MEMC Electronic Materials Inc. (WFR) Brandon Lee and David Light March 11, 2008

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

What is a wafer?  A thin slice of semiconductor material used to make microchips and other micro devices  All the processes of a micro device are conducted on a wafer  Come in different sizes (1 inch to 12 inches in diameter) and in different thicknesses  Wafer sizes have increased device performance and reduced production costs A silicon wafer

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

Wafer Industry Outlook  The introduction of electronics and computer technology into our daily lives is growing at an exponential rate.  One of the few markets that can improve device performance while sustaining steady revenue growth and reducing production costs.  There is a trend towards developing larger wafers (200mm and 300mm)  Over the past 10 years, the wafer industry has consolidated and only four companies have 10% or more of the market share  Highly correlated with semiconductor industry

Wafer Industry vs. Semiconductor Industry

Wafer Market Size and Growth

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

Company Overview  MEMC produces silicon wafers for the semiconductor and solar power industry globally  Based in St. Peters, MO  Produces both semiconductor wafers and solar wafers ranging in size from 100mm (4 inches) to 300mm (12 inches)  Strategy: “Continuous improvement of technology, market share, and profits.”  NYSE Ticker: WFR

Expanding into Solar Market  Began producing solar wafers in 2007  Currently outsources production Bringing production in house in 2009 Improved margins  Has contracts signed worth $15-18BN over the next 10 years  Has current capacity for one more contract over that time worth another $2-3BN  Solar represents a 30% annual growth market

Company History:  Founded in 1953  Pioneer in wafer development & leader in supplying semiconductor wafers for over 50 years  1995: IPO on NYSE under the ticker WFR  2006: Announced the signing of $7-9 billion in contracts to deliver solar wafers (an $18 billion market at the time)  2008: One of four wafer companies with 10% or more of the market share.

Management Team:  Nabeel Gareeb – President, CEO, and member of Board of Directors Joined MEMC in April 2002 Holds a Masters of Science in Electrical Management and a Bachelors of Science in Electrical Engineering  John Marren – Chairman of Board of Directors Has been with MEMC since November 2001 Partner of Texas Pacific Group Board of Directors of Conexant Systems, Inc. and ON Semiconductor Corporation  Dr. Shaker Sadasivam – Senior VP, Research and Development Has been with MEMC since 1993, serving many different roles Holds a Doctorate’s and Masters in Chemical Engineering and a Masters in Business Administration

Statistics:  Trailing P/E: 20.83x  Forward P/E: 14.20x  ROA: 22.83%  ROE: 51.62%  Debt to Equity Ratio:.015  Current Ratio: 3.578

Investment Thesis:  Great Visibility  Strong Long-Term Solar Growth  Good Pricing Power (12-18 months)  High barriers to entry in Polysilicon  Very efficient operator  Signed Contracts not yet reflected in stock price

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

Competitors Year Number of Suppliers MEMC Mitsubishi SEH Sumitomo Wacker Komatsu Nippon Steel TI Siemens Motorola Solarex Hitachi Toshiba LG Siltron Siltec IBM Topsil Unisil AT&T Crysteco Kawasaki Steel MEMC Mitsubishi SEH Sumitomo Wacker Komatsu LG Siltron Siltec Toshiba Nippon Steel MEMC Shin-Etsu Handotai SUMCO Wacker Komatsu Toshiba LG Siltron Total21107

Porter’s Five Forces  Barriers to Entry: Highly specialized and technical industry with very few competitors and high barriers to entry. 3 years to build a polysilicon plant, 18 months to build a wafer plant.  Bargaining Power of Buyers: Low. There used to be a lot of wafer companies, but consolidation has led to fewer competitors. Only four companies with 10% or more of market share.  Bargaining Power of Suppliers: Low. MEMC manufactures their own polysilicon, the major raw material used in making wafers.  Threat of Substitutes: Somewhat high. Anyone making high- quality wafers is a threat to take share and increase rivalry.  Rivalry: Fewer and fewer competitors in recent years.

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

WFR vs. S&P 500 (1 Year)

WFR vs. S&P 500 vs. S&P Semiconductors Index (5 Year) Source: 2007 Annual Report

Revenue Projection

DCF Assumptions  WACC: 13.95%  Long-term growth: 5%  Beta: 1.66

DCF Valuation  Current Price:  DCF Value:  Intrinsic Value:  Estimated Total Return: 21%

DCF Assumptions

Portfolio Fit

Outline:  What is a Wafer?  Industry Outlook  Company Overview  Competitors  Valuation & Portfolio Fit  Recommendation

Recommendation:  BUY 200 shares of WFR at market price  Approximate cost: $14,  Increases total number of holdings to 13.  WFR will represent approximately 4.12% upon purchase  WFR will expose the RCMP portfolio to the semiconductor industry and alternative energy