Earning Release

China Life Insurance Company Ltd. (NYSE:LFC) reported modest y-o-y growth in total revenues despite challenging economic and market conditions. We are encouraged by the company’s 1Q 09 performance and its reduced exposure to equity investments. Moreover, China Life maintains a strong solvency ratio and has achieved strong international credit ratings from various agencies. Our overall fundamental outlook for the company remains positive, and profits were stronger than anticipated. Therefore, although our current target price no longer supports a BUY at current price levels, we maintain our BUY rating for the common stock. We will reassess our common stock rating for China Life after the company announces its 1H 08 results in August 2009. Based on our fundamental outlook for the company, we maintain our current BUY rating for the ADR, although the current target price no longer supports a BUY. The Hong Kong dollar is currently pegged against the US dollar. We will reassess our ADR (1 ADR= 15 common shares) rating for China Life after the company announces its 1H 08 results in August 2009.

Invesco Ltd.’s (NYSE:IVZ) top- and bottom-line deterioriated significantly in 1Q 09 as a result of declining Assets Under Management (AUM) coupled with a rise in other expenses. Performance was below expectations as a result of lower service and distribution fees, lower yield on investment management fees and higher compensation expenses. We anticipate AUM to continue to be adversely impacted by overall weakness in financial markets and a bleak economic outlook. Therefore, we maintain our HOLD rating for the NYSE common stock at current levels. We will reassess the NYSE common stock rating for Invesco in our next update report. We continue to anticipate a significant positive currency impact on the European stock over the short term. Therefore, we reiterate the European stock a BUY. We will reassess the European stock rating for Invesco in our next update report.

Nova Chemicals Corporation’s (NYSE:NCX) 1Q 09 revenues and earnings were significantly below consensus estimates. The company is to be acquired by Abu Dhabi based International Petroleum Investment Company (IPIC) for US$6.00 per outstanding share. Hence we maintain our neutral outlook for the company at current price levels and reiterate the NYSE common stock a HOLD. We will continue to track the developments of the company until the completion of the proposed acquisition and subsequent delisting of the Nova stock. In view of the IPIC offer and the current USDCAD exchange rate, we maintain a neutral outlook on Nova’s Canadian stock and hence maintain our HOLD rating. We will continue to track the developments of the company until the completion of the proposed acquisition and subsequent delisting of the Nova stock.

Royal Caribbean Cruises Ltd’s (NYSE:RCL) 1Q 09 total revenues and earnings beat our and the street’s expectations. This prompted a significant 20.6% increase in the NYSE common stock in a single trading session at the close of trading on 23 April 2009, achieving our BUY target. RCL has not materially changed its guidance for FY 2009 and as our fundamental target price has been met, we downgrade the stock from a BUY to HOLD, as we believe it has exhausted its potential upside. We will review our estimates and rating in our next full update report in the coming weeks. We continue to expect a significant positive currency impact on the Norwegian stock over our investment horizon, hence we maintain our current BUY rating. We will reassess the Norwegian stock target price and rating for RCL in our next full update report in the coming weeks.

IPC Holdings Ltd.’s (NASDAQ:IPCR) 1Q 08 adjusted total revenues were above our estimate due to higher-than-expected premiums earned. However, bottom-line fell short of expectations reflecting higher-than-expected claims and underwriting expenses during the quarter. Going forward, although we expect investment income to remain under pressure; the hardening of premium rates will provide some support to the company’s top-line. Moreover, we believe that the planned merger with Max Capital Group Ltd, which is scheduled to be completed in 2Q 09, is a positive step, leading to a combined capital base of over US$3 bn, as well as offering a healthily diversified portfolio across the global insurance and reinsurance markets. Consequently, we maintain our current BUY rating for the NASDAQ common stock. We will reassess the NASDAQ common stock rating for IPC Holdings in the coming weeks. Based on our fundamental outlook and as we anticipate a significant positive currency impact on the European stock, we maintain our BUY rating for the European stock. We will reassess the European stock rating for IPC Holdings in the coming weeks.

