Standard & Poor’s U.S. Equity Research

Stephen BiggarVP, Director U.S. Equity Research

March 2006

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The Objectives of Security AnalysisThe Objectives of Security Analysis

“…to present the important facts regarding a stock or bond issue, in a manner most informing and useful to an actual or potential owner, and to reach dependable conclusions, based upon the facts and applicable standards, as to the safety and attractiveness of a given security at the current or an assumed price.”

Benjamin Graham, David L. Dodd,

Security Analysis Principles and Technique, 1934

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Differentiating Elements to Standard & Poor’s Equity Research

1. Independence… without fear or favor

2. Disciplined Investment Process… highly refined, rigorous analytical process that has substantial internal controls through oversight and monitoring by experienced, supervisory analysts… enables stock selection across both growth and value universes

3. Stock Selection Performance… 80 years of equity research and analysis… 50 years of quantitative modeling… built the right foundation for current 19 year qualitative stock selection performance

4. Breadth of Coverage… one of the broadest universes among independent providers

5. Proprietary Intellectual Property... on earnings measurement… index and model portfolio construction… value-added data… market commentary and analysis… company and industry classifications

6. Timeliness… fastest to market with analytical updates… rapid and flexible delivery

7. Portfolio Capabilities… from index maintenance to stock selection, to portfolio construction, a strong orientation to actionable research

8. Experience… hired, trained and managed to excel at analysis

9. Global Capabilities… 350 non-U.S. STARS and growing… 2000 + globally… establishing positive STARS performance through disciplined approach with equity analysts in Europe and Asia

10. Compliance… supervisory analysts, compliance structure, transparency and documentation

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Standard & Poor’sA Division of The McGraw-Hill Companies

• $5.2 billion in sales (2004)

• 13 consecutive years of consistent,sustainable earnings growth

• Founded in 1888

• Over 17,000 employees in 350 offices

• Operate globally in 33 countries

• Aviation Week Group

• Broadcasting Group

• BusinessWeek Group

• Construction Information Group

• Platts

• Standard & Poor’s

- Credit Market Services

- Data Services

- Portfolio Services

- Equity Research Services

• McGraw-Hill Education

- McGraw-Hill Learning Network

- School Education Group

- Higher Education, Professional and International Group

Educational andProfessional Publishing

Financial ServicesInformation and MediaServices

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S&P Equity Research

• World’s Largest Independent Equity research firm: 100 + analysts producing buy, hold, sell recommendations on more than 1,500 stocks in US and 350+ stocks in Europe and Asia.

• S&P equity analysts are frequently quoted in prominent media outlets, including The Wall Street Journal, CNBC, CNN, Bloomberg.

• 120,000 investment advisors and brokers have access to S&P’s Advisor Insight, an online subscription service providing information on stocks, funds, investment portfolios and daily market analysis

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Standard & Poor’sDisciplined Investment Process

Standard & Poor’s approach to securities analysis is based on the

premise that a given security’s “fair market value” can be

determined by using a combination of conventional fundamental

(“bottom-up”) approaches. In conjunction with guidance from

Standard & Poor’s Investment Policy Committee, sector strategies,

and technical analysis, Standard & Poor’s equity analysts

determine the price appreciation potential of a given common stock

by determining the price divergence between where a security is

projected to be priced in 12 months and its current market price.

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Standard & Poor’s“Top-Down” Approach

Industry / Sector Views

Standard & Poor’sInvestment

Policy CommitteeSector Earnings Forecasts

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Standard & Poor’sInvestment Policy Committee (IPC)

31 Years

27 Years

20 Years

18 Years

19 Years

23 Years

29 Years

27 Years

18 Years

Years of Market Experience

Managing Director and Chief Economist

Managing Director, S&P Ratings, Global Fixed Income Research

Chief Investment Strategist

Managing Director, Global Equity Research

Director, Mutual Fund Strategist

Sr. Director, Portfolio Advisors

Managing Director, Investment Analysis

Managing Director and Chair, Index Committee

Director, Chief Technical Strategist

TitleTitle

David Wyss

Diane Vazza

Sam Stovall

Kenneth Shea

(Chairman)

Rosanne Pane

David Braverman

James Branscome

David Blitzer

Mark Arbeter

Stephen Biggar Director, U.S. Equity Research 17 Years

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Macro Economic Forecast

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Macro Economic Forecast

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Recommended AllocationRecommended Allocation

45% U.S. Equities

15% Cash

20% Bond

s

20% Foreign Equities

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Healthy U.S. Economic Growth Expectations

Source: Standard & Poor’s and Global Insight, Inc.

Economic Indicator 2004 2005e 2006e

Real GDP 4.2 3.6 3.5

Consumer Spending 3.9 3.5 3.2

Equipment Investment 11.9 11.1 9.6

Inflation (Core CPI) 1.8 2.2 2.3

Yield on 10-Year Note 4.3 4.3 5.0

$ Exchange Rate 84 83 81

Est. Annual Chgs. (%)

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Sector Recommendations

Source: Standard & Poor’s and Global Insight, Inc.

