Session3_datafile.xlsx

THE GORDON MODEL COST OF EQUITY Current share price, P0 Current dividend, D0 Anticipated dividend growth rate Gordon model cost of equity, rE

60 3 12%

KELLOGG DIVIDENDS, MAY1996 - MAY2006 Dividend growth rate, quarterly last 5 years last 10 years Dividend growth rate, annualized Last 5 years Last 10 years Date

29-May-96 28-Aug-96 26-Nov-96 27-May-04 27-Aug-04 23-Nov-04 25-Feb-05 27-May-05 30-Aug-05 29-Nov-05 27-Feb-06 30-May-06

Dividends

0.195 0.210 0.210 0.253 0.253 0.253 0.253 0.253 0.278 0.278 0.278 0.278

COMPUTING KELLOGG'S rE WITH THE GORDON MODEL Kellogg stock price, P0, 30 May 2006 Current dividend Quarterly Annualized dividend, Div0 Dividend growth rate, g Last 5 years Last 10 years Gordon model cost of equity rE Using last 5 years' growth Using last 10 years' growth

48.28

JOHNSON & JOHNSON, CASH FLOW TO EQUITY, 1995-2005 Year ending

Dividends

31-Dec-95 31-Dec-96 31-Dec-97 31-Dec-98 31-Dec-99 31-Dec-00 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05

827,000,000 974,000,000 1,137,000,000 1,305,000,000 1,479,000,000 1,724,000,000 2,047,000,000 2,381,000,000 2,746,000,000 3,251,000,000 3,793,000,000

End 2005 equity data Stock price Number of shares Equity value

Repurchase of common stock

322,000,000 412,000,000 628,000,000 930,000,000 840,000,000 973,000,000 2,570,000,000 6,538,000,000 1,183,000,000 1,384,000,000 1,717,000,000

Stock issues

-112,000,000 -149,000,000 -225,000,000 -269,000,000 -221,000,000 -387,000,000 -514,000,000 -390,000,000 -311,000,000 -642,000,000 -696,000,000

61.07 3,119,842,000

Equity cash flow, end 2005 Future growth rate Based on 10-year growth rate Based on 5-year growth rate Gordon cost of equity, rE Based on 10-year growth rate Based on 5-year growth rate Note: Stock issues are proceeds from issuance of stock options (most to employees)

For x-axes on graph

y-axes 35,064 38,717

6,538,000,000 -696,000,000

O EQUITY, 1995-2005 Cash flow to equity

Year on year growth

9000000000

JNJ, CASH FLOW TO EQUITY, 1995-2005

8000000000 7000000000 6000000000

Total dividends Stock repurchases

5000000000 4000000000 3000000000 2000000000 1000000000 0

Stock issues Cash flow to equity

3000000000 2000000000 1000000000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -1000000000

2005

WACHOVIA BANK--DIVIDENDS, STOCK ISSUED AND STOCK REPURCHASED Does historical growth overstate the cost of equity?

1991 1992 1993 1994 1995 1996 1997 1998 1999 Compound growth rate

Common Total Dividend stock issued payments 16,462,000 150,730,000 29,717,000 170,756,000 24,961,000 191,488,000 25,339,000 210,503,000 24,115,000 235,495,000 25,826,000 254,458,000 59,281,000 327,303,000 80,375,000 381,798,000 59,478,000 418,447,000 17.42%

13.61%

Common stock repurchased 1,215,000 31,197,000 98,804,000 52,908,000 65,032,000 376,716,000 532,682,000 531,122,000 634,623,000

Total equity cash flow

135,483,000 172,236,000 265,331,000 238,072,000 276,412,000 605,348,000 800,704,000 832,545,000 993,592,000

118.65%

28.28%

Dividend per share 0.89 1.00 1.11 1.22 1.38 1.52 1.65 1.86

Total equity payout per share 0.80 1.01 1.54 1.38 1.62 3.62 4.04 4.06

Cost of capital using the Gordon Model Using total equity payout and total equity value End 1999 stock price Number of shares outstanding, end 1999

Future dividend growth, g? End 1999 equity value, P0

68.00 202,795,000 28.28% 13,790,060,000

Projected next total equity cash flow, D1

1,274,598,774

Gordon model cost of equity, rE

37.52%

Shares outstanding, annual average 169,841,000 170,673,000 172,273,000 172,339,000 170,635,000 167,255,000 198,290,000 205,058,000

202,795,000

Common stock issued Dividend payments Common stock repurchased Total equity payout Number of shares outstanding end of year Dividends per share

2.06

4.90

11.12%

25.47%

1999 59,478,000 418,447,000 634,623,000 1,112,548,000

1998 80,375,000 381,798,000 531,122,000 993,295,000

1997 59,281,000 327,303,000 532,682,000 919,266,000

1996 25,826,000 254,458,000 376,716,000 657,000,000

202,795,000

205,058,000

198,290,000

167,255,000

2.06

1.86

1.65

1.52

STOCK REPURCHASED st of equity?

1994

1993 25,339,000 210,503,000 52,908,000 288,750,000

24,961,000 191,488,000 98,804,000 315,253,000

1992 1991 29,717,000 16,462,000 170,756,000 150,730,000 31,197,000 1,215,000 231,670,000 168,407,000

172,339,000

172,273,000

170,763,000 169,841,000

1.22

1.11

1.00

0.89

WACHOVIA, TWO-STAGE GORDON MODEL End-1999 equity value, P0 End 1999 total equity payout High growth rate, ghigh Number of high-growth years, m Normal growth rate, gnormal Cost of equity, rE using the function TwoStageGordon

13,790,060,000 993,592,000

28.28% 3

4%

Function TwoStageGordon(P0, Div0, Normalgrowth) High = 4 Low = 0

Do While (High - Low) > 0.000 Estimate = (High + Low) / 2 factor = (1 + Highgrowth) / ( Term1 = Div0 * factor * (1 (1 - factor) Term2 = Div0 * factor ^ Highg (1 + Normalgrowth) / (Est If (Term1 + Term2) > P0 Then Low = (High + Low) / 2 Else: High = (High + Low End If Loop TwoStageGordon = Estimate End Function

StageGordon(P0, Div0, Highgrowth, Highgrowthyrs, )

(High - Low) > 0.0000001 = (High + Low) / 2 (1 + Highgrowth) / (1 + Estimate) Div0 * factor * (1 - factor ^ Highgrowthyrs) / _ factor) Div0 * factor ^ Highgrowthyrs * _ Normalgrowth) / (Estimate - Normalgrowth) 1 + Term2) > P0 Then = (High + Low) / 2 : High = (High + Low) / 2

Gordon = Estimate

COMPUTING THE BETA FOR INTEL monthly returns for Intel and S&P 500, 2001-2006 Alpha Beta Using Excel's Slope function Using Cov/Var R-squared

-0.0029 2.2516 2.2516 0.5304 Prices

Date

9-Jan-01 1-Feb-01 1-Mar-01 2-Apr-01 1-May-01 1-Jun-01 2-Jul-01 1-Aug-01 4-Sep-01 1-Oct-01 1-Nov-01 3-Dec-01 2-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 3-Jun-02 1-Jul-02 1-Aug-02 3-Sep-02 1-Oct-02 1-Nov-02 2-Dec-02 2-Jan-03 3-Feb-03 3-Mar-03 1-Apr-03 1-May-03 2-Jun-03 1-Jul-03 1-Aug-03 2-Sep-03 1-Oct-03 3-Nov-03

Intel

35.38 27.32 25.17 29.57 25.86 28 28.54 26.78 19.58 23.39 31.31 30.15 33.59 27.38 29.17 27.44 26.51 17.54 18.04 16.02 13.35 16.62 20.09 14.98 15.06 16.62 15.68 17.72 20.08 20.07 24 27.59 26.56 31.8 32.39

SP500

1366.01 1239.94 1160.33 1249.46 1255.82 1224.38 1211.23 1133.58 1040.94 1059.78 1139.45 1148.08 1130.2 1106.73 1147.39 1076.92 1067.14 989.82 911.62 916.07 815.28 885.76 936.31 879.82 855.7 841.15 848.18 916.92 963.59 974.5 990.31 1008.01 995.97 1050.71 1058.2

Returns Intel

SP500

-25.85% -9.68% -8.20% -6.64% 16.11% 7.40% -13.41% 0.51% 7.95% -2.54% 1.91% -1.08% -6.37% -6.63% -31.31% -8.53% 17.78% 1.79% 29.16% 7.25% -3.78% 0.75% 10.80% -1.57% -20.44% -2.10% 6.33% 3.61% -6.11% -6.34% -3.45% -0.91% -41.30% -7.52% 2.81% -8.23% -11.88% 0.49% -18.23% -11.66% 21.91% 8.29% 18.96% 5.55% -29.35% -6.22% 0.53% -2.78% 9.86% -1.71% -5.82% 0.83% 12.23% 7.79% 12.50% 4.96% -0.05% 1.13% 17.88% 1.61% 13.94% 1.77% -3.80% -1.20% 18.01% 5.35% 1.84% 0.71%

1-Dec-03 2-Jan-04 2-Feb-04 1-Mar-04 1-Apr-04 3-May-04 1-Jun-04 1-Jul-04 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04 1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 1-Sep-05 3-Oct-05 1-Nov-05 1-Dec-05 3-Jan-06

30.95 29.47 28.23 26.3 24.88 27.64 26.72 23.61 20.65 19.46 21.59 21.74 22.73 21.81 23.39 22.65 22.93 26.38 25.46 26.55 25.24 24.19 23.06 26.27 24.57 25.9

1111.92 1131.13 1144.94 1126.21 1107.3 1120.68 1140.84 1101.72 1104.24 1114.58 1130.2 1173.82 1211.92 1181.27 1203.6 1180.59 1156.85 1191.5 1191.33 1234.18 1220.33 1228.81 1207.01 1249.48 1248.29 1285.45

-4.55% -4.90% -4.30% -7.08% -5.55% 10.52% -3.39% -12.37% -13.40% -5.94% 10.39% 0.69% 4.45% -4.13% 6.99% -3.21% 1.23% 14.02% -3.55% 4.19% -5.06% -4.25% -4.78% 13.03% -6.69% 5.27%

4.95% 1.71% 1.21% -1.65% -1.69% 1.20% 1.78% -3.49% 0.23% 0.93% 1.39% 3.79% 3.19% -2.56% 1.87% -1.93% -2.03% 2.95% -0.01% 3.53% -1.13% 0.69% -1.79% 3.46% -0.10% 2.93%

Intel Returns vs SP500, 2001-2006 25%

f(x) = 2.2516049449x - 0.0029173233 R² = 0.5304233022

15%

5% -11%

-9%

-7%

-5%

-3%

-1% -5% Intel returns

-13%

-15%

-25%

-35%

-45%

1%

3%

5%

7%

SP500 returns

7%

returns

MEASURING E(rM) USING HISTORICAL DATA Derived from prices for the Vanguard 500 Index Fund (symbol: VFINX) These prices include dividends; April 1987 - August 2006 Average monthly return Monthly standard deviation Annualized return Annualized standard deviation Date

1-Apr-87 1-May-87 1-Jun-87 1-Jul-87 3-Aug-87 1-Sep-87 1-Oct-87 2-Nov-87 1-Dec-87 4-Jan-88 1-Feb-88 1-Mar-88 4-Apr-88 2-May-88 1-Jun-88 1-Jul-88 1-Aug-88 1-Sep-88 3-Oct-88 1-Nov-88 1-Dec-88 3-Jan-89 1-Feb-89 1-Mar-89 3-Apr-89 1-May-89 1-Jun-89 3-Jul-89 1-Aug-89 1-Sep-89 2-Oct-89 1-Nov-89

