UBS

# <u>UBS Investment Research</u>
UBS Business Jet Survey

Global Equity Research

Americas

Aerospace

Sector Comment

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Recovery Stalls

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Index holds at 50

Our March Business Jet Index came in at 50, indicative of a stable market and in line with our prior survey from January following increases in each of our previous eight surveys. While our Index continues to reflect a stable market, our straight up measure of absolute business conditions moved modestly lower this time, the first decline since March of 2009 and indicative of a slight degradation in market conditions since January.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## • Survey reflects improving customer interest

24 March 2010

Our survey continues to reflect improving customer interest and a strong I2-month outlook, although it is still weighed down by very high used inventory levels. Pricing in most models is off 30-40% from peak levels, but now appears to be stabilizing. Overall, our respondents cited an increased willingness to add to their own inventories this time, reflecting increased confidence in near-term pricing/liquidity. Despite improved buyer interest/outlook. we think significant oversupply on the used market, particularly in small/midsize aircraft, will continue to overhang new aircraft orders.

www.ubs.com/investmentresearch

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Prefer GD/COL

David E. Strauss
Analyst
david.strauss@ubs.com
+1-212-713 6185

Cristina Fernandez
Analyst
cristina.fernandez@ubs.com
+1-212-713 3321

Darryl Genovesi
Associate Analyst
darryl.genovesi@ubs.com
+1-212-713 4016

Tasneem Azim
Associate Analyst
tasneem.azim@ubs.com
+1-416-814 3678

Our Buy rating on GD reflects an improved defense risk profile and stabilization in our bizjet survey. with particular strength at the high end. Our Neutral rating on TXT reflects concerns over the shape of the recovery at Cessna, given significant oversupply, fractional weakness, and increased competition at the low-mid end (Embraer). Of the suppliers. Buy rated COL is our preferred play on business jets.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 1: UBS Business Jet Market Index

Chart 2: Overall Business Conditions Score

100

Survey Index

250

230

210

190

Apr-03

30

170

150

130

RelPer

110

0

S-203

Sedona

Mar-04

Mar-05

S60-05

Mar-06

Nov-06

May-07

Nov-07-

Apr-08-

Nov-08

Sep-08

Mar-09

70

50

10

Business Conditions Score

0

Sep.03

H
O
S

Mar-05:

Hospice

Mar-06:

Nov-06

May-07:

Nov-07

Apr-08:

Mar-04

NOV-08

Mar-09

60p5

Mar-10

UBS Business Jet Market Index

- * Rel Perf (RHS)

Source UBS Business Jet Survey I-44

* Simple average stock price performance index includes GD/TXT
Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 1: UBS Business Jet Market Index (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Business Jet Market Survey

Our UBS Business Jet Market Survey is designed to provide timely market data supplied directly by industry professionals. We regularly survey a group of US domestic and international broker/dealers, manufacturers, fractional providers, financiers and others, from whom we received 150 responses in March.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Investment Conclusion

Our March Business Jet Index came in at 50, indicative ofa stable market and in line with our prior survey from January following increases in each of our previous eight surveys. Our Index measures the change in our respondents' views from our prior survey and is not meant to be an absolute measure of business conditions. Our straight up measure of absolute business conditions continues to reflect a depressed market, moving modestly lower this time to 3.6 (from 3.7), the first decline since March of 2009 and indicative of a slight degradation in overall market conditions since our prior survey.

Our survey continues to reflect improving customer interest and a strong I?- month outlook, although it is still weighed down by very high used inventory levels. Pricing in most models is off 30-40% from peak levels, but now appears to be stabilizing. Overall, our respondents cited an increased willingness to add to their own inventories this time, reflecting increased confidence in near term pricing/liquidity. Despite improved buyer interest/outlook, we think significant oversupply on the used market, particularly in smalUmidsize aircraft, will continue to overhang new aircraft orders.

While not a component of our composite index, our young inventory score remains well below 50, indicating significant oversupply of high-quality young used aircraft. Our Financing score, also not a component of our index, continues to reflect incremental improvement in financing availability.

Table 1: UBS Business Jet Survey Results and Comparison to Prior Survey

<table><tr><th>Component</th><th>Better</th><th>Same</th><th>Worse</th><th>Score</th><th>Last Time</th><th>Change</th></tr><tr><td>Customer Interest</td><td>54%</td><td>39%</td><td>7%</td><td>74</td><td>76</td><td>-3%</td></tr><tr><td>Pricing</td><td>15%</td><td>66%</td><td>19%</td><td>48</td><td>45</td><td>7%</td></tr><tr><td>12 Month Outlook</td><td>61%</td><td>35%</td><td>4%</td><td>79</td><td>82</td><td>-4%</td></tr><tr><td>Inventory Levels</td><td>2%</td><td>6%</td><td>92%</td><td>5</td><td>7</td><td>-31%</td></tr><tr><td>Willingness</td><td>26%</td><td>53%</td><td>21%</td><td>53</td><td>50</td><td>6%</td></tr><tr><td>Composite Index</td><td>29%</td><td>41%</td><td>30%</td><td>50</td><td>50</td><td>0%</td></tr><tr><td>Young Inventory</td><td>8%</td><td>25%</td><td>67%</td><td>2222222 20</td><td>20</td><td>2%</td></tr><tr><td>Financing</td><td>24%</td><td>74%</td><td>3%</td><td>60</td><td>60</td><td>0%</td></tr><tr><td>Business <u>Conditions</u></td><td>n/a</td><td>n/a</td><td><u>n/a</u></td><td>3.6</td><td>3.7</td><td>-1%</td></tr></table>

