Financial Pacific - U.S. Paper & Forest Products (third party)

UBS Investment Research

Morning Expresso - United States

Monday 22 August 2011

Global Equity Research

Americas

Equity Strategy

Market Comment

22 August 2011

www.ubs.com/investmentresearch

U.S. Equity Product Management

212-713-2400

Morning Expresso

This report has been prepared by UBS Securities LLC ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 20. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm 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.

ab

Morning Expresso - United States 22 August 2011

UBS 2

Morning Meeting Agenda Energy Sector

Oil Companies, Major Analyst: William A. Featherston Tel: +1-212-713 9701

What if Grey or Black Skies Lie Ahead? Impact of recessionary commodity prices to our estimates This note provides an estimate/downside risk analysis under 3 scenarios: Base case

(current UBS estimates); Grey Sky & Black Sky (see Exhibit 1 for GDP and commodity price assumptions). We estimate our ‘12 E&P CFPS estimate would fall 19% & 42% & Majors EPS estimates would fall 28% and 60% from our base case estimates under Grey and Black sky scenarios, respectively.

Most and least preferred names under recessionary scenarios We prefer XOM & CVX under the Grey and Black Sky scenarios given strong balance sheet, FCF, & cheap valuation. Under both Grey & Black Skies, we see value in SWN & RRC and note these gassy resource plays see further support as potential takeout candidates. We also highlight APC, APA, MRO, and OXY among E&Ps, offering inexpensive valuation and reasonable FCF under a Grey Sky scenario. Meanwhile, we are cautious on CHK, KWK, PXD, SD & EOG in lower oil & gas price environments given their material FCF deficit.

What is different from the run up to 2008-9 recession? 1) oil prices are near mid-cycle levels & gas is already near the trough while both were at spiky levels in mid-2008; 2) E&Ps have a negative 5% FCF yield today unlike the +4% in 2Q08; & 3) balance sheets are of similar strength but today’s hedge positions are at lower prices than mid-2008.

Valuation: still see downside risk to Grey Sky scenario We see 10% and 5% downside for E&Ps & Majors valuation to reflect a Grey Sky scenario and 44% & 31% downside under the Black Sky scenario, respectively.

Notes: Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 22 August 2011

U.S. Paper & Forest Products

Paper Products Analyst: Gail S. Glazerman, CFA Tel: +1-212-713 3486

August US paper/board price update Overall stable, continued modest updrift in graphic paper prices Pulp & Paper Week reported August paper and board prices this weekend.

August largely continued trends from the prior several months. They showed modest improvement in printing and writing paper pricing and stable pricing on packaging grades. However, there were some mixed messages in uncoated free sheet.

Containerboard commentary remains positive The newsletter suggested, consistent with our view, that broad-based pricing is unlikely given the current macro environment. However, they painted a fairly positive picture of current market balance. They report that some major producers are 2-3 weeks behind on shipments, a few producers are seeking modest $10-30/t price hikes in the West (apparently to account for freight) and that export sales are fairly competitive with domestic mill nets. P&PW notes demand has held in Aug.

Graphic papers – some ups and downs (but generally up) P&PW showed modest 0.5-1% price recovery for printing & writing grades. While P&PW raised uncoated free cut size prices $7/t, they lowered offset grades by $10/t. They raised coated $5-10/t and uncoated groundwood by $5/t. Newsprint prices held at current levels for the 12th straight month.

Favor packaging grades – but macro is the key driver for now We continue to favor the outlook for paper-based packaging grades over graphic papers. While demand remains a major risk given the macro back drop we see much better supply/demand trends in packaging. Within graphic we favor uncoated free. We generally expect stable pricing over the next few months.

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 21 August 2011

US Daily Economic Comment

Economist: Maury N. Harris Tel: +1-212-713 2472

Bernanke to speak in coming week Monday preview: No data No economic data on Monday. (Note: There is no official release date for the Q2 National Mortgage Delinquency Survey,

although it is likely to be released in the coming week.) Policy preview: Chairman Bernanke at Jackson Hole Symposium Fed Chairman Bernanke will speak on Friday at the Fed’s Jackson Hole

conference, on the “Near- and Long-Term Prospects for the U.S. Economy”. We anticipate that Chairman Bernanke will seek to be more reassuring regarding the economic outlook than the August 9 Fed statement in his speech. Recent comments by FOMC Vice Chair Dudley suggest as much (see below). At the same time, we believe he will continue to stress that the Fed does have the tools to stimulate growth, and we expect him to spell out what those tools are without promising their use. The end goal for Chairman Bernanke, as we see it, will be to calm financial markets while buying time for the FOMC to observe more data before taking any additional action.

Data preview: Light week for economic data Away from Jackson Hole, it is a light week for data. We expect claims to continue to inch lower, and look for another rise in the FHFA home prices index. Consumer sentiment likely recovered a bit in late August after plunging earlier. Q2 growth will probably be revised down—to 1.0% from the 1.3% originally reported. The Richmond and Kansas City Fed surveys warrant some attention, given the collapse in the Phil. Fed survey. Durables goods orders appear to have jumped in July.

NY Fed Pres Dudley still sees stronger growth in H2 On Friday, NY Fed President Dudley spoke about the economy. Mr Dudley said that he expects stronger growth in the second half of 2011, and that the recent performance of economic data is “at worst, mixed”. He noted that the recent slew of negative news was being offset by loosening credit, stronger balance sheets, and better retail sales. He also pointed out that “[f]ollowing the release of the FOMC’s statement, market interest rates generally removed lower, which should help provide some additional support for economic activity and jobs”. His comments on credit are consistent with the recently released Fed Sr. Loan Officer Opinion Survey for July; that report indicated that US bank credit conditions were

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

Morning Expresso - United States 22 August 2011

UBS 3

US Economic Perspectives

Economist: Maury N. Harris Tel: +1-212-713 2472

August Angst The Equity Matrix Equity markets have created their own reality, and that reality may spill over into the “real economy.” Wall Street economists been

surprised by the weaker data and understandably are at least somewhat less certain about their forecasts. On our part, we still do not see sufficiently compelling evidence to merit a recession forecast. That said, we do see increased downside risk to the outlook from recent events.

Lending standards support second half The arguments for a double dip rely partly on tightening credit conditions—with European strains passing through into the US. However, the Fed’s Senior Loan Officer Survey indicates that US bank credit conditions were improving through July. Banks eased lending standards across all major categories of loans, and they also reported broad increases in loan demand.

Is “worst over” for inflation? On August 9 the FOMC statement stated that officials anticipate that “inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate”. However, the persistence of broad-based gains across most categories of the core CPI, especially shelter, raise doubts that the core can be counted on to slow. We still expect a gradual rise in underlying inflation into 2012.

The past week The July data released over the past week suggested a strong start to the third quarter, but the August survey data raised concerns about recession.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

Morning Expresso - United States 22 August 2011

UBS 4

MACRO AND STRATEGY RESEARCH

Equity Analytics

Analyst: Austin H. Burkett, CFA Tel: +1-212-713 3235

Price Reactions to U.S. Share Repurchase Announcements We examine price movements surrounding repurchase announcements Given recent interest in share repurchases, we observed the price

movements in relation to share repurchase announcements year-to-date for the S&P 500 and Russell 2000 companies. Average 183 basis point 1-day outperformance following announcements Russell 2000 stocks generally benefitted more with repurchase

announcements, with an average 245 basis points of outperformance following announcements versus 103 for S&P 500 stocks. We also observed that larger repurchase announcements (as % of shares outstanding) would (intuitively) provoke larger price reactions.

