Copyright ® 2005 Global Insight, Inc. Global Insight’s Industry Outlook Worldwide: Winners and Losers Mark Killion, CFA Managing Director World Industry Service Global Insight April 2005

Copyright ® 2005 Global Insight, Inc. 2 Agenda – Global Outlook for Sector Activity  World Industry Service (WIS) provides sector data and benchmark forecasts for sales, growth, returns and risks  Globally consistent views, harmonized sector indicators  Flexible benchmarks for each company’s own sector “peer group”, as well as all the sectors that represent key markets for each company  Comparative sector performances, industry forecasts  Which sectors enjoy the fastest growth?  What geographies are driving sector activity?  Global Benchmarks of Production, Trade and Capital  Sales Patterns, Profits Growth, Profit Margin  Exports, Imports, Fixed Capital Expenditures

Copyright ® 2005 Global Insight, Inc. 3 Introduction to the World Industry Service (WIS)  Unique set of global sector fundamental data, financial benchmarks, written reports, sector experts  Harmonized set of industries and indicators allow comparisons and aggregations across sectors and geography  71 industries and sub sectors that together comprise the entire economy; available for each of 70 countries/economies  Sales, Profits, Demand, Exports, Imports, CapEx, Prices  History since 1980 with forecasts 10+ years out  User friendly interface for navigation through choice of sector, country, indicator, time frame; all delivered via Web  Flexible metrics and reports for use in sales forecasting, credit risk management, corporate strategy, research

Copyright ® 2005 Global Insight, Inc. 4 Global Sectors Analysts interact with Country Macroeconomic Experts Sector Forecasts  Autos  Energy  Chemicals  Construction  Tourism  Health Care  Transport  Communications  Financial Global Sector Expertise Global Macroeconomic Expertise World Industry Service All Countries All Sectors Harmonized to Common Standard World Industry Service All Countries All Sectors Harmonized to Common Standard U.S. Macro Economics Asia, Latin America, Rest of World Macro Economics Asia, Latin America, Rest of World Macro Economics West and East Europe Macro Economics WIS sector forecasts incorporate both the country and industry perspectives

Copyright ® 2005 Global Insight, Inc. 5 Common Applications of WIS Available for Review 1)Custom Market Indexes Follow key customer performances, calculate market share, forecast sales for business segments and geography 2)Sector Risk Rating Manage risk exposure by tracking industry level changes in credit and operating risk, stress test portfolios with simulations and alternate “house view” scenarios 3)Key Drivers for Technology Use Global Sector Activity and Spending as Key Drivers for technology sector forecasts, or research into industry structure 4)Stock Sector Navigator Sector earnings and capital expenditures are used to value financial securities such as stocks, bonds, loans, for investment research and portfolio management Translating Economic Events into Implications for Global Sector Markets

Copyright ® 2005 Global Insight, Inc. 6 Global Sector Growth Performances Percent Annual Growth of Real Value Added - World  Strong economic recovery since the down- turn in 2001, but slower relative growth in compared to 2004  Manufacturing sector played key role in both the down-turn and in the subsequent recovery  Service sector growth rates are more resilient in the face of economic volatility  Strong re-bound and steady forecast for construction Outlook for Global Sector Markets

Copyright ® 2005 Global Insight, Inc. 7 Manufacturing Leads the Current Expansion (%Growth in Inflation Adjusted Sector Sales for World Total) Key Manufacturing SectorsKey Services Sectors Outlook for Global Sector Markets

Copyright ® 2005 Global Insight, Inc. 8 Transportation Equipment (%Growth in Inflation Adjusted Sector Sales for World Total) Transportation Equipment SalesMotor Vehicle Sales by Region Outlook for Global Sector Markets

Copyright ® 2005 Global Insight, Inc. 9 Strongest Volume Growth in Computers and Electronics % in Aggregate Sales Growth 2005 (%) 1Office & Computing Machinery Communications Equipment incl. Semiconductors Computer Support and Software Services Motor Cycles & Bicycles Electrical Apparatus & Supplies Synthetic Resins Metal & Woodworking Machinery Electrical Industrial Machinery Small Electrical Appliances & Housewares Drugs & Medicines Top-Ten Real Growth Performers By Worldwide Growth Rate in Value Added (Real)

Copyright ® 2005 Global Insight, Inc. 10 Share in Total Sales (%) Average Growth (%) 1Drugs and Medicines Aircraft and Aerospace Educational Services Health Services Transport & Storage Small Electrical Appliances and Housewares Financial Institutions Communication Equipment incl. Semiconductors Computer Support and Software Services Electrical Machinery Top-Ten Revenue Performers By Growth Rate in Sales (Nominal US$) Strongest Revenue Gains in Health Care and Services

Copyright ® 2005 Global Insight, Inc. 11 Ranking Sectors by the Outlook for Sales Growth Share in Total Sales (%) Average Growth (%) 10Furniture and Fixtures Paper and Products Wholesale Trade Agriculture, Hunting, Forestry & Fishing Industrial Chemicals Footwear (Excluding Rubber or Plastic) Retail Trade Petroleum Refineries Primary Metals Mining and Quarrying Most Modest Performers By Growth Rate in Sales (Nominal US$)

Copyright ® 2005 Global Insight, Inc. 12  Goods sector accounts for 32% of total world sales, manufacturing accounts for 20%  Financials’ 25% share dominate Services Sector  Community (public) services account for 20%  “Distributive Sectors” of Wholesale, Retail Trade account for 16% How Big Are Sector Markets in the Global Economy? Sector Percent Shares of Total World Sales

