2012 From ROE to CFROI® and - CFA Switzerland

HOLT

2012

From ROE to CFROI® and everything in between CFA Institute

Greg Collett CFA +44 (0) 207 88 33 643 [email protected] HOLT Custom Solutions

www.credit-suisse.com/holtmethodology CONFIDENTIAL – For Education and Training Purposes Only

Introducing HOLT®

Agenda

Introduction Accounting Performance Measurement Fade and Mean Reversion Link to Valuation Questions

CLARITY IS CONFIDENCE

HOLT

Accounting – how it all flows around


HOLT

The Ideal Performance Metric Question

Problem

Does the metric allow fair comparisons between old and new companies?

New assets = low return Old assets = high return

How do you compare a short life tech company to a longer life capital goods company?

Ratio vs IRR

Can you compare returns across countries with high and low inflation?

Income statement reflects inflation Balance sheet to a lesser extent

Do the return and growth measures track Total Shareholder Return (TSR) over time.

Does a rising return lead to greater TSR?

Is the return measure subject to accounting manipulation?

Financing manipulation does not always improve TSR


HOLT

The Ideal Performance Metric

Question

ROE

ROIC

Old Assets/New Assets

?

?

?

?

?

Asset Life

?

?

?

?

?

Inflation

?

?

?

?

?

Accounting Distortions

?

?

?

?

?


CROGI CROIGI CFROI

HOLT

Comparison of Financial Performance Metrics Cash Flow Return on Investment Cash Return on Inflation Adjusted Gross Investment

Cash Return on Gross Investment

CFROI

CROIGI

CROGI

Return on Invested Capital

ROIC Return on Equity

ROCE ROE


ROIIC RONA HOLT

Return on Equity ROE is defined as Net Earnings / Book Equity. It is an incomplete measure because it measures

CFROI

the return on assets not funded by debt.

CROIGI

CROGI

ROIC Return on Equity

ROE


HOLT

Return on Equity – Changing Leverage Adds Noise to the Signal Income Costs EBIT Interest PBT Tax Net Income Debt Equity Deb/(Debt+Equity) ROE

1000 700 300 100 200 60 140

1000 700 300 90 210 63 147

1000 700 300 80 220 66 154

1000 700 300 70 230 69 161

1000 700 300 60 240 72 168

1000 700 300 50 250 75 175

1000 700 300 40 260 78 182

1000 700 300 30 270 81 189

1000 700 300 20 280 84 196

1000 700 300 10 290 87 203

1000 700 300 0 300 90 210

1000 0 100% #N/A

900 100 90% 147%

800 200 80% 77%

700 300 70% 54%

600 400 60% 42%

500 500 50% 35%

400 600 40% 30%

300 700 30% 27%

200 800 20% 25%

100 900 10% 23%

0 1000 0% 21%

1,200

160% 140%

1,000

120% 800

100%

600

80% 60%

400

40% 200

20%

0

0% 1

2

3

4

5 Debt


6 Equity

7

8

9

10

11

ROE

HOLT

Understanding Inflation’s Impact on ROE

LIFO Revenue - Expenses Profit Net Income ROE

=

Owner’s Equity


Inventory FIFO

Wages Depreciation

~

~ HOLT

Inflation Can Seriously Distort ROE

20

Reported ROE

Reported ROE using actual U.S. inflation for a 6% “real” IRR project.

15

10

6% IRR Project (Inflation Adjusted)

5

0 1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

HOLT


Source: HOLT analysis

Return on Equity

Issue Old Assets/New Assets

ROE

Reason

No

Neither net income nor equity refect asset age

No

Neither net income nor equity refect asset life

No

Net income reflects inflation. Equity is an historical value


No

Both are subject to non-operating distortions

TSR Tracking

No

Tracks poorly

Asset Life Inflation


HOLT

Return on Invested Capital ROIC is defined as NOPAT / Invested Capital and is key to Economic Profit analysis.

