Global Investigator 201003021 (2)

Ajay Kapur, CFA Global Strategist, +852 2295 2564 [email protected] 02 Mar, 2010

1

Technology Investing: Great Fundamentals, but Selectivity is Key » Global leading indicators are comprehensively positive for increased technology capex spending Technology spending is led by cash, confidence, credit, corporate profitability growth, corporate excess returns on capital, (low) capacity utilization and the gap between new tech orders and inventories. These are all improving dramatically. Stay long tech, especially software.

» High operating leverage with savage cuts in capital intensity and SG&A costs Globally, technology firms have been cutting their capital intensity sharply. This is especially true for US firms, who have transferred manufacturing capacity to ex-Japan Asia. In this recession compared to 1991 or 2001, ROEs and especially free cash flow margins have been dramatically higher, especially for software.

» New product cycles and service innovation New product cycles like Windows 7, new products and services like social networking, mobile libraries (the Kindle), cloud computing, LED applications etc all keep the dream alive in this concept and fashion driven sector. Post-2000, value is the dominant style in technology investing.

» Technology valuations are reasonable On a relative PE basis, US tech stocks are almost the cheapest they have been in 50 years. On a relative PB basis, they look fairly valued, and likewise on a relative dividend yield basis. It matters how far back your valuation data go to.

» Rising oligopoly power in technology, especially software It is clear that the software sector sub-categories - systems software (Microsoft, Oracle), IT consulting (Computer Sciences, Affiliated Computer Services), application software (Activision, Electronic Arts), and internet software (Yahoo, Frontline Communications) – are all seeing a rapid rise in oligopoly power. Likewise in computer storage and networking equipment.

» Sentiment is mixed. Being bullish on technology is very consensus. But if sentiment were so hot on tech, we would see it trading at much higher relative multiples than it is now.

Rising global excess returns on capital to lead global capex

-6

-3

0

3

6

9

12

1/80 1/86 1/92 1/98 1/04 1/10-15%-10%-5%0%5%10%15%20%25%30%Global ROE - Corp BAA, LS

Global Capex YoY, RS

10E

11E

%

Source: MSCI, IBES, Bloomberg, Mirae Asset Research

US tech valuations: relative PE at 50-year lows

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1/61 1/69 1/77 1/85 1/93 1/01 1/090.5

1.0

1.5

2.0

2.5

3.0

3.5US Information Technologyrelative trailing P/E

Mean

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

Source: Datastream, Mirae Asset Research Global Equity Market Exposure Meter: Percent of equity portfolio we recommend that should be invested in equities; the balance in cash.

G L O B A L S T R A T E G Y

The Global Investigator 02 ׀ Mar, 2010

Ajay Kapur,CFA, Global Strategist, +852 2295 2564 [email protected]

Priscilla Luk, Senior Analyst, +852 2295 2559 [email protected]

Ritesh Samadhiya, CFA, Analyst, +852 2295 2518 [email protected]

Sophie Jihye Yoo, Research Associate, +852 2295 2544 [email protected]

Global Equity Market Exposure Meter

S&P 500 1115.71

See the last page for important disclosures


2

Technology Investing: Great Fundamentals, but Selectivity is Key

Since last summer we have regularly cited the underlying improvements in technology fundamentals, The Global Investigator, Watching Extreme US Dollar Bearishness, Equity Bullishness (22nd Sep, 2009), What Buffett and Grantham saw (10th Nov 2009). In this note we highlight:

1) Global leading indicators are comprehensively positive for increased technology capex spending.

2) The technology sector is severely under-invested itself, using capex/sales or capex/depreciation ratios, translating into massive operating leverage which means EPS surprises are going to continue to be exceptionally positive. Also, free cash flow margins are at obscene levels in the US, especially in software, improving prospects for M&A and cash returns.

3) New product cycles and services like cloud computing, plus the imperative for Europe and Japan to match US productivity increases, and product/service penetration in emerging markets are all powerful tailwinds.

4) Relative valuations are at around median levels, and so are absolute valuations. We use valuation data back to 1961. It makes a difference to the conclusions where your data starts.

5) Oligopoly power is increasing in many tech sub-categories, especially in the software space – in systems software, IT consulting, application software, and internet software. Also in network equipment and computer storage. The names in these sectors also conform to our passion for the “Global Brands” theme.

6) Sentiment toward the sector in real money terms is neutral, although polls of both sell-side and buy-side participants are convincingly bullish. It is a consensus favourite, but valuations do not reflect this. We favour a continued overweight in the software sector, but continue to avoid the semiconductor sector. Our technology head, Warren Lau has a contrarian sell on TSMC based on upcoming capex spend. Also, we are uncomfortable with poor price action, and the high Book-to-bill ratio, which is at high levels seen at relative performance peaks.

1. Technology Leading Indicators: Moving North

Technology spending is led by cash, confidence, credit, corporate profitability growth, corporate excess returns on capital, (low) capacity utilization and the gap between new tech orders, inventories and new product cycles. Environmentally friendly or alternative energy such as battery, LED, solar and wind power also trigger the capex cycle. We highlight the following charts to buttress these assertions.

As Figure 1 shows, US Free cash flow to GDP is at the highest level since the data begin in 1953. This leads US Information Technology Capex by about a year and forecasts a strong recovery. Figure 2 shows that GLOBAL free cash flow is also bottoming out, and leads GLOBAL capex (both tech and non-tech) by about 2 quarters. Cash flow obviously is related to corporate profitability – we have robust leading indicators of corporate profitability for the US – the product of the US Long Leading Economic Indicator and the gap between corporate pricing power and unit labor costs. Figure 3 shows that this corporate profitability proxy is at exceptionally strong levels. It leads Tech capex spending by about a year. Of course, plentiful cash and its cousin, corporate profits are all good, but access to credit is helpful in financing tech spending. Figure 4 shows the lending intentions of senior loan officers in the US Fed Loan Officer Survey. These lending intentions have turned completely and presage strong real growth in technology investing (40% of total non-residential investing is technology, 32% is structures, and 28% is industrial, transportation and other equipment). Cash, corporate profits and credit are all good, but confidence is required to make it happen. CEO confidence from the Conference Board has gone from three-decade lows back in late 2008 to almost the highs seen previously (not shown). This CEO confidence leads IT capex by three quarters. Another way to assess management confidence is to look at the capex spending intentions from the Philly Fed Survey (figure 5) and the Empire State Manufacturing Survey (figure 6). Albeit these capex spending intentions are for all capex, technology accounts for 40% of total non-residential capex. Both surveys shows capex spending intentions are robust and recovery is around the corner. Figure 7 shows the gap between IT new orders and inventories – if order growth is strong and there are few inventories around, tech production is likely to rise, capacity utilization is likely to rise, and multiples likely to expand. Fundamentally, if returns on capital exceed the cost of capital, firms should expand capacity - indeed as Figure 8 shows, this is the case – the gap between global ROE and the US Baa


3

corporate bond yield (as a proxy for the cost of credit) moves with capex cycles. Based on IBES consensus data we get forecasts of global ROE of 12.4% for 2010, and 13.7% for 2011. We assume the US corporate Baa yield remains at 6.25% (we do not know any better). This projected rise in corporate excess returns on capital presages a robust recovery in capex, including technology capex. Some investors believe that today’s low capacity utilization means that any increase in demand should be met by using existing capacity – why bother investing in new capacity? While this is a seemingly logical thought, it is also completely wrong as Figure 9 demonstrates. A lot of capex growth is replacement capex, and the low capacity utilization is simply reflecting old, defunct capacity that needs to be thrown out. Your capacity utilization of a black and white TV might just be an hour a week – replace that with a wide-screen HDTV and you might be watching a lot more. Same story with capacity utilization.

Figure 1: US free cash flow at record levels – leads IT capex

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

03/52 03/57 03/62 03/67 03/72 03/77 03/82 03/87 03/92 03/97 03/02 03/07 03/12-6%

-4%

-2%

0%

2%

4%

6%

8%

10%Capex, Y-o-Y change, LS

US non-financial corporate FCF toGDP, Pushed fwd by 12m (RS)

Source: The Federal Reserve Board, Mirae Asset Research

Figure 2: Global operating free cash flow turning up – leads capex

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1/86 1/89 1/92 1/95 1/98 1/01 1/04 1/07 1/10-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

CAPEX, YoY%

Operating cash flow YoY%, pushed 2 qtrs fwd

Global

Source: Factset, Mirae Asset Research


4

Figure 3: US Corporate Profitability Proxy is robust, and leads IT capex by a year

-3

-2

-1

0

1

2

3

4

1/70 1/73 1/76 1/79 1/82 1/85 1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/09-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%Corporate profitability proxy, pushed fwd by 13m, LS

Real Private fixed investment by Information processing equipment andsoftware, YoY%, RS

Source: Bureau of Economic Analysis, Datastream, Mirae Asset Research

Figure 4: US Fed Senior Loan Officer Survey Lending Intentions are strong – leads IT capex by 3 quarters

-30

-20

-10

0

10

20

30

40

50

60

70

803/90 3/92 3/94 3/96 3/98 3/00 3/02 3/04 3/06 3/08 3/10

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Tightening Standards for C&I Loans to Large & Medium Firms,pushed forward by 3 qtrs (LS, Inverted Scale)

Real Private Fixed Investment by Information processingequipment and software, YoY%, 2-Qtr MA, RS

Tightening Standards

Source: Bureau of Economic Analysis, The Federal Reserve Board, Mirae Asset Research


5

Figure 5: Philly Fed Capex spending intentions are robust – leads actual spending

-30

-20

-10

0

10

20

30

40

50

60

1/68 1/72 1/76 1/80 1/84 1/88 1/92 1/96 1/00 1/04 1/08

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%Philadelphia Fed Survey of Capex intention -6mth expectation, pushed fwd by 4 mths, LS

Capex, Y-o-Y change, RS

Source: The Federal Reserve Bank of Philadelphia, Federal Reserve Board, Mirae Asset Research

Figure 6: NY Fed Capex spending intentions are robust – leads actual spending

-30

-20

-10

0

10

20

30

40

50

1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11

-40%

-30%

-20%

-10%

0%

10%

20%

30%Empire State Manufacturing Survey of Capex intention- 6mth expectation, pushed fwd by 4 mths, LS

Capex, Y-o-Y change, RS

Source: The Federal Reserve Bank of Philadelphia, Federal Reserve Board, Mirae Asset Research


6

Figure 7: US IT new orders less inventories are robust – leads IT capex

-40

-30

-20

-10

0

10

20

30

1/70 1/74 1/78 1/82 1/86 1/90 1/94 1/98 1/02 1/06 1/10-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

US IT New Orders less Inventory Growth, 3-m MA, pushed fwd by 6m, LS

Real Private fixed investment by Information processing equipment andsoftware, YoY%, RS

%

Source: Bureau of Economic Analysis, Datastream, Mirae Asset Research

Figure 8: Rising global excess returns on capital to lead global capex

-6

-4

-2

0

2

4

6

8

10

12

1/80 1/83 1/86 1/89 1/92 1/95 1/98 1/01 1/04 1/07 1/10 1/13-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%Global ROE - Corp BAA, LSGlobal Capex YoY, RS

10E

11E

%

Source: MSCI, IBES, Bloomberg, Mirae Asset Research. Note: ROE forecasts for 2010 and 2011 are 12.4% and 13.7% respectively, based on MSCI Universe and IBES consensus. Assume that US Corporate Bond Yield (BAA) remains at 6.25%


7

Figure 9: Low capacity Utilization leads to STRONGER capex, as replacement upgrades take hold

11/15/70 14.2% 27.1% 56.0%5/15/75 9.9% 35.1% 74.7%7/15/80 14.6% 20.9% 43.8%12/15/82 32.4% 64.4% 73.3%10/15/86 5.8% 18.6% 35.7%3/15/91 12.7% 30.8% 47.6%2/15/02 2.8% 14.9% 23.0%6/15/09

Mean 13.2% 30.3% 50.6%All periods (1948 - 2009) 11.9% 25.9% 42.1%

After 12 qrts

Real Private Fixed Investment - Information processing equipment and software growth

Capacity utilization bottom date After 4 qrts After 8 qrts

Source: Bureau of Economic Analysis, IMF, Mirae Asset Research

2. High Operating Leverage with savage cuts in capital intensity and SG&A costs

Globally, technology firms have been cutting their capital intensity sharply. This is especially true for US firms, who have transferred manufacturing capacity to ex-Japan Asia. Figure 10 shows the capex-to-depreciation ratios for the various technology sub-sectors – technology hardware, semiconductors and software on a global basis. The upshot of this reduced capital intensity and (not shown) control of SG &A costs is enhanced operating leverage. Any growth in top-line that we suggested previously should have a dramatic impact on the EPS line. Already, free cash flow generation for technology, mainly in the US is at obscene levels. These are funds that can be used for M&A, or cash return, or upgrading their own technology. Figure 11 shows the Du Pont analysis for global technology and its three sub-sectors. The key takeaway is how in this recession compared to 1991 or 2001, ROEs and especially free cash flow margins have been dramatically higher. This is more applicable for software than tech hardware or semis. The detailed ROEs for the various regions have been relegated to the appendix 1.

