Chinese construction bubble Preparing for a potential burst

Sell Sandvik Hold Atlas Copco, Assa Abloy and Volvo Buy Schneider and Legrand
June 2011
Sbastien Gruter Gael de-Bray Adrien de-Susanne Colin Campbell Phone: +33 1 42 13 47 22 Phone: +33 1 42 13 84 14 Phone: +33 1 42 13 01 61 Phone: +44 207 762 56 09

Societe Generale (SG) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S) CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS AND THE STATUS OF NON-US RESEARCH ANALYSTS.

China A capex-/construction-led economy

China is clearly a capex-led economy, fixed asset investment represented 46% of GDP in 2009. All countries that have experienced a significant investment boom (GFCF > 30% for a number of years) have gone through a recession sooner or later

Construction spending ($1.1tr) represented 20% of GDP in 2010

Gross fixed capital formation (% of GDP)

Gross fixed 100 90 80 70 60 50 40 30 20 10 0 China India Korea Russia Japan Euro Area Brazil United States 46 31 29 36 58 54 53 60 58 62 71 Household consumption

Evolution of gross fixed capital formation (% of GDP)

50 45 40 35 30 25 20 15 10 China Korea Spain Japan

22

21

20

17

16

5 0

Source: IMF

1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Chinese construction bubble Myth or reality?

Households not highly leveraged

Price overheating

Central/local governments will keep supporting construction

Oversupply

Long-term needs - Urbanisation rate

Low reliability or lack of data

Real estate Current supply standing above underlying demand

Chinese real estate investment YoY growth
40%

New housing exceeding increase in urban population

70 60 50 40 New housing supply (million people) Increase in urban population (million people)

35%

30%

25% 30 20% 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 Q1 11 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

15%

10%

Source: National Bureau of Statistics

Source: SG Cross Asset Research, National Bureau of Statistics

Household indicators (2010) China in 2010 and 2015 (based on new five-year plan) vs other countries
India UK Japan US China 2010 China 2015

Urban population (%) Households (000s) Average no. of people per household Residential floor space per head (sqm) Personal disposal income per head (US$)
Source: SG Cross Asset Research, Economist Intelligence Unit

30% 223,340 5.3 10.5 1,110

90% 26,140 2.4 35.5 23,970

67% 50,200 2.5 33.3 26,080

82% 115,990 2.7 64.6 35,970

48% 396,000 3.3 31 1,870

52% 410,055 3.3 40 3,012

Infrastructure A lot has been achieved already

China is now ahead of its development curve as far as infrastructure is concerned
A highway network on a par with that of the US, growing by c.10% per annum

The largest high-speed rail network in the world

Paved roads per car (metres)

70

High-speed rail (km)

12,000 In operation In construction

60

10,000
50 40 30 20 10

8,000

6,000

4,000

2,000
China Spain France US Germany Italy

China Spain Japan France Others Germany Italy Belgium

Source: SG Cross Asset Research, CIA Factbook

Source: International Union of Railways

How can China sustain such high cement consumption?

China consumes 55% of global cement, equivalent to a per-capita consumption of c.1,400kg, almost 5x times higher than worldwide average

Cement consumption per capita (kg)

Cement consumption per capita (kg) vs GDP per capita

Cement consumption (kg per capita)
1,600 1,400 1,200 1,000 800 600 400 200 Spanish construction bubble US China France Spain

1,600 1,400 1,200 1,000 800 600 400 200 -

US

China

Spain

France

Maturity phase
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008

GDP per capita (PPP, current $)

Source: SG Cross Asset Research, OECD, Cembureau

Source: SG Cross Asset Research, US Geological Survey, Italcementi

Some weakness has emerged could the bubble pop?