Although KT Corporation’s (NYSE:KTC) 1Q 09 revenues were below our estimate, EBITDA, operating and net margin were above our estimates. Going forward, we expect that the merger of KT Corp with KT Freetel co., Ltd. (KTF), will help to fend off competition and reduce marketing expenses, thereby positively impacting margins. Thus in light of these factors and considering the current price levels we upgrade the common stock from a HOLD to a BUY and will reassess in the common stock rating in the coming weeks. We do not anticipate a change in our SELL rating for the ADR as we anticipate a significant negative currency impact over the next 6-12 months. We will reassess the ADR rating for KT Corp in the coming weeks.

Grupo Aeroportuario del Sureste, S.A.B. de C.V.’s (NYSE:ASR) 1Q 09 revenues and profitability exceeded our estimates, reflecting higher than anticipated revenue and lower than expected operating expenses. However, higher than anticipated income tax expenses partially offset the gains at the operating level. Given the 1Q 09 performance, and our expectations of robust non-aeronautical revenue growth, we reiterate our BUY rating over our 6-12 month investment horizon, even though the target price does not support a BUY rating at current price levels. We will reassess the common stock rating in our 1Q 09 update report in the coming weeks. Given our robust fundamental outlook we maintain our current HOLD rating, even though we expect a negative currency impact on the ADR over our investment horizon and that the target price does not support a HOLD rating at current price levels. We will reassess the ADR (1 ADR = 10 common shares) rating in our 1Q 09 update report in the coming weeks.

Cooper Industries Limited (NYSE:CBE) reported decline in revenues and earnings in 1Q 09. While revenues and earnings at the operating level were below our estimates, adjusted1 net income was in line with our estimate. Management has provided a cautious outlook in light of the current weak economic conditions and has revised it full year guidance downwards. In light of this, we maintain our cautious outlook for the NYSE common stock. Therefore, we downgrade our rating from a HOLD to a SELL as the NYSE common stock target price no longer supports our HOLD rating at current price levels. We will reassess our target price and rating in our 1Q 09 update report. As we continue to anticipate a significant positive currency impact on the European stock over our 6- 12 month investment horizon, we maintain our BUY rating at current price levels. We will reassess our target price and rating in our 1Q 09 update report.

National Oilwell Varco, Inc. (NYSE:NOV) reported strong 1Q 09 results, with its top-line and operating performance broadly in line with our expectations, while earnings were above our expectation. Although NOV reported a decline in order backlog, we believe its current order backlog will support growth in the company’s Rig Technology segment revenues over our investment horizon. We do not anticipate a change in our current rating for NOV’s NYSE common stock over our 6-12 months investment horizon. We will reassess the NYSE common stock rating in our 1Q 09 update report in the coming weeks. As we expect a positive currency impact on the European stock over our investment horizon and given our fundamental outlook, we maintain our BUY rating for the European stock. We will reassess the European stock rating for NOV in our 1Q 09 update report in the coming weeks.

Southern Copper Corporation’s (NYSE:PCU) 1Q 09 revenues and profitability fell sharply y-o-y as a result of falling metal prices, but the results were not as weak as we had forecast. Going forward, although we still expect copper prices to fall during FY 2009, amid the downturn in the global economy, we expect to raise our estimates and target price in our next update report considering these results. Nevertheless, at current levels we still consider the company to be fundamentally overvalued. Therefore, we maintain our 6-12 month SELL rating for the NYSE common stock. We will reassess our target price and rating in our next update report. The Peruvian stock trades in US dollars. As a result, we do not anticipate any currency impact over the coming 6-12 months. Therefore, based on our fundamental outlook, we maintain our SELL rating. We will reassess our target price and rating in our next update report.

Chartered Semiconductor Manufacturing Ltd. (NASDAQ:CHRT) reported a significant decline in net revenues, reflecting an overall decline in semiconductor demand resulting from deteriorating economic conditions worldwide, in line with our expectations. However losses at the operating and net level were significantly lower than expected. Furthermore, Management’s top-and bottom-line guidance is better than our previous expectations. In view of this we have moderated our rating for the stock from a SELL to a HOLD until we reassess the stock in our next full update report. We will reassess the ADR target price and rating for Chartered in the coming weeks. We moderate our Singapore stock rating (10 Singapore shares = 1 ADR) from a SELL to a HOLD based on our fundamental outlook and an anticipated positive currency impact on Singapore stock over our investment horizon. We will reassess the Singapore stock target price and rating for Chartered in the coming weeks.

