2013 Annual Report - Neeley School of Business

William C. Conner Foundation
Educational Investment Fund
2014 Annual Report
Celebrating 41 Years of
The Educational Investment Fund
Setting the Standard of Excellence in
Investment Management Education, Experience,
Ethics, and Philanthropy since 1973
William C. Conner Foundation
Educational Investment Fund
M.J. Neeley School of Business
Texas Christian University
Fort Worth, TX
April 1, 2015
2
Table of Contents
Management Letter ....................................................................................................................... 4
History of the Educational Investment Fund ................................................................................ 6
EIF Members and Officer Pictures ............................................................................................... 7
EIF Alumni Symposium Picture ................................................................................................. 10
Auditor’s Report ......................................................................................................................... 11
Financial Statements ................................................................................................................... 12
Notes to the Financial Statements ............................................................................................... 15
Supplemental Financial Information........................................................................................... 16
Distributions................................................................................................................................ 18
Performance Graphs.................................................................................................................... 19
Equity and Sector Allocations .................................................................................................... 20
Schedule of Investments ............................................................................................................. 21
Description of Holdings .............................................................................................................. 23
Fund Members ............................................................................................................................ 29
Board of Trustees ........................................................................................................................ 30
Preface
2014 marked the 41st year of operations of the Educational Investment Fund, during which time
the William C. Conner Foundation has provided students at Texas Christian University a unique
learning experience in fundamental security analysis and portfolio management. In 2014, 46
student analysts, 33 undergraduates and 13 MBA students, contributed to the management of the
Foundation’s assets. This report summarizes the activities and events that transpired in 2014.
3
To the Trustees of the William C. Conner Foundation
outbreak of violence between Israel-Hamas; the rise
of ISIS; pro-democracy protests in Hong Kong; and
an outbreak of Ebola dominated headlines and
exacerbated the timid tone throughout the global
markets. However, most recently, the plunge in
crude oil prices as a result of sputtering demand in
Europe and China coupled with a supply glut from
the U.S. has generated the most uncertainty. While
positive for consumers, the effects of negative
contagion in producer countries with elevated
production costs contributed to investor hesitancy.
Economy in Review
2014 was marked as a year of global asymmetry.
While modest in comparison to the prior year,
domestic equity markets advanced on the narrative
of improving U.S. growth, driving the S&P 500 to
new highs. However, gains in international markets
remained far more elusive as macro disruptions and
growth concerns left investors unsettled.
Though U.S. economic growth remains anemic,
2014 contained several material signs of
improvement. Following a disappointing first
quarter (falling 2.1%) attributed to unusually bad
weather, real GDP saw its greatest expansion in 11
years in the third quarter (rising 5%). For the year,
real GDP grew 2.4%. The U.S. also had its best year
of job growth since 1999, while consumer
confidence hit post-recession highs.
EIF Operating Summary
The EIF is a long-term equity focused fund,
traditionally with about 70% invested in stocks. The
total EIF portfolio return for 2014 was 8.65%
compared to 7.21% for the Lipper Balanced Fund
index, which is the average of the 30 largest
professionally managed balanced funds.
Despite an early tone of uncertainty, the
aforementioned economic improvements provoked
the Federal Reserve, led by Janet Yellen, to end the
historic Quantitative Easing program in October.
The cessation of this program set the U.S. on a path
of decoupling from the international economic and
policy environment.
In 2014, the EIF equity allocation averaged
72.95% with total returns of 10.82%, compared to
6.86% for the New York Stock Exchange Index,
9.82% for the Dow Jones Industrial Average, and
13.68% for the S&P500. The EIF fixed income
allocation averaged 19.92% with returns of 3.23%,
compared to 1.15% for the i-Shares short-term
government and corporate bond index and to
2.88% for the i-Shares intermediate term
government and corporate bond index. The EIF
bond holdings were strategically allocated toward
shorter-term bonds as the EIF took a more defensive
posture to protect against large losses that would be
incurred from interest rate increases.
On the international stage, the environment
remained bleak. Growth remained the central
concern in Europe as the area’s three largest
economies flirted with a technical triple-dip
recession and high unemployment levels despite
substantial accommodation by the ECB. Japan
doubled down on Abenomics in an attempt to thwart
deteriorating growth, though it was not enough to
save Japan from a triple-dip recession. Finally,
growth in China slowed to its lowest point in
decades while the broader emerging markets
experienced significant volatility as carry trades
(attempts to borrow low interest rate currencies to
invest in high interest rate currencies) began to
unwind.
We are proud to distribute $85,153 to our
beneficiaries, Texas Christian University and the
Department of Ophthalmology at the Baylor
College of Medicine. This contribution brings the
cumulative distribution of the William C. Conner
Foundation Educational Investment Fund to
$2,890,295. All fund members, past and present,
take great pride in the philanthropic component of
the EIF.
The broader economic environment was also
impacted by a large number of exogenous
geopolitical and macro disruptions. The unrest in
Ukraine; Russian annexation of Crimea; an
4
Year Highlights
Ending Comments
On October 17th, more than 50 EIF alumni and
distinguished guests were in attendance to celebrate
41 years of excellence at the EIF Alumni
Symposium. Following a presentation on the history
of the EIF from Dr. Lockwood a panel of EIF
Alumni spoke on their experiences within the EIF.
Our panelists this year included David May (Luther
King Capital Management), Mike Gerding (Rio
Asset Management), Thad Teaford (Carlson
Capital), Reiner Triltsch (Geneva Advisors) and
Andy Zacharias (Luther King Capital Management).
On behalf of all of the 2014 EIF members, I would
like to thank the William C. Conner family, the
Board of Trustees, the administration of Texas
Christian University, auditor Dan Meader, UBS,
and all of our guests during the course of the year.
We also thank the Luther King Capital
Management Center for Financial Studies and its
Director, Dr. Joe Lipscomb, for their continuing
support of the students in the EIF.
