EARNINGS QUALITY STOXX E 600 - Wolfe Research · model are companies reporting recurring “special” charges. We find 54 companies out of the STOXX Europe 600 reporting special

Chris Senyek, CFA, CPA (646) 845-0759

[email protected]

Adam Calingasan, CFA, CPA (646) 845-0757

[email protected]

Clinton Chang, CFA, CPA (646) 845-0756

[email protected]

This report is limited solely for the use of clients of Wolfe Trahan & Co. Please refer to the DISCLOSURE SECTION located at the end of this report for Analyst Certifications and Other Disclosures. For important disclosures, please go to www.WolfeTrahan.com/Disclosures or write to us at Wolfe Trahan & Co., 420 Lexington Ave., Suite 648, New York, NY 10170.

WolfeTrahan.com Page 1 of 78 Accounting & Tax Policy

ACCOUNTING & TAX POLICYEARNINGS QUALITY

October 24, 2012

EARNINGS QUALITY: STOXX EUROPE 600

Earnings Quality Analysis. This report launches our Earnings Quality (EQ) analysis for STOXX Europe 600 companies (ex-financials) as a tool to avoid underperforming stocks and find accounting related short ideas. We strongly believe that the balance sheet and cash flow statement are leading indicators of potential income statement problems and that management teams may mask deteriorating business fundamentals through various accounting maneuvers (e.g., cost capitalization, aggressively recognizing revenue, changing depreciation policies, etc.). With that in mind, our EQ score is an objective tool using five financial metrics along with sentiment and valuation to find potential underperforming stocks. The EQ score ranges from a minimum of 0 (lowest quality) to a maximum of 100 and we rank companies within each sector on a relative basis, using most recently reported financial information. Our analysis covers 467 companies excluding the financials’ sector, representing the STOXX Europe 600 with market capitalizations over €500 million.

Which Companies Have the Lowest Earnings Quality? We identify companies in the bottom 20% of their sector for earnings quality and companies scoring a "1" or "2" out of 100 (100 is best) include PostNL, Edenred, Fresnillo, Lanxess, Akzo Nobel, Diageo, Hochtief, Rotork, The Weir Group, Konecranes, Atlas Copco, and Vallourec (full lists begin on page 12). We filtered this list further by using a combination of a low EQ score and negative earnings estimate revisions and find large capitalization companies including Akzo Nobel, Atlas Copco, Swatch Group, L’Oreal, Ericsson, and AB Volvo. In the Appendix of this report, we list all companies by sector along with their related EQ score, ranking, sentiment, and valuation metrics.

High Earnings Quality and High Capital Creation. TREE (True Rate of Equity Expansion) is our improved ROE metric, measuring the historical capital creation of companies. When combined with earnings quality, it identifies the best and worst companies based on the amount and quality of capital generated. We find 27 companies with a high EQ score and TREE and 8 companies with a low EQ score and TREE.

Serial Restructuring Companies. One proxy for low earnings quality and a component our EQ

model are companies reporting recurring “special” charges. We find 54 companies out of the STOXX Europe 600 reporting special items in each of the last 4 quarters (or each of the last two semi-annual periods, if applicable).

WolfeTrahan.com Page 2 of 78 Accounting & Tax Policy October 24, 2012

TTAABBLLEE OOFF CCOONNTTEENNTTSS

Earnings Quality: An Objective Framework For Identifying Underperforming Stocks ........................................ 3

Earnings Quality Score Methodology ................................................................................................................ 4

Earnings Quality (EQ) Model Components ........................................................................................................ 5 Current Accruals ............................................................................................................................................... 6 Changes in Net Operating Assets ..................................................................................................................... 6 Total Accruals ................................................................................................................................................... 6 Other Asset Growth ......................................................................................................................................... 7 High Capital Expenditures ................................................................................................................................ 7

Additional Factors ............................................................................................................................................ 7 Increasing Share Count .................................................................................................................................... 7 Serial Restructuring Charges ............................................................................................................................ 7 Increased Leverage .......................................................................................................................................... 7 High Acquisitions (Serial Acquirors) ................................................................................................................. 8 Earnings Estimate Revisions (30 Day) .............................................................................................................. 8

Accounting Accruals: An Overview ................................................................................................................... 9

Accounting Accruals Example: Ericsson ........................................................................................................... 10

Earnings Quality Score Detail Example: Ericsson ............................................................................................. 11

STOXX Europe 600 Large Caps: Low Earnings Quality (Bottom 20%) ................................................................ 12

STOXX Europe 600 SMID Caps: Low Earnings Quality (Bottom 20%) ................................................................ 13

Low Earnings Quality (Bottom 20%) and Negative 30‐Day EPS Revisions ......................................................... 15

Serial Restructuring Companies ...................................................................................................................... 16

Share Count Increasing Companies ................................................................................................................. 18

Low Earnings Quality (Bottom 20%) and Low “TREE” ...................................................................................... 19

High Earnings Quality (Top 20%) and High “TREE” ........................................................................................... 20

Earnings Quality by Sector: Consumer Discretionary ................................................................................................................................. 22 Consumer Staples ........................................................................................................................................... 24 Energy ............................................................................................................................................................. 25 Healthcare ...................................................................................................................................................... 26 Industrials ....................................................................................................................................................... 27 Information Technology ................................................................................................................................. 30 Materials ........................................................................................................................................................ 31 Telecommunication Services .......................................................................................................................... 33 Utilities ........................................................................................................................................................... 34

Appendix I: Detailed Earnings Quality Metrics by Sector ................................................................................. 35

Appendix II: Common Ways to Manage Earnings ............................................................................................ 48

Appendix III: True Rate of Equity Expansion (“TREE”) ...................................................................................... 60

Appendix IV: STOXX Europe 600 ..................................................................................................................... 74

Accounting & Tax Policy Research Library ....................................................................................................... 76

Disclosure Section .......................................................................................................................................... 78


EEAARRNNIINNGGSS QQUUAALLIITTYY:: AANN OOBBJJEECCTTIIVVEE FFRRAAMMEEWWOORRKK FFOORR IIDDEENNTTIIFFYYIINNGG UUNNDDEERRPPEERRFFOORRMMIINNGG SSTTOOCCKKSS

This report launches our earnings quality (EQ) analysis for European companies. In December 2011, we launched our earnings quality analysis for U.S. companies as an investor tool to find accounting related short ideas and as a risk tool to assist investors in avoiding underperforming stocks. Over the past year, our model’s predictiveness has been above average as we’ve found more companies on our low earnings quality lists missing consensus EPS estimates compared to the overall S&P 500, S&P 1500, and Russell 3000 benchmark consensus EPS miss rates. These low earnings quality companies have also underperformed on a sector neutral basis as shown in the exhibit below. Given different reporting frequencies and data availability, we created a slightly different earnings quality model with the same principles in mind — the balance sheet and cash flow are leading indicators of potential income statement problems and that management teams may mask deteriorating business fundamentals (e.g., slowing revenue growth rate) through various accounting tricks (e.g., cost capitalization, aggressively recognizing revenue, changing depreciation policies, etc.). Our framework is based on four important areas: (1) accounting score [EQ score]; (2) additional binary type factors suggesting low earnings quality; (3) sentiment; and (4) valuation. YTD Relative Performance of Low Earnings Quality U.S. Companies

‐15%

‐10%

‐5%

0%

5%

10%

15%

1/2 1/30 2/27 3/26 4/23 5/21 6/18 7/16 8/13 9/10 10/8

Alpha

Low Earnings Quality

Note: Composite portfolio consists of companies in the bottom 10% of their sector in relation to earnings quality and with negative earnings revisions within the prior 30 days as of 12/31/2011 (57 companies). The portfolio is then measured against a sector neutral S&P 1500 benchmark. Market data through 10/22/2012.

Source: Wolfe Trahan Accounting & Tax Policy Research; Company filings; Bloomberg; Standard & Poor’s; FactSet.


EEAARRNNIINNGGSS QQUUAALLIITTYY SSCCOORREE MMEETTHHOODDOOLLOOGGYY

In order to objectively rank companies for accounting quality, we calculate a composite score based upon five financial metrics, which are described in more detail on the following page. Our universe consists of the STOXX Europe 600 index companies. The companies are first segregated into their respective GICS sector and we exclude the financials’ sector as we use more sector specific factors to interpret the earnings quality of these companies. For each of the five factors, we used a ranking system whereby each company is ranked high to low based on where the metric fell relative to all the other companies within their sector. We compare intra-sector as we

don’t believe the absolute size of each metric is comparable across sectors. For example, our capital expenditures to property, plant and equipment ratio could be materially different across sectors depending on the capital intensity of each business. In addition, we considered comparing companies by industry group, but results in fewer companies in each group and we found little difference in the overall EQ scores. Based on this ranking, each company is placed into a decile numbered 1 through 10 (10% buckets). A lower numbered decile indicates lower earnings quality for that particular factor. For example, for any given factor, if the company were ranked into the bottom 10%, or decile, of the total sector, it received a “1”. If it placed in the top 10% of companies, it would receive a “10” and be considered one of the highest earnings quality in its sector. Each company receives 5 individual decile ranks. Finally, we add the five decile ranks together, rank the companies within each sector by this sum, and scale the rankings to 100. This results in an overall EQ score for each company of 0 to 100. A score of 0 is the worst possible score. In order to further identify companies with other negative signals, we qualitatively reviewed additional factors (such as increasing share count, increase in leverage, restructuring charges, and serial acquisitions). While these factors are not explicitly included in the EQ score due to their binary nature, we believe that their existence and frequency suggests lower earnings quality. Therefore, we include them as “additional factors” separately identified. The more additional factors identified, the lower the overall earnings quality, all else being equal. For example, a company with an EQ score of “3” and three additional factors is viewed more unfavorably than a company with an EQ score of “3” and no additional factors.


EEAARRNNIINNGGSS QQUUAALLIITTYY ((EEQQ)) MMOODDEELL CCOOMMPPOONNEENNTTSS

In the exhibit below, we explain the various components of our earnings quality model. We include several “additional factors” that are indicative of potential issues (e.g., high number of acquisitions). However, such items are binary and, therefore, we cannot rank companies within a sector on that basis. We calculate ratios on a LTM (last twelve months) basis as we’ve found this to be more predictive historically than sequential changes. Earnings Quality Framework Summary Descriptions

FIVE KEY METRICS Calculation Description(1) Current Accruals

(↑ ratio = ↓ earnings quality)

(NI ‐ CFFO) / LTM Revenue Measures the level of non‐cash net current assets on the

balance sheet and whether earnings are supported by cash flow

(2) Change in Net Operating Assets

(NOA)(↑ ratio = ↓ earnings quality)

Changes in Net Operating Asset Accounts per Cash

Flow Statement / LTM Revenue

Measures the growth in net operating assets on the balance

sheet

(3) Total Accruals (↑ ratio = ↓ earnings quality)

(NI ‐ CFFO ‐ CFFI) / LTM Revenue Measures the level of both net current and non‐current assets

on the balance sheet and whether earnings are supported by

cash flow

(4) Other Asset Growth(↑ ratio = ↓ earnings quality)

Change in Other Total Assets / LTM Revenue Measures other growth in the balance sheet and identifies

possible excess cost capitalization

(5) High Cap‐Ex(↑ ratio = ↓ earnings quality)

LTM Cap‐Ex / PP&E Measures the over investment tendency of companies on which

there often are decreasing marginal returns

ADDITIONAL FACTORS Calculation Description(1) Increasing Share Count Companies with the largest increase in share count

over the prior 2 year period (top 10%)

We've found that companies with the largest increase in share

count over the prior 2 year period underperformed historically

with a high hit ratio

(2) Serial Restructuring Charges Four Consecutive Quarters of Special Charges of at

Least 0.25% of Revenue

We find companies reporting special items (restructuring

charges) for four consecutive quarters underperform

(3) Increased Leverage At Least a 1 Turn Increase in Debt / EBITDA Ratio Measures companies with increasing proportion of debt in

capital structure

(4) Serial Acquiror At Least 3 Out of 5 Prior Years With a 10%+ Increase in

Goodwill & Intangibles

Measures the tendency of companies completing acquisitions

to underperform and identify roll‐up type situations

SENTIMENT Calculation Description(1) Earnings Estimate Revisions ‐

30 Days

30 Day EPS Revisions Measure of earnings momentum

Source: Wolfe Trahan Accounting & Tax Policy Research.


EEQQ MMOODDEELL CCOOMMPPOONNEENNTTSS ((CCOONNTTIINNUUEEDD))

Below we explain the components of our EQ model and the rationale behind each metric. CCUURRRREENNTT AACCCCRRUUAALLSS

One key tenet of our earnings quality analysis is searching for companies with unsustainable growth rates in their balance sheets. To that end, we believe a company’s balance sheet is a leading indicator of potential problems on the income statement leading to future negative earnings surprises. Both statements are intertwined. For example, consider a company that is aggressively recognizing revenue. As a result, its earnings will be higher in the current period, but its accounts receivable will likely remain uncollected at period end. The company’s balance sheet reflects an increase in receivables and, therefore, cash flow is lower. The impact is a larger balance sheet relative to the company’s sales. The current accruals ratio measures the growth rate in the balance sheet’s non-cash current assets and liabilities included in the operating section of the cash flow statement. It is a conversion rate as low earnings quality exists when net income is not supported by a similar high level of operating cash flow. We use net income from continuing operations in our calculations to eliminate noise from discontinued operations and restructuring items. The higher the current accruals ratio, the lower the quality of earnings (e.g., net income is higher than cash flow). We’ve found that a change in this ratio has not been as predictive as the absolute level. We believe this is due to noise and seasonality in the numbers. CCHHAANNGGEESS IINN NNEETT OOPPEERRAATTIINNGG AASSSSEETTSS

Similar in thinking to the current accruals ratio is a more narrow measure of balance sheet growth- working capital type changes. In this ratio, we isolate the growth rate in the balance sheet primarily due to receivables, inventory, payables, accrued expenses, and other asset and liability changes. To eliminate noise, we use the amount reported on the cash flow statement since it excludes initial acquisition related growth and foreign currency translation growth (will not correct for management of the target’s working capital prior to the acquisition, however). This metric captures three important financial ratios: days receivable, days inventory, and days payable. It assists in identifying companies reporting accrual, but not cash based earnings with increases in receivable and inventory balances not offset by a similar increase in payables and/or accrued expenses. The higher the change in the net operating assets’ ratio, the lower the quality of earnings. TTOOTTAALL AACCCCRRUUAALLSS

The total accruals ratio is the broadest measure of overall balance sheet growth incorporating both net current assets and non-current assets. It is used to identify situations where a company is not managing or growing current net operating assets/liabilities, but rather is excessively growing non-current assets such as property, plant, and equipment or other items within investing cash flow. The ratio assists in finding companies excessively capitalizing costs into PP&E (or other accounts) on the balance sheet. This ratio captures investment for cash acquisitions and other investing activity cash outflows. All else being equal, a higher total accruals ratio suggests lower earnings quality.



OOTTHHEERR AASSSSEETT GGRROOWWTTHH

When revenue or earnings growth is slowing and/or when there are issues in the underlying business, companies may be tempted to excessively capitalize costs into “other assets” on the balance sheet. By recording costs on the balance sheet, this improves current period earnings. However, this is clearly unsustainable and, nevertheless, there are cash costs in acquiring “other assets”. This ratio isolates and calculates if there has been excessive growth in other areas of assets on the balance sheet. Higher other asset growth suggests lower earnings quality. HHIIGGHH CCAAPPIITTAALL EEXXPPEENNDDIITTUURREESS

This ratio measures the over investment tendencies of companies. While earlier stage growth companies will naturally be investing heavily in capital expenditures, there are diminishing marginal returns on capital investment. All else being equal, higher capital expenditures are suggestive of stock price underperformance. Academic research has corroborated this “anomaly” for many years.

AADDDDIITTIIOONNAALL FFAACCTTOORRSS In addition to the earnings quality score, we identified additional factors that we believe suggest lower earnings quality and, when combined with EQ, provide a stronger indicator of possible future stock price underperformance. Since these factors are binary (either existing or not), we cannot rank companies from highest to lowest and separate them into deciles. Therefore, we identify whether the factors exist and consider the number identified as a qualitative measure of earnings quality (the more additional factors, the lower the earnings quality). IINNCCRREEAASSIINNGG SSHHAARREE CCOOUUNNTT

While there are a variety of reasons cited by management for increasing the number of shares outstanding, our research has found that the share prices of companies with the largest increase in share count during the prior 2 years underperformed historically with a high hit ratio (i.e., a large percentage of the stocks with this factor underperformed). A company may choose to issue additional shares when they believe their share price is overvalued, to compensate employees, and/or to effect an acquisition. In our view, overall, an increasing share count is a negative management signaling mechanism and, therefore, we include it as an additional factor for companies in the worst decile. SSEERRIIAALL RREESSTTRRUUCCTTUURRIINNGG CCHHAARRGGEESS

We believe repetitive special charges are often a signal of pressure in the company’s underlying business fundamentals and, if they occur frequently, should be considered a normal operating expense in earnings. Historically, we’ve found approximately 200 basis points of 1 year subsequent stock price underperformance in companies reporting “special charges” >0.25% of revenues for each of the last 4 quarters (or each of the last two semi-annual periods, if applicable). Based on our research, historical returns don’t materially change if a 1% of revenue cut-off is used. IINNCCRREEAASSEEDD LLEEVVEERRAAGGEE

Companies increasing leverage ultimately increase risk to the equity owner, in our view. We measure leverage as the ratio of gross debt to EBITDA. Our increased leverage factor identifies companies with at least a one turn increase in leverage over the past 12 months (e.g., Debt/EBITDA ratio increases from 3.0x to 4.0x).



HHIIGGHH AACCQQUUIISSIITTIIOONNSS ((SSEERRIIAALL AACCQQUUIIRROORRSS))

In the past, we’ve found that the share prices of companies completing acquisitions underperform in the 1 year period after the acquisition’s closing date. Further, there are numerous accounting tricks that may be used in acquisitions to unsustainably increase the combined companies’ financial results. These two issues suggest that it’s important to find companies with high acquisitions and use it as a risk factor. In our analysis, acquisitive companies are separately identified and flagged. We use changes in goodwill and intangible assets as a proxy for acquisitions, highlighting companies where goodwill and intangibles have increased by 10% or more in at least 3 out of the last 5 years. Usually, most companies will record goodwill and intangible assets in purchase accounting for acquisitions (fair value all assets and liabilities), so monitoring increases in these balances is an objective way of finding acquisitive companies across a large universe. EEAARRNNIINNGGSS EESSTTIIMMAATTEE RREEVVIISSIIOONNSS ((3300 DDAAYY))

To add a measure of timing or momentum to our accounting ratios, we calculate 30 day earnings estimate revisions. This item is not included in our score or additional factors, but listed to assess sentiment.


AACCCCOOUUNNTTIINNGG AACCCCRRUUAALLSS:: AANN OOVVEERRVVIIEEWW

An important concept embedded in our five earnings quality metrics is that the balance sheet and, by extension, cash flow are leading indicators of potential future income statement issues. Just like economic indicators, we find earnings to be a lagging indicator. To understand the reasons earnings may be managed and underpinned by many assumptions and estimates, we review some basic accounting theory. Two important concepts form the foundation of accounting: the accrual and matching principle. Under accrual accounting, revenues are recorded when earned and expenses are recorded when incurred. This is often different than the time period in which the actual cash is received or expended. The matching principle further requires that revenues and related expenses incurred to generate the revenues be recorded in the same period. For example, cost of goods sold is recorded in the same period in which the related revenue from the sale of goods is recorded. The issue is that cash isn’t always collected or expended in this same period. The difference between the cash flows received and the income recognized on the sale is “accrued” as an asset or liability on the balance sheet. This gives rise to so-called “accruals”. The implication for financial analysis and earnings quality is that we believe the balance sheet (and cash flow) is often a leading predictor of the income statement. As the balance sheet grows in size, it may presage a future negative earnings surprise. This accrual principle is summarized as follows: accounting requires any increase in revenue or decrease in expense to be matched with either an increase in assets or decrease in liabilities. So if there is a revenue or expense issue, there is a direct link to either the assets or liabilities reported on the balance sheet. For example, if a company prematurely recognized revenue (increase in revenue) on the balance sheet, there is a corresponding increase in assets or decrease in liabilities. In this situation, the link between aggressive revenue recognition on the income statement is higher receivables reported on the balance sheet. Similarly, if a company is excessively capitalizing costs (expenses on the income statement are too low), there is a corresponding increase in assets on the balance sheet. In the Appendix of this report, we explain the micro concepts that give rise to various balance sheet accrual items. Using Ericsson as an example, the next exhibit is an illustration of the difference between accruals and total accruals, both of which are included in our EQ model.


AACCCCOOUUNNTTIINNGG AACCCCRRUUAALLSS EEXXAAMMPPLLEE:: EERRIICCSSSSOONN

Illustration of Ericsson’s Operating and Total Accruals

ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS

(SEK in millions) 2009 2010 2011

OPERATING ACTIVITIES

Net income 4,127 11,235 12,569

Depreciation and amortization 12,123 9,953 9,036

Taxes (1,011) 351 1,994

Dividends from JVs and associated cos. 70 119 177

Undistributed earnings in JVs 6,013 1,357 3,533

Gains/losses on sales of investments and ops, net (910) (237) (159)

Other non‐cash items 571 947 (1,968)

Inventories 5,207 (7,917) (3,243)

Customer finance, current and non‐current 598 (2,125) 74

Trade receivables 7,668 4,406 (1,700)

Trade payables (3,522) 5,964 (1,648)

Provisions and post‐employment benefits (2,950) (2,739) (5,695)

Other operating assets and liabilities, net (3,508) 5,269 (2,988)

Cash flow from operating activities 24,476 26,583 9,982

INVESTING ACTIVITIES

Investments in PP&E (4,006) (3,686) (4,994)

Sales of PP&E 534 124 386

Acquisitions of subsidiaries and other operations (19,321) (3,286) (3,181)

Divestments of subsidiaries and other operations 1,239 454 53

Product development (1,443) (1,644) (1,515)

Other investing activities 2,606 (1,487) (900)

Short‐term investments (17,071) (3,016) 14,692

Cash flow from investing activities (37,462) (12,541) 4,541

FINANCING ACTIVITIES

Proceeds from issuance of borrowings 14,153 2,580 2,076

Repayment of borrowings (9,804) (1,449) (1,259)

Sale of own stock and options exercised 69 51 92

Dividends paid (6,318) (6,677) (7,455)

Other financing activities 199 (175) 52

Cash flow from financing activities (1,701) (5,670) (6,494)

Current Accruals

Total Accruals

Change in NOA

Source: Wolfe Trahan Accounting & Tax Policy Research; Company filings.


EEAARRNNIINNGGSS QQUUAALLIITTYY SSCCOORREE DDEETTAAIILL EEXXAAMMPPLLEE:: EERRIICCSSSSOONN

Due to space limitations, we cannot publish all the detail behind each of the 5 ratios incorporated into a company’s overall earnings quality score. The Appendix of this report lists the ratios for each company. We provide an accompanying spreadsheet that details the reasons why certain companies are classified as low earnings quality companies. To illustrate the EQ detail behind a company, we use Ericsson as an example. The company scored a “6” out of “100”, indicating low earnings quality with an additional “R” factor indicating a company with recurring “special charges” recently. The left column below shows the adjusted financial data used in the analysis while the right two columns are the ratio’s calculation and the decile into which each of the five financial factors fall. As shown below, Ericsson scores poorly and is in the bottom half of all 5 ratios with the poorest score in current accruals and changes in net operating assets. Illustration of Company EQ Score Detail (in millions)

Ericsson EQ Score [0‐100; 0 = worst] 6 Additional Risk Factors* R

WT ADJUSTMENTS EARNINGS QUALITY METRICS

Adjusted Net Income Current Accruals Total Accruals

Net income 15,282 Adj. NI 15,274 Adj. NI 15,274

Goodwi l l impai r (not tax effected) 0 Adj. CFO 6,206 Adj. CFO 6,206

G/L on sa le of invests (tax effected) 0 LTM revenue 225,478 Adj. CFI (9,965)

G/L on sa le of assets (tax effected) 0 Current Accrual Ratio 4.0% LTM revenue 225,478

Asset wri te downs (tax effected) 8 Decile (1 = worst; 10 = best) 2 Total Accruals Ratio 8.4%

IPR&D (NOT tax effected) 0 Decile (1 = worst; 10 = best) 3

Insurance settlements (tax effected) 0

Lega l settlements (tax effected) 0

Other unusual (tax effected) 0

Adj. Net Income 15,274 Change in Net Operating Assets Other Asset Growth

Adj. Change in NOAs 14,829 Other current assets CY 0

LTM revenue 225,478 Less : Other current assets PY 0Adjusted Cash From Operations Change in NOAs Ratio 6.6% Other LT assets CY 0

Cash from operations 6,474 Decile (1 = worst; 10 = best) 2 Less : Other LT assets PY 0

Stock Comp (tax effected) 268 LT deferred charges CY 3,795

Adj. CFO 6,206 Less : LT deferred charges PY 3,236

LTM revenue 225,478

Other Asset Growth Ratio 0.2%

Adjusted Cash From Investing Decile (1 = worst; 10 = best) 4

Cash from investing 91

Less : Investment in securi ties , net 10,056

Adjusted CFI (9,965) High Capital Expenditures

Capex 5,195

PP&E, net 11,435

Adjusted Change in Net Operating Assets Capex Rate 45.4%

Change in NOAs (from CF s tmt) 14,829 Decile (1 = worst; 10 = best) 3

Less : Change in income tax 0

Less : Change in deferred tax 0

Adj. Change in NOAs 14,829

* S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Market data as of 10/22/2012.

Source: Wolfe Trahan Accounting & Tax Policy Research; Company filings; Standard & Poor’s; FactSet.


SSTTOOXXXX EEUURROOPPEE 660000 LLAARRGGEE CCAAPPSS:: LLOOWW EEAARRNNIINNGGSS QQUUAALLIITTYY ((BBOOTTTTOOMM 2200%%))

On the next few pages, by large and small-mid market capitalizations (€8 billion cut-off), we list companies in the bottom 20% of their sector for earnings quality irrespective of the direction of earnings estimate revisions and the existence of additional factors. Please refer to the Appendix of this report and/or our accompanying spreadsheet for the reasons why certain companies are classified as low earnings quality companies. European Large Cap. Companies in the Bottom 20% for Earnings Quality [sorted by lowest earnings quality score] (millions)

EARNINGS QUALITY SENTIMENT VALUATION

Company Name Country Sector

Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Akzo Nobel NV Netherlands Materials 10,112 10,112 2 ‐2.8% 11.5x ‐1.1%

Fresnillo PLC Mexico Materials 13,741 16,856 2 2.0% 22.7x 2.0%

Diageo plc United Kingdom Cons. Staples 44,276 54,316 2 0.0% 17.4x 3.8%

Atlas Copco AB Sweden Industrials 182,184 21,168 2 ‐0.3% 13.2x 4.3%

BT Group plc United Kingdom Telecom. 17,081 20,953 4 0.0% 8.9x 4.4%

Swatch Group AG Switzerland Cons. Disc. 19,675 16,257 5 ‐0.3% 12.9x 1.0%

L'Oreal SA France Cons. Staples 59,725 59,725 6 ‐0.2% 19.5x 3.5%

Ericsson Sweden Info. Tech. 191,748 22,280 6 R ‐1.5% 11.4x 1.6%

Alstom SA France Industrials 8,336 8,336 7 R 0.3% 7.7x ‐4.2%

RWE AG Germany Utilities 21,534 21,534 7 S 0.0% 8.7x ‐4.7%

AB Volvo Sweden Industrials 187,569 21,794 8 ‐3.0% 10.2x ‐0.5%

Randgold Resources Limited Channel Islands Materials 7,005 8,593 8 0.6% 17.1x 0.6%

Daimler AG Germany Cons. Disc. 41,156 41,156 8 L ‐1.4% 6.8x ‐5.3%

Swisscom AG Switzerland Telecom. 19,949 16,483 9 ‐0.2% 11.5x 7.4%

Fresenius SE & Co KGaA Germany Healthcare 16,630 16,630 11 S A 0.2% 16.2x 5.3%

Volkswagen AG Germany Cons. Disc. 66,023 66,023 11 3.0% 6.1x ‐0.7%

ASML Holding NV Netherlands Info. Tech. 19,909 19,909 13 ‐7.0% 12.7x 5.3%

Reckitt Benckiser Group plc United Kingdom Cons. Staples 26,484 32,489 13 A ‐0.4% 14.7x 5.7%

SGS SA Switzerland Industrials 15,317 12,656 14 A ‐0.4% 21.1x 2.2%

Christian Dior SA France Cons. Disc. 19,462 19,462 14 3.0% 11.1x 5.3%

Pearson plc United Kingdom Cons. Disc. 9,724 11,929 14 ‐1.2% 13.6x 6.4%

Electricite de France SA France Utilities 31,669 31,669 15 R A ‐1.0% 8.1x ‐3.4%

Pernod‐Ricard SA France Cons. Staples 22,499 22,499 15 ‐0.6% 17.0x 3.7%

Kone Oyj Finland Industrials 14,908 14,908 16 0.0% 20.6x 4.2%

Technip France Energy 10,107 10,107 17 0.0% 14.2x 1.2%

SABMiller plc United Kingdom Cons. Staples 42,071 51,611 17 R L A ‐0.4% 16.0x 3.5%

PPR SA. France Cons. Disc. 16,869 16,869 18 ‐1.6% 12.5x 4.6%

(1) S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Local currency presentation based on primary listing trading currency – United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). 2013E P/E based on consensus ests. Market data as of 10/22/2012.



SSTTOOXXXX EEUURROOPPEE 660000 SSMMIIDD CCAAPPSS:: LLOOWW EEAARRNNIINNGGSS QQUUAALLIITTYY ((BBOOTTTTOOMM 2200%%))

Below and on the next page are the SMID capitalization companies (between €750 million and €8 billion market cap.) with earnings quality in the bottom 20% of their sector (lowest EQ scores). European SMID Cap. Companies in the Bottom 20% of Earnings Quality [sorted by lowest earnings quality score] ) (millions)



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

PostNL N.V. Netherlands Industrials 1,307 1,307 1 L ‐1.6% 4.4x ‐1.6%

Edenred SA France Industrials 5,215 5,215 2 ‐1.1% 21.6x 2.4%

Lanxess AG Germany Materials 5,134 5,134 2 A ‐1.7% 7.9x ‐2.1%

The Weir Group PLC United Kingdom Industrials 3,776 4,632 2 A 0.0% 11.5x 2.0%

Hochtief AG Germany Industrials 2,967 2,967 2 S A ‐0.4% 9.8x ‐12.4%

Konecranes Plc Finland Industrials 1,380 1,380 2 L A 0.0% 13.0x ‐0.7%

Rotork plc United Kingdom Industrials 2,012 2,468 2 A 0.0% 19.5x 3.6%

Vallourec SA France Industrials 4,087 4,087 2 L A ‐4.2% 11.1x ‐6.5%

Elekta AB Sweden Healthcare 35,148 4,084 3 A 0.5% 20.0x 0.9%

Ingenico SA France Info. Tech. 2,067 2,067 3 R A 0.5% 15.4x 3.1%

TERNA‐Rete Elettrica Nazionale Italy Utilities 5,861 5,861 4 L 0.0% 13.4x ‐5.2%

Barry Callebaut AG Switzerland Cons. Staples 4,605 3,805 4 ‐0.1% 16.1x 0.5%

The Berkeley Group Holdings plc United Kingdom Cons. Disc. 1,974 2,421 5 1.6% 10.2x ‐8.1%

Sonova Holding AG Switzerland Healthcare 6,433 5,316 5 1.1% 17.5x 3.6%

Orion Oyj Finland Healthcare 2,597 2,597 5 3.5% 14.5x 6.0%

Wirecard AG Germany Info. Tech. 1,971 1,971 6 S A ‐1.4% 20.9x ‐2.1%

Petropavlovsk PLC United Kingdom Materials 809 992 7 ‐10.9% 5.1x ‐18.4%

PUMA SE Germany Cons. Disc. 3,297 3,297 7 ‐1.4% 14.5x 0.4%

D.E Master Blenders 1753 N.V. Netherlands Cons. Staples 5,830 5,830 8 R ‐2.1% 20.1x 0.3%

Capita PLC United Kingdom Industrials 4,777 5,860 8 A 0.0% 13.1x 2.6%

NCC AB Sweden Industrials 13,213 1,535 8 L ‐0.9% 8.8x ‐12.4%

K+S Aktiengesellschaft Germany Materials 6,957 6,957 8 ‐2.5% 10.5x 4.0%

Pirelli & C. SpA Italy Cons. Disc. 4,054 4,054 8 ‐1.1% 7.5x ‐4.4%

Petrofac Limited United Kingdom Energy 5,458 6,696 9 A 0.0% 12.5x ‐8.5%

Elisa Oyj Finland Telecom. 2,608 2,608 9 2.3% 13.1x 5.8%

Tele2 AB (publ) Sweden Telecom. 51,025 5,929 9 ‐4.5% 10.0x 8.4%

Tate & Lyle plc United Kingdom Cons. Staples 3,345 4,104 10 0.0% 11.4x 3.6%

Viscofan SA Spain Cons. Staples 1,627 1,627 10 A 0.0% 14.3x 2.9%

FLSmidth & Co. A/S Denmark Industrials 17,805 2,387 10 0.0% 9.7x 2.4%

Wärtsilä Oyj Abp Finland Industrials 5,811 5,811 10 5.9% 14.8x ‐2.7%

Ashtead Group plc United Kingdom Industrials 1,763 2,163 10 0.0% 12.5x ‐0.2%

Smith & Nephew plc United Kingdom Healthcare 5,856 7,183 11 0.0% 13.5x 5.7%

Stada‐Arzneimittel AG Germany Healthcare 1,387 1,387 11 0.4% 8.0x 6.2%

Bellway plc United Kingdom Cons. Disc. 1,222 1,499 11 2.7% 12.7x 1.5%

Accor SA France Cons. Disc. 5,545 5,545 11 R ‐1.5% 18.1x ‐7.8%

Pennon Group Plc United Kingdom Utilities 2,655 3,257 11 A 0.0% 14.7x 0.2%

Victrex plc United Kingdom Materials 1,176 1,443 11 1.2% 15.8x 3.5%

Aker Solutions ASA Norway Energy 30,703 4,145 11 L 1.1% 11.1x ‐4.6%

SGL Carbon SE Germany Industrials 2,160 2,160 13 A 2.1% 22.0x ‐1.6%

Arkema S.A. France Materials 4,526 4,526 13 A 2.2% 9.3x 1.9%

Fuchs Petrolub AG Germany Materials 3,533 3,533 13 0.0% 17.4x 2.4%

Novozymes A/S Denmark Materials 50,084 6,715 13 ‐0.2% 23.9x 2.3%

Aggreko plc United Kingdom Industrials 5,559 6,820 14 A ‐1.9% 19.2x ‐1.1%

Serco Group plc United Kingdom Industrials 2,814 3,452 14 0.0% 13.0x 4.9%

Hugo Boss AG Germany Cons. Disc. 4,981 4,981 14 ‐0.9% 14.3x 4.1%

Fugro NV Netherlands Energy 4,251 4,251 14 A ‐0.3% 12.2x 1.7%

Enel Green Power S.p.A. Italy Utilities 6,795 6,795 15 0.0% 12.5x ‐1.8%




SSTTOOXXXX EEUURROOPPEE 660000 SSMMIIDD CCAAPPSS:: LLOOWW EEAARRNNIINNGGSS QQUUAALLIITTYY ((BBOOTTTTOOMM 2200%%)) [[CCOONNTTIINNUUEEDD]]

European SMID Cap. Companies in the Bottom 20% of Earnings Quality (continued) [sorted by lowest earnings quality score]



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Infineon Technologies AG Germany Info. Tech. 5,811 5,811 16 ‐2.6% 20.2x 0.6%

Royal Vopak NV Netherlands Industrials 6,889 6,889 16 ‐0.7% 18.0x 0.0%

Skanska AB (publ) Sweden Industrials 42,812 4,974 16 L 0.3% 12.6x ‐6.9%

Societe BIC, S.A. France Industrials 4,242 4,242 16 ‐1.4% 14.8x 3.3%

Trelleborg AB Sweden Industrials 19,856 2,307 16 ‐0.7% 9.9x 4.5%

Lundin Petroleum AB Sweden Energy 48,941 5,687 17 ‐0.4% 35.0x 0.2%

Subsea 7 SA United Kingdom Energy 41,816 5,646 17 S 2.6% 12.5x 1.1%

Swedish Match AB Sweden Cons. Staples 53,680 6,237 17 ‐1.0% 16.3x 4.4%

JM AB Sweden Cons. Disc. 9,643 1,120 18 ‐0.6% 9.3x 8.4%

Rexam plc United Kingdom Materials 4,037 4,952 18 0.0% 11.6x 4.3%

Getinge AB Sweden Healthcare 48,499 5,635 18 A ‐2.3% 13.6x 4.3%

William Demant Holding A/S Denmark Healthcare 30,233 4,053 18 A 0.0% 19.1x 3.4%

Aixtron SE Germany Info. Tech. 1,008 1,008 19 ‐50.0% 31.8x ‐11.6%

Clariant AG Switzerland Materials 3,134 2,590 20 S R L ‐1.9% 8.4x ‐0.2%

Kazakhmys PLC United Kingdom Materials 3,956 4,853 20 ‐5.4% 7.8x ‐1.5%

(1) S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Local currency presentation based on primary listing trading currency – United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). 2013E P/E based on consensus ests. Market data as of 10/22/2012. Amounts in millions.



