USC Marshall School of Business' Undergraduate Student Investment Fund 2020 Annual Report

2020 Annual Report

U N D E R G R A D U A T E

S T U D E N T

I N V E S T E N T

F U N D

U N D E R G R A D U AT E S T U D E N T I N V E S T E N T F U N D A N N U A L R E P O R T

UNDERGRADUATE STUDENT INVESTMENT FUND

ANNUAL REPORT 2020

U N D E R G R A D U AT E S T U D E N T I N V E S T E N T F U N D A N N U A L R E P O R T

Fund Background The Undergraduate Student Investment Fund (USIF) is the capstone practicum component of the B.S. in Business Administration with an emphasis in Finance at the USC Marshall School of Business.

The course provides students with real-life training in asset management, hands-on experience in managing substantial sums of capital, and critical knowledge of the operational aspects needed to run a professional investment management advisory entity.

The objective of the Undergraduate Student Investment Fund is to become a practical alternative investment vehicle for both the USC Marshall School of Business and the University of Southern California. The Fund seeks to maximize the value of its assets under management, while operating in accordance with the investment policies as prescribed by the University Investment Committee. The Fund was established in 2008 and is now comprised of both the USIF Stock Fund and the Student Asset Allocation Fund, sponsored by VanEck (SAAF).

Historical Performance The graph below illustrates consolidated returns of the USIF Stock Fund and SAAF since inception.

Historical Performance of a $10,000 Investment (September 2008 - March 2020) $20,000 $18,000 $16,000

$17,203

$14,000 $12,000 $10,000 $8,000 $6,000

Total Ending Investment Value = $17,203 Annualized Return = 4.44%

$4,000 $2,000 $0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Denotes addition of SAAF Portfolio

Current Year Statistics (Class of 2020) Fund Name USIF Stock Fund

Active Portion

Relative Performance to Benchmark

Benchmark S&P500

Fund Return (10.93%)

Benchmark Return (6.98%)

S&P500

(5.69%)

(6.98%)

(2.08%)

(5.92%)

3.84%

(5.21%)

(6.29%)

1.09%

SAAF

Blended Benchmark*

Consolidated USIF

Weighted Average Benchmark

*60% MSCI ACWI (Net), 30% Bloomberg Barclays U.S. Aggregate, and 10% alternative asset indices

(3.95%) 1.29%

Table of Contents Letter to Our Friends and Alumni ..............................................................................................................................................1 Center for Investment Studies.....................................................................................................................................................2 Fund Policy and Background .......................................................................................................................................................3 USIF ....................................................................................................................................................................................................... 3 SAAF ...................................................................................................................................................................................................... 4 The Annual Commentary ...............................................................................................................................................................5 Reflections .............................................................................................................................................................................................7 Biographies ............................................................................................................................................................................................9 USIF 2020 Portfolio Managers .................................................................................................................................................... 9 Professors......................................................................................................................................................................................... 13 USIF Fund............................................................................................................................................................................................. 14 Financial Highlights ...................................................................................................................................................................... 14 Active Portfolio Overview .......................................................................................................................................................... 15 Commentary on Individual Holdings .................................................................................................................................... 16 Trading Views ................................................................................................................................................................................. 27 Erik Doctor: Costco Wholesale Corporation (COST) .................................................................................................. 27 Priyal Vij: JPMorgan Chase & Company (JPM) ............................................................................................................ 28 Kanhai Shah: IQVIA Holdings (IQV) .................................................................................................................................. 29 Student Asset Allocation Fund ................................................................................................................................................. 30 Financial Highlights ...................................................................................................................................................................... 30 Portfolio Overview ........................................................................................................................................................................ 31 Commentary on Individual Holdings .................................................................................................................................... 33 Trading Views ................................................................................................................................................................................. 36 Jake Willingham: Utilities Select Sector SPDR ETF (XLU) ......................................................................................... 36 Matthew Gue: iShares Gold Trust ETF (IAU).................................................................................................................. 37 Rohan Dhaon: Vanguard Extended Duration ETF (EDV) & Long-Term Treasury ETF (VGLT).................... 38 Financial Statements...................................................................................................................................................................... 39 Consolidated ................................................................................................................................................................................... 39 USIF .................................................................................................................................................................................................... 41 SAAF ................................................................................................................................................................................................... 43 Notes to Financial Statements ................................................................................................................................................. 45 New York Trip ................................................................................................................................................................................... 46 Alumni Updates ................................................................................................................................................................................ 47 Acknowledgements ........................................................................................................................................................................ 52

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Letter to Our Friends & Alumni Dear USIF Friends and Alumni, I hope you are all well during this difficult period. Despite the recent global events surrounding the COVID19 pandemic, we have had another productive year—we funded $165,000 scholarships, presented two “Investment Perspectives” online lectures, hosted 11 guest speakers, visited seven buy-side firms and traveled to New York City as the class of VanEck Global Scholars. We want to thank you all for the advice, help, and opportunities you have provided to the Center for Investment Studies (CIS), Undergraduate Student Investment Fund (USIF) students, Scott Abrams, and ourselves.

The CIS is a proud sponsor of the USC Marshall Student Investment Fund programs. The Center hosts five MBA student investment funds and two undergraduate funds. Collectively, 32 student managers invest approximately $10.1 million of the USC endowment. We thank the CIS Board (David Iben, Sharon Kilmer, Lisa Mazzocco, Michael Reilly, James Sarni, Sheldon Stone, and Larry Tashjian (Chair)) for their continuous guidance and involvement.

Sixteen USC Marshall undergraduate students manage a U.S. equity fund and an ETF fund, the Student Asset Allocation Fund (SAAF), sponsored by VanEck. As of March 31, 2020, the total USIF portfolio held approximately $3.5 million in assets under management. SAAF, in its fifth year, has given students the opportunity to invest in exchange traded funds (ETFs) and provides a unique learning opportunity in asset allocation and in investing across a wide range of asset classes.

In November, as a part of the “VanEck Global Scholars,” the SIF/USIF students had an exciting learning experience traveling to NYC, the trip involved presenting their mid-year fund performance and meeting with many new friends and alumni in the investment community. We want to extend our special thanks to Cynthia and Jan van Eck for hosting our visit and giving our students valuable insights into investment management. We very much appreciate our visits to Angelo, Gordon & Co., PJT Partners, Candlestick Capital and The Carlyle Group.

The CIS hosted an online “Investment Perspectives” speaker series in April for the current and incoming SIF/USIF classes. Belin Robertson, Trust Specialist, Merrill Lynch shared insights with a talk entitled “Legislation and Investing,” and John Lee, Executive Vice President, US Commercial Real Estate Investments, PIMCO presented the “Real Estate in the Age of COVID.” We are grateful to these industry professionals for sharing their expertise with the classes.

As we send off the USIF Class of 2020, we would like to ask them to join us in thanking the following individuals for their willingness to share time, experience, and insights as guest speakers and company hosts this year: Jay Binstock, RJ David, Glenn Freed, Samantha Foster, Larry Harris, Alaina Hartley, Brent Herlihy, Thomas Kamei, Lou Lebedin, Ivan Mirabelli, Michael Reilly, David Rosenberg, Jim Sarni, Cynthia Tusan, and Jack Woodruff.

We recognize the hard work of Scott Abrams who serves as the instructor for the USIF program. We thank Erica Keil, who provides administrative support for the Center. We are deeply indebted to our network of friends and alumni for their ongoing support. Each year, we extend our growing USIF network by establishing and renewing relationships with the investment community and USIF alumni.

We look forward to the upcoming year and your support as the 2021 student managers begin their own USIF experience.

Best regards, Suh-Pyng Ku Director, Center for Investment Studies

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Center for Investment Studies The Center for Investment Studies (CIS) is USC Marshall’s forum for students to acquire experiential knowledge, for faculty to conduct historical and real-time research, and for industry experts to share their valuable insights. With the Center for Investment Studies, the USC Marshall School of Business continues to promote a leading investment research program within both academia and the global professional community.

FBE 453a/b: Advanced Practicum in Investment Management Curriculum Students manage a part of USC’s endowment as USIF portfolio managers and share the responsibility of developing their own investment strategies.

A Legacy of Faculty Scholarship Strong emphasis is placed on investment research, enhanced by the availability of historical and real- time data on trading and security analyses as well as a large, world-class finance faculty.

Integrating with the Broader Financial Services Industry The Center provides a setting for forums, industry presentations, and distinguished speaker series. The USC Marshall faculty, industry money-management experts, and students are invited to participate and share their expertise.

Members of the Board of Directors

David Iben, CFA MBA ’82 USC

Michael Reilly, CFA B.S. ’85 MBA ’86 USC

Kopernik Global Investors, LLC Chief Investment Officer & Portfolio Manager

Chief Investment Officer of U.S. Equities & Director of Research The TCW Group, Inc.

Sharon Kilmer, CFA MBA ’82 USC

Angelo Gordon & Co. Managing Director Suh-Pyng Ku Ph.D. ’92 USC

Professor of Clinical Finance & Business Economics & Director of Center for Investment Studies USC Marshall School of Business

James P. Sarni, CFA B.S. ’83 MBA ’92 USC

Managing Principal Payden & Rygel Investment Management Sheldon M. Stone MBA ’78 Columbia University

Principal & Portfolio Manager Oaktree Capital Management

Lisa Mazzocco MBA Cal Poly Pomona

Larry Tashijian, CFA (Chair) B.S. ’75 MBA ’76 USC

Chief Investment Officer University of Southern California

President & Chief Executive Officer CAM Capital Advisors, LLC

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USIF Stock Fund Background & Policy Fund Background The Undergraduate Student Investment Fund (USIF) Stock Fund is a $1.32M fund that seeks to maximize the value of its assets under management while operating in accordance with the investment policies as prescribed by the University Investment Committee. The official inception date for the Fund is March 31, 2008.

Mandate The Fund is limited to taking long only positions in S&P 500 companies.

Performance Objective The objective of the USIF Stock Fund is to generate excess returns on a risk-adjusted basis.

Fund Benchmark The USIF Stock Fund benchmarks its performance against the S&P 500 Index.

Portfolio Structure

Two-Thirds of the Fund: S&P 500 Sector Management Stocks in the S&P 500 have been categorized into 11 sectors according to Standard and Poor’s industry classifications. The Fund’s assets under management are allocated to S&P 500 sectors, with a maximum sector weighting of 25.0%. Within each sector of the Fund’s “investable sub-universe,” two to four managers from USIF are assigned to serve as sector specialists. In turn, the sector specialists propose weights for the companies in their sector’s investable sub-universe. Each position is limited to 7.5% of the portfolio at the time of purchase, which can be waived when positions grow through price appreciation.

Sector specialists pitch their investment recommendations to the entire class, and a 60% vote is required for trade execution. The resulting portfolio is a large-cap, domestic equity fund with returns and volatility that closely track the S&P 500 index.

One-Third of the Fund: Completion Fund The remaining one-third of the Fund is invested in passively-managed instruments with the purpose of lowering the tracking error with respect to the S&P 500 index. Managers use the Fama-French three factor model (market, size, and style) to characterize the risk profile of the Fund and of the S&P 500 index. The Completion Fund holds exchange-traded funds to compensate for any aggregate excess or deficit risk exposures stemming from decisions within the active portfolio (specifically, the sector specialists’ security selections and sector-weighting decisions).

AUM: $1.2M

Completion Fund Active Fund 66.6%

33.3%

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Student Asset Allocation Fund Background & Policy sponsored by VanEck

Fund Background Established in 2015 by VanEck, the Student Asset Allocation Fund (SAAF) is a $2.37M fund concurrently managed by the USIF stock fund managers. The goal of the fund is to provide an investment vehicle for students to focus on selection among the broader range of asset classes in generating returns. SAAF’s mandate calls for full investment across global, diversified asset classes of passive ETFs using macro asset class tilts and bottom-up security analysis.

Mandate The fund is limited to passive global equity, fixed income, and alternative asset ETFs. All ETFs must have a minimum of $50M in total net assets at the time of investment, and all positions must be long only; this precludes investments in leveraged, inverse, and volatility ETFs. SAAF managers may rebalance monthly as appropriate. Further risk controls exist pertinent to the fund’s specific asset classes.

Performance Objective The SAAF performance objective is to maximize the Fund’s total risk-adjusted return. It emphasizes long-term net returns, prudent risks, and the capacity for funding annual payouts to USC’s operating budget.

Fund Benchmark The Fund uses a blended benchmark comprised of 60.0% MSCI ACWI (Net), 30.0% Bloomberg Barclays’ U.S. Aggregate bond index, and 10.0% alternatives.

The alternatives sub-portfolio is equally weighted across the S&P Listed Private Equity Index, the SPDR Dow Jones Wilshire Global Real Estate Index, and the MSCI World Infrastructure Index (Net).

Portfolio Structure

Global Equities Currently, 60.8% of the portfolio is invested in global equities, of which domestic equities account for approximately three-fourths of the allocation.

International equities are split between developed markets (DM) and emerging markets (EM). All three sectors follow core-satellite strategies that apportion a large amount of capital to broad indices, using more specific ETFs to provide “tilts.”

Three sector specialists wrote summer reports and cover the U.S., DM, and EM spaces, making recommendations based on their wider macroeconomic views.

Global Fixed Income Fixed income investments currently comprise 19.7% of the portfolio. The mandate provides flexibility to take advantage of a broad range of investments, although we limit our investment universe to investment grade and long-duration ETFs.

Alternatives The remaining 19.5% of the portfolio is dedicated to 8.9% alternative investments and 10.6% cash. No single alternative ETF can be more than 5.0% of the portfolio. At the start of the year, we targeted an equal weight strategy across alternative ETFs in real estate and commodities.

Alternatives

AUM: $2.3M

Cash

8.9%

10.6%

Fixed Income 19.7%

Equities 60.8%

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THE ANNUAL C The actively managed portion of the Fund returned -

For the USIF Stock Fund 2020 During

our

tenure

as

fund

managers

for

the

Undergraduate Student Investment Fund (USIF), we observed several key events that guided our investment decisions and long-term strategy. We took over the Fund during what we considered to be the later stages of the bull run. Over the first six months of our tenure, we looked to strong consumer spending and global QE to mitigate our concerns over the ongoing trade war, slowing global growth, rising corporate debt, a partially inverted yield curve, and above-average trading multiples.

We decided to invest with a “cautiously optimistic” investment strategy. The second half of our tenure began with a strong performance across asset classes while the markets reached all-time highs in mid-February despite growing concerns over the COVID-19 outbreak. This was largely driven by low interest rates, trade war alleviations, and the 2020 election cycle. However, the markets took a bearish turn in late February as investors began pricing in the negative economic impact of COVID-19. All in all, the S&P 500 returned -6.98% over the span of our control as USIF managers.

5.69% and outperformed its benchmark (the S&P 500) by 129 bps. However, one third of the total Fund is also managed passively through a completion fund, in order to minimize the Fund’s tracking error against the S&P. The completion fund, meanwhile, has returned -21.88% in this period. Put together, the total USIF portfolio returned 10.93%, trailing the S&P by 395 bps.

In response to COVID-19 and our revised macro outlook, we decided to tilt our portfolio more toward the Consumer Staples, Healthcare, Materials, and Utilities sectors. Tactically, we also are market weight for Communications, Consumer Discretionary, and Financials.

