Global Equity Research

Global Equity Research UBS Investment Research UBS Business Jet Survey S.Y.: r Ca-rimer: North America Leading the Way • Index at 49, up 21% Our latest Business Jet Market Index came in at 49. 21% higher than our prior survey from January with all three market segment indices (small/mid/large) increasing to near 50. Our measure of absolute business conditions increased 12% to 4.5. as high as it has been since 2008. • Customer interest & 12 mo outlook lead survey All five component scores moved higher with large increases in our customer interest, pricing and l2-month outlook scores driving the overall increase in our index. Our customer interest and 12-month outlook scores are both now well above 50, indicating incremental improvement, although still high inventory levels remain a drag on our index. • North America customer interest strongest Our overall customer interest score increased 27% led by strength in North America (73). Latin America (68) and Asia (66). partially offset by relative weakness in Middle East (53) and Europe (40). • See positive risk-rewards for stocks We believe North America bizjet is improving driven by replacement demand postponed during the downturn. While the bizjet stocks have moved higher, we still see positive risk-rewards as we don't think stocks incorporate much for bizjets at current levels including Buy rated TXT/COLJGD. Chart 1: UBS Business Jet Market Index Chart 2: Overall Business Conditions Score 100 — 50 a 0 id I 200 150 cc 100 le ,tt ?^5B5g8 rit Ira a a a UBS Business Jet Markel Index — • Red Pei (RIG) 26 March 2012 David E. Strauss Anatol Deny' Genovesi Malrst 10 a 1 5 0 uu 33 4 4 4 4 4 ce! —7 vtimasssla tmaaa a 1 1 Srnple averagee81:16D/TXT stock price perlornance near retalma to SAP 500 Source: UBS Business Jet Survey Source: UBS Business Jet Survey This report has been prepared by UBS Securities LLC ANALYST CERTIRCAT1ON AND REQUIRED DISCLOSURES BEGIN ON PAGE 17. UBS does and seeks to do business with companies covered in its research reports. Asa 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. EFTA01088087 UBS Business Jet Survey 26 March 2012 Business Jet Market Survey Ow 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 recently received 172 responses. Investment Conclusion Our latest Business Jet Market Index came in at 49, 21% higher than our prior survey from January with all three market segment indices (smalUmid/large) near 50. Our measure of absolute business conditions increased 12% to 4.5, as high as it has been since 2008. All five component scores moved higher with significant increases in our customer interest, pricing and 12-month outlook scores driving overall increase in our index. Our willingness score moved 16% higher to 51, slightly above 50, indicating improvement in participants' willingness to take on additional inventory. While all five components of our index moved higher this time, our inventory and pricing scores remain below 50 indicative of still high inventory levels and depressed used pricing. Our young inventory score, not a component of our index, moved 4% higher this time to 42, still indicative of oversupply of high-quality young used aircraft. Our financing score, also not a component of our index, moved 14% higher to 61 and reflects continued improvement in financing availability. Table 1: UBS Business Jet Survey Results and Comparison to Prior Survey Component Better Same Worse Score Last Time Change Customer Interest 48% 44% 8% 70 55 27% Pricing 9% 66% 25% 42 33 26% 12 Month Outlook 56% 38% 6% 75 66 13% Inventory Levels 3% 30% 67% 16 15 17% Witingness 25% 53% 22% 51 44 16% Composite Index 25% 48% 27% 49 41 21% Young Inventory 20% 44% 36% 42 40 4% Financiag 25% 71% 4% 61 53 14% Business Conditions Ma Mt Ws 4.5 4.0 12% Source: UBS Business Jet Survey UBS 2 EFTA01088088 UBS Busses Jet Survey 26 March 2012 UBS Business Jet Market Index Our UBS Business Jet Market 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 Market Index came in at 49, 21% higher than our prior survey in January. Chart 3: UBS Business Jet Market Index 100 - ..0. 3 Wisle 3 °2(° :1,8I gr-. _ is tti m 7, 4 ai 50 - 13 III . o ,r) tri ate . 