Jessica Binder, CFA

2008 年 11 月 26 日欧洲：投资组合策略：策略焦点
2008 年 11 月 26 日
欧洲：投资组合策略
策略焦点
欧洲黄皮书：公司三季度前景展望要点
几乎所有公司在第三季度对于前景的展望都是悲观的。管理团队对
于经济增长的急速下滑忧心忡忡，且这种下滑蔓延到新兴市场的可
能性也日渐增大。因而，他们纷纷削减不必要的开支并储备现金。
管理层看法
我们分析了道琼斯斯托克 600 指数各行业最大公司 08 年三季度的盈利报告以评 Jessica Binder, CFA
+44(20)7051-0460 | jessica.binder@gs.com
估其中反映经济形势、价格走向、成本压力和主要议题的信息。高盛国际
发达市场增长急速放缓彼得·欧品海默
大多数公司的管理层都认同经济增长正在放缓的观点，一部分人认为这是他们职 +44(20)7552-5782 | peter.oppenheimer@gs.com
高盛国际
业生涯中经历过的最为迅速的下滑。许多公司下调了盈利预测，有些公司鉴于前
景的极度不确定性甚至取消了预测。 Sharon Bell, CFA
+44(20)7552-1341 | sharon.bell@gs.com
新兴市场喜忧参半高盛国际
在前几个季度中，新兴市场几乎无一例外地成为地域多元化企业的有力支撑。然
Gerald Moser
而在本季度，新兴市场在经济增长的风险、速度和可持续性方面呈现出喜忧参半 +44(20)7774-5725 | gerald.moser@gs.com
的局面。高盛国际
信贷紧缩影响本土市场，开支承压
在第三季度，信贷紧缩、流动性和资产负债状况的稳健性成为主要议题，各公司
也使出浑身解数向投资者保证其状况良好。很多公司表示正在削减开支，特别是
股份回购支出和资本开支以储备现金。
利好因素：大宗商品成本和汇率
本季度的好消息为数不多，但前几年一直作为不利因素的大宗商品成本和汇率却
成为例外。尽管大宗商品成本下降的持久性尚不确定，但各公司可能在第四季度
受益于其走低的价格。此外，更加疲弱的欧元和英镑也对许多欧洲公司的业绩报
告产生了有利影响。
高盛集团与本研究报告所分析的企业存在业务关系，并且继续寻求发展这些关系。因此，投资者应当考虑到本公司可能存在可能影响本报告客观性
的利益冲突，不应视本报告为作出投资决策的唯一因素。有关分析师的申明，见本报告最后部分。其他重要信息披露见分析师申明之后部分，或参
阅 www.gs.com/research/hedge.html。由非美国附属公司聘用的分析师不是美国 FINRA 的注册/合格研究分析师。
高盛集团
高盛策略研究全球投资研究
1
November 26, 2008 Europe: Portfolio Strategy: Strategy Matters
November 26, 2008
Europe: Portfolio Strategy
Strategy Matters
European Beige Book: Takeaways from 3Q outlook statements
Company outlook statements were almost universally
bearish in the third quarter. Management teams are
concerned that economic growth is slowing dramatically,
and there is an increasing chance this weakness will be seen
in emerging markets as well. As a result, they are looking to
cut discretionary spending and preserve cash levels.
Management teams say ...
We reviewed the 3Q08 earnings transcripts of the largest companies in Jessica Binder, CFA
+44(20)7051-0460 | jessica.binder@gs.com
each sector of the DJ Stoxx 600 to assess anecdotal evidence on the Goldman Sachs International
economic picture, pricing trends, cost pressures and major themes.
Peter Oppenheimer
Growth is decelerating sharply in developed markets +44(20)7552-5782 | peter.oppenheimer@gs.com
Goldman Sachs International
Most company executives acknowledged that growth is slowing, and
some mentioned that this is the swiftest slowdown they have experienced Sharon Bell, CFA
in their careers. Many companies lowered guidance, and in some cases +44(20)7552-1341 | sharon.bell@gs.com
removed it as there was extreme uncertainty regarding the outlook. Goldman Sachs International
Gerald Moser
Emerging markets are a mixed bag +44(20)7774-5725 | gerald.moser@gs.com
In past quarters, emerging markets were almost universally hailed as a key Goldman Sachs International
support for geographically diverse companies. This quarter, however,
there were mixed messages as to the risks, pace and sustainability of their
growth.
The credit crunch hits home, and spending takes a hit

The credit crunch, liquidity and strength of balance sheets was a key
theme in the third quarter and companies went to great lengths to try to
reassure investors that they were in a good position. Many mentioned that
they were cutting spending, particularly on share buybacks and capex in
order to preserve cash.
One positive: Commodity costs and currency

There were not many bright spots in the quarterly calls, with the exception
of commodity costs and currencies, which had been significant headwinds
over the past few years. While the permanence of the fall in commodity
costs is unclear, companies will likely start to benefit from lower prices in
the fourth quarter. In addition, a weaker euro and sterling has led to
stronger reported results for many companies in Europe.
The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC
certification, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts
with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research

Goldman Sachs Strategy Research 1
Key takeaways from DJ Stoxx outlook statements

The Summary of Commentary on Economic Conditions, commonly known as the Beige
Book, is published by the US Federal Reserve eight times per year. In the Beige Book, the
12 regional Reserve branches offer anecdotal evidence on the current economic
environment in their respective regions based on interviews with key business contacts,
economists, market experts, and other sources.
In this report we have reviewed the 3Q08 earnings transcripts of the largest companies in
the DJ Stoxx 600 to assess anecdotal evidence on the economic picture, pricing trends,
cost pressures and major themes (such as emerging markets, the credit crunch, and
returns to shareholders). Our US counterparts produce a very similar report; see S&P 500
Beige Book, November 6, 2008. We have also highlighted key themes below.
The 108 companies included in this report collectively reported earnings of €281 bn in
FY2007, 56% of the total for the index. All comments in this report were taken verbatim
from the company transcripts as recorded by CallStreet, available through Factset.1
Growth slowdown seems evident

Managements have grown much more bearish over the course of this year. If the first
quarter could be classified as “reasonably optimistic”, and the second quarter “more
muted”, then this last quarter is simply “pessimistic”. Companies in almost all sectors
noted the weakness they saw and a few even noted this was the swiftest slowdown they
have ever experienced. As the co-Chief Executive Officer of SAP stated,
When the financial crisis accelerated at the end of the third quarter it impacted our
business in all regions with an unprecedented sharp downturn in business activity….In
my 26 years at SAP, I have never witnessed such a sharp decline in customer
spending in such a short period of time.
Furthermore, companies used the quarter as an opportunity to lower or remove guidance

given the uncertainty in the marketplace, including Abertis, BMW, ASML and Deutsche
Post. As adidas said on its conference call:
We are retracting all our financial guidance for 2009. The current macroeconomic
volatility is as difficult as I have seen it, in my more than 20 years in the industry. The
implications for our business are extremely unclear, and prevent us from giving what I
believe would be a fact-based, formal guidance that would be fair to measure us by in
the next 12 months.
And Lafarge:
At that time, we expected an overall slowdown. Now, although visibility is reduced for
2009, we do not exclude a more severe downturn with more impact on our markets.
This is why today, despite our solid results in 3Q, we are not in a position to confirm
our 2010 targets.
Perhaps most notably is the fact that prospects do not appear to be improving, and if
anything, have worsened. Since the quarter ended, there have been a few high-profile
profit warnings for the fourth quarter, including BASF, Nokia and AXA. Sandvik highlighted
the weakening outlook in its quarterly conference call:
1
We would like to thank Christopher Henry and Hanyi Lim for their contributions to this
report.

We did see a rather significant change in customer behavior in this quarter, especially
towards the end of the quarter that we are all recognizing that we for some time have
been heading towards a slower business climate... The development that I can
mention … has continued into October, and actually accelerated.
There were some companies, however, that stated that they were not seeing any
slowdown in growth, at least as of yet and re-affirmed or increased guidance. While many
of these companies were in defensive sectors, such as healthcare, telecoms and utilities,
there were some in more cyclical industries. Companies that cited strong trends included
Reckitt, Novartis, Novo-Nordisk, Sanofi-Aventis, Deutsche Telekom, KPN, E.ON, and
Ericsson.
Companies are still ‘cautiously optimistic’ about emerging markets

Despite the weakness in emerging market equities in recent weeks, companies still see
those markets as driving sales growth and profitability. Even in the autos sector, which has
been hurt by weakening consumer spending, Volkswagen noted strong trends in Eastern
Europe, and in Russia and Ukraine in particular:
In Eastern Europe, however, we saw an increase in deliveries of 19.6% and therein our
sales figures of – in Russia and in Ukraine and in Europe. In Russia we were able to
increase our deliveries to customers by 68% while in Ukraine it was up by 51%.
Other companies noted mixed trends depending on the region of exposure. As SAP
mentioned,
As to the emerging markets, if you look at the BRIC countries, India and China had a
very good quarter. Brazil had a very good quarter. The only BRIC country that had a
rough quarter in 3Q was Russia. The reasons for that are well known, and just look at
what they did to the Russian stock market and a few other things. And we do not
expect Russia to recover that quickly.
One thing that seems certain, however, is that emerging markets are unlikely to grow at
the same rate over the next few years as they have in the recent past. This view was
shared by Sandvik, UPM-Kymmene and, Geberit and Metro. As Norsk Hydro said in its
conference call,
We see reduced growth in China, still significant growth in China, but not to the tune
that we saw last year when it was well above 30%. This year it will be more to the tune
of 10%. And we also expect China to grow in the years to come, but not at the kind of
pace that we’ve had over recent years.
However, other companies expressed some caution on the ability of these countries to
truly ‘de-couple’ from the rest of the world. As Credit Suisse expressed,
We are optimistic but extremely cautious with the emerging markets. I think the
probable decoupling play has been overplayed, certainly – well, we have been starting
to see the effects in the emerging markets from the global crisis.
We share this fear, as we expressed a few weeks ago (see Strategy Matters: Emerging
Risks – EM exposure in European markets, October 30, 2008). We believe that this
dependence on emerging economies for growth has exposed the European markets to
further profit risks.
Credit crunch hits home, and spending takes a hit

One feature that stood out from the conference calls was the lengths companies were
willing to go to to demonstrate confidence in their balance sheets and liquidity. Even

companies with strong balance sheets felt the need to reassure investors that their cash
positions were strong and they had access to credit markets. But even those that do have
access to credit are feeling the pinch from wider spreads. As Enel mentioned,
The average cost of the credit lines of Enel are very low; of course I have to say that
the most recent – the most recently initiated credit facilities I mean in the last two
months, the cost is higher. It is in the range of 100 bp over LIBOR.
Financial companies will likely suffer reduced profitability going forward as their ability to
do ‘business as usual’ is impaired. As Investor said,
Because the reality is we will need to stabilize the credit markets otherwise we’ll have
very severe effects on the real economy and already today we see it is very difficult for
a buyout, for example, to get financing. But, we even see it’s increasingly difficult even
to finance production equipment in companies.
These companies are hurt not only by lower earnings prospects going forward, but the
value of assets on their balance sheets. As the crisis moves from US sub-prime mortgages
to the real economy, financials may be faced with further writedowns. As AEGON
discussed on its conference call,
The outlook for economic growth has been severely damaged and recession, perhaps
a severe one, is probably imminent. Such conditions have often given rise to elevated
levels of impairments in credit instruments in the past. And although AEGON does not
publicly forecast impairment levels, it’s reasonable to expect above average
impairments in the next year or so.
Cash preservation becomes a priority

The credit crunch has changed how non-financial companies do business. From their
conference calls, it was clear that there was a new focus on working capital management
and cash preservation. As Royal DSM said,
And also the financial crisis plays a role there, because for all of the companies,
including ourselves, cash today is important, and destocking means of course that the
cash flows are improving, and the working capital is decreasing. And that really was
totally new.
Companies appear to be embracing the idea that ‘cash is king’, a theme that we
highlighted in September (see Strategy Matters: Cash is king in an economic slowdown,
September 26, 2008). In that report we highlighted that we thought there were downside
risks to cash distributions, and in particular, buybacks seemed at risk. Many companies in
Europe highlighted they were suspending their buybacks, such as Nokia, DSM, ABB,
adidas and SwissRe, and even those companies in less cyclical businesses, such as
AstraZeneca and E.ON. As BP said,
As far as share buybacks go, let me just be clear on this, that we didn’t buy any shares
over the close period. We did that in spite of the fact that we believe BP shares are
excellent value at this level. But in these volatile and uncertain financial markets, we
believe it’s prudent to manage our cash flow conservatively.
Other companies are going a step further, and cutting back on capex, and in some cases
dividends. Those that have lowered expectations for capital spending across almost all
sectors include StoraEnso, Holcim, Lafarge, Siemens, Volkswagen, Carlsberg, Metro, Air
France, Telecom Italia, Enel and Liberty International. As ArcelorMittal discussed,
We are adapting our existing growth plan to market conditions and significantly
reducing our growth capex… We expect fourth quarter capex to be about $1.5 bn, I
think instead of $3 bn previously forecast. I think the significant reduction in capex is

appropriate for the situation but also demonstrates the significant flexibility that we
have as ArcelorMittal to adapt to this new environment.
And as Deutsche Lufthansa said in reference to its dividend:
And the dividend question, again it’s – let’s say half soft and half hard. I don’t know
any investor who would expect us to really spend money for dividends if at the same
time you are not able to have secured financing for your investment.
Commodity costs and currencies finally become a tailwind

However, one bright spot did emerge from the conference calls regarding the outlook for
commodity prices and currencies. Commodity costs are significantly below their peaks
earlier in the year, and while many companies did not necessarily benefit in the third
quarter from lower prices, they do expect to see an impact in the fourth quarter of this year
and into 2009. As Unilever said,
Let’s now look at what’s been happening to commodity costs. Commodity price
inflation has added over €800 mn of incremental cost to our P&L in 3Q… All these
together have contributed to the cost escalation in 3Q. We expect to see some
improvement in 4Q and for the full-year impact to be c.600 bp, roughly 2.5 bn of
incremental cost year-on-year. We do anticipate far more benign conditions in 2009.
This issue should particularly benefit the travel & leisure sector, which has historically
shown an inverse correlation with oil prices. As Ryanair discussed,
We are totally unhedged for 4Q and would expect to be able to buy oil at significantly
cheaper prices, which reflect a decline in spot. In recent months, however, a significant
disconnect has emerged between the spot and forward prices, resulting in 1Q and 2Q
for next fiscal year pricing at a premium of $17 to $18 a barrel over spot rate. In
addition, the hedging markets are proving very illiquid, which partly explains these
high premiums.
However, some of the oil & gas and basic resources mentioned that they believed lower
prices to be a short-term phenomenon. As Total mentioned,
Despite the recent and very dramatic fall in oil prices, we continue to believe that the
supply/demand balance will be tight over the long term and our investment vision is
long term.
One other area of improvement is currency, which had been a major headwind for the last
few years. While the fall in sterling earlier in the year started to benefit UK companies, a
fall in the euro is now having broader implications for European companies. As Novo
Nordisk stated,
Following years of depreciation, two of Novo Nordisk’s most important invoicing

currencies, namely the US dollar and Japanese yen, have in the latest month
appreciated substantially. The appreciation of the key invoicing currencies has a long-
term positive impact on Novo Nordisk’s financial outlook.
Comparing Europe to the US

The main themes highlighted in our US colleagues’ most recent S&P 500 Beige Book,
published on November 6, are summarized below.
Mixed messages on global growth outlook

Earnings calls this quarter lacked the consensus of prior periods when upbeat commentary
on global growth prospects was nearly unanimous. While some management teams cited

slowing economic growth and the possibility of a global recession, others reported no
deceleration in foreign market end-demand for their products or suggested that the US
slowdown was just now spilling into developed and emerging markets. Commentary on
the economic outlook for Europe was notably bearish.
Consumers spending less and trading down

Comments from management teams across all ten sectors focused on the impact of
weakening consumer sentiment and spending both in the US and around the world. While
food and energy prices are becoming less of a weight on consumers, rising
unemployment and falling home prices are dampening spending in discretionary and
seemingly non-discretionary categories. Consumers are looking for value and “trading
down.”
Government intervention helping weak banks most

Many management teams shared their perspectives on the recent US government
intervention in the financial system. Some banks applauded recent policy action while
others questioned the impact on stronger banks versus weaker banks and lamented the
lack of focus on the key issue of declining home prices.
Credit crisis increasing balance sheet focus

The recent credit market crisis played a starring role in 3Q earnings calls, with
management teams in all sectors focusing on balance sheet and liquidity issues. Even
companies with rock-solid balance sheets and no short-term financing issues felt the need
to reassure investors that they had access to capital. The impact of the credit crisis was
also apparent in commentary on reduced plans for near-term M&A, capex, and buybacks.
Forecasting ability hampered by uncertainty

Management earnings guidance for future quarters was not only weak, but also was
severely lacking in specifics and confidence. Countless management teams declined to
offer forward-looking earnings guidance because of the difficulty of forecasting in the
current environment. Others candidly commented that any guidance provided was given
with a low level of conviction.
Management outlook statements

Below is a compilation of excerpts from management outlook statements. We have
categorized the comments by key theme and classified them as positive or negative for the
company. All management comments in this report were taken verbatim from the
company transcripts as recorded by CallStreet, available through Factset. The source of
the text is noted for each company.
Please note that, in the tables below, an asterisk next to a rating denotes that the stock is
on our Conviction Buy/Sell List. The source for all data is I/B/E/S, Worldscope and Goldman
Sachs Research estimates. NTM refers to next 12 months.