Relationship between dividends payers and price reaction Share repurchases are often compared to dividends, as both involve a cash transfer to shareholders. We observed larger outperformance for companies not paying dividends relative to those that were.

Effect of prior performance on post-announcement price movement If a stock had been performing poorly, the market may view a repurchase announcement as a statement of confidence from management in the face of underperformance. We observed the largest 3-month underperformers benefitted the most from share repurchase announcements.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

Global Emerging Markets Fund Flows

Strategist: Nicholas Smithie Tel: +1-212-713 8679

Still no respite Outflows everywhere Total GEM funds experienced strong outflows of around $2.8 billion over the last week. All the regions saw strong net selling as

investors remain concerned over the European debt crisis and global slowdown. On a 4-week moving average basis, we have seen outflows of $1.1 billion from Asia ex Japan; outflows of $1 billion from Dedicated GEM with EMEA and LatAm seeing outflows of $447 million and $310 million, respectively.

Outflows in non-ETF funds gathers momentum Non-ETF funds (long-only money) have seen another week of strong outflows. With the exception of April, this group have consistently experienced net selling pressures this year. On a 4-WMA basis, ETF saw outflows of $952 million compared to outflows of $1,909 million in the non-ETF segment. ETF flows typically make up 41% of total flow.

Money flows into the defensive/domestic-demand driven markets We also look at the biggest movers within the geographical focused funds. The top five destinations for flows over the past week (as a percent of AUM) were Colombia, Mexico, Thailand, Indonesia and the Czech Republic. The biggest net losers of funds were Taiwan, South Africa, South Korea, Russia and Malaysia.

Net selling year to date compared to strong inflows last year Total GEM fund flows year-to-date amount to a withdrawal of $16.9 billion of funds. This compares to total inflows of $84.1 billion into GEM in 2010. On a cumulative basis over $155bn has flowed into GEM funds since January 2006.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

Morning Expresso - United States 22 August 2011

UBS 5

COMMUNICATION Janedis’ Media Matters

Entertainment Analyst: John Janedis, CFA Tel: +1-212-713 1064

Pressure Continues-More Than Just Macro? What’s New? Media stocks remained under pressure last week, as concerns related to ad growth and margins in a downturn stay in focus. From a

fundamental perspective, we believe nat’l adv. has begun to slow somewhat recently, though not materially. However, we remain on the sidelines for the group post our late June downgrade as we see downside to estimates for the balance of the year and into 2012. While valuations seem more compelling given the 17% drop in stock prices over that time, the group is likely more expensive than it seems. Top picks: VIA/CBS.

Media M&A Conference Call Takeaways We hosted a conference call focused on M&A trends within the broadcast and newspapers sectors. From a multiple perspective, TV transactions are getting done in the 7x-8x range, radio closer to 7x and newspapers in the 4x-5x range.

New York Times Linage +1% in August; WSJ Trending Down 1% Through the third wk of August, Linage at the NYT is +1% with nat’l auto -78%, dept. stores +29%, telco -9%, banks/financials -4%, and movies -21%. Classifieds are +11%, with h/w -27%, r/e -8%, and auto +55%. Linage at the WSJ is trending down 1% in Aug (+23% comp), vs. July +3% (+21%), June +2% (+17% comp), May +8% (+7% comp), and April flat (+22% comp).

Valuation Large-cap media is trading at 6.3x our FTM EBITDA vs. 7.2x last week; mid-cap is trading at 7.8x vs. 8.7x; advertising is trading at 5.2x vs. 5.6x; online recruitment is trading at 5.1x vs. 6.4x; and publishing is trading at 3.5x vs. 3.7x.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 22 August 2011

Morning Expresso - United States 22 August 2011

UBS 6

ENERGY

North American E&P Weekly

Analyst: William A. Featherston Tel: +1-212-713 9701

Weekly Summary Crude and natural gas finish lower after another volatile week Oil prices held steady through mid-week before plummeting on Thursday due to

renewed Eurozone debt and U.S recession fears fuelled by a trio of bearish economic news. Oil prices ended the week down 3.6% at $82.26/Bbl. Natural gas prices slumped throughout the week, pushed lower by a bearish EIA storage report, falling back below $4.00/MMBtu. Prices closed out the week down 3.0% to $3.94/MMBtu.

E&Ps underperform the broader markets U.S. E&Ps fell 7.6% WoW, underperforming the S&P 500, which fell 4.7%. Canadian E&Ps were also down 7.6% WoW, underperforming the TSX’s 3.8% drop.

Company news NBL purchased 331,670 net acres in the SW PA & NW WV Marcellus from CNX for $3.4 billion ($1.07 bn in cash over 3 years and $2.13 bn in an 8 year drilling carry) for ~$7,100/acre on an NPV basis above recent deal average of ~$5,486 on an NPV basis. We upgraded OAS to “Buy” on above consensus ’12 volumes as we believe investors will shift focus to the ‘12 growth outlook driven by an increase in drilling activity & well performance. RRC raised its resource estimate by 1 Tcfe to 40-56 Tcfe with the increase coming from the Midcontinent and unveiled a 6 Bcfe type curve for the NE Marcellus.

A look at the week ahead We expect the EIA to report a 75-85 Bcf injection on Thursday. Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

Morning Expresso - United States 22 August 2011

UBS 7

HEALTHCARE CareFusion Rating: Buy Target: US$26.00 Price: US$23.86 RIC: CFN.N Prior: Unchanged Prior: Unchanged Mkt Cap: US$5.28bn BBG: CFN US

Medical Supplies Analyst: Rajeev Jashnani, CFA Tel: +1-212-713 9127

Update from CFO Catching up with management We had an opportunity to speak with CFO Jim Hinrichs & VP IR Carol Cox. Summary updates on key business items,

cost savings & M&A are below w/ more detailed thoughts on page 2. Notably, regarding its hospital customers, CFN re-emphasized the challenging environment & noted that customers’ #1 priority is to better organize, collect & deploy information within their organizations.

Perspective on Infusion & Dispensing On pumps, we believe CFN may shift sales force comp from rev-based to mgn-based in an effort to restore historical pricing; success in achieving this end will also be dependent on competitive dynamics. On Dispensing, cash flows are predictable given that ~75% of units are leased. In contrast, significant portion of revs are booked at the time of sale & could be volatile if purchasing slows later in the fiscal yr. However, despite a tough environment in F11, CFN posted its best year w/ ~10% bookings growth (units will be placed in F12). We believe growth is largely coming from facilities where CFN was previously not present.

Streamlining co enables international M&A strategy CFN has repeatedly noted significant inefficiencies in its legal / IT structures. We estimate that CFN can drive op mgns from 18.1% in F12 to 20.3% in F14 largely on mix (low mgn pumps to high mgn disposables) while we believe cost savings from streamlining the organization will be used to absorb acquisitions. Our perception is that co will internally refine its M&A strategy in the near-term w/ a focus on ex-US expansion. We have no specific reasons to doubt CFN’s ability to reposition the company for better growth. That said, international expansion does carry some operational risk.