Weaker construction equipment sales over the past two months

Several data point to (at least) a slowdown in growth rates

Share price of Chinese machinery stocks under pressure, weak commodity indices

Excavators in China Delivery growth yoy

300% 250% 200% 150% 100% 50% 0%

Chinese construction machinery stocks 12M FWD P/E

35 30 25 20 15 10 5

Jul-08

Jul-07

Jul-09

Oct-07

Oct-08

Oct-09

Jul-10

Apr-07

Apr-08

Apr-09

Apr-10

Oct-10

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Apr-11

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

-100%

Source: CCMA

Source: SG Cross Asset Research, Datastream, * Includes Sany Heavy Industry, IMM, Lonking, Shantui, Liugong; Zoomlion, XGMA

Dec-10

Mar-11
6

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

-50%

Capgoods portfolio for a bursting of a Chinese construction bubble

SG Capital Goods universe
Risk areas Chinese construction Mining industry Emerging markets Cost structure Resilience characteristics Aftermarket/ service Backlog/ visibility Ranking

Volvo Sandvik Atlas Vallourec MAN Scania Philips SKF ABB Nexans Schneider Assa Abloy Alstom Invensys Legrand Siemens

--------

--------+++ ++

--------------+ + + ++ + + + +++ + + ++ ++ +++ + ++ + + + + ++ ++ + --

Attractiveness

-----

----

----

--

Smiths
Source: SG Cross Asset Research

Capgoods exposure to the Chinese construction theme

2010 sales exposure to mining and Chinese construction
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 26% 12% 1% 17% 36% 24% 26% 3% 27% 1% 18% 9% 5% 8% 12% 9% 4% 3% 100% Chinese construction exposure Mining exposure

Hitachi

Komatsu

Metso

Volv o

Kone

Joy Global

Schneider

Sandv ik

Atlas Copco

Caterpillar

Source: SG Cross Asset Research, Company data

Contribution of China and mining to organic growth 2004-2010

Contribution f rom China 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sandv ik Atlas Volv o CE Schneider SKF Assa Abloy ABB Siemens Contribution f rom Mining

Source: SG Cross Asset Research, company data 8

Assa Abloy

Legrand

Discounting a more cautious scenario for mining capex

Base metal index
2100 1900 1700 1500 1300 1100
30,000 70,000 +56% 60,000 50,000 +21% 40,000 -7% -11%

Consensus capex forecast for top 5 miners

IBES SGe

900 700
20,000 10,000

Mar-08

Mar-09

Mar-10

May-08

May-09

May-10

Mar-11

Jul-08

Jan-08

Jan-09

Jan-10

Jul-10

Jul-09

500

Jan-11

May-11

Sep-08

Nov-08

Sep-09

Nov-09

Sep-10

Nov-10

2010 2011e 2012e 2013e

Source: Datastream * Includes LME Aluminium, Copper, Lead, Nickel and Zinc

Source: SG Cross Asset Research, IBES, * Includes BHP Billiton, Rio Tinto, Vale, Xstrata, Anglo American

Mining equipment spending ($m)

2008 2009 2010 2011e 2012e 2013e

New forecasts ($m) yoy change Old forecasts ($m)

45,400 11% 45,400

31,780 -30% 31,780

38,000 20% 38,000

52,300 38% 53,500

54,000 3% 59,000

50,000 -7% 63,000

New vs Old
Source: SG Cross Asset Research, company data

-2%

-8%

-21%

Sandvik - Downgrade to Sell (TP cut to SEK90)

Most exposed to mining and thus to the Chinese construction risk
Mining = 36% of revenues in 2010, 70% contribution to the groups organic growth over 2004-2010 Strong correlation with base metal index

New CEO unlikely to radically change integrated business profile

Vertical integration is natural for Tooling and Materials Technology (mastering of raw material is key) Disposal of SMT not on the card, new head just promoted Base metal index
Base metal index (LHS) 2200 140 120 100 1200 80 60 700 40 200 20 SANDVIK (RHS) 160

1700

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Source: Datastream * Includes LME Aluminium, Copper, Lead, Nickel and Zinc