4S SS O 44r44/44/AritrrWE”Mq4ac'eaa7 -- -- — "" .vm tsmarm tsmar t cg. t5 0.gsf5 cm=st .1 4.0 .R t afe-9af a 2-) =m2 -) =22 =22 =mcn22 -) =22 -) =22 =2 Scum: UBS Business Jel Survey Market Segment Indices All three of our market segment indices improved with our small cabin index increasing 25% to 49 (from 40), midsize increasing 23% to 51 (from 41) and large cabin increasing 139E to 48 (from 42). Chart 4: Market Segment Indices. by Cabin Class 60 50 40 30 20 10 A 2 Ire O O 0 O O O A 2 2 2 -Survey hdex —0— Small -a- M idsize }large z 0 0 A g Sauce: UBS Business Jel Survey UBS 3 EFTA01088089 UBS BusinessJet Survey 26 March 2012 Survey Participant Profile Of the 172 market professionals who responded to our survey, a majority (58%) are broker/dealers. Brokers/dealers are involved in the purchase and sale of both new (direct from manufacturer) and used aircraft, often purchasing on spec. Chart 5: Business Jet Market Survey- Participant Role Other 13% Manufacturer 10% Financier, 19% Oealed Broker 58% Note:Other incIddes appraisers. liactonal providers. management. charter. FBO and MRO service providers. Scurr.e: UBS Business Jet Survey The majority of our participants are located in North America (73%) with an additional 20% in Europe. Chad 6: Business Jet Market Survey- Participant Location Asia 8 Pack 1% Lath America 3% Middle East 8. Africa North America 73% Europe 20% Source: UBS Business Jet Survey UBS EFTA01088090 UBS Business Jet Survey 26 March 2012 While the majority of our survey participants are located in the U.S.. most transact a significant proportion of their business with foreign customers. Chart 7: Proporifon of Business Transacted Outside the US MI 11% None 8% 25-50% 19% Less than 25% 30% Scums: UBS Business Jai Survey 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 $301.4 6% 30% 155.10M $10.20M $&5M 520.30M 25% 11% 28% Scums: UBS Business Jet Survey WM EFTA01088091 UBS BusinessJet Survey 26 March 2012 Survey Results 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 161 responses (II participants did not respond to this question) with scores ranging from zero to eight. Chart 9: Indication of Overall Business Condition, March 2012 35% - 30%. 25% 20% cc 15% 10% 5% 1% 1 0% 0 I 2 3 1 r le 0% 0% 4 5 6 7 8 9 10 Business Ccoditons Rath Source: UBS Business Jel Survey Overall, our average business conditions score came in at 4.5, 12% higher from ow prior survey in January. Chart 10: Overall Business Conditions Overall Business Conditions 10 rou 1 11 1 1 111 1 1111 ct 110111111111111 5 SggSS*4 1 9. 8 4184”:1 14 .4 14 .4 rak528 4SS`OSSIS1S '41" '= " c" )° (mom X'-'480 14•=2"8a 41448MM4•548aM.I.ESBgail4•=2 . 8aM Og ian MOS BS* 2 raz-)2 2 "rarmionth-)2 2 wthu.. -“nth -)22"wr≥m"..t z22" z2 Source: UBS Business Jel Survey UBS 6 EFTA01088092 UBS Business Jet Survey 26 March 2012 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 170 responses (two participants did not respond to this question), 48% indicated that customer interest had improved, while 8% indicated that customer interest had deteriorated. The remaining 44% indicated that customer interest had stayed the same. This result is better than our prior survey, in which 29% indicated that customer interest had improved, 19% indicated customer interest had deteriorated and 52% indicated that customer interest had stayed the same. Chart 11: Indication of Customer Interest, March 2012 Deledorad 8% Stayed the sane Improved 44% 48% Source: UBS Business Jel Survey Our customer interest score increased 27% to 70, well above the 50 mark indicating incremental improvement. Chart 12: UBS Business Jet Survey Score - Customer Interest 100 s-s s'A s rt 14 7, 2 in to tO 4SEWSsecccccc NN pn121nA21O2gislAsllnAnrnnql°81A4P81A4 Source: UBS Business Jel Survey UBS 7 EFTA01088093 UBS ButesJet Survey 26 March 2012 Customer Interest by Region The improvement in customer interest was led by strength in North America (73), Latin America (68), Asia (66), partially offset by relative weakness in Middle East (53) and Europe (40). Chart 13: Customer Interest Score by Region and Comparison to Prior Survey ice 80 60 40 20 0 North America Europe Latin America Middle Eat Asia • Nor Survey ■ Current Survey Smuts: UBS Business Jel Survey 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 124 responses (48 participants did not respond to this question), 68% indicated they were seeing the strongest interest in large cabin aircraft, with 17% indicating midsize and 15% indicating small cabin. Compared to our prior survey, this reflects slightly higher interest in small and midsize relative to large cabin. Chart 14: Cabin Class with Most Buyer Interest, March 2012 Midsize Cabin 17% Small Calm 15% • large Cabin 68% Source: UBS Business Jel Survey UBS 8 EFTA01088094 UBS BusInessJet Survey 26 March 2012 Pricing In the next question, we asked, "Since our last survey in January, overall pricing levels increased, stayed the same, or decreased?" Of the 160 responses (12 participants did not respond to this question), 9% indicated that pricing levels had increased, while 25% indicated that pricing levels had decreased. The remaining 66% indicated that pricing levels had stayed the same. These results are improved from our prior survey in January in which 3% indicated that pricing levels had increased, 37% indicated that pricing levels had decreased. and the remaining 60% indicated that pricing levels had stayed the same. Chart 15: indication of Pricing, March 2012 Decreased 25% Increased I I Slay ed the same 66% Sauce: UBS Business Jet Suvey Our pricing score came in at 42, 26% higher from our prior survey in January. Chart 16: UBS Business Jet Survey Score - Pricing 100 0 menu y*y-.7s? S'cri I t Of 8* 4484888884$4$4g1t 2q911. eltusatempSa0484AP2'84A4 re..9p544.-9StSgOtAmi.44, m, mm m m,—m m, m Scums: UBS Business Jet Sway UBS 9 EFTA01088095 UBS BusIneesJet Survey 26 March 2012 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 123 responses (49 participants did not respond to this question), 88% indicated they were seeing the strongest pricing in large cabin aircraft, with 10% indicating midsize and 2% indicating small cabin. Compared to our prior survey, this reflects slightly stronger pricing for midsize aircraft. Chart 17: Cabin Class with Strongest Pricing, March 2012 Small Cabin 2% Midsize Cabin 10% 0 Large Cabin 88% Source: UBS Business Jel Survey UBS 10 EFTA01088096 UBSBusintasJet Survey 26 March 2012 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 172 responses (all participants responded to this question), 56% expect business conditions to improve, while 6% expect business conditions to deteriorate. The remaining 38% expect business conditions to stay the same over the next 12 months. These results are better than our prior survey in which 41% expected business conditions to improve, 8% expected business conditions to deteriorate and 51% expected business conditions to stay the same. Chart 18:12-Month Forward Outlook for Business Conditions, March 2012 Deteriorate ex, Stay the same IS% knows 56% Source: UBS Business Jel Survey Our 12-month outlook score came in at 75 this time, 13% higher than in our prior survey and well above 50, indicating that on average our survey participants expect business conditions to improve over the next 12 months. Chart 19: UBS Business Jet Survey Score - 12.Month Outlook 100 • O 0 r, tn% coo* I Z I .. Pr 2 PP: 0, 44 1 1 1 ri tetil l a SI to te,ssI N R . n .4.nr ° P to8 n I, ,.._ CM r- tO , CO en EU kn I I 444VMWSISISCati.ererr4.4 44z0$ $$°°°°" r'c' enAgrAlAgoL A2g1A1A,”-Ang.A2PAIAIPcatAgiqatAg Sauce: UBS Business Jel Survey UBS 11 EFTA01088097 UBS Business Jet Survey 26 March 2012 Overall Inventory Levels In the next question, we asked, "How would you characterize current inventory levels?" In this question, we targeted broker/dealers, but in some cases, other participants also responded. The survey participants were asked to select "high", "average", or "low." Of the 135 responses (37 participants did not respond to this question), 3% believe inventory levels are low, while 67% believe inventory levels are high. The remaining 30% believe inventory to be at average levels. These results are better than our prior survey in January in which 3% believed inventory levels were low, 73% believed inventory levels were high and the remaining 24% believed inventory to be at average levels. Chart 20: Indication of Inventory Levels, March 2012 Low 3% Average 30% Pep 67% Sauce: UBS Business Jel Suvey Our inventory score came in at 18 this time, 17% higher from our prior survey in January. but continues to reflect high overall inventory levels. Chart 21: UBS Business Jet Survey Score - Inventory Levels "IN 4444$4$m4144reoreortyrovmmg *$$*$$ec'ec'ec sq5114PS4A2IS4A2gS4Ailsti4A,5grn ,snega.t14.