#1A Rising Tide is a Good Gamble Ira Sohn Conference May 8, 2013 PERSHIQUARE Pershing Square Capital Management, L.P.#2Disclaimer The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing Square") contained in this presentation are based on publicly available information. Pershing Square recognizes that there may be confidential information in the possession of the companies discussed in this presentation that could lead these companies to disagree with Pershing Square's analyses, conclusions and opinions. This presentation and the information contained herein is not investment advice or a recommendation or solicitation to buy or sell any securities. All investments involve risk, including the loss of principal. The analyses provided may include certain forward-looking statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies discussed in this presentation, access to capital markets, market conditions and the values of assets and liabilities. Such statements, estimates, and projections reflect various assumptions by Pershing Square concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein and Pershing Square disclaims any liability with respect thereto. Actual results may vary materially from the estimates and projected results contained herein. Funds managed by Pershing Square and its affiliates are invested in Procter & Gamble Co ("PG") common stock. Pershing Square manages funds that are in the business of trading - buying and selling - securities and financial instruments. It is possible that there will be developments in the future that cause Pershing Square to change its position regarding PG. Pershing Square may buy, sell, cover or otherwise change the form of its investment in PG for any or no reason. Pershing Square hereby disclaims any duty to provide any updates or changes to the analyses contained here including, without limitation, the manner or type of any Pershing Square investment.#3Procter & Gamble P&G Ticker: "PG" Recent stock price: $78 (¹) Dividend yield: 3% ► Leading global personal and household care company ■ $84bn in revenues and $16bn in operating profit ► Equity market capitalization of ~$230bn (1) Based on stock price as of May 7, 2013. Enterprise valuation of ~$265bn Currently earns ~$4/share Pershing Square owns approximately 29 million shares 2#4Investment Thesis One of the great businesses of the world Vastly under-earning relative to its intrinsic earnings power Company taking steps to improve performance ► Stakeholders are monitoring situation closely ▸ Expectation, by all stakeholders, of a sustainable turnaround in the near- term Valuation represents a very attractive risk-reward 3#5P&G is a Great Business#6P&G Operates in Highly Attractive Categories P&G participates in very high quality consumer categories that have strong profitability, high barriers to entry, excellent global growth opportunities, and limited private label exposure Business Quality Category Very high Beauty Very high Grooming Very high Healthcare High Fabric / Home Care Products (1) Pet care included in Fabric/Home Care. Based on company reports and industry research. Hair Care, Skin Care, Cosmetics, Deodorants, Personal Cleaning, Prestige Fragrance Blades and Razors, Face and Shave Products, Electric Shavers Oral Care, Health Care, Feminine Care Fabric Care, Dish Care, Surface Care, Air Care, Batteries, Pet Care (1) Moderate (paper) to Baby / Family Baby wipes, Bath Care High (diapers) Tissue, Diapers, Facial Tissue Est. Gross Margins -65% -60% - 65% 55% -47.5% -40% 5 Private Label Exposure (US) Very Limited Very Limited Limited in Oral Care, moderate in Fem Care Limited to moderate Commentary Growth Opportunity Strong Emerging Markets ("EM") presence. Cosmetics category more discretionary Good EM presence. Opportunity to grow Gillette "Male" category EM presence below company average EM presence is moderate and growing Moderate with Strong EM presence in highest exposure in Diapers. No presence in paper products paper products Personal Care Household Care#7...With Leading Global Consumer Brands We believe P&G is uniquely positioned with 25 "billion dollar" brands. The strength, consumer appeal, and size of these brands demonstrate the