Pershing Square Capital Management, L.P.

Robin Hood in Reverse

November 22, 2013
Disclaimer
Pershing Square Capital Management, L.P. (Pershing Square) is an investment adviser to funds that are in the business of buying and selling securities and other
financial instruments. Pershing Square currently maintains a substantial short position in the common stock of Herbalife Ltd. (Herbalife).

Pershing Square will profit if the trading price of Herbalife common stock declines and will lose money if the trading price of common stock of Herbalife increases.

Pershing Square may change its views about or its investment positions in Herbalife at any time, for any reason or no reason. Pershing Square may buy, sell, cover or
otherwise change the form or substance of any of its investments related to Herbalife at any time for any reason or no reason. Pershing Square disclaims any
obligation to notify the market or any other party of any such changes.

The information and opinions expressed in this presentation (the Presentation) are based on publicly available information about Herbalife and other companies.
Pershing Square recognizes that there may be non-public information in the possession of Herbalife or others that could lead Herbalife or others to disagree with
Pershing Squares analyses, conclusions and opinions.

The Presentation includes forward-looking statements, estimates, projections and opinions prepared with respect to, among other things, certain legal and regulatory
issues Herbalife faces and the potential impact of those issues on its future business, financial condition and results of operations, as well as, more generally,
Herbalifes anticipated operating performance, access to capital markets, market conditions, assets and liabilities. Such statements, estimates, projections and
opinions may prove to be substantially inaccurate and are inherently subject to significant risks and uncertainties beyond Pershing Squares control.

Although Pershing Square believes the statements it makes in the Presentation are accurate in all material respects and do not omit to state material facts necessary
to make those statements not misleading, Pershing Square makes no representation or warranty, express or implied, as to the accuracy or completeness of those
statements or any other written or oral communication it makes with respect to Herbalife and any other companies mentioned, and Pershing Square expressly
disclaims any liability relating to those statements or such communications (or any inaccuracies or omissions therein). Thus, shareholders and others should
conduct their own independent investigation and analysis of those statements and communications and of Herbalife and other companies to which those statements
or communications may be relevant.

The statements Pershing Square makes in the Presentation are not investment advice or a recommendation or solicitation to buy or sell any securities. Except where
otherwise indicated, the Presentation speaks as of the date hereof, and Pershing Square undertakes no obligation to correct, update or revise those statements or to
otherwise provide any additional materials. Pershing Square also undertakes no commitment to take or refrain from taking any action with respect to Herbalife or any
other company.

As used herein, except to the extent the context, otherwise requires, Pershing Square includes its affiliates and funds it manages or advises and their respective
partners, directors, officers and employees.


1
SEC Recent Actions on Pyramid Schemes
In January 2013, the SECs enforcement unit opened an
investigation into Herbalife
(1)

On October 17, 2013, the SEC announced charges and seized the
assets of a worldwide pyramid scheme operating under business
names CKB and CKB168
(2)