Figure 10: Technology Sector has reduced capital intensity dramatically – high operating leverage should see EPS surprising positively

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3/85 3/88 3/91 3/94 3/97 3/00 3/03 3/06 3/090.0

0.5

1.0

1.5

2.0

2.5

3.0

Software

Tech HardwareSemis

Global capex to depreciation

Source: Factset, Mirae Asset Research


8

Figure 11: Du Pont Analysis for technology – High ROEs and free cash flow in 2009, despite recession

Global Tech Sector 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 102 156 165 207 248 276 302 349 380 441 588 731 845NI/ EBT, % (1) 58.7 52.8 50.9 54.7 55.6 52.7 49.8 33.1 40.3 35.8 60.2 57.4 60.9EBT/ EBIT, % (2) 92.6 84.4 80.0 82.7 82.3 76.8 76.2 66.0 57.0 60.8 83.1 86.2 85.2EBIT/ Sales, % (3) 17.4 11.6 8.7 9.4 10.3 9.6 9.7 6.8 4.9 5.0 8.3 9.3 8.4Sales/ Assets, % (4) 112.3 99.6 93.0 94.5 89.1 89.1 88.8 86.8 88.2 88.1 92.0 96.0 99.4Assets/ Equity, x (5) 1.76 2.30 2.41 2.45 2.70 2.74 2.77 2.87 2.92 2.95 2.77 2.68 2.68ROE, % (1x2x3x4x5) 18.7 11.8 8.0 9.8 11.4 9.5 9.1 3.7 2.9 2.9 10.5 11.8 11.6NI/ Sales, % (6) 9.5 5.2 3.6 4.2 4.7 3.9 3.7 1.5 1.1 1.1 4.1 4.6 4.3Depr/ Sales, % (7) 7.3 6.5 6.6 6.0 5.5 6.1 5.8 6.4 6.1 6.0 5.6 5.5 5.6Capex/ Sales, % (8) 12.1 9.9 7.8 6.8 8.0 8.6 8.5 8.3 6.8 6.4 7.1 7.9 8.2FCF/ Sales, % (6+7-8) 4.7 1.8 2.4 3.5 2.2 1.4 1.0 -0.4 0.5 0.7 2.7 2.2 1.7Net Debt/ Equity, % 9.6 -1.9 -5.2 -4.6 19.6 29.2 31.8 36.3 34.9 31.8 17.7 23.5 25.1

Global Software 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 19 23 28 41 45 61 70 88 99 120 159 209 259NI/ EBT, % (1) 65.0 60.5 48.2 54.1 61.0 46.1 50.3 46.7 61.2 59.9 59.8 56.2 56.3EBT/ EBIT, % (2) 79.8 79.6 61.0 86.4 85.8 75.9 81.9 83.0 89.6 87.8 91.0 89.9 90.7EBIT/ Sales, % (3) 10.3 10.3 6.7 13.9 13.8 8.7 10.7 10.2 14.0 10.6 11.6 10.9 11.9Sales/ Assets, % (4) 119.1 117.7 92.1 104.7 100.4 103.9 106.3 106.2 103.0 98.9 99.5 90.4 93.6Assets/ Equity, x (5) 1.91 1.82 2.87 2.37 2.44 2.51 2.39 2.36 2.24 2.16 2.12 2.24 2.26ROE, % (1x2x3x4x5) 12.1 10.6 5.2 16.1 17.7 7.9 11.2 9.9 17.7 12.0 13.4 11.1 12.9NI/ Sales, % (6) 5.3 5.0 2.0 6.5 7.2 3.0 4.4 3.9 7.7 5.6 6.3 5.5 6.1Depr/ Sales, % (7) 6.4 5.9 5.4 5.3 5.5 5.2 5.1 6.0 5.2 5.2 5.2 5.3 5.2Capex/ Sales, % (8) 10.1 8.0 6.4 6.6 6.6 5.3 5.4 5.4 5.5 5.2 5.6 5.8 5.6FCF/ Sales, % (6+7-8) 1.7 2.8 1.0 5.2 6.1 2.9 4.2 4.5 7.4 5.5 5.9 5.1 5.7Net Debt/ Equity, % 30.2 20.5 50.7 15.3 29.9 28.9 10.1 2.1 -11.6 -11.3 -21.5 -7.2 -7.8

Global Tech Hardware 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 63 109 112 139 169 176 190 213 230 255 334 407 464NI/ EBT, % (1) 57.5 53.2 52.3 54.7 54.1 53.9 51.9 31.8 0.5 -15.8 56.4 49.1 59.7EBT/ EBIT, % (2) 93.4 85.6 81.9 82.8 82.1 76.8 76.5 62.3 34.6 40.5 79.6 82.3 83.3EBIT/ Sales, % (3) 19.0 12.4 9.3 9.3 10.2 9.7 9.9 6.4 3.4 3.4 6.8 7.1 6.9Sales/ Assets, % (4) 110.1 99.5 93.8 94.8 88.5 87.6 87.5 85.0 86.7 86.4 90.4 96.8 103.9Assets/ Equity, x (5) 1.74 2.36 2.42 2.47 2.76 2.81 2.85 3.00 3.12 3.18 2.99 2.92 2.89ROE, % (1x2x3x4x5) 19.6 13.3 9.1 9.9 11.0 9.9 9.8 3.2 0.0 -0.6 8.3 8.1 10.4NI/ Sales, % (6) 10.2 5.7 4.0 4.2 4.5 4.0 3.9 1.3 0.0 -0.2 3.1 2.9 3.5Depr/ Sales, % (7) 7.4 6.3 6.6 6.0 5.5 6.0 5.8 6.4 6.1 6.1 5.7 5.2 4.7Capex/ Sales, % (8) 11.3 9.9 7.8 6.6 7.9 8.4 8.4 8.5 6.7 6.0 5.9 6.6 6.6FCF/ Sales, % (6+7-8) 6.3 2.1 2.8 3.6 2.1 1.6 1.3 -0.8 -0.6 0.0 2.8 1.5 1.6Net Debt/ Equity, % 7.9 -4.6 -9.5 -6.9 18.6 29.9 33.8 43.4 45.7 39.0 24.9 30.7 29.5

Global Semis 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 20 24 25 27 34 39 42 48 51 66 95 115 122NI/ EBT, % (1) 67.8 NA NM 56.5 69.9 45.1 1.3 6.9 63.8 68.3 70.8 72.3 68.4EBT/ EBIT, % (2) 92.7 -52.7 -14.5 71.0 81.1 77.4 61.4 71.5 82.6 79.6 88.5 92.3 86.1EBIT/ Sales, % (3) 12.1 1.2 1.5 6.1 9.2 8.9 6.6 6.9 9.5 12.8 15.8 19.7 13.3Sales/ Assets, % (4) 123.0 90.9 83.5 82.0 88.7 92.6 87.6 86.4 85.7 91.6 97.9 97.0 83.4Assets/ Equity, x (5) 1.83 1.93 2.06 2.24 2.29 2.26 2.38 2.08 2.03 2.37 2.11 2.10 2.26ROE, % (1x2x3x4x5) 17.1 -2.2 -2.7 4.5 10.7 6.5 0.1 0.6 8.8 15.1 20.5 26.8 14.8NI/ Sales, % (6) 7.6 -1.3 -1.6 2.4 5.2 3.1 0.1 0.3 5.0 7.0 9.9 13.1 7.9Depr/ Sales, % (7) 7.3 9.3 8.3 7.9 5.6 8.2 7.4 8.3 7.9 5.4 5.1 7.8 10.8Capex/ Sales, % (8) 18.3 11.5 9.4 9.9 10.4 13.7 14.4 10.5 9.9 11.2 16.4 17.0 20.0FCF/ Sales, % (6+7-8) -3.4 -3.4 -2.6 0.4 0.5 -2.5 -6.9 -1.9 3.0 1.1 -1.3 3.9 -1.4Net Debt/ Equity, % 7.8 12.9 9.9 8.6 23.5 23.4 31.7 5.0 -1.0 34.1 14.2 20.4 37.1

Source: Worldscope, Mirae Asset Research.


9

Figure 11 (continued)

Global Tech Sector 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 926 1083 1396 1548 1612 1664 1699 1674 1593 1505 1431 1342 953NI/ EBT, % (1) 60.4 56.2 62.8 53.4 NA NM 51.0 69.7 70.8 74.7 69.4 45.7 56.7EBT/ EBIT, % (2) 87.1 80.9 87.9 88.5 NA 0.1 87.6 93.4 93.8 93.8 92.8 87.0 88.4EBIT/ Sales, % (3) 9.0 7.5 10.0 9.5 -6.3 1.0 6.5 9.6 9.6 10.1 9.8 5.8 5.8Sales/ Assets, % (4) 100.1 100.7 94.6 86.5 87.7 86.5 89.7 93.7 94.1 94.9 97.1 99.0 87.7Assets/ Equity, x (5) 2.66 2.54 2.24 2.02 2.09 2.15 2.07 1.98 1.99 2.01 2.09 2.20 2.15ROE, % (1x2x3x4x5) 12.7 8.8 11.7 7.9 -15.6 -5.2 5.4 11.6 12.0 13.5 12.8 5.0 5.5NI/ Sales, % (6) 4.8 3.4 5.5 4.5 -8.5 -2.8 2.9 6.3 6.4 7.1 6.3 2.3 2.9Depr/ Sales, % (7) 5.4 5.9 5.9 6.9 9.2 6.9 6.1 5.5 5.3 5.2 5.4 5.6 5.8Capex/ Sales, % (8) 7.3 6.6 6.1 8.0 7.1 4.9 4.8 6.0 6.4 6.3 6.0 5.6 3.9FCF/ Sales, % (6+7-8) 2.9 2.8 5.3 3.4 -6.3 -0.9 4.2 5.7 5.4 6.0 5.7 2.4 4.8Net Debt/ Equity, % 22.1 21.8 6.3 5.0 2.3 -4.1 -13.2 -16.6 -15.2 -13.1 -8.1 -5.0 -15.5

Global Software 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 303 402 576 651 686 717 730 692 663 607 555 513 361NI/ EBT, % (1) 54.3 56.0 53.3 NM NA NM 50.8 64.0 66.2 67.9 65.5 58.4 69.3EBT/ EBIT, % (2) 91.2 91.9 93.6 57.5 NA 51.2 92.4 94.0 95.0 93.8 93.4 91.5 94.4EBIT/ Sales, % (3) 12.6 13.0 15.6 2.4 -16.4 2.0 11.1 12.6 14.8 14.7 15.7 13.1 17.5Sales/ Assets, % (4) 98.3 93.5 78.0 62.2 72.7 74.9 74.2 71.7 72.9 75.0 79.3 79.9 71.9Assets/ Equity, x (5) 2.22 2.07 1.91 1.67 1.88 1.96 1.88 1.83 1.94 2.06 2.12 2.13 1.90ROE, % (1x2x3x4x5) 13.6 12.9 11.6 -4.2 -30.9 -5.3 7.3 9.9 13.1 14.4 16.2 11.9 15.7NI/ Sales, % (6) 6.2 6.7 7.8 -4.1 -22.6 -3.6 5.2 7.6 9.3 9.3 9.6 7.0 11.4Depr/ Sales, % (7) 5.5 6.1 7.2 12.4 16.2 7.1 6.0 5.2 4.9 4.9 5.0 5.3 5.3Capex/ Sales, % (8) 4.6 4.5 4.7 6.4 5.0 3.8 3.4 3.4 3.8 4.2 4.3 4.2 3.3FCF/ Sales, % (6+7-8) 7.2 8.3 10.2 2.0 -11.4 -0.3 7.8 9.4 10.4 10.1 10.4 8.1 13.5Net Debt/ Equity, % -17.0 -24.8 -26.8 -19.8 -26.5 -32.4 -37.2 -36.2 -29.4 -23.7 -17.3 -19.0 -31.1

Global Tech Hardware 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 500 540 654 701 715 726 736 745 702 669 649 614 427NI/ EBT, % (1) 59.1 57.5 65.8 60.2 NA NA 46.9 66.0 71.5 75.2 71.4 45.7 37.6EBT/ EBIT, % (2) 85.9 80.4 85.3 87.1 NA NA 84.1 91.6 92.3 92.7 91.9 84.3 78.5EBIT/ Sales, % (3) 7.4 6.1 7.1 7.9 -3.9 -0.2 4.8 7.3 7.2 7.5 7.6 3.9 2.8Sales/ Assets, % (4) 105.8 107.2 105.8 101.4 103.5 99.7 103.8 108.4 109.4 110.4 110.7 113.3 100.0Assets/ Equity, x (5) 2.87 2.81 2.56 2.35 2.42 2.47 2.36 2.24 2.21 2.22 2.29 2.47 2.46ROE, % (1x2x3x4x5) 11.4 8.4 10.8 10.0 -11.4 -7.4 4.7 10.7 11.5 12.7 12.7 4.2 2.0NI/ Sales, % (6) 3.8 2.8 4.0 4.2 -4.6 -3.0 1.9 4.4 4.7 5.2 5.0 1.5 0.8Depr/ Sales, % (7) 4.7 4.7 4.8 4.7 5.7 5.2 4.7 4.1 4.0 3.9 4.2 4.4 4.9Capex/ Sales, % (8) 6.3 5.8 5.3 6.0 5.5 3.9 3.8 4.4 5.0 4.7 4.4 4.4 3.6FCF/ Sales, % (6+7-8) 2.1 1.7 3.5 2.9 -4.4 -1.6 2.8 4.1 3.7 4.4 4.8 1.5 2.1Net Debt/ Equity, % 31.4 35.1 21.8 21.2 18.5 8.5 -2.6 -7.9 -9.8 -9.0 -3.6 1.5 -6.0

Global Semis 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 123 141 166 196 211 221 233 237 228 229 227 215 165NI/ EBT, % (1) 71.3 50.3 68.1 67.6 NA -18.0 62.4 81.3 75.7 81.7 71.1 -43.0 NAEBT/ EBIT, % (2) 87.1 62.4 86.7 93.9 NA 71.8 87.4 95.9 95.2 95.7 94.2 74.8 NAEBIT/ Sales, % (3) 15.7 9.3 19.2 24.8 -2.8 4.6 7.6 14.9 12.9 14.4 11.0 3.2 -0.8Sales/ Assets, % (4) 74.3 78.9 71.6 71.0 61.1 63.4 68.6 81.3 78.9 79.2 81.2 83.3 59.4Assets/ Equity, x (5) 2.29 2.14 1.76 1.72 1.67 1.74 1.69 1.62 1.60 1.58 1.65 1.71 1.58ROE, % (1x2x3x4x5) 16.5 4.9 14.3 19.3 -6.5 -0.6 4.8 15.3 11.7 14.1 9.8 -1.5 -2.7NI/ Sales, % (6) 9.7 2.9 11.4 15.7 -6.3 -0.6 4.2 11.6 9.3 11.3 7.3 -1.0 -2.9Depr/ Sales, % (7) 10.6 12.8 10.7 10.6 16.1 13.8 12.6 10.6 11.1 10.4 10.5 11.2 15.3Capex/ Sales, % (8) 17.4 13.9 12.9 18.9 17.9 11.3 11.5 14.6 14.7 14.5 14.1 12.2 8.7FCF/ Sales, % (6+7-8) 2.9 1.8 9.1 7.4 -8.2 1.9 5.2 7.6 5.7 7.2 3.7 -2.0 3.7Net Debt/ Equity, % 26.1 30.5 3.5 1.0 2.7 1.8 -7.6 -11.6 -10.9 -10.6 -8.3 -2.3 -17.7

Source: Worldscope, Mirae Asset Research. Note: *Preliminary numbers based on company annual or interim results reported in FY09.