-8-1 ,s4 Source: UBS Business Jel Survey UlIS 12 EFTA01088098 UBS Business Jet Survey 26 March 2012 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 132 responses (40 participants did not respond to this question), 20% believe young inventory levels are low, 36% believe young inventory levels are high, and the remaining 44% believe young inventories to be at average levels. These results are slightly better than in our prior survey in which 17% believed young inventory levels were low, 36% believed young inventory levels were high and 47% believed young inventories to be at average levels. Chart 22: Indication 01 Young Inventory Levels, March 2012 Low 20% 35': Average 44% Scarce: UBS Business Jel Survey Our young inventory score at 42 continues to reflect oversupply of high•quality, young used aircraft. Chart 23: UBS Business Jet Survey Score - Young Used Inventory Levels Young Inventory Score 100 50 0 91 91 90 87 91 90 Be 86 11 1111 71/1 25;;; g;; Ii/ 20 O20127 1221231231251321321391lit 42 iii i= 0 6- 8 4° 8 8 *2 8 2 .2 0 s 0 sse-Cee e a.... ••,:ee mkgZ s g7a A. g7t-s 22a 4-'5 2- 8 ailli±,* -88 52 ala -.22 -.az -/a20-322"a2-222 a 2-2 2 2-22 Sauce: UBS Business Jel Survey U13S 13 EFTA01088099 MS Business Jet Survey 26 March 2012 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 89 responses (83 participants did not respond to this question), 25% indicated they would be more willing to take on inventory, while 22% indicated they would be less willing to take on inventory. The remaining 53% indicated no change in their willingness to take on inventory. These results are better than our prior survey, in which 16% indicated they would be more willing to take on inventory, 28% indicated they would be less willing and 56% indicated no change in their willingness to take on inventory. Chart 24: Willingness to Increase Inventory Levels, March 2012 Less w ding 22% Same 53% More wiling 25% Scarce: UBS Business Jel Survey Our willingness score increased 16% to 51 this time, above the 50 mark indicating that participants are more willing to take on additional inventory compared to our prior survey in January. Chart 25: UBS Business Jet Survey Score - Willingness to Increase Inventory Levels 0I 10o- 0 ZS u 3‘; ;RI ,,, NN C, r„ es, 8 "") V MN ! 67) o • ' e- VT147, 1 lit assa888888SSsSsocc000ssssSgS88spis -- - --- c ----- -"" ,,=11,. N •- ,,=11,. N .- ,,,i at .- ', a a all- a 0 a a a- 6 a c .,- aa - a-" - a - ' 8 / 2 A14 -) Z2 Al i SZ2 1334 -3Z2 .4e2 -77Z2A 3.43S - '49,2 1 ;e 3 8 21;e 8 2 A; SI Smuts: UBS Business Jel Survey UBS 14 EFTA01088100 UBS Business Jet Survey 26 March 2012 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 161 responses (11 participants did not respond to this question), 25% indicated that customer financing conditions had improved, while 4% indicated that financing conditions had deteriorated. The remaining 71% indicated that financing conditions had stayed the same. These results are better than our prior survey, in which 18% indicated financing conditions had improved, 12% indicated financing conditions had deteriorated and 70% indicated no change in financing conditions. Chart 26: Financing Conditions, March 2012 Deteriorated 4% Milroy ed 4125% Stayed Ise same 71% Source: UBS Business Jel Survey Our financing score came in at 61 this time. 14% above our previous survey and above the 50 mark indicating incremental improvement. Chart 27: UBS Business Jet Survey Score — Financing 100 2 A 50 0 57 58 60 60 60 60 5g 63 63 sa 61 55 54 55 • 1! 