The European Goodwill Impairment Study 2011-2012

The european Goodwill impairmenT STudy

2011-2012

The European Goodwill Impairment Study – 2011-2012

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Who We Are

Houlihan Lokey is an international investment bank with expertise in mergers and acquisitions, capital markets,

financial restructuring, and valuation. Over the past 40 years, Houlihan Lokey has established one of the

largest worldwide financial advisory practices. Our transaction expertise and leadership in the field of valuation

inspire confidence in the financial executives, boards of directors, special committees, retained counsel,

investors and business owners we serve. In 2010, Thomson Reuters ranked us the No. 1 global M&A fairness

opinion advisor over the past 10 years. In addition, we were named valuation firm of the year at the 2010 and

2011 M&A Advisor International Awards.

Our stability, integrity, technical leadership and global capabilities make us a trusted advisor for clients

worldwide, across a wide range of services including:

Opinion Services

Transaction & Valuation Reporting Services

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Our experience and analytical insight allow us to help our clients with their tax and financial reporting valuation

needs. We go beyond mere documentation to provide our clients with the confidence to meet their growing

financial reporting responsibilities, under both International Financial Reporting Standards (IFRS) and U.S.

Generally Accepted Accounting Principles (U.S. GAAP). Our breadth of resources has enabled us to become a

leader in valuing intangible and tangible assets as well as liabilities for a variety of purposes, including

purchase price allocation, impairment of goodwill and other assets, tax reporting, fresh-start accounting and

equity-based compensation. Our commitment to understanding changes in regulations and best practices—and

our ability to set the standards for uncharted territory—allow our clients to remain focused on operating their

businesses.

For more information, visit www.HL.com.


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Table of Contents

Executive Summary ............................................................................................................................ 4

What Is an Impairment?...................................................................................................................... 6

Introduction—How Is the Current Economic Environment Reflected in Impairment Accounting? .............. 9

The Study—Results on an Aggregated Level ....................................................................................... 11

Industries Analysed .......................................................................................................................... 18

1. Aerospace, Defence and Government Services ........................................................................... 18

2. Automotive ............................................................................................................................. 22

3. Basic Industrials Group - Chemicals.......................................................................................... 26

4. Basic Industrials Group – Metals .............................................................................................. 30

5. Basic Industrials Group – Other ................................................................................................ 34

6. Business Services and Management Consulting ......................................................................... 38

7. Consumer Products, Food and Retail ........................................................................................ 42

8. Energy .................................................................................................................................... 47

9. Engineering, Construction and Building Products....................................................................... 52

10. Financial Institutions Group - Banks ....................................................................................... 56

11. Financial Institutions Group – Insurance ................................................................................. 61

12. Financial Institutions Group – Other ....................................................................................... 65

13. Healthcare ............................................................................................................................ 69

14. Media, Sports and Entertainment ........................................................................................... 73

15. Real Estate, Lodging and Leisure............................................................................................ 77

16. Technology and IT ................................................................................................................. 81

17. Telecommunications.............................................................................................................. 85

18. Transportation....................................................................................................................... 89

Appendix I – About the Authors......................................................................................................... 93

Appendix II - Glossary....................................................................................................................... 95

Appendix III - List of Companies ....................................................................................................... 96

Appendix IV - Endnotes .................................................................................................................. 109


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Executive Summary

Goodwill Impairment Accounting After the Financial Crisis

Since the global financial decline, much has been said about the issue of goodwill impairment and how large

the write-downs would be. While many of Europe’s largest companies continue to pursue strengthening their

balance sheets by increasing equity levels, restocking inventories and refinancing debt, it is evident that a

number of them are still struggling with the repercussions of the financial crisis and yet their goodwill

impairment levels remain surprisingly low. This has led us to question whether the largest companies in

Europe were prepared to recognise their goodwill impairments, or had they sufficiently recovered to avoid such

impairment charges at the end of 2010. And just how risky are their balance sheets?

Houlihan Lokey’s European Goodwill Impairment Study 2011-2012 indicates that some industries have now

recovered from the financial crisis (September 2008 through end of 2010 covered period) and are reporting

increasing profits compared to 2009. However, certain industries such as Banks, Insurance, Financial

Institutions Group – Other, as well as Real Estate, Lodging and Leisure are still suffering from the

repercussions of the crisis but their goodwill impairment levels remain surprisingly low. Of particular note is the

fact that booked impairments for 2010 are the lowest we have seen over the past five years.

Purpose of the Study—Analysis Performed

The 2011-2012 Study analysed acquisitions and goodwill impairments recorded by the 600 largest European

companies listed on the STOXX Europe 600 Index*. The study’s findings provide insight into goodwill

impairment developments by industry, showing the extent to which goodwill impairments are being recognised

across each industry. It also provides executives with the ability to benchmark their companies against peers as

well as compare their industry against other industries’ results and general movements.

This study follows our previous annual European Goodwill Impairment Studies carried out in 2009 and 2010.

We analysed and reported on the acquisition history, goodwill impairments, the developments of market

capitalisation, and the book value of equity of companies across 18 major industries between 2006 and 2010.

Major Findings

Based on data compiled by Houlihan Lokey, the following are some key findings:

STOXX Europe 600 companies spent a total of Euro 1.9 trillion on acquisitions (based on the purchaseprice paid during 2006 to 2010), which equals 26% of their market capitalisation as of December 2010.

While a total of Euro 187 billion was booked as goodwill impairment during the period under review, onlyEuro 14 billion was booked in 2010—the lowest we have ever observed.

In 2010, only 155 of the 600 companies analysed booked goodwill impairments (194 companies in2009). In addition, approximately 22% (or 133 of the 600 companies analysed) still showed a highimpairment risk for 2010 (24% in 2009). This is in contrast to the pre-crisis years of 2006 when only 7%of companies showed such an impairment risk.


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Almost 60% of the goodwill impairment in 2010 was booked by three industries: Banks, Energy, andTelecommunications. The latter two industries have faced their own specific challenges, which haveresulted in high goodwill impairments.

Impairment of fixed assets was the driver of overall impairment in 2010 at almost Euro 20 billion. Thisdiffers from previous years when impairments of goodwill were significantly higher than impairments offixed assets and intangible assets. This leads us to ask: Why are goodwill impairments now having lessimpact on companies’ profit and loss statements than fixed asset and intangible asset impairments? Ofnote, the impairment of intangible assets at Euro 12 billion is nearly on the same level as goodwillimpairment in 2010.

Concluding Thoughts

In the preceding two studies, Houlihan Lokey revealed that five industries had shown worrisome impairment

risk ratios: Automotive, Banks, Insurance, Financial Institutions Group – Other, as well as Real Estate, Lodging

and Leisure. Though these industries still possess the worst ratios in terms of book value of equity to market

value of equity, the Automotive and Real Estate, Lodging and Leisure industries have recovered slightly.

However, the impairment risks for the Banking industry and Financial Institutions Group – Other have worsened

over the past year. This seems to indicate that maintaining market values below book values may now be

considered acceptable.

The 2011-2012 Study results raise a number of interesting questions and provide some food for thought:

Does maintaining book value of equity above market value represent a longer term change in goodwillimpairment reporting practices? If so, how should it be viewed by those in the industries affected? And isthis acceptable to investors and other stakeholders in these industries?

If this is not considered a long-term development then how long can we anticipate it to last?

For more information on this study, please contact one of the following Houlihan Lokey representatives.

Dr. Marc Hayn

Managing Director

Frankfurt

+49 (0) 69 256 24 6128

Dr. Tim Laas

Senior Vice President

Frankfurt

+49 (0) 69 256 24 6129

E.W. (Sandy) Purcell

Senior Managing Director

London

+44 (0) 207 747 1464

*See Appendix II: Glossary for more information.


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What Is an Impairment?

The overall principle is that an asset (or a group of assets) is impaired when the entity is not able to recover the

carrying value either through the use or the sale of the asset or group of assets.

Chart 1Recoverable Amount

Typically, when a manager chooses between sell and make, they will favor the option which leads to the highest

value. The impairment test reflects this economic rationale. Therefore, the carrying amount has to be compared

to the fair value less the costs to sell (selling approach) and the value in use (making approach). If a third party

is more eligible to create a higher value, then this is an important metric to consider. On the other hand, if the

intrinsic value exceeds the external value, management (in general) will not sell assets below the value in use.

Nevertheless, both value concepts are affected by a number of external and internal factors. It is not

necessarily the case that the impact of each factor will cause impairments; notwithstanding this, impairment

tests have to be carried out.

Both values (the fair value less costs to sell and the value in use) do not always have to be determined. If either

the fair value less costs to sell or the value in use is higher than the carrying amount, there is no impairment

and further valuation steps are not required.

This study refers to IAS 36 Impairment of Assets, and we focused specifically on goodwill, intangible assets

and property, plants and equipment and financial assets, such as subsidiaries (IAS 27), associates (IAS 28),

and joint ventures (IAS 31), which are not held for sale and do not belong to discontinued operations.


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Triggering Events

IAS 36 differentiates between two classes of assets: intangible assets with an indefinite useful lifetime and

those that are not yet available for use. Goodwill acquired in a business combination is required to be tested

annually. For all other assets within the scope of IAS 36, impairment tests are only required if there are any

indications that the assets may be impaired. The standard explicitly refers to the following triggering events:1

External sources

Significant decline in the asset’s market value;

Significant changes in the technological, market, economic or legal environment;

Increase in market interest rates; and/or

Carrying amount of the net assets being higher than the market capitalisation.

Internal sources

Obsolescence or physical damage of an asset;

Significant change in the usage of an asset with an adverse effect; and/or

Indication that the expected economic performance will be reduced.

The standard defines occurrences that are reflected in internal reporting and indicate that an asset may be

impaired as follows:2

Cash flows for acquiring the asset(s), or subsequent cash needs for operating or maintaining it, aresignificantly higher than those originally budgeted;

Actual net cash flows or net operating profit/loss is significantly worse than budgeted;

Significant decline in budgeted net cash flows or operating profit; and/or

Operating losses or net cash outflows, when current period amounts are aggregated with budgetedamounts for the future.

Under IFRS the order of the impairment is defined as follows:3

1. Reduction in the carrying amount of goodwill; and2. Pro-rata reduction on the basis of the carrying amount to the other assets.

Therefore, the impairment is not limited to the carrying amount of the goodwill. This means that companies

with a small amount of goodwill may have to book an impairment that is significantly higher than the goodwill.

Take the following for example:

Carrying amount 200;

Recoverable amount 100; and

Goodwill 20.

In this case, the impairment is not limited to 20. The goodwill is fully impaired and the carrying amounts of

the other assets have to be reduced by 80 on a pro rata basis.


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What Was Analysed?

The study comprises the 600 largest European companies belonging to the STOXX Europe 600 Index as of

March 2011. It covers the period 2006 through December 2010 (the covered period) for capital market

information and financial reporting data.

Data analysed include:

Market capitalisation (MC);

Book value of equity (BVE);

Purchase price paid (PPP);

Earnings before taxes (EBT);

Goodwill;

Goodwill acquired;

Goodwill impairment; and

Impairments of intangible and tangible assets.

We used data to determine the following:

Market capitalisation4 to book value of equity: A ratio below 100% causes a trigger and it may be the firstindicator that an impairment is not unlikely.

Purchase price paid to market capitalisation ratio: Most of the analysed companies have carried outacquisitions in the covered period. The more the acquirer paid, the more challenging the impairment testwill be. Contrary to the acquired goodwill, internally developed goodwill resulting from organic growthcannot be recognised. Therefore, the impairment risk is lower for companies generating organic growth. Inaddition, the decline in market capitalisation increases the risk that goodwill acquired is overpriced.Covering the STOXX Europe 600 companies, almost 80% of purchase price paid was incurred during thebull market in the period 2006 to 2008.


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Introduction—How Is the Current Economic Environment Reflected in ImpairmentAccounting?

The current study found that for most industries the financial crisis is no longer an issue. In 2010, many

industries were back on track. Contrary to 2008 and 2009, when all industries were generating profits on an

aggregated basis, and some industries exhibited even profits based on EBT, which were higher than in peak

times before the crisis. Aggregated data reveal that EBT increased by nearly 60% compared to 2009, but it is

still almost 15% below 2007 peak results.

Chart 2Aggregated EBT Adjusted for Goodwill Impairments—All STOXX Europe 600 Companies

(in millions of Euro)

Source: Capital IQ

Forward-looking data is always an important factor for goodwill impairment as compared to historical

performance. Each industry and company may have different value drivers, but expected GDP growth is an

important factor for all. Every six months (in April and October), the IMF publishes a five-year GDP forecast.

Chart 3 highlights how these forecasts have changed since 2008. While the real GDP forecast for the EU

decreased only slightly from April to October 2008, it decreased dramatically from October 2008 to April

2009. Interestingly, the most recent IMF forecast, published in April 2011, has not changed this forecast.

Despite earlier signs of recovery, EU GDP is far from the growth path predicted in 2008.

875,468

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2006 2007 2008 2009 2010EBT before Goodwill Impairment EBT


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Chart 3Real GDP Development for the European Union

Source: IMF data and statistics published July 26, 2011.

This complex environment is also reflected by capital markets. The STOXX Europe 600 had its peak in the

middle of 2007 and its trough in Q1’09. Afterwards, the STOXX Europe 600 recovered, but it is still

significantly below its 2007 peak (more than -40%) and even below its starting level in January 2006 (-13%).

Chart 4STOXX Europe 600 Index

Source: Bloomberg.

90%

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

GDP forecast as of April 2008 GDP forecast as of October 2008 GDP forecast as of April 2009

GDP forecast as of October 2009 GDP forecast as of April 2010 GDP forecast as of October 2010

GDP forecast as of April 2011

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Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

STOXX Europe 600


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The Study—Results on an Aggregated Level

Houlihan Lokey analysed the goodwill impairment of STOXX Europe 600 companies for transactions carried out

from 2006 to 2010. Our analysis indicates the following:

Based on purchase price paid as of closing from 2006 up until 2010, STOXX Europe 600 companiesspent a total of Euro 1.9 trillion on acquisitions, which equals the market capitalisation of the index byabout 26% as of December 2010. A number of acquisitions were carried out during the bull market at ahigher level of market capitalisation compared to the level at the end of December 2010.

A total of Euro 0.2 trillion was booked as goodwill impairment from 2006 to 2010. Further, only write-downs of Euro 0.1 trillion occurred during the 2008 to 2009 financial crisis. Thus, despite the crisis, theoverall reported goodwill seems to be nearly unaffected.

Chart 5Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment

Sources: Capital IQ, Bloomberg, and annual reports.

The amount of booked goodwill impairment as of 2008 and 2009 appears to have not fully reflected thedecline of market capitalisation. This result raises several questions: Why have companies not bookedhigher impairments? Is this caused by an insufficient level of capital, or does the market assume tooconservative projections?

As companies retained a significant portion of their profits, equity (calculated as the sum of commonstock), additional paid in capital, and retained earnings increased for the STOXX Europe 600 companiesby almost 14%. Too low capital should not have been such an issue in 2010. Hence, the answer to thequestion raised earlier is clear: Management teams appear to generally believe that the values of theircompanies are higher than their market capitalisations.

Further results include: In 2010, only 155 of the 600 companies analysed booked goodwill impairments(compared to 194 in 2009).

43,990 27,98070,571

30,814 13,652

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600


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Chart 6Number of Companies with Goodwill Impairments by Industry

Sources: Capital IQ and annual reports.

As of December 2010, book value of equity still significantly exceeded the market capitalisation for 13%of STOXX Europe 600 companies. About 25% or more of all companies in the following industries showedthis worrisome ratio (MC/BVE ratio): Financial Institutions Group – Banks, Financial Institutions Group –Insurance, Financial Institutions Group – Other, and Real Estate, Lodging and Leisure.

Despite improvement in the capital markets and the already booked goodwill impairments, book value ofequity is still not supported by the market capitalisation for these companies. In general, impairments maybe avoided only if the value in use equals at least the book value. In comparison to Houlihan Lokey’sEuropean Goodwill Impairment Study – 2009 and 2010-2011, the crucial industries (FinancialInstitutions Group - Banks, Financial Institutions Group - Insurance, Financial Institutions Group – Otheras well as Real Estate, Lodging and Leisure) - with the exception of Automotive - are still the same.

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Chart 7Companies with Book Value of Equity Above or at Market Capitalisation*

* Sources: Capital IQ, Bloomberg, and annual reports.As of December 2010.

Booked goodwill impairments did not lead to changes in ratios of book value of equity to marketcapitalisation, which are in line with the ratios before the financial crisis (2006 to 2007). Three yearsafter the investment bank Lehman Brothers filed for Chapter 11 bankruptcy, the market capitalisation tobook value of equity (MC/BVE) ratio is not yet back to a reasonable level for all companies.

As of December 2010, 79 companies show a market capitalisation significantly below book value of equity(BVE) compared to 23 companies in 2006.

Is this an indicator that overall the level of booked goodwill impairments is still too low?

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Chart 8Market Capitalisation in Relation to Book Value of Equity


If the market capitalisations for companies do not support the goodwill, then the value in use must exceedthe market values. In 2008 there were good reasons why the internal view (value in use) was often moreappropriate than the external view (market capitalisation). But the number of companies with book valuessignificantly above market capitalisations is still not at the level before the crisis, the current data suggestthat the internal view is not always more appropriate than the market view.

Recognising goodwill impairments in times of high profits may cause a communication challenge, whichpreferably should be avoided.

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Houlihan Lokey developed the concept of an Impairment Risk Factor (IRF), which uses four weather conditions

- Sunny, Cloudy, Rainy, and Stormy - to depict potential impairment risk. The classification of a company to

one of these weather conditions depends on the impairment risk ratios of “Purchase Price Paid to Market

Capitalisation” and “Market Capitalisation to Book Value of Equity” as outlined in table 1.

Table 1Definition of Impairment Risk Factor

The potential impairment risk for each industry and its development compared to our 2010-2011 Study is

represented in table 2.

SUNNY CLOUDY RAINY STORMY

PPP/MC-Ratio <0.25 >0.25 <0.25 >0.25

MC/BV-Ratio >1.00 >1.00 <1.00 <1.00

Score 1 2 3 4


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Table 2Impairment Risk Factor (IRF) by Industry

Industry

ImpairmentRisk Factor

Dec 09

ImpairmentRisk Factor

Dec 10

Change ofImpairmentRisk Factor

ImpairmentForecast

Percentageof StormyCompanies

Number ofStormy

Companies

Aerospace Defence and Government Services 2.0 1.7 8% 1

Automotive 1.8 1.5 7% 1

Basic Industrials Group - Chemicals 1.3 1.0 0% 0

Basic Industrials Group - Metals 1.5 1.5 4% 1

Basic Industrials Group - Other 1.4 1.4 2% 1

Business Services and Management Consulting 1.6 1.4 0% 0

Consumer Products, Food and Retail 1.4 1.3 0% 0

Energy 1.5 1.6 8% 5

Engineering, Construction and Building Products 1.9 1.8 14% 4

Financial Institutions Group - Banks 2.7 2.8 40% 21

Financial Institutions Group - Insurance 2.4 2.4 29% 9

Financial Institutions Group - Other 2.1 2.0 10% 3

Healthcare 1.4 1.4 0% 0

Media, Sports and Entertainment 1.6 1.5 3% 1

Real Estate, Lodging and Leisure 2.4 2.3 28% 9

Technology and IT 1.5 1.4 0% 0

Telecommunications 1.6 1.3 0% 0

Transportation 1.6 1.4 0% 0


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The good news is that most industries show an improved forecast while none of the industries analysed are

facing Stormy conditions. Surprisingly, certain industries have a worsened impairment climate compared to last

year, these industries are Energy and Financial Institutions Group – Banks. Energy was among the industries

with the biggest impairment in each category: goodwill, intangible assets and fixed assets. The increase in

intangible and fixed asset impairment seems to be a means to get pressure out of the balance sheets without

booking goodwill impairments in times of overall good economic conditions. Almost every fourth company had a

market capitalisation at or below book value of equity. This ratio is still more than three times higher than

before the financial crisis.


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Industries Analysed

1. Aerospace, Defence and Government Services

Aerospace, Defence and Government Services (ADG) comprises both civilian and military aerospace and

defence equipment manufacturers and key government suppliers.

Economic Climate

The European aerospace and defence market generated estimated total revenues of Euro 149.5 billion in

2010, a 2.8% increase from 2009, compared to a 1.1% increase from 2008 to 2009.5 The industry

experienced slower growth in 2009 due to reduced operations in Iraq and Afghanistan. Industry growth is

expected to rise in 2011 and subsequent years, primarily driven by civil aerospace, which is expected to reach

Euro 206.6 billion by the end of 2014.

In 2010, European defence spending decreased by approximately 2.8%, despite the continued growth of world

military expenditure.6 In the first half of 2011, European governments continued to reduce their defence

budgets in an attempt to relieve excessive budget deficits. The U.K., for instance, intends to reduce its defence

budget by 2.5% by 2012, for a total 7.5% reduction from 2014 to 2015, through the reductions of

procurement programmes, private finance initiative (PFI) service contracts and the installed base of defence

equipment in Britain.7 Additionally, the Defence Ministry in Germany is expected to generate Euro 8.3 billion

of savings relative to its preceding plan between 2010 and 2015.8 In July 2011, Germany ended compulsory

military service in an effort to reduce the size of its armed forces by 20% to a targeted maximum of 185,000

personnel.9

In June 2011, the European Defence Agency signed an agreement with the European Space Agency with the

purpose of boosting cooperation, sharing research and distinguishing areas where space assets can support

military needs.10 The agreement would also promote synergies between the military and civilian sectors, as well

as among the EU member states, by encouraging the use of dual-use technologies and the sharing of defence

assets.11

Moreover, EU member states continue to consolidate resources, as a result of contracting defence budgets, as

illustrated by the 50-year treaty on defence and security signed by Britain and France in November 2010. The

treaty encompasses the joint use of aircraft carriers, a 10,000-person joint expeditionary force and

unparalleled levels of cooperation over nuclear missiles.12

Civil aerospace is considered to be structurally stronger than in prior cycles as more than 50% of the order

backlog is in emerging markets, and because several companies have made considerable progress in reducing

costs.13 The civil aerospace aftermarket has begun recovering from the effects of the economic downturn in

2008 and 2009. Although aircraft deliveries decreased between 2009 and 2010, the commercial value

generated by the sector, including maintenance and services activities, increased 25% in 2010 compared to

2009.14 Analysts anticipate civil aerospace aftermarket sales growth of 5% to 10% in 2011, as well as strong


19

growth over the next few years, driven by improved air traffic and airline capacity growth, the end of

de-stocking and maintenance deferrals and the structural ageing of aircrafts globally.15,16

Large commercial aircraft deliveries decreased by approximately 1% in 2010, but have been forecast to

increase an estimated 6% in 2011 and 15% in 2012, primarily driven by growth in existing platforms and new

programmes.17 However, airline industry margins are expected to decrease from 5% in 2010 to 3.1% in 2011

due to high oil prices.18

In 2010, global passenger air traffic rose by 8.2%, driven primarily by emerging markets, while global airline

capacity increased by 4.4%.19 Comparatively, air traffic and capacity in Europe increased 4.2% and 2.6%,

respectively, despite declines in growth in December 2010 due to severe weather. Europe accounted for

35.6% of the international passenger traffic market in 2010.20,21

As of March 2011, global passenger air traffic growth slowed to 5.8% year-over-year mainly due to the

earthquake and tsunami in Japan, as well as the political unrest in the Middle East and North Africa, while

capacity increased by 8.3%.22 Europe experienced continued air traffic growth in the first quarter of 2011,

increasing 29.3% in April 2011 compared to April 2010, during which the industry had been impacted by the

Icelandic volcanic eruption which resulted in localised airspace closure;23 and overall European passenger

traffic in March 2011 increased 5.3% compared to March 2010.24 Some analysts anticipate that overall

passenger volume at European airports is expected to grow by 4.5% in 2011.25

In 2011, analysts also expect lessors to account for a greater portion of aircraft financing and European

governments to decrease their aircraft financing support as a result of financial budget pressures and new

OECD regulations.26

Table 3Aerospace, Defence and Government Services—Companies Included

Impairment Climate

In general, the Aerospace, Defence and Government Services industry moved closely with the STOXX Europe

600. As of December 2010, its market value decreased compared to its level in January 2006 and the industry

lost more than 22% of its market value compared to its peak in June 2007.

BAE Systems plc Chemring Group plc Cobham plcEuropean Aeronautic Defence andSpace Company EADS N.V.

