Health Care Sector Stock Presentation

1. Health Care SectorStock Presentation Joseph Farfsing David Garman Ash Yijun Gu Scot Helton Timothy Keith

2. Agenda • Recap of sector presentation • Stock recommendation/proposals • Analysis of proposals • Summary

3. Sector recommendation • Underweight Healthcare by 390 basis point to keep in line with S&P 500 • Factors to consider in Healthcare: • Uncertainties related with government regulation, healthcare reforms and political risk • Increasing aging populations

4. Stock proposals

6. Medtronic Evaluation (MDT) Liquidate Current Position Sell 240 bps

7. Overview • Industry: Medical Equipment • Strengths/Opportunities: • Technical prowess • Intellectual property portfolio • Experience with regulators • Sector Market Drivers (demographics)

8. Overview • Threats/Concerns: • Regulation reform (i.e, intellectual prop.) • Foreign exposure: 30+ % • Litigation - Most recently a news item: Medtronic paid J&J $270 m to end a dispute over royalties involving use of stents - Political risk related to sector

9. DCF Sensitivity analysis

10. Why liquidate position? We are the least optimistic about the upside over a one year horizon for this security: strong hold for analysts -History of litigation and general sector risk only enhance these feelings Opportunity to take some profit for SIM portfolio -approx. $48,000 unrealized gain -Only current SIM stock in sector without loss In a nut shell: take a break while we are ahead and reevaluate MDT after things shake out in terms of risk

11. Cardinal Health (CAH) Sell 58 bps

12. Company Overview • Industry – Health Care Distributors • Cardinal Health is a global manufacturer and distributor of medical and surgical supplies and technologies dedicated to making healthcare safer and more productive. • Customers include hospitals, medical centers, retail and mail-order pharmacies, clinics, physicians, pharmacists and other healthcare providers.

13. Concerns • Extremely tight margins - around 6% on average – which could be seriously hurt from decreased hospital spending and price control regulation • Lack of Health Care spending over the next year • Negative synergies from the spin-off of the Clinical and Medical Products division

14. Sensitivity Analysis Implied equity value / share is most sensitive to changes in the Terminal Discount Rate

15. Eli Lilly Co. (LLY) SELL 42 bps

16. Company Overview • Founded in 1876, • Headquartered in Indianapolis, IN • Principle activities are to discover, develop, manufacturer and market pharmaceutical-based health care solutions • Specializes in the treatment of diabetes worldwide

17. Industry overview • Pharmaceutical—mature • Highly competitive, threats from generic drug makers • Extensive expenditure in R&D • Lengthy process of laboratory and clinical testing, data analysis, manufacturing development and regulatory review

18. Strengths • Currently the 10th largest pharmaceutical company in the world • Invested heavily in biotech, and by far the fifth largest biotech company in the world • Core competency: combine deep, therapeutic knowledge in targeted disease areas with the capability of generating potential biotech solutions alongside more traditional, chemistry-based work • Fully integrated pharmaceutical network: sophisticated partners all over the world, have access to critical resources around the globe, easier to expand overseas

19. Concerns • Costly and highly uncertain drug research and development—delay drug introduction • Intense competition from multinational pharmaceutical companies and generic companies • Subject to increasing government price controls and other heathcare cost containment measures • Weaker foreign currency and prolonged economic downturn may adversely affect business operation

20. Sensitivity Analysis

21. Multiples Valuation

24. Recent News • Prasugrel (co-developed by Daiichi Sankyo Company, Limited and Eli Lilly) reduced the risk of multiple types of heart attacks in phase III TRITON-TIMI 38 study • Eli Lilly will launch two global trials to advance second Alzherimer’s disease treatment candidate into late-stage testing - both phase iii pivotal trials begin enrollment in may 2009; reinforces Lilly's commitment to alzheimer's disease and biotech product research

25. Johnson & Johnson (JNJ) Sell 46 bps

26. Company Overview • Market Leader in Pharmaceuticals and Medical Devices and Diagnostics • Strong Presence in Consumer Health Care products with brands such as Band-AID, Aveeno, Listerine, and Neutrogena • Consistent Earnings, Strong ROE, Modestly Leveraged, Recent Dividend Increase to 3.5% Div. Yield

27. Growth Drivers by Business Segment • Consumer Health Care • OTC availability of ZYRTEC • Strong Growth in Baby Care & Skin Care products • Strong International Sales • Pharmaceuticals • Strong Sales of Drugs REMICADE, CONCERTA, and TOPAMAX • Strong Pipeline of New Drugs with 7 to 10 to complete filings for FDA approval in 2009 and 2010. • European Commission Approval of STELARA and PREZISTA During 1st Quarter • Medical Devices & Diagnostics • Number 1 position in Ophthalmic Lens Manufacturing • Growth Rate of 6.4% from 2007 to 2008

28. Concerns • Generic competition for RISPERDAL resulted in 38% decrease in sales for the drug • Negative currency impact of 12.6% for First Quarter • Prolonged unemployment may lead to lower than expected spending on health care • Potential negative health care reform

29. DCF Sensitivity Analysis

30. Multiple Valuation

31. Forward P/E Price to Sales Price to Book Price to Cash Flow

32. WellPoint Evaluation (WLP) Sell 104 bps

33. Company Overview • WellPoint Inc., was formed in 2004 with the merger between WellPoint Health Networks Inc. and Anthem Inc. • Leading provider of Health benefits plans by enrollment with 35 million members. • Independent licensee of Blue Cross and Blue Shield plans in 14 states with exclusive rights. • Diverse product offerings including PPO’s, HMO’s, CDHP’s, PBM, and many self-funded individual plans.

34. Industry Overview • Highly competitive; Price competition contracts profit margins • Over 95% of revenue is derived from premiums • Barriers to entry are high from heavy regulation and medium concentration with the top four players contributing about 44% of revenues • Large exposure to the U.S.

35. Strengths • High customer retention rates allowing for high growth potential contingent on rising employment levels. • Strong brand name through the Blue Cross Blue Shield. • Cost controls, this QTR reduced MCR from 85.%1 to 81.6% YoY. Exiting high cost Medicaid operations in Ohio and Connecticut • Acquisitions resulting in larger more diverse revenue streams. Acquired DeCare Dental adding 4 million new members.

37. Concerns • Consumer trends to higher deductible lower premium plans (CDHP’s). Up 14% in Q1. • Rising unemployment contributing to loss of enrollment. 1st QTR enrollment down 2.3% YoY. Expect a drop to 33.9 million members, or 3% YoY, by end of the 2009. • Investment losses. Reduced EPS for 1st QTR 2009 by $.46. Expect total year to be $.45 per share. • High SG&A expenses increased 90 bp YoY to 15.5%.

39. Regulation • Premium and deductible limitations deteriorating profit margins. • Mandatory coverage imposing adverse selection on the industry • Cost savings from IT initiatives and pay for performance standards. • Being able to tap into the market of the over 46 million Americans who are uninsured

40. Absolute P/E

41. Relative Forward P/E

42. RelativeTrailing P/E

43. Absolute P/S

44. Relative P/S

45. P/B

46. Absolute P/CF

47. Relative P/CF

49. Sensitivity Analysis