32!41 15: 1111111111111 53110 g marneme ____ AgginAggAngAgg 4 S4Ag Smote: UBS Business Jel Survey UBS 16 EFTA01088101 UBS ButesJet Survey 26 March 2012 Commentary The following are selected comments from business jet professionals. Overall Business Conditions ■ We saw an improvement in 2011 over 2010 and hope the trend continues. ■ Slightly more activity now than in recent past. ■ Much more activity since the start of the year. ■ Things are slowly improving. ■ Very uneven recovery favoring late serial number aircraft, which are very robust in some markets. Huge difference between early and late serial numbers this time. ■ Very good activity in Q4 2011. Typical activity in Q1 2012, but lower than in 2011. ■ We're still bumping along the bottom. Aircraft Values / Pricing ■ Pressure to sell this year's production slots (already work-in-process) will continue to restrain prices for both new and used light jet models. ■ Prices have stabilized for now. ■ Still a buyer's market. Outlook ■ We believe markets will remain flat this year. ■ We don't anticipate a recovery in values until late 2013 or early 2014. ■ We don't believe we're headed toward a big improvement this year given the economy and problems in Europe/Middle East. Customer Interest ■ We have seen a slight slow down in interest over the past few months. ■ Clients are on the sidelines waiting for improved economic conditions. ■ Interest returning to light jet market. ■ Interest amongst customers seems to be improving. ■ Activity has increased, but no one seems to want to pull the trigger. ■ Phone activity has been very quiet last 3.4 weeks, with exception of deals already in the works. International Markets ■ Some real opportunities with real buyers in India/SE Asia, however Europe seems to still be asleep. UBS 16 EFTA01088102 UBS BusinessJai Survey 26 March 2012 ■ The African continent has shown a fair resilience to the economic slump, specifically South Africa which has robust banking legislation and offers good tax breaks on aircraft depreciation. ■ The expansion into Africa via South Africa is helping to underpin the demand for business aircraft. ■ Poor airline safety records coupled with infrequent schedules are making business aircraft justifiable to the African business community. ■ Germany and Eastern Europe are buying airplanes again. ■ Strong demand from emerging markets. Financing ■ Weak demand for loans. ■ More and more leasing and unique funding solutions coming to market. ■ We have seen an increase in requests for financing for purchases in the last 30 days. ■ 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 are dependent on end•user demand, availability of customer financing, program execution and inventory management. Our estimates, ratings and price targets for General Dynamics, Textron and Rockwell Collins 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. ■ 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 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. UBS17 EFTA01088103 UBSBusinessJe1Survey 26 Mardi 2012 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 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 Coverage' IB Serviced Buy Neutral Sell Buy Hold/Neutral Sell 57% 37% 7% 36% 35% 17% UBS Short-Term Rating Rating Category Coverages IB Serviced Buy Sell Buy Sell less than 1% less than 1% 0% 12% 1:Percentage of companies 2:Percentage of companies the past 12 months. 3:Percentage of companies 4:Percentage of companies within the past 12 months. under coverage globally within the 12-month rating category. within the 12-month rating category for which investment banking (IB) services were provided within under coverage globally within the Short•Term rating category. within the Short•Term rating category for which investment banking (IB) services were provided Source: UBS. Rating allocations are as of 31 December 2011. UBS Investment Research: Global Equity Rating Definitions UBS 12-Month Rating Buy Neutral Sell UBS Short-Term Rating Definition FSR is > 6% above the MRA. FSR is between •6% and 6% of the MRA. FSR is > 6% below the MRA. Definition Buy: Stock price expected to rise within three months from the time the rating was assigned because of a specific catalyst or event. Sell: Stock price expected to fall within three months from the time the rating was assigned because of a specific catalyst or event. Buy Sell UBS 18 EFTA01088104 UBS Business Jet Survey 26 March 2012 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. UBS Securities LLC: David E. Strauss; Danyl Genovesi. Company Disclosures Company Name General Dynamics Corp." Rockwell Collins Inc?' 4' 5' et 44). r. t Is, Ib Textron Inc.