Finmeccanica SpA Meggitt PLC MTU Aero Engines Holding AG Rolls-Royce Group plc

Safran S.A. Thales Ultra Electronics Holdings plc Zodiac S.A.


20

Chart 9Aerospace, Defence and Government Services—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Aerospace, Defence and Government Services companies made acquisitions totalling approximately

Euro 18 billion during the covered period, of which Euro 16 billion was spent in 2006 through 2008.

Significant and noteworthy acquisitions include a stake in Airbus by EADS in 2006; the acquisition of Armor

Holdings by BAE Systems in 2007; and the acquisition of DRS Technologies by Finmeccanica in 2008.27

At fiscal year-end 2010, Aerospace, Defence and Government Services reported a total goodwill of

Euro 39 billion, of which Euro 12 billion was acquired from 2006 to 2010. Approximately 64% of the

purchase price paid in 2006 to 2008 was allocated to goodwill. In 2010, companies in this industry booked

goodwill impairments of Euro 0.3 billion, equal to approximately 1% of the recorded goodwill as of fiscal year

2010 and 2% of the purchase price paid.

Goodwill impairment booked from 2006 to 2010 comprises only about 15% of the goodwill acquired in the

same period. In addition, the total purchase price paid represents still more than 24% of the market

capitalisation (PPP/MC ratio) as of December 31, 2010, whereas booked goodwill impairment (2006 through

December 2010) covers only 10% of the total purchase price paid. At the end of December 2010, 8% of

Aerospace, Defence and Government Services companies showed book value of equity above the market

capitalisation.

61 244 172

1,054349

3,7815,937 6,008

1,5271,200

0

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2006 2007 2008 2009 2010

0%

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250%


Goodwill Impairment Charges Purchase Price Paid (EURm) STOXX Europe 600 ADG


21

Chart 10Aerospace, Defence and Government Services—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, Aerospace, Defence and Government Services had an overall IRF

score of 1.7 at the end of December 2010 (2.0 in December 2009). Therefore, the impairment forecast for

this industry has slightly improved and indicates still Cloudy conditions. Only one company is included in the

Stormy category. The IRF distribution for all companies included in this industry is reflected in chart 11.

Chart 11Aerospace, Defence and Government Services—IRF Distribution


0% 0%14%

21%

64%

0% 8% 0% 8%

83%

2

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Market Capitalisation / Book Value of Equity

Dec-09 Dec-10

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25%

Rainy

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22

2. Automotive

The Automotive industry comprises companies based in Europe specialising in the production of automobiles,

auto parts, tyres and automotive equipment.

Economic Climate

In 2010, the conclusion of governmental fleet renewal schemes in several EU member states resulted in a

5.5% decline in demand for passenger cars compared to 2009, while demand for commercial vehicles

increased 8%.28,29 Light vehicle production in Europe in 2010 increased 12%, primarily driven by an increase

in exports to North America and China as well as the non-recurrent de-stocking effect in 2009.30 The European

automobile industry accounts for approximately 25% of worldwide vehicle production.31

In Q1’11, analysts estimated European vehicle production increased 8%, largely driven by German OEMs.32

In May 2011, demand for passenger cars increased by an estimated 7.1% year-over-year in the EU, however,

for the five months ended May 2011, total passenger car demand decreased 0.8% compared to the same

period in 2010.33

Growth in European vehicle demand continues to be driven by emerging market demand, particularly China.34

Light vehicle production in Europe is forecast to increase 5% in 2011, compared to 2% for global auto

production.35 In Western Europe, analysts forecast a 1% decline in passenger car demand, from approximately

13 million units in 2010 to 12.9 million in 2011, while light commercial vehicle demand in Europe is

expected to increase 8% to 1.6 million units.36,37 Furthermore, the conclusion of the scrappage schemes

resulted in a continuous decline in new car sales in Europe. After recovering for the first time in 11 months

with a slight increase of 0.9% year-over-year in February 2011, new car sales declined once more in March

and April 2011, by 5% and 4.1% year-over-year, respectively.38 Overall, in 2011, new vehicle registrations are

forecast to decrease by 1%, while vehicle production is expected to increase by 1% in Europe.39 Although

Western European passenger car demand is forecast to be 13 million units in 2012 and 13.6 million units in

2013, declining consumer confidence and rising unemployment could have a considerable negative impact on

volume.40

In 2010, the European truck market grew by 8%, primarily driven by rapidly increasing sales of original

equipment tyres and industrial production recovery.41 European truck volumes increased approximately 60% in

2010 year-over-year, and are forecast to increase by 35% in 2011.42,43

In 2010, European auto parts companies experienced increases in production, primarily as a result of the non-

recurrence of a significant de-stocking effect. European auto parts production increased an estimated 12% in

2010, and is forecast to grow approximately 1% in 2011.44


23

Auto suppliers are expected to experience strong cyclical recovery with improvement in demand. OEMs are

increasingly focusing on improving scale through global platforms, which may result in an increase in auto

supplier consolidation.45 As a result of the OEM emphasis on global platforms, auto suppliers will be better-

positioned to manage raw material inflation risks, as the OEMs will be more likely to share the liability of raw

material inflation.46 Over the next few years, analysts expect European auto suppliers to exceed light vehicle

production as a result of improved revenue contribution from emerging markets and a decrease in platforms

utilised by global OEMs.

Tyre demand in Europe increased 16% in 2010, recovering from its 10% decrease in 2009, and is forecast to

grow 6% in 2011.47 However, accelerating raw material prices could cause tyre operating margins to be

unstable in the short-term, as there is usually a delay before tyre companies can offset a rise in raw material

prices through price increases.48 Additionally, several tyre companies have initiated sizeable capacity expansion

projects for future growth, but this may lead to reduced cash-flow in the short-term.49

In February 2011, the European Parliament approved legislation that will regulate CO2 emissions from light

commercial vehicles in Europe.50 The regulation targets a weight-based standard of average CO2 emissions of

130 grams per kilometre for new cars in 2012, with a long-term target of 95 grams per kilometre by 2020.51 If

the average CO2 emissions of a manufacturer’s fleet surpass the regulation’s limit value in any year from 2012,

the manufacturer has to pay an excess emissions premium for each gram per kilometre of exceedance for every

car registered.52 Currently, cars registered in the EU average CO2 emissions of 140 grams per kilometre.53

Table 4Automotive— Companies Included

Impairment Climate

The market capitalisation for companies included in the Automotive industry increased compared to its level in

January 2006 by almost 40%. However, as of December 2010, the industry lost almost 20% of its market

value compared to its peak in June 2007. Note, the peak in 2008 was caused mainly by the stock rally in

relation to the Porsche-Volkswagen transaction.

BMW GroupCompagnie Generale DESEtablissements Michelin SCA

Continental AG Daimler AG

Fiat Industrial Fiat S.p.A. GKN plc Inchcape PLC

Nokian Tyres Oyj Pirelli & C. SpA Porsche Automobile Holding SE PSA Peugeot Citroen

Renault S.A. Valeo S.A. Volkswagen AG


24

Chart 12Automotive—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Automotive companies made acquisitions of approximately Euro 34 billion during the covered period, of which

Euro 24 billion was spent in 2009. At fiscal year-end 2010, this industry reported a total amount of goodwill

of approximately Euro 18 billion, of which Euro 16 billion was acquired from 2006 to 2010. Noteworthy

acquisitions include a stake in Volkswagen by Porsche in 2007; the acquisition of Scania by Volkswagen in

2008; and the 2009 acquisition of Volkswagen by Porsche.54

In fiscal year 2010, companies in the Automotive industry booked total impairments of about Euro 1.6 billion,

with the largest amount of Euro 0.8 billion (50.7%) relating to the impairment of fixed assets. In addition,

Euro 0.7 billion (47.6%) of intangible assets were impaired. The remaining less than Euro 0.1 billion related

to goodwill impairments booked by only two companies. The relatively high amount of fixed-asset impairment

might be an indicator for overcapacity in the industry. The booked goodwill impairments in fiscal year 2010 are

the lowest impairments of the previous periods and account for approximately 2% of the total goodwill

impairments booked during the period 2006 to 2010.

Comparing the amount of goodwill impairment with the acquired goodwill in 2006 to 2010 only 9% of the

goodwill acquired was impaired. In addition, the total purchase price paid represents nearly 14% of the market

capitalisation (PPP/MC ratio) as of December 31, 2010, whereas, booked goodwill impairment (2006 to

December 2010) covers only 4% of the total purchase price paid. At the end of December 2010, 20% of

companies showed book value of equity close to or above the market capitalisation.

189 35 302 88926

1,445

3,746 4,301

23,669

662

(1,000)

4,000

9,000

14,000

19,000

24,000

29,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paide (EURm) STOXX Europe 600 Automotive


25

Chart 13Automotive—Distribution of Market Capitalisation and Book Value of Equity


At the end of 2010, the market capitalisation for the Automotive industry was only 3% below the average

market capitalisation for 2007 and 2008.

According to the MC/BVE and PPP/MC ratios, the industry had an overall score of 1.5 at the end of December

2010 (and 1.8 at December 2009). The impairment forecast for the industry has slightly improved and

indicates still Cloudy conditions. However, one company is still in the Stormy category, with 20% showing a

book value of equity above market capitalisation.

Chart 14Automotive—IRF Distribution


7%

21%14%

36%

21%

7%13%

0%

20%

60%

1

2

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Market Capitalisation / Book Value of EquityDec-09 Dec-10

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26

3. Basic Industrials Group - Chemicals

Chemicals is a subsector of the Basic Industrials Group which comprises consumer, specialty, pharmaceutical,

base, and fine chemicals.

Economic Climate

Overall EU chemicals production increased 10.1% in 2010 compared to 2009, driven by an increase in

exports, as well as orders from other EU manufacturing sectors.55 The EU external trade chemicals surplus

increased 10.3% in 2010 compared to 2009, primarily driven by specialty chemicals and external demand

from non-EU, Europe, Latin America and emerging Asia.56 Polymers, petrochemicals and basic inorganics were

the primary contributors to EU chemical production growth in 2010.57 However, industry production remains

approximately 5.6% below pre-crisis levels.58 Chemical sales increased 17.2% in 2010 compared to 2009,

primarily due to export sales.59

The Chemicals industry in the EU has been steadily recovering since April 2009, even though its major

customer sectors experienced varying impacts from the economic downturn. The biggest production increases

in the EU chemicals sector in 2010, compared to 2009, originated from the automotive industry, followed by

basic metals and electrical equipment.60 However, the European construction sector (a significant chemicals

customer) experienced a 4% decrease in production in 2010, and is forecast to further contract by 1% in

2011.61,62

EU chemicals production in April 2011 rose 2.9% and EU chemicals prices increased by 9.8% compared to

March 2010.63 Chemical sales increased 17.3% in March 2011 year-over-year, driven by exports and overall

chemicals price increases.64 In Q2’11, analysts anticipated a sharp decline in global industrial activity as the

rate of inventory stocking decreased, partially driven by the effects of Japan and energy price inflation.65

However, as Japanese activity and oil prices recover, analysts expect a return of industrial activity in Q3’11.66

Table 5Basic Industrials Group - Chemicals—Companies Included

Impairment Climate

The Chemicals industry performed well at the end of Q3’08, when it was then hit by the financial crisis and

stock prices decreased. Though at the end of 2009 market capitalisation was sitting at less than 20% of its

Akzo Nobel N.V. Arkema S.A. BASF SE Brenntag

Clariant AG Croda International plc Givaudan AG Johnson Matthey plc

K+S Aktiengesellschaft Kemira Group Lanxess AG Novozymes A/S

Rhodia S.A. Royal DSM N.V. Sika AG Solvay S.A.

Symrise AG Syngenta AG Umicore S.A. Victrex

Wacker Chemie AG Yara International ASA


27

peak in June 2008, it rallied back in 2010 to mark a new high by end of December 2010, at 80% above the

level of January 2006.

Chart 15Basic Industrials Group - Chemicals—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment



Chemicals companies made acquisitions of about Euro 33 billion during the covered period, of which

Euro 27 billion was spent from 2006 to 2008. At fiscal year-end 2010, this industry reported goodwill of

Euro 18.9 billion, of which Euro 12.9 billion was acquired from 2006 to 2010. Notable deals include:67

The acquisitions of Engelhard and Degussa Construction Materials both in 2006;

The acquisition of Ciba Holding by BASF in 2009;

The acquisition of Imperial Chemical Industries by Akzo Nobel in 2008 (booked an impairment of morethan Euro 1 billion for Morton International in 2008); and

The acquisition of Morton International by K+S in 2009.

In fiscal year 2010, Chemicals companies booked total impairments of Euro 0.7 billion. The largest amount

relates to the impairment of fixed assets at Euro 0.6 billion (82.3%), followed by the impairment of intangible

assets at Euro 0.1 billion (16.6%), and the remaining Euro 0.01 billion (1.1%) accounting for the impairment

of goodwill.

The goodwill impairments booked for fiscal years 2008 and 2009 account for 94% of the total goodwill

impairments booked from 2006 to 2010. Booked goodwill impairments in fiscal year 2010 are 98% below the

66 43

1,301409

7

8,932

3,329

15,003

3,751

1,813

0

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16,000

2006 2007 2008 2009 2010

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Chemicals


28

booked impairments of fiscal year 2009, which was driven mainly by the goodwill impairments booked by

BASF SE and Royal DSM N.V.

Goodwill impairments from 2006 to 2010 equal about 14% of the goodwill acquired in the same period. In

addition, the total purchase price paid represents 18% of the market capitalisation (PPP/MC ratio) as of

December 31, 2010, whereas booked goodwill impairment (2006 to December 2010) covers only 10% of the

total purchase price paid. As of December 2010, only 5% of Chemicals companies showed book value of

equity close to or above market capitalisation.

Chart 16Basic Industrials Group - Chemicals—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, Basic Industrials Group - Chemicals had an overall

score of 1.0 at the end of December 2010 (and 1.3 at December 2009), which is again the lowest score for all

industries investigated. Therefore, the IRF for the industry indicates Sunny conditions.

0% 5% 5%20%

70%

0%5%

18%

77%

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4

17

1 1

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29

Chart 17Basic Industrials Group - Chemicals—IRF Distribution


10%

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0% 1% 10% 100% 1000%Mar

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apit

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Boo

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25%

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Cloudy


30

4. Basic Industrials Group – Metals

Metals is a subsector of the Basic Industrials Group comprising precious metals and minerals, iron and steel,

coal, aluminium, and the base metal markets.

Economic Climate

In 2010, the global Metals industry experienced 78% growth in mergers and acquisitions (M&A) activity,

primarily driven by Asian and South American countries.68 As a result of escalating commodity prices and

increasing pressure on contracts by miners, metals companies largely focused on vertical integration to secure

raw materials.69 Analysts expect strong growth in metals M&A activity in 2011 due to decreased economic

uncertainty, as companies seek to further consolidate, secure raw materials and expand their presence in

developing markets. 70

Industrial production in Europe is forecast to grow 4% in 2011.71 Production capacity in 2011 and 2012 is

expected to be relatively depressed owing to low capital spending during the previous two years.72 Steel

production in Europe is expected to increase by 3% in 2011, compared to 7% globally, as a result of a lower

demand outlook in Europe.73 Analysts anticipate steel prices to increase in line with input costs over 2011; low

utilisation rates will inhibit steel producers from attaining price increases before input costs. 74

Precious metals continue to experience investment growth in Europe, as they are considered a safe investment

amid current concerns regarding a potential sovereign debt default by peripheral EU nations.75

In 2011, commodity prices are expected to continue rising, driven by sustained demand from developing

economies. 76 Analysts expect base metals performance to be volatile depending on periodic financial and debt

shocks; however, expansionary monetary policy is expected to contribute to overall growth. 77 Aluminium is

forecast to experience strong growth, despite confronting challenges of excess capacity and high inventories.78

Additionally, strong commodity prices are leading to robust balance sheets for metals companies; analysts

expect companies to use the excess cash to pursue additional M&A activities, particularly in emerging

markets.79


31

Table 6

Basic Industrials Group - Metals—Companies Included

Impairment Climate

In terms of market capitalisation (as of December 2010), the Metals industry is 132% above its level in

January 2006, but it experienced a decline due to the financial crisis and is still 15% below its market

capitalisation compared to its peak in May 2008.

Chart 18Basic Industrials Group - Metals—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Companies made acquisitions totalling Euro 115 billion during the covered period, of which Euro 107 billion

was spent throughout 2006 to 2008. At the end of fiscal year 2010, the Metals industry reported a total

amount of goodwill of Euro 38 billion, of which Euro 31 billion was acquired from 2006 to 2010.

Notable deals carried out include the acquisitions of:80

Acerinox S.A. Anglo American plc Antofagasta plc Aperam

Arcelor Mittal Aurubis AG BHP Billiton plc Boliden AB

Eramet S.A. Eurasian Natural Resources Corp Plc Fresnillo PLC Kazakhmys PLC

Kloeckner & Co SE Lonmin plc Norsk Hydro ASA Outokumpu Oyj

Petropavlovsk PLC Randgold Resources Ltd. Rautaruukki Corporation Rio Tinto Group

Salzgitter AG SSAB AB ThyssenKrupp AG Vedanta Resources plc

Voestalpine AG Xstrata plc

1,630307

5,235

772 171

42,46444,721

19,439

3,800 4,269

0

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40,000

2006 2007 2008 2009 2010

0%

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250%

300%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Metals


32

Arcelor by the Mittal Steel Company and other related transactions in 2006 and 2007;

Tintaya Copper Mine by Xstrata in 2006;

Alcan by Rio Tinto in 2007;

IPSCO by SSAB in 2007;

Anglo Ferrous Brazil by Anglo American in 2008;

Böhler-Uddeholm by Voestalpine in 2008; and

Jubilee Mines by Xstrata in 2007.

In fiscal year 2010, Metals companies booked total impairments of Euro 1.4 billion of which the largest

amount of Euro 1.1 billion (84%) relates to the impairment of fixed assets, followed by the impairment of

goodwill at Euro 0.2 billion (13.1%), while the remainder of less than Euro 0.1 billion (2.9%) accounts for the

impairment of intangible assets.

The booked goodwill impairments in fiscal year 2010 were 78% below the booked impairments of the previous

fiscal year at Euro 0.8 billion. Goodwill impairments from 2006 to 2010 equal 26% of the goodwill acquired

in the same period. In addition, the total purchase price paid represents 21% of the market capitalisation

(PPP/MC ratio) as of December 31, 2010, whereas booked goodwill impairment (2006 to December 2010)

covers only 13% of the total purchase price paid, which was driven mainly by one impairment booked by Rio

Tinto in 2007. As of December 2010, 16% of the companies showed book value of equity close to or above

the market capitalisation.

Chart 19Basic Industrials Group – Metals—Distribution of Market Capitalisation and Book Value of Equity


0% 0%

20%24%

56%

0% 8% 8%

19%

65%

0 2 2

5

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33

Considering the MC/BVE and PPP/MC ratios, the industry had an overall score of 1.5 at the end of December

2010 (and 1.5 at December 2009). Our impairment forecast for this industry indicates Cloudy conditions.

Chart 20Basic Industrials Group - Metals—IRF Distribution


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

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apital

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/B

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25%

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34

5. Basic Industrials Group – Other

Other, a subsector of the Basic Industrials Group, comprises electrical components and equipment, industrial

machinery, and paper products.

Economic Climate

In 2010, the global electrical components and equipment market generated total revenues of approximately

Euro 60 billion, representing a 3.7% increase over 2009.81 Europe accounted for 23.1% of the global market

in 2010.82 In 2011, European electrical companies have been increasing prices and passing on higher raw

material costs to customers.83 However, contract engineering companies have found it more difficult to pass on

higher costs as they generally fix input costs at the time of contract signing.84 Most electrical component

companies carry relatively higher inventories than required, as a result, analysts expect the beginning of

de-stocking by the end of Q2’11.85 Furthermore, electrical companies are forecast to continue increasing

expenditures in R&D, sales and production development.86 Analysts expect energy efficiency to remain a

significant growth driver for electrical companies, especially after the deployment of the Smart Grid.87 The

Smart Grid, a new power grid that uses advanced automation and IT, is expected to support the integration of

renewable intermittent energy sources, enable consumers to decrease their energy usage and permit utilities to

decrease their operating costs.88 Industrial productivity and infrastructure investments are expected to be

primary growth drivers for electrical companies as well.89

Industrial production in Europe experienced growth of 8% to 10% in 2010.90 The completion of de-stocking at

customers and distributors enhanced industrial machinery growth rates in the first half of 2010.91 Additionally,

volume recovery in 2010 led to strong margin development for companies in the industry.92 Industrial

machinery companies are increasingly seeking business in the mining equipment, industrial automation and

trucks end markets, the strongest markets in 2010.93 The industry is forecast to generate 10% average organic

sales growth in 2011 and 8% in 2012, primarily driven by the structural expansion in emerging markets.94

However, the growth in emerging markets is expected to decrease in the second half of 2011.95 Capital Goods

sector sales growth has historically correlated very highly with the change in new credit as a percentage of

GDP, as a slowing in the pace of corporate deleveraging leads to increased investment. In their 2011 outlook,

analysts take the view that a slowdown in the pace of deleveraging is sufficient to further boost demand growth

in 2011.96 Additionally, industrial machinery companies are expected to generate growth from the cyclical

rebound in Europe.97 Pricing in 2011 is expected to remain strong as inventory volumes are recovering,

commodity prices are increasing and companies are not compelled to liquidate inventory for cash. Analysts

expect commodity prices to continue increasing in 2011, driven by industrial metals such as copper and nickel

as well as plastics and steel prices. 98 Industrial production in Europe is forecast to grow 6.2% in 2011.99

The global paper products market experienced 12.5% growth in 2010.100 The European paper and packaging

industry has continued recovering in 2010, partially driven by industry consolidation and better pricing.101 Pulp

prices have remained strong as a result of increasing demand, especially from China.102


35

Additionally, commodity prices have continued rising due to cost pressures from expensive purchased fibre and

increasing chemical and energy costs.103 However, the cost pressures negatively affect company margins.104

Consolidation within the paper industry enables companies to reduce costs and European excess capacity.105

The European paper market is forecast to grow at a compound annual growth rate of 3.7% from 2010 through

2015.106

Table 7

Basic Industrials Group - Other—Companies Included

Impairment Climate

In terms of market capitalisation, Basic Industrials Group - Other (as of December 2010) is 47% above its

levels in January 2006. However, as of December 2010, the industry’s market value was still down almost

20% from its July 2007 peak.

Aalberts Industries ABB Ltd. Alfa Laval AB Alstom S.A.

Andritz AG Atlas Copco Group Bekaert S.A. Charter International plc

Cookson Group PLC DCC plcGamesa CorporaciónTecnológica S.A.

GEA Group AG

Georg Fischer Hexagon AB IMI plc Invensys plc

Kone Oyj Konecranes PlcKoninklijke PhilipsElectronics N.V.

L'Air Liquide S.A.

Legrand S.A. Man SE Metso Corp. Mondi plc

Nexans S.A. Orkla ASA Prysmian S.p.A. Renewable Energy Corp. ASA

Rexam plc Rheinmetall AG Sandvik AB Scania AB

Schindler Holding AG Schneider Electric S.A. SGL Carbon SE Siemens AG

SKF AB Smiths Group plc Stora Enso Corp. Sulzer, Ltd.

Svenska Cellulosa Aktiebolaget, SCA The Linde Group The Weir Group PLC Tognum AG

Trelleborg AB UPM-Kymmene Corp. Vallourec S.A. Vestas Wind Systems A/S

Volvo AB Wärtsilä Oyj Abp Zardoya Otis, S.A.


36

Chart 21Basic Industrials Group - Other—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Companies in this industry made acquisitions totaling Euro 82 billion during the covered period, of which

Euro 70 billion was spent from 2006 to 2008. At fiscal year-end 2010, this industry reported goodwill of

Euro 86 billion, of which Euro 38 billion was acquired from 2006 to 2010. Significant deals carried out

include the acquisitions of BOC by Linde in 2006; American Power Conversion by Schneider Electric in 2007;

the Bayer Diagnostics Division, UGS, and Dade Behring by Siemens in 2007; Genlyte Group and Respironics

by Royal Philips Electronics in 2008; Intergraph by Hexagon AB; and Areva T&D’s distribution business by

Schneider Electric S.A.107

As of fiscal year 2010, companies booked total impairments of Euro 2.4 billion. The largest amount relates to

the impairment of goodwill at Euro 1.4 billion (55.2%), followed by the impairment of fixed assets at

Euro 0.8 billion (32.6%), and the remaining Euro 0.3 billion (12.1%) relates to the impairment of intangible

assets.