The SEC has a long history of prosecuting pyramid schemes,
including the landmark 1973 action against Koscot, and has
prosecuted two pyramid schemes in the last 18 months
(3)
2
(1) Source: Ben Protess & Michael J. De La Merced, S.E.C. Opens Investigation Into Herbalife, NEW YORK TIMES, January 9, 2013 (http://dealbook.nytimes.com/2013/01/09/s-e-c-
opens-investigation-into-herbalife/?_r=0)
(2) Source: SEC Press Release (Oct. 17, 2013) (http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539880547
(3) SEC v. Koscot Interplanetary, Civ. A. No. 17134 (N.D. Ga. 1973); SEC Press Release (Oct. 2013) (available at https://www.sec.gov/News/PressRelease/Detail/Press
Release/1370539880547); SEC Press Release (Aug. 2012) (available at https://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171483920
On October 17th, 2013, the SEC issued an
Investor Alert warning investors to beware
of pyramid schemes posing as multi-level
marketing programs
3
The SEC Investor Alert Identified Seven Hallmarks
of a Pyramid Scheme
Source: SEC Press Release and Investor Alert (Oct 17, 2013), available at https://www.sec.gov/investor/alerts/ia_pyramid.htm
Investor Alert: Beware of Pyramid Schemes
Posing as Multi-Level Marketing Programs
The SEC's Office of Investor Education and Advocacy is issuing this Investor Alert to warn
individual investors about pyramid schemes, a type of investment scam that fraudsters often pitch
as a legitimate business opportunity in the form of multi-level marketing programs.
4
Have you ever been tempted by an advertisement or offer to make "easy money" or "online
income" out of your own home? Multi-level marketing ("MLM") programs are promoted through
Internet advertising, company websites, social media, presentations, group meetings, conference
calls, and brochures. In an MLM program, you typically get paid for products or services that you
and the distributors in your "downline" (i.e., participants you recruit and their recruits) sell to others.
However, some MLM programs are actually pyramid schemes -- a type of fraud in which
participants profit almost exclusively through recruiting other people to participate in the program.
Hallmark #1: Emphasis on Recruiting
5
Emphasis on recruiting. If a program primarily focuses on recruiting
others to join the program for a fee, it is likely a pyramid scheme. Be
skeptical if you will receive more compensation for recruiting others
than for product sales.
- SEC Investor Alert, October 17, 2013
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm)
Its All About Recruiting
6
Source: Herbalifes 2011 Extravaganza, Las Vegas, NY (October 26-29, 2011) (available at http://www.youtube.com/watch?v=cVbd8bw4MlQ)
VIDEO
Susan Peterson Founders Circle Member, Herbalifes 2011 Extravaganza
Its All About Recruiting
7
Source: Herbalifes 2011 Extravaganza, Las Vegas, NY (October 26-29, 2011) (available at http://www.youtube.com/watch?v=cVbd8bw4MlQ)
If you want to move the check, you need to find other
people that want to make money and represent the
Herbalife products and Herbalife opportunity.
Susan Peterson Founders Circle Member, Herbalifes 2011 Extravaganza:
Promises of high returns in a short time period. Be leery of pitches for
exponential returns and get rich quick claims. High returns and fast
cash in an MLM program may suggest that commissions are being paid
out of money from new recruits rather than revenue generated by
product sales.
- SEC Investor Alert, October 17, 2013

Hallmark #2: Promises of High Returns in a Short
Time Period
8
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm)
9
Senior Herbalife Distributors Lead Recruits to Believe They
Can Make Hundreds of Thousands in Short Order
Source: Doran Andry, Financial Success Systems First Package video
VIDEO
Doran Andry Chairmans Club Member
Current and Former Board Members Tell Recruits That
Herbalife is an Opportunity to Make Money Quickly
10
Source: Promotional video for online recruiting business Success Connection (available at http://www.youtube.com/watch?feature=player_embedded&v=kKq8IhJ_dMI)
VIDEO
Leslie Stanford: Former Herbalife Board Member and Current Founders Circle Member
John Tartol: Herbalife Board Member and Chairmans Club Member
Hallmark #3: Easy Money or Passive Income
Easy money or passive income. Be wary if you are offered
compensation in exchange for little work such as making payments,
recruiting others, and placing advertisements.
- SEC Investor Alert, October 17, 2013

11
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm); Financial Success Systems Herbalife Success University Presentation
(Module 1)

Senior Herbalife Distributors Tell Recruits They
Can Earn Millions in Passive Income
12
VIDEO
Doran Andry, Again Chairmans Club Member
Source: Doran Andry, Financial Success Systems First Package video
Hallmark #4: Buy-in Required
Herbalife requires a buy-in via an Herbalife Member Pack for $57.75 or $89.55 to receive
a discount and the option to run the business. To advance quickly and receive
commissions, distributors must also spend ~$3,000 - $4,000 purchasing inventory to qualify
as a Supervisor, in order to be eligible to earn recruiting rewards.
13
Buy-in required. The goal of an MLM program is to sell products. Be
careful if you are required to pay a buy-in to participate in the program,
even if the buy-in is a nominal one-time or recurring fee (e.g., $10 or
$10/month).
- SEC Investor Alert, October 17, 2013

Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm)
Hallmark #5: Complex Commission Structure
Complex commission structure. Be concerned unless commissions are
based on products or services that you or your recruits sell to people
outside the program. If you do not understand how you will be
compensated, be cautious.
- SEC Investor Alert, October 17, 2013

126 Pages of Text and Forms
More than 150 Rules
More than 60,000 words
11+ Levels of Distributors
Five Different Forms of
Compensation
14
Minimal Marketing Advice
Largely Unintelligible
Frequently Revised &
Supplemented

Herbalife Sales and Marketing Plan
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm); Herbalife Sales & Marketing Plan; see link at
http://factsaboutherbalife.com/wp-content/uploads/2012/12/Marketing-Plan-and-Business-Rules-2012.pdf

No genuine products or service. MLM programs involve selling a
genuine product or service to people who are not in the program.
Exercise caution if there is no underlying product or service being sold
to others, or if what is being sold is speculative or appears
inappropriately priced. (emphasis added)
- SEC Investor Alert, October 17, 2013

Hallmark #6: No Genuine Products or ServiceSold to
People Who Are Not in the Program / Inappropriately Priced
In Herbalifes case:
No empirical evidence of retail sales outside the program
Commodity products with highly inflated suggested retail prices
15
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm); see materials collected and analyzed in Pershing Square Presentation,
Who Wants to be a Millionaire? (December 20, 2012)
Hallmark #6 (Contd): Inappropriately Priced Products
Retail Price Per Multivitamin Tablet
(1)
16
$0.26
$0.11
$0.08
$0.08
$0.06
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.26
$0.11
$0.08
$0.08
$0.06
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
= 4x Centrum
(1) HLF Source: Herbalife U.S. Product Price List (11-2013). Centrum source: Walmart.com (11-2013)).
Hallmark #7: No Demonstrated Revenue from Retail
Sales
No demonstrated revenue from retail sales. Ask to see documents,
such as financial statements audited by a certified public accountant
(CPA), showing that the MLM company generates revenue from selling
its products or services to people outside the program.
- SEC Investor Alert, October 17, 2013

17
Lets see how Herbalife has answered this question
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm)
Retail Sales: The Big Question
So we dont have an exact
percentage David, because we
dont have visibility to that level
of detail. . . . So, well, again,
going back to our 70% rule, we
believe that its that 70% or
potentially in excess of that.
-Herbalife President Des Walsh
18
David Einhorn:
What is the percentage that is actually sold to
consumers that are not distributors?
Source: Herbalife Q1 2012 earnings call
VIDEO
Herbalife Q1 2012 Earnings Conference Call May 1
st
, 2012
The Day After Einhorn Asked His Question, Herbalife
Issued an 8K Changing Walshs Answer
19
Source: Herbalife Report on Form 8-K, filed May 2, 2012
The Day After Einhorn Asked His Question, Herbalife
Issued an 8K Changing Walshs Answer
20
Source: Herbalife report on form 8-K, filed May 2, 2012, at 2
0.0
50.0
100.0
150.0
200.0
$40
$45
$50
$55
$60
$65
$70
$75
Apr 30 May 1 May 2 May 3
V
o
l
u
m
e

(
m
m

S
h
a
r
e
s
)
P
r
i
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e
Volume Price
The Market Did Not Like This Answer
21
$70.32
$46.20
34% decline













The FTC, SEC, the Courts, and even Herbalife itself have all
recently reaffirmed the critical role of retail sales to customers
outside the distribution network in distinguishing a legitimate MLM
from a pyramid scheme
22
Why Did the Market React So Negatively?