®' 7' IS,II& 22 Reuters 12-mo rating Short-term rating Price Buy N/A US$72.78 Buy N/A US$57.55 Buy N/A US$27.14 Price date 23 Mar 2012 23 Mar 2012 23 Mar 2012 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•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. 16. UBS Securities LLC makes a market in the securities and/or ADRs of this company. UBS 19 EFTA01088105 UBSBusinessJel Survey 26 Mardi 2012 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. 22. UBS AG, its affiliates or subsidiaries held other significant finandal interests in this company/entity as of last month's end (or the prim month's end if this report is dated less than 10 working days after the most recent month's end). Unless otherwise indicated. please refer to the Valuation and Risk sections within the body of this report. General Dynamics Corp. (US$) — Rice Target NM) — &mit Noe LUSO &y2 BJy Neutral No Rettig 8 8 4' ne s e $ 4- 1 $ 5 5 5 5 i i t t 1 r 1 1 5I C C S 4 Source: UBS: as of 23 Mar 2012 Rockwell Collins Inc. (US$) —Roe Target (UM Stockfrce 100- 8) ai 10 20 — 0 1 1 i 03 I i CO CO I Of 1 Of 0 I i i i els iL 4 . l i l L l ci s, Q , 2 9 9 I' 9 9 I' a i q. .3 $ i R. .3 $ i '?. .3 $ 4 S 4 $ 4 4. 4 8 4 Buy Boy' No Mang Source: UBS; as of 23 Mar 2012 UBS 20 EFTA01088106 UBS Business &I Survey 26 March 2012 Textron Inc. (US$) — Prix Target lUSS) — Stock Puce (US$) eon — eon 40D 20D OD le I 41- 3 a t s a s a g a s Buy I Bli Buy Neunl No Rang I i i 1 1 1 1 I I I I I $ 11$ 0 0 0 0 0 / a a I I It" 2 . Source: UBS; as of 23 Mar 2012 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 analyst's 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$4.25 (23 Mar 2012); Embraer. US$31.40 (23 Mar 2012); Source: UBS. All prices as of local market close. UBS 21 EFTA01088107 UBS BOSInag JN SIMIAN 26 March 2012 Global Disclaimer This report has been prepared by LOBS Semmes LLC. n athlete a USS AG. UBS AG. Is subsidianes. branches and athletes are referred sa herein as UBS. In certain ceuntree UBS AG is referred to 08 UBS SA. This apart IS ter diStralliOn Only under (*eh dreuffelande as may be permitted by applcab* lows Nothing n this regal consteues a representation and any investment strategy d recomrrendation °contained herein is suitable or anal:plate to a recpxnas rdwided cram:sancta ce omerano comblutes a personal recammendaten. a is Mashed sold/ for inlormation purposes. II OOPS nOICOnlIrde an adeettiSOMent and b AN SO be COnStrued as a SOlatabon Cr an der to toy Or We any gotta** or related mane's, inittruM0018 in any junsdCtion NO representation Cf warranty. timer express or ironed. a prowled in relaton to the accuracy. =matron:to or relabiuy of the unlorrrabon contained reran. except was respect to rdormation concerning UBS AG. C silosciaron. and Winans. nor a a ntended lobe a complete dammed at summary at the secunbes. markets et deverbprnent•• referred ton the repot. UBS does not Widertake ad rneKeirs WO obtain parte. Mr vAll a Mare Ma Molders any antes:max dolts not licCed any liablitY for any inreStrrent losses Imesiment8 involve raid and invenOttl 84000 exhale prudence 01 Makno thee erreSOnent C*CinOnS. The report should not be rega,Mcl by randentli 88 8 Subatute for the ended* d their Com judgement P841 Peridrigindi IS nol necessarily a gide tot-Aura perlormanco. The value el any rreestment a incur* may go damn as well as up and you may not get bath the lull amour mooed. Arty apnea amassed in this regal are Subjed to Change without nekee and may dater or be Cenbary 10 foniOnf erpfessed by Other buril0088 areas Or groups d US$ as a re MI Of Wag dement SWAWJACOS and Cr4048. Research will raze. update and cease coverage solely at the dr.crceon ed UBS Mostment Bank Research Managemcm. The analysis careened herein a based on numerous assumptions. afferent assumptions could remit inmaternallyMitred results. The analrf(s) rosponsbo for me preparation ol the report may interact wen trading desk