Equity Strategy chapter. Global Gambits The Right Moves for Right Now. Global Equity Research December 8, 2005

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1 December 8, 2005 Global Gambits The Right Moves for Right Now Equity Strategy chapter The following is a chapter from Global Gambits The Right Moves for Right Now, dated December 8, This chapter is presented for convenience, and should be read in conjunction with the full report and its analyst certifications and important disclosures. The full report is available on MorganMarkets.

2 Abhijit Chakrabortti (1-212) J.P. Morgan Securities Inc. Equity Strategy Eyes Wide Shut Key Drivers Earnings disappointment. We believe a key support for equities is being withdrawn. After nine quarters of earnings delivery surprising consensus expectations to the upside, we have seen the first marginal disappointment in 3Q05. We expect the trend of earnings disappointment to escalate in Synchronized global monetary tightening. We believe 2006 will mark the end of the reflation trade for developed equity markets. We expect to see rising real interest rates across key regions, with US rates actually moving towards being tight after a prolonged period of very accommodative policy. While we expect that Japan will raise interest rates in 2H next year, ending its zero interest rate policy, we see real rates remaining low as Japan finally, sustainably exits deflation. While we see inflationary pressures as a threat in other regions, a return to inflation is a positive for Japan, in our view. Valuations should hold, at best. With a backdrop of rising inflation expectations and long rates, we do not expect to see multiple expansion for equities next year. P/E valuation multiples should hold at current levels, at best, in our view. The valuation gap between the US and eurozone has closed meaningfully this year, and we would not expect further closure, given the sector compositions and long-term growth outlooks of the respective regions. The Japanese multiple expanded significantly this year. We do not expect this to be repeated next year, rather we expect Japanese performance to be driven by superior earnings growth. Japan decoupling to continue. In a weak returns outlook for US equities next year, we believe Japan will be the only region that may be able to sustain absolute performance. While the export-orientated sectors will be similarly exposed to the maturing of the global cycle as other regions, we believe Japanese domestic sectors, including financials, could show resilience. Our Non-Consensus Views 0% earnings growth in US in We expect the US profits share of GDP has peaked at close to a 40-year high, and that late cycle cost pressures will consolidate next year. We forecast no earnings growth in the US next year, compared to 12% currently forecast by bottom-up consensus, and 7% by topdown consensus. While we expect most sectors to disappoint relative to consensus, we expect the key disappointments will come from the cyclical and financials sectors. Negative returns outlook for global equities. In line with our cautious earnings and tightening policy outlook, we expect global equities to underperform cash in We are overweight cash vs. underweight on both equities and bonds. Overweight defensive growth. We believe 2006 will mark a second year low beta will outperform. We remain cautious on cyclical sectors. In particular, we hold a preference for defensive growth sectors. We believe 2006 will see a definitive end to the trend of value outperformance in place globally since 2000 but almost eliminated YTD in Overweight telecoms. The telecoms sector globally now offers a similar, and in the US a superior, in our view, dividend yield to the utilities sector. The telecoms sector also trades at a P/E discount to the utilities sector. The sector is supported by the potential for positive cash surprises and an improving pricing environment, given recent consolidation in the US. The telecoms sector has underperformed utilities 19% YTD on a global basis, in local currency. We are therefore overweight telecoms vs. underweight on utilities within defensive sectors. 15