0.83% 4.34% 9.98% 15.05% Price

17.32 17.49 18.37 19.28 20.02 19.56 15.31 14.06 15.12 15.75 16.48 15.98 16.14 16.27 17.01 16.95 16.37 17.07 17.54 17.28 17.58 18.87 18.40 18.82 19.80 20.60 20.47 22.32 22.73 22.64 22.11 22.56

Return

0.98% 4.91% 4.83% 3.77% -2.32% -24.50% -8.52% 7.27% 4.08% 4.53% -3.08% 1.00% 0.80% 4.45% -0.35% -3.48% 4.19% 2.72% -1.49% 1.72% 7.08% -2.52% 2.26% 5.08% 3.96% -0.63% 8.65% 1.82% -0.40% -2.37% 2.01%

1-Dec-89 2-Jan-90 1-Feb-90 1-Mar-90 2-Apr-90 1-May-90 1-Jun-90 2-Jul-90 1-Aug-90 4-Sep-90 1-Oct-90 1-Nov-90 3-Dec-90 2-Jan-91 1-Feb-91 1-Mar-91 1-Apr-91 1-May-91 3-Jun-91 1-Jul-91 1-Aug-91 3-Sep-91 1-Oct-91 1-Nov-91 2-Dec-91 2-Jan-92 3-Feb-92 2-Mar-92 1-Apr-92 1-May-92 1-Jun-92 1-Jul-92 3-Aug-92 1-Sep-92 1-Oct-92 2-Nov-92 1-Dec-92 4-Jan-93 1-Feb-93 1-Mar-93 1-Apr-93 3-May-93 1-Jun-93 1-Jul-93 2-Aug-93

23.10 21.55 21.83 22.40 21.84 23.95 23.79 23.71 21.57 20.51 20.43 21.74 22.33 23.30 24.96 25.56 25.61 26.70 25.49 26.67 27.29 26.83 27.19 26.10 29.07 28.53 28.89 28.33 29.16 29.30 28.86 30.03 29.41 29.75 29.85 30.87 31.46 31.49 31.92 32.59 31.80 32.64 32.73 32.59 33.82

2.37% -6.95% 1.29% 2.58% -2.53% 9.22% -0.67% -0.34% -9.46% -5.04% -0.39% 6.21% 2.68% 4.25% 6.88% 2.38% 0.20% 4.17% -4.64% 4.53% 2.30% -1.70% 1.33% -4.09% 10.78% -1.88% 1.25% -1.96% 2.89% 0.48% -1.51% 3.97% -2.09% 1.15% 0.34% 3.36% 1.89% 0.10% 1.36% 2.08% -2.45% 2.61% 0.28% -0.43% 3.70%

1-Sep-93 1-Oct-93 1-Nov-93 1-Dec-93 3-Jan-94 1-Feb-94 1-Mar-94 4-Apr-94 2-May-94 1-Jun-94 1-Jul-94 1-Aug-94 1-Sep-94 3-Oct-94 1-Nov-94 1-Dec-94 3-Jan-95 1-Feb-95 1-Mar-95 3-Apr-95 1-May-95 1-Jun-95 3-Jul-95 1-Aug-95 1-Sep-95 2-Oct-95 1-Nov-95 1-Dec-95 2-Jan-96 1-Feb-96 1-Mar-96 1-Apr-96 1-May-96 3-Jun-96 1-Jul-96 1-Aug-96 3-Sep-96 1-Oct-96 1-Nov-96 2-Dec-96 2-Jan-97 3-Feb-97 3-Mar-97 1-Apr-97 1-May-97

33.56 34.25 33.91 34.33 35.49 34.52 33.01 33.44 33.97 33.14 34.23 35.62 34.75 35.53 34.23 34.73 35.63 37.01 38.10 39.22 40.78 41.72 43.10 43.21 45.03 44.87 46.83 47.74 49.35 49.81 50.30 51.03 52.33 52.53 50.21 51.26 54.13 55.62 59.83 58.65 62.31 62.80 60.20 63.79 67.67

-0.77% 2.04% -1.00% 1.23% 3.32% -2.77% -4.47% 1.29% 1.57% -2.47% 3.24% 3.98% -2.47% 2.22% -3.73% 1.45% 2.56% 3.80% 2.90% 2.90% 3.90% 2.28% 3.25% 0.25% 4.13% -0.36% 4.28% 1.92% 3.32% 0.93% 0.98% 1.44% 2.52% 0.38% -4.52% 2.07% 5.45% 2.72% 7.30% -1.99% 6.05% 0.78% -4.23% 5.79% 5.90%

2-Jun-97 1-Jul-97 1-Aug-97 2-Sep-97 1-Oct-97 3-Nov-97 1-Dec-97 2-Jan-98 2-Feb-98 2-Mar-98 1-Apr-98 1-May-98 1-Jun-98 1-Jul-98 3-Aug-98 1-Sep-98 1-Oct-98 2-Nov-98 1-Dec-98 4-Jan-99 1-Feb-99 1-Mar-99 1-Apr-99 3-May-99 1-Jun-99 1-Jul-99 2-Aug-99 1-Sep-99 1-Oct-99 1-Nov-99 1-Dec-99 3-Jan-00 1-Feb-00 1-Mar-00 3-Apr-00 1-May-00 1-Jun-00 3-Jul-00 1-Aug-00 1-Sep-00 2-Oct-00 1-Nov-00 1-Dec-00 2-Jan-01 1-Feb-01

70.68 76.31 72.03 75.97 73.43 76.80 78.11 78.98 84.66 88.98 89.88 88.31 91.91 90.94 77.78 82.76 89.52 94.95 100.47 104.69 101.42 105.47 109.53 106.91 112.85 109.32 108.78 105.80 112.49 114.77 121.64 115.52 113.32 124.38 120.64 118.18 121.12 119.31 126.70 120.00 119.48 110.07 110.63 114.55 104.09

4.35% 7.66% -5.77% 5.33% -3.40% 4.49% 1.69% 1.11% 6.94% 4.98% 1.01% -1.76% 4.00% -1.06% -15.63% 6.21% 7.85% 5.89% 5.65% 4.11% -3.17% 3.92% 3.78% -2.42% 5.41% -3.18% -0.50% -2.78% 6.13% 2.01% 5.81% -5.16% -1.92% 9.31% -3.05% -2.06% 2.46% -1.51% 6.01% -5.43% -0.43% -8.20% 0.51% 3.48% -9.58%

1-Mar-01 2-Apr-01 1-May-01 1-Jun-01 2-Jul-01 1-Aug-01 4-Sep-01 1-Oct-01 1-Nov-01 3-Dec-01 2-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 3-Jun-02 1-Jul-02 1-Aug-02 3-Sep-02 1-Oct-02 1-Nov-02 2-Dec-02 2-Jan-03 3-Feb-03 3-Mar-03 1-Apr-03 1-May-03 2-Jun-03 1-Jul-03 1-Aug-03 2-Sep-03 1-Oct-03 3-Nov-03 1-Dec-03 2-Jan-04 2-Feb-04 1-Mar-04 1-Apr-04 3-May-04 1-Jun-04 1-Jul-04 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04

97.46 105.04 105.72 103.13 102.10 95.70 87.95 89.61 96.47 97.32 95.88 94.03 97.55 91.62 90.93 84.44 77.92 78.43 69.89 76.03 80.71 75.74 73.76 72.64 73.33 79.38 83.56 84.61 86.09 87.75 86.81 91.71 92.50 97.33 99.10 100.47 98.95 97.39 98.71 100.61 97.28 97.65 98.69 100.19 104.24

-6.58% 7.49% 0.65% -2.48% -1.00% -6.47% -8.44% 1.87% 7.38% 0.88% -1.49% -1.95% 3.68% -6.27% -0.76% -7.40% -8.04% 0.65% -11.53% 8.42% 5.97% -6.36% -2.65% -1.53% 0.95% 7.93% 5.13% 1.25% 1.73% 1.91% -1.08% 5.49% 0.86% 5.09% 1.80% 1.37% -1.52% -1.59% 1.35% 1.91% -3.37% 0.38% 1.06% 1.51% 3.96%

1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 1-Sep-05 3-Oct-05 1-Nov-05 1-Dec-05 3-Jan-06 1-Feb-06 1-Mar-06 3-Apr-06 1-May-06 1-Jun-06 3-Jul-06 1-Aug-06

107.78 105.14 107.34 105.45 103.43 106.71 106.84 110.80 109.79 110.66 108.80 112.90 112.92 115.91 116.21 117.65 119.22 115.76 115.91 116.61 119.37

3.34% -2.48% 2.07% -1.78% -1.93% 3.12% 0.12% 3.64% -0.92% 0.79% -1.70% 3.70% 0.02% 2.61% 0.26% 1.23% 1.33% -2.95% 0.13% 0.60% 2.34%

MEASURING THE MARKET RISK PREMIUM E(rM) - rf USING HISTORICAL DA

Vanguard 500 Index Fund (symbol: VFINX) minus Treasury Bills April 1987 - August 2006 All measurements relate to monthly returns on SP500, r Mt, and the Treasury bill rate rft Average monthly risk premium Monthly standard deviation

4.34%

Annualized risk premium Annualized standard deviation

5.50% 15.04%

Date

1-Apr-87 1-May-87 1-Jun-87 1-Jul-87 3-Aug-87 1-Sep-87 1-Oct-87 2-Nov-87 1-Dec-87 4-Jan-88 1-Feb-88 1-Mar-88 4-Apr-88 2-May-88 1-Jun-88 1-Jul-88 1-Aug-88 1-Sep-88 3-Oct-88 1-Nov-88 1-Dec-88 3-Jan-89 1-Feb-89 1-Mar-89 3-Apr-89 1-May-89 1-Jun-89 3-Jul-89 1-Aug-89 1-Sep-89 2-Oct-89 1-Nov-89

0.46%

Price

17.32 17.49 18.37 19.28 20.02 19.56 15.31 14.06 15.12 15.75 16.48 15.98 16.14 16.27 17.01 16.95 16.37 17.07 17.54 17.28 17.58 18.87 18.4 18.82 19.8 20.6 20.47 22.32 22.73 22.64 22.11 22.56

Return 0.98% 4.91% 4.83% 3.77% -2.32% -24.50% -8.52% 7.27% 4.08% 4.53% -3.08% 1.00% 0.80% 4.45% -0.35% -3.48% 4.19% 2.72% -1.49% 1.72% 7.08% -2.52% 2.26% 5.08% 3.96% -0.63% 8.65% 1.82% -0.40% -2.37% 2.01%

Treasury bill rate

Market risk premium

0.47% 0.51% 0.47% 4.44% 0.47% 4.36% 0.47% 3.29% 0.50% -2.83% 0.53% -25.03% 0.51% -9.03% 0.47% 6.79% 0.48% 3.60% 0.48% 4.05% 0.47% -3.55% 0.48% 0.52% 0.49% 0.31% 0.52% 3.93% 0.54% -0.89% 0.56% -4.04% 0.59% 3.60% 0.60% 2.11% 0.61% -2.11% 0.65% 1.07% 0.67% 6.41% 0.69% -3.21% 0.71% 1.55% 0.74% 4.34% 0.72% 3.24% 0.70% -1.34% 0.68% 7.97% 0.66% 1.16% 0.66% -1.06% 0.65% -3.01% 0.64% 1.38%