Nomura Holdings Inc.’s (NYSE:NMR) 4Q 09 top- and bottom-line results were significantly weaker than our estimates, as a result of lower interest income and private equity losses. Considering the company’s disappointing quarterly results, as well as the impact of ongoing volatility in global financial markets, and on banking stocks in particular, we maintain our HOLD rating. We will reassess our common stock rating for Nomura in our next full update report. We continue to anticipate a significant positive currency impact on the ADR over our investment horizon. Therefore, we maintain our BUY rating. We will reassess our ADR (1 ADR = 1 common share) rating for Nomura in our next full update report.

Schlumberger Ltd. (NYSE:SLB) reported a decline in its 1Q 09 top-line, in line with our expectation, reflecting a drop in Exploration & Production (E&P) activity. Furthermore, the company’s operating performance deteriorated due to continued pricing pressure amidst declining E&P activity. The downturn in the global economy continues to weigh on hydrocarbon demand and prices which will impact levels of global E&P activity during FY 2009. This is likely to impact Schlumberger’s performance during the period. Hence, we do not anticipate a change in our current HOLD rating for Schlumberger’s NYSE common stock. We will reassess Schlumberger’s NYSE common stock rating in our 1Q 09 update report. As we expect a significant positive currency impact1 on the European stock over our 6-12 month investment horizon, we maintain our BUY rating for the European common stock. We will reassess our European stock rating for Schlumberger in our 1Q 09 update report.

Eni S.p.A. (NYSE:E) witnessed a decline in its 1Q 09 revenues due to lower realized hydrocarbon prices. Higher operating costs depressed the company’s operating performance. However, revenues and operating performance were above our expectations for 1Q 09 due to higher-than-expected realized prices and lower-than-expected operating costs. We remain concerned about the negative impact of the global economic downturn on hydrocarbon demand and prices in FY 2009, which will hinder Eni’s performance over our investment horizon. However, given the better-than-expected 1Q 09 results and current price common stock price levels, we maintain our BUY rating for the common stock over our 6- 12 month investment horizon. We will fully reassess the company in our 1Q 09 update report in the coming weeks. As we expect a significant negative currency impact1 on the ADR (1 ADR = 2 common shares) over our investment horizon and given our fundamental outlook, we maintain our HOLD rating for the ADR. We will reassess Eni’s ADR rating in our 1Q 09 update report in the coming weeks.

News

Aegon N.V. (NYSE:AEG) announced that it has agreed to sell its loss-making Taiwanese life insurance subsidiary to Zhongwei Company Ltd. in order to “optimize capital allocation and improve returns”. Aegon expects the sale of its life insurance activities in Taiwan to positively impact its future earnings. Following the completion of the transaction, the capital set aside for Aegon Taiwan will be freed up for other purposes. We believe the sale of its Taiwanese operations is a prudent decision. In our view, Aegon is sufficiently fundamentally strong with an adequate level of capital. Consequently, we believe that the common stock offers an attractive investment opportunity at current levels. We will reassess the common stock rating for Aegon once it announces its 1Q 09 results on 14 May 2009. As the target price no longer supports a BUY rating and based on our continued anticipation of a negative currency impact on the ADR over our investment horizon, we downgrade the ADR from a BUY to a HOLD. We will reassess our ADR (1 ADR= 1 common stock) rating for Aegon once it announces its 1Q 09 results on 14 May 2009.