LLOOWW EEAARRNNIINNGGSS QQUUAALLIITTYY ((BBOOTTTTOOMM 2200%%)) AANNDD NNEEGGAATTIIVVEE 3300‐‐DDAAYY EEPPSS RREEVVIISSIIOONNSS

Below, we list companies in the bottom 20% of their sector for earnings quality that also had negative earnings estimate revisions over the prior 30-days. European Companies in the Bottom 20% for Earnings Quality with Neg. EPS Revisions [sorted by lowest earnings quality score]



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

PostNL N.V. Netherlands Industrials 1,307 1,307 1 L ‐1.6% 4.4x ‐1.6%

Edenred SA France Industrials 5,215 5,215 2 ‐1.1% 21.6x 2.4%

Lanxess AG Germany Materials 5,134 5,134 2 A ‐1.7% 7.9x ‐2.1%

Akzo Nobel NV Netherlands Materials 10,112 10,112 2 ‐2.8% 11.5x ‐1.1%


Vallourec SA France Industrials 4,087 4,087 2 L A ‐4.2% 11.1x ‐6.5%

Atlas Copco AB Sweden Industrials 182,184 21,168 2 ‐0.3% 13.2x 4.3%

Barry Callebaut AG Switzerland Cons. Staples 4,605 3,805 4 ‐0.1% 16.1x 0.5%

Swatch Group AG Switzerland Cons. Disc. 19,675 16,257 5 ‐0.3% 12.9x 1.0%

L'Oreal SA France Cons. Staples 59,725 59,725 6 ‐0.2% 19.5x 3.5%



Petropavlovsk PLC United Kingdom Materials 809 992 7 ‐10.9% 5.1x ‐18.4%

PUMA SE Germany Cons. Disc. 3,297 3,297 7 ‐1.4% 14.5x 0.4%


NCC AB Sweden Industrials 13,213 1,535 8 L ‐0.9% 8.8x ‐12.4%

AB Volvo Sweden Industrials 187,569 21,794 8 ‐3.0% 10.2x ‐0.5%

K+S Aktiengesellschaft Germany Materials 6,957 6,957 8 ‐2.5% 10.5x 4.0%

Pirelli & C. SpA Italy Cons. Disc. 4,054 4,054 8 ‐1.1% 7.5x ‐4.4%

Daimler AG Germany Cons. Disc. 41,156 41,156 8 L ‐1.4% 6.8x ‐5.3%

Tele2 AB (publ) Sweden Telecom. 51,025 5,929 9 ‐4.5% 10.0x 8.4%

Swisscom AG Switzerland Telecom. 19,949 16,483 9 ‐0.2% 11.5x 7.4%


ASML Holding NV Netherlands Info. Tech. 19,909 19,909 13 ‐7.0% 12.7x 5.3%

Novozymes A/S Denmark Materials 50,084 6,715 13 ‐0.2% 23.9x 2.3%

Reckitt Benckiser Group plc United Kingdom Cons. Staples 26,484 32,489 13 A ‐0.4% 14.7x 5.7%

Aggreko plc United Kingdom Industrials 5,559 6,820 14 A ‐1.9% 19.2x ‐1.1%

SGS SA Switzerland Industrials 15,317 12,656 14 A ‐0.4% 21.1x 2.2%

Hugo Boss AG Germany Cons. Disc. 4,981 4,981 14 ‐0.9% 14.3x 4.1%

Fugro NV Netherlands Energy 4,251 4,251 14 A ‐0.3% 12.2x 1.7%

Pearson plc United Kingdom Cons. Disc. 9,724 11,929 14 ‐1.2% 13.6x 6.4%


Pernod‐Ricard SA France Cons. Staples 22,499 22,499 15 ‐0.6% 17.0x 3.7%

Infineon Technologies AG Germany Info. Tech. 5,811 5,811 16 ‐2.6% 20.2x 0.6%

Royal Vopak NV Netherlands Industrials 6,889 6,889 16 ‐0.7% 18.0x 0.0%

Societe BIC, S.A. France Industrials 4,242 4,242 16 ‐1.4% 14.8x 3.3%

Trelleborg AB Sweden Industrials 19,856 2,307 16 ‐0.7% 9.9x 4.5%

Lundin Petroleum AB Sweden Energy 48,941 5,687 17 ‐0.4% 35.0x 0.2%

Swedish Match AB Sweden Cons. Staples 53,680 6,237 17 ‐1.0% 16.3x 4.4%


JM AB Sweden Cons. Disc. 9,643 1,120 18 ‐0.6% 9.3x 8.4%

PPR SA. France Cons. Disc. 16,869 16,869 18 ‐1.6% 12.5x 4.6%

Getinge AB Sweden Healthcare 48,499 5,635 18 A ‐2.3% 13.6x 4.3%

Aixtron SE Germany Info. Tech. 1,008 1,008 19 ‐50.0% 31.8x ‐11.6%


Kazakhmys PLC United Kingdom Materials 3,956 4,853 20 ‐5.4% 7.8x ‐1.5%

(1) S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Local currency presentation based on primary listing trading currency – United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). 2013E P/E based on consensus ests. Market data as of 10/22/2012. Amounts in millions.



SSEERRIIAALL RREESSTTRRUUCCTTUURRIINNGG CCOOMMPPAANNIIEESS

The companies listed below and on the following page all reported special charges >0.25% of revenues for each of the last 4 quarters (or each of the last two semi-annual periods, if applicable). For purposes of our analysis, “special charges” is a term that includes both restructuring and goodwill charges. Serial Restructuring Companies (sorted by sector, then EQ score) (in millions)



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield


LVMH Moet Hennessy Louis Vuitton France Cons. Disc. 62,429 62,429 31 R ‐1.4% 15.9x 3.2%

PSA Peugeot Citroen France Cons. Disc. 2,045 2,045 38 S R L ‐13.4% NA ‐4.4%

Greene King plc United Kingdom Cons. Disc. 1,294 1,587 49 R 1.8% 10.1x 3.4%

Informa plc Switzerland Cons. Disc. 2,418 2,966 61 R 0.0% 9.7x 8.0%

Daily Mail and General Trust plc United Kingdom Cons. Disc. 1,843 2,261 67 R 0.0% 9.2x 10.1%

Lagardere SCA France Cons. Disc. 2,663 2,663 93 R ‐0.5% 9.5x 3.3%



British American Tobacco plc United Kingdom Cons. Staples 61,872 75,901 27 R 0.0% 14.3x 5.6%

Casino Guichard‐Perrachon S.A. France Cons. Staples 7,624 7,624 67 R ‐7.2% 11.3x 6.2%

Henkel AG & Co. KGaA Germany Cons. Staples 23,880 23,880 77 R A ‐0.3% 16.0x 6.3%

C&C Group plc Ireland Cons. Staples 1,233 1,233 90 R 0.0% 12.3x 9.2%

Britvic Plc United Kingdom Cons. Staples 861 1,057 94 S R 0.0% 11.4x 8.9%

Svenska Cellulosa Aktiebolaget SCA Sweden Cons. Staples 91,129 10,588 98 R ‐19.0% 13.5x 5.6%

Essilor International SA France Healthcare 14,470 14,470 26 R A 0.7% 22.7x 3.1%

GlaxoSmithKline plc United Kingdom Healthcare 68,720 84,302 61 R A ‐0.9% 11.7x 7.8%

AstraZeneca PLC United Kingdom Healthcare 36,579 44,873 76 R 0.7% 8.3x 12.5%

Roche Holding AG Switzerland Healthcare 158,138 130,664 84 R 0.1% 12.2x 6.7%

BTG plc United Kingdom Healthcare 1,154 1,416 89 S R 10.0% 28.5x 4.2%

Merck KGaA Germany Healthcare 21,651 21,651 97 R 0.0% 13.2x 6.7%

Alstom SA France Industrials 8,336 8,336 7 R 0.3% 7.7x ‐4.2%

IMI plc United Kingdom Industrials 2,961 3,632 20 R A ‐1.2% 10.5x 4.2%

Invensys plc United Kingdom Industrials 1,827 2,242 20 R 0.0% 9.8x 1.7%

Balfour Beatty plc United Kingdom Industrials 2,134 2,618 23 R L A 0.0% 8.3x ‐6.8%

Cookson Group plc United Kingdom Industrials 1,579 1,936 27 R ‐11.6% 8.3x 5.0%

Thales SA France Industrials 5,557 5,557 40 R ‐0.4% 8.7x 8.0%

Cobham plc United Kingdom Industrials 2,370 2,907 40 R 0.0% 9.6x 7.4%

Melrose PLC United Kingdom Industrials 3,065 3,760 52 S R 0.0% 12.8x 1.5%

Schneider Electric S.A. France Industrials 26,991 26,991 52 R ‐0.8% 11.5x 7.6%

Rentokil Initial plc United Kingdom Industrials 1,585 1,945 70 R 0.0% 9.6x 4.7%

Nexans SA France Industrials 995 995 81 R L ‐1.9% 9.4x 3.9%

De La Rue plc United Kingdom Industrials 1,065 1,307 98 R 1.8% 14.7x 5.2%

Ingenico SA France Info. Tech. 2,067 2,067 3 R A 0.5% 15.4x 3.1%


Atos S.A. France Info. Tech. 4,404 4,404 44 S R 0.0% 11.5x 6.1%

Alcatel‐Lucent, S.A. France Info. Tech. 1,901 1,901 47 R L ‐25.0% 40.2x ‐4.6%

Cap Gemini S.A. France Info. Tech. 4,775 4,775 56 R ‐0.7% 11.2x 10.5%

STMicroelectronics NV Switzerland Info. Tech. 4,239 4,239 88 R L ‐13.3% 18.2x 0.1%

Nokia Corporation Finland Info. Tech. 8,016 8,016 97 R 17.6% NA ‐7.9%


Syngenta AG Switzerland Materials 31,125 25,718 26 R ‐0.5% 15.3x 3.8%

Anglo American plc United Kingdom Materials 26,543 32,561 36 R ‐8.9% 9.4x 4.7%

EVRAZ plc United Kingdom Materials 3,315 4,066 67 R 50.0% 10.1x 10.4%

Lafarge S.A. France Materials 12,865 12,865 67 R ‐0.7% 12.4x 4.3%

DS Smith Plc United Kingdom Materials 1,954 2,397 82 R 6.7% 10.4x 2.6%




SSEERRIIAALL RREESSTTRRUUCCTTUURRIINNGG CCOOMMPPAANNIIEESS ((CCOONNTTIINNUUEEDD))

A continuation of the prior exhibit is below. Serial Restructuring Companies (sorted by sector, then EQ score) (in millions)



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

TDC A/S Denmark Telecom. 32,874 4,408 43 R 1.8% 11.0x 9.6%

Telenor ASA Norway Telecom. 165,500 22,345 48 R ‐6.0% 11.2x 7.0%

Telekom Austria AG Austria Telecom. 2,478 2,478 61 R ‐6.9% 19.8x 9.9%

Cable & Wireless Communications Plc United Kingdom Telecom. 931 1,142 83 R 0.0% 9.3x 14.5%


Centrica plc United Kingdom Utilities 16,912 20,746 26 R A 0.0% 12.0x 4.6%

GDF Suez S.A. France Utilities 41,366 41,366 78 R ‐0.6% 10.7x 6.4%

Severn Trent plc United Kingdom Utilities 3,963 4,862 96 R ‐2.0% 16.9x 5.4%




SSHHAARREE CCOOUUNNTT IINNCCRREEAASSEESS SSIIGGNNAALL SSTTOOCCKK PPRRIICCEE UUNNDDEERRPPEERRFFOORRMMAANNCCEE

We believe the action of companies’ issuing stock is a strong signaling mechanism of share price overvaluation. After all, unless a company is deleveraging, why would a company issue new shares if they believe their stock is undervalued? The companies listed below ranked in the worst decile for largest share count increases over the past two years. Based on our research for U.S. companies, we found that companies with the largest increase in share count over the past two years underperformed their sectors by the widest margin (bottom 10%). We use this item as one of the “Additional Factors” in our earnings quality framework. Companies with Highest 2 Year Share Count Increase (sorted by sector, then EQ score) (in millions)



Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

bwin.party digital entertainment plc Gibraltar Cons. Disc. 983 1,206 35 S 0.0% 10.5x 5.8%

PSA Peugeot Citroen France Cons. Disc. 2,045 2,045 38 S R L ‐13.4% NA ‐4.4%

Michelin SCA France Cons. Disc. 11,259 11,259 38 S 1.3% 7.0x 2.4%

Aegis Group plc United Kingdom Cons. Disc. 2,690 3,300 43 S A 0.0% 17.5x 3.1%

LEONI AG Germany Cons. Disc. 847 847 49 S ‐3.1% 5.5x 10.7%

Axel Springer AG Germany Cons. Disc. 3,184 3,184 81 S A ‐1.3% 10.7x 9.7%

ARYZTA AG Switzerland Cons. Staples 4,063 3,357 56 S ‐1.8% 10.6x 5.3%

Britvic Plc United Kingdom Cons. Staples 861 1,057 94 S R 0.0% 11.4x 8.9%

Subsea 7 SA United Kingdom Energy 41,816 5,646 17 S 2.6% 12.5x 1.1%

Premier Oil plc United Kingdom Energy 1,937 2,376 31 S A 7.6% 6.4x ‐2.6%

Afren PLC United Kingdom Energy 1,526 1,872 46 S A 0.0% 9.0x 10.3%

Hunting plc United Kingdom Energy 1,168 1,432 46 S A 0.0% 11.6x 1.9%

SeaDrill Limited Bermuda Energy 19,180 14,683 91 S ‐0.7% 11.4x 0.5%

Petroleum Geo Services ASA Norway Energy 20,964 2,830 97 S 2.4% 11.1x 9.4%

Fresenius SE & Co KGaA Germany Healthcare 16,630 16,630 11 S A 0.2% 16.2x 5.3%

Grifols, S.A. Spain Healthcare 7,441 7,441 84 S A ‐1.0% 20.5x 4.2%

BTG plc United Kingdom Healthcare 1,154 1,416 89 S R 10.0% 28.5x 4.2%


Babcock International Group plc United Kingdom Industrials 3,447 4,229 34 S A 1.4% 13.2x 4.5%

HomeServe plc United Kingdom Industrials 774 950 34 S A 0.0% 11.1x 8.8%

Travis Perkins plc United Kingdom Industrials 2,618 3,212 46 S ‐1.0% 10.9x 5.2%

Meggitt PLC United Kingdom Industrials 3,085 3,784 49 S 0.0% 10.6x 7.1%

Melrose PLC United Kingdom Industrials 3,065 3,760 52 S R 0.0% 12.8x 1.5%

International Consolidated Airlines United Kingdom Industrials 2,963 3,635 63 S L 0.0% 13.6x ‐9.2%

Prysmian S.p.A. Italy Industrials 3,174 3,174 90 S A ‐0.8% 9.6x 6.0%

Groupe Eurotunnel SA France Industrials 3,215 3,215 92 S 0.0% 119.6x 5.4%

Klöckner & Co Aktiengesellschaft Germany Industrials 773 773 92 S L 1.7% 24.6x 12.0%


Atos S.A. France Info. Tech. 4,404 4,404 44 S R 0.0% 11.5x 6.1%

Hexagon AB Sweden Info. Tech. 51,217 5,951 47 S A 2.5% 14.7x 5.1%

Temenos Group AG Switzerland Info. Tech. 951 786 81 S A 0.0% 14.0x 7.8%


The Linde Group Germany Materials 24,095 24,095 23 S 0.1% 15.2x 3.4%

Glencore International plc Switzerland Materials 24,866 30,504 46 S 0.0% 7.9x ‐1.5%

Aurubis AG Germany Materials 2,143 2,143 59 S ‐2.9% 10.1x 12.1%

ThyssenKrupp AG Germany Materials 9,541 9,541 59 S L ‐9.4% 22.1x ‐3.4%

EVRAZ plc United Kingdom Materials 3,315 4,066 67 R 50.0% 10.1x 10.4%

Chr. Hansen Holding A/S Denmark Materials 22,557 3,024 79 S ‐0.8% 21.1x 4.1%

DS Smith Plc United Kingdom Materials 1,954 2,397 82 R 6.7% 10.4x 2.6%

Nyrstar NV Switzerland Materials 779 779 87 S A 9.1% 7.4x 10.5%

Norsk Hydro ASA Norway Materials 54,802 7,399 90 S ‐16.2% 18.8x 6.2%

RWE AG Germany Utilities 21,534 21,534 7 S 0.0% 8.7x ‐4.7%

VERBUND AG Austria Utilities 6,160 6,160 63 S A ‐0.9% 14.5x 3.4%

National Grid plc United Kingdom Utilities 25,667 31,487 70 S 0.0% 12.9x 3.8%




LLOOWW EEAARRNNIINNGGSS QQUUAALLIITTYY ((BBOOTTTTOOMM 2200%%)) AANNDD LLOOWW ““TTRREEEE””

Below are companies in the bottom 20% of their sector for earnings quality with a True Rate of Equity Expansion (TREE) less than 5%. TREE is our improved ROE measure; please refer to the Appendix of this report for a detailed discussion about the TREE calculation mechanics. Companies in the Bottom 20% of Earnings Quality with a Low TREE [sorted by lowest earnings quality score] (in millions)

EARNINGS QUALITY CAPITAL CREATION VALUATION

("TREE")


Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

5‐yr

TREE

5‐yr Cap.

Ret. to Ave.

Mkt. Cap.

2013E

P/E

Infineon Technologies AG Germany Info. Tech. 5,811 5,811 16 ‐2% 3% 20.2x

Lundin Petroleum AB Sweden Energy 48,941 5,687 17 ‐1% 1% 35.0x

Clariant AG Switzerland Materials 3,134 2,590 20 S R L 0% 18% 8.4x

Pirelli & C. SpA Italy Cons. Disc. 4,054 4,054 8 2% 13% 7.5x

Trelleborg AB Sweden Industrials 19,856 2,307 16 3% 7% 9.9x

Bellway plc United Kingdom Cons. Disc. 1,222 1,499 11 5% 7% 12.7x

Hochtief AG Germany Industrials 2,967 2,967 2 S A 5% 11% 9.8x

Rexam plc United Kingdom Materials 4,037 4,952 18 5% 18% 11.6x

(1) S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Local currency presentation based on primary listing trading currency – United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. 2013E P/E based on consensus ests. Market data as of 10/22/2012.



HHIIGGHH EEAARRNNIINNGGSS QQUUAALLIITTYY ((TTOOPP 2200%%)) AANNDD HHIIGGHH ““TTRREEEE””

The companies listed below are higher earnings quality companies (EQ Score > 80) with a high 5-yr TREE growth rate (>13%). Companies in the Top 20% for Earnings Quality with a TREE > 13% [sorted by highest TREE] (in millions)

EARNINGS QUALITY CAPITAL CREATION VALUATION

("TREE")


Market Cap.

(Local

Currency)

Market Cap.

(Euros)

EQ

Score

Add'l

Factors (1)

5‐yr

TREE

5‐yr Cap.

Ret. to Ave.

Mkt. Cap.

2013E

P/E

Novo Nordisk A/S Denmark Healthcare 527,684 70,750 95 A 27% 34% 21.4x

Petroleum Geo Services ASA Norway Energy 20,964 2,830 97 S 24% 3% 11.1x

Marks & Spencer Group plc United Kingdom Cons. Disc. 6,233 7,646 98 A 23% 22% 10.5x

Unilever plc United Kingdom Cons. Staples 65,123 79,889 81 22% 21% 16.9x

Red Eléctrica Corporación S A. Spain Utilities 5,004 5,004 81 22% 15% 9.8x

Andritz AG Austria Industrials 4,784 4,784 81 20% 22% 16.1x

Stagecoach Group plc United Kingdom Industrials 1,585 1,944 88 19% 14% 9.9x

DSV A/S Denmark Industrials 22,443 3,009 85 19% 23% 12.2x

Endesa SA Spain Utilities 17,395 17,395 85 18% 43% 8.9x

Temenos Group AG Switzerland Info. Tech. 951 786 81 S A 18% 12% 14.0x

Nobel Biocare Holding AG Switzerland Healthcare 1,066 880 92 18% 8% 17.4x

Nokia Corporation Finland Info. Tech. 8,016 8,016 97 R 18% 18% NA

De La Rue plc United Kingdom Industrials 1,065 1,307 98 R 17% 21% 14.7x

Wolters Kluwer NV Netherlands Cons. Disc. 4,415 4,415 82 16% 16% 9.0x

Axel Springer AG Germany Cons. Disc. 3,184 3,184 81 S A 16% 26% 10.7x

Assa Abloy AB Sweden Industrials 80,625 9,368 90 16% 14% 13.9x

SeaDrill Limited Bermuda Energy 19,180 14,683 91 S 16% 56% 11.4x

Aalberts Industries NV Netherlands Industrials 1,564 1,564 85 16% 4% 9.8x

Straumann Holding AG Switzerland Healthcare 1,755 1,450 82 16% 9% 18.1x

Roche Holding AG Switzerland Healthcare 158,138 130,664 84 R 15% 17% 12.2x

Sage Group plc United Kingdom Info. Tech. 3,751 4,602 81 15% 16% 14.0x

Vestas Wind Systems A/S Denmark Industrials 6,343 850 95 L A 14% 1% 33.8x

Eiffage SA France Industrials 2,310 2,310 97 14% 18% 8.2x

Dassault Systemes SA France Info. Tech. 10,145 10,145 88 14% 14% 21.5x

Enel SpA Italy Utilities 27,702 27,702 85 14% 42% 8.1x

Grifols, S.A. Spain Healthcare 7,441 7,441 84 S A 13% 10% 20.5x

(1) S = share count increaser; R = recurring special charges; L = increased leverage; A = high acquisitions. Note: Local currency presentation based on primary listing trading currency – United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. 2013E P/E based on consensus ests. Market data as of 10/22/2012.



EQ Scores by Sector


CCOONNSSUUMMEERR DDIISSCCRREETTIIOONNAARRYY

STOXX Europe 600: Consumer Discretionary Companies (millions)


Company Name Country Industry Group

Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

The Berkeley Group Holdings plc United Kingdom Consumer Durables and Apparel 1,974 5 1.6% 10.2x ‐8.1%

Swatch Group AG Switzerland Consumer Durables and Apparel 19,675 5 ‐0.3% 12.9x 1.0%

PUMA SE Germany Consumer Durables and Apparel 3,297 7 ‐1.4% 14.5x 0.4%

Pirelli & C. SpA Italy Automobiles and Components 4,054 8 ‐1.1% 7.5x ‐4.4%

Daimler AG Germany Automobiles and Components 41,156 8 L ‐1.4% 6.8x ‐5.3%

Bellway plc United Kingdom Consumer Durables and Apparel 1,222 11 2.7% 12.7x 1.5%

Accor SA France Consumer Services 5,545 11 R ‐1.5% 18.1x ‐7.8%

Volkswagen AG Germany Automobiles and Components 66,023 11 3.0% 6.1x ‐0.7%

Pearson plc United Kingdom Media 9,724 14 ‐1.2% 13.6x 6.4%

Christian Dior SA France Consumer Durables and Apparel 19,462 14 3.0% 11.1x 5.3%

Hugo Boss AG Germany Consumer Durables and Apparel 4,981 14 ‐0.9% 14.3x 4.1%

PPR SA. France Retailing 16,869 18 ‐1.6% 12.5x 4.6%

JM AB Sweden Consumer Durables and Apparel 9,643 18 ‐0.6% 9.3x 8.4%

UBM plc Ireland Media 1,642 20 A ‐1.7% 10.9x 6.9%

Compagnie Financiere Richemont SA Switzerland Consumer Durables and Apparel 32,829 20 A 0.6% 13.5x 4.6%

Nokian Tyres Oyj Finland Automobiles and Components 3,859 20 ‐6.3% 9.5x 0.3%

WPP plc Ireland Media 10,587 24 0.0% 10.7x 7.0%

Continental AG Germany Automobiles and Components 15,112 25 ‐1.0% 7.2x 4.7%

Havas France Media 1,519 25 0.0% 10.4x 0.1%

Tod's SpA Italy Consumer Durables and Apparel 2,753 25 ‐0.2% 16.4x 4.0%

Amer Sports Corp. Finland Consumer Durables and Apparel 1,168 29 L ‐1.4% 11.2x 2.6%

TF1 Group France Media 1,343 29 ‐2.7% 8.7x 2.6%

Bayerische Motorenwerke AG BMW Germany Automobiles and Components 39,196 31 ‐0.4% 7.9x 1.4%

LVMH Moet Hennessy Louis Vuitton France Consumer Durables and Apparel 62,429 31 R ‐1.4% 15.9x 3.2%

Burberry Group plc United Kingdom Consumer Durables and Apparel 5,132 33 A 0.0% 15.7x 5.2%

GKN plc United Kingdom Automobiles and Components 3,424 35 ‐7.7% 7.2x 5.8%

Compass Group PLC United Kingdom Consumer Services 12,658 35 A 0.0% 15.1x 5.8%

bwin.party digital entertainment plc Gibraltar Consumer Services 983 35 S 0.0% 10.5x 5.8%

PSA Peugeot Citroen France Automobiles and Components 2,045 38 S R L ‐13.4% NA ‐4.4%

Husqvarna AB Sweden Consumer Durables and Apparel 19,464 38 ‐1.9% 10.9x 5.0%

Michelin SCA France Automobiles and Components 11,259 38 S 1.3% 7.0x 2.4%

H & M Hennes & Mauritz AB (publ) Sweden Retailing 386,294 38 ‐3.5% 20.3x 3.6%

Sodexo S.A. France Consumer Services 9,162 43 ‐0.3% 17.2x 6.8%

Whitbread PLC United Kingdom Consumer Services 4,127 43 A 0.7% 14.5x 0.8%

Hermès International S.C.A. France Consumer Durables and Apparel 22,084 43 A 0.8% 29.9x 2.3%

Intercontinental Hotels Group plc United Kingdom Consumer Services 4,314 43 ‐5.6% 16.8x 7.2%

Aegis Group plc United Kingdom Media 2,690 43 S A 0.0% 17.5x 3.1%

Renault Société Anonym France Automobiles and Components 9,995 49 ‐1.6% 3.8x 3.0%

Dufry AG Switzerland Retailing 3,533 49 L ‐2.9% 10.6x 7.0%

LEONI AG Germany Automobiles and Components 847 49 S ‐3.1% 5.5x 10.7%

Inchcape plc United Kingdom Retailing 1,778 49 0.0% 8.7x 6.1%

Valeo SA France Automobiles and Components 2,607 49 ‐0.2% 5.8x 16.3%

Greene King plc United Kingdom Consumer Services 1,294 49 R 1.8% 10.1x 3.4%

Adidas AG Germany Consumer Durables and Apparel 13,945 49 0.3% 14.9x 5.4%

Eutelsat Communications S.A. France Media 5,541 49 ‐0.6% 16.1x 3.5%

Industria de Diseno Textil SA Spain Retailing 60,837 58 1.8% 22.8x 3.1%

TUI Travel PLC United Kingdom Consumer Services 2,835 58 0.0% 9.4x 1.1%

Informa plc Switzerland Media 2,418 61 R 0.0% 9.7x 8.0%

Fiat S.p.A. Italy Automobiles and Components 5,192 61 1.8% 4.8x ‐2.6%

SEB SA France Consumer Durables and Apparel 2,566 61 A ‐1.0% 10.3x 7.1%

SES, S.A. Luxembourg Media 8,471 61 0.0% 13.9x 4.3%

OPAP SA Greece Consumer Services 1,563 65 1.4% 9.3x 36.9%

Barratt Developments plc United Kingdom Consumer Durables and Apparel 1,868 67 0.0% 14.4x 9.9%

Home Retail Group plc United Kingdom Retailing 858 67 0.0% 15.3x 16.5%

Daily Mail and General Trust plc United Kingdom Media 1,843 67 R 0.0% 9.2x 10.1%




CCOONNSSUUMMEERR DDIISSCCRREETTIIOONNAARRYY ((CCOONNTTIINNUUEEDD))

STOXX Europe 600: Consumer Discretionary Companies (continued) [in millions]



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Taylor Wimpey plc United Kingdom Consumer Durables and Apparel 1,924 67 0.0% 12.3x 2.1%

Publicis Groupe SA France Media 8,265 67 ‐0.3% 12.2x 9.1%

Kingfisher plc United Kingdom Retailing 6,631 73 ‐4.2% 11.0x 7.2%

Debenhams plc United Kingdom Retailing 1,409 73 0.0% 10.7x 6.1%

Modern Times Group Mtg AB Sweden Media 13,913 75 ‐7.5% 10.1x 14.6%

Paddy Power plc Ireland Consumer Services 2,770 75 A 0.0% 20.9x 6.2%

Next Plc United Kingdom Retailing 5,686 75 0.4% 12.0x 7.6%

Rightmove plc United Kingdom Media 1,611 75 A ‐1.7% 23.5x 3.8%

British Sky Broadcasting Group plc United Kingdom Media 11,839 75 0.0% 13.5x 10.2%

Axel Springer AG Germany Media 3,184 81 S A ‐1.3% 10.7x 9.7%

Carnival plc United Kingdom Consumer Services 17,839 82 0.5% 16.0x 2.8%

Wolters Kluwer NV Netherlands Media 4,415 82 ‐1.3% 9.0x 6.9%

Kabel Deutschland Holding AG Germany Media 4,917 82 0.0% 17.8x 6.9%

Ladbrokes PLC United Kingdom Consumer Services 1,638 82 0.0% 10.6x 9.5%

Schibsted ASA Norway Media 23,157 87 4.3% 19.1x 5.1%

Electrolux AB Sweden Consumer Durables and Apparel 48,390 87 ‐0.5% 10.6x 9.2%

ITV plc United Kingdom Media 3,476 89 0.0% 10.5x 9.9%

ProSiebenSat.1 Media AG Germany Media 4,436 89 0.5% 10.8x 19.5%

Luxottica Group SpA Italy Consumer Durables and Apparel 13,248 89 A 0.0% 19.4x 5.2%

Lagardere SCA France Media 2,663 93 R ‐0.5% 9.5x 3.3%

William Hill plc United Kingdom Consumer Services 2,448 93 0.0% 12.6x 9.2%

Mediaset SpA Italy Media 1,674 95 L ‐16.7% 18.2x 35.8%

Persimmon plc United Kingdom Consumer Durables and Apparel 2,403 96 0.0% 13.1x 7.9%

Marks & Spencer Group plc United Kingdom Retailing 6,233 98 A ‐2.9% 10.5x 9.2%

JCDecaux SA France Media 3,890 99 ‐1.0% 15.9x 8.4%




CCOONNSSUUMMEERR SSTTAAPPLLEESS

STOXX Europe 600: Consumer Staples Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Diageo plc United Kingdom Food, Beverage and Tobacco 44,276 2 0.0% 17.4x 3.8%

Barry Callebaut AG Switzerland Food, Beverage and Tobacco 4,605 4 ‐0.1% 16.1x 0.5%

L'Oreal SA France Household and Personal Products 59,725 6 ‐0.2% 19.5x 3.5%

D.E Master Blenders 1753 N.V. Netherlands Food, Beverage and Tobacco 5,830 8 R ‐2.1% 20.1x 0.3%

Tate & Lyle plc United Kingdom Food, Beverage and Tobacco 3,345 10 0.0% 11.4x 3.6%

Viscofan SA Spain Food, Beverage and Tobacco 1,627 10 A 0.0% 14.3x 2.9%

Reckitt Benckiser Group plc United Kingdom Household and Personal Products 26,484 13 A ‐0.4% 14.7x 5.7%

Pernod‐Ricard SA France Food, Beverage and Tobacco 22,499 15 ‐0.6% 17.0x 3.7%

SABMiller plc United Kingdom Food, Beverage and Tobacco 42,071 17 R L A ‐0.4% 16.0x 3.5%

Swedish Match AB Sweden Food, Beverage and Tobacco 53,680 17 ‐1.0% 16.3x 4.4%

Etablissements Delhaize Frères et Cie Belgium Food and Staples Retailing 2,919 21 A ‐1.0% 6.6x 6.2%

Nestlé S.A. Switzerland Food, Beverage and Tobacco 189,058 23 0.3% 17.0x 3.8%

Suedzucker AG Germany Food, Beverage and Tobacco 5,542 23 12.1% 11.6x 5.5%

Kesko Oyj Finland Food and Staples Retailing 2,248 27 0.0% 13.0x ‐6.6%

Davide Campari ‐ Milano SpA Italy Food, Beverage and Tobacco 3,722 27 0.0% 18.0x 3.9%

Chocoladefabriken Lindt & Spruengli AG Switzerland Food, Beverage and Tobacco 7,197 27 0.0% 25.2x 2.3%

British American Tobacco plc United Kingdom Food, Beverage and Tobacco 61,872 27 R 0.0% 14.3x 5.6%

PZ Cussons plc United Kingdom Household and Personal Products 1,410 27 0.0% 17.1x 1.3%

Booker Group PLC United Kingdom Food and Staples Retailing 1,744 37 0.0% 18.8x 4.1%

Nutreco N.V. Netherlands Food, Beverage and Tobacco 2,035 38 ‐1.6% 10.7x 5.0%

Etn Fr Colruyt NV Belgium Food and Staples Retailing 5,299 38 A 0.0% 13.8x 4.9%

Imperial Tobacco Group plc United Kingdom Food, Beverage and Tobacco 22,695 42 ‐0.5% 10.8x 7.3%

Associated British Foods plc United Kingdom Food, Beverage and Tobacco 10,817 44 0.0% 14.6x 1.5%

Beiersdorf AG Germany Household and Personal Products 12,929 44 0.0% 25.3x 2.8%

Kerry Group plc Ireland Food, Beverage and Tobacco 7,079 48 0.0% 15.3x 3.7%

Oriflame Cosmetics SA Luxembourg Household and Personal Products 11,915 48 A ‐0.9% 10.4x 7.0%

Distribuidora Internacional de Spain Food and Staples Retailing 3,054 52 0.0% 15.3x 2.9%

J. Sainsbury plc United Kingdom Food and Staples Retailing 6,735 56 0.0% 11.4x ‐0.8%

Danone France Food, Beverage and Tobacco 28,180 56 ‐1.6% 14.3x 5.2%

Tesco PLC United Kingdom Food and Staples Retailing 25,334 56 ‐5.9% 8.9x 2.9%

ARYZTA AG Switzerland Food, Beverage and Tobacco 4,063 56 S ‐1.8% 10.6x 5.3%

Heineken NV Netherlands Food, Beverage and Tobacco 27,501 63 0.0% 15.0x 5.4%

Koninklijke Ahold N.V. Netherlands Food and Staples Retailing 10,018 63 A 0.0% 9.2x 11.2%

Rémy Cointreau SA France Food, Beverage and Tobacco 3,774 67 ‐3.4% 20.3x 2.9%

Ebro Foods SA Spain Food, Beverage and Tobacco 2,119 67 ‐1.0% 13.1x 5.2%

Casino Guichard‐Perrachon S.A. France Food and Staples Retailing 7,624 67 R ‐7.2% 11.3x 6.2%

