ERP in Pictures Japan 2012

07 March 2012
Global Asset Allocation

Special Report
www.sgresearch.com
Risk Premium in Pictures

Japanese risk premium high enough to prefer Nikkei to JGBs
Asset Allocation Strategy Alain Bokobza (33) 1 42 13 84 38
alain.bokobza@sgcib.com
In this monthly report, we outline our proprietary risk premium for 27 developed and 23 emerging markets in the Americas, Europe, Africa, Asia, Australia and New Zealand. On page 23/24, we provide tables highlighting the results for these 50 markets. Prefer Nikkei to JGB. Japanese equities have been by far the best index performer over the last month. The BoJs more pro-active stance has weakened the yen versus the US dollar. The Japanese equity risk premium has started to decrease from its recent all-time high level. However, the upside potential on Japanese equities remains high, as their valuation (including the risk premium itself) remains attractive. After the recent rally, risks abound on Italian equities. The drop in Italian bond yields in February (-73bp) due to ECB monetary action brought some relief to Italian companies. Italian equities recovered very quickly last month in line with the move in the risk premium. However, consensus earnings growth expectations remain too optimistic in our view (2012: +20%, 2013: +16% and 2014: +12%) given austerity issues and the weak macro growth outlook. Emerging Asia equities vulnerable to profit warnings. Most of Asian emerging equity markets were on the upside over last month. In terms of valuation (including risk premium), these markets appear attractive. However, emerging companies in Asia look very vulnerable to profit warnings to us as 2012 earnings growth expectations remain above 10% (ranging from 11% in China to 20% in Thailand), at a time when China policy makers (with the concurrence of SGs economics team) confirm that 2012 should be a year of sub-normative growth.
Japanese risk premium started to decrease
6%
5%
Roland Kaloyan (33) 1 58 98 04 88

roland.kaloyan@sgcib.com
Philippe Ferreira (33) 1 42 14 69 28

philippe.ferreira@sgcib.com
Arthur van Slooten (33) 1 42 13 45 06

arthur.van-slooten@sgcib.com
Double-digit 2012 EPS growth for EM Asia markets

2012 China 11% 17% 13% 15% 13% 12% 18% 20% India Indonesia Korea Malaysia Philippines Taiwan Thailand 2013 13% 15% 16% 14% 11% 11% 21% 15% 2014 8% 6% 17% 12% 6% 10% 10% 7%
Equities cheap relative to Bonds
6%
5%
4%
4%
3%
URL links to our proprietary methodology in English URL links to our proprietary methodology in French
3%
2%
1%
2%
1%
0%
90 92 94 96 98
Bonds cheap relative to Equities

00 02 04 06 08 10 12
0%
Source: Datastream, SG Cross Asset Research
Source: Datastream, IBES
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
Macro Commodities Forex Rates Equity Credit
F441
Derivatives
Developed markets in pictures

G3: US, Europe and Japan EUROPE
Emerging markets in pictures

ASIA
p4
China, India and Indonesia
p14
EMU, UK and Small Cap (Europe)
p5
Korea, Malaysia and Philippines
p15
Austria, Belgium and Denmark
p6
Taiwan and Thailand
p16
Finland, France and Germany
p7
LATIN AMERICA
Greece, Ireland and Italy
p8
Argentina, Brazil and Chile
p17
Netherlands, Norway and Portugal p9
Colombia, Mexico and Peru
p18
Spain, Sweden and Switzerland
p10
EUROPE/MIDDLE EAST/AFRICA
Croatia, Czech Republic and Egypt p19
REST OF THE WORLD
Australia, Canada and Hong-Kong p11 Israel, New Zealand and Singapore p12
Hungary, Poland and Romania
p20
Russia, South Africa and Turkey
p21
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Equity Risk Premium Developed Markets
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G3: US, Europe and Japan

US key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 5.7% 3.7% 1.2% 6.8% 2.0% 7.7% Earnings Growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 9% 13% 11% 7.0% 3.9% 33.6%
US risk premium
7%
6%
7%
6%
5%
4%
5%
4%
3%
2%
3%

90 92 94 96 98 00 02 04 06 08 10 12
2%
1%
1%
Data since January 1980. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
EUROPE key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 5.9% 4.4% 2.1% 9.0% 2.6% 8.5% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 7% 11%
EUROPE risk premium

10%
10%
8%
8%
6%
6%
9%
4% 4%
3.2% 2.9% 43.3%

2% 2%

0%
90 92 94 96 98 00 02 04 06 08 10 12
0%
European risk premium and the 10Y bond yield are the average of national equity risk premiums and 10Y bond yields, weighted every month for each countrys total equity market capitalisation. Cost of Capital = Risk Premium + 10Y Bond Yield Source: Datastream, SG Cross Asset Research
JAPAN key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 4.0% 2.1% 0.2% 5.2% 1.0% 5.0% Earnings growth 2011e 2012e 2013e Historical average Historical GDP growth (g) Payout Ratio -21% 60% 18% 8.0% -0.5% 37.1%
JAPAN risk premium