scalability and growth opportunities of P&G's innovative products "Brands that win at the two moments of consumer truth" Charmin ULTRA STRONG bounce PEARL Dash Prilosec erus ENDECO ARIEL ACTRIE Crest PRO LEALFRE Tide PODS 6 Jedn Chunks IAMS: DURACELL Savdiy Swiffer OLAY WETJET MACH Gaflette ACE CLASSICA SKI#8Strong Global Market Share P&G ranks highly in global market share in most of its categories, which reflects the company's historically strong execution Representative Market Share and Global Ranking by Category #1 #1 #1 ……… Fabric Care Batteries #1 Blades & Diapers & Razors Wipes #1 Fem. Care #2 Oral #1 Hair Care #1 Paper Towels Care Note: Categories presented above are illustrative examples of P&G's category leadership and do not include all of P&G's categories with leading market share. Based on P&G annual reports and Wall Street research. 7#9Attractive Emerging Markets Presence Approximately 40% of P&G's sales are from fast growing emerging markets. In the HPC industry, only Colgate and Unilever have a materially more attractive emerging markets sales mix than P&G Estimated Percentage of Sales from Emerging Markets (1) 60% 50% 40% 30% 20% 10% 0% 55% 50% Colgate 40% 40% P&G Unilever (1) Source: Wall Street research and company reports. L'Oreal based on Cosmetics division. BDF ●●●● Beiersdorf 38% 8 36% L'ORÉAL Ek Kimberly-Clark 14% CLOROX CHU 8% DWIGH COINC#10High Caliber Talent Force P&G's people have historically been a source of significant competitive advantage ► Talented work force ■ Marketing and sales ■ R&D and supply chain ► Talent development program focused on building leaders ■ Ex-P&G'ers are running some of the largest consumer companies in the world Culture of "winning wherever it plays" ■ By reputation, "Proctoids" are trained to win and are feared by competitors 9#11Innovation Culture P&G's heritage of innovation is inherent to the company's culture How washing miracle Occions of Sudy cence CLATUES VORY SOAP Pampers Crest POR PARTE fluoristan head & shoulders hs DAWN 10 PERT PUIS ARIEL ExcerGel 10 ► Innovation is part of the DNA of the company Swiffer System Febreze Creat 17 Whitestrips BLED#12Under-Earning Relative to Earnings Power#13Why is P&G Under-Earning? Bloated overhead cost structure ■ P&G never fully integrated massive Gillette acquisition of 2005 Suboptimal manufacturing productivity levels Inefficient organizational design ■ Convoluted org structure limiting company's execution and productivity Emerging market regions are still building scale and require investment Marketing investments are not achieving appropriate returns Pricing in certain categories not optimized The good news is that most of these issues are readily fixable and that P&G's brands and products are generally in a strong position 12#14Company Recognizes Enormous Cost Opportunity In Feb. 2012, P&G announced a $10bn cost reduction plan to be completed fully by FYE June 2016. This plan consisted of: ► $6bn of Productivity Savings through COGS reduction ► $1bn of Overhead Savings ► $1bn of Marketing Efficiencies ► $2bn Operating leverage, assuming ~5% organic growth 13#15What Should P&G be Earning? Based on our view of appropriate revenue growth and operating profit margins, we believe that P&G should be earning closer to $6/share by FY June 2016 a level more indicative of the company's true earnings power (1) Organic revenue growth (2) EBIT Margin (3) Earnings per share 1 Current FYE June 30, 2013 3% 19% -$4.00 Note: FYE June 2013 Organic revenue growth, EBIT margin and EPS is based on company guidance. 14 FY 2016 Earnings Power Pershing Square View 5% -24% -$6.00#161. Organic Revenue Growth#17P&G Should Generate Consistent 5% Organic Growth Based on its (1) mix of emerging and developed market, (2) global scale and (3) significant marketing investments, we believe P&G should grow organic sales consistently at a 5% level on a long- term basis Developed Markets Emerging Markets % of sales Total Growth 60% 40% Estimated Growth Low High 1.5% 7.5% -4% 3.5% 16 10% ~6% Midpoint: 5% long-term organic sales growth Our estimate of 5% organic revenue growth is consistent with P&G's longer-term historical levels and long-term targets#18Comparison of Peer Company Growth Rates Many peer companies with lower emerging markets exposure, weaker brands and/or less advantaged categories are achieving 4% - 7% organic growth rates Unilever Colgate Beiersdorf L'Oreal Kimberly Clark Clorox Church and Dwight P&G Emerging Markets Mix 55% 50% 40% 38% 36% 14% 8% 40% Brand Strength ▲▲▲▲ ▲▲▲▲ ▲▲▲ ▲▲▲▲ Note: Emerging markets mix is based on Wall Street research and company reports. 