15% EV/EBIT premium to the sector despite significant clouds emerging

10

Dec-10

Jun-00

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Atlas Copco Downgrade to Hold (TP cut to SEK150)

Mining = 26% of revenues in 2010, 50% contribution to the groups organic growth over 2004-2010

Exposed to mining, China and EM

Most exposed stock to emerging markets; China 11% of group revenues Share price correlated with base metal prices, albeit not as much as Sandvik

Mining contribution to the groups revenue growth

70% 60% 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007 2008

Source: SG Cross Asset Research, company data

Excellent management and best-in-class returns now fully discounted

Trading at a 20% EV/EBIT premium to the sector average Aftermarket & assembly profile remain key strengths in the event of a negative macro outlook
11

Other stocks offering exposure to the Chinese construction theme

Volvo (Hold, TP cut to SEK110) Exposed to the Chinese construction market (8% of sales) so sentiment likely to continue to be weak, although low valuation & strong truck market should provide some support Schneider (Buy, TP 140) Small exposure to the Chinese construction market (4% of sales). Energy efficiency and industrial productivity themes should support growth. Valuation still appealing. Legrand (Buy, TP 35) Tiny exposure to the Chinese construction market (3% of sales). Recovery of mature markets from lows should keep driving both earnings growth and the share.

Assa Abloy (Hold, TP SEK170) 9% of sales exposed to Chinese construction, although the share is likely to be driven by recovery in non-residential markets in the US and EU. Defensive profile should be appreciated in the event of a weaker macro outlook

12

Valuation and risks

Sandvik (Sell, TP SEK90)
Valuation methodology: DCF using WACC of 9.6%, 2.5% LT growth and a 14% normalised margin Risks to our TP: higher base metal prices & weaker SEK

Atlas Copco
Valuation methodology: DCF using WACC of 9.6%, 2.5% LT growth and a 21% normalised margin Risks to our TP - upside (downside): higher (lower) base metal prices & stronger (weaker) growth in EM

Volvo
Valuation methodology: DCF using WACC of 10%, LT growth of 2% and normalised margin of 8% Risks to our TP - upside (downside): stronger (lower) operating leverage at Trucks & weaker (higher) SEK

Assa Abloy
Valuation methodology: DCF using 8.5% WACC, 2% LT growth and 16% normalised margin Risks to our TP upside (downside): rebound in US/EU non residential construction that is stronger (weaker) than expected

Schneider
Valuation methodology: DCF using normalised EBITA margin 15%, WACC 8.4%, LT growth rate 2.5% Risks to our TP: slowdown in emerging markets

Legrand
Valuation methodology: DCF using normalised growth 2%, normalised margin 19%, WACC 8.4% Risks to our TP: KKR and Wendel (combined stake of 21.3%) may decide to sell additional shares in the market

13

EU capgoods valuation ratios

Reco. Buy Buy Buy Buy Buy Buy Buy Buy Hold Hold Hold Hold Hold Hold Hold Hold Hold Sell Sell Company GKN Legrand MAN Philips Scania AB Schneider Siemens SKF ABB Areva Assa Abloy Atlas Copco Invensys Nexans Smiths Group Vallourec Volvo Alstom Sandvik Average*
Source: SG Cross Asset Research estimates

Curr. GBP EUR EUR EUR SEK EUR EUR SEK CHF EUR SEK SEK GBP EUR GBP EUR SEK EUR SEK

Price Target 21-Jun-11 Price 211 28 94 18 139 113 93 175 21 26 166 161 318 65 1,120 81 106 42 108 248 35 115 29 155 140 115 225 23 30 170 150 310 65 1220 92 110 40 90

Market Cap. EUR 3,700 7,466 13,259 18,141 6,082 30,840 85,460 8,722 40,774 9,979 6,310 20,881 2,907 1,859 4,955 9,530 24,519 12,506 14,033

