Wal-Mart Stores, Inc.

Credit Memorandum

FROM                : Blake Caluzzi, Giang Vuong (Jade), Kahmun Yap

TO                        : Professor Richard Long

SUBJECT                : FIN 119 - FIN INSTITNS, INSTRUMNS & MKTS

DATE                        : October 24th, 2017

All Risk Bond Fund

All Risk Bond Fund (the Fund) purchases publicly traded bonds issued by companies across all industries and credit ratings.  Listed below are details of the Fund.

Assets Under Management - $4 billion

Maximum Exposure per Issuer - $40 million (1%)

Minimum Investment per Issuer - $5 million (0.25%)

Portfolio Targeted Duration  - 8.0.  (The portfolio’s current duration is 7.8.)          

Current Average Credit Quality of Portfolio - BBB

The Fund has just received a cash inflow of $60 million.  The portfolio manager would like to invest the new cash in retail company bonds if the risk reward tradeoff is appropriate. Our team will be analyzing a senior unsecured bond which matures at 04/08/2026, issued by WAL-MART STORES INC.

Based on our analysis, we will make a recommendation whether  to buy the bond, not buy the bond, or watch the bond for changes which may make the issue more attractive for purchase.

TABLE OF CONTENT

TABLE OF CONTENT        1

SECURITY DESCRIPTION        3

COMPANY INFORMATION        3

Business Origin and Brief History:        3

Business Description / Overview of Operations:        4

Management and Backgrounds: (CEO, CFO, COO)        5

Key Long-Term Strategies:        7

INDUSTRY INFORMATION        7

Main Industry Drivers        7

Industry Specific Risks -        8

FINANCIAL ANALYSIS        9

Liquidity (148)        9

Asset Composition (166-168)        9

Debt Analysis (176)        9

Revenue Trends        9

Profit Margins 10-K Financials and Management Discussion        10

Cash Flow 10-K Financials and Management Discussion        10

QUALITATIVE ANALYSIS        10

Company Specific Risks:        10

Contingencies and Commitments:        10

STRENGTHS (3 to 5 Strengths)        11

WEAKNESSES (3 to 5 Weaknesses)        12

RECOMMENDATION AND RATIONALE        12

ITEMS FOR FINANCIAL ANALYSIS:        13

Income Statement        13

Balance Sheet (All with Trend Analysis)        15

REFERENCE        16

1. SECURITY DESCRIPTION

1. Issuer: WAL-MART STORES INC
2. Bond Type: SR UNSECURED
3. Maturity: 04/08/2026
4. Ratings:  Moody’s: Aa2                S&P: A                Fitch: AA
5. Total Par Amount of Issue: EUR 650,000 (m)
6. Unique Covenants: They have negative covenant, certain sales of assets, restriction on Activities, Restrictive Covenant and Merger Restrictions
7. Call Provision: Make Whole @15.00 (Treasury + 15 bp)
8. Auditor: Rogers, Arkansas - Ernst & Young LLP                Opinion:  Rogers, Arkansas - Ernst & Young LLP        
9. Initial Price and Yield Spread:  Price is 99.55100 and spread is 92 bp
10. Current Market Price and Yield Spread:         114.352 and 88.18 bp
11. Current Duration: Work Out: 7.24 - OAS: 4.92
12. Use of Proceeds: We estimate that the net proceeds from the sale of the notes will be approximately €1,487,594,400 (approximately $2,045,888,600 at the exchange rate of €1.00 = $1.3753 on March 28, 2014) after deducting underwriting discounts and listing and other transaction expenses.. We will use the net proceeds from the sale of the notes for general corporate purposes.

1. COMPANY INFORMATION

1. Business Origin and Brief History:

Wal-Mart Stores, Inc. - the king of retail helps people save money and live better with their successful international chain of stores in the world. Sam Walton is the legendary founder of Walmart. He purchased a store from Luther E. Harrison in Bentonville, Arkansas and opened Walton’s 5 & 10. His first mission statement for the retail store was “The lowest prices anytime, anywhere”, which is powerful and drives the success of the company for the past 50 years. Walmart’s history is mostly tied to the story of Sam Walton. He was born in 1918 in Kingfisher, Oklahoma. He joined the military in 1942 and married Helen Robson in 1943. After that his military service, they moved to Iowa and Newport, Arkansas. This was where Sam operated his own variety store and had some retail experience. Waltons left Newport and went to Bentonville in 1950, it opened Walton’s 5&10 on the downtown square. With the ambition and great opportunities opened to him, Sam’s first Wal-Mart was opened in 1962 in Rogers, Arkansas. Due to the competitive nature of the retail industry, Sam made the decision to achieve higher sales volumes by keeping sales prices lower than his competitors by reducing his profit margin. With that, he opened his second store in Harrison, Arkansas. Bob Bogle, Walton’s assistant came up with the name “Wal-Mart” for the new chains. The successful business model helped Walton and his family to open 24 more stores and achieve $12.7 million in sales in 1967. In 1983, the first Sam’s Club and by 1985, Walmart had 882 stores across the nation with sales of $8.4 billion which led them to the most profitable retailer in the US by 1988 and that’s also when their supercenter and Neighborhood Market first opened. By the same year, Sam Walton stepped down as the company’s CEO and pass it to David Glass, which didn’t stop the Walmart from growing. In 1991, Walmart had it first international store in Mexico. As of 2017, Walmart conducted business in 28 countries and e-commerce websites in 11 countries by serving over 260 million customers who visit 11,695 stores. With the same business model, which help people around the world save money and live better anytime and anywhere, Walmart provides great customer values through digital and physical shopping.