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Procter & Gamble

NYSE: PG
Student Investment Fund Stock Report Analysts: Janel Logan, Amanda Repp and
Padma Venkatraman

BusinessSummary

Recommendation:
LongTermBuy
Procter&Gamble,foundedin

1837andbasedinCincinnati,OH,
RecentPrice(12/04/09):$62.60 Sector:ConsumerStaples
isrecognizedastheworld'slargest

produceranddistributorof TargetPrice: $65.53 SubSector:ConsumerGoods

householdandpersonalproducts.
52WeekRange:$43.93$64.00 StockClassification:ClassicGrowth
PGisorganizedintothreeglobal
businessunits:Beauty;Healthand MarketCapt: $178B InstitutionalOwnership:58%
WellBeing;andHouseholdCare.
P/ERatio: 17.4 DividendYield:2.8%
PGProcterandGambleoperates
EarningsperShare: $4.58 Beta:0.6
inover80countriesandoffers
productsandservicestomore
than180countriesworldwide.PG PricePerformance
hasastrongglobalmarket
presence.In2009,PGgenerated
61%ofitstotalsalesin
internationalmarkets.

Highlights

PGisfocusedondevelopingits
consumerunderstanding,
marketing,andbrandbuilding
techniques.
InvestmentThesis
PGmanages23brandsthat
individuallygenerateover$1 Concernsoverasluggisheconomyin2010ledustoPGwe
billioninannualsalesand20 favorlargecapitalization,lowbeta,defensivestocksthatpay
brandsthatindividuallygenerate aboveaveragedividendsandhavestronggrowthpotentialin
halfofabillioninannualsales. foreignmarkets.
12ofPGsbilliondollarbrandsare PGisthebestconsumerstaplesstockintermsofbrand
currentlythe#1globalmarketshare management,innovationandconsumerunderstanding.
leaderintheirrespectiveproduct ProcterandGamblehassuperiorfinancialstandingandhas
categories. providedshareholderswithsubstantialvaluecreationovertime.
Student Investment Fund: Procter & Gamble

BusinessSegments
PGisorganizedintothreeglobalbusinessunits:Beauty,HealthandWellBeing,andHouseholdCare.

BEAUTYIncludestwosubsegments:
o Beauty(2009Sales$18.79B,23.7%ofsalesrevenue)cosmetics,deodorants,hair
care,personalcleansing,prestige,fragrancesandskincareproducts
Billiondollarbrandsinclude:Head&Shoulders,Olay,PanteneandWella
o Grooming(2009Sales$7.54B,9.54%ofsalesrevenue)bladesandrazors,electric
hairremovaldevices,facialproducts,shaveproductsandhomeappliances
Billiondollarbrandsinclude:Braun,Fusion,GilletteandMach3

HEALTHANDWELLBEINGIncludestwosubsegments:
o HealthCare(2009Sales$13.62B,17.23%ofsalesrevenue)femininecare,oralcare
andpersonalhealthcareproducts
Billiondollarbrands
include:Actonel,
Always,CrestandOral
B
o SnacksandPetCare(2009
Sales$3.11B,3.94%ofsales
revenue)petfoodandsnacks
Billondollarbrands
include:Iamsand
Pringles

HOUSEHOLDCAREIncludestwosub
segments:
o FabricCareandHomeCare
(2009Sales$23.19B,29.33%of
salesrevenue)aircare,
batteries,dishcare,fabriccare
andsurfacecare
Billiondollarbrands
include:Ariel,Dawn,Downy,Duracell,GainandTide

o BabyCareandFamilyCare(2009Sales$14.10B,17.84%ofsalesrevenue)babywipes,
bathtissues,diapers,facialtissuesandpapertowels
Billiondollarbrandsinclude:Bounty,CharminandPampers

Student Investment Fund: Procter & Gamble

BusinessDivestures
ProcterandGamblehasrecentlydivestedtwoofitsbusinesssegmentsinordertorefocusonitscorebusiness
segmentsandtocontinuetomaintainitsstrongportfolioofbrands.

Folgers:OnJune4,2008,PGsolditsFolgerscoffeeunittoJ.M.SmuckerCompanyinanallstockdeal
worthapproximately$2.95billion.

Pharmaceuticals:In2006,thecompanybeganwindingdownitsdiscoverphasepharmaceutical
productsinfavoroflicensinglatestagecompounds,andannouncedin2008itwouldexitthedrug
industryentirely.In2009,PGsolditspharmaceuticalunittoWarnerChilcottina$3.1billioncashdeal.
Asaresultofthedivesture,ProcterandGambleexpectstobooka43centpershareearningsboostin
thesecondquarteroffiscalyear2010.

ThesedivestureswillallowPGtoprimarilyfocusonitspersonalcare,beauty,andhouseholdproductdivisions.
Moreover,itisourassessmentthatthesedivesturesrevealProcterandGamblesstrongfocusonmaintaining
asolidportfolioofbrandsthataddvalueforthecompanyratherthangrowingforgrowth'ssake.

ConsistencyinTopManagement
ProcterandGamblerecentlynamedRobertMcDonaldaspresidentandCEO,succeedingA.G.Lafley,effective
asofJuly2009.ThenewCEORobertMcDonald,otherwiseknownasBobMcDonald,comesintotheposition
witharichcompanybackground.McDonaldpreviouslyservedasViceChairofPGsGlobalBusinessUnitsand
Operations.Furthermore,McDonaldhasvastexperienceinbrandbuildingandmarketdevelopment,andhas
over30yearsofexperiencewithProcterandGamble.

ThenewsofBobMcDonaldbeingnamedCEOofthecompany,shortlyfollowedtheannouncementofPGs
CFOClaytDaleysretirement.DaleywasreplacedJanuary1,2009byJonMoeller.Priortoacceptingthenew
CFOposition,MoellerpreviouslyservedastheVicePresidentandTreasurerofProcterandGamble.Moeller
alsoservedasVicePresidentofFinanceandAccountinginvariousglobalbusinessunitswithinthecompany.
SimilartoMcDonald,MoellerhasdevelopedarichhistoryatProcterandGamble.

Lookingforward,ProcterandGamblecanremainconfidentintheirrecentchangesintopmanagement.Both
executivesuccessorsareindividualswhohaveathoroughandwelldevelopedunderstandingofthe
companyscorebusinessesandinternationalmarkets,gainedthroughmanyyearsofexperiencewithProcter
andGamble.

Student Investment Fund: Procter & Gamble

Competitors
ProcterandGambleprovideslargestandbroadestportfolioofproductsinthehouseholdandpersonalcare
industrywith24billiondollarbrands.PGgenerates43%morerevenuethanitsclosestcompetitor,Unilever
(UL).PGalsomaintainsarelativelyhighoperatingmarginof20.46%in2009,thehighestamongstits
competitors.Moreover,thecompanyinvestsmorethan$2billionannuallyinResearchandDevelopment
nearlytwicethatofUnilever,andequaltothecombinedtotalofitsothermajorcompetitorsAvon,Clorox
Company(CLX),ColgatePalmoliveCompany(CL),EnergizerHoldings(ENR),Henkel,KimberlyClark(KMB),
L'Oreal,andReckittBenckiser.