Source: UBS Business Jet Survey #43-44

Our Buy rating on GD reflects an improved defense risk profile and stabilization in our bizjet survey, with particular strength at the high end. Our Neutral rating on TXT reflects concerns over the shape of the recovery at Cessna, given significant oversupply, fractional weakness, and increased competition at the low-mid end (Embraer). Among the suppliers, Buy-rated COL is our preferred play on business jets.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Investment Conclusion (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 3: GD and TXT Forward PIE Multiples

30x

25x-

Forward P/E Multiple

20x

15x

10x

<signature> Mum

5x

Ox

Mar-91

Mar-92-

Mar-04

Mar.95-

Mar-96-

Mar-97

Mar-98

Mar-99-

Mar-00-

Mar-01-

Mar-02-

Mar-03

Mar-04-

GD

Mar-05

Mar-06

Mar-07-

TXT

Mar-08-

Mar-10

Note: Forward PE using rolling 12-month (actual) EPS through June 2009 and UBS estimates for future periods. TXT PE multiple for the current period reflects our 2010 estimate. Source: UBS estimates

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## UBS Business Jet Market Index

Our UBS Business Jet Index is a proprietary index designed to measure the total "value" of the responses to our survey questions. We have weighted each factor in our index based on our perception of its overall importance to the condition of the new business jet market. Our index is scored on a scale of zero to 100, with 51-100 representing incrementally strengthening market conditions. 50 incrementally stable, and 0-49 incrementally weakening market conditions. Our March Business Jet Index came in at 50, indicative of a stable market and in line with our prior survey from January.

Chart 4: UBS Business Jet Market Index

| Date | Index Value |
|---|---:|
| Apr-03 | 44 |
| May-03 | 48 |
| Jul-03 | 49 |
| Sep-03 | 54 |
| Nov-03 | 58 |
| Jan-04 | 66 |
| Mar-04 | 61 |
| May-04 | 60 |
| Jul-04 | 69 |
| Sep-04 | 65 |
| Nov-04 | 68 |
| Jan-05 | 67 |
| Mar-05 | 68 |
| May-05 | 66 |
| Jul-05 | 67 |
| Sep-05 | 63 |
| Nov-05 | 63 |
| Jan-06 | 55 |
| Mar-06 | 55 |
| May-06 | 61 |
| Jul-06 | 60 |
| Sep-06 | 63 |
| Nov-06 | 65 |
| Jan-07 | 62 |
| Mar-07 | 61 |
| May-07 | 60 |
| Jul-07 | 62 |
| Sep-07 | 57 |
| Nov-07 | 54 |
| Jan-08 | 48 |
| Mar-08 | 39 |
| May-08 | 26 |
| Jul-08 | 13 |
| Sep-08 | 14 |
| Nov-08 | 20 |
| Jan-09 | 25 |
| Mar-09 | 35 |
| May-09 | 37 |
| Jul-09 | 38 |
| Sep-09 | 43 |
| Nov-09 | 45 |
| Jan-10 | 50 |
| Mar-10 | 50 |

Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## UBS Business Jet Market Index (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Survey Participant Profile

Of the 150 market professionals who responded to our survey, a majority (59%) arc broker/dealers. Brokers/dealers are involved in the purchase and sale of both new (direct from manufacturer) and used aircraft, often purchasing on spec.

<u>Chart</u> 5: Business Jet Market Survey—Participant Role

| Participant Role | Percentage |
|---|---:|
| Dealer/Broker | 59% |
| Financier | 17% |
| Manufacturer | 13% |
| Other (includes appraisers, fractional providers, management/charter, FBO and MRO service providers) | 11% |

Note: Other ndudes appraisers, fractional providers. management charter, FBO and MRO service providers. Source: UBS Business Jel Survey N44

The majority of our participants are located in North America (75%), although most transact a significant proportion of their business with foreign customers.

Chart 6: Business Jet Market Survey—Participant Location

Chart 7: Proportion of Business Transacted Outside the US

| Region | Proportion (%) |
|---|---:|
| North America | 75% |
| Europe | 19% |
| Latin America | 3% |
| Middle East & Africa | 2% |
| Asia & Pacific | 1% |
| **Total** | **100%** |

| Category        | Percentage |
|-----------------|------------|
| None            | 7%         |
| All             | 9%         |
| More than 75%   | 12%        |
| 50-75%          | 21%        |
| 25-50%          | 22%        |
| Less than 25%   | 29%        |


Source: UBS Business Jet Survey N44

Sane: UBS Business Jet Survey N44

Respondents varied fairly uniformly in average transaction size with the
majority in the 55-20 million range.

Chart 8: Business Jet Market Survey—Average Transaction Size

$30M+
6% $0-5M
20%
$20-30M
16%

$5-10M
27%
$10-20M
31%

Source: UBS Business Jel Survey #44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Survey Participant Profile (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Survey Results

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Overall Business Conditions

In the first question, we asked, "On a scale of zero to 10. how would you characterize overall business conditions after factoring typical seasonality (0 = the worst ever, 5 = normal, 10 = the best ever)?" Note that while our Business Jet Market Index (discussed earlier) indicates incremental change from the prior period, this question is meant to measure the absolute level of business conditions. We received 144 responses (six participants did not respond to this question) with scores ranging from zero to eight.