Lastly, our portfolio is underweight in Energy, Information Technology, Industrials, and Real Estate. Using the FamaFrench 3 Factor model, we identified that our active portfolio tilts towards large-cap, growth stocks. Therefore, to minimize our tracking error with the S&P 500, we invested in mid-cap value ETFs in the passive completion fund. These ETFs include the Russell Mid-Cap Value ETF (IWS), the Vanguard Value ETF (VTV), and the Vanguard Mid-Cap Value ETF (VOE). However, mid-cap stocks have

Throughout the year, we have maintained our investment

lagged behind large-caps and the completion fund has

strategy with a preference for large-cap companies with

dragged down our returns.

strong balance sheets, defensible economic moats, and attractive market tailwinds. As a result, we made thesis-

As of March 31, 2020, our largest holdings are NVIDIA,

driven investments into fifteen companies, including

Apple, Amazon, Blackrock, and JPMorgan Chase. Our best

NextEra Energy (NEE) and Merck & Co. (MRK), our two

performers from a contribution basis are NVIDIA, Apple,

best new investments for the year on a contribution basis.

and Newell Brands. Our worst performers are GM,

Furthermore, we also sold and trimmed our positions in

LyondellBasell, and Alexion Pharmaceuticals. In these

18 securities, such as Newell Brands (NWL), Estee Lauder

unprecedented times, we are beyond thankful for the

(EL) and Schlumberger (SLB). Our sells were driven by the

opportunity to learn and invest on behalf of the USC

achievement of our price target (NWL), revisions of our

endowment.

investment thesis due to COVID-19 (EL), and desire to cut loses (SLB) and our sourcing of better investment

For the SAAF Fund 2020

opportunities. Looking forward, the Fund will be exposed

The fifth year of the Student Asset Allocation Fund (SAAF),

to increasing volatility due to COVID-19. We believe that

sponsored by VanEck, was largely defined by a turbulent

our investment strategies have left the Fund well-

market plagued by global uncertainty. During our tenure,

positioned for the incoming USIF 2021 class with

the macro environment has been impacted by (1) a global

attractive risk-reward opportunities.

economic slowdown addressed by widespread monetary

C O M M E N TA RY easing, (2) an aggressive US-China trade war, (3) an oil

of the iShares Gold Trust (IAU).

price war between Saudi Arabia and Russia, and (4) an ongoing historic paralysis of the global economy caused

On February 27, when the S&P 500 Index was priced at

by the COVID-19 pandemic.

3000, we decided to sell a significant amount of U.S., International, and EM equities ETF shares to increase our

Upon inheritance in April 2019, our portfolio was

positions in IAU and U.S. Utilities SPDR ETF (XLU). Amid

appropriately positioned by USIF 2019 to address a

growing concerns regarding the COVID-19 outbreak’s

hawkish Federal Reserve. However, as business spending

economic impact, we made a tactical investment in long-

grinded to a halt due to escalating trade tensions, the Fed

duration US Treasury bond ETFs in anticipation of Fed rate

decided to reverse its course and cut rates. Significantly

cuts – using Vanguard’s Long-Term Treasury ETF (VGLT)

underweight fixed income

Fund

and Extended Duration Treasury ETF (EDV). On March 5,

underperformed its benchmark by ~200 bps as of mid-

we substantially cut our equity exposure to adopt a more

August 2019.

aggressive tactical fixed income play and readjusted our

assets,

the SAAF

U.S. equity portfolio to be more defensive by buying Despite the intensifying trade war with China, we

SPDR’s Consumer Staples Select Sector ETF (XLP).

remained bullish U.S. equities once we began trading in September – viewing relative growth rates, monetary

On March 26, USIF 2020 rebalanced the SAAF portfolio to

easing campaigns and currency strength as the more

reflect our long-term macroeconomic outlook. We believe

salient macro-indicators guiding our strategic allocation.

that it is well-positioned for the transition period:

Apart from depressed growth, EU political mayhem, and

overweight U.S. equities (identifying mispriced sectors),

negative ECB rates justified our underweight allocation to

underweight EM equities (only core ETFs), neutral fixed

International Developed Equities. In Emerging Markets

income (only the Barclays AGG), neutral alternatives (gold,

(EM), we identified upside opportunity in Brazil and

precious metals ETFs) and heavy on cash (~10%).

implemented a targeted strategy using satellite ETFs – iShares MSCI Brazil ETF (EWZ) and iShares MSCI Brazil

Our tactical play with long-term treasury bonds helped

Small-Cap ETF (EWZS). An underweight fixed income

mitigate severe losses in equity holdings. As of March 31,

strategy

priced-in

2020, the SAAF Fund outperformed its benchmark by 384

expectations of continued Fed rate cuts and a persisting

bps and outperformed the legacy SAAF portfolio by 410

low-yield environment. In addition, we adopted an

bps. After conducting an attribution analysis, our

overweight position in alternative assets and benefited

outperformance is largely credited to our sub-asset class

from substantial gains in holdings such as our Aberdeen

allocation decisions in Alternative and Fixed Income

Standard Physical Palladium Shares ETF (PALL).

assets. Particular winners PALL, IAU, EDV and VGLT

was

maintained

given

already

substantiate this evaluation.

We returned in the new year with an increasingly pessimistic

macroeconomic

outlook.

Additional

On behalf of our class and future portfolio managers for

conservatism in our strategic allocation was motivated by

the SAAF Fund, we would like to thank Mr. & Mrs. Van Eck

massive sums of US corporate and consumer debt,

for supporting our academic endeavors.

worrying U.S.-Iran political tensions and a persistent growth premium in U.S. equities coupled with an over-

Thank you,

reliance on FAANG. To address this, we decided to

USIF 2020

increase our Fixed Income allocation and purchase shares

6

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2019 – 2020 USIF Reflections 2019 – 2020 USIF Reflections TOMY DUONG: “Initially, I was very intimidated by the investment management world; it seemed so out-of-reach and elusive for an ordinary student like myself. But spending a year learning from my peers and professor has made the topic of investing not only educational but also very accessible. The aggregation of the different ways in which we have thought about the same problems has been critical to my growth as both a student of and professional in finance. In my view, USIF has been an empowering experience, and I'm thoroughly grateful. Anyone in USIF should consider themselves exceptionally lucky to have been a part of this, and we owe it to Professor Abrams, Professor Ku, and our broader investment community for this once-in-a-lifetime enrichment.“

MARY LABANOWSKI: “Looking back on my four years at USC, there is no organization or program that compares to USIF. My experience as a portfolio manager has been second to none. The knowledge and skills that I gained are invaluable and will serve me well as I embark on my professional journey in finance. However, it is not just the hard skills I learned through USIF that made this such a rewarding experience. It is also the relationships built.

Thank you to the Center for Investment Studies, donors, Erica, for everything you have done to help support USIF. Thank you to Professor Abrams and Professor Ku for giving me this opportunity to be a part of such a unique and invaluable learning experience.

Finally, thank you to my classmates who not only helped me learn so much over these past 12 months but who also became lifelong friends. I will cherish this experience forever.”

MATTHEW LEE: “I still remember my high school senior self, reading and getting excited about USIF before I even set foot on USC’s campus. Now, after having the chance to be in the class, I can confidently say that it exceeded my expectations and that I am very grateful for such an opportunity. In an unparalleled finance experience, I learned more about capital markets, investing, and portfolio management than I ever thought I could.

What truly surprised me the most about USIF is how the class gave me a fresh perspective that helps me look at the world and markets around me with a more informed view. Never in any class have I talked more about current events and strategic decisions than we have this past year in USIF, and I can’t wait to use the invaluable lessons the class taught me all throughout my professional and personal endeavors. I want to thank my 15 fellow classmates, Professor Abrams, and Professor Ku for a transformative senior year and making USIF one of my favorite experiences as an undergraduate student.”

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TANIKA MEHRA: “Joining USIF is an incredible opportunity for any student with a passion for investing. I not only had the opportunity to manage $4 million of USC's endowment, but also had exposure to some of the thought leaders in finance, specifically in the asset management world. In USIF, we are part of a team of some of the brightest minds at USC, a network we can cherish for years to come. While each of us comes from different backgrounds, when we would meet every Wednesday, we would try to study the market, and see what's not priced in or how best to minimize drawdown. This class was what I looked forward to every week for the entirety of my senior year. I have learned so much from USIF, it is definitely the most engaging and fruitful class at USC. I could have graduated early but a stuck along at SC and gained this unparalleled experience, something I will always be grateful for.

WARREN POH: “A recent obsession of mine has been boxing. As investors, the stock market is our boxing ring: jab, right, hook, slip and roll. Through blood, sweat and tears, Professor Abrams has been our cornerman. He applies ice when we are hurt, talks some sense into us and most importantly —tells us to never give up. Though our time in USIF is over, we still have many more rounds to go. I feel more ready than ever to lace up for my next fight.”

JAKE WILLINGHAM: “USIF has been the most valuable class that I have been in at USC. Professor Abrams allows USIF to be an environment in which the students truly are in control of the fund, so that they can learn real-life applications and strategies. I decided to join this class because, although I am intrigued by finance, I had no real experience as an investor. Part of what makes the USIF experience so unique and valuable is that you surround yourself with students who are incredibly driven and knowledgeable in their respective fields. This allows each student to build off one another, increasing their knowledge over a wide variety of investment topics. I am grateful to Professor Abrams, Professor Ku and all of my fellow USIF members who have made this experience so worthwhile.”

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2019 – 2020 Portfolio Managers

Salman Abdullah Salman Abdullah is currently pursuing a B.S. in Business Administration. Outside of his academic pursuits, Salman is a mentor for the Trojan Investing Society, through which he strives to encourage other Trojans to pursue careers within finance. Salman is also a member of the Trojan Blockchain Society and Trojan Hedge Fund Group. Salman previously interned with Ernst & Young, in their Audit function in Abu Dhabi. He is currently working as a financial analyst for Focus Advisory Services in Los Angeles. In his free time, Salman enjoys playing guitar, photographing landscapes and exploring the local food scene.

Michael Chang Michael Chang is currently pursuing his B.S. degree in Business Administration at the USC Marshall School of Business. At USC, Michael is a student-athlete on the USC Men’s Volleyball team. Additionally, he has also served as the Chief Operations Officer of the Trojan Investing Society and as a Marshall Student Ambassador. Michael has previously interned in private equity at OpenGate Capital. Michael is looking forward to returning to Moelis and Company as an investment banking analyst in New York. Originally from Irvine, California, Michael enjoys traveling, exploring the local food scene, playing golf, dabbling in guitar, and spending quality time with friends and family.

Rohan Dhaon Rohan Dhaon is currently pursuing a B.A. in International Relations (Global Business) from the Dornsife College of Letters, Arts & Sciences. While at USC, Rohan has been actively involved with the Trojan Investing Society and Society 53 (the leadership board of the Student Alumni Society). His previous professional experiences include internships at: Everstone Capital (private equity firm in Singapore), Shay Capital (proprietary trading firm in New York) and Barclays’ Financial Sponsors and Consumer/Retail Investment Banking coverage team in Los Angeles. He is very excited to join the same Barclays team full-time after graduating in May. Born in New York City, Rohan spent the majority of his life abroad: living in Singapore and Abu Dhabi for six and fourteen years, respectively.

He enjoys swimming, golf, travel and triathlons.

Erik Doctor Erik Doctor is currently pursuing his B.S. in Business Administration at the USC Marshall School of Business. At USC, Erik serves as a mentor for the Trojan Investing Society, Marshall’s largest student organization, which focuses on investment banking. He was also involved with Marshall Real Estate Finance Association. Previously, he interned with Kayne Anderson Capital Advisors, Nomura Securities, and J.P. Morgan’s Financial Sponsors Investment Banking team in New York where he will be returning full-time as an Investment Banking Analyst. Erik is originally from San Francisco and enjoys golf, running, hiking, skiing, traveling, and spending time with friends and family.

2019 – 2020 Portfolio Managers

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Tomy Duong Tomy Duong is currently pursuing a B.S. in Business Administration at the USC Marshall School of Business. At USC, Tomy served as the president of Alpha Kappa Psi professional business fraternity and SpectrumSC. Moreover, Tomy was a Marshall Student Ambassador and is currently Teaching Assistant for FBE 423, Introduction to Venture Capital and Private Equity. He has previously interned at J.P. Morgan in New York City as a risk summer analyst. Last summer, he interned at Credit Suisse in New York City in the investment banking division and will be returning there full time in the Technology, Media, and Telecom Group. Originally from Biloxi, Mississippi, Tomy enjoys going to concerts, picking up piano, and learning Korean.

Jeffrey Ellison Jeffrey Ellison is currently pursuing a B.S. in Accounting at the Leventhal School of Accounting and a B.S. in Business Administration with a concentration in Finance at the Marshall School of Business. During his time at USC, Jeffrey was a teaching assistant in FBE 441, Investments, and ITP 104, Introduction to Web Publishing. Jeffrey has previously completed internships with Pilot Flying J as a Pricing Strategy Analyst and at KPMG as a in San Francisco as a Deal Advisory Intern. After graduation Jeffrey will be working at Raymond James in Los Angeles in the healthcare investment banking practice. In his spare time, Jeffrey enjoys swimming, surfing, hiking, and reading.

Matthew Gue Matthew Gue is currently pursuing his B.S. in Business Administration at the Marshall School of Business and a minor in Applied Analytics at the Viterbi School of Engineering.

At USC, Matthew served as Treasurer for the International Consulting Club, was a ProBono Consultant for Global Brigades @ Marshall, and was a member of the Trojan Investing Society. Matthew has previously interned with The Boeing Company as a Financial Warranty and Invoicing Analyst and with Chevrolet Philippines as a Financial Services Intern. He is looking forward to joining Citibank Philippines as a Full-Time Analyst within the Consumer Banking Operations division after graduating in May. Originally from Manila, Philippines, Matthew enjoys playing golf, watching NBA Basketball, playing Fantasy Basketball, and playing the piano.

Mary Labanowski Mary Labanowski is currently pursuing her B.S. in Business Administration at the USC Marshall School of Business. While at USC, Mary has served on the USC Panhellenic Executive Board, the governing body that oversees the national Panhellenic sorority chapters on USC’s campus. She also served as a mentor to local high school students through USC’s Scholars Leading Scholars program as well as a student manager for the USC Women’s Volleyball team. Mary previously interned with Morgan Stanley in their Energy Investment Banking coverage group, Magnetar Capital, a hedge fund, and Platform Partners, a private equity firm. She is looking forward to returning to Morgan Stanley full time as an investment banking analyst post-graduation. Originally from Houston, Texas, Mary enjoys hiking, tennis, and exploring new restaurants.

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2019 – 2020 Portfolio Managers (cont’d)

Matthew Lee Matthew Lee is currently pursuing his B.S. in Business Administration at the USC Marshall School of Business. While at USC, Matthew has served as one of the Directors of Trojan Investing Society's Leaders Program, the President of Moneythink USC, and a Marshall Student Ambassador. In addition to his involvements, he is currently a Teaching Assistant for Financial Analysis and Valuation. Not moving far from his home in Irvine, California, he is excited to join Lazard’s Los Angeles office as an investment banking analyst post-graduation. Previously, he gained experience in consulting, healthcare, and financial services, working for PwC in the technology consulting department in addition to Plaza Bank's project management division. In his free time, Matthew enjoys watching and playing basketball, exploring new restaurants, and working on his music making.