Anheuser‐Busch InBev SA/NV Belgium Food, Beverage and Tobacco 105,434 67 0.0% 17.2x 6.2%

Jeronimo Martins SGPS SA Portugal Food and Staples Retailing 8,798 67 0.0% 18.5x 4.0%

Henkel AG & Co. KGaA Germany Household and Personal Products 23,880 77 R A ‐0.3% 16.0x 6.3%

Marine Harvest ASA Norway Food, Beverage and Tobacco 17,252 79 L ‐22.2% 11.2x 4.6%

Wm. Morrison Supermarkets plc United Kingdom Food and Staples Retailing 6,448 81 ‐3.6% 9.1x 4.3%

Unilever plc United Kingdom Food, Beverage and Tobacco 65,123 81 ‐0.8% 16.9x 5.2%

Carrefour SA France Food and Staples Retailing 12,890 87 L ‐1.5% 11.4x 2.9%

METRO AG Germany Food and Staples Retailing 7,180 87 ‐12.5% 7.5x 9.9%

C&C Group plc Ireland Food, Beverage and Tobacco 1,233 90 R 0.0% 12.3x 9.2%

Carlsberg A/S Denmark Food, Beverage and Tobacco 78,935 92 0.1% 12.0x 4.7%

Britvic Plc United Kingdom Food, Beverage and Tobacco 861 94 S R 0.0% 11.4x 8.9%

Coca‐Cola Hellenic Bottling Company S.A. Greece Food, Beverage and Tobacco 6,231 96 ‐5.7% 18.5x 6.1%

Svenska Cellulosa Aktiebolaget SCA Sweden Household and Personal Products 91,129 98 R ‐19.0% 13.5x 5.6%




EENNEERRGGYY

STOXX Europe 600: Energy Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Petrofac Limited United Kingdom Energy 5,458 9 A 0.0% 12.5x ‐8.5%

Aker Solutions ASA Norway Energy 30,703 11 L 1.1% 11.1x ‐4.6%

Fugro NV Netherlands Energy 4,251 14 A ‐0.3% 12.2x 1.7%

Lundin Petroleum AB Sweden Energy 48,941 17 ‐0.4% 35.0x 0.2%

Technip France Energy 10,107 17 0.0% 14.2x 1.2%

Subsea 7 SA United Kingdom Energy 41,816 17 S 2.6% 12.5x 1.1%

John Wood Group plc United Kingdom Energy 3,104 26 ‐2.3% 13.2x 1.6%

TGS Nopec Geophysical Co. ASA Norway Energy 20,039 26 5.7% 12.1x 16.0%

CGG Veritas France Energy 3,775 31 ‐5.3% 12.1x 6.2%

Premier Oil plc United Kingdom Energy 1,937 31 S A 7.6% 6.4x ‐2.6%

BG Group plc United Kingdom Energy 45,571 31 A 3.4% 13.2x ‐1.8%

Saipem SpA Italy Energy 15,717 31 ‐0.9% 13.4x 0.2%

Repsol S.A. Spain Energy 18,076 43 ‐0.6% 9.0x 0.6%

Hunting plc United Kingdom Energy 1,168 46 S A 0.0% 11.6x 1.9%

Statoil ASA Norway Energy 464,321 46 A ‐0.8% 8.5x 1.3%

Eni SpA Italy Energy 63,853 46 A ‐0.5% 8.1x 4.2%

Afren PLC United Kingdom Energy 1,526 46 S A 0.0% 9.0x 10.3%

Galp Energia SGPS SA Portugal Energy 10,780 57 L 2.2% 23.8x ‐0.8%

SBM Offshore N.V. Netherlands Energy 1,828 60 A 0.4% 5.0x 22.9%

BP plc United Kingdom Energy 84,376 60 A 3.3% 7.0x ‐0.1%

AMEC plc United Kingdom Energy 3,410 60 A 0.0% 11.8x 8.2%

Tenaris SA Luxembourg Energy 17,708 69 ‐0.7% 11.6x 4.5%

OMV Aktiengesellschaft Austria Energy 9,115 71 S A 1.8% 6.4x 5.8%

Total SA France Energy 88,695 71 A 1.1% 7.3x 1.8%

Bourbon France Energy 1,344 77 ‐7.6% 11.5x 0.8%

Royal Dutch Shell plc Netherlands Energy 138,292 80 0.2% 7.6x 6.5%

Neste Oil Corp. Finland Energy 2,585 80 L 10.9% 9.9x ‐2.1%

Tullow Oil plc United Kingdom Energy 13,217 86 1.9% 26.3x 4.7%

Tecnicas Reunidas, S.A. Spain Energy 2,073 86 A 0.4% 13.9x 13.8%

SeaDrill Limited Bermuda Energy 19,180 91 S ‐0.7% 11.4x 0.5%

Établissements Maurel & Prom France Energy 1,286 94 14.4% 8.7x 23.0%

Petroleum Geo Services ASA Norway Energy 20,964 97 S 2.4% 11.1x 9.4%




HHEEAALLTTHHCCAARREE

STOXX Europe 600: Healthcare Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Elekta AB Sweden Healthcare Equip. and Services 35,148 3 A 0.5% 20.0x 0.9%

Sonova Holding AG Switzerland Healthcare Equip. and Services 6,433 5 1.1% 17.5x 3.6%

Orion Oyj Finland Pharma., Biotech. and Life Sciences 2,597 5 3.5% 14.5x 6.0%

Stada‐Arzneimittel AG Germany Pharma., Biotech. and Life Sciences 1,387 11 0.4% 8.0x 6.2%

Fresenius SE & Co KGaA Germany Healthcare Equip. and Services 16,630 11 S A 0.2% 16.2x 5.3%

Smith & Nephew plc United Kingdom Healthcare Equip. and Services 5,856 11 0.0% 13.5x 5.7%

Getinge AB Sweden Healthcare Equip. and Services 48,499 18 A ‐2.3% 13.6x 4.3%

William Demant Holding A/S Denmark Healthcare Equip. and Services 30,233 18 A 0.0% 19.1x 3.4%

Elan Corporation, plc Ireland Pharma., Biotech. and Life Sciences 6,445 24 14.3% 68.0x 0.4%

Celesio AG Germany Healthcare Equip. and Services 2,635 26 L ‐0.8% 10.7x 11.4%

Qiagen NV Netherlands Pharma., Biotech. and Life Sciences 4,126 26 A 0.0% 15.9x 3.6%

Essilor International SA France Healthcare Equip. and Services 14,470 26 R A 0.7% 22.7x 3.1%

Gerresheimer AG Germany Pharma., Biotech. and Life Sciences 1,202 26 ‐4.8% 13.1x 2.3%

BioMérieux S.A. France Healthcare Equip. and Services 2,745 26 A 0.5% 15.0x 5.1%

Hikma Pharmaceuticals plc United Kingdom Pharma., Biotech. and Life Sciences 1,471 39 A 0.0% 16.8x 3.6%

Rhoen Klinikum AG Germany Healthcare Equip. and Services 2,078 42 0.0% 13.7x 0.7%

Fresenius Medical Care AG & Co. KGAA Germany Healthcare Equip. and Services 17,811 42 0.2% 17.8x 4.8%

Bayer AG Germany Pharma., Biotech. and Life Sciences 56,557 47 0.2% 12.0x 4.8%

Meda AB Sweden Pharma., Biotech. and Life Sciences 20,145 47 A 0.0% 10.3x 20.5%

Lonza Group AG Switzerland Pharma., Biotech. and Life Sciences 2,450 53 L 1.2% 9.9x 4.8%

Actelion Ltd. Switzerland Pharma., Biotech. and Life Sciences 5,217 53 0.4% 15.0x 10.5%

Galenica Ltd. Switzerland Pharma., Biotech. and Life Sciences 3,617 58 0.0% 15.0x 6.5%

Sanofi France Pharma., Biotech. and Life Sciences 90,703 61 0.0% 11.1x 7.9%

GlaxoSmithKline plc United Kingdom Pharma., Biotech. and Life Sciences 68,720 61 R A ‐0.9% 11.7x 7.8%

UCB SA Belgium Pharma., Biotech. and Life Sciences 7,891 66 L 0.6% 24.1x 3.9%

Shire plc Ireland Pharma., Biotech. and Life Sciences 10,126 66 0.0% 13.6x 7.2%

GN Store Nord A/S Denmark Healthcare Equip. and Services 15,435 71 5.8% 18.5x 24.6%

Coloplast A/S Denmark Healthcare Equip. and Services 53,113 74 ‐0.6% 20.2x 4.6%

Novartis AG Switzerland Pharma., Biotech. and Life Sciences 141,810 76 0.6% 11.5x 7.4%

AstraZeneca PLC United Kingdom Pharma., Biotech. and Life Sciences 36,579 76 R 0.7% 8.3x 12.5%

Straumann Holding AG Switzerland Healthcare Equip. and Services 1,755 82 0.7% 18.1x 6.2%

Grifols, S.A. Spain Pharma., Biotech. and Life Sciences 7,441 84 S A ‐1.0% 20.5x 4.2%

Roche Holding AG Switzerland Pharma., Biotech. and Life Sciences 158,138 84 R 0.1% 12.2x 6.7%

BTG plc United Kingdom Pharma., Biotech. and Life Sciences 1,154 89 S R 10.0% 28.5x 4.2%

Nobel Biocare Holding AG Switzerland Healthcare Equip. and Services 1,066 92 ‐10.0% 17.4x 11.6%

Novo Nordisk A/S Denmark Pharma., Biotech. and Life Sciences 527,684 95 A 0.2% 21.4x 4.0%

Merck KGaA Germany Pharma., Biotech. and Life Sciences 21,651 97 R 0.0% 13.2x 6.7%




IINNDDUUSSTTRRIIAALLSS

STOXX Europe 600: Industrials Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

PostNL N.V. Netherlands Transportation 1,307 1 L ‐1.6% 4.4x ‐1.6%

Edenred SA France Commercial and Prof. Services 5,215 2 ‐1.1% 21.6x 2.4%

Hochtief AG Germany Capital Goods 2,967 2 S A ‐0.4% 9.8x ‐12.4%

Vallourec SA France Capital Goods 4,087 2 L A ‐4.2% 11.1x ‐6.5%

Atlas Copco AB Sweden Capital Goods 182,184 2 ‐0.3% 13.2x 4.3%

Konecranes Plc Finland Capital Goods 1,380 2 L A 0.0% 13.0x ‐0.7%

The Weir Group PLC United Kingdom Capital Goods 3,776 2 A 0.0% 11.5x 2.0%

Rotork plc United Kingdom Capital Goods 2,012 2 A 0.0% 19.5x 3.6%

Alstom SA France Capital Goods 8,336 7 R 0.3% 7.7x ‐4.2%

AB Volvo Sweden Capital Goods 187,569 8 ‐3.0% 10.2x ‐0.5%

NCC AB Sweden Capital Goods 13,213 8 L ‐0.9% 8.8x ‐12.4%

Capita PLC United Kingdom Commercial and Prof. Services 4,777 8 A 0.0% 13.1x 2.6%

Ashtead Group plc United Kingdom Capital Goods 1,763 10 0.0% 12.5x ‐0.2%

FLSmidth & Co. A/S Denmark Capital Goods 17,805 10 0.0% 9.7x 2.4%

Wärtsilä Oyj Abp Finland Capital Goods 5,811 10 5.9% 14.8x ‐2.7%

SGL Carbon SE Germany Capital Goods 2,160 13 A 2.1% 22.0x ‐1.6%

Serco Group plc United Kingdom Commercial and Prof. Services 2,814 14 0.0% 13.0x 4.9%

SGS SA Switzerland Commercial and Prof. Services 15,317 14 A ‐0.4% 21.1x 2.2%

Aggreko plc United Kingdom Commercial and Prof. Services 5,559 14 A ‐1.9% 19.2x ‐1.1%

Trelleborg AB Sweden Capital Goods 19,856 16 ‐0.7% 9.9x 4.5%

Societe BIC, S.A. France Commercial and Prof. Services 4,242 16 ‐1.4% 14.8x 3.3%

Skanska AB (publ) Sweden Capital Goods 42,812 16 L 0.3% 12.6x ‐6.9%

Royal Vopak NV Netherlands Transportation 6,889 16 ‐0.7% 18.0x 0.0%

Kone Oyj Finland Capital Goods 14,908 16 0.0% 20.6x 4.2%

IMI plc United Kingdom Capital Goods 2,961 20 R A ‐1.2% 10.5x 4.2%

ABB Ltd. Switzerland Capital Goods 41,671 20 A 0.0% 12.2x 4.5%

Invensys plc United Kingdom Capital Goods 1,827 20 R 0.0% 9.8x 1.7%

MITIE Group PLC United Kingdom Commercial and Prof. Services 1,064 20 0.0% 11.1x 4.9%

Sandvik AB Sweden Capital Goods 115,717 23 ‐1.1% 10.7x 3.6%

Zodiac Aerospace SA France Capital Goods 4,092 23 A ‐0.2% 12.1x 5.2%

YIT Oyj Finland Capital Goods 1,928 23 0.0% 9.9x 1.1%

Balfour Beatty plc United Kingdom Capital Goods 2,134 23 R L A 0.0% 8.3x ‐6.8%

MAN SE Germany Capital Goods 11,388 23 A ‐8.6% 15.4x ‐4.1%

OC Oerlikon Corporation AG Switzerland Capital Goods 3,064 27 ‐2.1% 11.2x 9.6%

Cookson Group plc United Kingdom Capital Goods 1,579 27 R ‐11.6% 8.3x 5.0%

Schindler Holding AG Switzerland Capital Goods 14,066 27 ‐0.5% 18.6x 4.9%

Imtech NV Netherlands Capital Goods 1,841 27 A ‐1.8% 8.6x 6.4%

Intertek Group plc United Kingdom Commercial and Prof. Services 4,559 27 A 0.0% 19.3x 3.0%

Atlantia SpA Italy Transportation 8,035 27 L 0.0% 11.3x 6.3%

Bureau Veritas SA France Commercial and Prof. Services 9,293 27 A 0.3% 19.7x 3.2%

Fiat Industrial SpA Italy Capital Goods 9,683 27 0.0% 8.6x 3.8%

Adecco S.A. Switzerland Commercial and Prof. Services 9,236 34 A 0.4% 12.2x 6.5%

Sulzer, Ltd. Switzerland Capital Goods 4,594 34 L 1.3% 13.4x 5.4%

Securitas AB Sweden Commercial and Prof. Services 18,122 34 ‐4.8% 9.0x 6.7%

Spirax‐Sarco Engineering plc United Kingdom Capital Goods 1,536 34 0.0% 14.8x 3.8%

Actividades de Construcción y Servicios Spain Capital Goods 4,901 34 8.8% 6.1x ‐1.0%

Babcock International Group plc United Kingdom Commercial and Prof. Services 3,447 34 S A 1.4% 13.2x 4.5%

HomeServe plc United Kingdom Commercial and Prof. Services 774 34 S A 0.0% 11.1x 8.8%

Ferrovial, S.A. Spain Capital Goods 7,856 40 NA 37.9x 4.4%

Thales SA France Capital Goods 5,557 40 R ‐0.4% 8.7x 8.0%

Randstad Holding NV Netherlands Commercial and Prof. Services 4,520 40 L ‐2.8% 10.7x 5.4%

Siemens AG Germany Capital Goods 68,411 40 ‐0.5% 11.9x 5.2%

Cobham plc United Kingdom Capital Goods 2,370 40 R 0.0% 9.6x 7.4%

GEA Group AG Germany Capital Goods 4,674 44 0.5% 12.1x 5.1%

Rolls Royce Holdings plc United Kingdom Capital Goods 16,264 44 A 0.0% 13.8x 3.8%




IINNDDUUSSTTRRIIAALLSS ((CCOONNTTIINNUUEEDD))

STOXX Europe 600: Industrials Companies (continued) [in millions]



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

AB SKF Sweden Capital Goods 66,958 44 ‐7.7% 11.3x 4.8%

Travis Perkins plc United Kingdom Capital Goods 2,618 46 S ‐1.0% 10.9x 5.2%

Carillion plc United Kingdom Capital Goods 1,328 46 0.0% 6.9x 2.9%

Bilfinger SE Germany Commercial and Prof. Services 3,317 46 A 0.7% 13.2x 1.9%

Abertis Infraestructuras S.A. Spain Transportation 8,419 46 ‐1.1% 12.7x 4.6%

Meggitt PLC United Kingdom Capital Goods 3,085 49 S 0.0% 10.6x 7.1%

Metso Corp. Finland Capital Goods 4,201 49 ‐1.1% 9.6x 7.1%

Experian plc Ireland Commercial and Prof. Services 10,367 49 A 0.0% 18.5x 7.2%

Hays plc United Kingdom Commercial and Prof. Services 1,138 49 A 0.0% 16.4x 8.0%

Wolseley plc Switzerland Capital Goods 7,567 52 0.0% 14.5x 3.3%

Melrose PLC United Kingdom Capital Goods 3,065 52 S R 0.0% 12.8x 1.5%

Schneider Electric S.A. France Capital Goods 26,991 52 R ‐0.8% 11.5x 7.6%

Legrand France Capital Goods 7,843 52 0.0% 14.0x 6.7%

MTU Aero Engines Holding AG Germany Capital Goods 3,259 52 ‐0.2% 13.0x 4.0%

Michael Page International plc United Kingdom Commercial and Prof. Services 1,151 52 A ‐6.7% 22.6x 5.3%

Georg Fischer AG Switzerland Capital Goods 1,364 57 ‐3.6% 8.8x 6.1%

Aéroports de Paris France Transportation 5,974 57 L A ‐1.1% 15.8x 2.8%

National Express Group plc United Kingdom Transportation 1,066 57 ‐4.0% 8.4x 5.4%

A.P. Møller ‐ Mærsk A/S Denmark Transportation 172,035 57 ‐2.8% 8.8x ‐5.0%

G4S plc United Kingdom Commercial and Prof. Services 3,717 57 0.0% 10.4x 5.5%

Royal Boskalis Westminster NV Netherlands Capital Goods 3,172 57 0.0% 12.0x 4.4%

Rexel SA France Capital Goods 4,117 57 ‐1.9% 9.3x 7.2%

International Consolidated Airlines United Kingdom Transportation 2,963 63 S L 0.0% 13.6x ‐9.2%

Teleperformance France Commercial and Prof. Services 1,297 63 A 0.0% 9.9x 8.4%

DCC plc Ireland Capital Goods 1,847 63 A 0.0% 10.3x 6.6%

Bouygues SA France Capital Goods 6,116 63 ‐2.0% 7.1x 6.0%

Finmeccanica SpA Italy Capital Goods 2,339 66 ‐2.7% 6.2x ‐2.3%

EADS N.V. Netherlands Capital Goods 21,824 66 1.1% 10.3x 1.2%

Deutsche Post AG Germany Transportation 19,374 66 0.0% 11.3x 2.1%

Alfa Laval AB Sweden Capital Goods 51,971 66 A ‐0.4% 14.0x 5.9%

Brenntag AG Germany Capital Goods 5,094 66 ‐0.6% 13.7x 5.0%

Scania AB (publ) Sweden Capital Goods 98,280 70 L ‐4.5% 11.6x 4.7%

Ultra Electronics Holdings plc United Kingdom Capital Goods 1,156 70 A 0.8% 12.4x 8.6%

Rentokil Initial plc United Kingdom Commercial and Prof. Services 1,585 70 R 0.0% 9.6x 4.7%

Safran SA France Capital Goods 12,477 73 ‐1.0% 12.7x 6.9%

TNT Express N.V. Netherlands Transportation 4,299 73 3.7% 22.5x 2.9%

Rheinmetall AG Germany Capital Goods 1,424 74 A ‐0.6% 6.8x 9.3%

Koninklijke Philips Electronics NV Netherlands Capital Goods 18,575 74 A ‐1.6% 11.7x 4.8%

VINCI S.A. France Capital Goods 18,422 74 0.6% 10.0x 11.5%

BAE Systems plc United Kingdom Capital Goods 10,174 74 0.0% 8.1x 9.3%

Kuehne + Nagel International AG Switzerland Transportation 12,957 74 ‐1.6% 18.8x 3.7%

Bunzl plc United Kingdom Capital Goods 3,389 74 ‐1.4% 14.5x 7.4%

Geberit AG Switzerland Capital Goods 7,819 74 0.0% 17.7x 5.2%

Zardoya Otis, S.A. Spain Capital Goods 3,563 74 A ‐2.0% 18.1x 5.6%

Nexans SA France Capital Goods 995 81 R L ‐1.9% 9.4x 3.9%

Compagnie de Saint‐Gobain France Capital Goods 14,363 81 ‐1.6% 9.0x 5.2%

Orkla ASA Norway Capital Goods 46,704 81 ‐2.5% 12.1x 3.5%

Andritz AG Austria Capital Goods 4,784 81 ‐0.4% 16.1x 6.8%

Outotec Oyj Finland Capital Goods 1,768 81 A 0.0% 13.7x 12.4%

Wienerberger AG Austria Capital Goods 675 85 ‐116.7% 181.1x 6.4%

Smiths Group plc United Kingdom Capital Goods 4,229 85 0.0% 10.9x 6.7%

Aalberts Industries NV Netherlands Capital Goods 1,564 85 0.0% 9.8x NM

DSV A/S Denmark Transportation 22,443 85 0.0% 12.2x 5.2%

Stagecoach Group plc United Kingdom Transportation 1,585 88 0.0% 9.9x 5.0%

Fraport AG Germany Transportation 4,132 89 0.4% 15.6x ‐0.3%




IINNDDUUSSTTRRIIAALLSS ((CCOONNTTIINNUUEEDD))

STOXX Europe 600: Industrials Companies (continued) [in millions]



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Firstgroup plc United Kingdom Transportation 917 89 ‐3.2% 5.3x 14.2%

Assa Abloy AB Sweden Capital Goods 80,625 90 ‐0.5% 13.9x 4.7%

Prysmian S.p.A. Italy Capital Goods 3,174 90 S A ‐0.8% 9.6x 6.0%

easyJet plc United Kingdom Transportation 2,394 92 9.4% 9.5x 5.2%

QinetiQ Group Plc United Kingdom Capital Goods 1,265 92 6.7% 13.2x 13.8%

Klöckner & Co Aktiengesellschaft Germany Capital Goods 773 92 S L 1.7% 24.6x 12.0%

Groupe Eurotunnel SA France Transportation 3,215 92 S 0.0% 119.6x 5.4%

Deutsche Lufthansa Aktiengesellschaft Germany Transportation 5,053 95 ‐2.6% 11.1x 3.5%

Vestas Wind Systems A/S Denmark Capital Goods 6,343 95 L A 120.0% 33.8x 12.1%

Eiffage SA France Capital Goods 2,310 97 ‐1.1% 8.2x 10.7%

De La Rue plc United Kingdom Commercial and Prof. Services 1,065 98 R 1.8% 14.7x 5.2%

Air France‐KLM SA France Transportation 1,783 98 L A 1.3% NA ‐11.6%

Ryanair Holdings plc Ireland Transportation 6,512 99 0.0% 12.6x 12.5%




IINNFFOORRMMAATTIIOONN TTEECCHHNNOOLLOOGGYY

STOXX Europe 600: Information Technology Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Ingenico SA France Technology Hardware and Equip. 2,067 3 R A 0.5% 15.4x 3.1%

Ericsson Sweden Technology Hardware and Equip. 191,748 6 R ‐1.5% 11.4x 1.6%

Wirecard AG Germany Software and Services 1,971 6 S A ‐1.4% 20.9x ‐2.1%

ASML Holding NV Netherlands Semis and Semi Equip. 19,909 13 ‐7.0% 12.7x 5.3%

Infineon Technologies AG Germany Semis and Semi Equip. 5,811 16 ‐2.6% 20.2x 0.6%

Aixtron SE Germany Semis and Semi Equip. 1,008 19 ‐50.0% 31.8x ‐11.6%

Electrocomponents plc United Kingdom Technology Hardware and Equip. 929 22 ‐5.6% 11.8x 5.3%

SAP AG Germany Software and Services 63,448 22 A ‐0.6% 15.8x 5.4%

Imagination Technologies Group Plc United Kingdom Semis and Semi Equip. 1,240 22 0.0% 27.0x 1.6%

Wincor Nixdorf AG Germany Technology Hardware and Equip. 1,007 31 ‐0.4% 11.2x 3.9%

Neopost SA France Technology Hardware and Equip. 1,467 34 A 0.2% 8.3x 8.2%

ARM Holdings plc United Kingdom Semis and Semi Equip. 8,199 34 0.0% 34.1x 2.3%

Halma plc United Kingdom Technology Hardware and Equip. 1,568 41 A 0.0% 14.8x 5.3%

Atos S.A. France Software and Services 4,404 44 S R 0.0% 11.5x 6.1%

Alcatel‐Lucent, S.A. France Technology Hardware and Equip. 1,901 47 R L ‐25.0% 40.2x ‐4.6%

Hexagon AB Sweden Technology Hardware and Equip. 51,217 47 S A 2.5% 14.7x 5.1%

Spectris plc United Kingdom Technology Hardware and Equip. 2,005 47 A ‐0.7% 11.0x 6.8%

Cap Gemini S.A. France Software and Services 4,775 56 R ‐0.7% 11.2x 10.5%

United Internet AG Germany Software and Services 3,006 56 0.0% 14.4x 3.8%

Telecity Group plc United Kingdom Software and Services 1,848 63 L 0.0% 24.7x ‐3.3%

Aveva Group plc United Kingdom Software and Services 1,410 66 ‐1.3% 23.0x 3.7%

Gemalto NV Netherlands Technology Hardware and Equip. 5,386 69 0.3% 19.2x 3.8%

Software AG Germany Software and Services 2,702 69 ‐0.5% 13.3x 7.2%

Spirent Communications Plc. United Kingdom Technology Hardware and Equip. 992 69 0.0% 14.6x 7.9%

Logitech International SA Switzerland Technology Hardware and Equip. 1,273 78 0.0% 10.5x 12.8%

Sage Group plc United Kingdom Software and Services 3,751 81 0.0% 14.0x 7.4%

Temenos Group AG Switzerland Software and Services 951 81 S A 0.0% 14.0x 7.8%

STMicroelectronics NV Switzerland Semis and Semi Equip. 4,239 88 R L ‐13.3% 18.2x 0.1%

Dassault Systemes SA France Software and Services 10,145 88 0.0% 21.5x 5.2%

Amadeus IT Holding SA Spain Software and Services 8,263 94 ‐0.8% 14.2x 9.7%

Nokia Corporation Finland Technology Hardware and Equip. 8,016 97 R 17.6% NA ‐7.9%




MMAATTEERRIIAALLSS

STOXX Europe 600: Materials Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Akzo Nobel NV Netherlands Materials 10,112 2 ‐2.8% 11.5x ‐1.1%

Lanxess AG Germany Materials 5,134 2 A ‐1.7% 7.9x ‐2.1%

Fresnillo PLC Mexico Materials 13,741 2 2.0% 22.7x 2.0%

Petropavlovsk PLC United Kingdom Materials 809 7 ‐10.9% 5.1x ‐18.4%

Randgold Resources Limited Channel Islands Materials 7,005 8 0.6% 17.1x 0.6%

K+S Aktiengesellschaft Germany Materials 6,957 8 ‐2.5% 10.5x 4.0%

Victrex plc United Kingdom Materials 1,176 11 1.2% 15.8x 3.5%

Arkema S.A. France Materials 4,526 13 A 2.2% 9.3x 1.9%

Fuchs Petrolub AG Germany Materials 3,533 13 0.0% 17.4x 2.4%

Novozymes A/S Denmark Materials 50,084 13 ‐0.2% 23.9x 2.3%

Rexam plc United Kingdom Materials 4,037 18 0.0% 11.6x 4.3%

Clariant AG Switzerland Materials 3,134 20 S R L ‐1.9% 8.4x ‐0.2%

Kazakhmys PLC United Kingdom Materials 3,956 20 ‐5.4% 7.8x ‐1.5%

The Linde Group Germany Materials 24,095 23 S 0.1% 15.2x 3.4%

Yara International ASA Norway Materials 77,717 23 A 2.1% 8.5x 9.9%

Imerys SA France Materials 3,513 26 0.3% 11.1x 6.3%

Sika AG Switzerland Materials 4,796 26 A ‐1.2% 14.2x 4.1%

Vedanta Resources plc United Kingdom Materials 3,114 26 L ‐13.4% 5.5x ‐0.1%

Syngenta AG Switzerland Materials 31,125 26 R ‐0.5% 15.3x 3.8%

Croda International plc United Kingdom Materials 3,089 26 ‐0.8% 16.1x 4.0%

BHP Billiton plc United Kingdom Materials 108,066 26 ‐7.5% 11.5x 1.9%

Salzgitter AG Germany Materials 1,850 36 ‐16.7% 14.3x ‐10.7%

Johnson Matthey plc United Kingdom Materials 4,544 36 ‐1.3% 12.7x 7.0%

Anglo American plc United Kingdom Materials 26,543 36 R ‐8.9% 9.4x 4.7%

Rio Tinto plc United Kingdom Materials 58,991 36 ‐6.7% 8.0x 0.1%

Eurasian Natural Resources Corp Plc United Kingdom Materials 4,453 36 L A ‐8.1% 7.5x ‐5.1%

Wacker Chemie AG Germany Materials 2,274 36 L ‐5.5% 14.3x ‐14.6%

Umicore SA Belgium Materials 4,475 46 0.0% 14.2x 7.3%

Glencore International plc Switzerland Materials 24,866 46 S 0.0% 7.9x ‐1.5%

Kemira Group Finland Materials 1,539 49 ‐1.2% 10.5x 4.6%

Filtrona plc United Kingdom Materials 1,177 49 0.0% 16.0x 4.1%

Xstrata plc Switzerland Materials 29,326 52 0.0% 9.9x ‐3.4%

Solvay SA Belgium Materials 7,637 54 ‐2.4% 10.7x 4.3%

BASF SE Germany Materials 59,625 54 ‐0.9% 10.9x 5.7%

Antofagasta plc United Kingdom Materials 12,905 54 1.5% 13.8x 8.5%

ThyssenKrupp AG Germany Materials 9,541 59 S L ‐9.4% 22.1x ‐3.4%

Royal DSM N.V. Netherlands Materials 6,584 59 ‐2.0% 10.7x 7.3%

Aurubis AG Germany Materials 2,143 59 S ‐2.9% 10.1x 12.1%

Boliden AB Sweden Materials 31,864 64 0.8% 8.8x 5.0%

Symrise AG Germany Materials 3,247 64 ‐0.7% 16.4x 5.3%

Lafarge S.A. France Materials 12,865 67 R ‐0.7% 12.4x 4.3%

EVRAZ plc United Kingdom Materials 3,315 67 R 50.0% 10.1x 10.4%

L'Air Liquide SA France Materials 28,710 70 ‐0.2% 16.8x 2.6%

Lonmin plc South Africa Materials 1,029 72 L ‐25.0% 68.3x 1.0%

ArcelorMittal Luxembourg Materials 19,208 74 ‐20.8% 10.2x 5.2%

CRH plc Ireland Materials 10,016 74 ‐1.2% 14.8x 5.3%

Givaudan AG Switzerland Materials 8,509 77 1.6% 16.2x 5.4%

UPM‐Kymmene Oyj Finland Materials 4,583 79 L ‐2.7% 10.3x 8.3%

Chr. Hansen Holding A/S Denmark Materials 22,557 79 S ‐0.8% 21.1x 4.1%

DS Smith Plc United Kingdom Materials 1,954 82 R 6.7% 10.4x 2.6%

Holcim Ltd. Switzerland Materials 20,820 82 0.3% 14.7x 4.4%

Voestalpine AG Austria Materials 4,128 82 ‐2.2% 7.3x 10.6%

Holmen AB Sweden Materials 15,885 87 9.3% 13.1x 2.8%

Nyrstar NV Switzerland Materials 779 87 S A 9.1% 7.4x 10.5%




MMAATTEERRIIAALLSS ((CCOONNTTIINNUUEEDD))

STOXX Europe 600: Materials Companies (continued) [in millions]



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Stora Enso Oyj Finland Materials 3,865 90 L ‐2.7% 9.6x 6.3%

Norsk Hydro ASA Norway Materials 54,802 90 S ‐16.2% 18.8x 6.2%

SSAB AB Sweden Materials 15,360 90 ‐37.7% 10.1x 8.7%

Acerinox, S.A. Spain Materials 2,029 95 L ‐7.4% 15.8x 6.7%

HeidelbergCement AG Germany Materials 7,688 95 0.0% 10.6x 6.8%

Mondi plc United Kingdom Materials 3,228 95 3.2% 10.5x 9.7%




TTEELLEECCOOMMMMUUNNIICCAATTIIOONN SSEERRVVIICCEESS

STOXX Europe 600: Telecom. Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

BT Group plc United Kingdom Telecommunication Services 17,081 4 0.0% 8.9x 4.4%

Tele2 AB (publ) Sweden Telecommunication Services 51,025 9 ‐4.5% 10.0x 8.4%

Elisa Oyj Finland Telecommunication Services 2,608 9 2.3% 13.1x 5.8%

Swisscom AG Switzerland Telecommunication Services 19,949 9 ‐0.2% 11.5x 7.4%

Telecom Italia S.p.A. Italy Telecommunication Services 13,907 22 0.0% 6.0x 12.3%

freenet AG Germany Telecommunication Services 1,641 26 4.0% 7.5x 11.8%

Belgacom SA Belgium Telecommunication Services 6,901 26 ‐0.9% 10.6x 8.5%

Vivendi France Telecommunication Services 20,845 35 A ‐0.5% 8.0x 7.3%

Telefónica, S.A. Spain Telecommunication Services 47,039 39 ‐1.6% 8.3x 7.6%

TDC A/S Denmark Telecommunication Services 32,874 43 R 1.8% 11.0x 9.6%

Telenor ASA Norway Telecommunication Services 165,500 48 R ‐6.0% 11.2x 7.0%

Vodafone Group Public Limited Company United Kingdom Telecommunication Services 87,072 52 0.0% 10.4x 8.0%

Iliad SA France Telecommunication Services 6,751 52 A ‐0.7% 31.4x ‐2.6%

Telekom Austria AG Austria Telecommunication Services 2,478 61 R ‐6.9% 19.8x 9.9%

TeliaSonera Aktiebolag (publ) Sweden Telecommunication Services 192,602 65 ‐1.7% 10.7x 8.9%

Koninklijke KPN N.V. Netherlands Telecommunication Services 8,226 65 ‐1.1% 6.7x 11.4%

France Télécom SA France Telecommunication Services 25,129 74 ‐1.6% 7.7x 12.2%

Inmarsat Plc United Kingdom Telecommunication Services 2,545 78 ‐3.3% 17.8x 4.3%

Cable & Wireless Communications Plc United Kingdom Telecommunication Services 931 83 R 0.0% 9.3x 14.5%

Deutsche Telekom AG Germany Telecommunication Services 38,472 87 ‐7.3% 14.2x 13.5%

Telenet Group Holding NV Belgium Telecommunication Services 4,043 87 ‐9.7% 29.0x 6.9%

Portugal Telecom, SGPS S.A. Portugal Telecommunication Services 3,334 87 A 0.0% 10.6x 5.6%




UUTTIILLIITTIIEESS

STOXX Europe 600: Utilities Companies (in millions)



Market Cap.