Copyright ® 2005 Global Insight, Inc. 13 OECD Countries’ Shares in Sector and Sector Growth Based on Value Added in ’97 US$ Aggregate By ISIC One-Digit Sectors

Copyright ® 2005 Global Insight, Inc. 14 Rest of the World (Non OECD) Shares in Sector and Sector Growth Based on Value Added in ’97 US$ Aggregate By ISIC One-Digit Sectors

Copyright ® 2005 Global Insight, Inc. 15 Role of Chinese Manufacturing in the World Economy Regional Shares of Growth in Global Manufacturing Sector Sales Source: GII World Industry Service

Copyright ® 2005 Global Insight, Inc. 16 Role of Manufacturing Sector in the Chinese Economy Regional Shares of Manufacturing VA in GDP and Growth in GDP Source: GII World Industry Service

Copyright ® 2005 Global Insight, Inc. 17 Growth in Goods Imports in Selected Countries Change in Imports Since 2000  China recorded the largest growth in Goods imports for any country during 2000 to 2004  Growth in imports of US$ 245 Bill. Amounts to 23.6% annual average growth  Although increase in India’s imports were smaller in value, it was also very strong at 16% percent annual growth

Copyright ® 2005 Global Insight, Inc. 18 What is Role of Chinese Exports in World Trade? Greater China Manufacturing Exports Percent Share of Total World Manufacturing Exports * Export totals from China, Hong Kong and Taiwan exclude trade with each other. These are included in Intra-Regional. Source: World Industry Service

Copyright ® 2005 Global Insight, Inc. 19 What is Role of EU 15 Exports in World Trade? EU 15 Manufacturing Exports Percent Share of Total World Manufacturing Exports * Export totals from EU 15 Rest of World exclude trade with each other. These are included in Intra-Regional. Source: World Industry Service

Copyright ® 2005 Global Insight, Inc. 20 Change in World Manufacturing Export Shares (Delta on the Shares: Share at End of Period less Share at Start of Period) What is the Chinese Competitive Threat? : +2.0% : +2.9% Source: World Industry Service

Copyright ® 2005 Global Insight, Inc. 21 Cross Border Trade Still Growing in Importance for Sector Production  Manufacturing accounts for the largest share of merchandise exports  Of the $ 8.34 Trill. anticipated trade value, $7.54 Trill. Will be from the manufacturing sector  Agriculture and Mining provide $230 and $575 Bill. respectively  Rising trade intensity: While volume of Global exports continued to grow, share of exports in global production also continued to expand

Copyright ® 2005 Global Insight, Inc. 22 Did the trade intensity increase over the past decade in China? Trade Intensity = (Export+Import)/Production North Asia: High Technology Sector Trade Intensity in High-Tech in China Source: World Industry Service

Copyright ® 2005 Global Insight, Inc. 23 Did the trade intensity increase over the past decade in India? Trade Intensity = (Export+Import)/Production Source: World Industry Service SAARC: High Technology Sector Trade Intensity in High-Tech in India

Copyright ® 2005 Global Insight, Inc. 24 Did the trade intensity increase over the past decade in Brazil? Trade Intensity = (Export+Import)/Production Latin America: High Technology Sector Trade Intensity in High-Tech in Brazil Source: World Industry Service

Copyright ® 2005 Global Insight, Inc. 25 Comparing China’s Trade Shares with Other Countries Source: World Industry Service Trade Shares of Metals & Construction Materials (World Production US$ 1.5 Trill. in 2005) Trade Shares of Industrial Chemicals (World Production US$ 1.3 Trill. in 2005)

Copyright ® 2005 Global Insight, Inc. 26 Comparing China’s Trade Shares with Other Countries Source: World Industry Service Trade Shares of Communication Equip. (World Production US$ 1.04 Trill. in 2005) Trade Shares of Motor Vehicles (World Production US$ 2.1 Trill. in 2005)

Copyright ® 2005 Global Insight, Inc. 27 What Is the Role of Capital Expenditures in Sector Activity? CapEx Spending as % of Total Sales United States Vs Europe, (2003) US CapEx Spending as % of Total Sales Total for 446 US Corporations in the GICS Sector Classification Source: Worldscope Company Financial Statements & WIS Calculations

Copyright ® 2005 Global Insight, Inc. 28 Ratio of Fixed CapEx to Sales (CapEx / Total Sales) Service Sector (ISIC 6-9)Goods Sector (ISIC 1-3)

Copyright ® 2005 Global Insight, Inc. 29 What is the Return on Fixed CapEx Spending? (ROFIC) US Corporate Sector: Return from Investment in Fixed Capital Company Net Income / 3-year sum of Fixed Investments US Macro Economy: Marginal Efficiency of Private Fixed Investment ∆ in GDP / 3-year sum of Fixed Investments Source: US BEA, Worldscope Company Financial Statements & WIS Calculations

Copyright ® 2005 Global Insight, Inc. 30 Marginal Efficiency of Investment ( ∆ in GDP / Three-year sum of CapEx) OECD and LDC’sU.S. and China

Copyright ® 2005 Global Insight, Inc. 31 Sector Return on Fixed Capital Spending (Operating Profits / Three-year sum of CapEx) Aggregate ISIC: 1 to 9China, by Sector

Copyright ® 2005 Global Insight, Inc. 32 Please Contact Us for a Personal Demonstration! More Information?  Mark Killion, CFA Managing Director, World Industry Service  Prem Premakumar Applications Manager, World Industry Service