THE HENRY FUNDtippie.biz.uiowa.edu/henry/reports/Annual_Report_2009.pdfThe University of Iowa‘s Henry B. Tippie School of Management. The two-semester course is limited traditionally

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THE HENRY FUND

2009 Annual Report November 30, 2009

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TABLE OF CONTENTS

Letter From the Investment Team 3

Fund Overview 4

Acknowledgments 5

Fund Performance 6

Summary of Transactions 9

Economic Overview 10

Basic Materials 12

Consumer Discretionary 13

Consumer Staples 16

Energy 19

Financials 23

Healthcare 30

Industrials 34

Technology 36

Utilities 41

Telecommunications 42

Statement of Security Holdings 44

Income Statement 45

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From the Investment Team

Dear Stakeholders,

As 2009 comes to a close and we reflect upon the turbulent market we have experienced over the past year, we feel

it is our duty to convey the sincerest of thanks to those who have made it possible for us to demonstrate our skill set

by managing a portion of the University of Iowa endowment portfolio. The large amount of market changing events

that has taken place over the past year has made this an exceptional learning experience for us and the Henry Fund

analyst team counts itself fortunate to have had the opportunity to learn under these arduous circumstances.

We‘d first like to thank Dr. Todd Houge, our class professor, mentor, and friend. The Henry Fund could not be

successful without his expert instruction, constant support, and tireless dedication. His enthusiasm for the subject

matter and the Fund were evident from the first class period in January to the final portfolio rebalancing in

December. We are better analysts because of him and we truly appreciate his efforts.

The investment team is also indebted to the Henry Fund Advisory Board. This group of alumni is committed to the

excellence of the Henry Fund experience, and dedicates its time each semester to provide an invaluable real world

environment and ensure our preparation for the professional world. Their unwavering high standards and

continuously insightful guidance have served to shape the direction of the fund and inspire creativity in our research.

We are grateful for their service.

Finally, we‘d like to thank Henry Royer and Henry B. Tippie for the generous contributions that were so

instrumental to the Fund‘s creation. Through their selfless actions these gentlemen have made a tremendous and

lasting impact on the students of the Henry Fund, the University of Iowa MBA program, and the Tippie College of

Business.

To the aforementioned people and a great many others, the 2009 Henry Fund Analyst team is grateful for an

educational experience it will never forget. Never did we think it possible to learn so much in a short a time. We

thank you for the honor of managing the Fund.

Sincerely,

The Henry Fund Class of 2009

Alan Adams Energy

John Culley Materials & Energy

Iana Stahov Consumer Discretionary

Monty Gupta Consumer Staples

Ibeth Molina Healthcare

Samantha Lane Healthcare

Sebastian Bock Financials

Anil Ramchandani Financials

Arindam Majumdar Technology

Jiarong Xia Technology

Carl Schumacher Telecom & Utilities

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Fund Overview

The Henry Fund, named after its two founding benefactors, was established in the spring of 1994 to provide University

of Iowa MBA students with a forum to blend academic rigor with real-world portfolio management experience. Henry

Royer, Henry Tippie, and the University of Iowa Foundation contributed the initial $50,000 investment that established

the Henry Fund.

The Henry Fund is an equity portfolio listed as an outside investment by The University of Iowa Foundation. The Fund

is required to meet the same basic performance guidelines as equity accounts in the long-term investment pool of The

University of Iowa Foundation. In keeping with these requirements, managers of the Henry Fund seek to achieve the

highest level of return while assuming risks similar to those of the S&P 500 index. The Henry Fund team, therefore,

recommends a targeted portfolio of stocks from a broad set of industries, investing in well-managed, profitable

businesses without unnecessarily exposing the fund to economic or industry risks.

The Fund is divided into three separate accounts: active, passive and cash. The active account, comprising approximately

97.97% of the Fund‘s assets, currently consists of equity positions in 36 companies. This account represents the primary

measurement of the manager‘s stock selection ability. The passive account (1.10%) consists of holding in a financial

sector ETF – Rydex S&P Equal Weight WTF (RYF). The Henry Fund scholarship payments necessitate that the fund

keep cash in a money market account in order to meet its annual commitment. This account also receives dividends and

is used to pay brokerage fees and other expenses incurred during the year.

The managers of The Henry Fund are students in the Applied Securities Management course (6F: 221 and 6F: 222) at

The University of Iowa‘s Henry B. Tippie School of Management. The two-semester course is limited traditionally to

twelve students. Students are selected by blind review based on a research report application at the end of the fall

semester of the first year of the MBA program. This year there were 11 analysts in the fund and were assigned to one of

10 economic sectors: basic materials; consumer cyclical; consumer services; consumer non-cyclical; energy and utilities;

financial services; healthcare; industrials and transportation; technology; and telecommunications. Because of the

growing importance of financial services, technology and health care, two analysts are assigned to each of these areas to

promote expanded coverage and wider diversification of our holdings. Three analysts covered the Industrials sector in

the fund due non-availability of a dedicated Industrials sector analyst.

Each manager develops a fully integrated investment review, based on a top-down approach that incorporates an

extensive economic, industry, and company-specific analysis. Once the analyst evaluates the value drivers of each

industry, he or she researches specific companies for potential investment. Each security is modeled using a variety of

valuation techniques including: discounted cash flow analysis (DCF), economic value added (EVA), fundamental

multiple analysis, and relative multiple valuation.

Fund managers are expected to act as both sector analysts and portfolio managers, providing basic industry research,

proposing investment ideas and evaluating the ideas of the other managers. Investment recommendations are presented

to the Investment Advisory Committee for review and then voted on by The Henry Fund managers. In addition, the

managers perform the administrative tasks of portfolio management, including marketing the fund to outside donors and

producing an annual report.

THE HENRY SCHOLAR

A portion of the Henry Fund dividend income supports annual scholarships to MBA students, the recipient of which is

called The Henry Scholar. It is approximately $1000 per $100,000 of the value of the portfolio. The scholarship is

renewable for a second year based on the student‘s academic performance. Thus, $2,000 in scholarship money is

transferred annually to the university cash account designated for Henry Scholars. The goals of The Henry Scholar

Program are to encourage and prepare students for careers in investments as well as to attract outstanding Henry Fund

candidate.

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Acknowledgments

FOUNDERS Henry Royer

Henry B. Tippie

Henry Royer attended Colorado College, where he received a BA in 1953. Following college graduation, he

became a grain merchandiser with Pillsbury Mills. He joined the Peavey Company in 1957, became Treasurer and a

board member of Lehigh Sewer Pipe and Tile in 1961, where he remained until 1965. From 1965 to 1983 Mr.

Royer held various positions with First National Bank (Norwest), Duluth, Minnesota. In 1983, he joined Merchants

National Bank of Cedar Rapids (Firstar), where he served as chairman and president until August 1994. He

subsequently served as president and CEO of River City Bank in Sacramento, California. He is now executive vice

president of Berthel Fisher & Company Planning, Inc., Cedar Rapids, Iowa.

Wherever he has been, Henry Royer has been active in both business and civic organizations. While in Iowa he

served on the Board of Visitors of the College of Business Administration. Currently, he is on the boards of IES

Industries, CRST International, Inc., Berthel Growth & Investment Trust, River City Bank, Families First, Inc.,

United Way, the Sacramento Symphony, the Sacramento Tree Foundation and the Sacramento Commerce and Trade

Organization.

Henry B. Tippie grew up in Belle Plaine, Iowa, and, after serving in the Army Air Force, earned a BSC in

accounting from The University of Iowa in 1949. He began his forty-nine year professional involvement with

Rollins in 1953, starting by balancing the small firm‘s checkbook. Today, four Rollins companies trade on the

NYSE and one on the Amex. In addition, Tippie is still involved with Rollins enterprises, serving on the board of

directors for all five publicly traded companies and as chairman of the board for two companies. He runs several of

his own ventures from his offices in Austin, Texas. Tippie has been a tremendous asset to The University of Iowa,

endowing a chair in business administration and several professorships in the business school. He also has endowed

two two-year accounting scholarships and, for graduates of Belle Plaine Community Schools, two four-year

scholarships. To help fund the completion of the Pappajohn Business Administration Building, he donated funds to

build a 175-seat auditorium, a student lounge and Pat‘s Diner, named for his wife, Patricia. For his numerous

contributions, Tippie received The University of Iowa‘s Distinguished Service Alumni Award and Outstanding

Accounting Alumni Award. In 1996 he was a recipient of the nationally prestigious Horatio Alger Award. In

February 1999, Tippie made a major commitment to the College of Business to support its students and faculty. In

recognition of his past, present, and future support that will exceed $30 million, the college was named the Henry B.

Tippie College of Business. Mr. Tippie was awarded the Hancher-Finkbine Alumni Medallion in 2002.

We were saddened to learn that on December 2nd, 2009, Jeff Rahm, a

member of the Henry Fund Investment Board passed away at St. Mary‘s

Hospital in Madison, WI. Jeff graduated from the Tippie MBA program in

2005. He was a Henry Fund alum having been the Henry Fund energy sector

analyst in 2004. He also had a BS degree in Mathematics and Physics from

Southwestern College. After receiving his MBA, Jeff worked for the State of

Wisconsin Investment Board as a credit analyst. Jeff was a great champion of

the Tippie MBA program and the Henry Fund, actively participating in the bi-

annual Investment Board meetings, helping students with invaluable career

advice and also actively seeking to place fresh graduates in the industry. Jeff

Rahm will be greatly missed at the Tippie College of Business and also as a

distinguished member of the Henry Fund Investment Board. We convey our

deepest condolences to his family and loved ones.

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ACADEMIC ADVISORS

Todd Houge, Ph.D., CFA

BROKERAGE SERVICES

E*Trade

INVESTMENT ADVISORY COMMITTEE

John Everhart

Scott Hassenstab, CFA

AEGON USA Investment Management, Inc.

Dirk Laschanzky, CFA

Principal Global Investors

Daniela Spassova, CFA


Mihail Dobrinov, CFA


Kevin Laub, CFA, CPA

Dean Investment Management

Keith Mitchell*, CFA

Mobilians International, Inc.

Marshall Bridges, CFA

HNI Corp.

John McClain

University of Iowa Foundation

Jeff Rahm*

State of Wisconsin Investment Board

Fund Performance

The Henry Fund recovered 31.44% of its value in 2009 compared to a dividend adjusted change of 22.44% in the

S&P 500 Index. Within our portfolio, 60% of our holdings (21 securities) outperformed the market, with the

remaining fourteen securities producing returns below the benchmark. The top four best performing stocks

averaged returns above 80%, while the four lowest-return stocks producing negative returns below -8%. The 6.66%

excess in the portfolio return above the benchmark was driven by the strong performance of the energy and

technology sectors together with the recovery of the financial sector. Following this section is a brief narrative

summary of individual sector performance. An expanded look at each sector can be found later on in the report. It

is important to note that the majority of the content in this report was written following the November month end

close. Therefore, any reference to YTD or annual performance shall represent the time period January 1, 2009

through November 30, 2009. Additionally, the “Key Stock Statistics” data that is shown in the detailed sector

sections has been prepared as of November 30, 2009.

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Basic Materials:

The materials sector has a 4.41% weight in our portfolio as compared to 3.58% in the S&P 500 Index, representing a

relative overweight position of 23.21%. The S&P Materials Index was up 43.14% year-to date, over performing the

S&P 500. The Fund‘s sector holdings Sherwin-Williams Co. and BHP Billiton returned 1% and 68.9% respectively.

Strong performance from BHP Billiton led to the significant overweight position in the sector. In May, we trimmed

both holdings within this sector as we decided to reduce the overweight of the sector.

Consumer Discretionary:

The consumer discretionary sector has a weight of 9.31% in our portfolio, slightly below the 9.36% in the S&P 500

Index, representing a relative underweight position of 0.5%. The S&P Discretionary Index increased by 35.14%

year-to-date outperforming the S&P 500 Index. The Fund‘s sector holdings DirectTV Group, Target, and Walt

Disney returned 38.1%, 34.8% and 33.2% respectively. All three of our holdings delivered a superior performance

compared to the benchmark. A new holding was added to the portfolio in May: Apollo Group with a weight just

above 1%. Over the holding period, the Apollo produced a negative return of 4.6%.

Consumer Staples:

The consumer staples sector accounts for 8.06% of our portfolio as compared to 11.67% in the S&P 500 Index. This

sector has a relative strong underweight position of 30.96%. The overall return for the S&P Consumer Staples

Index is 13.32% year-to-date, significantly below the S&P 500 return. The recovery of the stock market, the weak

economy and the nature of the sector explain its poor performance. Our current holdings are Central European

Distribution, Procter & Gamble and Safeway Inc. These companies returned 41.5%, 0.9%, and -5.3%, respectively.

No trades were made in this sector during 2009.

Energy/Utilities:

The energy sector underperformed the S&P 500 Index with a return of 17.08%. The current weight of the energy

sector in the S&P 500 Index is 12.19% and in our portfolio it has a weight of 14.29% representing an overweight of

17.25%. The utilities sector in the S&P 500 Index has returned 5.55% year-to-date, underperforming the

benchmark. Currently we hold a 2.84% position in utilities, whereas the S&P 500 index weight for utilities is

3.57%, representing a relative underweight of 20.55%. Almost all of our holdings‘ returns exceed the benchmark

with Peabody Energy Corp., Noble Corp., Schlumberger, and Chesapeake Energy Corporation posting returns of

95.4%, 87%, 50.9%, and 47.9% respectively. Only Exxon underperformed the benchmark with negative return of

6%. In the utilities sector FPL Group posted a return of 3.3% significantly below the S&P 500 index and the sector

index. In May, we reduce our position in FPL by selling 24% of our shares in that stock. That proved to be the right

movement as the stock‘s price has significantly reduced ever since.

