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Feb 2012

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WHATS INSIDE
Back from the Brink A Lesson from Lehman S&P 500 Companies Show Above-Average Credit Ratings Strength Sector Snapshots and Performance Graphs M&A and Private Capital Activity

MARKET OBSERVATIONS

Monthly compilation of high-level perspectives on M&A, public equity, private capital, and the capital markets.

EDITORS NOTE
With a new year unfolding and past performance being no indicator of future success, we welcome your continued input on content you would be interested in seeing in future issues of the MMO. This month, in addition to our regular content, two of our chief strategists offer contrasting perspectives for consideration. One, a rather convincing raft of wide-spread, positive indicators and an accompanying, nascent migration from capital preservation to growth strategies. The other, a cautionary tale of what we could expect if current market conditions turn out to be a red herring. You decide!
- Editorial Team

CONTACT INFORMATION Kaitlin Carlin- Production Editor kcarlin@spcapitaliq.com Cara Kiewel- Communications Director ckiewel@spcapitaliq.com Subscriptions and General Inquiries marketobservations@spcapitaliq.com

S&P Capital IQ clients can access the M&A data contained in Market Observations, as well as export customizable versions of our charts from the S&P Capital IQ platform. Navigation Tip: S&P Capital IQ> Markets tab > Visualizations: Market Observations

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S&P Capital IQ Market Observations February 2012 | Page 2

TABLE OF CONTENTS
Back from the Brink (pg 4) S&P Capital IQ Global Equity Strategist Alec Young shows how the year-to-date global equity markets have shown a striking role reversal since 2011. A Lesson from Lehman (pg 10)
S&P Capital IQs Valuation Chief Equity Strategist Sam Stovall takes a look back at the tumultuous month of November.

S&P 500 Companies Show Above-Average Credit Ratings Strength (pg 12) Diane Vazza, Managing Director, and Evan Gunter, Associate, discuss companies in the S&P 500 that have strong credit profiles. Sector Snapshots (pg 23)
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities

M&A and Private Capital Activity (pg 35)


M&A Activity by Quarter M&A Valuations by Quarter M&A Valuations by Sector and Deal Size M&A by Sector LBOs by Sector PE Investments by Sector PIPE deals by Sector VC deals by Sector

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S&P Capital IQ Market Observations February 2012 | Page 3

BACK FROM THE BRINK


From Worst to First: Int'l. Equities Rebound YTD, Led By Emerging Mkts. 20% 10%

Chart 1.

0% -10% -20% -30% -40%


Ch ina F ron t ier Eur op e Can a da Japan EAF E S&P 5 00 Brazi In dia lia co EM any a l M exi Au str a Germ Russi
Source: S&P Indices, MSCI (through 2/2 in USD)

2011

YTD

Global Equity Strategist, Alec Young Year-to-date global equity performance has been marked by a striking role reversal. Last years higher-beta, cyclical laggards have surged to the front of the pack as risk aversion has receded globally. Conversely, 2011s defensive, counter-cyclical leaders have largely faded in the new-year. Specifically, after badly underperforming in 2011, developed international stocks are handily outperforming the S&P 500s 5.4% gain with a 7.5% year-to-date advance (in USD). Even more surprising to most, Europe is beating the U.S., rising 7.5%, led by Germanys 14.2% surge. Digging deeper, emerging market (EM) stocks have rebounded most, sporting an impressive 13.9% gain in the wake of last years 20.4% drubbing (see chart 1). Representing roughly 50% of the EM equity asset class, the BRIC nations are fueling the turnaround, rising 17% after last years 24.9% slide. Sector performance has been marked by a similar dynamic, with cyclical areas like Financials, Materials and Industrials surging to the front after trailing badly last year. Conversely, defensive sectors like Consumer Staples, Health Care and Telecom, last years stalwarts, have fallen to the wayside as risk aversion has dimmed in 2012 (see table 1). Not surprisingly, this stark performance shift has coincided with a dramatic decline in global equity volatility, as the bunker mentality that gripped investors in 2011 has receded. Trailing 60-day standard deviations for both developed and emerging market equities have declined to about 20 from readings in the mid 30s in early November. The standard deviations of both asset classes are now nearing their respective long-term averages in the high teens (see chart 2). Equity volatility has plunged in all major overseas markets, including Canada, Germany, the U.K., Japan, Australia, China, India, Brazil and Russia. Even France, Italy and Spain have gone along for the ride.
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BACK FROM THE BRINK


From Worst to First - After Lagging in 2011, Cyclicals Take the Lead S&P Developed ex-U.S. S&P Emerging Market Sector Energy Materials Industrials Financials Consumer Disc. Info. Tech. Health Care Utilities Consumer Staples Telecom INDEX YTD 17.1% 16.1% 14.5% 14.3% 10.2% 10.2% 10.1% 10.1% 6.7% 4.2% 12.4% 2011 -20.9% -28.5% -30.3% -25.9% -14.4% -17.8% -21.1% -19.8% -4.5% -8.8% -22.9%
Source: S&P Indices, MSCI (through 2/1 in USD)

Table 1

Sector Materials Financials Consumer Disc. Industrials Info. Tech. Energy Utilities Health Care Consumer Staples Telecom INDEX

YTD 13.2% 11.4% 10.6% 9.9% 6.0% 5.1% 2.6% 2.3% 1.4% -0.7% 7.7%

2011 -23.8% -22.3% -14.7% -17.0% -16.8% -7.4% -20.7% 1.8% 0.8% -6.7% -14.9%

International Volatility Plummets Amid Improving Global Macro-Economic Environment

Chart 2

35 30 25 20 15 10 5 0

Ma y11

Jul -11

Jun-1 1

Ma r11

De c-1 1

A pr - 1 1

F e b- 1 1

Se p-1 1

Oct -1 1

Ja n-1 2

Aug-1

N ov-

EAFE Volatility*

EM Volatility*

LT EAFE Avg.

LT EM Avg.

F e b- 1 2

11

Source: S&P Capital IQ, Bloomberg (through 2/2 in USD)

* annualized rate of standard deviation of price changes over preceding 60 days

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S&P Capital IQ Market Observations February 2012 | Page 5

BACK FROM THE BRINK


So what explains this across the board performance U-turn? We think several bullish factors are at work leading investors to once again favor risk-on assets at the expense of capital preservation strategies. Chief among them is a sharp decline in European sovereign stress thanks to aggressive ECB action to provide liquidity to European banks. Specifically, the ECB's Long Term Refinancing Operation (LTRO), which provides cheap, three-year bank loans, is allowing EU banks to meet a heavy first-half bond maturity burden, thereby buying time and reducing the odds of a Lehman-like shock, in our view. In addition, Spanish and Italian banks have exploited a carry trade - using cheap ECB funding to buy their nations' higher-yielding two-year bonds, pocketing the spread. As a result, short-term sovereign funding pressure has eased, with two-year Italian and Spanish bond yields tumbling to 3% and 2.5%, respectively, from north of 6% last fall (see chart 3). As such, risk assets like European and EM equities have rebounded sharply as investors' biggest worry - a global credit crunch emanating from Europe - has faded sharply, helping pull cautious money into cyclical assets, which have the most to gain from reduced credit stress. Adding fuel to the rebound in risk appetite - the stabilization in global manufacturing momentum, most notably in the U.S. (see chart 4) - has investors feeling more confident the world economy can weather a likely mild European recession.

Chart 3
(,blns.)