Booked goodwill impairments in fiscal year 2010 is the largest amount of goodwill impaired during the covered

period. Goodwill impairments for the period 2006 to 2010 equal 10% of the goodwill acquired in the same

period. In addition, the total purchase price paid represents about 18% of the market capitalisation (PPP/MC

ratio) as of December 31, 2010, whereas booked goodwill impairment (2006 to December 2010) covers only

7% of the total purchase price paid. As of December 2010, 16% of the companies showed book value of

equity close to or above the market capitalisation.

260 575 1,205 4601,350

21,238

31,716

16,664

4,368

8,212

0

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2006 2007 2008 2009 2010

0%

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Goodwill Impairment (EURm) Purchase Price Paid STOXX Europe 600 BIG - Other


37

Chart 22Basic Industrials Group - Other—Distribution of Market Capitalisation and Book Value of Equity


Taking the MC/BVE and PPP/MC ratios into consideration, Basic Industrials Group - Other had an overall score

of 1.4 at the end of December 2010 (and 1.4 at June 2010). Our impairment forecast for this industry

indicates Sunny conditions, with one company still in Stormy territory.

Chart 23Basic Industrials Group - Other—IRF Distribution


0% 8% 6% 8%

79%

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76%

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39

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41

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38

6. Business Services and Management Consulting

Business Services and Management Consulting (Business Services) comprises companies that provide human

resources and employment services, IT services, research and consulting services, security services, facilities

services, and other diversified support services.

Economic Climate

In 2010, economic recovery and decreased structural cost basis led to improved earnings growth for business

services companies.108 Analysts anticipate the industry to experience further consolidation over the next couple

years, partially driven by recovery in balance sheet strength. 109 Furthermore, emerging markets represent a

significant growth opportunity for the industry.110

In 2011, analysts forecast the business services industry to generate 7% organic revenue growth.111 Cyclical

companies such as human resources and employment services companies are expected to experience the

strongest growth.112 Companies in the computer-services sector expect to benefit from the increase in spending

as developed countries recover from poor economic conditions.

Revenues generated from government opportunities in the industry are expected to decrease in 2011 as a

result of contract negotiations, reductions in discretionary spending and funding for specific projects and

contract renewals.113 However, business services companies, primarily in the U.K., are likely to attain

incremental revenue from the implementation of the U.K.’s Department of Work & Pensions’ work

programme.114 Administered by the private sector, this is a welfare programme intended to increase the hiring

rate of the unemployed, decrease the average time on benefits and raise the average time in employment.115

Furthermore, outsourcing is expected to continue providing strong growth opportunities, partially driven by

fiscal pressure experienced by EU governments resulting in private sector outsourcing.116

In the medium-term, security companies are expected to benefit from increasing interest rates and higher

inflation.117 Additionally, emerging markets offer stronger growth potential and elevated margins for security

companies, compared to mature markets.118 Emerging markets such as Asia, Latin America and Africa present

immature security markets, steady growth in the utilisation of banking services, higher GDP growth, expansion

in market share through acquisitions added to the organic growth and cross selling strategies.119

In 2010, the financial sector accounted for 28% of all consulting work in Europe, while IT consulting

generated approximately 27% of all consulting revenues.120 In Q1’11, consulting firms experienced an

improvement in organic growth, partially driven by activities related to international trade.121 Additional sectors

that present high growth potential for the industry include nuclear, offshore energy and green buildings. 122

Analysts forecast that the European market for consulting may grow nearly 5% in 2011 to 2012.123


39

Table 8Business Services and Management Consulting—Companies Included

Impairment Climate

Business Services’ market capitalisation (as of December 2010) is 62% above the January 2006 level having

fully recovered from the financial crisis. The industry outperformed the STOXX Europe 600 over the past two

years, and set a new high mark in December 2010.

Chart 24Business Services and Management Consulting—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Business Services companies made acquisitions of Euro 23 billion during the covered period, of which Euro 19

billion was spent from 2006 to 2008. At fiscal year-end 2010, the industry reported goodwill of Euro 30

billion, of which Euro 15.7 billion was acquired from 2006 to 2010. The largest acquisition carried out during

this period was that of Vedior by Randstad in 2008.124

As of fiscal year 2010, companies booked total impairments of Euro 0.2 billion. The largest amount, relating to

the impairment of goodwill, was at Euro 0.15 billion, followed by the impairment of intangible assets at less

than Euro 0.01 billion.

Adecco S.A. Aggreko plc Amadeus IT Holding Atos Origin S.A.

Babcock International Group plc Bureau Veritas S.A. Cap Gemini S.A. Capita Group plc

Experian plc G4S plc Hays plc HomeServe Plc

Indra Sistemas, S.A. Intertek Group plc Logica PLC Michael Page International plc

MITIE Group plc Randstad Holding N.V. Rentokil Initial plc Securitas AB

Serco Group plc SGS S.A. Teleperformance

37942

941

239 147

6,239

5,671

6,916

1,010

3,423

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%

Jan -06 Jul -06 Dec -06 Jul -07 Dec -07 Jun -08 Dec -08 Jun -09 Dec -09 Jun -10 Dec -10 Jun -11

Goodwill Impairment Purchase Price Paid (EURm) STOXX Europe 600 Business Services


40

Booked goodwill impairments in fiscal year 2010 were 39% below the booked impairments of the previous

fiscal year. The goodwill impairments booked for fiscal years 2008 and 2009 account for 68% of the total

goodwill impairments booked from 2006 to 2010. Goodwill impairments for this period equal 11% of the

goodwill acquired in the same period. In addition, the total purchase price paid represents nearly 24% of the

market capitalisation (PPP/MC ratio) as of December 31, 2010, whereas booked goodwill impairment (2006 to

2010) covers only 13% of the total purchase price paid. The largest impairment (Euro 0.5 billion) was booked

by Randstad in 2008. As of December 2010, 4% of Business Services companies showed book value of equity

close to or above the market capitalisation.

Chart 25Business Services and Management Consulting—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, Business Services had an overall score of 1.4 at the end of

December 2010 (and 1.6 at December 2009). Taking into account the low equity in comparison to recognised

goodwill, our impairment forecast for this industry indicates Sunny conditions, with no company in the Stormy

category.

0% 0% 5%14%

82%

0% 0% 4% 9%

87%

01

3

20

01

2

18

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60%

70%

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41

Chart 26Business Services and Management Consulting—IRF Distribution


10%

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1000%

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42

7. Consumer Products, Food and Retail

Consumer Products, Food and Retail (Consumer Products) comprises a variety of products such as cosmetics,

apparel, household products, electronics and luxury goods. Food includes grocery, beverage, agriculture and

commodities, distribution, and private label and contract manufacturing. Retail consists of department stores,

mass merchants, and specialty retailers.

Economic Climate

In 2011, analysts believe the deflated housing market and economic concerns will continue to negatively affect

consumer spending. 125 For instance, in the U.K., retail market prices are expected to rise as a result of an

increase in commodity prices, higher labor manufacturing costs, inflationary pressures on fuel and utility costs

and an increase in VAT, resulting in lower volume growth.126 However, Germany has been experiencing

improving sales trends in 2011.127

Retail sales are continuing to shift towards Internet shopping, partially driven by the economic recession and

the price comparison convenience provided by the Internet to obtain the best value.128 The online retail market

is forecast to grow 13.4% in 2011, compared to 1.9% forecast growth in the overall retail market. In the

medium-term, e-commerce growth drivers include continuing innovation from Internet retailers to improve the

overall consumer experience, increasing diversification of product offerings, enhanced delivery and returns

options, improved service levels, and growing Internet efficiencies.129

According to analysts, in 2011, food and household and personal care products companies are expected to

confront significant input cost pressures.130 Several large European food manufacturers have already increased

prices to pass on input cost inflation, and expect to further increase prices later in 2011.131 Analysts anticipate

food inflation to accelerate in 2011. 132 In addition, volume growth in European consumer staples is expected

to be adversely affected by cost inflation of 9% to 15%.133

In 2011, growth in the European beverages sector is expected to be driven by margin expansion, increasing

volume growth, acquisitions and deleveraging.134 Additionally, consumer demand for European beverages in

emerging markets continues to rise.135

Consumer goods sales growth in emerging markets was 15% in 2010, partially driven by the accelerating

number of middle-class consumers with discretionary spending income in emerging economies.136,137 Growth in

luxury goods in Q1’11 was primarily driven by strong demand in Asia, which is expected to persist in the

medium-term.138 In 2011, analysts forecast consumer goods sales growth of 9% for emerging markets. 139 In

the long-term, growth drivers for the industry include regional and category positions, innovations and an

increase in consumer spending.140


43

Table 9Consumer Products, Food and Retail—Companies Included

Impairment Forecast

In this study, Consumer Products was the industry with the most companies included. The market

capitalisation of these companies is 41% above its levels of January 2006. As of December 2010, the industry

had fully recovered from the drought of the financial crisis, outperformed the STOXX Europe 600 over the past

two years, and marked a new high as of December 2010.

Adidas AG Anheuser-Busch InBev Aryzta AG Associated British Foods plc

Beiersdorf AG British American Tobacco plc Britvic Bulgari SpA

Bunzl plc Burberry Group plc C&C Group Carlsberg A/S

Carrefour S.A.Casino Guichard Perrachon &Cie S.A.

Chocoladefabriken Lindt & Spruengli AG Christian Dior S.A.

Coca-Cola Hellenic Bottling CompanyS.A.

Compagnie FinanciereRichemont S.A.

Compass Group plc CSM N.V.

Danone Davide Campari Debenhams plc Delhaize Group

Diageo plc Dixons Retail Dufry Group Ebro Puleva S.A.

Edenred Electrolux AB ETS Fr Colruyt S.A. Greene King plc

Halfords Heineken Holding N.V. Heineken N.V. Henkel AG & Co. KGaA Vz

Hennes & Mauritz AB Hermes International S.A. Home Retail Group Husqvarna AB

Imperial Tobacco Group plc Inditex S.A. J. Sainsbury plc Jeronimo Martins SGPS S.A.

Kerry Group plc Kesko Oyj KingFisher plc Koninklijke Ahold N.V.

L'Oreal S.A. Luxottica Group SpA LVMH Moet Hennessy Louis Vuitton Marine Harvest ASA

Marks & Spencer Group plc Metro AG Mitchells & Butlers plc Nestlé S.A.

Next Group plc Nutreco Holding N.V. Oriflame Cosmetics S.A. Pandora

Parmalat SpA Pernod-Ricard S.A. PPR S.A. Puma AG Rudolf Dassler Sport

Reckitt Benckiser Group plc SABMiller plc SEB S.A. Societe Bic

Sodexo Suedzucker AG Swatch Group AG Swedish Match AB

Tate & Lyle plc Tesco PLC Travis Perkins plc Unilever N.V.

Unilever plc Whitbread plc Wm. Morrison Supermarkets plc Wolseley plc


44

Chart 27Consumer Products, Food and Retail—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Companies in this industry made acquisitions totalling Euro 208 billion during the covered period, of which

roughly Euro 168 billion was spent from 2006 to 2008. At fiscal year-end 2010, the industry reported

goodwill of Euro 266 billion, of which Euro 117 billion was acquired from 2006 to 2010. Notable and

significant acquisitions include those of:141

Allied Domecq by Pernod-Ricard in 2006;

Royal Numico by Danone in 2007;

Anheuser-Busch Companies by InBev in 2008;

Scottish & Newcastle by Carlsberg and Heineken Holding in 2008;

National Starch by Henkel in 2008;

Altadis by Imperial Tobacco Group in 2008;

Vin&Sprit Group by Pernod-Ricard in 2009; and

Beer operations from FEMSA by Heineken Holding N.V. in 2010.

As of fiscal year 2010, companies booked total impairments of Euro 4 billion. The largest amount of

Euro 2.2 billion (54.1%) relates to the impairment of fixed assets, followed by the impairment of goodwill at

Euro 1.3 billion (31.5%), and the remainder of Euro 0.6 billion (14.4%) relates to the impairment of

intangible assets.

Booked goodwill impairments in fiscal year 2010 are 42% below the level of goodwill impairments booked for

the fiscal year 2009 at Euro 2.1 billion. The goodwill impairments booked in fiscal year 2008, 2009 and

2010 account for 80% of the total goodwill impairments booked from 2006 to 2010. Goodwill impairments for

377 1,101 2,381 2,148 1,253

43,302

35,919

88,716

15,985

24,510

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Consumer Products, Food and Retail


45

2006 to 2010 equal 6% of the goodwill acquired in the same period. In addition, the total purchase price paid

represents about 17% of the market capitalisation (PPP/MC ratio) as of December 31, 2010, whereas the

booked goodwill impairment (of 2006 to December 2010) covers only 5% of the total purchase price paid.

As of December 2010, 5% of companies in this industry showed book value of equity close to or above the

market capitalisation.

Chart 28Consumer Products, Food and Retail—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, the Consumer Products industry had an overall score

of 1.3 at the end of December 2010 (and 1.4 at December 2009). Our impairment forecast indicates Sunny

conditions for this industry as a whole, with no company in Stormy territory.

0% 1% 10% 14%

75%

0%1% 4%

15%

80%

0%1 3

12

64

17

10

55

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46

Chart 29Consumer Products, Food and Retail—IRF Distribution


10%

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47

8. Energy

Energy comprises the oil, gas, coal and consumable fuels, utilities, and energy equipment and services sectors.

Economic Climate

Europe continues to focus on expanding renewable capacity primarily owing to energy security concerns, energy

price increases and environmental concerns.142 Utilities are experiencing pressure from the EU and national

governments as they are liberalising the power markets, expanding renewables, penalising fossil fuel generators

for CO2 emissions and advocating energy efficiency measures that decrease consumption.143 In April 2011, the

production of energy in the EU decreased by 3% compared to March 2011.144

The global oil and gas industry is expected to continue recovering in 2011; analysts forecast 6% growth in

global capital expenditures over 2011 and 2012. 145 Additionally, non-OPEC growth in crude markets is

anticipated to be limited.146 Oil prices in 2011 have increased significantly owing to the political unrest in the

Middle East and North Africa and concerns regarding oil supply from these regions.147

Due to rising fuel prices, analysts revised power price forecasts to 20% to 30% above current market

forwards.148 Higher power prices, reduced implicit subsidies and nuclear concerns are expected to result in

further support for cheaper renewable technologies, such as wind.149

As a result of the nuclear accident in Japan, countries have cancelled or postponed plans for nuclear power

stations. For instance, in May 2011, Germany announced its decision to shut down all 17 of its nuclear power

plants by the end of 2022.150 As a result, Germany has become increasingly reliant on France to replace

nuclear power, but analysts expect coal and renewable energy to account for a greater share of energy

generation as well.151

In June 2011, the EU consented to stress test its more than 140 nuclear reactors for resistance to natural

disasters, as well as man-made disasters such as power outages and engineering failures.152 The stress tests

will be performed by individual member states, and the final results will be presented in April 2012.153 If any

plant closures occur after the completion of the tests, analysts believe states would respond by increasing

capacity at coal plants in the short-term.154 However, gas may become the prevalent source of energy as gas

plants require significantly less capital investment and can be built more quickly.

In November 2010, the European Commission released the Energy 2020 strategy that outlines procedures over

the next 10 years to save energy, create an internal EU energy market, become leaders in energy technology

and innovation, and provide secure and affordable energy.155 The EU Renewable Directive requires EU member

states to produce 20% of their energy needs from renewable energy sources by 2020.156


48

On July 1, 2011, the European Commission launched the European Energy Efficiency Fund (EEE-F) as part of

the European Energy Programme for Recovery (EEPR), which will apportion Euro 146 million for a new

financial facility devoted to energy efficiency and renewable energies projects, particularly in urban settings.157

Table 10Energy—Companies Included

Impairment Climate

The Energy industry has followed the STOXX Europe 600 fairly closely, and as of December 2010 it is at its

levels of January 2006. However, as of December 2010, Energy lost almost 30% of its market value compared

to its peak in January 2008.

A2A SpA Acciona S.A. Aker Solutions ASA Alpiq Holding AG

AMEC plc BG Group plc Bourbon BP plc

Cairn Energy plc Centrica plcCompagnie Générale deGéophysique-Veritas

Dragon Oil PLC

Drax Group plc. E.ON AG EDP Renováveis EDP-Energias de Portugal, S.A.

Electricité de France Enagas S.A. Endesa S.A. ENEL Greenpower

Enel SpA Eni SpA Essar Energy Fortum Oyj

Fugro N.V. Galp Energia SGPS SA. Gas Natural SDG S.A. GDF Suez

Iberdrola Renovables S.A. Iberdrola S.A. International Power plc John Wood Group plc

Lundin Petroleum AB National Grid plc Neste Oil Corp. Northumbrian Water Group plc

OMV Aktiengesellschaft Pennon Group plc Petrofac Ltd. Petroleum Geo Services ASA

Premier Oil plc Public Power Corporation S.A. Red Eléctrica Corporación S.A. Repsol YPF S.A.

Royal Dutch Shell plc RWE AG Saipem SpA SBM Offshore N.V.

Scottish & Southern Energy plc SeaDrill Ltd. Severn Trent plc SNAM Rete Gas SpA

StatoilHydro ASA SUBSEA7 Suez Environnement S.A. Technip

Tenaris S.A.Terna Rete Elettrica NazionaleSpA

TGS Nopec Geophysical Co ASA Total S.A.

Tullow Oil plc United Utilities Group PLC Veolia Environnement S.A. Verbund AG


49

Chart 30Energy—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Energy companies made acquisitions of Euro 308 billion during the covered period, of which Euro 254 billion

was spent from 2007 to 2009. At the end of fiscal year 2010, this industry reported a total amount of goodwill

of Euro 168 billion, of which Euro 94 billion was acquired from 2006 to 2010. Noteworthy transactions

include:158

GDF Suez’s acquisition of Senoko Power in 2008 and a controlling interest in Aguas de Barcelona in2010;

Acciona’s acquisition of a stake in Endesa in 2007;

Iberdrola’s acquisition of Scottish Power in 2007;

Enel’s acquisition of Endesa in 2008;

Electricité de France’s acquisition of British Energy in 2009;

Gas Naturals SDG’s acquisition of Union Fenosa in 2009;

RWE’s acquisition of Essent in 2009,

BP’s acquisition of Devon’s Gulf of Mexico Deepwater properties in 2010, and

Royal Dutch Shell’s acquisition of certain assets held by East Resources in 2010.

As of fiscal year 2010, Energy companies booked total impairments of Euro 14.5 billion, of which the largest

amount relates to the impairment of fixed assets at Euro 9.1 billion (63%), followed by the impairment of

goodwill at Euro 2.5 billion (16.9%), and the remaining Euro 2.9 billion (20.1%) relating to the impairment of

intangible assets. Energy is the industry with the biggest overall impairment (goodwill, intangible and fixed

asset impairment), it scores either first or second for the biggest impairments in each impairment category.

627 1573,838 1,532 2,447

25,911

99,796

89,686

64,677

27,607

0

20,000

40,000

60,000

80,000

100,000

120,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Energy


50

Booked goodwill impairments in fiscal year 2010 were 60% above the booked impairments of the previous year

of Euro 1.5 billion. The goodwill impairments booked for fiscal years 2008, 2009 and 2010 account for 91%

of the total goodwill impairments booked during the period 2006 to 2010.

Goodwill impairments from 2006 to 2010 equal 9% of the goodwill acquired in the same period. In addition,

the total purchase price paid represents more than 26% of the market capitalisation (PPP/MC ratio) as of

December 31, 2010, whereas booked goodwill impairment (2006 to December 2010) covers only 4% of the

total purchase price paid. At the end of December 2010, 19% of Energy companies showed book value of

equity close to or above the market capitalisation, also one company showed a market capitalisation of 50% or

less of book value of equity.

Chart 31Energy—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, Energy had a score of 1.6 as of December 2010

(and 1.5 at December 2009). Our impairment forecast for the industry as a whole indicates Cloudy conditions,

with five companies still in Stormy territory.

1%3%

7%

24%

65%

2% 3%

14%20%

61%

12

9

13

39

12

5

16

44

0%

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30%

40%

50%

60%

70%


Between 90%and 110%


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51

Chart 32Energy—IRF Distribution


10%

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52

9. Engineering, Construction and Building Products

Engineering, Construction and Building Products comprises building materials and companies engaged in the

construction of commercial buildings, civil engineering projects, and large scale contracts.

Economic Climate

In 2010, Western European construction activity fell 14%, partially due to government budget constraints and

housing oversupply.159 During the economic downturn, materials companies experienced a decrease in margins,

while contracting companies experienced stable-to-improving margins.160 Nonetheless, analysts expect

materials companies to recover, driven by considerable cost-cutting initiatives and a recovery in construction

activity.161 However, rising energy costs could negatively impact the profitability of materials companies,

offsetting the benefits from cost-cutting.162

Contracting companies have increasingly diversified into numerous areas of infrastructure and services; as a

result, they have been able to continue expanding their order books throughout the construction downturn.163

Analysts believe that the growth of European contractors will continue to be influenced by traffic growth and

infrastructure expenditure.164

In 2011, analysts expect European construction to grow by 2.2%, followed by 4.9% in 2012 and 5.6% in

2013.165 The residential sector is forecast by analysts to be the primary driver of recovery in European

construction activity in the near-term.166 In 2011, analysts forecast the European residential market to grow

5%, however, non-residential markets are expected to grow merely 2%, as the private sector remains cautious

on the economic outlook.167 The residential sector is influenced by unemployment rates, housing pricing, the

development of interest rates and credit availability.168,169 The non-residential sector is primarily influenced by

economic developments such as unemployment, consumer confidence, the development of industrial and

services production and credit market availability.170 The civil engineering construction sector is highly

correlated with government finances as it is most reliant on public funding, thus widening budget deficit

forecasts result in a decrease in civil engineering spending.171,172

In 2010, civil engineering output accounted for 24% of overall European construction activity.173 In 2011,

analysts anticipate a 3% decrease in civil works in Western Europe, as governments are likely to decrease

spending on infrastructure projects in an effort to re-balance their economies.174,175 Due to the inability of

governments to finance large scale infrastructure projects, the public-private partnerships market is beginning

to experience increased activity. However, such activity is subject to the availability of credit and the ability

and willingness of banks to lend is selective to particular projects. As a result, in February 2011, the European

Commission announced the European Project Bond initiative to attract private financing for projects that have

significant public interest. The initiative will provide guarantees on subordinated debt facilities to support

senior project bonds issued by infrastructure project companies.176 Long-term growth for engineering services

companies is expected to be driven by private and public spending in developed markets, increasing demand

from emerging markets and demand related to sustainability.177


53

Construction costs may continue to increase in 2011, due to rising prices of raw materials such as copper and

steel, and the recovery of cement and aggregates prices.178 Analysts forecast cement volume growth in Western

Europe of 3.4% in 2012, following a 2% decline in 2011.179 In the long-term, the industry is expected to be

positively influenced by the development of emerging markets, the growth of energy infrastructure, the

renovation and maintenance of existing infrastructures and the development of energy efficiency.180

Table 11

Engineering, Construction and Building Products—Companies Included

Impairment Climate

Engineering, Construction and Building Products has almost consistently outperformed the STOXX Europe 600,

and (as of December 2010) is 16% above its levels of January 2006. However, compared to its peak in June

2007, the industry has lost almost 33% of its market value as of December 2010.

Actividades de Construcción y Servicios,S.A

Assa Abloy AB Balfour Beatty plc Bilfinger Berger AG

Bouygues SA Carillion plc CRH plc Eiffage S.A.

FLSmidth & Co. A/SFomento de Construcciones y Contratas,S.A.

Geberit AG Grupo Ferrovial S.A.

HeidelbergCement AG Hochtief AG Holcim Ltd. Holmen AB

Imerys SA Imtech N.V. Lafarge S.A. Outotec

Royal Boskalis Westminster N.V. Saint Gobain Skanska AB Spirax-Sarco Engineering PLC

Tecnicas Reunidas S.A. Vinci S.A.WienerbergerBaustoffindustrie AG

YIT Oyj


54

Chart 33Engineering, Construction and Building Products—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Engineering, Construction and Building Products companies made acquisitions totalling nearly

Euro 105 billion during the covered period, of which Euro 96 billion was made between 2006 and 2008. At

fiscal year-end 2010, the industry reported goodwill of Euro 82 billion, of which Euro 45 billion was acquired

from 2006 to 2010.