(Local

Currency)

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

TERNA‐Rete Elettrica Nazionale Italy Utilities 5,861 4 L 0.0% 13.4x ‐5.2%

RWE AG Germany Utilities 21,534 7 S 0.0% 8.7x ‐4.7%

Pennon Group Plc United Kingdom Utilities 2,655 11 A 0.0% 14.7x 0.2%

Electricite de France SA France Utilities 31,669 15 R A ‐1.0% 8.1x ‐3.4%

Enel Green Power S.p.A. Italy Utilities 6,795 15 0.0% 12.5x ‐1.8%

Fortum Oyj Finland Utilities 12,792 22 ‐2.2% 10.5x 1.5%

EDP‐Energias de Portugal, S.A. Portugal Utilities 7,704 26 A 0.0% 7.8x 3.1%

Centrica plc United Kingdom Utilities 16,912 26 R A 0.0% 12.0x 4.6%

Veolia Environnement S.A. France Utilities 4,108 33 ‐3.3% 12.5x 5.5%

United Utilities Group PLC United Kingdom Utilities 4,929 37 0.0% 17.0x 2.3%

Drax Group plc. United Kingdom Utilities 1,902 37 ‐3.9% 18.4x 8.6%

Enagas SA Spain Utilities 3,696 44 0.0% 9.3x 0.7%

E.ON AG Germany Utilities 34,796 48 1.4% 10.3x 3.6%

Snam S.p.A. Italy Utilities 11,552 52 0.0% 12.4x 2.8%

Gas Natural SDG SA Spain Utilities 11,908 56 ‐0.7% 9.0x 3.7%

SSE plc United Kingdom Utilities 13,753 56 L ‐0.9% 12.0x 2.0%

VERBUND AG Austria Utilities 6,160 63 S A ‐0.9% 14.5x 3.4%

Iberdrola SA Spain Utilities 24,284 67 2.2% 9.4x 6.3%

National Grid plc United Kingdom Utilities 25,667 70 S 0.0% 12.9x 3.8%

Suez Environnement Company SA France Utilities 4,209 70 A ‐1.6% 11.7x 6.5%

GDF Suez S.A. France Utilities 41,366 78 R ‐0.6% 10.7x 6.4%

Red Eléctrica Corporación S A. Spain Utilities 5,004 81 ‐2.2% 9.8x 3.8%

Enel SpA Italy Utilities 27,702 85 0.0% 8.1x 6.5%

Endesa SA Spain Utilities 17,395 85 1.1% 8.9x 10.9%

Acciona SA Spain Utilities 2,702 93 A ‐1.1% 17.3x 4.9%

Severn Trent plc United Kingdom Utilities 3,963 96 R ‐2.0% 16.9x 5.4%




Appendix I: Detailed Earnings Quality Metrics

By Sector (amounts in millions)

AAPPPPEENNDDIIXX II:: DDEETTAAIILLEEDD EEAARRNNIINNGGSS QQUUAALLIITTYY MMEETTRRIICCSS BBYY SSEECCTTOORR


(1) S = share count increaser; R = recurring special charges; L = increased leverage; A

= high acquisitions.

Note: Local currency presentation based on primary listing trading currency – United Kingdom (G

BP), Sweden (SEK), Denmark (D

KK), Switzerland (CHF), N

orw

ay (NOK), All others (Euro). 2013E P/E based on consensus estim

ates. Market data as of 10/22/2012.

Source: W

olfe Trahan Accounting & Tax Policy Research; Company filings; Standard & Poor's; FactSet.

CONSU

MER

DISCRETIONARY

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION

* 1st decile = lowest earnings quality

Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

The Berkeley Group Holdings plc

United Kingdom

Consumer Durables and Apparel

1,974

31.3%

30.3%

25.2%

5.3%

19.7%

11

11

75

1.6%

10.2x

‐8.1%

Swatch Group AG

Switzerland


19,675

11.5%

15.9%

23.1%

2.5%

22.3%

11

12

65

‐0.3%

12.9x

1.0%

PUMA SE

Germ

any


3,297

4.5%

5.8%

9.7%

2.7%

NM

22

31

57

‐1.4%

14.5x

0.4%

Daim

ler AG

Germ

any

Automobiles and Components

41,156

6.3%

9.5%

12.0%

2.4%

15.2%

11

22

88

L

‐1.4%

6.8x

‐5.3%

Pirelli &

C. SpA

Italy


4,054

4.6%

8.5%

19.9%

0.5%

22.3%

21

14

68

‐1.1%

7.5x

‐4.4%

Bellway plc

United Kingdom


1,222

5.0%

5.6%

5.5%

0.2%

32.9%

12

45

311

2.7%

12.7x

1.5%

Accor S A

France

Consumer Services

5,545

‐1.2%

0.3%

17.2%

23.5%

33.7%

46

11

311

R

‐1.5%

18.1x

‐7.8%

Volksw

agen AG

Germ

any


66,023

6.4%

7.6%

15.5%

0.0%

25.2%

11

26

511

3.0%

6.1x

‐0.7%

Christian Dior SA

France


19,462

‐0.5%

3.4%

7.8%

2.6%

22.5%

33

32

514

3.0%

11.1x

5.3%

Hugo

Boss AG

Germ

any


4,981

0.8%

4.0%

5.7%

0.6%

28.6%

22

44

414

‐0.9%

14.3x

4.1%

Pearson plc

United Kingdom

Media

9,724

3.1%

0.9%

14.0%

3.1%

22.3%

25

21

614

‐1.2%

13.6x

6.4%

JM AB

Sweden


9,643

2.8%

2.5%

4.2%

1.1%

NM

23

53

518

‐0.6%

9.3x

8.4%

PPR SA.

France

Retailing

16,869

‐1.2%

3.0%

3.3%

15.4%

28.8%

43

61

418

‐1.6%

12.5x

4.6%

Compagnie Financiere Richemont S A

Switzerland


32,829

1.0%

5.7%

7.0%

‐0.1%

27.5%

22

38

420

A0.6%

13.5x

4.6%

Nokian Tyres Oyj

Finland


3,859

9.3%

0.0%

21.9%

‐0.1%

34.5%

17

18

220

‐6.3%

9.5x

0.3%

UBM plc

Ireland

Media

1,642

‐3.5%

1.2%

3.9%

1.3%

44.4%

74

52

120

A‐1.7%

10.9x

6.9%

WPP plc

Ireland

Media

10,587

0.0%

3.1%

6.0%

0.0%

30.7%

33

47

324

0.0%

10.7x

7.0%

Continental AG

Germ

any


15,112

‐2.7%

2.5%

3.5%

1.3%

28.0%

63

62

425

‐1.0%

7.2x

4.7%

Havas

France

Media

1,519

‐2.7%

0.5%

11.3%

0.0%

89.7%

66

26

125

0.0%

10.4x

0.1%

Tod's SpA

Italy


2,753

2.2%

4.4%

6.8%

0.2%

8.8%

22

35

925

‐0.2%

16.4x

4.0%

Amer Sports Corp.

Finland


1,168

0.6%

1.9%

3.8%

0.0%

29.5%

24

57

429

L

‐1.4%

11.2x

2.6%

TF1 Group

France

Media

1,343

0.5%

1.2%

4.3%

‐0.9%

52.4%

34

59

129

‐2.7%

8.7x

2.6%

Bayerische Motorenwerke AG BMW

Germ

any


39,196

‐0.4%

‐2.3%

6.1%

0.6%

35.9%

310

44

231

‐0.4%

7.9x

1.4%

LVMH Moet Hennessy Louis Vuitton

France


62,429

0.2%

3.3%

7.6%

‐0.1%

22.3%

33

38

631

R

‐1.4%

15.9x

3.2%

Burberry Group plc

United Kingdom


5,132

‐4.4%

1.0%

5.1%

0.2%

38.4%

85

45

233

A0.0%

15.7x

5.2%

Compass Group PLC

United Kingdom

Consumer Services

12,658

‐1.5%

0.1%

3.3%

0.0%

35.3%

47

66

235

A0.0%

15.1x

5.8%

bwin.party digital entertainment plc

Gibraltar

Consumer Services

983

‐58.0%

6.2%

‐51.6%

2.6%

93.9%

10

210

21

35

S

0.0%

10.5x

5.8%

GKN plc

United Kingdom


3,424

‐1.6%

2.6%

10.3%

0.0%

14.5%

43

37

835

‐7.7%

7.2x

5.8%

Husqvarna AB

Sweden


19,464

‐1.6%

1.6%

1.3%

0.5%

16.6%

44

74

738

‐1.9%

10.9x

5.0%

Michelin SCA

France


11,259

‐1.2%

2.5%

6.8%

‐0.4%

21.4%

44

39

638

S

1.3%

7.0x

2.4%

PSA

Peugeot Citroen

France


2,045

‐2.6%

2.0%

4.0%

0.5%

17.4%

64

54

738

S R L

‐13.4%

NA

‐4.4%

H & M

Hennes & Mauritz AB (publ)

Sweden

Retailing

386,294

‐1.9%

0.1%

3.3%

0.0%

32.7%

47

66

338

‐3.5%

20.3x

3.6%

Sodexo

S.A.

France

Consumer Services

9,162

‐2.1%

‐0.3%

2.9%

0.0%

47.5%

58

67

143

‐0.3%

17.2x

6.8%

Whitbread PLC

United Kingdom

Consumer Services

4,127

‐2.5%

4.8%

11.4%

‐0.2%

11.8%

62

28

943

A0.7%

14.5x

0.8%

Aegis Group plc

United Kingdom

Media

2,690

‐2.1%

6.4%

‐28.3%

‐50.7%

80.6%

51

10

10

143

S A

0.0%

17.5x

3.1%

Herm

ès International S.C.A.

France


22,084

‐0.6%

3.7%

5.5%

‐1.6%

18.7%

42

410

743

A0.8%

29.9x

2.3%

Intercontinental H

otels Group plc

United Kingdom

Consumer Services

4,314

0.3%

0.9%

2.7%

1.2%

3.7%

35

63

10

43

‐5.6%

16.8x

7.2%

Greene King plc

United Kingdom

Consumer Services

1,294

‐4.2%

0.9%

10.4%

0.2%

5.8%

75

25

949

R

1.8%

10.1x

3.4%

Adidas AG

Germ

any


13,945

‐1.9%

‐0.7%

1.2%

0.4%

34.3%

59

74

349

0.3%

14.9x

5.4%

Dufry AG

Switzerland

Retailing

3,533

‐7.3%

‐0.1%

22.5%

0.0%

30.2%

98

16

449

L

‐2.9%

10.6x

7.0%

Eutelsat Communications S.A.

France

Media

5,541

‐27.6%

3.1%

12.0%

0.1%

16.9%

10

32

67

49

‐0.6%

16.1x

3.5%

Inchcape plc

United Kingdom

Retailing

1,778

‐0.5%

0.7%

1.0%

0.2%

13.8%

35

75

849

0.0%

8.7x

6.1%

LEONI AG

Germ

any


847

‐2.2%

0.2%

1.0%

0.3%

23.8%

56

75

549

S

‐3.1%

5.5x

10.7%

Renault Société Anonym

France


9,995

‐2.8%

‐0.1%

3.6%

0.8%

19.3%

67

53

749

‐1.6%

3.8x

3.0%

Valeo SA

France


2,607

‐4.9%

‐0.4%

4.3%

1.3%

28.9%

88

53

449

‐0.2%

5.8x

16.3%

TUI Travel PLC

United Kingdom

Consumer Services

2,835

0.5%

0.0%

0.5%

0.0%

NM

37

86

558

0.0%

9.4x

1.1%

Industria de Diseno Textil SA

Spain

Retailing

60,837

‐5.5%

‐0.8%

3.5%

2.8%

23.9%

89

61

558

1.8%

22.8x

3.1%

Fiat S.p.A.

Italy


5,192

‐6.3%

‐0.6%

3.1%

0.6%

34.0%

99

63

361

1.8%

4.8x

‐2.6%

Inform

a plc

Switzerland

Media

2,418

‐17.4%

0.4%

‐9.2%

1.4%

40.9%

10

610

22

61

R

0.0%

9.7x

8.0%

SEB SA

France


2,566

‐2.2%

1.1%

2.2%

‐0.1%

22.6%

55

78

561

A‐1.0%

10.3x

7.1%

SES, S.A.

Luxembourg

Media

8,471

‐30.8%

1.3%

11.1%

0.0%

14.7%

10

42

68

61

0.0%

13.9x

4.3%

OPAP SA

Greece

Consumer Services

1,563

‐5.3%

0.2%

57.8%

‐11.7%

21.1%

86

110

665

1.4%

9.3x

36.9%

Home Retail Group plc

United Kingdom

Retailing

858

‐2.3%

0.0%

0.5%

0.1%

18.8%

57

85

767

0.0%

15.3x

16.5%

Daily Mail and General Trust plc

United Kingdom

Media

1,843

‐ 4.2%

1.0%

0.3%

0.8%

16.2%

85

83

867

R

0.0%

9.2x

10.1%

Barratt Developments plc

United Kingdom


1,868

‐3.5%

‐0.5%

‐3.9%

0.1%

37.5%

79

95

267

0.0%

14.4x

9.9%

Publicis Groupe SA

France

Media

8,265

‐3.8%

‐1.5%

9.0%

0.0%

22.8%

710

37

567

‐0.3%

12.2x

9.1%

Taylor Wim

pey plc

United Kingdom


1,924

8.0%

6.4%

‐21.9%

‐56.2%

‐28.9%

11

10

10

10

67

0.0%

12.3x

2.1%

Debenhams plc

United Kingdom

Retailing

1,409

‐3.0%

0.0%

2.2%

0.4%

14.7%

77

74

873

0.0%

10.7x

6.1%

Kingfisher plc

United Kingdom

Retailing

6,631

‐2.2%

0.0%

0.7%

0.3%

10.0%

57

84

973

‐4.2%

11.0x

7.2%

British

Sky Broadcasting Group plc

United Kingdom

Media

11,839

‐8.1%

‐1.2%

‐1.7%

3.6%

24.1%

910

91

575

0.0%

13.5x

10.2%







orw



Source: W


CONSU

MER

DISCRETIONARY

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Modern Tim

es Group Mtg AB

Sweden

Media

13,913

‐2.2%

‐0.5%

‐1.2%

‐0.3%

44.0%

59

99

275

‐7.5%

10.1x

14.6%

Paddy Power plc

Ireland

Consumer Services

2,770

‐13.1%

‐4.6%

‐3.2%

1.6%

34.1%

10

10

92

375

A0.0%

20.9x

6.2%

Rightm

ove

plc

United Kingdom

Media

1,611

‐7.1%

‐0.3%

‐10.3%

0.0%

77.2%

98

10

61

75

A‐1.7%

23.5x

3.8%

Next Plc

United Kingdom

Retailing

5,686

‐2.7%

1.0%

0.2%

‐0.1%

19.2%

65

88

775

0.4%

12.0x

7.6%

Axel Springer AG

Germ

any

Media

3,184

‐3.6%

0.2%

4.6%

‐0.9%

12.0%

76

49

981

S A

‐1.3%

10.7x

9.7%

Kabel D

eutschland Holding AG

Germ

any

Media

4,917

‐29.8%

‐0.8%

‐5.1%

0.8%

27.8%

10

910

34

82

0.0%

17.8x

6.9%

Ladbrokes PLC

United Kingdom

Consumer Services

1,638

‐3.4%

‐0.7%

5.4%

‐0.3%

20.1%

79

49

782

0.0%

10.6x

9.5%

Wolters Kluwer NV

Netherlands

Media

4,415

‐7.7%

‐0.1%

0.2%

‐4.5%

108.3%

98

810

182

‐1.3%

9.0x

6.9%

Carnival plc

United Kingdom

Consumer Services

17,839

‐10.2%

‐0.2%

1.6%

1.0%

7.6%

98

73

982

0.5%

16.0x

2.8%

Electrolux AB

Sweden


48,390

‐5.6%

‐3.3%

4.0%

‐0.2%

22.1%

810

58

687

‐0.5%

10.6x

9.2%

Schibsted ASA

Norw

ay

Media

23,157

‐2.9%

‐0.2%

0.2%

‐1.6%

NM

68

810

587

4.3%

19.1x

5.1%

ITV plc

United Kingdom

Media

3,476

‐3.0%

‐0.3%

0.1%

‐10.9%

30.6%

78

910

489

0.0%

10.5x

9.9%

Luxottica Group SpA

Italy


13,248

‐5.9%

0.4%

1.7%

‐0.2%

15.8%

96

78

889

A0.0%

19.4x

5.2%

ProSiebenSat.1 Media AG

Germ

any

Media

4,436

‐35.8%

0.5%

‐36.7%

‐31.1%

43.9%

10

610

10

289

0.5%

10.8x

19.5%

William Hill plc

United Kingdom

Consumer Services

2,448

‐5.6%

‐4.4%

‐0.8%

0.0%

20.5%

810

96

693

0.0%

12.6x

9.2%

Lagardere SCA

France

Media

2,663

‐5.2%

1.1%

‐1.4%

‐1.8%

32.8%

84

910

393

R

‐0.5%

9.5x

3.3%

Mediaset SpA

Italy

Media

1,674

‐37.3%

‐4.2%

‐6.4%

0.0%

26.2%

10

10

10

65

95

L

‐16.7%

18.2x

35.8%

Persim

mon plc

United Kingdom


2,403

‐2.4%

‐1.7%

‐2.3%

‐0.3%

12.0%

610

99

996

0.0%

13.1x

7.9%

Marks & Spencer Group plc

United Kingdom

Retailing

6,233

‐6.6%

‐0.9%

0.6%

‐0.9%

11.8%

99

89

998

A‐2.9%

10.5x

9.2%

JCDecaux SA

France

Media

3,890

‐11.6%

‐2.6%

‐4.5%

‐0.2%

16.4%

10

10

10

98

99

‐1.0%

15.9x

8.4%







orw



Source: W


CONSU

MER

STA

PLES

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Diageo plc

United Kingdom

Food, Beverage

and Tobacco

44,276

0.4%

4.9%

17.3%

1.4%

16.3%

21

12

52

0.0%

17.4x

3.8%

Barry Callebaut AG

Switzerland

Food, Beverage

and Tobacco

4,605

2.3%

4.4%

3.7%

1.5%

19.6%

12

42

34

‐0.1%

16.1x

0.5%

L'Oreal SA

France

Household and Personal Products

59,725

‐1.8%

1.6%

5.2%

0.5%

31.7%

43

23

16

‐0.2%

19.5x

3.5%

D.E Master Blenders 1753 N.V.

Netherlands

Food, Beverage

and Tobacco

5,830

1.3%

7.5%

‐15.0%

6.4%

25.8%

11

10

11

8R

‐2.1%

20.1x

0.3%

Tate & Lyle plc

United Kingdom

Food, Beverage

and Tobacco

3,345

0.9%

6.5%

5.1%

3.2%

11.1%

21

21

910

0.0%

11.4x

3.6%

Viscofan SA

Spain

Food, Beverage

and Tobacco

1,627

‐1.6%

4.2%

7.4%

0.2%

19.9%

42

24

310

A0.0%

14.3x

2.9%

Reckitt Benckiser Group plc

United Kingdom


26,484

0.1%

2.1%

1.3%

0.4%

25.4%

33

63

213

A‐0.4%

14.7x

5.7%

Pernod‐Ricard SA

France

Food, Beverage

and Tobacco

22,499

0.9%

0.7%

4.0%

0.6%

13.2%

24

32

715

‐0.6%

17.0x

3.7%

SABMiller plc

United Kingdom

Food, Beverage

and Tobacco

42,071

3.8%

‐1.5%

72.5%

2.0%

15.8%

110

11

617

R L A

‐0.4%

16.0x

3.5%

Swedish Match AB

Sweden

Food, Beverage

and Tobacco

53,680

0.9%

2.0%

2.9%

2.1%

10.6%

23

41

917

‐1.0%

16.3x

4.4%

Etablissements Delhaize Frères et Cie

Belgium

Food and Staples Retailing

2,919

‐2.1%

0.4%

4.2%

0.6%

16.7%

55

32

521

A‐1.0%

6.6x

6.2%

Suedzucker AG

Germ

any

Food, Beverage

and Tobacco

5,542

4.0%

7.2%

7.5%

‐0.5%

11.2%

11

19

923

12.1%

11.6x

5.5%

Nestlé S.A.

Switzerland

Food, Beverage

and Tobacco

189,058

‐2.4%

1.1%

7.7%

‐0.3%

20.7%

64

18

223

0.3%

17.0x

3.8%

PZ Cussons plc

United Kingdom


1,410

1.0%

2.4%

8.6%

0.0%

9.0%

22

17

10

27

0.0%

17.1x

1.3%

British

American Tobacco plc

United Kingdom

Food, Beverage

and Tobacco

61,872

‐2.9%

3.1%

2.7%

0.5%

18.5%

82

53

427

R

0.0%

14.3x

5.6%

Chocoladefabriken Lindt & Spruengli AG

Switzerland

Food, Beverage

and Tobacco

7,197

‐0.6%

3.1%

4.4%

‐0.4%

16.0%

32

29

627

0.0%

25.2x

2.3%

Davide Campari ‐ Milano SpA

Italy

Food, Beverage

and Tobacco

3,722

‐1.1%

6.1%

2.2%

0.4%

11.4%

41

53

927

0.0%

18.0x

3.9%

Kesko Oyj

Finland


2,248

‐0.5%

0.6%

3.8%

‐0.3%

26.6%

35

49

127

0.0%

13.0x

‐6.6%

Booker Group PLC

United Kingdom


1,744

‐0.2%

0.0%

0.4%

0.0%

33.5%

37

76

137

0.0%

18.8x

4.1%

Etn Fr Colruyt NV

Belgium


5,299

‐2.3%

0.2%

1.3%

0.1%

20.0%

65

65

338

A0.0%

13.8x

4.9%

Nutreco

N.V.

Netherlands

Food, Beverage

and Tobacco

2,035

‐1.6%

‐0.4%

1.0%

0.1%

20.5%

48

65

238

‐1.6%

10.7x

5.0%

Imperial Tobacco Group plc

United Kingdom

Food, Beverage

and Tobacco

22,695

‐2.0%

1.1%

‐1.0%

1.3%

15.6%

54

92

642

‐0.5%

10.8x

7.3%

Associated British

Foods plc

United Kingdom

Food, Beverage

and Tobacco

10,817

‐2.2%

1.7%

4.3%

‐1.0%

16.0%

63

310

544

0.0%

14.6x

1.5%

Beiersdorf AG

Germ

any


12,929

‐0.4%

0.2%

‐0.1%

0.3%

15.8%

36

84

644

0.0%

25.3x

2.8%

Kerry Group plc

Ireland

Food, Beverage

and Tobacco

7,079

‐2.0%

0.4%

7.4%

‐0.1%

11.8%

55

28

848

0.0%

15.3x

3.7%

Oriflame Cosm

etics SA

Luxembourg


11,915

‐4.3%

‐3.8%

0.0%

3.4%

27.8%

910

71

148

A‐0.9%

10.4x

7.0%

Distribuidora Internacional de

Spain


3,054

‐2.7%

0.0%

0.5%

0.0%

19.5%

77

75

352

0.0%

15.3x

2.9%

ARYZTA

AG

Switzerland

Food, Beverage

and Tobacco

4,063

‐3.4%

1.6%

3.7%

0.0%

8.6%

83

46

10

56

S

‐1.8%

10.6x

5.3%

J. Sainsbury plc

United Kingdom


6,735

‐2.0%

‐0.2%

2.1%

‐0.1%

13.2%

57

57

756

0.0%

11.4x

‐0.8%

Danone

France

Food, Beverage

and Tobacco

28,180

‐4.0%

‐0.8%

0.4%

0.2%

23.9%

99

74

256

‐1.6%

14.3x

5.2%

Tesco PLC

United Kingdom


25,334

‐1.2%

0.0%

1.5%

‐0.3%

11.7%

46

58

856

‐5.9%

8.9x

2.9%

Heineken NV

Netherlands

Food, Beverage

and Tobacco

27,501

‐4.9%

0.2%

4.1%

0.0%

11.7%

96

36

863

0.0%

15.0x

5.4%

Koninklijke

Ahold N.V.

Netherlands


10,018

‐2.8%

0.1%

0.7%

0.0%

12.5%

76

65

863

A0.0%

9.2x

11.2%

Rémy Cointreau SA

France

Food, Beverage

and Tobacco

3,774

1.4%

0.7%

‐4.0%

‐49.4%

11.7%

14

10

10

867

‐3.4%

20.3x

2.9%

Anheuser‐Busch InBev SA/NV

Belgium

Food, Beverage

and Tobacco

105,434

‐7.3%

‐0.1%

2.8%

0.0%

19.2%

10

75

74

67

0.0%

17.2x

6.2%

Casino Guichard‐Perrachon S.A.

France


7,624

‐2.6%

0.4%

‐0.2%

‐0.8%

17.2%

75

89

467

R

‐7.2%

11.3x

6.2%

Ebro Foods SA

Spain

Food, Beverage

and Tobacco

2,119

‐ 1.8%

0.0%

‐0.3%

0.2%

9.6%

56

84

10

67

‐1.0%

13.1x

5.2%

Jeronim

o Martins SG

PS SA

Portugal


8,798

‐4.0%

‐1.7%

0.1%

0.3%

17.0%

810

73

567

0.0%

18.5x

4.0%

Henkel AG & Co. KGaA

Germ

any


23,880

‐3.4%

‐0.7%

‐1.1%

0.1%

17.9%

89

94

477

R A

‐0.3%

16.0x

6.3%

Marine Harvest ASA

Norw

ay

Food, Beverage

and Tobacco

17,252

‐7.6%

‐0.1%

‐3.0%

0.0%

20.0%

10

710

62

79

L

‐22.2%

11.2x

4.6%

Unilever plc

United Kingdom

Food, Beverage

and Tobacco

65,123

‐2.7%

‐1.1%

‐0.5%

‐2.1%

19.3%

79

810

381

‐0.8%

16.9x

5.2%

Wm. M

orrison Superm

arkets plc

United Kingdom


6,448

‐2.2%

‐0.3%

3.0%

‐0.3%

9.6%

68

49

10

81

‐3.6%

9.1x

4.3%

Carrefour S A

France


12,890

‐2.4%

‐0.9%

‐1.3%

‐3.4%

17.0%

69

910

587

L

‐1.5%

11.4x

2.9%

METRO AG

Germ

any


7,180

‐2.8%

‐0.7%

‐1.0%

0.0%

13.1%

88

97

787

‐12.5%

7.5x

9.9%

C&C Group plc

Ireland

Food, Beverage

and Tobacco

1,233

‐5.6%

‐1.5%

0.5%

0.0%

10.4%

910

65

10

90

R

0.0%

12.3x

9.2%

Carlsberg A/S

Denmark

Food, Beverage

and Tobacco

78,935

‐5.7%

‐0.4%

‐1.0%

‐0.1%

14.4%

10

89

77

92

0.1%

12.0x

4.7%

Britvic Plc

United Kingdom

Food, Beverage

and Tobacco

861

‐7.9%

‐1.1%

‐4.1%

‐0.1%

16.0%

10

910

86

94

S R

0.0%

11.4x

8.9%

Coca

‐Cola Hellenic Bottling Company S.A.Greece

Food, Beverage

and Tobacco

6,231

‐8.6%

‐1.3%

‐3.2%

‐0.2%

12.5%

10

10

10

87

96

‐5.7%

18.5x

6.1%

Svenska Cellulosa

Aktiebolaget SCA

Sweden


91,129

‐10.7%

‐0.4%

‐19.7%

‐1.7%

8.4%

10

810

10

10

98

R

‐19.0%

13.5x

5.6%







orw



Source: W


ENERGY

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Petrofac Limited

United Kingdom

Energy

5,458

14.0%

14.3%

21.3%

0.0%

63.2%

11

26

19

A0.0%

12.5x

‐8.5%

Aker Solutions ASA

Norw

ay

Energy

30,703

‐0.3%

2.8%

8.1%

0.0%

47.0%

35

55

111

L

1.1%

11.1x

‐4.6%

Fugro NV

Netherlands

Energy

4,251

0.4%

12.9%

14.8%

0.0%

15.1%

21

36

814

A‐0.3%

12.2x

1.7%

Lundin Petroleum AB

Sweden

Energy

48,941

‐38.6%

15.4%

12.4%

3.5%

26.3%

10

14

24

17

‐0.4%

35.0x

0.2%

Subsea 7 SA

United Kingdom

Energy

41,816

3.6%

3.7%

6.1%

2.3%

14.2%

13

62

917

S

2.6%

12.5x

1.1%

Technip

France

Energy

10,107

0.4%

3.7%

14.7%

‐0.1%

20.3%

23

37

617

0.0%

14.2x

1.2%

John W

ood Group plc

United Kingdom

Energy

3,104

1.3%

3.0%

2.7%

0.0%

40.2%

14

96

226

‐2.3%

13.2x

1.6%

TGS Nopec Geophysical Co. ASA

Norw

ay

Energy

20,039

‐44.2%

4.5%

24.8%

0.0%

62.1%

10

32

61

26

5.7%

12.1x

16.0%

BG Group plc

United Kingdom

Energy

45,571

‐20.6%

‐1.9%

21.9%

11.8%

25.9%

710

21

431

A3.4%

13.2x

‐1.8%

CGG Veritas

France

Energy

3,775

‐18.7%

2.8%

4.9%

0.3%

29.3%

74

73

331

‐5.3%

12.1x

6.2%

Premier Oil plc

United Kingdom

Energy

1,937

‐25.9%

9.7%

30.0%

‐8.2%

26.9%

82

110

331

S A

7.6%

6.4x

‐2.6%

Saipem SpA

Italy

Energy

15,717

0.0%

5.8%

9.0%

0.2%

13.1%

32

54

10

31

‐0.9%

13.4x

0.2%

Repsol S.A.

Spain

Energy

18,076

‐4.5%

2.0%

4.6%

9.2%

20.1%

65

81

643

‐0.6%

9.0x

0.6%

Afren PLC

United Kingdom

Energy

1,526

‐53.6%

0.6%

41.7%

‐0.1%

35.1%

10

71

72

46

S A

0.0%

9.0x

10.3%

Eni SpA

Italy

Energy

63,853

‐4.4%

2.0%

5.3%

18.4%

16.9%

65

71

846

A‐0.5%

8.1x

4.2%

Hunting plc

United Kingdom

Energy

1,168

‐2.4%

0.4%

77.6%

‐0.9%

21.4%

57

18

646

S A

0.0%

11.6x

1.9%

Statoil ASA

Norw

ay

Energy

464,321

‐5.2%

4.6%

9.1%

‐1.6%

24.0%

72

49

546

A‐0.8%

8.5x

1.3%

Galp Energia SGPS SA

Portugal

Energy

10,780

‐0.5%

0.0%

7.8%

2.3%

14.3%

38

53

957

L

2.2%

23.8x

‐0.8%

AMEC

plc

United Kingdom

Energy

3,410

‐0.8%

1.1%

3.9%

‐0.5%

31.6%

46

88

360

A0.0%

11.8x

8.2%

BP plc

United Kingdom

Energy

84,376

0.5%

3.1%

6.3%

‐2.4%

17.3%

24

69

860

A3.3%

7.0x

‐0.1%

SBM Offshore N.V.

Netherlands

Energy

1,828

‐32.8%

0.0%

10.5%

0.1%

25.4%

98

44

460

A0.4%

5.0x

22.9%

Tenaris SA

Luxembourg

Energy

17,708

‐1.2%

1.3%

6.3%

0.0%

18.1%

46

67

769

‐0.7%

11.6x

4.5%

OMV Aktiengesellschaft

Austria

Energy

9,115

‐3.1%

0.4%

3.0%

0.1%

17.0%

57

85

871

S A

1.8%

6.4x

5.8%

Total SA

France

Energy

88,695

‐4.6%

‐0.3%

5.4%

‐1.1%

26.8%

69

78

371

A1.1%

7.3x

1.8%

Bourbon

France

Energy

1,344

‐25.3%

1.6%

6.1%

0.2%

10.8%

86

64

10

77

‐7.6%

11.5x

0.8%

Neste Oil Corp.

Finland

Energy

2,585

‐0.8%

0.4%

0.7%

0.3%

7.2%

48

10

310

80

L

10.9%

9.9x

‐2.1%

Royal D

utch Shell plc

Netherlands

Energy

138,292

‐3.6%

‐1.0%

1.4%

0.1%

19.7%

69

95

680

0.2%

7.6x

6.5%

Tecnicas Reunidas, S.A.

Spain

Energy

2,073

‐2.5%

‐1.1%

‐2.0%

‐1.2%

24.6%

59

10

95

86

A0.4%

13.9x

13.8%

Tullow Oil plc

United Kingdom

Energy

13,217

‐33.2%

‐6.5%

‐65.6%

5.9%

19.6%

910

10

27

86

1.9%

26.3x

4.7%

SeaDrill Lim

ited

Berm

uda

Energy

19,180

‐25.1%

‐4.4%

16.4%

‐4.8%

14.1%

810

310

991

S

‐0.7%

11.4x

0.5%

Établissements Maurel &

Prom

France

Energy

1,286

‐124.8%

‐6.6%

3.0%

‐39.1%

35.4%

10

10

910

294

14.4%

8.7x

23.0%

Petroleum Geo Services ASA

Norw

ay

Energy

20,964

‐36.8%

1.1%

‐2.8%

‐3.9%

19.1%

96

10

10

797

S

2.4%

11.1x

9.4%







orw



Source: W


HEA

LTHCARE

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Elekta AB

Sweden

Healthcare Equip. and Services

35,148

9.6%

9.7%

45.6%

0.0%

32.6%

11

17

23

A0.5%

20.0x

0.9%

Sonova

Holding AG

Switzerland


6,433

‐2.6%

2.2%

7.2%

0.6%

33.8%

35

44

25

1.1%

17.5x

3.6%

Orion Oyj

Finland

Pharm

a., Biotech. and Life Sciences

2,597

0.2%

2.8%

5.8%

0.5%

18.1%

23

44

55

3.5%

14.5x

6.0%

Fresenius SE & Co KGaA

Germ

any


16,630

‐3.0%

2.0%

18.4%

2.6%

18.0%

46

22

511

S A

0.2%

16.2x

5.3%

Smith & Nephew plc

United Kingdom


5,856

‐1.6%

1.9%

3.4%

0.3%

41.6%

26

55

111

0.0%

13.5x

5.7%

Stada‐Arzneim

ittel AG

Germ

any

Pharm


1,387

‐1.4%

7.4%

28.3%

0.4%

5.8%

21

15

10

11

0.4%

8.0x

6.2%

Getinge

AB

Sweden


48,499

‐4.5%

2.6%

23.8%

0.0%

32.1%

54

27

218

A‐2.3%

13.6x

4.3%

William Demant Holding A/S

Denmark


30,233

‐3.0%

‐0.5%

6.8%

0.9%

35.3%

49

42

118

A0.0%

19.1x

3.4%

Elan Corporation, plc

Ireland

Pharm


6,445

44.2%

5.3%

5.2%

‐26.3%

29.0%

12

510

324

14.3%

68.0x

0.4%

BioMérieux S.A.

France


2,745

‐5.9%

0.9%

15.6%

0.9%

30.2%

67

33

326

A0.5%

15.0x

5.1%

Celesio AG

Germ

any


2,635

‐2.7%

‐0.5%

‐0.8%

2.8%

38.5%

39

72

126

L

‐0.8%

10.7x

11.4%

Essilor International SA

France


14,470

‐2.3%

2.4%

10.0%

‐0.7%

23.7%

34

39

326

R A

0.7%

22.7x

3.1%

Qiagen NV

Netherlands

Pharm


4,126

‐10.2%

5.8%

47.2%

‐0.5%

23.3%

91

18

326

A0.0%

15.9x

3.6%

Gerresheim

er AG

Germ

any

Pharm


1,202

‐6.3%

3.5%

4.7%

0.7%

21.5%

73

53

426

‐4.8%

13.1x

2.3%

Hikma Pharm

aceuticals plc

United Kingdom

Pharm


1,471

‐5.5%

4.6%

15.2%

‐0.1%

15.8%

62

38

639

A0.0%

16.8x

3.6%

Fresenius Medical Care AG & Co. KGAA

Germ

any


17,811

‐3.8%

0.7%

17.0%

‐0.6%

22.8%

57

28

442

0.2%

17.8x

4.8%

Rhoen Klinikum AG

Germ

any


2,078

‐2.9%

2.6%

2.9%

0.8%

10.7%

34

63

10

42

0.0%

13.7x

0.7%

Bayer AG

Germ

any

Pharm


56,557

‐4.2%

2.1%

‐0.7%

0.1%

18.2%

55

76

547

0.2%

12.0x

4.8%

Meda AB

Sweden

Pharm


20,145

‐8.9%

4.6%

‐1.3%

0.2%

NM

82

76

547

A0.0%

10.3x

20.5%

Actelion Ltd.

Switzerland

Pharm


5,217

‐12.6%

0.3%

14.3%

20.9%

13.6%

10

83

17

53

0.4%

15.0x

10.5%

Lonza Group AG

Switzerland

Pharm


2,450

‐9.0%

0.9%

25.3%

14.7%

5.4%

97

21

10

53

L

1.2%

9.9x

4.8%

Galenica Ltd.