6%
5%
6%
5%
4%
3%
4%
3%
2%
1%
2%
1%
0%
90 92 94 96 98

00 02 04 06 08 10 12
0%
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Europe (1): EMU, UK and Small Cap (Europe)

EMU Key inputs
6% 6%
EMU Risk premium

10%
10%
8%
8%
10%
4% 4%
2.7% 2.9% 44.5%

2% 2%

0%
90 92 94 96 98 00 02 04 06 08 10 12
0%
EMU risk premium and the 10Y bond yield are the average of national equity risk premiums and 10Y bond yields, weighted every month for each countrys total equity market capitalisation. Cost of Capital = Risk Premium + 10Y Bond Yield Source: Datastream, SG Cross Asset Research
UK Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 7.7% 5.6% 3.2% 10.3% 2.1% 9.8% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 4% 10% 7% 6.3% 3.9% 45.5%
UK Risk premium
11%
10% 9%
11%
10% 9%
8%
7% 6%
8%
7% 6%
5%
4% 3%
5%
4%

90 92 94 96 98 00 02 04 06 08 10 12
3%
2%
2%
SMALL CAP (Europe) Key inputs

SMALL CAP (Europe) Risk premium

10%
9% 8%
10%
9% 8%
7%
6%
7%
6%
5%
4% 3%
5%
4%

06 08 10
3%
2%
2%
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Europe (2): Austria, Belgium and Denmark

AUSTRIA Key inputs
AUSTRIA Risk premium

12%
10%
12%
10%
8%
6%
8%
6%
4%
2%
4%
2%

0%
93 95 97 99 01 03 05 07 09 11
0%
BELGIUM Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 3.0% 4.0% 0.9% 11.1% 3.5% 6.5% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 27% 12% 9% -2.1% 3.6% 43.7%
BELGIUM Risk premium

12% 12%

10% 10%
8%
6%
8%
6%
4%
2%
4%
2%

0%
93 95 97 99 01 03 05 07 09 11
0%
DENMARK Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 4.2% 2.0% -2.2% 6.6% 1.9% 6.1% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 30% 28%
DENMARK Risk premium

7%
7%
5%
5%
3%
3%
22%
1% 1%
7.0% 3.0% 28.6%

-1%
-1%
-3%
91 93 95 97 99 01 03 05 07 09 11
-3%
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Europe (3): Finland, France and Germany

FINLAND Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 5.0% 3.7% -1.9% 10.1% 2.3% 7.3% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio -5% 20% 8%
4% 4% 2%
FINLAND Risk premium

12% 12%

10% 8% 6% 10% 8% 6%
-1.6% 3.6% 54.6%
2% 0%
0%
-2%
93 95 97 99 01 03 05 07 09 11
-2%
Data since April 1989. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
FRANCE Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 5.7% 3.8% -0.2% 9.5% 2.8% 8.5% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 3% 11% 11% 2.6% 2.9% 47.2%
FRANCE Risk premium

10%
8%
10%
8%
6%
4%
6%
4%
2%
0%
2%
0%
-2%
90 92 94 96 98

00 02 04 06 08 10 12
-2%
GERMANY Key inputs

GERMANY Risk premium

7%
6% 5%
7%
6% 5%
4%
3% 2%
4%
3% 2%
1%
0% -1%
1%
0%

90 92 94 96 98 00 02 04 06 08 10 12
-1%
-2%
-2%
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Europe (4): Greece, Ireland and Italy

GREECE Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital -32.7% 6.2% -32.7% 13.5% 40.6% 7.9% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio na 38% -2% -9% 4.4% 48.7%
GREECE Risk premium

15%
10% 5% 0% -5% -10% -15% -20% -25% -30%
15%
10% 5% 0% -5% -10% -15% -20% -25%

00 02 04 06 08 10 12
-30%
-35%
-35%
IRELAND Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital -2.7% 7.5% -6.2% 13.3% 6.9% 4.2% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 15% 25%
IRELAND Risk premium

15%
15%
10%
10%
5%
5%
32%
0% 0%
-6.6% 3.1% 28.6%

-5% -5%
-10%
93

95 97 99 01 03 05 07 09 11
-10%
ITALY Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 4.7% 3.8% -2.5% 12.7% 5.0% 9.6% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 20% 16% 12% -0.4% 2.4% 56.8%
ITALY Risk premium

14%
12% 10%
14%
12% 10%
8%
6%
8%
6%
4%
2% 0%
4%
2%

92 94 96 98 00 02 04 06 08 10 12
0%
-2%
-2%
Data since February 1987. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
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Europe (5): Netherlands, Norway and Portugal

NETHERLANDS Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 5.4% 4.5% 0.6% 10.7% 2.2% 7.6% Earnings growth 2012e 2013e 2014e Historical average 15% 11% 7% -0.1%
NETHERLANDS Risk premium