REVENUE NETINCOME OPERATING DIVIDEND BILLIONDOLLARBRAND(S)
(INMILLIONS) (INMILLIONS) MARGIN YIELD


PAMPERS,PANTENE,CREST,
PROCTER& $79,029 $11,010 20.79% 3.0% TIDE,BOUNTY,DURACELL,
GAMBLE CHARMIN

DOVE,AXE,LIPTON, VASELINE,
UNILEVER $56,546 $7,015 N/A 1.38% SLIMFAST,BEN&JERRYS

CLOROXBLEACH,PINESOL,
CLOROX $5,440 $566 20.12% 3.3% GLAD,BRITAWATERFILTERS,
COMPANY BURTSBEES

HUGGIES,KLEENEX,SCOTT
KIMBERLY $18,730 $,1810 15.95% 3.8% PAPERTOWELS
CLARK

COLGATETOOTHPASTE,
COLGATE $1,4910 $2,310 22.68% 2.2% PALMOLIVEDISHWASHING
PALMOLIVE LIQUID,SOFTSOAP,SPEEDSTICK

Student Investment Fund: Procter & Gamble

GlobalPresence
ProcterandGambleoperatesinover80countriesandoffersproductsandservicesinmorethan180countries
worldwide.

Salesaredividedintofourmainsegments:

NorthAmericaaccountedfor44%oftotalsalesin2009or$34.8billion.

WesternEuropeaccountedfor22%oftotalsalesin2009or$17.4billion.

NorthEastAsiaaccountedfor4%oftotalsalesin2009or$3.2billion.

DevelopingMarketsaccountedfor30%oftotalsalesin2009or$23.7billion.

Student Investment Fund: Procter & Gamble

Currently,internationalsales(salesoutsideofNorthAmerica)generateroughly61%ofProcterandGambles
totalrevenue.Overthepastfiveyears,theaveragegrowthrateforPGsinternationalsaleswas12%which
isalmostthreetimesthatofPGsdomesticmarketsalesgrowthof5%.

Inrecentyears,ProcterandGamblehasheavilypenetrateddevelopingmarkets.Developingmarketsinclude
LatinAmerica,Central&EasternEurope/MiddleEastandAfrica,GreaterChinaand
ASEAN/Australasia/India/Korea.ProcterandGamblessalesindevelopingmarketscomprise30%ofitstotal
salesrevenueupasignificant20%sincethebeginningofthedecade.

InternationalMarketShare
ProcterandGamblemaintainsastrongfocusonitsmarketshare,asthisisakeyfactorforsuccessinthe
ConsumerStaplessectorinwhichtheycompetein.Eachfirmmustcompeteformarketshareandviabilityof
growingfuturesalesforthecompany.Aseconomiesaroundtheworldcontinuetorecoverfollowingthe
globaldownturn,ProcterandGamblerecognizesthatitispertinenttohaveanestablishedmarketsharein
ordertotakeadvantageofnewgrowthopportunitiesandincreasetheirsalesinthefuture.

Developingmarketscurrentlymakeup86%oftheworldspopulation.ProcterandGamblehasalready
establishedastrongmarketshareinthemostcrucialareasofthesedevelopingmarkets:Central&Eastern
Europe,MiddleEast&AfricaRegion,LatinAmerica,GreaterChinaandDevelopingAsia.Itisimportantthat
PGtakesadvantageofopportunitiesintheseparticularmarketsastheseareasprovidethelargest
internationalgrowthopportunities.ProcterandGamblehasestablishedthemselvesastheleaderinmarket
shareintheBladesandRazorsmarkets.TheyarealsofirstandsecondinmarketshareintheShampoosand
Diapersmarkets,respectively.Additionally,theymaintainfirst,secondandthirdmarketsharepositionsinthe
Laundry,FeminineCareandOralCareproductmarkets,respectively.

PurposedInspiredMacroStrategyforGrowth
ProcterandGambleistakingafocusedapproach
towardsitsgrowthopportunities.PGlooksto
growitsleading,globalbrandsandcorecategories. WheretoPlay:
PGwillachievethisbynarrowingthefocusoftheir
portfolio.Therecentdivestureoftheir 1)Growleading,globalbrandsandcore
pharmaceuticalbusinessisjustoneexampleofhow categories
theyarenarrowingtheirfocus.ThiswillallowPGto
focusmoreheavilyontheir43billionandhalf 2)Buildbusinesswithunderservedand
billiondollarbrandsthatgenerate85%oftheir unservedconsumers
revenues.Furthermore,focusingontheexpansion
ofthese43corebrandsintomarkets,wherethey 3)Continuetogrowanddevelopfaster
arecurrentlyunderrepresented. growing,structurallyattractivebusinesseswith
globalleadershippotential
Student Investment Fund: Procter & Gamble

AnotherfocusforProcterandGambleisonbuildingitsbusinessthroughunderservedandunserved
consumers.Aspreviouslymentioned,developingmarketsmakeupmorethan86%oftheworldspopulation.
PGssalesindevelopingmarketstotalednearly$24billionin2009nearlyfivetimesgreaterthantheir
averagecompetitorssalesindevelopingmarkets.ProcterandGamblecontinuestoaimtowardsgrowingits
current19%shareindevelopingmarkets.ThisallowsanattractiveopportunityforPGtofurtheritsgrowth
outreach.InarecentinterviewwithFortuneMagazine,ProcterandGamblesCEOBobMcDonaldexplained
thatthecompanycurrentlyservesapproximately3.84billionoftheworlds7.5billiontotalpopulation.
Moreover,McDonaldexpressedPGsplanstoadd1billionmorecustomersoverthenextfiveyears.

PGsfinalstrategytakesafocusedapproachtowardsgrowingstructurallysoundbusinesses,ratherthan
growingforgrowthssake.Thecompanymaintainsasolidstrategyforfuturegrowththataddsvalue.

KeyStrategiesforSuccess

ConsumerUnderstanding
o Eachyear,ProcterandGambleinteractswithnearly5millionconsumersinover60countries
worldwide.
o ItisimportantforProcterandGambletogaininsightonconsumerunderstandinginorderto
discoverinnovationopportunitiesandtofindwaysinwhichthecompanycanbetterserveits
customers.ItisespeciallyimportantforPGtorecognizeandadjusttoculturaldifferences
amongitsinternationalmarkets.
BrandBuilding
o ProcterandGamblecurrentlyhas23brandswithinitsproductportfoliothatindividually
generateoveronebilliondollarsinsalesannually.PGalsohas20brandsthatgeneratehalfofa
billiondollarsinannualsales.Combined,these43brandsaccountfor85%ofPGstotalsales
and90%ofPGsprofit.PGmaintainsthestrongestperformingportfolioofbrandswithinits
industry.Moreover,PGmaintainsitskeycompetitiveadvantagefortheoverallsuccessofthe
firm.
Innovation
o ProcterandGambleistheindustryleaderintermsofinnovation.EachyearintheU.S.,theIRI
NewProductPacesetterReportranksthebestsellingnewproductswithintheconsumer
market.Overthepast14years,ProcterandGamblehashad114top25pacesettersmore
thansixtimesthenumberofpacesettersoftheirlargestcompetitorscombined.(Pacesetteris
definedasanew,innovativeConsumerPackagedBrandthatexceeds$7.5Minitsfirstyear).
EstablishedGoToMarketCapability
o ProcterandGambleisrankedasthepreferredsupplierandindustryleaderinawiderangeof
capabilitiesincludingclearestcompanystrategy,brandsmostimportanttoretailers,strong
businessfundamentalsandinnovativemarketingprograms.
Scale
o ProcterandGambleisabletotakeadvantageofitsabilitytooperateonalargescale.This
allowsPGtoshareprocessesandproceduresamongthecategoriesunderwhichtheyoperate.
ThisalsocreatestheabilityforPGtocapitalizeonitsinternationalexpansionopportunities
sincetheyhavethecapabilitiesandresourcesforsuchventures.
Student Investment Fund: Procter & Gamble

ValuationAnalysis
DividendGrowth:Despiteasolidhistoricalyearto
yeardividendgrowthrateof16.9%,dividendgrowth
OurvaluationanalysisforPGwasconductedusing hasbeendecreasingfromits2005highof37%growth
conservativemodelassumptions.Ourdiscounted tomoremoderatemeasures.Forecasteddividend
cashflowmodelestimatesPGsintrinsicvalueat growthwasreducedtoalevelof10%fortheforecast.
$65.53persharefor2009,reaching$82.91by2019.