Financials:

The financials sector has a 12.66% weight in our portfolio as compared to 14.47% in the S&P 500 Index,

representing a relative underweight position of 1.81%. The S&P Financials Index was up 15.93% year-to date,

underperforming the S&P 500. Despite a rough end to 2008, the sector rebounded lead by the Fund‘s sector

holdings Banco Santander and Franklin Resources Inc. with returns of 82.3% and 69.4% respectively. Other

holdings included Bank of America, The Chubb Corporation and the Rydex S&P Financials ETF with returns of

75%

80%

85%

90%

95%

100%

Peabody Energy Corp.

Google Noble Corp. Banco Santander

Best Performers

-10%

-8%

-6%

-4%

-2%

0%

Apollo Group Safeway Inc. Exxon-Mobil Corp.

China Mobile

Worst Performers

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12.6%, 23.4% and 12.8% In May, we closed our positions in The Travelers Companies and Equifax in order to

purchase The Chubb Corporation and Rydex S&P Financials ETF.

Healthcare

The healthcare sector has a weight of 13.67% in our portfolio, slightly above the 12.51% in the S&P 500 Index,

representing a relative overweight position of 1.16%. The S&P Health Care Index increased by 16.1% year-to-date

underperforming the S&P 500 Index. The Fund‘s sector holdings Abbott Laboratories, Forest Laboratories, Johnson

& Johnson, Stryker Corporation, and Thermo Fisher Scientific returned 20.8%, 20.4%, 5.0%, 26.2%, and 38.6%

respectively. Due to the acquisition of all of Genentech‘s shares outstanding by Roche for $95.00 per share cash, we

took a 2.94% interest in Abbott Laboratories.

Industrials:

The industrials sector accounts for 10.75% of our portfolio as compared to 10.43% in the S&P 500 Index. This

sector is barely overweight by 0.32%. The overall return for the S&P Industrials Index is 18.4% year-to-date, just

below the S&P 500 return, despite the difficult economic conditions. Our current holdings include Eaton

Corporation, FedEx, Honeywell International, and Norfolk Southern with returns of 28.5%, 31.6%, 17.2%, and

9.2%. As the economy slowly recovers, we feel this segment may begin to see returns at or above the S&P 500

level. No additions were made to this sector in 2009 as we were short an industrials analyst. However, all current

holdings were covered by other sector analysts.

Information Technology:

The information technology sector has a 19.69% weight in our portfolio as compared to 19.22% in the S&P 500

Index, representing a relative overweight position of 0.47%%. The S&P Information Technology Index was up

54.40% year-to date, over performing the S&P 500 by nearly double. Strong performance by Google and Microsoft

with returns of 89.5% and 51.1% respectively drove this sectors performance. The other holdings included Intel,

Oracle Corporation, and QualComm Inc. with individual returns all above the S&P 500 at 30.2%, 24.5%, and 25.6%

respectively. In May, we increased our position in both Microsoft and Intel, bringing our position to slightly

overweight.

Telecom:

The telecom sector has a weight of 2.97% in our portfolio, slightly below the 3.0% in the S&P 500 Index,

representing a relative underweight position of 0.03%. The S&P Telecom Index increased by only 0.9% year-to-date

grossly underperforming the S&P 500 Index. Verizon was up year-to-date only 5.2%, which was decent compared

to our other holding China Mobile which was down 7.8% year-to-date. Verizon was added to our portfolio in May

with a 1.77% weight. This addition has proved to be a good decision overall for the Fund‘s portfolio.

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Summary of Transactions

Security # of Shares owned as of Net

Change 31-Dec-08 30-Nov-09

Abott Laboratories 0 600 600

Apollo Group 0 260 260

Banco Santander 2700 2700 0

Bank of America 1813 1813 0

BHP Billiton Limited (ADR) 527 474 (53) Central European Distribution 1324 1324 0

Chesapeake Energy Corp. 1358 1358 0

China Mobile 330 330 0

Chubb Corporation

790 790

DirecTV Group 1230 1230 0

Eaton Corporation 661 661 0

Equifax Inc. 1237 0 (1237)

ETF- Rydex S&P Financials 0 635 635

Exxon-Mobil Corp. 640 640 0

FedEx 392 392 0

Forest Laboratories Inc. 850 850 0

FPL Group 925 710 (215)

Franklin Resources Inc. 313 313 0

Genentech Inc. 272 0 (272)

Google 110 110 0

Honeywell International 1090 1090 0

Intel 2335 2590 255

Johnson & Johnson 748 748 0

Microsoft 2125 2380 255

Noble Corp. 850 850 0

Norfolk Southern 409 409 0

Oracle Corp. 1987 1987 0 Peabody Energy Corporation 850 850 0

Procter & Gamble 560 560 0

QualComm Inc. 570 570 0

Safeway Inc. 1466 1466 0

Schlumberger 509 509 0

Sherwin-Williams Co. 390 351 (39)

Stryker Corporation 615 615 0

Target Corp. 860 860 0

Thermo Fisher Scientific 830 830 0

Travelers Companies 804 0 (804)

Verizon 0 725 725

Walt Disney Holdings Co. 906 906 0

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Economic Overview

Real GDP Growth Rate

The revision of Q3 2009 GDP growth from an advance estimate of 3.5% to a preliminary of 2.8% removed some

momentum expectations. This growth contrasts with a 0.7% real GDP decline in Q2 2009. Recent results indicate

we have seen the bottom and the economy is now positioned for recovery. We do not expect, however, a swift

turnaround of 5-6% growth as in some other economic cycles. This recession has hit the key economic engines and

shook the largest contributor to GDP – consumption. It will take another year for confidence in the markets and the

recovery of the consumer to return spurring key sectors such as manufacturing and construction. We would be

concerned to see an early run-up in oil prices as that could throw the economy backward and return the consumer to

a strong saving profile. We expect the pace of GDP growth to moderate after the jump in Q3 2009 and reach about

2% by FYE 2010. Looking a few years ahead we could see 2.7% growth but no single period with a strong run-up.

Given that personal consumption expenditures and exports were the key contributors to GDP growth the previous

quarter, we see a more confident consumer going into the holiday season and expect retail sales to be fairly robust

given the environment and high unemployment rate. Also, exports growth would indicate global markets are

recovering which would boost employment in the near-term. Our primary concerns at this point are potential

problems with commercial mortgages, a premature run-up in the stock market to further hit individual portfolios and

early recovery in oil prices.

Inflation

In October, the consumer price index increased 0.3% which was in line with the index excluding food and energy –

a 0.2% increase. The pace of CPI growth was unchanged from the month prior (another 0.2% increase). The

primary contributors to CPI growth were indices for used cars and trucks and new vehicles (accounting for 90% of

the growth). On average, during calendar year 2009 we have registered month-over-month increases in CPI of

0.25% after an average monthly decline of 1.1% in Q4 2008. Advances in CPI have not accelerated by FYE2009,

which indicates continued uncertainty and sluggish demand growth reflected in still moderate prices. While there

have been concerns about the stimulus plan putting downward pressure on the dollar and spiraling up inflation, we

do not see any significant inflationary pressures within the next 1-2 years. We anticipate CPI growth reaching about

2.8% within 2 years.

Unemployment

The unemployment rate continued climbing in FY2009 from 6.8% in November 2008 to 10.2% in October 2009. In

the most recent Employment Situation report, nonfarm payroll employment declined 190,000 with the largest losses

in construction, manufacturing and retail trade. October's drop in seasonally adjusted nonfarm payroll employment

followed declines of 154,000 in August and 219,000 in September. We see unemployment rate peaking around 10%

and reaching 9.85% by 1H 2010 and 7.3% in 2 years. While recovery is looming, we anticipate continued

uncertainty in the job market, as we have seen reflected in the sudden acceleration of nonfarm payroll employment

decline registered in September 2009.

Interest Rates

In the near term, with both moderate growth expectations and moderate inflation expectations, we believe that

interest rates will move little over the next 12 months, particularly short rates. While treasuries are no longer fiercely

sought after as a safe haven and investors are re-entering the stock market, we expect rates to continue climbing but

no significant steepening of the yield curve. The current Fed Funds target rate remains at 0-0.25%, which we

anticipate to remain unchanged as no tightening policy is in sight during the first half of FY 2010. Given only

moderate inflationary concerns over the next couple of years, we do not expect the federal funds rate to exceed the

target 2% in that timeframe.

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Oil Prices

Energy prices remained highly volatile this year; in general, prices increased. Oil prices in particular ranged from

below $35 per barrel in December 2008 to over $80 per barrel in late 2009. The primary reason for the price

dropping below $35 was decreased demand due to recessionary conditions. As economic conditions improved

during the year though, oil prices increased. Now at the end of the year, though demand has increased, supply

exceeds demand and is pressuring prices lower. Annual international demand decreased for the first time in many

years in 2009 and additional supply was added. Relative stability in Nigeria, increasing production in Russia and

announcements in Iraq suggest supply will remain high going forward in relation to demand. OPEC has publicly

announced that it is comfortable with oil prices in the $68-73 per barrel price range. As of November 30, 2009, oil

was trading near $77 per barrel. We expect oil prices to average $78 per barrel throughout 2010 in part due to a

forecast of flat global demand for oil.

Consumer Confidence

Consumer confidence was depressed this year at historically low levels. Consumer confidence is an indicator of the

public‘s confidence about the health of the U.S. economy that reflects the public‘s optimism or pessimism and the

nation‘s mood. Low consumer confidence suggests low future consumer spending because consumers feel less

confident about their financial and employment prospects. As consumer spending accounts for more than two-thirds

of the economy, consumer confidence is very important to the health of the overall economy. Decreases in

confidence about the current and future state of economy usually trigger decreases in borrowing and spending. In

2009, rising unemployment, lower average wages and large drops in personal wealth encouraged consumers to focus

on paying off debt and saving, rather than spending.

Consumer confidence posted a slight gain in November 2009, up from all-time lows earlier in the year when the

Consumer Confidence Index was below 40. As of the end of November, the Consumer Confidence Index is 49, an

improvement from October‘s level of 48.7. Despite this slight increase, consumer confidence still remains low.

Rather than being viewed a sign of improving conditions, the short-term uptick in the confidence index was

attributed to a decrease in the percent of consumers expecting conditions to worsen. We expect consumer

confidence to slowly increase as unemployment stabilizes and the Obama Administration increases efforts to boost

the economy.

Foreign Exchange Rates

Foreign exchange rates can have great impact on both the operating and financial performance of U.S. export-

oriented companies, companies that have significant operations overseas, and foreign companies that are currently

listed on the U.S. stock market. The dollar has strengthened comparatively, however much of this strength was

attributed to a flight to safety. With expectations of continued low interest rates, continued expansion of the money

supply and skyrocketing national debt in the United States, we believe the dollar will weaken and this will be a trend

that lasts well into 2010.

12

Basic Materials 4.47% of the Active Portfolio

Analyst: John Culley 3.53% of the S&P 500 Index

The current holdings in the basic materials sector are BHP Billiton (BHP) and Sherwin-Williams (SHW). The

materials sector has seen commodity values rebound sharply over the past year as investors priced in a recovery and

moved cash back into riskier assets. Looking ahead to 2010, we make the case that commodity prices may climb

further in the first half of the year given the current low interest rate environment and additional economic stimulus

spending that will increase the demand for commodities. While overweighting the materials sector was a smart

decision in 2008, we see little upside in the sector currently and we look to bring the sector back to market weight.

With a portfolio weight of 4.47%, the fund‘s basic materials sector is currently 26.7% over weight compared with

the fund‘s S&P 500 benchmark, before rebalancing.

Of the 4.47% portfolio weighting, BHP Billiton became our major position as it outperformed our other materials

holding, Sherwin-Williams. While Sherwin-Williams outperformed our benchmark during the crisis last year, the

Company has not rebounded with its peers. Instead, the Company has underperformed due to its exposure to U.S.

consumer spending, the domestic real estate market, and as customers have shifted from away professional

contractor painting to do-it-yourself painting. We see Sherwin-Williams as fairly priced and look for the Company

to underperform our benchmark over the next six months. Therefore, we recommend selling Sherwin-Williams and

replacing it with Syngenta when we rebalance the Fund.

Sherwin-Williams (SHW) 1.68% of Active Portfolio SELL Recommendation

Key Stock Statistics

Price as of November 30, 2009 $60.84 Price/Earnings (ttm) 17.16

52-Week Price Range $42.19-64.13 Price/Book 4.10

52-Week Return 5.96% Price/Sales 0.97

Market Capitalization (B) $6.90B ROA (ttm) 9.44%

Shares Outstanding (M) 113.34 ROE (ttm) 24.45%

Institutional Ownership 73.60% 2008 EPS $4.08

Beta .64 2009 EPS (est.) $3.25

Dividend Yield 2.30% 2010 EPS (est.) $3.79

The Sherwin-Williams Company provides paint, coatings and related products to professional, industrial,

commercial and retail customers. Founded in 1866 with headquarters in Cleveland, Ohio, Sherwin-Williams

operates primarily in North and South America, but also conducts operations in Europe and Asia.