Chart 9: Indication of Overall Business Conditions, March 2010

| Business Conditions Rank | % of Responses |
|---:|---:|
| 0 | 3% |
| 1 | 3% |
| 2 | 12% |
| 3 | 33% |
| 4 | 31% |
| 5 | 7% |
| 6 | 7% |
| 7 | 3% |
| 8 | 1% |
| 9 | 0% |
| 10 | 0% |

Source: UBS Business Jet Survey #44

Overall, our average business conditions score came in at 3.6, 1% lower compared to our prior survey at 3.7.

Chan 10: Overall Business Conditions Score

| Date   | Overall Business Conditions Score |
|--------|-----------------------------------|
| Jun-03 | 3.9                               |
| Sep-03 | 4.3                               |
| Nov-03 | 5.1                               |
| Jan-04 | 5.4                               |
| Mar-04 | 5.1                               |
| May-04 | 5.3                               |
| Jul-04 | 5.4                               |
| Sep-04 | 5.4                               |
| Nov-04 | 5.4                               |
| Jan-05 | 6.0                               |
| Mar-05 | 6.2                               |
| May-05 | 6.1                               |
| Jul-05 | 6.5                               |
| Sep-05 | 6.5                               |
| Nov-05 | 6.4                               |
| Jan-06 | 6.5                               |
| Mar-06 | 6.4                               |
| May-06 | 6.4                               |
| Jul-06 | 6.3                               |
| Sep-06 | 6.4                               |
| Nov-06 | 6.2                               |
| Jan-07 | 6.3                               |
| Mar-07 | 6.4                               |
| May-07 | 6.2                               |
| Jul-07 | 6.2                               |
| Sep-07 | 6.4                               |
| Nov-07 | 6.2                               |
| Jan-08 | 6.1                               |
| Mar-08 | 5.6                               |
| May-08 | 5.2                               |
| Jul-08 | 4.7                               |
| Sep-08 | 3.2                               |
| Nov-08 | 2.6                               |
| Jan-09 | 2.4                               |
| Mar-09 | 2.2                               |
| May-09 | 2.7                               |
| Jul-09 | 2.3                               |
| Sep-09 | 3.2                               |
| Nov-09 | 3.5                               |
| Jan-10 | 3.7                               |
| Mar-10 | 3.6                               |

Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Overall Business Conditions (cont.)

This month's decline in overall business conditions was driven by our domestic participants, partially offset by a slight improvement internationally.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 11: UBS Business Jet Market Index

| Date     | Domestic (black) | International (clear) |
|----------|------------------:|----------------------:|
| Nov‑03   | 5.0               | 5.0                   |
| Jul‑06   | 6.2               | 6.4                   |
| Jul‑07   | 6.0               | 6.3                   |
| Jan‑08   | 5.5               | 5.8                   |
| Sep‑08   | 3.0               | 3.5                   |
| Dec‑08   | 1.8               | 2.1                   |
| Mar‑09   | 1.6               | 1.9                   |
| Mar‑10   | 3.5               | 4.0                   |

Legend: black = Domestic, clear/outline = International.
Values are visual estimates from the chart; caption shows overall averages Dom: 3.5, Int: 4.1.

Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Interest

In the next question, we asked, "Since our last survey in January, the level of customer interest improved, stayed the same or deteriorated?" Of the 147 responses (three participants did not respond to this question). 54% indicated that customer interest had improved, while 7%indicated that customer interest had deteriorated. The remaining 39%indicated that customer interest had stayed the same. This represents a modest decline from our prior survey, in which 55% indicated that customer interest had improved, 4% indicated customer interest had deteriorated and 41% indicated that customer interest had stayed the same.

Chart 12: Indication of Customer Interest, March 2010

| Category | Percentage |
|---|---|
| Improved | 54% |
| Stayed the Same | 39% |
| Deteriorated | 7% |


Source: UBS Business Jet Survey #44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Interest (cont.)

Our customer interest score came in at 74, slightly lower from January, but still well above 50, indicating that on average customer interest is improving.

Chart <u>13:</u> UBS Business Jet Survey Score—Customer Interest

| Date   | Customer Interest Score |
| :------- | :---------------------- |
| Apr-03 | 69                      |
| May-03 | 76                      |
| Jun-03 | 69                      |
| Sep-03 | 76                      |
| Nov-03 | 79                      |
| Jan-04 | 83                      |
| Mar-04 | 78                      |
| May-04 | 69                      |
| Jul-04 | 63                      |
| Sep-04 | 70                      |
| Nov-04 | 77                      |
| Jan-05 | 79                      |
| Mar-05 | 74                      |
| May-05 | 75                      |
| Jul-05 | 64                      |
| Sep-05 | 69                      |
| Nov-05 | 67                      |
| Jan-06 | 68                      |
| Mar-06 | 68                      |
| May-06 | 71                      |
| Sep-06 | 62                      |
| Nov-06 | 68                      |
| Jan-07 | 65                      |
| Mar-07 | 59                      |
| May-07 | 65                      |
| Jun-07 | 63                      |
| Sep-07 | 55                      |
| Nov-07 | 58                      |
| Jan-08 | 51                      |
| Feb-08 | 44                      |
| Apr-08 | 39                      |
| Jun-08 | 27                      |
| Sep-08 | 30                      |
| Nov-08 | 10                      |
| Dec-08 | 15                      |
| Jan-09 | 31                      |
| Mar-09 | 45                      |
| May-09 | 63                      |
| Jul-09 | 63                      |
| Sep-09 | 74                      |
| Nov-09 | 77                      |
| Jan-10 | 76                      |
| Mar-10 | 74                      |

Source: UBS Business Jet Survey 41-44

This slight decline in our customer interest score was driven by our domestic participants, while international customer interest increased this month.