We extend a special thank you to Dr. Larry
Lockwood as the EIF faculty advisor. Although the
operations of the fund are student managed, we
generate much of our success from the instruction
provided us by Dr. Lockwood. The knowledge and
experience that Dr. Lockwood contributes to the
fund creates a lasting impact on its members. We
extend a special thank you to Dr. Stan Block for his
countless years of service to the Fund and his lasting
legacy at TCU. With their combined wisdom they
have built a program of applied learning in financial
markets that rivals any other program in the
country.
The EIF continues to be held in high regard both
locally and nationally. During 2014, nearly across
the board, EIF members were recognized on TCU’s
Dean’s Honor List, and received numerous
scholarships including the CFA® Awareness
Scholarship,
Cowtown
Angels
Founding
Scholarship,
Admire
Family
Accounting
Scholarship, Luther King Capital Management
Center for Financial Studies Scholarship, the Neeley
Scholarship, and the Bob Bolen Scholarship. In
addition, four EIF members took the first place prize
in a competition against Texas MBA programs in the
Association for Corporate Growth case study of
leverage buyouts, mergers, and acquisitions. The
team brought home the $10,000 prize along with the
ACG trophy that will be on display at TCU for the
next year. In June 2015, thirteen EIF members plan
to take the CFA Level I exam, one will be taking the
Level II CFA exam, and one will be taking the Level
III CFA exam.
I am deeply honored to serve as the Chief
Administrator for the EIF this semester. On behalf
of all of the 2014 members of the EIF, I would like
to say thank you for allowing us to take part in this
great opportunity.
With much appreciation,
Dominick Robusto
Chief Administrative Officer
William C. Conner Educational Investment Fund
Texas Christian University
Many EIF members were successful in their search
for full-time employment. Some of the companies
hiring EIF members in 2014 included Goldman
Sachs, Citigroup, Deutsche Bank, Credit Suisse,
Houlihan Lokey, and Prudential Capital Group.
5
History of the Educational Investment Fund
The TCU Educational Investment Fund was
established in 1973 with a $600,000 donation from
William C. Conner, co-founder of Alcon
Laboratories. The donation consisted entirely of
Alcon Laboratories common stock, which was
used to establish the William C. Conner
Foundation. The five founding members, James
Bowie, Gary Naifeh, William McLaughlin, Ronald
Moore, Roy Topham, and faculty advisor Dr. Stan
Block used the Alcon stock to establish a margin
account against which the Fund could invest.
Foundations’ two beneficiaries: Texas Christian
University and the Department of Ophthalmology
at Baylor College of Medicine.
Universities across the country continue to
recognize the benefits of TCU’s student-run
investment fund. Over the past several years,
prestigious institutions such as UCLA, Rice
University, Columbia University, and the
University of Chicago have contacted TCU
regarding the development of their student-run
portfolio program, with many universities using
TCU’s William C. Conner Educational Investment
Fund as the base model for their programs.
Within two months of the Fund’s founding, the
stock market experienced its biggest decline since
the end of World War II, providing the original five
members with a valuable lesson in the risks
associated with investing. The fact that the Fund
survived its early setbacks to become the success it
is today is a testament to the vision of Dr. Conner,
and the determination of its founders.
The future of the Educational Investment Fund
remains bright. The generous contribution made
by Dr. Conner 41 years ago has enabled over 1,000
students to benefit from this unique educational
experience. The program consistently produces
top-rate graduates who go on to achieve success
through various industries, but specifically in the
world of finance. The Fund is proud to keep good
relationships with its alumni and appreciates those
individuals who regularly return to Fort Worth to
share their professional experiences with current
Fund members. This solid network of alumni is
indicative of the quality experience provided by
participation in the TCU Educational Investment
Fund.
In 1978, Dr. Conner contributed an additional
$100,000 to the Fund, bringing its total value to
slightly more than $800,000.
Through the
liquidation of its original holding, the EIF closed
its margin account and began investing directly in
various securities. Today, the fund has a value of
approximately $1.4 million.
In 1983, the manner of distributions to the
beneficiaries changed from an annual payment
equal to the realized profit for the year to an annual
distribution of 6% of the Fund’s year-end net asset
value. This change has allowed the EIF to grow,
while still providing income to its beneficiaries.
The success of the Educational Investment Fund
has been made possible by the vision and support
of Dr. Conner, the dedication of the William C.
Conner Board of Trustees, Dr. Stanley Block and
Dr. Larry Lockwood, as well as the numerous other
TCU faculty members, alumni, and students who
have donated their time and effort to the Fund.
Although the EIF is not the oldest university fund
in existence, it is the oldest fund whose operations
are controlled entirely by student managers. Since
its inception, the Fund has represented an
innovating, challenging approach to education in
finance.
It has allowed students to gain
unparalleled investment management experience
while still in a university setting. Throughout the
history of the EIF, over $2.8 million has been
distributed by the Fund, in the form of an annual
contribution to the William C. Conner
Thank you for being a vital part of Texas Christian
University and the M.J. Neeley School of
Business’s
Educational
Investment
Fund
experience. Your continued involvement with the
EIF ensures that past, present, and future alumni
will continue to be recognized for the superb
educational opportunities afforded by TCU.