Switzerland

Pharm


3,617

‐1.4%

1.2%

0.9%

0.0%

11.2%

26

67

958

0.0%

15.0x

6.5%

GlaxoSm

ithKline plc

United Kingdom

Pharm


68,720

‐3.3%

4.7%

‐1.8%

0.0%

11.0%

42

88

961

R A

‐0.9%

11.7x

7.8%

Sanofi

France

Pharm


90,703

‐8.0%

1.1%

‐3.3%

1.7%

16.2%

86

92

661

0.0%

11.1x

7.9%

Shire plc

Ireland

Pharm


10,126

‐6.1%

0.1%

0.0%

0.3%

17.7%

78

65

666

0.0%

13.6x

7.2%

UCB SA

Belgium

Pharm


7,891

‐5.7%

‐5.2%

1.2%

0.5%

18.5%

610

65

566

L

0.6%

24.1x

3.9%

GN Store Nord A/S

Denmark


15,435

‐58.3%

‐48.2%

‐48.7%

10.2%

31.5%

10

10

10

12

71

5.8%

18.5x

24.6%

Coloplast A/S

Denmark


53,113

‐4.6%

0.7%

‐2.1%

0.7%

13.2%

68

84

874

‐0.6%

20.2x

4.6%

AstraZeneca

PLC

United Kingdom

Pharm


36,579

3.0%

‐0.8%

3.6%

‐1.6%

11.9%

110

510

976

R

0.7%

8.3x

12.5%

Novartis AG

Switzerland

Pharm


141,810

‐7.5%

2.0%

‐3.3%

0.2%

14.8%

85

96

776

0.6%

11.5x

7.4%

Straumann Holding AG

Switzerland


1,755

‐4.5%

‐0.7%

‐1.6%

0.0%

13.3%

59

86

882

0.7%

18.1x

6.2%

Grifols, S.A.

Spain

Pharm


7,441

‐ 9.1%

2.2%

‐7.3%

‐1.2%

19.6%

95

10

94

84

S A

‐1.0%

20.5x

4.2%

Roche Holding AG

Switzerland

Pharm


158,138

‐8.9%

2.8%

‐2.9%

‐1.2%

12.7%

83

99

884

R

0.1%

12.2x

6.7%

BTG

plc

United Kingdom

Pharm


1,154

‐12.0%

3.8%

‐7.4%

‐0.8%

16.6%

10

310

96

89

S R

10.0%

28.5x

4.2%

Nobel Biocare Holding AG

Switzerland


1,066

‐10.5%

‐3.5%

‐3.8%

0.8%

12.7%

910

93

892

‐10.0%

17.4x

11.6%

Novo

Nordisk A/S

Denmark

Pharm


527,684

‐7.5%

0.6%

‐2.8%

‐3.2%

15.6%

78

810

795

A0.2%

21.4x

4.0%

Merck KGaA

Germ

any

Pharm


21,651

‐13.6%

‐0.2%

‐10.8%

‐2.7%

10.7%

10

910

10

997

R

0.0%

13.2x

6.7%







orw



Source: W


INDUSTRIALS

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

PostNL N.V.

Netherlands

Transportation

1,307

11.6%

5.2%

13.2%

39.5%

33.7%

12

21

21

L

‐1.6%

4.4x

‐1.6%

Edenred SA

France

Commercial and Prof. Services

5,215

2.7%

4.6%

7.4%

2.8%

156.1%

22

32

12

‐1.1%

21.6x

2.4%

The W

eir Group PLC

United Kingdom

Capital G

oods

3,776

4.1%

8.0%

26.1%

0.1%

32.6%

11

16

32

A0.0%

11.5x

2.0%

Atlas Copco

AB

Sweden

Capital G

oods

182,184

4.5%

5.5%

10.5%

1.6%

20.9%

11

23

52

‐0.3%

13.2x

4.3%

Hochtief AG

Germ

any

Capital G

oods

2,967

‐0.1%

4.9%

3.9%

6.2%

54.3%

32

51

12

S A

‐0.4%

9.8x

‐12.4%

Konecranes Plc

Finland

Capital G

oods

1,380

2.0%

4.1%

6.5%

1.4%

44.7%

22

43

12

L A

0.0%

13.0x

‐0.7%

Rotork plc

United Kingdom

Capital G

oods

2,012

0.3%

3.2%

15.1%

0.4%

39.8%

33

14

12

A0.0%

19.5x

3.6%

Vallourec S A

France

Capital G

oods

4,087

‐0.2%

3.6%

15.8%

5.0%

20.7%

32

11

52

L A

‐4.2%

11.1x

‐6.5%

Alstom SA

France

Capital G

oods

8,336

3.0%

4.9%

7.6%

0.8%

28.5%

22

33

37

R

0.3%

7.7x

‐4.2%

AB Volvo

Sweden

Capital G

oods

187,569

0.9%

5.5%

6.9%

3.7%

22.3%

22

42

48

‐3.0%

10.2x

‐0.5%

Capita PLC

United Kingdom


4,777

0.4%

3.5%

17.1%

0.0%

34.3%

32

16

28

A0.0%

13.1x

2.6%

NCC AB

Sweden

Capital G

oods

13,213

6.7%

7.7%

8.1%

0.1%

25.2%

11

35

48

L

‐0.9%

8.8x

‐12.4%

FLSm

idth & Co. A/S

Denmark

Capital G

oods

17,805

2.1%

5.0%

9.7%

0.1%

23.8%

22

25

410

0.0%

9.7x

2.4%

Wärtsilä Oyj Abp

Finland

Capital G

oods

5,811

6.7%

8.2%

8.9%

0.0%

21.4%

11

36

410

5.9%

14.8x

‐2.7%

Ashtead Group plc

United Kingdom

Capital G

oods

1,763

9.0%

0.1%

14.2%

23.6%

28.5%

18

21

310

0.0%

12.5x

‐0.2%

SGL Carbon SE

Germ

any

Capital G

oods

2,160

0.2%

9.7%

9.7%

1.9%

15.6%

31

23

713

A2.1%

22.0x

‐1.6%

Aggreko

plc

United Kingdom


5,559

‐6.1%

7.5%

32.8%

18.7%

NM

91

11

514

A‐1.9%

19.2x

‐1.1%

Serco Group plc

United Kingdom


2,814

0.2%

2.1%

6.8%

0.9%

26.3%

34

43

314

0.0%

13.0x

4.9%

SGS SA

Switzerland


15,317

‐2.7%

2.1%

8.2%

3.6%

37.8%

74

32

114

A‐0.4%

21.1x

2.2%

Kone Oyj

Finland

Capital G

oods

14,908

‐0.7%

‐0.3%

3.8%

16.5%

50.5%

48

51

116

0.0%

20.6x

4.2%

Royal Vopak NV

Netherlands

Transportation

6,889

‐3.9%

11.9%

42.0%

6.4%

15.3%

81

11

816

‐0.7%

18.0x

0.0%

Skanska AB (publ)

Sweden

Capital G

oods

42,812

3.1%

1.1%

5.9%

0.1%

37.4%

26

45

216

L

0.3%

12.6x

‐6.9%

Societe BIC, S.A.

France


4,242

2.4%

5.5%

8.7%

‐0.4%

25.1%

21

39

416

‐1.4%

14.8x

3.3%

Trelleborg AB

Sweden

Capital G

oods

19,856

‐1.5%

2.8%

2.2%

15.7%

25.7%

53

71

316

‐0.7%

9.9x

4.5%

Invensys plc

United Kingdom

Capital G

oods

1,827

3.9%

5.0%

6.7%

0.4%

0.0%

12

44

10

20

R

0.0%

9.8x

1.7%

MITIE Group PLC

United Kingdom


1,064

‐0.1%

1.2%

2.9%

0.3%

33.9%

36

64

220

0.0%

11.1x

4.9%

ABB Ltd.

Switzerland

Capital G

oods

41,671

0.2%

2.9%

14.8%

‐1.5%

22.5%

33

29

420

A0.0%

12.2x

4.5%

IMI plc

United Kingdom

Capital G

oods

2,961

2.6%

3.3%

7.5%

‐0.2%

20.5%

23

38

520

R A

‐1.2%

10.5x

4.2%

Zodiac Aerospace

SA

France

Capital G

oods

4,092

‐1.7%

2.0%

15.4%

‐0.4%

27.4%

64

18

323

A‐0.2%

12.1x

5.2%

Balfour Beatty plc

United Kingdom

Capital G

oods

2,134

4.3%

3.2%

4.4%

‐0.6%

23.5%

13

59

423

R L A

0.0%

8.3x

‐6.8%

MAN SE

Germ

any

Capital G

oods

11,388

‐0.3%

6.4%

7.1%

0.0%

16.7%

41

46

723

A‐8.6%

15.4x

‐4.1%

Sandvik AB

Sweden

Capital G

oods

115,717

‐1.0%

4.0%

3.6%

0.0%

20.3%

42

56

523

‐1.1%

10.7x

3.6%

YIT Oyj

Finland

Capital G

oods

1,928

2.1%

3.5%

3.1%

0.0%

25.1%

23

67

423

0.0%

9.9x

1.1%

Atlantia SpA

Italy

Transportation

8,035

‐4.7%

9.4%

34.1%

‐4.0%

27.5%

81

110

327

L

0.0%

11.3x

6.3%

Bureau Veritas SA

France


9,293

‐3.3%

1.0%

6.6%

1.0%

35.6%

86

43

227

A0.3%

19.7x

3.2%

Cookson Group plc

United Kingdom

Capital G

oods

1,579

‐1.5%

1.6%

2.6%

2.1%

22.7%

55

63

427

R

‐11.6%

8.3x

5.0%

Fiat Industrial SpA

Italy

Capital G

oods

9,683

‐2.4%

0.1%

7.4%

1.6%

23.8%

67

33

427

0.0%

8.6x

3.8%

Imtech

NV

Netherlands

Capital G

oods

1,841

‐1.1%

0.6%

3.9%

0.3%

39.7%

57

55

127

A‐1.8%

8.6x

6.4%

Intertek Group plc

United Kingdom


4,559

‐2.2%

2.7%

3.9%

0.0%

33.0%

63

56

327

A0.0%

19.3x

3.0%

OC Oerlikon Corporation AG

Switzerland

Capital G

oods

3,064

‐2.4%

1.8%

3.6%

3.0%

19.3%

65

52

527

‐2.1%

11.2x

9.6%

Schindler Holding AG

Switzerland

Capital G

oods

14,066

‐0.9%

0.9%

1.2%

8.2%

NM

46

71

527

‐0.5%

18.6x

4.9%

Babcock International G

roup plc

United Kingdom


3,447

‐1.2%

2.7%

0.0%

3.6%

20.0%

54

82

534

S A

1.4%

13.2x

4.5%

HomeServe plc

United Kingdom


774

10.7%

0.2%

29.6%

0.0%

12.8%

17

16

934

S A

0.0%

11.1x

8.8%

Actividades de Construcción y Servicios

Spain

Capital G

oods

4,901

‐4.4%

3.0%

‐3.0%

2.7%

53.5%

83

10

21

34

8.8%

6.1x

‐1.0%

Adecco S.A.

Switzerland


9,236

‐0.6%

0.1%

1.3%

0.5%

34.4%

47

74

234

A0.4%

12.2x

6.5%

Securitas AB

Sweden


18,122

‐1.3%

0.4%

2.1%

0.7%

43.0%

57

74

134

‐4.8%

9.0x

6.7%

Spirax‐Sarco Engineering plc

United Kingdom

Capital G

oods

1,536

‐0.2%

3.2%

5.1%

0.0%

18.6%

43

47

634

0.0%

14.8x

3.8%

Sulzer, Ltd.

Switzerland

Capital G

oods

4,594

‐2.3%

‐0.3%

22.0%

0.6%

19.5%

68

14

534

L

1.3%

13.4x

5.4%

Cobham plc

United Kingdom

Capital G

oods

2,370

‐2.0%

0.1%

8.3%

6.4%

15.1%

67

31

840

R

0.0%

9.6x

7.4%

Ferrovial, S.A.

Spain

Capital G

oods

7,856

‐10.2%

2.1%

‐0.6%

22.9%

114.6%

10

49

11

40

NA

37.9x

4.4%

Randstad Holding NV

Netherlands


4,520

‐0.7%

0.4%

2.9%

0.0%

35.3%

47

66

240

L

‐2.8%

10.7x

5.4%

Siemens AG

Germ

any

Capital G

oods

68,411

‐1.3%

3.4%

7.1%

‐0.9%

21.6%

53

49

440

‐0.5%

11.9x

5.2%

Thales S A

France

Capital G

oods

5,557

‐1.1%

2.1%

1.7%

2.5%

17.9%

54

73

640

R

‐0.4%

8.7x

8.0%

AB SKF

Sweden

Capital G

oods

66,958

0.0%

0.8%

3.0%

1.3%

15.5%

36

63

844

‐7.7%

11.3x

4.8%

GEA

Group AG

Germ

any

Capital G

oods

4,674

‐1.0%

1.9%

3.3%

0.1%

20.9%

55

65

544

0.5%

12.1x

5.1%

Rolls Royce Holdings plc

United Kingdom

Capital G

oods

16,264

2.2%

0.3%

8.6%

‐0.3%

18.4%

27

38

644

A0.0%

13.8x

3.8%

Abertis Infraestructuras S.A.

Spain

Transportation

8,419

7.1%

4.1%

2.4%

‐19.0%

15.9%

12

710

746

‐1.1%

12.7x

4.6%

Bilfinger SE

Germ

any


3,317

1.5%

2.4%

3.9%

‐14.4%

18.6%

24

510

646

A0.7%

13.2x

1.9%

Carillion plc

United Kingdom

Capital G

oods

1,328

3.3%

2.3%

3.2%

‐0.1%

10.9%

14

67

946

0.0%

6.9x

2.9%

Travis Perkins plc

United Kingdom

Capital G

oods

2,618

‐0.1%

0.9%

1.7%

0.0%

19.2%

36

76

546

S

‐1.0%

10.9x

5.2%







orw



Source: W


INDUSTRIALS

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Experian plc

Ireland


10,367

‐ 13.7%

‐0.3%

13.0%

4.5%

18.1%

10

82

26

49

A0.0%

18.5x

7.2%

Hays plc

United Kingdom


1,138

‐0.8%

‐0.1%

‐0.2%

0.0%

52.5%

48

96

149

A0.0%

16.4x

8.0%

Meggitt PLC

United Kingdom

Capital G

oods

3,085

‐5.4%

2.6%

3.3%

6.0%

14.4%

94

61

849

S

0.0%

10.6x

7.1%

Metso Corp.

Finland

Capital G

oods

4,201

‐0.2%

2.7%

2.0%

‐0.1%

14.9%

33

77

849

‐1.1%

9.6x

7.1%

Wolseley plc

Switzerland

Capital G

oods

7,567

0.7%

2.2%

‐0.1%

0.6%

7.8%

24

94

10

52

0.0%

14.5x

3.3%

Legrand

France

Capital G

oods

7,843

‐3.4%

0.9%

7.3%

0.1%

16.4%

86

35

752

0.0%

14.0x

6.7%

Melrose

PLC

United Kingdom

Capital G

oods

3,065

4.7%

1.9%

‐23.9%

‐29.5%

22.4%

14

10

10

452

S R

0.0%

12.8x

1.5%

Michael Page

International plc

United Kingdom


1,151

‐1.4%

‐1.4%

1.1%

0.3%

40.9%

510

85

152

A‐6.7%

22.6x

5.3%

MTU

Aero Engines Holding AG

Germ

any

Capital G

oods

3,259

‐1.2%

‐1.6%

11.3%

0.0%

19.9%

510

27

552

‐0.2%

13.0x

4.0%

Schneider Electric S.A.

France

Capital G

oods

26,991

‐3.5%

‐0.8%

10.6%

0.6%

18.8%

89

24

652

R

‐0.8%

11.5x

7.6%

A.P. M

øller ‐ M

ærsk A/S

Denmark

Transportation

172,035

‐5.1%

1.2%

9.6%

‐0.3%

19.0%

95

28

657

‐2.8%

8.8x

‐5.0%

Aéroports de Paris

France

Transportation

5,974

‐19.0%

‐0.2%

34.4%

3.9%

11.1%

10

81

29

57

L A

‐1.1%

15.8x

2.8%

G4S plc

United Kingdom


3,717

‐2.8%

‐0.1%

‐0.2%

0.4%

34.9%

78

94

257

0.0%

10.4x

5.5%

Georg Fischer AG

Switzerland

Capital G

oods

1,364

‐2.5%

1.1%

4.1%

0.0%

17.0%

66

56

757

‐3.6%

8.8x

6.1%

National Express Group plc

United Kingdom

Transportation

1,066

‐4.0%

5.7%

7.5%

‐1.0%

13.6%

81

39

957

‐4.0%

8.4x

5.4%

Rexel SA

France

Capital G

oods

4,117

‐0.3%

0.2%

1.4%

‐0.6%

31.4%

47

79

357

‐1.9%

9.3x

7.2%

Royal Boskalis Westminster NV

Netherlands

Capital G

oods

3,172

‐5.9%

2.5%

2.6%

3.8%

13.0%

94

62

957

0.0%

12.0x

4.4%

DCC plc

Ireland

Capital G

oods

1,847

‐0.7%

‐0.4%

1.2%

1.3%

15.6%

49

73

863

A0.0%

10.3x

6.6%

Bouygues S A

France

Capital G

oods

6,116

‐5.4%

‐0.9%

2.5%

0.2%

35.7%

99

65

263

‐2.0%

7.1x

6.0%

International Consolidated Airlines

United Kingdom

Transportation

2,963

‐2.7%

‐0.5%

6.3%

3.2%

13.6%

79

42

963

S L

0.0%

13.6x

‐9.2%

Teleperform

ance

France


1,297

‐4.0%

‐0.6%

0.9%

0.4%

35.3%

89

84

263

A0.0%

9.9x

8.4%

Alfa Laval AB

Sweden

Capital G

oods

51,971

‐2.7%

1.1%

3.6%

‐0.1%

16.4%

76

57

766

A‐0.4%

14.0x

5.9%

Brenntag AG

Germ

any

Capital G

oods

5,094

‐0.7%

0.6%

1.2%

0.2%

10.0%

46

75

10

66

‐0.6%

13.7x

5.0%

Deutsche Post AG

Germ

any

Transportation

19,374

‐0.9%

0.1%

1.8%

‐3.4%

26.1%

48

710

366

0.0%

11.3x

2.1%

EADS N.V.

Netherlands

Capital G

oods

21,824

‐1.8%

1.4%

4.9%

‐2.4%

17.6%

65

410

766

1.1%

10.3x

1.2%

Finmeccanica SpA

Italy

Capital G

oods

2,339

‐14.0%

5.9%

‐11.5%

‐0.2%

28.2%

10

110

83

66

‐2.7%

6.2x

‐2.3%

Rentokil Initial plc

United Kingdom


1,585

‐7.4%

1.2%

1.0%

‐0.8%

33.6%

95

89

270

R

0.0%

9.6x

4.7%

Scania AB (publ)

Sweden

Capital G

oods

98,280

‐3.0%

0.3%

9.0%

‐0.4%

12.6%

77

28

970

L

‐4.5%

11.6x

4.7%

Ultra Electronics Holdings plc

United Kingdom

Capital G

oods

1,156

‐7.1%

‐2.4%

13.1%

‐0.6%

30.9%

910

29

370

A0.8%

12.4x

8.6%

Safran SA

France

Capital G

oods

12,477

‐10.9%

1.3%

‐4.0%

4.4%

15.8%

10

510

27

73

‐1.0%

12.7x

6.9%

TNT Express N.V.

Netherlands

Transportation

4,299

‐2.6%

‐0.2%

‐1.3%

3.2%

12.7%

68

92

973

3.7%

22.5x

2.9%

Zardoya

Otis, S.A.

Spain

Capital G

oods

3,563

‐2.6%

‐0.7%

4.8%

0.0%

8.9%

69

46

10

74

A‐2.0%

18.1x

5.6%

BAE Systems plc

United Kingdom

Capital G

oods

10,174

0.6%

0.3%

0.7%

‐0.5%

15.1%

37

89

874

0.0%

8.1x

9.3%

Bunzl plc

United Kingdom

Capital G

oods

3,389

‐3.2%

‐0.2%

‐0.2%

0.0%

20.0%

78

96

574

‐1.4%

14.5x

7.4%

Geberit AG

Switzerland

Capital G

oods

7,819

‐4.6%

1.6%

0.2%

‐0.1%

17.2%

85

87

774

0.0%

17.7x

5.2%

Kuehne + Nagel International AG

Switzerland

Transportation

12,957

‐1.3%

‐0.6%

0.0%

0.0%

16.3%

59

86

774

‐1.6%

18.8x

3.7%

Rheinmetall AG

Germ

any

Capital G

oods

1,424

‐2.7%

0.2%

1.5%

‐0.1%

18.4%

77

78

674

A‐0.6%

6.8x

9.3%

VINCI S.A.

France

Capital G

oods

18,422

‐6.1%

‐1.3%

0.3%

1.9%

19.0%

99

83

674

0.6%

10.0x

11.5%

Koninklijke

Philips Electronics NV

Netherlands

Capital G

oods

18,575

‐3.3%

1.3%

1.1%

‐4.4%

24.0%

85

810

474

A‐1.6%

11.7x

4.8%

Andritz AG

Austria

Capital G

oods

4,784

‐1.9%

‐2.5%

‐1.1%

0.3%

18.9%

610

95

681

‐0.4%

16.1x

6.8%

Compagnie de Saint‐Gobain

France

Capital G

oods

14,363

‐3.2%

‐1.5%

3.2%

0.2%

14.4%

710

65

881

‐1.6%

9.0x

5.2%

Nexans SA

France

Capital G

oods

995

‐2.0%

1.3%

0.6%

‐0.4%

12.4%

65

88

981

R L

‐1.9%

9.4x

3.9%

Orkla AS A

Norw

ay

Capital G

oods

46,704

‐5.9%

2.7%

‐2.7%

0.0%

14.9%

93

10

68

81

‐2.5%

12.1x

3.5%

Outotec Oyj

Finland

Capital G

oods

1,768

‐5.3%

‐2.9%

‐0.4%

0.0%

37.8%

910

96

281

A0.0%

13.7x

12.4%

Smiths Group plc

United Kingdom

Capital G

oods

4,229

‐3.0%

‐2.2%

6.0%

‐2.9%

18.2%

710

410

685

0.0%

10.9x

6.7%

Aalberts Industries NV

Netherlands

Capital G

oods

1,564

‐3.7%

0.5%

2.8%

‐0.1%

15.6%

87

68

885

0.0%

9.8x

NM

DSV

A/S

Denmark

Transportation

22,443

‐1.2%

‐0.3%

0.2%

0.0%

12.9%

58

87

985

0.0%

12.2x

5.2%

Wienerberger AG

Austria

Capital G

oods

675

‐8.4%

‐0.1%

4.8%

0.5%

6.6%

10

85

410

85

‐116.7%

181.1x

6.4%

Stagecoach

Group plc

United Kingdom

Transportation

1,585

‐2.9%

1.1%

0.0%

‐2.1%

18.3%

76

910

688

0.0%

9.9x

5.0%

Firstgroup plc

United Kingdom

Transportation

917

‐3.6%

2.5%

‐2.0%

‐0.2%

8.5%

84

98

10

89

‐3.2%

5.3x

14.2%

Fraport AG

Germ

any

Transportation

4,132

‐15.6%

‐1.3%

17.8%

‐2.1%

13.6%

10

91

10

989

0.4%

15.6x

‐0.3%

Assa Abloy AB

Sweden

Capital G

oods

80,625

‐3.2%

1.2%

‐10.9%

‐14.3%

14.9%

75

10

10

890

‐0.5%

13.9x

4.7%

Prysm

ian S.p.A.

Italy

Capital G

oods

3,174

‐2.7%

0.9%

‐0.3%

‐0.3%

9.3%

76

98

10

90

S A

‐0.8%

9.6x

6.0%

easyJet plc

United Kingdom

Transportation

2,394

‐6.2%

‐2.1%

4.4%

‐2.2%

17.3%

910

510

792

9.4%

9.5x

5.2%

QinetiQ Group Plc

United Kingdom

Capital G

oods

1,265

‐0.6%

‐3.0%

‐0.3%

‐0.3%

8.9%

410

98

10

92

6.7%

13.2x

13.8%

Groupe Eurotunnel SA

France

Transportation

3,215

‐44.2%

1.3%

‐32.9%

0.0%

1.6%

10

510

610

92

S

0.0%

119.6x

5.4%

Klöckner & Co Aktiengesellschaft

Germ

any

Capital G

oods

773

‐3.0%

‐0.5%

‐2.6%

0.2%

8.7%

79

10

510

92

S L

1.7%

24.6x

12.0%

Deutsche Lufthansa

Aktiengesellschaft

Germ

any

Transportation

5,053

‐7.0%

‐1.3%

0.8%

‐0.9%

15.9%

99

89

795

‐2.6%

11.1x

3.5%







orw



Source: W


INDUSTRIALS

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Vestas Wind Systems A/S

Denmark

Capital G

oods

6,343

‐12.7%

‐9.0%

‐3.3%

0.4%

14.4%

10

10

10

48

95

L A

120.0%

33.8x

12.1%

Eiffage

SA

France

Capital G

oods

2,310

‐8.7%

‐2.8%

‐5.8%

0.8%

13.7%

10

10

10

49

97

‐1.1%

8.2x

10.7%

De La Rue plc

United Kingdom


1,065

‐9.7%

‐6.3%

‐3.0%

‐1.6%

20.0%

10

10

10

95

98

R

1.8%

14.7x

5.2%

Air France

‐KLM

SA

France

Transportation

1,783

‐8.8%

‐0.8%

‐4.7%

‐1.3%

15.9%

10

910

97

98

L A

1.3%

NA

‐11.6%

Ryanair Holdings plc

Ireland

Transportation

6,512

‐13.5%

‐5.5%

‐5.0%

‐2.8%

7.9%

10

10

10

10

10

99

0.0%

12.6x

12.5%







orw



Source: W


INFO

RMATION TECHNOLO

GY

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Ingenico SA

France

Technology Hardware and Equip.

2,067

‐1.4%

3.2%

11.1%

2.4%

134.1%

33

32

13

R A

0.5%

15.4x

3.1%

Ericsson

Sweden


191,748

4.0%

6.6%

8.4%

0.2%

45.4%

22

34

36

R

‐1.5%

11.4x

1.6%

Wirecard AG

Germ

any

Software and Services

1,971

16.9%

18.3%

35.0%

0.0%

NM

11

16

56

S A

‐1.4%

20.9x

‐2.1%

ASM

L Holding NV

Netherlands

Semis and Semi Equip.

19,909

4.3%

11.2%

11.3%

1.9%

22.2%

11

32

913

‐7.0%

12.7x

5.3%

Infineon Technologies AG

Germ

any


5,811

‐6.3%

6.7%

17.6%

1.5%

53.1%

82

23

216

‐2.6%

20.2x

0.6%

Aixtron SE

Germ

any


1,008

11.0%

10.3%

19.7%

‐4.4%

25.5%

11

210

719

‐50.0%

31.8x

‐11.6%

Electrocomponents plc

United Kingdom


929

‐0.2%

2.8%

2.7%

0.3%

32.1%

24

64

622

‐5.6%

11.8x

5.3%

Imagination Technologies Group Plc

United Kingdom


1,240

‐2.5%

8.2%

4.8%

0.0%

35.4%

52

46

522

0.0%

27.0x

1.6%

SAP AG

Germ

any


63,448

‐4.8%

3.4%

17.3%

1.3%

28.5%

73

23

722

A‐0.6%

15.8x

5.4%

Wincor Nixdorf AG

Germ

any


1,007

‐0.8%

2.5%

1.9%

0.1%

39.2%

34

66

431

‐0.4%

11.2x

3.9%

ARM Holdings plc

United Kingdom


8,199

‐13.1%

2.2%

‐8.3%

12.9%

66.4%

94

10

11

34

0.0%

34.1x

2.3%

Neopost SA

France


1,467

‐4.4%

3.9%

2.1%

1.2%

32.4%

73

63

634

A0.2%

8.3x

8.2%

Halm

a plc

United Kingdom


1,568

‐1.5%

1.3%

4.5%

0.2%

21.1%

35

55

941

A0.0%

14.8x

5.3%

Atos S.A.

France


4,404

‐4.6%

‐1.2%

‐3.6%

5.8%

49.1%

78

91

344

S R

0.0%

11.5x

6.1%

Alcatel‐Lucent, S.A.

France


1,901

2.0%

0.0%

‐2.1%

0.8%

23.7%

27

84

847

R L

‐25.0%

40.2x

‐4.6%

Hexagon AB

Sweden


51,217

‐4.4%

1.0%

6.3%

0.0%

24.8%

65

46

847

S A

2.5%

14.7x

5.1%

Spectris plc

United Kingdom


2,005

‐3.7%

1.5%

29.2%

‐0.2%

19.0%

65

18

947

A‐0.7%

11.0x

6.8%

Cap Gemini S.A.

France


4,775

‐2.4%

‐0.2%

3.9%

‐0.2%

33.9%

47

59

556

R

‐0.7%

11.2x

10.5%

United Internet AG

Germ

any


3,006

‐2.2%

‐0.5%

0.5%

‐3.5%

53.2%

47

710

256

0.0%

14.4x

3.8%

Telecity Group plc

United Kingdom


1,848

‐21.8%

‐2.3%

85.4%

0.0%

35.5%

10

10

16

463

L

0.0%

24.7x

‐3.3%

Aveva

Group plc

United Kingdom


1,410

‐3.8%

‐1.2%

0.0%

0.1%

32.3%

68

75

666

‐1.3%

23.0x

3.7%

Gemalto NV

Netherlands


5,386

‐2.8%

0.8%

2.8%

‐0.8%

27.9%

56

510

769

0.3%

19.2x

3.8%

Software AG

Germ

any


2,702

‐2.6%

‐1.0%

0.3%

0.2%

24.6%

58

75

869

‐0.5%

13.3x

7.2%

Spirent Communications Plc.

United Kingdom


992

‐5.7%

‐1.5%

4.9%

‐1.3%

56.4%

89

410

269

0.0%

14.6x

7.9%

Logitech

International SA

Switzerland


1,273

‐4.9%

‐1.6%

‐1.8%

‐0.2%

60.2%

89

89

178

0.0%

10.5x

12.8%

Sage

Group plc

United Kingdom


3,751

‐1.5%

0.2%

‐13.2%

0.0%

14.3%

46

10

610

81

0.0%

14.0x

7.4%

Temenos Group AG

Switzerland


951

‐19.9%

0.2%

‐7.6%

0.0%

36.0%

10

610

64

81

S A

0.0%

14.0x

7.8%

Dassault Systemes SA

France


10,145

‐9.9%

‐1.5%

‐4.1%

‐0.4%

53.0%

99

99

388

0.0%

21.5x

5.2%

STMicroelectronics NV

Switzerland


4,239

‐15.8%

‐3.9%

‐3.4%

5.9%

18.1%

10

10

81

10

88

R L

‐13.3%

18.2x

0.1%

Amadeus IT Holding SA

Spain


8,263

‐15.2%

‐1.8%

‐3.4%

1.7%

7.2%

10

10

92

10

94

‐0.8%

14.2x

9.7%

Nokia Corporation

Finland


8,016

‐12.6%

‐2.7%

‐11.1%

‐0.1%

34.1%

910

10

85

97

R

17.6%

NA

‐7.9%







orw



Source: W


MATERIALS

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

Akzo Nobel N

VNetherlands

Materials

10,112

1.6%

4.8%

7.1%

0.9%

19.5%

12

32

32

‐2.8%

11.5x

‐1.1%

Fresnillo PLC

Mexico

Materials

13,741

‐1.5%

2.9%

15.8%

0.6%

39.1%

32

23

12

2.0%

22.7x

2.0%

Lanxess AG

Germ

any

Materials

5,134

0.5%

5.0%

8.7%

0.2%

26.6%

21

34

12

A‐1.7%

7.9x

‐2.1%

Petropavlovsk PLC

United Kingdom

Materials

809

‐9.7%

14.7%

51.7%

11.9%

40.1%

10

11

11

7

‐10.9%

5.1x

‐18.4%

K+S Aktiengesellschaft

Germ

any

Materials

6,957

0.8%

6.1%

5.0%

3.6%

13.6%

21

41

78

‐2.5%

10.5x

4.0%

Randgold Resources Limited

Channel Islands

Materials

7,005

0.5%

11.3%

36.9%

‐0.7%

24.0%

21

19

28

0.6%

17.1x

0.6%

Victrex plc

United Kingdom

Materials

1,176

7.3%

9.5%

15.2%

0.4%

12.8%

11

24

811

1.2%

15.8x

3.5%

Arkema S.A.

France

Materials

4,526

‐1.8%

‐2.3%

18.8%

7.1%

27.8%

410

21

113

A2.2%

9.3x

1.9%

Fuchs Petrolub AG

Germ

any

Materials

3,533

3.0%

0.4%

5.7%

0.0%

23.8%

16

45

213

0.0%

17.4x

2.4%

Novozymes A/S

Denmark

Materials

50,084

‐3.9%

3.8%

7.0%

0.1%

18.1%

52

35

313

‐0.2%

23.9x

2.3%

Rexam plc

United Kingdom

Materials

4,037

‐2.5%

1.7%

‐1.6%

2.2%

18.1%

43

72

418

0.0%

11.6x

4.3%

Clariant AG

Switzerland

Materials

3,134

‐0.5%

1.5%

3.4%

3.4%

13.9%

34

52

720

S R L

‐1.9%

8.4x

‐0.2%

Kazakhmys PLC

United Kingdom

Materials

3,956

6.1%

‐0.5%

27.4%

‐2.3%

28.2%

18

110

120

‐5.4%

7.8x

‐1.5%

The Linde Group

Germ

any

Materials

24,095

‐7.2%

3.4%

7.2%

0.1%

15.9%

82

35

423

S

0.1%

15.2x

3.4%

Yara International ASA

Norw

ay

Materials

77,717

2.1%

1.4%

5.7%

0.3%

10.0%

14

44

923

A2.1%

8.5x

9.9%

Vedanta Resources plc

United Kingdom

Materials

3,114

‐5.7%

1.9%

71.4%

0.3%

8.1%

63

14

926

L

‐13.4%

5.5x

‐0.1%

BHP Billiton plc

United Kingdom

Materials

108,066

‐9.1%

0.1%

34.9%

0.9%

21.9%

10

71

32

26

‐7.5%

11.5x

1.9%

Croda International plc

United Kingdom

Materials

3,089

‐0.6%

0.9%

3.3%

0.0%

16.1%

35

56

426

‐0.8%

16.1x

4.0%

Imerys SA

France

Materials

3,513

‐5.2%

0.9%

6.6%

0.6%

14.0%

65

33

626

0.3%

11.1x

6.3%

Sika

AG

Switzerland

Materials

4,796

‐2.0%

0.9%

3.9%

0.6%

14.6%

45

53

626

A‐1.2%

14.2x

4.1%

Syngenta AG

Switzerland

Materials

31,125

0.1%

3.7%

3.9%

‐3.3%

17.5%

22

510

426

R

‐0.5%

15.3x

3.8%

Johnson Matthey plc

United Kingdom

Materials

4,544

‐1.1%

0.2%

0.1%

0.5%

15.1%

36

63

636

‐1.3%

12.7x

7.0%

Anglo American plc

United Kingdom

Materials

26,543

‐8.1%

1.5%

9.9%

0.7%

14.4%

93

33

636

R

‐8.9%

9.4x

4.7%

Eurasian Natural Resources Corp Plc

United Kingdom

Materials

4,453

‐6.0%

1.3%

54.4%

‐0.8%

19.5%

74

19

336

L A

‐8.1%

7.5x

‐5.1%

Rio Tinto plc

United Kingdom

Materials

58,991

‐6.9%

2.0%

21.7%

‐0.4%

21.0%

83

28

336

‐6.7%

8.0x

0.1%

Salzgitter AG

Germ

any

Materials

1,850

0.1%

1.9%

4.0%

0.0%

13.3%

23

57

736

‐16.7%

14.3x

‐10.7%

Wacker Chemie AG

Germ

any

Materials

2,274

‐8.6%

3.5%

11.5%

‐1.2%

24.8%

92

29

236

L

‐5.5%

14.3x

‐14.6%

Glencore International plc

Switzerland

Materials

24,866

1.3%

0.7%

3.5%

0.0%

15.7%

26

57

546

S

0.0%

7.9x

‐1.5%

Umicore SA

Belgium

Materials

4,475

‐1.6%

‐0.5%

‐0.1%

0.0%

21.0%

38

66

246

0.0%

14.2x

7.3%

Filtrona plc

United Kingdom

Materials

1,177

‐7.8%

‐0.6%

19.4%

0.2%

23.3%

98

25

249

0.0%

16.0x

4.1%

Kemira Group

Finland

Materials

1,539

‐3.5%

‐1.2%

4.3%

0.2%

19.7%

59

45

349

‐1.2%

10.5x

4.6%

Xstrata plc

Switzerland

Materials

29,326

‐7.6%

0.6%

23.2%

0.0%

17.9%

86

27

452

0.0%

9.9x

‐3.4%

Antofagasta plc

United Kingdom

Materials

12,905

‐5.1%

‐0.8%

5.8%

0.9%

10.7%

59

42

854

1.5%

13.8x

8.5%

BASF SE

Germ

any

Materials

59,625

‐2.1%

0.6%

‐0.3%

‐1.7%

20.7%

46

69

354

‐0.9%

10.9x

5.7%

Solvay SA

Belgium

Materials

7,637

‐6.3%

‐0.7%

25.5%

0.0%

14.0%

78

15

754

‐2.4%

10.7x

4.3%

Aurubis AG

Germ

any

Materials

2,143

‐1.3%

0.6%

0.7%

‐0.2%

13.6%

36

58

759

S

‐2.9%

10.1x

12.1%

Royal D

SM N.V.