12%
10%
12%
10%
8%
6%
8%
6%
4%
2%
4%
Historical GDP growth (g) 3.0% Payout Ratio 46.3%

90 92 94 96 98 00 02 04 06 08 10 12
2%
0%
0%
NORWAY Key inputs

NORWAY Risk premium

15%
13% 11%
15%
13% 11%
9%
7%
9%
7%
5%
3% 1%
5%
3%

90 92 94 96 98 00 02 04 06 08 10 12
1%
-1%
-1%
PORTUGAL Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital -3.5% 5.4% -4.4% 9.2% 13.6% 10.1% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 12% 14% 3% 8.2% 2.4% 52.3%
PORTUGAL Risk premium

10%
8% 6%
10%
8% 6%
4%
2%
4%
2%
0%
-2% -4%
0%
-2% -4%
-6%
98

00 02 04 06 08 10 12
-6%
07 March 2012
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Europe (6): Spain, Sweden and Switzerland

SPAIN Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 6.3% 6.1% 0.7% 11.5% 4.9% 11.2% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 1% 12% 8%
6% 6% 4% 2%
SPAIN Risk premium

14%
12% 10% 8%
14%
12% 10% 8%
7.4% 4.7% 44.5%
4% 2%

0%
92 94 96 98 00 02 04 06 08 10 12
0%
Data since March 1988. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
SWEDEN Key inputs

SWEDEN Risk premium

10%
10%
8%
8%
6%
6%
13%
4% 4%
4.4% 4.0% 43.2%

2% 2%

0%
94 96 98 00 02 04 06 08 10 12
0%
SWITZERLAND Key inputs

SWITZERLAND Risk premium

6% 6%

5% 5%
4%
4%
8%
3% 3%
1.9% 2.7% 34.6%

2% 2%
1%
90 92 94 96 98

00 02 04 06 08 10 12
1%
10
07 March 2012
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Rest of the world (1): Australia, Canada and Hong Kong

AUSTRALIA Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 9.3% 5.5% 1.6% 13.6% 4.1% 13.5% Earnings growth 2011e 2012e 2013e Historical average Historical GDP growth (g) Payout Ratio 2% 11% 9%
6% 6% 4% 2%
AUSTRALIA Risk premium

14%
12% 10% 8%
14%
12% 10% 8%
6.8% 7.1% 64.8%
4% 2%

0%
90 92 94 96 98 00 02 04 06 08 10 12
0%
CANADA Key inputs

CANADA Risk premium

11%
9%
11%
9%
7%
5%
7%
5%
3%
1%
3%

90 92 94 96 98 00 02 04 06 08 10 12
1%
-1%
-1%
HONG KONG Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 6.9% 4.8% 0.6% 13.0% 1.3% 8.2% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio -12%
HONG KONG Risk premium

15%
15%
11%
11%
13% 6% 10.4%
3% 3% 7% 7%
3.8% 41.7%
-1%

-1%
97 99 01 03 05 07 09 11
07 March 2012
11
F441
Rest of the world (2): Israel, New Zealand and Singapore

ISRAEL Key inputs
Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 3.4% 3.8% 1.3% 6.6% 4.5% 7.9% Earnings growth 2012e 2013e 2014e Historical average Historical GDP growth (g) Payout Ratio 9% 9% -2% -4.5% 5.3% 38.5%
ISRAEL Risk premium

7%
6%
7%
6%
5%
4%
5%
4%
3%
2%
3%
2%

1%
06 08 10 12
1%
NEW ZEALAND Key inputs

Risk premium CURRENT Average Minimum Maximum 10Y Bond Yield Cost of Capital 6.0% 4.5% 0.8% 10.1% 4.1% 10.1% Earnings growth 2011e 2012e 2013e Historical average Historical GDP growth (g) Payout Ratio -8% 13% 14% 1.1% 5.1% 74.0%
NEW ZEALAND Risk Premium

12%
10%
12%
10%
8%
6%
8%
6%
4%
2%
4%
2%

0%
91 93 95 97 99 01 03 05 07 09 11
0%
Data since February 1989 Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
SINGAPORE Key inputs

SINGAPORE Risk premium

8%
7%
8%
7%
6%
5%
6%
5%
4%
3%
4%
3%

2%
98 00 02 04 06 08 10 12
2%
12
07 March 2012
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13
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Equity Risk Premium Emerging Markets
14
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Asia (1): China, India and Indonesia

CHINA Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital Earnings growth 12.0% 2012e 9.4% 6.4% 2013e 2014e 11%
12% 12%
CHINA Risk premium

14%
14%
13% 8% 14.8%
8% 8% 10% 10%
13.2% Historical average 3.5%
Historical GDP growth (g) 11.4% 30.5%