Tanika Mehra Tanika Mehra is currently pursuing a B.S. in Economics Mathematics at the USC Dornsife College of Letters, Arts & Sciences and minors in Business Finance from Marshall School of Business, Applied Analytics from Viterbi School of Engineering. While at USC, Tanika has been involved in Phi Beta Kappa honor society, weekly Economics Peer tutoring, Minds Foundation, and the Applied Statistics Club. Her work experience ranges from mapping out the Fintech landscape for a Private Equity fund to performing data analytics to compare forex companies. Last summer, she interned with Bank of America Merrill Lynch as an Equity Research Analyst, and will be joining them full-time in the Software division in San Francisco. In her free time, Tanika enjoys cooking, travelling, working out, volunteering, and spending time with friends and family.

Warren Poh Warren Poh is currently pursuing his B.S. in Business Administration at the USC Marshall School of Business. While at USC, Warren joined the Value Investing Group in the first semester of his freshman year and served as the group’s president last year. His previous professional experience includes an internship with Ring in Santa Monica and working for Alma Campus, a seed-stage startup. Prior to that, Warren worked at Old West Investment Management, a long/short hedge fund in Los Angeles. Warren will be joining GCA’s investment banking group in San Francisco full-time. In his spare time, Warren enjoys boxing and trying out new foods.

Kanhai Shah Kanhai Shah is currently pursuing a B.S. in Business Administration at the Marshall School of Business and a B.S. in Health Promotion & Disease Prevention at the Keck School of medicine. While at USC, Kanhai has been involved with the Center for Economic and Social Research as a research assistant, and with USC Zeher (a competitive dance team) as a dancer and choreographer. Kanhai has also completed internships in healthcare technology, investment management, public health, venture capital, an investment banking, and looks forward to returning to Stifel Financial as a healthcare investment banking analyst after graduation. In the long-term, Kanhai hopes to combine his interests in healthcare and finance as an investor in value-enhancing health innovation. Kanhai is from Westlake Village, CA and can often be found training, reading, and playing soccer.

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Ryan Slater Ryan Slater is currently pursuing a B.S. degree in Business Administration and a B.S. degree in Accounting through the Marshall School of Business and Leventhal School of Accounting. At USC, Ryan was a member of USC’s Division I golf team. He competed for USC in 14 events, most notably helping the team win the Pac-12 Men’s Golf Championship in 2018. Last summer Ryan worked for KPMG as an audit and deal advisory intern. He is looking forward to returning full-time in the fall as a deal advisory associate. In his free time, Ryan enjoys following professional sports, competing in fantasy football, listening to music, camping, and hiking.

Bryan Tang Bryan Tang is currently pursuing a B.S. in Business Administration at the Marshall School of Business. While at USC, Bryan has been involved as a member of the Trojan Investing Society and Delta Sigma Pi business fraternity. He has previously interned at Chong Sing Holdings FinTech Group, a financial services firm catering to small and medium-sized enterprises and individuals in Asia, and Cappello Global, a middle-market investment bank. Last summer, Bryan interned at RBC Capital Markets in its Global Investment Banking division as part of the Communications, Media & Entertainment industry coverage group, and is excited to return to the same role full-time after graduation. Originally from Singapore, Bryan is passionate about creative writing, boxing, and is a huge LeBron James fan.

Priyal Vij Priyal Vij is pursuing a B.S. in Business Administration at the Marshall School of Business. Throughout college, Priyal has been involved in a wide range of professional organizations focused on women in business, technology, finance, and service. She is involved in organizations such as Trojan Investing Society and USC Moneythink. Her freshman year, Priyal interned with RA Capital Advisors as an Investment Banking Intern.

As a sophomore, she was selected to partake in Wells Fargo Securities’ Sophomore Summer Analyst program where she rotated between the Technology Investment Banking group and the Investment Portfolio group. Priyal will be joining Credit Suisse’s TMT investment banking group in New York full-time. In her free time, Priyal enjoys staying active through hiking, running, and dancing. She enjoys trying new coffee shops and making music when she gets the chance.

Jake Willingham Jake Willingham is currently pursuing a B.S. in Business Administration at the USC Marshall School of Business. While at USC, Jake has been an active member in the Trojan Investing Society Mentorship Program and his fraternity, Tau Kappa Epsilon. He serves as an Investment Associate of his fraternity’s investing group, Beta Sigma Capital Holdings. Jake has interned at Lime Rock Partners in Houston as a private equity intern and Citation Oil and Gas as a summer financial analyst. He is looking forward to working full-time for Evercore’s energy investment banking group in Houston. Jake enjoys playing golf, watching sports and spending time with his Malshi named Milly.

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Professor Biographies

Scott Abrams

Assistant Professor of Clinical Finance and Business Economics Professor Scott Abrams is the instructor for the Undergraduate Student Investment Fund and coinstructor for the MBA Student Investment Fund classes.

He specializes in corporate finance, portfolio management, financial analysis and valuation, and microeconomics and teaches these subjects in both the graduate and undergraduate programs at USC Marshall.

He is the 2016 Golden Apple Teaching Award Winner for the Full-Time MBA Core Program. Professor Abrams received his MBA from USC Marshall and is an alumnus of the SIF Program (2004). Prior to joining the faculty at USC Marshall, he worked in corporate finance at Sony Pictures and Warner Bros. In addition, he is an alumnus of Deloitte and is a licensed CPA.

Suh-Pyng Ku

Vice Dean of Graduate Programs & CIS Director Professor Suh-Pyng Ku is the Director of the Center for Investment Studies and co-instructor for the MBA Student Investment Fund classes. Professor Ku’s teaching and research specialties include corporate finance, portfolio management, and security valuation. In addition, she serves as the Vice Dean for Graduate Programs and Director of the USC Marshall Center for Investment Studies. Previously, Professor Ku served as USC’s Vice Provost and Executive Director of Continuing Education and Summer Programs. Prior to that, she served as USC’s Chief Technology Officer for Enhanced Learning, Associate Dean for the Marshall MBA Program and Marshall’s Chief Information Officer. She is the 2014 Golden Apple Teaching Award Winner for the Full-Time MBA Core Program and a 2014 Steven B. Sample Teaching and Mentoring Award Nominee from the USC Office for Parent Programs. Professor Ku received her Ph.D. degree in Finance from USC.

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USIF Stock Fund Highlights The Active Portfolio (as of March 31, 2020) USIF Fund Performance Summary USIF Fund Performance Summary USIF Active Portfolio

% Change Since 3/31/19 (5.69%)

USIF Total Portfolio

(10.93%)

S&P 500 Total Return Index (Benchmark)

(6.98%)

Fund Assets Summary Date

Market Value of Assets

Quarterly Returns

SPXT (Benchmark)

Return

Difference

3/31/2019

$1,320,248.8

$5,664.5

6/30/2019 9/30/2019

1,364,960.2 1,381,330.8

3.39% 1.20%

5,908.3 6,008.6

4.30% 1.70%

(0.92%) (0.50%)

12/31/2019 3/31/2020

1,501,483.7 1,175,920.8

8.70% (21.68%)

6,553.6 5,269.2

9.07% (19.60%)

(0.37%) (2.08%)

Top Five Equity Holdings Holding

Ticker

NVIDIA Corporation Apple Inc.

NVDA AAPL

Market Value $51,929.2 50,858.0

% of Total 6.06% 5.94%

Amazon.com, Inc.

AMZN

50,692.7

5.92%

BlackRock, Inc.

BLK

36,517.5

4.26%

JPMorgan Chase & Co.

JPM

33,851.3

3.95%

Top Performing Companies Company Name

Ticker

Sector

NVIDIA Corporation

NVDA

Information Technology

Contribution 1.35%

Apple Inc.

AAPL

Information Technology

1.11%

Newell Brands Inc

NWL

Consumer Discretionary

0.45%

Amazon.com, Inc.

AMZN

Consumer Discretionary

0.36%

Sysco Corporation

SYY

Consumer Staples

0.30%

Company Name General Motors Company

Ticker GM

Sector Consumer Discretionary

LyondellBasell Industries NV Alexion Pharmaceuticals, Inc.

LYB ALXN

Materials Healthcare

(0.86%) (0.76%)

Chevron Corporation

CBX

Energy

(0.72%)

Altria Group Inc

MO

Consumer Staples

(0.67%)

Worst Performing Companies Contribution (1.21%)

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USIF Stock Fund Overview The Active Portfolio (as of March 31, 2020) Holding

Ticker

Shares

Cost Basis Per Unit

Share Price

Market Value

Unrealized

% of Total

Gain/Loss

Portfolio

Communication Services Alphabet Inc. Class A Alphabet Inc. Class C Facebook, Inc. Class A Walt Disney Company Subtotal

GOOGL GOOG FB DIS

18 26 201 170

$1,176.9 1,173.3 166.7 111.0

$1,162.0 1,162.8 166.8 96.6

$20,915.1 30,233.1 33,526.8 16,422.0

(1.27%) (0.89%) 0.07% (13.00%)

2.44% 3.53% 3.92% 1.92% 11.81%

Consumer Discretionary Amazon.com, Inc. General Motors Company Home Depot, Inc. Target Corporation Subtotal

AMZN GM HD TGT

26 1,170 121 253

$1,780.8 35.2 236.9 113.6

$1,949.7 20.8 186.7 93.0

$50,692.7 24,312.6 22,591.9 23,521.4

9.49% (41.03%) (21.19%) (18.19%)

5.92% 2.84% 2.64% 2.75% 14.14%

MO STZ COST

431 140 94

$45.5 175.3 301.6

$38.7 143.4 285.1

$16,666.8 20,070.4 26,802.2

(14.98%) (18.23%) (5.47%)

1.95% 2.34% 3.13% 7.42%

CVX

207

$123.2

$72.5

$14,999.2

(41.18%)

1.75% 1.75%

Financials Berkshire Hathaway Inc. Class B BlackRock, Inc. JPMorgan Chase & Co. Subtotal

BRK.B BLK JPM

172 83 376

$200.9 427.4 101.2

$182.8 440.0 90.0

$31,446.8 36,517.5 33,851.3

(8.99%) 2.95% (11.06%)

3.67% 4.26% 3.95% 11.89%

Healthcare Alexion Pharmaceuticals, Inc. Cerner Corporation IDEXX Laboratories, Inc. IQVIA Holdings Inc McKesson Corporation Medtronic Plc Merck & Co., Inc. UnitedHealth Group Incorporated Subtotal

ALXN CERN IDXX IQV MCK MDT MRK UNH

220 369 79 200 162 189 240 70

$135.2 57.2 245.7 143.2 117.1 90.7 72.1 243.6

$89.8 63.0 242.2 107.9 135.3 90.2 76.9 249.4

$19,753.8 23,243.3 19,137.0 21,572.0 21,912.1 17,044.0 18,465.6 17,456.6

(33.58%) 10.10% (1.41%) (24.70%) 15.55% (0.57%) 6.67% 2.38%

2.31% 2.71% 2.23% 2.52% 2.56% 1.99% 2.16% 2.04% 18.52%

RTN SNA

108 107

$179.2 156.5

$131.2 108.8

$14,164.2 11,643.7

(26.82%) (30.48%)

1.65% 1.36% 3.01%

AAPL MA NVDA PAYC

200 64 197 106

$190.0 257.5 179.6 274.2

$254.3 241.6 263.6 202.0

$50,858.0 15,459.8 51,929.2 21,413.1

33.87% (6.18%) 46.80% (26.32%)

5.94% 1.81% 6.06% 2.50% 16.31%

LYB SHW

375 42

$84.1 430.7

$49.6 459.5

$18,611.3 19,299.8

(40.97%) 6.69%

2.17% 2.25% 4.43%

Real Estate Digital Realty Trust, Inc. Subtotal

DLR

150

$119.0

$138.9

$20,836.5

16.73%

2.43% 2.43%

Utilities American Electric Power Company, Inc. NextEra Energy, Inc. Subtotal

AEP NEE

405 124

$83.8 232.2

$80.0 240.6

$32,391.9 29,836.9

(4.50%) 3.60%

3.78% 3.48% 7.27%

Consumer Staples Altria Group Inc Constellation Brands, Inc. Class A Costco Wholesale Corporation Subtotal Energy Chevron Corporation Subtotal

Industrials Raytheon Company Snap-on Incorporated Subtotal Information Technology Apple Inc. Mastercard Incorporated Class A NVIDIA Corporation Paycom Software, Inc. Subtotal Materials LyondellBasell Industries NV Sherwin-Williams Company Subtotal

Commentary on Individual USIF Fund Holdings

16

COMMUNICATION SERVICES Alphabet (NASDAQ:GOOGL) is a California-based technology conglomerate that operates two major segments: Google and Other Bets. The Google segment includes principal Internet products such as Search, Ads, Commerce, Maps, YouTube, Google Cloud, Android, Chrome and Google Play, as well as technical infrastructure. The Other Bets segment includes businesses such as Access, Calico, CapitalG, GV, Verily, Waymo, X, and Internet and television services. GOOGL has generated a loss for us due to the overarching market volatility, with both stocks previously trading at all-time highs near the end of February. While we expect GOOGL’s advertising revenue to decrease in the coming year due to the impact of COVID-19 on small businesses and consumer spending, we believe the company’s YouTube subscription business and its higher exposure to larger enterprises will help offset some of the potential revenue drag during this period. Moving forward, we believe it remains a strong stock to hold since it is the dominant player in an industry with strong secular tailwinds. We inherited Class A and Class C of GOOGL at a cost-basis of $1,176.89 and $1,173.31 per share, respectively. On March 31, 2020, the Class A and Class C closed at $1,161.95 and $1,162.81 which represents a negative return of 1.3% and 0.9%, respectively.

Facebook (NYSE: FB) is a consumer-facing advertising company that hosts social networks and messaging platforms. Its most well-known acquisitions have been Instagram, WhatsApp, and Oculus VR. The company is also deeply investing in financial technology and product innovation to further secure its moat as one of the two leaders in mobile ad sales. While we expect weakness in FB’s ad sales due to the economic contraction generated by COVID-19, we believe in FB’s long-term ability to monetize its user growth. FB’s corporate M&A strategy has served it well in the past, and we expect that it will continue to create value and deepen its moat moving forward. We inherited FB at a cost-basis of $166.69 per share. On March 31, 2020, FB closed at $166.80 which represents a positive return of 0.1%.

Disney (NYSE: DIS) is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks & Resorts, Studio Entertainment, and Consumer Products & Interactive Media. While Disney’s theme parks have been hit hard by COVID-19, we see strength in Disney’s streaming platform, Disney+, and ESPN+ in the long term. We inherited DIS at a cost basis of $111.03 per share. On March 31, 2020, DIS closed at $96.60 which represents a negative return of 13.0%.

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Commentary on Individual USIF Fund Holdings

CONSUMER DISCRETIONARY Amazon.com Inc (NASDAQ:AMZN) is an American multinational technology company based in Seattle with 750,000 employees. It is the leading online retailer and cloud computing provider. The company focuses on digital streaming and artificial intelligence. Although it is one of the best performers in our portfolio, it was hit largely due to the overall market volatility, down from its all-time high of $2,185.95 at the end of February. We believe AMZN is well-positioned to outperform with its dominant position in a market characterized by a growing TAM and massive barriers to entry.

AMZN continues to benefit from margin expansion while trading at a discount to peers despite a superior management team. AMZN has multiple service businesses growing at 30% or more and continues to invest in the business to keep growing across all its verticals. Notably, Amazon Web Services (AWS), its industry leading, cloud computing operation, grew 34% year over year in the 4Q 2019 while boasting an impressive 26% operating margins. We inherited shares of AMZN at a cost-basis of $1780.75 per share.

On March 31, 2020, AMZN closed at $1949.72 which represents a positive return of 9.5%.