Oil & Gas

Stoxx 600 Price Total Ret Consensus EPS Growth 2008E EPS P / E Mkt Cap
Country Rating Weight (Local) YTD 2007 2008E 2009E 3 mo chg (NTM) (€ bn)
BG Group PLC (BG.L) United Kingdom Neutral 0.9 8.46 -35.9% 0.5% 0.9% 0.9% -4.0% 9.9x 33.3
3Q 2008 earnings call Nov. 4, 2008
Pricing (+): So, our gas prices going forward, I think, will be more reflective of prevailing
market conditions. One can’t predict these things precisely, but I think it’s very unlikely that
we will see a return to gas prices which were reflected in those legacy contracts.
Capex (+/-): There is no change today to our capex guidance. There’s, as you will have
gleaned, a number of moving parts. We’ll provide an update to the market in February… I
think really the main thing driving the Kazakhstan decision is the fact that we are now, or
we plan to be, on the point of sanction in the fourth quarter and we feel that that is, for
such a major capital investment, just the wrong time to be doing it… For the projects
which you mentioned, Iara and Guará, of course the timing, the capex timing, for that is
going to be later.
Returns to shareholders (+): Our dividend policy, I don’t see changing; that is to say it’s
our policy to provide shareholders with long-term real growth in the dividend in line with
underlying growth in our earnings and cash flow profile.
Stoxx 600 Price Total Ret Consensus EPS Growth 2008E EPS P/E Mkt Cap
BP PLC (BP.L) United Kingdom Neutral 3.0 5.13 -23.9% 1.1% 1.5% 1.1% -3.9% 6.7x 113.2
3Q 2008 earnings call Oct. 28, 2008
Returns to shareholders (+/-): We’ve distributed over $10 bn to our shareholders.

Dividends paid in the first nine months of the year were $7.7 bn. Dividend payments and
the strength of the balance sheet are of course an area of investor focus in current market
conditions. Our objective remains unchanged: to grow the dividend through time in line
with our view of future sustainable performance.
As far as share buybacks go, let me just be clear on this, that we didn’t buy any shares
over the close period. We did that in spite of the fact that we believe BP shares are
excellent value at this level. But in these volatile and uncertain financial markets, we
believe it’s prudent to manage our cash flow conservatively… And so, I just would say that
we feel very confident in our ability to service our dividend at prices well below the $60 to
$90 framework that we described back in February.
Economy (-): Oil prices, on the other hand, are currently at the bottom of the $60 to $90
range. With the world economy entering a probable recession, it’s of course possible that
oil prices could dip further for a period of time. Our view is that this would be likely to
prove temporary. If oil prices did remain low for an extended period, then over time past
experience shows that both costs and fiscal regimes would adjust, albeit with a lag.
Capex (-): Inflation in the sector lagged the oil price cycle, the lag on the up as well as a lag
on the down. What is very clear is that historically, looking back over a very long period of
time, there has been a cause-and-effect relationship.
Access to credit markets (-): Our debt book, we believe it’s prudent to be conservative at
this point in time… So we’re likely to continue to hold quite a bit more cash than one
would under normal circumstances… The real swing short-term element is commercial
paper. We’ve found our ability to access commercial paper has been unimpeded
throughout the financial crisis, and we’ve been able to fund it at extremely attractive rates,
just a little bit above treasury.

ENI S.p.A. (ENI.MI) Italy Neutral 1.2 18.19 -22.9% 2.6% 2.9% 2.5% -2.6% 7.1x 44.3
Capex (+): We are obviously monitoring our capex closely with particular attention to the
time-to-market, a risk profile of each project, and I can anticipate that we have the
flexibility to respond appropriately to changing market perspectives… the full-year capital
expenditure plan that we presented in February is robust in the current market conditions
and the upstream acquisitions that we completed to date are cash generative and solid,
below the long-term assumption of $50 a barrel oil price.
Returns to shareholders (+): We are firmly committed to maintain a leading dividend

yield, also leveraging on the resilience of our Gas & Power division, which enables us to
remain highly cash-generative even at a time of falling oil prices.
Liquidity (+): From a strict liquidity perspective, we can rely on more than €7 bn of cash
and committed undrawn facilities. The strong cash generation, the high credit rating and
the availability of diversified committed bank lines without material adverse change
conditions and the financial covenants provide the evidence of our strong financial
position and allow us to cover both short and long-term financial needs.
Repsol YPF S.A. (REP.MC) Spain Buy* 0.3 15.00 -36.3% 2.4% 2.5% 2.4% -4.0% 6.3x 11.9
Capex (+): Right now and with the existing variables, I mean an environment of about $50,
$55 a barrel and with the position of the dollar, basically we are in line with the strategic
plan. So we really – if you remember in the strategic plan, we generate some cash flow of
about €15 bn to be split between dividend and extra cash flow. So we still have room at
this level, but we are keeping a total control regarding all the projects.
Royal Dutch Shell Class A (RDSA.AS) Netherlands Buy 1.9 19.75 -28.1% 3.0% 3.8% 3.0% 7.7% 6.5x 70.0
Margins (-): Refining and chemicals margins have held relatively firmly, although we do
expect pressure on margins from weaker demand and new industry refining and chemicals
capacity.
Economy (-): We do expect Shell asset sales to continue… However, there are clearly
some pressures in the credit market today which might mean there are fewer buyers of
assets than earlier in the year. We were successful in selling upstream and downstream
assets at peak cycle in recent years; the macro trends are down for both segments at least
for now. Now we are not in a rush to sell assets; it’s not a fire sale. So the pace on asset
sales might slow down here considerably.
Returns to shareholders (+): We have never lowered our dividend since ‘94, ’95… So we
are very strongly committed to our dividend policy, and that is at least in line with inflation
and make sure that if we make such a statement, of course, we have done our homework
about modelling, about all kind of assumptions.
Capex (+/-): Indeed, oil prices have come down, commodities have come down, certain
costs will come down, but it’s by far too early to actually give any impact of that in the
shorter term into next year. You also know that exchange rates are moving and fluctuating
quite a bit. So we need to wait for all of this before we talk again about 2009 capex. For the
time being, I think the 10% inflation is a good number to use.

StatoilHydro ASA (STL.OL) Norway Buy* 0.3 114.00 -37.8% 13.8% 18.7% 16.3% -14.1% 6.9x 11.8
Economy (+): We expect that the world economy will see a downturn for some time
derived from this financial crisis and that this also will have an impact on the demand and
supply for our core commodities. Fundamentally however, we maintain the longer term
perspective on our industry. There will be growing demand for oil and gas in the years to
come.
Leverage (+): As per the end of this quarter, September30, our cash exceeded our debt
with Nkr13 bn. So in other words, we are generating a strong cash flow and we also have a
strong balance sheet, which gives us financial flexibility and capacity to continue with our
high quality capex program while staying fully committed to our dividend policy of paying
45% to 50% of our net income.
M&A (+): When it comes to M&A activities… we have to think long-term in this industry…
And we have a strong financial position, as I illustrated, and we have access to funds, to
put it that way, being rated the way we are… So, we will continue to look at that kind of
opportunities and they could even be cheaper than they were sometime ago and,
depending very much on the specifics here.
Total S.A. (TOTF.PA) France Neutral 2.3 41.30 -23.9% 5.4% 6.3% 5.6% -1.5% 7.3x 87.2
Leverage (+): As a result, we have reduced our gearing from 25% at the end of June to
15% at the end of September. This is below our target range of 20% to 30%. And it reflects
our desire to be prudent in the current environment by strengthening the balance sheet…
We will pay an interim dividend on November 15 and this should have the effect of
bringing the gearing back closer to 20%.
Returns to shareholders (+/-): Finally for buybacks, since the beginning of the third
quarter we have bought back close to 12 mn shares for about $0.8 bn… For the buyback,
as we said, we have no policy on buybacks, I would say. We use cash available if in excess
to buy back some shares and that’s it. And currently, today we are not buying back any
shares, but we will see what will be our cash position in two months’ time, and then we’ll
adjust in terms of that.
Liquidity (+): You have our balance sheet and you can see that we have $19 bn in cash at
the end of the third quarter. In addition to this cash, we have several billion dollars of
standby credit lines available to us that are essentially untouched, and we have about
$10 bn of Sanofi shares that we are selling progressively.
On the debt side, we issued about $4 bn of bonds earlier this year, so we are in a position
now where we can wait for an improvement in market conditions before we issue new
bonds. So that is liquidity.
Economy (-): Now what is our view of the medium- to long-term environment? Despite the
recent and very dramatic fall in oil prices, we continue to believe that the supply/demand
balance will be tight over the long term and our investment vision is long term. Obviously,
we expect to see some near-term weakness in demand related to a slowdown in global
economic growth. But OPEC seems to be serious about maintaining a proper
supply/demand balance on all the markets.
Capex (+): Our near-term capex reflects mainly the portfolio of long-term projects that we
are currently developing and preparing to start up. We are not in a situation where we
need to make significant changes. All projects currently in development create substantial

value at $50 to $60 per barrel… for 2009 you have to keep in mind that most of our capex
program is already committed. About 80% or more than 80% of that is already committed;
so whatever is the oil price, those capex would be implemented. Are we going to adjust? I
mean we are in the budget process and I cannot comment more because we haven’t seen
yet to the degree that I know that the E&P division is working on how to compose and
maintain our capex program as far as we can.
Vestas Wind Systems A/S (VWS.CO) Denmark Buy* 0.2 253.00 -54.2% 1.6% 2.5% 3.2% -5.0% 11.0x 6.3
Working capital (+): We have managed to push the net working capital down to close to
the zero level in the last four quarters, and again demonstrating the ability to get a better
development on the cash side, which is something, as I said, has been a very important
focus point for us over the last few years.
Government initiatives (+): We are presently investing $700 mn into the US, which we
started, and we have already inaugurated our first factory there. And with the wind
resource in the US and this kind of political focus, we feel that maybe the US will grow
significantly in the coming years, which is obviously very encouraging for our industry and
which, for sure, will also fuel a lot of additional activities economically in the States.
Chemicals
Akzo Nobel N.V. (AKZO.AS) Netherlands Neutral 0.2 24.64 -53.2% 2.1% 3.5% 3.5% -2.7% 7.0x 6.4
Pricing (+): Price increases are beginning to land here with 5% impact on the top line,
allowing us to compensate for higher raw material costs… Well, as it, you see peaks and
troughs in this. As you push through price increases, there’s degrees of resistance, and
people obviously use up the stocks they’ve got first.
Pensions (-): Underlying message here is, remember, our plans are very mature. The
largest plan, the ICI, plan is very well matched in terms of assets and liabilities. So the
volatility around the pension number for us, you should expect much lower volatility
because of this high degree of matching. And that’s been borne out by these quarterly
checks, if you like, on the major countries, which include, obviously, the UK and the
Netherlands.
Economy (+/-): Growth really coming from Asia and Latin America. Strong growth there,
we’re seeing it in double-digits… there’re going to be some bumps on the road, but if we
look through this through a number of years, there is a sort of unstoppable momentum,
domestic momentum in many of these markets, particularly, for example, in China… I
think there’ll be volatility in the short term.
Commodity costs (+): But that has a lag in terms of how it [oil prices] feeds through into
our businesses. It’s more one to try and plan carefully for 2009. And it’s too early to say.
We’ve, you’ve seen the headline price of a barrel come down quite significantly. We hope
it stays sustained as these levels. And yeah, it could help us favorably in 2009. But you
have to offset that against difficult visibility to forecast, and the concern about how well
volumes are going to hold up across the piece if the economy really does deteriorate
further in 2009.

BASF S.E. (BASF.DE) Germany Neutral 0.6 24.23 -50.1% 4.2% 4.0% 3.0% -6.5% 7.9x 22.9
Economy (-): The news and information that we are presenting today reflects a distinct
change in our business environment. I mean you’re seeing the affected sales, the impact of
the global financial crisis is speeding up and hitting harder on the real economy. The
economic skid marks can no longer be ignored. The decline in demand in important
markets, stock piling by our customers and the fall in oil prices and other raw materials are
signs of a recessionary trend that is likely to sharpen in 2009… The downswing of the
economy was increasingly noticeable from September onward. Worldwide we are
responding to declining demand by adjusting capacity utilization rates.
Returns to shareholders (+/-): In view of the current uncertainties in the commodities and
finance markets, we plan to suspend our share buyback program. But we remain
fundamentally committed to our goal of buying back shares for €3 bn by mid 2010… Now
as to the dividend, my statement is very clear. We’ll keep the dividend constant and we’ll
try to raise it. We always said that, but at least we will keep it constant.
Emerging markets (+): Regarding Asia, will Asia be able to keep up the speed of growth.
Well, the speed will slow down a little bit. We can see this in 3Q. In China, where we had
growth of 9% and looking at the year, at the overall year, it’s slightly above 10%. So China
will continue to grow because it is mainly driven by internal demand, 30% of GDP and
exports are only 16% of GDP. Of course, lower growth rates but still high growth rates, so I
am convinced that Asia is a stabilizing sector. The closures you mentioned are basically
taking place in the textile industry in the South of China and the toy industry, yes, we
noticed that in some parts and we are not only reacting in Europe and the USA by
adjusting capacities.
Access to credit markets (+): CP program, well, this is doing very well. To give you a
feeling, the spreads we received, compared to the normal situation up to 2Q, tripled, and
we are issuing below the LIBOR rate. This is a top quality; I don’t want to be more specific
here. And the credit lines are sufficient and we are using the CP program, which is
extremely liquid. We are not using the credit lines.
Bayer AG (BAYG.DE) Germany Buy* 0.8 40.34 -33.9% 3.8% 4.0% 4.1% -0.8% 9.9x 30.8
Liquidity (+): Furthermore, we are in good financial health, and we have no need of any
refinancing at the present time.
Returns to shareholders (+): We confirm our dividend policy, and are planning to pay out
between 30% and 40% of core earnings per share, as dividend.
Emerging markets (+): We continue to capture strong growth in the emerging markets. In
the so-called BRIC countries, we expanded our business by 15% to 1.1 bn. It is worth
noting that we became the number one international healthcare company in China,
growing at more than 40% in the quarter.
Working capital (-): There are high inventory levels in several of our segments. We also
see a reduction in a lot of our customers’ stock holding as they have difficult access to
credit lines.
Margins (-): If we talk about the overall margin guidance for next year in very broad terms,
clearly we’re operating in some cyclical markets and although there’s a sort of normal
economic downswing approaching the present financial crisis probably adds an extra
downside risk to that.