6%
04 06

6%
08 10 12
15.6% Payout Ratio
Data since August 1994. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
INDIA Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 5.6% 6.6% 4.4% 9.4% 8.3% Earnings growth 2012e 2013e 2014e Historical average 17% 15% 6% 12.8%
INDIA Risk premium

10%
9%
10%
9%
8%
7%
8%
7%
6%
5%
6%
5%

13.9% Payout Ratio
4%
02 04 06 08 10 12
4%
INDONESIA Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 9.1% 3.6% -0.2% 9.1% 6.0% Earnings growth 2012e 2013e 2014e Historical average 13% 16% 17% 15.3%
INDONESIA Risk premium

11%
9%
11%
9%
7%
5%
7%
5%
3%
1%
3%
1%
15.1% Payout Ratio
-1%
03 05

07 09 11
-1%
07 March 2012
15
F441
Asia (2): Korea, Malaysia and Philippines

KOREA Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 4.7% 4.8% 2.3% 8.8% 3.5% 8.2% Earnings growth 2012e 2013e 2014e Historical average 15%
8% 8%
KOREA Risk premium

10%
10%
14% 12% 10.5%

4% 4% 6% 6%

2%
01

2%
03 05 07 09 11
MALAYSIA Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 7.1% 6.0% 4.8% 7.9% 3.4% Earnings growth 2012e 2013e 2014e Historical average 13%
MALAYSIA Risk premium

8%
8%
7%
7%
11% 6% 8.2%
5% 5% 6% 6%
Historical GDP growth (g) 6.6%

10.4% Payout Ratio 46.1%
4%
02 04 06 08 10 12
4%
PHILIPPINES Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 6.4% 6.0% 5.2% 7.2% 5.0% Earnings growth 2012e 2013e 2014e Historical average 12% 11%
PHILIPPINES Risk premium

7.5%
7.5%
7.0%
7.0%
6.5%
6.5%
10%
6.0% 6.0%
9.3%
5.5% 5.5%

11.5% Payout Ratio
5.0% 5.0% Nov -10 Jan-11 Mar-11May -11 Jul-11 Sep-11Nov -11 Jan-12 Mar-12
Data since October 1988. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
16
07 March 2012
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Asia (3): Taiwan and Thailand

TAIWAN Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 6.7% 5.9% 4.6% 7.4% 1.0% 7.6% Earnings growth 2012e 2013e 2014e Historical average 18%
7% 7%
TAIWAN Risk premium

8%
8%
21% 10% 3.6%

5% 5% 6% 6%

Payout Ratio 52.6%
4%
02 04 06 08 10
4%
Data since May 1989. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Bloomberg, Datastream, SG Cross Asset Research
THAILAND Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 8.5% 6.9% 2.5% Earnings growth 2012e 2013e 2014e 20% 15%
THAILAND Risk premium

12%
12%
10%
10%
8%
8%
7%
6% 6%
11.0%
4% 4%

12.0% Payout Ratio
2%
02 04 06 08 10 12
2%
07 March 2012
17
F441
Latam (1): Argentina, Brazil and Chile

ARGENTINA Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital Earnings growth 10.9% 2012e 3.3% -6.5% 2013e 2014e 2% 15% 6% 14.9%
ARGENTINA Risk premium

12%
10% 8% 6% 4% 2% 0%
12%
10% 8% 6% 4% 2% 0% -2% -4%
10.9% Historical average
-2% -4% -6%
14.1% Historical GDP growth (g) 13.0% 24.9% Payout Ratio 48.7%

Aug-10 Feb-11 Aug-11 Feb-12
-6%
-8% Feb-10
-8%
Data since July 1992. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
BRAZIL Key inputs

Risk premium CURRENT Average * Minimum Maximum Bond Yield Cost of Capital 2.8% 2.1% Earnings growth 2012e 2013e 8% 11%
BRAZIL Risk premium

8%
8%
6%
6%
4%
4%
-12.1% 2014e 6.6% Historical average
5%
2% 2%
11.2%
0% 0%

-2%
04 06 08 10 12
-2%
*Average takes into account data after September 2003. Data since June 2000. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
CHILE Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 5.7% 5.2% 4.1% 7.4% 4.6% Earnings growth 2012e 2013e 2014e Historical average 14% 10% 11% 11.4%
CHILE Risk premium

7.5%
7.0% 6.5%
7.5%
7.0% 6.5%
6.0%
5.5%
6.0%
5.5%
5.0%
4.5%
5.0%
4.5%
4.0%

Oct-10Dec-10Feb-11 Apr-11 Jun-11Aug-11 Oct-11Dec-11Feb-12
4.0%
10.3% Payout Ratio
3.5%
3.5%
18
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Latam (2): Colombia, Mexico and Peru

COLOMBIA Key inputs
COLOMBIA Risk premium

8%
6%
8%
6%
4%
2%
4%
2%
0%
-2%
0%
-2%
14.2% Payout Ratio
-4%
03 05

07 09 11
-4%
MEXICO Key inputs

MEXICO Risk premium

5%
4%
5%
4%
3%
2%
3%
2%
1%
0%
1%
0%

11.3% Payout Ratio
-1%
02 04 06 08 10 12
-1%
PERU Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 6.4% 6.5% 3.3% Earnings growth 2012e 2013e 2014e 5% 5% 4%
PERU Risk premium

