1

2381March 12, 1999

20022001200019991998

6000

5000

4000

3000

2000

1000

Index

The NasdaqAt Milken Global Conferences

1857March 20, 2001

5048March 10, 2000

1771March 13, 1999

1753April 22, 2002

2

October 1, 1999

October 1, 1999Dow = 10,273

3

Down in 2001…

CompanyApr. 2000

PriceApr. 2001

Price%

ChangeCorning 66 22 -66%Hewlett-Packard 53 28 -47JDS Uniphase 104 21 -80Lucent 59 10 -83Nokia 56 34 -39Nortel Networks 56 15 -73Oracle 40 16 -60Qualcomm 108 57 -47Sun 46 17 -63Verisign 139 51 -63Worldcom 44 18 -44

4

…And Again in 2002

CompanyApr. 2001

PriceApr. 2002

Price%

ChangeCorning 22 7 -68%Hewlett-Packard 28 18 -36JDS Uniphase 21 6 -71Lucent 10 5 -50Nokia 34 18 -47Nortel Networks 15 4 -73Oracle 16 12 -25Qualcomm 57 38 -33Sun 17 9 -47Verisign 51 25 -51Worldcom 18 6 -66

5

1998 IPO

6

1999 IPO

7

2000 IPO

8

2001 IPO

9

2002 IPO

10

What Were They Thinking?From the Napster Website

Copyright 2001 Napster Inc. All Rights Reserved

11

2001

12

2002

13

2001…First There Were Five

14

2002…Then There Were Four

15

2001…12 Currencies In Euro-Zone

Belgian franc

Greek drachma

French franc

Italian lira

Dutch guilder

Portuguese escudo

Deutsche Mark

Spanish peseta

Irish pound

Luxembourg franc

Austrian schilling

Finnish markka

16

2002…One Euro

17

Japan’s Changing LeadershipPrime Ministers Since 1989

Junichiro Koizumi Apr. '01 - PresentYoshiro Mori Apr. '00 - Apr. '01Keizo Obuchi Jul. '98 - Apr. '00Ryutaro Hashimoto Jan. '96 - Jul '98Tomiichi Murayama Jun. '94 - Jan. '96Tsutomu Hata Apr. '94 - Jun. '94Morihiro Hosokawa Dec. '93 - Apr. '94Kiichi Miyazawa Oct. '91 - Dec. '93Toshiki Kaifu Sept. '89 - Oct. '91