ECB Buys Time - Balance Sheet Expansion Lowers Sovereign Stress


(%)

3,000 2,700 2,400 2,100 1,800 1,500

8 7 6 5 4 3 2 1 0

Italy 2 Yr. Bond Yld. (RHS) Spain 2 Yr. Bond Yld. (RHS) ECB BALANCE SHEET (LHS)

A pr - 1 1 Ma y11

Oct -1 0 De c-1 0

Ja n-1 1

Jul -11

Ma r11

Aug-1

N ov-

De c-1 1

Se p-1 1

F e b- 1 2

11

Source: S&P Capital IQ, Bloomberg (through 2/2 in USD)

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S&P Capital IQ Market Observations February 2012 | Page 6

BACK FROM THE BRINK


Global Manufacturing Stabilization Boosts Risk Appetite
Chart 4

65 60 55 50 45 40 35 30 25 CHINA PMI U.S. EZ PMI BRAZIL PMI JAPAN PMI


Source: S&P Capital IQ, Bloomberg (through 2/2 in USD)

Ma y07

Ma y08

Ma y09

Ma y10

Ma y11

Ja n-0 8

Ja n-0 9

Ja n-1 0

Ja n-1 1

Se p-0 7

Se p-0 8

Se p-0 9

Se p-1 0

Emerging markets have clearly been the stars of the show year-to-date, outperforming the S&P 500 and developed international equities by 850 bps and 640 bps, respectively. Easing inflation (see chart 5) has been the spark, in our view, as several months of falling prices have led key central banks to signal a greater willingness to ease monetary policy to revive slowing economic growth.

Source: IHS Global insight (as of 11/15)

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Se p-1 1

Ja n-1 2

S&P Capital IQ Market Observations February 2012 | Page 7

BACK FROM THE BRINK


Fallling EM Inflation Sparks Easing, Boosting Equities
(%)

Chart 5

16 14 12 10 8 6 4 2 0 -2 -4

China Y/Y CPI India Y/Y WPI* Brazil Y/Y CPI Russia Y/Y CPI

F eb-0 9 Ap r-0 9 Jun -0 9 Au g-0 9 Oct-0 9 D ec-0 9 F eb-1 0 Ap r-1 0 Jun -1 0 Au g-1 0 Oct-1 0 D ec-1 0 F eb-1 1 Ap r-1 1 Jun -1 1 Au g-1 1 Oct-1 1 D ec-1 1

Source: S&P Capital IQ, Bloomberg

*wholesale inflation
Lastly, we think attractive valuations have helped set the stage for 2012s strong start. While low valuations alone rarely make assets rise, they help create the foundation for alpha once bullish catalysts emerge. After last years swoon, overseas stocks were priced for extremely negative macro economic outcomes ranging from a global credit crunch to a Chinese hard landing, by our analysis. As these risks have receded we think low valuations have made it easier for foreign stocks to snap back impressively. Even after the year-to-date bounce, developed and emerging market equities are trading at only 11.1X and 10.2X 12-month forward consensus EPS, respectively, both discounts to their long-term averages (see chart 6), giving us confidence the gains are sustainable even as the pace of the advance likely slows.

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S&P Capital IQ Market Observations February 2012 | Page 8

BACK FROM THE BRINK


Low Valuations Boost Foreign Equities As Macro Catalysts Emerge
Chart 6

16 12 8 4 EAFE 12 Mo. Forward P/E EM 12 Mo. Forward P/E EAFE LT Avg. EM LT Avg.

F e b- 0 7 Jun-0 7 Oct -0 7 F e b- 0 8 Jun-0 8 Oct -0 8 F e b- 0 9 Jun-0 9 Oct -0 9 F e b- 1 0 Jun-1 0 Oct -1 0 F e b- 1 1 Jun-1 1 Oct -1 1 F e b- 1 2

Source: S&P Capital IQ, Bloomberg

Source: Bloomberg

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S&P Capital IQ Market Observations February 2012 | Page 9

A LESSON FROM LEHMAN


A Lesson from Lehman, Sam Stovall If you asked investors what would be the worst luck for the global markets today, they would probably answer The European sovereign debt crisis triggering a Lehman-like financial meltdown. This answer should come as no surprise to most investors, as it has been a topic of debate for more than a year. And while the time and type of eventual conclusion to this crisis remains elusive, in our opinion, the quantifiable fallout from a worst-case scenario does not. Just step back a few years and revisit the latter months of 2008 during the peak period of panic, just before and immediately following the September 15 bankruptcy filing of Lehman Brothers.
Benchm ark and Sector Total Returns 8/31/08-11/30/08 Broad Indices S&P 500 High Beta NAREIT-Equity Only S&P GSCI MSCI-Emerging Markets S&P MidCap 400 MSCI-EAFE S&P SmallCap 600 S&P Preferred Stock S&P 500 S&P 500 Low Volatility S&P 500 Aristocrats Barclays Aggregate % Chg. (48.8) (47.5) (46.5) (44.6) (36.6) (35.3) (34.2) (30.2) (29.6) (19.3) (17.9) (7.6) S&P 500 Sector Materials Financials Info. Technology Industrials Cons. Discretionary S&P 500 Energy Health Care Utilities Telecom. Services Cons. Staples % Chg. (42.4) (39.8) (36.3) (33.7) (32.6) (29.6) (27.2) (22.9) (19.4) (14.6) (13.7)

Source: S&P Capital IQ, MSCI, Bloomberg. Past performance is no guarantee of future results.

During the fourth quarter of 2008, the S&P declined 22.6% in price, which was the worst quarterly price performance since the 23.2% drop during the fourth quarter of 1987. In addition, the 500 sequentially sank 9.1%, 16.9%, and 7.5% in price in September, October and November of that year, as the market anticipated, and then responded to, the Lehman collapse. During that three-month stretch, there was but one place to hide among global assets. Other than U.S Treasury bonds the iShares Barclays 20+Year U.S. Treasury Bond Fund (TLT 119, NR) gained nearly 13% during those three months 12 other global asset classes declined more than 7.6% on a total return basis.

Source: Bloomberg

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S&P Capital IQ Market Observations February 2012 | Page 10

A LESSON FROM LEHMAN


From a global equity perspective, the worst performer was the S&P 500 High Beta index, which fell 48.8% including dividends, followed by the MSCI-Emerging Markets Index (-44.6%), and the S&P MidCap 400 Index (-36.6%). Other S&P 500-related Indices held up better that the S&P 500 Index itself, which declined 29.6%. In particular, the S&P 500 Low Volatility Index dropped 19.3% while the S&P 500 Dividend Aristocrats slipped 17.9%. Other asset classes that took it on the chin in late 2008 included the NAREIT-Equity Only Index, which tumbled 47.5% including dividends, the S&P GSCI (a broad commodities benchmark), which slumped 46.5% and the S&P Preferred Stock Index that slid 30.2%. Only the Barclays Aggregate Bond Index declined less than 10%. At the risk of piling on, I remind you that all 10 sectors within the S&P 500 fell, even when including dividends. The worst performer was not Financials, which fell 39.8%, but Materials, which tumbled 42.4%. Financials started tumbling earlier in the year and, in our opinion, many probably thought that the demise of Lehman would trigger a global depression, thus undermining the demand for Materials by emerging market nations. The Technology (-36.3%), Industrials (-33.7%) and Consumer Discretionary (-32.6%) sectors were the other cyclical groups that fell more than the broad market. Not surprisingly, the defensive sectors held up better than the S&P 500, even though all five declined in total return. The Consumer Staples group fell the least (-13.7%), followed by Telecom Services (-14.6%), Utilities (19.4%), Health Care (-22.9%) and Energy (-27.2%). Finally, since misery loves company, we see that 127 of the 130 subindustries in the S&P 500 declined in price, from less than 10% for Distributors, Household Products, and HyperMarkets & Super Centers, to 80% or more for the Health Care Facilities, Industrial REITs, and Multi-line Insurance groups. The only sub-industries to rise in price from September through November 2008 were Brewers (+3.0%), Agricultural Products (+7.5%), and Education Services (+20.7%). I embarked on this little depressing look-back, not because we believe another Lehman-like event is likely, but because it cant be dismissed. Indeed, we believe the overall picture in Europe has been improving, as encouraging demand for recent European sovereign debt auctions has buoyed investor optimism, while the low-cost ECB bank loans have lessened the risk of a credit crunch. The severity of the recession in Europe remains a wildcard. Our forecast is for a rough first half, followed by a slow uphill climb in the second half of this year. So there you have it. Should there be another Lehman-like meltdown, and you wish to use history as a guide (though its never gospel), I would suggest closing your eyes and preparing for a swift and severe sell-off in nearly all major asset classes, sectors and sub-industries, even with dividends added back. I would also venture to guess that youll probably be glad you didnt sell your Treasuries.

