28 July 2010

Price/Target:
Mkt Cap:
€45.2/€ 50.0
€59bn
Sanofi Aventis (SAN.PA) Sell
Net Cash/(Debt) (FY1) -€862m

Acquisition of Genzyme – merger analysis

Dec 2009A 2010E 2011E
PBT 11,725 11,923 11,718
In this note we present our M&A analysis to work out how much Sanofi-
EPS (€) 6.6 6.6 6.4
Aventis could afford to pay for Genzyme. In conclusion, we think paying
DPS (€) 2.5 2.5 2.6
below $70 per share could be seen as a “reasonable” deal for Sanofi
P/E (x) 6.8x 6.9x 7.0x shareholders and a deal above $80 per share would be seen as
overpaying. We have also calculated EPS accretion for other EU largecap
80
pharma companies, with the observation that current low debt funding
75
70
costs makes the deal accretive to all members of our Large Cap coverage
65
60
universe. In conclusion, with a deal that is accretive to a number of
55 parties, “winning” the Genzyme asset “could” be a pyrrhic victory and we
50
45 place a note of caution over all possible bidders. Sell rating reiterated.
40
35

Given the weight of speculation surrounding Genzyme and the recent history Carl
Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10
Source: FactSet Estimates
Price Price Relative to FTSE All Share

Icahn has had with the Company, we think it is reasonable to assume the
Company is in play. Our merger analysis implies that the most likely area of
common ground between a buyer and a seller is in the range of $70 to $ 80 per
share for Genzyme.

In the current low interest rate environment, Sanofi could pay upto $96 per share
before the deal was dilutive, on an 2011E EPS basis (assumptions included within
the report). HOWEVER, we also note that our DCF valuation for Genzyme
including synergies implies a fair value of no more than about $75 per share.
Using assumptions detailed within, we calculate a transaction at $75 per share,
could be accretive to Sanofi-Aventis’ business net income, by 1.7% in 2011, 6.2%
in 2012 and 12.7% in 2013.

Using a similar logic, we have also performed an accretion / dilution analysis for
other Companies in our European Universe, which provides the conclusion that
the deal would be accretive to the rest of our large cap universe. Given that
Genzyme is in an area, which is attractive to a number of Companies this implies
that there could be considerable competitive tension in the process. We note that
GSK and JNJ (not in our universe) have already been linked to Genzyme and we
could imagine that AZN could be interested in the opportunity, given their patent
cliff.

In conclusion, the events of Friday (US approval of Lovenox generics, followed by

Dominic Valder
M&A rumours linking SAN with Genzyme) highlight the difficulty in migrating a
Company from being dependent upon one set of businesses to another. We
+44 (0)20 7071 4705
dominic.valder@evosecurities.com
reiterate our SELL rating.

Nigel Birks

+44 (0)20 7071 4707

nigel.birks@evosecurities.com

Chris Donnellan

+44 (0)20 7071 4706 EVO Securities makes markets in Sanofi Aventis
chris.donnellan@evosecurities.com This publication was produced by Evolution Securities Limited (ESL). This publication is disseminated in the EEA
by ESL. This publication is disseminated in the US by Evolution Securities US (ESUS); it has not been altered in
any way by ESUS prior to distribution. ESUS is a wholly owned subsidiary of ESL. Under the Markets in Financial
Instruments Directive and the Financial Services Authority’s Conduct of Business Rules, this document is a
marketing communication and has not been prepared in accordance with legal requirements designed to promote
The company has reviewed a draft of this the independence of investment research. Although it is not subject to any legal requirement prohibiting dealing
research note and factual changes have been ahead of the dissemination of investment research, Evolution Securities Ltd upholds this standard through its
internal systems and controls.
made
 July 10

Genzyme – Valuation Analysis

We think a deal could be
Genzyme was founded to focus on finding treatments for rare diseases. This is an
consummated at $70 to $80 per
area of interest to other companies for the following reasons:
share 1. Its products currently have lower levels of competition,

2. Its products are mainly biologics (implying a tougher pathway for generics) and

3. They are highly profitable.

Genzyme generated sales of $4.5bn in 2009 and the largest 3 products are: 1)
Cerezyme (Gaucher’s Disease, 2009 sales=$793m); 2) Sevelamer (renal disease
2009 sales=$707m) and 3) Fabrazyme (Fabry’s Disease 2009 sales=$431m).