<u>Chart 14:</u> Customer Interest, Domestic vs. International

| Time Period | Customer Interest Score |
|---|---|
| Nov-03 | ~82 |
| Jan-04 | ~87 |
| Mar-04 | ~75 |
| May-04 | ~65 |
| Jul-04 | ~70 |
| Sep-04 | ~60 |
| Nov-04 | ~80 |
| Jan-05 | ~75 |
| Mar-05 | ~70 |
| May-05 | ~80 |
| Jul-05 | ~65 |
| Sep-05 | ~72 |
| Nov-05 | ~70 |
| Jan-06 | ~70 |
| Mar-06 | ~65 |
| May-06 | ~72 |
| Sep-06 | ~65 |
| Nov-06 | ~60 |
| Jan-07 | ~70 |
| Mar-07 | ~65 |
| May-07 | ~60 |
| Jun-07 | ~65 |
| Sep-07 | ~60 |
| Nov-07 | ~55 |
| Jan-08 | ~45 |
| Feb-08 | ~40 |
| Apr-08 | ~35 |
| Jun-08 | ~30 |
| Sep-08 | ~20 |
| Nov-08 | ~10 |
| Dec-08 | ~20 |
| Jan-09 | ~30 |
| Mar-09 | ~45 |
| May-09 | ~60 |
| Jul-09 | ~70 |
| Sep-09 | ~75 |
| Nov-09 | ~80 |
| Jan-10 | ~75 |
| Mar-10 | ~70 |

The chart shows customer interest score trends over time. From Nov-03 to Nov-08, the data is for "Domestic", and from Jan-08 to Mar-10, the data is for "International". Average for Domestic is 74, International is 76.

Source: UBS Business Jet Surrey #1.44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Interest by Cabin Class

In the next question. our participants were asked to indicate the class of aircraft in which they were seeing the most interest from potential buyers. Respondents were asked to choose from Large Cabin, Midsize Cabin or Small Cabin. Of the III responses (39 participants did not respond to this question). 62% indicated they were seeing the strongest interest in large cabin aircraft, with 15% indicating midsize and 23% indicating small cabin. These results are broadly in line with our prior survey, in which 66% indicated they were seeing the strongest interest in large cabin aircraft, 14% indicated midsize and 20% indicated small cabin.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Interest by Cabin Class (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 15: Cabin Class with Most Buyer Interest, March 2010

| Cabin Type    | Percentage |
|---------------|------------|
| Large Cabin   | 62%        |
| Small Cabin   | 23%        |
| Midsize Cabin | 15%        |

Source: UBS Business Jet Survey #44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Pricing

In the next question, we asked, "Since our last survey in January, overall pricing levels increased, stayed the same, or decreased?" Of the 145 responses (five participants did not respond to this question), 15% indicated that pricing levels had increased, while 19% indicated that pricing levels had decreased. The remaining 66% indicated that pricing levels had stayed the same. These results represent an improvement from our prior survey, in which 14% indicated that pricing levels had increased. 24% indicated that pricing levels had decreased, and 62% indicated that pricing levels had stayed the same.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 16: Indication of Pricing, March 2010

| Category | Percentage |
|---|---|
| Increased | 15% |
| Decreased | 19% |
| Stayed the same | 66% |

Source: Source: UBS Business Jet Survey 444

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Chart 16: Indication of Pricing, March 2010 (cont.)

Our pricing score increased 7% this time, the eighth straight increase, and is now nearing the 50 mark, indicating pricing is well on its way to stabilizing following significant declines over the past two years.

Chart 17: UBS Business Jet Survey Score—Pricing

| Date    | Pricing Score |
|---------|---------------|
| Apr-03  | 33            |
| May-03  | 36            |
| Jun-03  | 39            |
| Sep-03  | 48            |
| Nov-03  | 57            |
| Jan-04  | 61            |
| Mar-04  | 76            |
| May-04  | 70            |
| Jul-04  | 66            |
| Sep-04  | 62            |
| Nov-04  | 75            |
| Jan-05  | 72            |
| Mar-05  | 75            |
| May-05  | 74            |
| Jul-05  | 65            |
| Sep-05  | 74            |
| Nov-05  | 68            |
| Jan-06  | 62            |
| Mar-06  | 62            |
| May-06  | 61            |
| Sep-06  | 50            |
| Nov-06  | 53            |
| Jan-07  | 59            |
| Mar-07  | 61            |
| May-07  | 65            |
| Jun-07  | 64            |
| Sep-07  | 58            |
| Nov-07  | 55            |
| Jan-08  | 53            |
| Feb-08  | 45            |
| Apr-08  | 33            |
| Jun-08  | 24            |
| Sep-08  | 16            |
| Nov-08  | 7             |
| Dec-08  | 7             |
| Jan-09  | 8             |
| Mar-09  | 9             |
| May-09  | 20            |
| Jul-09  | 21            |
| Sep-09  | 30            |
| Nov-09  | 39            |
| Jan-10  | 45            |
| Mar-10  | 48            |

Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Pricing by Cabin Class

In the next question, our participants were asked to indicate the cabin class of aircraft in which they were seeing the strongest pricing. Respondents were asked to choose from Large Cabin, Midsize Cabin or Small Cabin. Of the 107 responses (43 participants did not respond to this question), 75% indicated they were seeing the strongest pricing in large cabin aircraft, with 8% indicating midsize and 17% indicating small cabin. These results are broadly in line with our prior survey, in which 71% indicated they were seeing the strongest pricing in large cabin aircraft, 12% indicated midsize and 17% indicated small cabin.

