Investor Relations Plan- Danyu Wang- Nirav Suchak- Qinqian Tang

Directory

Situation Analysis

IR Goals

Audience Messages

Strategies

Tactics Calendar

Budget

Measurement

Company Introduction

Company Introduction

• Healthcare multi-level marketing company

• Products – Weight management, Targeted nutrition, Energy & Fitness and Personal Care

• 2.5 Million distributors operate across 80 countries• Competes with companies in the Pharmaceutical and

Biotechnology industry

① Situation Analysis

Strengths Healthy pipeline of products Strong logistic footprint Supported by well known investors

like Carl Icahn Good financial performance and

steady growth

Weaknesses

Business model not well understood Business relies on employee

confidence about products Criticized as pyramid scheme

Opportunities

Multi-level marketing model is efficient Business has grown across 80

countries and still expanding Media is actively interested in the

company

Threats

Attacked publicly by investors like Bill Ackman

Possibly investigated by SEC for being a pyramid scheme

Negative news such like insider trading jeopardizes reputation

• SWOT Analysis

• Financial Performance

① Situation Analysis

Full Year 4Q 1Q

2012 2011 Change 2012 2011 Change 2013 2012 Change

Revenue $4.07B $3.45B 17.88% $1.06B $884.57M 19.76% $952M $822M 15.82%

Earning $477.19M $412.58M 15.66% $117.88M $105.36M 11.89% $119M $108M 10.19%

Operating Margin 16.40% 16.50% -10BP 15.30% 15.40% -10BP 17.75% 18.76% -1.01P

EPS 4.05 3.3 22.72% 1.04 0.86 20.93% 1.10 0.88 25%

Positive change in revenues and earnings compared to the previous year indicates that Herbalife enjoys good financial health.

① Situation Analysis• Financial Performance

2008 2009 2010 2011 20120

1

2

3

4

5

6

Financial Growth Trend

Revenue(B)

EPS

Operating Margin(10%)

Earning(100M)

① Situation Analysis

• Financial Performance Insight

Strong financial

performance

Increasing growth rate

Insight:

Profitable company

• Stock Performance (1 year)

① Situation Analysis

① Situation Analysis

• Stock Performance

Since the previous year, stock price of the market and Herbalife’s peers has increased.

But Herbalife’s stock price decreased significantly, especially around January when Ackman’s criticism came out.

Negative media attention has impacted the stock price significantly.

• Relative Evaluation

① Situation Analysis

HLF PG CL GNC Industry S & P 500

P/E(ttm)

8.82 18.08 22.69 18.43 24.13 17.94

PEG 0.55 2.50 2.12 0.84 - -

P/BV 9.05 3.34 25.30 4.87 - -

P/S(ttm)

0.95 2.63 3.24 1.77 - -

① Situation Analysis

Dividend history &

dividend yield HLF maintains a high dividend

and dividend yield

Good ROI for stockholders

Considering dividend history, stock is attractive for yield investors

Herbalife Dividend – 1.20 Dividend yield – 3.09

① Situation Analysis

• Evaluation Insights Herbalife shows a consistent increase in revenues and sales. Its

performance in this year compared to the previous also indicates a steady positive growth.

In comparison to the industry and the overall market, the P/E ratio of Herbalife is quite low.

Compared with peers like P&G and GNC, Herbalife’s P/E, P/S and PEG Ratio are lower.

Herbalife is undervalued when compared to peer companies, industry and the overall stock market.

Herbalife offers good dividend yield. Growth, Value and Yield investors would be interested in the

company.

