1. Consumer Staples Presentation August 4, 2009 Shane Connor Josh Drushel Jessica Kirwin

2. Agenda  Update of Sector Recommendation  Stock Recommendations  Summary  Questions

3. Consumer Staples Recap  SIM Current Holdings – 11.65%  S&P 500 – 11.81%  Sector Characteristics –Stable demand –Defensive (non-cyclical)  International Growth could be a bonus  Class approved 25 bps increase

4. Sector Holdings Current Holdings SIM – 11.65%  PepsiCo – 4.44%  Wal-Mart Stores Inc – 3.00%  Colgate Palmolive – 2.13%  Philip Morris Int’l – 2.09%  weights as of 7/31/09 Recommended Holdings SIM – 11.90%  PepsiCo – 3.94%  Wal-Mart Stores Inc – 3.00%  Safeway – 2.88%  Philip Morris Int’l – 2.09%

5. Colgate-Palmolive (NYSE:CL) Company Overview: CL has been manufacturing and marketing consumer products worldwide since 1803. It operates under two segments which are oral, personal, and home care as well as pet nutrition. Recommendation: Sell 234 basis points Investment Thesis: CL is a very stable performer in both good and bad economies, but due to the classes decision that the economy is turning around we feel there are much better opportunities that persist.

6. Industry: Personal and Household Products CompanySymbolPrice / Earnings Forward Price / Earnings Price / SalesDividend Yield Industry Average15.715.11.92.96% Colgate-PalmoliveCL1816.02.42.43% AvonAVP19.417.41.42.59% Estee LauderEL19.924.1.91.51% EcolabECL22.719.81.71.35%

7. Price Target Absolute Valuation HighLowMedianCurrent# Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) P/Forward E 21.913.719.11617.684.1272.84 P/S 3.21.92.62.42.5332.6282.53 P/B 48.813.923.420.526.652.7372.87 P/EBITDA 16.58.8311.8310.4611.95.6567.23 P/CF 20.512.817.415.416.534.4072.73 Average 73.64 DCFDiscount RateTerminal FCF Growth CL10%3% 78.17 Final Price Target= 75% DCF PT + 25% Valuation PT= $77.03 Closing price 8/4/09 = $72.21 Implied Upside= Price Appreciation + Dividend Yield = 9.13%

8. Positives/Risks Positives - Stable performer in all types of economies - Potential for continued international growth - Safe bet investment Risks - Recession may only be beginning internationally - Continued loss of market share domestically - Investing in CL and the economy completely turns around

9. Philip Morris Int’s ( NYSE:PM) Company Overview: PM is the leading international tobacco company with 7 of the world’s top 15 brands Recommendation: Hold current position Investment Thesis: PM is a stable performer

10. Industry: Tobacco CompanySymbolPrice / Earnings Forward Price / Earnings Price to SalesPrice/Cash Flow Industry Average13.112.62.711.4 Philip Morris Int’lPM13.714.63.712.2 British American TobaccoBTI13.412.52.9- LorillardLO12.912.32.712.5 Reynolds AmericanRAI9.09.61.58.1 As of 8/2/09

11. Price Target Absolute Valuation HighLowMedianCurrent#Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) P/Forward E16.111.013.914.114.03.549.00 P/S7.31.21.93.42.133.4870.31 P/B14.67.28.414.612.03.0136.12 P/EBITDA11.982.879.48.89.25.046.00 P/CF1178.864.511.511.03.8342.13 Average48.71 DCFDiscount Rate Terminal FCF Growth Price Target PM10%3%51.44 Final Price Target= 75% DCF PT + 25% Valuation PT= $50.76 Implied Upside= Price Appreciation + Dividend Yield = 18.2%

12. Positives / Risks Positives –Lower litigation risk compared to U.S. –Products sold in over 160 countries –Prices of products increased to enhance profitability (2009) –Free Cash Flow of $6.8 Billion in 2008 –Owns 7 of the world’s top 15 brands – including Marlboro the #1 Brand Worldwide –Customers are addicted to its products Risks –Increased excise taxes in Europe –Value of the dollar –The potential of increased regulation abroad

13. PepsiCo ( NYSE:PEP) Company Overview: PepsiCo manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide Recommendation: Sell 50 bps Investment Thesis: PepsiCo is a stable performer that has a diversified product line and good international growth. I feel the company is currently undervalued.