Chart 18: Cabin Class with Strongest Pricing, Much 2010

| Cabin Size   | Percentage |
| ------------- | ----------- |
| Large Cabin | 75%         |
| Small Cabin   | 17%         |
| Midsize Cabin | 8%          |

Source. U8S Busness Jel Survey #44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Pricing by Cabin Class (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 12-Month Outlook

In the next question, we asked, "Over the next 12 months, do you expect overall business conditions to improve, stay the same or deteriorate?" Of the 149 responses (one participant did not respond to this question), 61% expect business conditions to improve, while 4% expect business conditions to deteriorate. The remaining 35% expect business conditions to stay the same over the next 12 months. These results represent modest degradation from our previous survey, in which 66% expected business conditions to improve, 3% expected conditions to deteriorate and the remaining 31% expected business conditions to remain relatively unchanged over the following 12 months.

Chart 19: 1241onth Forward Outlook for Business Conditions, March 2010

| Outlook (12-month forward) | Percentage |
|---|---:|
| Improve | 61% |
| Stay the same | 35% |
| Deteriorate | 4% |

Source: UBS Business Jet Survey #44

Our 12-month outlook score came in at 79 this timc, slightly below our prior survey, but still well above 50, indicating that our survey participants expect market conditions to improve over the next 12 months on average.

Chart 20: UBS Business Jet Survey Score—12-Month Outlook

UBS Business Jet Survey Score - 12-Month Outlook:

| Date   | Outlook Score |
|--------|---------------|
| Apr-03 | 84            |
| May-03 | 84            |
| Jun-03 | 87            |
| Sep-03 | 87            |
| Nov-03 | 92            |
| Jan-04 | 93            |
| Mar-04 | 88            |
| May-04 | 88            |
| Jul-04 | 85            |
| Sep-04 | 85            |
| Nov-04 | 91            |
| Jan-05 | 89            |
| Mar-05 | 84            |
| May-05 | 82            |
| Jul-05 | 74            |
| Sep-05 | 75            |
| Nov-05 | 73            |
| Jan-06 | 73            |
| Mar-06 | 74            |
| May-06 | 69            |
| Sep-06 | 56            |
| Nov-06 | 58            |
| Jan-07 | 60            |
| Mar-07 | 55            |
| May-07 | 58            |
| Jun-07 | 57            |
| Sep-07 | 49            |
| Nov-07 | 43            |
| Jan-08 | 43            |
| Feb-08 | 35            |
| Apr-08 | 33            |
| Jun-08 | 32            |
| Sep-08 | 37            |
| Nov-08 | 39            |
| Dec-08 | 38            |
| Jan-09 | 49            |
| Mar-09 | 61            |
| May-09 | 75            |
| Jul-09 | 74            |
| Sep-09 | 78            |
| Nov-09 | 78            |
| Jan-10 | 82            |
| Mar-10 | 79            |


Source: UBS Business Jet Survey #1-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 12-Month Outlook (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Overall Inventory Levels

In the next question, we asked, "How would you characterize current inventory levels?" In this question, we targeted broker/dealers, but in some cases, other participants also responded. The survey participants were asked to select "high", "average", or "low." Of the 128 responses (22 participants did not respond to this question), 2% believe inventory levels are low, while 92% believe inventory levels are high. The remaining 6% believe inventory levels to be at average levels. These results represent modest degradation from our previous survey, in which I% believed inventory levels to be low. 88% believed inventory levels to be high. and the remaining 11% believed inventories to be at average levels.

Chart 21: Indication of Inventory Levels, March 2010

| Inventory Level | Percentage |
|---|---|
| Low | 2% |
| Average | 6% |
| High | 92% |

Source: UBS Business Jet Survey 944

Our inventory score at five continues to reflect extraordinarily high overall inventory levels.

Chart 22: UBS Business Jet Survey Score—Inventory Levels

| Date   | Inventory Score |
| ------ | --------------- |
| Apr-03 | 17              |
| May-03 | 20              |
| Jun-03 | 14              |
| Sep-03 | 18              |
| Nov-03 | 24              |
| Jan-04 | 26              |
| Mar-04 | 31              |
| May-04 | 33              |
| Jul-04 | 34              |
| Sep-04 | 39              |
| Nov-04 | 34              |
| Jan-05 | 43              |
| Mar-05 | 46              |
| May-05 | 49              |
| Jul-05 | 49              |
| Sep-05 | 58              |
| Nov-05 | 56              |
| Jan-06 | 59              |
| Mar-06 | 57              |
| May-06 | 63              |
| Sep-06 | 54              |
| Nov-06 | 48              |
| Jan-07 | 60              |
| Mar-07 | 67              |
| May-07 | 67              |
| Jun-07 | 66              |
| Sep-07 | 68              |
| Nov-07 | 66              |
| Jan-08 | 66              |
| Feb-08 | 65              |
| Apr-08 | 50              |
| Jun-08 | 41              |
| Sep-08 | 27              |
| Nov-08 | 12              |
| Dec-08 | 6               |
| Jan-09 | 4               |
| Mar-09 | 2               |
| May-09 | 2               |
| Jul-09 | 4               |
| Sep-09 | 2               |
| Nov-09 | 3               |
| Jan-10 | 7               |
| Mar-10 | 5               |

Source: UBS Busitess Jet Surrey 91-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Overall Inventory Levels (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Young Inventory Levels

In the next question, we asked, "How would you characterize current inventory levels of relatively young used aircraft?" In this question, we targeted broker/dealers, but in some cases, other participants also responded. The survey participants were asked to select "high", "average", or "low." Of the 126 responses (24 participants did not respond to this question). 8% believe young inventory levels are low, 67%believe young inventory levels arc high, and the remaining 25% believe young inventories to be at average levels. These results are roughly in line with our prior survey.

