Consumer Staples Company Presentation

1. Consumer StaplesCompany Presentation Des Dudaney Erica Elsasser Neil Hertenstein Mun Yi Se Tho May 18th, 2010

2. Table of Contents • Sector Summary • Company Comparison • PepsiCo Analysis • P & G Analysis • Recommendation

3. Recommendation • Sell 67 BP of Pepsi • Sell 40 BP of P&G • Hold Philip Morris & Wal-Mart Recomm-endations

4. Sector Summary

5. SIM Portfolio * Weights as of 4/30/2010 Sector Summary

6. CS Sector Recap • Decrease weight of Consumer Staples by 107 basis points • Provides a 27 bp underweighting • Defensive sector and lower returns in economic growth • Allows more cyclical sectors to experience higher gains Sector Summary

7. Sector Holdings • Recommended Holdings • SIM – 10.64% • PepsiCo……………….2.23% • Wal-Mart Stores Inc….2.78% • Philip Morris Int’l……...2.96% • Procter & Gamble…….2.67% Sector Summary Current Holdings SIM – 11.71% • PepsiCo………………2.90% • Wal-Mart Stores Inc…2.78% • Philip Morris Int’l……..2.96% • Procter & Gamble……3.07% * Weights as of 4/30/2010

8. Target Prices Prices as of 5/13/2010 Sector Summary 11/8/2014 8

9. Target Prices of Sector Stocks in S&P Sector Summary

10. Company Information

11. Philip Morris - Hold • Philip Morris International Inc. (PM) is the leading international tobacco company. • Spin-off from Altria(MO) in 2008. • PM owns seven of the world’s top 15 brands • Brand portfolio includes Marlboro, the number one cigarette brand worldwide. • Products sold in approximately 160 countries. • As of 2008, the company held an estimated 15.6% share of the total international cigarette market outside of the U.S. Company Comparison

12. Wal-Mart Stores - Hold • Wal-Mart Stores, Inc. operates various formats of retail stores and restaurants, including combination discount and grocery stores, supercenters, Sam’s Clubs, hypermarkets, cash-n-carry stores, department stores, and general merchandise stores • Attractive Valuation • Big move to online – sales, ad campaign etc. • Improved merchandising capabilities, capital efficiency, inventory management • Very non-cyclical Company Comparison

13. PepsiCo • PepsiCo, Inc., founded in 1898, manufactures, markets, and sells numerous foods, snacks, and carbonated and non-carbonated beverages worldwide. • Market capitalization of $106.55 billion. • PepsiCo owns hundreds of brands around the world, but the most recognizable include: Company Comparison

14. Procter & Gamble • The Procter & Gamble Company (P&G), founded in 1837, engages in the manufacture and sale of consumer goods worldwide. • The company operates in 3 global business units: • Beauty • Health and Well-Being • Household Care • Products are sold in over 180 countries worldwide Company Comparison

15. PepsiCo Analysis

16. EPS Growth % • EPS is expected to increase, but remain significantly lower than before. PepsiCo Analysis

17. ROE Relative to S&P 500 • ROE has been on a slight upward trend, but is expected to decrease. PepsiCo Analysis

18. EBITDA Relative to S&P 500 • EBITDA Margin is expected to decrease. PepsiCo Analysis

19. Profit Margin Relative to KO • Net profit margin is lower than Coca-Cola’s. PepsiCo Analysis

20. Cash Flow per share PepsiCo Analysis

21. Technical Analysis

22. Discounted Cash Flow PepsiCo Analysis

23. Sensitivity Analysis PepsiCo Analysis

24. Target Price PepsiCo Analysis

25. PepsiCo Recommendation • Benefits • Global leadership in the snack business • Expand snack business in developing and emerging markets • Taking advantage of the coincidence of consumption in snacks and beverages • Purchase of PBG and PAS bottlers • Focus on health and wellness • Expand the “Good for You” portfolio • Continue to make core snacks healthier through innovations in heart-healthy oil, sodium reduction and the additions of whole grains, nuts and seeds. • Risks • Failure to realize US bottler integration/synergies • Currency Volatility – 48% of PepsiCo revenue is from operations outside the US. Largest operations are in North America (US, Canada, Mexico) and UK Recommendation: Sell 67 bps Current Price: 66.75 Target Price: 74.00 Implied Upside: 13.6% PepsiCo Analysis

26. Procter & Gamble Analysis

27. EPS Growth % • EPS growth is expected to remain negative. P&G Analysis

28. ROE % • ROE is at low levels of the decade. P&G Analysis

29. EBITA Margin Relative to JNJ • EBITDA margin is below JNJ. P&G Analysis

30. Net Profit Margin % • Net Profit Margin has low growth rate and is expected to remain so. P&G Analysis

31. Technical Analysis

32. Absolute Valuation P&G Analysis

33. Relative Valuation to S&P 500 P&G Analysis

34. Relative Valuation to Industry P&G Analysis

35. Price Target 72.162 P&G Analysis

36. Discounted Cash Flow Model P&G Analysis

37. Sensitivity Analysis P&G Analysis

38. Procter & Gamble Recommendation Recommendation:Sell 40 bps Current Price: $63.38 Target Price: $72.00 Ratios $72.16 DCF $71.97 Implied Upside: 13.6% Dividend yield: 3.1% Implied Upside w/ Dividend: 16.7% P&G Analysis

39. Procter & Gamble Risks and Benefits Risks • Currency Volatility • Pampers Lawsuit • Changes in consumer spending • Lower upside relative to other consumer staple companies Benefits • International initiative • Product Expansion • Product leadership • Increased Advertising • Very defensive • Consistent dividends P&G Analysis

40. Recommendations

41. Stock Recommendation • Sell 107 bp • Sell 67 bp of Pepsi • Sell 40 bp of Procter & Gamble • Limited potential upside in both stocks Hold Wal-Mart and Philip Morris due to high upside • Sale of 107 bp in our sector will allow other sectors to utilize it to gain better returns for the portfolio • Risks • Sale of 107 bp will leave the portfolio less defensive should the economy decline again Recomm-endations

42. Questions?