Valuation-DCF-based price target of $26 On CY2012 estimates, CFN trades at 12.2x EPS, 6.2x EV/EBITDA & 9% FCF yld. Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$23.86 on 19 Aug 2011 16:42 EDT

Medtronic Rating: Buy Target: US$40.00 Price: US$31.25 RIC: MDT.N Prior: Unchanged Prior: Unchanged Mkt Cap: US$34.5bn BBG: MDT US

Advanced Medical Devices Analyst: Rajeev Jashnani, CFA Tel: +1-212-713 9127

F1Q12 preview We expect initial comments from new CEO New CEO Omar Ishrak’s tenure began ~2 mo’s ago, as such, initial comments may be limited; that said,

we believe more extensive comments are likely at the 8/25 shareholder mtg. In our view, Ishrak needs to shape the co into an organization w/ better execution, which takes time. Given MDT’s valuation, multiple expansion seems likely over the long-term. That said, the stock may be range-bound in the near term until mgmt articulates a cogent plan to create value & operational performance begins to stabilize in challenging core markets.

We est F1Q12 revs / EPS of $4.02B / $0.80, Street: $3.98B / $0.79 We est 1% organic rev growth w/ $170M from FX (guidance: $170-190M). On EPS, we est 0% growth; Street at -1%. Key operational takeaways pertain to ICD & Spine franchises (combined: 38% of revs). We assume -7% mkt growth for US ICD in C2Q11 w/ MDT sales of $420M (-10%) in their F1Q12. We est MDT ex-US ICD revs of $287M (2% cc); ex-US performance insightful given competitive dynamics between MDT & STJ new products. For Spine, we est US / ex-US revs of $613M (-3%) / $228M (4% cc). US Spine performance important to gauge Solera uptake & INFUSE-related fallout.

Adjusting FY sales outlook to reflect market conditions & acquisitions Before factoring in recent deals, we lowered cc rev growth from 3.0% to 2.1% (2.5% to 1.5% organic) on US CRM & Spine (biologics & core). Adding ~$65M from M&A yields 2.6% cc rev growth. Street at +1.6% (does not reflect M&A); mgmt guided to 1-3% CC in May. We maintained F12 EPS at $3.50 (+4%) on op ex; Street: $3.45; guidance: $3.43-3.50.

Valuation – DCF-based price target of $40 Our target implies a P/E of 10x on CY13 EPS. On CY12, MDT currently trades at 8.5x P/E, 6.3x EV/EBITDA & 13% FCF yld.

Notes: Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$31.25 on 18 Aug 2011 19:42 EDT

Seattle Genetics Rating: Neutral Target: US$16.00 Price: US$14.35 RIC: SGEN.O Prior: Unchanged Prior: Unchanged Mkt Cap: US$1.31bn BBG: SGEN US

Biotechnology Analyst: Matthew Roden, PhD Tel: +1-212-713 2491

Better Than Expected Adcetris Label What’s New? Nod to transplant-ineligible patients unexpected surprise This afternoon, the FDA approved Adcetris ahead of the Aug. 30th

PDUFA date, with a slightly broader label than was expected given FDA’s Richard Pazdur’s comments at the ODAC. The label includes patients who are ineligible for transplant and have failed two prior chemo regimens. Our forecasts include modest use in the transplant ineligible setting, and today’s news puts back on the table potential upside to our above-consensus estimates.

Transplant-ineligible patients key factor in Adcetris market opportunity We view the ineligible population as roughly the same size as the post-transplant opportunity, and suggests a larger addressable market for Adcetris. We model $212M in 2012 US Adcetris revenues, with $50M coming from transplant ineligible patients. We had revised our model to include a more modest contribution from this population following the mixed ODAC panel, but now believe our above-consensus estimates may be somewhat conservative.

Thoughts on the stock: reviewing model on broader label, pricing, costs We note the broader label offers an upside surprise to expectations, but we await additional clarity on anticipated Opex spend following agreement with the FDA on the appropriate confirmatory trials, as well as Adcetris pricing and launch timing. We note significant sensitivity in our model on pricing changes (we assume $15k per cycle), and await further detail on Monday’s conference call.

Valuation: Neutral rating with $16 price target We derive our price target using a risk-adjusted, DCF-based analysis. Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$14.35 on 19 Aug 2011 15:12 EDT

Morning Expresso - United States 22 August 2011

UBS 8

INDUSTRIALS E&C Weekly Blueprint

Heavy Construction Analyst: Steven Fisher, CFA Tel: +1-212-713 8634

Engineering & Construction Update Upcoming events: Petrofac, WorleyParsons, BHP results; NRC meeting Petrofac Q2 results (Aug. 22) and WorleyParsons results (Aug. 24) could

have read-through to other E&Cs. BHP’s earnings call (Aug. 24) could offer an updated outlook on mining capex. An NRC meeting on the Vogtle plant COL (Aug. 25) could reveal info about possible timing for COL approval.

Highlight from this week: Blue/Grey/Black sky scenario analysis On Aug. 16 UBS strategists published a report titled “What if Grey or Black Skies Lie Ahead?” which includes our preferred stock selections under three possible scenarios: blue skies (higher beta-to-oil – FWLT, MDR, KBR); grey skies (diversified business, solid backlog, less non war-related gov’t work – FLR, KBR); black skies (public sector and smaller project exposure – ACM, URS, BWC).

Industry data: stock performance, Architecture Billings Index declines The E&C group avg stock performance over the past week was -4.7%, below the S&P 500 of -2.7%, and the E&C group avg P/E multiple on 2012 consensus is now 9.6x, below 10.2x last week and the current S&P 500 of 10.9x. The July Architecture Billings Index (ABI) declined to 45.1, below June’s 46.3 and is below 50 for the 4th straight month (a score below 50 indicates a decline in demand for design services). The new projects inquiry index declined as well.

Sector view: Constructive on construction, despite near term turbulence We expect some macro-driven weakness this summer, but we still think the cyclical drivers (oil prices and backlogs) are supportive, and we like the LNG/ upstream themes. Buy ratings: KBR, MDR, FLR, FWLT, SHAW, ACM, TPC.

Notes: Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 19 August 2011

U.S. Aerospace & Defense Playbook

Aerospace Analyst: David E. Strauss Tel: +1-212-713 6185

The Week Ahead What’s next for Aerospace and Defense? Quiet week for A&D with Congress on recess and no major industry data points. Next week, we have

IATA global traffic data Tues, which we expect to reflect low- to mid-single digit growth based on reports out of the regions. We also have BBD earnings Wed and bizjets/helicopters used inventory data on Thurs. Looking out, ESL reports its Q3 on Sept. 1, while GD will host an investor day in NYC on Sept. 8. DoD appears likely to begin FY12 on a CR with Congress out on recess through August and likely to wait for deficit reduction Super Committee and DoD roles and missions review before re-marking FY12 budget under new discretionary caps.

Aero stocks pricing in flat to down EPS next year Correction has taken aero down 20%, more than the market, with group now at roughly 12x 2012 consensus estimates that call for 18% growth on average (down from 31% in 2011). Aero typically trades at mid-teens forward multiple, which we believe is appropriate assuming cycle holds up, implying that stocks now reflect expectations for flat to down EPS in 2012. Anything but a double dip recession and we think EPS growth is much better than this and the group recovers.