18

Tiger in 2001…Tiger in 2002

2001 2002

19

Al In 2001…

20

…Al In 2002

21

Commander In Chief

22

Commander In Chief

23

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Buy53 on 12/1/99

24

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Buy48 on 2/10/00

Buy 53 on 12/1/99

25

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Buy40 on 7/27/00

Buy 48 on 2/10/00Buy 53 on 12/1/99

26

The Street RecommendsBuy This Stock

2002200120001999

70

60

50

40

30

20

10

0

Price

Buy27 on 10/5/00

Buy 40 on 7/27/00

Buy 53 on 12/1/99Buy 48 on 2/10/00

27

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Buy14 on 1/2/01

Buy 27 on 10/5/00

Buy 53 on 12/1/99Buy 48 on 2/10/00

Buy 40 on 7/27/00

28

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Buy5 on 4/11/02

Buy 14 on 1/2/01

Buy 53 on 12/1/99Buy 48 on 2/10/00

Buy 40 on 7/27/00

Buy 27on 10/5/00

29

2002200120001999

70

60

50

40

30

20

10

0

Price

The Street RecommendsBuy This Stock

Neutral6 on 4/22/02

Buy 5 on 4/11/02

Buy 53 on 12/1/99Buy 48 on 2/10/00

Buy 40 on 7/27/00

Buy 27 on 10/5/00Buy 14 on 1/2/01

30

A Less Cyclical EconomyReal GDP 1948 - 2001

0095908580757065605550

20

15

10

5

0

-5

-10

-15

Percent Change, SAAR

8 Recessions in 35 years, 1948-82

2 “Mild” Recessions in 19 years,1983-2001

31

Housing: The Most Cyclical SectorReal GDP versus Real Housing

0095908580757065605550

60

40

20

0

-20

-40

Percent Change, Year Ago

Real HousingReal GDP ex Housing

32

0095908580757065605550

30

20

10

0

-10

-20

Percent Change, Year Ago

A Long Capital Spending BoomReal Non-Residential Fixed Investment

33

Consumers Kept SpendingReal Personal Consumption Expenditures

00959085807570

10

8

6

4

2

0

-2

-4

Percent Change, Year Ago

34

009590858075706560

2.20

2.00

1.80

1.60

1.40

1.20

Ratio

On a New, Lower TrackManufacturing: Inventory to Sales Ratio

1958-90 Average = 1.71

35

020098969492908886

10

8

6

4

2

0

Percent

Fed Funds RateCore CPI % Year

Fed Thinking About TighteningFed Funds and Core CPI % Year

1.75 on 12-11-01Next FOMC Meeting 5-7-02

36

828078767472706866

1300

1200

1100

1000

900

800

700

600

500

Index

995 on 2-9-66985 on 11-29-68

1052 on 1-11-731015 on 9-21-76

1024 on 4-27-81

631 on 5-26-70

577 on 12-6-74

784 on 8-6-82744 on 10-7-66747 on 3-3-78

Hard to Break 1,000Dow Jones Industrial Average

37

00989694929088868482

12000

10000

8000

6000

4000

2000

0

Index

Bull Market Becomes Total ManiaDow Jones Industrial Average

10006 on 3-29-99

7539 on 8-31-98

9337 on 7-17-98

1738 on 10-19-87

2722 on 8-25-87

15

38

20022001200019991998

12000

11000

10000

9000

8000

7000

Index

11727 on 1-14-0011337 on 5-21-01

8235 on 9-21-01

10006 on 3-29-99

Hard to Break 10,000Dow Jones Industrial Average

39

20022001200019991998

150

100

50

0

-50

-100

Percent Change, Year Ago

TechNon-Tech

Market SegmentationMarket Cap, Wilshire 5000

40

009590858075706560555045

60

40

20

0

-20

-40

-60

Percent Change, Year Ago

Unprecedented Earnings DeclineS&P 500 Reported EPS, 4Q Sum

41

2001200019991998

16

14

12

10

8

6

4

2

0

$ Earnings Per Share

Reported EarningsOperating Earnings

Which Earnings Number To Believe?S&P 500 Reported versus Operating Earnings

42

00959085807570656055

50

40

30

20

10

0

P/E Ratio

A Rich MarketPrice /(As Reported) EPS, 4Q Sum, S&P 500

43

01009998979695949392919089

50

40

30

20

10

0

P/E Ratio

Using Reported EarningsUsing Operating Earnings

Which P/E Right For You?Reported or Operating EPS, S&P 500

4-Quarter Trailing Sum

Difference: 26 vs. 22

Difference:34 vs. 29

44

00959085807570656055

7

6

5

4

3

2

1

0

Percent

Dividends Back In Fashion?S&P 500 Dividend Yield

45

It Was All EnthusiasmThe Nasdaq Run-Up

Average Or Year End

Earnings Per Share P/E

Ending Price

86-90 $16.66 23 37791-95 20.28 39 768

1996 25.99 50 13001997 25.46 64 16311998 18.97 105 20041999 17.92 187 33542000 21.38 131 2797

2001 <0 N/A 1950

46

ICGE? Or This Portfolio? Market Cap, December 1999, $44 Billion

21st Century Ins. LubrizolBoise Cascade Mandalay Resort Boston Properties Neuberger BermanBriggs & Stratton Potomac Electric PowerCallaway Golf SaksChurch & Dwight Six FlagsCummins Inc Stanley WorksHealthsouth Titan CorpHost Marriott Corp Tommy HilfigerInterstate Bakeries Tootsie RollKB Home Wendy'sLands End Williams-Sonoma

47

Are Japan’s Best Days Past?Real GDP Growth

009590858075706560

15

10

5

0

-5

Percent Change

1957-73=9.4%

1974-91=3.8%

1992-01=0.7%

E

48

00989694929088868482

60

40

20

0

-20

-40

-60

US$ Billions

Net Foreign Direct Investment In ChinaNet Foreign Direct Investment In Japan

Foreign Direct Investors ChooseFDI Flows, China and Japan

49

Are China’s Best Days Ahead?Real GDP Growth

009590858075

20

15

10

5

0

Percent Change, Year Ago

E

50

20001999199819971996199519941993199219911990

10

5

0

-5

-10

Percent Change, Year Ago

Southeast Asia GDP Growth RateWtd. Avg. of Thailand, Malaysia, Philippines, Indonesia

51

20022001200019991998199719961995199419931992

14

12

10

8

6

4

2

Percent

France and Germany (Avg.)United Kingdom

U.K. Teaches a LessonUnemployment: U.K., France & Germany

52

0100999897969594939291

12

10

8

6

4

2

0

-2

-4

Percent Change, Year Ago

Ireland Portugal

Ireland Or Portugal?Real GDP Growth

E

53

20502040203020202010200019901980197019601950

80

60

40

20

0

Percent

0-14 years old65 years and older

Dependents-Developing WorldYoung and Old as % of Working Age Population

0 -14 = 51%65+ = 8%

54

20502040203020202010200019901980197019601950

80

60

40

20

0

Percent

0-14 years old65 years and older

Dependents-Developed WorldYoung and Old as % of Working Age Population

0 - 14 = 27%65+ = 22%

55

Two Worlds; Separate and Unequal

Young OldBrazil AustraliaChina CanadaEgypt FranceIndia GermanyIndonesia ItalyMexico JapanPakistan SpainPhilippines U.K.Turkey U.S.

Total Pop. (Millions)

Growth Rate (%)

%, Ages 0-14

%, Ages 65+

9 "Young" 3131 1.5 30 69 "Old" 753 0.5 18 15

Median Income: PPP$ 3,617

Median Income: PPP$ 23,752

56