00 may 2005. 1 asset & wealth management retail 24% private client svcs 21% private bank 32%...

1 1May 2005

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Asset & Wealth Management

Retail24%

Private Client Svcs

21%Private Bank

32%

2004 ProformaOperating Results ($mm) 2004 Revenue by Business Segment

Leadership Positions

$1.3T of assets under supervision

$791B of AUM

$328B of mutual fund assets

$25B of avg. loans

12,300 employees

#1 U.S./#3 Global Private Bank

#2 Global money market asset manager

#3 U.S. active asset manager

#5 U.S. mutual fund company

#2 offshore fund manager

1Key Statistics1(12/31/04)

2004 Revenue 4901 Credit Costs (16) Expenses 3,542 Operating Earnings 879

Pre--tax Margin 28% ROE 37%

Institutional23%

1Annual comparison

3

JPMorgan Asset Management

One of the top 5 active managers in the world and top 10 overall by size

Highly diversified by asset class and client group

Multiple investment processes to meet broad client needs

3,000 institutions served globally, 2.2 million retail clients, 200,000 online brokerage customers through BrownCo and 850,000 401(k) participants through JPMorgan Invest

Over 4,000 employees worldwide

Key Global Facts

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What we stand for: Global Business Principle

ADVISE

EXECUTE

ALPHA GENERATION

UNDERSTAND

FIDUCIARYFIDUCIARY

RESPONSIBILITYRESPONSIBILITY

CLIENT SOLUTIONS

Our Fiduciary Responsibility defines our relationship with our clients and informs every decision we take on their behalf

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Our U.S. Equity research investment philosophy: Fair Value vs. Stock Price

Fair value

Actual Stock Price

Val

uatio

n

Time

• Stock prices ultimately reflect future earnings and cash flows

• Stocks are frequently mispriced by the market relative to their true long-term value

• A disciplined investment process that exploits mispricings can deliver superior investment

results

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Disciplined Disciplined PortfolioPortfolio

ConstructionConstruction

Information Information AdvantageAdvantage

SystematicSystematicValuationValuation

Our philosophy is implemented through a unique and robust investment process

Fundamental Research

• U.S. analyst team of 20 buy-side, sector-specialists

• Global network of analysts expands our information sources

Dividend Discount Model

• Proprietary earnings and cash flow estimates drive DDR

• Stocks ranked into quintiles based on DDRs

Stock Selection Focused

• Minimize uncompensated risks (beta, sector, style)

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The research analyst position at JPMorgan Asset Management is distinct

Note: As of March 31, 2005

JPMorgan JPMorgan Asset Asset

ManagementManagementresearch analystresearch analyst

Central

• Analyst role is a “career” position

• $80 mm investment in global research network annually

Network

• 20 U.S. analysts in New York

• 90 analysts worldwide utilizing same methodology

Buy-side

• Insights generated exclusively for client benefit

• Compensation driven by alpha creation within sector

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Success in local markets requires a local presence and a global perspective

JPMorgan’s global network allows U.S. analysts to better understand U.S. companies

Example: Global Technology Team

Luke SzymczakNitin BhambhaniRob Bowman

Biral DevaniChristian Pecher

Kaoru KobuKentaro SasakiHiroyuki Shigemasa

Paul Chan

As of March 31, 2005

North America — Large cap (New York)

Equity analysts 20Average years in industry 13

Europe & UK(London)


Pacific Rim (ex Japan)(Singapore)


Japan (Tokyo)


Global Emerging Markets

Equity analysts*36 Average years in industry 12

*Includes Combined PM/Analysts

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Systematic Valuation

Long term earnings power

Actual Forecasted

Actual near term earnings

Today

Ear

ning

s

Time

• Stock prices should reflect expectations of future earnings and cash flows

• “Normalized,” sustainable earnings reflect true investment value

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Altera 7.77Analog Devices 7.60Xilinx 7.55Intersil 7.48

Microchip Technology 7.36Maxim Integrated 7.27Linear Technology 7.26Applied Materials 7.20

Novellus 7.18Qualcomm 7.17Kla-Tencor 7.16Texas Instruments 7.14Broadcom 7.12

National Semiconductor 7.09Intel 6.97Teradyne 6.96Agere Systems 6.95

Micron Technology 6.80LSI Logic 6.77Sandisk 6.70Advanced Micro Devices 6.31

Note: A DDR establishes relative valuations among companies only and does not represent the stock's expected actual

return within any given time period. Quintiles are 20% by number of names, not capitalization. The information on thispage is for example purposes only and does not necessarily reflect current estimates.