Perf 1M 0.0 -4.8 -3.6 -7.8 -8.8 0.3 1.9 -5.5 -7.0 -14.9 -6.2 -1.9 4.9 -3.9 -9.1 -7.0 -8.0 0.7 -7.2 -3.9

Perf PE EV/EBITA EV/Sales 3M 2011e 2012e 2011e 2012e 2011e 2012e 7.5 0.3 12.0 -20.6 0.9 -2.7 0.2 -3.4 -0.5 -17.0 -4.6 -0.1 -10.1 1.8 -16.0 7.5 -1.5 2.3 -7.8 -1.6 10.0 13.9 14.2 10.8 11.4 13.0 12.3 11.9 15.1 20.9 13.0 15.3 14.4 17.2 12.8 17.3 12.1 13.6 14.1 13.5 8.5 12.3 11.8 9.1 10.6 11.4 11.4 10.4 13.4 15.4 11.6 14.0 13.4 11.3 11.5 11.3 9.1 11.8 12.4 11.4 8.2 9.8 8.6 5.8 7.8 9.7 7.3 8.5 11.1 22.0 11.2 11.3 10.6 9.5 9.6 11.8 8.7 10.0 10.8 9.5 6.8 8.5 7.3 4.7 7.2 8.4 6.5 7.4 9.7 18.0 9.7 10.0 9.7 7.3 8.6 7.8 6.5 8.8 9.5 8.0 0.62 2.04 0.70 0.63 1.20 1.54 0.93 1.36 1.58 1.60 1.82 2.51 1.00 0.49 1.67 1.94 0.78 0.69 1.69 1.29 0.56 1.84 0.64 0.55 1.08 1.38 0.83 1.22 1.42 1.63 1.61 2.24 0.91 0.47 1.57 1.56 0.67 0.65 1.55 1.15

EV/CE ROCE/ Div. Yield 2011e WACC 11e 2011e 1.9 2.3 1.9 0.8 3.5 1.5 2.4 2.3 2.8 0.9 1.8 4.8 3.1 0.7 1.9 1.7 1.5 1.5 2.3 2.2 1.4 1.9 1.7 1.1 3.4 1.3 2.6 2.2 2.3 0.4 1.5 3.5 2.6 0.6 1.2 1.1 1.1 1.1 1.7 1.8 3.6 3.7 3.6 4.4 4.0 3.5 3.2 4.2 3.4 0.0 3.1 3.2 1.9 1.9 3.1 2.1 3.3 1.9 3.9 3.2

14

APPENDIX
COMPANIES MENTIONED ABB (ABBN.VX, Hold) Alstom (ALSO.PA, Sell) Areva (AREVA.PA, Hold) Assa Abloy (ASSAb.ST, Hold) Atlas Copco (ATCOa.ST, Hold) Caterpillar (CAT.N, No Reco ) GKN (GKN.L, Buy) Legrand (LEGD.PA, Buy) MAN (MANG.DE, Buy) Metso (MEO1V.HE, No Reco ) Nexans (NEXS.PA, Hold) Philips (PHG.AS, Buy) Sandvik (SAND.ST, Sell) Schneider (SCHN.PA, Buy) Siemens (SIEGn.DE, Buy) SKF (SKFb.ST, Buy) Smiths Group (SMIN.L, Hold) Vallourec (VLLP.PA, Hold) Volvo (VOLVb.ST, Hold)

ANALYST CERTIFICATION Each author of this research report hereby certifies that (i) the views expressed in the research report accurately reflect his or her personal views about any and all of the subject securities or issuers and (ii) no part of his or her compensation was, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report: Gal de Bray, Adrien de Susanne, Colin Campbell.

