Health Care Sector – Stock Presentation Kailas Joshi Daniel Kurth

Agenda Sector Review Johnson & Johnson (JNJ) Eli Lilly (LLY) WellPoint (WLP) Cardinal Health (CAH) New Recommendations Q&A 3/3/20092

Health Care Sector Review 3/3/20093

Healthcare Sector Overview The sector market capitalization is at $1.15 Trillion The Sector represents 15.94% of the S&P 500 by Market Cap Sector Revenues represented $63,874 million in 2008 Source: US Equity Indices, as of 1/30/2009www.standardandpoors.com Sector ReviewLLYCAH & WLPRecommendationsJNJ 3/3/20094

Sector Description # of Cos. Adjusted Market Cap SP-5AS&P $7,192,455 SP-10Energy39$1,014,055 SP-15Materials29$218,994 SP-20Industrials59$763,552 SP-25Consumer Discretionary80$589,017 SP-30Consumer Staples40$924,124 SP-35Health Care54$1,146,392 SP-40Financials81$770,678 SP-45Information Technology75$1,166,403 SP-50 Telecommunications Services 9$267,760 SP-55Utilities34$331,480 S&P 500 Sectors – Overview *Values in USD millions Source: US Equity Indices, as of 12/31/2008www.standardandpoors.com Sector ReviewLLYCAH & WLPRecommendationsJNJ 3/3/20095

Key External Factors Positive Demographic Shift Increased prevalence of Heart Disease and Obesity Increased Government involvement 3/3/20096 Sector ReviewLLYCAH & WLPRecommendationsJNJ

Sector Weights in SIM Portfolio Consumer Staples Energy Health Care Utilities Telecom Services Consumer Discretionary Industrials Information Technology Materials Financials As of 1/30/2009 3/3/20097 Sector ReviewLLYCAH & WLPRecommendationsJNJ

Sector Performances in S&P 500 Sector ReviewLLYCAH & WLPRecommendationsJNJ Source: 2008 Market Update, Fidelity Management & Research Co. (FMRC) as of 12/31/2008 3/3/20098

Recommendations S&P 500 weighting = 15.94% SIM Weighting = 21.50% Sector is overweight by 5.56% Recommended sector weight: 19.00% Action: reduce weight by 250 basis points Reasons: – 21.5% is extremely overweight – SIM portfolio could experience serious losses if the sector underperforms the rest of the market – Changes in weights of other sectors will naturally tend to increase the weight of Health care 9 Crisis/Recession FluThe Healing SectorOSU SIM PortfolioAnalyses & ValuationRecommendation 3/3/2009

HoldingYTD Return Return Since 1/1/2008 Cardinal Health (CAH)(2.83%)(43.84%) Eli Lilly (LLY)(20.59%)(44.20%) Johnson & Johnson (JNJ)(12.18%)(23.67%) WellPoint (WLP)(14.35%)(60.43%) SIM Portfolio Holdings As of 1/31/2008 Sector ReviewLLYCAH & WLPRecommendationsJNJ 3/3/200910

Proposal Current Holdings – Johnson & Johnson (JNJ) – HOLD – Eli Lilly (LLY) – SELL – Cardinal Health (CAH) – SELL – WellPoint (WLP) – HOLD New Holding – Medtronic (MDT) – BUY Resulting Portfolio Weight – 19.0% 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Johnson & Johnson (JNJ) 3/3/200912

Market Cap $138 Billion Price: $47.92 P/E: EPS: 4.57 Div: 1.84 (3.50%) Segments: 1. Consumer 2. Medical Devices 3. Pharmaceutical 3/3/ Overview Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – DCF Valuation Terminal Discount Rate:11.0%Terminal Value$218,546 Terminal FCF Growth:2.5%NPV of Free Cash Flows87,297 (53%) NPV of Terminal Values76,968 (47%) Projected Equity Value164,265 Shares Outstanding2,758.9 Current Price$47.92 Implied Equity Value$59.54 Upside/(Downside) to DCF24% 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations - Multiples 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ Absolute Valuation HighLowMeanCurrent Target Multiple Target E, S, B, etc/Share Target Price P/Forward E $68.25 P/S $80.75 P/B $76.09 P/EBITDA $79.44 P/CF $76.97 P/E/G ratio $58.28 ROE $57.04 Target Price $66.54

Risperdal (anti- psychotic) and Topamax (anti-epilepsy) come off patent No major new drugs until end of 2009 (Golimumab) Medical Devices: strong growth through DePuy orthopedic joint replacements 3/3/ Outlook Sector ReviewLLYCAH & WLPRecommendationsJNJ

Solid Performance in 2009 – Good Dividend, AAA Bond Rating Currently 7.4% of SIM Portfolio Recommendation: HOLD 3/3/ Action Sector ReviewLLYCAH & WLPRecommendationsJNJ

Eli Lilly (LLY) 3/3/200918

Market Cap: $32.05B Current Price: $27.75 P/E: N/A EPS: Div: 0.49 (6.90%) Segments: – Pharmaceuticals – Animal Health 3/3/ Overview Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – DCF Valuation Terminal Discount Rate:11.0%Terminal Value$67,417 Terminal FCF Growth:3.0%NPV of Free Cash Flows$25,158 (51%) NPV of Terminal Values$23,743 (49%) Projected Equity Value$48,901 Shares Outstanding1,090.8 Current Price$27.75 Implied Equity Value$44.83 Upside/(Downside) to DCF61.5% 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations - Multiples 3/3/ Absolute Valuation HighLowMeanCurrent Target Multiple Target E, S, B, etc/Share Target Price P/Forward E $37.62 P/S $60.63 P/B $49.52 P/EBITDA $52.80 P/CF $40.30 Target Price $42.00 Sector ReviewLLYCAH & WLPRecommendationsJNJ