CFROI

CROIGI

CROGI


ROIC ROCE ROE CLARITY IS CONFIDENCE

ROIIC RONA HOLT


Operating Profit (EBIT) - Effective Tax Charge = NOPAT (Net Operating Profit After Tax)

ROIC =

NOPAT Invested Capital Total Assets - Payables - Other Current Liabilities - Cash = Invested Capital


HOLT

Return on Invested Capital – Issues

Current Dollar income which includes noncash items such as depreciation and amortisation

ROIC =

NOPAT Invested Capital

Can we expect this ratio to tell us anything useful about performance? NOPAT and Invested Capital are not in constant dollars!

Historical cost depreciated assets Excludes off balance sheet items


HOLT

Accounting Items Can Distort the Return Calculation Example: Two Plants •

Managers A and B operate plants of equal capacity but with different ages

•

Plants each have 20 year life, original cost of assets = 1,000

Plant A

Plant B

NOPAT

100

100

Age of Assets

10

0

Invested Capital

500

1,000

ROIC

20%

10%


Manager B is penalized for having a newer plant!

HOLT

Worldwide Accounting and Reporting Issues Prevent Comparability


HOLT


Issue Old Assets/New Assets Asset Life

ROIC

Reason

No

Asset age reduces assets

No

Not taken into account

NOPAT is current dollars, Inflation No Invested Capital is not Depends on analyst Accounting Distortions Maybe adjustments (op leases)


HOLT


CFROI


CROIGI

CROGI

ROIC

ROE CLARITY IS CONFIDENCE

HOLT

Cash Return on Gross Investment NOPAT +Depreciation +Other non-cash

Operating After Tax Cash Flow CROGI

=

items

Gross Investment Invested Capital +

ROIC

Accumulated Depreciation +

ROE

Capitalized Expenses

... by adding back non-cash items to NOPAT and accumulated depreciation to Invested Capital This captures the total value of investment in the asset base more accurately CLARITY IS CONFIDENCE

HOLT


Example: Two Plants


Plant A

Plant B

NOPAT

100

100

Depreciation

50

50

Operating After Tax Cash Flow

150

150

Invested Capital

500

1,000

Accum ulated Depreciation

500

0

Gross Investment

1,000

1,000

CROGI

15%

15%

CROGI shows that managers A and B are achieving similar cash returns on the original investment!

HOLT

Cash Return on Gross Investment – Operating Leases

Plant A Plant B Plant C NOPAT

100

100

100

Depreciation

50

50

0

Operating Leases

0

0

50


150

150

150

Invested Capital

1,000

1,000

0

500

0

0

0

0

1,000

1,000

1,000

1,000

15%

15%

15%

Accumulated Depreciation Gross Capitalised Leases Gross Investm ent

CROGI

CROGI shows that managers A, B and C are achieving similar cash returns on the original investment!

These scenarios assume zero net working capital CLARITY IS CONFIDENCE

HOLT

Cash Return on Gross Investment Net PPE/Gross PPE

PPE Life

0.56

25.00

0.54

20.00

0.52

15.00 0.50

10.00 0.48

5.00

0.46 0.44

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0.00

The Net/Gross plant ratio tells us that the PPE is 50% depreciated.

Capex/Depreciation 2.5

Capex/Depreciation is greater than one indicating net growth

2.0

1.5

Plant life (GrossPPE/depreciation) has increased. This could be caused by changes in sector composition and weight over time.

1.0

0.5

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0.0

HOLT

CLARITY IS CONFIDENCE Europe>1bn Eur ex Financials. Source Credit Suisse HOLT 2 Oct 2012



CROGI YES No

Reason Accumulated depreciation is added back Not taken into account

Cash flow is current dollars, Inflation No Invested Capital is historical Depends on analyst Accounting Distortions Maybe adjustments (op leases)


HOLT


From an investor’s point of view…..

What is the impact of inflation on the investment made ten years ago?

Are you measuring return on what you spent ten years ago or on what that investment is worth in today’s money (current Dollars)?


