?

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

Colgate Expands in Personal Care, Unilever Beefs Up Household Product Business

by Erin Lash, CFA Stock Analyst Analysts covering this company do not own its stock. Pricing data through April 04, 2011. Rating updated as of April 04, 2011. Currency amounts expressed with "$" are in U.S. dollars (USD) unless otherwise denoted.

Analyst Note Mar. 23, 2011 | Lauren DeSanto

Stock Price

28.0

Colgate-Palmolives first acquisition since 2006 is a small but smart deal for the firm. By acquiring the Sanex personal-care brand (which includes shower gels and deodorants) from Unilever for $940 million (EUR 672 million), or roughly 3.6 times fiscal 2010 sales, Colgate expands its presence in Western Europe at a time when competition has become particularly heated. Unilever was forced to sell the business for antitrust reasons after it acquired Sara Lees personal-care business in 2009, but it appears that it is getting a solid price for this attractive brand. Moreover, the sale should also enable Unilever to finally close the transaction with Sara Lee, which was announced about a year and a half ago. In addition to the Sanex sale, Unilever announced that it is buying Colgates Colombian laundry detergent business, which includes the Fab, Lavomatic, and Vel brands, for $215 million. This deal fits with Colgates desire to exit the category and is in line with Unilevers recent strategic efforts to build out its higher-margin household business in faster-growing emerging markets. We dont intend to change our fair value estimates for either firm on the basis of these announcements, given the relatively small size of the transactions, but we think Unilever remains fairly valued and Colgate modestly undervalued at current market prices.

Unilevers status as a giant consumer product firm partly resulted from its foresight to secure a first-mover advantage in international markets, particularly in fast-growing developing and emerging markets. However, because of its use of a local go-to-market strategy, Unilevers efforts failed to generate a clear global strategy, while producing a bloated organization in terms of brands, facilities, and employees. In our opinion, Unilever neglected the scale and efficiency advantages that potentially exist for a firm of its size. Management is working to jump-start sales growth and operating margin improvement. The latest restructuring plan seeks to aggressively reduce the firms brand portfolio, manufacturing facilities, and employee base. Although management is still reluctant to target the level of improvement it anticipates from these efforts, we expect the operating margin to approach 16% by 2014 (versus an adjusted operating margin of 14.8% in 2009). We are skeptical whether these efforts will be more successful than past attempts to reduce the complexity of Unilevers business--most notably through the firms path to growth initiative--that failed to generate the pop to sales and margins that management had expected. Unilever also faces external challenges, such as elevated commodity costs and weak consumer spending. Commodity cost pressures (for inputs such as petrochemicals, edible oils, and tea) will not abate over the near term, given supply constraints and increased demand in emerging markets. Unlike the past, Unilevers ability to charge higher prices to offset these increased costs could be challenged. Until unemployment levels retreat further, consumers will maintain a guarded stance regarding their purchase decisions, in our view. While Unilever has increased its spending on promotions over the past several quarters to drive volume higher and maintain market share, we expect the firm will selectively seek to raise prices in order to offset these cost pressures. We intend to monitor the impact of these actions on the firms sales growth and profitability.

18.0 07 08 09 10 11

Thesis Dec. 21, 2010 | Erin Swanson, CFA

In the past, an extremely decentralized and complex structure hindered Unilevers ability to realize the growth and profitability that should emanate from one of the largest players in the consumer goods industry. But we believe managements efforts to root out inefficiencies--a strategy begun by former CEO Patrick Cescau and which new CEO Paul Polman is continuing to implement--seems to be gaining traction, despite numerous external headwinds.

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

Close Competitors Unilever PLC Nestle SA Kraft Foods, Inc.

Currency(Mil) USD USD USD

Market Cap 92,531 199,445 55,109

TTM Sales 59,255 102,401 49,207

Oper Income 8,486 14,712 5,666

Net Income 5,682 9,997 4,114

Morningstar data as of April 04, 2011.