K+S AG (SDFG.DE) Germany Sell 0.1 29.55 -26.9% 1.1% 6.0% 7.8% -0.1% 3.9x 3.9
Liquidity (+): Net debt amounted to about €634 mn, and was thus down 24% compared to
last year. By the end of the year, we expect to have redeemed our financial debt, except
long-term pension and mining obligations. In addition, we have secured so far undrawn
credit facilities of more than €1 bn some months ago at attractive rates.
Economy (-): Following a prolonged and literally almost euphoric upward movement,
commodity exchanges have experienced significant profit taking, liquidation, and de-
leveraging from the middle of July onwards causing major reductions of the prices of all
the major agricultural products. In anticipation of global recession, this tells us the capital
markets either expect people to reduce their diet or that we face abundance in cereals,
corn, and soybean. We have a different view, because we neither expect people to change
their diet significantly, nor do we see global stock piles of surplus agricultural products to
feed the world.
Koninklijke DSM N.V. (DSMN.AS) Netherlands Buy 0.1 17.74 -43.0% 3.1% 4.1% 3.1% 5.9% 5.6x 3.2
Economy (-): The impact of the economic downturn is increasingly visible in our Material
Sciences activities. It is apparent that the crisis in the financial markets has started to
impact the real economy, leading to significantly lower customer demand in some areas.
Working capital (+): The combined effect of the low availability of credit, a strong
decrease in demand in certain end markets, a strong drop in oil prices, increase in
currency volatility, and anticipatory behavior in downstream industries, which result in
clear de-stocking is unprecedented... And that destocking in the whole value chain that is
of course affecting us. And also the financial crisis plays a role there, because for all of the
companies, including ourselves, cash today is important, and destocking means of course
that the cash flows are improving, and the working capital is decreasing. And that really
was totally new.
Emerging markets (+): In China we had again more than 30% growth in the third quarter.
Of course, China also in this quarter shows some slowdown, especially on the export
oriented industries. But a lot of our sales in China are of course for domestic usage, and
not export orientation.
Returns to shareholders (-): Question about share buybacks: No. Well, so far we have said
in April, that we will not do the full 500 anymore, but only 250, which we did. And
announce in April, that we will look at the other 250 at the beginning in the quarter one, so
to say of 2009.
Linde AG (LING.DE) Germany Neutral 0.2 54.73 -38.4% 5.8% 5.5% 5.9% -0.9% 9.4x 7.7
Access to credit markets (+): The credit crisis has not been impacting us in this nine
months period. That said we are well aware of the profound crisis on the financial markets
and the signals given by lead indicators, economic forecasts and some of our end
customer segments.
For the remaining debt until the end of 2010 we have a €2 bn committed facility with more
than 50 banks in place and have more than €1 bn of cash. Of course we have ongoing

market access. We have bonds and MTN issues in August, September and October and I
can also confirm that we were currently in the market facing commercial papers on a
frequent basis. So in a nutshell we have the long-term debt structure in place and short-
term debt is already backed up by liquidity reserves and the committed credit facility.
Margins (+): For 2008 our guidance hence remains unchanged with a sales increase and
an over proportionate growth in operating profit.
Basic Resources
ArcelorMittal SA (MTP.PA) Luxembourg Buy* 0.3 16.58 -68.5% 5.2% 8.2% 5.6% 11.5% 2.8x 12.5
Returns to shareholders (+): We also maintain our dividend at $1.50 per share in 2009.
Capex (-): We are adapting our existing growth plan to market conditions and significantly
reducing our growth capex… We expect 4Q capex to be about $1.5 bn, I think instead of
$3 bn previously forecast. I think the significant reduction in capex is appropriate for the
situation but also demonstrates the significant flexibility that we have as ArcelorMittal to
adapt to this new environment… We intend to reduce our capex to 4.5 bn in 2009 as we
adapt our growth plan to market conditions. Importantly, we’re still investing in growth
and have zero cutbacks on safety and maintenance capex spent. Our maintenance capex…
has increased but is $3 bn. Hence in 2009, we’re forecasting $1.5 bn of capex on growth
projects.
Leverage (+): Finally, we are planning to increase our financial flexibility and to do so
targeting to reduce net debt by $10 bn by end of 2009… In terms of our gross debt
maturity… our maturity profile is fairly lumpy. Nevertheless, we expect the first refinancing
requirements not to occur before 2010.
Economy (-): Now, before looking at steel market trends in the major geographic regions, I
would like to provide a few comments on the market concerns for the global economy.
Clearly the market has changed dramatically since we reported our 2Q results.
Unprecedented de-stocking is now occurring in most major regions, yet all is not negative.
Compared to the previous crisis, the steel industry is also in a much stronger position.
Before the recent supply adjustment to demand, the steel industry was not suffering any
excess capacity, a situation very different from previous recession.
Beyond demand, the best news has been the rapid adjustment of supply. As demand fell,
producers reacted quickly and reduced production. In this context we believe global de-
stocking should be completed by end of 2008 or early 2009, and that some signs of
improvement should be visible soon.
Norsk Hydro ASA (NHY.OL) Norway Neutral 0.0 23.00 -72.1% 7.5% 3.9% 3.4% -22.1% 6.7x 1.8
Margins (-): Clearly we will see some of these [commodity] costs coming down again in
the present economy and the present economic outlook. It will take some time, and in the
interim they will affect our margins.
Emerging markets (+/-): We see reduced growth in China, still significant growth in China,
but not to the tune that we saw last year where it was well above 30%. This year it will be

more to the tune of 10%. And we also expect China to grow in the years to come, but not
at the kind of pace that we’ve had over the recent years.
Returns to shareholders (+): We have, both the stated dividend policy and the practice of
Norsk Hydro over the years has been to maintain a reasonably stable dividend. We have a
dividend policy saying that we should dividend 30% of earnings over the cycle. We would
not normally swing with the cycle.
Salzgitter AG (SZGG.DE) Germany Buy 0.1 45.39 -54.5% 15.8% 14.7% 9.6% -0.3% 4.5x 1.9
Economy (-): My personal view is that we will see the worst in the first quarter. In the
second quarter, may be slightly better of course not for all our products, for strip steel and
for beams especially, maybe that’s because heavy plate comes later… And in the second
half I personally believe the situation will become better in small steps, not in big steps but
in small steps. The de-stocking I believe has begun and if the de-stocking has the same
velocity as it has now and imports are limited then I think the de-stocking might come to
an end at the end of the first quarter or the beginning of the second quarter next year.
Stora Enso Oyj (STERV.HE) Finland Sell 0.1 6.18 -36.0% 1.0% 0.3% 0.4% 14.4% 16.6x 3.5
Pricing (+): We were able to improve pricing in the majority of paper and board volumes,
not in all of them.
Capex (-): In 3Q, we reduced our capital investments by some 20% compared to a year
earlier to a level of 150 mn. The aim is then to reduce the overall capex level while
ensuring that the focus is on these strategically important projects and initiatives.
Liquidity (-): We have proactively worked to reduce the liquidity risk and our reliance on
short-term borrowing. We’ve extended the maturity profile since mid-2007 when the first
wave of the financial crisis hit the market in the US.
Government intervention (+): We have dramatically changed our position from being the
largest importer of Russian wood to being in a position of being independent of Russian
imports.
Tenaris S.A. (TENR.MI) Luxembourg NC 0.1 7.98 -46.8% 1.1% 1.5% 1.4% 23.2% 5.6x 3.7
Pricing (+): Higher average selling prices, which were up 20% over last year and 14%
sequentially, reflect the implementation of prices increases in an environment where pipe
prices, particularly North America, have risen strongly.
Economy (-): Business conditions have changed so rapidly that at this point it is not clear
how deep and how long the impact on the real economy will be. Consequently also the
demand of energy is difficult to forecast and estimate for the coming years.
As in other sectors of the economy, we are having to adjust from an environment of strong
expansion to one where we expect contraction. But at this stage, it is still unclear as to its
extent. However, we believe that the energy sector will be impacted less than most other
sectors of the economy, due to the constraint on the supply base, which is characterized
by high depletion rates, and the long lead times to develop new reserves, the difficulties in

gaining access to reserves and the strategic relevance of oil and gas for national security
of many countries.
UPM-Kymmene Oyj (UPM1V.HE) Finland Sell 0.1 10.34 -20.2% 1.0% 0.8% 0.8% 0.8% 12.7x 5.4
Emerging markets (-): Asia so far has been a good demand. But the last couple of months
has been, we have experienced a slowing demand.
Economy (+/-): Demand is slowing down in most paper grades due to weakening global
economy, capacity closures increasing and taking place also in Europe, price increased in
magazine papers in Europe during the third quarter. We were able to increase prices in
magazine papers. Wood fibre costs have remained high, while energy and raw material
prices are easing. And then rapidly strengthening of US dollar improve competitiveness of
Europe via paper exports.
Pricing (+): And thirdly, it’s the pricing power that we have been able to gain. And there
we have three elements. Price increases in local currencies, the euro has been helping us
somewhat, and then finally better market product optimization
Construction & Materials

ACS S.A. (ACS.MC) Spain Neutral 0.1 31.95 -17.8% 3.2% 3.2% 3.1% -4.5% 10.4x 5.4
Margins (=): Construction margins remain in the same level as last year, although product
mix is changing. We foresee our margins remain flat for the rest of the year
Liquidity (+): We have close to €3 bn of liquidity to face any guarantees for our
investments… we have received more than nine, sorry €5.9 bn from Union Fenosa. Finally
our debt maturity calendar that frees us to refinance any significant debt until 2010.
Economy (-): The overall construction activity, we think it is now suffering two things. First,
the slowdown in the international market we’ve commented… obviously, the domestic
constructions in the residential business work will be very much down in this ‘09 and ’10.
Geberit AG (GEBN.VX) Switzerland Sell 0.1 103.90 -26.0% 10.3% 11.6% 10.8% 3.3% 9.5x 2.7
Economy (-): The higher market volatility and the crisis in the global banking sector and
credit markets make short-term and mid-term forecasts very difficult. Indeed, we faced…
one unprecedented event after another, and both the effect and the duration of recent
development of the building industry’s growth cannot yet be determined… What we are
missing is, clearly reference points in all our key markets to be able to guide you for next
year.
Emerging markets (-): The building industry is holding up reasonably well in Geberit’s
emerging world markets, but growth rates likely to reduce.
Commodity costs (+/-): The raw material prices came down, so we should have a positive
impact in 4Q. Hopefully we can keep this slight advantage in 1Q. And I said it this way
because we have seen in the last few days, for example, copper went up 10% two days

ago, nickel as well. In other words, volatility is still there. But in average, the raw material
prices are down versus, I would say, the average price of the first nine months of 2007.
Holcim Ltd. (HOLN.VX) Switzerland Sell 0.2 47.60 -56.5% 14.9% 8.2% 6.7% -15.2% 7.0x 6.5
Economy (+/-): We expect a further deterioration in the economic environment in the

fourth quarter. The construction markets of western and southern Europe will decline
further. The east and southeast regions will see a slowdown. In North America, the US
construction sector has not yet bottomed out and the Canadian market looks set to slow
down. In Latin America, the volume of construction orders is likely to remain relatively
stable but the difficulties facing the US economy will also negatively impact this region.
Group region Africa, Middle East will be able to maintain generally good business. In Asia-
Pacific, demand will slow down at least in some markets.
Capex (-): With regard to capital expenditure to maintain first as a rationalization and
replacement capital expenditure. We have given you at the beginning of the year the
guidance of 1.5 bn. This will be reduced this year to 1.2 bn. Then with regard to capital
expenditure there we have given you guidance of 3.5 bn, let’s assume that these 3.5 bn
this year will be used. And we will reduce that in 2009 to 2.8 bn.
Government initiatives (+): Do you think infrastructure spending will support demand? I
firmly believe so. We also see in some of the markets already signs of so called stimuli
packages – just want to mention China, but there are also others. And I think more such
infrastructure stimuli packages will come forward. We should not forget that the – in the
real economy the building material industry is always the first which gets the hit, but it’s
also the first which will take advantage of the upswing. And I can see in various markets,
emerging markets, but also developed markets, that infrastructure expenditure will
certainly increase and will be a focus area of many governments.
Lafarge S.A. (LAFP.PA) France Neutral 0.1 37.28 -69.0% 10.4% 9.8% 8.3% -9.1% 4.4x 5.0
Economy (-): At that time, we expected an overall slowdown. Now, although visibility is
reduced for 2009, we do not exclude a more severe downturn with more impact on our
markets. This is why today, despite our solid results in 3Q, we are not in a position to
confirm our 2010 targets.
Capex (-): Our priority today goes to cash flow generation and de-leveraging. We are
limiting our total capital expenditures, working at both sustaining and internal
development capex.
Government spending (+/-): Finally, it is good to remind that the fundamentals of our
sector remain strong both in this short term, challenging environment and overall in the
mid to long-term perspective. The needs for infrastructure are considerable. One-third of
the building materials and use is in infrastructure, and in this sector public policies
counterbalance economic slowdown. Population growth and the basic needs for housing
and infrastructure in emerging markets will continue to drive long-term demand.
Commodity costs (-): While there has been much publicity about the fall in oil prices, our
key input costs such as coal, petcoke and natural gas did not keep pace with the declines
seen in oil in the third quarter. As such, higher energy costs still applied pressure on the
year-to-date and quarter operating margins.

Emerging markets (+/-): We have seen some weakening in the growth and demand in
emerging countries, but this remains in many countries where we operate, still in positive,
and in some cases very positive territory. So if we go around the globe, clearly some
countries, including in the Middle East, are continuing to show some good evolutions.
Some countries in Asia are continuing to see some very good evolution. It’s the case in
India, the case in Philippines, the case in Malaysia. So overall, even if there is again a
slight decline in the third quarter, and looking forward in the beginning of the October
months, we believe that we will still be showing, for the full year and the quarter, good
results from our emerging countries.
Industrial Goods & Services

ABB Ltd. (ABBN.VX) Switzerland Buy 0.5 13.40 -55.2% 1.4% 1.7% 1.5% -4.6% 7.5x 20.2
Economy (-): It’s clear that everyone is wondering about the impact of the recent events
on the global financial market overall, and the third quarter was the first quarter out of the
last 11 where we failed to post a double-digit increase in orders. Orders were up 7% in
dollar terms, but 1% in local currencies. We saw some further weakening in our short-cycle
businesses in 3Q, related mainly to construction.
Up until now, we have not seen any project cancellations or delays in Power Systems
related to financing. We’ll have to wait and see how the situation develops in the coming
quarters, but the strong project backlog keeps – helps us to remain cautiously optimistic
about the future of the power business.
Returns to shareholders (-): So far we have spent $660 mn on the stock buyback, out of a
2 bn authorized program. And as you know, we have until the AGM of 2010 to execute
that. Now I would say at this stage, first of all that, we usually don’t comment on our
actions ahead since it is market sensitive. I think if you connect that with the comments we
made before, obviously keeping a solid balance sheet for the moment is priority number
one.
Emerging markets (+): Whether it’s Brazil, whether it’s China, whether it’s India, I think
each of them will hold up in different areas. I think I’m optimistic on China. I think India is a
little less optimistic, but we’ll see exactly how that economy goes. We’ve been doing
relatively well in South American and Brazilian companies – countries, and also in Eastern
Europe and Middle East so far. I wouldn’t necessarily say that emerging has any excessive
downside versus the mature economies right now.
Abertis Infraestructuras S.A. (ABE.MC) Spain NC 0.1 12.98 -36.2% 1.0% 1.0% 1.0% -5.1% 12.6x 3.8
Economy (-): These market conditions, which are more pronounced in Spain than in
France, are not expected to change over the coming months… The economic downturn
was more important and more negative in Spain than in France.
Returns to shareholders (+): Regarding dividends, on September 30, the Board of

Directors of Abertis decided to increase the 2008 interim dividend by 7% from 0.28 per
share to 0.30. That is in accordance with our commitment to our shareholders to increase
our dividend in the future. And on top of that, we will maintain our bonus share issue.