IncomeStatementInputs: BalanceStatementInputs:

Property,PlantandEquipment:PGsfiveyear
RevenueGrowth:Despitehavingasolid5year historicalaveragePPE/Salesof25.8%andhasbeen
historicalgrowthof8.6%,PGfacedrevenuegrowth improvingoverthepastthreeyears.DespitePGs
of3.3%during2009.In2009,PGsawtheadverse recentefficiencywithmanagingitscapital
affectsofaweakconsumerspendingenvironment, investments,westeadilygrewPPE/Salesthroughout
whichwasexacerbatedbyitsinabilitytofurther ourforecastfrom24.0%in2010to26%by2019.
lowerpricesonitshigherpricedpremiumproducts Thismoreaccuratelyreflectsitshistoricalaverage
duringtherecession.Wethereforeforecasted andreflectsmoreofaworstcasescenario
revenuegrowthonayeartoyearbasis.For2010, assumption.
weagainpenalizedPGsrevenuegrowthtoalevelof
3%,andused2%in2011.WeexpectPGsrevenue CapitalAssetPricingModel
growthtobouncebackoutoftherecessionwitha

CostofEquity:Costofequityof7.85%was
moderategrowthrateof5%in2012.Following
calculatedusingariskfreerateof4.25%,marketrisk
2012,weforecastthegrowthofrevenuetotaper
premiumof6%andbetaof0.6.Conductinga
downtoalongtermgrowthrateof3%by2019.
regressionanalysisonPGshistoricalpricessince
Selling,GeneralandAdministrativeExpenses:PGs
2002yieldedabetaestimateof.49.Tomaintain
historicalaverageSG&A/Salesexpensewas30.4%.
conservatisminourmodel,weincreasedthebeta
Forourforecast,weincreasedSG&A/Salesto32%
estimateto0.6toallowforreversiontothemean.
duetoPGsstatedintentiontoincreaseadvertising

expendituresinthefuture.

CostofGoodsSold:PGoperatedwithahistorical WeightedAverageCostofCapitalAssumptions

averageCOGS/Salesof48.6%.Thisaveragewas

maintainedthroughouttheforecastedyears. WeightedAverageCostofCapital:WACCof7.4%
ResearchandDevelopment:PGchargesitsR&D wascalculatedusingcostsof2.7%inshortterm
coststoitsSG&Aexpenses,whichisprimarilywhy debtand5.28%inlongtermdebt.Costofequity
R&D/Saleswere0%asofthepastthreeyears.We wascalculatedat7.85%asdescribedabove.

maintained.5%R&D/Salesfortheforecast. LongtermHorizonValueGrowthRate:Weapplied
TaxRate:SincePGstaxratehasbeensteadily alongtermhorizongrowthrateof3%forPGto
decliningfromits30.6%highin2005,wemaintained maintainaconservativeoutlookforthecompany's
itshistoricalaveragerateof28.2%forthe longtermprospects.
forecastedyears.
ShareGrowth:In2007,PGannounceditsplanfora
repurchaseof$24$30billionofitscommonstock

through2010.Therefore,weheldPGssharegrowth
to0%throughtheforecastedyears.
Student Investment Fund: Procter & Gamble

Profitability

Returns:PGmaintainsstablelevelsofreturnson
assetsandequitythroughouttheforecast.PG
generatedahistoricalaverage8.7%returnon
assets.This8.7%isslightlycompressedtoan
average8%returnonassetsthrough2019.PGalso
generatedanaverage21.1%returnonequityover
thepastfiveyears.Ourconservativemodeling
approachisreflectedinanarrowingofPGsaverage
returnonequityto14%throughouttheforecasted
years.



EarningsPerShare&DividendsPerShare:PG's

abilitytogenerateprofitsforshareholdersis
reflectedinitsearningspershareanddividendsper
sharemetrics.PGgeneratedahistoricalaverage
growthinearningspershareof8.1%.Whileour
conservativemodelreducesthisratetonearlya
quarterofitshistoricalaverageEPSgrowth,PGs
forecastedEPSgrowthremainsapositive2.2%
through2019.PGalsodeliveredamodesthistorical
averageDPSof11.4%toitsshareholders.PGsDPS
wastightenedtoalevelof8.2%annualgrowthfor
theforecast.Evencompressedtotheserates,PG
managestogrowbothEPSandDPSathealthyand
sustainablelevelsthrough2019.


ValueCreationMetrics

FreeCashFlow:Overthepastfiveyears,PGhas
successfullyshownitsabilitytocreatefreecash
flow.Aftergrowingatahistoricalyearlyaverage
rateof17.7%,PGsFCFwasdrasticallyreducedtoa
sustainablelevelof2.7%averagegrowthforthe
forecast.
NetOperatingProfitAfterTax:
Historically,PGhasgrownitsNOPATatanaverage
rateof11.03%.Followingasignificantreductionin
NOPATin2010,weforecastNOPATtogrowatan
averageyearlygrowthrateof3%.



Student Investment Fund: Procter & Gamble




EconomicValueAdded:In2009,PGcreated$10.2
billionineconomicprofit.OurforecasttightensEVA
to$8.7billionand$8.5billionin2010and2011,
respectively.ThisdecreaseinEVAwasduetoour
projectedforecastsof3%and2%revenuegrowth
fortheyears,inrespectiveorder.Despitethisdip,
economicprofitforPGgrowsatasteadyaveragerate
of3%peryearfortheforecast.

MarketValueAdded:PGcreatedMVAof$143.4
billionin2009.For2010,thismetricgrewto$148
billion.PGsMVAisprojectedtocontinueitsgrowth

atayearlyrateof3%through2019.




ValueSpread:ROICvs.WACC

ROIC:Historicalaveragereturnoninvestedcapital
was46.7%forPG.In2009,generatedasignificantly
higherROICof54.4%.Fortheforecast,ROICwas
slimmedtoanaverage42.4%through2019.
WACC:Weightedaveragecostofcapitalwas
calculatedat7.4%.Asdescribedabove,the
riskfreerate,beta,andmarketriskpremiumwere
increasedtomaintainconservatism.
ValueSpread(ROICWACC):ProcterandGambles
historicalaveragevaluespreadwas39.9%.In2009,
PGsvaluespreadwas44%.PGsforecastedvalue
spreadaverages35%.Evenwithaconsiderably
lowerforecastedvaluespread,PGdisplays
considerablepotentialtofurtherincreaseitsvalue
creationbeyondourforecastedROICWACCspread
measure.