Genzyme has experienced manufacturing problems at two of its manufacturing

facilities over the past year (Allston and Haverhill), which has significantly impacted
the stock price, rendering the company susceptible to M&A approaches. Veteran
activist investor Carl Icahn is also involved in the situation, owning a 4% stake in
the Company.

Our DCF of Genzyme generates a fair value of $55 to $65 per share, excluding
synergies and $65 - $75 per share including synergies. It is interesting to note that
Genzyme’s all time high stock price was $84 per share in August 2008 and that the
valuation has been impaired following the manufacturing problems they had with
Cerezyme and Fabryzme at the Allston and Haverhill manufacturing plants. It is
interesting to note that assuming a 5% cost of debt, the transaction would be
accretive, on a business net income basis (ie excluding restructuring expenses and
amortisation) at up to $96 per share.

We note activist shareholder, Carl Icahn, has taken a stake in the Company (4%,
according to Bloomberg on 31st March 2011) and has recently forced the addition of
two additional directors onto Genzyme’s board. This implies to us that the Company
is focussed on maximising shareholder value in the short term. Selling shareholders
would aim to use the following reasons to support their valuation:

► The phase 3 trials that are running for Campath in Multiple Sclerosis. First phase
3 data is due in mid 2011 and we have not assumed success in this trial in our
DCF.

► Management has fixed the worst of the manufacturing issues at the Allston and
Haverhill plant and hopes to be able to fully supply the market with Cerezyme by
the end of 2010 and Fabrazyme at some point in 2011.

This implies discipline is required by an acquiror NOT to overpay. This is

because debt funding costs are so low, relative to acquisition multiples, that
accretion / dilution analysis justifies a far higher acquisition price than DCF models.
We think $70 to $80 per share could be a range that selling shareholders and an
acquirer could settle on. The selling shareholders could argue that they obtained a
full price, based on a DCF, and the acquiring Company could argue the transaction is
accretive. Our summary valuation chart is included below:

2
July 10

Genzyme – Summary Valuation Chart

($)
95

90

85

80

75

70

65

60

55

50
DCF Stand alone DCF Inc synergies Genzyme High 1st Yr post-deal EPS
Neutral
Source: EVO Securities

3
 July 10

Sanofi-Aventis / Genzyme merger analysis

Assuming synergies of 10% of
Former Genzyme businesses would generate 12% of pro-forma 2011E Sales and 7%
the target’s costs, Genzyme
of pro-forma 2011E EBIT, EXCLUDING any synergies. INCLUDING peak synergies,
could generate 16% of the pro-
calculated at 10% of target operating expenses, former Genzyme business would
forma group’s EBIT in 2013
generate 14% of pro-forma 2013E sales and 16% of 2013E EBIT, as shown in the
following table:

Genzyme Sales as a % of pro-forma group Sales Genzyme EBIT as a % of pro-forma group EBIT
30% 30%

25% 25%

20% 20%

15% 15%

10% 10%

5% 5%

0% 0%
2011 2012 2013 2014 2011 2012 2013 2014
Genzyme Sanofi Genzyme Sanofi

Source: EVO Securities Source: EVO Securities. Note: Includes synergies of 2% Genzyme costs in
2011, 5% in 2012 and 10% in 2013.

We have put together a merger model for Sanofi-Aventis and Genzyme, using the
following assumptions:

► An acquisition price of $75 per share, which approximates to a 40% premium to

22nd July closing share price.

► The deal closes at YE 2010.

► The deal is 100% financed by debt at a 5% cost of debt.

► Combined tax rate equivalent to Sanofi’s forecast of 28%.

► Cost synergies at 2% of Genzyme’ costs in 2011, 5% in 2012 and 10% from

2013.

► We assume 100% of Genzyme’s free cash flow is used to pay down the debt.