HOLT

Differing Inflation Rates Make International Comparisons Difficult Can you use CROGI to compare companies across time and in different countries?

HOLT

CLARITY IS CONFIDENCE Source Credit Suisse HOLT 2 Oct 2012

Cash Return on Inflation Adjusted Gross Investment CROIGI is defined as Cash Return / Inflation Adjusted Gross Investment.

Cash Return on Inflation Adjusted Gross Investment

CFROI

CROIGI

CROGI

ROIC


HOLT



Operating After Tax Cash Flow CROIGI = Inflation Adjusted Gross Investment

Gross Investment + Inflation Adjustment on Gross Investment

CROGI

ROIC ROE

... by adding an inflation adjustment to the gross fixed assets to approximate their value in today’s money. This gives a fair value to the entire asset base, regardless of age.


HOLT

Cash Return on Inflation Adjusted Gross Investment Example: Two Plants

Operating After Tax Cash Flow Gross Investm ent Age Inflation Adjustm ent* Inflation Adjusted Gross Investment

CROIGI

Plant A

Plant B

150

150

1,000

1,000

10

0

220

0

1,220

1,000

12%

15%

CROIGI shows that plant A’s return is actually less than B’s when the value of investment is compared in today’s money!

* Assuming 2% Annual Inflation CLARITY IS CONFIDENCE

HOLT

Why Is It Important to Adjust for Inflation? Year USA Inflation SA Inflation Avg Exchange Rate Life (Years)

1 3.9% 13.5% 2.76 10

2 2.8% 12.7% 2.85

3 2.6% 10.4% 3.27

4 2.4% 9.8% 3.55

5 2.5% 8.8% 3.63

6 2.3% 8.4% 4.3

7 1.6% 7.8% 4.61

8 0.6% 7.7% 5.55

9 1.4% 6.8% 6.12

10 2.2% 6.2% 6.94

Analysys in USD Cost in USD Accumulated Depreciation Net Asset Value GCF Inflation Adjusted Cost ROIC CROGI CROIGI CFROI

1000 100 900 150 1,000 15% 15% 15% 8%

1000 200 800 154 1,028 17% 15% 15% 8%

1000 300 700 158 1,055 20% 16% 15% 8%

1000 400 600 162 1,080 23% 16% 15% 8%

1000 500 500 166 1,107 28% 17% 15% 8%

1000 600 400 170 1,133 34% 17% 15% 8%

1000 700 300 173 1,151 43% 17% 15% 8%

1000 800 200 174 1,158 58% 17% 15% 8%

1000 900 100 176 1,174 88% 18% 15% 8%

1000 1000 0 180 1,200 180% 18% 15% 8%

Analysys in ZAR Cost in USD Accumulated Depreciation Net Asset Value GCF Inflation Adjusted Cost ROIC CROGI CROIGI CFROI

2,760 276 2,484 414 2,760 15% 15% 15% 8%

2,760 552 2,208 467 3,111 19% 17% 15% 8%

2,760 828 1,932 515 3,434 23% 19% 15% 8%

2,760 1,104 1,656 566 3,771 29% 20% 15% 8%

2,760 1,380 1,380 615 4,102 37% 22% 15% 8%

2,760 1,656 1,104 667 4,447 48% 24% 15% 8%

2,760 1,932 828 719 4,794 65% 26% 15% 8%

2,760 2,208 552 774 5,163 94% 28% 15% 8%

2,760 2,484 276 827 5,514 150% 30% 15% 8%

2,760 2,760 0 878 5,856 318% 32% 15% 8%

1.00 1.00

1.03 1.13

1.05 1.24

1.08 1.37

1.11 1.49

1.13 1.61

1.15 1.74

1.16 1.87

1.17 2.00

1.20 2.12

GP Factor in USA GP Factor in SA

Grows with US inflation Grows with US inflation

Grows with SA inflation Grows with SA inflation

Notes 1. A South African company buys an asset in US$ in 1991 and places it on its books in ZAR. The asset does not get revalued 2. The company produces a profit stream that can be priced in US$ or ZAR. Products are sold at a local price or global commodity price 3. It is assumed that NDA (working capital) is zero for the CFROI calculation.


