PREPARED BY: ASHLEY CLARK RICHARD GROSS JON HARMACEK OLGA ISENBERG BRYON JORDAN Industrial Sector Presentation

Agenda Sector Analysis Business Analysis Economic Analysis Financial Analysis Valuation Analysis Recommendation Q&A

Sector Analysis The Industrials Sector makes up 11.57% of the SIM Portfolio, 178 basis points above the S&P 500.

Sector Analysis – Top 10 companies General Electric Co14.7% United Parcel Service Inc6.1% United Technologies Corp5.9% 3M Co5.5% Union Pacific Corp3.6% Boeing Co3.5% Lockheed Martin3.4% Emerson Electric Co3.2% Burlington Northern Santa Fe Co3.1% Honeywell Intl Inc2.9% All Other48.1%

Sector Analysis – Returns by sector Industrial QTD Return – 3.65% Industrial YTD Return %

Business Analysis – Economic cycle Source:

Business Analysis – Industrials vs. S&P 500 Source:

Source: Business Analysis – Stages of Maturity

Economic Analysis Industrials are highly correlated to GDP, real interest rates, real private investments, federal government spending and housing market In June 2009, The Fed Beige Book report indicated that the expectations of several districts regarding the recession have improved, though they do not see the substantial increase in economic activity through the end of the year In Q2 2009, manufacturing activity declined or remained at a low level across most states

Economic Analysis – GDP vs. Industrial Equipment

Economic Analysis – GDP vs. Change in Real Investment

Economic Analysis – GDP vs. New Single Family Home Sales

Economic Analysis – Industrial Production Index vs. Recessions

Economic Analysis – Capacity Utilization vs. Recessions

Economic Analysis – Real Private Investment vs. Recessions

Financial Analysis - Net Profit Margin

Financial Analysis - ROE

Financial Analysis - ROE Key Operating Statistics EBITDA Margin18.0%17.8%18.5%18.4% Stable Net Profit Margin7.7%8.2%8.4%7.8%7.3%Decreasing ROE17.3%17.8%19.5%20.7%21.3%Increasing *Red indicates consensus estimates

Financial Analysis - EPS YOY Growth

Financial Analysis - Earnings Per Share Next Expected EPS Date: Sep Mar Jun Sep Dec Year Year to Year21%15%12%1%-34%6% *Red indicates consensus estimates Expected Significant Decrease in 2009 Overall Expected Increase in 2010 Overall

Validation Analysis - Industrials Industrials Sector HighLowMedianCurrent P/E P/S P/B P/CS vs S&P 500 P/E P/S P/B P/CS

Validation Analysis - P/E vs. S&P 500

Validation Analysis - P/S vs. S&P 500

Validation Analysis - P/B vs. S&P 500

Validation Analysis - P/CF vs. S&P 500

Recommendation Maintain the current overweight of 178 basis points (SIM 11.57% vs. S&P %) Positives:  During the recession most of industrial stocks are undervalued  Most of the stocks should have an upside when economy turns around  Increased government spending (i.e. OSK, GE, Shaw)  Low interest rates Risks:  Double-dip recession driving prices further down  Lag between GDP growth and Industrial growth  Companies have divested most of the assets due to the prolonged recession  Excess capacity in the housing market and commercial real estate

Q&A