S&P 500 GICS Sector Performances and Recommended Sector Weightings 3/17/06

P/E on '06e P/E to Actual% Change Projected Proj. 5-Yr. Sector % S&P Sector Sector %

S&P 500 Sector Mar. YTD 2005 '06e EPS EPS Grth. Weightings Emphasis WeightingsConsumer Discretionary 1.5 3.9 (7.4) 17.3 1.5 10.3 Underweight 9.5Consumer Staples 2.1 2.9 1.3 18.0 1.8 9.4 Marketweight 9.5Energy 2.8 7.5 29.1 10.3 1.0 9.6 Overweight 11.0Financials 1.8 4.4 3.7 12.5 1.3 21.1 Overweight 22.0Health Care 1.1 3.3 4.9 18.3 1.7 13.2 Overweight 14.5Industrials 4.4 6.4 0.4 17.0 1.5 11.5 Marketweight 11.0Information Technology 1.5 3.7 0.4 21.0 1.5 15.3 Marketweight 15.0Materials 4.0 6.6 2.2 15.6 1.3 3.0 Underweight 2.0Telecommunication Services 3.2 13.6 (9.0) 16.2 2.8 3.3 Underweight 2.0Utilities (0.9) 2.1 12.8 14.5 2.2 3.3 Marketweight 3.5S&P Composite 1500 2.0 5.1 3.8 15.7 1.3S&P 500 2.1 4.7 3.0 15.4 1.4 Sector recommendations are market-S&P MidCap 400 1.4 6.3 11.3 17.9 1.4 cap weighted, influenced by economic,S&P SmallCap 600 2.2 9.8 6.7 17.9 1.3 fundamental, and technical considerations.

Recommended

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Technical Opinion

2005 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2006 Mar

116

120

124

128

132

x10

50-DAY EMA

BREAKOUT OF ASCENDING TRIANGLE

S&P 500

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RecommendationsRecommendations

Source: Standard & Poor’s

Single-Digit Bull

Y-E 2006 S&P 500 Target: 1360

Sector Recommendations

POS: Financials, Energy, Health Care.

NEG: Cons. Disc., Materials, Tele. Svcs.

Focus on Quality

S&P Quality Rankings of A- or Higher

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A Day in the Life

• Check news

• Research maintenance– Update spreadsheets, reports, sector meetings

• Macroeconomic outlook

• Industry Surveys

• Look for investment opportunities

• Coordinate with overseas analysts

• Talk to companies, listen to conference calls

• Speak with clients, the media, etc.

• Earnings season (PRIORITIZE!)

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Standard & Poor’s Fundamental (“Bottom-Up”) Approach

• Intrinsic Value Analysis– Determine a security’s “fair value” based principally on discounted

“free” cash flow (DCF) analysis. Essentially, estimates of future “free” cash flows are discounted back to current dollars, incorporating such variables as risk assessment and a company’s capital structure

• Relative Valuation– Assessing a security’s relative value by comparing appropriate

financial ratios across peer groups

• Sum-of-Parts– Determining “fair value” of a stock by determining the private market

values for a company’s identifiable, separate units

Overarching investment methodology is “Growth At A Reasonable Price.”

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Intrinsic Value Approach

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Relative Valuation Analysis

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Sum of the Parts

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How to Analyze – Steel and Aluminum

• Auto sales and production

• New construction

• Production and capacity utilization

• Inventories

• Steel scrap prices

• Market share

• Product mix

• Cost control/profit margins

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STARS Nomenclature

•Standard & Poor’s fundamental analysis is expressed in the STARS (STock Appreciation Ranking System), first introduced in 1987.

•5-STARS: (Strong Buy): Total return is expected to outperform the total return of the S&P benchmark by a wide margin, with shares rising in price on an absolute basis.

•4-STARS: (Buy): Total return is expected to outperform the total return of the S&P benchmark, with shares rising in price on an absolute basis.

•3-STARS: (Hold): Total return is expected to closely approximate that of the total return of the S&P benchmark, with shares generally rising in price on

an absolute basis.

•2-STARS: (Sell) Total return is expected to underperform the total return of the S&P benchmark, and share price is not anticipated to show gain.

•1-STAR: (Strong Sell): Total return is expected to underperform the total return of the S&P benchmark by a wide margin, with shares falling in price on an absolute basis.

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U.S. S&P STARS Distribution (2/21/06)

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180

912

344

103

1-STARS 2-STARS 3-STARS 4-STARS 5-STARS

Strong SellSell

Hold

Buy

Strong Buy

1.5% 11.5% 58.4% 22.0% 6.6%

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Standard & Poor’s U.S. STARS Cumulative Performance December 1986 – January 2006

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06

1 STARS 2 STARS 3 STARS

4 STARS 5 STARS S&P 500 INDEX

On an annual basis since inception, Standard & Poor’s recommendations outperformed theS&P 500 index 15 times, underperformed three times, and tied once.