HOLT



CROIGI YES No

Reason Accumulated depreciation is added back Not taken into account

Numerator and denominator Inflation YES are in current dollars Depends on analyst Accounting Distortions Maybe adjustments (op leases)


HOLT


What if two projects with the same return have different lives?

How do you select the correct one?

For the same investment would you choose a 10% project with a 5 year life or a 10 year life?


HOLT

Ericsson and GSK’s returns look the same……..but are they?

ERICSSON LM (2009) Gross Cash Flow

Gross Investm ent

=

€5,449 €34,343

= 15.9%

GLAXOSMITHKLINE PLC (2009) Gross Cash Flow Gross Investm ent


=

£12,249 £77,174

31 Source Credit Suisse HOLT 2 Oct 2012

= 15.9%

HOLT

Cash Flow Return On Investment (CFROI®) Cash Flow Return on Investment

CFROI ®

CROIGI

CROGI

ROIC


HOLT

Why is Project Life so Important?

Gross Cash Flow

50 Life helps measure the economic return earned today, by forecasting how much cash flow will be received over a realistic time period.

10 10% return? Life = 4 Years

Current £ Gross Investment

Consider a £100 investment that earns £10 in cash flows for 4 years. The CROIGI return “looks” like 10% (10/100), yet when life is considered, the economic return (CFROI) is negative.

100 CFROI = - 3.1%


HOLT

Why is Project Life so Important? Consider that same £100 investment that earns £10 in cash flows for 30 years. The CROIGA return “looks” like 10%, however, the cash flows are forecasted to last 30 years, making the economic return 9.68%.

50

Infl. Adj. Gross Cash Flow

Non-Depreciating Asset Release

10 10% return? Life = 30 Years

Current Gross Investment

100


CFROI = 9.68%

HOLT

CFROI® Not Distorted By Asset Mix 20

10

Machine Tools

IRR = 3.0% 10 Years

100 75 10 Distribution Company IRR = 8.3% 10 Years

100


HOLT

CFROI accounts for asset life differences offering more insight than a ratio Traditional Return Metric (Ratio) ERICSSON LM (2009) Gross Cash Flow Gross Investm ent

=

€5,449 €34,343

CFROI = 6.9%

= 15.9%

GLAXOSMITHKLINE PLC (2009) Gross Cash Flow Gross Investm ent


=

£12,249 £77,174

CFROI

= 15.9%

36 Source Credit Suisse HOLT 2 Oct 2012

Asset life: 6.2 years

CFROI = 12.6%

Asset life: 12.4 years

HOLT

Adjustments Are Essential to True Economic Performance Measurement

CFROI

Asset Life

Inflation Adjustment

Accumulated Depreciation

Enterprise level measure

ROIC

Cash Flow Return on Investment

CROIGI

CROGI

Adjustm ents


HOLT

From Cash To CFROI® (Internal Rate of Return) Net Income (Before Extraordinary Items) +/- Special Items (after tax) + Depreciation/Amortization Expense + Interest Expense + R&D Expense + Rental Expense + Minority Interest Expense + Net Pension Cash Flow Adjustment + LIFO charge to FIFO Inventory + Monetary Holding Gain/Loss - Equity Method Investment Income £10

Net Monetary Assets + Inflation Adjusted Land & Improvements + Investments (Non-Equity Method ) + Inventory (w/ LIFO Inventory Reserve) + Other LT Assets less Pension Assets £25

Non-Depreciating Assets

Gross Cash Flow

CFROI® = 6.0% 13-Year Asset Life

£100 Inflation Adjusted Gross Investment


Net Book Assets + Accumulated Depreciation + Inflation Adjustment to Gross Plant + LIFO Inventory Reserve + Capitalized Operating Leases + Capitalized R&D - Equity Method Investments - Pension Assets - Goodwill - Non-Debt Monetary Liabilities & Deferred Taxes

HOLT

Rules for Value Creation – What is Good Growth? Managing for shareholder value requires an understanding of the trade-off between cash flow returns and growth. Capital should be allocated to positive spread businesses and projects that are creating value. Marginal businesses should concentrate on improving operating efficiencies instead of growth.