6
Educational Investment Fund Members
Sixth Row (left to right): Gyanendra Kumar, Shawn Wescott, Jordan Gaglione, and Trip Hoover
Fifth Row (left to right): John Guill, Robert Conner, Dan Johnson, and Tedd Carew
Fourth Row (left to right): Guillermo Saldana, Ben Westcott, Tanner Houston, and Dominick Robusto
Third Row (left to right): Austin Sandvik, Travis Gauntt, Ray Serzanin, and Matt Keim
Second Row (left to right): Varun Gadia, Campbell Robinson, Kirby Schulz, Thach Pham, and Huy Le
First Row (left to right): Dr. Larry Lockwood, Jamie D’Onofrio, Michelle Nguyen, Katie Knight, Amit Lalvani, and Paul Elliott
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Spring 2015 Officers
Second Row (left to right): Austin Sandvik, Operations; Kirby Schulz, IT; Amit Lalvani, Fund Accountant;
Matt Keim, Portfolio Manager
First Row (left to right): Campbell Robinson, Portfolio Manager; Dominick Robusto, Administrator;
Trip Hoover, Economist
8
Fall 2014 Officers
Second Row (left to right): Gyanendra Kumar, Economist; Ray Serzanin, Operations;
Tanner Houston, Portfolio Manager; Amit Lalvani, Fund Accountant
First Row (left to right): Huy Le, IT; Benjamin Westcott, Administrator;
Tedd Carew, Portfolio Manager
9
The 2014 EIF Alumni Symposium Panelists
From left to right:
Mike Gerding (Rio Asset Management, LLC), David May (Luther King Capital Management), Thad Teaford (Carlson Capital),
Reiner Triltsch (Geneva Advisors, LLC), and Andy Zacharias (Luther King Capital Management).
10
DANIEL S. MEADER, CPA
700 NORTH CARROLL AVE. SUITE 110
Southlake, Texas 76092
(817) 310-2901
Fax: (817) 310-2911
INDEPENDENT AUDITOR’S REPORT
To the Board of Trustees of William C. Conner Foundation
We have audited the accompanying statements of financial position of the William C. Conner
Foundation (a non-profit organization) as of December 31, 2014 and December 31, 2013 and the
related statements of activities and cash flows for the year then ended. These financial statements
are the responsibility of the Organization’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the William C. Conner Foundation as of December 31, 2014 and December
31, 2013 and the results of its activities and cash flows for the years then ended in conformity with
generally accepted accounting principles.
Daniel S. Meader, CPA
Southlake, Texas
February 24, 2015
11
12
13
14
William C. Conner Foundation Notes to
Financial Statements December 31, 2014
1. Organization and Summary of Significant Accounting Policies
The purpose of the William C. Conner Foundation, incorporated under the laws of the State of Texas, is to benefit Texas
Christian University of Fort Worth, Texas, and Baylor College of Medicine, Department of Ophthalmology, of Houston,
Texas. Pursuant to the 1982 amended articles of incorporation, the Foundation shall distribute an amount equal to six percent
of the net fair market value of all its investment assets at least annually in equal shares to Texas Christian University and
Baylor College of Medicine, Department of Ophthalmology. Additional distributions may be made to said universities, in
equal shares, at such times and in such amounts Trustees in their discretion may determine.
The Foundation reports its results in accordance with Statement of Financial Accounting Standards (SFAS) No. 117,
Financial Statements of Not-For-Profit Organizations. Under SFAS No. 117, the Foundation is required to report
information regarding its financial position and activities according to three classes of net assets: unrestricted net
assets, temporarily restricted net assets, and permanently restricted net assets.
Investments:
Investments are presented in the financial statements in the aggregate at their cost. Unrealized gains and losses are also set
forth employing fair market value based on the last sales price on the last day of the period.
Realized and unrealized gains and losses are dispositions of investments and changes in market value are considered
elements of revenue and expense. The tender of the Foundation’s interest in the Kinder Morgan MLP in exchange for cash
plus shares has been treated as a sale and investment.
Operating Assets:
Operating assets are depreciated on the straight-line method using the following useful life:
Computer Equipment
Life
5 years
In 2006, the Foundation retired or fully depreciated its previous computer equipment and purchased three new computers
through TCU. They are now fully depreciated.
Administrative Policy:
TCU provides administrative support services to the Fund, and advances payments to vendors on behalf of the Fund. TCU
periodically receives reimbursements from the Fund for these advances. As TCU operates on a different fiscal year than
the fund, at any given time accounts between the Fund and the TCU business office may not be entirely settled, but the
amounts due to or due from are not material.
2. Taxes
The Internal Revenue Service has determined that the Foundation meets the requirements of the internal Revenue code and is
exempt from federal income tax under section 501(c)(3) and 509(a)(3). The Internal Revenue Service has also determined
that the Foundation will not be a private foundation subject to the provisions of the Internal revenue Code Sections 507(a),
(c) and (g) relating to the imposition of excise taxes on private foundation. Federal income taxes will be imposed only on
unrelated business income at the current corporate tax rates.
