
cent higher than the first quarter of 2010. Our oil and gas production for the first
quarter of 2011 increased over 4 percent, as compared to the first quarter of 2010,
to 730,000 BOE per day.”

Expecting an increase in the price of oil, OXY should maintain its growth pattern and
continuing with a strong performance for the upcoming quarter.

Boardwalk Pipeline Partners, LP (NYSE: BWP)

Boardwalk Pipelines is a limited partnership that is mainly involved in the transporta-
tion and storage of natural gas. On account of the global sentiment towards nuclear
energy, demand for natural gas is expected to increase, which is favorable for BWP.
Although the play was originally a dividend play, with a 6.6% yield, the fund has seen
some return on the share price as well and with the company scheduled to release
earnings for 2011 Q1 on May 2nd, the fund looks forward to BWP adding further
value to the fund.

Vestas Wind Systems (VWSYF.PK)

With a slightly longer investment horizon in mind, we expect a significant growth with-
in the Renewable Energy sector. Vestas Wind Systems is perfectly aligned to capitalize
on this development. Although the share price for Vestas has fallen by approximately
20% over the past month, the sudden drop concerns speculation regarding newly ac-
cepted VWS accounting policies.

With a forward P/E Ratio of 84.90, the outlook for the firm seems to be extremely
robust. According to the wind turbine organization Vindmolleindustrien, Jyllands-
Posten has said that following 2011, the wind turbine section should expect a return
to double-digit growth levels. Moreover, Vestas recently unveiled its recent innova-
tion – the 7 MW turbine slated for production in early 2015. The firm has confirmed
projects within Kenya and Mexico for a total combined capacity of 696 MW. It is also
in talks with Belgium for an offshore wind park with a capacity of 216 MW. All in all,
there seem to be several indicators signaling for a positive outlook.

11
Sector Review: Healthcare Senior Analyst
Eric Hoffman

Junior Analysts
Stephen Lane
Healthcare Sector Returns Phil Crawford
111% Adam Karmali
109%
MICC Healthcare Sector Scott Shapiro
iShares Healthcare Index

107% S&P Index

105%

103%

101%

99%

97%
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3 - month Performance Statistics
Return
Dividend Yield

MICC Healthcare Sector
4.49%
0.00%

iShares Healthcare Index
8.27%
0.00%

S&P
4.33%
N/A

Healthcare Sector Forecast

Until very recently (March 23, to be exact), the healthcare sector was in a special
type of turmoil, the turmoil of uncertainty, which weighed on the markets. But now,
seemingly all of a sudden, the Patient Protection and Affordable Care Act has come to
life--and it only marginally relieved the pressure on the sector. The act, which, analysts
agree, will confer an overall net negative effect on earnings in the industry, should
have at least allowed stock prices to rise moderately, as investors would almost always
choose the quantifiable negative to the potentially unlimited risk of the unknown. But
the act has not been met with unanimous acceptance.

The Republicans in the House have voted continuously to repeal the act, while
Obama has made it clear that he plans on vetoing the resolution should it pass both
houses. But with polls showing that more and more US citizens (and politicians seek-
ing re-election) concerned with job destruction have turned to supporting the repeal,
it isn’t clear that the story ends here. What is known however is that the future of the
healthcare industry will center on the globalization of services through new technol-
ogy, the ability of firms to provide services in emerging markets, and the flexibility of
healthcare companies to adapt to changes in domestic and international legislation.

12
Helathcare Sector Holdings
Emdeon Inc. (NYSE: EM)
Emdeon’s revenue cycle management and payment services continue to lead its
growth and they continue to gain market share despite a challenging healthcare utiliza-
tion environment. In Q4 of 2010, Emdeon completed its acquisition of Chamberlin
Edmonds, which will broaden its revenue cycle management offering. The 2010 Q4
revenue of $275.5 million was a 15.5% increase over 2009 Q4 revenue. They have
continued their successful strategy of layering value-added products and technology-
enabled services on top of their leading health information network.