The Paint Stores Group operates 3,346 Sherwin-Williams retail outlets across the U.S. These outlets sell paints,

stains, coatings, caulks, applicators, wall coverings, floor coverings, spray equipment and related products. The paint

stores customers include: Do-it-yourselfers, professional painting contractors, home builders, property managers,

architects, interior designers, marine renovators, and original equipment manufacturers. The retail stores sell the

coatings and equipment under several highly recognizable brands including: Sherwin-Williams®, ProMar®,

SuperPaint®, A-100®, Duron®, PrepRite®, Duration®, Master Hide®, ProClassic®, Classic 99®, MAB™,

Columbia™, and Express Tech®.

BHP Billiton (BHP) 2.80% of Active Portfolio HOLD Recommendation



52-Week Price Range $33.09 - $78.75 Price/Book 5.06

13


Market Capitalization (B) $209.33 ROA (ttm) 13.08%

Shares Outstanding (M) 2,780 ROE (ttm) 15.01%


Beta 1.44 2010 EPS (est.) $2.23


BHP Billiton is the largest diversified natural resources company in the world. The company extracts and produces

several commodities including: oil, natural gas, aluminum, copper, lead, zinc, gold, silver, diamonds, titanium,

phosphate, nickel, iron ore, metallurgical coal and thermal coal. At year end 2008, BHP Billiton was #1 supplier of

seaborne traded met coal, #3 supplier of iron ore, copper, silver, nickel, and lead, and the 10th largest petroleum

company in the world, based on production.

The Company was formed in 2001 when Broken Hill Proprietary Company (BHP) of Australia merged with Billiton

based in the United Kingdom. In its current form, BHP Billiton functions as a dual-listed with BHP Billiton Limited

shares trading on the Australian stock exchange and BHP Billiton Plc shares listed on the London Stock Exchange.

In addition, both shares are listed as ADR‘s on the New York Stock Exchange. While both companies have retained

separate corporate identities, they are operated and managed as if they were one unified company. The company

maintains its headquarters in Melbourne, Australia and reports year end results on June 30th.

The company operates in nine distinct Customer Sector Groups aligned with the company‘s diversified commodity

businesses. These sector groups include: Petroleum, Aluminum, Base Metals, Diamonds and Specialty Products,

Stainless Steel Materials, Iron Ore, Manganese, Metallurgical Coal, and Energy Coal.

Syngenta AG (SYT) Not Currently Held BUY Recommendation




52-Week Price Return 70.10% Price/Sales 2.38



Institutional Ownership 7% 2008 EPS $2.95

Beta 0.42 2009 EPS (est.) $3.10


We looked at Syngenta AG because of its leading position in the agrochemicals industry. We expect long-term

growth of demand in agrochemicals and seeds as higher yields become a bigger concern for farmers. We believe

Syngenta should benefit from the trends in market and expect its stock to capture the long-term upside potential of

the growth in demand. Moreover, as we see the company investing in the portfolio conversion of its seeds segment,

we consider that SYT will gain a stronger position in the market over the long-term.

Consumer Discretionary 9.41% of the Active Portfolio

Analyst: Iana Stahov 9.36% of the S&P 500 Index

The Consumer Discretionary Sector includes the following industries: Apparel/Accessories; Appliance & Tools;

Audio & Video Equipment; Auto & Truck Manufacturers; Auto & Truck Parts; Footwear; Furniture & Fixture;

Jewelry & Silverware; Recreational products; Textile-Non Apparel; Tires and Retail Services. The current Henry

Fund Holdings in this sector as of November 30, 2009 are Target Corp. (TGT; Discount Retailing), DirecTV Group,

Inc. (DTV; Cable & Satellite), The Walt Disney Co. (DIS; Media Broadcasting & Entertainment) and Apollo Group,

14

Inc. (APOL; Online Education).

The Consumer Discretionary sector performance is highly dependent on consumer spending, consumer confidence

and disposable income. The current weakened economy poses the biggest challenge on the sector as consumers still

have strong concerns about their future income and are more reluctant to spend on discretionary items. As the

consumer discretionary sector recovered though 2H 2009, DTV, TGT and DIS registered FY2009 appreciations of:

43.71%, 37.91% and 34.19%, respectively. Our holdings performed in line with the S&P500 Discretionary Index

(+39.81%) and performed twice better as the broad S&P500 at +22.25% YTD.

Given our projections of sustainable high unemployment around 9.85% in 1H 2010 and deceleration in Real GDP

growth along with increasing consumer confidence and flat oil prices, we anticipate sluggish recovery in

discretionary through 2010. As such, we have decided to neutral-weight our position in the Consumer Discretionary

sector. Besides the new holding Apollo Group, Inc. added in 1H 2009 we have not added new securities. After

executing the 2H 2009 trades, we will remain with the same holdings: Target, DirecTV, Walt Disney and Apollo

Group.

Target Corp. (TGT) 3.11% of Active Portfolio BUY Recommendation



52-Week Price Range $25.00- $51.77 Price/Book 2.38





Beta 1.09 2009 EPS (est.) $3.16


Target Corporation (TGT) is the second largest discounter in the U.S., after Wal-Mart, and, as of November 5, 2009,

it operates 1,743 stores across the country. Target is a relative up-scale discount retailer compared with other

discount stores, with a focus on providing quality, fashion, private and exclusive brand products to consumers.

Target has experienced a tough year as consumers have been trading down to deep-discounters such as Wal-Mart.

TGT is positioned in the middle between the typical department stores and the deep-value retailers, which we

believe provides TGT with leverage during a sluggish economic recovery. As consumers start trading up and

drifting away from deep-discounters to more quality and designer-oriented retailers, they will be attracted by Target.

A slow economic recovery will not warrant an immediate return to the typical department stores just yet. The

company‘s same-store sales were basically flat in October (-0.1%) after a 1.7% decline in September. We assess its

comparable store sales have bottomed and believe that TGT‘s fundamentals are attractive, as it has continued to

diversify its product line into consumables and commodities and invest in new stores in underserved markets. We

anticipate the recent addition of fresh produce to its sales mix to increase store traffic and volume to spill-over into

non-necessities product categories. Moreover, the company‘s current stock price remains attractive at forward P/E

of about 13.1 versus industry average of 15.6. We believe the company‘s stock has limited downside risk and

substantial upside potential. Therefore, we recommend a Buy on Target.

DirecTV (DTV) 3.02% of Active Portfolio BUY Recommendation





15




Beta 0.88 2009 EPS (est.) $1.38

Dividend Yield 0% 2010 EPS (est.) $2.21

The DirecTV Group is a world-leading provider of digital television entertainment services in the US and Latin

American. It engages in acquiring, promoting, selling and distributing digital entertainment programming via

satellite to residential and commercial subscribers. With about 81% U.S. subscribers, DTV has over 22.8 million

total subscribers as of Q3 2009, which translates in a 8.2% increase over 1 year ago. DirecTV has achieved

significant growth in the past years due to successful implementation of its competitive strategy which focused on

HD technology, exclusive premium sports content, and utilizing technology to provide value added service. Since

the company achieved the goal to provide the best customer experience in the industry, DirecTV continues to attract

new subscribers while maintaining high retention rate.

With steady growth in both revenue and net subscribers, in Q3 2009 DirecTV registered record free cash flow and a

robust share repurchase program at $1.8B to-date. The fact that about 2/3 of its new subscribers in the quarter signed

up for HD and/or DVR services (highest level ever), indicates the company is strongly positioned and its recovery

would likely be much stronger than for the economy as a whole. Going forward, we have strong confidence about

the company‘s superior competitive advantage and believe its ability to capitalize on the migration to HD. Based on

the April 2009 analyst report, we recommend a Buy on DirecTV stock.

The Walt Disney Co. (DIS) 2.13% of Active Portfolio BUY Recommendation



52-Week Price Range $15.14– $30.87 Price/Book 1.60





Beta 1.17 2009 EPS (est.) $1.88


The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with

operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer

Products. The Company employed approximately 144,000 people as of October 3, 2009. The company‘s assets

include ESPN, ABC network and Disney Studios and Parks.

Disney is the most diversified media and entertainment company that is bale to cross-leverage content across all of

its segments. Like many other media companies, Disney‘s stock suffered in the recent economic downturn and its

FY2009 EPS declined 20% YoY but beat analysts‘ expectations by 12% in Q4. While operating margins in Media

remained flat (supported by strong cash flow from cable networks) and Parks declined only about 3%, margins in

Studios and Consumer Products dipped the most by 12 and 15%, respectively. Key headwinds to cash flow have

been declines in parks attendance, lack of a strong franchise in Studios and the contraction in consumer spending

on its branded products.

A key development has been Disney‘s announcement to acquire Marvel Entertainment for $50/ share or a 29%

premium at announcement. The deal is expected to be completed by the end of calendar 2009. We asses this

acquisition via Marvel‘s valuable character copyrights to add about $2.5 to Disney‘s stock. We anticipate strong

top-line synergies as MVL characters will be leveraged across Disney‘s segments and achieve the scale and

international reach stand-alone Marvel did not have. As a result, we recommend a Buy on Disney‘s stock.

16

Apollo Group, Inc. (APOL) 1.15% of Active Portfolio BUY Recommendation




YTD Return -4.6% Price/Sales 2.22




Beta -0.10 2009 EPS (est.) $5.26


Apollo Group, Inc. is the most recent addition to the Consumer Discretionary Portfolio (included in May 2009) and

primarily known for its University of Phoenix. Online education companies have a recessionary-resistant profile

and, given the outlook of a sluggish recovery and still high unemployment levels we anticipate enrollment at

Apollo‘s schools to continue robust. Even post-downturn, given that many companies targeting aggressive cost

controls moved operations abroad, we anticipate many manufacturing jobs to be lost. As a result, people would

have to respecialize and, preferably, quickly and at a lower cost, an opportunity offered via Apollo‘s various online

education programs. Overall, we believe there are two key drivers for online education programs: wage gaps that

will push people to pursue degrees and the U.S. continued shift from a manufacturing to a knowledge-based

economy. As traditional schools simply do not have the capacity to absorb the entire 19.1M fall 2011E enrollment,

online schools such as Apollo will capture increasing enrollment.

After APOL stock reached $75.5 in mid-October 2009 or a 28% appreciation relative to our purchase price (mid-

May), the stock dipped 24% due the SEC investigation into the company‘s revenue recognition practices. It is

anticipated the investigation will spill-over into other online education stocks. Part of a new emerging industry,

these companies are vulnerable to regulation compliance mishaps before better controls are established. APOL is

currently trading at a 9 forward P/E which reflects a significant discount given the continued robustness of its cash

flow and enrollment. We will continue monitoring the evolution of the SEC investigation.

Consumer Staples 8.14% of the Active Portfolio

Analyst: Monty Gupta 11.72% of the S&P 500 Index

The Consumer Staples sector has been the slowest growth sector in 2009. Year to date through November 30, 2009,

while the S&P 500 registered a growth of 22%, the Consumer Staples appreciated by 13%. In the year of economic

recovery and stock market rebound, the Consumer Staples stocks are expected to bounce back less than other

sectors. In anticipation of this slower than other sectors growth for Consumer Staples, we took a substantially

underweight position and invested only 8.14% of our portfolio in staples against 11.72% weight of Consumer

Staples in S&P 500. Over the past two years of stock market rollercoaster ride, Henry Fund has continuously

changed its exposure to Consumer Staples sector to take advantage of our analysts‘ economic prediction, and the

decision has reaped substantial advantages.

At the beginning of 2009, the Consumer Staples portfolio included three stocks: Safeway (SWY), Proctor & gamble

(PG) and Central European Distribution Company (CEDC). All these stocks have relatively high-end product

portfolio from Consumer Staples sector point of view. As we were witnessing the economic rebound in March 2009,

we were comfortable holding all these stocks to take advantage of the economic recovery. However, by November

2009, as the economy has turned around and the early benefits of an economic recovery have been harvested, we

believe that some of these stocks do not have a large upside left. Moreover, due to major changes in the individual

companies in our portfolio as well as in couple of companies outside of our portfolio, we are changing our position

in few Consumer Staples holdings. We have decided to exit CEDC and SWY and add Wal-Mart (WMT) and Kraft

17

Foods (KFT) to our portfolio.

Henry Fund firmly believes that the global economy is on the cusp of strong recovery. We estimate that in the next

6-12 months, the Consumer Staples sector will not witness as fast growth as other sectors. Therefore, we will

underweight the sector by close to 25% in comparison to the benchmark S&P500.

Wal-Mart Stores Inc. (WMT) Not Currently Held BUY Recommendation



52-Week Price Range $46-59 Price/Book 3.08

52-Week Return -0.18% Price/Sales 0.51

Market Capitalization (B) $211B ROA (ttm) 8.59%

Shares Outstanding (B) 3.85 ROE (ttm) 20.29%


Beta 0.2 2009 EPS (est.) $3.39


With revenues of $401 billion and market capitalization of $198 billion, Wal-Mart is by far the largest retail chain in

North America. The company operates retail stores in various formats across the globe and provides a broad

collection of merchandise and services at Every Day Low prices (EDLP).