3 Equity Strategy: Sectors and Regions to Overweight Sector/Region Japan Recommendation: Overweight MSCI Weight: 10.9% Allocation: 15.0% Deviation: +4.1% Rationale Exit from deflation: Japan is the one region that should continue to see low real interest rates next year. Although we expect that the BoJ will end quantitative easing in mid-2006 and end its prolonged zero interest rate policy in 3Q, real rates should remain low as tightening in policy reflects a sustainable end to deflation in Japan. In contrast to other regions where we view inflation as a threat, we therefore view a return to inflation as positive for Japan. It reflects improving corporate pricing power and rising asset prices and provides impetus for consumption, in our view, rather than delaying of purchases on the expectation of declining prices, as had previously been the case. Earnings outlook: Our top-down models forecast the best earnings growth outlook for Japan over 2006 and Earnings growth in Japan should be supported by firm domestic growth, and robust margins even in the backdrop of some moderation in global demand. Our expectation that the corporate sector will face a continuation of improving pricing power and declining ULCs suggests resilient margins. We forecast 11% earnings growth for 2006, the best of our forecasted growth rates of all regions. Positive on financials and other domestically oriented sectors: Whereas in most regions we see the financials sector as a key drag on markets, in Japan we view the sector as a key support. We are positive on the Japanese financials sector (despite recent strong performance) given our expectation of continued steepening in the yield curve representing margin expansion, improving NPL outlook, rising collateral values and the start of a new loan growth cycle. On a P/Book basis, the sector still trades on par with global peers. Telecommunications Recommendation: Overweight MSCI Weight: 4.3% Allocation: 8.0% Deviation: +3.7% Consumer Staples Recommendation: Overweight MSCI Weight: 8.3% Allocation: 13.0% Deviation: +4.7% Dividend yield/relative valuation: The sector now offers the highest dividend yield of all sectors globally at 3.3%, and in the US, at 3.6%, the sector offers a higher dividend yield than the utilities sector. Underperformance relative to other defensive sectors: The sector has significantly underperformed other defensive sectors this year, and specifically underperformed the utilities sector by 19% ytd, on a global basis. We expect a rotation out of value sectors generally next year to the benefit of defensive growth. The telecoms sector, as a highly under-owned sector, should be a key beneficiary, in our view. Consolidation in the US sector: Pricing pressures remain for the sector in all regions with CPI for telecoms declining yoy, meaning the sector is very dependent on volume growth in order to maintain revenues. However, with recent consolidation in the US sector, we believe that some pricing power will return to the sector, and pricing trends are already improving considerably. Positive cash surprises: Within Europe we believe the sector will provide positive cash surprises. Having restored balance sheets, paid down debt and written off goodwill, and with capex forecast to be focused on upgrading infrastructure, we believe cash surprises are likely, and those may then be used to increase dividend payments, provide special dividends, or increase share buybacks. Relative earnings protection: In an environment of market-wide earnings disappointment that we expect next year, the consumer staples sector should provide relative earnings protection. The consensus expectations for 9% earnings growth globally and 6% earnings growth in the US next year are not aggressive, in our view, compared to expectations of 12% for the market as a whole. Protection from a more muted consumer outlook: We expect that consumption in the US will moderate next year as the feed-through effects of a sustained high oil price on disposable income are felt, along with rising interest rates, and slowing house price growth. In this environment, our preference is for consumer staples rather than the consumer discretionary sector. Branding: We favor sectors and stocks with brand focus and pricing power at this maturing point in the cycle. We view the staples sector as well positioned in this respect. Source: MSCI, Datastream, JPMorgan estimates. 16