10

3. New Product Cycles and Service innovation

New product cycles like Windows 7, new products and services like social networking, mobile libraries (the Kindle), cloud computing, etc all keep the dream alive in this concept and fashion driven sector. Historically, the stylized facts of tech investing involve higher returns for the Big. The Gorrillas beat the pygmy guerrillas. While there is always space for niche players, the work of Geoffrey Moore suggests that the player that has proprietary control over open architecture, where switching costs are high, gets rewarded by large market capitalization. The big also benefit from economies of scale and of acquisition. Technology investing also remains highly cyclical and is prone to excitable bubbles. The early and late 60s saw such technology bubbles, as did the late 1990s that most investors are familiar with. Figure 12 shows some of the tech darlings of the late 1960s, and their subsequent losses, and Figure 13 shows some of the late 1990s pets, who fell from grace as the bubble popped. Normally, growth investing beats value investing in technology – except in the aftermath of bubbles, and when those bubbles are popping. We seem to be in such a period, where value is the dominant style in technology investing. See Figure 14, Figure 15 and Figure 16 for the efficacy of various investing styles, and note the changes that occurred since 2000 when the tech bubble popped.

Figure 12: The late 1960s tech bubble. This is a fashion industry I.

1970Low

Computer StocksControl Data 163 28 83 54Sperry Rand 65 18 72 28Mohawk Data 111 18 84 285University Computing 186 13 93 118IBM 375 218 42 49Data Processing Financial 92 6 94 38Leasco Data 57 7 88 31Levin Townsend 67 3 96 38National Cash Register 81 29 64 39Electronic Data Systems 162 24 85 352 Average decline of computer stocks 80 103Technology StocksPolaroid 141 51 64 72Xerox 115 65 43 50Optical Scanning 146 16 89 200Texas Instruments 140 61 57 46Itek 172 17 90 71Recognition Equipment 102 12 88 **Fairchild Camera 102 18 82 443EG&G 72 9 88 100General Instruments 63 11 83 42Kalvar 73 11 85 *** Average decline of technology stocks 77 128

P/E at High

Stock Prices1967-68

High*Extent of

Decline (%)

Source: Psychology and the Stock Market – Investment strategy beyond Random Walk, p.90, David N. Dreman, 1977, Mirae Asset Research. Note: *Several stocks reached highs after 1968; in such cases, the post-1968 high is used. ** Company had earnings deficit.. ***In order to avoid distortion, the P/E ratios of Kalvar (1.216) and ATO (740) are omitted. Had they been included, the average P/E ratio would have been substantially higher.


11

Figure 13: The late 1990s tech bubble. This is a fashion industry II.

2001-02Low

Technology StocksCisco Systems 80 9 89 219AOL/Time Warner 281 29 90 313Oracle 46 7 84 43Nortel Networks 839 4 99 *Sun Microsystems 257 10 96 117EMC 104 4 96 179JDS Uniphase 1172 13 99 *Qualcomm 90 12 87 386Yahoo 119 4 97 ** Average decline of technology stocks 93 209

P/E at High

Stock Prices1999-00

HighExtent of

Decline (%)

Source: Factset, Worldscope, Mirae Asset Research. Note: * Company had earnings deficit. **In order to avoid distortion, the P/E ratios of Yahoo (2375x) is omitted. Had it been included, the average P/E ratio would have been substantially higher.

Figure 14. US software investing style efficacy : Value a winner after the TMT bust of 2000-2002

20

40

60

80

100

120

140

160

180

200

1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/0920

40

60

80

100

120

140

160

180

200Valuation

Capex Deployment

Earnings Accruals

0

200

400

600

800

1000

1200

1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/090

200

400

600

800

1000

1200

Price Momentum

Earnings Momentum

Profitability

Growth

Source: Mirae Asset Research. Note: Lines showing average top quintile basket less average sector performance. Baskets are rebalanced monthly. Valuation basket based on 12m fd P/E, P/op inc, P/B, P/sales, P/FCF, EV/EBIT, EV/EBITDA, EV/capital employed, EV/sales, EV/Op FCF, trailing P/E and EV/FCF; top quintile = quintile of stocks with lowest valuation multiples. Capex deployment basket based on capex/depr, capex/sales and capex/fixed assets; top quintile = quintile of stocks with lowest capex ratios. Earnings accruals basket based on acct receivables/total assets YoY% chg, inventories/total assets YoY% chg and acct payable/total assets YoY% chg; top quintile = quintile of stocks with lowest accruals ratios. Price momentum basket based on 6m/9m/12m price momentum, price relative strength, 12m chg in 3m price momentum and up/down days; top quintile = quintile of stocks with strongest price momentum. Earnings momentum basket based on consensus FY1/FY2/12m fd EPS revisions, consensus FY1/FY2 EPS momentum; top quintile = quintile of stocks with strongest earnings momentum. Profitability basket based on ROE, ROE YoY% chg, rtn on capital employed and rtn on capital employed YoY% chg; top quintile = quintile of stocks with highest profitability ratios. Growth basket based on 3yr/5yr actual sales growth, 3yr/5yr actual EPS growth and consensus FY1/FY2 EPS growth; top quintile = quintile of stocks with strongest growth. For a detailed description on factors, please see appendix 2.


12

Figure 15. US tech hardware investing style efficacy : Value a winner after the TMT bust of 2000-2002

40

60

80

100

120

140

160

180

1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/0940

60

80

100

120

140

160

180Valuation

Capex Deployment

Earnings Accruals

50

100

150

200

250

300

350

400

450

1/88 1/91 1/94 1/97 1/00 1/03 1/06 1/0950

100

150

200

250

300

350

400

450Price Momentum

Earnings Momentum

Profitability

Growth

Source: Mirae Asset Research. Note: Lines showing average top quintile basket less average sector performance. Valuation basket based on 12m fd P/E, P/op inc, P/B, P/sales, P/FCF, EV/EBIT, EV/EBITDA, EV/capital employed, EV/sales, EV/Op FCF, trailing P/E and EV/FCF; top quintile = quintile of stocks with lowest valuation multiples. Capex deployment basket based on capex/depr, capex/sales and capex/fixed assets; top quintile = quintile of stocks with lowest capex ratios. Earnings accruals basket based on acct receivables/total assets YoY% chg, inventories/total assets YoY% chg and acct payable/total assets YoY% chg; top quintile = quintile of stocks with lowest accruals ratios. Price momentum basket based on 6m/9m/12m price momentum, price relative strength, 12m chg in 3m price momentum and up/down days; top quintile = quintile of stocks with strongest price momentum. Earnings momentum basket based on consensus FY1/FY2/12m fd EPS revisions, consensus FY1/FY2 EPS momentum; top quintile = quintile of stocks with strongest earnings momentum. Profitability basket based on ROE, ROE YoY% chg, rtn on capital employed and rtn on capital employed YoY% chg; top quintile = quintile of stocks with highest profitability ratios. Growth basket based on 3yr/5yr actual sales growth, 3yr/5yr actual EPS growth and consensus FY1/FY2 EPS growth; top quintile = quintile of stocks with strongest growth. For a detailed description on factors, please see appendix 2.

Figure 16. US semis investing style efficacy : Value investing is dominant since 2000-2002 tech bust

50

100

150

200

250

300

350

1/94 1/96 1/98 1/00 1/02 1/04 1/06 1/08 1/1050

100

150

200

250

300

350Valuation

Capex Deployment

Earnings Accruals

0

50

100

150

200

250

300

1/94 1/96 1/98 1/00 1/02 1/04 1/06 1/08 1/100

50

100

150

200

250

300

Price Momentum

Earnings Momentum

Profitability

Growth

Source: Mirae Asset Research. Note: Lines showing average top quintile basket less average sector performance. Valuation basket based on 12m fd P/E, P/op inc, P/B, P/sales, P/FCF, EV/EBIT, EV/EBITDA, EV/capital employed, EV/sales, EV/Op FCF, trailing P/E and EV/FCF; top quintile = quintile of stocks with lowest valuation multiples. Capex deployment basket based on capex/depr, capex/sales and capex/fixed assets; top quintile = quintile of stocks with lowest capex ratios. Earnings accruals basket based on acct receivables/total assets YoY% chg, inventories/total assets YoY% chg and acct payable/total assets YoY% chg; top quintile = quintile of stocks with lowest accruals ratios. Price momentum basket based on 6m/9m/12m price momentum, price relative strength, 12m chg in 3m price momentum and up/down days; top quintile = quintile of stocks with strongest price momentum. Earnings momentum basket based on consensus FY1/FY2/12m fd EPS revisions, consensus FY1/FY2 EPS momentum; top quintile = quintile of stocks with strongest earnings momentum. Profitability basket based on ROE, ROE YoY% chg, rtn on capital employed and rtn on capital employed YoY% chg; top quintile = quintile of stocks with highest profitability ratios. Growth basket based on 3yr/5yr actual sales growth, 3yr/5yr actual EPS growth and consensus FY1/FY2 EPS growth; top quintile = quintile of stocks with strongest growth. For a detailed description on factors, please see appendix 2.


13

4. Technology Valuations are reasonable

Valuations lie in the eyes of the beholder. Also, it matters how much history one chooses to look at and which metrics one relies on. We have a considerably long time series for US technology stocks, going back to 1961. Figure 17, Figure 18 and Figure 19 shows the US absolute PB, Trailing PE and dividend yield going back to 1961. On a trailing PE basis, tech stocks are at fair value, on a PB basis, slightly above fair value, and on a dividend yield basis above fair value (as is the US market as a whole). On a RELATIVE PE basis (figure 20), US tech stocks are almost the cheapest they have been in 50 years. Only the recession of the early 1990s comes close. On a RELATIVE PB basis (figure 21), they look fairly valued, and likewise on a relative dividend yield basis (figure 22). Bottom line: US tech stocks are cheap to fairly valued using 50 years of data.

Figure 23 shows the absolute valuations for Asian, Japanese and European tech stocks, where we have shorter history. They look fairly valued based on a combination of valuation metrics.

Figure 17: US tech valuations – PB slightly above fair value

-2

0

2

4

6

8

10

12

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/09

-2

0

2

4

6

8

10

12US Information Technology P/B

Mean

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

The Go-Go Years

TMT Bubble

Source: Datastream, Mirae Asset Research

Figure 18: US tech valuations - PE at long-term average

0

10

20

30

40

50

60

70

80

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/090

10

20

30

40

50

60

70

80

US Information Technology trailing P/E

Mean

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

The Go-Go Years

TMT Bubble



14

Figure 19: US tech valuations – dividend yield higher than average

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/09

-1.0

0.0

1.0

2.0

3.0

4.0

5.0US Information Technology DY

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

Mean

Cheaper

Expensive


Figure 20: US tech valuations: relative PE at 50-year lows

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/090.5

1.0

1.5

2.0

2.5

3.0

3.5US Information Technologyrelative trailing P/E

Mean

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

MarketInformation Technology

Information Technology

relativePeak 34.6 70.4 3.0Mean 16.9 27.1 1.6Median 17.2 25.5 1.5Current 24.9 23.4 0.9

The Go-Go Years

TMT Bubble



15

Figure 21: US tech valuations: relative PB at long-term average

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/090.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0US Information Technologyrelative P/B

Mean

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD



relativePeak 5.5 11.0 3.7Mean 2.4 4.1 1.7Median 2.3 3.5 1.5Current 2.3 3.9 1.7

The Go-Go Years

TMT Bubble


Figure 22: US tech valuations: relative dividend yield at long-term average

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1/61 1/65 1/69 1/73 1/77 1/81 1/85 1/89 1/93 1/97 1/01 1/05 1/090.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0US Information Technology relative DY



relative

Peak 6.6 4.7 0.9

Mean 3.2 1.7 0.5

Median 3.1 1.3 0.5

Current 2.0 0.9 0.5

Avg. + 2SD

Avg. + 1SD

Avg. - 1SD

Avg. - 2SD

Mean

Cheaper

Expensive



16

Figure 23: Global tech valuations: cheap to fair

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1/80 1/83 1/86 1/89 1/92 1/95 1/98 1/01 1/04 1/07 1/10-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Japan Information Technology Composite Valuation IndexEurope IT CVIAsia ex Japan IT CVI

Cheaper

Expensive

Source: MSCI, Datastream, Mirae Asset Research Note: Composite Valuation Index(CVI) consists of the normalized average of P/E, P/B, P/CE and D/Y for Japan and Europe, P/E, P/B, D/Y, P/CE, and fwd P/E for Asia ex Japan.