The company operates in an extremely competitive industry offering stiff competition both in US and the countries

globally it serves. Because of its format and product offerings WMT faces strong competition from other department

stores, discount store, supermarkets, drug stores, specialty stores, and warehouse clubs. Many of WMT competition

are regional, national or international brick-and-mortal retail stores, as well as catalogue businesses and internet-

based retail companies. WMT operations are divided into three divisions including Wal-Mart US, Sam‘s Club and

Wal-Mart International. In 2009, Wal-Mart US is the largest contributor with 63.7% of total revenue, followed by

Wal-Mart International at 24.6% and Sam‘s Club at 11.7%.

WMT is well positioned to gain market share in this slow growing economic environment as customers trade-down

both in the quality of the products they select and the stores they chose for shopping. WMT‘s aggressive pricing

strategy backed-up by creative initiatives like ‗productivity loop‘, higher investment in inventory processes resulting

in lower costs and reduced shrinkage, will empower WMT to offer better prices. In addition, the ongoing stores

remodel project will improve customer experience and drive traffic, as well as bring cost savings. WMT will start

reaping the gains next year onwards. WMT‘s thrust on online sales and leveraging brick-and-mortar model to

empower online sales will generate substantial cyber sales.

Kraft Foods Inc. (KFT) Not Currently Held BUY Recommendation








Beta 0.6 2009 EPS (est.) $1.96

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Kraft Foods is one of the leading manufacturer and distributor of branded packaged food and beverages in the

World. It operates in five major consumer segments, namely Beverages, Cheese, Convenient Meals, Grocery and

Snacks. Kraft‘s major brands include Oscar Mayer, Kool-Aid, Jell-O, Maxwell House, Velveeta, Oreo, Honey Maid,

Nabisco and Ritz. Kraft markets foods in 150 countries and has production facilities in 68 countries.

With revenues of $42 billion and a market capitalization of $39 billion in 2008, Kraft Foods is one of the largest

branded food and beverage companies in the World. Kraft Foods has nine brands with annual global sales of $1

billion each. These brands include Kraft Cheese and Kraft Dinners and Dressings; Maxwell House Coffee; Oscar

Mayer meats; Nabisco cookies and crackers and Oreo brand; Philadelphia cream cheese; Jacobs coffees; Milka

chocolates; and LU biscuits.

We are recommending a buy for Kraft Foods in anticipation of improved net profit and higher profit margins. We

are also expecting lower labor costs due to implementation of a restructuring program and higher cost synergies

because of product portfolio revamp. While the net revenue will be lower than 2008 because of overall reduction in

consumer spending and lower product costs, it will not impact KFT profitability.

Proctor & Gamble (PG) 2.71% of Active Portfolio BUY Recommendation





Market Capitalization (B) $182 ROA (ttm) 7.25%



Beta 0.57 2009 EPS (est.) $4.18


Procter & Gamble is the largest consumer staples companies in the world and among the top-10 market capitalized

companies. P&G is an undoubted leader in the household durable product category. With a 171-year history, Procter

& Gamble has grown substantially over the years because of its strong management, nimble-footedness, and

receptiveness to change.

Procter & Gamble will continue to be one of the safest investment prospects. It will continue to generate higher

revenue, increased margins, and high return on invested capital because of its superior product offerings, diversified

product portfolio, geographic diversification, and creation of product synergies through acquisitions and divestitures.

The company has announced continuous product portfolio restructuring, strengthening its portfolio through

acquisition and divestiture. Further restructuring – disposing underperforming brands and acquiring brands that

provide cost and brand portfolio synergies, will assist in improving bottom lines due to revenue synergies and cost

savings PG is shifting its product portfolio focus towards health, beauty and grooming products. Higher profit

margins and increased demands for innovative products will boost profit margins.

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CEDC 3.0% of Active Portfolio SELL Recommendation






Shares Outstanding (M) 58 ROE (ttm) 7.01%

Institutional Ownership 61.3% 2008 EPS $(0.38)

Beta 3.09 2009 EPS (est.) $3.34

Dividend Yield NA 2010 EPS (est.) $4.14

Central European Distribution Corporation (CEDC) is an integrated alcoholic beverage company. Headquartered in

Poland, CEDC exports its Vodka products to other countries and imports and distributes other alcoholic beverages

like wines, spirits and beer in Poland, Russia and Hungary. CEDC offers a portfolio of over 700 brands in various

categories and is the third largest alcoholic beverage company in the world by market capitalization.

We have issued a sell rating for CEDC because the stock is within our projected price range. We are also afraid that

with a beta of 3.09, this stock is extremely volatile and if the current economic weakness continues, CEDC would be

hit hard.

CEDC has inherent risks related to currency exchange rate that are neither predictable nor easy to mitigate.

Furthermore, with exception to inorganic growth through acquisitions, we do not see a strong business plan for

organic growth. Being extremely volatile and uncorrelated to the US market, CEDC takes away the stability which

the Consumer Staples stocks are expected to add to the portfolio. We are therefore, closing our position in CEDC.

ENERGY 14.45% of the Active Portfolio

Analyst: Alan Adams 12.19% of the S&P 500 Index

The current holdings in the energy sector are Exxon Mobil Corporation (XOM), Schlumberger (SLB), Peabody

Energy (BTU), Noble Corporation (NE), and Occidental Petroleum (OXY). This past year was marked by large

fluctuations in oil and natural gas prices. Oil prices declined below $40 per barrel earlier in the year and ended

November near $80 per barrel. Natural gas prices started the year above $7 per MMBTU, dropped to below $2 per

MMBTU and have gyrated between $2.5 to $5 per MMBTU at the end of the year. The volatility in prices was

primarily due to uncertainties in demand and increasingly high levels of inventory and supply. As global economies

recovered, the energy sector experienced gains in tandem with oil and gas prices, with the notable exception of

Exxon Mobil.

Going forward, we expect global energy demand to remain flat or to grow slightly during 2010 as economies across

the globe recover from the economic downturn. We hold companies in the energy sector that will provide the

portfolio with substantial returns when the economy recovery occurs and will thrive in any additional downturn as

well. The fund started the year holding Exxon Mobil, Schlumberger, Noble Corp., Peabody Energy and Chesapeake

Energy. Although Chesapeake had promising natural gas assets and increasing production, we sold it in December

due to poor corporate governance, expectations of depressed natural gas prices and oversupply of natural gas in the

U.S. It is our belief that alpha will come from our energy sector holdings with a bias toward oil, greater exposure to

international operations and strong balance sheets. Each of our energy holdings is well capitalized and able to make

opportunistic acquisitions as other firms increasingly sell assets to fund operations. We positioned the energy sector

for a slow recovery and are slightly overweighting it going into 2010.

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Exxon Mobil Corp. (XOM) 3.73% of Active Portfolio BUY Recommendation





Market Capitalization (B) $346 ROA (ttm) 7.22%



Beta 0.35 2009 EPS (est.) $3.71


ExxonMobil is the world‘s largest integrated oil and gas company. ExxonMobil was formed from the merger of

Exxon and Mobil in 1999. Both organizations were originally part of the Standard Oil Trust formed back in 1882

by John D. Rockefeller. ExxonMobil competes in every aspect of the hydrocarbon exploration, production and

supply chain. The business is divided into three major operating units: Upstream, Downstream, and Chemical.

The Upstream portion of ExxonMobil‘s business deals with the exploration, development, production, and gas and

power marketing. Downstream refers to the refining and marketing of petroleum products such as motor fuels and

lubricants. The Chemical business unit holds leadership positions for some of the largest-volume and highest-

growth petrochemicals in the world.

Exxon Mobil is expected to outperform the market and its peers based on its financial strength, the diversity of its

business, and its ability to increase reserves at a rate higher than production. Large natural gas facilities in Qatar

will help it boost its production and profits in 2010, and beyond.

Schlumberger (SLB) 2.53% of Active Portfolio BUY Recommendation








Beta 1. 81 2009 EPS (est.) $2.77


Schlumberger was founded in 1916 and is the world‘s leading oilfield services company supplying technology,

project management and information solutions to optimize performance in the oil and gas industry. Schlumberger is

comprised of two business segments: Oilfield Services and WesternGeco. Schlumberger‘s Oilfield Services is the

world‘s premiere oilfield services company providing technology services and solutions to the petroleum industry.

WesternGeco is the largest and most technologically advanced surface seismic company. Schlumberger Oilfield

Services is run through its 29 oilfield services Geomarket regions that are grouped into 4 geographic areas: North

America, Latin America, Europe/CIS/Africa and Middle East & Asia. WesternGeco is the world‘s leading seismic

company providing comprehensive reservoir imaging, monitoring, and development services. Schlumberger‘s

geographic diversification and superior technologies will continue to make it a leader in oilfield services. We expect

its reliance on international revenues and its increasing number of deepwater projects to enable it to outperform its

peers in 2010.

The maturation of existing oil wells and development of new technologies will continue to drive demand for

21

Schlumberger‘s services. Oil and natural gas are becoming more difficult to find and recover. With oil and gas

companies constantly striving to replace their reserves, Schlumberger is natural partner and beneficiary. We expect

Schlumberger to have an improved year in 2010.

Occidental Petroleum (OXY) Not Currently Held BUY Recommendation



52-Week Price Range $47.50- 85.20 Price/Book 2.19





Beta 1.02 2009 EPS (est.) $3.42


Occidental Petroleum Corporation is international oil and gas exploration and production company, and a major

North American chemical manufacturer. The company was founded in California in 1920. In 1961, OXY made its

first major discovery in the Sacramento Valley. The company expanded operations through a number acquisitions:

Cities Services Company in 1982, the U.S. Department of Energy‘s interest in the Elk Hills Naval Petroleum

Reserve in 1998, Altura Energy in 2000, and Vintage Petroleum assets in 2006. At the end of 2008, OXY was the

fourth-largest U.S. oil and gas company, based on equity market capitalization. Occidental has three segments: 1)

Oil and Gas; 2) Chemicals; and 3) Midstream, Marketing, and Other.

We expect recent acquisitions, including Phibro L.L.C., discoveries in California and new agreements in the

Middle East to enable the company to exceed current expectations. Also, given recent prices favoring oil and the

relative strength of international economies versus the U.S., OXY‘s focus on oil and international exposure

position it well to outperform its peers.

Chesapeake Energy (CHK) 2.52% of Active Portfolio SELL Recommendation


Price as of November 30, 2009 $23.92 Price/Earnings (ttm) N/A



Market Capitalization (B) $14.92 ROA (ttm) -17.11%

Shares Outstanding (M) 647.71 ROE (ttm) -43.57%


Beta 1.32 2009 EPS (est.) $2.02


Chesapeake Energy Corporation is a natural gas and oil company. It explores, develops and acquires properties for

production of natural gas and crude oil, and it provides marketing and midstream services for natural gas and oil for

other working interest owners in properties in which it operates. It has properties in: Alabama, Arkansas,

Colorado, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, New Mexico, Nebraska, New York,

Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Virginia, and West Virginia. As of December 31, 2008,

all of Chesapeake‘s twelve trillion cubic feet equivalent (Tcfe) of proved reserves were onshore in the U.S., 94% of

which are natural gas.

22

We sold Chesapeake in December due to poor corporate governance, expectations of depressed natural gas prices

and oversupply of natural gas in the U.S. Although demand is expected to increase by 22% over the next 25 years in

part due to the fact that it is the cleanest fossil fuel, supply of natural gas in the U.S. has doubled in the last six years

and international LNG imports to the U.S. are expected to increase. Chesapeake is currently in a position now in

which it must produce more gas in order to pay for capital expenditures.

Peabody Energy Corp. (BTU) 2.96% of Active Portfolio BUY Recommendation








Beta 1.34 2009 EPS (est.) $1.56


With sales of almost $6 billion in 2008, Peabody Energy Corporation1 is the world‘s largest private sector coal

company. Peabody operates primarily as a thermal coal producer in the U.S., but also has thermal and met coal

operations in Australia and Venezuela. The company owns, operates or has interests in 41 coal mines under three

segments: Western U.S. Mining, Midwestern U.S. Mining and Australian Mining. In addition, Peabody operates a

coal trading segment that supplements its mining operations.

Of all the coal companies in our universe, we think Peabody will be the least impacted by potential environmental

regulation changes, such as the Waxman-Markey bill that has yet to pass through the Senate. The Company‘s

domestic operations are primarily in clean coal, which will most likely be less penalized than the dirtier coal in the

Eastern U.S. Also, Peabody is expanding its metallurgical coal operations in the Asia-Pacific region, which will

benefit from increasing demand in those local emerging markets. We maintain our BUY recommendation on

Peabody with a six month target price of $46.

Noble Corp. (NE) 2.75% of Active Portfolio BUY Recommendation








Beta 1.04 2009 EPS (est.) $6.33


Noble Corp provides contract drilling services for the oil and gas industry worldwide. The company operates a fleet

of 63 mobile offshore drilling units consisting of 43 jackups, 13 semisubmersibles, four drillships and three

submersible rigs. The rig count includes five units under construction, including one premium jackup, one ultra-

deepwater drillship and three deepwater semisubmersibles. Of the rigs under construction, all have acquired

customer contracts to be executed upon completion except for the drillship, which was built on a speculative basis.