We think the deal works for

On this basis the deal would be 2% accretive to 2011E EPS, 6% accretive to 2012E
Sanofi up to the low $70s and
EPS and 13% accretive to 2013E EPS, on a pre-exceptional and pre-amortisation
beyond that it would imply a
basis. We would view an acquisition at a premium to this price as being bad for
breakdown in capital discipline
shareholders, as it would imply that capital discipline had broken downin Sanofi
(unless, of course, the management could justify a higher synergy level). The
analysis is shown in the following table:

4
July 10

Sanofi Aventis – Genzyme merger model, assuming $75 takeout price

2011E 2012E 2013E 2014E 2015E

SANOFI AVENTIS
Sales 30,013 28,917 28,701 29,889 30,872
growth % -2.7% -3.6% -0.8% 4.1% 3.3%
Op costs (18,119) (18,477) (18,855) (19,769) (20,410)
EBIT (business) 11,894 10,441 9,846 10,120 10,461
Margin % 39.6% 36.1% 34.3% 33.9% 33.9%
GENZYME
Sales 4,075 4,375 4,745 5,001 5,251
growth % 14.7% 7.4% 8.5% 5.4% 5.0%
Op costs (3,203) (3,215) (3,208) (3,351) (3,519)
EBIT 871 1,160 1,537 1,649 1,732
% margin 21.4% 26.5% 32.4% 33.0% 33.0%

MERGED
Sales 34,087 33,292 33,446 34,890 36,123
growth % -0.9% -2.3% 0.5% 4.3% 3.5%
Op costs (21,322) (21,691) (22,063) (23,120) (23,929)
Cost synergies 64 161 321 335 352
EBIT 12,829 11,761 11,703 12,105 12,545
% margin 37.6% 35.3% 35.0% 34.7% 34.7%

Sanofi Net financials (176) (93) (17) 46 91

Genzyme Cash Int 14 71 134 201 272
Merger debt (746) (746) (746) (746) (746)
Total net Fx (908) (768) (629) (500) (383)

Post merger pre-tax 11,922 10,993 11,074 11,605 12,162

Tax (3,338) (3,078) (3,101) (3,249) (3,405)
Tax rate 28.0% 28.0% 28.0% 28.0% 28.0%
Net income (adj) 8,584 7,915 7,973 8,356 8,756

Total shares 1,311 1,311 1,311 1,311 1,311

EPS (Bus), including GENZ 6.55 6.04 6.08 6.38 6.68

EPS Acc (Dil) 1.7% 6.2% 12.7% 14.2% 15.3%
Source: EVO Securities

Acquisition analysis – credit statistics

We have calculated various debt multiples to see if Sanofi could afford the
acquisition. We have used Net Debt / EBITDA and interest cover, using EBIT /
interest cover at a variety of different share prices. The analysis implies that Sanofi
has the flexibility to fund the acquisition entirely from debt. Additionally, it implies
that raising funds will not be a significant barrier to consummating the transaction.
Our analysis is included in the following table:

5
 July 10

Debt ratios versus Genzyme price premium

Premium to 22 Jul 0% 10% 20% 30% 40% 50% 60% 70%

Price ($) 54.2 59.6 65.0 70.4 75.8 81.3 86.7 92.1

Price (€) 42.0 46.2 50.4 54.6 58.8 63.0 67.1 71.3

Equity value (€m) 11,200 12,320 13,440 14,560 15,680 16,800 17,920 19,040

Enterprise Value (€m) 10,441 11,561 12,681 13,801 14,921 16,041 17,161 18,281

2011 Net Debt / EBITDA 0.44x 0.52x 0.60x 0.67x 0.75x 0.83x 0.91x 0.99x

2011 EBIT / interest 18.6x 17.2x 16.0x 15.0x 14.0x 13.2x 12.5x 11.9x
Source: EVO Securities

Impact of acquiring Genzyme on other European

LargeCap stocks:
Following the reports linking GSK to Genzyme we have performed an accretion /
dilution analysis on all the European LargeCap stocks to Genzyme. In conclusion, at
$75 per share, the acquisition would be accretive for all European large cap stocks,
on a pre-exceptional basis. Further, from a strategic perspective, we would
understand if AstraZeneca, GlaxoSmithKline and Sanofi-Aventis had interest in the
Company. We note, there are also newspaper articles linking Johnson and Johnson
(outside our coverage universe) to the Genzyme.

In this analysis, we use similar assumptions to those listed above, including a take
out price of $75 for Genzyme. As shown, the acquisition would be positive for all five
of the European companies.