15
Supplemental Financial Information
Investment Transactions
Description
Quantity
Date
Amount
Sales
FINANCIAL SECTOR SPDR TRUST ETF
(1,504)
02/14/2014
$32,418.18
(385)
02/25/2014
36,624.65
FINANCIAL SECTOR SPDR TRUST ETF
(1,328)
03/07/2014
29,654.71
AKORN INC
UNITED PARCEL SERVICE INC
(1,429)
03/26/2014
30,733.12
ECOLAB INC
(69)
06/18/2014
7,330.72
WALT DISNEY CO
(90)
06/18/2014
7,380.78
APPLE INC
(70)
06/18/2014
6,352.81
BERKSHIRE HATHAWAY INC
(47)
06/18/2014
5,813.80
QUALCOMM INC
(66)
06/18/2014
5,116.55
NEXTERA ENERGY INC
(60)
06/18/2014
5,760.22
DELPHI AUTOMOTIVE PLC
(82)
06/18/2014
5,435.37
INTL BUSINESS MACH
(166)
06/18/2014
30,086.16
VF CORP
(141)
06/18/2014
8,635.15
WELLS FARGO & CO
(172)
06/18/2014
8,776.63
(54)
06/18/2014
5,277.89
AMERICAN CAMPUS COMMUNITIES INC REITS
(206)
06/18/2014
7,728.76
PROCTER & GAMBLE CO
(460)
06/26/2014
36,392.38
UNION PACIFIC CORP
EXXON MOBIL CORP
(330)
06/26/2014
33,479.43
(1,016)
07/17/2014
41,570.15
BCE INC NEW CAD
(155)
07/17/2014
6,930.04
CHICAGO BRIDGE & IRON CO
28,945.19
ABBOTT LABS
(468)
07/25/2014
KINDER MORGAN ENERGY PARTNERS MLP
(98)
08/13/2014
8,910.55
INDUSTRIAL SECTOR SPDR TRUST SHARES
(605)
09/24/2014
32,207.70
STRYKER CORP
(60)
10/01/2014
4,709.94
GILEAD SCIENCES INC
(50)
10/01/2014
5,168.68
ABBVIE INC COM
(191)
10/01/2014
10,816.32
MCDONALDS CORP
(365)
10/01/2014
34,536.50
MASTERCARD INC CL A
(400)
10/13/2014
28,755.31
(99)
10/22/2014
11,121.20
TECHNOLOGY SECTOR SPDR TRUST SHS
(699)
10/29/2014
27,700.36
HEALTH CARE SELECT SECTOR SPDR FUND
(583)
11/12/2014
39,369.39
GENL ELECTRIC
(1,300)
11/21/2014
34,852.28
FINANCIAL SECTOR SPDR TRUST ETF
(1,258)
12/05/2014
31,018.24
(607)
12/05/2014
29,453.18
ECOLAB INC
CONSUMERS STAPLES SECTOR SPDR TRUST SHS
$679,062.34
16
Description
Quantity
Date
Amount
Purchases
BERKSHIRE HATHAWAY INC NEW CL B
283
02/14/2014
$32,613.18
1,300
06/18/2014
35,023.25
GILEAD SCIENCES INC
382
07/11/2014
34,330.35
VALERO ENERGY CORP NEW
720
07/17/2014
35,853.25
TECHNOLOGY SECTOR SPDR TRUST SHS
402
07/25/2014
16,030.88
INDUSTRIAL SECTOR SPDR TRUST SHARES
605
08/04/2014
31,470.27
1,033
09/24/2014
32,585.81
TECHNOLOGY SECTOR SPDR TRUST SHS
297
09/26/2014
11,823.39
HEALTH CARE SELECT SECTOR SPDR FUND
583
10/01/2014
36,999.24
CONSUMERS STAPLES SECTOR SPDR TRUST SHS
607
10/08/2014
27,578.07
1,258
10/13/2014
28,949.93
233
10/22/2014
22,440.40
NETFLIX INC
88
10/29/2014
34,119.01
AMGEN INC
223
11/12/2014
36,113.51
INDUSTRIAL SECTOR SPDR TRUST SHARES
610
11/21/2014
35,057.64
CALIFORNIA RESOURCES CORP
122
12/01/2014
0.00
3,050
12/05/2014
29,473.70
975
12/05/2014
31,702.08
GENL ELECTRIC CO
MASTEC INC
FINANCIAL SECTOR SPDR TRUST ETF
LYONDELLBASELL INDUSTRIES
AVON PRODUCTS INC
WEBSTER FINANCIAL CORP
$512,163.96
17
Distributions
Each year, the foundation distributes six percent of its ending net asset value as of December 31 year end to its
beneficiaries, Texas Christian University and the Department of Ophthalmology at the Baylor College of Medicine.
With the 2005 distribution, the proceeds to TCU were split between the General Fund and the Finance Department.
The payment history is detailed below:
Year
TCU - General Fund
Prior
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
74,722
31,351
42,011
24,957
26,358
28,525
31,512
36,988
34,453
35,178
36,728
33,690
37,447
37,364
38,870
34,532
38,998
41,819
47,985
51,280
56,224
53,905
47,754
38,892
47,622
45,616
22,352
22,486
22,762
14,575
16,590
17,932
17,360
18,552
21,285
21,288
TCU Finance Dept.
Baylor
Total Payout
22,352
22,486
22,762
14,575
16,590
17,932
17,360
18,552
21,285
21,288
74,722
31,351
42,011
24,957
26,358
28,525
31,512
36,988
34,453
35,178
36,728
33,690
37,447
37,364
38,870
34,532
38,998
41,819
47,985
51,280
56,224
53,905
47,754
38,892
47,622
45,616
44,704
44,972
45,524
29,150
33,180
35,865
34,721
37,104
42,570
42,576
149,444
62,702
84,022
49,914
52,716
57,050
63,024
73,976
68,906
70,356
73,456
67,380
74,894
74,728
77,740
69,064
77,996
83,638
95,970
102,560
112,448
107,810
95,508
77,784
95,244
91,232
89,408
89,944
91,048
58,300
66,360
71,730
69,443
74,208
85,139
85,153
Cumulative
Payout
149,444
212,146
296,168
346,082
398,798
455,848
518,872
592,848
661,754
732,110
805,566
872,946
947,840
1,022,568
1,100,308
1,169,372
1,247,368
1,331,006
1,426,976
1,529,536
1,641,984
1,749,794
1,845,302
1,923,086
2,018,330
2,109,562
2,198,970
2,288,914
2,379,962
2,438,262
2,504,622
2,576,352
2,645,795
2,720,003
2,805,142
2,890,296
Cumulative Distributions
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
18
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
Prior
1980
$0
Cumulative EIF Performance versus Fund Benchmarks
Cumulative Change
EIF Return vs. Lipper Balanced Index Fund Index
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Cumulative Change
EIF
Lipper
Q1
1.23%
1.82%
Q2
4.65%
5.38%
Q3
4.72%
4.78%
Q4
8.65%
7.21%
EIF Equities vs. Equity Market Benchmarks
14%
12%
10%
8%
6%
4%
2%
0%
EIF Equities
S&P 500
DOW
NYSE
Q1
1.33%
1.80%
-0.15%
1.88%
Q2
5.41%
7.12%
2.67%
6.95%
Q3
5.42%
8.33%
4.60%
4.88%
Q4
10.82%
13.68%
9.82%
6.86%
Cumulative Change
EIF Bonds vs. i-Share Govt/Corp Bond Indices
4%
3%
2%
1%
0%
EIF
Short Term
Interm
Q1
1.21%
0.30%
0.83%
Q2
2.65%
0.79%
2.09%
19
Q3
2.66%
0.62%
1.94%
Q4
3.23%
1.15%
2.88%
EIF Sector Allocation (as of 12/31/2014)
Telecommunication Services
3%
Utilities 4%
Consumer
Discretionary 17%
Materials
4%
Information
Technology 17%
Consumer
Staples 10%
Industrials 7%
Energy 9%
Health
Care 14%
Financials 17%
2014 Asset Allocation
75.67%
74.18%
20.84%
20.07%
5.75%
3.48%
Q1
Q2
Cash
Fixed Income
20
69.21%
72.73%
20.01%
10.78%
19.48%
7.79%
Q3
Q4
Equity
Schedule of Investments
Asset Class: Equity
VF Corp
Delphi Automotive PLC
Walt Disney Co
Starbucks Corp
Netflix Inc.
