Standard & Poor’s Equity Research Methodology

Fundamental Security Analysis
Bottom-Up Analysis
Core STARS Coverage
■ All S&P 500 ■ 300/S&P 400 ■ 200/S&P 600 ■ Key non-U.S. stocks

Company Valuation Analysis
Step 5 Step 6
Finalize Earnings Model
■ Project Standard & Poors Core Earnings, S&P’s more accurate, proprietary representation of the true performance of a firm's ongoing operations ■ Determine earnings quality ■ Evaluate corporate governance

Products and Services
Step 8 Step 9
Decide Buy/Hold/Sell recommendation within 12 months ■ STARS selection ■ Target price ■ Risk assessment Retail Advisor Insight Custom Newsletters Equity Liaison Desk Industry Surveys MarketScope Model Portfolios Monthly Investment Review NetAdvantage Sector Scorecard Stock Reports The Outlook

Step 1
Review public information
■ 10K's ■ 10Q's ■ Annual Reports ■ Conference Calls

Step 2
Conversations with company management for detailed information
■ Establish relationships with new companies ■ Most meetings with companies done via phone; some in-person meetings ■ Obtain a better understanding of: ● Trends ● Leverage/margins ● Efficiency programs ● Costs - current, changes

Step 3
Prepare 3-Year Preliminary Earnings Model
■ EPS Growth Rate ■ Earnings Prospects ■ Balance sheet and

Step 4
Review financial assumptions with company as appropriate for company guidance (e.g. earnings comparisons)

Step 7
Analyst uses multiple criteria for valuing a company, including: ■ Intrinsic Value Analysis ■ Relative Valuation ■ Sum of Parts ■ Risk Assessment/Adjustment These criteria are defined as follows:
Criteria / Definition Intrinsic Value Analysis ■ Determine security's "intrinsic value" based on discounted "free" cash flow (DCF) analysis. Estimates of future "free" cash flows are discounted back to current dollars, including variables like risk assessment and capital structure ■ Present value of shares vs. current share price ■ 10-15 year projection ■ Defined parameters around DCF to make it more reasonable (e.g. interest rate inputs) Relative Valuation ■ Assessing a security's relative value by comparing appropriate financial ratios across peer groups ■ Comparison with industry group ● P/E ● Efficiency ● Margins

■ Management team ■ Competitive environment ■ Suppliers ■ Buyers ■ Substitutes ■ Barriers to entry ■ Regulatory environment

Coverage Criteria
■ S&P Composite 1500 Index constituent ■ Significant trading volume ■ Market capitalization ■ Corporate actions (mergers/ acquisitions, spin-offs) ■ Emerging growth companies

cash flows

Analyst value-add ■ Assumptions ■ Analysis ■ Analyst assigns weightings to each criterion and arrives at final valuation
■ Company value ● P/E trading history ● High/low in cycle ● Current P /E level justification ■ Valuation vs. appropriate index

Deletions to Equity Coverage
■ Negative corporate actions (bankruptcy, mergers and acquisitions) ■ Dropped from S&P Composite 1500 Index ■ Stock price < $5/share ■ Lack of investor interest No. of Companies Covered Per Analyst ■ 20-25 companies

Sum of Parts ■ Determining "fair value" of a stock by determining private market values for a firm's individual units ■ No clear comparison and/or conglomerate ■ Break divisions up as stand-alone business units ■ Calculate a relative value for each division ■ Arrive at a blended valuation Risk Assessment/Adjustment ■ Technical ■ Insider buying ■ Beta

Institutional Equity Insights Market Insight Professional Investor Insight Research Insight Stock Guide

Ongoing Analytical Review
Step 10 Step 1 Repeat Steps 1, 2, 3, 7, 8, 9 Step 2
■ Constant updates for covered companies from primary sources. Goal: 7-8 updates per year

Ongoing Analytical Review
Step 7 Step 8 Step 9

● Quarterly updates published and distributed ● Material events ● Changes in recommendations ● Stock report updates ● MarketScope updates ● First Call notes

Step 3

Top-Down Analysis

Top Down Analysis
Investment Policy Committee (IPC) — Meets Weekly Standard & Poor’s Equity Research Sector Group Heads and Sector Strategists establish top-down opinions via STARS Committee, Analytic Policy Board, and Sector Group Head meetings Analysis includes:
■ Interest rate forecasts ■ Market performance forecasts ■ Sector weightings ■ Economic, political and related developments of interest to investment community ■ Consensus concerning effect of such developments on S&P view of financial markets, including any changes to Standard & Poor’s recommended percentage allocation of investors’ assets among equities, fixed income investments, and cash