General Motors Company (NYSE: GM) designs, builds, and sells cars, trucks, crossovers, and automobile parts worldwide. The company operates through GM North America, GM International, GM Cruise, and GM Financial business segments and markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Holden, Baojun, and Wuling brand names. We expected the halting of production from the UAW strike both to end sooner than consensus and to not deplete cash flows as severely as the market anticipated. In addition, our long-term outlook places GM as an industry-leader in the electric and autonomous vehicle space in the US, outperforming primary competitor Ford for market share in key product categories: trucks and SUVs. The short-term thesis was realized, but we decided to hold on to our shares and commit to our long-term conviction. The disruption to global supply chains and lack of confidence in the global economy have badly beaten automotive stocks; however, we are confident that our long-term thesis will hold and that GM will be able to weather the ongoing storm. We purchased GM at a cost-basis of $35.24 per share on October 11, 2019. On March 31, 2020, GM closed at $20.78 which represents a negative return of 41.0%, making it one of the lower performing companies in our USIF portfolio.

Home Depot (NYSE: HD) is the world’s leading home improvement retailer currently operating at about 2,300 stores worldwide. HD sells a variety of products and services to its three primary customer segments: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers, and professional customers such as renovators and general contractors. Although HD is the best in its class relative to other home improvement retailers, the Consumer Discretionary sector faced multiple tailwinds that hindered its growth and affected its stock price. Specifically, the combination of increasing trade tariffs from the U.S.-China trade war, large infrastructure costs, and COVID-19 implications resulted in a loss over our USIF trading year. Nevertheless, HD remains well-positioned in the long-term to generate superior returns due to declining interest rates, its strong supply chain operations, and the integration of the company’s “One Home Depot” vision. We purchased HD at a cost-basis of $236.91 per share on November 14, 2019. On March 31, 2020, HD closed at $186.71 which represents a negative return of 21.2%.

Commentary on Individual USIF Fund Holdings

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CONSUMER DISCRETIONARY (cont’d) Target Corporation (NYSE: TGT) operates as a general merchandise retailer in the United States and offers beauty and household essentials, food assortments, apparel, accessories, home décor products, electronics, toys, seasonal offerings, and other merchandise. The company is a discount retailer that markets itself as “cheap and chic.”

TGT’s performance can be attributed to poor holiday sales and the recent impacts on retail from COVID-19, but ultimately, we believe that its high-profile partnerships, strong omni-channel innovations, and shift to smaller-format stores will set the company up for long-term success. We purchased TGT at a cost-basis of $113.65 per share on October 21, 2019. On March 31, 2020, TGT closed at $92.97 which represents a negative return of 18.2%.

CONSUMER STAPLES Altria (NYSE: MO) is a holding company that engages in the manufacture and sale of cigarettes in the United States and headquartered in Richmond, VA. As the vaping/smoking cessation industry evaporates due to expensive regulatory requirements, MO is well-positioned with its FDA approved iQOS device and high margin smokeless category. As a market leader in a recession proof industry, an investment into MO at its current attractive valuation offers a considerable margin of safety looking forward. We purchased MO at a cost-basis of $45.49 per share on October 21, 2019. On March 31, 2020, MO closed at $38.67 which represents a negative return of 15.0%.

Constellation Brands (NYSE: STZ) is an international producer and marketer of beer, wine, and spirits. Together with its subsidiaries, the company operates in the United States, Canada, Mexico, New Zealand, and Italy and is best known for its premium beer brands: Corona, Modelo, and Pacifico. The company continues to be well-positioned to capitalize on long-term market tailwinds in the premium beer sector. Moreover, it continues to make strategic sales of business units and brands in the less-appealing wine market. The company’s long-term prospects also include a substantial $4 billion investment in the Canadian-based cannabis company, Canopy Growth. With its market share and brand power, we believe that STZ will continue to outperform its peers as well as the broader S&P 500 as the economy stumbles amid increasing uncertainty. We inherited STZ at a cost-basis of $175.33 per share. On March 31, 2020, STZ closed at $143.36 which represents a negative return of 18.2%.

Costco Wholesale Corporation (NASDAQ: COST) operates 785 membership warehouses globally (United States, Central America, Canada, Mexico, Europe, Japan, Korea, Australia, and China). It offers branded and private-label products to its members in five major categories: food and sundries, hardlines, fresh foods, softlines, and ancillary. COST also operates online and offers members business delivery, travel, and various other services in certain markets. Given its membership business model, it can operate profitably at significantly lower gross margins than most other retailers.

Moving forward, we believe COST’s unrivaled value proposition, recession proof business model, and growth opportunities online and in new markets will provide significant stock appreciation over the long term. We purchased COST at a cost-basis of $301.62 per share on October 21, 2019. On March 31, 2020, COST closed at $285.13 which represents a negative return of 5.5%.

19

Commentary on Individual USIF Fund Holdings

ENERGY Chevron Corporation (NYSE: CVX) provides administrative, financial, management and technology support to its subsidiaries which operate largely in the integrated energy, chemicals, and petroleum fields. With both upstream and downstream business segments, CVX is the second largest player in the energy sector of the S&P 500. We believe CVX is one of the more visible and low-risk growth profiles among other major oil peers due to its more competitively-positioned upstream portfolio of short-cycle investment opportunities anchored by its massive legacy position in the Permian Basin.

These factors coupled with its clean balance sheet and attractive dividend yield of ~6% make it one of the few bright lights in an otherwise dark energy sector. We inherited CVX at a cost-basis of $123.18 per share. On March 31, 2020, CVX closed at $72.46 which represents a negative return of 41.2%.

FINANCIALS Berkshire Hathaway (NYSE: BRK.B) is a holding company that owns subsidiaries engaged in several different business activities. The most important of these are insurance businesses conducted on both a primary basis and reinsurance basis, a freight rail transportation business, and a group of energy generation businesses. BRK also owns minority stakes in many other companies. Although the company is taking several hits from lower underwriting results at GEICO and RH Reinsurance, we rate BRK as a hold due to its hefty cash balance of approximately ~$120bn which will be likely be deployed for accretive M&A activities to its shareholders. In 2Q 2019, the company purchased a quarter of shares than what Wall Street had estimated; this surprise signifies a potential acquisition to be made further down the line. We inherited BRK.B at a cost-basis of $200.89 per share. On March 31, 2020, BRK.B closed at $182.83 which represents a negative return of 9.0%.

BlackRock, Inc. (NYSE: BLK) invests in the public equity, fixed income, real estate, currency, commodity, and alternative markets across the globe. BLK owns and operates iShares which manages nearly 40% of the U.S. ETF market. It employs fundamental and quantitative analysis with a focus on bottom-up and top-down approaches for investing decisions. BLK’s performance can be attributed to record inflows dampened by increased volatility and uncertainty in the last couple months. Its brands, such as iShares, Aladdin, and FutureAdvisor, are recognizable and benefits from passive management which is an extremely sticky business as investors maintain and grow their accounts over time. Furthermore, the recent sell-offs from market volatility has created an attractive opportunity for BLK’s clients to rebalance into equities which will further drive BLK’s growth. We inherited BLK at a cost-basis of $427.37 per share. On March 31, 2020, BLK closed at $439.97 which represents a positive return of 3.0%.

Commentary on Individual USIF Fund Holdings

20

FINANCIALS (cont’d) JPMorgan Chase & Co. (NYSE: JPM) is a financial holding company that provides investment banking in addition to financial products and services to clients. The firm operates under four key business segments: Consumer & Community Banking, Corporate & Investment Bank, Asset & Wealth Management, and Commercial Banking.

CEO Jamie Dimon has been warning investors of the high likelihood of a bad recession and that JPM earnings will be “meaningfully lower” this year. He also warns investors of the possibility of suspending its dividend if necessary; however, JPM’s diversified sources of revenue and strong management have kept the stock trading higher than industry averages, making it an ideal long-term holding for the USIF portfolio. We inherited JPM at a cost basis of $101.23 per share. On March 31, 2020, JPM closed at $90.03 which represents a negative return of 11.1%.

HEALTHCARE Alexion Pharmaceuticals (NASDAQ: ALXN) is an American drug company known for its research and development of biotechnological therapeutics for rare diseases. ALXN is best known for its blockbuster orphan drug, Soliris, which treats Atypical Hemolytic Uremic Syndrome (AHUS), Paroxysmal Nocturnal Hemoglobinuria, other rare autoimmune diseases. In 2019, Soliris accounted for 79% of Alexion’s revenue. While the stock has declined deu to concerns over Soliris’ upcoming patent cliff, we anticipate that ALXN will be able to switch patients from Soliris to its new indication, Ultomiris, at a faster rate than consensus estimates. We also expect AlLXN’s recent acquisition of Achillion Pharmaceuticals to create more value for the company since portfolio diversification in the Biotech sphere tends to correlate with higher multiples. Lastly, we see ALXN as an attractive takeover candidate for a larger platform due to the increased demand for orphan drugs in recent years. We inherited ALXN at a cost basis of $135.18 per share. On March 31, 2020, ALXN closed at $89.79 which represents a negative return of 33.6%.

Cerner Corporation (NASDAQ: CERN) is the leading supplier of Healthcare Information Technology (HCIT) solutions and operates as one of two primary Electronic Health Record (EHR) providers in the industry. With systems employed in over 27,000 facilities, CERN has demonstrated its ability to be a key innovator in the HCIT space.

Due to both the high EHR switching costs that position CERN as an integral stakeholder in the healthcare value chain and the company’s strategic investments that helped expand its solution offerings, CERN is poised to remain as a dominant player in the HCIT space. Overall, we believe that CERN will remain as a strong and long-term holding in the USIF portfolio due to the company’s ability to continue being an innovative leader which will further increase its sales in the future. We inherited CERN at a cost basis of $57.21 per share. On March 31, 2020, the CERN closed at $62.99 which represents a positive return of 10.1%.

21

Commentary on Individual USIF Fund Holdings

HEALTHCARE (cont’d) IDEXX Laboratories (NASDAQ: IDXX) is a healthcare company that develops, manufactures, and distributes products and provides services primarily for the companion animal veterinary, livestock and poultry, dairy, and water testing markets.

IDXX is also the global leader in veterinary diagnostics, software, and water microbiology testing. We believe that IDXX is a durable business franchise with a razorblade profitable model that warrants a long-term investment in core growth portfolios. IDXX represents a low beta alternative in a volatile equity market environment that is well-positioned to outperform other pet healthcare companies in the long run, particularly through continued global growth expansion of the installed Catalyst base and the overall premium instrument installed base. Lastly, IDXX has maintained a net debt to trailing-12-month EBITDA ratio of under 2.0x in recent years.

We purchased IDXX at a cost-basis of $245.69 on March 5, 2020. On March 31, 2020, the IDXX closed at $242.24 which represents a negative return of 1.4%.

IQVIA Holdings (NYSE: IQV) is the largest contract research organization (CRO) in the world, and provides outsourced R&D, analytics and consulting, and data science solutions to life sciences companies across the world. The company reports three operating segments: Technology & Analytics Solutions, Research & Development Solutions, and Contract Sales & Medical Solutions. COVID-19 will continue to disrupt clinical trials thereby limiting IQV’s revenue pipeline. Nonetheless, we are confident that IQV is well positioned to benefit from several long-term secular trends, such as increasing demand for healthcare informatics solutions and outsourced R&D solutions, increasing spending in biopharmaceutical R&D, and the move from fee-for-service to value-based-care healthcare systems. We purchased IQV at a cost-basis of $143.25 per share on October 21, 2019. On March 31, 2020, IQV closed at $107.86 which represents a negative return of 24.7%.

McKesson Corporation (NYSE: MCK) is the largest pharmaceuticals distributor in the United States in terms of revenue and market cap with an estimated U.S. drug distribution market share of around 33%. The reason we bought MCK is that we believed that increased access to health insurance, expansion of global middle classes, and increasing aging populations, are positive drivers for healthcare distribution due to the need for higher volumes of medical product shipments. Although higher acceleration of lower-priced generic drugs are pressuring revenue margins, we believe that MCK will benefit from the aforementioned drivers for growth. Lastly, due to COVID-19, we believe that these are strong catalysts driving a positive outlook for McKesson’s future performance. We inherited MCK at a cost-basis of $117.06 per share. On March 31, 2020, MCK closed at $135.26 which represents a positive return of 15.6%.

Commentary on Individual USIF Fund Holdings

22

HEALTHCARE (cont’d) Medtronic Plc (NYSE: MDT) is a diversified medical technology company headquartered in Dublin, Ireland, and operates in over 160 countries. MDT not only has successful medical devices launched in almost every facet of healthcare but is also one of the market leaders in the industry shift towards value-based healthcare. Although the company may face short-term issues due to supply disruptions from COVID-19, we believe that MDT will remain a strong holding in the long-run due to its high value proposition and its consistent revenue and earnings growth over the last few years. We purchased MDT at a cost-basis of $90.70 on March 26, 2020. On March 31, 2020, MDT closed at $90.18 which represents a negative return of 0.6%.

Merck (NYSE: MRK) is the leading global biopharmaceutical company of the world.

MRK has been inventing and introducing new medicines and vaccines for many of the world’s most challenging diseases. Through prescription medicines, vaccines, biologic therapies, and animal health products, MRK operates and works with customers in more than 140 countries to deliver innovative health solutions. MRK continues to be at the forefront of research to advance the prevention and treatment of diseases that threaten people and communities around the world — including cancer, cardiometabolic diseases, emerging animal diseases, Alzheimer’s disease and infectious diseases like HIV and Ebola. Although the stock has faced volatility due to COVID-19 concerns, we are confident in its potential once the pandemic subsides. We believe that MRK makes for a great investment due to its strong financials and solid dividend payouts. The company enjoyed monumental sales growth in Q3 with aggregate profits reaching $12.4 billion and surpassed analysts’ expectations with an overall revenue surge of 15%. Lastly, Keytruda, which is their blockbuster cancer drug, is projected to become the world’s best-selling drug by 2024 — which could mean billions in licensing deal revenue for Merck. We purchased MRK at a cost-basis of $72.13 per share on March 26, 2020. On March 31, 2020, MRK closed at $76.94 which represents a positive return of 6.7%.

UnitedHealth Group (NYSE: UNH) is the largest for-profit managed healthcare company in the United States by revenue. UNH operates in four segments: UnitedHealthcare (a health insurance provider), OptumRx (a pharmacy benefits manager), OptumInsight (a health data and consulting platform), and OptumHealth (a tech-enabled population health platform). The reason we bought UNH is that we believed that concerns over Medicare-for-All, political regulation, and margin collapse due to COVID-19 all failed to negate the upside in its Medicare Advantage Program and Optum business segments. Moving forward, we see UNH’s role as a critical component in the United States’ response to COVID-19. In addition, we believe that its strong secular tailwinds driving demand for its value-based competencies after COVID19 and its expected institutional cash inflow into healthcare names will drive UNH’s performance in the future. We purchased UNH at a cost-basis of $243.59 per share. On March 31, 2020, UNH closed at $249.38 which represents a positive return of 2.4%.