4 Equity Strategy: Sectors and Regions to Underweight Sector/Region US Recommendation: Underweight MSCI Weight: 52.3% Allocation: 49.0% Deviation: -3.3% Rationale Earnings underperformance in 2006E: We forecast the weakest earnings growth for the US in 2006, of 0%. We believe it will lead the downturn in earnings growth that we expect across all regions. Earnings growth rebound in 2007 will be modest, in our view. Given that consensus expects 12% earnings growth next year for the US, our forecast would represent persistent quarterly earnings disappointments for the market, removing a key support over the past two and one-half years of positive earnings surprises. Our cautious earnings outlook is premised on some moderation in growth, continued input cost pressures, and continued flat yield curve. Policy conditions moving towards being tight : In line with consolidating inflationary pressures we expect that the Fed will continue to raise rates to 5% by mid next year. This would represent the Fed moving beyond neutral towards tight. This may not necessarily be the peak in Fed funds, but may simply represent an intermediate pause. In line with rising policy rates, we see the Fed funds rate as a floor for 10-year yields. We expect that long rates will rise, raising consumer borrowing costs and the cost of capital for corporates. This environment leaves little possibility of market multiple expansions, in our view. Sector/stock/style composition i.e., bottom-up it is difficult to find anything to buy: While market valuations do not look expensive (14.5x 12-month forward earnings), it is difficult to find sectors that are outright cheap. The energy sector trades at 10x and the financials sector at 12x (elevated earnings expectations). Ex these sectors, the market actually trades closer to 16x forward earnings. Financials Recommendation: Underweight MSCI Weight: 25.0% Allocation: 20.0% Deviation: -5.0% Consumer Discretionary Recommendation: Underweight MSCI Weight: 11.8% Allocation: 8.0% Deviation: -3.8% Flat yield curves globally (ex-japan): We expect to see continued relatively flat/flattening yield curves across all regions, except Japan next year. Banks earnings, in particular, show a strong positive relationship with the steepness of the yield curve. Slowing loan growth and peaking collateral values: In addition, we expect that financials face a muted loan growth environment from both the consumer and corporate sector, and risk to collateral values. We see these negatives as most acute in the US and UK. The exception to our cautious stance on financials is Japan, as discussed above. High likelihood of earnings disappointment: Given this backdrop, we expect that consensus earnings expectations of 10% for the sector will be disappointed next year. The inflated expectations inherent in the financials P/E multiples undermine arguments that the sector is attractively cheap, in our view. US discretionary spending to be pressured: We believe that the US consumer will face headwinds next year from sustained elevated oil prices, rising bond yields and a slowing housing market. In this environment, we believe that discretionary spending will be pressured and that the retailing sector in particular will perform poorly. Consensus earnings expectations too high: Consensus expects 15% earnings growth for the discretionary retail sector in the US, which we believe is unrealistic given the scenario discussed above. Elevated valuations: The US discretionary retail sector trades on 17x 12-month forward earnings. Given the high earnings expectations contained in these valuations, the sector is very overvalued, in our view. Source: MSCI, Datastream, JPMorgan estimates. 17

5 Equity Strategy: Top Picks Company Key Financials Rationale and Catalysts Altria Group Recommendation: Overweight Fiscal EPS (Local): Year-end December Ticker ADR: MO US / MO E 2006E Exchange: NYSE P/E (Calendar) Price : (Local) US$ E 2006E Mkt Cap : US$ bn Analyst : Michael Smith, ACA; Erik Bloomquist, CFA EV/EBITDA (Calendar) Phone (44-20) ; (44-20) E 2006E . mike.a.smith@jpmorgan.com. erik.bloomquist@jpmorgan.com Mitsubishi UFJ Financial Group Recommendation: Overweight Fiscal EPS (Local): Year-end March Ticker: 8306JP / 8306.T E NM 68,903 76,156 Exchange: Tokyo Stock Exchange P/E (Calendar) Price (Local): E 2006E Mkt Cap (US$): bn Analyst: Katsuhito Sasajima P/B Phone: (81-3) E 2006E katsuhito.sasajima@jpmorgan.com Source: Company data, Datastream, JPMorgan estimates, JPMorgan SaVanT. Prices as of November 22, For a detailed review of Altria see our report Break up Could Yield Best of Breed, July 13, In late 2004, Altria publicly announced its intention to break up into two or three business parts through the spinning off of its 84% ownership of Kraft stock and possibly spinning off Philip Morris International (PMI). This could allow PMI to trade without the taint of US litigation. The spin-off will be possible when the three large-scale US lawsuits (Price, Engle, Department of Justice) are resolved, and developments during 2005 have given increased indications of these cases being resolved in the industry s favor. PMI s EBITA could nearly double organically over the next decade to US$13 billion p.a., making it one of the biggest and fastest growing consumer goods companies in the world. The pre-eminent Marlboro and L&M brands, combined with market leading distribution and management, give PMI one of the best growth outlooks in the industry. A standalone PMI would be virtually debt free by 2008 on our estimates. The US cigarette industry is seeing one of its best trading periods in several years, with reduced price discounting and premium brands gaining market share. Philip Morris USA is delivering mid to high single-digit underlying EBITA growth and could be debt free in 2006 on our estimates. Mitsubishi UFJ Financial Group announced plans to redeem a portion of government-owned preferred shares this October a surprising move, in our opinion. We think the decision stems from an increase in retained earnings, as both Mitsubishi Tokyo Financial Group and UFJ Holdings substantially raised their 1H FY05 consolidated net profit estimates in late September. We think Mitsubishi UFJ FG will likely repay the remaining 1,076.4 billion of government-provided capital in 2H FY05. The recent succession of moves by MTFG/UFJ, including a retail banking partnership with Norinchukin Bank, has been noteworthy. For our base-case scenario, we assume no Y/Y change in net operating profit and credit costs of 30bps, and for our best-case scenario, we assume benefits from an improved net interest margin and consolidated earnings contributions from the consumer finance and securities businesses. We use the undiluted number of shares in both cases. 18