Accretion / Dilution analysis for other EU large caps acquiring Genzyme

2011E 2012E 2013E Comments

AstraZeneca ($) EPS pre-synergies 5.98 5.78 6.17 Could be interested. Needs to
EPS post-synergies 6.11 6.19 6.97 address patent cliff
Accretion 2.1% 7.1% 13.0%
GlaxoSmithKline (GBp) EPS pre-synergies 1.30 1.38 1.48 Linked to deal in newspaper
EPS post-synergies 1.33 1.47 1.64 article. Requested to be kept
Accretion 2.9% 6.5% 10.9% up to date with process”
Novartis ($) EPS pre-synergies 4.81 4.99 4.90 Likely no interest. Digesting
EPS post-synergies 4.92 5.28 5.44 Alcon acquisition
Accretion 2.2% 5.8% 11.0%
Roche (CHF) EPS pre-synergies 14.80 16.18 17.52 Likely no interest. Digesting
EPS post-synergies 14.91 16.85 18.96 Genentech minorities purchase
Accretion 0.8% 4.1% 8.2%
Sanofi Aventis (€) EPS pre-synergies 6.44 5.68 5.40 Linked to Genzyme in various
EPS post-synergies 6.55 6.04 6.09 articles over last month
Accretion 1.7% 6.3% 12.7%
Based on acquisition price of $75 per Genzyme share
Source: EVO Securities

6
 July 10

Sanofi Aventis (SAN.PA)

Rating Price Target Price Market cap Net Cash EV

Sell €50.0 €45.2 €59bn -€862m €60bn

Segmental Analysis
Year End Dec - €m 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Lovenox 2,738 3,043 2,891 2,350 2,177 2,043 2,005
Plavix 2,616 2,623 2,236 2,082 2,099 2,102 2,058
Delix / Tritace 513 429 395 355 320 288 259
Avapro / Aprovel 1,202 1,236 1,288 1,302 974 753 671
Multaq 0 25 148 387 679 868 1,169
Cardiovascular/Thrombosis tota 7,069 7,356 6,958 6,477 6,248 6,054 6,162
Taxotere 2,033 2,177 2,116 1,441 1,295 1,227 1,192
Eloxatin 1,348 957 382 939 678 290 250
Copaxone 622 467 463 460 46 0 0
Oncology / Immunology total 4,003 3,601 2,961 2,840 2,019 1,516 1,442
Ambien / Stilnox 370 376 415 448 477 511 540
Ambien CR 459 498 484 97 92 87 83
Depakine 323 329 329 313 297 282 268
CNS total 1,152 1,202 1,228 857 866 880 891
Lantus 2,450 3,080 3,482 3,796 4,046 4,297 4,551
Amaryl 387 416 441 451 462 474 489
Diabetes total 2,837 3,496 3,923 4,246 4,508 4,772 5,040
Allegra 688 745 492 522 539 549 560
Xyzal 93 115 138 152 156 159 163
Actonel 330 264 224 180 144 115 57
Xatral 331 296 296 133 60 54 49
Nasacort 241 220 198 188 179 170 161
Ketek 20 21 21 21 21 21 21
Apidra 171 137 166 191 214 235 254
Sculptra 82 90 97 107 117 129 129
Acomplia 72 0 0 0 0 0 0
Internal Medicine total 2,028 1,888 1,632 1,493 1,429 1,432 1,394
Polio / Whopping cough/ Hib Vaccin 768 968 968 1,113 1,225 1,335 1,442
Influenza Vaccines 736 1,062 1,075 700 735 772 810
Travel Vaccines 309 313 351 379 398 417 438
Meningitis 68 80 88 94 99 104 109
Adult Boosters 399 406 426 439 452 466 480
Menactra 404 445 467 491 554 621 683
Other Vaccines 174 179 346 381 411 320 339
Acambis (ACAM2000-Smallpox) 3 30 32 33 35 36 38
Pipeline Vaccines 0 0 0 0 0 0 50
Total Vaccines 2,861 3,483 3,753 3,630 3,909 4,071 4,390
Other Prescription Pharma 7,577 5,867 5,545 5,212 5,004 4,803 4,611
Generics: 0 1,010 1,357 1,480 1,607 1,745 1,897
OTC 41 1,401 1,902 2,079 2,183 2,292 2,407
Teriflunamide 0 0 0 0 0 25 75
Afibercept 0 0 0 0 40 100 200
AVE0010 (GLP-1) 0 0 0 20 50 100 150
AVE 5026 0 0 0 0 5 25 100
other pipeline 0 0 0 0 45 175 375
Jevtana 0 0 0 50 150 240 340
Pipeline total 0 0 0 70 290 665 1,240
Sales 27,568 29,304 29,258 28,384 28,062 28,231 29,473
% Growth -2% +6% 0% -3% -1% +1% +4%