Valuation, Growth and Profitability

Unilever to realize a portion of the anticipated cost savings from its current restructuring initiatives. As a result, our forecast assumes that operating margins approach 16% by 2014, up from an adjusted operating margin of 14.8% in 2009. Through 2014, we expect returns on invested capital to average 18% compared with our 8.9% cost of capital, supporting our thinking that Unilever possesses a narrow economic moat.

Were lowering our fair value estimate to $30 per ADR from $31, which implies forward fiscal 2011 price/earnings of 16 times, enterprise value/EBITDA of 11 times, and a free cash flow yield of 6.1%. Our valuation is based on the 12-month rolling average exchange rate of $1.33 per euro as of Dec. 16. Because of Unilevers global business, our fair value estimate will continue to fluctuate with this exchange rate. Left unhedged, depreciation in the euro will lower the dollar-denominated investment in the firms ADRs. While we believe Unilever is overpaying to acquire Alberto Culver, the deal makes sense from a strategic perspective. We contend that Albertos hair-care brands will complement Unilevers portfolio, filling the gap between Unilevers existing value brand Suave and premium-priced brand Dove, and Unilever should be able to expand the distribution of Albertos offerings into faster-growing emerging markets. However, the addition of Alberto will make only a modest dent in tilting Unilevers portfolio toward higher-growth personal-care categories and will not affect our fair value estimate. In our view, consumer spending will remain fragile, given that unemployment levels remain elevated, but we expect the global consumer product firm to benefit from new product launches. We believe annual sales growth will approximate 4% over the next five years. Elevated commodity costs, as well as investments to support its core brands in this highly competitive operating environment, will limit margin expansion, but we expect

Risk

Elevated commodity costs can weigh on Unilevers profitability, and because consumer spending remains weak, the firm may be unable to offset these cost pressures with higher prices. In addition, with about 50% of its total sales resulting from developing and emerging markets, Unilever is subject to changes in foreign exchange rates. This international presence also exposes the firm to political and economic risks. Finally, Unilever is undergoing a major restructuring initiative, the results of which are far from certain and could lead to instability in its operations.

Bulls Say

Unilever is the third-largest packaged food firm in the world, producing more than EUR 21 billion in annual sales from a stable of brands including Knorr, Hellmanns, Lipton, Breyers, and Ben & Jerrys. As one of the largest global household and personal product firms, Unilever generates nearly 50% of its annual sales from well-known brands such as Dove, Ponds, Suave, TRESemme, and Noxzema. By focusing on opportunities in developing and emerging markets years earlier than its peers, Unilever has realized some of the benefits of being a first-mover and now generates around 50% of its sales from these markets. Cash flow generation in fiscal 2009 was impressive (at

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

EUR 3.7 billion, or 14% of sales), primarily because of lower inventory levels as Unilever appears to be realizing the benefits of its efforts to reduce the complexity of its supply chain.

Bears Say

and personal product (about 50% of total sales) company. The firms brands include Knorr soups and sauces, Hellmanns mayonnaise, Lipton teas, and TRESemme hair-care products. With roots that trace back nearly 140 years, Unilever now operates as a leading player in consumer goods, selling products in more than 170 countries. Management: Paul Polman, 53, has held the top spot at Unilever since January 2009, after most recently serving as executive vice president and zone director for the Americas at Nestle . In our opinion, Polman--the first outsider to run the large consumer goods organization--could be the right person to shake things up, after gaining valuable experience during his nearly 30 years at Procter & Gamble and Nestle. Overall, corporate governance at Unilever is fair. We are impressed by the level of detail this firm provides to the market, particularly in its quarterly earnings releases. We also like that Unilever operates with different individuals holding the positions of chairman and CEO. However, that is where the favorable aspects of the firms corporate governance end. First, we take issue with Unilevers compensation structure. More than 50% of the CEOs total annual compensation is composed of base pay. Also, directors are paid hefty sums for serving on Unilevers board, again mostly in cash. We believe managements and directors interests could be better aligned with shareholders if equity represented a larger portion of total compensation. Finally, in our opinion, the firms multiple-class structure, with varying voting rights, is not in the best interests of minority shareholders.