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S&P Capital IQ Market Observations February 2012 | Page 11

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Companies Show Above Average Credit Ratings Strength, Diane Vazza and Evan Gunter Companies within the S&P 500 index have strong credit measures, as the high proportion of investment-grade-rated entities demonstrates. Standard & Poor's Ratings Services rates 75% of S&P 500 companies investment grade ('BBB-' and higher) and 12% speculative grade ('BB+' and lower). By comparison, 49% of all U.S. companies that Standard & Poor's rates are investment grade. Debt is an important source of funding for many of the companies within in the S&P 500, which have $6.9 trillion in total debt, compared with $12.5 trillion in market capitalization (as of Jan. 31, 2012).The relative credit strength of the S&P 500 is not surprising considering that these are the largest companies in the U.S., and they typically have the greatest capacity to raise equity financing. The investment-grade companies represent 87% of the total market capitalization of the S&P 500 and 94% of its total debt. The industrials and utilities sectors have the strongest credit profiles relative to other sectors. Standard & Poor's rates 94% of companies in these sectors investment grade. The utilities sector has the highest potential for upgrades, as six companies (or 18.2%) in the sector have positive outlooks or ratings on CreditWatch positive. The telecommunication services sector is at the greatest risk of downgrades, with two of the rated companies (28.6%) with negative outlooks or ratings on CreditWatch negative. The financials sector has the most companies at risk of downgrades, with 15 (or 19.7%) that have negative outlooks or ratings on CreditWatch negative (see tables 5 and 6).

Table 1
Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total

Global Industry Classification Standard (GICS) Sector Distribution


Total Count 80 42 42 81 52 61 72 30 7 33 500 Investment-Grade (Count) 50 37 29 70 40 50 41 23 2 31 373 Speculative-Grade (Count) 17 4 10 6 3 3 5 5 5 2 60 Positive Outlook or CreditWatch (% of Rated) 7.46 9.76 5.13 9.21 4.65 7.55 10.87 10.71 0.00 18.18 8.78 Negative Outlook or CreditWatch (% of Rated) 10.45 9.76 15.38 19.74 11.63 7.55 2.17 3.57 28.57 6.06 10.85

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

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S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Standard & Poor's credit ratings are opinions about credit risk, measured on a scale from 'AAA', for the strongest issuers, to 'D', which is reserved for issuers that have defaulted on financial commitments.

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S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Upgrade And Downgrade Risks Are Roughly Equal Across the entire S&P 500, 9% of companies are at the greatest risk of downgrades, and 8% are at the greatest risk of upgrades. We assign positive or negative outlooks to issuer ratings when we believe that an event or trend has at least a one-in-three likelihood of resulting in a rating action over the intermediate term for investment-grade entities (generally up to two years) and over the shorter term for speculative-grade entities (generally up to one year). Standard & Poor's places a rating on CreditWatch if there is at least a one-in-two likelihood of a rating change within 90 days. Although these numbers suggest that credit quality may decline in the near to medium term, the outlook for S&P 500 companies is less negative than that of the U.S. corporate sector as a whole, which has a negative bias of 13.5%, compared with a positive bias of just 7.6% at the end of January. Corporate funding costs rise considerably when moving down the ratings scale to speculative grade from investment grade. A broader mix of investors and institutions can buy and hold investment-grade bonds, so companies rated 'BBB' and higher typically borrow at lower rates than speculative-grade-rated companies. At the end of January, U.S. corporate bonds rated 'BBB' had yields 1.7%-3.4% lower than the yields of bonds rated 'BB' (see chart 2). A few companies on the S&P 500 have the potential to move to investment grade from speculative grade, and vice versa. Zions Bancorp (BBB-/Negative/A-3) is a potential fallen angel, meaning that it's at risk of being downgraded to speculative grade from investment grade. On the other hand, four companies on the S&P 500 are potential rising stars, meaning Standard & Poor's could upgrade them to investment grade from speculative grade, which would likely lead to lower credit costs. These four companies are rated 'BB+' with positive outlooks: Wynn Resorts Ltd, Starwood Hotels & Resorts Worldwide Inc., Jabil Circuit Inc., and Harman International Industries Inc.

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S&P Capital IQ Market Observations February 2012 | Page 14

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Rating AAA AA A BBB BB B and below NR Grand Total Count by Rating 4 17 143 207 50 9 70 500 Positive Outlook or CreditWatch (count) 0 0 4 27 6 1 0 38 Negative Outlook or CreditWatch (count) 0 4 17 13 9 4 0 47 Market Capitalization Total Debt ($ bln) ($ bln) 855.9 47.9 1852.1 732.0 5251.5 4436.6 2882.9 1286.6 428.0 319.9 30.2 58.4 1157.3 58.8 12,457.9 6,940.4

Table 2

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

Rated Companies On The S&P 500 Are Predominantly Investment Grade Although the majority of S&P 500 companies is investment grade, the ratings have declined since 2008, just as the ratings on most companies Standard & Poor's rates have declined. Within the S&P 500, the share of companies rated 'AA' or 'A' has declined to 32% from 37%, while the share of 'BBB' rated entities has increased to 41% from 36%. Despite this shift, the median rating has remained 'BBB+' for the S&P 500 companies--three notches higher than the median rating of 'BB+' for all rated U.S. companies.

Distribution of S&P 500 Companies by Rating Chart 1


2012 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% AAA AA+ AA AAA+ A ABBB+ BBB BBB- BB+ BB BBB+ B and below
Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

2008

2005

Year 2012 2008 2005

%-Rated 87 91 85

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S&P Capital IQ Market Observations February 2012 | Page 15

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


As an alternative to looking at the distribution of ratings by number of companies, we also measured the distribution by market capitalization and total debt. Although 'BBB' rated companies outnumber any other rating category, companies rated 'A' dominate based on market capitalization and total debt. Companies rated in the 'A' category have a total market capitalization of $5.3 trillion and $4.4 trillion in total debt. Currently, 14% of the companies in the S&P 500 are unrated, up from 9% three years earlier. Because Standard & Poor's rated a higher proportion of the index three years ago, speculative-grade companies made up a larger percentage of the index (at 16%).

U.S. Financial and Nonfinancial Corporate Bond Yields by Rating Category


(credit rating)

Chart 2

AA

BBB

BB
Current 5 yr Treasury Yield

10

12

14 (%)

16

18

20

22

24

26

28

All OAS (option-adjusted spreads) are calculated off the reference five-year Treasury yield. 'AAA' rated entities are not shown owing to small sample size. Range width in each rating category represents the minimum and maximum points of corporate bond yields in the period Jan. 31, 2011- Jan. 31, 2012. Source: Standard & Poor's Global Fixed Income Research.

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S&P Capital IQ Market Observations February 2012 | Page 16

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Total Debt and Cash of the S&P 500
($ Billion) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 Total Debt (sum) Cash & Equiv (sum)

Chart 3

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

Total debt of the S&P 500 companies declined to $6.9 trillion at the end of 2011 from $9.5 trillion in 2007. As the debt level has declined, firms' cash holdings increased to $1.3 trillion from $1.1 trillion (see chart 3). As net debt, or debt minus cash, has declined, the ratio of net debt has fallen to 1.13x EBITDA from 1.55x in 2010. As this ratio decreases, it indicates increased credit strength. Meanwhile, debt remained relatively stable as a proportion of assets, at 0.31 (see chart 4).

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S&P Capital IQ Market Observations February 2012 | Page 17

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Credit Ratios of the S&P 500
Net Debt / EBITDA (right) Total Debt / Assets 0.80
(x)

Chart 4

2.5

0.70

Data as of December 31, 2011. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

0.60 2 0.50 1.5 0.40 1 0.30 0.5

0.20

0 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011

0.10

Rating AAA AA A BBB BB B and Below NR Composite Avg

Average Market Capitalization ($ bln) 214.0 109.3 37.2 14.4 8.3 3.5 18.3 25.0

Average Total Enterprise Value ($ bln) 204.0 116.0 41.7 18.5 13.9 8.6 17.1 28.6

Debt / Debt & Equity (%) Total Debt / EBITDA (X) 14.0 0.3 28.2 1.0 36.5 1.5 41.3 2.0 63.5 3.6 58.7 3.8 12.7 0.4 36.9 1.5

Data as of 12/31/2011. Excludes S&P 500 Companies from the financial sector, as well corporates with significant financial sector exposure. Note: Total Enterprise Value is not calculated for banks, brokers or financial services companies as most of the inputs used in a TEV calculation represent operating and not financial assets and liabilities for these companies. Source: Standard & Poor's Global Fixed Income Research & S&P Capital IQ.