Significant acquisitions carried out include: APRR Group’s acquisition by Eiffage in 2006; Grupo Ferrovial’s

acquisition of BAA in 2006; Vinci’s acquisition of Autoroutes Du Sud de La France in 2006;

HeidelbergCement of Hanson in 2007; and Lafarge’s acquisition of Orascom Cement in 2008.181

As of fiscal year 2010, companies booked total impairments of Euro 1.3 billion, of which the largest amount

relates to the impairment of fixed assets at Euro 0.7 billion (53.7%), followed by the impairment of goodwill at

Euro 0.6 billion (41.9%), and the remaining Euro 0.1 billion (4.4%) accounts for the impairment of intangible

assets.

Booked goodwill impairments in fiscal year 2010 are 40% below than those of the previous year of

Euro 0.9 billion. Goodwill impairments for 2006 to 2010 equal 6% of the goodwill acquired in the same

period. In addition, the total purchase price paid represents 57% of the market capitalisation (PPP/MC ratio)

as of December 31, 2010, whereas booked goodwill impairment (2006 to December 2010) covers only 3% of

the total purchase price paid. At end of December 31, 2010, 21% of Engineering, Construction and Building

Products companies showed book value of equity close to or above market capitalisation.

276 130 566 927 550

52,845

24,410

18,786

3,3915,435

0

10,000

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30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm)

STOXX Europe 600 Engineering, Construction and Building Products


55

Chart 34Engineering, Construction and Building Products—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, the industry had an overall score of 1.8 at December 2010 (and

1.9 at December 2009); therefore, our impairment forecast for the industry as a whole indicates still Cloudy

conditions, with three companies still in the Stormy category.

Chart 35Engineering, Construction and Building Products—IRF Distribution


0%10% 6%

29%

55%

0%14%

7%

18%

61%

0

4

2

5

17

32

9

17

0%

10%

20%

30%

40%

50%

60%

70%


Between 90%and 110%


Above 150%

Per

cent

age

ofC

ompa

nies


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

ketC

apit

alis

atio

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quit

y


25%

Rainy

Sunny

Stormy

Cloudy


56

10. Financial Institutions Group - Banks

The Banks subsector of the Financial Institutions Group (FIG – Banks) comprises deposit-taking institutions,

such as commercial banks, savings-and-loans banks, credit institutions and universal banking institutions, as

well as bank holding companies.

Economic Climate

In 2010, the European banks subsector continued to underperform the European market, primarily due to

concerns regarding capital, Basel III and funding owing to the peripheral European downturn.182 The subsector

has begun to recover in 2011, partially due to discussions regarding a solution to the peripheral European

downturn, including further development of the European Financial Stability Facility (EFSF).183 EFSF was

established by EU member states in June 2010, as part of the financial stability package, to issue bonds

guaranteed by the EU for up to Euro 440 billion for on-lending to Euro area member states in crisis.184

The funding crisis of the European banks has resulted in increased interdependency between the banks and

sovereigns in peripheral countries as there is no central lender to bail out the banking sector in the Euro

area.185 As a result, the sovereigns have been obligated to provide fiscal bailouts.186 Additionally, the European

Central Bank has been compelled to continue to extend its liquidity provision for the subsector so as to

maintain orderly financial markets in Europe.187

In November 2010, the G20 leaders officially endorsed the Basel III framework, which requires banks to hold

more capital against their loans, and the Basel Committee issued the details of the global regulatory standards

on bank capital adequacy and liquidity in December 2010. The framework includes two new proposed liquidity

statutes: For short-term liquidity, banks will be required to maintain 100% of their possible 30-day outflow in

high-quality assets, including cash and government bonds, whereas, for long-term liquidity, banks will be

required to secure funding from stable channels, thereby limiting loan to deposit ratios in excess of 100%.188

Analysts believe the proposal on long-term liquidity could negatively influence economic growth and lead to

decreased corporate credit availability, less matched funding for mortgages, reduced long-term financing

availability, preference for ABS versus covered bonds and less demand for bank bonds.189 Analysts estimate

that banks in the EU may confront a funding shortfall of Euro 3 trillion to meet the proposed rules, unless they

reduce the size of their assets (or increase the portion of assets with shorter-term maturities), increase the

percentage of longer-term maturities in wholesale funding, and/or replace short-term wholesale funding with

deposits.190 The new rules will be phased in from January 2013 through January 2019.191

In 2010, European finance ministers conducted stress tests on banks to alleviate market concerns regarding

the health of banks in Europe and to help eliminate notions that some lenders may have concealed the full

level of their exposure to bad debt.192 Based on a Tier 1 ratio, seven banks failed the test, and aggregate

impairment losses for the 91 banks under the adverse scenario totaled Euro 566 billion.193 Furthermore, the

2010 stress tests were unable to restore confidence in the financial health of banks in the EU, partially

because only sovereign exposures held on trading books were included in the tests, while most of the sovereign


57

exposures are held on banking books.194 The EU regulator conducted an additional EU stress test in 2011 with

tougher criteria, based on 2010 year-end balance sheets, and released the results of the tests on 90 banks,

comprising an estimated 65% of banking assets, as of June, 15, 2011.

In 2011, bank term debt has been experiencing extremely wide spreads and significant borrowing volumes,

despite the high borrowing cost.195 In Q1’11, long-term debt issuance by European banks increased

approximately 26% year-over-year, primarily driven by collateralised issuance.196 In the second half of 2011,

analysts expect growth in European banks to be primarily driven by their ability to pass on higher debt spreads

to lending customers rapidly enough to offset the growing cost of funds.197 Analysts expect banks to continue

re-pricing in 2011; banks have confronted higher capital requirements and more costly funding, as a result,

they have been able to raise the rates they charge consumers.198

Analysts believe that the growth experienced by European banks is primarily attributable to non-EU growth

markets.199 This development is expected to continue through 2012, with domestically-focused operators

expected to generate negligible loan growth.200 Analysts believe that banks profit from operations in banking

markets that are currently expanding as they offer superior long-term loan volume trends and risk-adjusted

returns. 201

Table 12

Financial Institutions Group - Banks—Companies Included

Alpha Bank S.A. Banca Carige SpA Banca Monte dei Paschi di Siena SpABanca Popolare dell'Emilia RomagnaScrl

Banca Popolare di Milano Scrl Banca Popolare di Sondrio SCARL Banco Bilbao Vizcaya Argentaria, S.A. Banco Comercial Portugues S.A.

Banco de Sabadell S.A. Banco de Valencia S.A. Banco Espirito Santo S.A. Banco Popolare SC

Banco Popular Espanol S.A. Banco Santander, S.A. Bank of Piraeus S.A. Bankinter S.A.

Barclays plc BNP Paribas Close Brothers Group plc Commerzbank AG

Credit Agricole S.A. Credit Suisse Group Danske Bank A/S Deutsche Bank AG

Dexia SA DnB NOR ASA Erste Group Bank AG Evrobanka EFG tedionica

HSBC Holdings plc ING Groep N.V. Intesa Sanpaolo SpA Investec plc

Jyske Bank A/S KBC Group N.V. Lloyds Banking Group plc Mediobanca S.p.A.

National Bank of Greece S.A. Natixis Nordea Bank AB Pohjola Bank plc

Raiffeisen International Bank-HoldingAG

Royal Bank of Scotland Group plc Skandinaviska Enskilda Banken AB Societe Generale Group

Standard Chartered PLC Svenska Handelsbanken AB Swedbank AB Sydbank A/S

The Governor and Company of The Bankof Ireland

UBS AG UniCredit S.p.A. Unione di Banche Italiane Scpa

Valiant Holding AG


58

Impairment Climate

The market capitalisation of the FIG—Bank industry closely followed the development of the Europe STOXX

600 and decreased 22% compared to its levels of January 2006. As of December 2010, the industry lost more

than 40% of its market value compared to its peak in May 2007.

Chart 36

Financial Institutions Group - Banks—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


FIG — Banks had acquisitions totalling Euro 330 billion during the covered period, of which Euro 289 billion

was spent during 2006 to 2008. At fiscal year-end 2010, the industry reported Euro 242 billion of goodwill, of

which Euro 123 billion was acquired from 2006 to 2010. Noteworthy acquisitions include those of:202

IXIS by Natixis in 2007;

Sanpaolo IMI by Banca Intesa in 2007;

ABN Amro by Royal Bank of Scotland in 2007;

Capitalia by UniCredit in 2007;

Banca Antonveneta by Banca Monte dei Paschi di Siena in 2008;

Fortis Banque by BNP Paribas in 2009;

Dresdner Bank by Commerzbank in 2009;

HBOS by Lloyds Banking Group in 2009;

Sal.Oppenheim by Deutsche Bank in 2009, and

Postbank by Deutsche Bank in 2010.

545 584

43,930

5,079 2,027

68,973

176,609

43,506

19,342 21,942

-10,000

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

190,000

2006 2007 2008 2009 20100%

50%

100%

150%

200%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 FIG- Banks


59

As of fiscal year 2010, companies booked total impairments of Euro 3.8 billion, which is nearly 50% below the

booked impairments of fiscal year 2009 at Euro 7.6 billion.


the total purchase price paid represents 34% of the market capitalisation (PPP/MC ratio) as of December 31,

2010, whereas booked goodwill impairment (2006 to December 2010) covers 29% of the total purchase price

paid. At the end of December 2010, more than 70% of the industry showed book value of equity close to or

above the market capitalisation, with almost one fifth having a market capitalisation below 50% of book value

of equity.

Chart 37

Financial Institutions Group - Banks—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, FIG - Banks had an overall score of 2.8 at end of

December 2010 (and 2.7 at December 2009), which is the highest IRF of all covered industries. Our

impairment forecast for this industry indicates Rainy conditions, with 40% of the companies still in Stormy

territory.

11%

42%

18% 18%12%

19%

42%

11%

23%

6%

10

22

6

12

3

6

24

1010

7

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


Between 90%and 110%


Above 150%

Per

cent

age

ofC

ompa

nies


Dec-09 Dec-10


60

Chart 38

Financial Institutions Group - Banks—IRF Distribution


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

ketC

apit

alis

atio

n/

Boo

kVa

lue

ofE

quit

y


25%

Rainy

Sunny

Stormy

Cloudy


61

11. Financial Institutions Group – Insurance

Insurance is a subsector of the Financial Institutions Group (FIG – Insurance) comprising companies that

safeguard the assets of its policyholders by transferring risk from an individual or business to an insurance

company. The three primary insurance sectors are property/casualty, life and health insurance.

Economic Climate

In 2010, the European insurance industry was negatively affected by weak earnings momentum, depressed

yields and concerns regarding peripheral sovereigns, however, the industry generated a more than 3.5%

increase in total gross written premiums.203,204 Gross written European life premiums grew approximately 4%,

and gross written non-life premiums grew nearly 3% in 2010, primarily driven by the economic recovery and

renewed interest in insurance products.205 Gross written health and property premiums increased 6% and 1%,

respectively. Despite considerable volatility in the capital markets in 2010, the total investment portfolio of

European insurers grew 5% to approximately Euro 7.5 trillion.

Proposed by the European Commission in early 2009, the Solvency II Directive became EU law in December

2009. Solvency II is a major revision of EU insurance law intended to modernise supervision, deepen market

integration, improve consumer protection, and increase the international competitiveness of European insurers.

Under this law, insurers would be obligated to take account of all of the types of risk they are exposed to and

manage such risks more effectively. This would result in an increase in transparency and ensure that

supervisory authorities cooperate effectively and coordinate their activities. Solvency II is intended to align the

capital requirements of European insurers with the amount of risk they assume, however, this substantial

recapitalisation by insurers would result in the decline of investment returns. Nonetheless, analysts believe that

this law will be regulated in such a manner that it will not change the overall capital of the insurance industry,

although it may establish a volatile operating environment in the long-term. 206,207 Over the past several months,

Solvency II has compelled insurers to lessen exposure to equities as they are capital intensive, focus their

operations on insurance rather than investment returns and maintain a higher capital balance as asset risk

necessitates its own solvency capital.208

In January 2011, the European Commission released the Omnibus II Directive, which proposes to change the

formulation of rules and standards under Solvency II, and postpones full implementation of the Solvency II

regulation to January 1, 2013.209

In 2011, non-life insurance experienced positive pricing developments, with 2% to 4% growth in Q1’11.210

Analysts expect property and casualty insurance earnings to stabilise, with further improvements in 2012 due

to pricing increases, and life insurance and asset management to experience modest growth. 211


62

Table 13Financial Institutions Group - Insurance—Companies Included

Impairment Climate

The Insurance industry has followed the STOXX Europe 600 fairly closely, and is 28% below its levelof January 2006. Compared to its peak in May 2007, companies have lost almost 50% of theirmarket value as of December 2010.

Chart 39

Financial Institutions Group - Insurance—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment

Sources: Capital IQ, annual reports, and Bloomberg.

Admiral Group plc AEGON N.V. Ageas Allianz SE

Amlin plc Assicurazioni Generali SpA Aviva plc AXA

Baloise-Holding Catlin Group Ltd. CNP Assurances S.A. Delta Lloyd N.V.

Hannover Rückversicherung AG Helvetia Versicherungen AG Jardine Lloyd Thompson Group plc Legal & General Group Plc

Mapfre S.A. Munich Re Group Old Mutual plc Prudential plc

RSA Insurance Group plc. Sampo Oyj SCOR SE Standard Life plc

Storebrand ASA Swiss Life Holding Swiss Reinsurance Co. Topdanmark A/S

TrygVesta A/S Vienna Insurance Group Zurich Financial Services AG

295 430 897 739 989

32,207

42,195

19,052

6,954

2,017

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 FIG - Insurance


63

Insurance companies made acquisitions totaling Euro 102 billion during the covered period, of which

Euro 93 billion were made between 2006 and 2009. Notable deals include:212

AXA’s acquisition of Winterthur in 2006;

Fortis’s acquisition of ABN AMRO in 2007;

Old Mutual’s acquisition of Skandia U.K. Holdings in 2008;

Ceska Group acquisition by Assicurazioni Generali in 2008;

The Midland Company’s acquisition by Munich Re in 2008; and

Erste Group’s (insurance business) acquisition by Vienna Insurance Group in 2008.

Booked goodwill impairments in fiscal year 2010 were 34% above the previous fiscal year of Euro 0.7 billion.



2010, whereas booked goodwill impairment (2006 to December 2010) covers only 3% of the total purchase

price paid. As of December 31, 2010, 61% of Insurance companies showed book value of equity close to or

above market capitalisation.

Chart 40

Financial Institutions Group - Insurance—Distribution of Market Capitalisation and Book Value of Equity


Taking the MC/BVE and PPP/MC ratios into consideration, Insurance had an overall score of 2.4 as of

December 2010 (and 2.4 at December 2009). Therefore, our impairment forecast for the industry indicates

Cloudy conditions, with 26% of companies still in the Stormy category.

6%

27%30%

15%

21%

3%

32%

26%

23%

16%

1

10

8

7

5

2

9

10

5

7

0%

5%

10%

15%

20%

25%

30%

35%


Between 90%and 110%


Above 150%

Per

cent

age

ofC

ompa

nies



64

Chart 41Financial Institutions Group - Insurance—IRF Distribution


10%

100%

1000%

0% 1% 10% 100% 1000%

Mar

ketC

apit

alis

atio

n/B

ook

Valu

eof

Equ

ity


25%

Rainy

Sunny

Stormy

Cloudy


65

12. Financial Institutions Group – Other

Other, a subsector of the Financial Institutions Group, (FIG – Other) comprises diversified institutions engaged

in activities such as investment banking, private equity, stock exchange, asset management and real estate.

Economic Climate

In 2010, overall revenues for European investment banks declined 17%, partially due to the 36% quarter-over-

quarter decrease in fixed income revenues in Q4’10.213 The performance of fixed income was offset by the

23% increase in underwriting and advisory businesses revenues in Q4’10 compared to Q3’10.214 Equities

trading revenues decreased 9% quarter-over-quarter in Q4’10.215 For Q1’11, overall revenues for European

investment banks declined 10% year-over-year.216

Analysts forecast European investment banking revenues to decline 1% in 2011, with a slight decrease in

fixed-income trading resulting from Basel III effects, offset by an increase in advisory businesses and

equities.217,218 Additionally, European investment banks could benefit from regulatory arbitrage opportunities

resulting from regulatory constraints negatively affecting U.S. investment banks.219

In 2010, the value of assets under management in Europe increased by approximately 11% year-over-year to

Euro 13.8 trillion, due to the sustained economic recovery, increased investor demand and general market

appreciation.220 Currently, institutional investors account for 68% of total European assets under

management.221 As of April 2011, Europe had net assets of approximately Euro 7.9 trillion.222

Private equity in Europe declined in the beginning of 2011 compared to the end of 2010; deal volume

decreased 7% and value decreased 48% to Euro 12.2 billion, driven by sovereign debt issues and uncertainty

regarding the effects of government austerity plans.223 The decline in private equity activity is primarily

attributable to a severe quarterly decline in the buyout segment. However, compared to the first quarter of

2010, buyout volume rose 22% in the Q1’11, and value increased by 12%.224 Additionally, venture deal

activity decreased 11% quarter-over-quarter in the beginning of 2011, and market value declined 17% to

Euro 247 million. 225

In 2010, M&A activity in Europe increased 13% compared to 2009, partially driven by emerging markets.226 In

Q1’11, dollar volume of M&A activity in Europe increased 10% year-over-year, but decreased 17% compared

to Q4’10, partially due to concerns regarding the health of government finances and other threats to the global

economy.227 Furthermore, an estimated 52% of all European deals in the first half of 2011 were secondary

buyouts, in which the deal was between two private equity firms, further emphasising the shortage of deals in

Europe. 228

Additionally, on May 27, 2011, the EU Council of Ministers formally adopted the Alternative Investment Fund

Managers (AIFM) Directive, initially proposed by the European Commission in April 2009.229 Under the AIFM

Directive, hedge funds and private equity companies will be directly regulated and supervised by the EU

beginning in 2012.230


66

In 2010, European exchanges were primarily focused on reducing costs, decreasing prices and maintaining

market share.231 However, in 2011, analysts expect European exchanges to concentrate on growth strategies to

diversify their revenues.232 Expected growth strategies include innovation and diversification of revenues by

asset class, service offering and geography, and consolidation in trading and post-trade in small- or medium-

sized deals.233 Analysts forecast 10% growth in the value of European cash equities traded in 2011.234

Table 14Financial Institutions Group - Other—Companies Included

Impairment Climate

As of December 2010, FIG – Other had a market capitalisation 36% above the level as of January 2006.

However, compared to its peak in October 2007, companies in this industry lost more than 30% of their

market value at the end of December 2010.

3i Group plc Aberdeen Asset Management PLC Ackermans & Van Haaren N.V. Ashmore Group PLC

Bolsas y Mercados Españoles S.A. Criteria CaixaCorp, S.A. Deutsche Boerse AG Eurazeo

EXOR GAM Holding AG Groupe Bruxelles Lambert S.A. Hargreaves Lansdown

Henderson Group PLC ICAP plc IG Group Holdings Plc Industrivärden

Intermediate Capital Group PLC Investment AB Kinnevik Investor AB Julius Bär Gruppe AG

London Stock Exchange Group plc Man Group plc Pargesa Holding S.A. Partners Group Holding AG

Provident Financial plc Ratos AB Schroders plc Sofina S.A.

Wendel


67

Chart 42Financial Institutions Group - Other—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment



Companies in this industry made acquisitions totalling Euro 34 billion during the covered period, of which

Euro 27 billion was spent from 2006 to 2008. At fiscal year-end 2010, the industry reported a total of

Euro 26 billion of goodwill, of which Euro 19 billion was acquired from 2006 to 2010. Notable acquisitions

include those of ISE by Deutsche Börse in 2007; Borsa Italiana by the London Stock Exchange in 2008; Grupo

Financiero Inbursa by Criteria CaixaCorp in 2008; and Adeslas by Criteria CaixaCorp S.A. in 2010.235

Goodwill impairments for 2006 to 2010 equal 15% of the goodwill acquired in the same period. Also, the total

purchase price paid represents 27% of the market capitalisation (PPP/MC ratio) as of December 31, 2010,

whereas booked goodwill impairment (2006 to December 2010) covers only 10% of the total purchase price

paid. At the end of December 2010, 37% of the industry showed book value of equity close to or above the


58 23629

2,021

41

7,272

9,9799,668

2,9583,863

0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 FIG - Other


68

Chart 43Financial Institutions Group - Other—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, FIG — Other had an overall score of 2.0 at end of December

2010 (and 2.1 at December 2009). Our impairment forecast for the industry indicates Cloudy conditions, with

10% of companies still in the Stormy category.

Chart 44

Financial Institutions Group - Other—IRF Distribution


6%

29%

6%10%

48%

3%

24%

10% 10%

52%

1

7

3 3

15

2

9

23

15

0%

10%

20%

30%

40%

50%

60%


Between 90%and 110%


Above 150%

Per

cent

age

ofC

ompa

nies


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

ketC

apit

alis

atio

n/

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quit

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25%

Rainy

Sunny

Stormy

Cloudy


69

13. Healthcare

Healthcare comprises companies engaged in manufacturing medical equipment, supplies and pharmaceuticals,

as well as operating healthcare facilities and provision of managed healthcare.

Economic Climate

In 2010, the European medical technology sector attained organic sales growth of an estimated 6%.236

Analysts forecast the sector to continue growing at an organic sales growth of 7% in 2011, 9% in 2012, and

10% in 2013.237 Nonetheless, organic sales growth rates remain below pre-crisis levels of approximately 13%

in 2003 to 2007, due to increased penetration of core markets, growing price competition and reimbursement

pressures, and rising costs of conducting businesses, which are becoming increasingly complex.238

Cyclical European medical technology companies are expected to achieve organic sales growth of 9% in 2011,

as new product cycles allow them to gain share in their markets.239 Comparatively, defensive European medical

technology companies are expected to experience organic sales growth of only 6%, as they have limited

prospects to grow their markets.240 Defensive European medical technology companies are expected to

concentrate on accelerating sales growth and increasing efficiencies.241 In 2011, analysts anticipate that

growing cash positions at various European medical technology firms may lead to strategic transactions,

including M&A and internal investment. 242 The current market environment provides large firms with an

opportunity to acquire other niche companies in order to restore top-line growth.243

In 2010, several European countries announced pharmaceutical pricing reforms; however, the European

pharmaceutical sector is confronting difficulties in generating top- or bottom-line growth in the near future, but

anticipates to overcome it by 2015.244 The replacement potential of pipeline drugs is quite limited and

company managements are concentrating on cutting costs, expanding in emerging markets and diversifying

product portfolios.245

Analysts forecast sales growth of 5% in 2011 and 3% in 2012 in the pharmaceuticals sector, despite

increasing competition from generic manufacturers.246 Generic manufacturers continue to gain market share in

the pharmaceutical market; analysts forecast generic manufacturers to account for 5% of pharmaceutical sales

in 2011 and more than 7% in 2012, an increase from 2.5% to 3% in the previous few years.247 Although the

replacement potential of pipeline drugs is incremental in 2011, analysts expect significant blockbuster drug

opportunities in 2012.248 Analysts also expect 2013 to be the most promising in terms of pipeline delivery

versus ongoing patent expirations, with the net incremental pipeline replacement becoming positive in

2014.249

Additionally, emerging markets are becoming a significant part of the pharmaceutical sector’s strategy to

generate sustainable revenue growth.250 Analysts believe that growth in pharmaceuticals has increasingly

shifted from mature markets towards emerging markets such as Brazil, Russia, India and China.251 Emerging

markets are forecast to account for approximately 50% of industry sales growth between 2010 and 2015,

primarily driven by branded generics and off-patent original products.252


70

Table 15Healthcare—Companies Included

Impairment Climate

The Healthcare industry moved closely with the development of the STOXX Europe 600 index, and is at its

levels of January 2006. Compared to its peak in April 2007, companies in the industry have lost 12% of their

market value as of December 2010.

Chart 45Healthcare—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Healthcare companies made acquisitions totalling Euro 188 billion during the covered period, of which

Euro 104 billion was made in 2009 and 2010. At fiscal year-end 2010, the industry reported goodwill of

Euro 127 billion, of which Euro 71 billion was acquired from 2006 to 2010.

Actelion Ltd. AstraZeneca plc Bayer AG BioMérieux S.A.