<u>Chart</u> 23: Indication of Young Inventory Levels, March 2010

| Level   | Percentage |
| ------- | ---------- |
| High    | 67%        |
| Average | 25%        |
| Low     | 8%         |

Source: UBS Business Jet Survey #44

While our young inventory score reflects a drawdown from the recent peak, it
still reflects a significant oversupply ofhigh-quality. young used aircraft.

Chart 24: UBS Business Jet Survey Score—Young Used Inventory Levels

| Date    | Young Inventory Score |
|---------|-----------------------|
| Jan-07  | 91                    |
| Mar-07  | 91                    |
| May-07  | 86                    |
| Jun-07  | 90                    |
| Sep-07  | 87                    |
| Nov-07  | 91                    |
| Jan-08  | 90                    |
| Feb-08  | 88                    |
| Apr-08  | 77                    |
| Jun-08  | 64                    |
| Sep-08  | 47                    |
| Nov-08  | 25                    |
| Dec-08  | 12                    |
| Jan-09  | 6                     |
| Mar-09  | 4                     |
| May-09  | 4                     |
| Jul-09  | 4                     |
| Sep-09  | 8                     |
| Nov-09  | 14                    |
| Jan-10  | 20                    |
| Mar-10  | 20                    |

Source: UBS Business Jet Survey /11-44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Young Inventory Levels (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Willingness to Increase Inventories

In the next question, we asked, "Over the next month, will you be more or less willing to increase your inventory?" In this question, we again targeted broker/dealers, but in some cases, other participants also responded. The survey participants were asked to select "more willing", "same", or "less willing." Of the 76 responses (74 participants did not respond to this question), 26% indicated they would be more willing to take on inventory, while 21% indicated they would be less willing to take on inventory. The remaining 53% indicated no change in their willingness to take on inventory. This represents an improvement from our prior survey, in which 25% indicated they would be more willing to take on inventory, 26% indicated they would be less willing to take on inventory and the remaining 49% indicated no change in their willingness to take on inventory. We use this question to validate sentiment in the marketplace with regard to the near-term outlook.

Chart 25: Willingness to Increase Inventory Levels, March 2010

| Category       | Percentage |
|----------------|------------|
| Less willing   | 21%        |
| More willing   | 26%        |
| Same           | 53%        |

Source: UBS Business Jet Survey #44

While this is the most volatile component of our survey, our willingness score increased 6% this time to 53, indicating respondents are more likely to add to inventories and reflective ofincreased confidence in near-term pricing/liquidity.

Chart 26: UBS Business Jet Survey Score—Willingness to Increase Inventory Levels

**UBS Business Jet Survey Score—Willingness to Increase Inventory Levels**

| Date   | Willingness Score |
| :------- | :----------------- |
| Apr-03 | 32                 |
| May-03 | 38                 |
| Jun-03 | 47                 |
| Sep-03 | 53                 |
| Nov-03 | 50                 |
| Jan-04 | 63                 |
| Mar-04 | 66                 |
| May-04 | 54                 |
| Jul-04 | 54                 |
| Sep-04 | 54                 |
| Nov-04 | 51                 |
| Jan-05 | 54                 |
| Mar-05 | 64                 |
| May-05 | 64                 |
| Jul-05 | 57                 |
| Sep-05 | 57                 |
| Nov-05 | 62                 |
| Jan-06 | 51                 |
| Mar-06 | 63                 |
| May-06 | 57                 |
| Sep-06 | 55                 |
| Nov-06 | 54                 |
| Jan-07 | 62                 |
| Mar-07 | 57                 |
| May-07 | 61                 |
| Jun-07 | 60                 |
| Sep-07 | 50                 |
| Nov-07 | 47                 |
| Jan-08 | 54                 |
| Feb-08 | 46                 |
| Apr-08 | 38                 |
| Jun-08 | 26                 |
| Sep-08 | 29                 |
| Nov-08 | 14                 |
| Dec-08 | 18                 |
| Jan-09 | 19                 |
| Mar-09 | 24                 |
| May-09 | 31                 |
| Jul-09 | 38                 |
| Sep-09 | 42                 |
| Nov-09 | 37                 |
| Jan-10 | 50                 |
| Mar-10 | 53                 |

Source: UBS Busiless Jel Survey #1-14

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Willingness to Increase Inventories (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Financing

In the next question, we asked, "Since our last survey in January, has the availability of customer financing improved, stayed the same, or deteriorated?" Of the 148 responses (two participants did not respond to this question), 24% indicated that customer financing conditions had improved, while 3% indicated that financing conditions had deteriorated. The remaining 73% indicated that financing conditions had stayed the same. These results are roughly in line with our prior survey.

Chart 27: Financing Conditions, March <u>2010</u>

| Financing condition | Percentage |
|---|---:|
| Stayed the same | 73% |
| Improved | 24% |
| Deteriorated | 3% |

Source: UBS Busriess Jet Surrey #44

Our financing score came in at 60 this time, in line with our previous survey and indicating continued incremental improvement in financing availability.