Total
Altria Group Inc.
Avon Products Inc.
Diageo PLC ADR
Total
Valero Energy Corp
Kinder Morgan
Occidental Petroleum CRP
California Resources Corp
Total
Berkshire Hathaway Inc.
American International Group Inc.
Wells Fargo & Co
American Campus Communities Inc.
Webster Financial Corp
Total
Stryker Corp
Abbvie Inc.
Amgen Inc.
Gilead Sciences Inc.
Total
Union Pacific Group
Industrial Sector SPDR
Mastec Inc.
Total
Apple Inc.
Oracle Corp
Cognizant Tech Solutions Corp
Qualcomm Inc.
Google Inc. Class C
Google Inc. Class A
Total
Market Value
12/31/2014
Equity % as of
12/31/2014
Total % as of
12/31/2014
Consumer Discretionary
519
$38,873.10
470
$34,178.40
354
$33,343.26
370
$30,358.50
88
$30,061.68
1801
$166,814.94
3.76%
3.31%
3.23%
2.94%
2.91%
16.15%
2.74%
2.41%
2.35%
2.14%
2.12%
11.75%
Shares
Consumer Staples
793
3050
246
4089
$39,071.11
$28,639.50
$28,066.14
$95,776.75
3.78%
2.77%
2.72%
9.27%
2.75%
2.02%
1.98%
6.75%
Energy
50
696
305
122
1173
$35,640.00
$29,447.76
$24,586.05
$672.22
$90,346.03
3.45%
2.85%
2.38%
0.07%
8.75%
2.51%
2.07%
1.73%
0.05%
6.37%
Financials
236
609
616
765
975
3201
$35,435.40
$34,110.09
$33,769.12
$31,640.40
$31,716.75
$166,671.76
3.43%
3.30%
3.27%
3.06%
3.07%
16.14%
2.50%
2.40%
2.38%
2.23%
2.23%
11.74%
Health Care
420
573
223
332
1548
$39,618.60
$37,497.12
$35,521.67
$31,294.32
$143,931.71
3.84%
3.63%
3.44%
3.03%
13.94%
2.79%
2.64%
2.50%
2.21%
10.14%
Industrials
352
610
1033
1995
$41,933.76
$34,513.80
$23,356.13
$99,803.69
4.06%
3.34%
2.26%
9.66%
2.95%
2.43%
1.65%
7.03%
Information Technology
350
$38,633.00
815
$36,650.55
654
$34,439.64
404
$30,029.32
28
$14,739.20
28
$14,858.48
26290
$169,350.19
3.74%
3.55%
3.33%
2.91%
1.43%
1.44%
16.40%
2.72%
2.58%
2.43%
2.12%
1.04%
1.05%
11.93%
21
Ecolab Inc.
LyondellBasell Industries
Total
Materials
197
233
430
$20,590.44
$18,497.87
$39,088.31
1.99%
1.79%
3.78%
1.45%
1.30%
2.75%
Telecommunication Services
565
$25,910.90
565
$25,910.90
2.51%
2.51%
1.83%
1.83%
$35,075.70
$35,075.70
3.40%
3.40%
2.47%
2.47%
Total Equity Value
$1,032,769.98
100.00%
72.77%
Asset Class: Fixed Income
iShares iBoxx High Yield Corporate Bond ETF
Vanguard Intermediate Term Corporate Fund
Vanguard Short Term Investment Grade Fund
Vanguard Short Term Bond Index Fund
Vanguard GNMA Fund
Shares
173
5058
7015
8245
4618
Market Value
12/31/2014
$15,500.80
$49,717.31
$74,783.30
$86,407.41
$49,971.26
Fixed Inc. % as
of
12/31/2014
5.61%
17.99%
27.06%
31.26%
18.08%
Total % as of
12/31/2014
1.09%
3.50%
5.27%
6.09%
3.52%
Total Fixed Income Value
25109
$276,380.08
100.00%
19.47%
Market Value
12/31/2014
$110,074.69
Cash % as of
12/31/2014
100%
Total % as of
12/31/2014
7.76%
BCE Inc.
Total
Nextera Energy Inc.
Total
Utilities
330
330
Asset Class: Cash
Cash & Money Balances
Total Portfolio Value
$1,419,224.75
22
Description of Equity Holdings as of December 31, 2014
(all return comparisons are holding period specific)
Consumer Discretionary
Delphi Automotive (DLPH): Delphi Automotive PLC manufactures vehicle components. The
Company produces electrical and electronic, powertrain, safety and thermal technology components for
automobile and commercial vehicle manufacturers. Delphi supplies original equipment manufacturers
throughout the world. Delphi has a market cap of $21.21B and returned 22.75% for the EIF in 2014,
outperforming the S&P 500 by 9.07%.