Operating margins have suffered during the past several years as Unilever failed to present a clear global strategy, while also inefficiently ramping up its product base and overhead. Despite spending heavily on marketing and promotions and reducing price points, sales continue to suffer in Western Europe, which makes up about one third of Unilevers total revenue. Even after culling its product portfolio from 1,600 items to less than 400 during the past five years, Unilever still had trouble generating consistent sales growth. Unilever paid a full price for Alberto Culver, and wringing out the cost savings needed to make the deal worthwhile will not be easy.

Financial Overview

Financial Health: Unilever is in solid financial health and should be able to service its debt without any financial strain on its business. At the end of 2009, Unilevers long-term debt amounted to EUR 7.7 billion (debt/capital of 0.45) and operating earnings covered interest expense 10 times. We forecast debt/capital of 0.4 by 2014 and earnings before interest and taxes to cover interest expense 10 times. We give Unilever an issuer credit rating of A+.

Company Overview

Profile: Netherlands-based Unilever NV and U.K.-based Unilever PLC operate Unilever Group, a diversified packaged food (about 50% of total sales), and household

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

Analyst Notes
Mar. 23, 2011 Colgate Expands in Personal Care, Unilever Beefs Up Household Product Business

Colgate-Palmolives first acquisition since 2006 is a small but smart deal for the firm. By acquiring the Sanex personal-care brand (which includes shower gels and deodorants) from Unilever for $940 million (EUR 672 million), or roughly 3.6 times fiscal 2010 sales, Colgate expands its presence in Western Europe at a time when competition has become particularly heated. Unilever was forced to sell the business for antitrust reasons after it acquired Sara Lees personal-care business in 2009, but it appears that it is getting a solid price for this attractive brand. Moreover, the sale should also enable Unilever to finally close the transaction with Sara Lee, which was announced about a year and a half ago.

In addition to the Sanex sale, Unilever announced that it is buying Colgates Colombian laundry detergent business, which includes the Fab, Lavomatic, and Vel brands, for $215 million. This deal fits with Colgates desire to exit the category and is in line with Unilevers recent strategic efforts to build out its higher-margin household business in faster-growing emerging markets. We dont intend to change our fair value estimates for either firm on the basis of these announcements, given the relatively small size of the transactions, but we think Unilever remains fairly valued and Colgate modestly undervalued at current market prices.

Feb. 03, 2011

Unilever Ends Year on Solid Footing; Shares Fairly Valued

Fourth-quarter and full-year results from Unilever support our thesis that the expansive scale and pricing power inherent in its brand portfolio should ensure the consumer product firm generates solid cash flow. Free cash flow amounted to nearly 8% of sales for fiscal 2010, which we think is an impressive level that should ensure that the firm is able to continue investing in the business. While Unilever is not without its share of challenges (namely rising input costs and a fragile consumer spending environment), we are maintaining our fair value estimate. With its shares trading around 16 times forward earnings, we believe Unilever is fairly valued at current market prices. Fourth-quarter sales increased 5.1% year over year (excluding favorable foreign currency movements, acquisitions, and divestitures), entirely driven by increased volume. Emerging markets were again a bright spot for the firm, as underlying sales in the Asia, Africa, and Central and Eastern European segment (40% of consolidated sales)

rose 8.5%, as higher volume (up 8.8%) offset slightly lower prices (down 0.3%). While Unilever has increased its spending on promotions over the past several quarters to drive volume higher and maintain market share, we expect the firm will selectively seek to raise prices in order to offset commodity cost pressures. However, Unilevers ability to charge higher prices to offset these increased costs could be challenged, as consumers will probably maintain a guarded stance regarding their purchase decisions, in our view, until unemployment levels retreat further. Cost savings from efficiency initiatives were unable to offset input cost inflation, as the adjusted operating margin contracted 20 basis points in the quarter to 12.8%. However, Unilever significantly reduced its advertising and promotional spending in the quarter (probably reflecting the timing of product launches), and as a result, the operating margin contraction was modest. We expect that this spending will return to more normalized levels over the next

