1. SECTOR PRESENTATION BY: WILLIAM SANTOSO, MANISH KUMAR, & SARAH RIESKE Telecommunications

2. Presentation Outline: Industry Information Analyses:  Business  Economic  Financial Performance  Valuation Recommendations Questions

3. Sector Information

4. Sector Information: Composition Sectors:  Telecommunications Domestic  AT&T Landlines, cell phones, wireless internet  Telecommunications Foreign  China Mobile Landlines, cell phones, wireless internet  Wireless communications  NII Holdings Cell phones, M2M, other VAS

5. Industry Information SIM Holding Information NameMarket Cap Telecom - Domestic299.5B Telecom - International3047.1B Wireless Communications657.1B Total4003.7B NameMarket Cap AT&T150.16B China Mobile Ltd.201.75 B NII Holdings, Inc.3.72B Total355.63B Sector Information: Size Largest Companies in Sector: America MobilNippon Telegraph & Telephone China Mobile, Ltd.Telefonica SA AT&TVerizon

6. S&P 500 SIM Portfolio Sector Information: Size

7. Sector Information: Performance YTD performance (12%) Relative to S&P (4.99%) QTD performance (10%) Relative to S&P 1.86%

8. Business Analysis

9. Profitability: Porter’s 5 Forces Buyer Power: Moderate  Low switching costs for individuals, higher for companies Supplier Power: Low  Enough vendors to dilute supplier power Threat of New Entrants: Low  Substantial start up costs (exacerbated by poor credit markets) & regulation Substitute Products: Low  Many products, commodity-type attitude, low switching costs Rivalry: Cut throat  Lower margins result from increased price competition

10. Other Factors Economic – defensive industry Cheap relative to the S&P 500 & on an absolute basis Rapidly evolving industry/high competition  Risk of obsolescence  Shrinking margins  Deregulation Mature in the business cycle:  Established networks and low maintenance costs, little need for increased capital spending

11. Economic Analysis

12. Positive Effect Negative Effect Population Growth GDP Growth Disposable Income Inflation Material Costs Labor Costs Influencing Factors

13. Unemployment (Current) V. Telecommunication

14. Unemployment (June 1998 – June 2008) V. Telecommunication

15. Consumer Confidence V. Telecommunication

16. Nominal GDP V. Telecommunication

17. Real GDP V. Telecommunication

18. Financial Performance Analysis

19. EBITDA (Relative to S&P 500)

20. ROE (Relative to S&P 500)

21. Net Profit margin (Relative to S&P 500)

22. EPS against (Relative to S&P 500)

23. Dividend Yield (Relative to S&P 500)

24. Valuation Analysis (Relative to S&P 500)

25. P/Forward E

26. P/Trailing E

27. Price/Book

28. Price/Sales

29. Price/EBITDA

30. Telecom Sector is  Slightly undervalued ( 0.99), Defensive, Cheap relative to S&P 500  Potential growth in wireless and data division  Cut throat competition in the growth areas  Uncertainty in global financial market Summary

31. Recommendation  Do nothing and wait for  Break through product/technology  Economic recovery (Increase corporate spending)  OR Increase SIM portfolio by 11 basis points to make it equal to S&P (3.39%) Recommendations

32. What Questions do you have ? Questions?