23

Commentary on Individual USIF Fund Holdings

INDUSTRIALS Raytheon Technologies Corporation (NYSE: RTX), as of April 3, 2020, is the resulting combined company of Raytheon and United Technologies. The merger was completed with stock, as each share of Raytheon common stock has been converted into the right to receive 2.3348 shares of United Technologies common stock. The combined company will be much more diversified with 54% of revenue coming from the defense sector and 46% of revenue being generated by the commercial aerospace sector. Both companies have technology offerings they can each leverage to provide superior products and solutions to their respective industries. Moving forward, RTX has a strong balance sheet that will help to accelerate its innovation in breakthrough technologies such as hypersonics, directed energy, avionics, and cybersecurity. Over the long term, the newly created diversified portfolio will combine the best of commercial and military technology, enabling many new value-creating opportunities. We purchased RTX at a cost-basis of $179.23. On March 31, 2020, RTX closed at $131.15 which represents a negative return of 26.8%.

Snap-on, Inc. (NYSE: SNA) is a major global manufacturer and marketer of highquality tool, diagnostic, service, and equipment solutions for professional tool and equipment users under various brands and trade names. The company also derives income from financing programs used to facilitate the sale of its products. SNA services customers through the mobile van channel, company direct sales, distributors, and ecommerce. The company also captures a leading share of the automotive professional tool market through its strong business model which emphasizes superior product quality, product innovation, and a service-focused distribution strategy. SNA’s operating performance, ability to generate cash, and general industry tailwinds provide upside for the stock in the future. We inherited SNA at a cost-basis of $156.52 per share. On March 31, 2020, SNA closed at $108.82 which represents a negative return of 30.5%.

Commentary on Individual USIF Fund Holdings

24

INFORMATION TECHNOLOGY Apple (NASDAQ:AAPL) is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, wearables, computer software, and online services. AAPL is the world's largest technology company by revenue and is also the world's third-largest mobile phone manufacturer after Samsung and Huawei. While AAPL’s supply chain was significantly affected by the COVID-19 outbreak, we believe that AAPL’s almost $100 billion of cash and substantial free cash flow provide a strong safety net to weather just about any storm. Despite the supply chain issues, Apple’s recently launched the iPhone SE2 ($399) without significant delay. This model will help increase its declining smartphone sales especially in emerging markets where Android smartphone sales dominate. The development of an affordable iPhone will increase the addressable market of Apple’s services and wearables, like Apple Music, the AirPods and Apple Watch. We believe that this will result in further margin expansion and revenue growth for years to come. We inherited AAPL at a cost-basis of $189.95 per share. On March 31, 2020, AAPL closed at $254.29 which represents a positive return of 33.9%.

Mastercard (NYSE: MA) is the second largest global payments and technology company in the U.S. that connects consumers, financial institutions, merchants, governments and businesses worldwide through its payment network. Moving forward, MA has a large runway for growth as payment processing becomes more and more cashless globally, as market share grows through emerging market growth, and as global personal consumption expenditures rise. We believe MA has further untapped growth in the B2B payments market which represents a TAM almost 2-3x the traditional C2B channel. With strong fundamentals and a highly defensible moat, MA provides security of consistent double-digit secular growth, which is increasingly rare, and is arguably one of the best S&P 500 names to invest in. We purchased MA at a cost-basis of $257.47 on March 26, 2020. On March 31, 2020, MA closed at $241.56 which represents a negative return of 6.2%.

Nvidia (NYSE: NVDA) is a technology company that engages in the design and manufacture of computer graphics processors (GPU), chipsets, and related multimedia software. Looking forward, we believe in the continued strength in the company’s dominance in the GPU space. Additional growth will be driven by the further adoption of the company’s chips in the automotive, medical and industrial space. We inherited NVDA at a cost-basis of $179.56 per share. On March 31, 2020, NVDA closed at $263.60 which represents a positive return of 46.8%.

Paycom (NYSE: PAYC) is a SAAS provider of a cloud-based human capital management (HCM) software solutions, headquartered in Oklahoma City, OK. PAYC beat Workday to be included in the S&P 500 and will continue to take away market share from competitors due to its unique mid-market position. PAYC, which employs an inside sales model, will continue capturing the remaining 60% of the HCM market due to its attractive price point and value-added features. We purchased PAYC on at a cost-basis of $274.18 on March 6, 2020. On March 31, 2020, PAYC closed at $202.01 which represents a negative return of 26.3% over the year.

25

Commentary on Individual USIF Fund Holdings

MATERIALS LyondellBasell Industries N.V. (NYSE: LYB) operates as an independent chemical company that engages in the refinery and production of plastic resins and other chemicals. In terms of relative performance, LYB’s 13% decline in EBITDA fared well against its competitors BASF, Dow, ExxonMobil Chemicals, and SABIC who all experienced between 24% to 66% decline in EBITDA in Q4 2019 vs Q4 2018. Moving forward, we believe LYB will outperform its sector benchmark. We inherited LYB at a cost-basis of $84.08. On March 31, 2020, LYB closed at $49.63 which represents a negative return of 41.0%.

The Sherwin-Williams Company (NYSE: SHW) develops, manufactures, distributes, and sells paints, coatings, and related products to professional, industrial, commercial, and retail customers. SHW’s relationship with retailers such as Wal-Mart and Lowe’s will continue to drive its growth going into the future. This, coupled with emerging market growth opportunities like Asia will pave the way for SHW in the long-term. We inherited SHW at a cost-basis of $430.71 per share. On March 31, 2020, SHW closed at $459.52 which represents a positive return of 6.7%.

REAL ESTATE Digital Realty Trust (NYSE: DLR) is a real estate investment trust that delivers space, power, and interconnection solutions to its clients. DLR provides data centers colocation and interconnection for a diverse customer base across many verticals, including IT, communications, financials, manufacturing, energy, healthcare, and consumer. As of December 31, 2019, its portfolio consisted of 225 data centers in fourteen countries and five continents. We think that the company remains a strong holding due to the growing demand for data centers due to factors such as cloud adoption, IT outsourcing, and the development of new technologies such as 5G, autonomous vehicles, and artificial intelligence. Additionally, DLR has made many new acquisitions in new geographies and products. These acquisitions will allow it to become a stronger player given the importance of interconnectivity in the industry. We inherited DLR at a cost-basis of $119.00 per share. On March 31, 2020, DLR closed at $138.91 which represents a positive return of 16.7%.

Commentary on Individual USIF Fund Holdings

26

UTILITIES American Electric Power Co., Inc. (NYSE: AEP) is a public utility holding company that engages in the business of generation, transmission, and distribution of electricity to retail and wholesale customers. AEP has a diversified revenue stream across multiple states along with an industry leading transmission segment. The company’s heavy investment in its renewable generation portfolio will provide a long runway for sustainable growth in the future which makes AEP an attractive position in the USIF portfolio. We inherited AEP at a cost-basis of $83.75 per share. On March 31, 2020, AEP closed at $79.98 which represents a negative return of 4.5%.

NextEra Energy, Inc. (NYSE: NEE) generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, and fossil fuel, such as coal and natural gas facilities. NEE is well positioned with economies of scale and a relatively lax Florida regulatory environment. Looking to the future, NEE’s growth will be driven by its immense customer base (largely in Florida) and renewable portfolio which includes the largest market share in North American wind. We purchased NEE at a cost-basis of $232.25 per share on October 21, 2019. On March 31, 2020, NEE closed at $240.62 which represents a positive return of 3.6%.

Note: All references to returns are the unrealized portions only; realized gains/losses are reflected in our contribution analysis.

27

cession-proof

business,

and

technological integration tactics, the stock offered a lot of value to our portfolio.

What were some of the risks you addressed when recommending Costco?

ED: One of the key risks considered was the threat of increasing tariffs on China. New tariffs would cause price increases and resulting margin contractions, which would decrease future earnings and growth. Another major risk related to its expansion plans in other markets. Store openings in the U.S. and abroad are catalysts for its revenue growth.

Lower than expected membership demand and any integration issues

Trading Views with Erik Doctor: Costco Wholesale Corporation (NYSE: COST) What

got

you

interested

in

would damage productivity and lower its ROI.

Moreover, because of their price

pitching Costco?

advantage and loyal customer base,

What give you the conviction to keep holding this company?

ED: In the fall of 2019, as the trade

they are much better shielded against Amazon than its

war

China

recessionary

escalated

and

competitors including Sam’s Club

began

to

and Target. Also, even though

circulate, I searched for a defensive stock with strong fundamentals and

fears

Costco’s stock grew over 43% in 2019, its defensive nature limits its

upside potential. Costco was a

downside

company that immediately caught

market environments. In a strong or

my eye due to its competitive advantage and recent expansion

declining economy, consumers find great value in memberships due to

into new markets globally. The

the lowest offered retail prices for a

combination

broad

of

the

company’s

risk

range

in

of

recessionary

products

and

recession-proof business model and growth opportunities made this

services (grocery, travel, gas). In addition to Costco’s recession-

stock a very attractive addition to

proof business model, the company

our fund. The stock could provide

also

stability in an economic decline and significant appreciation in a

growth

continued market rally.

the cash to expand its operations

What was your investment thesis?

ED:

Costco’s

proposition

unrivaled

positions

value

them

to

operate with the lowest retail prices and generate strong recurring cash flows through its membership fees.

presented

many opportunities

different

in

its

pipeline. First, the company has into other key global markets.

Second, the company has also experienced

growth

from

its

improved e-commerce platform and

customer

engagement

strategies. Given Costco’s longterm competitive advantage, rec-

ED: Despite the current coronavirus pandemic, Costco’s physical and digital supply chains have remained resilient without any major disruptions.

Consumers have continued to find value in their memberships, as Costco’s warehouse stores have experienced surges in volume. In the short term, Costco is well positioned to deliver strong growth driven by square footage growth, membership revenue growth, and sector leading physical store traffic growth. In the long term, Costco will continue to generate value through online innovation, increased membership renewals, and its global scale.

“

Given Costco’s long-term competitive advantage, recession-proof business, and technological integration tactics, the stock offered a lot of value to our portfolio.

“

with

28 What was the investment thesis on JPM?

Are there any major catalysts to look out for with regards to JPM’s stock price?

PV: The Financials industry itself is going through a tough period of uncertainty since the outbreak of COVID-19. As companies prepare for a recession, banks will be hit brutally. CEO Jamie Dimon has been warning investors of the high likelihood of a bad recession and that earnings will be “meaningfully lower” this FY. He also warns the public of the possibility of suspending dividends if situations became extreme. These potential catalysts could bring down the stock price, but we are confident that this is only temporary and that JPM has the ability to recover.

What is your outlook on the industry going forward given COVID-19?

PV: The performance of financial institutions is usually indicative of the market conditions at the given time. The outbreak of COVID-19 has

Trading Views with Priyal Vij: JPMorgan Chase & Co. (NYSE: JPM) brought about an economically induced recession causing massive unemployment and business uncertainty. As a result, credit quality is expected to deteriorate, and capital markets liquidity will be affected. The fed is constantly monitoring the financial health of these big banks through stress tests and I am confident that with the improved capital requirements, the industry can make it through the tough times. Needless to say, the virus situation remains liquid and banks should remain vigilant and be prepared to make strategic decisions with regards to lending and investor relations. Until a vaccine is released, I predict that the US will not see a gamechanging light at the end of the tunnel.

However, strong management and constantly reevaluation of the situation will help maintain stability of these banks during an unfortunate time like this.

“

How do you suggest USIF 2021 should reevaluate JPM? PV: I recommend that USIF 2021 reevaluates the entire industry before making any moves. As uncertainty surrounding COVID-19 continues, the US economy will continue to be at risk. The next class should be able to make an educated decision on whether holding stocks within Financials is a good idea for yearly performance purposes. They should also be prepared to reallocate to sectors with better economic certainty as recessionary effects tend to lag.

Despite not being able to trade throughout the summer, I would suggest that the USIF 2021 class continues to develop a macroeconomic outlook to generate a better decision on how to reassess financials during the Fall term.

“

PV: Our class inherited JPM from a couple of years back due to the investment thesis that JPM is the “best of the breed.” Strong management under CEO Jamie Dimon has allowed JPM to build its brand over the years. The company has been capitalizing on the opportunities for technological advancements with its $11B investment in AI and Machine Learning. Holding onto a financial institution during such economic uncertainty was on our minds when reevaluating the USIF portfolio.

However, we believed that even in a tumultuous period like this, the company’s diversified businesses offer multiple sources of revenue, such as its credit card services and ventures like Haven healthcare, which will keep the company afloat.

…As a result, credit quality is expected to deteriorate, and capital markets liquidity will be affected.

29

and concerns over competition. One additional risk that I would devote special attention to monitoring is the risk of regulation that would limit IQ-V’s ability to monetize patient data.

How has IQV performed since you bought it?

KS: We bought IQV on 10/21/19 for $143.25 per share. After reaching a high of $169.14 in February before the COVID-19 outbreak hit the markets, IQV fell sharply and closed on 3/31/20 at $107.86, representing a 24.70% loss over our holding period.

How does the COVID-19 outbreak affect your outlook for IQV?

What does IQIVIA do?

KS: IQVIA is a contract research organization, which means that it provides services to support life sciences companies through the R&D process. IQV leverages its unrivaled information science capabilities to provide life sciences companies with R&D outsourcing, analytics and insights, and data science solutions.

Why did you decide to pitch IQV? KS: Healthcare is currently going through systematic disruption. U.S. healthcare is moving from volume to value, and this means that the health system of tomorrow will increasingly prioritize quality, efficiency, and accountability.

This transition, however, requires high quality data and high-quality informatics. As the undisputed leader in health data science, IQV’s proprietary data and insight-generating capabilities will become far more valuable every day that healthcare continues this disruption.

For IQV’s primary end market (life sciences), I believe that data science has the potential to make clinical trials more successful and more

efficient, and therefore, I forecast growing demand from the biopharma segment. Further, I also expect added demand from currently untapped markets, as health care companies in new end markets also begin looking to IQV’s solutions to help them generate the insights they need to offer value-based care to patients in a data-driven world.

Tech-enabled healthcare is the future, and that requires top-notch data.

Therefore, I am confident that IQV, as the undisputed leader in a market with powerful tailwinds, will emerge as a winner over the next 5 years.

What are some of the catalysts and risks present in your thesis?

KS: Some catalysts guiding my investment thesis include global growth in biomedical R&D spending, increasing financial pressures that drive the need for efficiency, and data integration challenges affecting health providers, all of which should drive demand for IQV’s solutions as sources of competitive advantage.

The risks that are built into my thesis include concerns over information security, global geo-political risks, and

However, I don’t believe that this warrants selling IQV. First, I believe that pipeline concerns are now priced into IQV. Second, I don’t believe that the COVID-19 outbreak negates my investment thesis. In the long-term, I think this outbreak shows that life sciences companies need efficiency and technological innovations, such as virtual trials, more than ever.

What would you like the next year’s class of IQV to know?

KS: My investment thesis is a longterm one - 5 years, to be precise. That is when most experts expect the market for health information solutions to reach saturation, and that is when I see IQV losing its competitive advantage and its upside.

“

U.S. healthcare is moving from volume to value, and this means that the health system of tomorrow will increasingly prioritize quality, efficiency, and accountability.

“

Trading Views with Kanhai Shah: IQVIA Holdings (NYSE: IQV)

KS: COVID-19 poses a threat to companies that are reliant on current clinical trials for future revenue generation. For IQV, postponing clinical trials means that their revenue pipeline is being pushed back a few months, which explains the 39% decline in IQV’s equity value since 2/20/20.