5. Rising Oligopoly Power in technology, especially software

The large are gobbling up the small in tech-land. This is one reason why one of the stylized facts of tech investing is that the big gorillas win – they co-opt the chimpanzees. Figures 24 thru 26 show the market share commanded by the top 2 players in various sub-categories of technology. It is clear that the software sector sub-categories - systems software (Microsoft, Oracle), IT consulting (Computer Sciences, Affiliated Computer Services), application software (Activision, Electronic Arts), and internet software (Yahoo, Frontline Communications) – are all seeing a rapid rise in oligopoly power. Likewise in computer storage and networking equipment.

Figure 24: Rising oligopoly power in networking equipment and systems software

Figure 25: Rising oligopoly power in computer storage, IT consulting

55

60

65

70

75

80

85

3/96 3/98 3/00 3/02 3/04 3/06 3/08 3/1055

60

65

70

75

80

85Systems SoftwareNetworking Equipment

Computer Hardware

Top 2 Concentration

% of industry sales

25

30

35

40

45

50

55

60

65

70

75

3/96 3/98 3/00 3/02 3/04 3/06 3/08 3/1025

30

35

40

45

50

55

60

65

70

75Telecommunications EquipmentSemiconductorsComputer Storage & PeripheralsIT Consulting & Services

% of industry sales

Top 2 Concentration

Source: Worldscope, Mirae Asset Research. Note: Based on quarterly sales data. 4Q09 - Systems Software = 38 firms (top 2: Microsoft, Oracle), Networking Equipment = 31 firms (top 2: CISCO, Juniper Networks), Computer Hardware = 19 firms (top 2: Hewlett-Packard, IBM).

Source: Worldscope, Mirae Asset Research. Note: Based on quarterly sales data. 4Q09 - Telecommunications Equipment = 75 firms (top 2: Motorola, Qualcomm), Semiconductors = 79 firms (top 2: Intel, Texas Instruments), Computer Storage & Peripherals = 43 firms (top 2: EMC, Western Digital), IT Consulting & Services = 51 firms (top 2: Computer Sciences Corp, Affiliated Comp Svc)


17

Figure 26: Rising oligopoly power in internet software, application software

5

10

15

20

25

30

35

40

45

50

55

3/96 3/98 3/00 3/02 3/04 3/06 3/08 3/105

10

15

20

25

30

35

40

45

50

55Semiconductor EquipmentElectronic Equipment & Instruments

Internet Software & ServicesApplication Software

% of industry sales

Top 2 Concentration

Source: Worldscope, Mirae Asset Research. Note: Based on quarterly sales data. 4Q09 - Semiconductor Equipment = 40 firms (top 2: Applied Materials, Amkor Technologies), Electronic Equipment & Instruments = 148 firms (top 2: Ingram Micro, Tech Data Corp), Internet Software & Services = 134 firms (top 2: Yahoo, Frontline Communications), Application Software = 104 firms (top 2: Activision, Electronic Arts).

6. Sentiment is mixed. Being bullish on technology is very consensus. So why is the sector only at fair value?

There is little doubt that both the buy and sell-side have a consensus bullish opinion on technology. However, as Figure 27 shows the NASDAQ short interest ratio is just neutral. Also, at the peak of the TMT bubble in 2000, tech-specific sector funds and ETFs accounted for more than half of all sector funds and ETF value. Today that ratio is only 15%, well below the average of 20% or so since 1990. If sentiment were so hot on tech, we would see it trading at much higher relative multiples than it is now. Maybe investors just are not positioned as aggressively as their bullish replies in polls.

Figure 27: NASDAQ short interest ratio: Just neutral

-60%

-40%

-20%

0%

20%

40%

60%

80%

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 101.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0Nasdaq 6m fwd perf, LSNasdaq Short Interest Ratio, RS

Panic

Source: Bloomberg, Pinnacle Data, Mirae Asset Research. Note: Short interest ratio = Monthly total short interest divided by average daily trading volume for Nasdaq Composite in the previous month.


18

In conclusion, technology fundamentals are exceptionally good. Leading indicators of tech demand are pointing to a robust recovery, the sector benefits from high operating leverage, low capital intensity and high free cash flows, is seeing higher oligopoly power, new product cycles and services, and is trading at fair valuations that fall shy of these improved fundamentals. Stay long technology, especially software.


19

This page is intentionally left blank.


20

Appendix 1

Dupont analysis for US technology sector and sub-sectors

US Tech Sector 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 102 111 116 141 157 174 188 222 240 285 390 470 533NI/ EBT, % (1) 58.7 58.8 58.2 63.3 64.6 57.3 57.7 20.4 45.2 27.4 62.4 57.1 62.0EBT/ EBIT, % (2) 92.6 91.6 88.1 89.8 85.1 75.7 80.6 66.5 51.0 65.2 90.6 92.3 91.5EBIT/ Sales, % (3) 17.4 14.9 11.3 12.5 13.0 10.4 11.2 6.2 3.7 4.5 11.7 12.4 10.6Sales/ Assets, % (4) 112.3 102.4 95.3 96.3 89.3 89.1 89.8 89.0 93.5 94.9 101.4 109.3 112.6Assets/ Equity, x (5) 1.76 1.75 1.85 1.83 2.16 2.33 2.30 2.48 2.63 2.73 2.44 2.26 2.31ROE, % (1x2x3x4x5) 18.7 14.4 10.2 12.5 13.8 9.3 10.8 1.9 2.1 2.1 16.3 16.2 15.7NI/ Sales, % (6) 9.5 8.0 5.8 7.1 7.2 4.5 5.2 0.8 0.9 0.8 6.6 6.5 6.0Depr/ Sales, % (7) 7.3 7.2 7.3 6.9 5.9 6.7 6.4 7.4 6.7 6.7 6.0 5.3 5.1Capex/ Sales, % (8) 12.1 11.2 8.6 7.9 8.6 8.2 7.8 7.5 6.6 6.6 6.7 7.6 7.2FCF/ Sales, % (6+7-8) 4.7 4.0 4.5 6.1 4.4 2.9 3.8 0.8 1.0 0.9 5.9 4.3 4.0Net Debt/ Equity, % 9.6 7.5 5.0 1.7 27.7 40.3 36.5 38.5 36.3 28.0 4.6 10.8 5.2

US Software 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 19 20 23 32 33 41 49 59 67 86 118 156 189NI/ EBT, % (1) 65.0 61.2 51.0 54.2 62.8 38.7 49.0 39.6 64.2 61.0 62.0 58.0 57.0EBT/ EBIT, % (2) 79.8 78.8 57.5 83.9 83.5 65.0 76.1 77.0 88.4 88.0 92.1 90.0 91.6EBIT/ Sales, % (3) 10.3 10.1 6.4 12.8 13.2 6.8 9.0 8.5 14.0 11.3 13.3 11.1 12.6Sales/ Assets, % (4) 119.1 119.4 92.4 106.9 99.1 101.1 104.8 106.0 103.8 101.4 101.4 95.7 96.9Assets/ Equity, x (5) 1.91 1.83 2.97 2.48 2.51 2.57 2.38 2.54 2.35 2.24 2.14 2.19 2.22ROE, % (1x2x3x4x5) 12.1 10.7 5.1 15.5 17.2 4.4 8.4 7.0 19.3 13.8 16.5 12.1 14.1NI/ Sales, % (6) 5.3 4.9 1.9 5.8 6.9 1.7 3.4 2.6 7.9 6.1 7.6 5.8 6.6Depr/ Sales, % (7) 6.4 5.9 5.5 5.7 6.0 5.9 5.9 7.1 6.1 6.0 5.8 6.0 5.8Capex/ Sales, % (8) 10.1 8.0 6.4 6.4 6.4 5.8 5.4 5.7 5.9 5.8 5.9 6.0 5.8FCF/ Sales, % (6+7-8) 1.7 2.8 1.0 5.2 6.5 1.8 3.9 4.0 8.1 6.3 7.6 5.7 6.6Net Debt/ Equity, % 30.2 24.1 59.0 30.3 46.9 49.8 26.1 19.2 2.3 -6.6 -20.2 -12.5 -14.3

US Tech Hardware 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 63 70 71 86 99 103 107 124 133 148 200 228 256NI/ EBT, % (1) 57.5 59.4 59.9 64.3 63.6 58.3 60.0 2.6 NA NA 61.5 52.3 62.4EBT/ EBIT, % (2) 93.4 93.4 91.3 91.4 85.1 75.9 81.5 59.0 NA NA 87.5 90.2 88.5EBIT/ Sales, % (3) 19.0 17.5 13.4 13.2 13.3 11.3 12.4 5.4 -0.4 -0.3 9.6 10.4 8.3Sales/ Assets, % (4) 110.1 100.2 94.7 93.8 86.4 85.4 86.0 83.8 89.8 92.0 101.2 116.6 124.1Assets/ Equity, x (5) 1.74 1.74 1.75 1.73 2.14 2.35 2.34 2.56 2.88 3.25 2.81 2.57 2.68ROE, % (1x2x3x4x5) 19.6 16.9 12.1 12.6 13.3 10.0 12.2 0.2 -5.4 -8.8 14.6 14.8 15.2NI/ Sales, % (6) 10.2 9.7 7.3 7.7 7.2 5.0 6.1 0.1 -2.1 -2.9 5.1 4.9 4.6Depr/ Sales, % (7) 7.4 6.8 7.3 6.9 5.7 6.6 6.2 7.3 6.6 6.7 5.8 4.8 4.4Capex/ Sales, % (8) 11.3 11.3 8.8 7.7 8.5 8.1 7.6 7.5 6.1 5.6 5.3 6.0 5.6FCF/ Sales, % (6+7-8) 6.3 5.2 5.9 7.0 4.4 3.5 4.7 -0.1 -1.6 -1.9 5.6 3.8 3.3Net Debt/ Equity, % 7.9 5.6 0.4 -1.0 29.5 45.5 44.4 51.2 59.1 58.2 22.8 33.4 25.3

US Semis 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 20 21 22 23 25 30 32 39 40 51 72 86 88NI/ EBT, % (1) 67.8 NA NA 68.8 77.4 65.0 37.9 48.0 66.4 66.3 64.9 65.4 65.8EBT/ EBIT, % (2) 92.7 NA -88.6 82.7 87.3 86.7 76.2 82.8 92.2 96.8 96.7 98.2 97.8EBIT/ Sales, % (3) 12.1 -0.9 0.6 6.9 10.7 8.9 5.4 7.3 11.7 19.8 20.1 23.1 20.2Sales/ Assets, % (4) 123.0 107.0 104.4 104.0 105.0 104.4 100.6 102.6 101.7 101.5 102.3 101.5 91.0Assets/ Equity, x (5) 1.83 1.78 1.83 2.10 1.92 1.85 1.91 1.89 1.84 1.70 1.64 1.59 1.57ROE, % (1x2x3x4x5) 17.1 -4.1 -3.3 8.6 14.6 9.6 3.0 5.6 13.4 22.0 21.1 24.0 18.6NI/ Sales, % (6) 7.6 -2.2 -1.7 4.0 7.3 5.0 1.6 2.9 7.2 12.7 12.6 14.8 13.0Depr/ Sales, % (7) 7.3 10.7 9.4 8.3 7.6 8.2 8.9 9.0 8.6 7.6 7.3 6.7 8.2Capex/ Sales, % (8) 18.3 12.6 9.9 11.5 12.5 13.2 13.7 10.9 11.5 13.2 15.1 17.0 18.0FCF/ Sales, % (6+7-8) -3.4 -4.1 -2.2 0.7 2.3 0.0 -3.2 1.0 4.3 7.2 4.9 4.5 3.2Net Debt/ Equity, % 7.8 11.2 1.1 -1.4 -8.5 -7.7 -8.4 -17.5 -25.0 -24.4 -21.2 -18.9 -20.1



21

Dupont analysis for US technology sector and sub-sectors (continued)