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S&P Capital IQ Market Observations February 2012 | Page 18

S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


In terms of average credit measures and valuations for nonfinancial corporate entities, companies Standard & Poor's rates highly are larger, on average, both in terms of market capitalization and total enterprise value. Market capitalization to total enterprise values are closer together for higher-rated entities than they are for lower-rated ones. (Total enterprise value is the combined value of the firm's debt plus equity, minus cash and short-term investments.) Companies rated 'AAA' have higher market capitalization than total enterprise value, on average, because these entities tend to have a high levels of cash on the balance sheets or relatively low debt. In contrast, 'B' rated companies have an average total enterprise value that is more than double their average market capitalization. This shows these speculativegrade entities have higher proportions of debt relative to equity within their capital structures. Surprisingly, companies Standard & Poor's does not rate show many average credit measures comparable to those of 'AAA' rated entities. The companies that are not rated have debt to debt and equity and total debt to EBITDA that compare closely to the averages of 'AAA' companies. Partially, this is because of a selection bias. Some of the largest unrated companies within the S&P 500, such as Apple Inc, have strong equity financing, little to no debt, and strong cash reserves. Their credit measures are so strong because they have little need to raise debt financing, and they do not have bonds outstanding, so they may not have a credit rating from Standard & Poor's.

Table 4

Top Ten Nonfinancial Companies Ranked by Market Capitalization and Total Enterprise Value
Constituents Name Apple Inc. Exxon Mobil Corporation Microsoft Corporation International Business Machines Corp. Wal-Mart Stores Inc. Chevron Corporation General Electric Company Google Inc. Johnson & Johnson AT&T, Inc. Rating NR AAA AAA A+ AA AA AA+ AAAAA AMarket Cap ($ blns) 425.6 401.4 247.8 223.4 210.1 205.4 197.5 188.6 180.0 174.3 Constituents Name General Electric Company Exxon Mobil Corporation Apple Inc. Wal-Mart Stores Inc. International Business Machines Corp. AT&T, Inc. Microsoft Corporation Procter & Gamble Co. Verizon Communications Inc. Chevron Corporation Rating AA+ AAA NR AA A+ AAAA AAAAA Total Enterprise Value ($ blns) 520.7 413.4 395.5 267.0 242.9 236.1 209.9 204.4 197.8 195.6

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research and S&P Capital IQ.

Data as of January 31, 2012. Note: Total Enterprise Value is not calculated for banks, brokers or financial services companies as most of the inputs used in a TEV calculation represent operating and not financial assets and liabilities for these companies. Source: Standard & Poor's Global Fixed Income Research & S&P Capital IQ.

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S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


There are many ways to gauge the size of a company. For nonfinancials, we used market capitalization to rank companies by the size of their equity, and we used total enterprise value to rank them by a measure that combines debt with equity (see table 4). The top ten companies ranked by market capitalization compared with the top 10 ranked by total enterprise value have a lot of overlap and a few differences. Two of the companies from the top 10 by market capitalization, Johnson & Johnson and Google Inc., did not make it onto the top total enterprise value list. Both of these firms have holdings of cash and cash equivalents in the top 4% of S&P 500. In turn, Verizon Communications and Procter & Gamble Co. made the list of the top 10 total enterprise values but not the top 10 by market capitalization. A note on the methodology: we have used financial measures from S&P Capital IQ for the charts and tables within this report. In some cases, these measures may diverge from those Standard & Poor's Ratings Services uses. Standard & Poor's Ratings Services makes adjustments to company-reported financials according to its criteria. The S&P 500 is a large-cap index that is the most widely-followed measure of U.S. equity market performance and corporate profitability. (See www.standardandpoors.com for details of the S&P 500 index construction).

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S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Company Abbott Laboratories ConocoPhillips Tyco International Ltd. Computer Sciences Corporation News Corp. Murphy Oil Corporation Sunoco, Inc. Berkshire Hathaway Inc. CME Group Inc. Medtronic, Inc. State Street Corp. The Bank of New York Mellon Corporation Wells Fargo & Company Halliburton Company United Technologies Corp. Walgreen Co. AFLAC Inc. Bank of America Corporation Citigroup, Inc. Lowe's Companies Inc. MetLife, Inc. Morgan Stanley The Allstate Corporation The Goldman Sachs Group, Inc. V.F. Corporation Avon Products Inc. DENTSPLY International Inc. Express Scripts Inc. Hospira Inc. Big Lots Inc. Capital One Financial Corp. Entergy Corporation Genworth Financial Inc. H&R Block, Inc. Zions Bancorp. Owens-Illinois, Inc. R.R. Donnelley & Sons Company Alpha Natural Resources, Inc. Frontier Communications Corporation Iron Mountain Inc. NRG Energy, Inc. PulteGroup, Inc. Dean Foods Company Sprint Nextel Corp. SUPERVALU Inc. Sears Holdings Corporation Sector Healthcare Energy Industrials Information Technology Consumer Discretionary Energy Energy Financials Financials Healthcare Financials Financials Financials Energy Industrials Consumer Staples Financials Financials Financials Consumer Discretionary Financials Financials Financials Financials Consumer Discretionary Consumer Staples Healthcare Healthcare Healthcare Consumer Discretionary Financials Utilities Financials Consumer Discretionary Financials Materials Industrials Energy Telecommunication Services Industrials Utilities Consumer Discretionary Consumer Staples Telecommunication Services Consumer Staples Consumer Discretionary Rating AA A ABBB+ BBB+ BBB BB+ AA+ AA AAA+ A+ A+ A A A AAAAAAAAABBB+ BBB+ BBB+ BBB+ BBB BBB BBB BBB BBB BBBBB+ BB+ BB BB BBBBBBB+ B+ B+ CCC+ Outlook / CreditWatch CreditWatch Negative CreditWatch Negative CreditWatch Negative CreditWatch Negative CreditWatch Negative CreditWatch Negative CreditWatch Negative Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook Negative Outlook

Table 5

Potential Downgrades of the S&P 500

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research & S&P Capital IQ.

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S&P 500 COMPANIES SHOW ABOVE AVERAGE CREDIT RATINGS STRENGTH


Company NYSE Euronext, Inc. Oracle Corporation Goodrich Corp. Northeast Utilities Progress Energy Inc. Constellation Energy Group, Inc. Roper Industries Inc. Williams Companies, Inc. Vulcan Materials Company Advanced Micro Devices, Inc. The Coca-Cola Company Unitedhealth Group, Inc. KeyCorp Assurant Inc. Avery Dennison Corporation Bemis Company, Inc. Fifth Third Bancorp HCP, Inc. Life Technologies Corporation Mead Johnson Nutrition Company Pall Corp. Pinnacle West Capital Corporation Principal Financial Group Inc. Public Service Enterprise Group Inc. TE Connectivity Ltd. Allegheny Technologies Inc. Ameren Corporation Health Care REIT, Inc. Molson Coors Brewing Company priceline.com Incorporated Tyson Foods Inc. Unum Group Yum! Brands, Inc. Harman International Industries Inc. Jabil Circuit Inc. Starwood Hotels & Resorts Worldwide Inc. Wynn Resorts Ltd. CONSOL Energy Inc. Sector Financials Information Technology Industrials Utilities Utilities Utilities Industrials Energy Materials Information Technology Consumer Staples Healthcare Financials Financials Industrials Materials Financials Financials Healthcare Consumer Staples Industrials Utilities Financials Utilities Information Technology Materials Utilities Financials Consumer Staples Consumer Discretionary Consumer Staples Financials Consumer Discretionary Consumer Discretionary Information Technology Consumer Discretionary Consumer Discretionary Energy Rating A+ A BBB+ BBB+ BBB+ BBBBBBBBBBB B+ A+ ABBB+ BBB BBB BBB BBB BBB BBB BBB BBB BBB BBB BBB BBB BBBBBBBBBBBBBBBBBBBBBBBBBB+ BB+ BB+ BB+ BB Outlook / CreditWatch CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive CreditWatch Positive Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook Positive Outlook

Table 6

Potential Upgrades of the S&P 500

Data as of January 31, 2012. Source: Standard & Poor's Global Fixed Income Research & S&P Capital IQ.