The FTC Reaffirms the Critical Role of Retail Sales
Multilevel Marketing

Not all multilevel marketing plans are legitimate. If the money you make
is based on your sales to the public, it may be a legitimate multilevel
marketing plan. If the money you make is based on the number of
people you recruit and your sales to them, its not. Its a pyramid
scheme. Pyramid schemes are illegal, and the vast majority of
participants lose money.

- FTC Website, Bureau of Consumer Protection Business Center
23 Source: http://www.business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans
FTC Facts for Consumers: Bottom Line About Multilevel Marketing Plans
and Pyramid Schemes (November 2012)
Source: Complaint in FTC v. Fortune Hi-Tech Marketing, Inc., No. 13CV578 Dkt #4 (N.D. Ill. January 24, 2013) (emphasis added). 24
Fortune Hi-Tech Marketing Complaint
On January 24, 2013, Fortune Hi-Tech Marketing was shut down by the FTC
and State Attorneys General from Kentucky, Illinois and North Carolina on
the ground that it was a pyramid scheme. In its complaint, the government
noted the lack of retail sales outside the distributor network
The FTC Reaffirms the Critical Role of Retail Sales
A Federal Judge Reaffirms the Critical Role of
Retail Sales
Source: Bostick v. Herbalife International of American, No 2:13-cv-02488-BRO-RZ, Dkt #40, at 9 (C.D. California October 11, 2013)
Although [Herbalife] contend[s] that distributors should be classified as
ultimate users, Omnitrition points out that [i]f Koscot is to have any teeth, [a
sale for a distributors personal use] cannot satisfy the requirement that sales
be to ultimate users of a product. Id. at 783. Therefore, downline
distributors are not ultimate users for purposes of the second element
of the Koscot test. (bold emphasis added)
25
Order Denying Herbalifes Motion to Dismiss (pg. 9)
In the class-action, Bostick v. Herbalife, Herbalife argued that distributors
should be classified as ultimate users. On October 11, 2013, Federal
District Court Judge OConnell denied Herbalifes motion to dismiss and
stated that distributors are not ultimate users.











. . . Regulations applicable to network marketing organizations
generally are directed at preventing fraudulent or deceptive schemes,
often referred to as pyramid or chain sales schemes, by ensuring
that product sales ultimately are made to consumers and that
advancement within an organization is based on sales of the
organizations products rather than investments in the organization or
other non-retail sales-related criteria.
Even Herbalife Admits That Retail Sales Are Crucial
26
Herbalife 2012 10K Risk Factors
Source: Herbalife 2012 Report on form 10-K, filed February 19, 2013, at 30
27
Herbalife Requires Distributors to Keep Detailed
Retail Sales Records
Source: Herbalife Sales & Marketing Plan at 71
Required Information:
- Name
- Address
- Telephone no.
- Products sold
- Sales price
28
Herbalifes Retail Order Form
29
Source: Herbalife Sales & Marketing Plan at 42
30
What does management have to
say about this critical issue?
31
CEO Michael Johnson Interview on CNBC December 19, 2012
Source: http://video.cnbc.com/gallery/?video=3000136542ar
VIDEO
CEO Michael Johnson Answers The Same Question
32
December 19, 2012:

CNBC: What % of your sales are
outside that distribution network?

Johnson: 90%

CNBC: So the vast majority?

Johnson: Absolutely
33
CEO Michael Johnson Interview on CNBC January 10, 2013
Source: http://video.cnbc.com/gallery/?video=3000140236
VIDEO