30

SAAF Portfolio Highlights (as of March 31, 2020) SAAF Performance Summary

% Change Since

SAAF Fund

3/31/2019

SAAF Total Portfolio

(2.08%)

Total Benchmark

(5.92%)

Fund Assets Summary Date

Return

Benchmark Return

Difference

3/31/2019 6/30/2019

Market Value of Assets $2,414,416.7 2,468,249.3

2.23%

3.48%

(1.25%)

9/30/2019 12/31/2019

2,466,107.3 2,621,950.5

(0.09%) 6.32%

1.07% 5.85%

(1.16%) 0.47%

3/31/2020

2,364,107.9

(9.83%)

(14.63%)

4.79%

Market Value

% of Total Portfolio

Top Five Holdings By Portfolio Weight Holding

Ticker

iShares Core U.S. Aggregate Bond ETF Vanguard Total Stock Market

AGG VTI

$466,210.2 425,403.0

19.72% 17.99%

Vanguard International Dividend Appreciation ETF iShares Gold Trust

VIGI IAU

150,232.3 134,183.3

6.35% 5.68%

Consumer Staples Select Sector SPDR ETF

XLP

118,199.9

5.00%

Top Five Performing Holdings By Contribution Holding

Ticker

Sector

Aberdeen Standard Physical Palladium ETF

PALL

Alternatives

1.24%

Vanguard Value ETF Vanguard Long Term Treasury ETF

VTV VGLT

US Equities Fixed Income

1.11% 0.84%

Vanguard Extended Duration Treasuries ETF iShares Gold Trust

EDV IAU

Fixed Income Alternatives

0.80% 0.64%

Holding Vanguard Total Stock Market

Ticker VTI

Sector US Equtities

Vanguard International Dividend Appreciation ETF ETFMG Alternative Harvest ETF

VIGI MJ

International Equities International Equities

(1.57%) (0.97%)

Schwab US Dividend Equity ETF SPDR SSGA Gender Diversity Index ETF

SCHD SHE

US Equities US Equities

(0.61%) (0.60%)

Contribution

Bottom Five Performing Holdings By Contribution Contribution (3.18%)

31

SAAF Portfolio Overview (as of March 31, 2020) Cost Basis Holding

Per Unit

Share Price

Market Value

Unrealized

Percentage of

Gain/Loss

Portfolio

Ticker

Shares

VGT XLU

450 2008

$214.4 60.7

$211.9 55.4

$95,355.0 111,263.3

(1.14%) (8.76%)

4.03% 4.71%

United States Equity Vanguard Info Tech ETF Utilities SPDR Consumer Staples Select Sector SPDR ETF

XLP

2170

53.7

54.5

118,199.9

1.36%

5.00%

First Trust Cloud Computing ETF ALPS Medical Breakthroughs ETF

SKYY SBIO

1732 3707

54.1 32.1

54.5 31.7

94,376.7 117,511.9

0.80% (1.26%)

3.99% 4.97%

Financial Select Sector SPDR ETF

XLF

5645

20.8

20.8

117,528.9

0.29%

4.97%

Vanguard Total Stock Market

VTI

3300

153.9

128.9

425,403.0

(16.24%)

17.99%

(7.94%)

45.67%

Subtotal International Equity Vanguard International Dividend Appreciation ETF

VIGI

2576

$73.1

$58.3

$150,232.3

(20.27%)

6.35%

Deutsche X-Trackers MSCI EAFE Hedged Equity

DBEF

2297

31.2

26.8

61,559.6

(14.16%)

2.60%

Invesco S&P Global Water Index ETF Subtotal

CGW

923

32.1

33.2

30,606.7

3.21% (16.35%)

1.29% 10.25%

IEMG

2863

$40.8

$40.5

$115,865.6

Emerging Markets Equity iShares Core MSCI EM Subtotal

(0.71%)

4.90%

(0.71%)

4.90%

Fixed Income iShares Core U.S. Aggregate Bond ETF Subtotal

AGG

4041

$113.5

$115.4

$466,210.2

1.68% 1.68%

19.72% 19.72%

Alternative Assets iShares Residential Real Estate ETF

REZ

331

$79.5

$55.2

$18,271.2

(30.52%)

0.77%

iShares Gold Trust Aberdeen Precious Metals ETF

IAU GLTR

8904 773

13.9 83.4

15.1 75.1

134,183.3 58,052.3

8.34% (9.92%)

5.68% 2.46%

(1.91%)

8.90%

Subtotal Cash

10.55% Benchmark

Asset Class/Benchmark Equity

Weight 60.00%

MSCI ACWI (Net)

SAAF Weight* 63.30%

60.00%

Fixed Income

30.00%

Barclays Global Universal

10.00%

Returns SAAF Returns (11.26%) (9.00%)

18.84%

8.93%

12.68%

(18.47%)

3.33% 3.33%

(21.47%) (24.90%)

MSCI World Infrastructure Index (Net)

3.33%

(9.03%)

Cash

0.00%

5.19%

Total

100.00%

100.00%

Performance Attribution Analysis Asset Class

Equity Fixed Income Alternatives Cash

Allocation

Selection

Interaction

Total

Effect

Effect

Effect

Effect

(0.37) (1.00) (0.49) 0.10

1.35 0.58 3.01 -

0.07 (0.22) 0.81 -

1.05 (0.63) 3.32 0.10

(1.77)

4.94

0.66

3.84

0.00%

10.88%

0.00%

11.59%

0.00%

8.93%

S&P Listed Private Equity Index SPDR Dow Jones Wilshire Global Real Estate Index

*weighted average throughout FY2020

Alpha

(11.26%)

30.00%

Alternative Assets

Benchmark

1.87% (5.92%)

(2.08%)

3.84%

0.00%

Commentary on Individual SAAF Portfolio Holdings

32

U.S. Equity – Core Vanguard Total Stock Market Index ETF (NYSEARCA: VTI) tracks a market-cap weighted index covering the investable U.S. equities market. We sold our previous core ETF, the Vanguard Value ETF (VTV), and purchased the VTI in order to increase our correlation with the entire U.S. equities asset class. Our investment thesis was that VTI would help minimize our drawdown with the benchmark and provide much more upside potential than VTV. We purchased VTI on September 18, 2019, at a cost-basis of $153.90 per share. We realized some gains during the year by selling a portion of our stake for $155.04 per share. On March 31, 2020, VTI closed at $128.91 which represents a negative return of 16.2%.

U.S. Equity – Satellites Financial Select Sector SPDR Fund (NYSEARCA: XLF) offers extremely liquid exposure to the heavyweights in the U.S. financials sector since it is largely concentrated in large banks rather than small-caps. We maintain relative confidence in the ability of the financial services industry to reshape itself and adjust to the changing environment and believe the sector will see a rebound in the aftermath of the COVID19 pandemic. We purchased XLF on March 12, 2020, at a cost basis of $20.76 per share.

On March 31, 2020, XLF closed at $20.82 which represents a positive return of 0.3%.

First Trust Cloud Computing ETF (NASDAQ: SKYY) tracks an index of cloudcomputing companies which are weighted by their subgroup: infrastructure, platform, and service. Under the thesis that more and more big and small companies are switching to the cloud, we believe SKYY represented a great investment given the ubiquity of cloud computing. As cloud computing continues to solve many issues including data storage capacity, security, and speed, we see the growth potential for the cloud will grow exponentially. We purchased SKYY on March 26, 2020, at a cost basis of $54.06 per share. On March 31, 2020, SKYY closed at $54.49 which represents a positive return of of 0.8%.

The ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO) tracks the Poliwogg Medical Breakthroughs Index, which includes small and mid-cap biotech stocks that have at least one drug in Phase II or Phase III clinical trials and have enough cash on hand for at least 24 months of cash burn coverage. Our investment thesis is that medical innovation is likely to provide superior returns over a long-term horizon, especially as demand for specialty medical products and services is projected to increase rapidly over the next decade. Therefore, SBIO serves as an attractive growthoriented satellite to our more conservative U.S. equity core to generate Fund returns above the benchmark. We purchased SBIO at a cost-basis of $32.11 per share. On March 31, 2020, SBIO closed at $31.70 which represents a negative return of 1.3%.

The Consumer Staples Select Sector SPDR® Fund (NYSEARCA: XLP) seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Consumer Staples Select Sector Index. Our investment thesis with this ETF is it provides exposure to recession resistant and essential companies. We purchased XLP on March 12, 2020, at a cost basis of $53.74 per share. On March 31, 2020, XLP closed at $54.47 which represents a positive return of 1.4%.

33

Commentary on Individual SAAF Holdings

U.S. Equity – Satellites (cont’d) The Utilities Select SPDR Fund (NYSEARCA: XLU) tracks a market-cap weighted index of U.S. Utilities stocks drawn exclusively from the S&P 500. We chose to purchase this ETF because it re-allocated the SAAF to a more defensive sector, at a time when the U.S. was on the verge of the COVID-19 crisis. The utilities sector was resistant to fall at first, but investors began to see the toll that COVID-19 was going to take on residential customer electricity demand. This led to the ETF and its underlying holdings to fall. We purchased XLU on March 12, 2020, at a cost basis of $60.73 per share. On March 31, 2020, XLU closed at $55.41 which represents a negative return of 8.8%.

Vanguard Information Technology ETF (NYSEARCA: VGT) tracks a market-cap weighted index of Information Technology companies. Our investment thesis was that VGT’s exposure to more small and micro-cap tech stocks has helped it historically outperform the S&P. The COVID-19 crisis will allow for many of these companies to delve deeper into Healthcare IT, Telehealth, Online Gaming, etc. We inherited VGT at a cost basis of $214.35 per share. On March 31, 2020, VGT closed at $211.90 which represents a negative return of 1.1%.

International Equities (Developed Markets) – Core Vanguard International Dividend Appreciation ETF (NYSEARCA: VIGI) tracks a market-cap weighted index of developed and emerging market firms (ex-U.S.) that have increased their annual dividends for seven or more consecutive years. The thesis on this ETF was, in part, that these underlying companies would be able to prevail in a difficult European market. This, coupled with the fact that it has less holdings in countries such as Japan and Germany, led the group to believe that VIGI would be a superior allocation to put as our core than DBEF. We purchased VIGI on January 23, 2020, at a cost basis of $73.15. On March 31, 2020, VIGI closed at $58.32 which represents a negative return of 20.3%.

Deutsche X-Trackers MSCI EAFE Hedged Equity (NYSEARCA: DBEF) seeks to track the performance of the MSCI EAFE U.S. Dollar Hedged Index. The fund is designed to provide exposure to equities in developed international markets excluding the United States and Canada, while also managing currency fluctuations between the U.S. dollar and the fund’s three other main currencies: yen, euro, and pound sterling. DBEF’s large AUM, high trading volumes, and currency hedged returns make for a great position in international developed equities. In the future, we believe DBEF will outperform international equities due to its large-cap tilt and currency hedged returns, providing greater stability than the broader international equities market. We inherited DBEF at a cost basis of $31.22 per share and realized some gains during the year by selling a portion of our stake at $34.29 per share. On March 31, 2020, DBEF closed at $26.80 which represents a negative return of 14.2%.

Commentary on Individual SAAF Portfolio Holdings

34

International Equities (Developed Markets) – Satellite Invesco S&P Global Water Index ETF (NYSEARCA: CGW) seeks to track the S&P Global Water Index and invests in the securities of companies that operate water utilities, infrastructure, equipment, and materials with a global footprint. We invested in CGW with the investment thesis that over the long-term, the globally increasing scarcity of water, growing investments into water infrastructure, and urgent need for corrective measures for water pollution provide water utilities companies with both growth and margin expansion opportunities. Looking forward, we expect that CGW is well poised to outperform the broader international equity markets as a satellite because its holdings operate in a defensible niche that should resist broader market volatility. We purchased CGW on March 26, 2020, at a cost-basis of $32.13 per share.

As of March 31, 2020, CGW closed at $33.16 which represents a gain of 3.2%.

International Equities (Emerging Markets) – Core iShares Core MSCI Emerging Markets ETF (NYSEARCA: IEMG) seeks to track the investment results of an index composed of large-, mid-, and small-capitalization emerging market equities. During our tenure, emerging markets have been plagued by uncertainty caused by trade conflicts, slowing global growth, and the COVID-19 pandemic. In navigating these macro-factors, we decided to sell our stake in IEMG on March 5, 2020, at a price of $48.86 (taking a ~5% loss) to avoid anticipated decline and free up cash. Upon rebalancing our portfolio on March 26, 2020, we bought back into our position at $40.76. We believe that certain Asian markets such as China, South Korea, and Taiwan may have a timing advantage that may help them emerge from the COVID-19 crisis better than their European and American counterparts. We inherited IEMG at a cost-basis of $51.71 per share and realized some losses during the year by selling a portion of our stake at $51.11 and $48.88 per share. On March 31, 2020, IEMG closed at $40.47 which represents a negative return of 0.7%

Fixed Income iShares Core U.S. Aggregate Bond ETF (NYSEARCA: AGG) tracks the investment results of an index composed of the Bloomberg Barclays Aggregate Bond Index. AGG’s holdings consist of 7,640 investment-grade fixed income securities across various sub asset classes (treasuries, corporates, munis, etc.). The portfolio’s weighted average YTM is 1.62%, the duration is 5.52 years, and OAS is 103 bps, making this ETF a strong representation of the US bond market. AGG, over the course of the year, has served well as our Fixed Income Core ETF because it provides broad exposure to U.S. investment-grade bonds, is cost effective, and gives our portfolio stability. We purchased AGG on October 31, 2019, at a cost-basis of $113.47 per share. On March 31, 2020, AGG closed at $115.37 which represents a positive return of 1.7%.

35

Commentary on Individual SAAF Portfolio Holdings

Alternatives Aberdeen Standard Physical Precious Metals Basket Shares ETF (NYSEARCA: GLTR) is the first fund that invests in a broad basket of physical precious metals. It tracks the spot prices of a basket of gold, silver, platinum, and palladium, less trust expenses, using bullion held in London and Zurich. Specifically, GLTR’s holdings include 56% gold, 22% silver, 18% palladium, and 4% platinum. Similar to IAU, GLTR diversifies our portfolio with precious metals and protects us against any drastic market downturns. Although COVID-19 has put a dent on the overall returns of GLTR, we believe that it is well-positioned to redeem its past month of negative returns – especially since the ETF will outperform others given the U.S. current low-interest rate environment. We purchased GLTR on March 5, 2020, at a cost basis of $83.37 per share. On March 31, 2020, GLTR closed at $75.10 which represents a negative return of 9.9%. iShares Gold Trust ETF (NYSEARCA: IAU) tracks the day-to-day price and performance of gold by storing gold bars in several vaults around the world instead of at one specific location. IAU is considered a defensive ETF that diversifies our portfolio and protects us against inflation and any drastic market downturns – such as what the world is facing right now with regards to COVID-19. Overall, IAU has generated a 5.68% return over our USIF trading year. As central banks from around the world are cutting their benchmark interest rates, gold is poised to do well in the current U.S. economic environment - one that is nearing zero-interest rates – thereby ultimately hedging our portfolio in a potential recessionary environment. We inherited IAU at a cost basis of $13.91 per share. As of March 31, 2020, IAU closed at $15.07 which represents a positive return of 8.3%. iShares Residential Real Estate ETF (ARCA: REZ) seeks to track the investment results of a market-weighted index composed of U.S. residential, healthcare (assisted living), and self-storage real estate equities. The fund is split up by exposure to roughly 50% residential REITs, 35% healthcare REITs, and 15% specialized REITs. The current interest environment makes borrowing very attractive, and strong home data suggests a positive outlook on home sales. The U.S.’s aging population and trends toward selfstorage bode well for assisted living and self-storage REITs. We purchased REZ on October 28, 2019, at a cost basis of $79.45. As of March 31, 2020, REZ closed at a price of $55.20 which represents a negative return of 30.5%.