Gilead Sciences, Inc. (NASDAQ: GILD)

Gilead, a biopharmaceutical company that develops therapeutics for life-threatening
diseases, is a recent addition to our portfolio. There are currently four drugs on the
market to combat HIV/AIDS, three for patients with liver disease, and five to treat
cardiovascular and respiratory conditions. Gilead also has excellent growth potential
with a very strong pipeline that consists of eleven products that are in Phase 2 or 3
clinical trials and have exhibited positive clinical results. The 2011 Q1 financial results
show product sales increased to $1.86 billion, up 4% over Q1 2010 results. Revenues
decreased 8% from Q1 2010 revenues due to a decrease in royalties resulting from
decline in pandemic planning initiatives worldwide. While there is no guarantee that
the products in the pipeline will be commercialized and they face decreased royalties,
the depth of Gilead’s pipeline and the large market share of its current products will
certainly keep it a profitable and growing company.

13
Sector Review: Macro Senior Analyst
Zachary Peskin

Junior Analysts
Andrew Freiman
Macro Sector Returns Dennis Hurley
115% Michael Ashton
113% Whitney Hagan
MICC Macro Sector
111%
S&P Index
109%

107%

105%

103%

101%

99%

97%

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3 - month Performance Statistics
Return
Dividend Yield

MICC Macro Sector
6.11%
0.10%

S&P
4.33%
N/A

Macro Review

The DJIA opened on January 3, 2011, around 11,500, its highest level since 2008. The
global economy looked set to begin a new era of expansion on the heels of fairly
strong recovery. Relative stability was fundamentally shaken by mass unrest in several
MENA authoritarian countries, beginning with the successful revolutions in Tunisia and
Egypt. Especially after the start of the conflagration in Libya, unrest in the Middle East
spooked investors and caused a dramatic spike in both oil prices and oil price volatil-
ity. Higher oil prices may threaten steady economic expansion, especially in the United
States. When the markets closed on 4/20/2011 the price of a barrel of WTI light,
sweet crude was $111.88, its highest level since pre-crisis 2008, while the price of a
barrel of Brent crude on the LME topped $124.

In March new cracks opened in the Eurozone as sovereign debt levels in many coun-
tries continued to rise and growth remained sluggish in the PIIGS. Portugal will soon
be forced to take a joint EU-IMF bailout similar to those foisted upon the foundering
governments of Ireland and Greece. The E.C.B. recently raised its benchmark lend-
ing rate by .25% amid signs of Eurozone inflation despite anemic growth in southern
Europe.

14
Macro Secotor Forecast (continued)

March and April proved similarly tumultuous in the United States as continuing struc-
tural deficits showed no signs of shrinking while the overall deficit remained stubborn-
ly above 9% of GDP. In Washington, budget battles between the adamant fiscal hawks
of the Tea Party and GOP and more fiscally liberal Democrats produced a budget
stalemate for weeks. Political leaders narrowly averted a government shutdown by
reaching an 11th hour on financing the national government through the end of the
summer. Acute debt worries surfaced again when S&P changed its outlook on United
States’ AAA credit rating to negative.

Macro Sector Forecast

S&P has surprisingly lowered its outlook for US treasuries, though not its AAA rating,
concerned that Congress may fail to raise the debt ceiling. The following assumes that
that concern will prove unfounded.

Core inflation will rise only modestly at 2% a year. Interest rates will remain low with
prime at 3.5%, which will allow both business and personal lending to increase. The
former will allow for stronger job creation in manufacturing services and construction
lowering the unemployment rate to 8%. The latter will help raise historically low rates
of home buying and construction. The sum will help the GDP rise by a reasonable but
not robust 3%.

Macro Sector Holdings

Safe Bulkers, Inc. (NYSE: SB)
Since the investment into Safe Bulkers the fund has seen a loss in value due to unex-
pected equity offering. In order to better fund the construction of ships as well as re-
structure some of their debt, the company issued 5 million new shares to the general
public. As a result of this 8% dilution, the share price fell about 8%. Although it would
have been beneficial to have bought in at a slightly later time, the initial investment
thesis of higher volume and prices in the future, as well as strong company fundamen-
tals, still hold true.