Return Measure

Positive Spread Business

Discount Rate (Cost of Capital) Neutral Spread Business

Strategic Options

Negative Spread Business

• Increase returns



• Hold returns and grow assets

• Then grow

• Reduce Reinvestment • Divest or Liquidate


HOLT

CFROI Observations: Fade Happens Initial CFROI (t+1)

Ending CFROI (t+5) 240 80 180 60

15-20%

120 40 60 20 0 -5

0

5

10 10

15 15

20 20

25 25

-5 -5

00

55

10

15 15

20

25

-5

0

5

10

15

20

25

300 700

10-15%

600 250 500 200 400 150 300 100 200 50 100 00

6-10% USA Large & Mid-Cap: 1980-2005 CLARITY IS CONFIDENCE

1000 500 900 450 800 400 700 350 600 300 500 250 400 200 300 150 200 100 50 100 0

HOLT 40

Growth Observations: Fade Really Happens! Initial Growth (t+1)

Ending Growth (t+5)

250 90 80 200 70

20-30%

60 150 50 40 100 30 20 50 10 00

-20 -20

-10 -10

00

10 10

20

30

40

-20 -20

-10 -10

00

10 10

20 20

30 30

40 40

10 10

20 20

30 30

700 140 600 120 500 100

10-20%

400 80 300 60 200 40 100 20

00 45 140 40 35 100 30 80 25 20 60 15 40 10 20 5 0

120

-20 to -10% USA Large & Mid-Cap: 1985-2005 CLARITY IS CONFIDENCE

``

-20 -20

-10 -10

00

40 40

HOLT 41

Drivers of Firm Value

Firm Value = PV Cash Flows + Market Value of Investments

Firm Value =


∫

Returns vs. Discount Rate, Asset Growth and hence, Sales Growth, Competitive Advantage Period, Fade Rate of Returns and Asset Growth

HOLT

Valuation Continuum PE Multiple

Dividend Discount Model

Tobin’s Q Value/Cost

Discounted FCFF Discounted EVA®

PEG Ratio

EV/EBITDA

HOLT CFROI DCF Price/Book

Price/Sales

Real Options

Monte Carlo Simulations Gordon Growth

EPS Growth

Increasing Sophistication and Completeness

Relative Valuation

Cash Distribution Models Cash Production Models


Variance and Probability Models

HOLT

Case Study: NOKIA NOKIA CORPORATION 2500.00

90.00 80.00

2000.00

70.00

60.00 1500.00

50.00 40.00

1000.00

30.00 20.00

500.00

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

0.00

1991

10.00

0.00

-10.00 ROE

ROIC

CROGI

CROIAGI

CFROI

Price

TSR (RHS)

ROIC rises while price, TSR and other measures are falling…why?

HOLT


Case Study: NOKIA – ROIC – why so volatile? 18,000

90

16,000

80

14,000

70

12,000

60

10,000

50

8,000

40

6,000

30

4,000

20

2,000

10

0

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 NOPAT

Operating Invested Capital

ROIC (RHS)

Invested capital is the problem

HOLT


Case Study: NOKIA – ROIC – why so volatile? 40,000 30,000 20,000

10,000 0 -10,000

-20,000

Plant (Net)

Current Assets

Current Liabilities

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

-30,000

Other Long Term Assets

Current assets declined from 2000 to 2004 while current liabilities remained relatively unchanged. Assets increased significantly from 2006 without a proportional increase in current liabilities. HOLT


Case Study: NOKIA – ROIC – why so volatile? 60,000

35

50,000

30 25

40,000

20 30,000 15 20,000

10

Working Capital

Gross Fixed Assets

Gross Investment

Gross Cash Flow (RHS)