Student Investment Fund: Procter & Gamble

RelativeValuation
PricetoEarnings:ProcterandGamblecurrently
tradesatalowerPEmultipleof13.5,whichislower
thantwoofitstopcompetitors,ColgatePalmolive
(CL)andClorox(CLX),withPEmultiplesof19and15
respectively.




PricetoCashFlow:PGspricetocashflowof11is
anadditionalrelativevaluationmetricthatfavorsPG
comparedtoColgatePalmolivessignificantlyhigher
PCFof16;CloroxsPCFisalso11.

ValuationMeasures
AltmanZScoreTestforBankruptcy:
TheAltmanZScorewasdevelopedtopredicta
companyslikelihoodofbankruptcyusingfive
financialmetrics.Companiesscoringabove2.9are
consideredtobefinanciallyhealthy.Lowerscores
reflectahigherlikelihoodoffailureofafirm.
Historically,PGscoredanaverage3.19wellabove

thesafezone.ProcterandGamblealsoscoredinthe
safezonewithanaverage3.92fortheforecast.

PiotroskisFinancialFitnessScorecard
Thisscorecardevaluatescompaniesbasedon
incomestatementandbalancesheetperformance.
Firmscanscoreuptoamaximumof11points.
Historically,ProcterandGamblescoredanaverage
of7out11.PGsaveragescorefortheforecasted
yearsis8outof11,whichsuggestsincreased
financialstabilitythrough2019.
Student Investment Fund: Procter & Gamble


GrahamandDodd InsiderTrading
ThomsonReutersmetriciscomputedusinga Overtime,netinsiderstendtosellofftheirpositions
GrahamandDoddapproachtovaluation.PG,ranked inordertodiversifytheirholdings.Mostrecently,
inthe7thDecile,indicatesthatProcterandGambles PGsnetinsidershaveslowedthesellingoftheir
investorsarepayingalowerpremiumforfuture positions.Overall,netinsidershavedivestedan
earningsthan70%ofinvestorsintheS&P500.This aggregate$43millionsince2004.
isindicativeofundervaluation.


EarningsMomentum
ProcterandGamblehasfavorableearnings
momentumdespiterecenttougheconomictimes.
PGsearningsmomentumisbetterthan87%of
stocksintheS&P500.

OtherAnalystsRecommendation
Rankedonascalefrom1to5(1beingastrongby
and5beingastrongsell)PGhasameananalysts
recommendationof1.9,indicatingabuysignalfrom
analysts


CorrelationwithStudentInvestmentFundStocks
Correlationsarecalculatedbetweenstockreturnsto
revealhowinvestmentsmoveinrelationtoone
anotherwithinaportfolio.Lowcorrelationsare
favorableandindicateaweak
relationinperformance DaystoCover
betweentwoequities.Inorder Thisratiomeasurestheperiodoftimeitwilltake
toensureProcterandGamble shortsellerstocovertheirpositionsrelativetothe
wouldfitfavorablyinto stockstotaltradingvolume.AsofJanuary2006,
WashburnsStudent PGsstabledaystocoverratioremainslow,
InvestmentFund,werana suggestingshortsellershavelittleinterestinthe
correlationofProcterand stock.
Gambleshistoricalreturns
since2004withrespecttothe
historicalreturnsofstocks
currentlyheldintheSIFover
thesametimeperiod.Procter
andGamblesstrongestcorrelationof.49was
sharedbetweenJohnsonandJohnson(JNJ)and
UnitedTechnologiesIncorporated(UTX).PG'slow
correlationwiththerestoftheportfolioshould
ensuretheStudentInvestmentFundmaintainsits
lowerthanaveragebetaexposure.

Procter and Gamble Technical Appendix, Page 1 of 8

A B C D E F G H I J K L M N
1 Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in
2 Enter Firm Ticker PG the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether
3 the historical average is truly representative of what the firm can achieve in the future.
4 values in millions
5 Historical Income Statements Forecasting Percentages
6 Enter first financial statement year in cell B6 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Average Manual
7 Total revenue 56,741 68,222 74,832 81,748 79,029 Revenue Growth 20.2% 9.7% 9.2% -3.3% 8.6%
8 Cost of goods sold 27,872 33,125 35,659 39,536 38,898 COGS % of Sales 49.1% 48.6% 47.7% 48.4% 49.2% 48.6%
9 Gross profit 28,869 35,097 39,173 42,212 40,131
10 SG&A expense 16,460 19,773 24,170 25,575 24,008 SG&A % of Sales 29.0% 29.0% 32.3% 31.3% 30.4% 30.4% 32.0%
11 Research & Development 1,940 2,075 0 0 0 R&D % of Sales 3.4% 3.0% 0.0% 0.0% 0.0% 1.3% 0.5%
12 Depreciation/Amortization 0 0 0 0 0 D&A % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
13 Interest expense (income), operating 0 0 0 0 0 Inc. Exp. Oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
14 Non-recurring expenses 0 0 0 0 0 Exp. Non-rec 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
15 Other operating expenses 0 0 0 0 0 Other exp. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
16 Operating Income 10,469 13,249 15,003 16,637 16,123
17 Interest income (expense), non-operating 0 0 0 0 0 Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
18 Gain (loss) on sale of assets 0 0 0 0 0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
19 Other income, net 346 283 565 462 560 Other income, net 0.6% 0.4% 0.8% 0.6% 0.7% 0.6%
20 Income before tax 9,981 12,413 14,264 15,632 15,325
21 Income tax 3,058 3,729 4,201 3,834 4,032 Tax rate 30.6% 30.0% 29.5% 24.5% 26.3% 28.2%
22 Income after tax 6,923 8,684 10,063 11,798 11,293
23 Minority interest 0 0 0 0 0 Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
24 Equity in affiliates 0 0 0 0 0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
25 U.S. GAAP adjustment 0 0 0 0 0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
26 Net income before extraordinary items 6,923 8,684 10,063 11,798 11,293
27 Extraordinary items, total 0 0 277 277 2,143 Extrordinary items Too unpredictable to forecast, set to zero in the forecast
28 Net income 6,923 8,684 10,340 12,075 13,436
29 Total adjustments to net income (136) (148) (161) (176) (192) Adjustments to NI Too unpredictable to forecast, set to zero in the forecast
30 Basic weighted average shares 2,516 3,055 3,159 3,081 2,952 Share growth 21.4% 3.4% -2.5% -4.2% 4.1% 0.0%
31 Basic EPS excluding extraordinary items 2.75 2.84 3.19 3.83 3.83
32 Basic EPS including extraordinary items 2.75 2.84 3.27 3.92 4.55
33 Diluted weighted average shares 2,737 3,286 3,399 3,317 3,154 Diluted share growth 20.1% 3.4% -2.4% -4.9% 3.6% 0.0%
34 Diluted EPS excluding extraordinary items 2.53 2.64 2.96 3.56 3.58
35 Diluted EPS including extraordinary items 2.53 2.64 3.04 3.64 4.26
36 Dividends per share -- common stock 1.03 1.16 1.28 1.45 1.64
37 Gross dividends -- common stock 2,595 3,555 4,048 4,479 4,852 Dividend growth 37.0% 13.9% 10.6% 8.3% 16.9% 10.0%
38 Retained earnings 4,328 5,129 6,292 7,596 8,584
39
40
41
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Procter and Gamble Technical Appendix, Page 2 of 8