US Tech Sector 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 590 717 868 924 952 975 980 941 867 790 733 668 578NI/ EBT, % (1) 62.8 58.9 62.9 45.0 NA NA 46.2 66.4 68.6 76.9 69.0 58.7 68.0EBT/ EBIT, % (2) 92.3 90.0 92.9 89.2 NA NA 87.3 92.7 94.2 94.1 92.9 90.6 93.0EBIT/ Sales, % (3) 11.3 9.4 13.6 9.3 -10.5 -0.5 7.5 10.4 12.0 11.9 12.1 8.9 10.4Sales/ Assets, % (4) 112.4 108.7 95.6 84.3 87.7 81.1 82.7 85.3 89.2 89.8 89.7 93.3 81.9Assets/ Equity, x (5) 2.29 2.26 2.02 1.79 1.93 2.00 1.94 1.88 1.91 1.95 2.05 2.14 2.03ROE, % (1x2x3x4x5) 16.9 12.3 15.4 5.7 -22.3 -8.1 4.9 10.2 13.3 15.1 14.3 9.5 10.9NI/ Sales, % (6) 6.6 5.0 8.0 3.7 -13.2 -5.0 3.0 6.4 7.8 8.6 7.8 4.8 6.6Depr/ Sales, % (7) 5.2 5.6 5.9 7.7 10.8 6.7 5.8 4.9 4.6 4.3 4.5 4.7 5.2Capex/ Sales, % (8) 6.7 6.1 5.5 7.0 6.5 4.5 3.8 3.8 3.9 4.2 4.3 4.2 3.5FCF/ Sales, % (6+7-8) 5.1 4.5 8.4 4.5 -8.9 -2.8 5.1 7.5 8.5 8.7 8.0 5.2 8.3Net Debt/ Equity, % 2.9 5.1 -7.7 -6.6 -12.4 -20.1 -25.0 -29.5 -27.4 -25.8 -17.0 -18.7 -28.3

US Software 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 222 296 409 427 443 462 465 431 399 355 314 285 242NI/ EBT, % (1) 55.7 56.9 53.4 NA NA -4.3 52.5 65.4 62.4 69.6 64.2 55.6 70.0EBT/ EBIT, % (2) 92.0 92.6 94.5 -48.9 NA 83.3 93.6 94.4 95.0 94.0 94.0 92.1 94.7EBIT/ Sales, % (3) 13.0 13.7 19.3 0.7 -23.1 6.2 14.2 14.7 16.6 16.5 17.6 14.3 19.8Sales/ Assets, % (4) 98.9 89.9 72.9 59.2 70.6 68.7 65.8 62.8 66.9 68.5 73.7 74.1 66.3Assets/ Equity, x (5) 2.16 2.04 1.86 1.64 1.93 1.96 1.89 1.80 1.96 2.02 2.07 2.08 1.88ROE, % (1x2x3x4x5) 14.2 13.2 13.2 -6.6 -41.3 -0.3 8.7 10.3 12.9 15.0 16.3 11.3 16.4NI/ Sales, % (6) 6.7 7.2 9.7 -6.8 -30.3 -0.2 7.0 9.1 9.8 10.8 10.6 7.3 13.1Depr/ Sales, % (7) 6.3 7.2 7.6 15.5 20.3 7.1 5.9 5.2 5.2 5.1 5.2 5.5 5.8Capex/ Sales, % (8) 4.6 4.7 4.8 7.0 5.2 3.7 3.4 3.4 3.4 4.0 4.1 4.1 3.3FCF/ Sales, % (6+7-8) 8.3 9.6 12.5 1.7 -15.3 3.1 9.5 10.9 11.6 11.9 11.7 8.8 15.6Net Debt/ Equity, % -23.1 -26.1 -30.1 -22.9 -34.4 -43.1 -42.5 -41.6 -31.9 -30.4 -22.4 -29.8 -37.4

US Tech Hardware 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 279 319 350 369 374 377 373 369 338 306 293 269 232NI/ EBT, % (1) 61.9 61.7 69.0 58.9 NA NA 40.1 65.1 73.6 82.2 74.2 70.4 67.3EBT/ EBIT, % (2) 90.4 87.7 90.6 87.9 NA NA 79.6 90.2 92.5 93.3 91.6 89.6 89.8EBIT/ Sales, % (3) 8.9 7.5 9.8 8.1 -5.3 -2.5 4.5 7.2 8.6 8.8 9.2 6.7 6.9Sales/ Assets, % (4) 126.4 125.7 117.0 104.9 109.2 97.6 101.8 107.1 111.4 112.9 106.6 111.6 97.5Assets/ Equity, x (5) 2.66 2.73 2.37 2.09 2.21 2.31 2.23 2.17 2.10 2.15 2.25 2.43 2.35ROE, % (1x2x3x4x5) 16.7 13.9 17.0 9.2 -14.5 -13.6 3.3 9.8 13.8 16.3 14.9 11.5 9.5NI/ Sales, % (6) 5.0 4.1 6.1 4.2 -6.0 -6.0 1.4 4.2 5.9 6.7 6.2 4.2 4.1Depr/ Sales, % (7) 4.2 4.1 4.4 4.4 5.5 4.9 4.3 3.5 3.2 3.0 3.2 3.3 3.9Capex/ Sales, % (8) 5.7 5.3 4.7 5.3 5.0 3.6 2.9 2.8 2.9 3.1 3.1 3.2 3.1FCF/ Sales, % (6+7-8) 3.5 2.8 5.8 3.4 -5.5 -4.7 2.8 5.0 6.2 6.6 6.3 4.4 5.0Net Debt/ Equity, % 29.2 35.4 17.0 16.0 10.3 0.3 -7.5 -16.0 -21.0 -21.0 -10.2 -9.0 -20.2

US Semis 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 89 102 109 128 135 136 142 141 130 129 126 114 104NI/ EBT, % (1) 71.9 53.6 65.7 67.1 NA NA 31.9 71.2 69.7 80.8 66.5 6.0 36.0EBT/ EBIT, % (2) 96.9 92.7 95.6 96.8 NA NA 83.3 95.2 96.5 96.3 93.8 87.0 107.4EBIT/ Sales, % (3) 22.2 12.2 24.3 30.2 -9.9 -6.5 7.5 17.3 19.3 16.4 13.7 6.6 2.9Sales/ Assets, % (4) 81.1 78.6 67.3 67.8 55.8 53.0 57.5 67.8 70.6 69.7 69.8 75.3 63.3Assets/ Equity, x (5) 1.62 1.57 1.51 1.42 1.40 1.42 1.42 1.40 1.39 1.40 1.52 1.55 1.49ROE, % (1x2x3x4x5) 20.3 7.5 15.5 18.8 -10.6 -8.8 1.6 11.1 12.8 12.5 9.1 0.4 1.1NI/ Sales, % (6) 15.5 6.1 15.3 19.6 -13.6 -11.7 2.0 11.7 13.0 12.7 8.6 0.3 1.1Depr/ Sales, % (7) 9.2 11.4 11.3 10.5 18.6 16.6 14.3 11.4 10.5 9.4 9.4 10.1 12.1Capex/ Sales, % (8) 16.2 13.8 11.5 15.4 18.7 12.4 9.8 10.1 10.6 10.7 10.9 10.6 7.1FCF/ Sales, % (6+7-8) 8.5 3.7 15.1 14.6 -13.7 -7.5 6.5 13.0 12.8 11.4 7.1 -0.1 6.1Net Debt/ Equity, % -26.5 -17.0 -25.2 -27.8 -24.8 -25.9 -32.2 -35.6 -33.5 -27.7 -23.5 -19.7 -28.4



22

Dupont analysis for Europe technology sector and sub-sectors

Europe Tech Sector 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 18 21 31 41 51 58 63 66 67 78 83 100NI/ EBT, % (1) 56.1 49.0 50.2 46.7 57.6 29.0 36.3 52.8 53.9 65.7 -10.0 65.1EBT/ EBIT, % (2) 57.6 61.4 65.3 69.9 71.3 62.6 59.6 58.2 53.1 78.9 51.0 83.5EBIT/ Sales, % (3) 8.4 8.4 7.1 7.3 8.1 7.5 7.7 7.3 6.8 6.4 3.0 7.9Sales/ Assets, % (4) 102.2 98.3 103.0 85.3 91.2 90.2 85.2 82.1 80.3 86.0 89.5 95.1Assets/ Equity, x (5) 3.26 3.08 4.09 4.93 4.27 4.19 4.24 4.26 4.02 3.77 3.80 3.54ROE, % (1x2x3x4x5) 9.0 7.6 9.9 10.0 12.9 5.1 6.0 7.9 6.3 10.7 -0.5 14.5NI/ Sales, % (6) 2.7 2.5 2.3 2.4 3.3 1.4 1.7 2.3 1.9 3.3 -0.2 4.3Depr/ Sales, % (7) 4.3 4.6 4.5 4.9 4.7 4.8 5.1 5.1 5.2 4.8 4.9 4.5Capex/ Sales, % (8) 6.3 6.0 5.3 6.0 6.3 6.2 6.1 5.6 5.1 5.2 5.8 4.9FCF/ Sales, % (6+7-8) 0.6 1.1 1.5 1.3 1.7 -0.1 0.6 1.8 2.0 2.9 -1.0 3.9Net Debt/ Equity, % 18.8 19.2 20.5 22.2 27.9 32.9 47.6 51.1 34.3 24.5 24.2 14.0

Europe Software 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 7 11 18 18 22 24 24 28 31 43NI/ EBT, % (1) 70.6 57.1 62.5 62.1 67.4 62.2 56.7 58.2 60.6 59.0EBT/ EBIT, % (2) 95.5 83.5 84.6 75.6 81.0 79.6 79.5 84.6 89.8 92.6EBIT/ Sales, % (3) 9.9 7.5 11.4 9.0 9.3 7.9 7.4 7.6 9.7 9.6Sales/ Assets, % (4) 114.7 124.5 121.4 108.4 115.6 113.0 115.3 121.2 127.6 130.4Assets/ Equity, x (5) 2.08 2.76 2.71 3.27 2.62 2.82 2.71 2.74 2.57 2.62ROE, % (1x2x3x4x5) 15.9 12.3 19.8 15.0 15.3 12.5 10.4 12.5 17.4 17.9NI/ Sales, % (6) 6.7 3.6 6.0 4.2 5.1 3.9 3.3 3.8 5.3 5.2Depr/ Sales, % (7) 3.3 4.5 3.7 4.1 3.6 3.8 3.6 3.6 3.5 3.5Capex/ Sales, % (8) 9.8 8.7 4.5 6.6 5.4 3.8 4.0 3.5 5.2 3.8FCF/ Sales, % (6+7-8) 0.2 -0.5 5.1 1.7 3.3 3.9 2.9 3.8 3.6 4.9Net Debt/ Equity, % -3.4 18.4 14.9 27.2 19.0 4.8 12.2 6.4 -8.9 -17.4

Europe Tech Hardware 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 15 16 23 29 32 38 39 40 41 46 46 48NI/ EBT, % (1) 57.2 55.2 52.3 47.4 70.1 44.9 49.3 51.2 53.4 64.7 NM 64.9EBT/ EBIT, % (2) 59.5 65.3 67.4 71.3 71.9 63.9 59.8 56.6 49.9 77.9 6.7 80.9EBIT/ Sales, % (3) 8.7 9.4 7.5 7.4 8.0 7.5 7.8 7.3 6.7 5.9 1.6 7.2Sales/ Assets, % (4) 116.4 116.7 111.9 88.4 93.0 91.7 84.8 80.5 78.5 83.9 87.4 92.7Assets/ Equity, x (5) 3.89 3.56 4.65 5.59 4.62 4.27 4.40 4.42 4.16 3.98 4.12 3.89ROE, % (1x2x3x4x5) 13.3 14.1 13.7 12.4 17.3 8.4 8.6 7.5 5.8 10.0 -4.8 13.6NI/ Sales, % (6) 2.9 3.4 2.6 2.5 4.0 2.1 2.3 2.1 1.8 3.0 -1.3 3.8Depr/ Sales, % (7) 4.2 4.5 4.4 4.9 4.7 4.9 5.2 5.2 5.4 4.8 4.9 4.3Capex/ Sales, % (8) 6.4 5.5 5.2 5.8 6.4 6.1 6.2 5.7 5.2 4.7 5.1 4.2FCF/ Sales, % (6+7-8) 0.7 2.4 1.8 1.6 2.4 0.9 1.3 1.6 2.0 3.1 -1.6 3.9Net Debt/ Equity, % 17.2 12.4 14.1 16.5 22.6 25.3 46.7 54.1 34.8 24.9 27.9 17.9

Europe Semis 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 6 9NI/ EBT, % (1) 77.0 74.3EBT/ EBIT, % (2) 84.4 89.6EBIT/ Sales, % (3) 11.7 14.8Sales/ Assets, % (4) 78.2 79.6Assets/ Equity, x (5) 2.52 2.17ROE, % (1x2x3x4x5) 15.0 17.0NI/ Sales, % (6) 7.6 9.9Depr/ Sales, % (7) 7.2 8.5Capex/ Sales, % (8) 15.9 16.9FCF/ Sales, % (6+7-8) -1.0 1.4Net Debt/ Equity, % 27.4 20.9



23

Dupont analysis for Europe technology sector and sub-sectors (continued)

Europe Tech Sector 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 110 130 170 191 187 179 172 167 154 150 137 122 78NI/ EBT, % (1) 66.9 70.8 66.0 64.8 NA NA -12.5 70.1 86.4 79.8 78.9 11.6 -2.0EBT/ EBIT, % (2) 87.6 91.3 89.0 89.7 NA NA 51.6 89.2 92.1 92.4 89.4 78.8 56.2EBIT/ Sales, % (3) 9.7 10.9 9.4 10.3 -6.2 -7.2 3.3 10.7 10.2 10.2 7.9 4.8 2.4Sales/ Assets, % (4) 102.7 109.1 100.2 87.8 87.3 87.5 90.3 95.9 91.8 90.2 93.7 91.7 90.3Assets/ Equity, x (5) 3.36 2.51 2.48 2.12 2.22 2.25 2.15 2.02 1.98 2.01 2.14 2.42 2.30ROE, % (1x2x3x4x5) 19.5 19.2 13.8 11.1 -15.7 -21.3 -0.4 13.0 14.8 13.6 11.2 1.0 -0.1NI/ Sales, % (6) 5.7 7.0 5.5 6.0 -8.1 -10.8 -0.2 6.7 8.1 7.5 5.6 0.4 0.0Depr/ Sales, % (7) 4.2 4.4 4.9 5.9 8.3 8.5 7.9 6.3 5.5 5.1 5.1 5.0 5.4Capex/ Sales, % (8) 4.6 5.5 6.0 8.3 7.0 4.1 3.7 4.7 4.5 4.0 3.8 3.3 2.6FCF/ Sales, % (6+7-8) 5.3 5.9 4.4 3.6 -6.8 -6.4 4.0 8.3 9.1 8.6 6.9 2.1 2.8Net Debt/ Equity, % 3.9 -4.4 -0.7 1.4 1.8 -6.2 -28.7 -31.1 -26.5 -19.4 -14.9 -1.7 -9.9