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

Analyst Notes (continued) several quarters as Unilever invests to support new products, but we intend to monitor the impact of these
Nov. 30, 2010

actions on the firms sales growth and profitability.

Alberto Opens Itself Up to Other Bidders, but We Think Unilever Acquisition Is Done Deal

wasnt sufficiently transparent in soliciting the offer. As part of a shareholder lawsuit settlement, Alberto Culver has opened itself up to other potential bidders, but this news does little to dissuade us from thinking that the pending acquisition by Unilever is essentially a done deal. The shareholder lawsuit argued that Alberto failed to adequately seek out other offers, negotiating with Unilever in such a way that effectively precluded other interested parties from submitting a superior bid. Were not in a position to comment on what Alberto did behind the scenes before receiving the $37.50 per share takeout offer from Unilever--a 19% premium to the companys stock price at the time and a 34% premium to our fair value estimate--but apparently the shareholder group believes the company
Nov. 04, 2010 Competitive Pressures Fail to Derail Unilever in 3Q

Given the complexity of negotiating these kinds of deals (without leaking information, no less) and Albertos solid record of stewardship over decades, we dont take issue with how the deal transpired. Unilevers offer is a healthy reward for shareholders and a solid strategic fit for both firms, which is of paramount importance. Regardless, with the lawsuit settled, the breakup fee for the deal has been reduced and Unilevers matching rights have been eliminated. The shareholder vote on the deal has been delayed until Dec. 17, giving other potential suitors additional time to make a superior bid. We would be highly surprised if this were to happen.

Were maintaining our fair value estimate for Unilever following the release of third-quarter results. Our thesis remains intact that the scale and brand strength inherent in Unilevers portfolio will enable this global consumer product firm to withstand pressures stemming from an intensely competitive environment. Third-quarter sales increased 3.6% year over year (excluding foreign currency movements, acquisitions, and divestitures) as higher volume (up 4.8%) offset lower prices (down 1.2%). Emerging markets were again a standout for the firm, as underlying sales in the Asia, Africa, and Central and Eastern European segment (40% of consolidated sales) rose 6.8%, primarily reflecting higher volume (up 8.8%). Unilever continues to spend heavily on marketing and promotions to lower price points in categories where

competition is particularly aggressive, and these actions are enabling it to drive volume growth in more mature markets. For example, revenue growth in the Americas (33% of consolidated sales) increased 3.9% from the prior-year quarter, while growth in Western Europe (27% of consolidated sales) was flat with the year-ago period--an improvement compared with the second quarter, when sales slipped 2.2%. Despite rising input costs and continued investments in advertising and promotions, adjusted operating margins improved 20 basis points to 17.0%, thanks to cost savings from efficiency initiatives. In our view, increased promotional spending throughout the industry is conditioning consumers to expect it, and weaning them from lower prices could prove challenging particularly as unemployment levels remain elevated. Further, we contend

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Unilever PLC UL
Last Price 30.59 USD Fair Value 30.00 USD Consider Buy 21.00 USD

[NYSE]

QQQ
Uncertainty Medium Economic Moat Narrow
TM

Consider Sell 42.00 USD

Stewardship C

Morningstar Credit Rating Industry A+ Packaged Foods

Analyst Notes (continued) that input cost inflation will continue to limit the firms margin expansion, given increased demand for commodities in emerging markets.