The Brink’s Company (NYSE: BCO)

Brinks is one of the foremost security-related companies providing a variety of ser-
vices like armored car transportation, money processing, long- distance transport of
valuables, and vaulting solutions to banks, retailers, and a variety of other commercial
and governmental customers. Brink’s has experienced a 52 week range of $18.30 -
$34.46 and is currently trading just under its high at $33.13. The stock price has rested
comfortably over $30, but has hit some resistance in getting over the 33 mark. Ana

15
Macro Secotor Holdings (continued)

-lysts report that technical indicators for Brinks are bullish and S&P has given Brinks
a neutral credit hold rating. A conference call to announce and discuss the Earnings
Report will occur in the afternoon of April 28th 2011. Analysts see this as a key deter-
minant of whether or not Brinks can jump over the $33 mark or if it’s time to sell off
the position.

ProShares Short 20+ Year Treasury ETF (NYSE: TBF)

The premise behind the initial investment in TBF (an ETF that shorts 20yr+ maturity
US Treasury bonds) was a bet on rising interest rates. After the flight to quality during
the most recent recession, treasury yields were at historic lows. The Federal Reserve
is able to control the short end of the curve through bond purchases (QE2). The Fed-
eral Reserve has less control over the long end of the curve. As the economy recov-
ered and inflation expectations increased, longer maturity treasury yields began to rise.
TBF’s performance has remained relatively unchanged since our original purchase. The
thesis proved to be correct, but TBF has proved to be an inefficient investment. Be-
cause of the nature of short ETFs, their tracking value of the underlying asset erodes
over time. The carry cost of this investment, coupled with its inefficiency, has made it a
disappointing holding for MICC and it was sold at the end of April.

16
Sector Review: Media Senior Analyst
Chirag Shah

Junior Analysts
Andrew Sung
Media Sector Returns David Hong
111%
Steven Russell
109%
Isabella Chen.
107%

105%

103%

101%

99% MICC Media Sector

iShares Telecommunications Index
97% PowerShares Media Index
S&P Index
95%

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3 - month Performance Statistics
Return
Dividend Yield

MICC Media Sector
4.44%
0%

iShares Telecommunications Index
5.58%
0.00%

PowerShares Media Index
7.36%
0%

S&P
4.33%
N/A

Media Sector Forecast

There are several trends that are currently evident in the media and telecom sector
In terms of telecom in the United States, the tentative purchase of T-Mobile by AT&T
will bring on a battle of two companies, AT&T and Verizon. SprintNextel, which would
be the third largest company, could be in trouble especially after posting a loss of 17
cents a share in the last quarter. Although legal hurdles remain, it looks likely that the
deal will be approved. Verizon has said they aren’t looking for an acquisition in re-
sponse, and instead have been focusing on continuing to increase their own subscriber
base, especially driven by its iPhone and chipping away at AT&T’s base.

Video streaming service has seen and will continue to see increased competition.
DirectTV recently entered the market with the purchase of the bankrupt Blockbuster,
already joining a crowded market led by Netflix, Amazon.com, Hulu, and Vudu. The
competition is already showing its effect: Netflix shares fell 9% after its 2Q profit out-
look fell short of analyst expectations. As the size and influence of such video stream-
ing services grow, the potentially negative effect on cable services will be important to
keep track of.

17
Media Sector Holdings

Telefonica SA (NYSE: TEF)

Telefonica was originally purchased as it was best positioned in growing Brazilian and
LatAm mobile market and offers a high dividend yield. Although stock price has
remained stagnant over holding period as concerns over the Spanish economy ham-
pered stock performance, the 6.60% yield has helped returns. Recently, Telefonica has
announced a strategy to focus and position itself in growing markets like Brazil, LatAm
and Germany. As a result, management will increase investment in these regions while
laying off workers in its lagging Spanish business. Additionally, the company plans to
sell $900 million worth of assets in the Spanish market. The thesis still holds as Tele-
fonica is still the major benefactor of growth in the mobile market in many of the high
growth economies in the western hemisphere. The thesis has only been strengthened
with management’s announcement to shift focus away from the Spanish market.

