approaching 2010/14 lows on PE-relative. Staples have also de- rated severely — in fact Food & Beverage relative PE fell somewhat more than the other Defensives. However, current levels are still somewhat higher versus the historical range (since 1999) than for Healthcare or Utilities. That being said, the PE

ontinue the march higher into month end tomorrow with most major indices at or near ytd highs. Although the recent move up in the US has been led by Defensives (Consumer Staples in particular), it is Autos, Oil & Gas, and Basic Resources that are outperforming this morning in Europe. Some big moves in after

multiple expansion, given low price-to-book ratios and valuations at the lower end of historical ranges Cyclicals have never been this cheap versus Defensives 190% - 170% - 150% 130% 110% • 90% 70% • 50% M ill N cn r— M in t Cl en IA Ni CTr en IA Ni 01 r N. N. N. N. IS 00 00 00 00 en en e

Energy 0.3% Energy 0.3% Financials 1.2% Capes 3.9% Industrials 1.3% Industrials 1.3% Materials 5.3% Energy Equipment & Services 3.8% Defensives 5.6% Information Technology 5.4% Utilities -4.6% DBUSBRTE (Reasonable PE Tech) -6.0% Telecommunication Services 6.1% Consumer 4.8% Consum

-13.1% Energy -13.1% Financials 1.1% Capex 4.7% Industrials 0.2% Industrials 0.2% Materials -4.5% Energy Equipment & Services -11.6% Defensives 3.0% Information Technology 8.2% Utilities -6.116 013US8RTE (Reasonable PE Tech) • -10.1% Telecommunication Services 2.0% Consumer 8.6% C

-4.3% Energy -4.3% Financials -10.9% Capex -6.0% Industrials -4.9% Industrials -4.9% Materials -5.3% Energy Equipment & Services -3.5% Defensives -3.5% Information Technology -6.7% Utilities 7.3% DBUSBRTE (Reasonable PE Tech) • -17.4% Telecommunication Services 8.1% Consumer -4.8% C

-4.3% Energy -4.3% Financials -10.9% Capex -6.0% Industrials -4.9% Industrials -4.9% Materials -5.3% Energy Equipment & Services -3.5% Defensives -3.5% Information Technology -6.7% Utilities 7.3% DBUSBRTE (Reasonable PE Tech) • -17.4% Telecommunication Services 8.1% Consumer -4.8% C

between March and August and thus provide a better entry point. Position indicators suggest that investors are underweight Cyclicals and overweight Defensives which is turn means that Defensive sectors are more vulnerable to position unwinding. • We introduced an underweight in US equities in mid October