Chart 28: UBS Business Jet Survey Score—Financing

| Date    | Financing Score |
| ------- | --------------- |
| Jan-09  | 32              |
| Mar-09  | 41              |
| May-09  | 53              |
| Jul-09  | 57              |
| Sep-09  | 58              |
| Nov-09  | 60              |
| Jan-10  | 60              |
| Mar-10  | 60              |

Source: UBS Bustiess Jel Survey N44

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Customer Financing (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Commentary

The following arc selected comments from business jet professionals.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Current Market Conditions

■ Things are getting better, but we are not in a 'V' recovery, not even close.

■ Still too many buyers only interested in buying at wholesale prices.

■ We have seen a strong upturn, back to the levels of 18 months ago.

■ International (Non-US) markets are holding a good level of interest and sales, reflecting an improved economy in some regions, Brazil for example.

■ Flying has picked up 5-10% since this time last year.

■ Best first quarter in years! Prices have been dropping over the last couple of weeks, which probably helps. Business is getting better by the day!

	- Business is improving.

■ The used market is approaching normal levels, although pricing remains highly depressed.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Interest & Inquiries

■ Call volume and interest are still rising, with most of our interest coming from overseas.

■ There is activity in the marketplace but it seems to come in spurts. Other dealers have said the same thing to me. Things heat up, some sales take place and then everything goes quiet for a few weeks.

■ We continue to observe a gradual improvement in demand.

■ Interest levels continue to rise, but this has not yet translated into a significant improvement in sales.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Pricing

■ Buyers are seeking large discounts on repo purchases.

■ We have been trading corporate jets in the global market since 1977 and this is the worst price collapse we have ever seen.

■ Increasing rumors about heavily discounted new OEM product are negatively impacting pre-owned valuations.

■ Gulfstream products remain the strongest; Challenger 604 and Citation Excel have improved; Citation X and Hawker 400/800 are still declining.

	- Prices continue to erode.

■ Prices arc still low and buyers are looking for bargains, but them are plenty of buyers out there.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Pricing (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Financing

■ Liquidity has yet to fully return. The banks are hurting their asset value by failing to fund an orderly market again.

■ Dealer floor plan financiers are nearly extinct.

■ As the market works through inventory, credit will become more available. However, we may never sec rates go as low as in the past.

■ Financing is very difficult to find.

■ Banks' client selection and underwriting scrutiny have never been more stringent.

■ While lender scrutiny is relaxing and overall the financing environment appears to be opening up, availability remains depressed. We are still far from the conditions of 2006-07.

■ Still very limited lending.

■ Many banks and finance companies are more focused on reducing repo inventory than supporting buyers with competitive financing.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Transactions

■ It is a kind of hit or miss world for most. If the moon, sun and stars align and you have the right buyer, seller and airplane you can make a deal.

■ Younger aircraft are selling, while older aircraft are taking forever to sell.

■ In the last 30 days we have closed four transactions to retail buyers.

■ The market has improved somewhat, but buyers are still a bit hesitant to pull the trigger. International buyers are only slightly more aggressive.

■ We have three aircraft pending sale: one Challenger 601 and two Hawker 800s. All three are for retail customers with financing secured, and all are likely to close within the next 1-3 weeks, but these are VERY cheap compared to the rest of the market and compared to book value.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Outlook

■ I do not expect the market to fully recover for at least another 1-2 years.

■ We may be running into a double-dip situation, similar to 1984.85.

■ The traditional corporate flight department is awakening from its long winter nap, which should mean a much stronger 2010-1 I than 2009.

■ Until we see hiring resume, production increase, housing starts and sales on a steady incline, consumer spending increase and consumer confidence grow each month we will see more of the same in aircraft sales activity.

■ The two major hurdles are the trade gap and credit availability / rates.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Outlook (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Statement of Risk

The business jet market is cyclical in nature, largely driven by the general economic environment. Business jet manufacturers' earnings and cash flow arc dependent on end-user demand, availability of customer financing, program execution and inventory management. Our estimates, ratings and price targets for both General Dynamics and Textron are subject to additional risks including poor program execution and government funding related to their defense and security businesses. Additionally, Textron faces liquidity risks related to it its asset based lending businesses.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 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: (I)all of the views expressed accurately reflect his or her personal views about those securities or issuers; 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.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Analyst Certification (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 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 Investment Research: Global Equity Rating Allocations

<table><tr><th>UBS 12-Month Rating</th><th>Rating Category</th><th>Coverage</th><th>IB Services²</th></tr><tr><td>Buy</td><td>Buy</td><td>48%</td><td>40%</td></tr><tr><td>Neutral</td><td>Hold/Neutral</td><td>40%</td><td>35%</td></tr><tr><td>Sell</td><td>Sell</td><td>13%</td><td>26%</td></tr><tr><td>UBS Short-Term Rating</td><td>Rating Category</td><td>Coverage</td><td>IB Services</td></tr><tr><td>Buy</td><td>Buy</td><td>less than 1%</td><td>17%</td></tr><tr><td>Sell</td><td>Sell</td><td>less than 1%</td><td>67%</td></tr></table>

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 31 December 2009.

UBS Investment Research: Global Equity Rating Definitions

<table><tr><th>UBS 12-Month Rating</th><th>Definition</th></tr><tr><td>Buy</td><td>FSR is &gt; 6% above the MRA.</td></tr><tr><td>Neutral</td><td>FSR is between -6% and 6% of the MRA.</td></tr><tr><td>Sell</td><td>FSR is &gt; 6% below the MRA.</td></tr><tr><td>UBS Short-Term Rating</td><td>Definition</td></tr><tr><td>Buy</td><td>Buy: Stock price expected to rise within three months from the time the rating was assigned
because of a specific catalyst or event.</td></tr><tr><td>Sell</td><td>Sell: Stock price expected to fall within three months from the time the rating was assigned
because of a specific catalyst or event.</td></tr></table>

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Required Disclosures (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 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.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## 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.