6 Equity Strategy: Top Picks (cont d) Company Key Financials Rationale and Catalysts Qwest Communications Recommendation: Overweight Fiscal EPS (Local): Year-end December Qwest should see FCF increase from an estimated US$750 million in 2005 to US$1.3 billion in 2006 driven by: flat Ticker: Q US / Q E 2006E revenues (declines in voice offset by growth in data and wireless); continued cost savings (more than US$250 million (0.59) (0.26) 0.03 in savings); and the recent refinancing of high coupon debt (close to US$300 million in savings). The Street estimates for 2006 FCF stands at about US$1.0 billion. Exchange: NYSE P/E (Calendar) Price (Local): US$ E 2006E Mkt Cap (US$): 9.6 bn NM Analyst: Jonathan Chaplin EV/EBITDA (Calendar) Phone: (1-212) E 2006E jonathan.chaplin@jpmorgan.com We arrive at our US$5.50 Sep-06 price target by applying the company s 2005E FCF yield of 12% to our estimate of US$1.3 billion in FCF in This assumes that Qwest continues to trade at a 30% discount to the rest of the group. If Qwest s multiple contracts closer to that of its peers there could be further upside, in our view. Source: Company data, Datastream, JPMorgan estimates, JPMorgan SaVanT. Prices as of November 22,