Guidance (-): If we talk about the outlook for 2009, we don’t want to update our guidance.
We think that the outlook for 2008 presented at the end of June was subject to some
working assumptions. And today those working assumptions are different than we
expected, particularly due to the macro conditions are worse than originally forecast.
Deutsche Post AG (DPWGN.DE) Germany Buy 0.2 10.80 -52.0% 1.2% 1.2% 1.1% -26.3% 9.5x 9.1
Economy (-): The issue… is that we have a massive weakening of the economy and we are
not the only ones who see that as well. If you look into the numbers of all competitors,
they see a weakening of the economy as well. And that’s the reason why we now
announced today additional measures. These are that we will focus entirely on the
International Only business. We will just focus on where we are the best at, that means
cross-border business.
Guidance (-): What we want to say there is that definitely we will face more losses than
originally anticipated due to the fact that we announced today a massive restructuring
program.
EADS (EAD.PA) Netherlands Sell* 0.1 11.95 -44.8% -0.4% 1.6% 1.8% 7.2% 6.6x 4.1
Liquidity (+): We have a strong balance sheet with no refinancing needs in the short
term… We hold €12.9 bn in gross cash at the end of September and we have €1 bn in euro
bonds that mature in March 2010. In addition, we have an undrawn credit facility of €3 bn
fully committed by 36 banks.
Economy (+): Despite the current market uncertainty our backlog continues to grow… It is
of course too early to assess the full extent of the financial crisis, however, as yet our
aircraft and helicopter businesses have only seen a limited impact whilst neither our
institutional nor government businesses are seeing material effects at this stage.
Sandvik AB (SAND.ST) Sweden Neutral 0.1 47.70 -59.3% 7.7% 7.1% 6.0% -6.2% 7.8x 4.8
Economy (-): We did see a rather significant change in customer behaviour in this quarter,
especially towards the end of the quarter that we are all recognizing that we for some time
have been heading towards a slower business climate. Whether it’s going to be a
recession or just normal decline in the market is still to be seen, but what was new was of
course the influence of the financial crisis and the lack of liquidity in the market, which
really created a very simultaneous drop in demand in certain areas, both on a global
arena, but also throughout the business sectors. The development that I can mention, I will
come back to that a little later too, has continued into October, and actually been
accelerated.
Emerging markets (+/-): Asia continued to grow in spite of the weakness that we are
seeing in Japan. Again, spearheaded by China growth continues to be strong, albeit at a
lower level than what we have seen in recent years.
Liquidity (+): When markets are not functioning, and we are trying… [to] go from short
more into – shift more to the long-term loans. Looking at our loan situation and duration
profile, we can see here that we have nearly 20 bn of the 32, 22 bn related to long-term,

and something around 10 bn, short-term. I can tell you that we have secured lending of the
short-term up to the end of 2009.
Capex (-): Again oil and gas, energy sector much less so the big mining companies they
have postponed some of their projects, but they haven’t as far as I know cancelled any
projects yet… In the energy sector with lower oil price, there is some hesitancy about
investing in new capacity.
Siemens AG (SIEGN.DE) Germany Buy* 1.0 46.29 -56.7% 3.6% 2.8% 5.9% NM 8.0x 37.5
FY 2008 earnings call Nov. 13, 2008
Economy (+): In 2008, 31% businesses were in the emerging markets, which compares to
19% in our last downturn 2001. Again, the emerging markets will be a critical area where
we will drive growth initiatives also in the upcoming more difficult global environment.
The next factor, which is a significant one for us going into a more difficult global
environment, is the strong order backlog …we have an order backlog of 85 bn; 40 bn of it
will be for 2009.
Capex (-): For 2009, we actually have frozen about 50% of the capex budget investment of
the divisions and the sectors. You can rest assured that we keep a very tight lid on capex
spending in the company for the businesses going forward.
Liquidity (+): Our cash position of nearly seven billion, with another €6.1 bn of undrawn
credit facilities, will provide us with a very strong liquidity position today, and we do not
intend to weaken it going forward. The key takeaway is that we have about €13 bn of
available net liquidity, which gives us plenty of headroom to repay our short-term debt,
which is about 1.8 bn, as well as to grow the business forward.
TNT N.V. (TNT.AS) Netherlands Neutral 0.2 15.35 -43.6% 2.3% 2.1% 2.0% -7.5% 7.5x 5.8
Economy (-): We did see severe pressure on our European air volumes, particularly
occurring in September and continuing into the first weeks of October.
Because of the recessionary business environment we are faced with, we have had to
reduce our outlook for Express downward … For Mail, we have left our outlook
unchanged.
Vallourec S.A. (VLLP.PA) France Sell* 0.1 74.26 -58.5% 18.8% 18.0% 16.8% 7.2% 4.4x 3.9
Leverage (+): And finally for the global figures, and as a reminder that is probably more
important now than it was in the past, we have a very solid balance sheet. Just one figure
about that, at the end of the last quarter our net debt amounted to €451 mn, which
represents a gearing ratio of 15%, down [from] the 18.6% that we had at the end of the first
half.
Pricing (+): As far as the prices are concerned we consider that we keep good pricing
power. And a more general comment is that in addition, a statement many times
mentioned by the market is that the significant reduction of drilling, which could happen,
significant reduction of drilling would very rapidly provoke a decrease of gas production.

And in such a case the gas price would increase and create a condition for new increase of
drilling.
Volvo AB (VOLVB.ST) Sweden Sell* 0.1 33.10 -70.6% 7.4% 6.7% 4.3% -22.8% 7.3x 3.4
Economy (-): As we progressed through the quarter, we started seeing a very steep
braking curve from our customers as they became more and more impacted by the
downturn and the following liquidity crisis they have.
Now, the business environment in Europe clearly has falling volumes and heading towards
a downturn or we are in a downturn there from all of our different business areas. It’s also
so that we had, especially on the truck side and I’ll speak more to that in detail, we had a
number of cancellations of orders… We’ve seen some of that also in the other business
areas if not to the extreme. So even customers, who in the short term have been looking to
take our products have actually had even to go back, sometimes even when the products
have been produced and say, we cannot take them because we don’t have the credit
facilities that we thought we had because of the failure of the banking and financial
system.
Pension (+): The pension plan asset is something we primarily have in the US, Sweden,
and the UK. And we are at this stage fully funded and we currently do not see any need for
additional cash contribute in that at this point in time.
Automobiles & Parts

BMW AG (BMWG.DE) Germany Buy 0.2 19.70 -52.1% 4.8% 2.1% 1.6% -25.6% 12.0x 6.3
Guidance (-): In light of the tense situation on the global auto market, the business
development for the year 2008 cannot be forecasted at present. But one thing is clear:
group sales will not exceed last year’s record level… We might have to increase risk
provisions once more in the fourth quarter to prepare for a more long-term weakness in
the market.
Working capital (+/-): We have also taken action in the production early on. Customers
are buying fewer cars, and this is true for all market segments. It makes absolutely no
sense to produce for stock only… We find it necessary to cut at least 40,000 units more
from our initial production plan for 2008.
Economy (-): Residual values are coming under mounting pressure, above all in Europe. In
consequence, we had to increase the risk provision once more. It now amounts to over a
€1 bn. Naturally, these developments are reflected in our current performance figures… As
in the first six months, the increase in the risk provision for residual values and credit
defaults was the single largest negative factor in the third quarter… The situation in the US
hasn’t improved significantly since then. And it has actually become even worse in Europe,
above all in Germany and the UK.
We launch a new product in the US, end of 2010, as you know. So we are quite optimistic
that the US will have a good chance to be one of the first markets to upturn again. In my
opinion, first the US and then European markets, and not vice versa.

Liquidity (-): Of our €53.1 bn financial debt as of September 30, 2008, less than 50%,
roughly a number of €24.5 bn is short term, due within 12 months, and has to be
refinanced.
Daimler AG (DAIGN.DE) Germany Neutral 0.6 23.73 -62.9% 4.7% 3.3% 2.8% -30.3% 8.2x 21.2
Economy (-): As you all know the financial crisis turned into an economic crisis… The
resulting drop in the auto markets intensified as the third quarter progressed and it did so
in a way we’ve never experienced before… We saw substantial declines in major European
passenger car markets. In some markets such as Spain, Italy or the UK, the situation
became very challenging. Since this summer, double-digit declines have been almost
routine.
We will see a number of collapses in some of our suppliers, but hopefully in a much more
managed and controlled way than we have seen it in the past sometimes.
Access credit markets (-): As far as our funding is concerned, we have bond maturities in
the fourth quarter in the amount of €1.7 bn. We will be a regular issuer in the bond market
in the future and we are aware that the pricing will be higher than in the past.
Emerging markets (+/-): As far as emerging markets are concerned, still in September
and ongoing in October, in China we have very high growth rates. September for instance
was 67% or something like that. In Latin America or Brazil specifically we had similar
positive rates even though at much smaller base… In India we did very well, as well again
on a small basis, but in Russia the 70% drop of the stock exchange has affected our
customer base and we have seen in Russia, we still expect to meet our more recent sales
expectations which were considerably higher than the original plan, but there definitely the
dynamics have slowed down significantly and that is the market – emerging market at that
point of time, which seems to be affected by that time the most among the emerging
market, negatively affected.
Fiat SpA (FIA.MI) Italy Neutral 0.1 5.14 -70.1% 1.5% 1.6% 0.9% -11.4% 5.4x 3.7
Economy (+): There appears to be, for whatever reason, a sense of doom and gloom,
which has all of a sudden developed about, not only Fiat but in general, but the
automotive industry in its wider sense. And without getting involved in specifics – and
probably we can dispel some of these issues as we go forward – but I think the level of
pessimism has probably reached the levels that really cannot be explained.
If we sit down and listed all the potential negative areas of development going forward – I
think we can probably envision a world which is much, much uglier than it is today. I think
the likelihood of those events happening simultaneously is undoubtedly remote, and I
think that we can think about them, but it is highly unlikely that all the things that I’ve read
would, in fact, happen, at least simultaneously.
[When speaking about a scenario analysis] A 20% decline in volumes across all of our
business sectors, would entail an absolute lock-up for the industrial system in Europe and
probably on a global scale, which is beyond what we have ever seen historically. And if
that’s the case, I think we are probably the least guys to be ... worry about, because I think
that the system itself would come to a collapse.

But we know where breakeven is, and I think we’ll hit that number which is – that would be
a structural disaster if we hit the number like 1,840,000. But we begin to bleed at that level.
So, we don’t see that happening in 2009. I think it is even in the worst conjecture of
potential events in 2009 it’s probably one of the most remote things that we see.
Commodity prices (+): We have not made commitments in 2009 that would not allow us
to benefit from a commodity price decline. So we are entering 2009 with a clean sheet of
paper, not being bound by any of the erratic movements that we have seen in 2008.
Volkswagen AG (VOWG.DE) Germany Neutral 1.0 329.71 113.3% 10.4% 11.9% 8.5% -2.6% 37.4x 36.2
Economy (-): Our deliveries and sales have held up well but we cannot remain detached
from the broader macro trend and our sales development is slowing… I must add a note of
caution that we too are feeling the pressure from declining overall demand.
Emerging markets (+): In Eastern Europe, however, we saw an increase in deliveries of

19.6% and therein our sales figures of – in Russia and in Ukraine and in Europe. In Russia
we were able to increase our deliveries to customers by 68% while in Ukraine it was up by
51%.
Liquidity (+): A quick comment on liquidity and access to the financial market. Refinancing
markets were particularly unstable in the third quarter of 2008, the situation that is
continuing and impacting all areas of the automotive value chain, including the suppliers
and dealers. However, we firmly believe that we can access sufficient liquidity for our
financial services arm.
Capex (-): I think we made it very clear that in a similar way as we adapt as far as our
production schedule is concerned to keep our capital lockup on a reasonable basis, we
also are trying to identify and re-evaluate on which investments are absolutely necessary.
In that respect, it’s clear in the most actual situation that capacity-related investments are,
in a few cases, to be reduced, postponed, or whatsoever, and certainly there could also be
some structural investments which are not directly related to our key products where we
could take a different decision as we have taken in the past.
Food & Beverage

Carlsberg AS B (CARLB.CO) Denmark Buy 0.1 164.50 -66.6% 24.3% 25.8% 29.5% -13.5% 5.6x 2.3
Economy (+/-): Beer as a category is the one of the most resilient consumer categories to
macroeconomic changes, in particular in developed markets. In the third quarter a number
of different factors have negatively impacted volume in certain markets… Within Northern
and Western Europe the decline in on-trade in the UK continues and market growth in the
Baltics has very much been impacted by the worsening overseas economies. Based on the
development in the third quarter, we reduced our forecast of full year growth in Russian
beer market volume to 1% to 2%... All other markets in our Eastern European business
showed market growth for the first nine months and in every market we grew market
share, both year to date and in quarter three.
Pricing (-): Though cost inflation continued also into 3Q, this was offset again by price
increases. On a year to date basis, we have obtained average sales price increases of 4%
and support our value focus.

Capex (-): Our focus on capex in general has postponed the increase in the current
financial environment.
InBev (INTB.BR) Belgium NC 0.1 10.32 -70.0% 1.9% 1.9% 2.1% -4.5% 4.9x 2.1
InBev 3Q 2008 Earnings Call Nov. 6, 2008. As of November 25, Goldman Sachs covers Anheuser-Busch InBev with a Neutral Rating.
Economy (-): On beer, the industry has been a tough industry this year, consumers have
been pressured by food inflation and that has been felt on the beer side more than on the
soft drink side.
Leverage (-): We do intend to deleverage this company as fast as possible. We’re in the
business of selling beer, not in financial engineering. We did the financial package to really
get the combined company. About in the next two, three years, we’re going to be very
focused on integrating the businesses, deleveraging the company and delivering the
synergies. And asset disposal of course is part of the deleveraging strategy.
Nestle S.A. (NESN.VX) Switzerland Neutral 2.9 42.74 -9.7% 2.8% 3.0% 3.3% 0.7% 13.2x 106.1
3Q 2008 earnings call October 23, 2008
Returns to shareholders (+): We are continuing with our share buyback at the accelerated
pace announced in August, such that by the end of the year we will probably be running
about SFr2 bn ahead of where we would otherwise have been, with about SFr13 bn of the
25 bn completed.
Capex (+): Our commitment to capital expenditure is unchanged. We will continue to

support the needs of the business with a particular focus on higher return, higher growth
businesses such as Nestlé Nutrition and Soluble Coffee.
Emerging markets (+): Turning to our successful Eastern European business, organic
growth has continued its slight accelerating trend in each quarter of the year and is in the
mid-teens… Latin America’s slowdown in organic growth from the first half was due to
ambient dairy, which though still growing double-digit, reflected lower milk prices in the
region… More broadly, our total Mainland China business is doing well with double-digit
organic growth, and will, we believe, continue to do so.
Access to credit markets (+): Our exceptionally strong balance sheet and predictable cash
flows makes us the gold standard in the industry… Our message is simple: Nestlé’s debt
has been more short-term than long-term rated because this has been the most cost
efficient strategy… We have seen continued demand for our commercial paper in
September and October and we continue to place it at sub-LIBOR levels. We expect to end
2008 with lower net debt than at the end of 2007 due to the $10.4 bn inflow generated by
the partial disposal of Alcon. These funds received in July have a maturity that reduced
our exposure to the commercial paper market.
Parmalat S.p.A. (PLT.MI) Italy NC 0.1 1.20 -49.3% 0.1% 0.1% 0.1% -19.0% 12.4x 2.0
Economy (-): In 2008, in addition to large cost increases caused by the higher pay for raw
material and crude oil related items, which already had a severe impact on 2007 results,
we were faced with a significant change in consumer buying attitudes. The reduced
availability of financial resources, shifting priorities of their needs caused consumers to

buy only essential items. However, discretionary purchases, they choose low-price basic
products at the expense of innovative, alternative and branded products.
Margins (-): The sharp reduction in the profitability of the dairy industry coupled with
changing scenarios in the market for raw material and petroleum-based products is
causing all operators to demand major changes in the agreement that they have in force
with their supplier. The impact of this trend, which will be felt as early as the fourth quarter
of 2008, is expected to be considerable in 2009.
Unilever N.V. (UNC.AS) Netherlands Sell 0.8 18.90 -22.0% 1.3% 1.4% 1.4% 5.4% 13.2x 29.3
Access to credit markets (+): Our balance sheet is strong and our financial management
is prudent and disciplined and this is serving us well in the current volatile financial
markets, where we’re benefiting from the flight to quality. We continue to access
commercial paper at sub-LIBOR rates.
Economy (-): We continue to see a difficult trading environment with consumers down-
trading to private label, particularly in some of our food categories. In other categories,
such as personal care and household cleaning we have seen very limited down-trading.
Emerging markets (+): Our business in Central and Eastern Europe continues to grow
ahead of the market with broadbased share gains. Russia had an excellent quarter, another
one, growing at 20%... Latin America, grew up 12% in the quarter maintaining the
momentum of the first half. This represents a strong performance with growth ahead of
markets. Brazil, an important business for Unilever continues to improve performance with
growth close to 10% in the quarter.
Commodity costs (+/-): Let’s now look at what’s been happening to commodity costs.
Commodity price inflation has added over €800 mn of incremental cost to our P&L in
quarter three… All these together have contributed to the cost escalation in quarter three.
We expect to see some improvement in quarter four and for the full-year impact to be
around 600 bp, roughly 2.5 bn of incremental cost year-on-year. We do anticipate far more
benign conditions in 2009.
Returns to shareholders (+/-): We have completed 1.5 bn of share buybacks in the year.
We have no immediate plans to do more but we’ll keep this under review.
Personal & Household Goods

adidas AG (ADSG.DE) Germany Neutral 0.1 23.79 -53.1% 2.7% 3.1% 3.2% -0.7% 7.4x 4.7
Economy (-): We are retracting all our financial guidance for 2009. The current
macroeconomic volatility is as difficult as I have seen it, in my more than 20 years in the
industry. The implications for our business are extremely unclear, and prevent us from
giving what I believe would be a fact-based, formal guidance that would be fair to measure
us by in the next 12 months… based on the current order book and retailer feedback, we
are optimistic that our group will achieve sales and earnings growth again in 2009. But not
at the same level that we have this year.