17 Advantaged Categories √√√+ verr Ver ver ✓✓✓. ✓✓✓ Ver Ver CY'12 Organic Sales Growth 7% 6% 5% 6% 5% 4% 5% 3%#192. EBIT Margin#20EBIT Margin Opportunity We believe P&G should earn a 24% EBIT margin- a substantial increase in profitability from its current EBIT margin of ~19% % of Revenue Gross Margin Less: Advertising & Other Marketing Expense Less: Core SG&A Expense (ex Advertising) EBIT Margin P&G's biggest opportunities: ✓ Gross margin improvements ✓Core SG&A efficiencies 19 FY 2012 49.6% (16.5)% (14.4)%->> 18.8 % Pershing View 51.5% (16.5)% (11.0)% 24.0 %#21Gross Margins - Big Structural Opportunity Our due diligence suggests that the underlying gross margins of P&G's categories could be as high as 54%. This analysis takes into account P&G's scale as well the premium pricing of its leading brands P&G Segment Beauty Grooming Fabric & Home Care Baby & Family Care Health Care Total P&G % of P&G Rev. 24% 10% 32% 19% 15% 20 Pershing View Appropriate Gross Margin -65% -60% -65% -47.5% -40% -55% 52%-54% This category-level analysis suggests that our 51.5% gross margin estimate for P&G is conservative#22Gross Margins: COGS Productivity Benchmarking P&G's $6bn of COGS reduction target from FY 2011 to 2016 translates into less than 3% annual COGS efficiency. Many CPG peers undertaking productivity initiatives have demonstrated significantly higher annual COGS productivity in the range of 3.5% to 4% (1) Annual COGS Savings 4.3% <3% 4.1% 3.7% 21 3.6% CHURCH DWIGHT CO P&G Colgate Plan CLOROX Unilever Note: Based on company reports and earnings calls. Defined as annual COGS cost savings as a percentage of COGS. For CPG peers, reflects the average COGS savings achieved in 2010 and 2011. 4.2% INC 4% average KRAFT#23Gross Margins - COGS Productivity at 3.5% If P&G could achieve 3.5% annual COGS productivity over the course of its restructuring program from FY 2011 to 2016, we believe the Company would easily generate 51.5% gross margins FY 2011 Gross Margin (Start of Restructuring) Plus: 3.5% Annual COGS Productivity Less: Reinvestment, Inflation, Negative Mix Shift FY 2016E Gross Margin Pershing View 50.9 % -750bps ~(690)bps 22 51.5% We estimate that P&G can utilize more than 90% of its COGS savings to reinvest in pricing, offset commodity inflation, counterbalance negative product and geographic mix and still achieve our gross margin estimate Note: FY 2011 gross margin of 50.9% represents the fiscal year prior to P&G's restructuring program. FY 2012 gross margin of 49.6% declined 130bps from FY 2011 as the negative impact of reinvestment more than offset the positive impact of COGS productivity. Estimate of 750bps of total COGS productivity based on a 5-year total of COGS savings of more than $7.2bn and FY 2016E Revenue of $97bn.#24Gross Margins - Untapped Opportunity Previous P&G leadership believed a 52% gross margin was only the starting point for a company that had not yet reached peer levels "We'll also continue to improve gross margins. The Company's current gross margin is about 52%. We can earn a higher total company margin by achieving best-in-class margins in more categories and business units. Based on industry benchmarking, we believe that only about half of P&G businesses have gross margins better than their competitive peer set. As we get more of our businesses to best-in-class levels, we'll increase our total company margin." 