The Walt Disney Company (NYSE: DIS)

Disney was bought as it was a strong, stable company with several long term growth
catalysts and cross-selling opportunities. The stock price has hit a resistance point of
$41 since pitched and has rebounded to $42.50. Disney has officially started con-
struction on its Shanghai theme park – this should be a huge catalyst for the company
in the mid to long term. ESPN and ABC, both Disney owned channels, have seen a
23-27% spike in viewership due to the NBA playoffs. Both of these further strengthen
the thesis as the Shanghai park construction is expected to finish on time; ESPN still
has very high growth prospects while Disney remains a stable company as a whole.

18
Sector Review: Consumer Goods Senior Analyst
David Shim

Junior Analysts
109%
Consumer Sector Returns Adrian Diaz-Granados
Andrew Schrichte
Chris Lee
107% MICC Consumer Index
Lucy Zheng
105%

103%

101%

99%

97%
1

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3 - month Performance Statistics
Return
Dividend Yield

MICC Consumer Sector
8.30%
0.44%

iShares Consumer Index
0.25%
0.49%

S&P
4.33%
N/A

Consumer Goods Sector Forecast

In the consumer sector, news with earnings seems to be more robust and stabilizing.
Nestle reported a 6.4% rise in Q1 sales beating analysts estimates, helped by strong
demand in emerging markets. As was seen with Danone—a French food corpora-
tion that is a world leader in fresh dairy products and bottled water (in USA known
as Dannon)—this week, bottled water sales have been a key component in growth in
emerging markets. Also, the total volume of goods sold in emerging markets exceed-
ed expectations, pushing their share price almost 2% higher today.

Japanese consumer confidence fell in the immediate aftermath of the devastat-

ing earthquake and tsunami in March, highlighting how the disaster’s economic and
psychological impact extended beyond the affected areas and into Japanese society
overall. Households across the nation purchased less consumer durables and people
became more worried about their jobs and incomes. On another note, operations
at the Tsukiji wholesale fish market have returned to normal and people are eating
sushi again despite radiation concerns, Kyodo News reported. Economic and Fiscal
Policy Minister Kaoru Yosano urged households outside the disaster regions to return
to their normal lives, warning that cutting back out of respect for the quake’s victims
would damage the economy. This is in response to recent reluctance to spend in the
country, in addition to supply disruptions that may negatively affect exports. In turn,
this is prompting economists to downgrade their projections for Japanese GDP. The

19
Consumer Goods Secotor Forecast (continued)

economy may shrink at an annual pace of 3% through early summer, according to

Bloomberg analysts. However, it’s interesting to note that within the past few days,
Japanese stocks have increased after better than expected U.S. consumer confidence
and manufacturing data boosted optimism in the global economy. Toyota Motor Corp.
gained 0.6%. The Nikkei 225 Stock Average rose 0.2% in Tokyo.

European consumer confidence weakened more than economists forecast in April as

surging energy costs weakened households’ spending power and a variety of coun-
tries cut spending to lower budget deficits. An index of household sentiment fell for a
second month to minus 11.4 from minus 10.6 in March. Economists forecast a drop
to minus 11, a Bloomberg News survey found.
The Reuters preliminary index of consumer sentiment rose to 69.6 on April 15, beat-
ing a forecast by economists surveyed by Bloomberg News for the figure to rise to
68.8. The sentiment reading is still below February’s level, with March sentiment the
lowest in more than a year.