Growth of $100invested on 12/31/86 would be worth on 01/31/065 STARS = $1,9024 STARS = $9493 STARS = $679S&P 500 = $5292 STARS = $4371 STARS = $124

Average Annual Performance12-31-86 to 01-31-065 STARS = +16.7%4 STARS = +12.5%3 STARS = +10.6%S&P 500 = +9.1%2 STARS = +8.0%1 STARS = +1.1%

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Proprietary Intellectual Property / Thought Leadership

• Global Industry Classification System

• Standard & Poor’s Earnings and Dividend Ranking System

• Standard & Poor’s Core Earnings

• Sector Studies / Analysis

• S&P STARS

• Compustat, Capital IQ Database

• Etc.

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Standard & Poor’sPrincipal Quantitative Models

• Standard & Poor’s Earnings and Dividend Ranking System (“Quality Rankings”)

• Standard & Poor’s Fair Value System

• Standard & Poor’s Investability Quotient

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S&P Earnings & Dividend Ranking System

Earnings & Dividend Rank

S&P's appraisals of the growth and stability of earnings and dividends over the past 10 years for individual companies are indicated by the following quality ranks. Quality Rankings are not intended to predict stock movements.

A+ Highest

A High

A- Above Average

B+ Average

B Below Average

B- Lower

C Lowest

D In Reorganization

NR Not Ranked

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Compliance

• All Standard & Poor’s equity research products are approved by a Supervisory Analyst

• Standard & Poor’s equity analysts are prohibited from owning common stocks of companies they cover

• All Standard & Poor’s equity analysts must pre-clear all trades through a Standard & Poor’s compliance officer

• A restricted list is updated continuously to reflect pending STARs additions, drops and imminent features

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Required DisclosuresS&P Global STARS Distribution

In the U.S.: As of December 31, 2005, research analysts at Standard & Poor’s Equity Research Services U.S. have recommended 28.2% of issuers with buy recommendations, 61.3% with hold recommendations and 10.5% with sell recommendations. In Europe: As of December 31, 2005, research analysts at Standard & Poor’s Equity Research Services Europe have recommended 33.8% of issuers with buy recommendations, 46.8% with hold recommendations and 19.4% with sell recommendations. In Asia: As of December 31, 2005, research analysts at Standard & Poor’s Equity Research Services Asia have recommended 24.8% of issuers with buy recommendations, 53.1% with hold recommendations and 22.1% with sell recommendations. Globally: As of December 31, 2005, research analysts at Standard & Poor’s Equity Research Services globally have recommended 28.7% of issuers with buy recommendations, 59.1% with hold recommendations and 12.2% with sell recommendations.

5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis. 4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis. 3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis. 2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price is not anticipated to show a gain. 1-STARS (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis.

Relevant benchmarks

In the U.S. the relevant benchmark is the S&P 500 Index, in Europe and in Asia, the relevant benchmarks are generally the S&P Europe 350 Index and the S&P Asia 50 Index.

For All Regions: All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

Additional information is available upon request.

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Required DisclosuresOther Disclosures

This report has been prepared and issued by Standard & Poor’s and/or one of its affiliates. In the United States, research reports are prepared by Standard & Poor’s Investment Advisory Services LLC (“SPIAS”). In the United States, research reports are issued by Standard & Poor’s (“S&P”), in the United Kingdom by Standard & Poor’s LLC (“S&P LLC”), which is authorized and regulated by the Financial Services Authority; in Hong Kong by Standard & Poor’s LLC which is regulated by the Hong Kong Securities Futures Commission, in Singapore by Standard & Poor’s LLC, which is regulated by the Monetary Authority of Singapore; in Japan by

Standard & Poor’s LLC, which is regulated by the Kanto Financial Bureau; in Sweden by Standard & Poor’s AB (“S&P AB”), in Malaysia by Standard & Poor’s Malaysia Sdn Bhd (“S&PM”) which is regulated by the Securities Commission and in Australia by Standard & Poor’s Information Services (Australia) Pty Ltd (“SPIS”) which is regulated by the Australian Securities & Investments Commission.

The research and analytical services performed by SPIAS, S&P LLC, S&P AB, S&PM and SPIS are each conducted separately from any other analytical activity of Standard & Poor’s.

Disclaimers

This material is based upon information that we consider to be reliable, but neither S&P nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. With respect to reports issued by S&P LLC-Japan and in the case of inconsistencies between the English and Japanese version of a report, the English version prevails. Neither S&P LLC nor S&P guarantees the accuracy of the translation. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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Required Disclosures

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

For residents of the U.K. –this report is only directed at and should only be relied on by persons outside of the United Kingdom or persons who are inside the United Kingdom and who have professional experience in matters relating to investments or who are high net worth persons, as defined in Article 19(5) or Article 49(2) (a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001, respectively.

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QUESTIONS?