personnel. sales personnel and other COnStiluen008 for the typose Of pothered. tontriefiging and interpreting mantel intOrMaten. LOBS IS under nO ebbotter1I0 update Or keep current the inamt9ICei 001118ined herein. LOSS rele8 on inrconabon banters to dintsOlthe Itrivi 01 information COMained in One Or more ltre88 within UBS. MO Other treat. tines. grows Or ',Inhales Or UBS. The torepeneabon of he analyst vrI10 prepared thus report rz clatermned exckiavdy by research manammert arid senior management (not incising investment baniong). Analyst compensaton is not based on inveelmert barbing revenues. Metva. COmptelSalbn May relate tO the revenues Of VOS tweament Sark ass w.0)/0. 01 wriCh invedinent bearing. seen and trading ate a pan The seamen decobed heron may nec be algal° for sale nab ornocoem a to conan categories of roasters. Options. &maim products and lutwes are not suitable for al investors. and trade° n tate inleunnO11$ IS 0008150red rely MOngege and ameobacked se:toilets may involve 8 high degree or risk WO may be highly vdable in reSperdel0 RKAsalkonS in irteren rates and Other market COndt1,18 Pan performence rik not reoessarly indicative ol Mire festal,. Foreign Curraty rates or exchange may adversely ailed the yaks. dice Or JACOPO Or any sectary ct related instrwnenl mentioned in the report For tnvettirrert advi o. trade execution or other rounes. elects ahead wean mar local sales representatire. Nether USS nor any el its Of I isles. Mu ay MUSS' Or any 010 101110M. dired0r4. employees o agents accepts any IOW kir sly Ian Or damage arising out Olthe use d all Cr any peel 01 MS report For Chancel instruments admIted to treeing on an EU no:Mated market LOS AO. its aflliates or subSidcadeli (exCkidng US$ Secunties LW Order MS Dental IMMIS LPI Sell as a Markel Mahn Cr liquidly provide. do accordance vdh the imerpremion of these teems n the US) in the !nand"! instrument of into never save Mal @taro me betray el *pudgy provider is cured out in accordance Min me ClelnhOn given 10 a by Me taws and reoplalen$ d any Other EU tune:900ns. such WOrrnalen 6 separately (WOW in this research regal. UBS MO ilti *Males and mplomets may have long or short posoom Pade as ennead and buy and sal in inzeurroms or derivatives olenided herein. Any pnces stated nibs report are for inlotmabon purpose: only and do not reprosort valuator@ for ndrndual socunbes or other instruments. There a no represemation that any transaction Can Or COuld have been erteded al those prices 54 entrees 00 neil 00088%80/ relied USS's internal b0014 and Wade Or thaeleCal MO*340troledvalialeine and may be based On certain assurrpoons. afferent as:urn:ans. by USS or any other Seuf C O. may pea staztanhaty MU rent results. United Kingdom and fur rest at Europe: Except as oterwee :pentad herein, the =lanai is communicated by UBS Urrnect a subsdary ot ISS AG. to persons who are *Intro counterpart*: a professional clients and is only available 10 each persons. The nformaten careened bran does not apply to. and Medd not be retied upon by. mai chants. USS Limeed a aultioreed ant reatisted by the Financial se viol AO-Wily (FSA) USS research complies win al the F5A requirements and laws 00ncernig deckivseli and MOM are indarted On the research where aWicable. Howe: PI00810d by USS Limted and Odra:led by US$ limited and Lan Securites France $A. US$ Securnes France SA is regulated by the Au10610 dee Machos Financiers (Alta Where an emir./ of Lies Semmes France S.A. has combined to this repot, the report is afro deemed to have bean prepared by UBS Secure-es France S.A. Germany: Prepared by UBS Limited and distaff/Jed by UBS United and UBS Dente:Wend AO. USS Deut8Chland AO is regulated by the Bundedanfilla fur FintendenSleaturpaulSiCht (BaFfi). Spain: Prepared by UBS trued and cisIntersael by UBS Vrrtled and USS Mambas Etpasla SV. SA. USS Seance Espana SV. SA a mounted by the Common Nacional del Merced:. de Vakees ICNIAV). Turkey: Prepared by UBS Mantel Devil., AS on lama of and datilauted by MS LIIIVIOCE. Russia: Prepared and <Mutated by ecunbee CSC. Hand: atilkoled by USS AO to persons who ale intithuliOnal invOSIMS only. Italy: Mope/600y U133 tented and chltrbuted by MSS