Starbucks (SBUX): Starbucks Corporation retails, roasts, and provides its own brand of specialty
coffee. The Company operates retail locations worldwide and sells whole bean coffees through its sales
group, direct response business, supermarkets, and on the World Wide Web. Starbucks also produces
and sells bottled coffee drinks and a line of ice creams. Starbucks has a market cap of $61.57B and
returned 6.25% for the EIF in 2014, underperforming the S&P 500 by 7.43%.
The Walt Disney Corporation (DIS): The Walt Disney Company is an entertainment company that
conducts operations in media networks, studio entertainment, theme parks and resorts, consumer
products, and interactive media. The Company produces motion pictures, television programs, and
musical recordings, as well as books and magazines. Disney has a market cap of $160.12B and returned
24.38% for the EIF in 2014, outperforming the S&P 500 by 10.70%.
VF Corporation (VFC): The VF Corporation is a worldwide leader in lifestyle apparel and related
products. The company owns a plethora of retail brands including The North Face, Vans, Reef,
Wrangler Jeans, Nautica and Jansport. Because these brands span a diverse range of product categories,
VF has organized a number of coalitions to effectively market and manage each brand. These coalitions
include the Outdoor & Sports Coalition, the Jeanswear Coalition, the Imagewear Coalition, the
Sportswear Coalition and the Contemporary Coalition. VF has a market cap of $32.35B and returned
22.19% for the EIF in 2014, outperforming the S&P 500 by 8.51%.
Consumer Staples
Altria Group Inc. (MO): The Altria Group engages in the manufacturing and selling of cigarettes,
smokeless tobacco products and wine. The company offers cigarettes under its Marlboro, Virginia
Slims and Parliament brands. The company also sells smokeless products through its ownership of
Skoal, Copenhagen, Red Seal and Husky brands. Finally, the company produces a diverse range of
blended wines under the Chateau St. Michelle and Columbia Crest names. The company also maintains
a portfolio of leases in rail transport, aircraft, real estate and electric power assets. Altria sells its
products to restaurants, wholesale clubs, supermarkets, wine shops, mass merchandisers and other
retailers worldwide. Altria has a market cap of $97.38B and returned 34.52% for the EIF in 2014,
outperforming the S&P 500 by 20.84%.
23
Avon Products (AVP): Avon is a global beauty product company, and with over 6 million
independent sales representatives is the largest direct seller in the world. The company’s products
include color cosmetics, skincare, fragrances, and fashion and home products. The company has
operations in over 62 countries worldwide. Avon Products has a market cap of $4.01B and returned
(3.20%) for the EIF in 2014, underperforming the S&P 500 by 2.41%.
Diageo, PLC (DEO): Diageo engages in the production, distribution, and marketing of spirits, beer and
wine products worldwide. The company owns a wide range of brands including Johnnie Walker,
Crown Royal, Captain Morgan, Seagram, and Smirnoff. Diageo also owns the distribution rights for the
Jose Cuervo tequila brands in North America. Diageo has a market cap of $71.68B and returned
(11.43%) for the EIF in 2014, underperforming the S&P 500 by 25.11%.
Energy
Kinder Morgan Energy Partners (KMP): Kinder Morgan is a pipeline transportation and energy
storage company. The pipelines transport natural gas, crude oil, gasoline, carbon dioxide, and other
products; and its terminals store petroleum and chemical products. Kinder Morgan has a market cap of
$89.91B and returned 23.28% for the EIF in 2014, outperforming the S&P 500 by 9.60%.
Occidental Petroleum Corporation (OXY): Occidental explores for, develops, and markets crude oil
and natural gas. The company also manufactures and markets a variety of chemicals and vinyls.
Occidental also gathers, treats, processes, transports, stores, and trades crude oil, natural gas, NGLs,
and carbon dioxide. OXY has a market cap of $62.12B and returned (8.86%) for the EIF in 2014,
underperforming the S&P 500 by 22.54%.
Valero Energy Corp (VLO): Valero Energy Corporation is based in San Antonio, TX. The company
was incorporated in 1981 and currently owns 16 refineries and 10 ethanol plants in the US, UK,
Canada, and Aruba. Valero refineries produce gasoline, jet fuel, diesel fuel, asphalt, petrochemicals,
lubricants, and other refined products. Valero markets branded and unbranded products through
approximately 7,400 outlets. Valero Energy has a market cap of $25.80B and returned 0.24% for the
EIF in 2014, underperforming the S&P 500 by 13.44%.
Financials
American Campus Communities, Inc. (ACC): American Campus Communities, Inc. own and
operates on and off-campus housing properties within close proximity to colleges and universities. The
company provides development and construction services for student housing properties owned by
universities, charitable foundations and others. American Campus Communities also provides third
party management and leasing services. The company has a market cap of $4.35B and returned 16.57%
for the EIF in 2014, outperforming the S&P 500 by 6.94%.
American International Group (AIG): American International Group, Inc. is an international
insurance organization serving commercial, institutional and individual customers. AIG provides
property-casualty insurance, life insurance and retirement services. Some of these services include
24
general liability, automobile, workers compensation, health insurance, and term life insurance. AIG has
a market cap of $77.07B and returned 10.73% for the EIF in 2014, underperforming the S&P 500 by
2.95%.
Berkshire Hathaway Inc. – Class B (BRK.B): Berkshire Hathaway is a holding company that wholly
and partially owns subsidiaries across many different industry with insurance and reinsurance serving
as its primary operational segments. The company also owns and operates a number of other businesses
engaged in a variety of activities. Berkshire has a market cap of $350.65B and returned 30.62% for the
EIF in 2014, outperforming the S&P 500 by 18.64%.