15

APPENDIX
Historical Price: ASSA-ABLOY (ASSAb.ST)
2008/2009 Change 25/07/08 20/10/08
189 169 149 129 109 89 69 49 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

2010/2011 22/04/10 15/07/10 15/07/10 28/10/10 30/11/10 13/01/11 29/04/11

Change New Target: 133.0 New Rating: Hold New Target: 171.0 New Target: 160.0 New Rating: Sell New Target: 170.0 New Rating: Hold

New Target: 88.0 New Rating: Sell New Target: 60.0 New Target: 55.0 New Target: 52.0 New Target: 80.0 New Target: 97.0 New Target: 105.0

20/10/08 19/01/09 02/04/09 23/04/09 30/07/09 29/10/09

Source: SG Cross Asset Research

Historical Price: Atlas Copco (ATCOa.ST)

206 186 166 146 126 106 86 66 46 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

2008/2009 Change 21/10/08 24/10/08 03/02/09 28/04/09 23/10/09 20/11/09 New Target: 57.0 New Target: 55.0 New Target: 52.0 New Target: 78.0 New Target: 91.0 New Target: 95.0

2010/2011 14/01/10 29/04/10 19/07/10 05/10/10 05/10/10 25/10/10 13/01/11 03/02/11 21/04/11

Change New Target: 111.0 New Target: 117.0 New Target: 125.0 New Rating: Buy New Target: 145.0 New Target: 165.0 New Target: 200.0 New Target: 190.0 New Target: 200.0

Source: SG Cross Asset Research

16

APPENDIX
Historical Price: Legrand (LEGD.PA)
35

2008/2009 Change 23/07/08 08/09/08 20/10/08 20/10/08 07/05/09 30/07/09 30/07/09 17/09/09 28/10/09 06/11/09 New Target: 17.5 New Target: 17.0 New Rating: Sell New Target: 11.0 New Target: 13.5 New Rating: Hold New Target: 15.5 New Target: 18.8 New Target: 20.0 New Target: 21.0

2010/2011 12/01/10 12/01/10 05/02/10 07/05/10 05/11/10 10/01/11

Change New Rating: Buy New Target: 23.0 New Target: 24.0 New Target: 28.0 New Target: 32.0 New Target: 35.0

30

25

20

15

10 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

Source: SG Cross Asset Research

Historical Price: SANDVIK (SAND.ST)

2008/2009 Change 21/07/08 New Target: 73.0 New Target: 39.0 New Target: 35.0 New Rating: Buy New Target: 68.0 New Target: 74.0 New Target: 90.0

2010/2011 12/01/10 05/05/10 05/10/10 05/10/10 10/01/11 03/02/11

Change New Target: 100.0 New Target: 120.0 New Rating: Sell New Target: 90.0 New Target: 115.0 New Rating: Hold

133

29/10/08 20/11/08 30/04/09 30/04/09 20/07/09 02/11/09

113

93

73

53

33 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

Source: SG Cross Asset Research

17

APPENDIX
Historical Price: Schneider (SCHN.PA)
2008/2009 Change 25/07/08
138

2010/2011 12/01/10 19/02/10 22/04/10 23/07/10 02/08/10 18/11/10 10/01/11 10/01/11 08/03/11

Change New Target: 74.0 New Target: 77.0 New Target: 84.0 New Target: 90.0 New Target: 95.0 New Target: 105.0 New Rating: Buy New Target: 135.0 New Target: 140.0

New Target: 75.0 New Target: 67.0 New Target: 52.0 New Target: 48.0 New Rating: Buy New Target: 60.0 New Rating: Hold New Target: 67.0 New Target: 70.0

29/09/08 20/10/08 18/12/08 08/06/09 08/06/09 03/08/09 14/09/09 01/12/09

118

98

78

58

38 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

Source: SG Cross Asset Research

Historical Price: VOLVO 'B' (VOLVb.ST)

128

2008/2009 Change 30/03/09 30/03/09 27/04/09 27/04/09 06/10/09 06/10/09 New Rating: Hold New Target: 39.0 New Rating: Sell New Target: 43.0 New Rating: Buy New Target: 79.0