But That Answer Was Actually a Misstatement
34
If 90% of distributors are buying for themselves, clearly these are not
retail sales to customers outside the program
January 10th, 2013 (22 Days Later), Michael Johnson Says:
It was a misstatement. 90% of our
distributors - ok - who are buying our
product - let me just try to clarify this - buy
it for one reason, and they buy it for self-
consumption, and that was a
misstatement on that day, I was kind of
hyped up that day, wasnt I?
35
Unwilling to provide actual retail sales
data, Herbalife says that people are
just confused
36
CEO Michael Johnson Interview on CNBC December 19, 2012
Source: http://video.cnbc.com/gallery/?video-3000136542
VIDEO
[A] part of the distributors is described as
customers . . . Obviously, this is not serious.
-Commercial Court in Belgium
Source: Test-AanKoop v. Herbalife International Belgium [Comm. Ct Brussels], November 23, 2011, AR 2004/7787, No. JC-DC / 27 [Jee] (Belg.), slip op. at 12.
Courts Have Rejected Herbalifes Claim that its
Distributors are Retail Customers
37
On November 23, 2011, the Belgian Commercial Court found Herbalife to be
a pyramid scheme, rejecting Herbalifes claim that distributors are simply
misnamed
39
What excuses does Herbalife give for
not collecting retail sales data?











In June 2009, Herbalife Said It Doesnt Collect
Retail Sales Data Because of Price-Fixing Concerns
Collecting proof of actual retail sales is not illegal and does not
create anti-trust risk
Source: Transcript of hearing on Motions for Summary Judgment in Herbalife v. Ford, No. 07 civ. 2529, Dkt #300 at 13 (C.D. Cal., June 1, 2009)
40
Herbalifes Attorney in Summary Judgment Argument June 1, 2009
41
Herbalife Has a New Excuse
Source: http://video.cnbc.com/gallery/?video-3000140234
VIDEO
President Des Walsh interview on CNBC January 10, 2013
Herbalife Claims Privacy Concerns Prevent
Collecting Retail Sales Data
42
How is Herbalife responding to the SEC October 2013 Investor Alert?
Source: SEC Press Release and Investor Alert (Oct. 17, 2013) (available at https://www.sec.gov/investor/alerts/ia_pyramid.htm)
SEC Investor Alert Hallmark:
No demonstrated revenue from retail sales. Ask to see documents,
such as financial statements audited by a certified public accountant
(CPA), showing that the MLM company generates revenue from selling
its products or services to people outside the program.
- SEC Investor Alert, October 17, 2013

Herbalife responds to this simple question with misstatements and
misdirection
To collect two years of Retail Order Forms from all of Herbalifes
distributors

To hire an independent big four accounting firm to verify and validate
the retail sales data

To submit the results of the data and analysis directly to the various
regulators (which would protect the privacy of Distributors)

Herbalife need only:

(1) Direct Distributors to cooperate and

(2) Inform them that their records will be submitted to the government,
which means the records must be authentic and truthful*
Pershing Square Offers to Pay the Cost:
*Source: 18 U.S.C. 1001. Statements or entries generally
(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and
willfully - (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses
any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years or, if the
offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A, 109B, 110, or
117, or section 1591, then the term of imprisonment imposed under this section shall be not more than 8 years.
43
Herbalife Exhibits All Seven SEC Hallmarks of a
Pyramid Scheme
44
Emphasis On Recruiting
Promises Of High Returns In A Short Time Period
Easy Money Or Passive Income
Buy-In Required
Complex Commission Structure
No Genuine Product or ServiceSold to People Who
Are Not in the Program / Inappropriately Priced
No Demonstrated Revenue from Retail Sales
Herbalife says nutrition clubs are
proof of retail sales