Defense budget cuts worse than indicated Our analysis of the Deficit Reduction bill indicates the cuts to defense are larger and more front end loaded than widely understood. We believe the DoD budget will be reduced by roughly $500B in a best case scenario with the base budget flat to down in FY12-13 and modernization likely 5-10% lower. If the Super Committee can't agree to additional cuts, we estimate defense will be reduced by $1T with the FY13 budget likely 10% lower and modernization down even more.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 22 August 2011

Morning Expresso - United States 22 August 2011

UBS 9

TECHNOLOGY US Internet and Interactive Entertainment

Internet Services Analyst: Brian Pitz Tel: +1-212-713 9310

Pitz & Fitz’s Internet / IE Weekly Amazon Instant Video offers over 100K movies and TV Shows Amazon announced that Amazon Instant Video now offers customers over 100K

movies and TV shows. Amazon Instant Video now offers unlimited streaming of over 9,000 movies and TV shows to Amazon Prime members at no extra charge to the standard $79 annual Prime membership fee. Amazon’s separate video-on-demand streaming service charges $1.99 to buy a new release TV show and $3.99 to rent a new-release movie for 24 hours. Amazon has over 15K HD titles in its VOD collection.

Netflix to launch in Spain, Britain in early 2012 According to Reuters, Netflix will launch in Spain in the first half of 2012. Citing a conversation between Pedro Perez, president of the local producers association FAPAE, Spain and Screen Daily, Reuters said that the video streaming company

��has been in contact with various Spanish producers. The company is also looking to ex pand its services to Britain and other markets like Japan and South Korea. Netflix launched service in Canada last fall.

Foursquare users can now check in to official events Although Foursquare users have been unofficially checking into events for a long time, the company announced it will now officially support event check-ins for partner events. The company has teamed with ESPN for sports events, MovieTicket.com for movie tickets, and Songkick for concerts to populate its database with official events. The partner events will offer users additional check-in functionality, such as the ability to check into a specific movie theater.

Notes: Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 22 August 2011

Semiconductor Equipment Industry Update

Semiconductors Analyst: Stephen Chin Tel: +1-212-713 4111

Weak Taiwanese semicap orders continue 3Q11 semicap orders from Taiwan are tracking down -78% q/q Our own analysis of 9 Taiwanese semiconductor companies shows only $129M of

total semicap orders were placed in the first 7 weeks of 3Q11 versus $1.1B and $2.0B in all of 2Q11 and 1Q11. Total foundry semicap orders from Taiwan are tracking down -82% q/q and total DRAM semicap orders are tracking down -52% q/q. We estimate global semicap orders likely bottom in 4Q11-1Q12.

Checks found TSMC placed $18M order with Applied Materials last week Our analysis shows TSMC’s total semicap orders so far in 3Q11 are only $84M versus $820M in 2Q11 and $1.6B in 1Q11 but are likely bottoming as they are lower than its recession level ordering patterns of $300M/qtr in the 2Q08-4Q08 period. We note that Applied has received 20% of TSMC total semicap orders so far in 2011 which is inline with its historical average of 22%. We expect Applied to report in line Jul-11 quarter results this week but likely guide its Oct-11 sales down -10% q/q as our checks find its Silicon orders are tracking down -20% q/q.

North American Jul-11 semicap book to bill declined -9% m/m to 0.86 Our review of SEMI’s monthly data showed Jul-11 semicap bookings declined -16% month over month to $1.3B (3rd consecutive monthly decline) as Jul-11 billings declined -8% m/m to $1.5B. We note that we are approaching similar trough bookings and book to bill levels seen in the 2007 downcycle but still 10% above the 2002 and 2004 downcycles.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS commentary as at 22 August 2011

Morning Expresso - United States 22 August 2011

UBS 10

TRANSPORTATION DHT Holdings, Inc. Rating: Neutral Target: US$2.75 Price: US$2.84 RIC: DHT.N Prior: Unchanged Prior: US$4.30 Mkt Cap: US$0.18bn BBG: DHT US

Marine Transport Analyst: Rick Paterson Tel: +1-212-713 7944

Cutting Estimates Estimates lowered Due to persistent softness in the oil tanker shipping market we are making further cuts to our DHT estimates. 2011E EPS falls

from $0.37 to $0.26, and our 2012 estimate declines from $0.45 to $0.33. Our quarterly dividend estimate remains $0.10. Perfect storm getting worse Shipping is typically a demand and supply fundamental story, and both are hurting the stock prices at present. The

industry orderbook remains extremely elevated, at 22% of the fleet on order for delivery. Low new orders, vessel delivery slippage, and accelerated scrapping won’t fix that overhang anytime soon. However, the new problem is obviously the potential for global macro weakness, hitting the demand side of the shipping equation. Not good.

Our view on the stock: sit tight and clip the dividend With a long road to recovery and heightened volatility and uncertainly, we do not recommend an investment in DHT. For those that already own it our advice is to sit tight, be patient, and clip the dividend.

Valuation We use Net Asset Value to set a price target, and with vessel second hand values down again this obviously pushes this lower, to $2.75 (prior $4.30) based on 1x NAV.

Notes:

Source: The content presented above reflects a front page summary of UBS Research content, UBS estimates based on a share price of US$2.84 on 19 Aug 2011 15:42 EDT

Morning Expresso - United States 22 August 2011

UBS 11

UBS Key Calls - US Live Key Call Portfolio

Stock Name RIC Rating Price Target Date of call Current Price Analyst Apple Inc. AAPL.O Buy US$510 2-Jun-11 US$356.03 Maynard Um

Baker Hughes Inc. BHI.N Buy US$102 7-Jun-11 US$54.82 Angie Sedita

Cardinal Health, Inc. CAH.N Buy US$51 18-Jan-11 US$39.98 Steven Valiquette

Celgene Corporation CELG.O Buy US$71 9-Dec-10 US$54.68 Matthew Roden, PhD

Citigroup Inc C.N Buy US$56 3-May-11 US$26.77 William Tanona, CFA

CONSOL Energy, Inc. CNX.N Buy US$87 4-Aug-11 US$41.71 Shneur Gershuni, CFA

Deere & Co. DE.N Buy US$110 18-Jan-11 US$69.01 Henry Kirn, CFA

Dow Chemical DOW.N Buy US$46.5 21-Mar-11 US$26.26 Andrew Cash

Ford Motor Co. F.N Buy US$22 10-Jan-11 US$9.99 Colin Langan, CFA

General Electric Co. GE.N Buy US$23 10-Jan-11 US$15.09 Jason Feldman

Google Inc. GOOG.O Buy US$800 10-May-10 US$490.92 Brian Pitz

Joy Global Inc. JOYG.O Buy US$112 28-Feb-11 US$71.29 Henry Kirn, CFA

McDonalds Corp. MCD.N Buy US$97 9-Feb-11 US$87.23 David Palmer

Prudential Financial Inc. PRU.N Buy US$77 19-Apr-10 US$46.49 Andrew Kligerman

Qualcomm Inc. QCOM.O Buy US$70 26-Apr-11 US$46.52 Parag Agarwal

SanDisk Corp. SNDK.O Buy US$62 21-Mar-11 US$32.5 Uche Orji

Source: Reuters, UBS. Prices as at market close on August 19, 2011.