Disclaimers & Disclosures No Morningstar employees are officers or directors of this company. Morningstar Inc. does not own more than 1% of the shares of this company. Analysts covering this company do not own its stock. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Morningstar Stock Data Sheet

Pricing data thru Apr. 04, 2011

Rating updated as of Apr. 04, 2011

Fiscal year-end: December

Unilever PLC UL
Netherlands-based Unilever NV and U.K.-based Unilever PLC operate Unilever Group, a diversified packaged food (about 50% of total sales), and household and personal product (about 50% of total sales) company. The firms brands include Knorr soups and sauces, Hellmanns mayonnaise, Lipton teas, and TRESemme hair-care products. With roots that trace back nearly 140 years, Unilever now operates as a leading player in consumer goods, selling products in more than 170 countries.
Morningstar Rating

Sales EUR Mil Mkt Cap USD Mil Industry

Sector

59,255
Last Price Fair Value

92,531
Uncertainty

Packaged Foods
Economic Moat
TM

Consumer Defensive
Stewardship Grade

QQQ
19.71 15.19

30.59

30.00 23.83 20.31

Medium 38.25 25.57

Narrow 32.34 16.95

C per share prices in USD

Annual Price High Low Recent Splits

22.01 16.01

22.03 17.36

24.38 17.97

28.10 20.63
1:1

38.02 20.22

32.41 25.74

31.23 28.45

Price Volatility
Monthly High/Low Rel Strength to S&P 500
19.0 9.0 5.0

52 week High/Low 31.46 - 25.74 10 Year High/Low 38.25 - 15.19 Bear-Market Rank 6 (10=worst) Trading Volume Million

Unilever House 100 Victoria Embankment London, United Kingdom EC4Y 0DY Phone: 44 2078225252 Website: http://www.unilever.com

2.0 1.0 0.7

Growth Rates Compound Annual

Grade: F 1 Yr 3 Yr 5 Yr 10 Yr

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

YTD

Stock Performance Total Return % +/- Market +/- Industry Dividend Yield % Market Cap USD Mil
Financials

Revenue % Operating Income % Earnings/Share % Dividends % Book Value/Share % Stock Total Return % +/- Industry +/- Market Profitability Analysis
Grade: C