23 - A.G. Lafley, Former CEO 2007 Annual Report#25Core SG&A Opportunity P&G's Core SG&A Ratio (ex-Advertising and Marketing) is currently 14.4%. The company believes its Core SG&A ratio at peer levels on a category-adjusted basis would be ~14.1% P&G's Benchmarking Analysis of Core SG&A (ex Advertising) Core SG&A FY 2012 % Mix Benchmark Companies 24% 20% 10 % 19% Energizer, Beiersdorf STINE 32% 10% CHD, CLX, Henkel, Reckitt, Unilever 19% 10% Kimberly-Clark, SCA 15% 15% Colgate, Kimberly-Clark, J&J P&G Segment Beauty Grooming Fabric & Home Care Baby & Family Care Health Care PG Core SGA $20bn $8bn $27bn $16bn $12bn 14.4% Note: Data from P&G provided at Back to School Conference presentation, 9/6/12 14.1 %: However, this benchmarking analysis does not take into account P&G's massive scale advantage 24 Beiersdorf, L'Oreal, Unilever#26Benefits of Scale to P&G's SG&A Ratios P&G's revenue base is more than four times the size of its peer benchmark average, which should allow P&G to operate at a significantly lower Core SG&A Ratio than its peers benchmark FY 2012 Revenue Core SG&A Expense % Fixed % Variable Core SG&A Ratio Peer Benchmark Average $20,000 $2,820 30% 70% 14.1% Assumes 30% of Core SG&A expense is fixed Pershing View Peer Benchmark at P&G's Revenue Base $84,000 25 $9,140 -11% We believe P&G's scale advantage should allow it to achieve our estimate of an 11% Core SG&A ratio#27Add it Up: EBIT Margins Should be 24% We believe our 24% EBIT margin estimate for P&G is very achievable Pershing View FY 2016E 51.5% % of Revenue Gross Margin Less: Advertising & Other Marketing Expense Less: Core SG&A Expense (ex Advertising) EBIT Margin FY 2012 49.6% (16.5)% (14.4)% 26 18.8% (16.5)% (11.0)% 24.0% Our EBIT margin estimate allows for: ✔ Substantial reinvestment opportunities (pricing, promotions, geographic expansion) Cushion to offset negative mix shift and commodities ✓ Advertising and marketing spend at the high end of category-adjusted peer average#28Comparison to Colgate We believe Colgate is the most comparable competitor to P&G based on gross margin profile, leading market share, HPC category overlap, and emerging markets mix. Given P&G's massive scale advantage, we believe P&G should at least approach Colgate's EBIT margin Gross Margin Category Leader Emerging Markets Presence EBIT Margin Current Revenue Base Colgate 51% 27 ✓+ -24% $17bn Pershing View P&G 51.5% -24% $84bn Note: Colgate's reported gross margin includes shipping and handling in SG&A. We have deducted shipping and handling expenses from Colgate's gross margin to conform to P&G's methodology.#29Comments by Past Leadership When P&G acquired Gillette in 2005, previous leadership believed P&G could achieve a 24% EBIT margin. We still believe P&G can approach that profitability level under strong leadership "Based on the synergy plan, we are confident that the combined entity will generate about a 24% operating margin by the end of this decade versus the 18.5% P&G delivered in fiscal 2004-5." 28 A.G. Lafley, CEO Gillette M&A Presentation 10/3/05#303. True Earnings Power#31True Earnings Power If P&G can grow its top-line annually by 5% and achieve a 24% EBIT margin by FY 2016, it can generate $6 of earnings per share $ in Billions, except per share data Revenue '13E-'16E CAGR EBIT Margin EPS June 30 FY 2013E 30 $83.9 $15.9 18.9% $4.00 June 30 FY 2016E 1 $97.2 5% $23.3 24.0% $6.00 Note: FY ends June 30. EPS is based on P&G's definition of Core EPS, which excludes certain non-recurring items. Assumes share repurchases reduce diluted share count by 2% annually.#32Our Engagement with P&G#33Pershing Square's Engagement with P&G Since our investment became public in July 2012, we have shared our perspectives with P&G's management and board on: ■ P&G's underwhelming performance under current leadership ■ Increasing overhead cost savings goals above 2012 plan ■ Increasing productivity goals above 2012 plan ■ Organizational design and alignment ■ Succession and accountability ■ Share repurchase activity ■ Separation of Chairman/CEO roles 32#34CEO McDonald Has Been Distracted by Outside Interests Prior to our discussions with P&G, Mr. McDonald was a member of at least 21 outside organizations, which we believe required him to commit 50 or more business days per year 1 Xerox Corporation Board of Directors Audit Committee Compensation Committee 2 US-China Business Council 3 Business Roundtable 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Organization Executive Committee Tax and Fiscal Policy Committee Consumer Goods Forum Fuqua School of Business China-US Exchange Foundation's Research Project Catalyst Board of Directors Foreign