Netherlands

Materials

6,584

‐3.2%

0.2%

8.4%

‐6.3%

15.4%

47

310

559

‐2.0%

10.7x

7.3%

ThyssenKrupp AG

Germ

any

Materials

9,541

‐5.4%

0.2%

‐2.4%

7.6%

13.2%

67

71

859

S L

‐9.4%

22.1x

‐3.4%

Boliden AB

Sweden

Materials

31,864

‐5.7%

‐1.0%

4.6%

0.0%

15.7%

69

46

564

0.8%

8.8x

5.0%

Symrise

AG

Germ

any

Materials

3,247

‐4.9%

‐0.3%

‐0.8%

0.4%

11.9%

57

64

864

‐0.7%

16.4x

5.3%

EVRAZ plc

United Kingdom

Materials

3,315

‐12.1%

‐0.4%

‐4.4%

1.1%

17.4%

10

78

24

67

R

50.0%

10.1x

10.4%

Lafarge S.A.

France

Materials

12,865

‐5.6%

1.0%

‐12.6%

4.3%

5.8%

64

10

110

67

R

‐0.7%

12.4x

4.3%

L'Air Liquide SA

France

Materials

28,710

‐6.9%

0.8%

5.5%

‐1.8%

15.1%

85

410

570

‐0.2%

16.8x

2.6%

Lonmin plc

South Africa

Materials

1,029

‐12.3%

‐3.3%

10.7%

0.0%

15.2%

10

10

26

572

L

‐25.0%

68.3x

1.0%

ArcelorM

ittal

Luxembourg

Materials

19,208

‐4.9%

‐0.4%

1.2%

0.0%

9.6%

58

57

974

‐20.8%

10.2x

5.2%

CRH plc

Ireland

Materials

10,016

‐2.6%

0.8%

0.3%

‐0.6%

6.9%

45

69

10

74

‐1.2%

14.8x

5.3%

Givaudan AG

Switzerland

Materials

8,509

‐8.4%

1.3%

0.3%

‐0.3%

13.0%

94

68

877

1.6%

16.2x

5.4%

Chr. Hansen Holding A/S

Denmark

Materials

22,557

‐6.8%

‐0.1%

‐0.6%

‐2.2%

14.1%

77

610

679

S

‐0.8%

21.1x

4.1%

UPM‐Kym

mene Oyj

Finland

Materials

4,583

‐7.5%

‐0.6%

‐5.1%

0.9%

4.6%

88

82

10

79

L

‐2.7%

10.3x

8.3%

DS Sm

ith Plc

United Kingdom

Materials

1,954

‐4.5%

‐2.2%

‐9.5%

‐0.6%

15.7%

510

89

582

R

6.7%

10.4x

2.6%

Holcim

Ltd.

Switzerland

Materials

20,820

‐8.7%

1.3%

‐0.9%

‐0.1%

7.5%

10

46

710

82

0.3%

14.7x

4.4%

Voestalpine AG

Austria

Materials

4,128

‐6.2%

‐1.3%

‐1.0%

0.0%

12.6%

79

76

882

‐2.2%

7.3x

10.6%

Holm

en AB

Sweden

Materials

15,885

‐5.1%

‐1.8%

5.3%

‐0.3%

6.9%

610

48

10

87

9.3%

13.1x

2.8%

Nyrstar NV

Switzerland

Materials

779

‐11.7%

‐6.6%

9.0%

‐0.5%

13.6%

10

10

38

787

S A

9.1%

7.4x

10.5%

Norsk Hydro ASA

Norw

ay

Materials

54,802

‐8.5%

1.7%

‐3.9%

‐20.1%

7.1%

93

710

10

90

S

‐16.2%

18.8x

6.2%

SSAB AB

Sweden

Materials

15,360

‐9.5%

‐3.7%

‐3.4%

0.0%

14.0%

10

10

76

690

‐37.7%

10.1x

8.7%

Stora Enso

Oyj

Finland

Materials

3,865

‐6.2%

‐1.0%

‐1.3%

0.0%

9.0%

79

77

990

L

‐2.7%

9.6x

6.3%

Acerinox, S.A.

Spain

Materials

2,029

‐7.3%

‐4.5%

‐4.0%

0.3%

7.4%

810

84

10

95

L

‐7.4%

15.8x

6.7%

HeidelbergCement AG

Germ

any

Materials

7,688

‐6.7%

‐1.0%

‐1.4%

‐0.1%

8.1%

79

78

995

0.0%

10.6x

6.8%

Mondi plc

United Kingdom

Materials

3,228

‐8.5%

0.8%

‐2.0%

‐8.9%

7.8%

95

710

995

3.2%

10.5x

9.7%







orw



Source: W


TELECOMMUNICATION SERVICES

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

BT Group plc

United Kingdom

Telecommunication Services

17,081

‐8.2%

12.3%

5.5%

2.0%

18.3%

21

32

94

0.0%

8.9x

4.4%

Elisa Oyj

Finland


2,608

‐11.5%

0.9%

1.1%

0.7%

31.7%

36

53

39

2.3%

13.1x

5.8%

Swisscom AG

Switzerland


19,949

‐17.6%

3.1%

2.4%

0.5%

26.4%

61

34

69

‐0.2%

11.5x

7.4%

Tele2 AB (publ)

Sweden


51,025

‐10.3%

1.9%

7.6%

0.0%

20.8%

23

26

79

‐4.5%

10.0x

8.4%

Telecom Italia S.p.A.

Italy


13,907

‐17.1%

1.6%

6.8%

6.1%

20.6%

55

21

822

0.0%

6.0x

12.3%

Belgacom SA

Belgium


6,901

‐11.7%

1.7%

0.9%

0.0%

32.6%

34

67

226

‐0.9%

10.6x

8.5%

freenet AG

Germ

any


1,641

‐2.5%

1.8%

‐2.0%

‐0.4%

73.8%

13

98

126

4.0%

7.5x

11.8%

Vivendi

France


20,845

‐15.4%

0.2%

1.3%

0.3%

50.4%

57

55

135

A‐0.5%

8.0x

7.3%

Telefónica, S.A.

Spain


47,039

‐17.7%

0.0%

0.4%

1.4%

27.5%

67

62

539

‐1.6%

8.3x

7.6%

TDC A/S

Denmark


32,874

‐12.1%

1.8%

2.1%

0.2%

17.2%

44

45

10

43

R

1.8%

11.0x

9.6%

Telenor ASA

Norw

ay


165,500

‐19.7%

‐1.8%

0.1%

2.9%

31.2%

810

61

448

R

‐6.0%

11.2x

7.0%

Vodafone Group Public Limited Company

United Kingdom


87,072

‐3.5%

‐0.4%

2.1%

‐3.7%

25.5%

19

410

652

0.0%

10.4x

8.0%

Iliad SA

France


6,751

‐21.8%

‐4.1%

27.2%

‐0.7%

44.8%

910

18

252

A‐0.7%

31.4x

‐2.6%

Telekom Austria AG

Austria


2,478

‐24.8%

1.3%

‐5.4%

0.4%

32.5%

10

59

43

61

R

‐6.9%

19.8x

9.9%

Koninklijke

KPN N.V.

Netherlands


8,226

‐17.6%

‐1.2%

‐0.3%

1.2%

21.5%

69

73

765

‐1.1%

6.7x

11.4%

TeliaSonera Aktiebolag (publ)

Sweden


192,602

‐18.6%

1.2%

‐1.7%

0.0%

27.4%

76

86

565

‐1.7%

10.7x

8.9%

France

Télécom SA

France


25,129

‐13.1%

0.6%

‐0.7%

‐0.2%

18.5%

46

77

974

‐1.6%

7.7x

12.2%

Inmarsat Plc

United Kingdom


2,545

‐27.1%

‐8.9%

20.3%

‐0.8%

29.6%

10

10

19

478

‐3.3%

17.8x

4.3%

Cable & W

ireless Communications Plc

United Kingdom


931

‐18.5%

0.0%

‐0.8%

0.1%

18.5%

78

86

883

R

0.0%

9.3x

14.5%

Deutsche Telekom AG

Germ

any


38,472

‐23.9%

2.0%

‐9.7%

‐60.6%

15.5%

92

10

10

10

87

‐7.3%

14.2x

13.5%

Portugal Telecom, SGPS S.A.

Portugal


3,334

‐19.9%

0.0%

‐31.5%

‐4.1%

25.8%

87

10

10

687

A0.0%

10.6x

5.6%

Telenet Group Holding NV

Belgium


4,043

‐36.5%

2.1%

‐15.1%

‐2.9%

16.9%

10

210

910

87

‐9.7%

29.0x

6.9%







orw



Source: W


UTILITIES

RATIOS

SECTO

R RELATIVE DECILE

EARNINGS QUALITY

SENTIMEN

TVALU

ATION


Company Nam

eCountry

Industry Group

Market Cap.

(Local

Currency)

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

Current

Accruals

Change

in

NOAs

Total

Accruals

Other

Asset

Growth

High

Cap

‐Ex

EQ

Score

Add'l

Factors (1)

Estimate

Revisions

(‐30D)

2013E

P/E

LTM FCF

Yield

TERNA‐Rete Elettrica

Nazionale

Italy

Utilities

5,861

‐4.2%

31.8%

69.0%

26.6%

13.1%

31

11

34

L

0.0%

13.4x

‐5.2%

RWE AG

Germ

any

Utilities

21,534

‐1.3%

3.4%

9.9%

‐0.4%

18.1%

14

46

27

S

0.0%

8.7x

‐4.7%

Pennon Group Plc

United Kingdom

Utilities

2,655

‐2.8%

7.5%

20.2%

‐0.4%

8.5%

22

27

711

A0.0%

14.7x

0.2%

Electricite de France

SA

France

Utilities

31,669

‐8.2%

4.0%

9.4%

3.9%

10.5%

63

43

515

R A

‐1.0%

8.1x

‐3.4%

Enel G

reen Power S.p.A.

Italy

Utilities

6,795

‐15.2%

1.3%

52.2%

2.2%

13.1%

85

14

315

0.0%

12.5x

‐1.8%

Fortum Oyj

Finland

Utilities

12,792

‐6.2%

‐0.3%

13.3%

7.0%

8.7%

47

32

722

‐2.2%

10.5x

1.5%

Centrica plc

United Kingdom

Utilities

16,912

‐5.3%

‐0.7%

4.0%

1.7%

20.6%

49

64

126

R A

0.0%

12.0x

4.6%

EDP‐Energias de Portugal, S.A.

Portugal

Utilities

7,704

‐7.5%

0.0%

5.0%

5.3%

10.5%

46

63

526

A0.0%

7.8x

3.1%

Veolia Environnement S.A.

France

Utilities

4,108

‐9.0%

0.0%

‐1.5%

15.5%

34.1%

77

91

133

‐3.3%

12.5x

5.5%

United Utilities Group PLC

United Kingdom

Utilities

4,929

‐15.8%

10.5%

15.9%

13.0%

5.8%

92

32

10

37

0.0%

17.0x

2.3%

Drax Group plc.

United Kingdom

Utilities

1,902

0.6%

‐0.9%

6.4%

1.9%

8.5%

19

54

737

‐3.9%

18.4x

8.6%

Enagas SA

Spain

Utilities

3,696

‐20.2%

15.7%

28.7%

‐4.6%

12.8%

10

12

10

444

0.0%

9.3x

0.7%

E.ON AG

Germ

any

Utilities

34,796

‐3.3%

‐0.9%

1.6%

1.5%

11.2%

210

75

448

1.4%

10.3x

3.6%

Snam S.p.A.

Italy

Utilities

11,552

‐15.2%

8.9%

25.0%

0.2%

5.7%

92

26

10

52

0.0%

12.4x

2.8%

SSE plc

United Kingdom

Utilities

13,753

‐4.3%

‐0.3%

1.4%

‐8.0%

16.4%

38

710

256

L

‐0.9%

12.0x

2.0%

Gas Natural SDG SA

Spain

Utilities

11,908

‐3.1%

5.3%

1.4%

‐1.4%

6.5%

23

88

956

‐0.7%

9.0x

3.7%

VERBUND AG

Austria

Utilities

6,160

‐9.4%

3.1%

6.2%

‐1.7%

9.7%

74

59

663

S A

‐0.9%

14.5x

3.4%

Iberdrola SA

Spain

Utilities

24,284

‐8.8%

3.6%

‐0.9%

0.3%

7.3%

64

95

867

2.2%

9.4x

6.3%

National G

rid plc

United Kingdom

Utilities

25,667

‐15.4%

2.6%

5.7%

‐0.5%

9.3%

95

67

670

S

0.0%

12.9x

3.8%

Suez Environnement Company SA

France

Utilities

4,209

‐11.0%

‐0.6%

‐1.9%

‐0.1%

15.3%

88

96

270

A‐1.6%

11.7x

6.5%

GDF Suez S.A.

France

Utilities

41,366

‐8.9%

0.8%

0.4%

‐1.2%

10.2%

66

88

678

R

‐0.6%

10.7x

6.4%

Red Eléctrica

Corporación S A.

Spain

Utilities

5,004

‐37.5%

‐3.3%

10.6%

‐1.1%

10.7%

10

10

47

481

‐2.2%

9.8x

3.8%

Enel SpA

Italy

Utilities

27,702

‐7.6%

0.8%

1.8%

‐2.1%

7.0%

56

79

985

0.0%

8.1x

6.5%

Endesa

SA

Spain

Utilities

17,395

‐7.8%

‐2.3%

‐2.1%

6.3%

7.2%

510

10

29

85

1.1%

8.9x

10.9%

Acciona SA

Spain

Utilities

2,702

‐10.6%

‐0.9%

‐2.7%

‐11.7%

7.6%

79

10

10

893

A‐1.1%

17.3x

4.9%

Severn Trent plc

United Kingdom

Utilities

3,963

‐25.0%

‐0.2%

‐5.6%

‐1.7%

5.6%

10

710

910

96

R

‐2.0%

16.9x

5.4%


Appendix II: Managing Earnings

AAPPPPEENNDDIIXX IIII:: CCOOMMMMOONN WWAAYYSS TTOO MMAANNAAGGEE EEAARRNNIINNGGSS


MMAANNAAGGIINNGG EEAARRNNIINNGGSS

VVOOLLUUNNTTAARRYY AACCCCOOUUNNTTIINNGG PPOOLLIICCYY CCHHAANNGGEESS

Companies are required to disclose both critical accounting policies and a summary of significant accounting policies. Unless mandated by the International Accounting Standards Board (IASB) or regulators, we view any changes to these disclosures with skepticism. As a possible indicator of earnings management, we read these sections for accounting changes benefiting earnings. Possible changes include revenue recognition, treatment of property, plant and equipment depreciation, cost capitalization, changes to the equity method of accounting from consolidation accounting, higher use of capital leases, and expense classifications. None of these items individually is necessarily a red flag. However, they should be used as part of the investment mosaic with other earnings quality items and fundamental analysis. RREEVVEENNUUEE RREECCOOGGNNIITTIIOONN

Historically, the largest number of financial restatements has resulted from improper revenue recognition. Some business models lend themselves to more flexibility in recognizing revenue. For example, consider a sell-in versus sell-through business model where there is a distributor or other vendor as the “middle man”. In a sell-in revenue recognition practice, revenue is recognized when shipped to the distributor and, from the company’s perspective, there is clearly more discretion in the timing and amount of inventory shipped and, therefore, recognized. This is often known as “stuffing the channel”. Conversely, in a sell-through model, revenue is recognized upon final shipment to the end customer (distributor to the customer). There is less (but still some) flexibility to stuff the channel in this scenario as revenue is recognized based on end demand from the customer. Improper revenue recognition under a sell-through model may still occur if a company is using “bill and hold” type sales or shipping inventory to a related party or vendor with close ties. Below we discuss the primary ways in which revenues may be managed.

1. Bill and hold sales. The existence of bill and hold type sales are a red flag, in our view. Bill and hold sales are where a company “sells” a product to its customer, title is transferred, collectability of payment is reasonably assured, but the product hasn’t shipped. Certainly, there may be legitimate means for such sales. However, since the product hasn’t shipped and isn’t consuming space on the customers’ premises, there is incentive for companies to use it as a means to pull forward sales into a current quarter. A discount may even be offered as terms for its use. The way to spot this artifice is through a careful reading and comparison of the company’s annual report accounting policy section and/or the questioning of company management.

2. Extended payment terms. In a similar vein to bill and hold sales, a company might grant extended payment terms to customers as an inducement for sales, in effect, financing the purchase with a longer-term receivable.

3. Sales return / discounts reserves. Revenues are recorded in earnings net of estimated sales return and discount reserves. Since these amounts are estimated, a company may use a reduction (drawdown) of these reserves as a gain to boost revenues. An alternative means to boost current period revenues is to under reserve for sales returns and discounts. In this scenario, since a lower amount is deducted from gross sales, earnings improve. However, this is unsustainable if returns/discounts turn out to be higher as the company will need to replenish the reserve in a future period (reducing earnings). Furthermore, if a product experiences a changing pattern of returns or discounts, there may be a surprise increase in this reserve and a corresponding reduction in net revenues. Further, a new policy for sales’ right of return may


MMAANNAAGGIINNGG EEAARRNNIINNGGSS ((CCOONNTTIINNUUEEDD))

indicate that sales returns/reserves could be understated. In the past, retailers and some drug companies have experienced issues with sales returns/discount reserves.

4. One-time gains recorded as revenue. Although not common, a company may choose to record a gain on the sale a business in revenue.

5. Contract accounting/percentage of completion accounting. Some business models lend themselves to more revenue recognition flexibility. For complex and multi-period/year projects, revenue is often recognized under the percentage of completion (POC) accounting method. The POC method records revenues based on the percentage of costs incurred in the current period relative to total estimated costs or based upon certain project milestones. At the onset of the project, revenues, expenses and a related project margin are estimated. In turn revenue is recognized each period based on these assumptions. If a companies’ estimate of costs and related revenues are inaccurate, there may be a one-time charge to write-off accumulated costs. Even if costs are not written off, there is still significant flexibility to manage reported revenues and margins under this type of accounting.

6. Material decreases/changes in deferred revenue. IRFS requires a deferred revenue liability to be recorded in situations where cash is received prior to when revenue is allowed to be recognized. A simple example is a 2 year newspaper subscription. On the balance sheet, there is an increase in cash and an increase in the short and/or long term deferred revenue liability. Assuming no new subscriptions, the deferred revenue liability decreases each period as papers are delivered and revenue is recognized in earnings. For an ongoing business growing sales, the deferred revenue liability should grow each period and be a source of cash in operating cash flow. Since deferred revenue represents a pool of future revenue, a company may change how deferred revenue is recognized or improperly draw down from this account. Therefore, we review this account for material year-over-year and sequential declines. A deferred revenue decrease or a deceleration in this account is a possible warning sign of a deteriorating underlying business since it represents revenue to be recognized in future periods.

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Apart from reviewing the financial footnote for changes in revenue recognition policies, existence of sell-in revenue recognition and bill and hold practices, we’ve found a few simple ratios to be the best at signaling aggressive revenue recognition:

I. Days Sales Outstanding (DSOs). We calculate this ratio as ending accounts receivable divided by sales (annualized if quarterly) multiplied by 365 days. Average accounts receivable may also be used, but we prefer to use ending as average smooths out the possible effects of such practices as stuffing the channel at quarter-end. We also recommend reviewing the debt footnote to ensure there are no securitization of accounts receivable. Selling receivables would artificially lower this ratio and, therefore, decrease its efficacy in detecting aggressive revenue recognition.

II. Days Deferred Revenue (DDR). If a company’s business model uses deferred revenue, we calculate a days deferred revenue metric similar to a days sales outstanding metric. It is calculated as the total deferred revenue divided by sales (annualized if quarterly) multiplied by 365 days. A declining ratio may suggest a move to a more aggressive revenue recognition policy, a slowing overall business, or a change in policies.



III. Sales Return Reserves / Discounts. If disclosures exist, we calculate the sales return/discounts reserve to sales and review for material decreases in this ratio. A company may dip into these reserves as a means to boost earnings and this is unsustainable if the sales return/discount reserves are actually higher. We also compare the sales return/discount provision to current period revenues.

IV. Large Increases in Other Receivables or Other Assets. As an enticement to boost current period sales, long-term financing may be used. An increase in balance sheet accounts such as other receivables, financing receivables or other assets are areas in which long term receivables may be recorded. In this scenario, days sales outstanding would not necessarily be a reliable red flag indicator.

V. Related Party Sales or Sales to Off-Balance Sheet Joint Ventures. Review financial statement footnotes for the existence of these items.

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Recognition of operating expenses in earnings is another area requiring significant management estimates and assumptions. To boost earnings, a company may defer current period expenses to a future quarter (cost capitalization), lower (understate) current period expenses, classify normal operating expenses as non-recurring items or use pro forma earnings. Changes in estimate driven expenses generally fall into one of six categories:

I. Cost capitalization; II. Depreciation changes; III. Reserves; IV. Accrued expenses; V. Exclusion of expenses (pro forma earnings); and

VI. Pension plan expected rate of return. CostcapitalizationImproper capitalization of costs on balance sheet has been an area historically rife with aggressive accounting. Its form varies from a change in an accounting policy, to an outright fraud, or even to a new business model under which it is permitted since there are no clear accounting rules. Cost capitalization is required in certain circumstances, but it still may impair comparability across companies. In its true form, cash is expended in the current period for business items (marketing, contract costs), but management must reasonably allocate the costs to future period(s) expected to benefit under the matching principle. Estimating the future benefit period of such costs is rife with assumptions. What’s more, cost capitalization is relatively easy to do. As an example, to shift current period expenses out of earnings to the balance sheet, a company might adopt a voluntary change in their cost capitalization policy. Expenses related to long life assets (e.g., PP&E) are capitalized on the balance sheet as an asset if they are expected to provide future benefits typically greater than 1 year. This allows the matching of costs incurred with related revenues. By capitalizing costs, earnings are higher since the costs are deferred to an expense in a future quarter. On the cash flow statement, the increase in the asset is reported as a cash outflow in operating, investing or financing cash flow. If the cost capitalization is reported in operating cash flow, it will be comparable to other companies. Conversely, if the capitalization of asset is reported in investing or financing, operating cash flow will be permanently overstated. Over time, as the



capitalized costs are expensed, earnings are lower, but operating cash flow is unchanged since the expense is non-cash and added back to operating cash flow. As an example, WorldCom improperly capitalized normal recurring costs as property, plant and equipment and reported the cash outflow in investing cash flow. Classifying Costs as Investing Cash Outflows – WorldCom

WorldCom

($ in millions)

2000 Reported 2000 Restated 2001 Reported 2001 Restated

Cash flow from operations $7,666 $4,227 $7,994 $2,845

Cash flows from investing activities

Capital expenditures (11,484) (11,668) (7,886) (6,465)

Acquisitions and related costs (14) 0 (206) (171)

Increase in intangible assets (938) 0 (694) 0

Decrease in other l iabil ities (839) 0 (480) 0

All other investing activites (1,110) 505 (424) 514

Cash used by investing activies ($14,385) ($11,163) ($9,690) ($6,122)

Year ended December 31,


As two examples of where cost capitalization is required consider interest cost and software development. Under IAS 23, interest cost on borrowings used to construct long term assets is capitalized as part of the asset’s cost. Since the interest cost is included in PP&E, it never appears as interest expense on the income statement. Rather, it is included as part of the asset and, therefore, depreciation expense over time. It also never appears as a cost in operating cash flow as the interest paid is encapsulated in the cash outflow shown for capital expenditures in investing cash flow. Therefore, this is why credit rating agencies calculate cash interest paid to measure debt servicing capabilities. Reported interest expense may be artificially low. Software development cost is another area where capitalization is allowed. IFRS generally requires capitalization of internal software development costs and then such costs are amortized over their expected benefit period. There is inherent subjectivity in the estimated cost amortization period and the determination of when technological feasibility is reached. This illustrates how even if an accounting principle requires a certain practice, different management assumptions may lead to different reported expense amounts, all else being equal. For internal use software, capitalization is required once the “application development stage” begins and this is defined as the stage in which the design, coding, hardware installation and testing occurs. DepreciationChangesAs discussed in an earlier section, overcapitalizing costs is a means to increase current period earnings. Changing assumptions used to calculate depreciation expense is another method used to increase earnings and has been the underlying reason for numerous historical accounting restatements. To calculate depreciation expense, there are three primary inputs: depreciation method (straight line, accelerated depreciation, etc.), asset’s residual value, and depreciable life. To lower annual depreciation



expense and boost earnings, a company might change its assumptions by increasing residual values, extending depreciable lives or changing the depreciation method. Any of such changes are red flags in our view. To identify these changes, we suggest reading through the financial filings as material changes in these items are required disclosures. The average depreciable life ratio is also helpful in spotting changes in assumptions (gross PP&E divided by LTM depreciation expense). Within a sector or industry group, comparing depreciation expense to sales assists in identifying companies with more lenient depreciation expense policies. In addition, the total accruals ratio used in our model will identify excess balance sheet growth that might occur through high cost capitalization. ReservesBalance sheet reserve liabilities are another category of accrued expenses that may be drawn down to lower current period expenses. Examples of balance sheet reserves include warranty, restructuring, bad debts, taxes, and litigation. Reserve accounts should be reviewed for gains from excess reserve reversals (i.e., the cookie jar) and under-reserving (expensing) in the current period. Since reserves are management estimates, IFRS provides significant flexibility in the timing and amount expensed in earnings or reversed as a gain in earnings. A common abuse over the years is to incur a large one-time excessive restructuring charge (shown as an accrued liability on the balance sheet) and then slowly reverse this as a gain into earnings. The large restructuring charge itself may improve future earnings as assets are written down (lower depreciation expense) and future operating expenses are pulled forward into a charge in earnings. Another example of a reserve reversal is taxes. Companies maintain a material tax reserve liability for uncertain tax positions. Management may reverse part of the reserve as an offset against reported income tax expense to lower the current period effective tax rate. This is a typical reason a company "beats" earnings due to a lower than expected income tax rate. A less well known tactic used to boost current period earnings is under expensing a recurring cost such as warranty or bad debts. This will benefit current earnings, but without a sustainable improvement in quality or collection efforts, the company will need to replenish the reserve through higher warranty/bad debt expense in future periods. To match costs in the same periods revenues are recognized, the company must expense its estimate of the cost of returns, product quality issues, bad debt, etc. in the period in which the sale occurs. In calculating the current period expense amount, companies generally use their historical experience and expectations based on current market conditions. This provides the flexibility to manage the expense amount. To detect possible under accruing of expenses, we compare the reserve amount to the related cost driver (warranty to sales, bad debt expense to accounts receivable, inventory reserves to inventory, sales returns to sales and inventory). A low reserve percentage relative to the historical ratio is one indicator of possible under-expensing current period costs. As an example, a company begins the quarter with a warranty accrued liability to sales of 3%. To reduce current period expenses, the company might expense only 1% of sales as warranty expense. As a result, the ending reserve declines to 2% of sales. If reserves really are 3% of sales, the company will need to increase warranty expense even higher than 3% of sales in future periods to make up for the current period shortfall. The next exhibit is an illustration of Ericsson's material reserve reversals. After the telecom bust, the company recorded substantial "big bath" restructuring and other charges. In hindsight, the charges were excessive and, therefore, part of this accrued liability was reversed as a gain in earnings over time. Based on the table below, there was at least a two year pattern of approximately 4.8 billion SEK reserve reversals into earnings each year.



Illustration of Reserve Reversals: Ericsson


AccruedExpenses:Underreporting/DrawDownsUnderstating accrued expenses on the balance sheet is one less known tactic to increase current period earnings. An accrued expense liability is an unpaid expense for which there has already been an IFRS expense recognized. As an example, consider an employee vacation accrual. During the year in which the employee earns vacation, an expense is recorded along with a vacation accrued liability as the employee works during the year. When the employee takes vacation, the accrued liability is reduced but there is no income statement impact. To boost current period earnings, a company may draw down the accrued expense liability and avoid a current period expense in earnings. Continuing the vacation accrual example, an employer could institute a policy of requiring employees to take two weeks of vacation at the end of December. During those two weeks in which the employee is off, the accrued liability is drawn down instead of recording employee compensation cost in earnings since vacation days are drawn down. This benefit is temporary if the accrued expenses are recurring as the accrued compensation cost will increase in the following period. The best ways we've found to detect these items are by comparing the ratio of the change in accrued expenses to the change in revenue and by reading through Management's Discussion and Analysis section (MD&A) for any changes in accrual accounting policies. Changes (decrease) in the accrued liability balance at year-end is also a red flag.

Ericsson’s 2006 20-F Filing: Provisions (SEK Millions) Warranty

commitments Restructuring Other1)2)Total

provisions

2006 Opening balance 4,821 2,314 11,533 18,668Additions 2,561 2,765 5,420 10,746Costs incurred -3,471 -2,308 -4,561 -10,340Reversal of excess amounts -1,100 -416 -3,231 -4,747Balances regarding divested/acquired businesses 224 20 -24 220Reclassification 15 19 -121 -87Translation difference for the year -89 -117 -372 -578Closing balance 2,961 2,277 8,644 13,882

2005 Opening balance 6,424 3,598 14,756 24,778Additions 2,858 1,323 5,564 9,745Costs incurred -3,181 -1,983 -6,894 -12,058Reversal of excess amounts -1,390 -480 -2,923 -4,793Balances regarding divested/acquired businesses 6 — — 6Reclassification 3 -322 224 -95Translation difference for the year 101 178 806 1,085Closing balance 4,821 2,314 11,533 18,668

1) Both current and non-current provisions. 2) Off-balance customer financing is included in other provisions.



ExclusionofExpenses(“ProFormaEarnings”)To boost reported earnings or mask slowing business growth, a company may choose to report pro forma earnings excluding certain operating costs such as intangible asset amortization and stock based compensation. Another similar tactic is the "recurring" expensing of non-recurring items related to restructurings, lawsuits, and other items. Our research has found that as the number of consecutive quarters of special charges in earnings reached four quarters, this group of stocks underperformed their sector by approximately 200-300 basis points in the following one year period, suggesting that the market begins to treat such costs as recurring items. The reality is that restructuring costs represent a catch up of costs that should have been expensed in prior periods and, thus, earnings in prior periods were overstated. MMAANNAAGGIINNGG GGRROOSSSS MMAARRGGIINNSS // IINNVVEENNTTOORRYY IISSSSUUEESS

There are several inventory maneuvers used to improve reported gross margins:

Gains from reversing inventory reserves; Delaying inventory write-downs by under-reserving for obsolete or old items; Overproducing to lower average cost; and Large inventory write-downs in the current period followed by selling it next period.

First, large reductions in inventory reserves may boost gross margins. Inventory reserves are recorded on obsolete, excessive, returns or old items. As an example, selling previously written down inventory at a higher expected margin (than at the time of write-down) boosts margins. It is unsustainable as the cost of producing new inventory is higher than the previously written down amount. Another way margins may temporary benefit is deferring an inventory write down into a future period. Next, inventory overproduction boosts gross margins by lowering the average cost per unit through higher fixed overhead absorption. Therefore, a company may boost margins simply by overproducing inventory for which there may be uncertain end product demand. Particularly in a relatively high fixed cost business, we watch both gross margin trends and inventory balances. Both rising gross margins and inventory balances (days inventory) are suggestive of lower quality of earnings, in our view. We would prefer to see rising margins and stable or lower days inventory. HowtoSpotInventoryIssuesWe've found the trend in, and peer group comparison of, the days inventory financial ratio to be the most predictive at identifying any inventory related issues (inventory / annualized cost of sales x 365). Changes in inventory reserves should also be reviewed for draw-downs or the lack of sufficient reserves.



TTAAXXEESS

Taxes are common area in which we’ve witnessed low earnings quality. The classic earnings management tool is to meet or exceed earnings forecasts due to a lower than expected income tax rate. This occurs for typically one or two reasons. First, companies are required use an estimated annual tax rate to calculate their quarterly tax rate. Using an initially higher annual effective tax rate estimate allows them to true-up the tax rate in any particularly quarter. The catch-up gain is recorded in earnings in the quarter in which it occurs and the prospective tax rate is also lower. Second, companies maintain a tax reserve accrued liability for tax positions where there is possible tax audit risk (akin to a legal reserve). This occurs when a company deducts an expense on their tax return (saving cash taxes), but does not record the tax benefit in their IFRS financial statements through a lower tax rate. In any given quarter, a company might settle or otherwise determine that the accrued tax liability is no longer necessary and reverse part of the liability as a gain offsetting income tax expense. For longer-term investors, the most important earnings quality tax area is analyzing the sustainability of and drivers of the current IFRS effective tax rate (income tax expense divided by pre-tax IFRS income) and the cash tax rate (cash taxes as disclosed / pre-tax IFRS income). A comparison to peer companies is also important. As we discussed as part of the earnings quality model, we’ve found that companies with low tax rates have underperformed as a group historically. However, the data was inconclusive for low cash tax rate companies. We believe this was due to the significant quarterly volatility in cash tax payment rates. However, in some cases of accounting fraud, a low cash tax rate has been a red flag of future problems and, therefore, we closely monitor it as a secondary measure. For example, as shown in the following exhibit, despite reporting $1.4 billion in GAAP earnings before taxes in 2000, Enron reported a very low cash tax rate during periods in which there was accounting issues. This suggested that the income reported for GAAP to shareholders wasn’t considered income for tax purposes (the Internal Revenue Service usually taxes income more similar to a cash income basis) and that income was shielded through complex tax shelters. Companies overstating earnings through non-cash means will generally pay lower cash taxes since the tax authorities don’t deem the GAAP income as real income. A Low Cash Tax Rate Signaled Early Warnings – Enron

ENRON

Calculated Cash Tax Rate

($ in millions)

1998 1999 2000

Income before taxes $878 $1,128 $1,413

Cash taxes, net of refunds 73 51 62

Cash tax rate 8% 5% 4%

Year ended December 31,




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Acquisitions create the pressure for management teams to show pro forma earnings accretion of the combined company and justify the financial terms of the transaction. This creates the perfect storm for earnings management and low earnings quality. Under the IFRS purchase accounting rules, companies are required to mark the entire balance of the target company (not parent) to fair value on the acquisition date. Intangible assets are also typically created as part of this process. The amount paid for the target company in excess of the net assets’ fair value (including intangibles) is recorded as goodwill and there is no amortization of goodwill for IFRS purposes. This amount remains on the balance sheet and is tested at least annually for impairment. There are several items to watch in acquisitions and each is discussed in turn:

Allocating a high percentage of purchase price to non-amortizable goodwill; Long amortization periods for intangible assets = lower annual expense; Excess write-down of the target’s property, plant and equipment = lower future depreciation; Big bath restructuring charges taken by the target company prior to acquisition; Movement to “pro forma” earnings reporting for acquisition related items; Changes in initial purchase price allocation to the target’s net assets; Disguising future compensation as earn-outs or other one-time payments; and Cherry picking accounting policies: choosing the more favorable accounting method of the two

companies. Since goodwill isn’t expensed as amortization (correctly in our view) anymore, IFRS provides an incentive for companies to allocate an excessive amount of the acquisition cost to goodwill instead of amortizable/depreciable assets. By allocating the cost to goodwill, the company reports higher earnings by avoiding depreciation/amortization expenses. Further, within the intangible asset category, companies are incentivized to allocate more costs to non-amortizable “indefinite” useful life intangible assets as compared to “definite” intangible assets, which are amortized over their benefit period. An indefinite useful life is defined as a period extending beyond the foreseeable horizon and created under IFRS if a company cannot ascertain an asset’s useful life. For intangible assets, a company may choose a longer amortization period or method of amortization (straight line compared to the accelerated method) to lower the annual expense amount. We believe amortization periods beyond 5 to 10 years are excessive given technology obsolescence and changing consumer trends. A few acquisition accounting antics center around lowering post-acquisition costs by incurring them prior to the closing date of the acquisition or by recording big bath accounting write-downs when valuing the target company’s net assets. One way of increasing a company’s post-acquisition earnings is by excessively writing down the target company’s property, plant and equipment in purchase accounting. In so doing, annual depreciation expense is lowered since the PP&E balance, subject to annual depreciation, is lower. One way of spotting this is to review the company’s purchase price allocations’ financial statement footnote. Another related way of lowering post acquisition depreciation expense is to simply change the depreciation method or life in purchase accounting. Still another way of lowering the annual expense is recording significant pre-acquisition restructuring costs by the target company. These expenses would be accrued as a liability on the balance sheet of the target company prior to the acquisition and, therefore, treated as an assumed liability in purchase accounting.