16%
14% 12% 10% 8%
16%
14% 12% 10% 8% 6% 4%
11.3%
6% 4%
12.3% Payout Ratio
2%
07 09

11
2%
07 March 2012
19
F441
EMEA* (1): Croatia, Czech Republic and Egypt

CROATIA Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 5.2% 5.3% 3.1% 7.0% 7.1% Earnings growth 2012e 2013e 2014e Historical average 18% 7%
6% 6%
CROATIA Risk premium

8% 8%

7% 7%
8%
5% 5%
5.0%
4% 4%

12.4% Payout Ratio
3%
Nov -10 Jan-11 Mar-11 May -11 Jul-11 Sep-11 Nov -11 Jan-12 Mar-12
3%
CZECH REPUBLIC Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital Earnings growth 12.6% 2012e 8.7% 3.3% 2013e 2014e 3%
CZECH REPUBLIC Risk premium

16%
16%
12%
12%
2% 9% 11.7%
4% 4% 8% 8%

0%
01 03 05 07 09 11
0%
Data since December 1994. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
EGYPT Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 4.6% 7.8% 2.0% Earnings growth 2012e 2013e 2014e 44% 22% 19%
EGYPT Risk premium

14%
12% 10% 8% 6%
14%
12% 10% 8% 6% 4% 2%
12.3% Historical average
7.1%
4% 2%
0% Oct-07

Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12
0%
Data since October 1997. Historical EPS growth, historical GDP growth and Payout ratio based on their 10-year average. Cost of Capital = Risk Premium + 10Y Bond Yield. Source: Datastream, SG Cross Asset Research
*EMEA: Europe Middle East Africa
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EMEA* (2): Hungary, Poland and Romania

HUNGARY Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 4.7% 6.1% 2.4% Earnings growth 2012e 2013e 2014e 5% 22% 43% 8.6%
HUNGARY Risk premium

12%
10%
12%
10%
8%
6%
8%
6%
4%
2%
4%
2%

12.8% Payout Ratio
0%
02 04 06 08 10 12
0%
POLAND Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 4.4% 3.3% 1.4% 5.7% 5.1% 9.5% Earnings growth 2012e 2013e 2014e Historical average -12% 0%
POLAND Risk premium

6%
6%
5%
5%
4%
4%
7%
3% 3%
5.3%
2% 2%

1%
02 04 06 08 10 12
1%
ROMANIA Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 6.7% 6.6% 5.4% 8.0% 6.7% Earnings growth 2012e 2013e 2014e Historical average -9%
ROMANIA Risk premium

9.0%
9.0%
8.0%
8.0%
16% 1% 8.5%
6.0% 6.0% 7.0% 7.0%

5.0%
Feb-11 Apr-11

5.0%
Jun-11 Aug-11 Oct-11 Dec-11 Feb-12
13.4% Payout Ratio

07 March 2012 21
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EMEA* (3): Russia, South Africa and Turkey

RUSSIA Key inputs
Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 6.3% 6.8% 3.4% Earnings growth 2012e 2013e 2014e -9%
8%
RUSSIA Risk premium

10%
10%
8%
-5% -1% 12.5%

4% 4% 6% 6%

2%
05 07 09 11
2%
SOUTH AFRICA Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 5.0% 6.2% 2.2% 9.0% 7.9% Earnings growth 2012e 2013e 2014e Historical average 28%
SOUTH AFRICA Risk premium

10%
10%
8%
8%
14% 4% 8.4%
4% 4% 6% 6%

2%
02 04 06 08 10 12
2%
TURKEY Key inputs

Risk premium CURRENT Average Minimum Maximum Bond Yield Cost of Capital 5.3% 0.5% Earnings growth 2012e 2013e 11%
TURKEY Risk premium

8%
8%
3%
3%
14% 12% 22.6%

-7% -7% -2% -2%
-11.1% 2014e 6.5% 9.1% Historical average

-12%
04 06 08 10 12
-12%
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Developed Markets (1)

