Vontobel Morning Note

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1 MARKET OVERVIEW Closing +/-% SMI SPI SLI SMIM Dow Jones NASDAQ Stoxx Hang Seng Nikkei MSCI EU SECTOR OVERVIEW PRICE INDEX (LOC.) Closing +/-% Pharmaceuticals Chemicals Health Care Eq Biotechnology Food & Beverage T, A & Luxury Goods Insurance Information Tech Techn., HW & Equip Overview 'Vontobel Morning Note' Equity Research SMI Companies Synthes (Hold, PT 159): Development and collaboration agreement signed with Eli Lilly Non-SMI Companies CKW (Hold, PT 330): Surprisingly good interim statement - increased demand and good contribution from trading, write down of 6 mn related to Swiss nuclear power Emmi (Hold, PT 230): Acquisition of Italian dessert producer strenghtens position in key international markets and holdings in Swiss milk operations increased. Another good move in the expansion strategy. LEM (Hold, PT 610): Only minor changes to estimates following yesterdays FY results and conference, HOLD and PT 610 unchanged Schmolz+Bickenbach (Buy, PT 15.0): Investor day underpins positive view on the stock, but offered no reason for upward revisions of estimates Schulthess (Reduce, PT 60.0): Final interim result of the public tender offer and additional acceptance period of 10 trading days - we recommend to accept the offer Sulzer (Buy, PT 175): Ton Büchner to leave Sulzer to join AkzoNobel - a loss for the company but will not materially change our investment case Upcoming Corporate Events CURRENCIES 01:33 Ex rate +/-Rp USD/CHF EUR/CHF INT. RATES (CHF) Closing +/-bp 3-mth money mkt 0.18 % 0 10-y SWAP 2.12 % The objectivity of this report may be compromised by existing or planned business relationships between the author and the analysed companies and potential conflicts of interest arising thereof. Investors should therefore on no account use this report as the sole basis on which to make a decision. Please see the end of the document for more details on potential conflicts of interest and disclaimer information.

2 Synthes Reuters: SYST.VX Price: CHF 148 Enterprise value (mns): USD 19,067 Hold PT: CHF 159 EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Development and collaboration agreement signed with Eli Lilly Synthes and Eli Lilly announced a development and collaboration agreement to address the needs of osteoporosis and bone fracture patients. Hold, PT CHF 159 confirmed. The agreement includes: 1) a development program for early stage compounds from Lilly that are used by Synthes within trauma, spine, CMF and reconstructive. 2) a development program for the evaluation of additional orthopedic uses for Lilly's osteoporosis drug Forteo building on a phase II study that was already concluded (Forteo has a boxed warning as it caused osteosarcoma in a trial with rats). 3) Co-promotion of Forteo to orthopedic surgeons in the US and in selcted countries outside the US. This agreement could allow Synthes to offer treatment solutions coupled to pharmaceuticals in the future which could be of potential interest. However, short- to mid-term we believe that the deal's impact on EPS will be limited as higher sales through co-promotion will be offset by higher R&D costs. CKW andreas.escher@vontobel.ch Reuters: CKWN.S Price: CHF 326 Enterprise value (mns): CHF 2,009 Hold PT: CHF 330 EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) estimates under revision Surprisingly good interim statement - increased demand and good contribution from trading, write down of 6 mn related to Swiss nuclear power With earnings of CHF 500 mn (+5.2%, VTe 492), an operating performance of EBIT CHF 102 mn (+37%, VTe 96) and a net profit of CHF 90 mn (+38%, VTe 80), 1H10/11 results topped estimates by a distance. No quantitative outlook was provided. Main drivers for the good 1H result were an impressive increase of 14% from the industrial segment, positive contribution of CHF 13 mn from trading activities and lower expenses for energy procurement. As a reminder, the comparable period last year was negatively impacted by partial downtime of French nuclear power in Bugey. As to nuclear power in Switzerland, costs of CHF 6 mn were written down following the Swiss government's decision to suspend the approvals process. All in all, surprisingly good results topping our forecast. Hence, estimates are under upwards revision. Due to the low free float of 12% only and the lack of triggers, we would remain on the sidelines. HOLD, PT Vontobel Research