Lets take a look at whats really
going on
45
The Reality of New York City Nutrition Clubs
46
Source: CNNMoney interview aired on January 11, 2013, available at http://money.cnn.com/2013/01/11/smallbusiness/herbalife-network/
VIDEO
Nutrition Club Rules Make Retail Sales Not Viable
No external displays of the Herbalifes name or logo
Must cover windows
No Open / Closed sign
No advertising or promotion
Not allowed to attract customers or walk-ins
Must serve a shake, aloe water and tea to every Member
Only complimentary offerings of products
Can charge membership fees to cover operating costs; product costs may not
be recovered
Customers not allowed to carry out food unless in a small, unmarked
container
47
Source: Herbalife Sales & Marketing Plan at 74, 101 - 115
According to Herbalifes rules, Nutrition Clubs are social gatheringsnot retail
stores or outlets, nor are they restaurants or carry-out establishments
48
Herbalife Claims its Competition Is Fast Food
Herbalife says its competition is McDonalds and KFC
Youre not going to like my answer on competition because
strategically we view the competition as fast food It is the steal a
meal a day from fast food. It is not to go after other supplement
companies. Its to go after McDonalds, to go after KFC.
-J ohn DeSimone, CFO, September 7th, 2011
A Map of Queens, New York
49
McDonalds Are Evenly & Rationally Distributed
50
But Why Are Nutrition Clubs Clustered In Two
Sections of Queens?
51
Interestingly, Grameen Americas Two Offices in
Queens are in the Heart of the Clusters
52
Who are the victims?
53
54
Herbalife Targets Vulnerable, Low-Income Minorities
[M]any Latino leaders [are] increasingly concerned with Herbalife's
predatory business practices and how the company targets the Latino
community in a methodical and calculated manner

The scale of the scheme is breath-taking. There are 550,000
Herbalife distributors in the United States. Somewhere between 60 to 83
percent of them are Latino. 300,000 to 400,000 Latino distributors will quit
this year alone only to be replaced by another 300,000 to 400,000 new Latino
distributors. If left unchecked, Herbalife could recruit, defraud and dispose of
as many as 4 million Latino distributors over the next 10 years.
Source: http://www.huffingtonpost.com/brent-a-wilkes/herbalife-a-pyramid-scheme_b_4220426.html
55
Numerous Voices Are Calling for an Investigation of
Herbalife
Rep. Linda Sanchez (CA-38)
Rep. Loretta Sanchez (CA-46)
Rep. Michelle Lujan Grisham (NM-1)
Neil M. O'Leary, Mayor of Waterbury, CT
State Senator Adriano Espaillat, NY SD-31
Ofelia Hernandez, Huntington Park, CA Councilor
Chris Garcia, Cudahy, CA Vice Mayor
Jorge Morales, South Gate, CA Councilor
Aide Castro, Lynwood, CA Councilor
Denise Robles, Commerce City, CA Councilor
Julissa Ferreras, NYC Councilor District 21
Melissa Mark-Viverito, NYC Councilor, District 8
Tito Jackson, Boston City Councilor, District 7 55
56
Herbalife Asks Distributors to Write to Their Local
Member of Congress in Support of Herbalife
I find the targeting of Distributors by
ethnicity offensive on many levels and the
suggestion that Herbalife takes advantage
of any Distributor to be simply false. At
Herbalife, we strive to change peoples
lives by providing the best nutritional
products and the best business opportunity
to ALL
57
Herbalife Targets Ethnic Affinity Groups

From Herbalifes 2010 Investor Presentation
Source: Herbalife 2010 investor day presentation
58
________________________________________________
Source: Herbalife flyer.
Herbalife Targets African Americans

59
Source: Herbalife Today (magazine published by Herbalife)
Herbalife Targets Latinos

60
Based on Herbalifes Own Reported Data, What
are a Distributors Chances of Success?
88% of all distributors receive no commissions from Herbalife
Even among Sales Leaders (who are pressured to invest
~$3,000 - $4,000 purchasing inventory in order to be eligible
to earn recruiting rewards), half received no commissions
and 95% averaged commissions of only $8 per week before
expenses
The top 1% of distributors received 87% of all commissions
According to Herbalifes most recent U.S. Statement of Average
Gross Compensation, the real facts are:
Source: Herbalife Statement of Average Gross Compensation of U.S. Distributors; Pershing Square Presentation, Who Wants to be a Millionaire
61
Ana Maria Archila
Co-Executive Director, Make the
Road New York
Make the Road New Yorks mission is to build the power of Latino
and working class communities to achieve dignity and justice
through organizing, policy innovation, transformative education,
and survival services.
62
Make The Road Video