Noble operates in various regions around the world, with offices in the U.S, Canada, Switzerland, Nigeria, Mexico,

The Netherlands, Brazil, Singapore, and the U.A.E. As of December 31st, 2008, the company had 6,000 employees.

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At the time the report was written, in early 2009, we placed a BUY recommendation on the stock with a target price

of $34. Since then, fundamentals for the energy services industry have improved dramatically with the price of oil

doubling to over $75 a barrel and energy companies rethinking their conservative capital spending plans for 2009

and 2010. We maintain our BUY recommendation on the stock.

FINANCIAL SERVICES

Analysts: Sebastian Bock and Anil Ramchandani

Our holdings in the financial sector currently represent 12.28% of the entire portfolio, which is underweighted

compared to the S&P index weight of 14.47%. Since financial sector was hit hard in the last year we continued to be

underweight on financials. More write-offs may have pushed this sector downwards and created a huge risk for our

portfolio. All of our holdings in the sector had positive returns. Our holdings include Banco Santander, Bank of

America, Franklin Resources, Chubb, and ETF Rydex - Financials. Returns were 74.4%, 8%, 70.8%, 19%, and

14.0%, respectively. In May, the fund purchased a Rydex Financials ETF because we did not have a stock

recommendation which could fill the huge underweight on this sector. At year end, the fund proposed sell on Rydex

Financials ETF and Franklin Resources. The fund also proposed acquiring Goldman Sachs and State Street.

TRAVELERS (TRV) Sold Position SELL Recommendation



52-Week Price Range $33.07 – 54.47 Price/Book 1.00





Beta 0.63 2009 EPS (est.) $5.00


The Travelers Companies, Inc. was created by the merger of Travelers Property Casualty Corporation and The St.

Paul Companies, Inc in 2004. The holding is one of the oldest property and casualty insurance organizations dating

back to 1853, and today it is among the top 10 players in the industry. The headquarters of the company is situated

in St. Paul, Minnesota, but it also has worldwide operations in Canada, Great Britain and Ireland. The main

operating segments are: Business Insurance, Financial, Professional & International Insurance and Personal

Insurance.

Although Travelers has a strong business, we wanted to position ourselves to take advantage of the performance of

emerging markets and be with the company which has strong core business. With its portfolio of mostly AAA rated

securities and municipal bonds, Travelers‘ investment portfolio had a less upside than its other competitors‘

portfolio. Moreover, a rise in combined ratio of Travelers meant that its core business is not performing well. The

overall consolidated GAAP combined ratio for Travelers was 92.5%, compared to 90.0% in 2007. As we found a

company whose investment portfolio was more exposed to emerging markets and had a more profitable core

business than Travelers, we recommended that we SELL Travelers‘ stock.

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CHUBB CORPORATION (CB) 3.08% of Active Portfolio BUY Recommendation








Beta 0.52 2009 EPS (est.) $5.65


The Chubb Corporation (Chubb) was incorporated as a business corporation under the laws of the State of New

Jersey in June 1967. Chubb and its subsidiaries are referred to collectively as the Corporation. According to

A.M. Best, the P&C Group is the 11th largest U.S. property and casualty insurance group based on 2007 net written

premiums. The Chubb Group is divided into three strategic business units i.e. Commercial Insurance, Specialty

Insurance, and Personal Insurance. The Chubb group provides insurance coverage principally in the United States,

Canada, Europe, Australia, and parts of Latin America and Asia.

We chose to substitute Travelers with Chubb Corporation due its stronger core business than Travelers. In addition,

Chubb‘s portfolio consisted of various emerging market securities. As emerging markets were not witnessing the

same decline in their GDP as developed market did and moreover, as capital markets had taken a hit in emerging

markets, we expected emerging markets to rebound sooner than domestic market. This move diluted our exposure to

domestic markets. The overall consolidated GAAP combined ratio for Chubb was 88.7% in Q1 2009, compared to

82.9% in 2007. As this combined ratio was significantly lower than that of Travelers‘ 92.5%, Chubb came out to be

as a better pick than Travelers. After buying Chubb‘s shares, Obama announced a policy which will charge revenues

generated in other nations. Obama‘s new policy increased Chubb‘s effective tax rate by approximately 2%. By

incorporating this new data, Chubb was as good a Buy as Travelers was in terms of ―% upside‖ from current levels.

It is advised for the next analyst to keep an eye on any such policy changes which may negatively hamper ―Free

Cash Flow to Equity‖ and the combined ratio of the company.

FRANKLIN RESOURCES (BEN) 2.63% of Active Portfolio SELL Recommendation








Beta 1.48 2009 EPS (est.) $3.55


Franklin Resources, Inc is a holding company for various subsidiaries that, together with the company, are referred

to as Franklin Templeton Investments, a global investment management organization offering investment choices

under the Franklin, Templeton, Mutual Series, Bissett, Fiduciary, and Darby brand names in over 30 countries

around the world and offers investment solutions and services in more than 150. Franklin Templeton Investments

25

and its predecessors have been engaged in the investment management and related services business since 1947. The

company's headquarters are located in San Mateo, California. BEN employed 8,233 workers and had assets under

management (AUM) totaling $495.7B at August 31, 2009 in comparison to $507.3B at 30th

September 2008.

Net cash flows have remained under pressure over the last year. Although AUM grew significantly in last 1 year, net

cash flow was negative 1%. Thus, it means that Franklin Resources‘ AUM grew only on the back of market

appreciation. In addition, market appreciation of AUM was way less when compared to the market appreciation of

AUM of Goldman Sachs and State Street Global Advisors. With their high management fee and lower performance,

Franklin would lose lot of its business to its competitors. Hence, we believe that Franklin Resources should be sold

at such rich valuation.

GOLDMAN SACHS (GS) Not Currently Held BUY Recommendation








Beta 1.42 2009 EPS (est.) $19.51


Goldman Sachs (GS) is a global investment banking, securities and investment management firm that provides a

wide range of services to corporations, financial institutions, governments and high-net-worth individuals. Founded

in 1869, the firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and

other major financial centers around the world.

Goldman Sachs has sufficient liquidity and a fundamentally strong business. The FICC segment of Goldman Sachs

has been outperforming in recent past giving them some abnormal returns than what they have got in past. It can be

attributed to wide spreads in the market which were created during this crisis.

As we think that spreads will become narrower, FICC segment may start giving more normal returns as it has in the

past. However, other volume based businesses such as underwriting and financial advisory will do better. With

greater liquidity in market, stock markets and Asset Management business of Goldman Sachs will perform better.

Leverages generally tend to increase in a more liquid environment and this will help Security Services business of

Goldman Sachs.

State Street (STT) Not Currently Held BUY Recommendation


Price as of November 30, 2009 $41.30 Price/Earnings (fwd) 9.22






Beta 1.34 2009 EPS (est.) $4.07


26

State Street Corporation, through its subsidiaries, provides a range of products and services for the institutional

investors worldwide. It operates in two divisions, Investment Servicing and Investment Management. These

divisions provide a range of products and services, which include mutual funds, collective investment funds and

other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and

other investment pools, and investment managers. The company was founded in 1832 and is headquartered in

Boston, Massachusetts. It operates in 27 countries and more than 100 geographic markets worldwide.

Assets under Custody (AuC) and Assets under Management grew by 9.5% and 11.54% in third quarter, respectively,

on the back of market appreciation of equity and fixed income assets, and new business.

We believe that State Street stock is suppressed due to litigations from CalPERS and CalSTERS. This litigation is

more tilted towards State Street. However, State Street has provided a loss provision for this litigation. Apart from

this, State Street, along with Goldman Sachs, are finance industry‘s fastest growing companies. State Street is not

directly exposed to the turbulences in the market as majority of its revenue come from Investment Servicing and

hedge funds and other institutional investors do not terminate their critical services even in the worst recession. State

Street‘s assets under custody and administration and assets under management have grown due to market

appreciation and by securing more business for the company and not many companies were able to do that in the last

quarter. Hence, we have a buy rating on this stock. A downgrade in STT‘s rating and a liquidity crunch (Tier 1

capital ratio below 6%) will trigger a sell discipline.

Moody’s Corp. (MCO) Not Currently Held BUY Recommendation



52-Week Price Range $15.41-31.79 Price/Book N/A



Shares Outstanding (M) 235.89 ROE (ttm) N/A


Beta 1.18 2009 EPS (est.) $1.67


Moody‘s Corp (MCO) is a leading provider of global credit ratings, research, and analysis, covering fixed income

securities, other debt instruments and the entities that issue such instruments in the capital markets, and credit

training services. The company markets quantitative credit risk assessment products and services and credit

processing software to banks, corporations and investors in credit sensitive assets through its analytics division. The

company provides credit ratings over 11,000 corporate issuers, approximately 26,000 public finance issuers, and 100

sovereign nations.

The global financial crisis and the credit crunch have greatly affected Moody‘s. During the last two years, Moody‘s

stock price has been underperformaced because of both the shrinking of debt market and uncertainty of legal claims

that the company is facing. With improved sentiment and spread narrowing boosting issuance in recent months and

sign of global economy recovering, we believe that Moody‘s business will improve. We also think the legal risk of

Abu Dhabi ruling remains low. However, we think MCO shares will be volatile near term given ongoing legal and

regulatory headlines. At the time the report was written, we believe its share price is undervalued and recommend a

―BUY‖ for the stock.

27

Banco Santander (STD) 3.66% of Active Portfolio BUY Recommendation





Market Capitalization (B) $136.5 ROA (ttm) NA



Beta 1.97 2009 EPS (est.) $1.25


Banco Santander is a leading provider of financial services ranging from retail banking to asset management. It is

Europe‘s largest bank by market capitalization. Based on our quantitative and qualitative analysis, we maintain our

BUY recommendation on the company.

As the company announced 2Q09 figures above analysts‘ expectations, STD remains one of the best performing

international banks. With superior diversification, strong fundamentals, significant cost-cutting potential, and

promising synergy prospects, we expect Santander‘s success story to continue. Unless regulators fail to address new

rules for the industry, STD will get a boost from higher solvency requirements and tighter control by national and

international authorities. Moreover, we anticipate positive surprises for 2010 coming from an improving consumer

in beaten down markets like Mexico and Spain, while increased market share in the European markets should

already be reflected in 2009 results. Also, we believe in the abilities of the CEO, Mr. Sáenz, to follow an external

growth strategy, as past acquisitions are comprehensible and fit in Santander‘s strategic positioning.

Bank of America (BAC) 2.25% of Active Portfolio HOLD Recommendation








Beta 1.97 2009 EPS (est.) -$0.49


The Bank of America Corporation is a bank holding company that provides a range of financial services

domestically and internationally. The Company‘s business operations are organized into three divisions, which are

further subdivided according to operational specialty. The three business lines are Global Consumer and Small

Business Banking (GCSBB), Global Corporate and Investment Banking (GCIB), and Global Wealth and Investment

Management (GWIM).

We have put a HOLD recommendation on BAC. Latest 3Q09 figures below analysts‘ expectations reminded us of

the uncertainties still surrounding the banking industry. Even though the Merrill deal has started to pay off, BAC is

not out of the crisis yet. The company is still highly exposed to credit losses and very dependent on a strengthening

consumer. A significant improvement in company‘s financials is not anticipated before credit losses peak, which is

unlikely to happen before the end of 2010. From the regulatory side, we may see tighter capital requirements and

28

increased scrutiny of trading operations. Expected changes towards a reduction of credit card interchanges may put

more pressure on company‘s earnings going forward. In the near term, we expect some upside for the stock coming

from the repayment of TARP funds at year-end. Also, a quick decision on the CEO succession planning may push

the stock up.

Intercontinental Exchange (ICE) Not Currently Held BUY Recommendation



52-Week Price Range $50.10 - 121.93 Price/Book 3.32

52-Week Return 45.10%% Price/Sales 8.21




Beta 1.18 2009 EPS (est.) $5.28


ICE operates regulated global futures exchanges and over-the-counter (OTC) markets for agricultural, energy, equity

index, and currency contracts, as well as credit derivatives. ICE offers these products to participants around the

world through its technology market infrastructure and trading platforms, together with clearing, market data, and

risk management services. Since its foundation in 2000, ICE has been developing rapidly. While the beginning

mission was to transform an open OTC energy market, ICE expanded into the futures markets by acquiring the

International Petroleum Exchange in 2001, now ICE Futures Europe, and launched its market data services through

ICE Data in 2002. In 2005, ICE completed its IPO on the New York Stock Exchange and is now a member of the

Russell 1000 and the S&P 500 indices. The Company continued to buy into new markets with the acquisition of the

New York Board of Trade (NYBOT), now known as ICE Futures U.S., ChemConnect's NGL, the Winnipeg

Commodity Exchange, and Chatham Energy. In 2008, ICE acquired YellowJacket and Creditex—the later as part

of their initiative to enter the CDS market. In addition, ICE has most recently announced plans to acquire The

Clearing Corporation (TCC).