Celesio AG Coloplast A/S Elan Corp. plc Elekta AB

Essilor International Fresenius Medical Care AG & Co. KGAA Fresenius SE Galenica Ltd.

Getinge AB GlaxoSmithKline plc GN Store Nord Grifols, S.A.

Hikma Pharmaceuticals Lonza Group AG Meda AB Merck & Co. Inc.

Nobel Biocare Holding AG Novartis AG Novo Nordisk A/S Orion Corp.

Qiagen N.V. Rhoen Klinikum AG Roche Holding AG Sanofi-Aventis

Shire Ltd. Smith & Nephew plc Sonova Holding AG Stada-Arzneimittel AG

Straumann Holding AG Synthes Inc. UCB S.A. William Demant Holding A/S

30 59 383 1,075 32

40,514

24,844

18,710

66,168

37,726

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2006 2007 2008 2009 2010

0%

50%

100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid STOXX Europe 600 Healthcare


71

Noteworthy deals include:253

Bayer’s acquisition of Schering in 2006;

AstraZeneca’s acquisition of MedImmune in 2007;

Novartis’s acquisition of Alcon in 2008;

GlaxoSmithKline’s acquisition of Stiefel Laboratories in 2009;

Merck & Co.’s merger with Schering-Plough Corporation in 2009;

Sanofi-Aventis’s acquisition of Merial in 2009; and

Novartis AG’s acquisition of Alcon Inc. in 2010.

As of fiscal year 2010, companies booked total impairments of Euro 6.1 billion, with the largest amount of

Euro 5.5 billion (90.8%) relating to the impairment of intangible assets, followed by the impairment of fixed

assets at Euro 0.5 billion (8.7%), and the remaining less than Euro 0.1 billion (0.5%) accounting for the

impairment of goodwill. The high amount of booked impairment of intangible assets relates mainly to IPR&D

impairment from Merck & Co. Inc. (i.e., vorapaxar, one of the company’s investigational cardiovascular

medicines).

Booked goodwill impairments in fiscal year 2010 are significantly below those of previous periods and account

for only 2% of the total goodwill impairments booked from 2006 to 2010. Goodwill impairments from 2006 to

2010 equal 2% of the goodwill acquired in the same period. In addition, the total purchase price paid

represents 27% of the market capitalisation (PPP/MC ratio) as of December 31, 2010, whereas booked

goodwill impairment (2006 to December 2010) covers only 1% of the total purchase price paid. At the end of

December 31, 2010, only one Healthcare company showed book value of equity close to or above market

capitalisation.


72

Chart 46

Healthcare—Distribution of Market Capitalisation and Book Value of Equity


Taking MC/BVE and PPP/MC ratios into consideration, Healthcare had an overall score of 1.4 as of December

2010 (and 1.4 at December 2009), therefore, our impairment forecast for the industry indicates Sunny

conditions.

Chart 47

Healthcare—IRF Distribution


0% 0% 0% 11%

89%

0% 0% 3% 8%

89%

0 0 1 3

32

0 0 14

33

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Between 90%and 110%


Above 150%

Per

cent

ate

ofC

ompa

nies


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

ketC

apit

alis

atio

n/

Boo

kVa

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quit

y


25%

Rainy

Sunny

Stormy

Cloudy


73

14. Media, Sports and Entertainment

Media, Sports and Entertainment comprises companies engaged in advertising, broadcasting, cable and

satellite, casinos and gambling, and publishing.

Economic Climate

The Media, Sports and Entertainment industry is expected to benefit from a strong recovery in corporate

spending driven by high levels of free cash flow.254 However, analysts believe that media areas exposed to

government spending, such as professional publishers, state-owned TV companies and regional newspapers,

will experience limited growth owing to the continual reduction of budget deficits. 255

In 2010, global advertising spending increased approximately 5%, primarily driven by short-term expenditures

to increase sales, recovery in various sectors and the emergence of new categories such as tablets and

smartphones.256 In the first half of 2011, European ad spending has been adversely affected by budget

reductions from fast moving consumer goods (FMCG) manufacturers and push-back on pricing by

advertisers.257 Additionally, commodity and oil prices increased significantly, as a result FMCG manufacturers

and automakers reduced their ad expenditures to offset the price increase.258 Global events such as the natural

disaster in Japan and the political unrest in the Middle East have also discouraged advertisers from further

investment.259 However, analysts believe ad spending is expected to recover in the second half of 2011,

partially driven by decreasing commodity and oil prices.260 In 2011, analysts forecast advertising in Western

Europe to grow by 2.1% versus 4.5% globally.261 In 2012, Western European advertising growth is expected to

re-accelerate to 3.9%, compared to 5.8% globally, primarily driven by major one-time events such as the

Summer Olympics, European championship football and U.S. presidential elections.262 Additionally, analysts

believe that social network advertising is a significant opportunity to capitalise on in the advertising sector. 263

Overall, the publishing sector has been experiencing a recovery in revenue growth. However, for newspapers,

classified-based regional advertising has been negatively affected by Internet expansion, whereas brand-based

national advertising has been recovering.264 In 2011, analysts forecast newspaper ad spending to decrease by

2.5%.265 The newspaper industry is expected to experience further consolidation and/or geographical expansion

as well.266 Analysts expect newspaper circulation to continue declining, and do not anticipate the successful

implementation of pay models for the online portion of newspaper and magazine businesses. 267

In 2010, TV experienced a strong recovery, and continues to gain share in every market as advertisers

increasingly reinvest in TV.268 TV advertising recovery in 2010 was primarily driven by broadcasters offering

larger volumes of ad slots.269 In 2011, TV advertising growth will primarily be dependent on pricing increases

due to the minimal number of slots available at peak times and limited opportunity for audience expansion.270

TV advertising is forecast to grow by 2% to 3% in Western Europe in 2011.271 Long-term growth in the media

industry is expected to be driven by structural, competitive and technological changes, especially driven by the

Internet.272


74

The regulation of new online gaming markets in the EU is expected to continue, but at varying rates depending

on the gaming regulations of individual member states.273 Analysts believe that increased European online

gaming regulation in 2011 and 2012 will be driven by governments seeking prospective revenues from a

widespread rise in gaming taxation. 274 In the short-term, rising tax and marketing costs for online operators

would compel them to look for scale benefits through M&A and the reduction of fixed costs related to software,

staff, administration and marketing. 275

Table 16

Media, Sports and Entertainment—Companies Included

Impairment Climate

Media, Sports and Entertainment has followed the STOXX Europe 600 fairly closely since the end of 2008 and

outperformed the STOXX Europe 600 in 2010. The market capitalisation of the industry is at its level of

January 2006. Compared to its peak in June 2007, the industry has lost more than 15% of its market

capitalisation as of December 2010.

Aegis Group plc British Sky Broadcasting Group plc Daily Mail and General Trust plc Eutelsat Communications

Gestevision Telecinco S.A. Informa plc ITV plc JCDecaux S.A.

Kabel Deutschland Ladbrokes PLC Lagardere SCA Mediaset SpA

Metropole Television M6 Modern Times Group Mtg AB OPAP S.A. PagesJaunes Groupe

Pearson plc Prosiebensat.1 Media Publicis Groupe S.A. Reed Elsevier N.V.

Reed Elsevier plc Sanoma Oyj Schibsted ASA Springer (Axel)

Television Francaise 1 S.A. United Business Media plc Vivendi William Hill plc

Wolters Kluwer N.V. WPP plc


75

Chart 48

Media, Sports and Entertainment—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Media, Sports and Entertainment companies made acquisitions totalling Euro 59 billion during the covered

period, of which Euro 24 billion was spent in 2008. At fiscal year-end 2010, the industry reported

Euro 81 billion of goodwill, of which Euro 36 billion was acquired during 2006 to 2010. Notable deals carried

out include:276

Lottomatica’s acquisition of GTECH Holdings in 2006;

Publicis Groupe’s acquisition of Digitas in 2007;

Thomson’s acquisition of Reuters in 2008; and

Vivendi’s acquisitions of Blizzard in 2008 and GVT in 2009.

As of fiscal year 2010, companies booked total impairments of Euro 0.5 billion, with the largest amount

relating to the impairment of intangible assets at Euro 0.3 billion (56.2%), followed by the impairment of

goodwill at Euro 0.2 billion (35.1%), and the remainder at less than Euro 0.1 billion (8.7%) accounting for the

impairment of fixed assets.

Booked goodwill impairments in fiscal year 2010 were 90% below the booked impairments of the previous

fiscal year at Euro 1.9 billion. Goodwill impairments for the period 2006 to 2010 equal 17% of the goodwill

acquired in the same period. In addition, the total purchase price paid represents 38% of the market

capitalisation (PPP/MC ratio) as of December 31, 2010, whereas booked goodwill impairment (2006 to 2010)

covers only 16% of the total purchase price paid. As of December 31, 2010, 7% of Media, Sports and

Entertainment companies showed book value of equity close to or above market capitalisation.

200 233

3,3841,890

183

10,902

13,438

24,132

6,2754,426

0

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2006 2007 2008 2009 2010

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Media, Sports and Entertainment


76

Chart 49

Media, Sports and Entertainment—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, Media, Sports and Entertainment had an overall

score of 1.5 as of December 2010 (and 1.6 at December 2009). The IRF for the industry as a whole indicates

Cloudy conditions, with only one company still in the Stormy category.

Chart 50

Media, Sports and Entertainment—IRF Distribution


0% 0% 4%11%

86%

0% 0% 7% 7%

87%

2 2

26

01

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77

15. Real Estate, Lodging and Leisure

Real Estate, Lodging and Leisure comprises companies engaged in developing, renting, leasing, and managing

residential and commercial properties.

Economic Climate

The European real estate industry stabilised in 2010, in terms of both value and occupancy.277 Additionally,

yields stabilised in 2010, which led to the emergence of rental growth as a primary driver of capital values and

resulted in a larger difference in sector performance.278 Analysts anticipate strong recovery in the cyclical office

rental markets in Europe to continue in 2011 and 2012 at growth rates of approximately 10%.279 Retail rents

are forecast to grow 1% to 2% in 2011 and 2012.280 Industrial rents are forecast to remain flat as a result of

high vacancy and more easily facilitated development.281 The commercial real estate markets continue to

endure a lack of credit availability; however, the re-financing risk for real estate companies has significantly

declined.282

In Europe, investment capital is primarily concentrated on the prime end of the direct property market, as

rental levels and occupancy levels have stabilised and are experiencing strong recovery.283 Analysts believe that

the stabilisation in rental value and occupancy is underwriting risk premiums, and could potentially lead to

continued capital inflows to direct real estate. 284 However, values for secondary properties will likely remain

depressed and experience further declines in 2011, due to the shortage of financing.285

The industry faces the challenge of refinancing the large amount of real estate debt that is set to mature

through 2013.286 Banks are continuing to recapitalise, and are thus concentrating on refinancing, renegotiating

and amending existing loans, making it more difficult for companies to obtain new loans in 2011.287 Basel III

regulation and government pressure on several primary European real estate lenders to exit the sector have led

to further tightening of the debt markets; the new capital constraints over the next five years may result in an

unwillingness of banks to offer real estate finance.288 Analysts believe that insurance companies, in search of

higher-yielding assets and supported by Solvency II, will become alternative debt providers to the industry.289

The real estate industry is also experiencing an increased focus on energy-efficient, sustainable buildings, as

sustainability will be linked to high quality and tenants are increasingly seeking energy-friendly buildings with

lower operating costs.290 In the short term, the European real estate industry faces the challenges of regulation,

the sovereign debt crisis, a weak lending market and austerity measures in Europe.291


78

Table 17

Real Estate, Lodging and Leisure—Companies Included

Impairment Climate

The performance of the market capitalisation of the Real Estate, Lodging and Leisure industry closely follows

the development of the STOXX Europe 600. However, as of December 2010, the industry lost almost 30% of

its market value compared to its peak in February 2007, and is just at its level of January 2006.

Chart 51

Real Estate, Lodging and Leisure—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Companies in this industry made acquisitions totalling Euro 35 billion, which were almost entirely made from

2006 to 2008. At fiscal year-end 2010, the industry reported a total of Euro 16 billion of goodwill, of which

Euro 5 billion was acquired from 2006 to 2010. Noteworthy acquisitions that were carried out include:

Accor S.A. Berkeley Group Holdings plc British Land Co. plc Carnival plc

Castellum AB Cofinimmo S.A. Corio N.V. Derwent London plc

Fonciere des Regions Gecina S.A. Hammerson plc Icade

Intercontinental Hotels Group plc Klepierre S.A. Land Securities Group plc Persimmon plc

PSP Swiss Property AG Segro plc Swiss Prime Site AG Thomas Cook Group plc

TUI Travel PLC Wereldhave N.V. Unibail-Rodamco SE Barratt Developments PLC

Immofinanz AG Taylor Wimpey PLC Capital Shopping Centres GRP Eurocommercial Properties

Great Portland Estates JM AB National Express GRP Paddy Power

2,037

3,634

637 831 492

6,402

16,099

7,117

3,738

1,807

0

2,000

4,000

6,000

8,000

10,000

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14,000

16,000

18,000

2006 2007 2008 2009 2010

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Real Estate, Lodging and Leisure


79

Derwent London’s acquisition of London Merchant Securities in 2007; Klepierre SA’s acquisition of Steen &

Strøm ASA in 2008; and Swiss Prime Site’s acquisition of Jelomi Holding in 2009.292

As of fiscal year 2010, companies in this industry booked total impairments of Euro 1 billion, the largest

amount relating to the impairment of goodwill at Euro 0.5 billion (50.2%), followed by the impairment of fixed

assets at Euro 0.4 billion (45.1%), and the remaining less than Euro 0.1 billion (4.7%) relating to the

impairment of intangible assets.

Fiscal year 2010 booked goodwill impairments were 41% below those of the previous period, and mark the

lowest amount of goodwill impairment in the covered period. The amount of total goodwill impairment for 2006

to 2010 (Euro 7.6 billion) is higher than the goodwill acquired in the same period (Euro 5.1 billion). In

addition, the total purchase price paid represents 28% of the market capitalisation (PPP/MC ratio) as of

December 31, 2010, whereas, the booked goodwill impairment (2006 to December 2010) covers 40% of the

total purchase price paid, the second highest percentage of all analysed industries. At the end of December

31, 2010, almost 60% of companies showed book value of equity close to or above market capitalisation.

Chart 52

Real Estate, Lodging and Leisure—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, the industry had an overall score of 2.3 at December 2010 (and

2.4 at December 2009), which is the third highest IRF of all analysed industries. The impairment forecast for

Real Estate, Lodging and Leisure as a whole indicates Cloudy conditions, with 22% of companies still included

in the Stormy category.

3%

30%

20%

33%

13%

3%

22%

31%

25%

19%

1

7

10

8

6

1

9

6

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80

Chart 53

Real Estate, Lodging and Leisure—IRF Distribution


10%

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81

16. Technology and IT

The Technology and IT industry comprises software companies, as well as companies engaged in

manufacturing semiconductors, communications equipment, computer equipment, and technology-related

office equipment.

Economic Climate

In 2010 and Q1’11, the semiconductor and software sectors of the technology industry outperformed the

overall European market.293 Semiconductor inventory in Q4’10 increased further to 10.2% above the three-year

seasonal average.294 The European semiconductor industry is facing various risks as a result of the earthquake

and tsunami in Japan, including direct input material shortages for production, shipment delays for capacity

expansions, and a decrease in customer production due to component shortages.295 The disruption in

components supply (due to the earthquake) did not have a significant impact on European semiconductor

companies in Q1’11.296 Analysts forecast global semiconductor revenues to increase by 14% in 2011.297

Additionally, PC and consumer electronics demand remained depressed in Q1’11, whereas the automotive,

industrial and smartphone end markets experienced strong demand.298

Smartphone shipment growth continued to be robust in the first half of 2011, driven by an increasing presence

in emerging markets and rising smartphone utilisation globally.299,300 Analysts believe that the smartphone

sector is currently focused on providing handsets at mass market pricing levels.301 Handset units are forecast to

grow by 10% globally in 2011, driven by 57% growth in smartphone units.302 Additionally, growth in PC units

is expected to slow down to 3.6% in 2011, compared to 13.7% in 2010, primarily as a result of an increase in

tablet market share.303 Analysts expect tablet manufacturers competing with Apple, Inc. to re-examine

manufacturing plans for their tablets as a result of low demand and possible inventory build compared to the

iPad.304

In 2011, analysts expect corporate IT spending to rise and consolidation in the software and IT services sector

to increase as larger companies seek to acquire maintenance streams, customers and additional technologies,

and smaller companies seek to grow or be acquired.305 Global corporate expenditures on IT are forecast to grow

an estimated 4.3% year-over-year in 2011, primarily as a result of customers’ continuing to reduce the backlog

of delayed purchases from 2008 and 2009.306 Analysts also expect IT services companies to generate stronger

revenue growth as well.307


82

Table 18Technology and IT—Companies Included

Impairment Climate

Technology and IT market capitalisation moved closely with the development of the STOXX Europe 600 Index,

and is 20% below its level of January 2006. However, as of December 2010, the industry lost almost 35% of

its market value compared to its peak in October 2007.

Chart 54

Technology and IT—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Technology and IT companies made acquisitions totalling Euro 57 billion during the covered period, of which

Euro 44 billion were made between 2006 and 2008. At fiscal year-end 2010, this industry reported a total of

Euro 32 billion of goodwill. However, during the period 2006 to 2010 total goodwill of Euro 30 billion was

acquired.

Aixtron AG Alcatel-Lucent ARM Holdings plc ASML Holding N.V.

Autonomy Corp. plc Dassault Systemes S.A. Electrocomponents Gemalto N.V.

Halma plc Infineon Technologies AG LM Ericsson Telephone Co. Logitech International S.A.

Meyer Burger Technology Micro Focus International PLC Misys plc Neopost S.A.

Nokia Corp. Rotork plc Sage Group plc SAP AG

Software AG Spectris STMicroelectronics N.V. Temenos Group AG

United Internet AG Wincor Nixdorf AG

12

2,6683,285

9120

19,537

8,661

15,616

6,3506,876

0

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20,000

25,000

2006 2007 2008 2009 2010

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Technology and IT


83

Significant acquisitions include those of:308

Lucent Technologies by Alcatel Technologies in 2006;

NAVTEQ by Nokia in 2008;

Business Objects by SAP in 2008;

LM Ericsson Telephone’s acquisition of Bizitek in 2009; and

SAP AG’s acquisition of Sybase in 2010.

None of the Technology and IT companies booked goodwill impairments in fiscal year 2010. Goodwill

impairments for the period 2006 to 2010 equal 23% of the goodwill acquired in the same period. In addition,


2010, whereas booked goodwill impairment (2006 to December 2010) covers 23% of the total purchase price

paid. As of December 31, 2010, no Technology and IT company showed book value of equity close to or above


Chart 55

Technology and IT—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, Technology and IT had an overall score of 1.4 as of

December 2010 (and 1.5 at December 2009). The IRF for this industry improved and now indicates Sunny

conditions.

0% 0% 4% 9%

87%

0% 0%0%

12%

88%

0 03

23

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84

Chart 56

Technology and IT—IRF Distribution


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85

17. Telecommunications

The Telecommunications industry comprises companies engaged in telecommunication networks.

Economic Climate

In Q4’10, European mobile growth declined 0.7% year-over-year, partially due to a deceleration in mobile data

revenue growth.309 However, outgoing mobile voice usage increased 5.6% year-over-year in Q4’10.310 The

European cable sector is experiencing steady growth, driven by increasing Internet usage, higher bandwidth

requirements for data-intensive applications such as video, expansion in devices with Internet capability and

convergence in mobile media and communications.311

In Q1’11, European mobile service revenue decreased 2.7% compared to Q4’10, due to mobile termination

rates reductions, sluggish smartphone penetration and Southern European austerity measures.312 In 2011,

mobile service revenue growth in Europe is forecast to decline by 1.4% as a result of reductions in mobile

termination rates and the cannibalisation of voice and messaging by smartphones.313,314 In 2011, analysts

believe that the volume of data traffic on portable devices through public Wi-Fi networks will grow by 25% to

50%, a much faster rate than cellular broadband network traffic volume.315 As a result, mobile providers may

partner with Wi-Fi providers or construct blended networks to benefit from this development.316

Analysts believe there is an increasing imbalance between European telecom operators and content providers’

networks as the telecommunications networks are being inundated with data from content delivery networks

(CDNs) such as Google/YouTube and other media sites.317 European operators are significantly increasing their

investments in new technologies, such as fibre and 4G, to sustain the elevating data flows in

telecommunications networks.318 Some of the largest European telecoms operators are beginning to proceed

cohesively, and met with the European Commissioner for Digital Agenda in 2011 to address the issue and

potentially obtain payment from content companies to meet broadband targets.319 However, this is a

controversial proposal as it violates the principle of net neutrality, which advocates the equality of all Internet

content.320 Certain European telecom operators and content operators are currently in negotiations that may

result in collaboration on new technologies to decrease the impact of data traffic on the telecommunications

networks.321 Broadband penetration in Europe is currently at 95.6% of PC homes and 71.4% of households.322

E-waste (electronic waste) is increasingly becoming a significant environmental issue in the sector. Europe was

the first major market to address the subject of recovery of e-waste by coordinating a recovery system through

the Waste Electrical and Electronic Equipment (WEEE) Directive in 2002, which placed responsibility on the

producers, rather than the distributors.323


86

Table 19Telecommunications—Companies Included

Impairment Climate

The market capitalisation of the Telecommunication industry has moved closely with the STOXX Europe 600

Index, and is 10% below its level as of January 2006. Furthermore, as of December 2010, the industry has

lost more than 30% of its market value compared to its peak in October 2007.

Chart 57Telecommunications—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Telecommunications companies made acquisitions of nearly Euro 138 billion between 2006 and December

2010, of which Euro 106 billion were made between 2006 and 2008. At fiscal year-end 2010, the industry

reported a total of Euro 225 billion of goodwill, of which Euro 80 billion was acquired from 2006 to 2010.

Notable deals include:324

Belgacom S.A. BT Group plc Cable & Wireless Worldwide Cable and Wireless Communications

Deutsche Telekom AG Elisa Oyj France Telecom Iliad S.A.

Inmarsat Plc Mobistar S.A. OTE Portugal Telecom SGPS S.A.

Royal KPN N.V. SES S.A. Swisscom AG TDC

Tele2 AB Telecom Italia SpA Telefonica S.A. Telekom Austria AG

Telenet Group Holding N.V. Telenor ASA TeliaSonera AB Vodafone Group plc

36,934

17,662

800

9,748

3,539

45,512

22,639

37,927

5,350

26,336

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Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Telecommunications


87

Telefonica’s acquisition of O2 in 2006 and its acquisition of Brasilcel (Euro 18 billion) in 2010;

Vodafone’s acquisitions of ClearWave and VenFin in 2006 as well as its acquisition of CGP InvestmentsHoldings in 2008

France Telecom’s acquisition of Mobinil in 2010 as well as a 40% stake in Meditel in 2010; and

Deutsche Telekom’s acquisition of Hellenic Telecommunications Organization in 2008.

As of fiscal year 2010, companies booked total impairments of Euro 5.1 billion, the largest amount relating to

the impairment of goodwill at Euro 3.6 billion (70.5%), followed by the impairment of fixed assets at

Euro 1.5 billion (29.5%). The companies did not book any impairments relating to its intangible assets.

The booked goodwill impairments in fiscal year 2010 are significantly below the impairments of previous years

2006, 2007 and 2009. The goodwill impairments of the periods 2006, 2007 and 2009 accounted for a total

of Euro 64.3 billion. Goodwill impairments for 2006 to 2010 equal 86% of the goodwill acquired in the same

period. The total purchase price paid represents 31% of the market capitalisation (PPP/MC ratio) as of

December 31, 2010, and booked goodwill impairment (2006 to December 2010) covers 90% of the total

purchase price paid. As of December 31, 2010, less than 10% of Telecommunications companies showed

book value of equity close to or above market capitalisation.

Chart 58

Telecommunications—Distribution of Market Capitalisation and Book Value of Equity


Considering the MC/BVE and PPP/MC ratios, Telecommunications had an overall score of 1.3, as of December

2010 (and 1.6 at December 2009); therefore, the IRF for the industry has improved and now indicates Sunny

conditions, with no company in Stormy territory.

0% 9% 0% 5%

86%

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Chart 59

Telecommunications—IRF Distribution


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89

18. Transportation

The Transportation industry comprises the rail, road, and water transportation sectors.