Webster Financial (WBS): Webster Bank delivers financial services to individuals, families, and
businesses primarily from Westchester County, NY to Boston, MA, and through Connecticut with a
small presence in Rhode Island. Webster provides commercial, small business, and consumer banking,
mortgage lending, financial planning, and trust and investment services through 169 banking centers,
309 ATMs, telephone banking, mobile banking and its website. Webster also offers equipment
financing, commercial real estate lending, and asset-based lending. Webster Financial has a market cap
of $2.94B and returned 0.62% for the EIF in 2014, outperforming the S&P 500 by 1.41%.
Wells Fargo & Co (WFC): Wells Fargo & Co provides retail, commercial, and corporate banking
services primarily in the United States. As a diversified bank Wells Fargo operates in many facets of
financial services, from community banking to corporate services such as investment banking. The
purchase of Wachovia has allowed Wells Fargo to expand its domestic operations even further. Wells
Fargo & Co is the largest US bank by market capitalization with a market capitalization of $284.39B
and returned 24.09% for the EIF in 2014, outperforming the S&P 500 by 10.41%.
Healthcare
Abbvie Inc. (ABBV): AbbVie Inc. researches and develops pharmaceutical products. The Company
produces pharmaceutical drugs for specialty therapeutic areas such as immunology, chronic kidney
disease, Hepatitis C, women's health, oncology, and neuroscience. AbbVie also offers treatments for
diseases including Multiple Sclerosis, Parkinson's, and Alzheimer's disease. Abbvie has a market cap of
$104.14B and returned 27.97% for the EIF in 2014, outperforming the S&P 500 by 14.29%.
Amgen Inc. (AMGN): Amgen focuses on areas of high unmet medical need and leverages its biologics
manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve
people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be the world’s largest
independent biotechnology company, has reached millions of patients around the world and is
developing a pipeline of medicines with breakaway potential. Amgen has a market cap of $121.10B
and returned (1.63%) for the EIF in 2014, underperforming the S&P 500 by 2.64%.
Gilead Sciences Inc. (GILD): Gilead Sciences is a research-based biopharmaceutical firm that
uncovers, develops and markets therapeutics to improve the lives of patients suffering from lifethreatening diseases. The company’s primary areas of focus include HIV/AIDS, liver disease and
serious cardiovascular and respiratory conditions. Headquartered in Foster City, California, Gilead has
operations in North and South America, Europe and Asia-Pacific. The Company continues to add to
25
existing portfolio of products through the internal discovery and clinical development programs and
through a product acquisition and in-licensing strategy. Gilead Sciences has a market cap of $141.30B
and returned 6.23% for the EIF in 2014, outperforming the S&P 500 by 1.59%.
Stryker Corp (SYK): Stryker Corporation develops, manufactures, and markets specialty surgical and
medical products. The Company's products include implants, biologics; surgical, neurologic, ear, nose
& throat and interventional pain equipment; endoscopic, surgical navigation, communications and
digital imaging systems; as well as patient handling and emergency medical equipment. Stryker has a
market cap of $35.66B and returned 27.40% for the EIF in 2014, outperforming the S&P 500 by
13.72%.
Industrials
MasTec Inc. (MTZ): MasTec is a leading North American infrastructure construction company, which
employs approximately 18,000 employees across the United States, Canada and Mexico. The company
is mainly involved in the engineering, building, installation, maintenance and upgrade of petroleum and
natural gas pipeline and facilities, wireless / wireline fiber installation, electrical transmission and
distribution (power lines), and power generation infrastructure. MasTec has a market cap of $1.85B and
returned (28.50%) for the EIF in 2014, underperforming the S&P 500 by 31.53%.
Union Pacific Corp. (UNP): Union Pacific Corporation is a rail transportation company. The
Company's railroad hauls a variety of goods, including agricultural, automotive, and chemical products.
Union Pacific offers long-haul routes from all major West Coast and Gulf Coast ports to eastern
gateways as well as connects with Canada's rail systems and serves the major gateways to Mexico.
Union Pacific has a market cap of $105.24B and returned 44.49% for the EIF in 2014, outperforming
the S&P 500 by 30.18%.
Materials
Ecolab Inc. (ECL): Ecolab Inc. develops and markets products and services for the hospitality,
institutional, and industrial markets. The Company provides cleaning, sanitizing, pest elimination, and
maintenance products, systems, and services. Ecolab provides its services to hotels and restaurants,
healthcare and educational facilities, light industry, and other customers located worldwide. Ecolab has
a market cap of $31.37B and returned 1.31% for the EIF in 2014, underperforming the S&P 500 by
12.37%.
LyondellBasell Industries (LYB): LyondellBasell Industries N.V. is one of the world’s largest
plastics, chemical, and refining companies. Incorporated in the Netherlands, the company participates
in the entire petrochemical value chain, from refining to specialized petrochemical product end uses. It
is the largest producer of polypropylene and polypropylene compounds, and is a leading producer of
propylene oxide, polyethylene, ethylene and propylene. Additionally, LyondellBasell is a leading
provider of technology licenses and a supplier of catalysts for polyolefin production. The company has
an extensive global presence with manufacturing, supply, technical and commercial infrastructure. Its
products are used in numerous downstream industries and countries around the world. LyondellBasell
26
has a market cap of $38.66B and returned (14.4%) for the EIF in 2014, underperforming the S&P 500
by 16.49%.
Technology
Apple Inc. (AAPL): Apple Inc. was established in 1976 and is headquartered in Cupertino, California.
Its products and services include iPhone, iPad, Mac, iPod, Apple TV, the iOS and Mac OS X operating
systems, iCloud, and various accessory and support offerings. It also sells and delivers digital content
and applications through the iTunes Store, App Store, iBookstore, and Mac App Store. It also operates
retail stores both nationally and internationally. Apple has a market cap of $643.12B and returned
40.62% for the EIF in 2014, outperforming the S&P 500 by 26.94%.