Europe Software 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 50 67 92 107 100 93 87 81 74 70 62 54 36NI/ EBT, % (1) 61.0 56.7 56.3 NA NA NA 14.8 61.0 94.2 72.0 74.2 66.5 68.0EBT/ EBIT, % (2) 95.0 95.6 92.5 -20.5 NA NA 70.2 88.8 92.8 91.7 91.4 87.1 89.8EBIT/ Sales, % (3) 12.2 10.8 8.5 0.8 -10.4 -16.9 3.5 6.5 9.1 9.1 10.3 9.1 9.7Sales/ Assets, % (4) 138.4 141.3 114.6 63.7 76.8 92.6 105.4 105.9 98.4 102.2 103.2 100.0 96.3Assets/ Equity, x (5) 2.81 2.36 2.13 1.71 1.82 2.24 1.92 1.96 1.93 2.13 2.16 2.33 1.98ROE, % (1x2x3x4x5) 27.4 19.6 10.8 -2.5 -21.1 -44.7 0.7 7.3 15.1 13.1 15.6 12.3 11.3NI/ Sales, % (6) 7.1 5.9 4.4 -2.3 -15.0 -21.6 0.4 3.5 7.9 6.0 7.0 5.3 5.9Depr/ Sales, % (7) 3.2 3.1 3.7 7.2 9.6 9.2 7.5 5.4 3.8 3.6 4.0 4.4 4.5Capex/ Sales, % (8) 4.0 3.8 3.9 5.0 4.8 3.4 2.3 2.9 3.1 3.0 3.1 3.2 3.4FCF/ Sales, % (6+7-8) 6.2 5.1 4.2 -0.2 -10.3 -15.8 5.5 6.1 8.7 6.7 7.9 6.5 7.0Net Debt/ Equity, % -14.4 -29.2 -18.9 -4.7 4.4 15.7 -18.1 -18.8 -17.6 -12.1 -3.5 15.2 0.9

Europe Tech Hardware 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 51 50 60 67 69 65 65 66 60 59 54 49 34NI/ EBT, % (1) 68.0 75.0 67.5 68.0 NA NA -23.3 72.5 85.7 82.9 85.2 35.7 NAEBT/ EBIT, % (2) 86.2 90.7 87.5 89.4 NA NA 48.1 89.7 93.0 93.3 90.8 77.2 NAEBIT/ Sales, % (3) 9.3 11.2 9.4 11.0 -5.5 -3.9 3.6 14.2 12.4 11.0 8.4 4.0 -0.3Sales/ Assets, % (4) 100.5 107.7 101.3 104.1 100.5 94.7 93.0 98.9 95.7 90.8 93.9 93.2 90.4Assets/ Equity, x (5) 3.61 2.69 2.76 2.51 2.78 2.51 2.53 2.24 2.18 2.08 2.27 2.60 2.49ROE, % (1x2x3x4x5) 19.8 22.1 15.5 17.5 -18.4 -16.8 -1.0 20.5 20.6 16.2 13.8 2.6 -4.0NI/ Sales, % (6) 5.4 7.6 5.6 6.7 -6.6 -7.1 -0.4 9.3 9.9 8.5 6.5 1.1 -1.8Depr/ Sales, % (7) 4.1 3.8 4.4 4.4 6.1 5.7 5.5 4.2 3.6 3.6 4.2 4.2 5.4Capex/ Sales, % (8) 3.9 4.6 5.1 5.3 4.4 2.5 2.1 2.5 3.0 2.4 2.4 2.4 2.2FCF/ Sales, % (6+7-8) 5.6 6.9 4.9 5.8 -4.9 -3.9 3.0 11.0 10.5 9.6 8.3 2.9 1.5Net Debt/ Equity, % 5.0 -0.7 8.0 6.7 -0.6 -24.5 -49.0 -51.2 -39.9 -26.4 -22.5 -14.1 -16.1

Europe Semis 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 9 13 18 17 18 21 20 20 20 21 21 19 8NI/ EBT, % (1) 72.7 69.5 75.6 74.3 NA NA NA 69.6 45.7 79.2 NM NA NAEBT/ EBIT, % (2) 83.2 85.5 91.7 96.6 NA -13.3 -25.8 85.9 75.5 89.3 16.0 NA NAEBIT/ Sales, % (3) 8.9 8.0 12.3 22.7 -0.9 1.6 1.3 6.9 3.5 8.7 1.3 -1.6 -3.2Sales/ Assets, % (4) 75.5 77.5 70.6 75.6 63.1 59.7 63.2 74.0 70.0 71.9 78.8 71.7 64.3Assets/ Equity, x (5) 2.17 1.91 1.91 1.90 1.74 1.75 1.76 1.65 1.60 1.68 1.73 1.99 2.11ROE, % (1x2x3x4x5) 8.8 7.1 11.5 23.5 -1.0 -1.0 -0.8 5.1 1.4 7.5 -1.5 -20.9 -15.3NI/ Sales, % (6) 5.4 4.8 8.5 16.3 -0.9 -0.9 -0.7 4.1 1.2 6.2 -1.1 -14.6 -11.3Depr/ Sales, % (7) 10.3 11.9 11.4 10.9 17.1 18.7 18.4 15.5 16.8 14.1 11.5 10.7 10.9Capex/ Sales, % (8) 17.2 16.2 18.9 28.7 25.4 12.4 12.9 16.0 14.0 12.6 11.3 8.5 4.4FCF/ Sales, % (6+7-8) -1.5 0.4 1.0 -1.5 -9.1 5.4 4.7 3.6 4.0 7.7 -0.9 -12.4 -4.8Net Debt/ Equity, % 17.0 5.2 -7.5 -0.2 2.0 1.9 -4.4 -6.5 -7.9 -8.7 -6.8 11.1 -2.1



24

Dupont analysis for Japan technology sector and sub-sectors

Japan Tech Sector 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 22 23 28 39 38 42 47 52 56 61 85 96NI/ EBT, % (1) 40.4 38.1 42.4 45.7 45.9 45.7 41.6 31.5 32.1 45.4 48.7 49.0EBT/ EBIT, % (2) 76.6 71.4 77.9 82.8 80.6 77.1 68.1 60.0 64.8 72.6 82.3 83.1EBIT/ Sales, % (3) 8.8 6.6 7.5 9.1 9.4 9.3 7.0 5.0 4.7 5.4 6.6 5.9Sales/ Assets, % (4) 96.5 90.4 90.5 89.1 86.8 86.5 85.3 85.8 84.4 85.2 85.6 91.2Assets/ Equity, x (5) 3.09 3.10 2.90 2.88 2.87 2.90 2.91 2.87 2.83 2.82 2.85 2.75ROE, % (1x2x3x4x5) 8.2 5.0 6.5 8.8 8.6 8.2 4.9 2.3 2.3 4.3 6.5 6.0NI/ Sales, % (6) 2.7 1.8 2.5 3.4 3.5 3.3 2.0 1.0 1.0 1.8 2.7 2.4Depr/ Sales, % (7) 6.2 6.4 5.8 5.6 5.8 5.7 6.1 6.0 6.0 6.0 5.6 5.2Capex/ Sales, % (8) 9.2 7.4 6.3 8.2 9.2 9.7 9.8 7.2 6.3 6.6 7.1 7.4FCF/ Sales, % (6+7-8) -0.3 0.8 2.0 0.8 0.1 -0.7 -1.7 -0.3 0.6 1.1 1.1 0.3Net Debt/ Equity, % -20.5 -22.6 -17.2 6.6 12.5 22.6 31.0 29.7 25.6 21.7 24.6 26.8

Japan Software 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 6 7 9 10 14 16NI/ EBT, % (1) 52.4 50.7 55.7 36.4 43.5 47.5EBT/ EBIT, % (2) 97.9 97.7 91.1 85.9 89.5 84.1EBIT/ Sales, % (3) 21.2 19.7 10.1 6.5 10.8 10.5Sales/ Assets, % (4) 99.7 91.6 81.2 78.4 60.4 64.1Assets/ Equity, x (5) 1.61 1.66 1.75 1.78 2.33 2.31ROE, % (1x2x3x4x5) 17.4 14.8 7.3 2.9 5.9 6.2NI/ Sales, % (6) 10.8 9.7 5.1 2.0 4.2 4.2Depr/ Sales, % (7) 1.6 2.0 2.5 3.0 3.5 3.5Capex/ Sales, % (8) 3.4 4.7 3.7 6.2 5.0 5.9FCF/ Sales, % (6+7-8) 9.1 7.0 3.8 -1.1 2.7 1.8Net Debt/ Equity, % -66.5 -64.5 -32.5 -37.4 9.8 20.2

Japan Tech Hardware 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 19 20 23 31 30 33 35 38 40 44 62 71NI/ EBT, % (1) 40.5 38.4 42.3 45.2 45.5 45.1 39.8 27.1 28.3 45.4 48.5 48.1EBT/ EBIT, % (2) 76.7 71.6 77.4 82.3 79.4 75.5 64.9 55.0 62.6 71.6 80.4 81.5EBIT/ Sales, % (3) 8.8 6.6 7.3 8.9 9.1 8.9 6.5 4.6 4.5 5.3 6.0 5.3Sales/ Assets, % (4) 97.0 91.0 91.1 89.6 87.0 86.7 85.5 86.5 85.4 86.0 87.7 93.8Assets/ Equity, x (5) 3.12 3.13 2.94 2.92 2.92 2.98 3.03 2.99 2.95 2.92 2.94 2.84ROE, % (1x2x3x4x5) 8.3 5.1 6.4 8.6 8.3 7.8 4.4 1.8 2.0 4.3 6.0 5.5NI/ Sales, % (6) 2.8 1.8 2.4 3.3 3.3 3.0 1.7 0.7 0.8 1.7 2.3 2.1Depr/ Sales, % (7) 6.2 6.4 5.8 5.7 5.9 5.8 6.2 6.1 6.1 6.1 5.7 5.3Capex/ Sales, % (8) 9.2 7.4 6.3 8.2 9.2 9.7 10.0 7.4 6.4 6.7 7.2 7.4FCF/ Sales, % (6+7-8) -0.3 0.8 1.9 0.7 0.0 -0.9 -2.1 -0.6 0.5 1.1 0.9 0.0Net Debt/ Equity, % -21.1 -23.3 -16.5 7.2 14.9 25.9 36.5 35.5 29.7 25.5 26.7 28.7

Japan Semis 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 7 6 6 6 7 7 7 9 9NI/ EBT, % (1) 51.7 51.0 54.9 46.9 -39.2 49.8 51.4 53.6 56.2EBT/ EBIT, % (2) 84.8 87.2 83.7 73.0 24.6 58.0 80.9 93.5 95.0EBIT/ Sales, % (3) 10.2 11.7 10.6 7.5 3.2 5.2 8.9 16.4 16.3Sales/ Assets, % (4) 74.3 72.7 69.3 68.5 63.7 64.0 72.5 80.0 82.3Assets/ Equity, x (5) 2.34 2.27 2.06 1.92 2.00 2.09 2.12 2.11 1.90ROE, % (1x2x3x4x5) 7.8 8.6 7.0 3.4 -0.4 2.0 5.7 13.9 13.6NI/ Sales, % (6) 4.5 5.2 4.9 2.6 -0.3 1.5 3.7 8.2 8.7Depr/ Sales, % (7) 4.9 5.4 6.4 7.2 7.2 6.8 6.8 5.3 5.8Capex/ Sales, % (8) 9.1 11.2 13.1 10.9 5.8 7.0 6.9 8.8 9.3FCF/ Sales, % (6+7-8) 0.3 -0.6 -1.8 -1.1 1.1 1.3 3.6 4.7 5.2Net Debt/ Equity, % 24.2 16.4 20.2 20.7 26.3 27.2 18.0 12.7 7.2



25

Dupont analysis for Japan technology sector and sub-sectors (continued)