O P Q R S T U V W X Y Z
1
Revenues grow at the same rate each year unless a growth value is manually entered in the cell above the forecast year, in which case the year-by-year value
2 overrides the historical or manual average. It makes sense to start tapering the growth forecasts 5 or 6 years into the forecast period.
3
4 Year-by-year revenue growth -3.00% -2.00% 5.00% 5.00% 4.00% 4.00% 3.50% 3.00% 3.00% 3.00%
5 Forecasted Income Statements -- 10 Years
6 year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
7 Total revenue 76,658 75,125 78,881 82,825 86,138 89,584 92,719 95,501 98,366 101,317
8 Cost of goods sold 37,242 36,497 38,322 40,238 41,848 43,522 45,045 46,396 47,788 49,222
9 Gross profit 39,416 38,628 40,559 42,587 44,290 46,062 47,674 49,104 50,577 52,095
10 SG&A expense 24,531 24,040 25,242 26,504 27,564 28,667 29,670 30,560 31,477 32,421
11 Research & Development 383 376 394 414 431 448 464 478 492 507
12 Depreciation/Amortization 0 0 0 0 0 0 0 0 0 0
13 Interest expense (income), operating 0 0 0 0 0 0 0 0 0 0
14 Non-recurring expenses 0 0 0 0 0 0 0 0 0 0
15 Other operating expenses 0 0 0 0 0 0 0 0 0 0
16 Operating Income 14,502 14,212 14,923 15,669 16,295 16,947 17,540 18,067 18,609 19,167
17 Interest income (expense), non-operating (957) (651) (596) (657) (653) (672) (748) (785) (865) (993)
18 Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0
19 Other income, net 468 459 482 506 526 547 566 583 601 619
20 Income before tax 14,014 14,019 14,808 15,517 16,169 16,822 17,359 17,864 18,345 18,793
21 Income tax 3,951 3,953 4,175 4,375 4,559 4,743 4,894 5,037 5,172 5,298
22 Income after tax 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
23 Minority interest 0 0 0 0 0 0 0 0 0 0
24 Equity in affiliates 0 0 0 0 0 0 0 0 0 0
25 U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0
26 Net income before extraordinary items 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
27 Extraordinary items, total 0 0 0 0 0 0 0 0 0 0
28 Net income 10,063 10,067 10,633 11,142 11,610 12,079 12,465 12,828 13,173 13,495
29 Total adjustments to net income 0 0 0 0 0 0 0 0 0 0
30 Basic weighted average shares 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952 2,952
31 Basic EPS excluding extraordinary items 3.41 3.41 3.60 3.77 3.93 4.09 4.22 4.35 4.46 4.57
32 Basic EPS including extraordinary items 3.41 3.41 3.60 3.77 3.93 4.09 4.22 4.35 4.46 4.57
33 Diluted weighted average shares 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154
34 Diluted EPS excluding extraordinary items 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
35 Diluted EPS including extraordinary items 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
36 Dividends per share -- common stock 1.81 1.99 2.19 2.41 2.65 2.91 3.20 3.52 3.88 4.26
37 Gross dividends -- common stock 5,337 5,871 6,458 7,104 7,814 8,596 9,455 10,401 11,441 12,585
38 Retained earnings 4,725 4,196 4,175 4,038 3,796 3,484 3,010 2,427 1,732 910
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Procter and Gamble Technical Appendix, Page 3 of 8

AA AB AC AD AE AF AG AH AI AJ AK AL AM AN
1
Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the
2 Enter Firm Ticker PG manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the
3 historical average is truly representative of what the firm can achieve in the future.
4 values in millions
5 Historical Balance Sheets Forecasting Percentages
6 year 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Average Manual
7 Assets PPE Growth 31.0% 4.1% 5.6% -5.7% 1.2%
8 Cash & equivalents 6,389 6,693 5,354 3,313 4,781 Cash % of Sales 11.3% 9.8% 7.2% 4.1% 6.0% 7.7%
9 Short term investments 1,744 1,133 202 228 0 ST Invest. % of Sales 3.1% 1.7% 0.3% 0.3% 0.0% 1.1%
10 Receivables, total 4,185 5,725 6,629 6,761 5,836 Receivables % Sales 7.4% 8.4% 8.9% 8.3% 7.4% 8.1%
11 Inventory, total 5,006 6,291 6,819 8,416 6,880 Inventory % of Sales 8.8% 9.2% 9.1% 10.3% 8.7% 9.2%
12 Prepaid expenses 1,924 2,876 3,300 3,785 3,199 Pre. Exp. % of Sales 3.4% 4.2% 4.4% 4.6% 4.0% 4.1%
13 Other current assets, total 1,081 1,611 1,727 2,012 1,209 Other CA % of Sales 1.9% 2.4% 2.3% 2.5% 1.5% 2.1%
14 Total Current Assets 20,329 24,329 24,031 24,515 21,905
15 Property, plant and equipment (net) 14,332 18,770 19,540 20,640 19,462 Net PPE % of Sales 25.3% 27.5% 26.1% 25.2% 24.6% 25.8%
16 Goodwill 19,816 55,306 56,552 59,767 56,512 Goodwill % of Sales 34.9% 81.1% 75.6% 73.1% 71.5% 67.2%
17 Intangibles 4,347 33,721 33,626 34,233 32,606 Intangibles % of Sales 7.7% 49.4% 44.9% 41.9% 41.3% 37.0%
18 Long term investments 0 0 0 0 0 LT Invest. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
19 Notes receivable -- long term 0 0 0 0 0 Notes Rec. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
20 Other long term assets, total 2,703 3,569 4,265 4,837 4,348 Other LT ass. % Sales 4.8% 5.2% 5.7% 5.9% 5.5% 5.4%
21 Other assets, total 0 0 0 0 0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
22 Total assets 61,527 135,695 138,014 143,992 134,833
23 Liabilities and Shareholders' Equity
24 Accounts payable 3,802 4,910 5,710 6,775 5,980 Acc. Payable % Sales 6.7% 7.2% 7.6% 8.3% 7.6% 7.5%
25 Payable/accrued 0 0 0 0 0 Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
26 Accrued expenses 7,531 9,587 9,586 10,154 7,879 Acc. Exp. % of Sales 13.3% 14.1% 12.8% 12.4% 10.0% 12.5%
27 Notes payable/short term debt 8,835 198 9,495 13,084 0 Notes payable % Sales 15.6% 0.3% 12.7% 16.0% 0.0% 8.9%
28 Current portion of LT debt/Capital leases 2,606 1,930 2,544 0 16,320 Curr. debt % of Sales 4.6% 2.8% 3.4% 0.0% 20.7% 6.3%
29 Other current liabilities 2,265 3,360 3,382 945 722 Other curr liab % Sales 4.0% 4.9% 4.5% 1.2% 0.9% 3.1%
30 Total Current Liabilities 25,039 19,985 30,717 30,958 30,901
31 Long term debt, total 12,887 35,976 23,375 23,581 20,652 LT debt % of Sales LT debt is manually adjusted for AFN in the pro formas
32 Deferred income tax 1,896 12,354 12,015 11,805 10,752 Def. inc. tax % Sales 3.3% 18.1% 16.1% 14.4% 13.6% 13.1%
33 Minority interest 0 0 0 0 0 Min. Int. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
34 Other liabilities, total 3,230 4,472 5,147 8,154 9,429 Other liab. % of Sales 5.7% 6.6% 6.9% 10.0% 11.9% 8.2%
35 Total Liabilities 43,052 72,787 71,254 74,498 71,734
36 Preferred stock (redeemable) 1,483 1,451 1,406 1,366 1,324
37 Preferred stock (unredeemable) 0 0 0 0 0
38 Common stock 2,977 3,976 3,990 4,002 4,007
39 Additonal paid-in capital 3,030 57,856 59,030 60,307 61,118
40 Retained earnings (accumluated deficit) 31,004 35,666 41,797 48,986 57,309
41 Treasury stock -- common (17,194) (34,235) (38,772) (47,588) (55,961) Set to last historical year's level throughout the forecasts.
42 ESOP Debt Guarantee (1,259) (1,288) (1,308) (1,325) (1,340) Set to last historical year's level throughout the forecasts.
43 Other equity, total (1,566) (518) 617 3,746 (3,358) The model uses the more conservative diluted common shares
44 Total Shareholders' Equity 18,475 62,908 66,760 69,494 63,099 number for total shares outstanding.
45 Total Liabilities and Shareholders' Equity 61,527 135,695 138,014 143,992 134,833
46 Diluted weighted average shares 2,737 3,286 3,399 3,317 3,154 Diluted share growth 20.1% 3.4% -2.4% -4.9% 3.6% 0.0%
47 Total preferred shares outstanding 0 0 0 0 0 model
The Preferred share
uses the growth
more conservative diluted common shares
48 number for total shares outstanding.
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Procter and Gamble Technical Appendix, Page 4 of 8