11.2 26.3 24.8 24.6 20.1 5.0 -1.5 -8.1

Current

3.3 6.6 -34.2 6.5 . -0.2 -2.7 0.7

5 Yr Avg

2.1 3.5 3.3 18.7 11.5 9.4 2.4 9.0

Ind

-0.8 6.7 15.3 12.1 . 8.8 1.5 8.1

Mkt

-2.5 10.5 -9.5 1.3 55910

2001

16.5 39.9 13.9 1.3 64279

2002

-0.1 -26.5 -3.4 1.6 63186

2003

7.0 -2.0 -4.6 1.8 66413

2004

3.5 0.5 3.8 2.0 67421

2005

29.0 38.1 15.4 34.6 8.3 20.3 2.1 2.6 84152 113191
2006 2007

-35.8 2.7 -9.8 4.3 69633

2008

42.9 19.5 17.8 3.1 96494

2009

0.3 -12.5 -8.0 3.6 93408

2010

0.0 -6.0 -3.1 3.7 92531

TTM

46015 47.7 6386 13.9 1597 0.54 0.24 454 2.12 3115 -1372 1743
2001

45345 54.6 4815 10.6 1961 0.34 0.27 453 1.99 4475 -1216 3258
2002

48140 53.3 6182 12.8 3084 1.03 0.33 449 2.41 4769 -1170 3598
2003

49923 50.2 4240 8.5 2296 0.77 0.41 456 2.42 5877 -1216 4661
2004

49822 13.4 6673 13.4 4729 1.55 0.46 451 3.27 5467 -1264 4203
2005

49643 49.3 6772 13.6 5942 8.01 0.56 743 4.90 5649 -1410 4239
2006

54928 48.8 7169 13.1 5315 7.17 0.99 744 5.98 5298 -1616 3682
2007

59225 47.3 10475 17.7 7347 2.53 1.01 2906 4.57 5658 -1669 3988
2008

55419 14.8 6986 12.6 4690 1.63 0.96 2890 5.72 8035 -1737 6299
2009

59255 15.0 8486 14.3 5682 1.95 1.15 2905 6.42 7350 . .
2010

59255 15.0 8486 14.3 5682 1.95 1.15 2905 6.77 7350 . .
TTM

Revenue EUR Mil Gross Margin % Oper Income EUR Mil Operating Margin % Net Income EUR Mil Earnings Per Share EUR Dividends EUR Shares Mil Book Value Per Share EUR Oper Cash Flow EUR Mil Cap Spending EUR Mil Free Cash Flow EUR Mil
Profitability

Return on Equity % 32.0 Return on Assets % 10.9 Fixed Asset Turns 6.1 Inventory Turns 9.6 Revenue/Employee EUR K 359.1 Gross Margin % Operating Margin % Net Margin % Free Cash Flow/Rev % R&D/Rev % Financial Position
Grade: A

37.8 11.3 6.3 6.9 346.5 * 35.0 14.3 10.4 . .

16.3 5.6 4.6 6.0 . 40.8 11.9 5.8 8.0 .

22.5 8.5 7.3 14.4 936.8 40.2 14.7 10.0 0.1 9.8

15.0 14.3 9.6 . .

12-09 EUR Mil

12-10 EUR Mil

Cash Inventories Receivables Current Assets Fixed Assets Intangibles Total Assets Payables Short-Term Debt Current Liabilities Long-Term Debt Total Liabilities Total Equity Valuation Analysis
Current

3791 5134 3320 15511 9532 24458 53108 6412 3270 16642 11036 35798 17310
5 Yr Avg Ind

3107 5781 5547 16748 10536 24521 55227 857 3053 18253 9737 35795 19432
Mkt

3.2 23.2 3.5 0.93 7.4

2001

4.3 32.3 4.3 0.99 7.8

2002

6.6 47.4 6.4 1.03 6.6

2003

5.1 33.0 4.6 1.12 6.3

2004

10.3 54.9 9.5 1.09 4.7

2005

12.4 48.4 12.0 1.04 3.3

2006

10.4 32.9 9.7 1.08 3.0

2007

13.7 45.0 12.4 1.10 3.6

2008

9.2 30.6 8.5 1.09 3.1

2009

10.9 32.0 9.6 1.13 2.8

2010

10.9 32.0 9.6 1.13 2.8

12-10

Return on Assets % Return on Equity % Net Margin % Asset Turnover Financial Leverage
Financial Health

-4879 12675 6413 1.98

2001

-4614 11483 6163 1.91

2002

-4617 10643 7443 1.46

2003

-3395 9337 7496 1.28

2004

-5258 7642 9896 0.77

2005

-5785 5595 14821 0.39

2006

-5302 8007 18089 0.44

2007

-3649 8845 13828 0.64

2008

-1131 11036 17310 0.64

2009

-1505 9737 19432 0.50

2010

-1505 9737 19432 0.58

TTM

Working Capital EUR Mil Long-Term Debt EUR Mil Total Equity EUR Mil Debt/Equity
Valuation

34.6 . 0.2 8.7 2.7

56.8 . 0.2 10.7 1.9

18.2 . 0.2 8.7 1.8

26.0 . 0.2 9.1 1.6

15.2 . 0.2 6.8 2.0

4.6 . 0.2 5.7 2.0

5.0 . 0.5 6.3 4.9

9.6 . 1.2 5.0 12.4

19.0 . 1.6 5.6 11.1

15.8 0.9 1.5 4.8 12.2

14.7 0.9 1.4 4.5 11.4

Price/Earnings P/E vs. Market Price/Sales Price/Book Price/Cash Flow

Quarterly Results
Revenue EUR Mil Mar 10 Jun 10 Sep 10 Dec 10

Industry Peers by Market Cap

Mkt Cap USD Mil Rev EUR Mil P/E ROE%

Price/Earnings Forward P/E Price/Cash Flow Price/Free Cash Flow Dividend Yield % Price/Book Price/Sales PEG Ratio

14.7 . 11.4 . 3.7 4.5 1.4 .