ICE announced 4Q08 figures in line with analysts‘ estimates; also, interim Q1 numbers look good with regard to

ongoing market turmoil and unstable economic conditions. Rebounding OTC trading after a depressed market in the

second half of 2008 particularly surprised us. Recent approval by the SEC to enter the $27 trillion credit default

swaps (CDS) market has opened new growth opportunities for the Company and is considered as an additional

revenue driver in the long term. Moreover, we expect solid energy volume trends fueled by increasing hedging

business should shelter ICE against a continuing down market to some extent. Overall, the Company is well

positioned to succeed in an increasingly competitive environment and should be able to take on the opportunity of

OTC business shifting onto exchanges. We believe the strong ICE management team will continue to drive global

expansion and we see significant upside potential for the stock in a stabilizing environment. Nevertheless, the

business for derivatives is marked by high uncertainty, and according to its relative valuation, the market seems to

have high expectations in ICE. We put a BUY recommendation on ICE, however the increased stock price at the

date of purchase did not allow us to act on our recommendation.

Equifax (EFX) Sold Position SELL Recommendation






29


Institutional Ownership 82.40% 2008 EPS $ 2.02

Beta 1.12 2009 EPS (est.) $ 2.09

Dividend Yield 0.70% 2010 EPS (est.) $ 1.37

Equifax Inc. (Equifax) is a leading credit report provider in the U.S. and is considered one of the "Big 3" in the

credit reporting market. We expect the domestic market for credit reporting to remain weak and marked by high

uncertainty. In addition, Equifax‘s international operations are unlikely to carry the company as foreign markets

have become equally exposed to the current economic downtown. Therefore, our investment recommendation is a

SELL.

We have downgraded Equifax to SELL. As the company announced 4Q08 figures in line with analysts‘ fears,

interim Q1 numbers continue to look weak with regard to ongoing market turmoil and unstable economic

conditions. As credit activity remains restrained in the U.S., Equifax‘s core business should be tempered in the

near-term and beyond, unless we see substantial improvement in credit sentiment. Moreover, ongoing tight cost

control will protect high margins only to some extent. With mostly fixed costs, we expect falling reporting volume

to cause accelerating margin contraction. The likelihood that we see relief from the International segment, the

former growth engine of the Company, is considered low as foreign markets are highly exposed to the economic

backdrop and unwilling to fiscally stimulate their economies. The fact that management did not provide a FY09

guideline adds further risk, and contribution of the growth segment TALX to total revenues is too low to navigate

Equifax through the next 6 – 12 months.

Ameritrade (AMTD) Not Currently Held HOLD Recommendation








Beta 1.18 2009 EPS $1.09


TD Ameritrade Holding is a leading provider of discount brokerage services for private and institutional clients with

the vast majority provided online. With more than 40% market share of daily average revenue trades, it is the

largest U.S. discount broker. Based on our quantitative and qualitative analysis, we put a HOLD recommendation

on the company.

Overall, the company is telling a solid growth story. The shift to asset gathering helps AMTD to withstand intense

competition on prices, and the recent acquisition of thinkorswim broadens the product portfolio. In addition, we are

seeing a positive structural change in retail trading and believe management‘s decision to lever the company to

rising rates will pay off in the midterm. However, after a 50% run since April, and AMTD trading at a reasonable,

but not cheap, 14x 2010 EPS estimate, we believe AMTD is fairly valued.

30

HEALTHCARE 13.52% of the Active Portfolio

Analysts: Samantha Lane and Ibeth Molina 12.51% of the S&P 500 Index

In 2009, the healthcare sector has been challenged by the ongoing approval process to the healthcare reform

proposed by Obama‘s administration. Moreover, as several of the best selling drugs in market are coming out of

patent in the next three years, the pharmaceutical industry saw a higher than usual number of mergers, especially

during the first half of the year. Being a defensive sector, healthcare outperformed the market in the first months of

the year, becoming an underperformer once the recovery of market began.

We started our coverage with two current holdings: Stryker Corporation (SYK) and Johnson & Johnson (JNJ).

Stryker has historically delivered strong operating results due to strong product innovation. We feel the greatest

growth lies within the spinal and endoscopy segments, supporting our buy recommendation. As a result, we decided

to continue to hold Stryker. Considering Johnson & Johnson‘s well diversified portfolio and in spite of some

patents‘ expirations, we believe the company has strong position for long-term growth. Thus, we decided to continue

holding the stock. As our position in Genentech was liquidated due to the acquisition by Roche, we placed those

funds in Abbott Laboratories (ABT), stock because of its strong product offering was added to our portfolio in May.

We also initiated coverage on Boston Scientific but due to negative ROE and overlap in product offerings from

current holdings we decided not to include this company in our portfolio.

Later in the year, we analyzed Forest Laboratories (FRX). As we found the company fairly priced, we have decided

to exit that position and bring Baxter International (BAX) to the healthcare portfolio. We believe BAX is well

positioned to outperform the sector as it has low exposure to impacts of the healthcare reform. Furthermore, we

evaluated a current holding Thermo Fisher Scientific. We found TMO‘s global expansion into China, India, and

Europe to be attractive and continue to hold this company within our portfolio. Finally, we initiated coverage on

WellPoint, Inc. and Covidien, Plc. We covered WellPoint as we were interested in diversifying the healthcare

portfolio as we currently do not own any health and welfare funds. Due to the uncertainty of Obama‘s healthchare

reform WellPoint stands to be greatly affected in the near future and therefore was not added to our portfolio.

Covidien‘s future growth due to the possible commercialization of four pharmaceuticals in the next two years

promoted our coverage of this stock. However, 68% of Covidien‘s revenue is from medical devices which stand to

be adversely affected by the medical device tax proposed by the Obama administration. As a result we decided not

to add Covidien and instead add Baxter as it is not exposed as much to this potential tax.

Stryker Corporation (SYK) 2.43% of Active Portfolio BUY Recommendation








Beta 0.93 2009 EPS (est.) $2.94


Stryker continues to expand into high growth areas such as the spinal and endoscopy markets, while continuing to

excel in new product innovation within its largest market, orthopaedics. Because of its continued high growth

opportunities, we continue to hold Stryker in our portfolio. However, Stryker could be adversely affected by a

proposed medical device tax should it pass as part of healthcare reform.

31

Johnson & Johnson (JNJ) 3.69% of Active Portfolio BUY Recommendation








Beta 0.62 2009 EPS (est.) $4.56


We continue to hold JNJ in our portfolio because of its well diversified portfolio and worldwide presence. The

company has a robust pipeline with three possible blockbusters coming to market beginning 2010. Additionally, as

almost a third of JNJ‘s revenues come from the consumer segment, we believe the company is not as exposed as

others in its industry to healthcare policy adjustments.

Boston Scientific (BSX) Not Currently Held HOLD Recommendation


Price as of November 30, 2009 $8.37 Price/Earnings (ttm) N/A




Shares Outstanding (B) 1.51 ROE (ttm) -16.17%

Institutional Ownership 85.00% 2008 EPS -$1.36

Beta 1.20 2009 EPS (est.) $0.50

Dividend Yield N/A 2010 EPS (est.) $0.60

In April, we initiated coverage on Boston Scientific due to the low stock price and attractive product portfolio of

cardiovascular devices. Upon evaluation it was found that despite spending some $1B on R&D, BSX was achieving

an ROE of -14.40%. Since April, the ROE has continued to worsen to -16.17% confirming our decision not to

include this company in our portfolio.

Abbott Laboratories (ABT) 2.57% of Active Portfolio BUY Recommendation








Beta 0.27 2009 EPS (est.) $3.69


We added Abbott to our portfolio in May at a price of $44.73 and have obtained a return of 21% over the holding

period. We decided to bring Abbott to the healthcare portfolio because we see it as one of the best managed

32

companies in the healthcare industry with a strong portfolio and very well positioned-drugs in key markets. With

over 50% of revenues coming from outside of US, we consider the company has strong growth opportunities and we

believe that Humira, Xience and Trilipix offer significant upside potential for the company to outperform its peers.

Thermo Fisher Scientific (TMO) 3.08% of Active Portfolio BUY Recommendation








Beta 0.27 2009 EPS (est.) $3.02


We continue to hold Thermo Fisher Scientific in our portfolio due to its attractive global expansion. TMO continues

to expand relationships and domestic manufacturing operations in China, India, and Europe which we believe, is the

primary growth opportunity.

Forest Laboratories (FRX) 2.04% of Active Portfolio HOLD Recommendation








Beta 0.72 2010 EPS (est.) $3.51


We looked at Forest Laboratories and because of its high dependency on two blockbusters (Lexapro and Namenda)

that will lose patent in the next five years and the absence of blockbuster potential in its pipeline, we have decided to

exit this position. We found that at the current trading price, FRX is fairly valued. We feel that at this point there

are better opportunities in the market to increase the return of the healthcare portfolio. Thus, we will liquidate our

FRX holding in December.

WellPoint Inc. (WLP) Not Currently Held HOLD Recommendation








33

Beta 1.16 2009 EPS (est.) $5.90


We initiated coverage of WellPoint looking to diversify our portfolio as we do not currently hold any companies

classified as Health and Welfare Funds. WellPoint‘s past success has been due to its focus on distinct customer

types, and developing benefit plans and services that meet their unique needs. However, increased unemployment

due to the economy and changes in healthcare policy due to Obama‘s proposed reform bill could adversely affect

WellPoint in the future. Thus, due to the uncertainty in healthcare reform, we chose not to add WellPoint at this

time.

Baxter International (BAX) Not Currently Held BUY Recommendation








Beta 0.4 2009 EPS (est.) $3.81


We looked at Baxter International because of its protagonist role in the biotech market. The decision to add this

stock to our holdings responds to the privileged position that Baxter has to continue extracting high margins, derive

strong growth and outperform its peers in the biotherapeutics market. Moreover, we believe this company will not

be considerably impacted by the healthcare reform as only 18% of its revenues are exposed to the adjustments in the

US market. Thus, we see significant upside potential for the stock going forward and we expect it will help our

healthcare holdings to exceed market returns.

Covidien Plc (COV) Not Currently Held BUY Recommendation








Beta 0.83 2009 EPS $1,79


We initiated coverage on Covidien as its products can be found in almost every US hospital. Covidien‘s strong

performance in the Medical Device segment and the potential for commercialization of four major pharmaceuticals

in the next 2 years are at the core of Covidien‘s value. However, 68% of its revenues are medical devices which

could fall victim to Obama‘s proposed medical device tax.

34

INDUSTRIALS 11.01% of the Active Portfolio

Analysts: John Culley, Iana Stahov, Jiarong Xia 10.43% of the S&P 500 Index

The current holdings in the industrials sector are Eaton Corp (ETN), Fedex (FDX), Honeywell International (HON)

and Norfolk Southern (NSC). Contraction of credit has been a primary inhibitor for industrials throughout the

previous year. This did not only shave about 30% from their top-line but also leaves many with few growth projects

at the start of the economic recovery. After the Purchasing Managers Index and New Orders dipped to all-time lows

in January 2009, we have registered a recovery in the index reaching a 39-mo. high in October 2009. Some warning

signs, however, come from softening in new orders that turned south in the poat couple of months. We believe that

industrials with more exposure to the early cycle markets (that tend to recover first) such as Residential and Electric

will post a quicker recovery and outperform the market. However, companies with more exposure to late cycle

markets (i.e. Non-residential construction and Aerospace) will see a drag to their earnings through FY2010.

Entering 2010 we expect the global economy to begin to recover and a corresponding pickup in business activity for

industrials. We believe that the numerous infrastructure spending programs are also likely to boost the industrials

sector, principally in the second half of the year and more so in 2010.

Honeywell International Inc. (HON) 3.46% of Active Portfolio BUY Recommendation


Price as of November 30,2009 $38.47 Price/Earnings (ttm) 13.90






Beta 1.34 2009 EPS (est.) $2.84

Dividend Yield 3.00 % 2010 EPS (est.) $2.51

Honeywell International Inc. is one of the leading technology and manufacturing companies in the US. The

company is engaged in providing aerospace products and services, control technologies for buildings, homes and

industry, automotive products, power generation systems, specialty chemicals; fibers, plastics and advanced

materials. Honeywell provides integrated avionics, engines, systems and service solutions for aircraft manufacturers,

airlines, business and is engaged in general aviation, military, space and airport operations. The company operates in

the following four segments: Aerospace, Automation and Control Solutions, Specialty Materials and Transportation

Systems.

As one of the cheapest large industrial companies, Honeywell has above-average potential to preserve earning

through this down-cycle. Honeywell trades at discounted PE of 13 and of 6.8 EBITDA, both are attractive compared

to the S&P500 and industrial peers. The company has implemented effective cost-cutting procedures and improved

its earning quality. In addition, we expect the company‘s earnings will increase as US economy recovers in 2010.

The trend towards energy efficiency solution and alternative fuel production will benefit Honeywell in the long run

because the company has been actively developing technologies in this area. At the time the report was written, we

believe its share price is undervalued and recommend a ―BUY‖ for the stock.

35

Norfolk Southern Corp. (NSC) 1.65% of Active Portfolio HOLD Recommendation





Market Capitalization (M) $18.91 ROA (ttm) 5.17%



Beta 1.01 2009 EPS (est.) $2.75


Norfolk Southern Corporation operates a Class I rail network primarily in the eastern United States. The company

transports raw materials, intermediate products and finished goods to and from destinations in the Southeast and

Eastern regions of the U.S. and offers connections to the Western U.S. via five gateway terminals in the Midwest.

