1. Healthcare Sector Analysis Alexander Bishop Justin Gibbs Bethaditya Winarno Jie Zhang

2. Agenda Healthcare Sector Overview Business Analysis Economic Analysis Financial Analysis Valuation Analysis Recommendations Q&A

3. Healthcare overview

4. A category of stocks relating to medical and healthcare goods or services, the sector market capitalization is at $1.96 Trillion

5. Healthcare Industries

6. Company NameIndustryMarket Cap. ($ MIL) JOHNSON & JOHNSONPharmaceutical174000.000 PFIZERPharmaceutical144000.000 MERCK & CO.Pharmaceutical113000.000 ABBOTT LABORATORIESPharmaceutical83000.000 AMGENBiotechnology57000.000 MEDTRONICHC-Equipment47000.000 GILEAD SCIENCESBiotechnology42000.000 BRISTOL-MYERS SQUIBBPharmaceutical41000.000 LILLY (ELI)Pharmaceutical39000.000 UNITEDHEALTH GROUPHC-Managed Care38000.000 Sector Leading Companies

7. SIM Holdings SecurityTicker%age AssetsEq shares out Amgen Inc.AMGN2.65% 995.000 CareFusion Corp.CFN0.88% 221.384 Gilead Sciences Inc.GILD3.35% 899.925 Johnson & Johnson Co.JNJ3.76% 2,759.100 Teva Pharmaceutical Industries Ltd.TEVA3.64% 923.960

11. Sector Performance YTD: -1.65% QTD: -1.65% Top 5 Performers Berkshire Hathaway Inc.15.52% Gilead Sciences Inc.11.56% NCR Corp.7.55% TCF Financial Corp.7.49% Amgen Inc. 3.38%

12. Business Analysis

13. Phase of Life Cycle

14. Aging of US population, 16% of US population will be 65+ older by 2020. Key Driver: Demographic

15. Porter Five Forces Analysis Rivalry: Highly concentrated in large companies, competition between largest companies Supplier Power: Low Substitutes: Generic drugs Buyer Power: Low, buyers are individual consumers Barriers to enter: long & costly FDA approval (10 years on average), high R&D cost, R&D process is very difficult and tedious

16. Patent Expiration Patents grant exclusive rights for 20 years Generic drug is a low cost substitute Increasing use of generic drugs

17. Substantial loss in market share

18. Economic Analysis

19. Positive trends Aging population and the baby boomers People living longer with chronic disease Obesity and diabetes epidemics Technological advances Global reach of disease Personalized medicine

20. US Projected Population from 2010-2050

21. US Obesity Trend No Data <10% 10%–14% 15%–19% 20%–24% 25%–29% ≥30%

22. Trends in National Health Expenditure

23. Healthcare Reform Could be beneficial to the industry because more people will be insured and able to seek out medical attention. With more people insured, the number of medical procedures performed should increase. The sector has been oversold out

24. Financial Analysis

25. EBITDA MARGIN

26. NET PROFIT MARGIN

27. RETURN ON EQUITY

28. REVENUE GROWTH

29. EARNINGS PER SHARE

30. CASH FLOW/ SHARE

31. Valuation Analysis

32. Current Valuations Below the median in every category Valuations will revert to the mean after restored market confidence Not due to a change in industry fundamentals Future drivers of Revenue look promising Demographics Penetration in emerging markets Healthcare expenditures up

33. Relative to S&P 500

34. Recommendations

35. Add 38 basis points to increase current weight to 150 basis points overweight Reasons: 1.Constant revenue growth, outperforming S&P500 2.Short-term modest economic growth 3.Healthcare reform 4.Patent expiration

36. Questions?