Returns to shareholders (-): In terms of the share buyback, our key plans at the moment,
our focus is to remain on paying down debt. We have no plans at the moment to do a
further share buyback.
British American Tobacco PLC (BATS.L) United Kingdom Buy 1.1 17.70 -19.3% 1.1% 1.3% 1.4% 1.9% 12.8x 42.1
Emerging markets (-): In Latin America volume declines in Mexico and Venezuela offset
good performances elsewhere, notably from Brazil and Chile. Eastern Europe was a driver
of the growth in Europe overall. Volume is up in Eastern Europe, about 4%, and net
turnover and profit both grew very strongly.
Pricing (+): In all regions there was a positive price and mix evidenced by the 8.6% rise in
revenue at constant rates of exchange, on the back of a 3.9% increase in volume.
Taxes (-): I don’t think there is any heightened concern around excise. There’s nothing out
there that is particularly worrying us. As you know it’s excise shocks that bother us, and
it’s very difficult to predict excise shocks. So I’m not sensing any concern around the patch
in terms of excise increases. Obviously it’s a risk, as governments become fiscally
challenged they will look to increase excise at a more accelerated rate. But we haven’t
seen that yet.
Returns to shareholders (+): Yeah, on the buyback, I mean we review the buyback at the
end of each year. We’ve, as you say, got about 40 mn to complete this year, which we’ll
carry on and complete. At the end of the year, we’ll take a look at the marginal cost of debt
financing. We’ll take a look at our EPS estimates. And we’ll take a look at what acquisitions
writedown horizon, and we’ll take a view on the buyback at that stage. So more news at
the end of the year, I think.
Economy (+/-): We’ve looked at what happens to our business in previous economic
downturns. Principally, we looked at the Asian crisis and the ruble crisis. And it’s not really
driven by GDP. What tends to happen is, if there’s an economic pinch consumers will
switch where they shop for a brand rather than the brand that they use…Then if the
economic pinch continues, then there may be some slight down trading. And this really,
and this is explained really by what, when we do tend to get hit is if there a big spike in
unemployment. And so if you’re still employed, and you will still continue to buy and you
will still up trade. But if you’re unemployed then you’ll trade down. And it’s not really the
GDP that drives it, it’s unemployment that drives any impact on us.
Henkel KGaA Nvtg Prf (HNKG_P.DE) Germany Sell 0.1 21.99 -41.7% 2.1% 2.2% 2.3% -1.2% 9.7x 3.9
Emerging markets (+): Double-digit sales growth in emerging markets, 13.5% organic
sales growth that is slightly lower than what we have experienced over the past, but it’s
still at a very high level.
Margins (+): So therefore that already shows that our pricing actions should have an
impact, have improved our situation in terms of margin and we expect that to continue
into the fourth quarter, where we see a levelling off of the impact of raw material price
increases, while our price increases will take then full effect, particularly in Western
Europe, some of those countries in Western Europe and in North America.
Access to credit markets (+): What is the status of our commercial paper? Interesting
because we’ve been able to access the commercial paper market in the US as well as in

Europe without any problems. We’re obviously rolling over these amounts every month
because there’s always one-third that is to be rolled over. We have not had any issue with
getting it done. We’re financing still at very attractive rates.
Commodity costs (+): The rapid decrease in the oil price obviously will come into the
system of raw materials with a time delay between three and six months.
Reckitt Benckiser Group PLC (RB.L) United Kingdom Neutral 0.5 27.81 -15.7% 1.3% 1.5% 1.7% 2.7% 16.8x 19.9
Margins (+): Year-to-date gross margin was up 80 bp to 58.5% and adjusted operating
margin was up 70 bp to 21.3%.
Guidance (+): Based on the results today and the momentum of the business, we are
raising our full year net revenue growth target at constant rates to 13% from at least 11%
to 12%. This reflects an increase in the like-for-like net revenue growth target for the
underlying business to 9% from at least 7% to 8% before as we are maintaining our target
for Adams.
Commodity costs (+): If we are going to see any mitigation it will be some time next year
which is assuming that raws and packs will be coming off their highs consistently across
the board which is yet to be confirmed.
Healthcare
AstraZeneca PLC (AZN.L) United Kingdom Sell 1.1 24.72 3.1% 3.7% 5.0% 5.2% 2.7% 7.2x 42.2
Liquidity (+): We take a conservative approach to managing our $3.5 bn of cash, and we
have not experienced any credit-related losses on our cash balances. We invest in AAA-
rated liquidity funds and US Treasury funds. Given the current environment, we have
moved the majority of centrally held cash into US Treasuries. We may also use bank
deposits, but only for a very short maturity, and with select banks only. We’ve got
approximately $4 bn in one and five-year committed facilities as a backstop to our
commercial paper program, all of which remain un-drawn.
Returns to shareholders (-): As for share repurchases, you’ll have seen that for the nine
months we completed net share repurchases of $485 mn. We’ve taken the decision that no
further share repurchases will take place in 2008 in order to maintain the flexibility to
invest in the business.
GlaxoSmithKline PLC (GSK.L) United Kingdom Sell 2.1 11.49 -18.5% 1.0% 1.0% 1.1% 1.8% 10.7x 77.2
Currency (+): So a very significant benefit from the ongoing weakness of sterling versus
major currencies, in particular, of course, the dollar, which we are seeing continue even as
we speak.
Generics (-): This quarter clearly demonstrates the very considerable transition occurring
in our portfolio as several brands face generic competition in the US and our sales of
Avandia continue to erode. Specifically, we saw the introduction of generic Lamictal in

America this quarter. This adds to the existing generic competition to Coreg, Requip and
Wellbutrin XL over the last 12 months.
Economy (+): Moving forward, it is clear that we will need to monitor closely the impact
that changes in the global economy will have on, for example, the consumer demand for
our products. However, it’s worth noting that to date we have only seen very modest
impact on GSK consumer products in certain territories.
Returns to shareholders (+/-): And with a 3Q dividend of 14p, up 8%, we have maintained
our commitment to progressively increasing dividends. On share buybacks we have
bought back so far this year 3.3 bn worth of shares, and we expect to purchase in total up
to about 4 bn by the end of the year. Looking ahead, we do not currently expect to make
significant share repurchases in 2009. The recent changes in the financial markets have led
us to now expect that investment opportunities are more likely to arise that will support
our strategic priorities.
Liquidity (+): The group is well placed financially, having completed its debt financing
program earlier in the year. At September 30, gross debt was 14.2 bn and cash and liquid
investments amounted to 5.6 bn, giving an overall net debt number of 8.6 bn. Our debt
maturity profile continues to be good with only 1.4 bn of short-term borrowings and
overdrafts being repayable within the next 12 months, with a further £600 mn repayable in
the subsequent 12-month period.
Novartis AG (NOVN.VX) Switzerland Buy* 2.4 55.30 -1.5% 3.2% 4.5% 5.0% 12.4% 11.1x 87.7
Guidance (+): Good performance and that has allowed us to raise our full year forecast
from low single digits sales growth to mid-single digit sales growth with operating income
growing ahead of sales.
Returns to shareholders (+): Free cash flow increased strongly but was mostly used then
for the benefit of higher dividends.
Access to credit markets (+): We have had no equity or bond investment exposure to any
of the insolvent financial institutions. We have no counterparty exposure to any insolvent
financial institution through financial contracts, be it swaps or options or other financial
instruments. We continue to have a very sound ability to issue US commercial paper with
no substantial limitations and at very fine rates.
Novo Nordisk A/S (NOVOB.CO) Denmark Buy 0.5 269.00 -18.6% 13.5% 15.2% 16.7% 2.0% 16.3x 16.9
Currency (+): Following years of depreciation, two of Novo Nordisk’s most important
invoicing currencies, namely the US dollar and the Japanese yen, have in the latest month
appreciated substantially. The appreciation of the key invoicing currencies has long-term
positive impact on Novo Nordisk’s financial outlook in reported terms but also near term,
or near term also results in foreign exchange hedging losses.
Guidance (+): The expectation for growth in reported operating profit for 2008 is increased
by 10 pp from a range of 22% to 25% to now a range of 32% to 35%. This primarily reflects
a positive impact on the recent significant appreciation of Novo Nordisk’s main invoicing
currencies, lower operational cost, partly countered by cost related to the employee share
program, adverse cost related to the discontinuation of the Phase III study with Norditropin
in dialysis patients with low serum albumin… It has been extremely volatile markets to

give guidance in. And that’s why we have explicitly outlined based on what currency
assumptions have we given this guidance.
Pricing (=/-): The price assumptions that we’re currently operating with for 2009,
obviously with the uncertainty on the US election and the pricing environment in the US, it
is our expectation that we should be rather cautious about price development in the US
We are also of course having a year off in Japan from price adjustments in Japan. So, in
broad terms stable pricing for 2009 is assumed in the budget.
M&A (+): I know that there was a reference to an article written that we had a financing
capacity of US$10-20 bn in terms of acquisition, not necessary that we would use that
financing capacity. But what I think we can say is that it’s obvious given the current
situation that there is significant development in equity value of especially the smaller
biotech companies and also larger companies for that matter. That may present some
opportunities for Novo Nordisk.
Sanofi-Aventis S.A. (SASY.PA) France Neutral 1.2 44.50 -26.3% 5.3% 5.4% 5.8% -0.4% 7.7x 45.6
Guidance (+): As you definitely will have noticed that we have decided to raise our
guidance for the year 2008.
Access to credit markets (+): We [are] at €3.7 bn of net debt, this consists of €2.9 bn of
cash investments and €6.6 bn of debt. In our investment, we have no exposure to
subprime markets or the financial services companies that failed as a result of the financial
crisis. I can add up that our investments are essentially done in mutual funds. And to finish
up on this item, I can add that we continue to have access to the commercial paper market.
Retail
Delhaize Group (DELB.BR) Belgium Buy 0.1 47.27 -19.7% 4.2% 4.3% 4.6% 5.6% 10.3x 4.7
Economy (-): We have been able to offer them more attractive prices and have rolled out a
broad range of private label products that are a smart alternative to national brands.
Customer response has been strong… Consumers remain prudent in their spending which
resulted in sales volume pressure at both Food Lion and Hannaford.
There is no doubt that the current economic environment is clearly the most difficult
consumers have faced in a long time.
Liquidity (-): Well, we have two maturities in the spring of 2009, a euro-bond 150 mn and a
convertible bond which would be around €170 mn. We feel comfortable, we don’t think we
have any issue here. We have good finance – existing financing agreements in place to pay
back the maturing debts and we have good cash flow contribution… But again, our
existing financial agreements are absolutely there to help us phase the maturing debt now.

Koninklijke Ahold N.V. (AHLN.AS) Netherlands Neutral 0.3 8.94 -4.6% 0.5% 0.7% 0.8% 2.1% 11.7x 9.7
Emerging markets (-): In the Czech Republic and Slovakia markets that we are committed
to, we continue to face challenging circumstances with pressure on consumer spending
and very competitive markets.
Margins (+/-): We will continue to try to balance the promotional and the sales and the
margin to make sure that in total we’re getting the right equation [at Albert Heijn]. What
we have said for years is that we are not going to chase margin at the expense of sales.
Metro AG (MEOG.DE) Germany Neutral 0.1 23.26 -58.6% 2.6% 3.0% 3.1% -4.5% 7.6x 2.6
Economy (-): The financial crisis poses four specific and demanding challenges to the
retail industry. Banks and the debt capital markets in general are tightening the financial
possibilities for corporate, also our partners from the consumer goods industry are under
pressure to improve cash generation… And most importantly, our customers are now so
intimidated by all the bad news that the level of insecurity has risen considerably and
some have actually lost money in the process… Already today we see poor performance in
countries suffering from a burst real estate bubble. Highly leveraged consumers are thus
forced to cut back on discretionary spending.
Looking ahead, reaching our earnings guidance for this year remains achievable. This
assumes no major turbulence in currencies and a reasonable Christmas business this year,
neither a fantastic nor catastrophic one. Looking further ahead, how do we [expect] 2009 to
be? I would much prefer to be precise here, but as you know visibility is currently foggy.
[The] beginning of 4Q is more or less totally in line what we have seen in the development
in 3Q.
Emerging markets (-): For Eastern Europe, we remain confident of the long-term potential
for further developing our business here, but, of course, also this region is not entirely
immune to economic cycles.
Capex (-): We have now reduced our capex budget for next year to around €2 bn. This will
support a store opening program similar to the last few years. Furthermore, we have
sufficient flexibility to cut further when necessary.
Media
British Sky Broadcasting Group PLC (BSY.L) United Kingdom Neutral 0.1 4.12 -40.3% 0.3% 0.3% 0.3% NM 12.9x 5.2
1Q 2009 earnings call - UK/European analysts Oct. 31, 2008
Economy (-): Well, it has certainly been a challenging environment for consumers, but we
have delivered a very strong set of results… I think there is a trend when people tighten
their belts, they spend more time in their home and I think Sky as a home entertainment
service relative to other entertainment choices, is not expensive.
We estimate the total television advertising sets fell by 10% in calendar 3Q and we
currently expect this level of decline to continue into the current quarter. Beyond the end
of this calendar year, visibility is very limited.

Mediaset S.p.A. (MS.MI) Italy Neutral 0.1 4.08 -36.3% 0.4% 0.4% 0.3% -2.4% 11.6x 2.9
Economy (-): We show a slight share decrease both on individual and on commercial
target [audience]. Clearly, the two main sport events of last summer, the Olympic Games
and the European Cup played also a role in this decrease. This was not the only one
reason but clearly affected a little our results.
In recent figures the advertising market is flat, but if we exclude Mediaset – without
Mediaset contribution, the market is decreasing by 1.1%. The revenues of magazines are
becoming more and more work. And the daily press is losing national advertising,
something very close to 8%.
SES S.A. (SESFD.PA) Luxembourg Buy* 0.1 13.58 -21.9% 0.9% 1.0% 1.2% 2.9% 11.6x 4.3
Access to credit markets (+): Financing has been secured through the next 12 months,
which means that in the challenging current credit market environment, SES does not
need to go into the markets during the next 12 months.
Returns to shareholders (+): Dividend distribution simply to confirm our policy we give
on year-on-year increasing dividend per share with a guidance for 2008 and beyond, so
dividend to be paid in April 2009 of an increase of 10% or higher than 10%. Those
dividends that have been paid out in April this year having been €0.60, so the minimum
would be 66, but obviously that’s the minimum, and so it’s 66 plus.
Vivendi S.A. (VIV.PA) France Neutral 0.7 21.82 -26.8% 2.4% 2.5% 2.7% -5.5% 8.0x 25.5
Liquidity (+): We are very liquid; we generate a lot of cash. Our present situation is that we
have more that 5 bn of undrawn facilities, bank lines from banks, which have not gone
bankrupt. And incidentally we’ll be at the same situation at the end of this year and at the
end of next year we’ll have less bank lines because of 1.5 bn of bridge to equity line we
had negotiated in January will lapse during next summer but at the same time, everything
else being equal, we will generate more cash and therefore we will still have 5 bn of
undrawn credit line at the end of 2009.
We have no significant bond and debt reimbursement before 2012. Each of our businesses
generates free cash and very significant amounts of free cash in some cases. The BBB
rating which we enjoy has been confirmed by the three rating agencies and I would say
even though financing costs are going up obviously for new monies, we’ve been able to
negotiate enough financing at the beginning of year or in prior years that our financing
cost would still be in control.
Guidance (=): We confirm our 2008 guidance for the group as well as for all our
businesses and we show our confidence in the future by maintaining our guidance and
dividend as well, meaning that in 2009 we’ll have a significant – yet another significant
increase in our distribution