7
 July 10

Income Statement
Year End Dec - €m 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Sales 27,568 29,304 29,258 28,384 28,062 28,231 29,473
Other Revenue 1,249 1,443 1,595 1,629 855 469 416
Cost of sales (7,335) (7,853) (8,631) (8,657) (8,559) (8,611) (8,989)
Gross profit 21,482 22,894 22,222 21,356 20,358 20,090 20,900
Gross profit margin 77.9% 78.1% 76.0% 75.2% 72.5% 71.2% 70.9%
SG&A (7,168) (7,325) (6,964) (6,812) (6,735) (6,776) (7,044)
R&D (4,575) (4,583) (4,272) (3,974) (3,929) (3,952) (4,126)
Total operating costs (11,720) (11,743) (11,297) (10,943) (10,843) (10,928) (11,481)
Pre-exceptional operating incom 9,942 12,025 12,231 11,894 10,441 9,846 10,120
Pre-exceptional margin 36.1% 41.0% 41.8% 41.9% 37.2% 34.9% 34.3%
Operating exceptionals (578) (1,100) 0 0 0 0 0
Profit/loss JVs/Associates
Reported EBIT 9,364 10,925 12,231 11,894 10,441 9,846 10,120
EBIT margin 34.0% 37.3% 41.8% 41.9% 37.2% 34.9% 34.3%
Net financials (232) (300) (307) (176) (93) (17) 46
Pre-tax profit 9,132 11,252 11,923 11,718 10,347 9,828 10,166
Tax (2,333) (2,626) (3,339) (3,281) (2,897) (2,752) (2,846)
Tax Rate 25.5% 23.3% 28.0% 28.0% 28.0% 28.0% 28.0%
Share of profit/loss associates 890 1,082 1,436 1,594 1,007 743 748
Minorities (441) (427) (350) (332) (301) (279) (267)
Net income 7,248 8,626 8,585 8,437 7,450 7,076 7,319

EBITDA 10,784 13,376 13,251 13,002 11,636 11,128 11,495

EBITDA margin
Per share data
Fully diluted Shares (m) 1,309.3 1,305.9 1,310.5 1,310.5 1,310.5 1,310.5 1,310.5
Headline EPS - fully diluted 3.08 4.51 5.11 4.98 4.21 5.06 5.25
Adjusted EPS - fully diluted 5.63 6.61 6.55 6.44 5.68 5.40 5.59
DPS 2.2 2.5 2.5 2.6 2.6 2.5 2.6

Cash flow statement

Year End Dec - €m 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Net income 7,248 8,626 8,585 8,437 7,450 7,076 7,319
Depreciation & amortisation 5,985 5,011 4,598 4,686 4,773 1,583 1,675
Change in working cap (421) (1,254) 214 433 (104) (242) (210)
Other 854 (208) 264 61 727 (753) (1,039)
Cashflow from operations 8,523 8,515 10,083 10,040 9,268 7,365 7,445
Capex (1,606) (1,785) (2,351) (2,310) (2,296) (2,303) (2,361)
Acquisitions (661) (5,563) (1,488) 0 0 0 0
Disposals 123 85 0 0 0 0 0
Other (10) (24) 0 0 0 0 0
Cashflow from investments (2,154) (7,287) (3,839) (2,310) (2,296) (2,303) (2,361)
Dividends paid (2,702) (2,872) (3,239) (3,262) (3,375) (3,353) (3,255)
Share issues/(buybacks) (1,221) 26 0 0 0 0 0
Other 114 2,059 (509) (9) (9) (9) (9)
Cashflow from financing (3,809) (787) (3,748) (3,271) (3,384) (3,362) (3,264)
Net increase in cash 2,560 441 2,496 4,458 3,589 1,700 1,820
Opening cash 1,666 4,251 4,692 7,188 11,646 15,235 16,935
Closing cash 4,226 4,692 7,188 11,646 15,235 16,935 18,755
Free cash flow 6,917 6,730 7,732 7,729 6,973 5,061 5,084