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0 1990

0 1989

5 1988

10,000

CFROI (RHS)

18,000

90

60,000

16,000

80

14,000

50,000

70

12,000

40,000

60

10,000

50

30,000

8,000

40

20,000

NOPAT

Working Capital

Operating Invested Capital

Gross Fixed Assets ROIC (RHS)

Gross Investment

Gross Cash Flow (RHS)

HOLT


60,000

2007

2006

0

2005

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

2002

2001

2000

1999

1998

1997

1996

1995

1994

0

1993

10

1992

0

1991

2,000

1990

20

1989

10,000

1988

4,000

2004

30

2003

6,000

Case Study: NOKIA – through the CFROI lens

HOLT


Case Study: WPP plc – high returns and growth have not delivered

HOLT


Case Study: TESCO plc– Sale and leaseback has increased ROIC

HOLT


The Ideal Performance Metric

Question

ROE

ROIC

Old Assets/New Assets

No

No

Yes

Yes

Yes

Asset Life

No

No

No

No

Yes

Inflation

No

No

No

Yes

Yes


No

No

Partial

Yes


CROGI CROIGI CFROI

Partial

HOLT

Conclusions

• Return measures are essential to our understanding of companies • They can be volatile which makes forecasting difficult and uncertain • Mean reversion happens • Most important of all…………… • Returns are not a measure of either absolute or relative value. • You need to know what you are measuring • You need to know what your measure is telling you


HOLT

Disclosure and Notice This material has been prepared by individual traders or sales personnel of Credit Suisse Securities (USA) LLC ("Credit Suisse") and not by the Credit Suisse research department. It is provided for informational purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the products or services mentioned. It is intended only to provide observations and views of individual traders or sales personnel, which may be different from, or inconsistent with, the observations and views of Credit Suisse research department analysts, other Credit Suisse traders or sales personnel, or the proprietary positions of Credit Suisse. Observations and views expressed herein may be changed by the trader or sales personnel at any time without prior notice. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expressed or implied is made regarding future performance. The information set forth above has been obtained from or based upon sources believed to be reliable, but Credit Suisse does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of errors, omissions or changes in market factors. This material does not purport to contain all of the information that an interested party may desire and, in fact, may provides only a limited view of a particular security or market. Credit Suisse may participate or invest in transactions with issuers of securities that participate in the markets referred to herein, perform services for or solicit business from such issuers, and/or have a position or effect transactions in the securities or derivatives thereof. Also, Credit Suisse may have accumulated, be in the process of accumulating or accumulate long or short positions in the subject security or related securities. This material does not constitute objective research under FSA rules. To obtain a copy of the most recent Credit Suisse research on any company mentioned please contact your sales representative or go to http://www.creditsuisse.com/researchandanalytics. FOR IMPORTANT DISCLOSURES on companies covered in Credit Suisse Investment Banking Division research reports, please see www.creditsuisse.com/researchdisclosures. Backtested, hypothetical or simulated performance results have inherent limitations. Simulated results are achieved by the retroactive application of a backtested model itself designed with the benefit of hindsight. The backtesting of performance differs from the actual account performance because the investment strategy may be adjusted at any time, for any reason and can continue to be changed until desired or better performance results are achieved. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor a guarantee of future returns. Actual results will vary from the analysis. The HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default variables and incorporated into the algorithms available in the HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur. The HOLT methodology does not assign a price target to a security. The default scenario that is produced by the HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variables may also be adjusted to produce alternative warranted prices, any of which could occur. Additional information about the HOLT methodology is available on request. CFROI, CFROE, HOLT, HOLTfolio, HOLTSelect, HS60, HS40, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or registered trademarks of Credit Suisse Group AG or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse © 2011 Credit Suisse Group AG and its subsidiaries and affiliates. All rights reserved. CLARITY IS CONFIDENCE

53

HOLT

2012 From ROE to CFROI® and - CFA Switzerland

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