Accounting rules allow changes in the initial purchase price valuation of the target company’s net assets for 1 year after the acquisition’s closing date. While some small changes within the first quarter or two are common as final asset/liability valuations are completed, large favorable purchase price accounting adjustments should be viewed with caution. This would include larger purchase price allocations to goodwill and non-amortizable intangibles, a larger write-down of property, plant and equipment, and inventory write-downs. For example, a company might choose to allocate more of the acquisition’s purchase cost to non-expensed goodwill instead of expensed intangible assets so as to meet or exceed earnings estimates. Switching to the use of pro forma earnings after the acquisition is another way to boost earnings. There may be justifiable reasons for reporting under an earnings measure that excludes certain non-recurring costs, such as restructuring. If a company is expected to report only several quarters of restructuring costs, viewing an earnings metric excluding such costs is most appropriate, in our view. However, since the costs chosen to be excluded are subject to significant management judgment and there is pressure to show post-acquisition earnings accretion, earnings quality deteriorates as the frequency and amount of such excluded items increases. Some acquisition structures include future “earn-out” payments to prior shareholders or employees based on targets of future sales, earnings or other operating performance metrics. This structure tends to be used in the acquisition of a private company in which there are only a few shareholders. Often, the senior management of the acquired company will move to the acquired firm and assume similar roles. One way of reducing subsequent compensation cost of these employees is to try and structure their future compensation in the form of an earn-out since these payment amounts are not expensed through earnings (some are marked up or down through earnings if their initial value changes). Last, acquisitions provide the opportunity for companies to change to more favorable accounting policies. Under the ruse of “harmonizing” different policies, there may be a switch (benign or otherwise) in depreciation policies, classification of expenses, taxes, revenue recognition and cost capitalization, among other items. Any changes may fall under the radar given the acquisition. Given the aforementioned numerous ways to manage post acquisition earnings, it’s logical to conclude that highly acquisitive companies should be analyzed based on cash flow. However, cash flow isn’t a great measure either as companies may materially alter working capital. A simple illustration is to push off collecting receivables until after the transaction closes (high DSOs when transaction closes) and then decrease to “normal level”. Alternatively, on the liability side of the balance sheet, a company might choose to reduce accounts payables (lows days payable ratio) prior to an acquisition (a cash outflow) and then rebuild accounts payable amounts (a cash inflow) after the acquisition closes.



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Unfortunately, no financial ratio or metric will flag potential large off-balance sheet entities. Therefore, only a careful reading of disclosures will identify possible red flags. An added complication is that disclosures are typically poor. Broadly, when reviewing footnote disclosures, we assess if off-balance sheet entities are used to hide debt, inventory or expenses. As an example, a company with an off balance sheet joint venture from which it purchases inventory (or sells inventory such as raw materials) may use it as a vehicle to shift inventory off the parent company’s balance sheet. This would obfuscate deterioration in the parent company’s financial ratios, such as days inventory outstanding. We review off-balance sheet entity disclosures to answer the following questions:

(1) What are the company’s maximum possible losses in the entity? (2) Are there any liquidity support agreements or debt guarantees under which the parent company

would be liable? What would be the possible cash requirements? (3) Under what circumstances would the parent company be required to consolidate the entity?

Would this violate debt covenants? (4) Would the company be compelled to voluntarily rescue the off-balance sheet entity.


Appendix III: True Rate of Equity Expansion

(“TREE”)

AAPPPPEENNDDIIXX IIIIII:: TTRRUUEE RRAATTEE OOFF EEQQUUIITTYY EEXXPPAANNSSIIOONN ((““TTRREEEE””))


TTRRUUEE RRAATTEE OOFF EEQQUUIITTYY EEXXPPAANNSSIIOONN ((““TTRREEEE””)) OOVVEERRVVIIEEWW

Shareholder value creation and capital allocation are two important criteria in evaluating investment opportunities. One traditional accounting metric used in measuring shareholder value creation — return on equity (ROE) — has become unreliable in recent years due to volatile and large swings in a company shareholder's equity account often unrelated to the underlying performance of the core operating business. That is, a high reported return on equity may provide investors with a misleading picture of company profitability from a distorted equity balance. To remedy this, we've created an alternative measure — TREE (True Rate of Equity Expansion) — calculated as the 5 year growth rate in a company's adjusted shareholder's equity. TREE is an improved ROE measure and an objective framework for finding great businesses. We use it for stock picking when combined with capital allocation (management teams returning cash to shareholders) and valuation. In short, we seek to identify companies with a high TREE, returning cash to shareholders and attractive valuation (P/E ratios and cash flow). We believe that TREE can be a useful tool for both growth and value investors. As an illustration of the failure of traditional return on equity measures, in the exhibit below, we calculate accounting return ratios for Philips Electronics. First, we show the significant volatility in common shareholder's equity (due to treasury stock share repurchases and "additional comprehensive income" including pension swings, foreign exchange translation, unrealized gains/losses on marketable securities and cash flow hedge derivatives). Next, we show how return on capital and equity measures have been very volatile and, therefore, difficult to put into context.

Wolfe Trahan Illustration Comparing TREE to Other Accounting Return Metrics for Philips Electronics (PHIA-NL) (Euro millions)

2007 2008 2009 2010 2011Assets:Total assets (a) 36,343 33,041 30,527 32,269 28,966 Less: Goodwill 4,135 7,701 7,362 8,035 7,016 Less: Intangibles 2,154 3,975 4,161 4,198 3,996 Total goodwill + tangible assets (b) 30,054 21,365 19,004 20,036 17,954 Net operating assets (c) 11,378 7,422 7,111 7,104 6,151

Common Shareholder's Equity:Total common equity 21,684 16,243 14,595 15,046 12,355

Add (Less) Unrealized Marketable Securities and Foreign Exchange Losses (Gains) 1,297 2,345 - (69) -

Add (Less): Tax-effected Unfunded (Overfunded) Pension (1,004) (695) (495) 1,197 1,332

= Total common equity ex. AOCI & Pension (d) 21,977 17,893 14,100 16,174 13,687

Debt:Total debt (e) 3,557 4,158 4,267 4,658 3,860

After-tax operating Income (f) 1,192 642 366 1,444 839 Earnings from continuing operations (g) 4,601 (178) 410 1,446 (780)

RatiosReturn on total assets (f)/(a) 3% 2% 1% 5% 3%Return on total tangible assets (f)/(b) 4% 2% 2% 8% 4%Return on invested capital (NOA) (f)/(c) 13% 6% 5% 20% 12%Return on invested capital (Debt + Equity) (f)/(d)+(e) 5% 3% 2% 8% 4%Return on equity (g)/(d) 23% -1% 2% 10% -5%

5 Year TREE 13% 14% 12% 11% 9%

Amounts reflect annual amounts as of end of each fiscal year. Return measures calculated based on beginning asset or equity balance from prior period.



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TREE is a measure of a company’s 5 year historical capital creation and is the 5 year compounded annual growth rate between a company's current adjusted book value per share and the book value per share 5 years ago. The current adjusted “TREE” book value is the hypothetical book value amount of a company if all cumulative earnings were retained (e.g. there were no distributions made to shareholders). We do not exclude goodwill and intangible assets since we believe management expects to earn a return on paying a premium for an acquisition (if the acquisition doesn’t work out as planned, the reduction in equity that occurs as result of the write-down indicates that management has destroyed capital). Similarly, we do not add-back restructuring charges or goodwill impairments as we feel these are indications of capital destruction given where capital could have been more expeditiously allocated in the past. For all book value amounts, both the actual and adjusted, we have excluded any amounts and changes due to accumulated other comprehensive income (AOCI) in equity. AOCI is used as a “holding account” within equity on the balance sheet for items that may not necessarily impact the economics of the company directly and is often highly volatile. AOCI includes fair value changes from cash flow hedges, translation of foreign subsidiary financial statements, changes in pension plan funded status, and unrealized gains/losses on available for sale marketable security portfolios. We adjust TREE for M&A, stock issuances, stock compensation, and other items.

Wolfe Trahan: Two Methods of Calculating Adjusted “TREE Book Value” – 5 years

(1) Non-earnings Equity Impact Method

The current adjusted “TREE” book value is calculated as follows:

= Current reported IFRS/GAAP book value (excluding AOCI)

+ Aggregate share repurchases (trailing 5 years)

+ Aggregate cash common dividends paid (trailing 5 years)

- Aggregate share issuances due to secondary offerings, stock option exercises, stock issued in M&A deals (trailing 5 years)

+/- Aggregate other items impacting equity (convertible debt/ preferred stock conversions, spin-offs, etc.) (trailing 5 years)

= Current adjusted IFRS/GAAP equity (book value)

Divided by average diluted share count over the 5 year period.

(2) Alternative Calculation (Cumulative Earnings Shortcut Method)

The current adjusted “TREE” book value is calculated as follows:

= Beginning reported IFRS/GAAP book value (excluding AOCI) from 5 year ago period

+ Cumulative net income over 5 year trailing period

= Current adjusted IFRS/GAAP equity (book value)

Divided by average diluted share count over the 5 year period.


Calculation of True Rate of Equity Expansion – 5 years

True Rate of Equity Expansion =

[(Current Adjusted “TREE” Book Value per share / Beginning Book Value per share )^1/5] – 1



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The average diluted share count is utilized to calculate book value per share. This ensures the inclusion of a reduced share count due to share repurchases and stock based compensation dilution. Below is an example of the TREE calculation for Philips Electronics. Both methods of calculating the adjusted “TREE” book value are shown.

Wolfe Trahan Illustration – Calculating TREE for Philips Electronics (Euro millions)

Koninklijke Philips Electronics N.V. - Calculation of 5 year TREE Cumulative Earnings Shortcut Method

Euro millions Per Share

5 Years Ago Book Value 19,960 16.88 Last 5 Years Cumulative Net Income 5,499 Current Adjusted TREE Book Value 25,459 25.88

TREE (5 year compound growth rate) 9% = [(Current TREE Book Value / 5 Year Ago Book Value)^(1/t)] -1 = [(25.88 / 16.88) ^(1/5)] -1

Koninklijke Philips Electronics N.V. - Calculation of 5 year TREE

Euro millions Per Share

5 Years Ago Book Value 19,960 16.88

Current Book Value 13,687 Remove non-earnings items that impacted book value: Add: 5 Year Trailing Common dividends 2,526 Add: 5 Year Trailing Share Repurchases 4,705 Add: 5 Year Trailing Peferred Dividends - Less: 5 Year Trailing Common stock issued (94) Add/Less: 5 Year Trailing Other Non-earnings items (SBC) 4,635 Current Adjusted TREE Book Value 25,459 25.88

TREE (5 year compound growth rate) 9% = [(Current TREE Book Value / 5 Year Ago Book Value)^(1/t)] -1 = [(25.88 / 16.88) ^(1/5)] -1

Note: Book value amounts exclude AOCI and Pension. Amounts reflect annual periods ending 12/31/11.


Our TREE thinking was inspired, in part, by Warren Buffett’s musings on intrinsic value:

“Inadequate though they are in telling the story, we give you Berkshire’s book value figures because they today serve as a rough, albeit significantly understated, tracking measure for Berkshire’s intrinsic value. In other words, the percentage change in book value in any given year is likely to be reasonably close to that year’s change in intrinsic value.”

Historically, Berkshire has not paid dividends or repurchased stock (although a share repurchase program was recently announced). Therefore, to apply this reasoning to a broader universe of publicly traded companies, we adjust reported GAAP book values to calculate a book value growth rate (TREE).


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On the next two pages are STOXX Europe 600 companies with high TREE growth over the past 5 years that have returned material amounts of capital to shareholders. The criteria we used to compile this list includes: 13% minimum TREE growth and 20% minimum capital returned (dividends + buybacks) to market capitalization. Since free cash flow estimates are not accumulated by consensus aggregators but EBITDA estimates are available, as a proxy for cash flow generation, we use 2013E EBITDA estimates to the current enterprise value. In the right hand columns, we list the breakdown of the company’s capital return method over the last 5 years (dividends vs. share repurchases). Finally, as a measure of sentiment, a footnote (1) indicates the company has had positive 2012E EPS analyst revisions over the last 30 days. Year-to-date, the share prices of the companies listed below and on the next page have returned on average 18.1% on an absolute basis and are flat on a sector relative basis. The STOXX Europe 600 index has a total return of 16.3% year-to-date.

STOXX Europe 600 Companies: High TREE and Capital Returned Companies [In order of highest TREE growth]

Amounts presented in local trading currency (millions)Capital

Creation

Company Name Country Industry Group Market cap. Dividend

Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Yr. Common

Dividends to Total 5 Yr.

Capital Returned

5 Year Capital

Returned / Average

Market cap.

Next PLC United Kingdom Department Stores 5,991 2.5 13.0 8.4 62% 29% 71%Imperial Tobacco Group PLC United Kingdom Tobacco 22,746 4.4 11.2 9.3 52% 90% 24%Swedish Match AB Sweden Tobacco 54,611 2.4 18.0 13.7 49% 29% 53%Petrofac Ltd. United Kingdom Oilfield Services/Equipment 5,524 2.3 13.8 7.2 48% 77% 24%Oriflame Cosmetics S.A. SDR Sweden Household/Personal Care 13,228 6.3 12.0 8.2 46% 100% 20% (1)Partners Group Holding AG Switzerland Investment Managers 4,940 2.8 20.1 NM 40% 31% 66%Admiral Group PLC United Kingdom Property/Casualty Insurance 3,069 7.2 12.4 NM 37% 100% 27%Paddy Power PLC Ireland Casinos/Gaming 2,836 1.9 23.4 13.9 34% 39% 34%Drax Group PLC United Kingdom Electric Utilities 1,816 5.4 10.0 6.7 34% 88% 31%BHP Billiton PLC United Kingdom Other Metals/Minerals 101,680 3.7 9.5 5.1 33% 50% 34%Rotork PLC United Kingdom Industrial Machinery 2,020 2.2 21.1 12.5 33% 90% 20%H&M Hennes & Mauritz AB Sweden Apparel/Footwear Retail 399,534 3.9 22.2 12.6 31% 100% 22%Kone Oyj Finland Engineering & Construction 13,366 2.7 20.5 13.1 30% 96% 22%Telefonica S.A. Spain Major Telecommunications 50,425 11.3 9.1 5.5 30% 83% 38%Koninklijke KPN N.V. Netherlands Major Telecommunications 9,568 5.2 7.5 4.9 29% 48% 55%AstraZeneca PLC United Kingdom Pharmaceuticals: Major 36,618 6.1 8.0 5.5 29% 54% 54%Croda International PLC United Kingdom Chemicals: Specialty 3,287 2.3 18.5 10.8 29% 77% 24%GlaxoSmithKline PLC United Kingdom Pharmaceuticals: Major 69,501 5.1 12.2 7.7 28% 61% 30%Jeronimo Martins SGPS S/A Portugal Food Retail 8,493 2.0 21.3 10.1 27% 100% 22%Novo Nordisk A/S Denmark Pharmaceuticals: Major 515,760 1.5 25.0 14.9 27% 34% 34% (1)Wincor Nixdorf AG Germany Information Technology Services 942 5.5 15.0 5.9 26% 62% 34%United Internet AG Germany Internet Software/Services 3,174 1.8 20.6 8.5 25% 25% 52%British American Tobacco PLC United Kingdom Tobacco 60,869 4.1 15.0 10.7 25% 79% 31%Geberit AG Switzerland Building Products 7,762 3.1 19.0 12.4 25% 67% 23%Bolsas & Mercados Espanoles SA Spain Investment Banks/Brokers 1,412 7.4 10.1 NM 25% 100% 44%Swisscom AG Switzerland Major Telecommunications 19,773 5.7 11.0 6.6 24% 99% 25%Fugro N.V. Netherlands Oilfield Services/Equipment 4,057 3.0 12.5 6.9 24% 45% 24%Antofagasta PLC United Kingdom Other Metals/Minerals 12,313 1.0 14.6 5.1 24% 100% 22%Actividades de Construccion y Servicios S.A. Spain Engineering & Construction 5,102 9.9 6.3 5.3 24% 66% 37% (1)Konecranes Oyj Finland Trucks/Construction/Farm Machinery 1,395 4.6 13.5 8.4 24% 69% 31%Diageo PLC United Kingdom Beverages: Alcoholic 42,913 2.6 18.3 12.5 24% 61% 20%Atlas Copco AB Sweden Industrial Machinery 187,270 3.2 13.2 9.3 24% 36% 26%Marks & Spencer Group PLC United Kingdom Department Stores 5,958 4.7 11.0 5.2 23% 68% 22%Belgacom S.A. Belgium Major Telecommunications 8,133 6.9 10.9 5.7 23% 87% 40%InterContinental Hotels Group PLC United Kingdom Hotels/Resorts/Cruiselines 4,691 2.4 19.2 10.6 23% 80% 22%National Grid PLC United Kingdom Electric Utilities 24,284 5.7 12.4 8.3 22% 66% 24%Unilever PLC United Kingdom Food: Major Diversified 63,529 3.4 17.6 10.1 22% 80% 21%Topdanmark A/S Denmark Multi-Line Insurance 15,606 - 10.5 NM 22% 0% 40% (1)IMI PLC United Kingdom Miscellaneous Manufacturing 2,931 3.4 11.1 7.0 22% 68% 33%Jardine Lloyd Thompson Group PLC United Kingdom Insurance Brokers/Services 1,629 3.2 14.5 NM 22% 81% 29%

Valuation Capital Returned

(1) Positive 2012E consensus EPS revisions over prior 30 days. Note: Local currency presentation based on primary listing trading currency –United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. P/E and EBITDA based on consensus ests.

Source: Wolfe Trahan Accounting & Tax Policy Research; Company filings; Bloomberg; Standard & Poor’s; FactSet. Based on market data as of 9/10/2012.


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Below is a continuation of the prior page exhibit.

STOXX Europe 600 Companies: High TREE and Capital Returned Companies (continued) ($ millions)


Creation


Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Yr. Common

Dividends to Total 5 Yr.

Capital Returned

5 Year Capital

Returned / Average

Market cap.

TGS-NOPEC Geophysical Co. ASA Norway Oilfield Services/Equipment 18,594 3.4 12.5 3.7 22% 52% 29%SGS S.A. Switzerland Miscellaneous Commercial Services 15,136 3.3 23.4 11.5 21% 86% 23%Hugo Boss AG Germany Apparel/Footwear 5,322 3.8 16.6 9.5 21% 99% 21%K+S AG Germany Chemicals: Agricultural 7,405 3.3 12.2 6.3 20% 94% 21% (1)Andritz Ag Austria Industrial Machinery 4,525 2.5 17.6 7.4 20% 83% 22%Inmarsat PLC United Kingdom Wireless Telecommunications 2,640 6.0 16.1 8.5 20% 78% 24% (1)SSE PLC United Kingdom Electric Utilities 12,876 5.9 11.9 8.0 20% 92% 25%Total S.A. France Integrated Oil 91,215 5.6 7.7 3.2 19% 90% 25%DSV A/S Denmark Trucking 24,835 0.8 14.8 9.5 19% 6% 23%Compass Group PLC United Kingdom Restaurants 13,303 2.8 16.5 9.3 18% 57% 20%Endesa S.A. Spain Electric Utilities 15,257 3.4 7.8 4.3 18% 100% 43%Royal Dutch Shell PLC (CL A) Netherlands Integrated Oil 177,217 4.8 8.2 3.7 18% 82% 26%NCC AB Cl B Sweden Engineering & Construction 13,381 8.2 8.7 7.6 18% 100% 29%Enagas S.A. Spain Oil & Gas Pipelines 3,756 5.2 10.1 6.9 17% 100% 26%Balfour Beatty PLC United Kingdom Engineering & Construction 2,053 4.7 8.2 6.7 17% 91% 24%Publicis Groupe S.A. France Advertising/Marketing Services 7,409 1.6 13.2 6.6 17% 50% 21%De La Rue PLC United Kingdom Commercial Printing/Forms 993 4.2 17.4 7.8 17% 99% 21%BASF SE Germany Chemicals: Major Diversified 58,902 3.9 11.7 5.6 17% 70% 23%Nestle S.A. Switzerland Food: Major Diversified 189,779 3.3 17.3 10.8 17% 39% 40%Experian PLC Ireland Miscellaneous Commercial Services 10,547 2.0 19.5 10.6 17% 61% 36%Skanska AB Sweden Engineering & Construction 43,964 5.7 15.6 7.8 17% 94% 33%Man Group PLC United Kingdom Investment Managers 1,527 13.0 17.2 NM 16% 64% 46%Securitas AB Sweden Miscellaneous Commercial Services 18,362 5.9 10.0 7.0 16% 100% 20%Schindler-Hldg AG Ptg Switzerland Industrial Machinery 13,324 1.7 19.2 9.3 16% 62% 22%Provident Financial PLC United Kingdom Finance/Rental/Leasing 1,891 5.3 13.8 NM 16% 96% 34%Novartis AG Switzerland Pharmaceuticals: Major 135,644 4.0 11.4 9.4 16% 57% 23%Axel Springer AG Germany Publishing: Newspapers 3,581 4.7 12.0 6.5 16% 89% 26%Essilor International S.A. France Medical Specialties 15,040 1.2 25.6 13.6 16% 49% 22% (1)Boliden AB Sweden Other Metals/Minerals 29,047 3.8 8.9 4.7 16% 45% 26%Telenor ASA Norway Major Telecommunications 174,489 4.6 14.2 5.8 16% 70% 24%Banco Bilbao Vizcaya Argentaria S.A. Spain Regional Banks 34,930 3.9 14.4 NM 16% 21% 86%Bouygues S.A. France Engineering & Construction 6,441 7.8 8.1 4.6 16% 61% 43%Ratos AB Sweden Investment Trusts/Mutual Funds 19,335 9.2 60.6 NM 16% 94% 28%Seadrill Ltd. Bermuda Contract Drilling 108,615 8.3 13.1 9.7 16% 94% 56%Electrocomponents PLC United Kingdom Wholesale Distributors 1,010 5.1 13.0 7.4 15% 100% 28%ICAP PLC United Kingdom Investment Banks/Brokers 2,219 6.4 9.2 NM 15% 81% 22%Muenchener Rueckversicherungs Germany Multi-Line Insurance 21,449 5.2 8.0 NM 15% 48% 39%YIT Oyj Finland Engineering & Construction 1,991 4.5 11.4 8.3 15% 97% 21%Sampo Oyj Finland Property/Casualty Insurance 13,054 5.1 9.9 NM 15% 92% 28% (1)Abertis Infraestructuras S.A. Spain Other Transportation 9,403 8.7 12.3 8.8 15% 92% 24%Aurubis AG Germany Other Metals/Minerals 1,984 2.8 9.1 4.5 15% 98% 24%Fortum Oyj Finland Electric Utilities 13,423 6.6 11.1 8.5 15% 97% 24%Tod's S.p.A. Italy Apparel/Footwear 2,779 2.8 18.7 9.5 15% 100% 34% (1)Hannover Rueckversicherung AG Germany Multi-Line Insurance 5,894 4.3 7.9 NM 15% 100% 25%United Utilities Group PLC United Kingdom Water Utilities 4,684 4.6 16.9 10.8 15% 100% 25%Terna Rete Elettrica Nazionale S.p.A. Italy Electric Utilities 5,781 7.3 13.5 8.1 15% 100% 35%ENI S.p.A. Italy Integrated Oil 71,536 5.9 8.4 3.3 14% 94% 27%Amlin PLC United Kingdom Property/Casualty Insurance 1,958 5.9 8.1 NM 14% 75% 30% (1)Enel S.p.A. Italy Electric Utilities 26,612 9.2 7.9 5.9 14% 100% 42%DCC PLC Ireland Industrial Conglomerates 1,838 3.6 11.5 7.3 14% 100% 20%Metso Corp. Finland Industrial Machinery 4,375 5.8 10.0 5.9 14% 99% 20%Svenska Handelsbanken A Sweden Regional Banks 147,035 4.2 11.2 NM 14% 93% 21%Umicore S.A. Belgium Other Metals/Minerals 4,462 2.1 15.8 8.2 14% 41% 23%Royal Ahold N.V. Netherlands Food Retail 10,732 3.9 10.4 5.2 14% 17% 27%Investec PLC United Kingdom Investment Banks/Brokers 3,342 4.3 9.2 NM 14% 88% 36%EDP-Energias de Portugal S.A. Portugal Electric Utilities 7,997 8.6 7.5 7.5 13% 96% 24%Societe BIC France Other Consumer Specialties 3,975 2.6 14.4 7.8 13% 72% 27%





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Below are European companies ranked solely based on the highest 5 year TREE growth rate, but do not meet the additional criteria on the prior exhibit of a relatively high 5 year historical capital returned to market cap. (for reference, this is still listed in the far right column). As an example, Iliad SA exhibits a high TREE (27%) and is included below, but has historically returned very little capital to shareholders (cumulative 3% of market cap. over last 5 years). Therefore, it does not appear among the group of companies identified on earlier pages for high capital creation and capital allocation. This list identifies growth companies and value creating companies that may be hoarding cash or reinvesting it internally.

STOXX Europe 600 Companies: High TREE Companies – Potential to Return More Capital?


CreationCapital

Returned


Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year Capital

Returned / Average

Market cap. Reckitt Benckiser Group PLC United Kingdom Household/Personal Care 26,075 3.5 14.6 10.6 34% 18%Aggreko PLC United Kingdom Industrial Machinery 6,330 0.9 22.3 9.8 33% 16%Aveva Group PLC United Kingdom Packaged Software 1,302 1.1 24.8 13.1 29% 8% (1)Yara International ASA Norway Chemicals: Agricultural 84,485 2.4 8.1 6.0 29% 14%Galenica AG Switzerland Pharmaceuticals: Major 3,640 1.6 14.9 10.8 28% 13%Iliad S.A. France Internet Software/Services 7,059 0.3 46.3 8.5 27% 3% (1)Industria de Diseno Textil S.A. Spain Apparel/Footwear Retail 55,476 1.6 24.4 12.2 26% 15%FLSmidth & Co. A/S Denmark Engineering & Construction 18,540 2.6 11.2 6.0 26% 10%Elekta AB Sweden Medical Specialties 31,349 1.5 21.6 12.1 26% 8%Weir Group PLC United Kingdom Industrial Machinery 3,562 2.0 11.2 7.7 26% 18%Novozymes A/S Denmark Biotechnology 53,788 1.1 26.7 14.8 25% 7% (1)Babcock International Group PLC United Kingdom Miscellaneous Commercial Services 3,304 2.5 13.2 9.7 25% 19%Wirecard AG Germany Miscellaneous Commercial Services 1,859 0.6 23.6 12.7 25% 6% (1)Fuchs Petrolub AG Germany Oil Refining/Marketing 3,456 2.1 17.4 10.2 25% 16%Koninklijke Vopak N.V. Netherlands Other Transportation 6,555 1.5 18.9 12.1 25% 12%AMEC PLC United Kingdom Oilfield Services/Equipment 3,630 2.9 14.6 8.4 24% 14%Petroleum Geo-Services ASA Norway Oilfield Services/Equipment 20,430 1.2 19.7 4.2 24% 3%ABB Ltd. Switzerland Industrial Conglomerates 40,593 3.7 13.7 7.4 24% 13%Coloplast A/S Denmark Medical Specialties 53,055 1.2 22.0 12.9 24% 15%Porsche Automobil Holding SE Germany Motor Vehicles 12,931 1.8 3.6 37.5 24% 7%Rio Tinto PLC United Kingdom Other Metals/Minerals 56,666 3.4 8.4 4.5 24% 10%Alstom S.A. France Industrial Conglomerates 8,717 2.7 8.9 5.5 23% 12%Ultra Electronics Holdings PLC United Kingdom Aerospace & Defense 1,069 2.5 12.2 8.0 23% 12%Koninklijke Boskalis Westminster N.V. Netherlands Engineering & Construction 3,034 4.4 12.9 9.0 23% 9%Victrex PLC United Kingdom Chemicals: Major Diversified 1,166 2.4 17.0 10.0 23% 17%Deutsche Boerse AG Germany Investment Banks/Brokers 8,117 5.4 10.7 NM 23% 18%SAP AG Germany Packaged Software 63,749 1.4 17.3 10.1 23% 10%Burberry Group PLC United Kingdom Apparel/Footwear 6,033 1.8 19.2 9.1 22% 18%Unilever N.V. Netherlands Food: Major Diversified 82,897 3.5 17.1 10.4 22% 19%Aixtron SE Germany Electronic Production Equipment 1,167 2.1 NA 13.2 22% 10% (1)Red Electrica Corp. S.A. Spain Electric Utilities 4,876 5.0 9.8 7.0 22% 15%Actelion Ltd. Switzerland Biotechnology 5,437 1.7 16.9 10.0 22% 8% (1)Sonova Holding AG Switzerland Medical Specialties 6,354 1.2 19.8 12.9 22% 6%BG Group PLC United Kingdom Integrated Oil 43,457 1.2 14.9 5.9 21% 6%ASML Holding N.V. Netherlands Electronic Production Equipment 18,417 1.0 16.2 10.8 21% 18%Spirax-Sarco Engineering PLC United Kingdom Industrial Machinery 1,657 2.5 17.2 9.2 21% 18%Bunzl PLC United Kingdom Pulp & Paper 3,668 2.4 15.3 10.8 20% 15%Syngenta AG Switzerland Chemicals: Agricultural 31,384 2.4 16.4 10.1 20% 19%Spectris PLC United Kingdom Electrical Products 2,128 2.2 13.4 9.2 20% 16%JM AB Sweden Homebuilding 10,098 5.4 10.0 6.4 20% 11%Software AG Germany Information Technology Services 2,479 1.6 13.6 7.6 20% 16%Reed Elsevier PLC United Kingdom Publishing: Books/Magazines 7,243 3.6 12.1 3.6 20% 18%

Valuation




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On the next several pages, we combine our TREE and capital return metrics with current valuation to rank companies. Our ranking system is based on an equal weighting of the following three metrics:

1) 5 year trailing TREE growth, 2) 5 year trailing capital returned to weighted average market capitalization; and, 3) 2012E Price / Earnings ratio.

All companies are ranked based on each of these metrics on a simple highest to lowest basis. A composite score is then calculated as the sum of each of the individual rankings. A ranking of “1” is the best as it means the company has high capital creation, returns cash to shareholders, and is attractively valued. Below is an illustration of this methodology with 5 sample companies.

Individual Ranks(A) (B) (C) (A+B+C)

5 year TREE

5 Year Capital Returned /

Market Cap. %2012E PE

Ratio 5 year TREE

% Year Capital Returned /

Market Cap.2012E PE

RatioComposite

Score Rank

Company A 18% 50% 16% 2 1 1 4 1Company B 17% 35% 12% 3 3 2 8 2Company E 30% 10% 2% 1 4 5 10 3Company C 6% 40% 7% 5 2 4 11 4Company D 10% 0% 10% 4 5 3 12 5

On the next two pages, we present the top ranked STOXX Europe 600 companies.


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Below are the top ranked European companies when combining historical TREE, capital returned, and valuation. Year-to-date, the top 50 ranked companies have returned 14.5% on an absolute basis and -1.8% on a sector relative basis.

TREE Ranking: STOXX Europe 600 Companies (TREE, Capital Returned, and P/E)


CreationCapital

Returned

Company Name Country Industry Group Ranking Market cap. Dividend

Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year Capital

Returned / Average

Market cap.

Koninklijke KPN N.V. Netherlands Major Telecommunications 1 9,568 5.2 7.5 4.9 29% 55%AstraZeneca PLC United Kingdom Pharmaceuticals: Major 2 36,618 6.1 8.0 5.5 29% 54%Actividades de Construccion y Servicios S.A. Spain Engineering & Construction 3 5,102 9.9 6.3 5.3 24% 37% (1)Telefonica S.A. Spain Major Telecommunications 4 50,425 11.3 9.1 5.5 30% 38%BHP Billiton PLC United Kingdom Other Metals/Minerals 5 101,680 3.7 9.5 5.1 33% 34%Endesa S.A. Spain Electric Utilities 6 15,257 3.4 7.8 4.3 18% 43%Drax Group PLC United Kingdom Electric Utilities 7 1,816 5.4 10.0 6.7 34% 31%Bolsas & Mercados Espanoles SA Spain Investment Banks/Brokers 8 1,412 7.4 10.1 NM 25% 44%Bouygues S.A. France Engineering & Construction 9 6,441 7.8 8.1 4.6 16% 43%Muenchener Rueckversicherungs Germany Multi-Line Insurance 10 21,449 5.2 8.0 NM 15% 39%Topdanmark A/S Denmark Multi-Line Insurance 11 15,606 - 10.5 NM 22% 40% (1)Total S.A. France Integrated Oil 12 91,215 5.6 7.7 3.2 19% 25%Belgacom S.A. Belgium Major Telecommunications 13 8,133 6.9 10.9 5.7 23% 40%NCC AB Cl B Sweden Engineering & Construction 14 13,381 8.2 8.7 7.6 18% 29%Enel S.p.A. Italy Electric Utilities 15 26,612 9.2 7.9 5.9 14% 42%Next PLC United Kingdom Department Stores 16 5,991 2.5 13.0 8.4 62% 71%Royal Dutch Shell PLC (CL A) Netherlands Integrated Oil 17 177,217 4.8 8.2 3.7 18% 26%IMI PLC United Kingdom Miscellaneous Manufacturing 18 2,931 3.4 11.1 7.0 22% 33%Balfour Beatty PLC United Kingdom Engineering & Construction 19 2,053 4.7 8.2 6.7 17% 24%Imperial Tobacco Group PLC United Kingdom Tobacco 20 22,746 4.4 11.2 9.3 52% 24%CNP Assurances France Life/Health Insurance 21 6,270 7.2 6.6 NM 12% 30%Amlin PLC United Kingdom Property/Casualty Insurance 22 1,958 5.9 8.1 NM 14% 30% (1)France Telecom France Major Telecommunications 23 27,436 13.0 8.0 4.6 12% 36%GlaxoSmithKline PLC United Kingdom Pharmaceuticals: Major 24 69,501 5.1 12.2 7.7 28% 30%Boliden AB Sweden Other Metals/Minerals 25 29,047 3.8 8.9 4.7 16% 26%Swisscom AG Switzerland Major Telecommunications 26 19,773 5.7 11.0 6.6 24% 25%BAE Systems PLC United Kingdom Aerospace & Defense 27 11,758 5.7 8.1 5.3 12% 36%Investec PLC United Kingdom Investment Banks/Brokers 28 3,342 4.3 9.2 NM 14% 36%Hannover Rueckversicherung AG Germany Multi-Line Insurance 29 5,894 4.3 7.9 NM 15% 25%ENI S.p.A. Italy Integrated Oil 30 71,536 5.9 8.4 3.3 14% 27%Admiral Group PLC United Kingdom Property/Casualty Insurance 31 3,069 7.2 12.4 NM 37% 27%Raiffeisen Bank International AG Austria Regional Banks 32 5,513 3.7 6.9 NM 11% 28% (1)Enagas S.A. Spain Oil & Gas Pipelines 33 3,756 5.2 10.1 6.9 17% 26%FirstGroup PLC United Kingdom Other Transportation 34 1,234 9.4 8.2 4.3 13% 28% (1)RWE AG Germany Electric Utilities 35 21,693 5.7 8.6 4.7 12% 32%EDP-Energias de Portugal S.A. Portugal Electric Utilities 36 7,997 8.6 7.5 7.5 13% 24%Zurich Insurance Group AG Switzerland Multi-Line Insurance 37 34,375 7.2 8.8 NM 13% 29%Sampo Oyj Finland Property/Casualty Insurance 38 13,054 5.1 9.9 NM 15% 28% (1)Vivendi France Wireless Telecommunications 38 20,171 6.2 7.8 4.7 8% 98%Baloise Holding AG Switzerland Multi-Line Insurance 40 3,514 5.9 8.2 NM 10% 34% (1)Aurubis AG Germany Other Metals/Minerals 41 1,984 2.8 9.1 4.5 15% 24%Neopost France Office Equipment/Supplies 42 1,301 10.0 7.8 5.7 17% 18%Yara International ASA Norway Chemicals: Agricultural 43 84,485 2.4 8.1 6.0 29% 14%Iberdrola S.A. Spain Electric Utilities 44 21,560 3.8 7.9 6.4 10% 30%Marks & Spencer Group PLC United Kingdom Department Stores 45 5,958 4.7 11.0 5.2 23% 22%BP PLC United Kingdom Integrated Oil 46 83,329 4.6 7.6 3.8 16% 18%Statoil ASA Norway Integrated Oil 47 476,703 4.3 8.7 2.0 13% 25%TGS-NOPEC Geophysical Co. ASA Norway Oilfield Services/Equipment 48 18,594 3.4 12.5 3.7 22% 29%Carillion PLC United Kingdom Engineering & Construction 49 1,222 6.1 6.8 5.0 10% 26%Konecranes Oyj Finland Trucks/Construction/Farm Machinery 50 1,395 4.6 13.5 8.4 24% 31%

Valuation




TTOOPP RRAANNKKEEDD SSTTOOXXXX EEUURROOPPEE 660000 CCOO’’SS:: TTRREEEE,, CCAAPPIITTAALL RREETTUURRNNEEDD,, AANNDD VVAALLUUAATTIIOONN ((CCOONNTT..))