② IR Goals

• Increase Institutional investors

• Increase analyst coverage

• Achieve fair valuation

• Attain positive visibility in media

③ Audiences

Institutional investors Value investors Growth investors Yield investors Analysts Financial media Board of Directors Senior Management

③ Audiences – Institutional Investors

Current Investor Investment Style

Investec Asset Management Renaissance TechnologiesTimesSquare Capital Mgmt. Goldman Sachs Asset Mgmt.Schroder Investment Mgmt.Columbia Mgmt. AdvisorsD. E. Shaw & CompanyNorges Bank Investment Mgmt.Mason Capital ManagementEagle Asset ManagementBlackRock Financial Mgmt.Freshford Capital Management

GrowthHedge FundGrowthGrowthGrowthGrowthHedge FundValueHedge FundGrowthGrowthHedge fund

Current Investor Investment Style

Icahn Associates CorporationFidelity Management Third Point LLCMorgan Stanley Inv. Mgmt.Wellington ManagementCapital Growth ManagementEast side Capital GroupJennison AssociatesBNP Paribas Investment (France)Munder Capital ManagementHerndon Capital ManagementTiger Consumer ManagementVisium Asset Management

Hedge FundGARPHedge FundValueValueGrowthHedge FundGrowthGrowth GrowthGARPHedge FundHedge Fund

③ Audiences – Institutional Investors

Target Investor Investment Style

Capital World InvestorsYacktman AssetCedar Rock CapitalM&G InvestmentState Farm InsuranceJanus Capital ManagementFirst Eagle InvestmentJensen InvestmentIndependent FranchiseCapital Research GlobalWells CapitalSystematic Financial

ValueValueValueValueGrowthGrowthValueValueYieldValueValueValue

③ Audiences - Analysts

Company Current Analyst

Avondale PartnersBank of America/Merrill LynchBarclays CapitalCanaccord AdamsCaris & Co.D.A. Davidson & Co.Janney Montgomery ScottSunTrust Robinson HumphreyWedbush Morgan Securities

Anand VankawalaChris FerraraBrian WangScott Van WinkleLinda Bolton WeiserTim RameyJohn San MarcoMike SwartzRommel T. Dionisio

③ Audiences - Analysts

Company Target Analyst

BMO Capital MarketsCredit SuisseDeutsche BankGoldman SachsGreat Lakes ReviewJP MorganMorgan StanleyWells FargoWilliam Blair

Karen ShortGary BalterCharles GromMatt FasslerElliott SchlangChris HorversMark WiltamuthKate WendtMark Miller

The New York TimesWall Street JournalFox BusinessMarket WatchBloomberg NewsThe Business Journal

③ Audiences – Financial Media

④ Message Triangle Healthcare industry is

going through a boom Sales volumes for the industry

are constantly increasing Consistent launch of new

products helps the industry prosper

Healthy product pipeline

Strong distribution network

Presence across 80 countries

Supported by well-known investors

EPS to grow by 16% (5 year est.) CAGR (5 years) – 31.95%, company is growing

steadily

High dividend yield and operating margin among peers

Highest revenue growth and P/BV ratio compared to competitors

⑤ Strategies

• Target 12 new institutional investors (Value, Growth & Yield)• Target more analysts to cover Herbalife• Enhance coverage in Financial media • Improve internal communication (primarily distributors)• Enhance business model understanding among stakeholders

⑥ Tactics: Events• Investor Day (Annual event) – March 23rd Attendees: CEO, COO, CFO and unit heads Provide live webcast• Annual Shareholders meeting – April 29th

Give a presentation on business model to shareholders• Quarterly Earnings – Webcasts (Q1-May 1, Q2-Jul 31, Q3-Oct 30, Q4-Feb

20) • Media Relations: Pitch distributor personal stories (showcasing the success after working

with Herbalife) to Financial and conventional media Set up monthly media interview with various board members and senior

management to answer media’s questions Dispel myths about the business model by clearly communicating to the

media. Presentation on the business model will be shared with the media.

⑥ Tactics: Events• Company Field Trip (Annual Event) Invite analysts and investors New Product and Science Center (Torrance, California) Provide detailed update on product pipeline Business model will be explained to investors and analysts to remove any

skepticism about Herbalife being a pyramid scheme. Interaction between distributors and senior management will be reinforced.

A meeting will be held where key distributor issues will be discussed and addressed by senior management members.