10.8 . 8.5 . . 5.5 1.0 .

18.8 . 12.1 17.7 2.9 3.7 1.4 .

16.8 13.6 8.9 18.5 1.7 2.3 1.4 1.8

Most Recent Period Prior Year Period

Rev Growth %

14268.6 .
Mar 10

. 14736.2 14416.1 . 14576.8 14113.9

Jun 10 Sep 10 Dec 10

Unilever PLC Nestle SA Kraft Foods, Inc. Major Fund Holders

92531 199445 55109

59255 14.7 102401 17.1 49207 21.9

32.0 21.7 13.3

Most Recent Period Prior Year Period

Earnings Per Share EUR

. .
Mar 10

. .
Jun 10

1.1 39.8
Sep 10

2.1 39.0
Dec 10

% of shares

Most Recent Period Prior Year Period

0.48 .

. .

0.55 0.51

0.44 0.42

Manning & Napier World Opportunities A BNY Mellon Large Cap Stock M Manning & Napier Overseas

0.13 0.03 0.02

*3Yr Avg data is displayed in place of 5Yr Avg

TTM data based on rolling quarterly data if available; otherwise most recent annual data shown.

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.

The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Morningstars Approach to Rating Stocks

Our Key Investing Concepts Economic Moat Rating Discounted Cash Flow Discount Rate Fair Value Uncertainty Margin of Safety Consider Buying/Consider Selling Stewardship Grades
TM

At Morningstar, we evaluate stocks as pieces of a business, not as pieces of paper. We think that purchasing shares of superior businesses at discounts to their intrinsic value and allowing them to compound their value over long periods of time is the surest way to create wealth in the stock market. We rate stocks 1 through 5 stars, with 5 the best and 1 the worst. Our star rating is based on our analysts estimate of how much a companys business is worth per share. Our analysts arrive at this "fair value estimate" by forecasting how much excess cash--or "free cash flow"--the firm will generate in the future, and then adjusting the total for timing and risk. Cash generated next year is worth more than cash generated several years down the road, and cash from a stable and consistently profitable business is worth more than cash from a cyclical or unsteady business. Stocks trading at meaningful discounts to our fair value estimates will receive high star ratings. For high-quality businesses, we require a smaller discount than for mediocre ones, for a simple reason: We have more confidence in our cash-flow forecasts for strong companies, and thus in our value estimates. If a stocks market price is significantly above our fair value estimate, it will receive a low star rating, no matter how wonderful we think the business is. Even the best company is a bad deal if an investor overpays for its shares. Our fair value estimates dont change very often, but market prices do. So, a stock may gain or lose stars based

just on movement in the share price. If we think a stocks fair value is $50, and the shares decline to $40 without much change in the value of the business, the star rating will go up. Our estimate of what the business is worth hasnt changed, but the shares are more attractive as an investment at $40 than they were at $50. Because we focus on the long-term value of businesses, rather than short-term movements in stock prices, at times we may appear out of step with the overall stock market. When stocks are high, relatively few will receive our highest rating of 5 stars. But when the market tumbles, many more will likely garner 5 stars. Although you might expect to see more 5-star stocks as the market rises, we find assets more attractive when theyre cheap. We calculate our star ratings nightly after the markets close, and issue them the following business day, which is why the rating date on our reports will always be the previous business day. We update the text of our reports as new information becomes available, usually about once or twice per quarter. That is why youll see two dates on every Morningstar stock report. Of course, we monitor market events and all of our stocks every business day, so our ratings always reflect our analysts current opinion.