United kph le Sm ues Italia Sim Priti is regulM by the Elam of Italy and by the Commissione per le Soceta e la 1301a (C.ColS0B1. Where an analyst ol USS MSG SIM has COnlatlled 10 WS report, the to upon is also deemed have bean prepared by WS Italia SIT EMI. South Africa: UBS Sash Africa (Ply) Laced (Registration No. 1995.01114a ) is a member Cl Me JSE Lasted. the Scum African Futures Exchange and the Bond Exchange of South Mica. MS SouthMica (Pw) Limited is an authorised Finance' Savo*: Provider Omar: of d: postal and plorsted address and a In ear is droners are available on recast or may be accessed at tepumwetacoza. United Slates: Ciontatted to US person: by ether USS SooJnbe: LLC or by LIDS Finance! Services hc . suesderies ol MS AG: or by a group subsidiary or Amatoof UBS AG that is not agate-red z a US troker.deabr (a 'nal-US atreitile). to map, US intadonal moors only. M$ Seconoes tic or UBS Financial Services Inc. accepts retpOraiblity for he content of a moon prepared by pother !VMS dilate when Odra/led to VS peaOns by UBS Securhes LLD or US$ Financial SernCe8 Inc Al transactions by a US person n he 800.ellki$ MenteMd in Ibis noon 1011S1 be (eleCted thrOugh US$ SeCuritel LW Cr US$ Financial Sandia Ire . and net thrcogh a ncn'US affiliate. Canada: Distrbuted by UBS Socunlies Canada Inc.. a subsidiary of LOBS AG and a member of the pnnispal Canadian seat exchanges a CSC. A statement ol as Mendel 00MidOn and allot 01 IN <heeler'. and BONO °MOM MOW proykled won request Hong Kong: CaldbUed by UBS SeCuthe8 AIM United Sin9100•0: 06800100 Or USS Stealth). Pie Lo (Meg (p) 039:112009 and CO Reg NO. 198503648CI Or UBS AO. Singapore Branch. PleMe Caltael UBS SeAMINS Pie Ltd. an exempt *nano./ adrisor under the Sngapore Financial Mynas Ad (Cap. 110i: or UBS AG Sngapore brand.. an exempt Mandel abase! under the Singapore Financial AcMsers Act leap. 110) and a wholesale bank teerded under Me Singapore EtanSuo Ad Kap. 19) reglaced by he MOnliffiry AtMorty of Singapore. Si relined deny mallets arising from. or in connection with. Me remind or report The (KOPP 0111.0 repot itstreSOM and wanant that they are accredted and IntilbAkintil inve$108 84 defined in Rio Seetadeti and Future@ Ad (Cap 2891. Japan: Diddbuted Or MS Securities Japan LId 10 institutional investor: only Whale the ropon has been prepared by UBS Manias Avon Lei. Les Societies Japan Ltd is the author. pubtalxr and diStebutOr 01 the report Australia: astrtuted by USS AG (ladder of Auslralan Financial &moos License No. 231087) and UBS Secure*: Morale Ltd (Helder ol Auslralan Faunae! Servces License No. 231098) only to Wholesale' Mom z derma by s761G of Ono Corparabora Act 2001. New Zealand: patlialled by WS New Zealand Lid. An investment advisor and moment broker disclosure mamma is available en request and floe a charge by wnling to PO Box 45. Auckland. NZ. Dubai: The research prepared and di:Matted by Lies AG CJbal Branch. is intended for Professional Clients on and is nO1 for tots detntoron mein brie United Arab entirafR6 KOMI: Oiatuted in KOrea by UM SeOurge8 Fle. U0. Seoul Sandi. TM report may have been Sled Or contrbuted 10 from rate to Woe by amloves cr Urn Secutes Pie. Ud . Seal Ehenth Malaysia: This (Medal IS aulk.trad 10 be ditarlbaed in Malaysia by UM Snuff** Malaysia Sem end C253825- *India : Prepared by UBS Securities India Private Ltd. 2S.2 Norm Avenue. Maker Many. Sandra Kona Complex. Barclra (East). Mertz grata) 400051. Phone: .912261558000 Sall ReillarabC0 Hunters: USE (Capital Market Segment): INB230951431 .NSE IF/10 Segment) INF23Cr3S1431.1aSE (Capital Martel Segment IN8010951437. The dsciasures cordaned in research repels produced by UBS Lamed shall be governed by andcanned n accontance orth Enlists law. Les :poetical/yr ratans Ile rod:trauma of this mammal in whole or in pan mama the widen permason et VIM and Les aCCOMS no Ilatilty VellalSOOVIX la the aCIDOIS of 'had part*" in ma reined Moms may depict objects Or elen*ntS .0kt1 are protected by laird party copyright. tradeMarlia and other iroetedual properly nowt G UBS 2012. The key Hata and USS ere among 11* registered and unregelered trademarks 01 UBS. Al tights reserved UBS UBSV EFTA01088108