Crude oil for May climbed $1.55 to $109.66/barrel on April 15, rising for a third day
as of Tuesday, April 19. Unrest in the Middle East and Libya has fueled the recent
surge in oil prices. Prices have advanced 20% this year as unrest spread from Tunisia
to Egypt, Libya, Yemen, Bahrain and Syria. Libya has been essentially split in half since
the beginning of the two-month conflict that has halted the country’s oil exports.
Elections in Nigeria this month may lead to decreased output from the country, which
actually happens to be Africa’s top crude-producing country. Attacks by armed groups
in the region cut more than 28% of the country’s oil output between 2006 and 2009,
according to data compiled by Bloomberg News.

While global uncertainty is dampening the prospects for continued robust growth,
general opinion points to plenty of optimism for continued recovery. While rising
commodity costs are hurting profits, corporate earnings continue to impress and
stock prices are holding up well and seem to be solidifying gains made in the past two
years. The Fed seems to be determined to keep rates low until at least the end of
the year and employment is rising. Emerging market middle class and rapid rebound
in markets has driven growth in luxury goods, auto industry and high-end consumer
goods. While the miraculous growth experienced in emerging markets may not con-
tinue at previous levels, they should continue to drive growth.

Consumer Goods Sector Holdings

Procter & Gamble (NYSE:PG)

PG is a strong value stock to keep in the MICC portfolio. Priced at around $63 a
share, it has appreciated slightly since our investment. It has an impressive dividend

20
Consumer Goods Sector Holdings (continued)

yield of 3.29% that grows every year. With a low beta of 0.51, the dividend looks even
more valuable. Along with strong financials, PG has a peerless product line of house-
hold, personal care and healthcare consumer products. Consumers continue to be
willing to pay a premium for quality brand names. As the American economy reaches
the latter half of the recovery, more consumers will switch from generic brands to the
more reliable, trusted brands they had always used. Globally, PG is expanding rapidly
into Indian and Chinese markets. It provides a range of low cost to higher tier prod-
ucts and is also partnering with local companies to increase market share in emerging
markets. Lastly, its research and development team is unparalleled by any competitor.
PG’s capital expenditures should begin paying off as they reduce costs and innovate
with new products. PG has finished consolidating product lines with the divestment
of Pringles, which marked their exit from the food industry. They reaffirmed organic
growth of 4-6% for the year and emerging markets should drive growth.

Archer Daniels Midland Company (NYSE:ADM)

Archers Daniel Midland is engaged in procuring, transporting, storing, processing and
merchandising agricultural commodities and products. It principally deals with oil-
seeds, corn, wheat, cocoa and other agricultural commodities. During its last earnings
release, the company reported $1.14 EPS beating average analyst estimates of $0.78.
Revenue was up 31.5% on a year over year basis. ADM has operating and efficiency
advantages against its competitors and is poised to take advantage of rising commod-
ity prices and a boom in emerging markets. These macroeconomic trends towards
increased demand in food (corn, livestock feed, protein) will drive growth for the
company. ADM is vertically integrated and has a strong global presence, which reduc-
es transport costs and drives efficiency. Currently priced at $35.81, most analysts have
a target of around $42. The global agricultural environment is favorable for ADM and
their management is prepared to keep costs down and increase profits at a steady
pace. Their volatile performance throughout the financial crisis is dampening market
sentiment that provides an attractive valuation, which should be seen starting this year.
ADM is seeing a long-term favorable macroeconomic push which will spur growth.
We recommend an overweight position in this stock.

Phillip Morris (NYSE:PM)

With price per share of around $65, Phillip Morris is at its all time high. We assess that
this price is fundamentally justified through recent changes in the company. Highlights
for this stock include:
1)Robust three-year average operating margin of 40.7% as opposed to com
petitors’ operating margin of around 30%
2)Leading estimated share of the total international cigarette market, excluding
the People’s Republic of China and the U.S., of 27.6%.
3)2010 total cigarette volume of 899.9 billion units exceeded 2009 by 35.8
billion, or 4.1%

21
Consumer Goods Sector Holdings (continued)

4)Philip Morris International Inc. bought more than $9 million worth of shares
in Medicago Inc., roughly half of the equity offering from the Canadian biotech
company. Medicago uses tobacco leaves to make influenza vaccines for the
pandemic and seasonal flu, and can potentially bring much more value to PM.
As a dominant global market player with high profit margin, PM can sustain its com-
petitive advantage over other competitors indefinitely. Increase in further cigarette
volume sale (especially in Asia) and new ventures into vaccines show high growth
potential for PM. Thus, we recommend that the club hold the stock.