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SECTOR SNAPSHOTS
Sector Snapshots
S&P Capital IQ and S&P Indices collaborated to produce these monthly performance views for the top ten sectors of the S&P 500.

Market Observations Covering


Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunications Utilities Industry Specific Data S&P Capital IQ uses the Global Industry Classification Standard (GICS) to categorize and tag all companies within our database. We also collect industry specific and supplemental data for 16 industries, including Airlines, Banks, Healthcare, Hotels and Gaming, Insurance, Metals and Mining, Oil and Gas, Retail, Semiconductors, and Telecom, Cable, and Wireless. To learn more about GICS or our industry specific and supplemental data items please contact information@spcapitaliq.com

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CONSUMER DISCRETIONARY SECTOR SNAPSHOT

Equities | U.S.
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CONSUMER STAPLES SECTOR SNAPSHOT

Equities | U.S.
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ENERGY SECTOR SNAPSHOT

Equities | U.S.
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FINANCIALS SECTOR SNAPSHOT

Equities | U.S.
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HEALTHCARE SECTOR SNAPSHOT

Equities | U.S.
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INDUSTRIALS SECTOR SNAPSHOT

Equities | U.S.
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INFORMATION TECHNOLOGY SECTOR SNAPSHOT

Equities | U.S.
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MATERIALS SECTOR SNAPSHOT

Equities | U.S.
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TELECOMMUNICATION SERVICES SECTOR SNAPSHOT

Equities | U.S.
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UTILITIES SECTOR SNAPSHOT

Equities | U.S.
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M&A MARKET
M&A Market
S&P Capital IQ provides detailed information on M&A and financing transactions covering the most active markets in the world. We track all publicly announced mergers, acquisitions, private placements, public offerings, shelf registrations, equity buybacks, and bankruptcies. Transaction data is updated daily from various sources such as regulatory filings, company websites, newsletters, trade publications, and press releases.

Our Transaction Data S&P Capital IQ covers 1,300,000+ transactions globally. All transaction information is seamlessly integrated in the S&P Capital IQ platform and S&P Capital IQ Excel Plug-In, and can be viewed alongside the most accurate company fundamentals. To learn more about our transaction coverage, history, and collection process contact information@spcapitaliq.com.

M&A Activity M&A Valuations Leveraged Buyouts Strategic M&A Private Equity Investments Pipes Venture Capital

Market Observations Covering

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M&A ACTIVITY BY QUARTER


Strategic vs. Financial Buyer M&A (North American Targets)

Source: S&P Capital IQ

Strategic vs. Financial Buyer M&A (European Targets)

Source: S&P Capital IQ Notes: Figures are based on announce dates and on a trailing three months basis through September 30, 2011. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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M&A ACTIVITY BY QUARTER (NORTH AMERICA)


Median Enterprise Value / EBITDA

Source: S&P Capital IQ

Median Enterprise Value / LTM Net Income

Source: S&P Capital IQ

Notes: Includes M&A transactions involving US and Canadian targets where relevant financials were available to calculate EBITDA and Net Income valuation multiples. Figures are based announce dates on a trailing three months basis through September 30, 2011. Includes both closed and pending transactions.

Transactions | North America and Europe


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M&A ACTIVITY BY QUARTER (EUROPE)


Median Enterprise Value / EBITDA

Source: S&P Capital IQ

Median Equity Value / LTM Net Income

Source: S&P Capital IQ

Notes: Includes M&A transactions involving European targets where relevant financials were available to calculate EBITDA and Net Income valuation multiples. Figures are based on announce dates on a trailing three months basis through September 30, 2011. Includes both closed and pending transactions.

Transactions | Europe
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M&A VALUATION BY SECTOR AND DEAL SIZE-NORTH AMERICA


Median Implied Enterprise Value / EBITDA (North American Targets) (As of 1/31/12) 2008 Less Than Greater $500M Than $500M 9.3x 11.2x 10.5x 10.9x 6.0x 11.4x 11.4x 15.1x 15.0x 16.3x 8.3x 12.0x 16.3x 15.0x 9.9x 9.0x 8.7x 9.6x 16.3x 8.9x Last Twelve Months Ending January 31st of: 2009 2010 Less Than Greater Less Than Greater $500M Than $500M $500M Than $500M 10.7x 7.8x 7.3x 11.6x 6.8x 10.1x 12.0x 9.5x 6.8x 9.8x 5.6x 9.5x 12.7x 10.6x 16.0x 9.4x 14.0x 12.7x 7.9x 9.7x 8.5x 12.9x 5.7x 9.0x 11.2x 12.7x 8.1x 12.9x 8.5x 11.3x 11.1x 7.2x 7.7x 6.7x 4.9x 7.3x 6.6x 11.0x 6.8x 30.3x 2011 Greater Than $500M 8.1x 8.3x 14.2x 14.7x 16.1x 9.4x 14.5x 12.3x 6.5x 8.9x 2012 Less Than Greater $500M Than $500M 10.6x 8.1x 9.3x 4.6x 9.4x 12.0x 12.8x 13.4x 11.8x 10.5x 8.2x 10.9x 12.8x 14.9x 7.9x 9.6x 6.2x 7.6x 6.4x 11.4x

Target's Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities

Less Than $500M 12.1x 5.3x 10.9x 12.1x 12.0x 7.0x 12.1x 6.9x 6.2x 12.1x

Source: S&P Capital IQ


Median Implied Equity Value / LTM Net Income (North American Targets) (As of 1/31/12) 2008 Less Than Greater $500M Than $500M 12.3x 24.8x 14.9x 25.2x 16.9x 25.1x 24.2x 25.3x 23.5x 41.9x 16.7x 29.0x 22.9x 32.7x 12.2x 17.2x 21.0x 28.7x 87.2x 25.9x Last Twelve Months Ending January 31st of: 2009 2010 Less Than Greater Less Than Greater $500M Than $500M $500M Than $500M 13.8x 20.7x 8.6x 26.3x 7.5x 24.1x 28.1x 14.0x 16.7x 20.1x 10.6x 17.8x 19.2x 18.7x 18.1x 16.6x 19.6x 29.2x 15.1x 18.1x 10.7x 23.0x 16.8x 24.7x 19.2x 22.3x 15.0x 33.2x 14.8x 24.2x 12.6x 0.0x 15.3x N/A 0.0x 44.9x 14.7x 30.6x 15.2x N/A

Target's Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities

Less Than $500M 16.4x 11.0x 20.3x 15.8x 21.7x 15.8x 21.7x 12.7x 75.6x 20.6x

2011 Greater Than $500M 17.4x 14.5x 36.2x 24.5x 33.1x 22.9x 41.2x 31.3x 0.9x 19.5x

2012 Less Than Greater $500M Than $500M 16.2x 20.5x 21.1x 12.1x 11.7x 22.7x 15.5x 14.5x 18.4x 21.9x 14.6x 22.0x 17.5x 39.9x 12.7x 17.3x N/A 44.5x 14.6x 17.5x

Source: S&P Capital IQ

Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions. N/A = Not available. N/M = Not made.