Risk Premium Last 1 month change 5.7% 5.9% 4.0% 4.9% 7.7% 5.1% 6.7% 3.0% 4.2% 5.0% 5.7% 5.1% -32.7% -2.7% 4.7% 5.4% 9.0% -3.5% 6.3% 6.3% 5.2% 9.3% 6.4% 6.9% 3.4% 6.0% 7.6% 4bp 10bp -56bp 30bp -11bp 24bp 28bp -5bp 6bp -3bp 34bp 9bp -450bp 43bp 114bp -7bp -17bp 89bp -6bp -9bp 11bp -98bp -5bp -46bp -35bp -78bp 14bp Developed Markets G3 USA Europe Japan* EUROPE EMU United Kingdom Small Cap Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland REST OF THE WORLD Australia* Canada Hong Kong Israel New Zealand* Singapore 10Y Bonds Yield Last 1 month change 2.0% 2.6% 1.0% 3.4% 2.1% 2.6% 2.8% 3.5% 1.9% 2.3% 2.8% 1.9% 40.6% 6.9% 5.0% 2.2% 2.3% 13.6% 4.9% 1.8% 0.6% 4.1% 2.0% 1.3% 4.5% 4.1% 1.5% 19bp -2bp 0bp -15bp 9bp 0bp -12bp -5bp 8bp 1bp -25bp 2bp 448bp -36bp -73bp 1bp 36bp -180bp 3bp 17bp 3bp 35bp 9bp 3bp 36bp 33bp -5bp Cost of capital Equity Index Last 1 month change 1 month change 7.7% 8.5% 5.0% 8.3% 9.8% 7.7% 9.5% 6.5% 6.1% 7.3% 8.5% 7.0% 7.9% 4.2% 9.6% 7.6% 11.3% 10.1% 11.2% 8.1% 5.9% 13.5% 8.4% 8.2% 7.9% 10.1% 9.1% 23bp 8bp -56bp 15bp -1bp 24bp 16bp -11bp 14bp 0bp 9bp 11bp -2bp 7bp 41bp -6bp -21bp -91bp -3bp 8bp 14bp -63bp 4bp -43bp 1bp -45bp 9bp 3.8% 2.8% 10.6% 3.2% 2.5% 3.2% 4.9% 5.5% 10.6% 2.8% 4.0% 4.9% -8.5% 2.3% 3.2% 0.5% 7.2% 4.2% -1.6% 4.3% 1.1% 0.1% 1.8% 7.6% -1.4% 1.7% 3.8%
Source: SG Cross Asset Research, Datastream, IBES
Developed Markets (2)

Pay-Out Growth (g) 3.9% 2.9% -0.5% 2.9% 3.9% 2.9% 3.4% 3.6% 3.0% 3.6% 2.9% 2.1% 4.4% 3.1% 2.4% 3.0% 6.4% 2.4% 4.7% 4.0% 2.7% 7.1% 4.5% 3.8% 5.3% 5.1% 8.3% Developed Markets G3 USA Europe Japan* EUROPE EMU United Kingdom Small Cap Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland REST OF THE WORLD Australia* Canada Hong Kong Israel New Zealand* Singapore Earning Growth 2012 9% 7% -21% 9% 4% 23% 26% 27% 30% -5% 3% 10% na 15% 20% 15% 9% 12% 1% 10% 12% 2% 9% -12% 9% -8% 6% Earning Growth 2013 13% 11% 60% 12% 10% 19% 17% 12% 28% 20% 11% 11% 38% 25% 16% 11% 11% 14% 12% 11% 11% 11% 13% 13% 9% 13% 11% Earning Growth 2014 11% 9% 18% 10% 7% 12% 13% 9% 22% 8% 11% 9% -2% 32% 12% 7% 9% 3% 8% 13% 8% 9% 4% 6% -2% 14% 16%
34% 43% 37% 45% 46% 43% 33% 44% 29% 55% 47% 36% 49% 29% 57% 46% 37% 52% 45% 43% 35% 65% 41% 42% 39% 74% 37%
*2011, 2012 and 2013 earnings growth. Source: SG Cross Asset Research, Datastream, IBES
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Emerging Markets (1)

Risk Premium Last 1 month change 12.0% 5.6% 9.1% 4.7% 7.1% 6.4% 6.7% 8.5% 10.9% 2.8% 5.7% 7.5% 4.8% 6.4% 5.2% 12.6% 4.6% 4.7% 4.4% 6.7% 6.3% 5.0% 5.3% -53bp -40bp 28bp 9bp -11bp 23bp 20bp -44bp 196bp -19bp 27bp 17bp 104bp 28bp 73bp -64bp -187bp 232bp 26bp -58bp -44bp -53bp 34bp Emerging Markets ASIA China India Indonesia Korea Malaysia Philippines Taiwan Thailand LATIN AMERICA Argentina Brazil Chile Colombia Mexico Peru EMEA Croatia Czech Republic Egypt Hungary Poland Romania Russia South Africa Turkey Long Term Bond Yield Last 1 month change 3.5% 8.3% 6.0% 3.5% 3.4% 5.0% 1.0% 3.5% 14.1% 10.3% 4.6% 6.7% 6.5% 5.9% 7.1% 1.8% 13.8% 8.1% 5.1% 6.7% 7.3% 7.9% 9.1% 12bp 8bp 12bp 7bp 0bp -37bp 1bp 34bp 0bp -18bp -31bp 7bp 28bp -15bp -36bp 8bp 0bp -54bp -7bp -39bp 0bp 21bp -21bp Cost of capital Equity Index Last 1 month change 1 month change 15.6% 13.9% 15.1% 8.2% 10.4% 11.5% 7.6% 12.0% 24.9% 13.1% 10.3% 14.2% 11.3% 12.3% 12.4% 14.4% 18.4% 12.8% 9.5% 13.4% 13.5% 12.9% 14.4% -42bp -33bp 39bp 16bp -11bp -14bp 20bp -9bp 196bp -37bp -4bp 24bp 132bp 13bp 37bp 55bp -187bp 179bp 19bp -97bp -52bp -32bp 13bp 4.8% 2.2% -2.1% 4.1% 2.7% 5.2% 6.3% 9.3% -13.3% 2.6% 5.3% 6.1% 1.0% -0.1% -4.5% 2.2% 14.3% 0.9% -1.8% 8.0% 4.2% 1.3% 1.5%
Emerging Markets (2)