Travel & Leisure

Air France-KLM (AIRF.PA) France Buy 0.1 9.69 -58.0% 3.4% 2.1% 1.2% -13.8% 7.6x 2.1
Liquidity (+): So this clearly shows the fact that not only we have a low net debt, but we
have a great deal of cash, which is well invested.
Economy (-): The drop in oil prices is excellent news for us and our industry in general.
But naturally this drop does not come from a rebalancing of the market, but rather
negative expectations about global worldwide growth in general.
Capex (-): Now the third element after costs is investments. Here we have already revised
downwards our investment plan essentially in purchases of planes, the fleets. The logic
there is simple, we’re being less ambitious in terms of capacity, so it’s logical that we
revise down the investment plan.
Deutsche Lufthansa AG (LHAG.DE) Germany Neutral 0.1 9.79 -42.3% 2.5% 1.4% 0.9% -17.5% 10.2x 2.2
Capex (+): As I mentioned before, we have no plans to change our capex plans… Clearly
the capex figures look demanding. We think we’re in a good position with our investment
grade rating to be able to get still comparatively good financing at competitive rates.
However, nobody of us has the crystal ball; we don’t know what the financial markets will
do. So therefore it’s good to have owned resources to be able to finance such a situation
out of owned resources.
Economy (-): We too are of course closely following these developments and reacting to
this economic slowdown, whereas at the beginning of the year we were still planning with
the capacity expansion of 7.1%. Since then we have adjusted our capacity expansion
downwards three times.
Returns to shareholders (-): And the dividend question, again it’s – let’s say half soft and
half hard. I don’t know any investor who would expect us to really spend money for
dividends if at the same time you are not able to have secured financing for your
investment.
InterContinental Hotels Group PLC (IHG.L) United Kingdom Neutral 0.0 4.82 -51.6% 0.5% 0.7% 0.6% 27.9% 7.7x 1.5
3Q 2008 earnings call – UK investor Nov. 11, 2008
Pricing (+): Despite weakening occupancy and rates we grew global RevPAR by 1.6% in
quarter three on a constant currency basis. The EMEA region showed the strongest gains
at 4.2%, which was mainly driven by growth of 24% in the Middle East part of that region.
Access to credit markets (-): Looking further out, rates of attrition from the pipeline will
be heavily dependent on when the lending markets reopen.
Economy (-): Forward bookings are down. We have obviously a range of things we look at.
We’ve got 30, 60, 90, 120-day forward bookings and all of those at the moment are
showing quite marked declines year-on-year coming out of October. And we’re just slightly
hesitant to say too much about them at the moment, though, because it’s not necessarily a
sign of people or underlying demand softening because what can happen obviously in
situations like this is that people just book later… Corporate rate negotiations are taking

longer this year. Probably unsurprisingly the corporate buyers are using the environment
to their advantage, as you would expect they would.
Ryanair Holdings PLC (RYA.I) Ireland Neutral 0.1 3.00 -35.7% 0.3% 0.1% 0.1% 30.0% 27.3x 4.2
Commodity costs (+/-): Our fuel hedging position for this year remains unchanged. We
are 80% hedged into 3Q at $124 a barrel. We are totally unhedged for 4Q and would expect
to be able to buy oil at significantly cheaper prices, which reflect a decline in spot. In recent
months, however, a significant disconnect has emerged between the spot and forward
prices, resulting in 1Q and 2Q for next fiscal year pricing at a premium of $17 to $18 a
barrel over spot rate. In addition, the hedging markets are proving very illiquid, which
partly explains these high premiums. Nevertheless, we’ve taken advantage of the recent
falls in the past two weeks of oil prices to hedge 25% of our 1Q and 2Q fiscal next year
supplies in average of $77 a barrel. This locks in a substantial saving over the $125 per
barrel paid in the first half of this fiscal year…We continue to closely monitor fuel prices as
well as the forward premium to see if we can find the opportunities to extend our hedging
program at or below $70 a barrel.
Economy (-): High oil prices and the global recession has, as we predicted, caused a string
of airline bankruptcies and a continuing trend towards consolidation in Europe. Recent
failures include Alitalia, Excel Airways, Futura, LTE, Sterling and Zoom. We believe more
loss-making European airlines will go bust this winter either because of unsustainable
losses or insufficient cash reserves.
Pricing (-): The outlook for the remainder of this fiscal year is entirely dependent upon
fares and fuel prices this winter. We believe the recession will be steep and will continue to
drive down both oil prices and average airfares. We are continuing to respond with
aggressive price promotions to keep Europe flying and to maintain our market leading
load factors. Although we have limited visibility, we now believe that average fares in the
second half of the year will fall by between minus 15 and minus 20 leading to losses in
both the third and fourth quarters, which will eat up most of the profits made in the first
two quarters.
Telecommunications
BT Group PLC (BT.L) United Kingdom Neutral 0.3 1.35 -54.5% 0.2% 0.2% 0.2% -10.8% 6.4x 12.3
Economy (-): Now I suspect what will happen in these environments is it will take longer
for these orders to actually come through. People do tend to take longer to make
decisions, so the pipeline converting into orders.
Liquidity (-): June last year (2007) we decided to go into the market place to raise long
term debt. We raised around £4.3 bn, the majority of it in 2007 and what that has meant for
us is effectively raising the amount of long-term debt we have to over £11 bn. And we also
have additional committed facilities of £2.4 bn. If I look at the funding requirements of the
business over the next two years and project that forward what I can see from all of the
analysis and data that I have is that the next time I need to refinance is December 2010.

Deutsche Telekom AG (DTEGN.DE) Germany Neutral 0.9 11.17 -20.5% 0.7% 0.7% 0.8% -0.3% 13.5x 33.3
Economy (+): When it comes to the impact of the economy in our business, we can
reaffirm that we have to date not seen any impact of the changing economic climate on
our operations. However, we are constantly monitoring all relevant data points, such as
bad debt, order entry, minutes of use, and others.
Guidance (+): The 2009 outlook is just a trend statement at this point in time, because we
said it earlier on, we still need to get our financial planning through the Supervisory Board,
and it’s just too early to make any more detailed statements into 2009. In these days,
saying we’re going to be stable and we have a – maybe a slight tick of improvement, is a
statement of stability, and we feel good about that
Capex (+): From a leverage perspective, I think we are in excellent shape. We have a very
strong balance sheet, we have a very strong equity base. So, from a deleveraging and
from a cutting costs perspective, we do not have to cut our capex.
Koninklijke KPN N.V. (KPN.AS) Netherlands Buy* 0.5 11.19 -5.5% 0.8% 0.9% 1.0% -3.1% 11.6x 20.2
Returns to shareholders (-): We will start our 1 bn share buyback program for 2009,
already in November of this year.
Economy (+): We haven’t seen any impact from an economic downturn on our operations
in the third quarter. We are closely tracking a number of early warning indicators, and
potentially, we could see a cash and P&L impact in 2009.
Liquidity (+): Now, where we are in terms of our liquidity, we can say that we have
sufficient liquidity for our upcoming redemptions. At the end of the third quarter, we had
0.7 bn in cash and there were no drawings on the 1.5 bn credit facility… we’ve signed
agreements with two relationship banks… adding another 400 mn credit facility to the
existing credit facility of 1.5 bn… Our liquidity profile has improved quite considerably this
year. We’ve issued 1.8 bn of bonds, redeemed about 1 bn and on top of that the disposals
were higher than the acquisitions coming through.
Pension (-): The volatile financial markets, or the depressed financial markets, have
increasingly impacted defined benefit plans at Dutch companies... the ratio has further
deteriorated in the early part of the fourth quarter. As of October 17, we’ve run the
calculation again, and I have to say that these are preliminary figures … but broad
brushed, these are accurate figures. So as of October 17 the coverage ratio stood at
around 105%, which is par with the minimum ratio required by the Dutch regulator.
Swisscom AG (SCMN.VX) Switzerland Neutral 0.1 349.00 -10.6% 39.9% 34.5% 36.1% -0.8% 9.7x 5.4
Pricing (-): The key driver of mildly lower revenues is the lower pricing on traditional
products such voice, termination, roaming… There is no change whatsoever in the
continuing trend in our industry of price pressure. This will be somewhat different in the
last quarter of this year as one important driver, which is low international roaming rate
this year, came into effect late September last year.
Economy (+): All in all, I believe that turmoil in markets and the worries about a global
recessionary environment are not impacting the company in the Corporate segment. This

is perhaps partly due to the fact that communication services across customer segments
are not very sensitive towards up or down swings... The sales to the financial sector
compared to overall sales to Corporate customers are also on a flat curve. In other words,
there is no contraction visible. Basically, there is no trend apart from stability.
Liquidity (+): The first sizeable refinancing is scheduled for 2010, SFr700 mn, which will be
up for renewal. Larger tranches will mature in 2011 and 2012. Although we should start our
refinancing efforts in the course of next year, I think it is important to understand that we
are not a forced draw on the market for a considerable time to come.
Telecom Italia S.p.A. (TLIT.MI) Italy Neutral 0.3 1.01 -49.6% 0.1% 0.1% 0.1% -1.7% 8.8x 10.3
Economy (+/-): The macroeconomic slowdown that we are experiencing now has not
impacted the group sales trend. To the opposite revenues have performed positively in
September plus 0.8% year-on-year, and we are on-track to meet 2008 guidance. We have
signs of course that times are getting tougher. We see it on the international roaming,
where we have a decline in revenues, and we see it on the small office, home office sector.
Liquidity (+): Approximately 45% of our gross debt maturing beyond 2013, with a number
of long and very long term maturities. Our liquidity margin allows us, even without going
to the market, to pay what’s due until 2010 and more. This given Telecom Italia can afford
a certain degree of flexibility in future bond issuance. We will top the market on a very
opportunistic basis and thanks to our liquidity margin we are not forced to do it now.
Capex (-): From the technical platform point of view we are aligned with the guidance for
this year, because we are targeting a reduction of capex of more – of c. €400 mn and
according to the – what we presented in March.
Telefonica S.A. (TEF.MC) Spain Neutral 1.7 15.36 -27.7% 1.3% 1.6% 1.7% 0.8% 8.9x 63.2
Returns to shareholders (+): We are fully committed to prioritize shareholder returns for
the use of our free cash flow. Year-to-date we have devoted 9% of Telefónica’s market cap
to remunerate our shareholders. We maintain our commitment to further increase
dividends. As we have publicly stated several times our M&A ambitions are very limited.
Liquidity (+): Despite current market conditions we have been able to maintain the
effective interest cost of our debt in line with our 6% target, which is more challenging
going forward. And finally, we show a comfortable maturity profile for the coming years.
As such, 2008 maturities are lower than existing cash and 2009 maturities are lower than
undrawn permitted credit lines expiring in 2010 and beyond. On top of that, we count on
our annual solid cash flow generation. Also may I remind you that our average debt life is
around six years, which is longer than the time we would need to fully repay it.
Emerging markets (+): In the third quarter of the year, despite a more complex economic
scenario, we have been able to accelerate revenue growth on the back of robust
performance recorded in Latin America.

TeliaSonera AB (TLSN.ST) Sweden Neutral 0.2 37.90 -37.9% 3.9% 4.0% 4.4% 1.4% 8.7x 8.0
Economy (+/-): The last word is about the market situation, we are right in the middle of a
period of severe financial turmoil, which is difficult to predict how long it will go on. We –
TeliaSonera is a strong financially balanced company with healthy cash flow and then we
operate in a business that is fairly noncyclical. Therefore, we see no immediate effects on
changing customer behaviour in our operations.
Finally, coming into the outlook, it is unchanged, which means that 4Q will be a strong
quarter. Extremely important to say that this will not be a walk in the park. You all know
what sort of – we have outside in the world right now. But we keep this outlook anyway.
Liquidity (+): If you look at the debt schedule, it’s something that concerns a lot of people
right now in the market. It is of course a concern for all of us operating with this kind of
issue. But what I would say is that the maturity schedule for TeliaSonera is rather good.
Vodafone Group PLC (VOD.L) United Kingdom Neutral 2.1 1.23 -40.3% 0.1% 0.1% 0.1% 0.2% 8.7x 76.6
Emerging markets (+): And finally in the broad overview point, data and emerging
markets continue to be an engine for growth, offsetting voice pricing pressures.
Return to shareholders (+): It will provide more certainty to shareholders if the Board
adopted a progressive dividend policy instead of the 60% of earnings formula. Essentially
this is a policy for which dividends will rise smoothly overtime, and the interim dividends
will rise by 3.2%.
Guidance (-): The decrease in revenue guidance reflects the more challenging market
conditions in particular in the UK and in Spain.
Liquidity (+): Key messages are that in no year do we go above 3 bn and on average we
have got about a seven year life. On the left hand side, you can see the snapshot at the end
of September, just over 1 bn of cash at that point in time. Commercial paper about £2.3 bn
and indeed we have been accessing the commercial paper markets even over the last few
weeks and have issued several $100 mn worth of commercial paper during that period.
The bond side we have £2.5 bn of bonds that will mature in May 2009 and we will probably
access the markets at a point in time. The markets clearly at the moment are fairly tight,
but this is possible to do, the pricing may be higher and we will look over the period
between now and May to make sure that we have that funded. Or in the event that we do
not do that we have got $9 bn of committed undrawn bank facilities spread across a large
range of banks and institutions, which have got a life of three to four years. So I think in
overall terms, our liquidity position is fine and we continue to have a strong balance sheet
position.
Capex (-): Capex we have reined in, we have reduced the amount of capex even though
we’re spending a bit more in India.

Utilities
E.ON AG (EONGN.DE) Germany Neutral 1.3 26.60 -43.4% 3.5% 3.0% 3.4% 0.6% 8.0x 49.6
Economy (+): Compared to other industries E.ON’s business should remain relatively
shielded from the economic slowdown. Electricity and gas demand are not very sensitive
to economic cycles… In most of our markets the need for investment in new power
generation capacity is driven by the need to replace aging capacity more than by
consumption growth.
Pricing (+/-): Nevertheless E.ON will not remain completely immune to the economic
downturn. Electricity and gas prices tend to move with overall energy prices and especially
oil prices. Oil prices reached extreme highs in July but have now fallen back to much lower
levels. Over time energy prices obviously have a material effect on our earnings. In our
power generation business we sell forward our output for several years. As a result, the
short term volatility of energy prices is smoothed out in our earnings.
Access to credit markets (-): E.ON continues to enjoy a good access to debt markets.
Nevertheless, credit spreads have increased substantially over the last few weeks and
liquidity being provided by the public debt market is at very low levels… We’re very
confident that we will meet our funding and refinancing requirements. …We have been
very active on the bond market in the past 15 months, issuing a total volume of €17 bn.
Despite the already tougher environment, we’ve been able to do this at adequate price
levels.
Returns to shareholders (-): In addition, we have decided to delay the completion of our
share buyback program. We have already purchased 6.5 of the €7 bn that we had
promised to buy back. We consider it prudent to wait for the credit markets to settle before
buying the remaining €500 mn of our own shares.
Enel S.p.A. (ENEI.MI) Italy Neutral 0.6 5.17 -30.9% 0.6% 0.7% 0.7% 8.4% 7.9x 21.7
Liquidity (+): As you can see from this chart the Enel group without Endesa is sitting on a
comfortable liquidity position. Beside the fully outstanding commitment to credit lines set
up for the acquisition of Endesa, we can rely on an additional commitment line for a total
original amount of €5 bn, which is currently available for c.€2.6 mn at a competitive spread
[inaudible] 15 bp.
Leverage (+): And we’ll continue to apply financial discipline to our debt reduction. And
would expect to have 50 bn lower and 50 bn net debt at the end of the year. We’re also
working on prioritizing our capex program in a way that we can actually serve that debt
reduction mission that we want to achieve.
Capex (-): There will be some postponement, there will be some redirection of our capex. I
think the 2008 performance can be assumed to be a maximum when it comes to it in terms
of overall capex. So I guess that spending in particular in 2009, 2010 will be regionally
anything between 5 and €6 bn maximum.
Access to credit markets (+): First of all, let me make a few comments on the commercial
paper program because as you probably know we have €4 bn of commercial paper
program… I have to say that for Enel, it is still today a very interesting funding tool with
the cost of very cheap. The cost of commercial paper is a reliable plus 5 to 10 bp, and I
have to say that even in the most difficult period of the recent market, this market

remained open for us. Going to the credit lines, today I can say that we have c.€4.5 bn of
credit lines available, in addition, other 2 or €3 bn in discussion. The average cost of the
credit lines of Enel are very low; of course I have to say that the most recent – the most
recently initiated credit facilities I mean in the last two months, the cost is higher. It is in
the range of 100 bp over LIBOR.
Fortum Oyj (FUM1V.HE) Finland Neutral 0.2 14.54 -50.3% 1.5% 1.6% 1.8% 2.5% 8.1x 6.4
Liquidity (+): We have relatively limited maturities in 2009 and 2010, especially in relation
to the EBITDA levels. We have about 460 mn next year and 630 mn in 2010. And then 2011,
we have a bigger amount, about 242 billion that we then have to refinance. But from a
refinancing point of view, we’re well off this year. It’s covered and next year and the year
after rather benefit.
But certainly 2009 we would look at an opportunity. We are keeping ready at all times
should there be openings in the market. But currently, we are not planning to issue in the
last quarter [of this year].
Iberdrola S.A. (IBE.MC) Spain Buy 0.6 5.85 -42.3% 0.5% 0.6% 0.6% 2.3% 10.0x 21.4
Economy (+): Demand has reduced elasticity even when GDP drops, as we have seen that
in Spain for example, there has been no dip in demand to do – in the course of the last 25
years and we have actually had some financial difficulties in this country in that period. In
the US and the UK, demand has rarely fallen and when it has, it has actually been with the
maximum of 3%. So sensitivity is very, very low compared to any fluctuations in GDP.
RWE AG (RWEG.DE) Germany Neutral 0.7 63.58 -31.0% 5.2% 6.3% 7.1% -1.2% 9.1x 26.3
Leverage (+): On financing, the financial market crisis has made financing more
challenging and made portfolio managers look at their investments from a different
perspective. While we have been partly criticized in the past of not having achieved our
optimal gearing as quickly as other utilities did, this has now turned out to be quite an
advantage and supports our conservative strategy.
Returns to shareholders (+): Furthermore, we confirm our 2008 dividend commitment to

pay out 70% to 80% of the recurrent net income …
Access to credit markets (+): Maturities from now to 2011 are only c. €1.2 bn. Our money
market programs are available and largely undrawn. And if you have a look at the profile
of our total bond outstanding you see that it is well balanced.
Margins (-): Price increases this year were not sufficient to offset higher electricity and gas
purchasing price, gas transportation fees and cost for bad debt.