Transactions | North America


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M&A VALUATION BY SECTOR AND DEAL SIZE-EUROPE


Median Implied Enterprise Value / EBITDA (European Targets) (As of 1/31/12) 2008 Less Than Greater $500M Than $500M 12.0x 11.3x 14.3x 20.4x 14.0x 8.5x 11.7x 8.0x 6.8x 9.7x 13.2x 14.3x 11.7x 14.8x 15.6x 12.1x 16.2x 8.4x 11.0x 13.2x Last Twelve Months Ending January 31st of: 2009 2010 Less Than Greater Less Than Greater $500M Than $500M $500M Than $500M 8.2x 11.7x 9.5x 16.5x 11.6x 7.1x 8.8x 7.0x 7.4x 10.8x 12.2x 11.4x 13.1x 18.7x 20.5x 10.1x 12.9x 7.3x 8.6x 11.0x 7.9x 8.3x 5.6x 14.2x 10.0x 7.8x 8.7x 6.6x 5.8x 10.0x 9.6x 14.2x 6.6x 15.5x 16.8x 9.1x 13.8x 4.3x 5.8x 10.1x 2011 Greater Than $500M 9.6x 9.4x 9.5x 25.8x 11.4x 10.2x 16.9x 10.6x 4.4x 8.4x 2012 Less Than Greater $500M Than $500M 9.0x 9.3x 6.2x 13.2x 10.8x 7.8x 10.3x 6.5x 4.7x 11.3x 9.1x 11.6x 8.6x 19.9x 12.6x 11.5x 11.4x 9.8x 7.2x 8.8x

Target's Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities

Less Than $500M 9.0x 9.6x 5.2x 15.3x 10.6x 7.4x 8.7x 9.3x 5.8x 7.5x

Source: S&P Capital IQ


Median Implied Equity Value / LTM Net Income (European Targets) (As of 1/31/12) 2008 Less Than Greater $500M Than $500M 19.3x 19.8x 17.4x 31.9x 19.6x 23.7x 15.8x 17.5x 30.3x 30.1x 17.0x 20.3x 19.9x 36.1x 18.2x 16.6x 16.5x 27.2x 20.8x 21.2x Last Twelve Months Ending January 31st of: 2009 2010 Less Than Greater Less Than Greater $500M Than $500M $500M Than $500M 16.5x 22.7x 13.3x 23.5x 14.5x 30.3x 15.7x 20.8x 16.5x 33.5x 13.9x 16.6x 12.0x 21.0x 14.1x 24.3x 21.8x 46.3x 22.6x 0.0x 12.0x 19.5x 13.4x 17.3x 16.8x 28.8x 18.6x 39.7x 14.1x 16.1x 10.1x 7.9x 11.2x 20.1x 20.8x 14.5x 19.2x 14.5x 14.5x 17.3x

Target's Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities

Less Than $500M 16.3x 12.6x 13.5x 16.1x 15.8x 11.6x 14.3x 15.8x 15.3x 14.3x

2011 Greater Than $500M 68.9x 32.9x 20.5x 19.8x 25.2x 19.0x 30.5x 21.5x 8.2x 13.3x

2012 Less Than Greater $500M Than $500M 15.6x 18.6x 15.2x 23.6x 10.9x 15.8x 14.4x 20.3x 20.0x 21.5x 14.5x 22.5x 21.2x 32.6x 9.3x 18.7x 14.5x 15.3x 12.4x 17.5x

Source: S&P Capital IQ

Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions. N/A = Not available. N/M = Not made.

Transactions | Europe
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M&A ACTIVITY BY SECTOR


North American Target M&A (As of 1/31/12) 2008 # of Deals Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2,785 480 894 1,871 1,215 2,472 2,380 1,296 185 208 13,786 $ $ $ $ $ $ $ $ $ $ $ Value ($mil) 219,019 49,665 144,606 276,306 143,600 119,083 180,260 179,303 47,292 73,791 1,432,923 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 2,095 402 733 1,982 1,050 2,130 1,931 979 127 153 11,582 $ $ $ $ $ $ $ $ $ $ $ 43,038 115,974 77,399 221,420 207,847 73,047 69,081 76,962 45,495 18,093 948,355 1,860 344 875 2,423 998 1,717 1,716 1,055 103 194 11,285 $ $ $ $ $ $ $ $ $ $ $ 150,265 34,612 134,512 78,629 114,444 60,060 71,827 24,398 18,400 11,611 698,757 2,279 435 1,117 3,798 1,352 2,181 2,202 1,314 130 222 15,030 $ $ $ $ $ $ $ $ $ $ $ 76,417 47,101 150,746 172,913 122,744 75,951 111,932 63,775 36,347 79,089 937,015

# of Deals 2,499 446 1,095 4,478 1,347 2,249 2,214 1,251 117 255 15,951

2012 Value ($mil) $ $ $ $ $ $ $ $ $ $ $ 68,886 14,507 191,259 255,893 178,372 83,730 111,804 88,732 10,605 39,626 1,043,414

European Target M&A (As of 1/31/12) 2008 # of Deals Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 4,302 1,337 470 2,381 860 4,547 2,398 1,387 312 491 18,485 $ $ $ $ $ $ $ $ $ $ $ Value ($mil) 230,537 104,131 65,227 454,567 83,449 144,336 68,661 104,408 102,252 199,030 1,556,599 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 3,567 1,059 315 2,220 794 4,118 1,982 1,093 194 470 15,812 $ $ $ $ $ $ $ $ $ $ $ 102,487 40,960 38,578 228,866 36,591 128,972 35,656 51,801 19,089 88,901 771,901 2,917 836 311 2,829 652 2,856 1,474 721 198 469 13,263 $ $ $ $ $ $ $ $ $ $ $ 53,561 37,141 45,680 129,071 63,115 93,160 19,545 13,885 28,812 71,180 555,149 3,313 1,026 380 3,770 817 3,341 1,744 920 228 571 16,110 $ $ $ $ $ $ $ $ $ $ $ 58,276 37,980 47,151 153,930 28,018 133,128 20,855 62,665 66,571 51,901 660,474

# of Deals 3,495 989 390 3,988 740 3,524 1,797 919 203 560 16,605

2012 Value ($mil) $ $ $ $ $ $ $ $ $ $ $ 82,509 30,703 45,155 176,801 38,040 113,708 42,744 50,962 39,268 64,617 684,507

Source: S&P Capital IQ

Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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LEVERAGE BUYOUTS BY SECTOR


North American Target Leveraged Buyouts (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 560 95 60 142 128 401 164 105 13 22 1,690 $ $ $ $ $ $ $ $ $ $ $ 110,235 14,534 11,424 46,648 20,578 41,469 56,089 10,883 28,924 43,712 384,497 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 370 67 40 151 88 276 151 101 11 8 1,263 $ $ $ $ $ $ $ $ $ $ $ 13,918 1,255 6,698 23,073 8,280 6,385 9,644 2,507 6 1,973 73,738 306 56 30 200 66 183 121 65 3 11 1,041 $ $ $ $ $ $ $ $ $ $ $ 9,054 185 1,794 2,820 7,033 2,343 6,010 1,475 1,534 580 32,828 313 58 52 183 118 200 158 94 12 13 1,201 $ $ $ $ $ $ $ $ $ $ $ 33,149 11,048 5,825 3,692 8,792 7,088 21,190 5,791 4,449 679 101,703

2012 # of Deals Value ($mil) 292 55 24 148 75 205 138 85 7 11 1,040 $ $ $ $ $ $ $ $ $ $ $ 12,022 3,065 8,021 4,506 23,323 12,072 18,104 2,187 1,001 1,255 85,555

European Target Leveraged Buyouts (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 788 175 18 176 107 654 211 179 27 20 2,355 $ $ $ $ $ $ $ $ $ $ $ 54,945 8,034 3,496 25,503 37,786 42,593 8,005 12,079 24,141 24,745 241,327 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 653 149 19 182 80 614 208 164 8 21 2,098 $ 18,987 $ 4,115 $ 6,653 $ 11,714 $ 4,106 $ 43,100 $ 5,707 $ 7,528 $ $ 1,123 $ 103,032 551 116 10 224 61 365 137 94 12 28 1,598 $ $ $ $ $ $ $ $ $ $ $ 9,065 4,095 1,798 7,506 2,279 44,100 3,758 2,232 1,131 871 76,835 604 132 20 253 105 461 148 131 16 51 1,921 $ $ $ $ $ $ $ $ $ $ $ 15,141 3,084 38 10,799 6,382 20,292 3,342 5,451 4,455 3,901 72,885

2012 # of Deals Value ($mil) 627 116 13 190 83 409 162 102 19 56 1,777 $ $ $ $ $ $ $ $ $ $ $ 23,844 1,507 8,904 9,924 434 19,332 7,496 7,996 10,504 6,398 96,340