Pay-Out Growth (g) 11.4% 12.1% 10.2% 4.1% 6.6% 9.1% 2.7% 7.3% 13.0% 7.2% 4.2% 7.2% 5.6% 6.3% 5.0% 3.9% 13.7% 4.7% 5.2% 8.5% 9.7% 8.7% 7.3% Emerging Markets ASIA China India Indonesia Korea Malaysia Philippines Taiwan Thailand LATIN AMERICA Argentina Brazil Chile Colombia Mexico Peru EMEA Croatia Czech Republic Egypt Hungary Poland Romania Russia South Africa Turkey Earning Growth 2012 11% 17% 13% 15% 13% 12% 18% 20% 2% 8% 14% 8% 35% 5% 18% 3% 44% 5% -12% -9% -9% 28% 11% Earning Growth 2013 13% 15% 16% 14% 11% 11% 21% 15% 15% 11% 10% 6% 21% 5% 7% 2% 22% 22% 0% 16% -5% 14% 14% Earning Growth 2014 8% 6% 17% 12% 6% 10% 10% 7% 6% 5% 11% 23% 72% 4% 8% 9% 19% 43% 7% 1% -1% 4% 12%
31% 23% 40% 21% 46% 35% 53% 38% 49% 42% 56% 56% 25% 97% 64% 71% 50% 34% 40% 32% 18% 43% 26%
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APPENDIX
ANALYST CERTIFICATION The following named research analyst(s) hereby certifies or certify 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 : Alain Bokobza, Roland Kaloyan, Philippe Ferreira, Arthur van Slooten.
SG RATINGS BUY: expected upside of 10% or more over a 12 month period. HOLD: expected return between -10% and +10% over a 12 month period. SELL: expected downside 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. Ratings and/or price targets are determined by the ranges described above at the time of the initiation of coverage or a change in rating or price target (subject to limited management discretion). At other times, the price targets may fall outside of these ranges because of market price movements and/or other short term volatility or trading patterns. Such interim deviations from specified ranges will be permitted but will become subject to review by research management.
Equity rating and dispersion relationship

250 47% 41% 200
Updated on 01/03/12
150 46% 44% 100 12% 50 43%
0 Buy Companies Covered