8
 July 10

Balance sheet
Year End Dec - €m 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Fixed assets 6,961 7,830 8,161 8,363 8,463 8,484 8,470
Goodwill 28,163 29,733 29,733 29,733 29,733 29,733 29,733
Intangible Assets 15,260 13,747 11,169 8,591 6,013 6,713 7,413
Long-term assets 56,584 56,175 56,851 56,069 54,598 56,062 57,496
Inventories 3,590 4,444 4,381 4,069 4,111 4,217 4,407
Accounts receivable 5,303 6,015 5,685 5,420 5,557 5,852 5,896
Cash 4,226 4,692 7,188 11,646 15,235 16,935 18,755
Current Assets 15,403 17,532 19,632 23,450 27,195 29,308 31,451
Total assets 71,987 73,707 76,483 79,519 81,793 85,370 88,947
Long-term debt 4,173 5,961 5,461 5,461 5,461 5,461 5,461
Pension liabilities 4,068 4,342 4,342 4,342 4,342 4,342 4,342
Long-term liabilities 17,571 19,205 18,705 18,705 18,705 18,705 18,705
Short-term debt 1,833 2,866 2,866 2,866 2,866 2,866 2,866
Accounts payable 2,791 2,654 2,475 2,332 2,406 2,566 2,590
Current liabilities 9,345 10,965 10,786 10,643 10,717 10,877 10,901
Total liabilities 26,916 30,170 29,491 29,348 29,422 29,582 29,606
Shareholder funds 44,866 48,188 51,619 54,771 56,940 60,322 63,836
Minorities 205 258 282 309 340 375 414
Total equity and liabilities 71,987 78,616 81,392 84,428 86,702 90,279 93,856

Gearing
Year End Dec 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Net Debt/EBITDA 0.1x 0.3x 0.1x 0.0 0.0 0.0 0.0
Interest cover 42.9x 40.1x 39.8x 67.6x 111.9x 573.7x 0.0
Net cash/(Net debt) (1,377) (3,858) (862) 3,596 7,185 8,885 10,705
Dividend cover 2.6x 2.7x 2.6x 2.5x 2.2x 2.2x 2.2x

9
 July 10

Disclosures

Analyst details

Dominic Valder - Research Analyst

AstraZeneca€ Novartis€ Roche€

GlaxoSmithKline€ Shire€ Sanofi Aventis€

Nigel Birks - Research Analyst

Nigel Birks - Research Analyst Nigel Birks - Research Analyst Nigel Birks - Research Analyst Nigel Birks - Research Analyst
Chris Donnellan - Research Analyst

Smith & Nephew€ Straumann€ Sonova€

Synthes€ William Demant€ Fresenius Medical Care€

Nobel Biocare€ Qiagen€ Fresenius SE€

Key: † Analyst has financial interest, ‹ Analyst has material interest, Á Analyst is a director, ” Analyst has a business interest, ¡ EVO Securities is broker and/or advisor and has in
the last twelve months acted as broker and/or advisor or provided investment banking services, for which it has received compensation within the next three months, ‘ EVO
Securities is no longer broker and/or advisor, but has in the last twelve months acted as broker and/or advisor or provided investment banking services, for which they have
received compensation or are expecting compensation within the next three months, € EVO Securities makes markets in the company, ® EVO Securities has shareholdings in the
Company in excess of 5%, ´ The Company has shareholdings in Evolution Group plc in excess of 5%

Recommendation history chart (for the last 12 months to previous days close)

Sanofi Aventis - Ratings Plotter as at 28/07/2010

16/09/09 25/01/10 05/05/10
Buy Add Sell
58

56

54

52

50

48

46

44
Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10

Source: FactSet / Evolution Securities ratings

% of recommendations % of recommendations % of recommendations

(all stocks) (corporate stocks) (non-corporate stocks)
Neutral
Not Rated
Sell
Reduce 2%
Neutral 6%
0% 0%
Add Neutral
18%
7% 22%

Not Rated
1%
Not Rated Buy
1% 44%
Sell Buy
10% 52%
Sell
12%
Reduce
4%

Reduce
5%
Add Buy
15% 85% Add
16%

10
 July 10

Equity research recommendation guide

Absolute basis, expected performance over the next 12 month period.
Buy: 10% or greater increase in share price Sell: 10% or more decrease in share price
Add: 5-10% increase in share price Reduce: 5-10% decrease in share price
Neutral: +5% / -5% variation in share price