Source: S&P Capital IQ

Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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STRATEGIC M&A BY SECTOR


North American Target Strategic M&A (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2,225 385 834 1,729 1,087 2,071 2,216 1,191 172 186 12,096 $ $ $ $ $ $ $ $ $ $ $ 108,783 35,131 133,181 229,657 123,022 77,614 124,170 168,420 18,368 30,079 1,048,426 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 1,725 335 693 1,831 962 1,854 1,780 878 116 145 10,319 $ $ $ $ $ $ $ $ $ $ $ 29,120 114,719 70,701 198,347 199,568 66,662 59,437 74,456 45,488 16,120 874,618 1,554 288 845 2,223 932 1,534 1,595 990 100 183 10,244 $ $ $ $ $ $ $ $ $ $ $ 141,210 34,427 132,718 75,809 107,411 57,717 65,817 22,923 16,866 11,031 665,929 1,966 377 1,065 3,615 1,234 1,981 2,044 1,220 118 209 13,829 $ $ $ $ $ $ $ $ $ $ $ 43,268 36,053 144,921 169,221 113,952 68,863 90,742 57,984 31,897 78,410 835,312

2012 # of Deals Value ($mil) 2,207 391 1,071 4,330 1,272 2,044 2,076 1,166 110 244 14,911 $ $ $ $ $ $ $ $ $ $ $ 56,864 11,442 183,238 251,387 155,050 71,658 93,700 86,545 9,604 38,372 957,859

European Target Strategic M&A (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 3,514 1,162 452 2,205 753 3,893 2,187 1,208 285 471 16,130 $ $ $ $ $ $ $ $ $ $ $ 175,592 96,097 61,731 429,064 45,663 101,743 60,656 92,329 78,112 174,285 1,315,272 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 2,914 910 296 2,038 714 3,504 1,774 929 186 449 13,714 $ 83,500 36,845 31,926 217,152 32,485 85,872 29,950 44,273 19,089 87,778 668,869 2,366 720 301 2,605 591 2,491 1,337 627 186 441 11,665 $ $ $ $ $ $ $ $ $ $ $ 44,496 33,047 43,882 121,564 60,835 49,060 15,787 11,653 27,681 70,309 478,314 2,709 $ 894 $ 360 $ 3,517 $ 712 $ 2,880 $ 1,596 $ 789 $ 212 $ 520 $ 14,189 $ 43,135 34,896 47,113 143,130 21,636 112,836 17,513 57,214 62,116 48,000 587,589

2012 # of Deals Value ($mil) 2,868 $ 873 $ 377 $ 3,798 $ 657 $ 3,115 $ 1,635 $ 817 $ 184 $ 504 $ 14,828 $ 58,665 29,196 36,251 166,878 37,605 94,376 35,248 42,966 28,764 58,219 588,167

Source: S&P Capital IQ Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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PRIVATE EQUITY INVESTMENTS BY SECTOR (NON-BUYOUTS)


North American Target Private Equity Investments (As of 1/31/12) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2008 # of Deals Value ($mil) 109 $ 7,263 24 $ 977 71 $ 5,245 120 $ 21,284 155 $ 3,310 111 $ 4,932 307 $ 6,180 62 $ 1,012 25 $ 1,047 19 $ 1,622 1,003 $ 52,873 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 88 $ 24,020 207 $ 7,241 324 $ 8,643 25 $ 433 72 $ 2,942 113 $ 2,506 40 $ 2,420 71 $ 4,704 129 $ 7,088 121 $ 17,183 483 $ 24,308 418 $ 18,888 191 $ 3,504 419 $ 4,200 750 $ 11,671 82 $ 3,543 189 $ 3,564 349 $ 7,576 269 $ 3,759 571 $ 4,422 887 $ 12,176 69 $ 1,461 111 $ 3,712 182 $ 3,608 18 $ 1,149 25 $ 375 29 $ 409 28 $ 4,248 38 $ 4,652 64 $ 4,931 931 $ 61,719 2,186 $ 60,120 3,245 $ 77,496

2012 # of Deals Value ($mil) 345 $ 7,110 109 $ 2,174 113 $ 8,081 490 $ 13,941 764 $ 8,484 388 $ 6,949 954 $ 13,525 160 $ 4,670 36 $ 838 50 $ 5,942 3,409 $ 71,715

European Target Private Equity Investments (As of 1/31/12) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2008 # of Deals Value ($mil) 96 $ 15,670 33 2,025 23 1,761 68 9,331 51 395 85 4,617 108 894 26 644 8 248 16 1,245 514 36,829 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 114 $ 1,469 203 $ 6,637 231 $ 3,216 31 $ 775 56 $ 1,136 67 $ 2,597 8 $ 399 13 $ 1,411 38 $ 5,819 99 $ 67,868 113 $ 56,586 230 $ 125,071 71 $ 1,240 112 $ 1,026 138 $ 2,277 103 $ 4,122 188 $ 9,579 342 $ 22,643 133 $ 1,033 175 $ 1,819 248 $ 5,436 30 $ 550 57 $ 3,002 74 $ 4,066 13 $ 2,332 15 $ 1,073 15 $ 2,136 14 $ 2,110 18 $ 8,740 31 $ 3,484 616 $ 81,898 950 $ 91,009 1,414 $ 176,745

2012 # of Deals Value ($mil) 176 $ 3,999 69 $ 576 29 $ 5,970 239 $ 52,029 130 $ 1,848 306 $ 12,163 243 $ 3,097 73 $ 1,342 9 $ 153 28 $ 13,637 1,302 $ 94,813

Source: S&P Capital IQ Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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PRIVATE EQUITY INVESTMENTS IN PUBLIC ENTITIES BY SECTOR


North American Target PIPEs (As of 1/31/12) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2008 # of Deals Value ($mil) 249 $ 5,896 94 $ 548 679 $ 17,394 237 $ 45,091 451 $ 4,747 301 $ 1,909 5,528 471 $ 1,719 $ 9,146 57 $ 191 971 39 $ 4,297 $ 91,420 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 160 $ 3,385 209 $ 2,516 237 $ 1,394 66 $ 789 67 $ 1,566 70 $ 476 469 $ 5,437 557 $ 6,155 610 $ 7,755 479 $ 510,110 298 $ 40,898 272 $ 13,234 349 $ 2,475 382 $ 1,890 407 $ 2,407 197 $ 4,512 219 $ 1,806 258 $ 1,236 327 $ 2,850 330 $ 1,290 384 $ 1,679 1,370 $ 10,792 1,908 $ 11,563 2,058 $ 9,367 22 $ 3,727 28 $ 1,854 47 $ 501 2,251 2,096 447 25 $ 44 $ 56 $ 3,464 $ 546,327 4,042 $ 71,636 4,399 $ 38,498 2012 # of Deals Value ($mil) 223 $ 2,296 87 $ 1,117 493 $ 5,499 356 $ 10,686 354 $ 1,733 225 $ 2,184 377 $ 1,694 1,548 $ 7,386 29 $ 491 633 41 $ 3,733 $ 33,720

European Target PIPEs (As of 1/31/12) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 2008 # of Deals Value 45 $ 18 $ 43 $ 57 $ 47 $ 69 $ 60 $ 54 $ 5 $ 19 $ 417 $ ($mil) 2,969 212 2,422 14,233 1,036 4,335 854 9,158 283 10,111 45,614 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value 50 $ 868 42 $ 4,779 66 $ 16 $ 301 15 $ 1,107 23 $ 28 $ 663 57 $ 1,408 75 $ 79 $ 126,299 85 $ 81,611 105 $ 40 $ 1,140 49 $ 2,103 50 $ 52 $ 2,277 58 $ 3,786 57 $ 68 $ 564 67 $ 2,760 82 $ 34 $ 717 50 $ 2,573 66 $ 2 $ 27 6 $ 275 13 $ 646 4,546 2 $ 14 $ 16 $ 371 $ 133,501 443 $ 104,947 553 $