1-Dec-89 2-Jan-90 1-Feb-90 1-Mar-90 2-Apr-90 1-May-90 1-Jun-90 2-Jul-90 1-Aug-90 4-Sep-90 1-Oct-90 1-Nov-90 3-Dec-90 2-Jan-91 1-Feb-91 1-Mar-91 1-Apr-91 1-May-91 3-Jun-91 1-Jul-91 1-Aug-91 3-Sep-91 1-Oct-91 1-Nov-91 2-Dec-91 2-Jan-92 3-Feb-92 2-Mar-92 1-Apr-92 1-May-92 1-Jun-92 1-Jul-92 3-Aug-92 1-Sep-92 1-Oct-92 2-Nov-92 1-Dec-92 4-Jan-93 1-Feb-93 1-Mar-93 1-Apr-93 3-May-93 1-Jun-93 1-Jul-93 2-Aug-93

23.1 21.55 21.83 22.4 21.84 23.95 23.79 23.71 21.57 20.51 20.43 21.74 22.33 23.3 24.96 25.56 25.61 26.7 25.49 26.67 27.29 26.83 27.19 26.1 29.07 28.53 28.89 28.33 29.16 29.3 28.86 30.03 29.41 29.75 29.85 30.87 31.46 31.49 31.92 32.59 31.8 32.64 32.73 32.59 33.82

2.37% -6.95% 1.29% 2.58% -2.53% 9.22% -0.67% -0.34% -9.46% -5.04% -0.39% 6.21% 2.68% 4.25% 6.88% 2.38% 0.20% 4.17% -4.64% 4.53% 2.30% -1.70% 1.33% -4.09% 10.78% -1.88% 1.25% -1.96% 2.89% 0.48% -1.51% 3.97% -2.09% 1.15% 0.34% 3.36% 1.89% 0.10% 1.36% 2.08% -2.45% 2.61% 0.28% -0.43% 3.70%

0.64% 1.72% 0.64% -7.58% 0.64% 0.65% 0.65% 1.93% 0.66% -3.19% 0.65% 8.58% 0.65% -1.32% 0.64% -0.98% 0.64% -10.09% 0.62% -5.66% 0.61% -1.00% 0.60% 5.62% 0.59% 2.09% 0.56% 3.69% 0.52% 6.36% 0.50% 1.88% 0.49% -0.30% 0.47% 3.70% 0.46% -5.09% 0.46% 4.06% 0.47% 1.83% 0.44% -2.14% 0.44% 0.90% 0.42% -4.51% 0.38% 10.40% 0.34% -2.21% 0.32% 0.94% 0.32% -2.28% 0.34% 2.55% 0.31% 0.17% 0.30% -1.82% 0.31% 3.67% 0.27% -2.35% 0.26% 0.89% 0.24% 0.09% 0.24% 3.12% 0.26% 1.63% 0.27% -0.17% 0.25% 1.11% 0.24% 1.83% 0.25% -2.70% 0.24% 2.37% 0.25% 0.03% 0.26% -0.68% 0.25% 3.45%

1-Sep-93 1-Oct-93 1-Nov-93 1-Dec-93 3-Jan-94 1-Feb-94 1-Mar-94 4-Apr-94 2-May-94 1-Jun-94 1-Jul-94 1-Aug-94 1-Sep-94 3-Oct-94 1-Nov-94 1-Dec-94 3-Jan-95 1-Feb-95 1-Mar-95 3-Apr-95 1-May-95 1-Jun-95 3-Jul-95 1-Aug-95 1-Sep-95 2-Oct-95 1-Nov-95 1-Dec-95 2-Jan-96 1-Feb-96 1-Mar-96 1-Apr-96 1-May-96 3-Jun-96 1-Jul-96 1-Aug-96 3-Sep-96 1-Oct-96 1-Nov-96 2-Dec-96 2-Jan-97 3-Feb-97 3-Mar-97 1-Apr-97 1-May-97

33.56 34.25 33.91 34.33 35.49 34.52 33.01 33.44 33.97 33.14 34.23 35.62 34.75 35.53 34.23 34.73 35.63 37.01 38.1 39.22 40.78 41.72 43.1 43.21 45.03 44.87 46.83 47.74 49.35 49.81 50.3 51.03 52.33 52.53 50.21 51.26 54.13 55.62 59.83 58.65 62.31 62.8 60.2 63.79 67.67

-0.77% 2.04% -1.00% 1.23% 3.32% -2.77% -4.47% 1.29% 1.57% -2.47% 3.24% 3.98% -2.47% 2.22% -3.73% 1.45% 2.56% 3.80% 2.90% 2.90% 3.90% 2.28% 3.25% 0.25% 4.13% -0.36% 4.28% 1.92% 3.32% 0.93% 0.98% 1.44% 2.52% 0.38% -4.52% 2.07% 5.45% 2.72% 7.30% -1.99% 6.05% 0.78% -4.23% 5.79% 5.90%

0.25% 0.25% 0.25% 0.26% 0.26% 0.25% 0.27% 0.29% 0.31% 0.35% 0.35% 0.36% 0.37% 0.39% 0.41% 0.44% 0.47% 0.48% 0.48% 0.48% 0.47% 0.47% 0.46% 0.45% 0.45% 0.44% 0.44% 0.45% 0.43% 0.42% 0.40% 0.41% 0.41% 0.42% 0.42% 0.43% 0.42% 0.42% 0.42% 0.42% 0.41% 0.42% 0.42% 0.43% 0.43%

-1.02% 1.79% -1.25% 0.97% 3.07% -3.02% -4.74% 1.00% 1.27% -2.82% 2.89% 3.62% -2.85% 1.83% -4.14% 1.01% 2.09% 3.32% 2.42% 2.42% 3.43% 1.81% 2.80% -0.20% 3.68% -0.80% 3.84% 1.48% 2.89% 0.51% 0.58% 1.03% 2.10% -0.04% -4.94% 1.64% 5.03% 2.29% 6.88% -2.41% 5.64% 0.36% -4.65% 5.36% 5.47%

2-Jun-97 1-Jul-97 1-Aug-97 2-Sep-97 1-Oct-97 3-Nov-97 1-Dec-97 2-Jan-98 2-Feb-98 2-Mar-98 1-Apr-98 1-May-98 1-Jun-98 1-Jul-98 3-Aug-98 1-Sep-98 1-Oct-98 2-Nov-98 1-Dec-98 4-Jan-99 1-Feb-99 1-Mar-99 1-Apr-99 3-May-99 1-Jun-99 1-Jul-99 2-Aug-99 1-Sep-99 1-Oct-99 1-Nov-99 1-Dec-99 3-Jan-00 1-Feb-00 1-Mar-00 3-Apr-00 1-May-00 1-Jun-00 3-Jul-00 1-Aug-00 1-Sep-00 2-Oct-00 1-Nov-00 1-Dec-00 2-Jan-01 1-Feb-01

70.68 76.31 72.03 75.97 73.43 76.8 78.11 78.98 84.66 88.98 89.88 88.31 91.91 90.94 77.78 82.76 89.52 94.95 100.47 104.69 101.42 105.47 109.53 106.91 112.85 109.32 108.78 105.8 112.49 114.77 121.64 115.52 113.32 124.38 120.64 118.18 121.12 119.31 126.7 120 119.48 110.07 110.63 114.55 104.09

4.35% 7.66% -5.77% 5.33% -3.40% 4.49% 1.69% 1.11% 6.94% 4.98% 1.01% -1.76% 4.00% -1.06% -15.63% 6.21% 7.85% 5.89% 5.65% 4.11% -3.17% 3.92% 3.78% -2.42% 5.41% -3.18% -0.50% -2.78% 6.13% 2.01% 5.81% -5.16% -1.92% 9.31% -3.05% -2.06% 2.46% -1.51% 6.01% -5.43% -0.43% -8.20% 0.51% 3.48% -9.58%

0.42% 3.93% 0.41% 7.25% 0.42% -6.19% 0.43% 4.90% 0.41% -3.81% 0.41% 4.07% 0.43% 1.26% 0.43% 0.68% 0.42% 6.52% 0.42% 4.55% 0.42% 0.59% 0.41% -2.17% 0.42% 3.58% 0.42% -1.48% 0.41% -16.04% 0.41% 5.80% 0.38% 7.47% 0.33% 5.56% 0.37% 5.28% 0.37% 3.75% 0.36% -3.53% 0.37% 3.55% 0.37% 3.41% 0.36% -2.78% 0.38% 5.03% 0.38% -3.56% 0.38% -0.87% 0.39% -3.17% 0.39% 5.74% 0.41% 1.60% 0.42% 5.39% 0.43% -5.60% 0.44% -2.37% 0.46% 8.85% 0.47% -3.53% 0.47% -2.53% 0.48% 1.97% 0.47% -1.98% 0.50% 5.51% 0.51% -5.94% 0.50% -0.93% 0.51% -8.71% 0.51% -0.01% 0.48% 3.00% 0.43% -10.00%

1-Mar-01 2-Apr-01 1-May-01 1-Jun-01 2-Jul-01 1-Aug-01 4-Sep-01 1-Oct-01 1-Nov-01 3-Dec-01 2-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 3-Jun-02 1-Jul-02 1-Aug-02 3-Sep-02 1-Oct-02 1-Nov-02 2-Dec-02 2-Jan-03 3-Feb-03 3-Mar-03 1-Apr-03 1-May-03 2-Jun-03 1-Jul-03 1-Aug-03 2-Sep-03 1-Oct-03 3-Nov-03 1-Dec-03 2-Jan-04 2-Feb-04 1-Mar-04 1-Apr-04 3-May-04 1-Jun-04 1-Jul-04 2-Aug-04 1-Sep-04 1-Oct-04 1-Nov-04

97.46 105.04 105.72 103.13 102.1 95.7 87.95 89.61 96.47 97.32 95.88 94.03 97.55 91.62 90.93 84.44 77.92 78.43 69.89 76.03 80.71 75.74 73.76 72.64 73.33 79.38 83.56 84.61 86.09 87.75 86.81 91.71 92.5 97.33 99.1 100.47 98.95 97.39 98.71 100.61 97.28 97.65 98.69 100.19 104.24

-6.58% 7.49% 0.65% -2.48% -1.00% -6.47% -8.44% 1.87% 7.38% 0.88% -1.49% -1.95% 3.68% -6.27% -0.76% -7.40% -8.04% 0.65% -11.53% 8.42% 5.97% -6.36% -2.65% -1.53% 0.95% 7.93% 5.13% 1.25% 1.73% 1.91% -1.08% 5.49% 0.86% 5.09% 1.80% 1.37% -1.52% -1.59% 1.35% 1.91% -3.37% 0.38% 1.06% 1.51% 3.96%

0.41% -6.99% 0.37% 7.12% 0.32% 0.32% 0.30% -2.78% 0.29% -1.29% 0.29% -6.77% 0.28% -8.72% 0.22% 1.65% 0.18% 7.20% 0.16% 0.72% 0.14% -1.63% 0.14% -2.09% 0.14% 3.53% 0.15% -6.42% 0.14% -0.90% 0.14% -7.55% 0.14% -8.18% 0.14% 0.51% 0.14% -11.66% 0.14% 8.28% 0.13% 5.84% 0.10% -6.46% 0.10% -2.75% 0.10% -1.63% 0.10% 0.85% 0.09% 7.83% 0.09% 5.04% 0.09% 1.16% 0.08% 1.66% 0.08% 1.83% 0.08% -1.16% 0.08% 5.41% 0.08% 0.78% 0.08% 5.01% 0.08% 1.73% 0.07% 1.30% 0.08% -1.60% 0.08% -1.67% 0.08% 1.27% 0.09% 1.82% 0.11% -3.47% 0.11% 0.27% 0.12% 0.94% 0.14% 1.37% 0.15% 3.82%