Japan Tech Sector 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 96 91 174 201 231 251 275 278 277 271 259 248 144NI/ EBT, % (1) 42.5 -10.1 50.5 52.3 NA 34.6 48.1 52.6 52.1 51.6 51.2 NM NAEBT/ EBIT, % (2) 82.6 60.8 80.7 90.5 NA 86.7 94.5 95.1 94.9 94.7 93.8 58.5 NAEBIT/ Sales, % (3) 5.5 2.5 4.1 7.3 -1.5 3.3 5.7 6.4 6.2 7.3 7.1 1.1 -1.7Sales/ Assets, % (4) 90.6 90.0 93.1 91.5 93.2 99.2 102.7 103.2 100.7 99.4 105.9 103.0 94.8Assets/ Equity, x (5) 2.74 2.81 2.59 2.59 2.54 2.60 2.40 2.31 2.22 2.29 2.32 2.46 2.57ROE, % (1x2x3x4x5) 4.8 -0.4 4.0 8.2 -4.6 2.5 6.4 7.6 6.9 8.1 8.4 -5.3 -8.3NI/ Sales, % (6) 1.9 -0.2 1.7 3.5 -2.0 1.0 2.6 3.2 3.1 3.6 3.4 -2.1 -3.4Depr/ Sales, % (7) 5.5 5.9 6.1 5.5 6.2 5.6 5.3 5.1 5.2 5.4 5.7 6.5 6.6Capex/ Sales, % (8) 7.2 6.6 5.7 6.8 5.9 4.3 4.3 5.2 5.7 6.5 6.3 6.3 5.2FCF/ Sales, % (6+7-8) 0.2 -0.8 2.0 2.2 -1.7 2.3 3.6 3.0 2.5 2.5 2.8 -2.0 -2.1Net Debt/ Equity, % 31.2 34.7 21.2 23.6 28.0 22.0 7.9 4.9 0.3 4.2 6.0 17.3 16.5

Japan Software 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 15 17 42 56 75 89 105 104 106 102 92 88 49NI/ EBT, % (1) 28.0 42.7 40.7 46.6 50.4 35.4 43.9 48.1 59.1 43.1 50.3 45.8 3.1EBT/ EBIT, % (2) 81.4 83.0 86.0 93.7 91.8 93.6 95.2 95.2 95.9 92.0 89.5 88.2 94.8EBIT/ Sales, % (3) 10.7 11.0 6.5 9.8 6.5 5.4 7.1 9.4 11.4 11.0 11.4 9.3 5.2Sales/ Assets, % (4) 71.9 72.9 76.4 80.4 84.0 92.7 89.8 85.5 80.3 80.8 87.1 92.9 108.8Assets/ Equity, x (5) 2.24 2.08 2.01 1.90 1.80 1.84 1.89 1.99 1.96 2.48 2.54 2.44 1.94ROE, % (1x2x3x4x5) 3.9 5.9 3.5 6.6 4.6 3.0 5.1 7.4 10.2 8.7 11.4 8.5 0.3NI/ Sales, % (6) 2.4 3.9 2.3 4.3 3.0 1.8 3.0 4.3 6.5 4.4 5.1 3.8 0.2Depr/ Sales, % (7) 3.6 4.0 8.7 4.9 5.0 4.9 4.8 5.4 5.0 5.6 5.7 5.7 3.9Capex/ Sales, % (8) 4.5 3.7 4.9 3.7 3.5 4.3 3.9 3.4 4.8 5.2 5.1 4.6 2.0FCF/ Sales, % (6+7-8) 1.6 4.2 6.2 5.5 4.5 2.4 3.9 6.3 6.6 4.8 5.7 4.9 2.1Net Debt/ Equity, % 9.9 -15.3 -15.6 -16.4 -20.6 -21.2 -26.2 -19.7 -20.8 11.1 8.1 17.6 -13.6

Japan Tech Hardware 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 72 66 116 123 131 135 141 143 140 140 137 130 75NI/ EBT, % (1) 42.4 -37.8 50.8 52.0 NA 36.4 47.9 51.3 51.5 51.8 50.8 NA NAEBT/ EBIT, % (2) 80.7 53.3 77.4 88.8 NA 84.8 94.1 94.8 94.5 95.1 94.7 NA NAEBIT/ Sales, % (3) 4.7 2.0 3.4 6.4 -2.7 2.9 5.3 5.7 5.3 6.2 6.0 -0.2 -1.7Sales/ Assets, % (4) 92.7 92.2 96.6 94.1 96.8 102.7 107.5 109.4 107.8 106.1 113.1 110.1 96.5Assets/ Equity, x (5) 2.85 2.94 2.77 2.83 2.84 2.91 2.62 2.46 2.33 2.34 2.37 2.58 2.72ROE, % (1x2x3x4x5) 4.3 -1.1 3.6 7.9 -7.4 2.7 6.7 7.4 6.5 7.5 7.7 -8.5 -8.3NI/ Sales, % (6) 1.6 -0.4 1.4 3.0 -2.7 0.9 2.4 2.8 2.6 3.0 2.9 -3.0 -3.2Depr/ Sales, % (7) 5.6 6.0 5.8 5.6 6.2 5.6 5.1 4.8 4.9 5.1 5.4 6.2 6.5Capex/ Sales, % (8) 7.3 6.7 5.8 7.0 6.0 4.2 4.1 4.8 5.3 6.3 6.0 6.2 5.3FCF/ Sales, % (6+7-8) -0.1 -1.1 1.3 1.6 -2.5 2.3 3.4 2.8 2.2 1.9 2.3 -3.0 -2.0Net Debt/ Equity, % 35.2 40.2 29.9 34.7 43.9 36.7 18.5 12.7 6.6 5.5 8.8 19.9 21.5

Japan Semis 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 9 8 16 22 25 27 29 31 31 29 30 30 20NI/ EBT, % (1) 53.3 -0.3 59.6 60.5 NA -3.4 58.5 71.7 38.2 65.0 55.5 NA NAEBT/ EBIT, % (2) 96.2 66.9 94.4 97.2 NA 87.1 96.6 96.8 95.8 97.8 97.8 NA NAEBIT/ Sales, % (3) 17.3 3.2 12.3 16.9 0.0 3.3 8.4 9.1 8.0 11.9 11.0 -6.9 -13.8Sales/ Assets, % (4) 78.2 66.3 71.1 77.8 62.5 66.3 75.3 77.4 75.6 80.5 83.9 69.3 62.2Assets/ Equity, x (5) 1.87 1.98 1.81 1.82 1.60 1.68 1.75 1.81 1.84 1.73 1.70 1.84 1.88ROE, % (1x2x3x4x5) 12.9 0.0 8.9 14.1 -1.4 -0.1 6.3 8.9 4.1 10.5 8.5 -10.0 -15.4NI/ Sales, % (6) 8.9 0.0 6.9 10.0 -1.4 -0.1 4.7 6.3 2.9 7.6 6.0 -7.8 -13.2Depr/ Sales, % (7) 5.6 7.0 7.1 6.2 9.5 8.8 8.2 7.9 8.5 8.0 8.6 11.6 12.3Capex/ Sales, % (8) 9.1 8.7 6.9 9.6 13.1 6.3 7.5 14.1 12.6 11.5 12.0 13.0 9.3FCF/ Sales, % (6+7-8) 5.4 -1.7 7.1 6.5 -5.0 2.3 5.4 0.1 -1.1 4.1 2.5 -9.3 -10.2Net Debt/ Equity, % 4.9 31.4 -1.9 -2.0 0.9 -2.6 -6.7 -8.7 -7.9 -13.9 -13.4 2.8 0.6



26

Dupont analysis for Asia ex Japan technology sector and sub-sectors

Asia ex Jp Tech Sector 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 5 9 11 12 15 20 30 57 87 105NI/ EBT, % (1) 172.9 83.3 80.2 73.9 50.6 71.3 95.5 85.5 86.5 94.7EBT/ EBIT, % (2) 65.5 51.5 57.6 36.6 50.0 41.8 34.0 77.2 80.9 49.0EBIT/ Sales, % (3) 5.2 7.3 8.2 7.3 7.4 6.4 7.4 12.9 14.7 6.7Sales/ Assets, % (4) 95.5 110.6 120.4 102.8 86.6 84.4 98.3 110.7 99.5 83.5Assets/ Equity, x (5) 2.34 4.06 3.48 3.59 2.60 2.73 3.97 2.81 2.76 3.35ROE, % (1x2x3x4x5) 13.2 14.2 15.8 7.3 4.2 4.4 9.4 26.4 28.3 8.6NI/ Sales, % (6) 5.9 3.2 3.8 2.0 1.9 1.9 2.4 8.5 10.3 3.1Depr/ Sales, % (7) 2.6 0.5 9.6 5.3 3.7 4.5 2.4 1.9 7.3 10.2Capex/ Sales, % (8) 4.5 6.3 18.7 17.2 7.5 11.0 10.0 17.3 15.7 19.9FCF/ Sales, % (6+7-8) 4.0 -2.7 -5.4 -10.0 -2.0 -4.6 -5.1 -7.0 1.9 -6.6Net Debt/ Equity, % 20.1 181.3 144.3 150.0 61.0 70.3 177.6 73.0 79.7 128.9

Asia ex Jp Software 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 6 7NI/ EBT, % (1) 63.4 73.3EBT/ EBIT, % (2) 83.8 77.6EBIT/ Sales, % (3) 9.1 9.9Sales/ Assets, % (4) 113.4 88.3Assets/ Equity, x (5) 2.68 2.56ROE, % (1x2x3x4x5) 14.7 12.7NI/ Sales, % (6) 4.8 5.6Depr/ Sales, % (7) 4.5 3.4Capex/ Sales, % (8) 3.9 12.5FCF/ Sales, % (6+7-8) 5.4 -3.5Net Debt/ Equity, % 52.4 48.7

Asia ex Jp Tech Hardware 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 5 8 9 10 13 17 23 42 67 82NI/ EBT, % (1) 172.9 92.3 81.3 67.4 47.3 71.0 74.8 84.4 84.6 84.7EBT/ EBIT, % (2) 65.5 32.7 59.4 53.4 60.1 42.6 61.8 75.0 67.9 62.6EBIT/ Sales, % (3) 5.2 9.2 7.7 8.0 6.7 5.3 9.4 9.4 9.3 8.4Sales/ Assets, % (4) 95.5 94.3 104.0 95.7 93.3 92.2 92.3 105.7 96.9 92.3Assets/ Equity, x (5) 2.34 3.23 2.67 2.42 2.47 2.64 2.34 2.30 2.46 2.68ROE, % (1x2x3x4x5) 13.2 8.5 10.3 6.7 4.4 3.9 9.4 14.4 12.8 11.0NI/ Sales, % (6) 5.9 2.8 3.7 2.9 1.9 1.6 4.3 5.9 5.3 4.4Depr/ Sales, % (7) 2.6 1.1 4.4 4.8 3.4 4.3 4.2 2.6 3.5 4.7Capex/ Sales, % (8) 4.5 5.5 13.6 10.6 6.8 9.8 7.0 6.7 9.9 14.0FCF/ Sales, % (6+7-8) 4.0 -1.7 -5.5 -2.9 -1.5 -4.0 1.5 1.9 -1.1 -4.9Net Debt/ Equity, % 20.1 114.0 75.5 58.7 42.8 60.1 51.1 42.0 56.7 74.5

Asia ex Jp Semis 84 85 86 87 88 89 90 91 92 93 94 95 96# of Companies 6 12 14 16NI/ EBT, % (1) 112.9 86.0 87.1 124.3EBT/ EBIT, % (2) 24.6 77.6 84.9 30.0EBIT/ Sales, % (3) 6.9 14.2 18.1 5.2Sales/ Assets, % (4) 99.9 112.4 101.0 77.3Assets/ Equity, x (5) 4.89 3.07 2.99 4.07ROE, % (1x2x3x4x5) 9.4 32.7 40.3 6.1NI/ Sales, % (6) 1.9 9.5 13.4 1.9Depr/ Sales, % (7) 2.0 1.6 9.6 14.9Capex/ Sales, % (8) 10.7 21.4 19.3 24.9FCF/ Sales, % (6+7-8) -6.8 -10.3 3.6 -8.1Net Debt/ Equity, % 248.6 89.2 97.6 188.0



27

Dupont analysis for Asia ex Japan technology sector and sub-sectors (continued)

Asia ex Jp Tech Sector 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 116 125 159 203 212 227 239 256 260 257 265 266 135NI/ EBT, % (1) 85.6 29.9 73.8 71.4 31.9 64.5 83.4 89.7 86.8 85.1 81.7 69.2 30.8EBT/ EBIT, % (2) 39.5 16.4 67.2 83.9 56.9 88.8 91.0 96.1 92.4 93.1 93.4 83.4 66.7EBIT/ Sales, % (3) 6.5 7.2 11.5 14.6 4.2 9.3 7.7 11.7 7.5 9.4 9.3 4.3 1.8Sales/ Assets, % (4) 72.1 87.0 88.8 84.7 78.2 85.1 91.3 104.5 100.6 105.2 107.4 114.8 106.3Assets/ Equity, x (5) 4.18 3.42 2.20 2.23 2.08 2.11 1.99 1.88 1.97 1.89 1.91 1.98 2.06ROE, % (1x2x3x4x5) 6.7 1.1 11.2 16.5 1.3 9.5 10.6 19.9 12.0 14.9 14.5 5.7 0.8NI/ Sales, % (6) 2.2 0.4 5.7 8.7 0.8 5.3 5.8 10.1 6.0 7.5 7.1 2.5 0.4Depr/ Sales, % (7) 9.4 10.1 7.3 7.8 9.6 8.5 7.6 6.9 7.3 7.1 7.1 7.1 7.4Capex/ Sales, % (8) 17.3 10.9 10.8 15.5 12.7 8.7 10.7 13.7 14.0 11.7 10.4 8.8 4.9FCF/ Sales, % (6+7-8) -5.8 -0.5 2.1 1.0 -2.3 5.1 2.7 3.3 -0.7 2.9 3.8 0.9 2.8Net Debt/ Equity, % 170.8 128.6 46.8 48.0 36.5 27.1 12.8 9.0 9.8 5.4 2.4 5.5 2.2