Cognizant Technologies Solutions (CTSH): Cognizant Technology Solutions Corporation provides
custom Information Technology (IT) consulting and technology services as well as outsourcing
services. The Company's core competencies include technology strategy consulting, complex systems
development, enterprise software package implementation and maintenance, data warehousing and
business intelligence. Cognizant has a market cap of $52.66B and returned 4.30% for the EIF in 2014,
underperforming the S&P 500 by 9.38%.
Google Inc. – Class A (GOOG): Google Inc. is a global technology company that provides a web
based search engine through its website. The Company offers a wide range of search options, including
web, image, groups, directory, and news searches. Google has a market cap of $360.90B and returned
(5.39%) for the EIF in 2014, underperforming the S&P 500 by 19.07%.
Netflix Inc. (NFLX): Netflix, Inc. is the world’s leading Internet television network with over 50
million members in nearly 50 countries enjoying more than two billion hours of TV shows and movies
per month, including original series. For one low monthly price, Netflix members can watch as much as
they want, anytime, anywhere, on nearly any Internet connected screen. Members can play, pause and
resume watching, all without commercials or commitments. Additionally, in the United States members
can receive DVDs delivered via mail to their homes. Netflix has a market cap of $20.64B and returned
(9.65%) for the EIF in 2014, underperforming the S&P 500 by 13.51%.
Oracle Corp (ORCL): Oracle Corp was established in 1977 and is headquartered in Redwood City,
California. It is a leader in database software. In addition it also develops middleware software,
application software and hardware systems worldwide. With Sun Microsystems acquisition, Java is also
part of Oracle now. It generates its revenues mainly by issuing new software licenses, updates and
product support. Oracle Corp has a market cap of $197.50B and returned 18.98% for the EIF in 2014,
outperforming the S&P 500 by 5.30%.
Qualcomm Inc. (QCOM): Qualcomm Inc. was established in 1985 and is headquartered in San Diego,
California. It has four segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology
Licensing (QTL); Qualcomm Wireless & Internet (QWI), and Qualcomm Strategic Initiatives (QSI). It
mainly develops CDMA-based integrated circuits for wireless voice and data communications. It also
grants licenses or otherwise provides rights to use portions of its intellectual property portfolio, which
includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless
27
products. The company operates primarily in China, South Korea, Taiwan, Japan, and the United
States. Qualcomm Inc. has a market cap of $122.90B and returned 2.26% for the EIF in 2014,
underperforming the S&P 500 by 11.42%.
Telecommunications
Bell Canadian Telecom (BCE): BCE Inc., provides a full range of communication services to
residential and business customers in Canada. The Company's services includes local, long distance and
wireless phone services, high speed and wireless Internet access, IP-broadband services, value-added
business solutions and direct-to-home satellite and VDSL television services. Bell Canadian Telecom
has a market cap of $37.99B and returned 11.34% for the EIF in 2014, underperforming the S&P 500
by 2.34%.
Utilities
Nextera Energy Inc. (NEE): NextEra Energy, Inc. is a clean energy company. The Company, through
its subsidiaries, generates, transmits, distributes, and sells electric energy utilizing natural gas, wind and
nuclear resources. NextEra Energy has a market cap of $46.39B and returned 27.91% for the EIF in
2014, outperforming the S&P 500 by 14.23%.
28
Educational Investment Fund Members
Spring 2014
Creighton Bassett
Ryan Mulvaney
Evan Lang
William Dace
John Eastman
Nick Julian
Braden Fudge
Matt Bean
Marcus Drauschke
Neeraj Dutt
Gus Gildner
Daniel Heslep
Kyle Minter
Tanner Murphy
Preston Oliver
Christopher Reiser
Dinh Xuan Tong
James Williams
Tyler Yarnell
Summer 2014
Gus Gildner
Kyle Minter
Matt Bean
Marcus Drauschke
Neeraj Dutt
Dinh Xuan Tong
Tedd Carew
Mike Donovan
Garrett Gastil
Tanner Houston
Austin Hughey
Alex Kuhlman
Huy Le
Sabrina Li
Mark Mangum
Ray Serzanin
Benjamin Westcott
Ron Yu
Administrator
Operations
Economist
Fund Accountant
Portfolio Manager
Portfolio Manager
IT
Administrator
Operations
Economist
Portfolio Manager
Portfolio Manager
IT
Fall 2014
Benjamin Westcott
Ray Serzanin
Gyanendra Kumar
Amit Lalvani
Tedd Carew
Tanner Houston
Huy Le
Robert Connor
Jamie D’Onofrio
Paul Elliot
Jordan Gaglione
Travis Gauntt
Trip Hoover
Daniel Johnson
Matt Keim
Katie Knight
Michelle Nguyen
Campbell Robinson
Dominick Robusto
Austin Sandvik
Kirby Schulz
Administrator
Operations
Economist
Fund Accountant
Portfolio Manager
Portfolio Manager
IT
Faculty Advisor
Dr. Larry Lockwood
For further information about the Educational
Investment Fund, please contact:
Educational Investment Fund
TCU Box 298530
Fort Worth, TX 76129
Phone: 817-257-7568
Fax: 817-257-7227
29
William C. Conner Foundation
Board of Trustees
Dr. O. Homer Erekson
Dean and John V. Roach Chair in Business
M.J. Neeley School of Business
Fort Worth, Texas
Jim Hille
Chief Investment Officer
Texas Christian University
Fort Worth, Texas
Halden Conner
Investments
Fort Worth, Texas
Scot Hollmann
Principal, Vice President
Luther King Capital Management
Fort Worth, Texas
Dr. Timothy Stout
Director, Cullen Eye Institute
Chairman, Department of Ophthalmology
Baylor College of Medicine
Houston, Texas
30