1-Dec-04 3-Jan-05 1-Feb-05 1-Mar-05 1-Apr-05 2-May-05 1-Jun-05 1-Jul-05 1-Aug-05 1-Sep-05 3-Oct-05 1-Nov-05 1-Dec-05 3-Jan-06 1-Feb-06 1-Mar-06 3-Apr-06 1-May-06 1-Jun-06 3-Jul-06 1-Aug-06

107.78 105.14 107.34 105.45 103.43 106.71 106.84 110.8 109.79 110.66 108.8 112.9 112.92 115.91 116.21 117.65 119.22 115.76 115.91 116.61 119.37

3.34% -2.48% 2.07% -1.78% -1.93% 3.12% 0.12% 3.64% -0.92% 0.79% -1.70% 3.70% 0.02% 2.61% 0.26% 1.23% 1.33% -2.95% 0.13% 0.60% 2.34%

0.17% 0.18% 0.19% 0.21% 0.23% 0.23% 0.24% 0.25% 0.27% 0.29% 0.29% 0.31% 0.32% 0.32% 0.35% 0.37% 0.38% 0.38% 0.39% 0.40% 0.41%

3.17% -2.66% 1.88% -1.99% -2.16% 2.89% -0.11% 3.39% -1.18% 0.50% -1.98% 3.39% -0.31% 2.29% -0.09% 0.86% 0.95% -3.33% -0.26% 0.20% 1.93%

EMIUM E(rM) - rf USING HISTORICAL DATA

mbol: VFINX) minus Treasury Bills - August 2006 rns on SP500, r Mt, and the Treasury bill rate rft Methodological note: Author used the St. Louis FRED data for 3-month Treasury Bills; this data is annualized, and is divided by 12 to get the monthly returns. Since the data can be taken as an ex-ante return, the April 1987 rate is attributed to May 1987.

COMPUTING THE COST OF EQUITY FOR INTEL USING THE MARKET RISK PREMIUM E(rM) - rf Intel beta Historical market risk premium Intel tax rate, TC Risk free rate, rf Intel cost of equity, rE,Intel Classic CAPM Tax-adjusted CAPM

2.2516 5.50% 31.29% <-- Computed from Intel financials

4.93% 17.31% 19.24%

Note: The tax-adjusted model in cell B8 uses the equivalence: E(rM) - rf (1-TC) = E(rM) - rf + TC*rf

COMPUTING THE COST OF EQUITY FOR INTEL USING THE MARKET PRICE/EARNINGS MULTIPLE TO COMPUTE E(rM) Market price/earnings multiple, August 2006 Equity cash flow payout ratio Anticipated growth of market equity cash flow Expected market return, E(rM)

17 50.00% 6.00% 9.12%

Intel cost of equity calculations

Intel beta Intel tax rate, TC Risk free rate, rf Intel cost of equity, rE,Intel Classic CAPM Tax-adjusted CAPM

2.2516 31.29% <-- Computed from Intel financials

4.93% 14.36% 16.29%

Note: Price/Earnings ratio for S&P 500 from http://www.bullandbearwise.com

COMPUTING THE COST OF DEBT FOR KRAFT 2005/12/31 316,000,000

2004/12/31 282,000,000

805,000,000 1,268,000,000 652,000,000 8,475,000,000

1,818,000,000 750,000,000 227,000,000 9,723,000,000

636,000,000

666,000,000

Net debt Net interest cost

10,884,000,000 5.50%

12,236,000,000

Total debt Cash paid: Interest

11,200,000,000

12,518,000,000

679,000,000

633,000,000

Cash and cash equivalents Short-term borrowings Current portion of long-term debt Due to Altria Group, Inc. and affiliates Long-term debt Interest and other debt expense, net

Interest cost

5.73%

Note: Altria debt is priced at LIBOR (from financial statements)

BT FOR KRAFT

YAHOO: NON-CALLABLE BBB CORPORATE BONDS WITH MATURITY 0.5 - 10 11 August 2006 Type

Issuer

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

PANHANDLE EASTN PIPE LINE CO SAFEWAY INC WEYERHAEUSER CO CONSTELLATION ENERGY GROUP INC PENNEY J C INC MOHAWK INDS INC PROGRESS ENERGY INC AOL TIME WARNER INC ARAMARK SVCS INC BANK UTD CORP COMCAST CABLE COMMUNICATIONS STARWOOD HOTELS&RESORTS WRLDWD VIACOM INC REALTY INCOME CORP CIGNA CORP TELUS CORP EOP OPER LTD PARTNERSHIP POTASH CORP SASK INC VORNADO RLTY TR KENTUCKY POWER CO AVALONBAY CMNTYS INC MTN BE ARCHSTONE SMITH TR BANK OKLA N A TULSA LIBERTY PPTY LTD PARTNERSHIP MASCO CORP RAYTHEON CO TIME WARNER COMPANIES INC TANDY CORP ICI WILMINGTON INC PHH CORP INTERNOTES BOOK ENTRY OCEAN ENERGY INC DEL USA WASTE SVCS INC CALENERGY INC ENTERPRISE PRODS OPER LP POTOMAC ELEC PWR CO ROYAL CARIBBEAN CRUISES LTD UNION PAC CORP CVS CORP ENSCO INTL INC

Price 100.29 104.75 102.35 102.35 103.1 102.61 102.26 102.34 102.77 104.32 103.96 103 101.9 103.41 103.31 103.58 102.98 103.25 102.04 102.06 101.45 101.62 103.54 103.56 101.15 103.09 104.45 103.33 103.27 101.9 100.82 103.58 104.21 100.15 102.73 103.13 103.99 100.01 103.33

Coupon(%) Maturity 2.75 15-Mar-07 9.875 15-Mar-07 6.125 15-Mar-07 6.35 1-Apr-07 7.6 1-Apr-07 6.5 15-Apr-07 6.05 15-Apr-07 6.15 1-May-07 7 1-May-07 8.875 1-May-07 8.375 1-May-07 7.375 1-May-07 5.625 1-May-07 7.75 6-May-07 7.4 15-May-07 7.5 1-Jun-07 6.763 15-Jun-07 7.125 15-Jun-07 5.625 15-Jun-07 5.5 1-Jul-07 5 1-Aug-07 5 15-Aug-07 7.125 15-Aug-07 7.25 15-Aug-07 4.625 15-Aug-07 6.75 15-Aug-07 8.18 15-Aug-07 6.95 1-Sep-07 7.05 15-Sep-07 5.6 15-Sep-07 4.375 1-Oct-07 7.125 1-Oct-07 7.63 15-Oct-07 4 15-Oct-07 6.25 15-Oct-07 7 15-Oct-07 5.75 15-Oct-07 3.875 1-Nov-07 6.75 15-Nov-07

YTM(%) 2.24% 1.62% 2.03% 2.53% 2.56% 2.50% 2.59% 2.78% 3.01% 2.67% 2.68% 3.05% 2.89% 2.94% 2.88% 2.87% 3.08% 3.11% 3.10% 3.08% 3.44% 3.33% 3.48% 3.57% 3.44% 3.56% 3.59% 3.66% 3.92% 3.78% 3.62% 3.83% 3.88% 3.87% 3.82% 4.20% 2.24% 3.87% 3.97%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

EOP OPER LTD PARTNERSHIP MALLINCKRODT GROUP INC MEDIAONE GROUP INC MTN BE UNION CAMP CORP PSEG FDG TR I PLATINUM UNDERWRITERS FIN INC GENERAL MLS INC LILLY INDS INC AMERICAN FINL GROUP INC OHIO PENNEY JC INC MTN BE PRECISION CASTPARTS CORP NEWS AMER INC CNA FINL CORP CENTURY TEL ENTERPRISES INC CLEAR CHANNEL COMMUNICATIONS SARA LEE CORP MTN BE TIME WARNER COMPANIES INC AMERICAN STD INC CONSUMERS ENERGY CO UNION PAC CORP ARAMARK SVCS INC AVNET INC DOMINION RES INC VA NEW EOP OPER LTD PARTNERSHIP IDEX CORP LENFEST COMMUNICATIONS INC MARSH & MCLENNAN COS INC PEMEX PROJ FDG MASTER TR TANGER PPTYS LTD PARTNERSHIP HOSPITALITY PPTYS TR KROGER CO UNITED DOMINION RLTY TR MTNSBE BECKMAN COULTER INC ROYAL CARIBBEAN CRUISES LTD GREATER BAY BANCORP CAROLINA PWR & LT CO MTN BE FORTUNE BRANDS INC GOODRICH CORP PROLOGIS APPALACHIAN PWR CO BERKLEY W R CORP DOMINION RES INC VA NEW MIDAMERICAN ENERGY HLDGS NEW TRW INC SR MEDTERMNTS BK EN DUKE RLTY LTD PARTNERSHIP

104.56 103.1 103.02 103.04 101.57 102.17 99.89 104.46 103.81 102.92 103.64 103.56 103.02 102.83 100.42 102.38 104.42 104.21 102.98 103.52 102.38 107.51 100.19 103.55 103.42 104.77 99.34 106.23 106.63 103.96 103.13 100.27 104.68 103.5 101.06 103.6 103.04 104.81 104.35 98.75 108.8 102.21 98.2 103.28 103.98

7.75 6.5 6.83 6.5 5.381 6.371 3.875 7.75 7.125 6.5 6.75 6.625 6.45 6.3 4.625 6 7.48 7.375 6.375 6.625 6.375 9.75 4.125 6.75 6.875 7.625 3.625 8.5 9.125 7 6.375 4.5 7.45 6.75 5.25 6.65 6.25 7.5 7.1 3.6 9.875 5.687 3.5 6.3 6.75

15-Nov-07 15-Nov-07 15-Nov-07 15-Nov-07 16-Nov-07 16-Nov-07 30-Nov-07 1-Dec-07 15-Dec-07 15-Dec-07 15-Dec-07 9-Jan-08 15-Jan-08 15-Jan-08 15-Jan-08 15-Jan-08 15-Jan-08 1-Feb-08 1-Feb-08 1-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 15-Feb-08 1-Mar-08 1-Mar-08 3-Mar-08 4-Mar-08 15-Mar-08 31-Mar-08 1-Apr-08 1-Apr-08 15-Apr-08 15-Apr-08 15-May-08 15-May-08 15-May-08 15-May-08 15-May-08 30-May-08

3.96% 3.92% 4.30% 3.97% 4.07% 4.55% 3.96% 4.16% 4.14% 4.21% 3.91% 3.97% 4.22% 4.21% 4.31% 4.24% 4.22% 4.35% 4.24% 4.11% 4.71% 4.50% 4.00% 4.27% 4.48% 4.30% 4.08% 4.16% 4.49% 4.31% 4.25% 4.32% 4.29% 4.43% 4.56% 4.32% 4.29% 4.46% 4.35% 4.35% 4.56% 4.37% 4.58% 4.32% 4.41%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