14. Merger with PBG and PAS PepsiCo announced today merger agreements with The Pepsi Bottling Group Inc. and PepsiAmericas, Inc. Total cost will be 7.8 billion –Pepsi Bottling Group $36.50 / share or.6432 PepsiCo shares –PepsiAmericas 25.50 / share or.5022 PepsiCo shares Create annual pre-tax synergies of 300 million by 2015

15. Industry: Beverages CompanySymbolPrice / Earnings Forward Price / Earnings Price to Sales Dividend Yield Industry Current 20.219.32.42.12% PepsiCo IncPEP15.514.82.13.17% Coca-Cola Co KO16.415.73.73.29% Dr. Pepper Snapple Group DPSN/A14.11.1N/A Hansen Natural HANS15.113.62.6N/A

16. Price Target Absolute Valuation HighLowMedianCurrent#Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) P/Forward E 22.713.119.814.817.5$3.74$65.45 P/S3.51.83.12.12.5$32.47$81.71 P/B7.75.56.77.47.27.74$55.71 P/EBITDA14.728.5512.619.210.56.22$65.31 P/CF19.610.417.112.214.54.69$68.00 Average$67.24 DCFCurrent Price Discount Rate Terminal FCF Growth Price Target PEP$56.2010%3%$69.78 Final Price Target= 75% DCF PT + 25% Valuation PT= $69.15 Implied Upside= Price Appreciation + Dividend Yield = 26.2%

17. Positives / Risks Positives –Frito-Lay brand –Acquisition of PBG and PAS –Continuing foreign investment –Low cost environment Risks –Merger integration issues –Continuing weak performance by Americas Beverage segment –Private label growth –Possible sales tax on carbonated soda beverages

18. Safeway (NYSE:SWY) Company Overview: Safeway is a food and drug retailer founded in 1915 and headquartered in California. They operate over 1,700 grocery stores in western and central U.S. as well as Canada and Mexico. They are the third largest grocery retailer. Recommendation: Buy 288 basis points Investment Thesis: We feel that Safeway is well positioned to benefit from a broad economic recovery. The company has an attractive FCF yield and is aggressively buying back shares.

19. Current Situation YTD :Safeway (-18.4%) vs. S&P 12.67% Missed Analysts EPS est. Lowered Guidance (2.10- 2.30) Lowered Guidance (1.70-1.90)

20. Positives - Attractive Valuation - Strong Free Cash Flow - History of share repurchases Numbers in millions FY Q1Q2 200720082009 Diluted Shares445436429422 % change-2.02%-1.61%-1.63% # of shares repurchased6.712.63.59.5 Average purchase price33.5728.4518.4019.63

21. Positives Cont. - More sensitive to economic recovery

22. Risks -Unemployment continues to rise

23. Risk Cont. -Food prices (disinflation) -Margin compression -Continuing same store sales declines

24. Industry: Retail Food CompanySymbolPrice / Earnings Forward Price / Earnings Price to Sales P/CF Industry9.710.6.24.3 KrogerKR10.710.2.25.0 Supervalu Inc.SVUN/A6.8.11.9 Wal-MartWMT14.513.8.59.6 SafewaySWY8.39.4.24

25. Safeway Price Target Absolute Valuation HighLowMedianCurrent#Your Target Multiple *Your Target E, S, B, etc/Share Your Target Price (F x G) P/E (ttm)21.18.315.69.411.5 P/Forward E 1981510.6121.9022.8 P/S.4.2.3.2.396.528.95 P/B2.81.12.21.11.517.2125.81 P/EBITDA6.432.684.922.983.756.3523.81 P/CF9.23.86.545.54.7326.03 Average25.48 Current Price 19.03 Implied Upside 34% Final Price Target= Valuation PT + Risk Factor = 24.40 Implied Upside= Price Appreciation + Dividend Yield = 30.3%

26. Thank You Questions?