Investment Advisory Council in Russia International Business Leaders Advisory Council of Beijing Singapore Economic Development Board, International Advisory Council United Negro College Fund Board of Directors US Advisory Committee for Trade Policy and Negotiations (ACTPN) US Council for International Business Board of Trustees Advanced Manufacturing Partnership Cincinnati Business Committee (Executive Committee / Innovation Task Force) McKinsey Advisory Council Northwestern University - Journal of Integrated Marketing Communications Ohio Business Roundtable The University of Utah Eccles School of Business 20 US-Philippines Society Board 21 West Point Military Academy Member Member Member Chair Vice Chair / Chair Vice Chair Chair Member Committee Co-Sponsor Exec Committee Member / Chair of Board of Visitors Role(s) Steering Committee Member Member Member Member Member Member Member Member Steering Committee Member Member / Co-Chair Member Advisory Board Member Member Advisory Board Member Member Member 33 Location Norwalk, CT Norwalk, CT Norwalk, CT Washington, DC / China Washington, DC Washington, DC Washington, DC Tokyo, Paris, Washington, DC Durham, NC Beijing, China / Washington, DC New York, NY Moscow, Russia Beijing, China Singapore New York, NY Washington, DC New York, NY Washington, DC Cincinnati, OH New York, NY Evanston, IL Columbus, OH Salt Lake City, UT Washington, DC West Point, NY & New York, NY (1) "?" indicates number of meetings per year not available (2) Includes 6 Board of Director Meetings per year and the Annual Meeting of Shareholders Note: Obligations per year refer to # of meetings; 48 obligations per year. For obligations where # of meetings is unknown, the organization's headquarters is listed for location Source: Bob McDonald's biography per Procter & Gamble website, Organization websites # of Meetings /Year 791 12 4 7 (8 days) 4 ? 3 (8 days) At least 2 2 1 (2 days) 1 1 1 (3 days) ? 1 1 ? ? ? ? ? ? ? ?#35P&G Has Recently Taken Encouraging Steps Issue Bloated overhead costs Low gross margins Organizational structure Innovation (Beauty category in particular) P&G's Positive Steps Feb. 2012: Announces a 5-year restructuring program that included $1bn of overhead savings ■ Jan. 2013: Announces an effective $1bn of incremental overhead savings Feb. 2012: Announces $6bn of gross margin saving April 2013: Reveals higher GM savings targets for 2014 Nov. 2012: Appoints an executive to oversee the Transformation of Organization ■ Creates a council of senior leaders to help execute productivity and organizational changes ■ Fall 2012: Reveals strong pipeline of innovation particularly in ailing Beauty category 34#36P&G is Showing Some Initial Progress... ► Improved U.S. market performance after very weak results last year ■ Currently ~65% of U.S. portfolio is gaining or holding share, up from 15% in June 2012 ■ Strong pricing interventions and improving innovation helping U.S. share position ► Good execution of cost savings program ■ COGS productivity and SGA savings being achieved ahead of plan ■ However, reinvestment and the cost of geographic expansion has not allowed for material margin improvement ► Strong capital allocation and good free cash flow productivity ■ Repurchasing approximately $6 billion of stock this year ■ Converting ~90% of net earnings to free cash flow 35#37...But Results Are Still Lagging Peers P&G's organic growth has consistently underperformed its peers' growth rates in each of the last four quarters CY Quarterly Organic Revenue Growth for the Prior 4 Quarters 7% 3% 2% 3% 3% Q2'12 Q3'12 Q4'12 Q1¹13 P&G COINO 7% 6% 5% Q2'12 Q3'12 Q4'12 Q1'13 Peer Average THE CLOROX COMPANY Colgate® P&G Performance Gap Q2 '12: Q3 '12: Q4 '12: Q1 '13: Kimberly-Clark L'ORÉAL Unilever Note: Quarters based on calendar year. Kimberly-Clark based on Personal Care segment, and Unilever based on Personal Care and Home Care segments. 