The company services a variety of industries including electrical generating facilities, mines, distribution centers and

various intermodal facilities. We think Norfolk is currently being discounted relative to its peers because of its large

intermodal operations. However, we see this segment as a major opportunity and a key driver of volume and

operating profit going forward. Based on valuation, we have a HOLD recommendation and a target price of $52 on

Norfolk Southern.

Eaton Corporation (ETN) 3.28% of Active Portfolio HOLD Recommendation



52-Week Price Range $30.02-$65.99 Price/Book 1.52





Beta 1.31 2009 EPS (est.) $2.46


Eaton Corp. is a large diversified global manufacturer with 55% of sales by final destination from international

markets and 1/5th

of total sales from international developing markets positioned for high growth. The company

operates in five business segments: Electrical systems and components serving for power quality, distribution and

control; Hydraulic systems serving industrial, mobile, and aircraft equipment; Aerospace products and services for

cockpit interface and circuit protection, motion control, propulsion sub-systems and air distribution; intelligent

Truck drive train for safety and fuel economy; and Automotive engine air management systems. Its Truck and

Automotive and Hydraulics segments have been hit the most in the recession with margins decreasing 15%, 8% and

8%, respectively, while the Electrical segment was the most resilient. In the latest Q3 2009 Eaton posted record

margins in the latter and improved orders and margins in the Truck segment. We believe the company‘s early cycle

markets have bottomed in Q2 2009 and its late cycle markets will continue deteriorating through FY2010. Given

that ETN‘s markets are spread fairly evenly between ―early‖ and ―late‖ ones, we believe the company will perform

in line with the market and do not see significant momentum in the near term. Also, still tight credit markets and

ETN spending less on R&D as a percentage of sales than peers would further impede it from posting stronger

growth during the economic recovery. Therefore, we recommend a Hold on ETN stock.

36

TECHNOLOGY 19.68% of the Active Portfolio Analysts: Arindam Majumdar and Jiarong Xia 19.09% of the S&P 500 Index

The Technology Sector has outperformed the S&P 500 in the year 2009. Year to date through November 30th 2009,

the NASDAQ Computer index registered a 65.56% appreciation as compared to a 26.19% appreciation by the S&P

500 itself. This is because of the rebounding of the sector after the influx of the stimulus plan and the stabilization of

the financial sector in addition to the improving economic conditions throughout the year and in anticipation of

increased in IT spending by the corporations.

When we inherited the Fund from the class of 2008, the portfolio included four technology holdings: Google

(GOOG), Microsoft (MSFT), Intel (INTC), and Oracle (ORCL). During the first half of the year, we were

comfortable with these four stocks because of their market leader position and competitive advantage. As the

economic conditions improved, our investment philosophy was to take positions in diversified IT services

companies, which have a broad category of offerings in addition to a strong clientele. We believe that companies of

this kind remain would benefit most from the turn-around of the broader market thus injecting firms with the capital

to invest on new IT projects. We analyzed various companies that fit this investment philosophy and decided to add

Accenture to the portfolio holding onto Google, Microsoft, Intel, and Oracle. We also exited from our position in

Qualcomm due to the stock price approaching 10% of the target price, as analyzed during spring. Also, Qualcomm

sluggish growth was not in line with our aggressive investment thesis and we felt Accenture with its diversified

global IT services business model would have the potential for the most upside in 2010.

Microsoft Corp. (MSFT) 5.44% of Active Portfolio HOLD Recommendation








Beta 0.96 2009 EPS (est.) $1.77


Microsoft is the world‘s largest software maker, driven by its monopolistic behavior in the operating systems

business. It generates revenues by - development, manufacturing, licensing and support of - software products and

services of various computing devices. Microsoft‘s software products and services include operating systems for

servers, personal computers, and intelligent devices, server applications for distributed computing environments,

information worker productivity applications, business solutions applications, high-performance computing

applications, software development tools, video games and consulting and product support services.

Microsoft‘s revenue is primarily generated from the sale of its licensed products such as the Windows line of

operating systems and its various server offerings, coupled with its foray into the e-entertainment and business vis-à-

vis media players and gaming consoles. Thus it is critical to the growth of the company that Microsoft continues to

constantly turnover its product offerings. Its new OS offering, Windows 7, which was released in mid 2009 has

generating a lot of buzz in the industry. Additionally, with users now having the option to migrate from XP to

Windows 7 directly, using Microsoft Deployment Tool 2010, Microsoft has ensured that adoption of Windows 7 is

easier for customers who aren‘t willing to upgrade to Vista. We believe Microsoft will see double digit growth in its

client business segment in 2009-2010 and will compromise almost 35% of its revenue stream. Additionally,

Microsoft is becoming more aggressive in the mobile phone application software industry. Its recent announcement

of launching Windows Mobile 6.5 and the new Windows Marketplace for hand-held mobile devices reflects the

changing face of Microsoft which has recognized Apple‘s success in the same vertical and is striving hard to

37

replicate it. We increased our holding in Microsoft from 5.00% to 5.5% over the summer in anticipation of the

upside that the stock would see due to the release of Windows 7.

Google Inc. 4.98% of Active Portfolio HOLD Recommendation






Shares Outstanding (Mil) 317.27 ROE (ttm) 16.11%


Beta 1.06 2009 EPS (est.) $21.76


Google is a global technology leader focused on improving the way people connect with information. Google’s

innovations in Web search and advertising have made its Web site a top Internet destination and its brand one of

the most recognized in the world. In essence, Google is a search-engine and it maintains an online index of

websites and other content. This is made freely available to all users who can access a computer via the Internet.

While this activity by itself does not generate revenues, Google earns its revenues from businesses that utilize

Google‘s portal for online advertising to access millions of customers across the globe.

Google's basic strength is its cost-per-click business model in which advertisers pay for the ad only if the customer

clicks on the ad. Google uses the customer‘s search results data, finds ads pertaining to the results in its inventory,

and displays the ads alongside the search results. This helps businesses advertise only to their targeted customer

base and increase their ROI. Google is able to maintain its dominant market share in search business because of its

superior algorithms and strong advertising technologies such as ―PageRank‖, ―Adwords‖ and ―Adsense‖.

Given Google‘s emphasis on innovation, growth and its presence in emerging markets, we felt that Google was well

poised to perform extremely well in both the short and the long term. Despite huge investments, Microsoft and

Yahoo failed to increase their market share in search business. To diversity its revenue stream, Google has ventured

into different areas such as Android, Google Apps, Graphic ads and online video. We also feel that Google‘s entry

into the mobile OS business with its product Android will prove to be stiff competition to Microsoft‘s products.

Oracle Corp. (ORCL) 5.40% of Active Portfolio HOLD Recommendation








Beta 0.88 2009 EPS (est.) $1.30


Oracle is one of the leading enterprise software companies that develops, manufactures and distributes database,

middleware and applications software. Oracle operates in two businesses namely software and services, which are

further divided in to five operating segments. The software business is divided in to: (1) new software licenses (2)

38

software updates and product support. The services business is comprised of (1) Consulting (2) On Demand and (3)

Education. The software business brings in 79% of revenues and the services business brings in 21% of revenues.

An active acquisition strategy is an important part of Oracle‘s corporate strategy. Since the 2005 acquisition of

PeopleSoft for $11.1 billion, Oracle has spent close to $40 billion to acquire a number of complimentary companies,

products services and technologies. This has helped it position itself as a global leader in enterprise software

products and solutions in addition to its increased footprint in the application software market. The inorganic growth

route has also increased Oracle‘s customer base, has given it critical economies of scale and added to shareholder

value.

Oracle‘s recent acquisition of Sun has added to its enterprise computing systems, software and services offerings.

But this acquisition has come under the European Commission‘s antitrust scanner. Apprehensive about Oracle

gaining control of Sun's widely used MySQL database, the Commission's antitrust regulators are currently debating

green-flagging the merger. If the Commission launches a full review, it could take as long as four months before a

decision is reached, according to Commission rules. The U.S. Department of Justice recently cleared the merger. But

the Justice Department's concerns centered more on licensing issues with Sun's Java software than MySQL. The

competition has already taken advantage of the uncertainty over the Sun-Oracle deal. Key players like IBM and

Hewlett-Packard have offered discounts and other incentives to lure Sun customers. They've also floated the idea

that Oracle may have a tough time trying to manage a hardware manufacturer like Sun. Despite Oracle‘s strong

performance in 2009 and its strong balance sheet and market position, we had a HOLD on it due to our fears of the

Sun acquisition as well as belief that IT services will be growth engine in the sector.

Accenture (ACN) Not Currently Held BUY Recommendation








Beta 0.66 2009 EPS (est.) $3.10


Accenture Plc (ACN) is one of the world‘s foremost management consulting, technology services and business

process outsourcing firms. Formerly known as Anderson Consulting, Accenture has emerged to be a market leader

in the IT services vertical with strong physical presence in North America, Europe and more important Asia. This

economies of scale associated with its size and service offerings, especially in the IT and business process

outsourcing business, has ensured its position as one of the market leaders in the IT consulting universe.

With increasing inter-connectivity between its management consulting, technology services and business process

outsourcing divisions, Accenture‘s strategy of being a one-stop-shop for the technology needs of its clients,

irrespective of the industry, is proving to be a winning strategy when compared to its competition. Despite

weakening revenue growth rates, attributed to the global economic meltdown, Accenture has continued to be a

strong player with service diversity being the cornerstone of its competitive advantage.

We believe that Accenture with its global delivery model, unique delivery suite, technology labs and more

importantly talented workforce, is best positioned to cash in on the expected surge in management consulting and IT

services requirements that will emerge from many of the beaten down sectors with projects seeing the light of day

http://news.cnet.com/8301-13860_3-10314354-56.html

39

after the imposed delay due to the conservatism seen in the market with more emphasis on holding cash rather than

investing in the business, from a technology standpoint. We feel that the share is undervalued with a potential

upside of 37% and so we recommend a ―BUY‖ for the stock.

Computer Sciences Corp. (CSC) Not Currently Held HOLD Recommendation








Beta 1.05 2009 EPS (est.) $8.12


Computer Sciences Corporation (CSC) provides information technology (IT) and business process outsourcing, and

IT and professional services to the commercial and government markets. The company‘s information technology

outsourcing services include the operation of customer‘s technology infrastructure, including systems analysis,

applications development, network operations, desktop computing, and data center management. CSC also offers

various business process outsourcing services, such as procurement and supply chain, call centers and customer

relationship management, credit services, claims processing, and logistics. In addition, the company provides

various IT and professional services, including systems integration that comprises designing, developing,

implementing, and integrating information systems; and consulting and professional services, such as advising

clients on the strategic acquisition and utilization of IT, as well as on business strategy, security, modeling,

simulation, engineering, operations, change management, and business process reengineering. Further, CSC licenses

software systems for the financial services and other industry-specific markets, as well as provides various end-to-

end business solutions; computer equipment repair and maintenance services; and credit reporting services. The

company provides its services to clients in industries, including aerospace and defense, automotive, chemical and

natural resources, consumer goods, financial services, healthcare, manufacturing, retail and distribution,

telecommunications, and technology, as well as to foreign government clients, civil departments and branches of the

military, and the department of homeland security. CSC is a multi-national firm with operations in North America,

Brazil, Europe, and the Asia Pacific region.

Though we are very bullish about IT services, we believe CSC faces a very tough price competitive market and with

concerns about certain pension obligations and a few corporate governance issues (multiple roles of chairman), we

put a HOLD recommendation on the stock.

Intel Corp. (INTC) 4.00% of Active Portfolio HOLD Recommendation







40


Beta 1.12 2009EPS (est.) $0.72


Intel Corporation was founded in California in 1968 and reincorporated in Delaware in 1989. As the world‘s largest

semiconductor chip maker, Intel manufactures integrated circuits for computers, servers, hand-held devices, and

communication products. The global recessionary environment has battered the whole semiconductor industry in

2009. Due to IT spending cutbacks from both corporate and individual consumers, the whole semiconductor

industry has much lower demand, particularly in the United States and Europe. However, compared to its

competitors, Intel is entering the recession in good shape with strong cash balance and is able to maintain a

successful R&D effort, develop new products and production processes, and improve their existing products and

processes at the same pace or ahead of their competitors. Intel also explored new markets such as netbook, mobile

computing devices and flash memory with aggressive strategies and new partnerships. We feel that Intel‘s current

share price is fairvalued and recommend a ―HOLD‖ for the stock.

eBay Inc. (EBAY) Not Currently Held HOLD Recommendation








Beta 1.74 2009 EPS (est.) $1.46


eBay Inc. was formed as a sole proprietorship in 1995 in California and reincorporated in 1996 in Delaware. eBay

now is the world's largest online marketplace - where practically anyone can sell practically anything at any time.

It's an idea that BusinessWeek once called "nothing less than a virtual, self-regulating global economy."

During last four years, eBay‘s stock price has suffered due to its poor performance in its core marketplaces. But

eBay‘s recent earning report showed that the company‘s management was finally able to stop the decline in its

revenue. With the marketplaces improving and PayPal/Skype growing healthily, we believe that eBay will continue

to execute and perform well in 2009 and 2010. However, at the time the report was written, we believe its share

price is fair-valued and recommend a ―HOLD‖ for the stock.