7 Equity Strategy: Stocks to Underweight Company Key Financials Rationale and Catalysts Aegon Recommendation: Underweight Fiscal EPS (Local): Year-end December Ticker: AGN NA / AEGN.AS E 2006E Ticker ADR: AGN US Exchange: Amsterdam Exchange P/E (Calendar) Price (Local): E 2006E Mkt Cap (US$): 24.8 bn Analyst: Nicholas Byrne P/NAV (Calendar) Phone: (44-20) E 2006E nicholas.byrne@jpmorgan.com Home Depot Recommendation: Underweight Fiscal EPS (Local): Year-end January Ticker: HD US / HD E 2006E Exchange: NYSE P/E (Calendar) Price (Local): US$ E 2006E Mkt Cap (US$): 90.7 bn Analyst: Stephen C. Chick, CFA EV/EBITDA (Calendar) Phone: (1-212) E 2006E steve.chick@jpmorgan.com Sun Microsystems Recommendation: Underweight Fiscal EPS (Local): Year-end June Ticker: SUNW US/SUNW E (0.12) (0.05) 0.03 Exchange: Nasdaq P/E (Calendar) Price (Local): US$ E 2006E Mkt Cap (US$): 12.8 bn NM Analyst: Bill Shope EV/EBITDA (Calendar) Phone: (1-212) E 2006E bill.c.shope@jpmorgan.com Source: Company data, Datastream, JPMorgan estimates, JPMorgan SaVanT. Prices as of November 22, At 11.6x estimated 2006 earnings, we regard Aegon s shares as expensive relative to the wider sector. Recent earnings have been strong, particularly in the Dutch Life business, but we believe this is well reflected in the price. We regard the US market as core to the investment case. In variable annuities, sales were up 25% in 3Q on 2Q; but excluding a one-off pension sale, underlying retail sales increased 1%, in line with the market. We believe Aegon will struggle to make further improvements in market share in a fiercely competitive market. In fixed annuities, spreads have compressed slightly in recent quarters (e.g., from 206bps in 2Q to 200bps in 3Q). In a flat yield curve environment, we expect margins to remain under pressure but we are also concerned that net deposits remain negative. Home Depot is large (the # 2 retailer in sales in the country) and arguably maturing within its core business. Hence, growth trends are moderating (9-12% revenue growth requires acquisitions). Instead of paying higher than a 1.00% dividend yield, as a maturing company HD spends nearly 3x capex/d&a and makes acquisitions of lower-margin supply business (HD Supply) on track for 5-6% of total revenues. The company s total 11% EBIT margins are at their highs, while EPS guidance requires further expansion, in our view. HD looks cheap at 13.6x 2006E P/E. But there is risk to forward estimates, in our view. Also, we expect ROIC will contract as HD acquires lower-margin businesses at expensive prices. Sun remains highly exposed to the UNIX market, which faces difficult long-term growth prospects. Competition remains intense in this market, with near-term pricing pressure and likely sluggish demand. Sun has been making aggressive moves in volume servers and utility pricing. We remain concerned, however, that Sun s aggressive pricing of its low-end server systems and a slower-than-expected ramp of add-on software and services could compress margins over time. Persistently high operating expenses have essentially erased much of the profit boost we anticipated from the StorageTek acquisition. We believe Sun still needs to get a grip on its expense management before the story can stabilize. 20

8 Asset Class/Sector and Country Allocations Sector Allocations Regional Allocations MSCI World Weight Allocation Deviation Recommendation MSCI World Weight Allocation Deviation Recommendation Energy 9.3% 12.0% +2.7% Overweight North America 55.7% 52.0% -3.7% Underweight United Kingdom 10.8% 11.0% +0.2% Neutral Materials 5.4% 4.0% -1.4% Underweight Eurozone 14.1% 13.0% -1.1% Underweight Rest of Europe* 4.8% 5.0% +0.2% Neutral Industrials 10.4% 11.0% +0.6% Neutral Japan 10.9% 15.0% +4.1% Overweight Non-Japan Asia** 3.5% 4.0% +0.5% Neutral Consumer Discretionary 11.8% 8.0% -3.8% Underweight Total Balanced Source: MSCI, Datastream, JPMorgan. Consumer Staples 8.3% 13.0% +4.7% Overweight * Rest of Europe includes Denmark, Norway, Sweden and Switzerland. Healthcare 10.1% 13.0% +2.9% Overweight ** Non-Japan Asia includes Hong Kong, Singapore, Australia and New Zealand. Financials 25.0% 20.0% -5.0% Underweight Software & Services 3.8% 4.0% +0.2% Neutral Asset Class Allocations Tech Hardware 7.6% 5.0% -2.6% Underweight Benchmark Weighting Allocation Deviation Recommendation Equities 60% 55% -5% Underweight Telecommunications 4.3% 8.0% +3.7% Overweight Bonds (10-year Treasury) 30% 25% -5% Underweight Cash 10% 20% +10% Overweight Utilities 4.0% 2.0% -2.0% Underweight Balanced 100% 100% Source: MSCI, Datastream, JPMorgan. Source: MSCI, Datastream, JPMorgan. Data as of November 29, Note: We use the MSCI Developed World Index as the benchmark against which to determine our sector and regional allocations. Our Overweight/Underweight recommendations reflect our belief that the relevant sector/region will outperform/underperform the index over the next six to 12 months. 21