Note: All references to returns are the unrealized portions only; realized gains/losses are reflected in our contribution analysis.

ETF right when their semester starts (August 2020). With that being said, I believe that at this point, the overall impact of COVID-19 is already priced into the ETF. Unless COVID-19 runs much more rampant than expectations lead us to believe, I see this stock as more of a longer-term play. Sectors that are not defensive or insulated from COVID-19 will be feeling the effects of the pandemic for quite some time. Utilities, despite the shortterm impact, will come out of this crisis clean. There may even be catalysts for the industry such as state governments allowing utility companies to charge higher rates in the future if customer bills are delayed.

What was the investment thesis on XLU? JW: The investment thesis on XLU was that utilities would provide our SAAF with US Equity exposure while playing to a defensive sector. The ETF was pitched on February 25, right before COVID-19 had fully grasped the economy. As a class, we had discussed re-allocating our SAAF holdings the previous week, so I thought that it would make sense to buy into a safe sector that only carried holdings in the US. Another selling point was that electricity demand would remain constant despite COVID-19 looming, and utilities could capitalize off of the low prices of natural gas. This ETF holds solely large-cap, established companies with credible ties to their regulators. Overall, the defensive sector coupled with needed reallocation drove this investment pitch.

Why did the price drop? Isn’t this a defensive sector?

JW: To put it simply: COVID-19 had a far more reaching effect than anticipated. Utilities stocks were some of the last to drop because investors were waiting to see if COVID-19

would hurt even the safest of sectors. Holding onto a defensive sector was not enough to buoy the price of this ETF because utilities business model’s were negatively impacted.

Commercial and industrial customers were not working at normal rates, which decreased the overall electricity demand.

Only the utilities companies with largely residential customers could weather the storm.

Utilities were also impacted by the worry of whether customers would be able to pay their utilities bills due to reasons such as unemployment, delayed paychecks, or stalled business. Renewable supply chains were impacted because forms of power such as solar energy require solar panels which are largely manufactured in China. All of these factors caused XLU’s price to decrease although it was a defensive play.

How quickly would you reassess XLU if you were a member of USIF 2021?

JW: If I were a member of USIF’s Class of 2021, I would reassess the

What did you learn from pitching this holding?

JW: I learned that even if you aim for a defensive sector during a time of volatility or crisis, you still may feel the effects of a downturn. This COVID-19 pandemic has affected aspects of utilities such as supply chains, customer accounts and delayed payments. When I pitched this ETF, I thought that the price would perhaps even increase due to investors flocking for safe havens.

This shows just how fragile many businesses, even ones that are seemingly insulated, truly are.

“

When I pitched this ETF, I thought that the price would perhaps even increase due to investors flocking for safe havens. This shows just how fragile many businesses - even ones that are seemingly insulated truly are.

“

Trading Views with Jake Willingham: Utilities Select Sector SPDR ETF (NYSEARCA: XLU)

36

37 Why did you decide to hold on to this legacy holding and buy more of this ETF?

What catalysts drove the success of this ETF over the year?

MG: The two main catalysts that drove the success of IAU over the year was the low global interest rate environment and high negative yielding global debt. In general, precious metals like gold tend to perform better in low-interest environments and are immune to economic slowdowns due to their low beta against equities. Over the past year, central banks, like the U.S. Federal Reserve, have been reducing interest rates due to the fear of an economic slowdown. Interest rates were further cut in March when the Fed decided to buy short-term corporate debt in order to save businesses from credit crunches brought by the coronavirus pandemic.

As the pandemic continues to worsen by disrupting global supply chains and minimizing economic activities, the fear of a global economic slowdown is quickly becoming a reality. Hence, this will augur well for safe-haven assets like gold.

Trading Views with Matthew Gue: iShares Gold Trust ETF (NYSEARCA: IAU) What is your outlook on this ETF given COVID-19?

MG: Based on current Bloomberg data, the price of gold has risen by 5.3% this year and is forecasted to increase further – despite its recent price volatility. The reason for this is that the declining interest rates and increasing money supply will continue to support the prices of gold bullion – especially as analysts are speculating that the price of gold could surpass $2,000 this year. In addition, the combination of both fear over the COVID-19 pandemic and the plunging stock market has renewed investors’ interest in precious metals.

Lastly, as real yields on U.S. Treasuries are currently negative, the opportunity cost of holding gold is non-existent.

Overall, although investors may soon return to riskier assets like equities, gold’s outlook will remain bullish to diversify investors’ portfolio despite its occasional wild swings.

What risks do you see for IAU, or for Gold, in the near future?

MG: The first risk that IAU faces is

the growing strength of the U.S. dollar. Gold is inversely correlated with the U.S. dollar – as the U.S. dollar rises, the value of gold falls. The recent strength of the U.S. dollar is driven by the fear of the coronavirus pandemic, which has influenced investors to get out of risky assets and get in cash. Although this fear augurs well for the outlook of gold, investors are also attracted to the U.S. dollar as it is one of the world’s leading reserve and trading currencies – especially for foreign companies and governments that need to pay off their debts in U.S. currency. The second risk is the falling oil prices due to the price war between Saudi Arabia and Russia. Due to slumping oil demand from world economies, oil prices may slide. If this happens, investors will be less concerned about inflation. Since gold serves as a hedge against inflation and times of recession, the value of gold will fall as the fear for inflation declines.

“

As the pandemic continues to worsen by disrupting global supply chains and minimizing economic activities, the fear of a global economic slowdown is quickly becoming a reality. Hence, this will augur well for safe-haven assets like gold.

“

MG: We decided to hold on to IAU for two reasons. The first reason is due to the perceived “recession-like” environment that was manifesting during the first six months of our tenure as exhibited by the gradual cut in interest rates and the subsequent inverted yield curve. The second reason, in relation to the first, was that gold is considered a “safe-haven” as it is a defensive stock that not only diversifies a portfolio but also hedges against inflation and recessionary environments. Theoretically, precious metal ETFs like gold tend to do well in these low-interest rate environments because investors shift their investments in equities into investments in gold. As a result, we decided to buy more shares of IAU, increasing its portfolio weight from 2% to 5% – this yielded one of our SAAF portfolio’s best returns at +13.1%.

38

“

Candidly speaking, an unanticipated risk was the fragility of the $18 trillion Treasurys market which degraded the traditional ‘safehaven’ nature of the asset.

ETF liquidity contrasted with illiquidity in its underlying asset has proven problematic in the past…

“

Trading Views with Rohan Dhaon: Vanguard Extended Duration ETF (NYSEARCA: EDV) and Vanguard Long-Term Treasury ETF (NYSEARCA: VGLT) What was the investment thesis for EDV ad VGLT? RD: As mentioned in the SAAF commentary, we bought shares of EDV and VGLT to assume a tactical position in long-term US government bonds amid growing concerns surrounding the ongoing COVID-19 pandemic. The average durations of EDV and VGLT are 18.6 and 24.5 years, respectively. Starting February 27, we gradually sold-off equities until early March and reallocated capital into these fixed income securities. The general investment thesis centered around our expectations that (1) the uncertainty caused by the pandemic would drive investors towards safe- haven assets and (2) the Federal Reserve would aggressively cut rates to support the economy. In order to maximize upside from these events, we sought ETFs with very long average durations.

What were some of the risks associated with this relatively aggressive tactical play?

RD: To us, the unconventionality of this tactical play was justified by the unprecedented emergence of COVID-19. At its most aggressive, our fixed income position comprised 40% of the SAAF portfolio – with ~16% in EDV and VGLT. Some of the more obvious

risks to our investment included the possibility of a Fed rate hike or broader capital flight out of US markets as investors hoarded cash. Candidly speaking, an unanticipated risk was the fragility of the $18 trillion Treasurys market which degraded the traditional ‘safe haven’ nature of the asset. ETF liquidity contrasted with illiquidity in its underlying asset has proven problematic in the past (specifically with high yield ETFs). Unfortunately, we did not foresee the market’s response adversely impacting US Treasurys. However, the Fed’s bond-buying program implemented to restore liquidity led to a late-March rally in Treasurys that allowed us to pocket a sizeable gain. At the end of the day, our tactical play largely contributed to our annual outperformance in the SAAF portfolio.

What did you learn from pitching this ETF? RD: There are no cookie-cutter assumptions that can be made in crisis scenarios, particularly regarding “safe-haven” assets.

Navigating the macroenvironment is incredibly difficult and risks must be thoroughly analyzed. Nevertheless, we were rewarded for taking a slightly aggressive move and ended our year on top of our benchmark.

39

USIF Stock Fund Financial Statements (as of March 31, 2020) Statement of Assets and Liabilities Consolidated USIF March 31, 2020

March 31, 2019

$

$

Assets Investments, at cost basis Unrealized appreciation

3,408,862

3,339,224

(127,050)

332,384

257,812

58,822

$

520 3,540,143

$

4,335 3,734,766

$

-

$

-

$

3,540,143

$

3,734,766

Cash Receivables Dividends and interest receivable Total assets Liabilities Investment securities purchased Total liabilities Net assets Statement of Operations Consolidated USIF For the twelve month period ending

March 31, 2020

March 31, 2019

Investment income Interest

$

$

2,696

1,685

Dividends Short term capital gain distribution

86,745 -

78,432 -

Long term capital gain distribution Total income

$

89,441

$

80,117

$

89,441

$

2 80,114

$

175,348

$

30,860

$

(459,435) (284,087)

$

20,981 51,842

$

(194,646)

$

131,956

Expenses Miscellaneous Net investment income Realized and unrealized gain (loss) from investments Net realized gain (loss) from investments Net unrealized gain (loss) from investments Net realized and unrealized gain (loss) from investments Net increase (decrease) in total assets from operations

40

USIF Stock Fund Financial Statements (as of March 31, 2020) Statement of Cash Flows Consolidated USIF For the twelve month period ending

March 31, 2020

March 31, 2019

Increase (decrease) in net assets from operations

$

$

(194,646)

131,956

Cash flow from operating activities Adjustments to reconcile net increase in assets from operations to net cash used in operating activities Net change in investments Net realized (gain) loss from investments

(175,348)

Proceeds from disposition of investment securities Purchase of investment securities (Decrease) increase in securities purchased payable (Increase) decrease in dividends receivable (Increase) decrease in interest receivable Increase (decrease) in payable, other Net unrealized (appreciation) depreciation on securities Net cash used in operating activities

(30,861)

4,726,626

1,353,083

(4,620,893) -

(1,433,019) -

3,788

(3,839)

27

(81)

-

-

459,435

(20,981)

$

198,990

$

(3,742)

Increase (decrease) in contributed capital Net cash used in financing activities

$

-

$

Net increase (decrease) in cash

$

198,990

$

(3,742)

$ $

58,822 257,812

$ $

62,564 58,822

Cash flow from operating activities -

Cash Beginning balance Ending balance

41

USIF Stock Fund Financial Statements (as of March 31, 2020) Statement of Assets and Liabilities USIF Stock Fund

Assets Investments, at cost basis

March 31, 2020

March 31, 2019

$

$

Unrealized appreciation Cash Receivables Dividends and interest receivable Total assets

$

Liabilities Investment securities purchased Total liabilities Net assets

1,171,346

1,169,760

(4,178)

138,770

8,324

10,939

457

779

1,175,949

$

-

1,320,249

-

$

-

$

-

$

1,175,949

$

1,320,249

Statement of Operations USIF Stock Fund For the twelve month period ending

March 31, 2020

March 31, 2019

$

$

Investment income Interest Dividends Short term capital gain contribution Total income

30,428 $

Expenses Miscellaneous Net investment income

439

30,867

362 21,667 -

$

-

22,029

2

$

30,867

$

22,027

$

(32,219)

$

63,278

$

(142,948) (175,167)

$

(10,406) 52,872

$

(144,300)

$

74,899

Realized and unrealized gain(loss) from investments Net realized gain(loss) from investments Net unrealized gain(loss) from investments Net realized and unrealized gain(loss) from investments Net increase (decrease) in total assets from operations

42

USIF Stock Fund Financial Statements (as of March 31, 2020) Statement of Cash Flows USIF Stock Fund For the twelve month period ending

March 31, 2020

March 31, 2019

Increase (decrease) in net assets from operations

$

$

(144,300)

74,899

Cash flow from operating activities Adjustments to reconcile net increase in assets from operations to net cash used in operating activities Net change in investments Net realized (gain) loss from investments Proceeds from disposition of investment securities

32,219 1,017,376

(63,278) 684,726

(1,051,180)

(701,294)

(Decrease) increase in securities purchased payable (Increase) decrease in dividends receivable

332

(383)

(Increase) decrease in interest receivable

(10)

(13)

Purchase of investment securities

Increase (decrease) in payable, other Net unrealized (appreciation) depreciation on securities Net cash used in operating activities

$

Cash flow from operating activities Increase (decrease) in contributed capital

142,948 (2,615)

$

-

Net cash used in financing activities

$

Net increase (decrease) in cash

$

Cash Beginning balance Ending balance

$ $

-

10,406 5,063

$

-

(2,615)

$

5,063

10,939 8,324

$ $

5,876 10,939

43

Student Asset Allocation Fund Financial Statements (as of March 31, 2020) Statement of Assets and Liabilities Student Asset Allocation Fund March 31, 2020

March 31, 2019

$

$

Assets Investments, at cost basis Unrealized appreciation Cash

2,237,515

2,169,464

(122,873) 249,488

193,614 47,883

63

3,556

-

-

Receivables Dividends and interest receivable Investment securities sold Total assets

$

Liabilities Investment securities purchased Total liabilities Net assets

2,364,194

$

-

2,414,517

-

$

-

$

-

$

2,364,194

$

2,414,517

Statement of Operations Student Asset Allocation Fund For the twelve month period ending

March 31, 2020

March 31, 2019

$

$

Investment income Interest Dividends Short term capital gain distribution Long term capital gain distribution Total income

$

Expenses Miscellaneous Net investment income

2,257 56,317

58,574

1,322 56,765 -

$

-

58,087

-

$

58,574

$

58,087

$

207,566 (316,486)

$

(32,418) 31,387

$

(108,920)

$

(1,030)

$

(50,347)

$

57,057

Realized and unrealized gain (loss) from investments Net realized gain (loss) from investments Net unrealized gain (loss) from investments Net realized and unrealized gain (loss) from investments Net increase (decrease) in total assets from operations

44

Student Asset Allocation Fund Financial Statements (as of March 31, 2020) Statement of Cash Flows Student Asset Allocation Fund For the twelve month period ending

March 31, 2020

March 31, 2019

Increase (decrease) in net assets from operations

$

$

(50,347)

57,057

Cash flow from operating activities Adjustments to reconcile net increase in assets from operations to net cash used in operating activities Net realized (gain) loss from investments

(207,566)

Proceeds from disposition of investment securities Purchase of investment securities (Decrease) increase in securities purchased payable (Increase) decrease in dividends receivable (Increase) decrease in interest receivable Increase (decrease) in payable, other Net unrealized (appreciation) depreciation on securities Net cash used in operating activities

$

32,418

3,709,251

668,357

(3,569,712) -

(731,725) -

3,456

(3,456)

38

(68)

316,486

(31,387)

201,605

$

(8,805)

Cash flow from operating activities Increase (decrease) in contributed capital

-

-

Net cash used in financing activities

$

-

$

-

Net increase (decrease) in cash

$

201,605

$

(8,805)

Beginning balance

$

47,883

$

56,688

Ending balance

$

249,488

$

47,883

Cash

45

Notes to Financial Statements The financial statements reflect the account balances and financial performance for the period ended March 31, 2020. The numbers are based on the statements from the Bank of New York Mellon. The financial information was prepared according to the accounting group’s best knowledge. Forward-looking statements, if included, do not indicate future performance and are solely the managers’ opinions.