Infineon Technologies AG’s (NYSE:IFX) common stock has appreciated significantly since our 1Q 09 update report, including a stock price appreciation of 11.3% in a single trading session on 17 April 2009, reflecting the impact of news that the company was seeking financial aid from the German government’s fund, set up to help companies in the current downturn, as well as the company’s announcement of the extension of its alliance with IBM Corp., Global Foundries Inc., Samsung Electronics Co., Ltd., STMicroelectronics N.V. and Chartered Semiconductor Manufacturing Ltd. to jointly develop 28-nanometer, high-k metal gate, low-power bulk CMOS process technology. The stock price also surged 8.6% in a single trading session on 22 April 2009, after the company announced a collaboration with Nokia Corporation (Nokia). Nevertheless, we maintain our SELL rating for the stock, primarily based on a lack of visibility regarding a potential investor for Qimonda and on possible aid from the German government, in the absence of which the company’s debt obligations remain a significant concern. We will reassess the Infineon common stock rating and target price after the company announces its 2Q 09 results. We maintain our SELL rating for the ADR based on our fundamental outlook and negative currency impact. Today the company has delisted its ADR from the NYSE. The ADR is being maintained as a ‘Level I’ program, and has been listed on the over-the-counter market OTCQX, with the ticker IFNNY.PK. We will reassess the ADR rating and target price for Infineon after the company announces its 2Q 09 results.

On 23 April 2009, Companhia Energética de Minas Gerais (NYSE:CIG) announced its plan to acquire a 66% stake in Terna Participacoes S.A. (Terna) for a consideration of BRL2.33 bn. CEMIG also plans to buy the remaining minority shareholder stake at some point in the future. The total acquisition cost for 100% of Terna will be around BRL3.35 bn. Initial analysis suggests that this acquisition will prove beneficial for CEMIG, therefore we upgrade the CEMIG preferred stock from a HOLD to a BUY over our 6-12 month investment horizon. We will review our target price and rating in our 1Q 09 update report after the company releases its 1Q 09 results in May 2009. We continue to expect a negative currency impact on the ADR over our investment horizon and therefore reiterate the CEMIG ADR (1 ADR = 1 preferred share) a HOLD. We will reassess our target price and rating in our 1Q 09 update report after the company releases its 1Q 09 results in May 2009.

New Valuations

Delhaize Group (NYSE:DEG) Despite the current weak economic conditions, Delhaize intends to end FY 2009 with a store network of between 2,744 to 2,754 stores as a result of the net addition of 71 to 81 stores in FY 2009. The company plans to add 11-16 stores in the US, 25-30 stores in Belgium, 16 stores in Greece and 19 new stores across the rest of the world during the year. We expect Delhaize to open 12 stores in the US and 26 stores in Belgium in FY 2009. Store expansion and renewal will provide customers better reach, an enhanced assortment of products and improved customer service, which is expected to drive top-line growth, going forward. However, in light of weak economic conditions across all geographies, the company is expected to face a decline in volume growth as customers prefer to make purchases from high volume merchandisers, based the perception that supermarkets are more expensive. Delhaize has been taking initiatives to remove its high-priced consumer image and maintain market share by being more aggressive in advertising and promotions in the US, and by offering price discounts in Belgium. During FY 2009, the company is expected to incur a capex of €600 mn-€620 mn, which will be utilized for the expansion of its store network. In addition, as guided by Management, the working capital of the company is expected to improve by €50 mn. Hence, we believe the strong store concepts, better product assortments, price positioning, pertinent capex and working capital improvements will support Delhaize’s performance over the long term, generating healthy cash flow.

Mizuho Financial Group Inc (NYSE:MFG) The International Monetary Fund (IMF) projects that Japanese GDP will contract by 5.8% in 2009 and by 0.2% in 2010 (source: World Economic Outlook Update, April 2009). The worldwide economic downturn has had a severe adverse impact on Japan’s export sector. According to the Financial Times, Japanese exports fell by 50% in the year to February 2009, and the country faced its first trade deficit in 30 years in the year to March 2009. This is likely to have a major impact on Japanese firms’ capex plans, as well as consumer spending. As a result, we expect demand for credit to weaken, constraining Net Interest Income (NII) over our investment horizon. However, we are encouraged by Bank of Japan (BOJ) moves to ease pressure on lenders by taking steps such as recapitalization and purchasing of equity holdings (aimed at cutting their exposure to market volatility). Furthermore, on 10 April 2009, the Japanese government announced a ¥15 tn stimulus package aimed at reviving the economy; this includes ¥12 tn in funding for banks to expand lending. Despite all of these measures, we remain concerned about MFG’s exposure to the US mortgage market, rising credit costs and further writedowns anticipated over our investment horizon. Therefore, our fundamental outlook remains cautious.