Union Fenosa S.A. (UNF.MC) Spain Buy 0.1 17.30 16.3% 0.8% 1.0% 1.0% 5.7% 16.9x 5.4
Commodity costs (+): At national level, looking at the realm of energy, the growth is
becoming more moderate, staying at about 2%, a bit lower this month in October.
Liquidity (+): And as for debt maturity, as you see here, these are quite comfortable:
686 mn from 2008, 1,099 from 2009… We will renew the notes in the short term. These
renewals, despite the situation of the financial markets, this is a comfortable situation. We
have our debt service coverage of 15 months. This liquidity you see here constituted by
credit lines are quite long term.
Banks
Banco Santander S.A. (SAN.MC) Spain Neutral 1.2 5.68 -56.8% 1.2% 1.3% 1.3% -5.5% 4.4x 44.4
Returns to shareholders (+): The next interim dividend, which we’ve already announced
and that will be paid in November, is going to go up by 10%.
Economy (-): In the next few months or quarters the group is going to grow very little in
risk assets, because there is no demand for loans… We see in Spain 2%-3% [growth].
That’s very moderate. Deposits are growing double-digits, roughly 20%, the margins are
good. So we see that the trend is picking up. Month-by-month we see improved spreads,
specifically in assets, but also in liabilities. It’s good.
Leverage (-): We believe that in Spain this year and at December 31, we won’t have to
touch that, we won’t have more than 2% NPL rate. 1.9% is what its going to be more or
less. We’re not, just, going to reach 2% of the NPL ratio. And somebody will ask me, what
about 2009? Well I’ll talk about it when we get there, because it’s very difficult to tell right
now.
Barclays PLC (BARC.L) United Kingdom Not Rated 0.4 1.47 -71.9% 0.7% 0.5% 0.3% -14.6% 4.8x 14.0
3Q 2008 sales and revenue call – Trading update
Liquidity (+): Just to recap, we’ve announced that we’re raising some £7 bn in new capital
with consequent significant increases in our capital resources and ratios. We sought to do
this quickly and decisively. The capital raising is structured to achieve at the same time,
rapid execution, strengthening relationships with existing large shareholders, the
introduction of a significant new shareholder, and broad participation from our
institutional shareholders.
Return to shareholders (-): it seemed right to us in responding to that, that we should

pass the final dividend for 2008… Given that, I think it’s right for us to do two things, one
indicate clearly when we expect to resume paying dividends, and we’ve said
unambiguously that we expect to do that in the second half of 2009. But two, I think it’s
right for us just to keep an eye on the environment and not come to a rapid conclusion
about what precisely the dividend shape and size should look like when we resume
payments.

BBVA (BBVA.MC) Spain Neutral 0.8 7.86 -50.7% 1.5% 1.6% 1.6% -4.1% 5.0x 28.0
Liquidity (+): This year, we’ve hardly got any maturities, and over the next few years the
maturities are well spread out. They’re very well structured. Two-thirds of the debt that we
have is going to mature after the year 2011, which means that we have a very comfortable
liquidity position – quite different from that of our peers.
Economy (-): In Spain and Portugal… We have had an across the board slowdown in the
economy and especially in lending that can be seen.
BNP Paribas S.A. (BNPP.PA) France Not Rated 0.9 39.00 -44.8% 8.5% 6.1% 7.2% -14.1% 5.5x 33.5
Economy (-): Well, we are facing the, say, the results of a period which has been impacted
by an unprecedented crisis. Clearly, the impact of the financial crisis this quarter is indeed
much higher than in previous quarters for BNP Paribas, but what has happened this
quarter is of a completely different nature than in the previous quarters.
Pricing (+): We are also seeing the good conditions and improving conditions in the
financing businesses, with wider margins, shorter maturities and stricter covenants and so
on.
Returns to shareholders (+): So the dividend is the decision of the Board, which is taken,
you know, it’s going to be taken in February upon the full-year results. We don’t want to
anticipate or to pre-empt this decision. And when we are calculating our ratios, we are
taking just as a kind of theoretical assumption, the same payout ratio than last year, which
is 40%. But for sure over nine months, our net income, group share, is 4.4 bn, so we are
clearly among the banks at least able to pay a dividend, which there are not that many
today.
Credit Agricole S.A. (CAGR.PA) France Neutral 0.2 7.75 -61.1% 2.3% 1.0% 1.6% -38.6% 5.0x 7.9
Returns to shareholders (+): We are reserved the same amount for dividend payment,
which means that we have reserved 100% of our result for our dividend. As to the format
of this payment, it’s too early days to say, but you know that dividend is a key factor in our
relationship with Regional Bank, our majority shareholder.
Credit Suisse Group AG (CSGN.VX) Switzerland Buy* 0.5 28.90 -52.5% 8.2% -1.2% 4.8% NM 6.8x 19.4
Liquidity (+): During the quarter, the Basel II Tier 1 ratio improved 20 bp to 10.4% as risk-
weighted assets increased by SFr6 bn driven by a 22 bn increase in foreign exchange
movements largely offset by business reductions. The loss recorded in Tier 1 capital was
more than offset by the reversal of the dividend accrual, capital issued in the quarter and
the foreign exchange benefit. Despite the continued strength of our existing capital base,
we decided last week to announce proactive steps to further increase our capital position.
We are raising 4.5 bn of core Tier 1 capital and 5.5 bn of hybrid Tier 1 capital. This
increases the pro forma Tier 1 ratio as at September 30, 2008, to 13.7%.

Leverage (+): We’ve also reduced trading VAR across the Investment Bank by 42% from
the peak in the first quarter of 2008 after normalizing from methodology and dated set
changes. This is effectively halving our risk positions. But in the trading environment
driven by deleveraging and specific market events, which we have experienced particularly
in the month of September, our risk reduction was clearly outpaced by the deteriorating
market conditions.
Emerging markets (+): We are optimistic but extremely cautious with the emerging
markets. I think the probable decoupling play has been overplayed, certainly – well, we
have been starting to see the effects in the emerging markets from the global crisis… We
think the underlying fundamental growth in many of the markets, particularly in that we
see in Asia will be important and strong contributors to our earnings going forward…
We share your concern of continued contagion of some of what we’ve seen in the crisis in
the more developed markets, what steps have we taken. We have generally reduced
positions overall where we’ve been able. We’ve tightened collateral agreements and
arrangements with our counterparties. We’ve taken in particular foreign exchange and
interest rate exposure down across emerging markets.
Deutsche Bank AG (DBKGN.DE) Germany Neutral 0.3 23.25 -72.3% 13.7% 2.7% 7.1% -48.3% 3.4x 12.3
Returns to shareholders (-): Also because there are some questions on the dividend we
accrued, €2.25 in the first half of 2008. That means we used that 2007 payout rate. But
obviously as we have seen this changing environment, we did not accrue anything further
in the third quarter of 2008. But there was no reversal of accruals made, to just be very
clear.
Liquidity (+): And on the liquidity side, we continue to have a diversified unsecured
funding of 521 bn. But which is not a concern to us because 86% is covered mainly by
deposits or capital market instruments.
HSBC Holdings PLC (HSBA.L) United Kingdom Sell 2.5 6.50 -28.9% 1.7% 1.2% 1.2% -9.4% 8.3x 91.9
Emerging markets (+): Our businesses in Asia have driven our performance, supported by
solid results in Europe and Latin America. These have helped to offset the increased
weakness in the US business. Our diversity has been a strength and a protection.
Economy (-): In regards to consumer lending through our branch networks, we have seen
some deterioration in the 2006 and 2007 vintages [audio gap] as you know yourself, it’s a
reflection on the underlying economy and particularly on the unemployment rates. We
have seen a tick-up in both of those, and I suspect you will find them tick up more as the
unemployment figures increase in the coming months.
Return to shareholders (+): This is a company that is focused on paying a dividend, have
a compound growth in dividend for the last 15 years, and we are aware of that.

Intesa Sanpaolo S.p.A. (ISP.MI) Italy Neutral 0.6 2.39 -51.9% 0.3% 0.4% 0.4% -12.3% 6.1x 21.4
Liquidity (+): In terms of liquidity, our direct customer deposits remain bigger, larger than
our loans to customers, and that’s the best guarantee to continue growth no matter how
the interbank markets behave in the future.
Returns to shareholders (-): So the Board today has accepted my proposal – our proposal
– the Chairman and my proposal not to proceed with the distribution of cash dividends for
2008 because we want to make sure that our bank has immediately and without any delay
the kind of capital ratios that the market expects from us.
Nordea Bank AB (NDA.ST) Sweden Neutral 0.3 59.00 -48.0% 1.2% 1.0% 0.9% -2.5% 6.4x 10.5
Liquidity (+): We had a stable and well diversified funding base. And we have attracted
new funding through the period, also long-term funding in 3Q, at good prices on a relative
basis. We have issued in September alone, 2 bn of long term funding. We have done a low
Tier 2 issue and we’ve had a reasonably good performance in the covered bond market in
Denmark and Sweden. Of course lower liquidity, but still functioning.
Economy (-): Loan losses are changing sign; recoveries last year, some losses this year…
Clearly, macroeconomic outlook is deteriorating. Uncertainty is increasing. We expect a
gradual slowdown of lending growth for the remaining part of the year, and we clearly see
lending margins improve, especially on the corporate side. Impaired loans have after
many quarters… increased somewhat. Half of the increase is to be accounted for in the
Baltic countries, while the Nordic level is still very low. And you can also see that the
bigger part of the impaired loans are actually performing loans where we have chosen to
take an early provision because of a weaker outlook.
Societe Generale S.A. (France) (SOGN.PA) France Buy* 0.4 28.39 -68.8% 2.0% 5.0% 6.8% -19.3% 4.3x 15.9
Government intervention (+): The banks have committed themselves to increase credit
volumes in the French economy by 3% to 4% per year. And Société Générale have decided
to increase by 4%. On top of these French state measures, of course we have benefited like
all the banks in the regions by the measure set by the Central Banks to restore
interbanking markets’ equity, the ECB but on a more global basis, all Central Banks.
Unicredito Italiano Spa Ord (CRDI.MI) Italy Buy 0.7 1.82 -66.0% 0.5% 0.3% 0.4% -25.0% 5.0x 24.3
Economy (-): On the macroeconomic effects, so we are fully aware of the significant
slowdown in this area. I think it’s important for you to have a view on what is implied in
our forecast, so we have a significant slowdown in 2008, 2009 but we see a recovering in
2010.
Emerging markets (+): On CE [Central Europe] … The first thing to keep in mind is that we
have been seeing quite a stronger result throughout 2008. It means that we get out of
2008, we’ve a quarter that will be much stronger than the beginning of 2008, the entering

of 2009. The other important point to keep in mind is that why clearly everybody is
revising downward, the projection core GDP and volume growth. But still the average
consensus the most recent average consensus for GDP growth in 2009 we see is around
3%, which is completely different from the situation we have in Western Europe.
UBS Ag (UBSN.VX) Switzerland Neutral 0.7 13.78 -68.3% -2.2% -4.8% 2.0% NM 9.9x 26.2
Access to credit markets (+): Having experienced a near shutdown of the funding and
liquidity market in late September, and early October, we are finally seeing them improve.
Tentatively, day-by-day, as the enormous weight of government intervention gains effects.
However, the markets remain powerless and still heavily dependent upon Central Bank
facilitation. The ongoing process of de-leveraging, lower asset prices across most markets
and economic uncertainty are now affecting revenues across all of our businesses.
Economy (-): Though it seems likely that the global economy will continue to deteriorate
for some time to come, answers to questions about how deep the recession will be, for
how long it will last, the impact it will have on the banking sector all remain unclear.
Leverage (+): First, we will continue to seek generally to de-risk the business for some
time to come being responsive to market developments. Since June 2007, we have
reduced its balance sheet by over $700 bn… However, we’re not yet at the stage where we
feel comfortable that the Investment Bank is at the right scale to operate most effectively
given the current economic climate. So you should expect that we will continue to shrink
its balance sheet somewhat in the future.
Insurance
Aegon N.V. (AEGN.AS) Netherlands Not Rated 0.1 3.25 -71.2% 1.5% -0.1% 0.9% NM 3.9x 4.5
3Q 2008 earnings call - Analyst and investor Meeting Nov. 6, 2008
Liquidity (+): As we made clear last week, we are committed to maintaining a capital level
consistent with our AA ratings. Our bond portfolio has been impacted by significant spread
widening, resulting in increasing unrealized losses. But as we will make clear, we do not
believe that the unrealized losses are a good proxy for future impairments. Furthermore,
AEGON has ample liquidity.
Economy (-): The outlook for economic growth as been severely damaged and recession,
perhaps a severe one, is probably imminent. Such conditions have often given rise to
elevated levels of impairments in credit instruments in the past. And although AEGON
does not publicly forecast impairment levels, it’s reasonable to expect above average
impairments in the next year or so. Obviously, since we do think we may be going into a
nasty recession with more cyclical sectors of the portfolio, consumer cyclicals, retailing,
auto, airlines are all vulnerable in this sort of environment. We think we’ve repositioned
our portfolio defensively. We’ve been anticipating a slowdown; it may be a more severe
slowdown than we were anticipating, but nevertheless we did reposition out of some of
these cyclical sectors.

Allianz SE (ALVG.DE) Germany Not Rated 0.7 56.24 -60.2% 18.0% 10.1% 12.6% -21.7% 4.5x 25.4
Returns to shareholders (+): What we have done is simply to accrue dividends in line with
what we have stated as policy, and if you were to compare the 1.6 which would have been
what we had to accrue based on previous year’s dividend level, that would translate into
1.8. So, there is not a real meaningful or decisive difference. Second remark, I think we do
know and we are very conscious about the fact that dividend is a very important factor for
our investors and this will be appropriately considered for our final decision.
Economy (-): There are recurrently observed overdue payments and those are a lead
indicator for higher future losses, which we already built into or banked into our reserves
end of September.
Liquidity (+): There is no real liquidity issue with the insurance business. We have highly
predictable cash flows. We are the only ones to collect the price in advance. And as you
know, and I’ve mentioned the numbers, we have ongoing free cash flow generation in our
life and non-life business.
Assicurazioni Generali S.p.A. (GASI.MI) Italy Sell 0.6 18.15 -39.5% 2.1% 1.7% 2.1% -17.6% 8.8x 21.6
Economy (+/-): All around us, the global financial system is deleveraging at a pace
unimaginable even weeks ago. This will continue for a while. The system as a whole is
also undercapitalized…The good news is that the sector is entering this downturn
strengthened and stronger than on previous occasions. At the start of the year concern
was focused on structured products. By mid year, equity gearing was the worry. And now,
it is credit, as spreads have widened through the third quarter and ballooned just
recently… The majority of our fixed income portfolio is government paper. The credit
worthiness of the fixed income portfolio remains excellent, with only 6% having a rating of
less than A. We have no exposure to US subprime assets.
ING Groep N.V. (ING.AS) Netherlands Neutral 0.4 6.29 -74.9% 4.3% 1.8% 2.1% -39.1% 3.0x 13.1
Government intervention (+): But one of the thoughts is to rewrite – and I’ve heard
numbers anywhere from 3 to 4 mn mortgages – rewrite those based on the current market
values of the home and the affordability to the occupier to try to keep people in the
home… So that’s in the works. I think the thought is that that could help get to a floor on
prices more quickly. But that is a very much a moving discussion. And as I said, most of
the focus in the last few weeks have been more on the capital injections. But I think they
will – we will look at that.
Economy (-): But I must say the first and the second quarters, I mean you see some
growth, but it’s more modest and right now it’s actually relatively low. Nevertheless, I
must say if you look at the [inaudible] of the real estate finance business, that it is still a
relatively healthy type of business with good LTVs.

