Macro Economic View : G5 & Eurozone

1. Manufacturing conditions continued to weaken in the second quarter (CY) with output dropping to the greatest extent in 3 years. The June manufacturing PMI reading is at a 3 yr low of 45.1, unchanged from the May reading. Only Ireland (53.1) and Austria (50.1) remain above the 50 mark. Both Italy and Spain remained well below the 50 mark, with the rate of contraction increasing. Italy’s PMI is at 44.6 vs 44.8 in May. Spained suffered a severe deterioration in business conditions as PMI fell to 41.1 vs 42.0 in May. A drop in new orders was cited as the cause for worsening conditions. France’s PMI reading is up slightly from the 2 yr low measured in May, 45.2 vs 44.7 in May. Domestic new orders were particularly low. Germany’s PMI fell to a 36-month low of 45.0 vs 45.2 in May, export orders declining at an accelerated pace. The manufacturing business climate also dropped significantly. The UK is now in recession. Manufacturing PMI is at 48.6 vs 45.9 in May. The PMI average for the quarter was the weakest since Q2 2009 (CY). The level of incoming new orders declined for the 3rd consecutive month. The Eurozone core + UK are being dragged down by weak demand both in domestic as well as export markets. Global manufacturing slowed sharply in June, with a PMI reading at a 3 yr low of 48.9, as growth in new orders stalled and international trade volumes declined. GDP growth outlook for the Eurozone in CY2012 remains at -0.4%, while for all of Europe it is 0.1%. The projection for 2013 for the Eurozone has been reduced to -0.1% Industrial Production growth forecast for the Eurozone was again revised downward to -2.2% vs -1.2% previously. For all of Europe it is -1.2% vs -0.4% previously. Europe remains the biggest drag on the global industrial economy due to a deepening of the euro crisis, banking crises, and the risk of a Greek departure from the Eurozone, still very high. Demand is low within Europe and has softened in almost all export markets as global manufacturing slows. Industrial orders have been put on hold due to growing economic uncertainty. On the somewhat bright side, commodity prices have fallen due to lack of demand. Source: Global Insight / JP Morgan / HSBC / Markit/Credit Suisse/Financial Times/EuroStat Macro Economic View : G5 & Eurozone 1

2. Slowing global demand and particularly in the Eurozone, plus the uncertainty caused by the euro crisis are starting to act as a drag on emerging economies. Although emerging market growth forecasts have also been revised downward, the EMEA emerging regions continue to expand Russia’s GDP growth will remain strong at 3.5% in 2012, compared to 4.3% in 2011 PMI declined sharply in June to 51.0 vs 53.2 in May Industrial production is forecasted to grow at 2.8% in CY2012 vs 4.7% in CY 2011 Middle East’s growth forecast is at 3.6% in CY2012, compared to 5.1% in 2011. North Africa GDP is 4.0% compared to -3.5 in 2011. North Africa is returning to growth after the Arab Spring uprisings Saudi Arabia’s GDP growth forecast for CY2012 is 4.7% vs 6.8% in CY2011 PMI is at a very strong 59.7 vs 60.3 in May (for non-oil producing industries.) UAE‘s GDP growth forecast for CY2012 is 4.2% vs 5.4% in CY2011 PMI is at 53.2 vs 53.8 in May Qatar‘s GDP growth forecast for 2012 is 4.7% vs 14.0% in CY2011 Industrial production is at 12.7% Turkey’s growth forecasts have been raised over the past several monthsas exporters continue to diversify to markets other than Europe, such as Middle East and USA. GDP growth forecast is now 2.3% for 2012 vs (previous forecast was 1.9%).This compares to 8.5% in 2011. The deceleration vs 2011 is mainly driven by soft demand from Europe, plus fiscal tightening by the government PMI is 51.4 vs 50.2 in May Industrial production forecast is now 3.4% in CY2012 vs 8.9% in CY2011. Source: Global Insight / JP Morgan / HSBC / Markit/Credit Suisse/Financial Times/EuroStat Macro Economic View : Emerging 2

3. Anticipated F12 Headwinds/Tailwinds Headwinds Tailwinds • Europe remains the biggest drag on the global economy with 2012 GDP growth at just 0.1% (-0.4% for the Eurozone) • Lower global demand has reduced the level of export business while the eurocrisis, austerity measures, and lower business confidence has had a negative impact on domestic demand • Demand has weakened particularly for investment goods in both domestic and export markets • Continued negative GDP growth is forecast for 2013 • Economic strength remains in the key emerging markets of EMEA, especially the Middle East and Africa • Russia’s manufacturing sector is also on a solid growth track • Although Poland’s PMI reading has sunk to just below the 50 mark, GDP and Industrial Production are still forecast to grow strongly • The decline in value of the euro relative to the dollar will have a positive impact on exports from the Eurozone • Lack of demand has reduced pricing pressure as the cost of industrial inputs falls. 3