AO AP AQ AR AS AT AU AV AW AX AY AZ
1
Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49
2
3 0.07 20,824 22,282 23,842 25,511 27,296 29,207 31,252 33,439 35,780 38,285
4 Year-by-year PPE/Sales 24.00% 24.00% 24.00% 25.00% 25.00% 25.00% 26.00% 26.00% 26.00% 26.00%
5 Forecasted Balance Sheets -- 10 Years
6 year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
7 Assets
8 Cash & equivalents 6,800 6,800 6,047 6,349 6,603 6,867 7,107 7,321 7,540 7,766
9 Short term investments 810 794 833 875 910 947 980 1,009 1,039 1,071
10 Receivables, total 6,176 6,052 6,355 6,673 6,939 7,217 7,470 7,694 7,925 8,162
11 Inventory, total 7,077 6,935 7,282 7,646 7,952 8,270 8,559 8,816 9,081 9,353
12 Prepaid expenses 3,173 3,109 3,265 3,428 3,565 3,708 3,838 3,953 4,071 4,193
13 Other current assets, total 1,620 1,587 1,667 1,750 1,820 1,893 1,959 2,018 2,079 2,141
14 Total Current Assets 25,655 25,278 25,448 26,721 27,790 28,901 29,913 30,810 31,735 32,687
15 Property, plant and equipment (net) 18,398 18,030 18,931 20,706 21,535 22,396 24,107 24,830 25,575 26,342
16 Goodwill 51,542 50,511 53,037 55,689 57,916 60,233 62,341 64,211 66,138 68,122
17 Intangibles 28,388 27,820 29,211 30,672 31,899 33,175 34,336 35,366 36,427 37,520
18 Long term investments 0 0 0 0 0 0 0 0 0 0
19 Notes receivable -- long term 0 0 0 0 0 0 0 0 0 0
20 Other long term assets, total 4,157 4,074 4,277 4,491 4,671 4,858 5,028 5,179 5,334 5,494
21 Other assets, total 0 0 0 0 0 0 0 0 0 0
22 Total assets 128,140 125,713 130,906 138,279 143,810 149,563 155,725 160,396 165,208 170,164
23 Liabilities and Shareholders' Equity
24 Accounts payable 5,731 5,617 5,898 6,192 6,440 6,698 6,932 7,140 7,354 7,575
25 Payable/accrued 0 0 0 0 0 0 0 0 0 0
26 Accrued expenses 9,586 9,395 9,864 10,357 10,772 11,203 11,595 11,943 12,301 12,670
27 Notes payable/short term debt 6,831 6,694 7,029 7,381 7,676 7,983 8,262 8,510 8,765 9,028
28 Current portion of LT debt/Capital leases 4,825 4,729 4,965 5,213 5,422 5,639 5,836 6,011 6,192 6,377
29 Other current liabilities 2,377 2,330 2,446 2,569 2,671 2,778 2,875 2,962 3,051 3,142
30 Total Current Liabilities 29,351 28,764 30,202 31,712 32,981 34,300 35,501 36,566 37,663 38,792
31 Long term debt, total 14,624 8,915 7,693 8,677 8,438 8,653 9,936 10,523 11,895 14,183
32 Deferred income tax 10,050 9,849 10,342 10,859 11,293 11,745 12,156 12,521 12,896 13,283
33 Minority interest 0 0 0 0 0 0 0 0 0 0
34 Other liabilities, total 6,291 6,165 6,473 6,797 7,069 7,351 7,609 7,837 8,072 8,314
35 Total Liabilities 60,316 53,693 54,710 58,045 59,780 62,049 65,201 67,446 70,526 74,573
36 Preferred stock (redeemable) 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324 1,324
37 Preferred stock (unredeemable) 0 0 0 0 0 0 0 0 0 0
38 Common stock 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007 4,007
39 Additonal paid-in capital 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118 61,118
40 Retained earnings (accumluated deficit) 62,034 66,230 70,406 74,444 78,240 81,723 84,733 87,160 88,892 89,802
41 Treasury stock -- common (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961) (55,961)
42 ESOP Debt Guarantee (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340) (1,340)
43 Other equity, total (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358) (3,358)
44 Total Shareholders' Equity 67,824 72,020 76,196 80,234 84,030 87,513 90,523 92,950 94,682 95,592
45 Total Liabilities and Shareholders' Equity 128,140 125,713 130,906 138,279 143,810 149,563 155,725 160,396 165,208 170,164
46 Total common shares (diluted) 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154 3,154
47 Total preferred shares outstanding 0 0 0 0 0 0 0 0 0 0
48 AFN (interactive with 3 items below) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
49 Adjustment to LT Debt (use Goal Seek) (6,028.4) (5,708.8) (1,221.9) 984.3 (239.5) 215.1 1,283.4 586.7 1,372.4 2,287.6
50 Issue Common Stock to Fund AFN
51 Set Balance Sheet Cash Lower to Fund AFN 6,800.0 6,800
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Procter and Gamble Technical Appendix, Page 5 of 8

BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BP
1 Enter Firm Ticker PG
2 values in millions
3 Historical Ratios and Valuation Model Forecasted Ratios and Valuation Model -- 10 Years
4 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
5 Liquidity
6 Current 0.81 1.22 0.78 0.79 0.71 0.87 0.88 0.84 0.84 0.84 0.84 0.84 0.84 0.84 0.84
7 Quick 0.61 0.90 0.56 0.52 0.49 0.63 0.64 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
8 Net Working Capital to Total Assets (0.08) 0.03 (0.05) (0.04) (0.07) (0.03) (0.03) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04) (0.04)
9 Asset Management
10 Days Sales Outstanding 26.92 30.63 32.33 30.19 26.95 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41 29.41
11 Inventory Turnover 11.33 10.84 10.97 9.71 11.49 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83 10.83
12 Fixed Assets Turnover 3.96 3.63 3.83 3.96 4.06 4.17 4.17 4.17 4.00 4.00 4.00 3.85 3.85 3.85 3.85
13 Total Assets Turnover 0.92 0.50 0.54 0.57 0.59 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
14 Debt Management
15 Long-Term Debt to Equity 69.8% 57.2% 35.0% 33.9% 32.7% 21.6% 12.4% 10.1% 10.8% 10.0% 9.9% 11.0% 11.3% 12.6% 14.8%
16 Total Debt to Total Assets 35.3% 26.7% 23.8% 25.5% 15.3% 16.7% 12.4% 11.2% 11.6% 11.2% 11.1% 11.7% 11.9% 12.5% 13.6%
17 Times Interest Earned N/A N/A N/A N/A N/A 15.2 21.8 25.0 23.8 25.0 25.2 23.5 23.0 21.5 19.3
18 Profitability
19 Gross Profit Margin 50.9% 51.4% 52.3% 51.6% 50.8% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4% 51.4%
20 Operating Profit Margin 18.5% 19.4% 20.0% 20.4% 20.4% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9% 18.9%
21 Net After-Tax Profit Margin 12.2% 12.7% 13.8% 14.8% 17.0% 13.1% 13.4% 13.5% 13.5% 13.5% 13.5% 13.4% 13.4% 13.4% 13.3%
22 Total Assets Turnover 0.92 0.50 0.54 0.57 0.59 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
23 Return on Assets 11.3% 6.4% 7.5% 8.4% 10.0% 7.9% 8.0% 8.1% 8.1% 8.1% 8.1% 8.0% 8.0% 8.0% 7.9%
24 Equity Multiplier 3.33 2.16 2.07 2.07 2.14 1.89 1.75 1.72 1.72 1.71 1.71 1.72 1.73 1.74 1.78
25 Return on Equity 37.5% 13.8% 15.5% 17.4% 21.3% 14.8% 14.0% 14.0% 13.9% 13.8% 13.8% 13.8% 13.8% 13.9% 14.1%
26 Free Cash Flow Per Share $1.48 $3.10 $4.04 $3.48 $3.29 $3.34 $3.38 $2.94 $3.40 $3.53 $3.40 $3.84 $3.96 $4.07
27 EPS (using diluted shares, excluding extraordinary item 2.53 2.64 2.96 3.56 3.58 3.19 3.19 3.37 3.53 3.68 3.83 3.95 4.07 4.18 4.28
28 DPS (dividends per share) 0.95 1.08 1.19 1.35 1.54 1.69 1.86 2.05 2.25 2.48 2.73 3.00 3.30 3.63 3.99
29
30 Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) Forecasted Valuation Metrics -- 10 Years
31 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
32 NOPAT (net operating profit after tax) 7,261 9,269 10,584 12,557 11,881 10,413 10,205 10,715 11,251 11,701 12,169 12,595 12,973 13,362 13,763
33 ROIC (return on invested capital) 39.1% 40.3% 45.9% 56.6% 51.4% 45.0% 44.7% 46.9% 45.3% 45.3% 45.3% 43.9% 43.9% 43.9% 43.9%
34 EVA (economic value added) 5,886 7,568 8,879 10,913 10,171 8,701 8,517 9,024 9,414 9,790 10,182 10,470 10,784 11,107 11,440
35 FCF (free cash flow) N/A 4,866 10,520 13,402 10,982 10,381 10,532 10,668 9,280 10,708 11,137 10,728 12,111 12,475 12,849
36 Weighted Average Cost of Capital 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
37 Net Operating Working Capital (NOWC) 4,247 4,212 3,506 1,561 3,638 4,735 4,776 3,921 4,118 4,282 4,454 4,609 4,748 4,890 5,037
38 Operating Long Term Assets 14,332 18,770 19,540 20,640 19,462 18,398 18,030 18,931 20,706 21,535 22,396 24,107 24,830 25,575 26,342
39 Total Operating Capital 18,579 22,982 23,046 22,201 23,100 23,133 22,806 22,853 24,824 25,817 26,850 28,716 29,578 30,465 31,379
40
41 Valuation (in millions) -- through year 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
42 Long-term Horizon Value Growth Rate (user-supplied) 3.00%
43 PV of Forecasted FCF, discounted at 7.40% $222,563 $228,656 $235,048 $241,777 $250,391 $258,216 $266,191 $275,166 $283,420 $291,923 $300,681
44 Value of Non-Operating Assets $4,781 $7,610 $7,594 $6,880 $7,224 $7,513 $7,814 $8,087 $8,330 $8,580 $8,837
45 Total Intrinsic Value of the Firm $227,344 $236,266 $242,642 $248,657 $257,616 $265,729 $274,005 $283,253 $291,750 $300,503 $309,518
46 Intrinsic Market Value of the Equity $206,692 $215,614 $221,990 $228,005 $236,964 $245,077 $253,353 $262,601 $271,098 $279,851 $288,866
47 Per Share Intrinsic Value of the Firm $65.53 $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
48 MVA (market value added) $143,593 $147,789 $149,969 $151,809 $156,730 $161,047 $165,840 $172,078 $178,148 $185,169 $193,274
49 Weighted Average Cost of Capital Calculations Capital Asset Pricing Model
50 Item Value Percent Cost Weighted Cost Risk Free Rate 4.25%
51 ST Debt (from most recent balance sheet) 0 0.00% 2.70% 0.00% Beta 0.60
52 LT Debt (from most recent balance sheet) 20,652 11.05% 5.28% 0.42% Market Risk Prem. 6.00%
53 MV Equity (look up stock's mkt. cap and enter in cell BB53 166,245 88.95% 7.85% 6.98% Cost of Equity 7.85%
54 Weighted Average Cost of Capital 7.40%
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Procter and Gamble Technical Appendix, Page 6 of 8

BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH
1
2 Inthissectionwearegoingtoexaminehistoricalandforecastedratios(or"multiples")typicallyusedtovaluestocks P/CF,EnterpriseValue/EBITDA,etc.Wefirst wanttocomparethehistoricaltrends
3 intheseratiostothetrendsintheirforecastedvalues.Ifourforecastedmultiplesaresystematicallyincreasingordecreasingourforecastsmaybetoooptimisticorpessimistic,andourforecast
4 assumptionsmayhavetobeadjusted.Second,wewanttocompareourdiscountedcashflowvaluationestimateswiththosederivedfromthevariousmultiples.Onceagain,ifthereisalarge
5 discrepancybetweenourDCFvaluationestimateofthecompany'sstockandtherangeofvaluesobtainedfromthevariousmultiples,wemaywanttoadjustourforecastassumptions.
6 1.You willneedtolookupthe company'syearendstockpricesandentertheminthefirst5(historical)yearsofthe"persharevalue"category.
7 2.UsetheestimatedDCFpricepershareintheforecastedperiod(linktoyourforecastedpricesincellsBG47BP47.
8
3.MarketcapitalizationwillbecalculatedasbasicweightedsharesxhistoricalyearendpricesandthenforecastedbasicweightedsharesxDCFforecastedprices.
4.Aswithpreviouscalculations,historicalmultiplesuseactualhistoricalvaluesandforecastedmultiplesuseforecastedvalues.
9
10
11
12 Historical Ratios and Valuation Forecasted Ratios and Valuation
13 Inputs 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
14 Per share value (hist. & DCF est.) $57.88 $64.27 $73.42 $61.82 $58.00 $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
15 Market capitalization $145,603 $196,338 $231,934 $190,455 $171,228 $201,812 $207,780 $213,410 $221,795 $229,389 $237,136 $245,791 $253,745 $261,937 $270,375
16 EBITDA $9,981 $12,413 $14,541 $15,909 $17,468 $14,970 $14,671 $15,404 $16,174 $16,821 $17,494 $18,107 $18,650 $19,209 $19,786
17 Enterprise Value $162,419 $227,270 $260,856 $225,173 $188,423 $217,790 $217,913 $223,409 $232,828 $240,224 $248,228 $258,206 $266,781 $276,381 $287,144
18 Multiples
19 Price/Sales 2.57 2.88 3.10 2.33 2.17 2.63 2.77 2.71 2.68 2.66 2.65 2.65 2.66 2.66 2.67
20 Price/EBITDA 14.59 15.82 15.95 11.97 9.80 13.48 14.16 13.85 13.71 13.64 13.56 13.57 13.61 13.64 13.67
21 Price/Free Cash Flow N/A 33.23 21.32 14.57 16.27 19.44 19.73 20.00 23.90 21.42 21.29 22.91 20.95 21.00 21.04
22 Enterprise Value/EBITDA 16.27 18.31 17.94 14.15 10.79 14.55 14.85 14.50 14.39 14.28 14.19 14.26 14.30 14.39 14.51
23 Price/Earnings 22.88 24.32 24.80 17.38 16.20 21.43 22.05 21.44 21.27 21.11 20.97 21.07 21.13 21.24 21.41
24 Free Cash Flow Yield 2.3% 4.2% 6.5% 6.0% 4.8% 4.7% 4.7% 3.9% 4.4% 4.4% 4.1% 4.5% 4.5% 4.4%
25 Dividend Yield 1.64% 1.68% 1.62% 2.18% 2.65% 2.48% 2.64% 2.83% 3.00% 3.19% 3.39% 3.60% 3.84% 4.09% 4.36%
26 Historical Override Forecasted Stock Prices Based on Historical Multiples -- 10 Years
27 Valuation Estimates Based On: Average w/Manual 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E
28 Price/Sales 2.61 $63.38 $62.12 $65.22 $68.48 $71.22 $74.07 $76.66 $78.96 $81.33 $83.77
29 Price/EBITDA 13.63 $69.09 $67.71 $71.10 $74.65 $77.64 $80.74 $83.57 $86.08 $88.66 $91.32
30 Price/Free Cash Flow 21.35 16.27 $57.21 $58.04 $58.79 $51.14 $59.01 $61.37 $59.12 $66.75 $68.75 $70.81
31 Enterprise Value/EBITDA 15.49 $78.56 $76.99 $80.84 $84.88 $88.27 $91.81 $95.02 $97.87 $100.81 $103.83
32 Price/Earnings 21.12 16.20 $55.22 $55.24 $58.35 $61.14 $63.71 $66.28 $68.40 $70.39 $72.28 $74.05
33 Low Price $55.22 $55.24 $58.35 $51.14 $59.01 $61.37 $59.12 $66.75 $68.75 $70.81
34 High Price $78.56 $76.99 $80.84 $84.88 $88.27 $91.81 $95.02 $97.87 $100.81 $103.83
35 DCF Price $68.36 $70.38 $72.29 $75.13 $77.70 $80.33 $83.26 $85.95 $88.73 $91.58
36
37
38 Price/SalesandEnterpriseValue/EBITDAvs.Price ForecastedPerShareStockValues
39 20 $100 $120
P/SandEnt.Value/EBITDA

40
ForecastedValuePerShare

$90 $105
HistoricalorDCFPrice

41 16
42 $80 $90
43 $70 $75
12
44
45 $60 $60
46 8 $50 $45
47
$40 $30
48 4
49 $30 $15
50 0 $20 $0
51
52
53
54
55 Price/Sales EnterpriseValue/EBITDA HistoricalorDCFPrice LowPrice DCFPrice HighPrice
56
Procter and Gamble Technical Appendix, Page 7 of 8

CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB
1
2
3
Price/EarningsRatioandDividendYield EarningsandDividendsPerShare
4 35 5.0% $4.50
$4.00
Price/EarningsRatio
5 30
4.0% $3.50

EPSandDPS
6
25
7 $3.00

DividendYield
20 3.0%
8 $2.50
9 15 $2.00
2.0%
$1.50
10 10
11 1.0% $1.00
5 $0.50
12
0 0.0% $0.00
13
14
15
16
Price/EarningsRatio DividendYield EarningsPerShare DividendsPerShare
17
18
19
20 Gross,OperatingandNetProfitMargins ReturnonAssets,EquityandInvestedCapital
21
60% 60%
22 55% 55%

ROA,ROEandROIC
23 50% 50%
45% 45%
GrossMargin

24 40% 40%
25 35% 35%
26 30% 30%
25% 25%
27 20% 20%
28 15% 15%
10% 10%
29 5% 5%
30 0% 0%
31
32
33
34 GrossMargin OperatingMargin NetMargin ReturnonAssets ReturnonEquity ReturnonInvestedCapital
35
36
37
NOPATandFreeCashFlow(millions)
38 EconomicValueAdded&MarketValueAdded(millions)
39 $16,000
NOPATandFreeCashFlow

$12,000 $210,000
40 $14,000
EconomicValueAdded

$11,500 $190,000
MarketValueAdded

41 $12,000
$11,000
42 $170,000
$10,500 $10,000
43 $150,000
$10,000 $8,000
44
$9,500 $130,000
$6,000
45
$9,000 $110,000
46 $4,000
47
$8,500
$90,000 $2,000
48
$8,000
$7,500 $70,000 $0
49
50
$7,000 $50,000
51
52
53 NOPAT FreeCashFlow
54 EconomicValueAdded MarketValueAdded
55
56
Procter and Gamble Technical Appendix, Page 8 of 8

DC DD DE DF DG DH DI DJ DK DL DM DN DO DP DQ DR DS DT DU DV
1
2
ShortInterest(thousandsofshares) AverageDailyTradingVolume(thousands)
3
4 72,000 32,000

ShortInterst(thousands)
66,000
5 60,000 28,000

Avg.DailyVolume
6 54,000
48,000 24,000
7 42,000
36,000 20,000
8 30,000
9 24,000 16,000
18,000
10 12,000 12,000
6,000
11 0 8,000
12
4,000
13
14
15 AxisTitle
16
17 ShortInterest(thousandsofshares) AverageDailyVolume(thousandsofshares)
18
19
20 DaystoCoverRatio(ShortInterest/Volume) PeerComparison:Price/CashFlowRatio
21
8.0 22 22
22
7.0
DaystoCoverRatio

20 20

CL&CLX
23
6.0
24 18 18
5.0
25 16 16

PG
26
4.0
14 14
27 3.0
2.0 12 12
28
29 1.0 10 10
30 0.0 8 8
31
32
33
34 DaystoCover PG CL CLX
35
36
37
38 PeerComparison:Price/EarningsRatio PeerComparison:Price/SalesRatio
39 30 30 5
40
41 4
25 25
CL&CLX

CL&CLX

42
43
3
PG

44
20 20
2
45
46 15 15
1
47
48 10 10 0
49
50
51
52
53 PG CL CLX PG CL CLX
54
55
56