UBS Securities LLC: David E. Strauss; Cristina Fernandez: Darryl Genovesi. UBS Securities Canada Inc: Tasneem Azim.

Company Disclosures

<table><tr><th>Company Name</th><th>Reuters</th><th>12-mo rating</th><th>Short-term rating</th><th>Price</th><th>Price date</th></tr><tr><td>General Dynamics Corp. 16</td><td>GD.N</td><td>Buy</td><td>N/A</td><td>US$76.94</td><td>23 Mar 2010</td></tr><tr><td>Rockwell Collins Inc. 2, 4, 5, 6a, 6b, 6c, 7,
8, 16, 18a</td><td>COL.N</td><td>Buy</td><td>N/A</td><td>US$62.85</td><td>23 Mar 2010</td></tr><tr><td>Textron Inc. 2, 4, 6a,6b, 6c, 7, 16, 18b</td><td>TXT.N</td><td>Neutral</td><td><u>N/A</u></td><td>US$22.45</td><td><u>23 Mar 2010</u></td></tr></table>

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

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.

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.

8. The equity analyst covering this company, a member of his or her team, or one of their household members has a long common stock position in this company.

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## EXCEPTIONS AND SPECIAL CASES (cont.)

16. UBS Securities LLC makes a market in the securities and/or ADRs of this company.

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

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

The analyst responsible for this report has reviewed the material operations of the issuer and/or met with senior management.

Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report.

<u>General</u> Dynamics Corp. <u>(USE)</u>

Price Target (US$): 
Stock Price (US$):

120
100
80
60
40
20

01-Apr-05-

01-Jul-05

01-Oct-05

-01-Jun

T
01Apr06

010896

01-Jan-07-

01-Apr-07-

01-Jul-07

T
2020-08-07

10.5.8

01/08

10-Jul-08

I
01.04.08

1

-

T80H09

01.09.98

I enjoy it

Buy 2

Buy

Neutral

No Rating

Source: UBS: as of 23 Mar 2010

Rockwell Collins Inc. (USE)

| Date | Stock Price (US$, approx.) |
|---:|---:|
| 01-Jan-2005 | 45 |
| 01-Jul-2005 | 50 |
| 01-Jan-2006 | 55 |
| 01-Jul-2006 | 62 |
| 01-Jan-2007 | 72 |
| 01-Jul-2007 | 80 |
| 01-Jan-2008 | 75 |
| 01-Jul-2008 | 60 |
| 01-Jan-2009 | 35 |
| 01-Jul-2009 | 30 |
| 01-Jan-2010 | 48 |

Legend notes:
- Labels shown: "Price Target (US$)" and "Stock Price (US$)". Only a single thick black line is plotted (represents the stock price trace above).

Analyst ratings timeline (approximate):
| Rating label | Approx. active period |
|---|---|
| Buy 1 | Jan 2005 – ~mid‑2005 (short) |
| Neutral 1 | ~mid‑2005 – ~mid‑2007 (long) |
| Buy | ~mid‑2007 – ~late‑2009 / into 2010 (long) |
| No Rating | brief points shown (~early‑2007 and ~Jan‑2010) |

Source: UBS; chart as of 23 Mar 2010.

Source: UBS: as of 23 Mar 2010

UBS 20

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## EXCEPTIONS AND SPECIAL CASES (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Textron Inc. <u>(US$)</u>

Price Target (US$) — Stock Price (US$)

80.0-

60.0-

40.0

20.0-

00

01-Jul-05

1000

8923701

01-Apr-06

01-Jul-06-

10.00

-01.Jan-07

- 01-Apr-07

01-Jul-07

- 01-Apr-08

8000

- 01.Jan.09 -

1
6040
01.04.09

Buy 1

Buy

Neutral

No Rating

I

Source: UBS; as of 23 Mar 2010

Note: On August 4.2007 UBS revised its rating system. (See 'UBS Investment Research: Global Equity Rating Definitions' table for details). From September 9. 2006 through August 3, 2007 the UBS ratings and their definitions were: Buy 1 = FSR is > 6% above the MRA, higher degree of predictability; Buy 2 = FSR is > 6% above the MRA. lower degree of predictability; Neutral 1 = FSR is between -6% and 6% of the MRA, higher degree of predictability; Neutral 2 = FSR is between -6% and 6% of the MRA, lower degree of predictability; Reduce 1 = FSR is > 6% below the MRA, higher degree of predictability; Reduce 2 = FSR is > 6% below the MRA, lower degree of predictability. The predictability level indicates an analyst's conviction in the FSR. A predictability level of '1' means that the analyst's estimate of FSR is in the middle of a narrower, or smaller, range of possibilities. A predictability level of '2' means that the analysts estimate of FSR is in the middle of a broader, or larger, range of possibilities. From October 13, 2003 through September 8, 2006 the percentage band criteria used in the rating system was 10%.

Additional Prices: Bombardier Inc., C$5.87 (23 Mar 2010); Embraer, US$24.66 (23 Mar 2010); Source: UBS. All prices as of local market close.

UBS 21

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Textron Inc. <u>(US$)</u> (cont.)

# <u>UBS Investment Research</u>
UBS Business Jet Survey (cont.)

## Global Disclaimer

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