Economic Climate

In 2010, trade volume growth in air and ocean was primarily driven by the re-stocking process. Analysts expect

trade routes between Europe and Asia to experience volume growth of 5% to 6% during the next three years.325

The Transportation industry continues to face numerous challenges, including rising oil prices and enduring oil

dependency, a worsening climate and local environment, and increasing congestion and declining

accessibility.326

In 2010, European airport traffic increased by 4.2%, but was still 2.1% below 2007 peak traffic levels

primarily due to the negative effects of the volcanic ash cloud in Iceland in April 2010.327 Passenger traffic in

Q1’11 rose by 5.4%.328 Traffic in the first half of 2011 has been adversely affected by the natural disasters in

Japan as well as the social unrest in the Middle East and North Africa.329 Nevertheless, passenger volume in

European airports is forecast by analysts to grow by 4.5% in 2011.330 High oil prices could negatively influence

airline capacity, and some airlines have already publicised capacity reductions for the winter.331

Container vessel orders declined 30% in 2010, compared to 45% in 2009, owing to order delays rather than

cancellations.332 In 2011, analysts believe the containers supply overhang may adversely affect the freight

rates outlook for head haul routes, particularly between Asia and Europe.333 Freight rates for containers trading

between Asia and Europe are expected to decline 16% in 2011, and 4% in 2012, with expected recovery in

2013.334 Additionally, sea freight fleet growth is expected to accelerate over the next few years; the fleet is

forecast to grow 9% year-over-year in 2011 and 9.8% year-over year in 2012.335 Analysts expect crude tanker

fleet utilisation to continue declining until mid-2013, as the sector is experiencing a multi-year downturn

partially due to over-supply.336 Fleet growth for bulk carriers is forecast to be 13% in 2011, surpassing

expected demand growth of 7%, despite the anticipated slippage in orders.337 In the next two years, analysts

believe cash conservation will become essential for ship owners, as crude tankers and bulkers are currently

experiencing a multi-year downturn.338

In 2011, analysts expect the European toll road sector to experience positive performance driven by the

increase in traffic volumes and the conclusion of risks attributable to the corporate sector.339 In March 2011,

the European Commission adopted the Transport 2050 strategy for a competitive transport system that will

expand mobility, eliminate obstacles in important areas, and stimulate growth and employment.340 The

proposals under this plan target a 60% reduction in transport emissions and a considerable decrease in

Europe’s dependence on imported oil by 2050. By 2050, the primary goals will include: no more

conventionally-fuelled cars in cities; 40% utilisation of sustainable low carbon fuels in aviation and at least

40% reduction in shipping emissions; and a 50% shift of medium distance intercity passenger and freight

journeys from road to rail and waterborne transport.341 On June 23, 2011, the EU signed an agreement on the

accession by the EU to the Convention concerning Internal Carriage by Rail (COTIF), which will enable the EU

to expand its influence on international rail issues.342


90

Table 20

Transportation—Companies Included

Impairment Climate

The market capitalisation of the Transportation industry has followed the development of the STOXX Europe

600 fairly closely, and is just below its level of January 2006. However, compared to its peak in July 2007,

companies have lost almost 30% of their market value as of December 2010.

Chart 60Transportation—Development of Market Capitalisation, Purchase Price Paid and Goodwill Impairment


Transportation companies made acquisitions totalling Euro 19 billion between 2006 and December 2010. At

fiscal year-end 2010, the industry reported a total of Euro 25 billion of goodwill, of which Euro 9.2 billion was

acquired during 2006 to 2010. Notable acquisitions carried out include those of:343

Societies des Autoroutes du Nord-Est de La France Group by Abertis Infraestructuras in 2006; and

Laidlaw by FirstGroup in 2008.

A.P. Møller - Mærsk A/S Abertis Infraestructuras S.A. Aeroports de Paris Air France-KLM

Atlantia SpA Brisa - Auto-Estradas de Portugal S.A. British Airways Plc Deutsche Lufthansa AG

Deutsche Post AG DSV A/S Firstgroup plc Fraport AG

Groupe Eurotunnel S.A. Iberia Lineas Aereas de Espana S.A. Kuehne & Nagel International AG PostNL N.V.

Royal Vopak N.V. Ryanair Holdings plc Stagecoach Group plc

15 53

68588 48

8,806

3,013

4,963

2,501

186

0

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2006 2007 2008 2009 2010

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100%

150%

200%

250%


Goodwill Impairment (EURm) Purchase Price Paid (EURm) STOXX Europe 600 Transportation


91

As of fiscal year 2010, Transportation companies booked total impairments of Euro 0.7 billion, with the largest

amount relating to the impairment of fixed assets at Euro 0.6 billion (84.6%), followed by the impairment of

intangible assets at less than Euro 0.1 billion (8.7%), and the remaining less than Euro 0.1 billion (6.8%)

relating to the impairment of goodwill.

Booked goodwill impairments in fiscal year 2010 were 46% below the booked impairments of fiscal year 2009

at Euro 0.09 billion. Goodwill impairments for the period spanning 2006 to 2010 equals 10% of the goodwill

acquired in the same period. In addition, the total purchase price paid represents almost 14% of the market

capitalisation (PPP/MC ratio) as of December 31, 2010, whereas, booked goodwill impairment (2006 to

December 2010) covers only 5% of the total purchase price paid. As of December 31, 2010, 10% of

Transportation companies showed book value of equity close to or above market capitalisation.

Chart 61Transportation—Distribution of Market Capitalisation and Book Value of Equity


Taking into consideration the MC/BVE and PPP/MC ratios, Transportation had an overall score of 1.4 as of

December 2010 (and 1.6 at December 2009). The IRF for the industry indicates Sunny conditions, with no

company in Stormy territory.

0% 10% 10%

20%

60%

0% 5% 5%

21%

68%

0 1 1

4

13

2 2

4

12

0%

10%

20%

30%

40%

50%

60%

70%

80%


Between 90%and 110%


Above 150%

Per

cent

age

ofC

ompa

nies



92

Chart 62

Transportation—IRF Distribution


10%

100%

1000%

0% 1% 10% 100% 1000%Mar

ketC

apit

alis

atio

n/

Boo

kVa

lue

ofE

quit

y


25%

Rainy

Sunny

Stormy

Cloudy


93

Appendix I – About the Authors

Dr. Marc Hayn

Dr. Hayn is a Managing Director in Houlihan Lokey’s Frankfurt office and Head of Northern Europe’s Financial

Advisory Services business. He specialises in corporate finance and has assisted clients in complex business

valuations, as well as conceptualising and implementing value based-management systems. He has carried out

a large number of valuations for the purposes of group reorganisations, purchase price allocations, impairment

tests, squeeze outs, domination and profit and loss transfer agreements, mergers, management participation

plan and portfolios.

Dr. Hayn teaches business valuation at the University of the Saarland and is a frequent guest speaker on

valuation. Also, he has published articles and books on topics such as new valuation techniques and valuation

for tax and accounting purposes.

Dr. Tim Laas

Dr. Laas is a Senior Vice President in Houlihan Lokey’s Frankfurt office, where he is a member of the firm’s

Financial Advisory Services business. He has more than a decade of experience providing valuation and

financial opinion services across several industries.

His valuations have been carried out for various purposes such as valuations for group reorganisations,

purchase price allocations, impairment tests, squeeze outs, domination and profit and loss transfer

agreements, mergers, management participation plan and portfolios.

Dr. Laas is a frequent guest speaker on valuations and has published articles and books on topics such as

valuation techniques with respect to personal taxes and valuation for tax and accounting purposes.


94

E.W. (Sandy) Purcell

Mr. Purcell is a Senior Managing Director in Houlihan Lokey’s London office and Head of the international

Financial Advisory Services business, where he manages valuation, financial advisory, and opinion services for

clients involved in domestic and cross-border transactions.

With more than two decades of experience in the financial services and advisory industry, Mr. Purcell has been

involved in providing fairness and solvency (capital adequacy) opinions on numerous U.S. and European

transactions. He also provides technical expertise on financial due diligence, strategic business valuation,

financial restructurings and divestitures.

He has significant experience with the valuation of securitised vehicles and structured investment vehicles

(SIVs), and has advised numerous hedge fund and private equity sponsors on the valuation of their portfolio

assets. He has structured, negotiated and closed complex financial and capital transactions in many industries,

including transportation, financial services, telecommunications, energy, aviation, consumer products and

industrial products.

Mr. Purcell has taught business valuation of privately held companies at Northwestern University and is a

frequent speaker on valuation, capital markets and other financial issues. In addition, he is a member of the

Institute of Directors (IoD), the Confederation of British Industry (CBI), the Association of Corporate Growth

(ACG), the Valuation Special Interest Group of the Institute of Chartered Accountants in England & Wales

(ICAEW), the Society of Share and Business Valuers, and the Business Valuation Association.


95

Appendix II - Glossary

4G In telecommunications 4G is the fourth generation of cellular wireless standards.

BVE Book value of equity: Written down value of an asset as shown on a firm’s balance

sheet. Book value of equity is computed by deducting accumulated depreciation

from the purchase price of the asset. According to GAAP provisions, an asset’s

book value of equity cannot show any increase or decrease in the asset’s market

value; it rarely reflects the asset’s true worth.

EBT Earnings before taxes

EU European Union

GAAP Generally Accepted Accounting Principles

GDP Gross domestic product

IAS International Accounting Standards

IFRS International Financial Reporting Standards

IRF Impairment Risk Factor: Concept developed by Houlihan Lokey, differentiated into

four categories that provides an indication of the potential impairment risk.

MC Market capitalisation: On-going market valuation of a public firm computed by

multiplying the number of outstanding shares with the current share market price.

It is, however, not necessarily the price a buyer would pay for the entire firm. And

it is not a realistic estimate of the firm’s actual size because a share’s market

price is based on trading in only a fraction of the firm’s total outstanding shares.

OECD Organisation for Economic Co-operation and Development

PPP Purchase price paid

Q Quarter

STOXX Europe 600 Index The STOXX Europe 600 Index is derived from the STOXX Europe Total Market

Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed

number of 600 components, the STOXX Europe 600 Index represents large, mid

and small capitalisation companies across 18 countries of the European region:

Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland,

Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,

Switzerland and the United Kingdom.

WiFi Wireless fidelity


96

Appendix III - List of Companies

Company Industry3i Group plc Financial Institutions Group – Other

A.P. Møller - Mærsk A/S Transportation

A2A SpA Energy

Aalberts Industries Basic Industrials Group – Other

ABB Ltd. Basic Industrials Group – Other

Aberdeen Asset Management PLC Financial Institutions Group – Other

Abertis Infraestructuras S.A. Transportation

Acciona S.A. Energy

Accor S.A. Real Estate, Lodging and Leisure

Acerinox S.A. Basic Industrials Group – Metals

Ackermans & Van Haaren N.V. Financial Institutions Group – Other

Actelion Ltd. Healthcare

Actividades de Construcción y Servicios, S.A Engineering, Construction and Building Products

Adecco S.A. Business Services and Management Consulting

Adidas AG Consumer Products, Food and Retail

Admiral Group plc Financial Institutions Group – Insurance

Aegis Group plc Media, Sports and Entertainment

AEGON N.V. Financial Institutions Group – Insurance

Aeroports de Paris Transportation

AGEAS Financial Institutions Group – Insurance

Aggreko plc Business Services and Management Consulting

Air France-KLM Transportation

Aixtron AG Technology and IT

Aker Solutions ASA Energy

Akzo Nobel N.V. Basic Industrials Group – Chemicals

Alcatel-Lucent Technology and IT

Alfa Laval AB Basic Industrials Group – Other

Allianz SE Financial Institutions Group – Insurance

Alpha Bank S.A. Financial Institutions Group – Banks

Alpiq Holding AG Energy

Alstom S.A. Basic Industrials Group – Other

Amadeus IT Holding Business Services and Management Consulting

AMEC plc Energy

Amlin plc Financial Institutions Group – Insurance

Andritz AG Basic Industrials Group – Other

Anglo American plc Basic Industrials Group – Metals

Anheuser-Busch InBev Consumer Products, Food and Retail

Antofagasta plc Basic Industrials Group – Metals

Aperam Basic Industrials Group – Metals

Arcelor Mittal Basic Industrials Group – Metals

Arkema S.A. Basic Industrials Group – Chemicals

ARM Holdings plc Technology and IT

ARYZTA AG Consumer Products, Food and Retail

Ashmore Group PLC Financial Institutions Group – Other

ASML Holding N.V. Technology and IT

Assa Abloy AB Engineering, Construction and Building Products

Assicurazioni Generali SpA Financial Institutions Group – Insurance

Associated British Foods plc Consumer Products, Food and Retail


97

Company IndustryAstraZeneca plc Healthcare

Atlantia SpA Transportation

Atlas Copco Group Basic Industrials Group – Other

Atos Origin S.A. Business Services and Management Consulting

Aurubis AG Basic Industrials Group – Metals

Autonomy Corp. plc Technology and IT

Aviva plc Financial Institutions Group – Insurance

AXA Financial Institutions Group – Insurance

Babcock International Group plc Business Services and Management Consulting

BAE Systems plc Aerospace, Defence and Government Services

Balfour Beatty plc Engineering, Construction and Building Products

Baloise-Holding Financial Institutions Group – Insurance

Banca Carige SpA Financial Institutions Group – Banks

Banca Monte dei Paschi di Siena SpA Financial Institutions Group – Banks

Banca Popolare dell'Emilia Romagna Scrl Financial Institutions Group – Banks

Banca Popolare di Milano Scrl Financial Institutions Group – Banks

Banca Popolare di Sondrio SCARL Financial Institutions Group – Banks

Banco Bilbao Vizcaya Argentaria, S.A. Financial Institutions Group – Banks

Banco Comercial Portugues S.A. Financial Institutions Group – Banks

Banco de Sabadell S.A. Financial Institutions Group – Banks

Banco de Valencia S.A. Financial Institutions Group – Banks

Banco Espirito Santo S.A. Financial Institutions Group – Banks

Banco Popolare SC Financial Institutions Group – Banks

Banco Popular Espanol S.A. Financial Institutions Group – Banks

Banco Santander, S.A. Financial Institutions Group – Banks

Bank of Piraeus S.A. Financial Institutions Group – Banks

Bankinter S.A. Financial Institutions Group – Banks

Barclays plc Financial Institutions Group – Banks

Barratt Developments PLC Real Estate, Lodging and Leisure

BASF SE Basic Industrials Group – Chemicals

Bayer AG Healthcare

Beiersdorf AG Consumer Products, Food and Retail

Bekaert S.A. Basic Industrials Group – Other

Belgacom S.A. Telecommunications

Berkeley Group Holdings plc Real Estate, Lodging and Leisure

BG Group plc Energy

BHP Billiton plc Basic Industrials Group – Metals

Bilfinger Berger AG Engineering, Construction and Building Products

BioMérieux S.A. Healthcare

BMW Group Automotive

BNP Paribas Financial Institutions Group – Banks

Boliden AB Basic Industrials Group – Metals

Bolsas y Mercados Españoles S.A. Financial Institutions Group – Other

Bourbon Energy

Bouygues SA Engineering, Construction and Building Products

BP plc Energy

Brenntag Basic Industrials Group – Chemicals

Brisa - Auto-Estradas de Portugal S.A. Transportation

British Airways Plc Transportation

British American Tobacco plc Consumer Products, Food and Retail


98

Company IndustryBritish Land Co. plc Real Estate, Lodging and Leisure

British Sky Broadcasting Group plc Media, Sports and Entertainment

Britvic Consumer Products, Food and Retail

BT Group plc Telecommunications

Bulgari SpA Consumer Products, Food and Retail

Bunzl plc Consumer Products, Food and Retail

Burberry Group plc Consumer Products, Food and Retail

Bureau Veritas S.A. Business Services and Management Consulting

C&C Group Consumer Products, Food and Retail

Cable & Wireless Worldwide Telecommunications

Cable and Wireless Communications Telecommunications

Cairn Energy plc Energy

Cap Gemini S.A. Business Services and Management Consulting

Capita Group plc Business Services and Management Consulting

Capital Shopping Centres GRP Real Estate, Lodging and Leisure

Carillion plc Engineering, Construction and Building Products

Carlsberg A/S Consumer Products, Food and Retail

Carnival plc Real Estate, Lodging and Leisure

Carrefour S.A. Consumer Products, Food and Retail

Casino Guichard Perrachon & Cie S.A. Consumer Products, Food and Retail

Castellum AB Real Estate, Lodging and Leisure

Catlin Group Ltd. Financial Institutions Group – Insurance

Celesio AG Healthcare

Centrica plc Energy

Charter International plc Basic Industrials Group – Other

Chemring Group plc Aerospace, Defence and Government Services

Chocoladefabriken Lindt & Spruengli AG Consumer Products, Food and Retail

Christian Dior S.A. Consumer Products, Food and Retail

Clariant AG Basic Industrials Group – Chemicals

Close Brothers Group plc Financial Institutions Group – Banks

CNP Assurances S.A. Financial Institutions Group – Insurance

Cobham plc Aerospace, Defence and Government Services

Coca-Cola Hellenic Bottling Company S.A. Consumer Products, Food and Retail

Cofinimmo S.A. Real Estate, Lodging and Leisure

Coloplast A/S Healthcare

Commerzbank AG Financial Institutions Group – Banks

Compagnie Financiere Richemont S.A. Consumer Products, Food and Retail

Compagnie Générale de Géophysique-Veritas Energy

Compagnie Generale DES Etablissements Michelin SCA Automotive

Compass Group plc Consumer Products, Food and Retail

Continental AG Automotive

Cookson Group PLC Basic Industrials Group – Other

Corio N.V. Real Estate, Lodging and Leisure

Credit Agricole S.A. Financial Institutions Group – Banks

Credit Suisse Group Financial Institutions Group – Banks

CRH plc Engineering, Construction and Building Products

Criteria CaixaCorp, S.A. Financial Institutions Group – Other

Croda International plc Basic Industrials Group – Chemicals

CSM N.V. Consumer Products, Food and Retail

Daily Mail and General Trust plc Media, Sports and Entertainment


99

Company IndustryDaimler AG Automotive

Danone Consumer Products, Food and Retail

Danske Bank A/S Financial Institutions Group – Banks

Dassault Systemes S.A. Technology and IT

Davide Campari Consumer Products, Food and Retail

DCC plc Basic Industrials Group – Other

Debenhams plc Consumer Products, Food and Retail

Delhaize Group Consumer Products, Food and Retail

Delta Lloyd N.V. Financial Institutions Group – Insurance

Derwent London plc Real Estate, Lodging and Leisure

Deutsche Bank AG Financial Institutions Group – Banks

Deutsche Boerse AG Financial Institutions Group – Other

Deutsche Lufthansa AG Transportation

Deutsche Post AG Transportation

Deutsche Telekom AG Telecommunications

Dexia SA Financial Institutions Group – Banks

Diageo plc Consumer Products, Food and Retail

Dixons Retail Consumer Products, Food and Retail

DnB NOR ASA Financial Institutions Group – Banks

Dragon Oil PLC Energy

Drax Group plc. Energy

DSV A/S Transportation

Dufry Group Consumer Products, Food and Retail

E.ON AG Energy

Ebro Puleva S.A. Consumer Products, Food and Retail

Edenred Consumer Products, Food and Retail

EDP Renováveis Energy

EDP-Energias de Portugal, S.A. Energy

Eiffage S.A. Engineering, Construction and Building Products

Elan Corp. plc Healthcare

Electricité de France Energy

Electrocomponents Technology and IT

Electrolux AB Consumer Products, Food and Retail

Elekta AB Healthcare

Elisa Oyj Telecommunications

Enagas S.A. Energy

Endesa S.A. Energy

ENEL Greenpower Energy

Enel SpA Energy

Eni SpA Energy

Eramet S.A. Basic Industrials Group – Metals

Erste Group Bank AG Financial Institutions Group – Banks

Essar Energy Energy

Essilor International Healthcare

ETS Fr Colruyt S.A. Consumer Products, Food and Retail

Eurasian Natural Resources Corp Plc Basic Industrials Group – Metals

Eurazeo Financial Institutions Group – Other

Eurocommercial Properties Real Estate, Lodging and Leisure

European Aeronautic Defence and Space Company EADS N.V. Aerospace, Defence and Government Services

Eutelsat Communications Media, Sports and Entertainment


100

Company IndustryEvrobanka EFG tedionica Financial Institutions Group – Banks

EXOR Financial Institutions Group – Other

Experian plc Business Services and Management Consulting

Fiat Industrial Automotive

Fiat S.p.A. Automotive

Finmeccanica SpA Aerospace, Defence and Government Services

Firstgroup plc Transportation

FLSmidth & Co. A/S Engineering, Construction and Building Products

Fomento de Construcciones y Contratas, S.A. Engineering, Construction and Building Products

Fonciere des Regions Real Estate, Lodging and Leisure

Fortum Oyj Energy

France Telecom Telecommunications

Fraport AG Transportation

Fresenius Medical Care AG & Co. KGAA Healthcare

Fresenius SE Healthcare

Fresnillo PLC Basic Industrials Group – Metals

Fugro N.V. Energy

G4S plc Business Services and Management Consulting

Galenica Ltd. Healthcare

Galp Energia SGPS SA. Energy

GAM Holding AG Financial Institutions Group – Other

Gamesa Corporación Tecnológica S.A. Basic Industrials Group – Other

Gas Natural SDG S.A. Energy

GDF Suez Energy

GEA Group AG Basic Industrials Group – Other

Geberit AG Engineering, Construction and Building Products

Gecina S.A. Real Estate, Lodging and Leisure

Gemalto N.V. Technology and IT

Georg Fischer Basic Industrials Group – Other

Gestevision Telecinco S.A. Media, Sports and Entertainment

Getinge AB Healthcare

Givaudan AG Basic Industrials Group – Chemicals

GKN plc Automotive

GlaxoSmithKline plc Healthcare

GN Store Nord Healthcare

Great Portland Estates Real Estate, Lodging and Leisure

Greene King plc Consumer Products, Food and Retail

Grifols, S.A. Healthcare

Groupe Bruxelles Lambert S.A. Financial Institutions Group – Other

Groupe Eurotunnel S.A. Transportation

Grupo Ferrovial S.A. Engineering, Construction and Building Products

Halfords Consumer Products, Food and Retail

Halma plc Technology and IT

Hammerson plc Real Estate, Lodging and Leisure

Hannover Rückversicherung AG Financial Institutions Group – Insurance

Hargreaves Lansdown Financial Institutions Group – Other

Hays plc Business Services and Management Consulting

HeidelbergCement AG Engineering, Construction and Building Products

Heineken Holding N.V. Consumer Products, Food and Retail

Heineken N.V. Consumer Products, Food and Retail


101

Company IndustryHelvetia Versicherungen AG Financial Institutions Group – Insurance

