Fisher College of Business – Student Investment Management Materials Irene Lipin Ryan Mayes Mike Longo sector analysis

Fisher College of Business – Student Investment Management Overview Sector & Business Analysis Economic Analysis Financial Analysis Recommendations Q&A

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Financial Analysis Sector & Business Analysis

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Sector Composition Containers and Packaging Metal, Plastic, Cardboard, and Glass Containers Paper Packaging Forestry and Paper Products Timber, Related Wood Products All Grades of Paper Construction Materials Sand Clay Gypsum Aggregates Chemicals Commodity Chemicals Diversified Chemicals Specialty Chemicals Industrial Gasses Fertilizers Metals and Mining Manufacturing of Aluminum Mining/Extracting of Gold & Silver Steel Other Precious Metals and Materials

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation S&P500 & SIM Sector Weights as of 1/31/2010

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Major Companies COMPANYTICKERINDUSTRY MARKET CAP ($Mil) PRICE AS OF 2/7/2010 BETAP/E BHP Billiton Ltd.BHPDiv. Metals & Mining192,560$ BHP Billiton PLCBBLDiv. Metals & Mining162,790$ ValeVALEDiv. Metals & Mining134,180$ Monsanto Co.MONAgri. Chem.41,880$ POSCOPKXSteel34,860$ Potash Corp. of Saskatchewan Inc. POTAgri. Chem.30,630$ The Dow Chemical Co.DOWChemicals30,330$ Freeport-McMoRan Cooper & Gold, Inc. FCXDiv. Metals & Mining30,200$ El du Pont de Nemours & Co. “DuPont” DDChemicals29,580$ Goldcorp, Inc.GGGold26,020$ Median:

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Industry and Business Cycle Mature Sector Highly Cyclical Sensitive to Fluctuations in the Business Cycle Relies on Strong Economy Sensitive to Supply / Demand Fluctuations Prices of Raw Materials Largely Demand Driven Growth through Acquisition Growth through R&D Exposed to Wide Array of Industries High Barriers to Entry Threat of New Competition is Low High Capital / Fixed Costs Increased Environmental Regulation No New Buyers Repeat Purchase Can get Boring Fewer BIG players

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Economic Analysis

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Materials versus S&P Yr Performance

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Recent Key Economic Drivers Robust demand from emerging markets Chinese economy Sustained demand from developed markets United States, European Union Spring-time homebuilding Weak Dollar Upward price pressure on commodities / raw materials Cheapens American exports

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Now, however… Tightening Chinese monetary authority Unfolding European debt crisis Strengthening dollar/Weakening Euro Downward price pressure on commodities / raw materials Raises prices of American exports

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Housing Starts vs. Sector Performance Correlation Coefficient (R) = -.22

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Commodities vs. Sector Performance Correlation Coefficient (R) =.67

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation $ Value vs. Sector Performance Correlation Coefficient (R) =.79

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Financial Analysis

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Revenue Growth Materials vs. S&P Materials S&P 500 Average increase 1.7% Average increase 3.4%

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation EBITDA Growth Materials vs. S&P Materials S&P 500 % of sales

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Absolute Valuation: Price / Forward Earnings 17.1 X 16.7 X

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Relative Valuation: Forward P/E 1.2 X 1.0 X

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Absolute Valuation: Price / Book 2.7 X 2.5 X

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Relative Valuation: Dividend Yield 0.9 X < 2.0% 1.2 X

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic AnalysisFinancial Analysis Recommendation Technical Valuation: Moving Avgs.

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Long-term outlook: Bullish Materials Sector responds well to economic recovery Impending inflation will “re-devalue” the dollar High growth potential in emerging markets and chemical agriculture segments

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Short-term outlook: Bearish Tightening Chinese monetary policy Slower bank lending Deutsche Bank mid-March rate hike Recent rally in the Dollar EU crisis: may continue? Tumbling commodities (fewer financial buyers) Weak confidence, modest industrial spending outlook Bottom line… 10-week horizon looks pretty bad

Fisher College of Business – Student Investment Management Sector & Business Analysis Economic Analysis Financial Analysis Recommendation Reduce SIM fund exposure to 150 bps underweight.

Fisher College of Business – Student Investment Management Q & A We Thank You, Materials Sector