3 Emmi Reuters: EMMN.S Price: CHF 208 Enterprise value (mns): CHF 1,512 Hold PT: CHF 230 (CHF) 2009A 2010E 2011E 2012E EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Acquisition of Italian dessert producer strenghtens position in key international markets and holdings in Swiss milk operations increased. Another good move in the expansion strategy. Emmi announced the acquisition of italian dessert specialist A-27 Spa. The company operates in Emmi's key international markets Italy, France, Germany, UK, Benelux with its brand Bonta Divina and achieved sales of EUR 65mn. Beside that Emmi increased it's holdings in Swiss milk production companies. The A-27 acquisition is a very good move that fully fit Emmi's expansion strategy. The Bonta Divina products are positioned in the premium dessert and achieve growth in the high-single digits. Operating margin well ahead of Emmi's average ( %). We estimate a purchase price of around 1x sales (CHF 75-80mn). The production is running at full capacity and needs to be expanded in the next 2 years in order to keep up with growth. The other stake increases are mainly to simplify operations. This acquisition perfectly fit's Emmi expansion strategy. The estimated price (around 1x sales) is rather at the upper end of Emmi's criterias (0.8x), but given the good position in key markets, growth and margins justified. P/E 12E of 10.4x not expensive. Rating HOLD, PT CHF 230. LEM andreas.escher@vontobel.ch Reuters: LEHN.S Price: CHF 590 Enterprise value (mns): CHF 640 Hold PT: CHF 610 EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Only minor changes to estimates following yesterdays FY results and conference, HOLD and PT 610 unchanged We saw little reason to alter our EPS numbers (FY12/13: -2%). The projected decline on the top line was compensated by a lower tax rate and lower financing costs. Hence, our HOLD rating and PT of CHF 610 remains unchanged. Outlook: not quantified. Main question mark is the solar market with LEM having a top line exposure of VontE 15%. A 30-40% decline in solar related demand would translate into some CHF 20 mn of sales (7% of FY10/11 group sales). As demand in the remaining industrial segment and automotive is not abating, we forecast a virtually unchanged FY11/12 top line. LEM is a clear beneficiary of the ongoing trend towards renewables. However, the shift from nuclear might be not as quick as one can think. Only minor adjustment to estimates, HOLD, PT 610 confirmed. Given the rich valuation (P/E 12E: 15x, EV/EBITDA 12E: 9.3x), further upside is limited in our view. However, the payout of "significantly more than 50%" may attract dividend seekers. 3 Vontobel Research

4 Schmolz+Bickenbach Reuters: STLN.S Price: CHF 10.9 Enterprise value (mns): EUR 1,996 Buy PT: CHF 15.0 EPS (reported) EPS growth % NA NA P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Investor day underpins positive view on the stock, but offered no reason for upward revisions of estimates S+B hosted its first ever investor day in Düsseldorf with various presentations from group and plant managements. No new financial information was released. Management's comments regarding current trading conditions were unanimously positive. The product mix will continue to improve (more higher value tool steel) and capacities remain fully utilized with shifts also running during holidays. Management was happy with consensus for 2011, that is EUR mn sales (VontE: 3577) and EUR mn EBITDA (335). EBITDA margin potential remains 8-12%. FCF will be positive, but could be low due to inventory build-up (alloy prices) and Finkl ramp-up. The investor day supported our positive investment case based on a substantial earnings recovery (improving product mix, strong underlying demand, ramp-up of Finkl). No changes to estimates. Schulthess christian.arnold@vontobel.ch Reuters: SGRN.S Price: CHF 58.7 Enterprise value (mns): CHF 594 Reduce PT: CHF 60.0 EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Final interim result of the public tender offer and additional acceptance period of 10 trading days - we recommend to accept the offer NIBE Industrier AB (Nibe) disclosed the final interim result of its voluntary public tender offer for all publicly held registered shares of Schulthess Group AG (Schulthess). Nibe s participation in Schulthess Group AG amounts to 85.26%. As expected, Nibe declared the public tender offer successful and announced that the offer can still be accepted in the additional acceptance period of 10 trading days, which will run from 14 June 2011 to 27 June pm CET. We recommend to accept the offer and tender the shares (for those investors who want to hold Nibe shares and participate in the heat pump business) or to sell shares via the market. 4 Vontobel Research

5 Sulzer Reuters: SUN.S Price: CHF 146 Enterprise value (mns): CHF 4,437 Buy PT: CHF 175 EPS (reported) EPS growth % P/E (reported) EV/EBITDA Price/Book Div. per share Div. yield % FCF yield % Sales growth % EBITDA mrgn % EBIT mrgn % ROE % Equity ratio % Gearing % Net debt (mn) Ton Büchner to leave Sulzer to join AkzoNobel - a loss for the company but will not materially change our investment case Sulzer's CEO, Ton Büchner, has decided to leave the company in 4Q in order to pursue a new carrier opportunity. He will become CEO of AkzoNobel, a Dutch coatings and chemical company. He was 17 years with Sulzer in various functions (head of Turbo Servcies, head of Pumps etc.) Now being lured away from another industrial major is a loss but we always had seen this as a risk, given his great experience, excellent track record and reputation in the market. We have no evidence of any frictions within Sulzer management/bod. Despite his departure, there is a very capable and experienced management team in place and an important strategic cornerstone is already set with the recent Cardo acquisition. We regret his departure and investors will take this news negatively which could result in a negative stock price reaction. Nevertheless, Sulzer is in a great shape, has a capable management team in place and should manage a seamless transition. No change to our investment case. Buy, PT CHF Vontobel Research

6 Upcoming Corporate Events DATE COMPANY EVENT Schaffner Investor Day Art & Fragrance (BX) AGM EG Laufenburg 1H 10/11 results Syngenta Investor day 6 Vontobel Research

7 Disclaimer 1. Analyst declaration This Vontobel Report has been produced by the organizational unit responsible for investment research (Research unit, sell-side analysis) of Bank Vontobel AG, Gotthardstrasse 43, CH-8022 Zurich, Tel +41 (0) Bank Vontobel AG is subject to supervision by the Swiss Financial Market Supervisory Authority (FINMA), Einsteinstrasse 2, 3003 Bern, The authors of the individual articles confirm that this report gives a complete and precise reflection of their opinion of the analysed companies and that they have neither directly nor indirectly received compensation for their assessment or opinion. The compensation of the authors of this report is not directly related to the investment banking volume generated between Vontobel Group and the analysed companies. The authors of this document own no securities in the analysed companies: This document was not submitted to the analysed companies before publication or distribution. 2. 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