Henderson Group PLC Financial Institutions Group – Other

Henkel AG & Co. KGaA Vz Consumer Products, Food and Retail

Hennes & Mauritz AB Consumer Products, Food and Retail

Hermes International S.A. Consumer Products, Food and Retail

Hexagon AB Basic Industrials Group – Other

Hikma Pharmaceuticals Healthcare

Hochtief AG Engineering, Construction and Building Products

Holcim Ltd. Engineering, Construction and Building Products

Holmen AB Engineering, Construction and Building Products

Home Retail Group Consumer Products, Food and Retail

Homeserve Plc Business Services and Management Consulting

HSBC Holdings plc Financial Institutions Group – Banks

Husqvarna AB Consumer Products, Food and Retail

Iberdrola Renovables S.A. Energy

Iberdrola S.A. Energy

Iberia Lineas Aereas de Espana S.A. Transportation

Icade Real Estate, Lodging and Leisure

ICAP plc Financial Institutions Group – Other

IG Group Holdings Plc Financial Institutions Group – Other

Iliad S.A. Telecommunications

Imerys SA Engineering, Construction and Building Products

IMI plc Basic Industrials Group – Other

Immofinanz AG Real Estate, Lodging and Leisure

Imperial Tobacco Group plc Consumer Products, Food and Retail

Imtech N.V. Engineering, Construction and Building Products

Inchcape PLC Automotive

Inditex S.A. Consumer Products, Food and Retail

Indra Sistemas, S.A. Business Services and Management Consulting

Industrivärden Financial Institutions Group – Other

Infineon Technologies AG Technology and IT

Informa plc Media, Sports and Entertainment

ING Groep N.V. Financial Institutions Group – Banks

Inmarsat Plc Telecommunications

Intercontinental Hotels Group plc Real Estate, Lodging and Leisure

Intermediate Capital Group PLC Financial Institutions Group – Other

International Power plc Energy

Intertek Group plc Business Services and Management Consulting

Intesa Sanpaolo SpA Financial Institutions Group – Banks

Invensys plc Basic Industrials Group – Other

Investec plc Financial Institutions Group – Banks

Investment AB Kinnevik Financial Institutions Group – Other

Investor AB Financial Institutions Group – Other

ITV plc Media, Sports and Entertainment

J. Sainsbury plc Consumer Products, Food and Retail

Jardine Lloyd Thompson Group plc Financial Institutions Group – Insurance

JCDecaux S.A. Media, Sports and Entertainment

Jeronimo Martins SGPS S.A. Consumer Products, Food and Retail

JM AB Real Estate, Lodging and Leisure

John Wood Group plc Energy


102

Company IndustryJohnson Matthey plc Basic Industrials Group – Chemicals

Julius Bär Gruppe AG Financial Institutions Group – Other

Jyske Bank A/S Financial Institutions Group – Banks

K+S Aktiengesellschaft Basic Industrials Group – Chemicals

Kabel Deutschland Media, Sports and Entertainment

Kazakhmys PLC Basic Industrials Group – Metals

KBC Group N.V. Financial Institutions Group – Banks

Kemira Group Basic Industrials Group – Chemicals

Kerry Group plc Consumer Products, Food and Retail

Kesko Oyj Consumer Products, Food and Retail

KingFisher plc Consumer Products, Food and Retail

Klepierre S.A. Real Estate, Lodging and Leisure

Kloeckner & Co SE Basic Industrials Group – Metals

Kone Oyj Basic Industrials Group – Other

Konecranes Plc Basic Industrials Group – Other

Koninklijke Ahold N.V. Consumer Products, Food and Retail

Koninklijke Philips Electronics N.V. Basic Industrials Group – Other

Kuehne & Nagel International AG Transportation

Ladbrokes PLC Media, Sports and Entertainment

Lafarge S.A. Engineering, Construction and Building Products

Lagardere SCA Media, Sports and Entertainment

L'Air Liquide S.A. Basic Industrials Group – Other

Land Securities Group plc Real Estate, Lodging and Leisure

Lanxess AG Basic Industrials Group – Chemicals

Legal & General Group Plc Financial Institutions Group – Insurance

Legrand S.A. Basic Industrials Group – Other

Lloyds Banking Group plc Financial Institutions Group – Banks

LM Ericsson Telephone Co. Technology and IT

Logica PLC Business Services and Management Consulting

Logitech International S.A. Technology and IT

London Stock Exchange Group plc Financial Institutions Group – Other

Lonmin plc Basic Industrials Group – Metals

Lonza Group AG Healthcare

L'Oreal S.A. Consumer Products, Food and Retail

Lundin Petroleum AB Energy

Luxottica Group SpA Consumer Products, Food and Retail

LVMH Moet Hennessy Louis Vuitton Consumer Products, Food and Retail

Man Group plc Financial Institutions Group – Other

Man SE Basic Industrials Group – Other

Mapfre S.A. Financial Institutions Group – Insurance

Marine Harvest ASA Consumer Products, Food and Retail

Marks & Spencer Group plc Consumer Products, Food and Retail

Meda AB Healthcare

Mediaset SpA Media, Sports and Entertainment

Mediobanca S.p.A. Financial Institutions Group – Banks

Meggitt PLC Aerospace, Defence and Government Services

Merck & Co. Inc. Healthcare

Metro AG Consumer Products, Food and Retail

Metropole Television M6 Media, Sports and Entertainment

Metso Corp. Basic Industrials Group – Other


103

Company IndustryMeyer Burger Technology Technology and IT

Michael Page International plc Business Services and Management Consulting

Micro Focus International PLC Technology and IT

Misys plc Technology and IT

Mitchells & Butlers plc Consumer Products, Food and Retail

Mitie Group plc Business Services and Management Consulting

Mobistar S.A. Telecommunications

Modern Times Group Mtg AB Media, Sports and Entertainment

Mondi plc Basic Industrials Group – Other

MTU Aero Engines Holding AG Aerospace, Defence and Government Services

Munich Re Group Financial Institutions Group – Insurance

National Bank of Greece S.A. Financial Institutions Group – Banks

National Express GRP Real Estate, Lodging and Leisure

National Grid plc Energy

Natixis Financial Institutions Group – Banks

Neopost S.A. Technology and IT

Neste Oil Corp. Energy

Nestlé S.A. Consumer Products, Food and Retail

Nexans S.A. Basic Industrials Group – Other

Next Group plc Consumer Products, Food and Retail

Nobel Biocare Holding AG Healthcare

Nokia Corp. Technology and IT

Nokian Tyres Oyj Automotive

Nordea Bank AB Financial Institutions Group – Banks

Norsk Hydro ASA Basic Industrials Group – Metals

Northumbrian Water Group plc Energy

Novartis AG Healthcare

Novo Nordisk A/S Healthcare

Novozymes A/S Basic Industrials Group – Chemicals

Nutreco Holding N.V. Consumer Products, Food and Retail

Old Mutual plc Financial Institutions Group – Insurance

OMV Aktiengesellschaft Energy

OPAP S.A. Media, Sports and Entertainment

Oriflame Cosmetics S.A. Consumer Products, Food and Retail

Orion Corp. Healthcare

Orkla ASA Basic Industrials Group – Other

OTE Telecommunications

Outokumpu Oyj Basic Industrials Group – Metals

Outotec Engineering, Construction and Building Products

Paddy Power Real Estate, Lodging and Leisure

PagesJaunes Groupe Media, Sports and Entertainment

Pandora Consumer Products, Food and Retail

Pargesa Holding S.A. Financial Institutions Group – Other

Parmalat SpA Consumer Products, Food and Retail

Partners Group Holding AG Financial Institutions Group – Other

Pearson plc Media, Sports and Entertainment

Pennon Group plc Energy

Pernod-Ricard S.A. Consumer Products, Food and Retail

Persimmon plc Real Estate, Lodging and Leisure

Petrofac Ltd. Energy


104

Company IndustryPetroleum Geo Services ASA Energy

Petropavlovsk PLC Basic Industrials Group – Metals

Pirelli & C. SpA Automotive

Pohjola Bank plc Financial Institutions Group – Banks

Porsche Automobile Holding SE Automotive

Portugal Telecom SGPS S.A. Telecommunications

PostNL N.V. Transportation

PPR S.A. Consumer Products, Food and Retail

Premier Oil plc Energy

Prosiebensat.1 Media Media, Sports and Entertainment

Provident Financial plc Financial Institutions Group – Other

Prudential plc Financial Institutions Group – Insurance

Prysmian S.p.A. Basic Industrials Group – Other

PSA Peugeot Citroen Automotive

PSP Swiss Property AG Real Estate, Lodging and Leisure

Public Power Corporation S.A. Energy

Publicis Groupe S.A. Media, Sports and Entertainment

Puma AG Rudolf Dassler Sport Consumer Products, Food and Retail

Qiagen N.V. Healthcare

Raiffeisen International Bank-Holding AG Financial Institutions Group – Banks

Randgold Resources Ltd. Basic Industrials Group – Metals

Randstad Holding N.V. Business Services and Management Consulting

Ratos AB Financial Institutions Group – Other

Rautaruukki Corporation Basic Industrials Group – Metals

Reckitt Benckiser Group plc Consumer Products, Food and Retail

Red Eléctrica Corporación S.A. Energy

Reed Elsevier N.V. Media, Sports and Entertainment

Reed Elsevier plc Media, Sports and Entertainment

Renault S.A. Automotive

Renewable Energy Corp. ASA Basic Industrials Group – Other

Rentokil Initial plc Business Services and Management Consulting

Repsol YPF S.A. Energy

Rexam plc Basic Industrials Group – Other

Rheinmetall AG Basic Industrials Group – Other

Rhodia S.A. Basic Industrials Group – Chemicals

Rhoen Klinikum AG Healthcare

Rio Tinto plc Basic Industrials Group – Metals

Roche Holding AG Healthcare

Rolls-Royce Group plc Aerospace, Defence and Government Services

Rotork plc Technology and IT

Royal Bank of Scotland Group plc Financial Institutions Group – Banks

Royal Boskalis Westminster N.V. Engineering, Construction and Building Products

Royal DSM N.V. Basic Industrials Group – Chemicals

Royal Dutch Shell plc Energy

Royal KPN N.V. Telecommunications

Royal Vopak N.V. Transportation

RSA Insurance Group plc. Financial Institutions Group – Insurance

RWE AG Energy

Ryanair Holdings plc Transportation

SABMiller plc Consumer Products, Food and Retail


105

Company IndustrySafran S.A. Aerospace, Defence and Government Services

Sage Group plc Technology and IT

Saint Gobain Engineering, Construction and Building Products

Saipem SpA Energy

Salzgitter AG Basic Industrials Group – Metals

Sampo Oyj Financial Institutions Group – Insurance

Sandvik AB Basic Industrials Group – Other

Sanofi-Aventis Healthcare

Sanoma Oyj Media, Sports and Entertainment

SAP AG Technology and IT

SBM Offshore N.V. Energy

Scania AB Basic Industrials Group – Other

Schibsted ASA Media, Sports and Entertainment

Schindler Holding AG Basic Industrials Group – Other

Schneider Electric S.A. Basic Industrials Group – Other

Schroders plc Financial Institutions Group – Other

SCOR SE Financial Institutions Group – Insurance

Scottish & Southern Energy plc Energy

SeaDrill Ltd. Energy

SEB S.A. Consumer Products, Food and Retail

Securitas AB Business Services and Management Consulting

SEGRO plc Real Estate, Lodging and Leisure

Serco Group plc Business Services and Management Consulting

SES S.A. Telecommunications

Severn Trent plc Energy

SGL Carbon SE Basic Industrials Group – Other

SGS S.A. Business Services and Management Consulting

Shire Ltd. Healthcare

Siemens AG Basic Industrials Group – Other

Sika AG Basic Industrials Group – Chemicals

Skandinaviska Enskilda Banken AB Financial Institutions Group – Banks

Skanska AB Engineering, Construction and Building Products

SKF AB Basic Industrials Group – Other

Smith & Nephew plc Healthcare

Smiths Group plc Basic Industrials Group – Other

SNAM Rete Gas SpA Energy

Societe Bic Consumer Products, Food and Retail

Societe Generale Group Financial Institutions Group – Banks

Sodexo Consumer Products, Food and Retail

Sofina S.A. Financial Institutions Group – Other

Software AG Technology and IT

Solvay S.A. Basic Industrials Group – Chemicals

Sonova Holding AG Healthcare

Spectris Technology and IT

Spirax-Sarco Engineering PLC Engineering, Construction and Building Products

Springer (Axel) Media, Sports and Entertainment

SSAB AB Basic Industrials Group – Metals

Stada-Arzneimittel AG Healthcare

Stagecoach Group plc Transportation

Standard Chartered PLC Financial Institutions Group – Banks


106

Company IndustryStandard Life plc Financial Institutions Group – Insurance

StatoilHydro ASA Energy

STMicroelectronics N.V. Technology and IT

Stora Enso Corp. Basic Industrials Group – Other

Storebrand ASA Financial Institutions Group – Insurance

Straumann Holding AG Healthcare

Subsea7 Energy

Suedzucker AG Consumer Products, Food and Retail

Suez Environnement S.A. Energy

Sulzer, Ltd. Basic Industrials Group – Other

Svenska Cellulosa Aktiebolaget, SCA Basic Industrials Group – Other

Svenska Handelsbanken AB Financial Institutions Group – Banks

Swatch Group AG Consumer Products, Food and Retail

Swedbank AB Financial Institutions Group – Banks

Swedish Match AB Consumer Products, Food and Retail

Swiss Life Holding Financial Institutions Group – Insurance

Swiss Prime Site AG Real Estate, Lodging and Leisure

Swiss Reinsurance Co. Financial Institutions Group – Insurance

Swisscom AG Telecommunications

Sydbank A/S Financial Institutions Group – Banks

Symrise AG Basic Industrials Group – Chemicals

Syngenta AG Basic Industrials Group – Chemicals

Synthes Inc. Healthcare

Tate & Lyle plc Consumer Products, Food and Retail

Taylor Wimpey PLC Real Estate, Lodging and Leisure

TDC Telecommunications

Technip Energy

Tecnicas Reunidas S.A. Engineering, Construction and Building Products

Tele2 AB Telecommunications

Telecom Italia SpA Telecommunications

Telefonica S.A. Telecommunications

Telekom Austria AG Telecommunications

Telenet Group Holding N.V. Telecommunications

Telenor ASA Telecommunications

Teleperformance Business Services and Management Consulting

Television Francaise 1 S.A. Media, Sports and Entertainment

TeliaSonera AB Telecommunications

Temenos Group AG Technology and IT

Tenaris S.A. Energy

Terna Rete Elettrica Nazionale SpA Energy

Tesco PLC Consumer Products, Food and Retail

TGS Nopec Geophysical Co ASA Energy

Thales Aerospace, Defence and Government Services

The Governor and Company of The Bank of Ireland Financial Institutions Group – Banks

The Linde Group Basic Industrials Group – Other

The Weir Group PLC Basic Industrials Group – Other

Thomas Cook Group plc Real Estate, Lodging and Leisure

ThyssenKrupp AG Basic Industrials Group – Metals

Tognum AG Basic Industrials Group – Other

Topdanmark A/S Financial Institutions Group – Insurance


107

Company IndustryTotal S.A. Energy

Travis Perkins plc Consumer Products, Food and Retail

Trelleborg AB Basic Industrials Group – Other

TrygVesta A/S Financial Institutions Group – Insurance

TUI Travel PLC Real Estate, Lodging and Leisure

Tullow Oil plc Energy

UBS AG Financial Institutions Group – Banks

UCB S.A. Healthcare

Ultra Electronics Holdings plc Aerospace, Defence and Government Services

Umicore S.A. Basic Industrials Group – Chemicals

Unibail-Rodamco SE Real Estate, Lodging and Leisure

UniCredit S.p.A. Financial Institutions Group – Banks

Unilever N.V. Consumer Products, Food and Retail

Unilever plc Consumer Products, Food and Retail

Unione di Banche Italiane Scpa Financial Institutions Group – Banks

United Business Media plc Media, Sports and Entertainment

United Internet AG Technology and IT

United Utilities Group PLC Energy

UPM-Kymmene Corp. Basic Industrials Group – Other

Valeo S.A. Automotive

Valiant Holding AG Financial Institutions Group – Banks

Vallourec S.A. Basic Industrials Group – Other

Vedanta Resources plc Basic Industrials Group – Metals

Veolia Environnement S.A. Energy

Verbund AG Energy

Vestas Wind Systems A/S Basic Industrials Group – Other

Victrex Basic Industrials Group – Chemicals

Vienna Insurance Group Financial Institutions Group – Insurance

Vinci S.A. Engineering, Construction and Building Products

Vivendi Media, Sports and Entertainment

Vodafone Group plc Telecommunications

Voestalpine AG Basic Industrials Group – Metals

Volkswagen AG Automotive

Volvo AB Basic Industrials Group – Other

Wacker Chemie AG Basic Industrials Group – Chemicals

Wärtsilä Oyj Abp Basic Industrials Group – Other

Wendel Financial Institutions Group – Other

Wereldhave N.V. Real Estate, Lodging and Leisure

Whitbread plc Consumer Products, Food and Retail

Wienerberger Baustoffindustrie AG Engineering, Construction and Building Products

William Demant Holding A/S Healthcare

William Hill plc Media, Sports and Entertainment

Wincor Nixdorf AG Technology and IT

Wm. Morrison Supermarkets plc Consumer Products, Food and Retail

Wolseley plc Consumer Products, Food and Retail

Wolters Kluwer N.V. Media, Sports and Entertainment

WPP plc Media, Sports and Entertainment

Xstrata plc Basic Industrials Group – Metals

Yara International ASA Basic Industrials Group – Chemicals

YIT Oyj Engineering, Construction and Building Products


108

Company IndustryZardoya Otis, S.A. Basic Industrials Group – Other

Zodiac S.A. Aerospace, Defence and Government Services

Zurich Financial Services AG Financial Institutions Group – Insurance


109

Appendix IV - Endnotes

1 International Accounting Standards (IAS) 36.12.2 IAS 36.14.3 IAS 36.104.4 Calculated on the preceding 20 trading days (Sources: Bloomberg and Capital IQ).5 Datamonitor. “Aerospace & Defense in Europe,” October 2010.6 Stockholm International Peace Research Institute. “Falling European Military Spending—A Threat to Our Security?”

April 11, 2011.7 Goldman Sachs. Europe: Aerospace & Defense. “Defence Downturn Deepens for Europe’s Big Three; Thales to Sell,”

April 6, 2011.8 Goldman Sachs. Europe: Aerospace & Defense. “Defence Downturn Deepens for Europe’s Big Three; Thales to Sell,”

April 6, 2011.9 Euronews. “German Conscription Ends,” July 5, 2011.10 Europolitics. “EU’s Defence and Space Agencies to Sign Cooperation Agreement,” June 17, 2011.11 Europolitics. “EU’s Defence and Space Agencies to Sign Cooperation Agreement,” June 17, 2011.12 Guardian.co.uk. “Britain and France Sign Landmark 50-Year Defence Deal,” November 2, 2010.13 Deutsche Bank. Global Markets Research: Commerical Aerospace. “Quarterly Healthcheck—Q1’10,” April 26, 2010.14 Aerospace & Defence Association of Europe. “Latest Figures from European General Aviation Manufacturers Show

Signs of Recovery,” May 19, 2011.15 Goldman Sachs. Europe: Aerospace & Defense. “Civil Aerospace: U.S. Recovery to Drive More Outperformance in

2011,” January 12, 2011.16 Citi. Equities: European Aerospace & Defense. “Positive into Paris Air Show,” May 18, 2011.17 Citi. Equities: European Aerospace & Defense. “Positive into Paris Air Show,” May 18, 2011.18 Citi. Equities: European Aerospace & Defense. “Positive into Paris Air Show,” May 18, 2011.19 International Air Transport Association. “Strong 2010 but Uncertainties in 2011 – Severe Weather Dents

Recovery,” February 2, 2011.20 International Air Transport Association. “Strong 2010 but Uncertainties in 2011 – Severe Weather Dents Recovery,”

February 2, 2011.21 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.22 International Air Transport Association. “Air Travel Shrinks in March – Events in Japan and MENA Impact Air

Transport,” May 3, 2011.23 International Air Transport Association. “International Air Travel Rebounds in April,” June 2, 2011.24 International Air Transport Association. “Air Travel Shrinks in March – Events in Japan and MENA Impact Air

Transport,” May 3, 2011.25 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.26 Goldman Sachs. Europe: Aerospace & Defense. “Civil Aerospace: U.S. Recovery to Drive More Outperformance in

2011,” January 12, 2011.27 Capital IQ.28 European Automobile Manufacturers’ Association. “Passenger Cars: Registrations in 2010 5.5% Lower than in 2009,”

January 14, 2011.29 European Automobile Manufacturers’ Association. “Commerical Vehicles: Registrations Up 8% in 2010,” January 25,

2011.30 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended on

High,” February 1, 2011.31 European Automobile Manufacturers’ Association. “The Automobile Industry Pocket Guide,” 2010.32 Deutsche Bank. Global Markets Research: European Autos. “Q1’11 Previews,” April 15, 2011.33 European Automobile Manufacturers’ Association. “Passenger Cars: Registrations Slip 0.8% in January-May,” June

17, 2011.34 Deutsche Bank. Global Markets Research: European Autos. “Q1’11 Previews,” April 15, 2011.35 J.P. Morgan. Europe Equity Research: European Auto Parts/Tires. “Fundamentals for Auto Parts/Tires Still Strong,”

May 26, 2011.


110

36 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended onHigh,” February 1, 2011.

37 Barclays Capital. Equity Research: European Autos & Auto Parts. “Mix Enrichment Continues in May,” June 7, 2011.38 EUbusiness. “European Car Sales Fall for Second Month,” May 17, 2011.39 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended on

High,” February 1, 2011.40 Barclays Capital. Equity Research: European Autos & Auto Parts. “Mix Enrichment Continues in May,” June 7, 2011.41 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended on

High,” February 1, 2011.42 UniCredit. Automotive Compendium. “Where the Rubber Meets the Road,” April 2011.43 J.P. Morgan. Europe Equity Research: European Trucks. “Q1’11 Preview: Fundamentals Improving, Slow Margin

Development,” April 18, 2011.44 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended on

High,” February 1, 2011.45 J.P. Morgan. Europe Equity Research: European Auto Components. “Initiating Coverage on Faurecia (OW), Continental

(OW) and Michelin (N),” January 11, 2011.46 J.P. Morgan. Europe Equity Research: European Auto Components. “Initiating Coverage on Faurecia (OW), Continental

(OW) and Michelin (N),” January 11, 2011.47 Deutsche Bank. Global Markets Research: European Automotive. “Q4 Sector Preview: 2010 Looks to Have Ended on

High,” February 1, 2011.48 J.P. Morgan. Europe Equity Research: European Auto Components. “Initiating Coverage on Faurecia (OW), Continental

(OW) and Michelin (N),” January 11, 2011.49 J.P. Morgan. Europe Equity Research: European Auto Components. “Initiating Coverage on Faurecia (OW), Continental

(OW) and Michelin (N),” January 11, 2011.50 International Council on Clean Transportation. “EU Standards for Light Commercial Vehicles,” March 7, 2011.51 PublicServiceEurope. “Electric cars stalled without government support,” June 14, 2011.52 EUROPA. “Reducing CO2 Emissions from Passenger Cars,” December 2010.53 EUROPA. “CO2 Emissions from New Cars Continue Steep Descent in 2010,” June 29, 2011.54 Capital IQ.55 Cefic – European Chemical Industry Council. “Monthly Short Summary, March 2011,” March 2, 2011.56 Cefic – European Chemical Industry Council. “Monthly Short Summary, April 2011,” April 6, 2011.57 Cefic – European Chemical Industry Council. “Monthly Short Summary, March 2011,” March 2, 2011.58 Cefic – European Chemical Industry Council. “Monthly Short Summary, March 2011,” March 2, 2011.59 Cefic – European Chemical Industry Council. “Monthly Short Summary, April 2011,” April 6, 2011.60 Cefic – European Chemical Industry Council. “Monthly Short Summary, March 2011,” March 2, 2011.61 Cefic – European Chemical Industry Council. “Monthly Short Summary, March 2011,” March 2, 2011.62 Citi. Equities: Chemicals. “Citi’s Chemicals Quidnunc Fundamental Focus,” May 27, 2011.63 Cefic – European Chemical Industry Council. “Monthly Short Summary, July 2011,” June 23, 2011.64 Cefic – European Chemical Industry Council. “Monthly Short Summary, July 2011,” June 23, 2011.65 J.P. Morgan. Europe Equity Research: European Chemicals. “Use Macro-Led Weakness to Buy Stocks Which Benefit

from Acquisitions & Restructuring. Buy Solvay, Arkema and Yuke Catt.“ June 7, 2011.66 J.P. Morgan. Europe Equity Research: European Chemicals. “Use Macro-Led Weakness to Buy Stocks Which Benefit

from Acquisitions & Restructuring. Buy Solvay, Arkema and Yuke Catt.“ June 7, 2011.67 Capital IQ.68 PricewaterhouseCoopers. Industrial Products: Metals. “Metals Deals: Forging Ahead 2010 Annual Review,” 2011.69 PricewaterhouseCoopers. Industrial Products: Metals. “Metals Deals: Forging Ahead 2010 Annual Review,” 2011.70 PricewaterhouseCoopers. Industrial Products: Metals. “Metals Deals: Forging Ahead 2010 Annual Review,” 2011.71 Citi. Equities: Metals and Mining. “Commodity Price Revisions,” May 16, 2011.72 Deutsche Bank. Global Markets Research: Metals and Mining. “A Bold 2011 for the Miners,” January 11, 2011.73 Bank of America Merrill Lynch. European Steel. “European Steel: 3 Themes for 2011,” January 10, 2011.74 Bank of America Merrill Lynch. European Steel. “European Steel: 3 Themes for 2011,” January 10, 2011.75 BMO Capital Markets Research. “Global Metals & Mining,” February 2011.76 Deutsche Bank. Global Markets Research: Metals and Mining. “A Bold 2011 for the Miners,” January 11, 2011.