Economic Moat Rating

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The Economic Moat Rating is our assessment of a firms ability to earn returns consistently above its cost of capital in the future, usually by virtue of some competitive advantage. Competition tends to drive down such

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Morningstar Research Methodology for Valuing Companies

Competitive Analysis

Economic TM Moat Rating

Company Valuation

Fair Value Estimate

Uncertainty Assessment

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The current stock price relative to fair value, adjusted for uncertainty, determines the rating.

Analyst conducts company and industry research: Management interviews Conference calls Trade-show visits Competitor, supplier, distributor, and customer interviews

The depth of the firms competitive advantage is rated: None Narrow Wide

Analyst considers company financial statements and competitive position to forecast future cash flows. Assumptions are input into a discounted cash-flow model.

DCF model leads to the firms Fair Value Estimate, which anchors the rating framework.

An uncertainty assessment establishes the margin of safety required for the stock rating.

2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Morningstars Approach to Rating Stocks (continued)

economic profits, but companies that can earn them for an extended time by creating a competitive advantage possess an Economic Moat. We see these companies as superior investments.

Very High, or Extreme. The greater the level of uncertainty, the greater the discount to fair value required before a stock can earn 5 stars, and the greater the premium to fair value before a stock earns a 1-star rating.

Discounted Cash Flow

Margin of Safety

This is a method for valuing companies that involves projecting the amount of cash a business will generate in the future, subtracting the amount of cash that the company will need to reinvest in its business, and using the result to calculate the worth of the firm. We use this technique to value nearly all of the companies we cover.

This is the discount to fair value we would require before recommending a stock. We think its always prudent to buy stocks for less than theyre worth.The margin of safety is like an insurance policy that protects investors from bad news or overly optimistic fair value estimates. We require larger margins of safety for less predictable stocks, and smaller margins of safety for more predictable stocks.

Discount Rate

We use this number to adjust the value of our forecasted cash flows for the risk that they may not materialize. For a profitable company in a steady line of business, well use a lower discount rate, also known as "cost of capital," than for a firm in a cyclical business with fierce competition, since theres less risk clouding the firms future.

Consider Buying/Consider Selling

The consider buying price is the price at which a stock would be rated 5 stars, and thus the point at which we would consider the stock an extremely attractive purchase. Conversely, consider selling is the price at which a stock would have a 1 star rating, at which point wed consider the stock overvalued, with low expected returns relative to its risk.

Fair Value

This is the output of our discounted cash-flow valuation models, and is our per-share estimate of a companys intrinsic worth. We adjust our fair values for off-balance sheet liabilities or assets that a firm might have--for example, we deduct from a companys fair value if it has issued a lot of stock options or has an under-funded pension plan. Our fair value estimate differs from a "target price" in two ways. First, its an estimate of what the business is worth, whereas a price target typically reflects what other investors may pay for the stock. Second, its a long-term estimate, whereas price targets generally focus on the next two to 12 months.

Stewardship Grades

We evaluate the commitment to shareholders demonstrated by each firms board and management team by assessing transparency, shareholder friendliness, incentives, and ownership. We aim to identify firms that provide investors with insufficient or potentially misleading financial information, seek to limit the power of minority shareholders, allow management to abuse its position, or which have management incentives that are not aligned with the interests of long-term shareholders. The grades are assigned on an absolute scale--not relative to peers--and can be interpreted as follows: A means "Excellent," B means "Good," C means "Fair," D means "Poor," and F means "Very Poor."

Uncertainty

To generate the Morningstar Uncertainty Rating, analysts consider factors such as sales predictability, operating leverage, and financial leverage. Analysts then classify their ability to bound the fair value estimate for the stock into one of several uncertainty levels: Low, Medium, High,
2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported.
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.