AAG HLDG INC CENTERPOINT ENERGY INC NORTHEAST UTILS ARCHSTONE-SMITH OPER TR SARA LEE CORP MTN BE PHILIP MORRIS COS INC CAPITAL ONE FINL CORP COX COMMUNICATIONS INC NEW MILLER BREWING CO PENNEY J C INC CONTINENTAL CABLEVISION INC TIME WARNER ENTMT CO LP BALT GAS & ELEC CO MTN BE BONY CADBURY SCHWEPPES US FINANACE COX COMMUNICATIONS INC NEW TRIBUNE CO MTN BK MONT TR CO MASCO CORP RAYCHEM CORP DEL UNIVISION COMMUNICATIONS INC NEWS AMER HLDGS INC CHANCELLOR MEDIA CORP LA MAY DEPT STORES CO UNION PAC CORP WEYERHAEUSER CO ALTRIA GROUP INC COMCAST CABLE COMMUNICATIONS SPRINT CAP CORP TELECOM ITALIA CAP WASTE MGMT INC DEL HALLIBURTON CO MTN BE LUBRIZOL CORP TRIBUNE CO MTN BK MONT TR CO CNA FINL CORP EOP OPER LTD PARTNERSHIP EOP OAKMONT ASSET TR D R HORTON INC EOP OPER LTD PARTNERSHIP VALASSIS COMMUNICATIONS INC D R HORTON INC EOP OPER LTD PARTNERSHIP EOP CONSUMERS ENERGY CO BRITISH SKY BROADCASTING GROUP LENNAR CORP PPL CAP FDG INC SOUTHWESTERN PUB SVC CO

103.77 102.14 98.14 97.26 102.61 105.5 104.69 103.27 99.53 106 108.37 105.12 102.24 98.66 98.17 101.08 102.07 105.11 97.91 105.5 106.18 102.61 105.55 103.01 101.96 103.31 103.2 98.55 103.98 102.12 102.14 101.26 103.79 98.2 98.51 100 104.43 103.38 106.5 97.69 100.05 104.77 106 98.92 103.55

6.875 5.875 3.3 3 6.15 7.65 7.125 6.4 4.25 7.375 9 7.25 5.78 3.875 3.875 5.5 5.75 7.2 3.875 7.375 8 5.95 7.25 5.95 5.625 6.2 6.125 4 6.5 5.625 5.875 5.67 6.6 4 4.514 5 6.8 6.625 8 4.1 4.8 6.875 7.625 4.33 6.2

1-Jun-08 1-Jun-08 1-Jun-08 15-Jun-08 19-Jun-08 1-Jul-08 1-Aug-08 1-Aug-08 15-Aug-08 15-Aug-08 1-Sep-08 1-Sep-08 1-Oct-08 1-Oct-08 1-Oct-08 6-Oct-08 15-Oct-08 15-Oct-08 15-Oct-08 17-Oct-08 1-Nov-08 1-Nov-08 1-Nov-08 1-Nov-08 4-Nov-08 15-Nov-08 15-Nov-08 15-Nov-08 15-Nov-08 1-Dec-08 1-Dec-08 8-Dec-08 15-Dec-08 15-Dec-08 22-Dec-08 15-Jan-09 15-Jan-09 15-Jan-09 1-Feb-09 15-Feb-09 17-Feb-09 23-Feb-09 1-Mar-09 1-Mar-09 1-Mar-09

4.65% 4.61% 4.39% 4.58% 4.65% 4.55% 4.59% 4.63% 4.50% 4.21% 4.65% 4.59% 4.66% 4.55% 4.79% 4.96% 4.73% 4.68% 4.90% 4.67% 5.00% 4.69% 4.57% 4.50% 4.68% 4.63% 4.61% 4.69% 4.61% 4.64% 4.87% 5.08% 4.85% 4.82% 5.19% 5.00% 4.83% 5.12% 5.15% 5.09% 4.78% 4.84% 5.08% 4.78% 4.70%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

BURLINGTON NORTHN SANTA FE CP COLONIAL BK MONTGOMERY ALA MACK-CALI RLTY L P PSEG PWR LLC PENNSYLVANIA ELEC CO UNION CARBIDE CORP AMERICAN FINL GROUP INC OHIO DTE ENERGY CO UNION PAC RES GROUP INC NIPSCO CAP MKTS INC MTN BE ASHLAND INC MTN BE GENERAL AMERICAN TRANS CORP SPIEKER PPTYS L P SPRINT CAP CORP CLEAR CHANNEL COMMUNICATIONS SEMPRA ENERGY GATX FINL CORP MARSH & MCLENNAN COS INC UNITED DOMINION REALTY TR INC WILLAMETTE INDS INC MTN BE BRITISH SKY BROADCASTING GROUP MAY DEPT STORES CO PUBLIC SERVICE CO COLO PULTE HOMES INC COX COMMUNICATIONS INC NEW NEW PLAN EXCEL RLTY TR INC MTN DUKE CAP CORP ELECTRONIC DATA SYS CORP CLEVELAND ELEC ILLUM CO FEDERAL REALTY INVT TR DOMINION RES INC WELLPOINT INC CLEAR CHANNEL COMMUNICATIONS COMCAST CORP NEW COX COMMUNICATIONS INC NEW TELECOM ITALIA CAP COX COMMUNICATIONS INC NEW TELECOM ITALIA CAP COLONIAL RLTY LTD PARTNERSHIP IBP INC KROGER CO SAFECO CORP AMERICAN STD INC AIFUL CORPORATION PENNEY J C CORP INC

103.58 107.31 106.04 97.58 103.09 102.99 105.64 104.24 106.02 106.73 105.38 104.7 105.94 103.97 97.78 99.84 109.44 105.77 103.96 104.17 108.86 99.77 105.28 99.27 107.72 106.5 107.23 105.95 107.29 110.5 100.45 98.07 97.11 102.74 98.26 96.36 98.27 96.36 98.89 108.09 108.78 99.65 107.3 96.59 109.17

6.125 15-Mar-09 8 15-Mar-09 7.25 15-Mar-09 3.75 1-Apr-09 6.125 1-Apr-09 6.7 1-Apr-09 7.125 15-Apr-09 6.65 15-Apr-09 7.3 15-Apr-09 7.72 17-Apr-09 6.86 1-May-09 6.75 1-May-09 7.25 1-May-09 6.375 1-May-09 4.25 15-May-09 4.75 15-May-09 8.875 1-Jun-09 7.125 15-Jun-09 6.5 15-Jun-09 6.45 18-Jun-09 8.2 15-Jul-09 4.8 15-Jul-09 6.875 15-Jul-09 4.875 15-Jul-09 7.875 15-Aug-09 7.4 15-Sep-09 7.5 1-Oct-09 7.125 15-Oct-09 7.43 1-Nov-09 8.75 1-Dec-09 5.125 15-Dec-09 4.25 15-Dec-09 4.5 15-Jan-10 5.85 15-Jan-10 4.625 15-Jan-10 4 15-Jan-10 4.625 15-Jan-10 4 15-Jan-10 4.75 1-Feb-10 7.95 1-Feb-10 8.05 1-Feb-10 4.875 1-Feb-10 7.625 15-Feb-10 4.45 16-Feb-10 8 1-Mar-10

4.63% 4.94% 4.73% 4.74% 4.85% 5.46% 4.84% 4.93% 4.86% 4.99% 4.72% 4.87% 4.88% 4.79% 5.13% 4.81% 5.19% 4.91% 4.98% 4.86% 4.89% 4.88% 4.91% 5.15% 5.06% 5.09% 4.97% 5.06% 4.94% 5.23% 4.98% 4.88% 5.44% 4.97% 5.19% 5.18% 5.18% 5.18% 5.10% 5.36% 5.24% 4.99% 5.31% 5.54% 5.14%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

SEMPRA ENERGY NISSAN MTR ACCEP CORP AMERICAN ELEC PWR INC METROPOLITAN EDISON CO NEWS AMER INC RAYTHEON CO SCOTTISH PWR PLC INTL PAPER CO WASHINGTON MUT INC MACK-CALI RLTY L P NEWELL RUBBERMAID INC NORFOLK SOUTHERN CORP PEPCO HOLDINGS INC ROYAL CARIBBEAN CRUISES LTD ENTERPRISE PRODS OPER LP UNION PAC CORP DOMINION RES INC VA NEW EXELON CORP NORTHERN BORDER PARTNERS L P HARRAHS OPER INC WILLIS NORTH AMER INC EOP OPER LTD PARTNERSHIP WASTE MGMT INC DEL PENNSYLVANIA ELEC CO UNSEC MTN TRIBUNE CO NEW DUKE ENERGY FIELD SVCS LLC SAFEWAY INC SOVEREIGN BANCORP INC CLEAR CHANNEL COMMUNICATIONS CONAGRA FOODS INC HEALTH CARE PPTY INVS INC MTN MARSH & MCLENNAN COS INC NUVEEN INVTS INC PUBLIC SERVICE CO OKLA MOLSON COORS CAP FIN BERKLEY W R CORP EOP OPER LTD PARTNERSHIP ROYAL KPN NV TELECOM ITALIA CAP GTECH HLDGS CORP HALLIBURTON CO HALLIBURTON CO CENTEX CORP KINDER MORGAN ENERGY PARTNERS MAY DEPT STORES CO

109.33 98.25 101.17 97.95 99.26 105.22 99.39 96.67 110.22 99.31 96.37 112.21 96.03 107.06 98.92 95.45 110.11 98 112.15 100.64 99.49 109.97 108.08 108.45 96.74 109.57 98.63 98.83 106.57 109.89 98.23 99.76 99.03 98.89 99.25 99.56 97.77 108.83 98.3 98.13 101.26 101.78 96.64 107.46 119.01

7.95 1-Mar-10 4.625 8-Mar-10 5.375 15-Mar-10 4.45 15-Mar-10 4.75 15-Mar-10 6.55 15-Mar-10 4.91 15-Mar-10 4 1-Apr-10 8.25 1-Apr-10 5.05 15-Apr-10 4 1-May-10 8.625 15-May-10 4 15-May-10 8 15-May-10 4.95 1-Jun-10 3.625 1-Jun-10 8.125 15-Jun-10 4.45 15-Jun-10 8.875 15-Jun-10 5.5 1-Jul-10 5.125 15-Jul-10 8.1 1-Aug-10 7.375 1-Aug-10 7.77 2-Aug-10 4.875 15-Aug-10 7.875 16-Aug-10 4.95 16-Aug-10 4.8 1-Sep-10 7.65 15-Sep-10 7.875 15-Sep-10 4.875 15-Sep-10 5.15 15-Sep-10 5 15-Sep-10 4.85 15-Sep-10 4.85 22-Sep-10 5.125 30-Sep-10 4.65 1-Oct-10 8 1-Oct-10 4.875 1-Oct-10 4.75 15-Oct-10 5.5 15-Oct-10 5.5 15-Oct-10 4.55 1-Nov-10 7.5 1-Nov-10 10.625 1-Nov-10

5.04% 5.17% 5.01% 5.08% 4.98% 4.94% 5.10% 5.01% 5.12% 5.26% 5.09% 5.01% 5.18% 5.87% 5.26% 4.96% 5.18% 5.03% 5.32% 5.31% 5.27% 5.27% 5.09% 5.37% 5.80% 5.19% 5.33% 5.12% 5.82% 5.15% 5.36% 5.21% 5.27% 5.16% 5.05% 5.24% 5.26% 5.57% 5.34% 5.25% 5.16% 5.02% 5.45% 5.49% 5.50%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