Morning Expresso - United States 22 August 2011

UBS 12

Rating & PT Changes Key Rating and Price Target Changes: US

Company Name Directional Indicator/Rationale Reuters Code Current Share Price

New Rating New PT Prior

Rating Prior PT

DHT Holdings, Inc. Maintain Neutral, lower PT DHT.N US$2.81 Neutral US$2.75 Neutral US$4.30

Source: Reuters, UBS. Prices as at market close on August 19, 2011.

Markets, Events and Newsflow Today’s Company Events

Company Name Event Reuters code Rating PT Notes

None Source: Reuters, UBS. Prices as at market close on August 19, 2011. Today’s Macroeconomic Events: US

Indicator Time (ET) UBS forecast Previous Consensus

MBA Deliquency Survey (likely this week)qoq na 8.3% na

Source: Bloomberg, UBS

Today’s UBS Hosted Corporate Roadshow: Company Event Location Halliburton Co 1X1 meeting hosted by Angie Sedita Midwest

Today’s UBS Hosted Fieldtrip:

Company Event Location None

Today’s UBS Hosted Conference:

Company Event Location

None

Morning Expresso - United States 22 August 2011

UBS 13

Latest Market Movements: Country/Region Market Latest Price/Last Close 1-day % Change YTD % Change

Americas

United States Dow Jones 10817.7 -1.57 -6.56

United States S&P 500 1123.5 -1.50 -10.66

United States Nasdaq 2341.8 -1.62 -11.72

United States S&P VIX 43.05 0.89

Europe

Europe FTSE Eurofirst300 919.2 1.03 -18.05

Belgium BEL 20 2141.2 1.06 -16.96

Germany DAX 5504.5 0.45 -20.39

France CAC 3058.4 1.37 -19.62

Italy MIB 30 14931.5 2.25 -25.98

Netherlands AEX 277.6 1.25 -21.71

Portugal PSI 20 6061.3 0.81 -20.12

Spain IBEX 8239.7 1.20 -16.43

Switzerland SMI 5149.9 1.10 -19.98

UK FTSE 100 5111.6 1.41 -13.36

Asia

Hong Kong Hang Seng 19486.9 0.45 -15.40

India BSE Sensex 16286.2 0.90 -20.59

Japan Nikkei 225 8628.1 -1.04 -15.65

Source: UBS, Reuters. Indices in Americas as at market close on August 19, 2011. Indices in Europe and Asia as at 05:00 EDT on August 22, 2011

Latest FX Movements: Name Currency Latest Price/Last Close 1-day % Change 1-month % Change YTD % Change

Euro €/$ 1.440 -0.20% 1.2% 7.5%

UK £/$ 1.646 -0.25% 1.9% 5.5%

Canada CAD/$ 1.010 0.09% -4.3% 0.8%

Switzerland CHF/$ 1.274 1.16% 4.5% 19.0%

China Yuan/$ 0.156 -0.05% 1.1% 3.1%

Brazil BRL/$ 0.625 -0.05% -2.1% 3.7%

India INR/$ 0.022 0.16% -2.7% -2.1%

Mexico MXN/$ 0.081 -0.18% -5.3% 0.3%

Japan $/JPY 0.765 -0.01% -3.0% -5.8%

Australia AUD/$ 1.040 0.22% -3.2% 1.6%

Source: UBS, Reuters. Prices as at market close on August 19, 2011

Morning Expresso - United States 22 August 2011

UBS 14

Latest Commodity Movements: Name Latest Price 1-day % Change 1-month % Change YTD % Change

Gold ($/oz) 1889.50 2.01 15.36 31.04

Brent Crude spot, $/bbl 106.25 -2.18 -8.07 16.92

WTI Crude spot, $bbl 85.52 0.32 - -

Natural Gas, $MMBTU 3.88 -1.50 -10.54 -5.45

Source: UBS, Reuters. Prices as at market close August 22, 2011.

Morning Expresso - United States 22 August 2011

UBS 15

Today’s UBS Event

ab

Expert Access Conference Call

Q2 UBS/Mercent eCommerce Update

Host: Brian Pitz / Brian Fitzgerald

UBS Internet Analysts

Speaker: Eric Best

CEO, Mercent Mercent is a leading provider of online channel marketing technology and services for retailers.

Topic of Discussion

We will be discussing the latest Q2 eCommerce trends with data from Mercent CEO, Eric Best. Given

Mercent’s purview into eCommerce trends on several online shopping channels including Amazon, eBay, Google, and Comparison Shopping Engines, we think the call should provide timely data on the current state of eCommerce.

Date & Time: Monday, August 22nd, 2011 // 1:00pm ET

Dial-in Details:

Toll Free: 888-754-4437

Toll: 212-231-2900 Code: 21536026

Replay Details: Toll Free: 800-633-8284

Toll: 402-977-9140 Code: 21536026

Morning Expresso - United States 22 August 2011

UBS 16

Recent UBS Event

ab

UBS Conference Call Which Shade?

In light of the fast moving markets, it seems difficult to garner any conviction. Given the recent market movements and investor concern, we invite you to listen to a dialog between some of UBS’ key macro

thinkers followed by the opportunity for Q&A.

Speakers: George Magnus – UBS Senior Economic Adviser

Paul Donovan – UBS Deputy Head of Global Economic Stephane Deo – UBS Chief European Economist

Drew Matus – Senior US Economist Nick Nelson – UBS Head of European Equity Strategy

Date & Time:

Friday 19th August 2011 09:00 New York // 14:00 London // 21:00 Hong Kong // 22:00 Tokyo

Live Dial-In Details – PINCODE: 902116#

EUROPE LOCAL ASIA Local WORLD TOLL-FREE Austria +43[0]26822056295 China +86 105 904 4820 Australia 1800 031 379 Belgium +32[0]22901710 India +91 226 150 1546 China 10800 441 1267 Denmark +45 327 14897 Singapore +65 68 232 174 Hong Kong 800 903 203 France +33 [0] 1709 935 33 Taiwan +886 221 626 706 India 000800 100 3650 Germany +49 307 2616 7228 Indonesia 0018 030 441 1309 Ireland +353 [0] 1436 7615 EUROPE TOLL-FREE Israel 1809 431 506 Italy +39 [0] 2303509370 Austria 0800 005 166 Japan 00663 381 2553 Luxemburg +352 2700073429 Germany 0800 000 6563 New Zealand 0800 451 407 Netherlands +31 [0] 207965351 Spain 900 801 889 Russia 81080 024 012 044 Spain +34 917889720 Switzerland 0800 001 742 South Africa 0800 983 154 Sweden +46 [0]850520338 UK 0500 551 099 Switzerland 0800 001 742 Switzerland +41 [0] 434569286 USA 1866 302 9131 UK +44 20 7162 9938 AMERICA Local United States +1 917 677 0122

Replay Details – Access Code: 902116# UK 020 7031 4064 US +1-954-334-0342 France +33 (0) 170993529 Austria +43 (0) 26822056415 Australia +61(0)2 82239748 Germany +49 (0) 30726167224 Spain +34 917889714 Hong Kong +852 30114552 Ireland +353 (0) 14367610 Sweden +46 (0) 850520333 Singapore +65 66221306 Italy +39 02303509364 Switzerland +41 (0) 225927181 Japan +81366451264 Netherland +31 (0) 207965345 Finland +358 (0) 923144681 Belgium +32 (0) 22901705 Portugal 800782056 Norway +47 21501292 Denmark +45 32714892 US - toll free +1-888-365-0240