Asia ex Jp Software 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 11 15 23 48 54 58 58 61 65 60 67 65 22NI/ EBT, % (1) 79.4 55.3 86.5 90.6 85.8 74.1 82.5 83.2 81.7 86.4 85.4 85.4 81.5EBT/ EBIT, % (2) 55.1 59.6 89.7 91.7 66.2 85.3 93.9 97.3 97.5 97.9 97.6 97.2 97.2EBIT/ Sales, % (3) 7.3 10.3 17.4 14.7 4.9 9.7 13.6 19.6 18.4 20.5 23.1 21.9 21.5Sales/ Assets, % (4) 91.2 103.3 95.5 60.8 56.0 64.4 73.7 85.0 86.7 94.4 85.3 83.8 94.8Assets/ Equity, x (5) 2.85 2.36 1.59 1.34 1.42 1.41 1.48 1.50 1.55 1.51 1.54 1.60 1.54ROE, % (1x2x3x4x5) 8.3 8.3 20.6 10.0 2.2 5.6 11.4 20.3 19.7 24.7 25.4 24.4 24.8NI/ Sales, % (6) 3.2 3.4 13.5 12.2 2.8 6.2 10.5 15.9 14.7 17.4 19.3 18.2 17.0Depr/ Sales, % (7) 4.6 4.6 4.3 5.7 7.3 7.1 5.7 4.3 4.0 3.5 3.3 3.5 3.2Capex/ Sales, % (8) 11.9 8.0 7.3 18.6 12.8 7.5 8.0 6.9 8.0 6.8 6.8 6.5 4.6FCF/ Sales, % (6+7-8) -4.1 0.0 10.5 -0.7 -2.7 5.7 8.2 13.3 10.6 14.0 15.8 15.2 15.6Net Debt/ Equity, % 36.0 22.8 -12.3 -31.9 -28.7 -34.3 -42.3 -40.5 -40.3 -37.4 -38.2 -41.3 -18.0

Asia ex Jp Tech Hardware 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 89 92 113 126 125 132 139 150 148 147 148 149 80NI/ EBT, % (1) 71.0 54.9 71.4 82.1 77.3 82.1 88.4 92.3 85.7 84.7 83.6 71.5 NAEBT/ EBIT, % (2) 64.1 36.6 52.2 73.8 72.7 79.8 89.7 93.1 83.8 83.9 89.6 78.7 -1.8EBIT/ Sales, % (3) 8.2 7.3 5.6 7.9 4.8 4.7 5.8 6.4 3.4 4.3 6.5 3.2 0.5Sales/ Assets, % (4) 81.8 91.9 104.7 107.0 99.8 105.8 110.9 118.3 115.7 127.2 130.1 138.1 128.5Assets/ Equity, x (5) 2.90 2.84 2.33 2.29 2.01 2.04 2.00 2.06 2.39 2.30 2.27 2.34 2.42ROE, % (1x2x3x4x5) 8.9 3.8 5.1 11.7 5.4 6.7 10.2 13.4 6.8 8.9 14.4 5.7 -1.6NI/ Sales, % (6) 3.7 1.5 2.1 4.8 2.7 3.1 4.6 5.5 2.5 3.0 4.9 1.8 -0.5Depr/ Sales, % (7) 4.5 4.8 3.7 3.7 4.6 5.0 4.1 4.3 4.5 4.6 4.5 4.5 5.0Capex/ Sales, % (8) 12.7 7.7 7.0 8.1 9.2 6.0 8.1 10.7 11.5 7.6 6.0 5.9 3.7FCF/ Sales, % (6+7-8) -4.5 -1.5 -1.2 0.4 -1.9 2.2 0.6 -0.9 -4.5 0.1 3.4 0.4 0.8Net Debt/ Equity, % 76.6 75.3 33.6 36.6 14.5 9.4 3.0 11.4 18.2 14.8 8.3 12.1 7.6

Asia ex Jp Semis 97 98 99 00 01 02 03 04 05 06 07 08 09*# of Companies 16 18 23 29 33 37 42 45 47 50 50 52 33NI/ EBT, % (1) NA NA 73.8 67.6 -72.8 59.4 80.6 89.3 88.0 85.0 79.2 50.5 NAEBT/ EBIT, % (2) -9.7 -7.5 71.2 87.1 38.3 91.7 91.6 97.1 94.8 95.8 95.3 78.8 NAEBIT/ Sales, % (3) 4.7 7.0 17.1 20.6 3.7 13.1 9.1 16.3 11.5 14.8 11.3 3.8 -3.6Sales/ Assets, % (4) 63.2 82.1 77.3 72.4 67.0 74.1 79.4 95.4 87.9 87.2 88.9 94.6 46.0Assets/ Equity, x (5) 6.86 4.28 2.14 2.28 2.20 2.23 2.02 1.80 1.74 1.68 1.72 1.77 1.59ROE, % (1x2x3x4x5) 2.1 -3.2 14.8 20.0 -1.5 11.8 10.7 24.2 14.6 17.6 13.0 2.5 -4.5NI/ Sales, % (6) 0.5 -0.9 9.0 12.1 -1.0 7.1 6.7 14.1 9.6 12.0 8.5 1.5 -6.2Depr/ Sales, % (7) 14.9 15.7 10.8 11.6 14.2 11.6 11.0 9.5 11.0 10.7 11.2 11.8 30.7Capex/ Sales, % (8) 22.7 14.3 14.7 22.1 15.7 11.1 13.3 17.1 17.7 17.4 16.8 13.6 15.4FCF/ Sales, % (6+7-8) -7.3 0.5 5.0 1.6 -2.6 7.6 4.4 6.6 2.9 5.3 3.0 -0.3 9.0Net Debt/ Equity, % 372.0 207.9 57.6 62.8 57.8 44.9 24.5 11.9 9.4 4.0 4.1 8.1 0.4



28

Appendix 2 Valuation Factors 12m Fd P/E: price to 12-month forward EPS Trailing P/E: price to trailing EPS P/Op Inc: Price to operating income P/BV: Price to book value Price/Sales: Price to sales P/FCF: Price to free cash flow EV/EBIT: Enterprise value to EBIT EV/EBITDA: Enterprise value to EBITDA EV/Cap Employed : Enterprise value to capital employed EV/Sales: Enterprise value to sales EV/Op CF: Enterprise value to operating cash flow EV/FCF: Enterprise value to free cash flow Price Momentum Factors 6m Price Mom: 6-month price momentum 9m Price Mom: 9-month price momentum 12m Price Mom: 12-month price momentum Price Rel Strength: 65-day to 260-day moving average in stock price 3m∆ Price Mom: 3-month change in 12-month price momentum Price ↑ / ↓ Days: Number of up less down days in stock price in 130 days Earnings Momentum Factors FY1 EPS Rev: Weighted average on 1-, 2- and 3-month change in FY1 EPS mean estimate FY2 EPS Rev: Weighted average on 1-, 2- and 3-month change in FY2 EPS mean estimate 12m Fd EPS Rev: Weighted average on 1-, 2- and 3-month change in 12-month forward EPS mean estimate FY1 EPS Mom: Number of upward less downward revisions in FY1 EPS estimates in 3 months FY2 EPS Mom: Number of upward less downward revisions in FY2 EPS estimates in 3 months Capex Deployment Factors Capex/Depr: Capital expenditure to depreciation expense Capex/Sales: Capital expenditure to sales Capex/FA: Capital expenditure to fixed assets Earnings Accruals Factors YoY∆ Receivables: YoY change in account receivables to total assets YoY∆ Inventory: YoY change in inventory to total assets YoY∆ Payables: YoY change in account payable to total assets Profit Factors Cash ROC: Cash return on capital employed YoY∆ Cash ROC: YoY change in cash return on capital employed ROE: Return on equity YoY∆ ROE: YoY change in return on equity Growth Factors 3yr Sales Gth: 3-year growth in sales 5yr Sales Gth: 5-year growth in sales 3yr EPS Gth: 3-year growth in eps 5yr EPS Gth: 5-year growth in eps FY1 Gth Est: Consensus estimate on FY1 eps growth FY2 Gth Est: Consensus estimate on FY2 eps growth


29

Required Disclosure The views expressed in this report accurately reflect the personal views of the analysts about the subject securities and listed corporations. Each analyst declares that neither he/she and his/her associate have served as an officer of nor has any financial interests in relation to the listed corporation reviewed by the analyst. None of the listed corporations reviewed or any third party has provided or agreed to provide any compensation or other benefits in connection with this report to any of the analysts of Mirae Asset Securities (HK) Limited (“MAHK”). MAHK confirms that, it, whether individually or as a group (i) does not own 1% or more financial interests in any of the listed corporations reviewed; or (ii) does not have any individual employed by or associated with any member companies of MAHK Group serving as an officer of any of the listed corporation reviewed. MAHK is not involved in making a market in the securities of the covered stocks. MAHK has no investment banking relationship with the stocks covered within the preceding 12 months.

This disclosure statement is made pursuant to paragraph 16 of the “Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission”.

Disclaimer This report was originally prepared and issued by MAHK for distribution to their professional, accredited and institutional investor customers. It is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject MAHK and its subsidiaries and affiliates (collectively MAHK Group) to any registration or licensing requirement within such jurisdictions. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of MAHK Group. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of MAHK Group. The information, opinion and material presented in this report are provided for general information purposes only and shall not be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities, other financial instruments or any derivative related to such securities or instruments. MAHK Group may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. The contents of this report do not constitute investment advice to any person and such person shall not be treated as a customer of MAHK Group by virtue of receiving this report. Information and opinions presented in this report have been obtained or derived from sources believed by MAHK Group to be reliable, but MAHK Group makes no representation or warranty, express or implied as to their accuracy, fairness or completeness and MAHK Group accepts no liability for any direct or consequential loss arising from the use of the material presented in this report unless such liability arises under specific statutes or regulations. This report is not to be relied upon in substitution for the exercise of independent judgment. MAHK Group may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. The reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. For the avoidance of doubt, views expressed in this report do not necessarily represent those of MAHK Group and may not imply comparable future performance. This report may provide the addresses of, or contain hyperlinks to, various websites. To the extent that this report refers to material outside MAHK Group’s own website, MAHK Group has not reviewed the linked sites and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to MAHK Group own website material) is provided solely for your convenience and information and the content of the linked sites does not in any way form part of this report. Accessing such websites shall be at your own risk. MAHK Group may, to the extent permitted by law, participate or invest in financing transactions with the issuer(s) of the securities referred to in this report, perform services for or solicit business from such issuers, and/or have a position or effect transactions in the securities or other financial instruments thereon. MAHK Group may, to the extent permitted by law, act upon or use the information or opinions presented herein, or the research or analysis on which they are based, before the material is published. MAHK Group, its officers or directors and the analysts preparing this report (each an Analyst and collectively the Analysts) may have relationships with, financial interests in or business relationships with any or all of the companies mentioned in this report (each a listed corporation and collectively the listed corporations) Information, opinions and estimates are provided on an “as in” basis without warranty of any kind and may be changed at any time without prior notice. There can be no assurance that future events or results will be consistent with any such opinion. Nothing in this report constitutes investment, legal, accounting or tax advice nor a representation that any investment or strategy is suitable or appropriate to your individual circumstances. Nothing in this report constitutes a personal recommendation to you. This report has been prepared by the research analyst(s) licensed by the Securities and Futures Commission in Hong Kong. The research analysts are not employees or associated persons of any corporation mentioned in this report. These research analysts are not registered as research analysts with FINRA or the NYSE, but are licensed persons in compliance with Hong Kong regulatory requirements. Those research analysts may not be associated persons of Mirae USA and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. This report has been prepared by MAHK for distribution in Hong Kong; in Korea by its holding company named Mirae Asset Securities Co. Ltd; in Vietnam by its joint venture company named Mirae Asset Securities (Vietnam) Joint Stock Company; in the United Kingdom by its subsidiary named Mirae Asset Securities (UK) Ltd; in the United States by its subsidiary named Mirae Asset Securities (USA) Inc. This information may only be issued or passed on to any person in the United Kingdom if that person is of a kind described in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2001 or otherwise pursuant to exemptions to section 21 of the Financial Services and Market Act 2000. In addition, no person who is an Authorised Person may issue or pass on this information, or otherwise promote MAHK Group, to any person in the United Kingdom other than under the rules of the Financial Services Authority (FSA) applicable to such Authorised Persons. This report and any information, material and contents herein are intended for general circulation only and do not take into account the specific investment objectives, financial situation or particular needs or any particular person. Any U.S. recipient of this report that would like further information regarding any security discussed herein should contact Mirae Asset Securities (USA) Inc. Furthermore, any recipient of this report that would like to effect any transaction in any security discussed herein should contact and place the orders with Mirae Asset Securities (USA) Inc. which, without in any way limiting the foregoing, accepts responsibility (solely for purposes of an within the meaning of Rule 15a-6 under the SEC Act of 1934) for this report and its dissemination in the United States. Investments in general and, derivatives, in particular, involve numerous risks, including, inter alia, market risk, counterparty default risk and liquidity risk. In some cases, securities and other financial instruments may be difficult to value or sell and reliable information about the value or risks related to the security or financial instrument may be absent. The investment(s) mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a financial adviser regarding the suitability of such investment(s), taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to purchase any of such investment(s). The suitability of any particular investment or strategy whether opined on, or referred to in this report or otherwise will depend on a person’s individual circumstances and objectives and should be confirmed by such person with his advisers independently before adoption or implementation thereof. This document may not be taken or transmitted into or distributed in Japan, Canada or the People’s Republic of China.

Copyright 2009 MAHK Group. All rights reserved.

Global Investigator 201003021 (2)

Documents

Transcript of Global Investigator 201003021 (2)