UNITRIN INC COMCAST CORP NEW NISOURCE FIN CORP TEXAS EASTN TRANSMISSION CORP XCEL ENERGY INC MINN BURLINGTON NORTHN SANTA FE CP DOMINION RES INC VA NEW ISTAR FINL INC RAYTHEON CO VIRGINIA ELEC & PWR CO KINDER MORGAN FINANCE CORP ULC BOSTON SCIENTIFIC CORP AGL CAP CORP BRE PROPERTIES INC FORTUNE BRANDS INC RAYTHEON CO RECKSON OPER PARTNERSHIP L P WADDELL & REED FINL INC WELLPOINT INC COMCAST CABLE COMMUNICATIONS SPRINT CAP CORP CENTEX CORP ROYAL CARIBBEAN CRUISES LTD CARDINAL HEALTH INC NORFOLK SOUTHERN CORP VORNADO RLTY L P RESIDENTIAL CAP CORP SAFEWAY INC NISSAN MTR ACCEP CORP ALCAN INC CSX CORP CLEAR CHANNEL COMMUNICATIONS COMCAST CORP NEW COX COMMUNICATIONS INC NEW KINDER MORGAN ENERGY PARTNERS COLONIAL RLTY LTD PARTNERSHIP FEDERATED DEPT STORES INC DEL KELLOGG CO KROGER CO RYDER SYS MTN BE AOL TIME WARNER INC ONEOK INC NEW TRICON GLOBAL RESTAURANTS VIACOM INC ANADARKO FIN CO

97.98 101.14 110.92 107.86 107.06 107.87 98.23 102.61 103.82 97.56 95.83 95.94 107.48 108.54 99.56 99.3 98.41 100.43 99.57 106.08 108.95 108.8 110.5 106.44 106.76 101.11 100.42 104.16 101.11 105.27 106.3 101.18 101.05 104.6 104.92 97.94 105.47 106.23 105.84 98.64 105.13 106.64 114.09 100.74 106.03

4.875 5.45 7.875 7.3 7 7.125 4.75 6 6 4.5 5.35 4.25 7.125 7.45 5.125 4.85 5.15 5.6 5 6.75 7.625 7.875 8.75 6.75 6.75 5.6 6 6.5 5.625 6.45 6.75 6.25 5.5 6.75 6.75 4.8 6.625 6.6 6.8 5 6.75 7.125 8.875 5.75 6.75

1-Nov-10 15-Nov-10 15-Nov-10 1-Dec-10 1-Dec-10 15-Dec-10 15-Dec-10 15-Dec-10 15-Dec-10 15-Dec-10 5-Jan-11 12-Jan-11 14-Jan-11 15-Jan-11 15-Jan-11 15-Jan-11 15-Jan-11 15-Jan-11 15-Jan-11 30-Jan-11 30-Jan-11 1-Feb-11 2-Feb-11 15-Feb-11 15-Feb-11 15-Feb-11 22-Feb-11 1-Mar-11 14-Mar-11 15-Mar-11 15-Mar-11 15-Mar-11 15-Mar-11 15-Mar-11 15-Mar-11 1-Apr-11 1-Apr-11 1-Apr-11 1-Apr-11 1-Apr-11 15-Apr-11 15-Apr-11 15-Apr-11 30-Apr-11 1-May-11

5.42% 5.15% 4.99% 5.23% 5.14% 5.08% 5.21% 5.32% 5.00% 5.13% 6.46% 5.29% 5.20% 5.26% 5.24% 5.03% 5.56% 5.49% 5.11% 5.20% 5.34% 5.62% 6.03% 5.13% 5.05% 5.32% 5.89% 5.45% 5.35% 5.14% 5.18% 5.95% 5.24% 5.60% 5.52% 5.31% 5.28% 5.07% 5.36% 5.33% 5.49% 5.49% 5.41% 5.57% 5.28%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

EXELON CORP HEALTHCARE RLTY TR PREMCOR REFNG GROUP INC RYDER SYS MTN BE CLEAR CHANNEL COMMUNICATIONS PUBLIC SERVICE CO OKLA VIACOM INC BLACK & DECKER CORP DTE ENERGY CO MATTEL INC MTN BE BOSTON SCIENTIFIC CORP EXELON GENERATION CO LLC WHIRLPOOL CORP TELEFONICA EMISONES SA SABMILLER PLC QUEST DIAGNOSTICS INC ALLIED CAP CORP NEW BURLINGTON NORTHN SANTA FE CP EOP OPER LTD PARTNERSHIP HEINZ H J FIN CO LAFARGE COPPEE S A PULTE HOMES INC CNA FINL CORP FIDELITY NATL FINL INC REPUBLIC SVCS INC CONAGRA FOODS INC MAY DEPT STORES CO SARA LEE CORP DEVON FING CORP U L C TYSON FOODS INC TYCO INTL GROUP S A CONSOLIDATED NAT GAS CO PPL ENERGY SUPPLY LLC FIRSTENERGY CORP COVENTRY HEALTH CARE INC WELLPOINT HEALTH NETWORK NEW EOP OPER LTD PARTNERSHIP TEPPCO PARTNERS L P CRH AMER INC CLEAR CHANNEL COMMUNICATIONS HEINZ H J FIN CO JEFFERIES GROUP INC NEW KINDER MORGAN ENERGY PARTNERS MARSH & MCLENNAN COS INC SPRINT CAP CORP

105.83 110.51 103.69 102.41 93.69 97.67 105.21 107.17 106.78 104.6 101.75 106.95 102.89 102.72 104.06 109.69 102.61 107.1 106.81 105.66 102.97 108.88 102.17 104.05 106.39 106.31 108 103.04 107.34 108.8 105.61 103.77 104.64 104.95 99.86 104.87 106.38 108.03 106.4 94.29 102.43 110.29 106.26 102.65 113.02

6.75 1-May-11 8.125 1-May-11 6.125 1-May-11 5.95 2-May-11 4.4 15-May-11 4.7 15-May-11 6.625 15-May-11 7.125 1-Jun-11 7.05 1-Jun-11 7.3 13-Jun-11 6 15-Jun-11 6.95 15-Jun-11 6.125 15-Jun-11 5.984 20-Jun-11 6.2 1-Jul-11 7.5 12-Jul-11 6.625 15-Jul-11 6.75 15-Jul-11 7 15-Jul-11 6.625 15-Jul-11 6.15 15-Jul-11 7.875 1-Aug-11 6 15-Aug-11 7.3 15-Aug-11 6.75 15-Aug-11 6.75 15-Sep-11 7.45 15-Sep-11 6.25 15-Sep-11 6.875 30-Sep-11 8.25 1-Oct-11 6.375 15-Oct-11 6.25 1-Nov-11 6.4 1-Nov-11 6.45 15-Nov-11 5.875 15-Jan-12 6.375 15-Jan-12 6.75 15-Feb-12 7.625 15-Feb-12 6.95 15-Mar-12 5 15-Mar-12 6 15-Mar-12 7.75 15-Mar-12 7.125 15-Mar-12 6.25 15-Mar-12 8.375 15-Mar-12

5.33% 5.55% 5.23% 5.36% 5.94% 5.26% 5.36% 5.40% 5.42% 6.18% 5.58% 5.30% 5.43% 5.34% 5.24% 5.23% 6.00% 5.10% 5.40% 5.30% 5.45% 5.79% 5.50% 6.34% 5.28% 5.32% 5.62% 5.55% 5.22% 6.22% 5.12% 5.41% 5.36% 5.35% 5.91% 5.33% 5.39% 5.89% 5.60% 6.23% 5.49% 5.58% 5.79% 5.69% 5.62%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

WEYERHAEUSER CO MEADWESTVACO CORP PROLOGIS KROGER CO UNION PAC CORP VALERO ENERGY CORP NEW AOL TIME WARNER INC STARWOOD HOTELS&RESORTS WRLDWD ARAMARK CORP PSEG PWR LLC KENNAMETAL INC HEALTH CARE PPTY INVS INC DOMINION RES INC VA NEW NEXFOR INC MAY DEPT STORES CO CONTINENTAL CORP PEPCO HOLDINGS INC VIACOM INC KINDER MORGAN INC SAFECO CORP ALCAN INC AMERISOURCEBERGEN CORP CINCINNATI GAS & ELEC CO MIDAMERICAN ENERGY HLDGS NEW STANCORP FINL GROUP INC ASTORIA FINL CORP DEVELOPERS DIVERSIFIED RLTY CO PLAINS ALL AMERN PIPELINE L P INTL PAPER CO CENDANT CORP CLEAR CHANNEL COMMUNICATIONS TIME WARNER COMPANIES INC USA INTERACTIVE SEMPRA ENERGY AEP TEX CENT CO BERKLEY W R CORP DUKE CAP CORP AEP TEX NORTH CO COX COMMUNICATIONS INC NEW NATIONAL FUEL GAS CO N J TXU ENERGY CO LLC CENTERPOINT ENERGY RESOURCES RESIDENTIAL CAP CORP D R HORTON INC FUND AMERN COS INC

105.51 105.65 100.34 105.65 106.35 107.17 105.71 109 88.5 107.03 107.32 104.07 103.86 108.11 111.78 109.71 104.2 100.47 98.52 107 97.28 99.08 101.45 103.01 107.21 101.39 99.52 111.18 102.39 106 96.38 115.84 103.3 102.64 99.82 101.87 102.92 99.86 107.18 97 105.19 111.45 102.29 103 99.08

6.75 15-Mar-12 6.85 1-Apr-12 5.5 1-Apr-12 6.75 15-Apr-12 6.5 15-Apr-12 6.875 15-Apr-12 6.875 1-May-12 7.875 1-May-12 5 1-Jun-12 6.95 1-Jun-12 7.2 15-Jun-12 6.45 25-Jun-12 6.25 30-Jun-12 7.25 1-Jul-12 8 15-Jul-12 8.375 15-Aug-12 6.45 15-Aug-12 5.625 15-Aug-12 6.5 1-Sep-12 7.25 1-Sep-12 4.875 15-Sep-12 5.625 15-Sep-12 5.7 15-Sep-12 5.875 1-Oct-12 6.875 1-Oct-12 5.75 15-Oct-12 5.375 15-Oct-12 7.75 15-Oct-12 5.85 30-Oct-12 7.375 15-Jan-13 5.75 15-Jan-13 9.125 15-Jan-13 7 15-Jan-13 6 1-Feb-13 5.5 15-Feb-13 5.875 15-Feb-13 6.25 15-Feb-13 5.5 1-Mar-13 7.125 1-Mar-13 5.25 1-Mar-13 7 15-Mar-13 7.875 1-Apr-13 6.5 17-Apr-13 6.875 1-May-13 5.875 15-May-13

5.59% 5.66% 5.43% 5.57% 5.19% 5.39% 5.69% 5.99% 7.48% 5.51% 5.70% 5.62% 5.47% 5.61% 5.63% 6.40% 5.62% 5.53% 6.80% 5.86% 5.41% 5.81% 5.42% 5.29% 5.47% 5.48% 5.47% 5.58% 5.39% 6.22% 6.45% 6.10% 6.36% 5.51% 5.53% 5.53% 5.71% 5.53% 5.79% 5.81% 6.03% 5.77% 6.07% 6.32% 6.04%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