111

77 Deutsche Bank. Global Markets Research: Metals and Mining. “A Bold 2011 for the Miners,” January 11, 2011.78 Deutsche Bank. Global Markets Research: Metals and Mining. “A Bold 2011 for the Miners,” January 11, 2011.79 Deutsche Bank. Global Markets Research: Metals and Mining. “A Bold 2011 for the Miners,” January 11, 2011.80 Capital IQ.81 Datamonitor. “Global Electrical Components & Equipment,” May 25, 2011.82 Datamonitor. “Global Electrical Components & Equipment,” May 25, 2011.83 J.P. Morgan. Europe Equity Research: Electrical Engineers. “Views and Expectation into Q2,” July 7, 2011.84 J.P. Morgan. Europe Equity Research: Electrical Engineers. “Views and Expectation into Q2,” July 7, 2011.85 J.P. Morgan. Europe Equity Research: Electrical Engineers. “Views and Expectation into Q2,” July 7, 2011.86 J.P. Morgan. Europe Equity Research: Electrical Engineers. “Views and Expectation into Q2,” July 7, 2011.87 Societe Generale. Equity: Capital Goods. “Riding the Cycle,” January 10, 2011.88 Societe Generale. Equity: Capital Goods. “Riding the Cycle,” January 10, 2011.89 J.P. Morgan. Europe Equity Research: Electrical Equipment. “EPG Conference Day 2: Siemens, ABB, Alstom and

More,” May 18, 2011.90 Bank of America Merrill Lynch. Capital Goods. “Beyond the Sweet Spot,” January 13, 2011.91 Deutsche Bank. Global Markets Research: Capital Goods. “2011 Outlook,” January 5, 2011.92 Bank of America Merrill Lynch. Capital Goods. “Beyond the Sweet Spot,” January 13, 2011.93 Deutsche Bank. Global Markets Research: Capital Goods. “2011 Outlook,” January 5, 2011.94 Barclays Capital. Equity Research. “European Capital Goods: Initiation of Coverage,” February 16, 2011.95 UniCredit. Equity Research: Capital Goods. “Capital Goods Sector Outlook,” June 24, 2011.96 Deutsche Bank. Global Markets Research: Capital Goods. “2011 Outlook,” January 5, 2011.97 Bank of America Merrill Lynch. Capital Goods. “Beyond the Sweet Spot,” January 13, 2011.98 Bank of America Merrill Lynch. Capital Goods. “Beyond the Sweet Spot,” January 13, 2011.99 J.P. Morgan. Europe Equity Research: European Capital Goods. “Q1’11 Survey and Previews Mechanicals: Outlook

Statements Stabilising at a High Level,” April 11, 2011.100 Datamonitor. Industrial Profile.“Global Paper Products,” April 2011.101 Credit Suisse. Equity Research: Paper & Packaging. “Shifting to Second Gear,” January 25, 2011.102 Credit Suisse. Equity Research: Paper & Packaging. “Shifting to Second Gear,” January 25, 2011.103 Credit Suisse. Equity Research: Paper & Packaging. “Shifting to Second Gear,” January 25, 2011.104 Credit Suisse. Equity Research: Paper & Packaging. “Shifting to Second Gear,” January 25, 2011.105 Credit Suisse. Equity Research: Paper & Packaging. “Shifting to Second Gear,” January 25, 2011.106 Datamonitor. Industrial Profile.“Global Paper Products,” April 2011.107 Capital IQ.108 RBC Capital Markets. Equity Research: Business Services Sector. “Growth Potential Underappreciated,” January 13,

2011.109 RBC Capital Markets. Equity Research: Business Services Sector. “Growth Potential Underappreciated,” January 13,

2011.110 RBC Capital Markets. Equity Research: Business Services Sector. “Growth Potential Underappreciated,” January 13,

2011.111 Bank of America Merrill Lynch. Business Services. “Like Growth? Love Business Services,” March 28, 2011.112 Bank of America Merrill Lynch. Business Services. “Like Growth? Love Business Services,” March 28, 2011.113 Bank of America Merrill Lynch. Business Services. “Like Growth? Love Business Services,” March 28, 2011.114 Bank of America Merrill Lynch. Business Services. “Like Growth? Love Business Services,” March 28, 2011.115 Bank of America Merrill Lynch. Business Services. “Like Growth? Love Business Services,” March 28, 2011.116 RBC Capital Markets. Equity Research: Business Services Sector. “Growth Potential Underappreciated,” January 13,

2011.117 Deutsche Bank. Global Markets Research: European Security Sector. “Top Picks,” January 14, 2011.118 Deutsche Bank. Global Markets Research: European Security Sector. “Top Picks,” January 14, 2011.119 Deutsche Bank. Global Markets Research: European Security Sector. “Top Picks,” January 14, 2011.120 Consultant-News.com. “European Consulting Market Hits Almost Euro 25 Billion and New Report Says Set to Grow,”

June 23, 2011.


112

121 Bureau Veritas SA. “Press Release,” May 4, 2011.122 Bureau Veritas SA. “Press Release,” May 4, 2011.123 Consultant-News.com. “European Consulting Market Hits Almost Euro 25 Billion and New Report Says Set to Grow,”

June 23, 2011.124 Capital IQ.125 Barclays Capital. European General Retail. “UPDATE: Barclays Capital Retail Checkout – Negative Trends Returning to

the Market,” June 7, 2011.126 Collins Stewart. Retail. “The Sale Is Now On,” June 8, 2011.127 Barclays Capital. European General Retail. “UPDATE: Barclays Capital Retail Checkout – Negative Trends Returning to

the Market,” June 7, 2011.128 Collins Stewart. Retail. “The Sale Is Now On,” June 8, 2011.129 Collins Stewart. Retail. “The Sale Is Now On,” June 8, 2011.130 Bank of America Merrill Lynch. European Consumer Staples. “Commodities Not Yet a Tailwind,” May 13, 2011.131 Bank of America Merrill Lynch. European Consumer Staples. “Commodities Not Yet a Tailwind,” May 13, 2011.132 Jeffries International Ltd. Consumer: Food Retailers. “European Food Retail 2011 Views,” January 7, 2011.133 UniCredit. Equity Research: Consumer Goods. “Consumer Monthly,” June 15, 2011.134 J.P. Morgan. Europe Equity Research: European Beverages. “You Get What You Pay For,” April 27, 2011.135 J.P. Morgan. Europe Equity Research: European Beverages. “You Get What You Pay For,” April 27, 2011.136 UniCredit. Equity Research: Consumer Goods. “Consumer Monthly,” June 15, 2011.137 Goldman Sachs. Europe Retail. “Building GS SUSTAIN Analysis Into Our Investment Framework,” March 5, 2010.138 UniCredit. Equity Research: Consumer. “Consumer Monthly,” May 13, 2011.139 UniCredit. Equity Research: Consumer Goods. “Consumer Monthly,” June 15, 2011.140 ESN. ESN Food & Beverage. “Repeating the Message; Stay Defensive,” April 13, 2011.141 Capital IQ.142 Jefferies. Equity Research Global: Clean Technology. “Powering Europe in the 21st Century,” April 19, 2011.143 Jefferies. Equity Research Global: Clean Technology. “Powering Europe in the 21st Century,” April 19, 2011.144 Europolitics. Industry. “Output Edges Up in the EU,” June 15, 2011.145 Deutsche Bank. Global Markets Research: European Integrated Oils. “2011 Outlook – The Upcycle Takes Hold,”

January 6, 2011.146 Deutsche Bank. Global Markets Research: European Integrated Oils. “2011 Outlook – The Upcycle Takes Hold,”

January 6, 2011.147 Deutsche Bank. Global Markets Research: European Utilities. “Impact of an Oil Price Spike,” March 3, 2011.148 Goldman Sachs. Europe: Utilities. “Higher Energy Commodities and Intervention: Renewables to Benefit,” June 14,

2011.149 Goldman Sachs. Europe: Utilities. “Higher Energy Commodities and Intervention: Renewables to Benefit,” June 14,

2011.150 Bank of America Merrill Lynch. The Oil Gusher #63. “Nuclear Shutdowns to Impact European Gas Demand?” June 13,





2011.155 Europa. “Energy: Commission Presents its New Strategy Towards 2020,” November 10, 2010.156 Jefferies. Equity Research Global: Clean Technology. “Powering Europe in the 21st Century,” April 19, 2011.157 European Commission. EEPR. “European Energy Efficiency Fund (EEE-F),” July 1, 2011.158 Capital IQ.159 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.160 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.161 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.


113

162 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.163 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.164 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.165 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.166 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.167 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.168 Deutsche Bank. Global Markets Research: European Contractors. “Cautiously Waiting for the Recovery,” January 13,

2010.169 Citi. Citigroup Global Markets: Building Products. “European Construction Outlook,” June 30, 2010.170 Deutsche Bank. Global Markets Research: European Contractors. “Cautiously Waiting for the Recovery,” January 13,

2010.171 Deutsche Bank. Global Markets Research: European Contractors. “Cautiously Waiting for the Recovery,” January 13,

2010.172 Goldman Sachs. Europe: Construction. “Addressing the Divergent Trends in Private and Public Construction,” April 6,

2010.173 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.174 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.175 RBC Capital Markets. Equity Research: Construction & Services. “Initiation of Coverage,” February 21, 2011.176 RBC Capital Markets. Equity Research: Construction & Services. “Initiation of Coverage,” February 21, 2011.177 Credit Suisse. Equity Research: Engineering Services Sector. “We Prefer Arcadis Over Imtech and WS Atkins,” January

10, 2011.178 RBC Capital Markets. Equity Research: Construction & Services. “Initiation of Coverage,” February 21, 2011.179 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.180 Goldman Sachs. Europe: Construction. “A Long Grind, But with Material Upside Potential,” April 21, 2011.181 Capital IQ.182 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.183 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.184 European Financial Stability Facility. “About EFSF,” 2010.185 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.186 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.187 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.188 Bank for International Settlements. “International Regulatory Framework for Banks (Basel III),” 2011.189 Bank of America Merrill Lynch. European Banking Advisor. “European Banks: 16% Sustainable Return (and priced for

12%),” April 14, 2011.190 Barclays Capital. Equity Research: European Banks. “Not So Fast, Regulators,” June 1, 2010.191 Bank for International Settlements. “International Regulatory Framework for Banks (Basel III),” 2011.192 EUbusiness. “EU Vows Transparency in Bank Stress Tests,” July 13, 2010.193 Societe Generale. Equity: European Banks. “Will the Upcoming EBA Bank Stress Tests Trigger Further Capital

Raising?” May 19, 2011.194 Societe Generale. Equity: European Banks. “Will the Upcoming EBA Bank Stress Tests Trigger Further Capital

Raising?” May 19, 2011.195 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.196 Bank of America Merrill Lynch. European Banking Advisor. “European Banks: 16% Sustainable Return (and priced for

12%),” April 14, 2011.197 Credit Suisse. Equity Research: European Banks. “A Roadmap for the Sovereign/Bank Crisis,” February 4, 2011.198 Bank of America Merrill Lynch. European Banking Advisor. “European Banks: 16% Sustainable Return (and priced for

12%),” April 14, 2011.199 Goldman Sachs. Europe: Banks. “Primed for Growth, Priced for Opportunity: Buy HSBC and Erste Bank,” December

13, 2010.200 Goldman Sachs. Europe: Banks. “Primed for Growth, Priced for Opportunity: Buy HSBC and Erste Bank,” December

13, 2010.201 Goldman Sachs. Europe: Banks. “Primed for Growth, Priced for Opportunity: Buy HSBC and Erste Bank,” December

13, 2010.


114

202 Capital IQ.203 CEA. “Annual Report,” 2010-2011.204 Credit Suisse. Equity Research: European Insurance 2011. “A Year in Transition,” January 19, 2011.205 CEA. “Annual Report,” 2010-2011.206 Goldman Sachs. Europe: Insurance. “Solvency II: Is it Time to Be Realistic?” April 16, 2010.207 EUROPA. “Solvency II,” 2011.208 J.P. Morgan. Europe Equity Research: European Insurance. “Insurers Seeking Investment Alpha – A Few Trends,” May

24, 2011.209 CEA. “Annual Report,” 2010-2011.210 UniCredit. Equity Research: Insurance. “European Insurers: The Pied Pipers,” June 7, 2011.211 Credit Suisse. Equity Research: European Insurance 2011. “A Year in Transition,” January 19, 2011.212 Capital IQ.213 Barclays Capital. Equity Research: European Investment Banks. “Trimming and Slimming,” March 4, 2011.214 Barclays Capital. Equity Research: European Investment Banks. “Trimming and Slimming,” March 4, 2011.215 Barclays Capital. Equity Research: European Investment Banks. “Trimming and Slimming,” March 4, 2011.216 Barclays Capital. Equity Research: European Investment Banks. “Risk of Further Earnings Downgrades,” June 9,

2011.217 Barclays Capital. Equity Research: European Investment Banks. “Trimming and Slimming,” March 4, 2011.218 Barclays Capital. Equity Research: European Investment Banks. “Risk of Further Earnings Downgrades,” June 9,

2011.219 J.P. Morgan. Global Investment Banks. “Regulatory Arbitrage Series: OW European over U.S. IBs,” March 8, 2011.220 EFAMA. EFAMA’s Fourth Annual Review. “Asset Management in Europe,” May 2011.221 EFAMA. EFAMA’s Fourth Annual Review. “Asset Management in Europe,” May 2011.222 EFAMA. “UCITS Experience Net Inflows in April due to Strong Net Sales of Equity Funds,” June 14, 2011.223 Unquote. “Private Equity Barometer Q1’11,” April 20, 2011.224 Unquote. “Private Equity Barometer Q1’11,” April 20, 2011.225 Unquote. “Private Equity Barometer Q1’11,” April 20, 2011.226 The Wall Street Journal. “Battered Europe Has the Strength to Merge,” January 4, 2011.227 The Wall Street Journal. “Europe M&A Activity Slowly Revives,” March 31, 2011.228 Unquote. “Secondary Buyouts on the Rise,” June 20, 2011.229 Council of the European Union. “Council Adopts EU Rules for Alternative Investment Fund Managers,” May 27, 2011.230 Council of the European Union. “Council Adopts EU Rules for Alternative Investment Fund Managers,” May 27, 2011.231 Citi. Equities: European Exchanges. “Battle for Growth,” January 17, 2011.232 Citi. Equities: European Exchanges. “Battle for Growth,” January 17, 2011.233 Citi. Equities: European Exchanges. “Battle for Growth,” January 17, 2011.234 Citi. Equities: European Exchanges. “Battle for Growth,” January 17, 2011.235 Capital IQ.236 Deutsche Bank. Global Markets Research: European Medical Devices. “2011 Outlook: A Year of Some Strong

Outperformers,” January 12, 2011.237 Deutsche Bank. Global Markets Research: European Medical Devices. “2011 Outlook: A Year of Some Strong






Outperformers,” January 12, 2011.


115

243 Deutsche Bank. Global Markets Research: European Medical Devices. “2011 Outlook: A Year of Some StrongOutperformers,” January 12, 2011.

244 Barclays Capital. Equity Research: European Pharmaceuticals. “Biosimilars – Opportunity or Threat?” February 11,2011.

245 Citi. Equities: EU Pharmaceuticals 2011. “Continuing Cremnophobia,” January 13, 2011.246 Citi. Equities: EU Pharmaceuticals 2011. “Continuing Cremnophobia,” January 13, 2011.247 J.P. Morgan. Europe Equity Research: European Pharmaceuticals. “The Diagnosis – 2011 Outlook,” January 6, 2011.248 J.P. Morgan. Europe Equity Research: European Pharmaceuticals. “The Diagnosis – 2011 Outlook,” January 6, 2011.249 Citi. Equities: EU Pharmaceuticals 2011. “Continuing Cremnophobia,” January 13, 2011.250 Citi. Equities: EU Pharmaceuticals 2011. “Continuing Cremnophobia,” January 13, 2011.251 Deutsche Bank. Global Markets Research: European Pharmaceuticals. “Emerging Markets for Beginners,” February 4,

2011.252 Deutsche Bank. Global Markets Research: European Pharmaceuticals. “Emerging Markets for Beginners,” February 4,

2011.253 Capital IQ.254 Credit Suisse. Equity Research: Media. “Reasons to Be Cheerful,” January 18, 2011.255 Goldman Sachs. Europe: Media. “5 Key Themes Point to Outdoor, Exhibitions, Agencies, Some Free TV,” January 5,

2011.256 Deutsche Bank. Pan European Media Sector. “Rolling into the Mid-Cycle,” January 10, 2011.257 J.P. Morgan. Europe Equity Research: European Media. “Stocks for Bulls and for Bears According to Our Media Quant

Screen,” June 10, 2011.258 J.P. Morgan. Europe Equity Research: European Media. “Stocks for Bulls and for Bears According to Our Media Quant



Screen,” June 10, 2011.261 Barclays Capital. European Media. “Ad Watch IV – Slowdown Not Slump,” June 21, 2011.262 Barclays Capital. European Media. “Ad Watch IV – Slowdown Not Slump,” June 21, 2011.263 Deloitte. The Deloitte Touche Tohmatsu Global Technology, Media & Telecommunications Industry Group.

“Technology, Media & Telecommunications Predictions 2011,” 2011.264 Goldman Sachs. Europe: Media. “5 Key Themes Point to Outdoor, Exhibitions, Agencies, Some Free TV,” January 5,

2011.265 J.P. Morgan. Europe Equity Research: European Media. “Stocks for Bulls and for Bears According to Our Media Quant

Screen,” June 10, 2011.266 Citi. European Media. “Surprise, Surprise,” January 19, 2011.267 Deutsche Bank. Pan European Media Sector. “Rolling into the Mid-Cycle,” January 10, 2011.268 Goldman Sachs. Europe: Media. “5 Key Themes Point to Outdoor, Exhibitions, Agencies, Some Free TV,” January 5,

2011.269 Deutsche Bank. European TV Sector. “2011: Focus Shifts to Pricing Power and Cost Discipline,” January 7, 2011.270 Deutsche Bank. European TV Sector. “2011: Focus Shifts to Pricing Power and Cost Discipline,” January 7, 2011.271 Deutsche Bank. European TV Sector. “2011: Focus Shifts to Pricing Power and Cost Discipline,” January 7, 2011.272 Goldman Sachs. Europe: Media. “5 Key Themes Point to Outdoor, Exhibitions, Agencies, Some Free TV,” January 5,

2011.273 Bank of America Merrill Lynch. Leisure Centre. “2011 – The Year Ahead in Leisure,” January 17, 2011.274 Bank of America Merrill Lynch. Leisure Centre. “2011 – The Year Ahead in Leisure,” January 17, 2011.275 Bank of America Merrill Lynch. Leisure Centre. “2011 – The Year Ahead in Leisure,” January 17, 2011.276 Capital IQ.277 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.278 Deutsche Bank. Global Markets Research: French Real Estate. “Property “A la Française” – Initiating French REITs,”

January 13, 2011.279 Goldman Sachs. Europe: Real Estate. “Looking for Pockets of Growth or Discounts with Receding Risks,” January 13,

2011.


116

280 Goldman Sachs. Europe: Real Estate. “Looking for Pockets of Growth or Discounts with Receding Risks,” January 13,2011.



283 Barclays Capital. Equity Research. “Global Real Estate Securities Monitor,” April 5, 2011.284 Barclays Capital. Equity Research. “Global Real Estate Securities Monitor,” April 5, 2011.285 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.286 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.287 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.288 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.289 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.290 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.291 PricewaterhouseCoopers and Urban Land Institute. Emerging Trends in Real Estate. “Europe,” 2011.292 Capital IQ.293 UniCredit. Equity Research: European Technology. “From Disruptions in Japan to New M&A Momentum,” April 8,

2011.294 J.P. Morgan. Europe Equity Research: European Semiconductors. “In a Stock Picking Environment,” April 7, 2011.295 UniCredit. Equity Research: European Technology. “From Disruptions in Japan to New M&A Momentum,” April 8,

2011.296 UniCredit. Equity Research: European Technology. “From Disruptions in Japan to New M&A Momentum,” April 8,

2011.297 Goldman Sachs. European Semiconductors & Tech Hardware. “2Q’11,” June 9, 2011.298 J.P. Morgan. Europe Equity Research: European Semiconductors. “In a Stock Picking Environment,” April 7, 2011.299 Citi. Equities: European Semiconductors. “1Q’11 Results Preview,” April 25, 2011.300 Barclays Capital. European Technology Hardware. “BarCap Global Communication Media and Technology Conference

Guide,” May 23, 2011.301 Citi. Equities: European Semiconductors. “1Q’11 Results Preview,” April 25, 2011.302 Goldman Sachs. European Semiconductors & Tech Hardware. “2Q’11,” June 9, 2011.303 Goldman Sachs. European Semiconductors & Tech Hardware. “2Q’11,” June 9, 2011.304 Citi. Equities: European Semiconductors. “1Q’11 Results Preview,” April 25, 2011.305 Credit Suisse. Equity Research: European Software and Services. “European Software and Services 2011 Outlook,”

January 11, 2011.306 Credit Suisse. Equity Research: European Software and Services. “European Software and Services 2011 Outlook,”

January 11, 2011.307 Bank of America Merrill Lynch. European Technology. “The IT Services Handbook,” June 3, 2011.308 Capital IQ.309 Credit Suisse. Equity Research: European Telecoms. “Data Growth Slowing, Auctions Coming,” April 5, 2011.310 Credit Suisse. Equity Research: European Telecoms. “Data Growth Slowing, Auctions Coming,” April 5, 2011.311 Societe Generale. Diversified Telecom Services. “European Cable’s Gilded Age: Pipe Dreams No Longer,” April 21,

2011.312 Bank of America Merrill Lynch. European Telecoms. “Disliked and Underweight,” June 3, 2011.313 Credit Suisse. Equity Research: European Telecoms. “Data Growth Slowing, Auctions Coming,” April 5, 2011.314 Bank of America Merrill Lynch. European Telecoms. “Q1 Can Be the Cruelest Quarter,” June 6, 2011.315 Deloitte. The Deloitte Touche Tohmatsu Global Technology, Media & Telecommunications Industry Group.

“Technology, Media & Telecommunications Predictions 2011,” 2011.316 Deloitte. The Deloitte Touche Tohmatsu Global Technology, Media & Telecommunications Industry Group.

“Technology, Media & Telecommunications Predictions 2011,” 2011.317 Bank of America Merrill Lynch. European Telecoms. “European Net Neutrality: Very Different from the U.S.,” February

23, 2011.318 Bank of America Merrill Lynch. European Telecoms. “European Net Neutrality: Very Different from the U.S.,” February

23, 2011.


117

319 Bank of America Merrill Lynch. European Telecoms. “European Net Neutrality: Very Different from the U.S.,” February23, 2011.

320 The Financial Times Ltd. Telecoms. “Europe Telecom Groups Target Google,” April 26, 2011.321 Bloomberg. “YouTube in Network Deal Talks With Operators, Manufacturers,” June 8, 2011.322 Bank of America Merrill Lynch. European Telecoms. “Q1 Can Be the Cruelest Quarter,” June 6, 2011.323 Bank of America Merrill Lynch. European Telecoms. “Disliked and Underweight,” June 3, 2011.324 Capital IQ.325 Deutsche Bank. Industrial Transportation. “Sustainable Growth in 2011 After a Buoyant 2010,” February 2, 2011.326 Europa. Conference “Intelligent Transport Systems in Action”,” June 6, 2011.327 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.328 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.329 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.330 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.331 Citi. European Airports and Airport Operators. “Increasing Sector Interest Expected from 2H’11,” June 8, 2011.332 Goldman Sachs. Europe: Transportation: Shipping. “The Good, the Bad, the Ugly: A Closer Look at Shipping Cycles,”

June 8, 2011.333 Goldman Sachs. Europe: Transportation: Shipping. “The Good, the Bad, the Ugly: A Closer Look at Shipping Cycles,”






June 8, 2011.339 Deutsche Bank. Industrial Transportation. “Sustainable Growth in 2011 After a Buoyant 2010,” February 2, 2011.340 Europa. “Transport 2050: Commission Outlines Ambitious Plan to Increase Mobility and Reduce Emissions,” March

28, 2011.341 Europa. “Transport 2050: Commission Outlines Ambitious Plan to Increase Mobility and Reduce Emissions,” March

28, 2011.342 Europa. “Transport: EU to Join International Rail Organization,” June 23, 2011.343 Capital IQ.


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