Source: SG Cross Asset Research
Hold Cos. w/ Banking Relationship
Sell
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 assu mes 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.
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 tot al revenues, a portion of which are generated by investment banking activities.
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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): Alain Bokobza Socit Gnrale Paris, Roland Kaloyan Socit Gnrale Paris, Philippe Ferreira Socit Gnrale Paris, Arthur van Slooten Socit Gnrale Paris
IMPORTANT DISCLAIMER: The information herein is not intended to be an offer to buy or sell, or a solicitation of an offer to buy or sell, any securities and has been obtained from, or is based upon, sources believed to be reliable but is not guaranteed as to accuracy or completeness. SG does, from time to time, deal, trade in, profit from, hold, act as market-makers or advisers, brokers or bankers in relation to the securities, or derivatives thereof, of persons, firms or entities mentioned in this document and may be represented on the board of such persons, firms or entities. SG does,, from time to time, act as a principal trader in debt securities that may be referred to in this report and may hold debt securities positions. Employees of SG, or individuals connected to them, may from time to time have a position in or hold any of the investments or related investments mentioned in this document. SG is under no obligation to disclose or take account of this document when advising or dealing with or on behalf of customers. The views of SG reflected in this document may change without notice. In addition, SG may issue other reports that are inconsistent with, and reach different conclusions from, the information presented in this report and is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. To the maximum extent possible at law, SG does not accept any liability whatsoever arising from the use of the material or information contained herein. This research document is not intended for use by or targeted to retail customers. Should a retail customer obtain a copy of this report he/she should not base his/her investment decisions solely on the basis of this document and must seek independent financial advice. The financial instrument discussed in this report may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein. The value of securities and financial instruments is subject to currency exchange rate fluctuation that may have a positive or negative effect on the price of such securities or financial instruments, and investors in securities such as ADRs effectively assume this risk. SG does not provide any tax advice. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. Investments in general, and derivatives in particular, involve numerous risks, including, among others, market, counterparty default and liquidity risk. Trading in options involves additional risks and is not suitable for all investors. An option may become worthless by its expiration date, as it is a depreciating asset. Option ownership could result in significant loss or gain, especially for options of unhedged positions. Prior to buying or selling an option, investors must review the "Characteristics and Risks of Standardized Options" at http://www.optionsclearing.com/publications/risks/riskchap.1.jsp. 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. Notice to French Investors: This publication is issued in France by or through Socit Gnrale ("SG") which is authorised and supervised by the Autorit de Contrle Prudentiel and regulated by the Autorite des Marches Financiers. Notice to U.K. Investors: This publication is issued in the United Kingdom by or through Socit Gnrale ("SG"), London Branch . Socit Gnrale is a French credit institution (bank) authorised and supervised by the Autorit de Contrle Prudentiel (the French Prudential Control Authority). Socit Gnrale is subject to limited regulation by the Financial Services Authority (FSA) in the U.K. Details of the extent of SG's regulation by the FSA are available from SG on request. The information and any advice contained herein is directed only at, and made available only to, professional clients and eligible counterparties (as defined in the FSA rules) and should not be relied upon by any other person or party. Notice to Polish Investors: this document has been issued in Poland by Societe Generale S.A. Oddzial w Polsce (the Branch) with its registered office in Warsaw (Poland) at 111 Marszakowska St. The Branch is supervised by the Polish Financial Supervision Authority and the French Autorit de Contrle Prudentiel. This report is addressed to financial institutions only, as defined in the Act on trading in financial instruments. The Branch certifies that this document has been elaborated with due dilligence and care. Notice to U.S. Investors: For purposes of SEC Rule 15a-6, SG Americas Securities LLC (SGAS) takes responsibility for this research report. This report is intended for institutional investors only. Any U.S. person wishing to discuss this report or effect transactions in any security discussed herein should do so with or through SGAS, a broker-dealer registered with the SEC and a member of FINRA, 1221 Avenue of the Americas, New York, NY 10020. (212)-278-6000. Notice to Singapore Investors: This document is provided in Singapore by or through Socit Gnrale ("SG"), Singapore Branch and is provided only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact Socit Gnrale, Singapore Branch in respect of any matters arising from, or in connection with, the document. 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), whic h 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.
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Notice to Canadian Investors: This document is for information purposes only and is intended for use by Permitted Clients, as defined under National Instrument 31-103, Accredited Investors, as defined under National Instrument 45-106, Accredited Counterparties as defined under the Derivatives Act (Qubec) and "Qualified Parties" as defined under the ASC, BCSC, SFSC and NBSC Orders http://www.sgcib.com. Copyright: The Socit Gnrale Group 2012. 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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07 March 2012

Global Asset Allocation

Risk Premium in Pictures

Roland Kaloyan (33) 1 58 98 04 88

Philippe Ferreira (33) 1 42 14 69 28

Arthur van Slooten (33) 1 42 13 45 06

Double-digit 2012 EPS growth for EM Asia markets

Equities cheap relative to Bonds

Bonds cheap relative to Equities

Source: Datastream, SG Cross Asset Research

Source: Datastream, IBES

Risk Premium in Pictures

Developed markets in pictures

Emerging markets in pictures

China, India and Indonesia

EMU, UK and Small Cap (Europe)

Korea, Malaysia and Philippines

Austria, Belgium and Denmark

Taiwan and Thailand

Finland, France and Germany

Greece, Ireland and Italy

Argentina, Brazil and Chile

Netherlands, Norway and Portugal p9

Colombia, Mexico and Peru

Spain, Sweden and Switzerland

REST OF THE WORLD

Hungary, Poland and Romania

Russia, South Africa and Turkey

Risk Premium in Pictures

Equity Risk Premium Developed Markets

Risk Premium in Pictures

G3: US, Europe and Japan

Equities cheap relative to Bonds

Bonds cheap relative to Equities

EUROPE key inputs

EUROPE risk premium

Equities cheap relative to Bonds

3.2% 2.9% 43.3%

Bonds cheap relative to Equities

JAPAN key inputs

JAPAN risk premium

Equities cheap relative to Bonds

Bonds cheap relative to Equities

Risk Premium in Pictures

Europe (1): EMU, UK and Small Cap (Europe)

EMU Risk premium

Equities cheap relative to Bonds

2.7% 2.9% 44.5%

Bonds cheap relative to Equities

Equities cheap relative to Bonds

Bonds cheap relative to Equities

SMALL CAP (Europe) Key inputs

SMALL CAP (Europe) Risk premium

Equities cheap relative to Bonds

Bonds cheap relative to Equities

Risk Premium in Pictures

Europe (2): Austria, Belgium and Denmark

AUSTRIA Risk premium

Equities cheap relative to Bonds