2010/2011 16/04/10 26/04/10 10/01/11 10/01/11 07/02/11 25/03/11 28/04/11

Change New Target: 93.0 New Target: 110.0 New Rating: Hold New Target: 125.0 New Target: 120.0 New Target: 115.0 New Target: 125.0

108

88

68

48

28 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11
Price Target MA100 Change Reco

Source: SG Cross Asset Research

18

APPENDIX
SG RATINGS BUY: expected total return of 10% or more over a 12 month period. HOLD: expected total return between -10% and +10% over a 12 month period. SELL: expected total return of -10% or worse over a 12 month period. Sector Weighting Definition: The sector weightings are assigned by the SG Equity Research Strategist and are distinct and separate from SG research analyst ratings. They are based on the relevant MSCI. OVERWEIGHT: sector expected to outperform the relevant broad market benchmark over the next 12 months. NEUTRAL: sector expected to perform in-line with the relevant broad market benchmark over the next 12 months. UNDERWEIGHT: sector expected to underperform the relevant broad market benchmark over the next 12 months.

Equity rating and dispersion relationship

250 48% 40%

200

150 50% 100 39% 13% 50 48%

0 Buy
Companies Covered

Hold
Cos. w/ Banking Relationship

Sell

Source: SG Cross Asset Research

MSCI DISCLAIMER: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an as is basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are service marks of MSCI and its affiliates or such similar language as may be provided by or approved in advance by MSCI.

19

APPENDIX
IMPORTANT DISCLOSURES
Alstom Alstom Alstom Areva Areva Areva Caterpillar Caterpillar Legrand MAN Schneider Schneider SG acted as joint bookrunner in Alstom's senior bond issue. SG acted as financial advisor to Alstom for the acquisition of Areva T&D. SG is a lender to Alstom Group. SG acted as offer's sponsorof the conversion of Areva's investment certificates into shares. SG acted as financial advisor to Alstom for the acquisition of Areva T&D. SG is acting as financial advisor to Areva SG acted as joint bookrunner in Caterpillar Financial Services' senior bond issue. SG acted as joint bookrunner of Caterpillar's bond issue. SG acted as joint bookrunner in legrand's bond issue (4.375% 21/03/18 EUR). SG is acting as Mandated Lead Arranger of the acquisition facilities set up by MAN for the acquisition of Brazil-based Volkswagen Truck & Bus SG acted as Joint Dealer Manager in Schneider's bond tender offer. SG acted as financial advisor to Alstom for the acquisition of Areva T&D.

Director: A senior employee, executive officer or director of SGAS and/or SGCIB is a director and/or officer of Alstom. SG or its affiliates act as market maker or liquidity provider in the equities securities of ABB, Alstom, Atlas Copco, MAN, Philips, Schneider, Siemens, Vallourec, Volvo.SG or its affiliates expect to receive or intend to seek compensation for investment banking services in the next 3 months from Alstom, GKN, MAN, Siemens, Volvo. SG or its affiliates have received compensation for investment banking services in the past 12 months from Alstom, Areva, Caterpillar, MAN, Schneider. SG or its affiliates managed or co-managed in the past 12 months a public offering of securities of Alstom, Caterpillar. SGAS had a non-investment banking non-securities services client relationship during the past 12 months with ABB, SKF, Schneider, Siemens, Vallourec, Volvo. SGAS received compensation for products and services other than investment banking services in the past 12 months from ABB, SKF, Schneider, Siemens, Vallourec, Volvo. SGCIB received compensation for products and services other than investment banking services in the past 12 months from ABB, Alstom, Areva, Legrand, Nexans, Philips, Sandvik, Schneider, Siemens, Vallourec, Volvo.