9 Analyst Certification The research analyst who is primarily responsible for this research and whose name is listed first on the front cover certifies (or in a case where multiple research analysts are primarily responsible for this research, the research analyst named first in each group on the front cover or named within the document individually certifies, with respect to each security or issuer that the research analyst covered in this research) that: (1) all of the views expressed in this research accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this research. Important Disclosures for Compendium Reports U.S., European, Latin American, and Australian equities recommended in this report: Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on JP Morgan's website or by calling this U.S. toll-free number ( ). Important Disclosures Asian and Japanese equities recommended in this report: Market Maker: JPMSI makes a market in the stock of Pacific Basin Shipping, SPIL (Siliconware Precision Industries). Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for San Miguel Corporation, Standard Chartered within the past 12 months. Analyst Position: The covering analyst, research associate, or member(s) of their respective household(s) have a long position in the securities of CapitaLand. Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of Maanshan Iron and Steel. Client of the Firm: Acer Inc is or was in the past 12 months a client of JPMSI. Alcatel is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services and non-investment banking securities-related service. AU Optronics is or was in the past 12 months a client of JPMSI. CapitaLand is or was in the past 12 months a client of JPMSI. China Oriental is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Chinatrust Financial Holdings is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related service and nonsecurities-related services. Henderson Land Development is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Hyundai Motor is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service and non-securities-related services. Ibiden (4062) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service. Japan Tobacco (2914) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service. Komatsu (6301) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Mitsubishi UFJ Financial Group (8306) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. NEC Electronics (6723) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service and non-securities-related services. Pacific Basin Shipping is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Polaris Industries is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-securities-related services. San Miguel Corporation is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Sinopec Corp. is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-securities-related services. SPIL (Siliconware Precision Industries) is or was in the past 12 months a client of JPMSI. Standard Chartered is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Taiwan Cement is or was in the past 12 months a client of JPMSI. Tata Consultancy Services is or was in the past 12 months a client of JPMSI.

10 Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from Alcatel, China Oriental, Chinatrust Financial Holdings, Henderson Land Development, Komatsu (6301), Mitsubishi UFJ Financial Group (8306), Pacific Basin Shipping, San Miguel Corporation, Standard Chartered. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from Alcatel, CapitaLand, China Oriental, Chinatrust Financial Holdings, Henderson Land Development, Hyundai Motor, Komatsu (6301), Mitsubishi UFJ Financial Group (8306), NEC Electronics (6723), Pacific Basin Shipping, San Miguel Corporation, Standard Chartered. Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Alcatel, Chinatrust Financial Holdings, Hyundai Motor, Ibiden (4062), Japan Tobacco (2914), Komatsu (6301), NEC Electronics (6723), San Miguel Corporation, Standard Chartered. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking from CapitaLand, Chinatrust Financial Holdings, Hyundai Motor, Komatsu (6301), NEC Electronics (6723), San Miguel Corporation, Standard Chartered. Explanation of Ratings and Analyst(s) Coverage Universe: JPMorgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst s (or the analyst s team s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst s (or the analyst s team s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst s (or the analyst s team s) coverage universe.] The analyst or analyst s team s coverage universe is the sector and/or country shown on the cover of each publication. JPMorgan Equity Research Ratings Distribution, as of September 30, 2005 Overweight (buy) Neutral (hold) JPM Coverage 40% 42% 18% IB clients* 46% 45% 39% JPMSI Equity Research Coverage 34% 49% 17% IB clients* 65% 55% 45% Underweight (sell) *Percentage of investment banking clients in each rating category. For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category, our Neutral rating falls into a hold rating category, and our Underweight rating falls into a sell rating category. Valuation and Risks: Company notes and reports include a discussion of valuation methods used, including methods used to determine a price target (if any), and a discussion of risks to the price target. Analysts Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

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