Outlook Growth Factors – Acquisition of ImClone should provide operations and cost synergies – Current neuroscience drugs are performing quite well Key Concerns – Growing competitive environment – Lack of block-buster drug pipeline 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Actions SELL SIM position in LLY by 190 bps – Strong earnings growth – Main theme of the portfolio going forward is to be more diversified across the industries in the Health Care sector 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Cardinal Health (CAH) & WellPoint (WLP) 3/3/200924

Cardinal Health (CAH)WellPoint (WLP) 3/3/ Price Performance (5 years) Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – Analyst Opinions Price Target SummaryCAH ($/Share)WLP ($/Share) Mean Target Median Target High Target Low Target Number of Analysts1110 Current Stock Price (3/2/2009) /3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ Source: – as of 2/27/2009www.finance.yahoo.com

Healthcare Supply Chain Services – Delivers pharmaceutical and medical devices to pharmacies, hospitals etc – 4% growth rate – 1.56% Profit margin Clinical Medical Products – Manufactures technologies and services that help hospitals prevent medical errors – 30% Growth Rate – 15.96% Profit Margin 3/3/ Overview CAH Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – DCF Valuation (CAH) 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ Current CAHCAH without Clinical & Medical Products Shares Outstanding364.0Shares Outstanding364.0 Current Price$30.92Current Price$30.92 Implied Equity Value / Share$38.43Implied Equity Value / Share$36.29 Upside/(Downside) to DCF24%Upside/(Downside) to DCF17% Terminal Discount Rate: 12.5% Terminal FCF Growth: 2.5%

Outlook for CAH Key Growth Drivers: – Spinoff of Clinical and Medical Supplies from Healthcare Supply Chain Services – Captured 1/3 of all distributed pharmaceutical products in their supply chain – Strong growth in nuclear pharmacy Key Concerns – “In many ways we see fiscal ’09 as a transitional year for Cardinal Health, where we put the foundation for future growth under both segments” –CEO R. Kerry Clark – CVS and Walgreens accounted for 22% and 19% of the companies revenue in 2008 (CVS expires on 6/30) – Lowered earnings outlook due to spending delays by hospitals 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Actions Eliminate our position in CAH – Negative outlook for the next 6-12 months – Restructuring will potentially affect earnings – Two customers equal 41% of business with one contract expiring in 2009 – General economic conditions are not conducive to higher performance in the 6-12 month time frame Maintain position in WLP 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Recommendations 3/3/200931

Stock Recommendations Medtronic (MDT) 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Current Price: $27.22 Market Cap: Billion Revenue $13.5 Billion P/E Ratio: EPS: 2.53 Main Segments – Cardiac Rhythm Management – Spinal – Cardiovascular 3/3/ Overview Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – Analyst Opinions Price Target SummaryMDT ($/Share) Mean Target45.59 Median Target46.00 High Target50.00 Low Target37.00 Number of Analysts11 Current Stock Price (3/2/2009) /3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Valuations – DCF Valuation 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ MDT Shares Outstanding Current Price$27.22 Implied Equity Value / Share$33.09 Upside/(Downside) to DCF22% Terminal Discount Rate: 11.0% Terminal FCF Growth: 3.0%

Valuations - Multiples 3/3/ Absolute Valuation HighLowMeanCurrent Target Multiple Target E, S, B, etc/Share Target Price P/Forward E $44.94 P/S $47.32 P/EBITDA $45.00 Target Price $40.00 Sector ReviewLLYCAH & WLPRecommendationsJNJ

Key Growth Drivers Cardiac Rhythm Management – EnRythm: first pace maker to include Managed Ventricular Pacing. Reduces unnecessary pacing Spinal – CD Horizon Legacy Peek: provides stability and reduces stress on spine. 10% growth compared to 2007 Cardio-Vascular – Endeavor: first drug eluting stent approved by FDA since % increase in demand from Contributed $175 million in revenue 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

Outlook Key Factors – $1.75 Billion in Cash and Short Term Investments (purchased Ventor Technologies and CoreValve) – No customer represents over 10% of the companies sales in 2008, 2007 or 2006 – Strong position in heart, diabetes and spinal segments Concerns – Cutting executive pay 5% and freezing wages for all employees in May 3/3/ Sector ReviewLLYCAH & WLPRecommendationsJNJ

3/3/ Comparative Charts Sector ReviewLLYCAH & WLPRecommendationsJNJ 1-year 5-year

Summary of Actions HoldingIndustry Current Price (2/27/2009) Target Price (12 month)Action Current Weight Change in Weight Resulting Weight Johnson & Johnson (JNJ) Major Pharmaceuticals $47.92$66.54HOLD7.4%N/C7.4% Eli Lilly Major Pharmaceuticals $29.38$42.00SELL5.3%(1.9%)3.4% Cardinal Health Health Care Supplies $30.92$45.94*SELL5.2%(5.2%)0% WellPoint Health Care Services $32.65$51.80*HOLD4.2%N/C4.2% Medtronic Health Care Equipment $27.22$40.00BUY04.0% SIM weighting in Health Care Sector21.5%(2.5%)19.0% 3/3/ * Based on Mean Analyst Target Price from

Questions? 3/3/200941