2004 2006 2011 . . . 2033

Earnings

Future

Today’s price:

$17.94

Semiconductors sector: JPMorgan ranking by long-term value

Quintile 2

Quintile 3

Quintile 4

Quintile 5

Quintile 1

Example: Altera

$17.94

$0.88

13.50%

Our analysts’ forecasts for normalized earnings and growth

drive a stock’s Dividend Discount Rate (DDR) ranking

Market price

Normalized earnings

Earnings growth

DDR

DDR

7.77 %

As of January 13, 2005

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Our quintile rankings have demonstrated strong predictive power over time

January 1, 1986 – December 31, 2004

Quintile performance vs. S&P 500

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5

Source: JPMorgan Asset Management

Active DDRs represent DDRs which include +/- adjustment and prior to that A-rating adjustment.

Chart shows performance of quintiles (as determined by JPMorgan research universe) versus the S&P 500 Index, with quintiles rebalanced monthly: each sector is market weighted. Quintile performance represents the average returns of quintles vs. the annual median sector returns of the S&P 500 averaged over the full time period. Quintile performance results have certain inherent limitations. Unlike an actual performance record, quintile results do not represent actual trading, liquidity constraints, fee schedules and transaction costs. No representation is being made that any portfolio will or is likely to achieve profits or losses similar to those shown. Past performance is not indicative of future results.

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*As of March 31, 2005Note: Targets are relative to the strategies’ respective benchmarks and are gross of fees. Expected returns are estimates based upon proprietary research. There is no guarantee that target returns will be achieved. See appendix for additional information.

Target excess return

Targeted excess return and tracking error

0

1

2

3

4

0 1 2 3 4 5 6

REI 100

REI 150

REI 250

Research Market Neutral

Target incremental risk - tracking error

Large Cap U.S. Equity: Research Focused Strategies

Structured strategies

Active strategies

Large Cap Core, Value, Growth

Large Cap Core Plus

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Zephyr StyleADVISOR

36-month moving windows, computed monthly

Manager Style January 1999 – December 2004

Large Cap Core Equity

Russell Generic Corners

Style neutrality is tightly maintained

Zephyr StyleADVISOR: JPMorgan Asset Management

rvalue rgrowth

r2value r2growth

Small

-1

0

1

Large

Value -1 0 1 Growth

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DDR Spread

DDR Q1 & Q2 Average vs Large Cap Coverage Sector Neutral Eq Weighted

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Ja

n-8

6

Ja

n-8

7

Ja

n-8

8

Ja

n-8

9

Ja

n-9

0

Ja

n-9

1

Ja

n-9

2

Ja

n-9

3

Ja

n-9

4

Ja

n-9

5

Ja

n-9

6

Ja

n-9

7

Ja

n-9

8

Ja

n-9

9

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Last Date 2/28/2005

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Equity Market Valuation

• The equity risk premium (ERP) is the bottom-up aggregated DDR minus the 10-year Treasury yield. It measures the relative attractiveness of stocks versus bonds.

• Currently, the ERP of 3.6% is above the long term average of 3.0%.

• The real DDR, an absolute rather than a relative measure of value, remains below its long term average.

Equity Risk Premium and Real DDR

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

86 88 90 92 94 96 98 00 02 04

Re

al D

DR

0%

1%

2%

3%

4%

5%

6%

ER

P

Real DDR

ERP

Overall Avg. Mar 2005ERP 3.0% 3.6%Real DDR 6.2% 5.6%

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This document is intended solely to report on various investment views held by JPMorgan Asset Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Indices do not include fees or operating expenses and are not available for actual investment. The information contained herein employs proprietary projections of expected returns as well as estimates of their future volatility. The relative relationships and forecasts contained herein are based upon proprietary research and are developed through analysis of historical data and capital markets theory. These estimates have certain inherent limitations, and unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees or other costs. References to future net returns are not promises or even estimates of actual returns a client portfolio may achieve. The forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The value of investments and the income from them may fluctuate and your investment is not guaranteed. Past performance is no guarantee of future results. Please note current performance may be higher or lower than the performance data shown. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made.

Performance results are gross of investment management fees. The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are available upon request.

JPMorgan Asset Management

The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100 million, gaining an annual return of 10% per annum would grow to $259 million after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100 million, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235 million after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253 million after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding.

Illustration showing impact of investment management fees: An investment of USD $1,000,000 under the management of JPMFAM achieves a 10% compounded gross annual return for 10 years. If a management fee of 0.75% of average assets under management were charged per year for the 10-year period, the annual return would be 9.25% and the value of assets would be USD $2,422,225 net of fees, compared with USD $2,593,742 gross of fees. Therefore, the investment management fee, and any other expenses incurred in the management of the portfolio, will reduce the client’s return.

The securities mentioned throughout the presentation are shown for illustrative purposes only and should not be interpreted as recommendations to buy or sell. A full list of firm recommendations for the past year are available upon request.

JPMorgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co and its affiliate worldwide.

Copyright 2005 JPMorgan Chase & Co. All rights reserved.

00 may 2005. 1 asset & wealth management retail 24% private client svcs 21% private bank 32%...

Documents

global research network

sector slide

global private bank

style slide

asset class

active asset manager

global business principle

key global facts