• Brokerage conferences Jan 7-10, JP Morgan Healthcare Conference, San Francisco May 12, Goldman Sachs Consumer Products Symposium, New York May 23, Citi 2012 Global Consumer Conference, New York Sept 14, America Merrill Lynch Investment Conference, San Francisco Nov 14, Morgan Stanley Global Consumer & Retailer Conference, New York

⑥ Tactics: Events

• Investor Meetings (Prospective & Current) Los Angeles - May – Target Investors: Capital World Investors, Capital Research

Global (Clubbed with Non-deal Road Show) San Francisco - January – Target Investors: Wells Capital (This will be arranged

after the JP Morgan Healthcare Conference) New York - November – Target Investors: First Eagle Investment, Systematic

Financial (This will be arranged after the Morgan Stanley Global Consumer & Retailer Conference). Current investors: Jennison Associates, TimesSquare Capital Management, Goldman Sachs Assert Management.

London - April – Target Investors: Cedar Rock Capital, M&G Investment, Independent Franchise. Current Investors: Morgan Stanley Investment Management, Investec Asset Mgmt., Schroeder Investment Mgmt.

Boston - September – Current Investors: Fidelity Management, Wellington Management, Capital Growth Mgmt., Columbia Mgmt. Investment Advisors. (Clubbed with Non-deal Road Show)

⑥ Tactics: Events

• Analyst society presentations Potential partners: CFA Institute(Seminars), NYSSA (Anniversary Dinner)

• Non-deal Road shows Chris Ferrera – Bank of America/ Merill Lynch (January) Brian Wang – Barclays Capital (May) Tim Ramey – D. A. Davidson & Co. (June) John San Marco – Janney Montgomery Scott (September) Mike Schwartz – SunTrust Robinson Humphrey (December)

⑥ Tactics: Online• Website: Add interactive graphs on Financial and MLM page Show more information about products Regulate IR files in clear categories Add a specific section on the website about the business model. Presentation

about the business model will be provided. Content and testimonials from customers and distributors should be shared there.

• Social Media: Give link of updated information on official website Update information in English (currently some is in Spanish) Give more introduction of products Explain business model on social media Set up online community or BBS for employees (distributors)

⑦ CalendarCalendar Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Annual Meeting ✔

QuarterlyMeetings, Surveys & Board updates

✔ ✔ ✔ ✔

Investor Day ✔

Media interviews/ Sr. Management updates

✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Non-deal Road shows

4 44 4 44 ✔

Investor Meetings

✔4 ✔ 44 44 ✔4

Company Field Trip

✔

Analyst society presentations

✔NYSSA

44CFA

Brokerage conference

4✔ 4✔ 4✔ 4✔

✔✔- Tactics clubbed together

⑧BudgetBudget Category Expense

Website and social media changes $2,000

Annual Report $2,000

Salaries (IRO) $200,000

Investor Day (Annual event) $50,000

Annual Meeting $30,000

Quarterly Meeting (4 times/ year) $40,000

Investor Meetings (5 times/year) $50,000

Non-deal Road Shows (5 times/ year) $20,000

Company Field Trip $25,000

Analyst society presentation $10,000

Surveys $1,000

Brokerage conference (5 times/ year) $75,000

Total yearly budget $505,000 (Approx.)

⑨Measurement

Periodic reports

toboard

Better stock performance

Improved valuation (P/E; P/BV; PEG)

Growth in Institutional investors

Positive Media coverage

Increase in analysts covering Herbalife

Surveys (investors & analysts)

• 1) How would you rate the access to senior management?• 2) How would you rate investor and financial info on website? • 3) How would you rate your confidence in the company's business model?• 4) How would you rate the company managements response to investor

issues? • 5) Are you happy with the quality of events we have held? How would you rate

us?• 6) How would you rate the frequency of investor events we conduct?• 7) How would you rate the frequency of updates about important financial info?• 8) How would you rate the channels used to inform investors about updates?

Any comments on channels to be used?• 9) Among our peers and competitors, how would you rank Herbalife?• 10) How would you rate our social media channels, for informing investors

about company info?

⑩Survey

Thank You!