20

APPENDIX -- DISCLAIMER
FOR DISCLOSURES PERTAINING TO COMPENDIUM REPORTS OR RECOMMENDATIONS OR ESTIMATES MADE ON SECURITIES OTHER THAN THE PRIMARY SUBJECT OF THIS RESEARCH REPORT, PLEASE VISIT OUR GLOBAL RESEARCH DISCLOSURE WEBSITE AT http://www.sgresearch.com/compliance.rha or call +1 (212).278.6000 in the U.S.. The analyst(s) responsible for preparing this report receive compensation that is based on various factors including SGs total revenues, a portion of which are generated by investment banking activities. Non-U.S. Analyst Disclosure: The name(s) of any non-U.S. analysts who contributed to this report and their SG legal entity are listed below. U.S. analysts are employed by SG Americas Securities LLC. The non-U.S. analysts are not registered/qualified with FINRA, may not be associated persons of SGAS and may not be subject to the FINRA restrictions on communications with a subject company, public appearances and trading securities held in the research analyst(s) account(s): Sbastien Gruter Socit Gnrale Paris, Gal de Bray Socit Gnrale Paris, Adrien de Susanne Socit Gnrale Paris, Colin Campbell Socit Gnrale London

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APPENDIX -- DISCLAIMER
Important European MIFID Notice: The circumstances in which material provided by SG European Fixed Income (Credit) & Forex Research, SG Commodity Research, SG Convertible Research and SG Equity Derivatives Research have been produced are such (for example, because of reporting or remuneration structures or the physical location of the author of the material) that it is not appropriate to characterize it as independent investment research as referred to in the European Markets in Financial Instruments Directive and that it should be treated as marketing material even if it contains a research recommendation (recommandation dinvestissement caractre promotionnel). However, it must be made clear that all publications issued by SG will be clear, fair and not misleading. For more details please refer to SGs Policies for Managing Conflicts of Interest in Connection with Investment Research posted on SGs disclosure website referenced herein. 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If you are an accredited investor or expert investor, please be informed that in SG's dealings with you, SG is relying on the following exemptions to the Financial Advisers Act, Cap. 110 (FAA): (1) the exemption in Regulation 33 of the Financial Advisers Regulations (FAR), which exempts SG from complying with Section 25 of the FAA on disclosure of product information to clients; (2) the exemption set out in Regulation 34 of the FAR, which exempts SG from complying with Section 27 of the FAA on recommendations; and (3) the exemption set out in Regulation 35 of the FAR, which exempts SG from complying with Section 36 of the FAA on disclosure of certain interests in securities. Notice to Hong Kong Investors: This report is distributed in Hong Kong by Socit Gnrale, Hong Kong Branch which is licensed by the Securities and Futures Commission of Hong Kong under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ("SFO"). This document does not constitute a solicitation or an offer of securities or an invitation to the public within the meaning of the SFO. This report is to be circulated only to "professional investors" as defined in the SFO. Notice to Japanese Investors: This publication is distributed in Japan by Societe Generale Securities (North Pacific) Ltd., Tokyo Branch, which is regulated by the Financial Services Agency of Japan. This document is intended only for the Specified Investors, as defined by the Financial Instruments and Exchange Law in Japan and only for those people to whom it is sent directly by Societe Generale Securities (North Pacific) Ltd., Tokyo Branch, and under no circumstances should it be forwarded to any third party. The products mentioned in this report may not be eligible for sale in Japan and they may not be suitable for all types of investors. Notice to Australian Investors: This document is issued in Australia by Socit Gnrale (ABN 71 092 516 286) ("SG"). SG is regulated by APRA and ASIC and holds an AFSL no. 236651 issued under the Corporations Act 2001 (Cth) ("Act"). The information contained in this document is only directed to recipients who are wholesale clients as defined under the Act. http://www.sgcib.com. Copyright: The Socit Gnrale Group 2011. All rights reserved. This publication may not be reproduced or redistributed in whole in part without the prior consent of SG or its affiliates.

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