Munich Re (MUVGN.DE) Germany Neutral 0.6 108.32 -14.9% 17.9% 8.8% 13.8% -28.8% 8.1x 22.4
Returns to shareholders (+): We continue our share buyback, and we will propose to the
Supervisory Board in the Annual Meeting to keep the dividend unchanged in the amount
of 5.50 per share also for the current fiscal.
Sampo Oyj (SAMAS.HE) Finland Neutral 0.2 14.23 -16.0% 6.2% 1.2% 1.5% 2.0% 9.9x 7.0
Liquidity (-): The investment allocation stands broadly as you become used to seeing it,
some three quarters or so of our total investments are in fixed income products. The
money market proportion has trended down as we have taken the view that interest rates
have peaked and as a consequence have shifted our cash balances into longer term fixed
income instruments. With bonds now standing amounted for 57% of the total investment
portfolios. We still have 19% of our total holdings in cash or money market instruments.
The fixed income allocation has also changed somewhat as we have taken more credit risk
in secondary bond markets primarily buying familiar household names at rather deep
discounts and thus being able to continuously raise the running yield on our bond
portfolios.
Swiss Reinsurance Co. (RUKN.VX) Switzerland Buy* 0.3 44.00 -38.6% 12.0% 4.5% 9.4% -43.2% 4.9x 9.4
Liquidity (+): Our balance sheet ended the quarter in a very healthy condition despite this
impact from the financial markets. We have a significant excess capital compared to the
level required by the rating.
Economy (-): On the asset side of things, I would say that – I still believe the outlook is
uncertain. We seemed to be in a slightly quieter period towards the end of October than
we were in the first half of October. But we’re trying to be prepared for more volatility to
come.
Pricing (+): Finally, and this is one of the more important bright spots that we see, is that I
think our assessment of the lately market direction for both the P&C and Life & Health
business has changed, mainly as a result of what we’ve seen towards the end of
September and especially again at the beginning of October. We are seeing increasing
demand for reinsurance solutions on both P&C and Life & Health and that should lead to
better pricing. On pricing, we are cautiously optimistic.
Returns to shareholders (-): We believe it’s prudent to suspend the buyback.
Zurich Financial Services AG (ZURN.VX) Switzerland Neutral 0.5 208.70 -29.5% 46.9% 32.3% 38.9% -16.7% 5.4x 19.2
Pricing (+): But now we are seeing firm evidence of pricing improvements within North
America and Corporate markets.
Returns to shareholders (+/-): In addition to paying the dividend, we have bought back an
additional 421 mn worth of shares in the third quarter, bringing the total of our buyback
program to $1.45 bn… Considering the market volatility, the group is not buying back

shares as part of the previously announced 2.2 bn share buyback program. It is clear that
our shares have recently been at very attractive prices to be bought back. But in the long
term, companies survive and thrive by finding the right balance between prudence and
taking advantage of bargain opportunities, particularly during flat situations.
Financial Services
Deutsche Boerse AG (DB1GN.DE) Germany Buy 0.3 52.43 -60.5% 4.7% 5.4% 5.9% -0.1% 9.0x 10.2
Economy (+): In addition, we expect that increasing awareness of market and counterparty
risks that the financial crisis has brought into the spotlight will also become a structural
growth driver as market participants begin to understand the extent to which a central
clearing party can mitigate bilateral risks. Finally, recent market volatility also supported
volume development in the third quarter as market participants tend to increase their use
of derivatives in an uncertain market environment.
Returns to shareholders (+): Since the program began in 2005, we distributed over
€2.7 bn through dividends and share buybacks to shareholders. On July 1 this year, we
resumed share buybacks with a volume of up to €400 mn through to the end of this year,
subject to rating requirements, financing needs for potential investment projects, and of
course general liquidity considerations. Of the €400 mn, we have purchased €200 mn in
July and September. And we are currently in the market buying back further shares.
Investor AB (INVEB.ST) Sweden Buy 0.1 114.25 -26.9% 15.7% -0.6% 10.6% NM 11.9x 5.0
Economy (-): Because reality is we will need to stabilize the credit markets otherwise we’ll
have very severe effects on the real economy and already today we see it is very difficult
for a buyout, for example, to get financing. But, we even see it’s increasingly difficult even
to finance production equipment in companies and I think we really need to get the credit
market working again… Today it’s very difficult to finance a buyout, if at all possible right
now, but that will surely change… I mean, I think the private equity industry is here to stay.
So, that’s kind of the – my first outlook. I’m sure there are going to be a lot of very good
investments done over the next few years by private equity firms.
Real Estate
British Land Co. PLC (BLND.L) United Kingdom Neutral 0.1 4.98 -52.3% 0.5% 0.5% 0.5% -1.8% 9.6x 3.1
Economy (-): Life will be tough for our customers with the UK recession which in turn will
affect occupancy on land levels, which is why starting from a high occupancy level is very
important.
Leverage (+): Our balance sheet is as strong today as it was pre-credit crunch. To maintain
this we’ve sold over 6 bn of property over the last three years. We’ve increased our
interest cover to two times and we’ve maintained loan to value in the mid 40s.

Corio N.V. REIT (COR.AS) Netherlands Buy 0.1 33.02 -37.7% 3.1% 3.1% 3.1% -0.9% 10.7x 2.2
Economy (+): And the daily business if you look at the numbers like occupancy rate,
reletting renewals, like-for-like it is not as fantastic as it used to be, but it’s still strong…
Looking at Vacancy, this is where you can see that that is still on the very low numbers.
Apart from Spain, I do not expect that number to increase very much towards the end of
the year, but it’s uncertain what the next year will bring and I think as soon as we have a
clear vision on that we will give you an update.
Leverage (+): The leverage or solvency ratio, now again down to below 40, as a result
again of the sale of the… industrial and office portfolio. The average interest cost in the
quarter was around 5.1%, being exactly the same as at the end of last year.
Liquidity (+): Going forward you can see that that the maturity of debt in 2009 and 2010
are still relatively low numbers and at the first period repayment redemptions we are
facing takes place in 2011.
Liberty International PLC (LII.L) United Kingdom Sell 0.1 5.44 -54.8% 0.4% 0.3% 0.3% -10.9% 18.3x 1.9
Economy (-): So, we are making our ways through this process of falling valuations; in fact
the IPD fall now since June last year is around 25%. But the process is not yet complete.
The indication, not surprisingly given the events of September and October, is that
October will also be a difficult month for valuations. And in fact the valuers now make a
specific point in the valuation report that the transactional evidence for their valuations is
very limited at the moment. We have seen no deterioration in this picture in the third
quarter of 2008 and we have over 95% rent collection since the quarter end, which is in line
with previous quarters. And we do believe that in terms of tenant failures, the next major
task will be in the first quarter of 2009 once the Christmas trading season is over.
Capex (-): Finally, coming on to prospects. You’re all undoubtedly well aware of turbulent
financial markets of the last few months. We are responding actively. We have already
embarked on a number of steps and in fact had already started on these before the events
of the last few months to minimize further capital expenditure commitments…
Technology
Alcatel-Lucent (ALUA.PA) France Buy 0.1 1.63 -67.0% -0.2% 0.2% 0.3% -31.4% 6.4x 3.8
Capex (-): And now the real question about what happens with capex. The answer is, it
depends. I think we come from an era in which capex was capex was capex. And we’re
going to an era of selective capex. I think operators will look very carefully on what capex
is doing on the short and mid-term. How does it help them to generate new revenue, how
does it help them to improve on a cost situation. And they will probably be less inclined to
go to the more exotic type of models. So to go to a far away market with a new set of
financial instruments to go with a latest version of technology not used anywhere is
probably not the part of the capex that will get the most of the attention in the coming 12
to 18 months.

ASML Holding N.V. (ASML.AS) Netherlands Neutral 0.1 11.57 -45.8% 1.4% 0.9% 0.5% -9.2% 21.7x 5.1
Guidance (-): Now, the current worldwide financial turmoil and the significant overall
economic uncertainty creates a situation in which our customers are reassessing their own
capacity ramp-up plans and those of their strategic alliances. Furthermore, our customers
are confronted with lower than expected demand, causing overcapacity, low memory
product pricing, and importantly, a restricted access to capital, which limits their ability to
ramp up to latest technology. Due to this wait-and-see attitude of our customers, we are
unable to guide on short-term bookings or to give any type of mid-term sales forecast.
Currency (+): The first one is euro weakening versus yen and the dollar, and as you know
we are a euro company, our competitors are yen based and our customers are buying in
dollars; so being, or becoming a price-aggressive company due to the weakening of the
yen is a good thing. I remind everybody that the euro has appreciated versus the other
currencies by a factor of 60% or 80% in the past four years. We have weathered this
appreciation and still gained market share and increased profitability. The fact that the
tables are turning is in fact a very, very good encouraging possibility for us to proceed,
giving even more value to our customers and probably even reinforcing our market share
gain and protecting our margin.
Returns to shareholders (-): We have a clear financial policy that says if the cash balance
of the company goes outside the bandwidth that we have given, then that excess cash will
be returned to the shareholders… Under the current circumstances, it is important to stay
within our financial parameters, as we have clearly outlined to the market and to the rating
agencies and basically to ourselves and to the shareholders. So currently we stay within
that, and we stick to the quoted policy.
Ericsson Sh B (ERICB.ST) Sweden Sell* 0.4 52.40 -34.6% 6.9% 4.7% 4.9% 0.1% 10.7x 15.0
Margins (+): Gross margin is at 37%, which is up from last year, stable sequentially, still
for us reflecting somewhat higher increasing margin trend, as we have a higher proportion
now of rollouts in emerging markets that put pressure on the margins.
Economy (+): In 2008 first, we have seen, as I said, no impact yet from the financial
turmoil in the reported numbers. When we then look into 2009, there is a big difference
from where we were in 2000, when the telecom crisis began. Today, most operators are
financially strong, most don’t even carry debt, most networks are quite loaded and the
traffic increase is generally strong. This is the opposite of 2000, when as you recall, the
operators were in heavy debt and there were lots of capacity in the networks… Still I think
we all understand that there are uncertainties here on how the consumer eventually will be
impacted and what that means on their telecom spend, and other financial market effects
that could hit us.
Emerging markets (+): If you then look at Asia-Pacific, which was 70% up, negatively
affected, obviously, by China’s slowdown due to the Olympic Games, still, in fact, China
was up 4% year-over-year, but it was also a slow quarter last year. India is now the largest
market, Indonesia is the third largest market, other markets Vietnam, Singapore were
strong, while we have some political more difficult countries Bangladesh and Pakistan,
that is – it’s actually now, right now falling in sales for us. Latin America is our strongest
growing region right now, 43% up, lots of activities, the trend will continue for a while…
But anyway China should be a good market in 2009, almost irrespective if the global crisis
has an effect on China.

Nokia Corp. (NOK1V.HE) Finland Sell 1.1 10.82 -58.0% 1.4% 1.4% 1.1% -11.4% 9.3x 41.1
Margins (+): Some competitors have been more price aggressive recently in an effort to
either clear stock or try to gain badly needed scale. We have not broadly participated in
what we believe to be unsustainable price moves by certain competitors… In quarter three,
Nokia’s non-IFRS gross margin was 35.7%, up 100 bp sequentially. This captures the
extent to which Nokia is a variable cost business.
Leverage (+): In connection with the NAVTEQ acquisition, we introduced a moderate

amount of leverage to our capital structure through the issuance of commercial paper. At
the end of quarter three, outstandings were $3.5 bn. Our cash and other liquid assets
totalled €7.2 bn at the end of third quarter.
Returns to shareholders (-): During the third quarter, we used €250 mn to repurchase
14 mn shares. Since 2004, Nokia has reduced its share count by more than 22%. That’s
more than 1 bn shares. In early August, however, we put our share buyback program on
pause. While I continue to view buybacks as an efficient means of distributing excess cash,
given the current environment we think it’s prudent to conserve and build up cash, and we
don’t currently plan to buy back stock in the fourth quarter.
SAP AG (SAPG.DE) Germany Neutral 0.6 26.68 -23.8% 1.6% 1.9% 2.0% -5.1% 13.5x 23.7
Economy (-): When the financial crisis accelerated at the end of the third quarter it
impacted our business in all regions with an unprecedented sharp downturn in business
activity. Customer reactions became unpredictable as their operating environment became
more difficult. Some customers extended or postponed decisions while waiting for clarity
on the economic situation. This was more apparent for the small businesses and mid-size
companies due to their constrained access to capital and credit and resulted in a lower
than usual SME contribution… In my 26 years at SAP, I have never witnessed such a sharp
decline in customer spending in such a short period of time.
Emerging markets (+/-): As to the emerging markets, if you look at the BRIC countries,
India and China had a very good quarter. Brazil had a very good quarter. The only BRIC
country that had a rough quarter in 3Q was Russia. The reasons for that are well known,
and just look at what they did to the Russian stock market and a few other things. And we
do not expect Russia to recover that quickly.
Returns to shareholders (=): And I will take the one regarding the buyback. I think it’s a
great time for buyback. But we have to be realistic. It’s also a time, and we all have to
admit it, a time when we all have to say that cash is king. Now seriously, we are just in a
process to investigate our buyback activities throughout the next quarters and we’ll come
back with an answer to this one within the next weeks.
STMicroelectronics N.V. (STM) Netherlands Neutral 0.1 5.33 -44.5% 0.6% 0.6% 0.6% 10.4% 9.6x 3.5
Economy (-): Since then, the outlook for the semiconductor industry for 2008 has declined
from mid-single-digit growth to low-single-digit growth due to the turmoil in the world’s
financial markets.

The narrow financial challenge has now turned into more of a broad economic crisis,
resulting in most of the semiconductor industry looking at a much different 3Q to 4Q
dynamic. Instead of the typical seasonal growth we normally see in the fourth quarter, we
are now expecting a seasonal decrease.
Leverage (+): We were able to self fund 1.7 bn for acquisition, while increasing our cash
dividends to among the highest in the semiconductor universe and undertaking a share
buyback program. Let me also add a comment on our net financial position, which was a
net debt of 409 mn in the third quarter. Up until this quarter, we had a net positive cash
position 11 quarters in a row. We certainly anticipate returning to a net positive cash
position following the completion of the ST and Ericsson joint venture.

Reg AC
We, Jessica Binder, CFA and Peter Oppenheimer, hereby certify that all of the views expressed in this report accurately reflect our personal views
about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.
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Gao Hua Securities Disclosures
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proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our proprietary trading desks and
investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.
Gao Hua Securities and its affiliates, officers, directors, and employees, excluding equity analysts, will from time to time have long or short positions
in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this
research.
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occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.
Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all
investors. Investors should review current options disclosure documents which are available from Gao Hua sales representatives or at
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written consent of Beijing Gao Hua Securities Company Limited.

Jessica Binder, CFA

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2008 年 11 月 26 日 欧洲：投资组合策略：策略焦点

Europe: Portfolio Strategy

The credit crunch hits home, and spending takes a hit

One positive: Commodity costs and currency

The Goldman Sachs Group, Inc. Global Investment Research

Key takeaways from DJ Stoxx outlook statements

Growth slowdown seems evident

Furthermore, companies used the quarter as an opportunity to lower or remove guidance

Goldman Sachs Strategy Research 2

Companies are still ‘cautiously optimistic’ about emerging markets

Credit crunch hits home, and spending takes a hit

Goldman Sachs Strategy Research 3

Cash preservation becomes a priority

Goldman Sachs Strategy Research 4

And as Deutsche Lufthansa said in reference to its dividend:

Commodity costs and currencies finally become a tailwind

Following years of depreciation, two of Novo Nordisk’s most important invoicing

Comparing Europe to the US

Mixed messages on global growth outlook

Goldman Sachs Strategy Research 5

Consumers spending less and trading down

Government intervention helping weak banks most

Credit crisis increasing balance sheet focus

Forecasting ability hampered by uncertainty

Management outlook statements

Goldman Sachs Strategy Research 6

Oil & Gas

3Q 2008 earnings call Nov. 4, 2008

3Q 2008 earnings call Oct. 28, 2008

Returns to shareholders (+/-): We’ve distributed over $10 bn to our shareholders.

Goldman Sachs Strategy Research 7

3Q 2008 earnings call Oct. 31, 2008

Returns to shareholders (+): We are firmly committed to maintain a leading dividend

3Q 2008 earnings call Nov. 13, 2008

3Q 2008 earnings call Oct. 30, 2008

Goldman Sachs Strategy Research 8

3Q 2008 earnings call Nov. 3, 2008

3Q 2008 earnings call Nov. 5, 2008

Goldman Sachs Strategy Research 9

3Q 2008 earnings call Nov. 6, 2008

3Q 2008 earnings call Oct. 29, 2008

Goldman Sachs Strategy Research 10

3Q 2008 earnings call Oct. 30, 2008

3Q 2008 earnings call Oct. 29, 2008

Goldman Sachs Strategy Research 11

3Q 2008 earnings call Nov. 12, 2008

3Q 2008 earnings call Oct. 27, 2008

3Q 2008 earnings call Nov. 3, 2008

Goldman Sachs Strategy Research 12

3Q 2008 earnings call Nov. 5, 2008

3Q 2008 earnings call Oct. 21, 2008

Goldman Sachs Strategy Research 13

3Q 2008 earnings call Nov. 14, 2008

3Q 2008 earnings call Oct. 23, 2008

3Q 2008 earnings call Nov. 7, 2008

Goldman Sachs Strategy Research 14

3Q 2008 earnings call Oct. 28, 2008

Construction & Materials

3Q 2008 earnings call Oct. 24, 2008

3Q 2008 earnings call Oct. 30, 2008

Goldman Sachs Strategy Research 15

3Q 2008 earnings call Nov. 12, 2008

Economy (+/-): We expect a further deterioration in the economic environment in the

2008 年 11 月 26 日欧洲：投资组合策略：策略焦点