($mil) 6,122 786 2,895 12,855 408 3,944 628 1,820 573 1,298 31,328

2012 # of Deals Value 61 $ 16 $ 49 $ 100 $ 42 $ 57 $ 56 $ 43 $ 7 $ 16 $ 447 $

($mil) 550 544 2,762 34,134 611 3,165 950 3,395 8 7,724 53,844

Source: S&P Capital IQ Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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VENTURE CAPITAL INVESTMENTS BY SECTOR


North American Target Venture Capital (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 314 60 125 144 756 221 1,706 126 53 34 3,539 $ $ $ $ $ $ $ $ $ $ $ 3,339 575 5,115 2,987 9,873 2,843 13,675 702 1,030 485 40,625 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 307 44 110 98 697 260 1,535 97 26 42 3,216 $ $ $ $ $ $ $ $ $ $ $ 2,976 228 4,956 7,359 6,680 2,442 10,612 739 337 1,386 37,716 414 92 84 221 958 346 1,790 128 37 60 4,130 $ $ $ $ $ $ $ $ $ $ $ 1,944 232 908 2,889 6,882 3,347 7,707 522 409 138 24,977 598 156 124 306 1,079 384 2,334 170 27 90 5,268 $ $ $ $ $ $ $ $ $ $ $ 2,882 451 3,463 5,497 6,484 3,596 10,887 923 1,804 1,182 37,170

2012 # of Deals Value ($mil) 690 139 121 335 1,053 440 2,650 151 19 76 5,674 $ $ $ $ $ $ $ $ $ $ $ 5,397 308 4,910 8,676 8,672 9,123 12,607 2,454 89 2,241 54,477

European Target Venture Capital (As of 1/31/12) 2008 # of Deals Value ($mil) Sector Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Grand Total 314 56 40 104 370 260 859 69 33 40 2,145 $ $ $ $ $ $ $ $ $ $ $ 1,270 297 1,715 2,113 2,200 1,904 2,499 559 269 488 13,314 Last Twelve Months Ending January 31st of: 2009 2010 2011 # of Deals Value ($mil) # of Deals Value ($mil) # of Deals Value ($mil) 301 52 36 93 351 245 825 87 31 38 2,059 $ $ $ $ $ $ $ $ $ $ $ 2,150 289 1,113 4,428 1,750 2,540 3,679 461 266 526 17,202 268 43 22 76 282 195 722 67 14 53 1,742 $ $ $ $ $ $ $ $ $ $ $ 962 432 374 15,450 1,445 1,999 1,773 995 110 5,379 28,919 346 74 38 149 304 309 843 96 22 64 2,245 $ $ $ $ $ $ $ $ $ $ $ 2,905 535 3,943 6,580 1,482 6,341 2,459 1,646 302 2,650 28,842

2012 # of Deals Value ($mil) 327 $ 67 $ 32 $ 131 $ 309 $ 274 $ 909 $ 90 $ 13 $ 50 $ 2,202 $ 3,420 350 1,644 10,377 1,408 16,607 2,643 1,843 23 5,083 43,399

Source: S&P Capital IQ

Notes: Figures are based on transaction announce dates. Includes both closed and pending transactions as well as those without transaction values.

Transactions | North America and Europe


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About S&P Capital IQ Market Observations
Market Observations is a monthly compilation of high-level perspectives on M&A, public equity, private capital, and the capital markets. Market Observations is primarily based on S&P Capital IQs public company, private company, and private equity information, and includes expert commentary from Standard & Poors Equity and Fixed Income Research. S&P Capital IQ is a Standard & Poors business, and provides the most accurate and timely financial information to investment banks, asset management firms, private equity firms, and corporations around the world. Learn more at www.capitaliq.com.

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DISCLOSURES
S&P STARS - Since January 1, 1987, S&P Capital IQ Equity Research has ranked a universe of U.S. common stocks, ADRs (American Depositary Receipts), and ADSs (American Depositary Shares) based on a given equitys potential for future performance. Similarly, S&P Capital IQ Equity Research has used STARS methodology to rank Asian and European equities since June 30, 2002. Under proprietary STARS (STock Appreciation Ranking System), S&P equity analysts rank equities according to their individual forecast of an equitys future total return potential versus the expected total return of a relevant benchmark (e.g., a regional index (S&P Asia 50 Index, S&P Europe 350 Index or S&P 500 Index)), based on a 12-month time horizon. STARS was designed to meet the needs of investors looking to put their investment decisions in perspective. Data used to assist in determining the STARS ranking may be the result of the analysts own models as well as internal proprietary models resulting from dynamic data inputs. S&P Quality Rankings (also known as S&P Earnings & Dividend Rankings)Growth and stability of earnings and dividends are deemed key elements in establishing S&Ps earnings and dividend rankings for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings. The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of rankings: A+ Highest B- Lower A High C Lowest A- Above Average D In Reorganization B+ Average NR Not Ranked B Below Average

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DISCLOSURES
S&P Issuer Credit Rating - A Standard & Poors Issuer Credit Rating is a current opinion of an obligors overall financial capacity (its creditworthiness) to pay its financial obligations. This opinion focuses on the obligors capacity and willingness to meet its financial commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation. In addition, it does not take into account the creditworthiness of the guarantors, insurers, or other forms of credit enhancement on the obligation. S&P Capital IQ EPS Estimates S&P Capital IQ earnings per share (EPS) estimates reflect analyst projections of future EPS from continuing operations, and generally exclude various items that are viewed as special, non-recurring, or extraordinary. Also, S&P Capital IQ EPS estimates reflect either forecasts of S&P Capital IQ equity analysts; or, the consensus (average) EPS estimate, which are independently compiled by Capital IQ, a data provider to S&P Capital IQ Equity Research. Among the items typically excluded from EPS estimates are asset sale gains; impairment, restructuring or merger-related charges; legal and insurance settlements; in process research and development expenses; gains or losses on the extinguishment of debt; the cumulative effect of accounting changes; and earnings related to operations that have been classified by the company as discontinued. The inclusion of some items, such as stock option expense and recurring types of other charges, may vary, and depend on such factors as industry practice, analyst judgment, and the extent to which some types of data is disclosed by companies. S&P Core Earnings S&P Capital IQ Core Earnings is a uniform methodology for adjusting operating earnings by focusing on a company's after-tax earnings generated from its principal businesses. Included in the S&P Capital IQ definition are employee stock option grant expenses, pension costs, restructuring charges from ongoing operations, write-downs of depreciable or amortizable operating assets, purchased research and development, M&A related expenses and unrealized gains/losses from hedging activities. Excluded from the definition are pension gains, impairment of goodwill charges, gains or losses from asset sales, reversal of prior-year charges and provision from litigation or insurance Settlements.
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DISCLOSURES
S&P 12 Month Target Price The S&P Capital IQ equity analysts projection of the market price a given security will command 12 months hence, based on a combination of intrinsic, relative, and private market valuation metrics, including S&P Fair Value. S&P Capital IQ Equity Research S&P Capital IQ Equity Research U.S. includes Standard & Poors Investment Advisory Services LLC; Standard & Poors Equity Research Services Europe includes McGraw-Hill Financial Research Europe Limited trading as Standard & Poors; Standard & Poors Equity Research Services Asia includes Standard & Poors LLCs offices in Singapore, Standard & Poors Investment Advisory Services (HK) Limited in Hong Kong, Standard & Poors Malaysia Sdn Bhd, and Standard & Poors Information Services (Australia) Pty Ltd. Abbreviations Used in S&P Capital IQ Equity Research Reports CAGR- Compound Annual Growth Rate CAPEX- Capital Expenditures CY- Calendar Year DCF- Discounted Cash Flow EBIT- Earnings Before Interest and Taxes EBITDA- Earnings Before Interest, Taxes, Depreciation and Amortization EPS- Earnings Per Share EV- Enterprise Value FCF- Free Cash Flow FFO- Funds From Operations FY- Fiscal Year P/E- Price/Earnings PEG Ratio- P/E-to-Growth Ratio PV- Present Value R&D- Research & Development ROE- Return on Equity ROI- Return on Investment ROIC- Return on Invested Capital ROA- Return on Assets SG&A- Selling, General & Administrative Expenses WACC- Weighted Average Cost of Capital Dividends on American Depository Receipts (ADRs) and American Depository.
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