Potash Corporation of Saskatchewan Inc (NYSE:POT) We expect phosphate and nitrogen fertilizer prices to remain low through FY 2009, as crop prices show no sign of recovery. Furthermore, as outlined above, we expect potash prices to fall over our investment horizon. The twin impact of lower selling prices and faltering demand from crop growers is expected to have an adverse impact on the company’s results over the coming year. At this stage, we do not anticipate recovery in demand and pricing until FY 2010, as a previously awaited rebound in food prices has yet to eventuate. Nevertheless, Potash Corp.’s low-cost structure (which enables it to generate healthy cash flows even at low prices), its dominant fertilizer market position (especially for potash) and its strong balance sheet remain compelling positives. Therefore, although the near term pricing outlook remains weak, we maintain our optimistic long term fundamental outlook.

Gafisa S.A.(NYSE:GFA) Despite the weak economic environment in Brazil, we continue to expect an increase in the company’s real estate development and sales business given the scope provided by Brazil’s housing deficit, which was estimated to be approximately 7.5 mn housing units in 2008, according to the Global Property Guide. Moreover, in March 2009, in an initiative to curb the shortage of low income housing and boost the contracting economy, Brazil’s government has introduced a housing plan, whereby it plans to create approximately 1 mn low income homes by 2010. This benefits Gafisa, given the presence of its subsidiary Fit Residencial Empreendimentos Imobiliários Ltd. (Fit) and the recently merged Tenda in the affordable and low income housing segment. However, given the weakening economic environment, Gafisa reduced the number of launches in 4Q 08 and is considering cutting back in FY 2009. Moreover, Gafisa’s margins are expected to contract given Tenda’s higher operating expense to net operating revenue ratio and an anticipated increase in Gafisa’s construction costs. Going forward, we expect an increase in Gafisa’s minority interests and financial expenses resulting from the acquisition of Tenda in FY 2008, further impacting margin at the net level. Although Gafisa has secured credit lines to finance its upcoming projects and had a strong cash position of BRL605.5 mn at the end of FY 2008, we believe this could be eroded over the year due to a requirement to repay debt early arising from a breach of its covenant, with our estimate for debt significantly higher than BRL1 bn for FY 2009. At current price levels we believe the stock is fairly valued.

Brookfield Properties Corporation (NYSE:BPO) The real estate market in North America is reeling from the affects of the prevailing economic recession and financial crunch. Companies in North America are cutting staff and costs, which is impacting the demand for office space. Vacancy rates ended at 14.8% in 2008, increasing 50 bps y-oy in 4Q 08, and are forecast to rise to 16.5% in 2009 (Source: “2009 Real Estate Forecast”, Grubb and Ellis). As companies look to monetize empty space, the sub-lease market is on the rise, placing direct pressure on landlords such as Brookfield, with a likely requirement to lower rents and increase incentives to tenants. However, although we anticipate revenues and funds from operations (FFO) to decline for these reasons, we have a relatively stable outlook for Brookfield’s commercial property operations in the long term. Brookfield has a portfolio of high quality assets mainly comprising class A properties in big cities, high occupancy levels and low rollover exposure (approximately 3% for FY 2009). The company also has some high quality tenants in its portfolio, with certain large financial and energy sector companies, and a good recent renewal record. However, its residential business is likely to be more significantly affected in FY 2009 and FY 2010. Although we expect commercial property operation margin to fall, as revenues from the even lower margin residential segment decline further, margins are set improve in FY 2009. Brookfield successfully financed 100% of its debt maturities in 2008 and has rolled over 66% of its debt maturing in 2009. The company’s current cash flows are healthy and its aggressive debt restructuring does not put it under liquidity pressure. The company is increasing efforts to preserve liquidity and plans to cut spending on future developments and its residential land development operations. We expect a slight recovery from 2009 levels in North America in 2010 and subsequently our expectations are for an improvement in performance from Brookfield, with anticipated scope for an increase in rental rates from the current huge discounts. Moreover, in this current volatile market, we believe the company’s common stock is trading at a high discount to its NAV. With market and sentiment expected to improve by 2010, we believe that Brookfield’s NYSE common stock level currently offers upside potential.

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