* This will be available within 4 working hrs of the call ending for 14 day(s) from 19 August 2011 until midnight on 02 September 2011

Morning Expresso - United States 22 August 2011

UBS 17

Recent UBS Event

ab

Expert Access Conference Call

TV/Radio/Newspaper M&A Market Update

Host: John Janedis

UBS Media Analyst Speaker:

Phil Murray - EVP, Dirks, Van Essen & Murray George Reed - Managing Director, Media Services Group

Topic of Discussion

• How healthy is the demand for TV/Radio stations as well as newspapers • Are the buyers of assets financial or strategic buyers • What kind of leverage will banks allow to support transactions • What kind of multiples are being paid across the various asset classes and has the bid/ask spread

changed recently • To what extent will the recent market volatility impact valuation

Date & Time: Friday, August 19, 2011 // 11:00am ET

Dial-in Details:

Toll free: 800-926-9801

Toll: 212-231-2922 Code: 21535265

Replay Details: Toll Free: 800-633-8284

Toll: 402-977-9140 Code: 21535265

Morning Expresso - United States 22 August 2011

UBS 18

Recent UBS Event

ab Conference Call

What If...Grey or Black Skies Lie Ahead?

Hosted by:

Jonathan Golub - Chief US Equity Strategist Chip Miller - US Small Cap Equity Strategist

Date & Time: Wednesday, August 17th, 2011

11:00 (US) /16:00 (UK) / 23:00 (HK)

Topics of Discussion: We answer the question of “What If” we have a recession

We estimate that a 40% chance of recession is currently discounted Nevertheless – we continue to believe a recession is unlikely

Presenting our investment conclusions

Access Numbers: Toll Free:

US 800-941-4658 / UK 080004961078 / GER 08001808920 Toll: 1-212-231-2901

Code: 21535728

Replay Information: Toll Free: 800-633-8284

Toll: 402-977-9140 Code: 21535728

Morning Expresso - United States 22 August 2011

UBS 19

Further Information

Morning Expresso – United States Welcome to the Morning Expresso, an early morning summary of the key ideas and issues presented from UBS for the day ahead. Its contents include:

- key items from UBS’ United States Morning Meeting

- highlighted recommendation and price target changes

- today’s anticipated company, sector and macro-economic catalysts from the US Contextual Diary

- company and client events, conferences and conference calls from UBS

- overnight global market, forex and commodity movements

Morning Expresso is designed to give you all that you ‘need to know’ each morning.

Data presented is accurate as at 06:00 EDT on Monday, August 22, 2011.

Contacts & Feedback For further details concerning today’s Morning Expresso – United States note, please visit www.ubs.com/investmentresearch or speak to your UBS contact. This note is not intended to be static and it will evolve over time. Feedback welcomed on email to

[email protected]

Statement of Risk

Forecasting earnings and corporate financial behavior is difficult because it is affected by a wide range of economic, financial, accounting and regulatory trends, as well as changes in tax policy.

Morning Expresso - United States 22 August 2011

UBS 20

Analyst Certification

Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were prepared in an independent manner, including with respect to UBS, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.

Morning Expresso - United States 22 August 2011

UBS 21

Required Disclosures This report has been prepared by UBS Securities LLC, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS.

For information on the ways in which UBS manages conflicts and maintains independence of its research product; historical performance information; and certain additional disclosures concerning UBS research recommendations, please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available upon request. UBS Securities Co. Limited is licensed to conduct securities investment consultancy businesses by the China Securities Regulatory Commission.

UBS Investment Research: Global Equity Rating Allocations

UBS 12-Month Rating Rating Category Coverage1 IB Services2

Buy Buy 54% 39%Neutral Hold/Neutral 39% 35%Sell Sell 7% 14%UBS Short-Term Rating Rating Category Coverage3 IB Services4

Buy Buy less than 1% 33%Sell Sell less than 1% 25%

1:Percentage of companies under coverage globally within the 12-month rating category. 2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. 3:Percentage of companies under coverage globally within the Short-Term rating category. 4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided within the past 12 months. Source: UBS. Rating allocations are as of 30 June 2011. UBS Investment Research: Global Equity Rating Definitions

UBS 12-Month Rating Definition Buy FSR is > 6% above the MRA. Neutral FSR is between -6% and 6% of the MRA. Sell FSR is > 6% below the MRA. UBS Short-Term Rating Definition

Buy Buy: Stock price expected to rise within three months from the time the rating was assigned because of a specific catalyst or event.

Sell Sell: Stock price expected to fall within three months from the time the rating was assigned because of a specific catalyst or event.

Morning Expresso - United States 22 August 2011

UBS 22

KEY DEFINITIONS Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividend yield over the next 12 months. Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a forecast of, the equity risk premium). Under Review (UR) Stocks may be flagged as UR by the analyst, indicating that the stock's price target and/or rating are subject to possible change in the near term, usually in response to an event that may affect the investment case or valuation. Short-Term Ratings reflect the expected near-term (up to three months) performance of the stock and do not reflect any change in the fundamental view or investment case. Equity Price Targets have an investment horizon of 12 months. EXCEPTIONS AND SPECIAL CASES UK and European Investment Fund ratings and definitions are: Buy: Positive on factors such as structure, management, performance record, discount; Neutral: Neutral on factors such as structure, management, performance record, discount; Sell: Negative on factors such as structure, management, performance record, discount. Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review Committee (IRC). Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating. When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece. Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, if any, follows.

Morning Expresso - United States 22 August 2011

UBS 23

Company Disclosures

Company Name Reuters 12-mo rating Short-term rating Price Price date AECOM Technology Corp.1, 5, 16 ACM.N Buy N/A US$18.64 19 Aug 2011 Anadarko Petroleum Corp.4, 5, 6a, 6c,

7, 13, 16 APC.N Buy N/A US$66.09 19 Aug 2011

Apache Corporation2, 4, 5, 6a, 6c, 7, 16 APA.N Buy N/A US$97.03 19 Aug 2011 Apple Inc.6c, 7, 16, 18a AAPL.O Buy N/A US$356.03 19 Aug 2011 Baker Hughes Inc.2, 4, 5, 6a, 6b, 6c, 7, 13,

16 BHI.N Buy N/A US$54.82 19 Aug 2011

Cardinal Health, Inc.2, 4, 6a, 6c, 7, 16, 18b, 22 CAH.N Buy N/A US$39.98 19 Aug 2011