Tobacco Anishka Clarke Diversified Consumer Staples John Kartsonas Oilfield Services & Drilling Justin McCann Electric Utilities Craig Shere. Consumer Electronics Yogeesh Wagle Specialty Retail & Footwear Robert Gold. . . . CPA Wireless Telecom Services Todd Rosenbluth Integrated Telecom Services Jonathan Rudy. Group Head Insurance Susan Dawkins Insurance Brokers Erik Eisenstein Thrifts & Mortgage Finance Robert Hansen Investment Banking & Brokerage Raymond Mathis Real Estate Investment Trusts Robert McMillan Real Estate Investment Trusts Evan Momios. CA Consumer Staples Sreedhar Mahamkali Consumer Staples Yannick Mathieu Consumer Discretionary Habib Nasrallah. ST. . John Yang Japan Technology Samuel Wong. 212-438-4706 VP Sales Michael Roncone . . CFA Computer Storage & Peripherals Richard Tortoriello Semiconductor Equipment EMERGING GROWTH Mark Basham. CFA Director of Research — Asia Energy. . CFA Real Estate Chuan-Yang Lim Technology David So Hong Kong Telecoms. CFA Director of Research — Europe Telecommunications & Information Technology Alessandra Coppola Consumer Discretionary Matthew Czepliewicz. CFA Director — Telecoms & Media Sharon Wong. NEW YORK . . . CFA. FRM Quantitative Analyst Winston Siay. Amobi. CFA Industrials Cristina Perea Telecommunications David Seemungal Pharmaceuticals Sonal Seth Financials David Wilson Utilities Clive McDonnell European Strategist ANALYSTS — ASIA Lorraine Tan. Efraim Levy. . TECHNOLOGY/ TELECOM SVCS. . . Equity Research INVESTMENT POLICY Mark Arbeter. CPA Aerospace & Defense Stewart Glickman Diversified Materials Bryon Korutz Paper Products. CFA Application Software Richard Stice. . Forest Products Leo Larkin Diversified Metals & Mining Richard O’Reilly. EUROPEAN EQUITY RESEARCH 14 RYDER STREET. . Investment Policy Committee Sam Stovall Chief Investment Strategist David Wyss. 44 TH FL . . Group Head Semiconductors Ari Bensinger Telecommunications Equipment Stephanie Crane Office Electronics Megan Graham-Hackett Computer Hardware Scott Kessler Internet Software & Services Kenneth Leon. Utilities & Infrastructure Steven Koh. 212-438-9505 Equity Liaison Officer EQUITY RESEARCH POLICY CONSUMER STAPLES/ENERGY/UTILITIES INDUSTRIALS/MATERIALS 55 Charles Baumann Diane Cappadona Mike Fink Barry King Charles Laporta William Mack Colin McArdle Jeff Perlmutter Andrew West Paul Willig Peter Willson WATER STREET. . CFA Biotechnology Herman Saftlas Pharmaceuticals Phillip Seligman Managed Health Care FINANCIALS Michael Jaffe. . . CFA Automobile Manufacturers Dennis Milton Restaurants Amrit Tewary Household Durables. . Quantitative Services James Branscome Chair. Tech & Media. . NY 10041 SUPERVISORY ANALYSTS & EDITORS Kenneth Shea Managing Director. Food Retail Howard Choe Household Products. Group Head Beverages. . CFA. CFA Financials Christiane Dienhart. CFA Apparel Retailers & Mfrs. Packaged Foods Joseph Agnese Drug Retail.S TANDARD & P OOR ’ S G LOBAL E QUITY R ESEARCH MARKETING DESK Sal Patanio . CFA Chemicals James Sanders Industrial Machinery Stewart Scharf Environmental Services. CFA Regional Banks Mark Morgan Diversified Banks Thomas Smith. CFA Gas Utilities Tina Vital Integrated Oil & Gas HEALTH CARE Thomas Graves. Electrical Components & Equipment James Corridore Airlines & Trucking Robert Friedman.D Managing Director. CFA. . Chief Economist CONSUMER DISCRETIONARY Richard Joy. Water Utilities & Packaging INFO.D. CPA Media & Entertainment Jason Asaeda General Merchandise Stores William Donald Publishing. Global Equity Research Stephen Biggar VP-Deputy Director. 617-482-7223 Senior Account Executive Sharon Blumenthal . . CFA Director — Consumer Discretionary Donovan Huang China Utilities & Materials Yeu Huan Lai. CMT Chief Technical Analyst David M. Group Head Homebuilding. Blitzer. Ph. . Advertising Marie Driscoll. . CFA Banking & Finance Alison Seng Consumer Staples Christopher Lee Autos & Industrials . Group Head Emerging Growth Markos Kaminis Emerging Growth Massimo Santicchia Emerging Growth Subhajit Gupta. Group Head Lodging & Gaming Tuna N. CFA. Ph. JAMES’S LONDON SW1Y 6QB UNITED KINGDOM PHONE: +44 (0) 207 312 7000 Catherine Seifert. Group Head Health Care Equipment Frank Connelly Diversified Health Care Frank DiLorenzo. CFA Pharmaceuticals Jelena Karafotias..

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