36 (4)% (4)% (4)% (2)%#38Shareholders Are Monitoring the Situation Closely ► All stakeholders (Management, Board, and Shareholders) are expecting improved results over the course of the current year ► The next two three quarters are critical to demonstrate current leadership has the abilities to turn the company around ► We believe key milestones to demonstrate a sustainable turnaround are: Approaching 5% top line growth Improvement in Global Market Share (trends still remain negative) ✓ Margin improvement through productivity, levering strong EPS growth Improved organizational design 37#39Management is Confident in Improving Results "I'm very confident in our sequential improvement in market share driven by innovation. I would differ with your characterization [of P&G not achieving material market share improvement]. I think we've made substantial progress in increasing the percent of our business growing market share. And I think that ties pretty directly to the innovations you've seen....We are continuing to invest in innovation. We've increased the spending on research and development the past three years and we're going to continue to make sure that we're building the capability to keep that innovation going. And the results in the marketplace are demonstrating that we're executing with excellence today, more so perhaps than the previous period you were talking about. So I'm confident we're going to continue this sequential improvement and you'll see it in the [market] sharing, you'll see it in the top line." Bob McDonald, CEO Earnings conference call, 4/24/13 38#40Leadership Must Be Held Accountable "As we get larger and larger, and as we work to make the company operate like it's smaller, developing a culture of taking personal responsibility for the execution that occurs is critically important. And that's what we're doing right now. We're emphasizing that culture. I won't say it didn't exist before. But we're emphasizing that as we get smaller, and as we behave like a smaller company, taking that personal responsibility and having that personal accountability for excellence and execution becomes absolutely critical." 39 Bob McDonald, CEO 2/18/2012#41Highly Attractive Risk / Reward#42Intrinsic Value is $125/share in Two Years If P&G can achieve its underlying earnings potential of $6/share by FY 2016, P&G would be worth $125 per share in approximately two years, including dividends FY 2016E EPS P/E Multiple June 2015 Value per Share Plus: FY 2014 to 2015 Dividends June 2015 Total Value per Share Premium to Current Stock Price Note: FY ends June 30. Assumes $2.40 of annual dividends for two years. Based on recent stock price of $78. $6.00 20.0 x $120 5 $125 At a $125 value per share in two years, P&G's stock price would generate a 26% compound annual return for shareholders 41 60 %#43Valuation: Limited Downside At the current price of $78/share, we believe P&G's stock has very limited downside as it trades at only 18.8x its current level of depressed earnings and has a dividend yield of 3% CY 2013 P/E: 18.8x P&G $78/share Div yield: 3% Note: CY 2013E EPS per CapIQ. P&G's current valuation does not fully reflect its: ✓ Ownership of many of the best brands in the industry ✓ Portfolio of highly attractive categories ✓ Leading market shares ✓ Strong footprint in emerging markets Strong level of advertising spend Shareholder-friendly capital allocation Strongest margin opportunity in the industry (excluding public, family-controlled HPC companies) 42#44Valuation: Limited Downside Even if P&G is unable to achieve its underlying earnings potential, we believe there is little downside in the stock as it trades at a discount to peers, despite having the largest cost opportunity in the sector CY 2013 P/E Multiples 18.8 x P&G 21.0 x 18.2 x mili THE CLOROX COMPANY Colgate® Kimberly-Clark L'ORÉAL 22.5 x …………. Note: CY 2013E EPS per CapIQ. URCH CO NOO 19.6 x 25.7 x 43 19.6 x Unilever Peer Avg: 21.1x#45Further Downside Protection in Board's Posture ► P&G's board of directors' public statements suggest that they are watching the situation closely ► If P&G's leadership executes, all key constituents will be rewarded immensely ► If P&G's current CEO cannot demonstrate a sustainable turnaround in the near term, we believe the Board will do the right thing and put in place new leadership ■ Would mark more than four years of continuous underperformance relative to peers ■ Several outstanding CEO candidates inside P&G ■ Several exceptional external CEO candidates as well 44