CareFusion Corporation4, 6a, 16 CFN.N Buy N/A US$23.86 19 Aug 2011 CBS Corp.4, 6a, 13, 16, 22 CBS.N Buy N/A US$22.04 19 Aug 2011 Celgene Corporation6c, 7, 16 CELG.O Buy N/A US$54.68 19 Aug 2011 Chesapeake Energy Corp.4, 6a, 16 CHK.N Neutral N/A US$29.31 19 Aug 2011 Chevron Corp.6b, 7, 16 CVX.N Buy N/A US$93.29 19 Aug 2011 Citigroup Inc2, 4, 5, 6a, 6b, 6c, 7, 16, 22 C.N Buy N/A US$26.77 19 Aug 2011 CONSOL Energy, Inc.4, 5, 6a, 16 CNX.N Buy N/A US$41.71 19 Aug 2011 Deere & Co.16, 22 DE.N Buy N/A US$69.01 19 Aug 2011 DHT Holdings, Inc.2, 4, 6a, 16, 19 DHT.N Neutral (CBE) N/A US$2.81 19 Aug 2011 Dow Chemical5, 6a, 6b, 6c, 7, 13, 16, 22 DOW.N Buy N/A US$26.26 19 Aug 2011 EOG Resources2, 4, 6a, 16, 22 EOG.N Neutral N/A US$87.57 19 Aug 2011 ExxonMobil Corp.3a, 4, 5, 6b, 7, 16, 18f XOM.N Neutral N/A US$69.80 19 Aug 2011 Fluor Corporation4, 6a, 6b, 6c, 7, 13, 16 FLR.N Buy N/A US$54.18 19 Aug 2011 Ford Motor Co.4, 6a, 6b, 6c, 7, 13, 14, 16,

18c F.N Buy N/A US$9.99 19 Aug 2011

Foster Wheeler Ltd.5, 13, 16 FWLT.O Buy N/A US$21.20 19 Aug 2011 General Electric Co.4, 5, 6a, 6b, 6c, 7, 16, 18g, 22 GE.N Buy N/A US$15.09 19 Aug 2011

Google Inc.2, 4, 5, 6a, 6b, 6c, 7, 16, 18d GOOG.O Buy N/A US$490.92 19 Aug 2011 Joy Global Inc.3b, 4, 6a, 13, 16, 20 JOYG.O Buy (CBE) N/A US$71.29 19 Aug 2011 KBR, Inc.4, 6a, 6c, 7, 16 KBR.N Buy N/A US$25.21 19 Aug 2011 Marathon Oil Corporation4, 6c, 7, 16 MRO.N Buy N/A US$25.17 19 Aug 2011 McDermott International5, 16 MDR.N Buy N/A US$11.87 19 Aug 2011 McDonalds Corp.6b, 7, 13, 16, 22 MCD.N Buy N/A US$87.23 19 Aug 2011 Medtronic, Inc.4, 5, 6a, 6b, 6c, 7, 16 MDT.N Buy N/A US$31.29 19 Aug 2011 Noble Energy, Inc.2, 4, 6a, 6c, 7, 16 NBL.N Buy N/A US$81.24 19 Aug 2011 Oasis Petroleum Inc2, 4, 6a, 16 OAS.N Buy N/A US$23.98 19 Aug 2011 Occidental Petroleum Corp.2, 4, 5, 6a, 16, 18h OXY.N Buy N/A US$80.91 19 Aug 2011

Pioneer Natural Resources Co.4, 6a,

16 PXD.N Neutral N/A US$71.91 19 Aug 2011

Prudential Financial Inc.2, 4, 6a, 6b, 6c,

7, 16, 22 PRU.N Buy N/A US$46.49 19 Aug 2011

Qualcomm Inc.16, 18e QCOM.O Buy N/A US$46.52 19 Aug 2011 Quicksilver Resources Inc.4, 6a, 16,

20 KWK.N Buy (CBE) N/A US$9.60 19 Aug 2011

Range Resources Corp.2, 4, 6a, 16 RRC.N Neutral N/A US$57.45 19 Aug 2011 SanDisk Corp.13, 16, 20 SNDK.O Buy (CBE) N/A US$32.50 19 Aug 2011 SandRidge Energy Inc2, 4, 6a, 16 SD.N Neutral N/A US$6.72 19 Aug 2011 Seattle Genetics, Inc.16, 20 SGEN.O Neutral (CBE) N/A US$15.04 19 Aug 2011 Shaw Group Inc4, 6a, 6c, 7, 16, 20 SHAW.N Buy (CBE) N/A US$20.60 19 Aug 2011 Southwestern Energy Company4,

6a, 16 SWN.N Neutral N/A US$36.21 19 Aug 2011

Tutor Perini Corp.5, 16 TPC.N Buy N/A US$12.91 19 Aug 2011 Viacom Inc.2, 4, 6a, 6c, 7, 16 VIAb.N Buy N/A US$40.87 19 Aug 2011

Morning Expresso - United States 22 August 2011

UBS 24

Source: UBS. All prices as of local market close. Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing date 1. UBS Securities LLC is acting as manager/co-manager, underwriter, placement or sales agent in regard to an offering of

securities of this company/entity or one of its affiliates. 2. UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities of

this company/entity or one of its affiliates within the past 12 months. 3a. UBS Ltd is acting as financial advisor to Royal Dutch Shell plc and ExxonMobil Corporation on the sale of certain

underground gas storage facilities in Germany to GDF Suez 3b. UBS Securities LLC is acting as advisor to Joy Global Inc on the announced acquisition of a stake in International Mining

Machinery. 4. Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking

services from this company/entity. 5. UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services

from this company/entity within the next three months. 6a. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking

services are being, or have been, provided. 6b. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment

banking securities-related services are being, or have been, provided. 6c. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities

services are being, or have been, provided. 7. Within the past 12 months, UBS Securities LLC has received compensation for products and services other than

investment banking services from this company/entity. 13. UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity

securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end).

14. UBS Limited acts as broker to this company. 16. UBS Securities LLC makes a market in the securities and/or ADRs of this company. 18a. A U.S. based global equity strategist, a member of his team, or one of their household members has a long common

stock position in Apple, Inc. 18b. A U.S. based global equity strategist, a member of his team, or one of their household members has a long common

stock position in Cardinal Health, Inc. 18c. A U.S. based global equity strategist, a member of his team, or one of their household members has a long common

stock position in Ford Motor, Co. 18d. A U.S. based global equity strategist, a member of his team, or one of their household members has a long common

stock position in Google, Inc. 18e. A U.S. based global equity strategist, a member of his team, or one of their household members has a long common

stock position in Qualcomm Inc. 18f. The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position

in Exxon Mobil Corp. 18g. The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position

in General Electric. 18h. The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position

in Occidental Petroleum Corp. 19. Because UBS believes this security presents lower-than-normal risk, its rating is deemed Buy if the FSR exceeds the

MRA by 5% and Sell if the FSR is more than 5% below the MRA (compared with 6% and 6%, respectively, under the normal rating system).

20. Because UBS believes this security presents significantly higher-than-normal risk, its rating is deemed Buy if the FSR exceeds the MRA by 10% (compared with 6% under the normal rating system).

22. UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end (or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end).

Morning Expresso - United States 22 August 2011

UBS 25

Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report. For a complete set of disclosure statements associated with the companies discussed in this report, including information on valuation and risk, please contact UBS Securities LLC, 1285 Avenue of Americas, New York, NY 10019, USA, Attention: Publishing Administration.