M D C HLDGS INC EMBARQ CORP ROYAL CARIBBEAN CRUISES LTD CYTEC INDS INC HARLEYSVILLE GROUP INC PACKAGING CORP AMER TELE COMMUNICATIONS INC CAROLINA TEL & TELEG CO PSI ENERGY INC POTOMAC ELEC PWR CO TELECOM ITALIA CAP CONSOLIDATED NAT GAS CO ROYAL CARIBBEAN CRUISES LTD COMMERCE GROUP INC MASS CLEVELAND ELEC ILLUM CO IMCERA GROUP INC PLAINS ALL AMERN PIPELINE L P CENTERPOINT ENERGY RES CORP COMCAST CORP NEW EXELON GENERATION CO LLC MACK-CALI RLTY L P DUKE CAP CORP PACIFIC GAS & ELEC CO CORNING INC TOLL BROS FIN CORP METROPOLITAN EDISON CO GLENCORE FDG LLC POTOMAC ELEC PWR CO MAGELLAN MIDSTREAM PRTNRS LP OHIO CAS CORP ARIZONA PUB SVC CO WESTAR ENERGY INC MARSH & MCLENNAN COS INC MAYTAG CORP MEDTERM NTS BK ENT CLEAR CHANNEL COMMUNICATIONS D R HORTON INC TELECOM ITALIA CAP LUBRIZOL CORP ATMOS ENERGY CORP INDIANA MICH PWR CO JONES APPAREL GROUP INC / CONSOLIDATED NAT GAS CO COMCAST CORP NEW ONCOR ELEC DELIVERY CO APPALACHIAN PWR CO

94.15 103.13 102.5 92.39 98.25 98.69 111.33 102.5 96.97 97.72 96.36 105.59 101.5 100.29 99.67 106.39 99.53 101.08 97.26 98.57 96.25 98.73 96.38 102.14 90.12 96.25 95.6 95.09 103.26 106.57 99.97 102.94 96.23 102.31 92.88 95 93.18 97.54 94.74 95.95 89.05 95.24 104.78 104.06 95.38

5.5 15-May-13 6.738 1-Jun-13 7 15-Jun-13 4.6 1-Jul-13 5.75 15-Jul-13 5.75 1-Aug-13 7.875 1-Aug-13 6.75 15-Aug-13 5 15-Sep-13 4.95 15-Nov-13 5.25 15-Nov-13 6.625 1-Dec-13 6.875 1-Dec-13 5.95 9-Dec-13 5.65 15-Dec-13 7 15-Dec-13 5.625 15-Dec-13 5.95 15-Jan-14 5.3 15-Jan-14 5.35 15-Jan-14 5.125 15-Feb-14 5.5 1-Mar-14 4.8 1-Mar-14 5.9 15-Mar-14 4.95 15-Mar-14 4.875 1-Apr-14 6 15-Apr-14 4.65 15-Apr-14 6.45 1-Jun-14 7.3 15-Jun-14 5.8 30-Jun-14 6 1-Jul-14 5.375 15-Jul-14 6.45 15-Aug-14 5.5 15-Sep-14 5.625 15-Sep-14 4.95 30-Sep-14 5.5 1-Oct-14 4.95 15-Oct-14 5.05 15-Nov-14 5.125 15-Nov-14 5 1-Dec-14 6.5 15-Jan-15 6.375 15-Jan-15 4.95 1-Feb-15

6.59% 6.16% 6.54% 5.97% 6.06% 5.98% 5.87% 6.30% 5.52% 5.33% 5.87% 5.68% 6.61% 5.90% 5.70% 5.91% 5.70% 5.77% 5.76% 5.59% 5.75% 5.71% 5.39% 5.55% 6.63% 5.48% 6.74% 5.44% 5.92% 6.23% 5.80% 5.53% 5.98% 6.08% 6.65% 6.43% 6.02% 5.88% 5.77% 5.67% 6.89% 5.73% 5.77% 5.76% 5.65%

Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp Corp

CENTURYTEL INC PULTE HOMES INC ENTERPRISE PRODS OPER LP INTL PAPER CO ARCHSTONE-SMITH OPER TR ODYSSEY RE HLDGS CORP HEALTH CARE REIT INC MAYTAG CORP MEDTERM NTS BK ENT AMERICAN ELEC PWR INC CENTERPOINT ENERGY INC HARRAHS OPER INC CENTEX CORP CONSTELLATION ENERGY GROUP INC EXELON CORP ONEOK INC NEW COX COMMUNICATIONS INC NEW TELECOM ITALIA CAP NEWS AMER HLDGS INC EQUITY ONE PENNEY JC INC MTN BE COMCAST CORP NEW HARRAHS OPER INC ROYAL CARIBBEAN CRUISES LTD WHIRLPOOL CORP PENNEY J C INC

91.87 93.33 93.79 96.22 97.18 95.13 98.86 92 96.81 106.09 95.25 93.66 92.05 94.74 95.6 95.96 94.47 112.59 95.92 106.33 99.4 100.5 102.12 102.83 113.86

5 15-Feb-15 5.2 15-Feb-15 5 1-Mar-15 5.3 1-Apr-15 5.25 1-May-15 6.875 1-May-15 5.875 15-May-15 5 15-May-15 5.25 1-Jun-15 6.85 1-Jun-15 5.625 1-Jun-15 5.25 15-Jun-15 4.55 15-Jun-15 4.9 15-Jun-15 5.2 15-Jun-15 5.5 1-Oct-15 5.25 1-Oct-15 7.6 11-Oct-15 5.375 15-Oct-15 6.875 15-Oct-15 5.85 15-Nov-15 6.5 1-Jun-16 7.25 15-Jun-16 6.5 15-Jun-16 7.65 15-Aug-16

6.25% 6.22% 5.94% 5.86% 5.66% 7.65% 6.04% 6.20% 5.72% 5.95% 6.34% 6.19% 5.71% 5.66% 5.84% 6.08% 6.05% 5.81% 5.96% 5.97% 5.93% 6.43% 6.95% 6.11% 5.80%

TH MATURITY 0.5 - 10 YEARS

Fitch rating

2.742 BBB 9.427 BBB 5.984 BBB 6.204 BBB 7.371 BBB 6.334 BBB 5.917 BBB 6.009 BBB 6.811 BBB 8.508 BBB 8.056 BBB 7.16 BBB 5.52 BBB 7.494 BBB 7.163 BBB 7.241 BBB 6.567 BBB 6.901 BBB 5.513 BBB 5.389 BBB 4.928 BBB 4.92 BBB 6.882 BBB 7.001 BBB 4.572 BBB 6.547 BBB 7.832 BBB 6.726 BBB 6.827 BBB 5.496 BBB 4.339 BBB 6.879 BBB 7.322 BBB 3.994 BBB 6.084 BBB 6.787 BBB 5.529 BBB 3.875 BBB 6.532 BBB

Callable No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

Years to maturity 0.59 0.59 0.59 0.64 0.64 0.68 0.68 0.72 0.72 0.72 0.72 0.72 0.72 0.73 0.76 0.81 0.84 0.84 0.84 0.89 0.97 1.01 1.01 1.01 1.01 1.01 1.01 1.06 1.10 1.10 1.14 1.14 1.18 1.18 1.18 1.18 1.18 1.22 1.26

BBB Bond Yields, 11Aug06 7%

f(x) = 0.0001227977x^3 - 0.0023149676x^2 + 0.0152477476x + 0.02 R² = 0.8479466107

6%

Yield

Current yield

5%

4%

3%

2%

1% 0

1

2

3

4

5 6 Maturity

7

8

7.412 BBB 6.305 BBB 6.63 BBB 6.308 BBB 5.298 BBB 6.236 BBB 3.879 BBB 7.419 BBB 6.863 BBB 6.316 BBB 6.513 BBB 6.397 BBB 6.261 BBB 6.127 BBB 4.606 BBB 5.86 BBB 7.163 BBB 7.077 BBB 6.19 BBB 6.4 BBB 6.227 BBB 9.069 BBB 4.117 BBB 6.519 BBB 6.647 BBB 7.278 BBB 3.649 BBB 8.002 BBB 8.558 BBB 6.733 BBB 6.181 BBB 4.488 BBB 7.117 BBB 6.522 BBB 5.195 BBB 6.419 BBB 6.066 BBB 7.156 BBB 6.804 BBB 3.645 BBB 9.077 BBB 5.564 BBB 3.564 BBB 6.1 BBB 6.492 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

1.26 1.26 1.26 1.26 1.27 1.27 1.30 1.31 1.35 1.35 1.35 1.41 1.43 1.43 1.43 1.43 1.43 1.48 1.48 1.48 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.56 1.56 1.56 1.56 1.59 1.64 1.64 1.64 1.68 1.68 1.76 1.76 1.76 1.76 1.76 1.80

6.626 BBB 5.752 BBB 3.362 BBB 3.084 BBB 5.993 BBB 7.251 BBB 6.806 BBB 6.198 BBB 4.27 BBB 6.958 BBB 8.305 BBB 6.897 BBB 5.653 BBB 3.928 BBB 3.947 BBB 5.441 BBB 5.633 BBB 6.85 BBB 3.958 BBB 6.991 BBB 7.535 BBB 5.798 BBB 6.869 BBB 5.776 BBB 5.517 BBB 6.001 BBB 5.935 BBB 4.059 BBB 6.251 BBB 5.508 BBB 5.752 BBB 5.599 BBB 6.359 BBB 4.073 BBB 4.582 BBB 5 BBB 6.511 BBB 6.409 BBB 7.512 BBB 4.197 BBB 4.797 BBB 6.562 BBB 7.193 BBB 4.377 BBB 5.987 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

1.81 1.81 1.81 1.85 1.86 1.89 1.98 1.98 2.01 2.01 2.06 2.06 2.14 2.14 2.14 2.16 2.18 2.18 2.18 2.19 2.23 2.23 2.23 2.23 2.24 2.27 2.27 2.27 2.27 2.31 2.31 2.33 2.35 2.35 2.37 2.43 2.43 2.43 2.48 2.52 2.52 2.54 2.56 2.56 2.56

5.913 BBB 7.455 BBB 6.837 BBB 3.843 BBB 5.942 BBB 6.505 BBB 6.745 BBB 6.38 BBB 6.886 BBB 7.233 BBB 6.51 BBB 6.447 BBB 6.843 BBB 6.132 BBB 4.347 BBB 4.758 BBB 8.11 BBB 6.736 BBB 6.252 BBB 6.192 BBB 7.532 BBB 4.811 BBB 6.53 BBB 4.911 BBB 7.311 BBB 6.948 BBB 6.994 BBB 6.725 BBB 6.925 BBB 7.919 BBB 5.102 BBB 4.334 BBB 4.634 BBB 5.694 BBB 4.707 BBB 4.151 BBB 4.706 BBB 4.151 BBB 4.803 BBB 7.355 BBB 7.4 BBB 4.892 BBB 7.106 BBB 4.607 BBB 7.328 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

2.59 2.59 2.59 2.64 2.64 2.64 2.68 2.68 2.68 2.68 2.72 2.72 2.72 2.72 2.76 2.76 2.81 2.85 2.85 2.85 2.93 2.93 2.93 2.93 3.01 3.10 3.14 3.18 3.23 3.31 3.35 3.35 3.43 3.43 3.43 3.43 3.43 3.43 3.48 3.48 3.48 3.48 3.52 3.52 3.56

7.271 BBB 4.707 BBB 5.313 BBB 4.543 BBB 4.785 BBB 6.225 BBB 4.94 BBB 4.138 BBB 7.485 BBB 5.085 BBB 4.151 BBB 7.686 BBB 4.165 BBB 7.473 BBB 5.004 BBB 3.798 BBB 7.379 BBB 4.541 BBB 7.914 BBB 5.465 BBB 5.151 BBB 7.366 BBB 6.824 BBB 7.165 BBB 5.039 BBB 7.187 BBB 5.019 BBB 4.857 BBB 7.178 BBB 7.166 BBB 4.963 BBB 5.162 BBB 5.049 BBB 4.905 BBB 4.886 BBB 5.148 BBB 4.756 BBB 7.351 BBB 4.959 BBB 4.84 BBB 5.432 BBB 5.404 BBB 4.708 BBB 6.979 BBB 8.928 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