The exhibit below is a continuation of the prior page exhibit.

TREE Ranking: STOXX Europe 600Companies (TREE, Capital Returned, and P/E) (continued)


CreationCapital

Returned

Company Name Country Industry Group Ranking Market cap. Dividend

Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year Capital

Returned / Average

Market cap.

ICAP PLC United Kingdom Investment Banks/Brokers 51 2,219 6.4 9.2 NM 15% 22%Repsol YPF S.A. Spain Integrated Oil 52 19,571 5.7 10.0 5.3 13% 29%Oriflame Cosmetics S.A. SDR Sweden Household/Personal Care 53 13,228 6.3 12.0 8.2 46% 20% (1)SSE PLC United Kingdom Electric Utilities 53 12,876 5.9 11.9 8.0 20% 25%Royal Imtech N.V. Netherlands Engineering & Construction 55 1,936 3.4 9.3 7.1 19% 18%Fugro N.V. Netherlands Oilfield Services/Equipment 56 4,057 3.0 12.5 6.9 24% 24%Petrofac Ltd. United Kingdom Oilfield Services/Equipment 57 5,524 2.3 13.8 7.2 48% 24%Wincor Nixdorf AG Germany Information Technology Services 58 942 5.5 15.0 5.9 26% 34%Deutsche Boerse AG Germany Investment Banks/Brokers 59 8,117 5.4 10.7 NM 23% 18%Atlas Copco AB Sweden Industrial Machinery 60 187,270 3.2 13.2 9.3 24% 26%Seadrill Ltd. Bermuda Contract Drilling 60 108,615 8.3 13.1 9.7 16% 56%Royal Ahold N.V. Netherlands Food Retail 62 10,732 3.9 10.4 5.2 14% 27%Vedanta Resources PLC United Kingdom Other Metals/Minerals 63 2,735 3.5 7.6 4.1 18% 14%Weir Group PLC United Kingdom Industrial Machinery 64 3,562 2.0 11.2 7.7 26% 18%British American Tobacco PLC United Kingdom Tobacco 64 60,869 4.1 15.0 10.7 25% 31%National Grid PLC United Kingdom Electric Utilities 66 24,284 5.7 12.4 8.3 22% 24%OMV AG Austria Oil Refining/Marketing 66 8,572 4.2 6.1 3.4 12% 19% (1)Swedish Match AB Sweden Tobacco 68 54,611 2.4 18.0 13.7 49% 53%Securitas AB Sweden Miscellaneous Commercial Services 68 18,362 5.9 10.0 7.0 16% 20%Barclays PLC United Kingdom Major Banks 70 25,418 2.9 7.0 NM 4% 42%RSA Insurance Group PLC United Kingdom Property/Casualty Insurance 71 4,102 8.0 10.0 NM 11% 27%Axel Springer AG Germany Publishing: Newspapers 72 3,581 4.7 12.0 6.5 16% 26%Fortum Oyj Finland Electric Utilities 72 13,423 6.6 11.1 8.5 15% 24%Allianz SE Germany Multi-Line Insurance 72 42,023 4.9 8.4 NM 12% 22%Banco Bilbao Vizcaya Argentaria S.A. Spain Regional Banks 75 34,930 3.9 14.4 NM 16% 86%TeliaSonera AB Sweden Major Telecommunications 76 205,333 6.0 11.3 7.6 12% 31%Vinci S.A. France Engineering & Construction 76 19,202 5.0 10.5 6.1 11% 29%Alstom S.A. France Industrial Conglomerates 78 8,717 2.7 8.9 5.5 23% 12%Gas Natural SDG S.A. Spain Gas Distributors 79 11,328 5.6 8.7 5.8 7% 30%Red Electrica Corp. S.A. Spain Electric Utilities 79 4,876 5.0 9.8 7.0 22% 15%Helvetia Holding AG Switzerland Multi-Line Insurance 79 2,855 4.8 8.6 NM 10% 24%Vodafone Group PLC United Kingdom Wireless Telecommunications 82 87,675 5.4 11.0 8.3 10% 45%Jardine Lloyd Thompson Group PLC United Kingdom Insurance Brokers/Services 83 1,629 3.2 14.5 NM 22% 29%Novartis AG Switzerland Pharmaceuticals: Major 84 135,644 4.0 11.4 9.4 16% 23%E.ON AG Germany Electric Utilities 85 36,309 5.2 9.1 5.8 10% 25% (1)voestalpine AG Austria Steel 86 4,183 3.3 9.2 4.9 12% 23%Deutsche Bank AG Germany Major Banks 87 29,221 2.4 8.4 NM 2% 262%BASF SE Germany Chemicals: Major Diversified 88 58,902 3.9 11.7 5.6 17% 23%Provident Financial PLC United Kingdom Finance/Rental/Leasing 88 1,891 5.3 13.8 NM 16% 34%Tesco PLC United Kingdom Food Retail 90 27,593 4.3 10.1 6.5 16% 19%Porsche Automobil Holding SE Germany Motor Vehicles 91 12,931 1.8 3.6 37.5 24% 7%K+S AG Germany Chemicals: Agricultural 92 7,405 3.3 12.2 6.3 20% 21% (1)Wolters Kluwer N.V. Netherlands Publishing: Books/Magazines 92 4,409 4.7 9.2 7.3 16% 16%Partners Group Holding AG Switzerland Investment Managers 92 4,940 2.8 20.1 NM 40% 66%Rio Tinto PLC United Kingdom Other Metals/Minerals 95 56,666 3.4 8.4 4.5 24% 10%Elisa Oyj Finland Major Telecommunications 96 2,754 7.8 12.2 7.1 12% 38%Heineken Holding N.V. Netherlands Beverages: Alcoholic 97 10,396 2.3 12.8 6.4 12% 61%Electrocomponents PLC United Kingdom Wholesale Distributors 98 1,010 5.1 13.0 7.4 15% 28%Catlin Group Ltd. Bermuda Property/Casualty Insurance 98 1,649 6.1 8.2 NM 1% 58%Eiffage S.A. France Engineering & Construction 100 2,171 4.8 9.4 7.6 14% 18%

Valuation




CCOONNTTRRAARRIIAANN VVAALLUUEE TTRREEEE IIDDEEAASS

Below we identify a group of 28 companies as interesting contrarian ideas given their historical TREE and capital return profile, year-to-date stock underperformance, and current trading valuation. Our criteria for creating the list is as follows: minimum 12% 5-year trailing TREE growth, minimum 20% 5-year trailing capital returned to market cap., year-to-date sector-relative underperformance, a below market 2012E P/E ratio (<13x). Some of these situations are likely classic value traps. To filter this and add a measure of momentum, the last column footnote indicates if there have been positive 2012E consensus EPS revisions in the last 30 days.

Contrarian Value TREE Ideas: STOXX Europe 600


CreationCapital

Returned

Company Name Country Industry Group Stock

Return 2012 Market cap. Dividend

Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year Capital

Returned / Average

Market cap.

Imperial Tobacco Group PLC United Kingdom Tobacco (1.5) 22,746 4.4 11.2 9.3 52% 24%Drax Group PLC United Kingdom Electric Utilities (5.2) 1,816 5.4 10.0 6.7 34% 31%Telefonica S.A. Spain Major Telecommunications (7.9) 50,425 11.3 9.1 5.5 30% 38%Koninklijke KPN N.V. Netherlands Major Telecommunications (21.8) 9,568 5.2 7.5 4.9 29% 55%AstraZeneca PLC United Kingdom Pharmaceuticals: Major 3.3 36,618 6.1 8.0 5.5 29% 54%GlaxoSmithKline PLC United Kingdom Pharmaceuticals: Major 0.4 69,501 5.1 12.2 7.7 28% 30%Bolsas & Mercados Espanoles SA Spain Investment Banks/Brokers (11.2) 1,412 7.4 10.1 NM 25% 44%Actividades de Construccion y Servicios S.A. Spain Engineering & Construction (16.3) 5,102 9.9 6.3 5.3 24% 37% (1)Belgacom S.A. Belgium Major Telecommunications 4.7 8,133 6.9 10.9 5.7 23% 40%K+S AG Germany Chemicals: Agricultural 12.4 7,405 3.3 12.2 6.3 20% 21% (1)Endesa S.A. Spain Electric Utilities 1.6 15,257 3.4 7.8 4.3 18% 43%Royal Dutch Shell PLC (CL A) Netherlands Integrated Oil 3.0 177,217 4.8 8.2 3.7 18% 26%NCC AB Cl B Sweden Engineering & Construction 18.0 13,381 8.2 8.7 7.6 18% 29%Enagas S.A. Spain Oil & Gas Pipelines 7.4 3,756 5.2 10.1 6.9 17% 26%Novartis AG Switzerland Pharmaceuticals: Major 8.2 135,644 4.0 11.4 9.4 16% 23%Axel Springer AG Germany Publishing: Newspapers 15.2 3,581 4.7 12.0 6.5 16% 26%Bouygues S.A. France Engineering & Construction (6.1) 6,441 7.8 8.1 4.6 16% 43%ICAP PLC United Kingdom Investment Banks/Brokers 7.6 2,219 6.4 9.2 NM 15% 22%Abertis Infraestructuras S.A. Spain Other Transportation 4.2 9,403 8.7 12.3 8.8 15% 24%Fortum Oyj Finland Electric Utilities 0.4 13,423 6.6 11.1 8.5 15% 24%Enel S.p.A. Italy Electric Utilities 3.2 26,612 9.2 7.9 5.9 14% 42%Royal Ahold N.V. Netherlands Food Retail (0.8) 10,732 3.9 10.4 5.2 14% 27%EDP-Energias de Portugal S.A. Portugal Electric Utilities 4.5 7,997 8.6 7.5 7.5 13% 24%Statoil ASA Norway Integrated Oil 5.2 476,703 4.3 8.7 2.0 13% 25%FirstGroup PLC United Kingdom Other Transportation (14.6) 1,234 9.4 8.2 4.3 13% 28% (1)Repsol YPF S.A. Spain Integrated Oil (27.4) 19,571 5.7 10.0 5.3 13% 29%France Telecom France Major Telecommunications 0.4 27,436 13.0 8.0 4.6 12% 36%Heineken Holding N.V. Netherlands Beverages: Alcoholic 14.8 10,396 2.3 12.8 6.4 12% 61%

Valuation




LLOOWWEESSTT 55 YYEEAARR TTRREEEE

Below are European companies ranked solely based on the lowest 5 year TREE growth rate.

STOXX Europe 600 Companies: Low TREE Companies


CreationCapital

Returned


Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year Capital

Returned / Average

Market cap.

Taylor Wimpey PLC United Kingdom Homebuilding 1,870 1.0 15.2 7.7 <-100% 1% (1)National Bank of Greece S.A. Greece Regional Banks 1,616 - NA NM <-100% 13%Royal Bank of Scotland Group Plc United Kingdom Major Banks 16,512 - 11.9 NM -40% 84%Alcatel-Lucent France Telecommunications Equipment 2,087 - NA 2.4 -23% 2% (1)Banco Popolare S.C. Italy Regional Banks 2,243 2.3 12.4 NM -23% 7%Segro PLC United Kingdom Real Estate Investment Trusts 1,707 6.8 13.1 NM -22% 20% (2)Capital Shopping Centres Group PLC United Kingdom Real Estate Investment Trusts 2,955 4.6 20.9 NM -20% 15% (2)Natixis France Investment Banks/Brokers 7,520 4.1 7.7 NM -19% 2%Bank of Ireland Ord Stk EUR0.64 Ireland Regional Banks 2,856 - NA NM -18% 11% (1)Lloyds Banking Group PLC United Kingdom Financial Conglomerates 26,071 - 20.9 NM -18% 0%Immofinanz AG Austria Real Estate Development 2,746 5.7 11.3 NM -17% 27% (1)Unione di Banche Italiane SCpA Italy Regional Banks 2,844 1.6 14.4 NM -15% 15%Banca Monte dei Paschi di Siena S.p.A. Italy Regional Banks 3,261 9.3 374.3 NM -15% 5%ITV PLC United Kingdom Broadcasting 3,463 2.3 10.7 6.5 -14% 3%UBS AG Switzerland Financial Conglomerates 44,042 0.9 11.9 NM -14% 12%OC Oerlikon Corp. AG Switzerland Industrial Conglomerates 2,871 - 11.1 4.8 -14% 2% (1)Intesa Sanpaolo S.p.A. Italy Regional Banks 22,103 5.9 10.5 NM -13% 11%Barratt Developments PLC United Kingdom Homebuilding 1,673 - 20.9 8.9 -13% 1%Commerzbank AG Germany Regional Banks 8,468 - 9.1 NM -13% 84%3i Group PLC United Kingdom Investment Managers 2,163 3.7 19.9 NM -12% 9%British Land Co. PLC United Kingdom Real Estate Investment Trusts 4,778 4.9 18.1 NM -12% 17% (2)Hammerson PLC United Kingdom Real Estate Investment Trusts 3,304 3.7 23.4 NM -10% 17% (2)Derwent London PLC United Kingdom Real Estate Development 1,958 1.7 37.4 NM -10% 11%Land Securities Group PLC United Kingdom Real Estate Investment Trusts 6,218 3.6 22.7 NM -10% 16% (2)Wolseley PLC Switzerland Wholesale Distributors 7,840 1.8 17.1 9.5 -10% 1%Melrose PLC United Kingdom Metal Fabrication 3,181 4.3 15.3 15.0 -9% 109%Ferrovial S.A. Spain Other Transportation 7,078 3.7 35.4 15.3 -7% 90%Unibail-Rodamco S.A. France Real Estate Development 14,990 4.9 16.8 NM -6% 64%Air France-KLM France Airlines 1,342 - NA 4.7 -6% 6% (1)CGG Veritas France Oilfield Services/Equipment 3,631 - 21.9 4.3 -5% 0%Ageas N.V. Netherlands Life/Health Insurance 4,482 3.2 8.2 NM -5% 25%Wienerberger AG Austria Building Products 730 1.9 NA 6.4 -4% 3%UniCredit S.p.A. Italy Regional Banks 21,271 - 13.5 NM -3% 9%Finmeccanica S.p.A. Italy Aerospace & Defense 2,161 10.8 7.6 4.5 -3% 18%Continental AG Germany Auto Parts: OEM 16,070 1.9 8.2 4.6 -2% 1%Credit Agricole S.A. France Regional Banks 13,698 8.4 13.5 NM -2% 8%Infineon Technologies AG Germany Semiconductors 6,013 2.1 15.2 4.1 -2% 3%Stora Enso Oyj Finland Pulp & Paper 4,062 5.8 13.1 6.0 -1% 15%Lundin Petroleum AB Sweden Oil & Gas Production 49,530 - 36.5 7.7 -1% 1%UCB S.A. Belgium Pharmaceuticals: Other 7,277 1.8 24.0 13.2 -1% 22%freenet AG Germany Internet Software/Services 1,589 9.7 9.8 6.2 -1% 17%STMicroelectronics N.V. Switzerland Semiconductors 3,950 6.8 NA 3.9 -1% 13% (1)Etablissements Maurel & Prom France Oil & Gas Production 1,390 3.5 11.0 4.0 -1% 10%Great Portland Estates PLC United Kingdom Real Estate Investment Trusts 1,393 1.9 70.8 NM 0% 19% (2)Nexans France Electrical Products 1,137 2.8 14.1 3.8 0% 12%Groupe Bruxelles Lambert SA Belgium Financial Conglomerates 8,825 3.5 11.2 NM 0% 18% (1)Banca Popolare di Milano S.C.A.R.L. Italy Regional Banks 1,496 21.4 16.2 NM 0% 9% (1)Cookson Group PLC United Kingdom Electronic Components 1,703 3.6 8.9 5.9 0% 4%Marine Harvest ASA Norway Agricultural Commodities/Milling 16,774 16.7 29.0 7.4 0% 85%Clariant AG Switzerland Chemicals: Specialty 3,304 - 10.8 5.2 0% 18%Gemalto N.V. Netherlands Electronic Equipment/Instruments 5,543 0.5 22.2 12.7 0% 16% (1)

Valuation

(1) Positive 2012E consensus EPS revisions over prior 30 days. (2) REITs have low TREE due to asset writedowns on fair value investment property. Note: Local currency presentation based on primary listing trading currency –United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. P/E and EBITDA based on consensus ests.



SSTTOOXXXX EEUURROOPPEE 660000 CCOOMMPPAANNIIEESS:: CCOONNSSIISSTTEENNTT DDIIVVIIDDEENNDD IINNCCRREEAASSEERRSS

European companies, on average, return more capital through dividends than share repurchases. Below are the STOXX Europe 600 Companies that have increased their dividend per share every year for at least the last 10 years. The footnotes (1) or (2) indicate that the company has increased its dividend for at least 20 and 30 consecutive years, respectively.

Consistent Dividend Increasers


Creation


Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year % of Capital

Returned by Dividends

5 Year Capital

Returned / Average

Market cap.

Swedish Match AB Sweden Tobacco 54,611 2.4 18.0 13.7 49% 29% 53%Vodafone Group PLC United Kingdom Wireless Telecommunications 87,675 5.4 11.0 8.3 10% 77% 45% (1)Nestle S.A. Switzerland Food: Major Diversified 189,779 3.3 17.3 10.8 17% 39% 40%Paddy Power PLC Ireland Casinos/Gaming 2,836 1.9 23.4 13.9 34% 39% 34%Novo Nordisk A/S Denmark Pharmaceuticals: Major 515,760 1.5 25.0 14.9 27% 34% 34%BHP Billiton PLC United Kingdom Other Metals/Minerals 101,680 3.7 9.5 5.1 33% 50% 34%British American Tobacco PLC United Kingdom Tobacco 60,869 4.1 15.0 10.7 25% 79% 31%GlaxoSmithKline PLC United Kingdom Pharmaceuticals: Major 69,501 5.1 12.2 7.7 28% 61% 30%FirstGroup PLC United Kingdom Other Transportation 1,234 9.4 8.2 4.3 13% 99% 28%Pearson PLC United Kingdom Publishing: Books/Magazines 9,767 3.6 14.1 9.6 10% 83% 28% (1)Mitie Group PLC United Kingdom Miscellaneous Commercial Services 1,057 3.3 12.0 7.4 Low BV 78% 27% (1)Carillion PLC United Kingdom Engineering & Construction 1,222 6.1 6.8 5.0 10% 97% 26%Cobham PLC United Kingdom Aerospace & Defense 2,371 3.9 10.1 7.0 Low BV 64% 26% (1)SSE PLC United Kingdom Electric Utilities 12,876 5.9 11.9 8.0 20% 92% 25% (1)Imperial Tobacco Group PLC United Kingdom Tobacco 22,746 4.4 11.2 9.3 52% 90% 24%Centrica PLC United Kingdom Gas Distributors 17,271 4.7 12.4 5.4 Low BV 99% 24%Croda International PLC United Kingdom Chemicals: Specialty 3,287 2.3 18.5 10.8 29% 77% 24%Eurocommercial Properties N.V. Netherlands Real Estate Investment Trusts 1,188 6.6 16.8 NM 7% 84% 24%Novartis AG Switzerland Pharmaceuticals: Major 135,644 4.0 11.4 9.4 16% 57% 23%Sanofi S.A. France Pharmaceuticals: Major 86,603 4.0 11.0 7.4 9% 74% 22%Halma PLC United Kingdom Electronic Equipment/Instruments 1,603 2.3 16.0 10.0 Low BV 91% 22% (2)ICAP PLC United Kingdom Investment Banks/Brokers 2,219 6.4 9.2 NM 15% 81% 22%Essilor International S.A. France Medical Specialties 15,040 1.2 25.6 13.6 16% 49% 22%Fresenius SE & Co.KGaA Germany Medical Specialties 15,435 1.1 16.1 7.2 11% 100% 21%Greene King PLC United Kingdom Restaurants 1,287 4.2 10.5 8.7 8% 51% 21% (2)Diageo PLC United Kingdom Beverages: Alcoholic 42,913 2.6 18.3 12.5 24% 61% 20%DCC PLC Ireland Industrial Conglomerates 1,838 3.6 11.5 7.3 14% 100% 20%Compass Group PLC United Kingdom Restaurants 13,303 2.8 16.5 9.3 18% 57% 20%Danone S.A. France Food: Major Diversified 29,698 2.8 16.0 8.6 15% 71% 19%Babcock International Group PLC United Kingdom Miscellaneous Commercial Services 3,304 2.5 13.2 9.7 25% 92% 19%Tesco PLC United Kingdom Food Retail 27,593 4.3 10.1 6.5 16% 78% 19% (2)Spirax-Sarco Engineering PLC United Kingdom Industrial Machinery 1,657 2.5 17.2 9.2 21% 96% 18% (1)Groupe Bruxelles Lambert SA Belgium Financial Conglomerates 8,825 3.5 11.2 NM 0% 97% 18%Weir Group PLC United Kingdom Industrial Machinery 3,562 2.0 11.2 7.7 26% 99% 18% (1)Capita PLC United Kingdom Personnel Services 5,011 3.0 14.3 10.8 Low BV 73% 17% (1)Roche Holding AG Switzerland Pharmaceuticals: Major 151,207 3.8 13.0 8.7 15% 97% 17% (1)Victrex PLC United Kingdom Chemicals: Major Diversified 1,166 2.4 17.0 10.0 23% 98% 17%Sage Group PLC United Kingdom Packaged Software 3,896 3.5 15.2 9.1 15% 98% 16%PZ Cussons PLC United Kingdom Household/Personal Care 1,303 2.2 19.0 9.6 Low BV 94% 16% (2)Aggreko PLC United Kingdom Industrial Machinery 6,330 0.9 22.3 9.8 33% 72% 16%


(1) 20 years consecutive dividend per share increase. (2) 30 years consecutive dividend per share increase. Low / Neg. BV: Company has a beginning book value 5 years ago that is either very low or negative, making the TREE calculation not meaningful. Note: Local currency presentation based on primary listing trading currency –United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. P/E and EBITDA based on consensus ests.



SSTTOOXXXX EEUURROOPPEE 660000 CCOOMMPPAANNIIEESS:: CCOONNSSIISSTTEENNTT DDIIVVIIDDEENNDD IINNCCRREEAASSEERRSS ((CCOONNTTIINNUUEEDD))

The prior page exhibit is continued below.

Consistent Dividend Increasers


Creation


Yield 2012E

P/E EV / 2013E

EBITDA

5 Year TREE

Growth Rate

5 Year % of Capital

Returned by Dividends

5 Year Capital

Returned / Average

Market cap.

Spectris PLC United Kingdom Electrical Products 2,128 2.2 13.4 9.2 20% 60% 16%Fuchs Petrolub AG Germany Oil Refining/Marketing 3,456 2.1 17.4 10.2 25% 61% 16%Coloplast A/S Denmark Medical Specialties 53,055 1.2 22.0 12.9 24% 40% 15%Chocoladefabriken Lindt & Spruengli AG Switzerland Food: Specialty/Candy 7,670 1.5 27.7 14.5 15% 60% 15%Bunzl PLC United Kingdom Pulp & Paper 3,668 2.4 15.3 10.8 20% 76% 15%Johnson Matthey PLC United Kingdom Chemicals: Major Diversified 5,123 2.4 15.2 8.7 15% 84% 15% (1)AMEC PLC United Kingdom Oilfield Services/Equipment 3,630 2.9 14.6 8.4 24% 83% 14%Associated British Foods PLC United Kingdom Food: Major Diversified 10,133 1.9 14.8 7.9 9% 95% 13%Galenica AG Switzerland Pharmaceuticals: Major 3,640 1.6 14.9 10.8 28% 72% 13%Intertek Group PLC United Kingdom Miscellaneous Commercial Services 4,586 1.3 22.1 11.5 Low BV 96% 13%Ultra Electronics Holdings PLC United Kingdom Aerospace & Defense 1,069 2.5 12.2 8.0 23% 98% 12%Serco Group PLC United Kingdom Miscellaneous Commercial Services 2,853 1.5 14.0 8.6 16% 70% 11% (1)Hermes International S.C.A. France Apparel/Footwear 23,339 0.9 34.8 17.8 19% 59% 10% (1)L'Oreal S.A. France Household/Personal Care 58,097 2.0 20.3 12.3 13% 70% 10% (2)Smith & Nephew PLC United Kingdom Medical Specialties 6,092 1.9 14.3 7.5 17% 46% 8%Fresenius Medical Care AG & Co. KGaA Germany Medical/Nursing Services 17,219 1.2 18.7 9.4 14% 99% 8%Aveva Group PLC United Kingdom Packaged Software 1,302 1.1 24.8 13.1 29% 95% 8%Kerry Group PLC Ireland Food: Specialty/Candy 6,524 0.9 15.7 10.8 15% 47% 7% (1)Novozymes A/S Denmark Biotechnology 53,788 1.1 26.7 14.8 25% 74% 7%BG Group PLC United Kingdom Integrated Oil 43,457 1.2 14.9 5.9 21% 72% 6%


(1) 20 years consecutive dividend per share increase. (2) 30 years consecutive dividend per share increase. Low / Neg. BV: Company has a beginning book value 5 years ago that is either very low or negative, making the TREE calculation not meaningful. Note: Local currency presentation based on primary listing trading currency –United Kingdom (GBP), Sweden (SEK), Denmark (DKK), Switzerland (CHF), Norway (NOK), All others (Euro). Capital returned includes common stock dividends and share repurchases. P/E and EBITDA based on consensus ests.



Appendix IV: STOXX Europe 600

AAPPPPEENNDDIIXX IIVV:: SSTTOOXXXX EEUURROOPPEE 660000


SSTTOOXXXX EEUURROOPPEE 660000 DDEETTAAIILL

In the exhibits below and on the following page, we display some of the key descriptive information and statistics of the STOXX Europe 600 index. STOXX Europe 600 Sector Detail

Cons. Disc.14% Cons. Staples

8%

Energy6%

Financials22%

Healthcare6%

Industrials21%

Info. Tech.5%

Materials10%

Telecom. 4%

Utilities4%

STOXX Europe 600 Sector Detail


Components of the STOXX Europe 600 by Country and Sector

Country Subtotal %

Cons. Disc.

Cons. Staples Energy Financials Healthcare Industrials Info. Tech. Materials Telecom. Utilities

Austria 10 1.7% 0 0 1 4 0 2 0 1 1 1Belgium 14 2.3% 0 3 0 6 1 0 0 2 2 0Bermuda 2 0.3% 0 0 1 1 0 0 0 0 0 0Channel Islands 1 0.2% 0 0 0 0 0 0 0 1 0 0Denmark 16 2.7% 0 1 0 4 4 4 0 2 1 0Finland 19 3.2% 2 1 1 2 1 6 1 3 1 1France 82 13.7% 17 6 5 14 3 20 6 4 3 4Germany 68 11.3% 12 4 0 9 8 13 7 11 2 2Gibraltar 1 0.2% 1 0 0 0 0 0 0 0 0 0Greece 3 0.5% 1 1 0 1 0 0 0 0 0 0Ireland 12 2.0% 3 2 0 1 2 3 0 1 0 0Italy 28 4.7% 5 1 2 11 0 4 0 0 1 4Luxembourg 4 0.7% 1 1 1 0 0 0 0 1 0 0Mexico 1 0.2% 0 0 0 0 0 0 0 1 0 0Netherlands 31 5.2% 1 6 3 6 1 9 2 2 1 0Norw ay 13 2.2% 1 1 4 3 0 1 0 2 1 0Portugal 5 0.8% 0 1 1 1 0 0 0 0 1 1South Africa 1 0.2% 0 0 0 0 0 0 0 1 0 0Spain 28 4.7% 1 3 2 8 1 4 1 1 1 6Sw eden 39 6.5% 5 2 1 10 3 11 2 3 2 0Sw itzerland 53 8.8% 4 4 0 15 8 10 3 8 1 0United Kingdom 169 28.2% 29 14 12 37 5 36 9 16 4 7

Grand Totals 600 100.0% 83 51 34 133 37 123 31 60 22 26


# of Companies USD Mkt. Cap.

Cons. Disc. 83 14% 1,030,107 11%Cons. Staples 51 9% 1,383,266 15%Energy 34 6% 925,938 10%Financials 133 22% 1,716,448 19%Healthcare 37 6% 984,987 11%Industrials 123 21% 1,042,508 11%Info. Tech. 31 5% 265,341 3%Materials 60 10% 923,896 10%Telecom. 22 4% 497,481 5%Utilities 26 4% 466,865 5%

Totals 600 100% 9,236,836 100%


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Report Title Topic Date

1 European Financial Crisis: Mark to Market Maneuvers Financial Institutions 9/23/2011

2 CIT Deep Dive Corporate Actions / Fin. Institutions [CIT] 9/28/2011

3 Spin‐offs, Post Bankruptcy Equity & Value Opportunities Corporate Actions 10/7/2011

4 Pension Funding Deteriorates $250 Billion Pensions 10/12/2011

5 Synovus Financial: DTA Valued at $500 Million Financial Institutions [SNV] 10/24/2011

6 Companies Initiating Dividends Outperform Corporate Actions 10/31/2011

7 Shareholder Value Creation Stock Ideas: TREE Analysis Capital Allocation 11/8/2011

8 Yahoo! Possible Avenues to Unlock Tax Value Corporate Actions [YHOO] 11/15/2011

9 Banks: Earnings Quality Analysis Earnings Quality / Fin. Institutions 11/21/2011

10 Large Share Repurchases and Deep Value Capital Allocation 11/30/2011

11 Earnings Quality: Ideas and a Guide to Avoid Accounting Pitfalls Earnings Quality 12/6/2011

12 A Dive Into Banks' Off‐Balance Sheet Vehicles Financial Institutions 12/16/2011

13 Audio Update: Pension Underfunding with Chris Senyek Pensions 12/20/2011

14 2012 Pension Outlook Pensions 1/3/2012

15 Verizon Cash Flow Deep Dive: Taxes & Wireless Support Dividend Telecom [VZ] 1/5/2012

16 2012 Stock Picking Ideas: Capital Creation and Earnings Quality Capital Allocation / Earnings Quality 1/9/2012

17 Audio Update: Key Themes in Financials with Chris Senyek Financial Institutions 1/12/2012


19 Dividend Increases Signal Stock Price Outperformance Corporate Actions 1/30/2012

20 Weekly Spin‐off Update (Including Post Holdings Analysis) Corporate Actions [POST] 2/3/2012

21 Key Themes: Chart Book Chart Book 2/4/2012

22 Reincorporating: Will Others Follow Aon's Move? Corporate Actions / Taxes [AON] 2/15/2012

23 Audio Update: Corporate Tax Reform Unveiled with Chris Senyek Taxes 2/23/2012

24 10‐K Navigation Guide Primers 2/28/2012


26 Banks: Earnings Quality Analysis Earnings Quality / Fin. Institutions 3/5/2012

27 Apple's Dividend Initiation and Buyback Corporate Actions [AAPL] 3/19/2012

28 Pensions: Restructuring & Mark to Market Adoption Pensions 3/21/2012

29 Audio Update: Pension Restructurings and MTM with Chris Senyek Pensions 3/22/2012

30 New Contrarian Ideas Based on TREE & Earnings Quality Capital Allocation / Earnings Quality 3/23/2012

31 Earnings Quality: Identifying Underperformers Earnings Quality 3/30/2012


33 Financial Institutions' Accounting Themes Financial Institutions 4/9/2012

34 CIT Deep Dive: Lowering Economic Book Value by $5 Corporate Actions / Fin. Institutions [CIT] 4/18/2012

35 Tax Changes in 2013 Likely to Compel Special Dividends in 2012 Corporate Actions / Taxes 4/23/2012

36 Hidden Value in Net Operating Losses (NOLs) Corporate Actions / Taxes 5/2/2012


38 Pro Forma Earnings Earnings Quality 5/9/2012

39 Pensions: State of the Union Pensions 5/11/2012

40 Banks: 'Q1 Earnings/Asset Quality Analysis Earnings Quality / Fin. Institutions 5/16/2012

41 Returning Cash to Shareholders: Who's Next? Capital Allocation 5/21/2012

42 Spin‐offs, Post Bankruptcy Equity & Value Opportunities Corporate Actions [ADT, LMCA, VC] 5/31/2012


44 Capital Allocation: Buyback and Dividend Analysis Capital Allocation 6/7/2012


46 Winners From Pension Funding Relief Pensions 6/26/2012

47 Audio Update: Pension Relief with Chris Senyek Pensions 6/29/2012


49 Pension Funding Relief Signed Into Law Pensions 7/9/2012



AACCCCOOUUNNTTIINNGG && TTAAXX PPOOLLIICCYY RREESSEEAARRCCHH LLIIBBRRAARRYY ((CCOONNTTIINNUUEEDD))

Report Title Topic Date

51 Senyek's Stock Idea Spreadsheet Capital Allocation / Database 7/17/2012

52 Repatriation Transactions and Bills to Extend Bush‐Era Tax Cuts Taxes 7/25/2012


54 Banks: 'Q2 Earnings/Asset Quality Analysis Earnings Quality / Fin. Institutions 8/14/2012



57 Capital Allocation: Buyback and Dividend Analysis Capital Allocation 9/5/2012


59 Audio Update: Avoiding Underperforming Stocks with Chris Senyek Earnings Quality 9/7/2012

60 European Stock Ideas: Shareholder Value Creation TREE Analysis Capital Allocation 9/20/2012

61 Tyco: ADT Deep Dive Corporate Actions [ADT, TYC] 9/26/2012


63 CIT: Four Possible Catalysts in 2013 Financials [CIT] 10/3/2012

64 Pensions: Year‐End Outlook Pensions 10/11/2012


* Every Friday, we send out “Senyek’s Weekly Spin‐off Update”, a brief look at new announcements, updates, and activities in

spin‐off and post‐bankruptcy equities. Monthly, we send out "Senyek's Stock Ideas Spreadsheet " based on three important

areas of our investment analysis and research: capital creation/allocation, earnings quality, and valuation. It may also be used as

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Documents

EARNINGS QUALITY STOXX E 600 - Wolfe Research · model are companies reporting recurring “special” charges. We find 54 companies out of the STOXX Europe 600 reporting special