1. Recommendation: BUY United Parcel Service (UPS); Sell NG, JOYG, BHP

2. Industry Overview Industry demand drivers: E-commerce Emerging economies Trade 2

3. Company Profile UPS is the world's largest express carrier, specializing in time-definite package delivery and a growing presence in specialized transportation and logistics services. UPS delivers packages for more than 1.1 million shipping customers to 7.4 million consignees each day in over 220 countries and territories, using a network of 99,800 delivery vehicles, 527 planes, and 400,600 employees as of December 31, 2010. In 2010, UPS delivered 15.6 million pieces per day and recorded $49.5 billion in revenue. 3

4. Investment Information 4

5. In Search of Superior risk- adjusted returns UPS Outguns FDX: 1.Lower volatility (beta) 2.Higher yield 3.Stronger profitability UPS v. FDX 5

6. 6 Notes: Returns since January 1, 2003 Adjusted for dividends Risk adjusted returns = (TotalReturns%*100)/standard deviation Past performance does not guarantee future results UPSFDX Total Returns24%42% Standard Deviation 7.53 17.55 Risk-adjusted returns 3.20 2.37

7. Chart: Buy the Dip 7

8. Chart: Oversold and Bottoming 8

9. Key Investment Points #1: Pricing power – domestic duopoly, international oligopoly #2: E-commerce tailwind for long-term growth #3: Return of capital to shareholders 9

10. #1: Pricing Power 1.DHL competition 2.Oil price spike 3.Recession / avg weight down 10

11. #1: Pricing Power 11

12. #1: Pricing Power 4 competitors: UPS, FDX, DHL, USPS DHL: Low cost provider exited domestic express land/air market in 2009 DHL continues to offer international and heavy weight shipping USPS considering more limited services UPS and FDX now have greater pricing power 12

13. #1: Pricing Power 13

14. #2: E-commerce: US 14

15. #2: E-commerce: US 15

16. #2: E-commerce: China 16

17. #3: Return of Capital Reduced share count by >2% per year since 2005 17

18. #3: Return of Capital Dividend CAGR 10% for the last decade 18

19. SWOT Analysis Strengths  Strong competitive position – duopoly  International growth, esp. Asia  Scale / profitability  Strong cash flow, financial flexibility Weaknesses  Capital intense  Unionized labor force (agreement runs through July 2013) Opportunities  USPS cutbacks  Price increases  Increase buy backs, dividends  New distribution partnerships Threats  Labor strike  Oil prices  Recession  Price war with FedEx, USPS  Mkt decline / pension funding 19

20. Valuation Dividend Discount Model Beta0.89 Rf2.33% MRP8% Required Return9.5% 5-yr Dividend Growth Rate7.30% Dividend2.08 Fair Value $96.74 P/E Price Target 2012E EPS $5.16 1-yr average forward P/E17.0x Price Target $87.72 DCF Model Terminal growth rate2.50% Terminal FCF$3,986 /(r-g)$83,562 Discount factor$1.45 PV TV$57,480 + PV of FCF$12,867 = Enterprise Value$70,347 less debt$12,170 add cash$5,640 = Equity Value$63,817 / Shares981 Fair Value$65.07 Note: UPS' FCF potential is likely understated as margins have fallen. 20

21. Valuation 21

22. Valuation: Which Method? Given the company’s record of consistent dividend increases, DDM appears most appropriate However, each valuation method in sensitive to the assumptions used to derive the inputs An average of the methods yields a more conservative 12-month price target. Valuation Summary Dividend Discount Model $96.74 P/E Price Target $87.72 DCF Model $65.07 Average $83.18 Current Price $64.70 Upside29% 22

23.  BUY 150 shares of UPS at a limit price of $64 ($9,600, 2.1% of portfolio)  Sell 100 JOYG @ Market (~$83.45, $8,345)  Sell 125 BHP @ Market (~$85.17, $10,646)  Sell 400 NG @ Market (~$10.30, $4,121) Portfolio Recommendation 23

24. Industrials  Target Sector Allocation: 7.3%,  Current Sector Allocation: 3.3%  Allocation after sale: 1.6%  Allocation after purchase: 3.7% Portfolio Recommendation 24

25. Materials  Target Sector Allocation: 2.4%,  Current Sector Allocation: 5.4%  Allocation after sales: 2.2% Portfolio Recommendation 25

26. Materials  BHP: Levered to China, fairly valued in an uncertain market = sell  JOYG: Similar to BHP. Repurchase if the stock falls to $55 or below. Expect the stock to fall no further than the upper $40s. I would highly recommend a repurchase.  NG: Will need to raise funds by issuing stock. We can repurchase after the secondary if we so desire. Sell Rationale 26