3.56 3.58 3.59 3.59 3.59 3.59 3.59 3.64 3.64 3.68 3.72 3.76 3.76 3.76 3.81 3.81 3.85 3.85 3.85 3.89 3.93 3.98 3.98 3.98 4.01 4.02 4.02 4.06 4.10 4.10 4.10 4.10 4.10 4.10 4.12 4.14 4.14 4.14 4.14 4.18 4.18 4.18 4.23 4.23 4.23

4.976 BBB 5.389 BBB 7.1 BBB 6.768 BBB 6.538 BBB 6.605 BBB 4.836 BBB 5.848 BBB 5.779 BBB 4.612 BBB 5.583 BBB 4.43 BBB 6.629 BBB 6.864 BBB 5.148 BBB 4.884 BBB 5.233 BBB 5.576 BBB 5.022 BBB 6.363 BBB 6.998 BBB 7.238 BBB 7.919 BBB 6.342 BBB 6.322 BBB 5.538 BBB 5.975 BBB 6.24 BBB 5.563 BBB 6.127 BBB 6.35 BBB 6.177 BBB 5.443 BBB 6.453 BBB 6.433 BBB 4.901 BBB 6.282 BBB 6.213 BBB 6.425 BBB 5.069 BBB 6.421 BBB 6.681 BBB 7.779 BBB 5.708 BBB 6.366 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

4.23 4.27 4.27 4.31 4.31 4.35 4.35 4.35 4.35 4.35 4.41 4.42 4.43 4.43 4.43 4.43 4.43 4.43 4.43 4.47 4.47 4.48 4.48 4.52 4.52 4.52 4.54 4.56 4.59 4.59 4.59 4.59 4.59 4.59 4.59 4.64 4.64 4.64 4.64 4.64 4.68 4.68 4.68 4.72 4.72

6.378 BBB 7.352 BBB 5.907 BBB 5.81 BBB 4.696 BBB 4.812 BBB 6.297 BBB 6.648 BBB 6.603 BBB 6.979 BBB 5.897 BBB 6.498 BBB 5.953 BBB 5.825 BBB 5.958 BBB 6.837 BBB 6.457 BBB 6.303 BBB 6.554 BBB 6.27 BBB 5.973 BBB 7.233 BBB 5.872 BBB 7.016 BBB 6.345 BBB 6.349 BBB 6.898 BBB 6.066 BBB 6.405 BBB 7.583 BBB 6.036 BBB 6.023 BBB 6.116 BBB 6.146 BBB 5.884 BBB 6.079 BBB 6.345 BBB 7.058 BBB 6.532 BBB 5.303 BBB 5.858 BBB 7.027 BBB 6.705 BBB 6.088 BBB 7.41 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

4.72 4.72 4.72 4.73 4.76 4.76 4.76 4.81 4.81 4.84 4.85 4.85 4.85 4.86 4.89 4.92 4.93 4.93 4.93 4.93 4.93 4.98 5.01 5.01 5.01 5.10 5.10 5.10 5.14 5.14 5.18 5.23 5.23 5.27 5.43 5.43 5.52 5.52 5.60 5.60 5.60 5.60 5.60 5.60 5.60

6.397 BBB 6.483 BBB 5.481 BBB 6.389 BBB 6.112 BBB 6.415 BBB 6.504 BBB 7.225 BBB 5.65 BBB 6.493 BBB 6.709 BBB 6.198 BBB 6.018 BBB 6.706 BBB 7.157 BBB 7.634 BBB 6.19 BBB 5.599 BBB 6.598 BBB 6.776 BBB 5.012 BBB 5.677 BBB 5.619 BBB 5.703 BBB 6.413 BBB 5.671 BBB 5.401 BBB 6.97 BBB 5.713 BBB 6.958 BBB 5.966 BBB 7.877 BBB 6.777 BBB 5.846 BBB 5.51 BBB 5.767 BBB 6.073 BBB 5.508 BBB 6.648 BBB 5.412 BBB 6.654 BBB 7.066 BBB 6.354 BBB 6.675 BBB 5.93 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

5.60 5.64 5.64 5.68 5.68 5.68 5.73 5.73 5.81 5.81 5.85 5.88 5.89 5.89 5.93 6.02 6.02 6.02 6.06 6.06 6.10 6.10 6.10 6.15 6.15 6.18 6.18 6.18 6.22 6.44 6.44 6.44 6.44 6.48 6.52 6.52 6.52 6.56 6.56 6.56 6.60 6.64 6.69 6.73 6.76

5.841 BBB 6.533 BBB 6.829 BBB 4.979 BBB 5.852 BBB 5.827 BBB 7.074 BBB 6.585 BBB 5.156 BBB 5.066 BBB 5.449 BBB 6.274 BBB 6.773 BBB 5.933 BBB 5.668 BBB 6.58 BBB 5.652 BBB 5.887 BBB 5.449 BBB 5.428 BBB 5.324 BBB 5.571 BBB 4.98 BBB 5.776 BBB 5.493 BBB 5.065 BBB 6.276 BBB 4.89 BBB 6.246 BBB 6.85 BBB 5.802 BBB 5.829 BBB 5.585 BBB 6.304 BBB 5.922 BBB 5.921 BBB 5.312 BBB 5.639 BBB 5.225 BBB 5.263 BBB 5.755 BBB 5.25 BBB 6.203 BBB 6.126 BBB 5.19 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No No

6.76 6.81 6.85 6.89 6.93 6.98 6.98 7.02 7.10 7.27 7.27 7.31 7.31 7.33 7.35 7.35 7.35 7.44 7.44 7.44 7.52 7.56 7.56 7.60 7.60 7.64 7.68 7.68 7.81 7.85 7.89 7.89 7.93 8.02 8.10 8.10 8.14 8.15 8.18 8.27 8.27 8.31 8.44 8.44 8.48

5.443 BBB 5.571 BBB 5.331 BBB 5.508 BBB 5.402 BBB 7.227 BBB 5.942 BBB 5.435 BBB 5.423 BBB 6.457 BBB 5.906 BBB 5.606 BBB 4.943 BBB 5.172 BBB 5.439 BBB 5.732 BBB 5.557 BBB 6.75 BBB 5.604 BBB 6.466 BBB 5.886 BBB 6.468 BBB 7.099 BBB 6.321 BBB 6.719 BBB

No No No No No No No No No No No No No No No No No No No No No No No No No

8.52 8.52 8.56 8.64 8.73 8.73 8.76 8.76 8.81 8.81 8.81 8.85 8.85 8.85 8.85 9.15 9.15 9.17 9.18 9.18 9.27 9.81 9.85 9.85 10.02

ds, 11Aug06

6x^2 + 0.0152477476x + 0.0221118412

6 aturity

7

8

9

10

11

COMPUTING KRAFT'S rD FROM A YIELD CURVE YTM=0.0001*time3-0.0023*time2+0.0152*time+0.0221 Average time to maturity (years) Yield

5 5.31%

Sensitivity analysis

Years to maturity 3 4 5 6 7 8 9 10 11

Average time to maturity (years) Yield

4.97% 5.25% 5.31% 5.21% 5.01% 4.77% 4.55% 4.41% 4.41%

1 0.03444

Sensitivity analysis

Years to maturity 3 4 5 6 7 8 9 10 11

4.97% 5.25% 5.31% 5.21% 5.01% 4.77% 4.55% 4.41% 4.41%

KRAFT: COST OF EQUITY rE BASED ON DIVIDENDS Stock price, end 2005 Current dividend, D0

27.75 0.92

#NAME?

Using growth rate Dec01-Dec05

19.15%

#NAME?

Using growth rate Dec03-Dec05

16.79%

#NAME?

Gordon cost of equity, rE

Date 20-Dec-01 13-Mar-02 26-Jun-02 12-Sep-02 19-Dec-02 12-Mar-03 25-Jun-03 11-Sep-03 18-Dec-03 11-Mar-04 23-Jun-04 10-Sep-04 20-Dec-04 11-Mar-05 24-Jun-05 2-Sep-05 22-Dec-05

Dividends per share 0.130 0.130 0.130 0.150 0.150 0.150 0.150 0.180 0.180 0.180 0.180 0.205 0.205 0.205 0.205 0.230 0.230

Computing the growth rate of dividends Quarterly growth, Dec01-Dec05 Annualized

3.63% 15.33%

Quarterly growth, Dec03-Dec05 Annualized

3.11% 13.04%

KRAFT: COST OF EQUITY rE BASED ON CASH FLOW TO EQUITY Shares outstanding Share price, end 2005 Equity value, E End 2005 total equity payout High growth rate, ghigh Number of high-growth years Normal growth rate, gnormal Cost of equity, rE, using the function twostagegordon

Date 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-Dec-05 Growth rates Four year Two year

1,669,880,755 27.75 46,339,190,951 2,612,000,000 20.00% <-- Guess 3 <-- Guess 6% <-- Guess

#NAME?

#NAME?

Stock Dividends paid Stock issuance repurchases 170,000,000 225,000,000 372,000,000 936,000,000 8,425,000,000 372,000,000 1,089,000,000 688,000,000 1,280,000,000 1,175,000,000 1,437,000,000 62.14% 77.72%

58.97% 14.87%

Note: "Stock issuance" is net proceeds from Class A common stock

Cash flow to equity holders 395,000,000 -7,117,000,000 1,461,000,000 1,968,000,000 2,612,000,000 60.36% 33.71%

W TO EQUITY

COMPUTING THE COST OF EQUITY rE FOR KRAFT USING THE MARKET PRICE/EARNINGS MULTIPLE TO COMPUTE E(rM) Market price/earnings multiple, December 2005 Equity cash flow payout ratio Anticipated growth of equity cash flow Expected market return, E(rM) Kraft cost of equity calculations Kraft beta Kraft tax rate, TC Risk free rate, rf

18 50.00% 6.00% 8.94%

0.4700 <-- From Yahoo 29.37% <-- Computed from Kraft financials 4.93%

Kraft cost of equity, rE,Kraft Classic CAPM Tax-adjusted CAPM

6.82% 6.05%

Note: Price/Earnings ratio for S&P 500 from http://www.bullandbearwise.com

COMPUTING THE WACC FOR KRAFT Shares outstanding Share price, end 2005 Equity value, E Net debt, D

1,669,880,755 27.75 46,339,190,951 10,884,000,000

WACC based on Gordon per-share dividends and interest from financial statements Cost of equity, rE 16.79% Cost of debt, rD Tax rate, TC WACC

5.50% 29.37% 14.33%

WACC based on Gordon equity payouts and interest from financial statements Cost of equity, rE 14.46% Cost of debt, rD Tax rate, TC WACC

5.50% 29.37% 12.45%

WACC based on classic CAPM and interest from financial statements Cost of equity, rE 6.82% Cost of debt, rD Tax rate, TC WACC

5.50% 29.37% 6.26%

WACC based on tax-adjusted CAPM and interest from financial statements Cost of equity, rE 6.05% Cost of debt, rD Tax rate, TC WACC

5.50% 29.37% 5.64%

MPUTING THE WACC FOR KRAFT

dividends and interest from financial statements

outs and interest from financial statements

interest from financial statements

M and interest from financial statements