Amazon.com, Inc. (AMZN) Not Currently Held HOLD Recommendation






Shares Outstanding (M) 1110 ROE (ttm) 24.31%


Beta 1.15 2009 EPS (est.) $1.46

41


Amazon.com, Inc. was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of

Delaware. Amazon.com opened their virtual doors on the World Wide Web in July 1995 and seek to be Earth‘s

most customer-centric company.

Amazon‘s primary source of revenue is the sale of a wide range of products and services to customers through its

website: www.amazon.com. the products include merchandise and content the company has purchased for resale

from vendors and products offered by third-party sellers. In addition, the company generates revenue through co-

branded credit card agreements and other marketing and promotional services, such as online advertising.

Amazon has provided customers more selection, less hassle, faster checkout, and competitive pricing. We believe

that the benefit of the company's business model is even more apparent during current recession. With less than 5%

of all retail sales done over the Internet, there's huge upside for e-commerce business. As the largest player in the

online retail segment, We believe that Amazon has huge growth room for its online retail business. However, at the

time the report was written, Amazon‘s stock was trading at a very high P/E ratio of 80. We believe its share price is

fair-valued and recommend a ―HOLD‖ for the stock.

UTILITIES 2.88% of the Active Portfolio Analyst: Carl Schumacher 3.57% of the S&P 500 Index

In 2009, the utility sector has underperformed the broader market. This past spring, as the market was down over

25% YTD, the utility sector follow the S&P down to the trough, however, the sector has not been as strong in its

rebound. YTD. We believe that our current utility holding, of FPL Group, has strong fundamentals and a renewable

energy portfolio that provides the opportunity for a growth story within the utility sector. We have rated the stock a

BUY as we see a long term value in this company.

FPL Group (FPL) 2.88% of Active Portfolio BUY Recommendation


Price as of November 30, 2009 $51.97 Price/Earnings(ttm) 12.49



Market Capitalization(B) $22.03 ROA(ttm) 3.76%

Shares Outstanding (M) 413.35 ROE(ttm) 13.8%


Beta 0.71 2009 EPS $4.10


FPL Group is the holding company for Florida Power and Light Co., the nation‘s largest investor-owned regulated

electric utility company, and NextEra Energy Resources, a wholesale energy provider, which is also the largest

producer of renewable energy within the United States. FPL is well-positioned, as the company has a stable revenue

stream from its rate-regulated business and a renewable energy portfolio that presents the company with the

opportunity to be a growth story within the utility industry. FPL Group‘s dominance in the wind energy space is

will continue, as the company has plans to add an additional 1000-2000 MW in generating capacity annually in

2009-2013.

We feel that the FPL Group is well positioned to benefit from any clean energy legislation that would be passed in

the future. In June, the US House of Representatives passed the Waxman-Markley Bill, also known as the American

Clean Air Act, which would require that 20% of electricity come from renewable energy swources by 2020 and that

a cap and trade program on emissions be fully instituted by 2016. Such legislation would greatly benefit FPL

Group, due to the company‘s strong investment in renewable energy.

42

After both tracking and outperforming the S&P 500 index over the course of the first nine months of the year, FPL

has lagged the S&P 500 since September, and is up only approximately 5% YTD versus 20% for the S&P. Over the

longer term, however, we feel that the company‘s mix of stable cash flows and growth potential make FPL a viable

utility holding for the portfolio.

TELECOMMUNICATIONS 3.04% of the Active Portfolio Analyst: Carl Schumacher 3.00% of the S&P 500 Index

In 2009, Telecommunication sector has significantly lagged the broader market. As would be expected, the

telecommunications sector, traditionally a defensive play, has been largely flat YTD versus significant market

rebound, which has the S&P up 20% YTD. We expect that the telecommunications industry will continue to lag

the broader market as we continue to see a recovery moving forward.

This year, we reassigned Qualcomm to the technology sector and have introduced Verizon into the

telecommunications sector. We have reiterated our BUY recommendation on China Mobile; however, we are

considering replacing China Mobile with Syniverse Holdings, which we believe to have greater upside potential.

Verizon Communications, Inc

(VZ)

1.72% of Active Portfolio

BUY Recommendation








Beta 1.15 2009 EPS $0.14

Dividend Yield N/A 2010 EPS (est.) 0.44

Verizon Communications, Inc. is one of the world‘s leading providers of communications services. Verizon derives

its revenues from its two main operating segments, Domestic Wireless and Wireline. In 2008, Verizon‘s Domestic

Wireless operating segment overtook the company‘s Wireline segment in total revenues. In 2008, revenues from

Domestic Wireless accounted for approximately 51% of the company‘s revenues, compared with 49% for Wireline.

More recently, Verizon announced a deal in which the company would be divesting a number of its wireline assets

in more rural areas. After the completion of this deal, it is anticipated that approximately 70% of the company‘s

revenues will be generated from wireless operations with the wireline segment accounting for the other 30%.

Moving forward, we expect Verizon to continue to see revenue gains as we emerge from one of the worst economic

periods in recent history. Despite the pressure on wireline revenues and the maturity of the voice services portion of

the wireless telecommunications industry, Verizon is well-positioned for the future due to its status as the largest

wireless service provider in the US and its strong investments in continued technology such as FiOS and the LTE

platform that will eventually allow it to rollout a 4G network. We believe that Verizon is poised to see more

revenue growth moving forward as AT&T loses its exclusivity on the iPhone and Verizon further benefits from its

technology investments in FiOS along with a greater focus on its wireless business.

43

Syniverse Holdings, Inc.

(SVR)

Not Currently Held BUY Recommendation








Beta 0.87 2008 EPS $1.16

Dividend Yield n/a 2009 EPS (est.) $1.04

Syniverse Holdings, Inc. is a leading enabler of wireless voice and data services for telecommunications companies

worldwide. The company is one of the wireless industry‘s only operator-neutral intermediaries and its data

clearinghouse, network and technology services enable customers within the wireless industry to translate

incompatible communication standards and protocols and to simplify operator interconnectivity.

Demand for Syniverse services is driven primarily by wireless voice and data traffic, subscriber roaming activity,

SMS and MMS messaging, number porting and next generation IP applications. The company currently provides

services to more than 650 operators in over 140 countries; and serves most of the largest global wireless operators,

including AT&T, Sprint, T-Mobile, Verizon Wireless, China Telecom and many others. While over 70% of

Syniverse revenues in 2008 were derived from the US and Canada, the company also generated significant revenues

from Asia Pacific, the Caribbean and Latin America; and Europe, Middle East and Asia.

Despite the negative revenue growth that has plagued the company in 2009, we feel that Syniverse still has a strong

foothold in a necessary part of the wireless telecommunications industry, and the company will continue to grow

revenues as the world continues to increase its usage of mobile communications. We feel that the company‘s

strategic position and service offerings, recently bolstered by the acquisition of VeriSign‘s messaging business, will

continue to drive value for Syniverse moving forward, despite the potential for margins to be squeezed a because of

competitive and industry pressures in the future.

China Mobile Ltd. (CHL) 1.21% of Active Portfolio BUY Recommendation








Beta 0.98 2009 EPS $4.06


China Mobile Ltd. (CHL) is the world‘s largest telecommunications company by subscriber count. It offers mobile

services, such as mobile voice services, voice value-added services, data businesses, multimedia messaging services

and other miscellaneous services. The company caters to a subscriber base of approximately 500 million users and

enjoys a market share of 73% in China.

We expect the company to be able to successfully leverage its position as the dominant player within China‘s mobile

telecommunications space to successfully carry out its longer term customer growth strategy of further expansion

44

into more of the rural areas of China. The company‘s strong strategic position and past market dominance make

China Mobile a good bet to perform well for the foreseeable future.

Statement of Security Holdings

Shares Price Value Weight Shares Price Value Weight

Abott Laboratories ABT 600 54.49 32,694$ 2.5%

Apollo Group APOL 260 57.07 14,838$ 1.2%

Banco Santander STD 2700 17.30 46,710$ 3.6%

Bank of America BAC 833 16.95 14,119$ 1.5% 1813 15.85 28,736$ 2.2%

BHP Billiton Limited (ADR) BHP 421 38.21 16,086$ 1.7% 474 75.30 35,692$ 2.8%

Central European Distribution CEDC 715 20.00 14,300$ 1.5% 1324 27.88 36,913$ 2.9%

Chesapeake Energy Corp. CHK 833 14.47 12,054$ 1.3% 1358 23.92 32,483$ 2.5%

China mobile limited CHL 330 46.87 15,467$ 1.2%

Chubb Corporation CB 790 50.14 39,611$ 3.1%

DirecTV Group DTV 1447 22.79 32,977$ 3.5% 1230 31.63 38,905$ 3.0%

Eaton Corporation ETN 505 45.23 22,841$ 2.4% 661 63.90 42,238$ 3.3%

Exxon-Mobil Corp. XOM 490 78.20 38,318$ 4.0% 640 75.07 48,045$ 3.7%

FedEx FDX 392 63.65 24,951$ 2.6% 392 84.45 33,104$ 2.6%

Forest Laboratories Inc. FRX 850 23.50 19,975$ 2.1% 850 30.66 26,061$ 2.0%

FPL Group FPL 925 45.43 42,023$ 4.4% 710 51.97 36,899$ 2.9%

Franklin Resources Inc. BEN 363 61.98 22,499$ 2.4% 313 108.03 33,813$ 2.6%

Google GOOG 110 583 64,130$ 5.0%

Honeywell International HON 743 27.68 20,566$ 2.2% 1090 38.47 41,932$ 3.3%

Intel INTC 2625 14.30 37,538$ 3.9% 2590 19.20 49,728$ 3.9%

Johnson & Johnson JNJ 480 57.81 27,749$ 2.9% 748 62.84 47,004$ 3.7%

Microsoft MSFT 2125 20.60 43,775$ 4.6% 2380 29.41 69,996$ 5.4%

Noble Corp. NE 795 24.19 19,231$ 2.0% 850 41.31 35,114$ 2.7%

Norfolk Southern NSC 787 46.87 36,887$ 3.9% 409 51.40 21,023$ 1.6%

Oracle Corp. ORCL 3057 16.94 51,786$ 5.4% 1987 22.08 43,873$ 3.4%

Peabody Energy Corporation BTU 757 21.76 16,472$ 1.7% 850 44.46 37,791$ 2.9%

Procter & Gamble PG 825 59.79 49,327$ 5.2% 560 62.35 34,916$ 2.7%

QualComm Inc. QCOM 570 45.00 25,650$ 2.0%

Safeway Inc. SWY 1466 22.04 32,311$ 3.4% 1466 22.50 32,985$ 2.6%

Schlumberger SLB 420 42.01 17,644$ 1.8% 509 63.89 32,520$ 2.5%

Sherwin-Williams Co. SHW 630 56.24 35,431$ 3.7% 351 60.84 21,355$ 1.7%

Stryker Corporation SYK 615 39.84 24,502$ 2.6% 615 50.40 30,996$ 2.4%

Target Corp. TGT 860 37.98 32,663$ 3.4% 860 46.56 40,042$ 3.1%

Thermo Fisher Scientific TMO 830 47.23 39,201$ 3.0%

Verizon VZ 725 31.46 22,809$ 1.8%

Walt Disney Holdings Co. DIS 906 23.53 21,318$ 2.2% 906 30.22 27,379$ 2.1%

ETF- Rydex S&P Financials RYF 635 22.13 14,053$ 1.1%

Akamai technologies AKAM 1475 13.96 20,591$ 2.2%

American Captial Strategies ACAS 1020 3.37 3,437$ 0.4%

Charles River Labs CRL 554 24.25 13,435$ 1.4%

Deustche Bank' DB 307 36.05 11,067$ 1.2%

Equifax Inc. EFX 1237 24.22 29,960$ 3.1%

Genentech Inc. DNA 452 77.18 34,885$ 3.7%

Pediatrix Medical Group PDX 486 30.28 14,716$ 1.5%

Travelers Companies TRV 804 42.17 33,905$ 3.6%

iShares S&P Global Telecomm IXP 600 49.83 29,898$ 3.1%

Vanguard Financials ETF VFH 745 26.28 19,579$ 2.1%

Total Equity Portfolio 938,815$ 98.40% 1,274,705$ 99.04%

Money Market/Cash Account 15,261$ 1.60% 12,369$ 0.96%

Effective Portfolio Value 954,076$ 100.0% 1,287,074$ 100.00%

S&P500 (index change) $SPX.X 903.25 1,095.63

Security TickerNovember 30, 2008 November 30, 2009

45

Income Statement

November 30, 2009 November 30, 2008

Beginning Fund Balance 969,516.81$ Beginning Fund Balance 562,523.87$

Cash Added -$ Cash Added 1,000,000.00$

Dividend Income 20,982.57$ Dividend Income 23,011.97$

Interest Income 4.03$ Interest Income 99.18$

Total Income 20,986.60$ Total Income 23,111.15$

Total Capital Gains (Loss), Net 297,570.16$ Total Capital Gains (Loss), Net (615,495.71)$

Taxes and Fees -$ Taxes and Fees -$

Scholarship Application 1,000.00$ Scholarship Application 622.50$

Miscellaneous -$ Miscellaneous -$

Ending Fund Balance 1,287,073.57$ Ending Fund Balance 969,516.81$

Documents

THE HENRY FUNDtippie.biz.uiowa.edu/henry/reports/Annual_Report_2009.pdfThe University of Iowa‘s Henry B. Tippie School of Management. The two-semester course is limited traditionally