Morning Expresso - United States 22 August 2011

UBS 26

Global Disclaimer This report has been prepared by UBS Securities LLC, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS. In certain countries, UBS AG is referred to as UBS SA. This report is for distribution only under such circumstances as may be permitted by applicable law. Nothing in this report constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation. It is published solely for information purposes, it does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, except with respect to information concerning UBS AG, its subsidiaries and affiliates, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the report. UBS does not undertake that investors will obtain profits, nor will it share with investors any investment profits nor accept any liability for any investment losses. Investments involve risks and investors should exercise prudence in making their investment decisions. The report should not be regarded by recipients as a substitute for the exercise of their own judgement. Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Any opinions expressed in this report are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or groups of UBS as a result of using different assumptions and criteria. Research will initiate, update and cease coverage solely at the discretion of UBS Investment Bank Research Management. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. The analyst(s) responsible for the preparation of this report may interact with trading desk personnel, sales personnel and other constituencies for the purpose of gathering, synthesizing and interpreting market information. UBS is under no obligation to update or keep current the information contained herein. UBS relies on information barriers to control the flow of information contained in one or more areas within UBS, into other areas, units, groups or affiliates of UBS. The compensation of the analyst who prepared this report is determined exclusively by research management and senior management (not including investment banking). Analyst compensation is not based on investment banking revenues, however, compensation may relate to the revenues of UBS Investment Bank as a whole, of which investment banking, sales and trading are a part. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Options, derivative products and futures are not suitable for all investors, and trading in these instruments is considered risky. Mortgage and asset-backed securities may involve a high degree of risk and may be highly volatile in response to fluctuations in interest rates and other market conditions. Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related instrument mentioned in this report. For investment advice, trade execution or other enquiries, clients should contact their local sales representative. Neither UBS nor any of its affiliates, nor any of UBS' or any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. For financial instruments admitted to trading on an EU regulated market: UBS AG, its affiliates or subsidiaries (excluding UBS Securities LLC and/or UBS Capital Markets LP) acts as a market maker or liquidity provider (in accordance with the interpretation of these terms in the UK) in the financial instruments of the issuer save that where the activity of liquidity provider is carried out in accordance with the definition given to it by the laws and regulations of any other EU jurisdictions, such information is separately disclosed in this research report. UBS and its affiliates and employees may have long or short positions, trade as principal and buy and sell in instruments or derivatives identified herein. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments. There is no representation that any transaction can or could have been effected at those prices and any prices do not necessarily reflect UBS's internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions, by UBS or any other source, may yield substantially different results. United Kingdom and the rest of Europe: Except as otherwise specified herein, this material is communicated by UBS Limited, a subsidiary of UBS AG, to persons who are eligible counterparties or professional clients and is only available to such persons. The information contained herein does not apply to, and should not be relied upon by, retail clients. UBS Limited is authorised and regulated by the Financial Services Authority (FSA). UBS research complies with all the FSA requirements and laws concerning disclosures and these are indicated on the research where applicable. France: Prepared by UBS Limited and distributed by UBS Limited and UBS Securities France SA. UBS Securities France S.A. is regulated by the Autorité des Marchés Financiers (AMF). Where an analyst of UBS Securities France S.A. has contributed to this report, the report is also deemed to have been prepared by UBS Securities France S.A. Germany: Prepared by UBS Limited and distributed by UBS Limited and UBS Deutschland AG. UBS Deutschland AG is regulated by the Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin). Spain: Prepared by UBS Limited and distributed by UBS Limited and UBS Securities España SV, SA. UBS Securities España SV, SA is regulated by the Comisión Nacional del Mercado de Valores (CNMV). Turkey: Prepared by UBS Menkul Degerler AS on behalf of and distributed by UBS Limited. Russia: Prepared and distributed by UBS Securities CJSC. Switzerland: Distributed by UBS AG to persons who are institutional investors only. Italy: Prepared by UBS Limited and distributed by UBS Limited and UBS Italia Sim S.p.A.. UBS Italia Sim S.p.A. is regulated by the Bank of Italy and by the Commissione Nazionale per le Società e la Borsa (CONSOB). Where an analyst of UBS Italia Sim S.p.A. has contributed to this report, the report is also deemed to have been prepared by UBS Italia Sim S.p.A.. South Africa: UBS South Africa (Pty) Limited (Registration No. 1995/011140/07) is a member of the JSE Limited, the South African Futures Exchange and the Bond Exchange of South Africa. UBS South Africa (Pty) Limited is an authorised Financial Services Provider. Details of its postal and physical address and a list of its directors are available on request or may be accessed at http:www.ubs.co.za. United States: Distributed to US persons by either UBS Securities LLC or by UBS Financial Services Inc., subsidiaries of UBS AG; or by a group, subsidiary or affiliate of UBS AG that is not registered as a US broker-dealer (a 'non-US affiliate'), to major US institutional investors only. UBS Securities LLC or UBS Financial Services Inc. accepts responsibility for the content of a report prepared by another non-US affiliate when distributed to US persons by UBS Securities LLC or UBS Financial Services Inc. All transactions by a US person in the securities mentioned in this report must be effected through UBS Securities LLC or UBS Financial Services Inc., and not through a non-US affiliate. Canada: Distributed by UBS Securities Canada Inc., a subsidiary of UBS AG and a member of the principal Canadian stock exchanges & CIPF. A statement of its financial condition and a list of its directors and senior officers will be provided upon request. Hong Kong: Distributed by UBS Securities Asia Limited. Singapore: Distributed by UBS Securities Pte. Ltd [mica (p) 039/11/2009 and Co. Reg. No.: 198500648C] or UBS AG, Singapore Branch. Please contact UBS Securities Pte Ltd, an exempt financial advisor under the Singapore Financial Advisers Act (Cap. 110); or UBS AG Singapore branch, an exempt financial adviser under the Singapore Financial Advisers Act (Cap. 110) and a wholesale bank licensed under the Singapore Banking Act (Cap. 19) regulated by the Monetary Authority of Singapore, in respect of any matters arising from, or in connection with, the analysis or report. The recipient of this report represent and warrant that they are accredited and institutional investors as defined in the Securities and Futures Act (Cap. 289). Japan: Distributed by UBS Securities Japan Ltd to institutional investors only. Where this report has been prepared by UBS Securities Japan Ltd, UBS Securities Japan Ltd is the author, publisher and distributor of the report. Australia: Distributed by UBS AG (Holder of Australian Financial Services License No. 231087) and UBS Securities Australia Ltd (Holder of Australian Financial Services License No. 231098) only to 'Wholesale' clients as defined by s761G of the Corporations Act 2001. New Zealand: Distributed by UBS New Zealand Ltd. An investment adviser and investment broker disclosure statement is available on request and free of charge by writing to PO Box 45, Auckland, NZ. Dubai: The research prepared and distributed by UBS AG Dubai Branch, is intended for Professional Clients only and is not for further distribution within the United Arab Emirates. Korea: Distributed in Korea by UBS Securities Pte. Ltd., Seoul Branch. This report may have been edited or contributed to from time to time by affiliates of UBS Securities Pte. Ltd., Seoul Branch. Malaysia: This material is authorized to be distributed in Malaysia by UBS Securities Malaysia Sdn. Bhd (253825-x).India : Prepared by UBS Securities India Private Ltd. 2/F,2 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai (India) 400051. Phone: +912261556000 SEBI Registration Numbers: NSE (Capital Market Segment): INB230951431 , NSE (F&O Segment) INF230951431, BSE (Capital Market Segment) INB010951437. The disclosures contained in research reports produced by UBS Limited shall be governed by and construed in accordance with English law. UBS specifically prohibits the redistribution of this material in whole or in part without the written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect. Images may depict objects or elements which are protected by third party copyright, trademarks and other intellectual property rights. © UBS 2011. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.

ab