Significant Accounting Policies – Included below are the major accounting policies adopted by the Undergraduate Student Investment Fund (hereinafter referred to as “USIF”) and the Student Asset Allocation Fund, sponsored by VanEck (hereinafter referred to as “SAAF”), which follow the Generally Accepted Accounting Principles (hereinafter referred to as “GAAP”) in the United States of America. Since conforming to GAAP’s accounting policies requires estimation and assumptions, the actual balances of assets and liabilities might differ from the reported ones.

Nature of Operations USIF and SAAF are tax-free endowment funds of the University of Southern California. USIF seeks to outperform the S&P 500 Index while maintaining a similar risk profile to the Index. USIF is managed as a set of 11 industry sector sub-portfolios with an overlay portfolio dedicated to risk management. SAAF focuses on asset allocation by investing in passive ETFs that meet the following qualifications: long only, non-leveraged, non-inverse, nonvolatility, and a minimum of $50M in net assets at time of investment.

Investment Securities Equity securities are traded on United States national securities exchanges (or reported on the NASDAQ National Market System) and are valued at the last reported sales price as of March 31, 2019 and March 31, 2020. Fixedincome securities are traded through the Bank of New York Mellon’s Institutional desk and are valued by the bank as of March 31, 2019 and March 31, 2020. Both equity and fixed-income transactions are accounted for as of the date of transaction. Trades that were not settled by the end of the period were recorded as a receivable (payable) for investment securities sold (purchased).

Cash Equivalents Highly liquid investments with maturities of three months or less from the purchase date are held in a money market fund and are valued at cost, which approximates fair value.

Revenue Recognition All revenues are recognized on an accrual basis. Dividend income is recognized on the ex-dividend date, while interest income is recognized when earned. Amounts that are earned but not received as of the end of the period were recorded as a receivable on the balance sheet.

Investment Transactions – Purchases and sales for USIF in the twelve-month period ending March 31, 2020 were $1,051,180 and $1,017,376, respectively. Purchases and sales for SAAF in the twelve-month period ending March 31, 2020 were $3,709,251 and $3,569,712, respectively.

Inventory Management – The first-in-first-out (FIFO) inventory system is used for gain recognition. Gains on sale were recognized based on the initial investment prices. Adjustments from FIFO to average price or to LIFO would result in immaterial differences in realized and unrealized gains in the statements.

Commissions – Trades were executed, through Bank of New York Mellon as a trustee, with a commission fee of $0.02 per share traded. These fees are not included in the expenses and are recorded in the resulting gain or loss when transactions were executed.

Miscellaneous – Any non-commission expenses are considered miscellaneous.

46

Annual New York Trip In November, the current USIF class, accompanied by the SIF class, received the opportunity to travel to New York City for the mid-year investment update showcase hosted by VanEck. The USIF class discussed mid-year performance as well as rationale for the allocation changes for both the USIF and SAAF portfolios. The showcase was followed by a Q&A portion where the class received feedback on trade decisions, how to manage risk going forward, and advice for the future USIF classes. Many USIF and SIF alumni attended the meeting and provided thoughtful insight which the class was able to learn from. The following day, the current USIF class was given the opportunity to network with and meet USC alumni from a variety of sell-side and buy-side shops: • • • •

Counterpoint Global at Morgan Stanley (Active Fundamental Equity) PJT Partners (Global Advisory-focused Investment Bank) Candlestick Capital (Hedge Fund) The Carlyle Group (Private Equity)

47

Alumni Updates Class of 2008 Name Weston Ahlswede Jay Binstock Thomas Chen Chirag Gupta Paul Hogan James Kramer Benjamin Liang Eugene Loh Hung Luu Clark Miller Nikhil Nardhani Oscar Rodgriguez Aaron Stahl KC Stumbaugh Katten

Firm Accel-KKR Capital Group | American Funds N/A Credit Suisse Accenture Procopio, Cory, Hargreaves & Savitch Magusta Group Société Générale Square MUFG JRK Property Holdings Beverly Hills Investment Co. N/A Credit Suisse

Role Portfolio Manager Senior Specialist N/A Vice President Senior Engagement Manager Corporate Attorney Managing Director FX Trader Product Manager Structured Finance Director Asset Manager Associate N/A Vice President, Equity Research

Firm The Walt Disney Company Aerotas Deloitte rideOS Kodiak Robotics Fosun Hive Hallstein Artesian Water Oriental City Investments Group Evercore Piper Jaffray Matrix Private Capital Group Xoco.com Haitong International Securities

Role Sr. Manager, Strat. & Bus. Dev. Founder / CEO Senior Tax Consultant Co-Founder / CEO Finance Manager Real Estate M&A CEO Owner / Investor Associate Director Director of Investments Founder / CEO Credit Desk – Vice President

Firm 360 Global Sciences Sycamore Partners Crane & Associate Blackstone Gaming Coalition Ichthus Capital Partners Coding is for Losers MyStudio CoinOut N/A New Century Automotive pickupp True Botanicals The Sani Group Calera Capital Green Street Advisors American Century Investments

Role Founder / CEO Investment Professional Associate Finance Head of Operations Founder / Managing Partner Commissioner Founder Vice President of Sales N/A Business Development Analyst COO Director of Operations and Finance M&A Vice President Senior Analyst, Retail Sector Head Portfolio Manager

Class of 2009 Name Nicolas Alparaz Logan Campbell Kevin Deiter Justin Ho Tony Jercinovich Will Miao Alexander Muhr C.Y. Kelvin Ng Justin Roman Kimberly Tung Wasley Ryan Tunnell Connie Xu William Yiu

Class of 2010 Name Stephen Scott Brown Chris Copping Alex Crane Putchong Dispanurat Xiaolin Gong Cameron Hui David Krevitt Linnette Le Jenna Witten Won Kun Lee Daniel Lin Calvin Ma Jason Price Shaun Sakhrani Stephanie Scott Vincent Tibone Jonathan Veiga

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Alumni Updates Class 2011 Name Qige Candice Cao Matthew Gilbert Matthew Holz James Hwang Nick Khoury Justin Lacey Eelix Leung Michael LoGalbo Kevin Osman Nil Patel Kine Paulsen Jonathan Plummer Caitlin “Katie” Price Nicholas Sanchilli Mamta Shah Aaron Wong

Firm First Capital Securities Co. Thoma Bravo ARYA Group JLL Shamrock Capital Advisors Merrill Lynch Wealth Management DLJ Real Estate Capital Partners Wharton School of Business Disruptive Technology Advisers KPMG kinfizz BeachLocal IHS Markit Union Gaming Securities Western University of Health Sciences HSBC

Role Institutional Sales Manager Principal Consultant Director Senior Associate Wealth Management Advisor Private Equity Associate MBA Candidate Senior Associate Senior Tax Associate Partner Director, Business Intelligence COO, Issuer Solutions and Global Insights Director Medical Student Assoc. Dir., Global Banking & Markets

Firm Stifel KSL Capital Partners Transcend Cytotherapy Pico Group Centerview Partners Point72 HouseCanary China-dedicated L/S hedge fund Rockwood Capital Credit Suisse HSBC

Role Investment Banking Associate Vice President Chief Operating Officer Management Associate Principal Investment Analyst Director of Corporate Development Analyst Senior Associate Debt Market, Structured Products Corporate Banking Vice President

Firm Caissa ClearLight Partners Liberty Metals & Mining Ares Management Juita Viden Media Group Harvard Business School Morgan Stanley U.S. Bank BlackRock PwC TrueCar Story3 Capital Partners BofA Merrill Lynch Citi IBM

Role Senior Client Solutions Associate Associate Private Equity Analyst Vice President Content Distribution MBA Candidate Equity Research Associate Relationship Manager FX Trader / Vice President Senior Associate, Transaction Services Product Analytics Vice President Vice President Vice President Senior Consultant

Class of 2012 Name Sean Andrews Catherine Atieh Meixi Chen Andrew Chia Brian Esmond Watson Lau Charles Liao Henry Lin Neil Schreiber Cedric Vincent Tiu Bonnie Wu

Class of 2013 Name Brendon Ballo Dustin Byer Leon Chik Justin Davidoff Amanda Foo Andy Greos Joe Laetsch Zachary Lindberg Patrick Liou Jieyuan “Colleen” Liu Satyen Motiani Ryan Nehoray Rahul Puri Eva Shen Daksha Vaid

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Alumni Updates Class of 2014 Name Joseph Bailey Brian Boum Brentley Campbell Hayden Furey Shakun Khanna Simeon Lee Ben Levison Gabriel Pereyra Marc-Lloyd Ramniceanu Jonathan Skinner Kevin Swick Dikshant Tahilramani Douglas Tran Willian Utomo Weidi Zhang

Firm Hothkis & Wiley Capital Management Harris Associates Man Group J.P. Morgan Ares Management Hacker One Stanford Graduate School of Business Google USRA Inc. The Blackstone Group Capital Group MIT Rice Hall James & Associates IDN Media Asterisk Realty & Placement Agency

Role Research Associate Research Associate European Midcap L/S Analyst ECM Vice President Private Equity Associate Senior Product Designer MBA Candidate Brain Resident Director of Business Development Associate Investment Analyst Graduate Candidate Analyst Chief Operating Officer Business Development Manager

Firm Angel Island Capital Amazon Aristeia Capital Compass Lexecon Grupo Constructor Rouz The Alinea Group Expo Ventures California State Fullerton Openspace Ventures Piper Jaffray Bel Air Investment Advisors Synapse K&L Gates PlanGrid Binance

Role Associate Software Development Engineer Research Analyst Economist Director Business Operations Associate Venture Advisor Graduate Candidate Analyst Associate Analyst Strategic Planning Lead Associate Business Operations Product Manager

Firm N/A Citi Apple Ripple Industries LLC Nike Allen & Co. Medley Management Farmers Insurance PwC Crosslink Capital Guggenheim Partners Instacart

Role N/A Investment Associate Global Supply Manager Investment Professional Global Digital Omnichannel Manager Analyst Associate Actuarial Analyst Tax Associate Associate Senior Associate Senior Analyst

Class of 2015 Name Zachary Bergenfeld Gianni Chen Jon Dorfman Tiffany Eu Jose “Joseph� Harari Josh Hartley Ifeanyichukwu Jemie Andy Li Samuel Loke Kenneth Mang Sinjin Sato Kathleen Siswanto Ashley Song Connie Wang Natalie Yang

Class of 2016 Name Andrew Billings Haldo Cabrera Evan Chinn Daniel Clancy Ryan Favero Salmaan Javed Vladimir Jefferson Ryan Kehlet Ryan McCarthy Cullen Riley Stanley Su Brandon Tang

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Alumni Updates Class of 2016 (cont’d) Brian H. Wang Stanzi Wicht Ada Xie

Point B Centerview Partners 爱库存-全球领先众包分销平台

Senior Analyst Investment Banking Analyst VP of Prod., Growth & Strat., Chief of Staff

Firm Oaktree Capital Management Capital Group William Blair SenseDeal AI Deutsche Bank Matrix Capital Management Evercore Boston Consulting Group Centerview Partners Bain BlackRock Clearcover HarbourVest Partners Peterson Partners MSCI

Role Associate Equity Research Associate Investment Banking Analyst Director of International Partnerships Investment Banking Associate Investment Analyst Equity Research Associate Associate Investment Banking Analyst Associate Associate Chief of Staff Private Equity Analyst Associate Research Associate

Firm BofA Merrill Lynch Visa Prudential Capital Group DoubleLine Capital Valentia Capital Prime Opportunities Investment Group Centerview Partners J.P. Morgan UCLA Piper Sandler LightBay Capital Houlihan Lokey Lazard Barclays Deloitte

Role Investment Banking Analyst Business Associate Investment Analyst Analyst Analyst Equity Research Analyst Analyst Investment Banking Analyst Graduate Candidate Investment Banking Analyst Private Equity Analyst Financial Analyst Investment Banking Analyst Investment Banking Analyst Business Technology Analyst

Class of 2017 Name Michael Aronson Drew Cohen Guarav Doshi Kevin Gao Hank Huang Jack Hussey Neeraj Koduri Austin Lam Nim Mann Jesse Meltz Lucy Qu Elliot Schad Kaitlyn Shao Natalia Schevchenko Sheng Yao

Class of 2018 Name Animesh Balakrishnan Kevin Bernstein Lindsey Carrigan Herman Chui Kevin Conde Yehudah Judah Talia Jurkowitz Mallika Kapur Ke Li Bhavik Patel Grant Roski Amendola Travis Schwartz Samson Soon Spencer Wix Garrett Yung

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Alumni Updates Class of 2019 Name Emilio Alvarado William Andreasyan Grant Calderone Michelle Dai Eugenia Huang Clayton Jurkowitz Lucy Li Sherry Liang Claire Lin Patrick O’Toole Levi Posen Viren Rupani Terek Rutherford Avik Wadhwa Wray Wrang Aimee Xu

Firm CenterSquare Investment Management First Pacific Advisors BofA Merrill Lynch BofA Merrill Lynch Unibail-Rodamco-Westfield Macquarie Group Rothschild HSBC Suntrust Robinson Humphrey BofA Merrill Lynch D.A. Davidson Companies Houlihan Lokey Payden & Rygel London School of Economics Boston Consulting Group Perella Weinberg

Role Real Estate Private Equity Analyst Vice President FX Institutional Sales Analyst Investment Banking Analyst Analyst Investment Banking Analyst Investment Banking Analyst Management Trainee Investment Banking Analyst Analyst Institutional Equity Research Associate Incoming Investment Banking Analyst Analyst Student Associate Investment Banking Analyst

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Acknowledgements We would like to express our sincerest gratitude to all the people who have diligently contributed to the success of the Fund and our personal development in the field of investment management. First and foremost, we would like to thank our Professors, Professor Scott Abrams and Dean Suh-Pyng Ku, for their dedication to the Fund and mentorship of all the managers. Going beyond the call of duty, they have consistently challenged us, equipping us for success both in the Fund and our professional lives. The class extends its appreciation to the Center for Investment Studies for providing us with all the resources and tools that we need to manage the Fund. This year’s managers received significant support from the USC Investment Office. We would like to acknowledge Lisa Mazzocco, Sam Foster, and Bob Ohanesian. In addition, we thank Erica Keil who helped us with the administration of the USIF program. Finally, we would like to thank Helen Pitts, Denise Millard, Helga Haraldsson, and the Marshall AIS team for their ongoing support.

While the classroom was an important part of our learning experience, a great deal of learning took place through our discussions with professionals in the investment community during in-class and company visits. Up-close interaction with investment professionals provided the USIF managers with tremendous learning opportunities, insights into the latest issues within the industry, and invaluable career advice. We would like to thank the following firms for their hospitality and support: VanEck, FactSet, TCW Group, USC Investment Office, Payden & Rygel, Oaktree Capital Management, Strategic Global Advisors, Capital Group, PIMCO, Dimensional Fund Advisors, PJT Partners, Candlestick, Counterpoint Global, The Carlyle Group, Greycroft, and Syntax Advisors.

Undergraduate Student Investment Fund

2020