22
Sector Review: Industrials Senior Analyst
David Wong

Junior Analysts
Alan Calabrese
Industrial Sector Returns
107% Daryl Lin
Marshall Verdi
105% Nicholas Hosseini
103%

101%

99%

MICC Industrial
97% Sector
S&P Index
95%

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3 - month Performance Statistics
Return
Dividend Yield

MICC Industrial Sector
-0.52%
0.40%

iShares Industrial Index
6.14%
0.29%

S&P
4.33%
N/A

Industrials Sector Forecast

The industrials sector saw a lot of volatility in commodity prices and concerns about
global growth. Banks are expected to increase interest rates in the mid-term, follow-
ing moves by China and the EU to tackle rising commodity prices. Despite the recent
correction in commodity prices and major indexes, the general bull market sentiment
will most likely continue to drive up commodity prices.

The current high oil prices are likely a reflection of the supply-risks associated with
having to replace/re-direct lost supply due to the geopolitical tensions in the middle-
east currently. The price spike is not due to any forces of supply and demand concern
currently, given that Saudi Arabia has replaced Libya’s lost supply, and currently produc-
es 12bn barrels a day with 3bn in reserve/day, and recently reduced its supply to Japan
(3rd largest use of imported oil) cut back on its order by up to 29%, as reconstruction
efforts get underway.

The higher oil price is really a double edged sword since it eats into the profit margins
of industrial firms producing heavy machinery that is very oil-intensive, such as big
mining equipment or agricultural equipment but also justify further exploration and
mining works into regions which were previously financially too expensive.

23
Industrials Sector Forecast (continued)

The large surge in demand and order recently has also been a function of higher
commodity prices, driven by decreasing arable land, greater demand from developing
countries and some bad weather thus far. However, what the sudden inflation in com-
modity prices has done is forced an overcorrection, such that farmers who originally
planted staple foods, maize, wheat, etc., have shifted to planting corn in the production
of ethanol. There is likely a strong over-reaction and this over-supply that will ensue will
drive down prices some. As for the demand for metals, the majority of exports from
mining in Australia are being diverted to China and South America, unless the central
banks in these countries can continue sustainable growth without runaway inflation,
or over-tightening of economy leading into a slowdown. Demand for metals and raw
materials will continue to be strong as long as these two major players continue with
their rate of growth (whether that is sustainable remains to be seen).

Industrials Sector Holdings (continued)

Union Pacific Corporation (NYSE: UNP)

Union Pacific Corporation owns the Union Pacific Railroad Company, one of Amer-
ica’s leading transportation companies and operator of one of the largest railroads
in North America. The Union Pacific railroad stretches from Chicago to the Pacific
Ocean and is the only railroad that serves all six significant gateways to Mexico. UNP
also caters to six commodity groups: agricultural, automotive, chemicals, energy, indus-
trial products, and intermodal shipping. At the beginning of 2011 the stock price stood
at $ 92.66 and since then as of April 18, 2011 $96.76. This marks a growth of 4.42 %.
The outlook for the railroad industry is also on the upswing. A recent report of the
Association of American Railroads (AAR), the main trade body of the U.S Freight
Railway industry, showed that the first quarter 2011 rail carload volume, excluding
grain and coal, is up nearly 7.9% to 4.6 million rail cars compared with the prior-year
quarter. This provides an optimistic view of the future growth potential in the railroad
industry. Overall, UNP has been a successful play for MICC this semester and hopes
to provide equal successful growth in the future.

Visit us online:
www.cornell-micc.com
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