The following Evolution research teams adopt a sector relative approach to recommendations: Banks, Property, Gold

Sector* relative basis, expected performance over next 12 months

Buy: Stock expected to outperform the sector and be among most attractive in sector
Neutral: Stock expected to perform in-line with the sector and may increase / decrease in value but remain less attractive than Buy-rated stocks / more
attractive than Sell-rated stocks
Sell: Stock expected to underperform the sector and may increase / decrease in value but be among the least attractive in the sector

(*A sector comprises stocks covered by one or more analysts which share a common industry and which together constitute those analysts’ coverage
universe)

Evolution Securities Ltd Disclaimer

This document is issued by Evolution Securities Ltd (ESL) (Incorporated in England No. 2316630), which is authorised and regulated in the United Kingdom by
the Financial Services Authority (FSA) for designated investment business and is a member of the London Stock Exchange.

This document is for information purposes only and should not be regarded as an offer or solicitation to buy the securities or other instruments mentioned in it. Expressions of
opinions are those of the research department of ESL only and are subject to change without notice. No representation or warranty, either expressed or implied, is made nor
responsibility of any kind is accepted by any Evolution Group company, its directors or employees either as to the accuracy or completeness of any information stated in this
document. There is no regular update series for research recommendations issued by ESL.
ESL and/or its officers, directors and employees may have or take positions in securities mentioned in this document (or in any related investment) and may from time to time
dispose of any such securities (or instrument). ESL may act as a market maker in the securities of companies discussed in this document (or related investments), and may sell
them or buy them from customers on a principal basis and may also perform underwriting services for or relating to those companies.
ESL or persons connected with it may provide or may have provided corporate services to the issuers of securities mentioned in this material and recipients of
this document should not therefore rely on this report as being an impartial document. Accordingly, information may be known to ESL or persons connected
with it which is not reflected in this material.
ESL has a policy in relation to the management of the firms conflicts of interest, this is available at: https://research.evosecurities.com/conflicts.pdf
The stated price of any securities mentioned herein is as at the end of the business day immediately prior to the publication date unless otherwise stated and is not a
representation that any transaction can be effected at this price. No personal recommendation is being made to you; the securities referred to may not be suitable for you and
should not be relied upon in substitution for the exercise of independent judgement. Forecasts are not a reliable indication of future performance and an investment in equity
could put your capital at risk
ESL shall not be liable for any direct or indirect damages, including lost profits arising in any way from the information contained in this material. This material is for the use of
intended recipients only and only for distribution to professional and institutional investors, i.e. persons who are authorised persons or exempted persons within the meaning of
the Financial Services and Markets Act 2000 of the United Kingdom, or persons who have been categorised by ESL as professional clients under the rules of the FSA.
This document is being supplied to you solely for your information and may not be reproduced, re-distributed or passed to any other person or published in whole or in part for
any purpose.
The material in this document is not intended for distribution or use outside the European Economic Area. This material is not directed at you if ESL is prohibited or restricted by
any legislation or regulation in any jurisdiction from making it available to you.
Unless otherwise stated, the source for all forecasts included in this document is Evolution Securities and the source for historic results data is the company being reported on.
For Evolution Securities Limited Disclosures and Disclaimers please go to: https://research.evosecurities.com/pdfs/disclosure.pdf
This publication has been produced by Evolution Securities Limited (ESL). It is being distributed in the US by Evolution Securities US (ESUS) and it has not been altered in any
way by ESUS prior to distribution.

Evolution Securities US Disclaimer

ESUS accepts responsibility for the content of the publication. Any US institution, which is a recipient of this publication, wishing to effect transactions in any security discussed in
this publication, should do so with ESUS.
ESUS and/or its affiliates, including all entities within the Evolution Group Plc, may hold 1% or more of any class of common equity securities in the issuer that this publication
covers.
Disclosures in relation to ESUS and/or any affiliate’s role in managing or co-managing a public offering of securities for the issuer, receiving compensation for investment banking
services from the issuer in the past 12 months and/or expecting or intending to receive compensation for investment banking services from the issuer in the next three months
and/or making a market in the issuer’s securities is set out in the main disclosure section of this publication

11