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  • 8
  • Updated 18 May 1999
  • 10
  • 24
  • Transcript

    • 1. May 2005
    • 2. Asset & Wealth Management Retail 24% Private Client Svcs 21% Private Bank 32% 2004 Proforma Operating 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 1 Key Statistics 1 (12/31/04) 2004 Revenue 4901 Credit Costs (16) Expenses 3,542 Operating Earnings 879 Pre- - tax Margin 28% ROE 37% Institutional 23% 1 Annual 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
    • 4. What we stand for: Global Business Principle ADVISE EXECUTE
      • ALPHA GENERATION
      UNDERSTAND FIDUCIARY RESPONSIBILITY
      • CLIENT SOLUTIONS
      Our Fiduciary Responsibility defines our relationship with our clients and informs every decision we take on their behalf
    • 5. Our U.S. Equity research investment philosophy: Fair Value vs. Stock Price Fair value Actual Stock Price Valuation 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
    • 6. Our philosophy is implemented through a unique and robust investment process Disciplined Portfolio Construction Information Advantage Systematic Valuation
      • 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)
    • 7. The research analyst position at JPMorgan Asset Management is distinct Note: As of March 31, 2005 JPMorgan Asset Management research 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
    • 8. JPMorgan’s global network allows U.S. analysts to better understand U.S. companies Success in local markets requires a local presence and a global perspective Example: Global Technology Team Luke Szymczak Nitin Bhambhani Rob Bowman Biral Devani Christian Pecher Kaoru Kobu Kentaro Sasaki Hiroyuki Shigemasa Paul Chan As of March 31, 2005 North America — Large cap (New York) Equity analysts 20 Average years in industry 13 Europe & UK (London) Equity analysts 18 Average years in industry 11 Pacific Rim (ex Japan) (Singapore) Equity analysts 5 Average years in industry 11 Japan (Tokyo) Equity analysts 16 Average years in industry 12 Global Emerging Markets Equity analysts* 36 Average years in industry 12 *Includes Combined PM/Analysts
    • 9. Our philosophy is implemented through a unique and robust investment process Disciplined Portfolio Construction Information Advantage Systematic Valuation
      • 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)
    • 10. Systematic Valuation
      • Stock prices should reflect expectations of future earnings and cash flows
      • “ Normalized,” sustainable earnings reflect true investment value
      Long term earnings power Actual Forecasted Actual near term earnings Today Earnings Time
    • 11. Our analysts’ forecasts for normalized earnings and growth drive a stock’s Dividend Discount Rate (DDR) ranking Altera 7.77 Analog Devices 7.60 Xilinx 7.55 Intersil 7.48 Microchip Technology 7.36 Maxim Integrated 7.27 Linear Technology 7.26 Applied Materials 7.20 Novellus 7.18 Qualcomm 7.17 Kla-Tencor 7.16 Texas Instruments 7.14 Broadcom 7.12 National Semiconductor 7.09 Intel 6.97 Teradyne 6.96 Agere Systems 6.95 Micron Technology 6.80 LSI Logic 6.77 Sandisk 6.70 Advanced 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 this page 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% Market price Normalized earnings Earnings growth DDR DDR 7.77 % As of January 13, 2005
    • 12. Our quintile rankings have demonstrated strong predictive power over time January 1, 1986 – December 31, 2004 Quintile performance vs. S&P 500 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.
    • 13. Our philosophy is implemented through a unique and robust investment process Disciplined Portfolio Construction Information Advantage Systematic Valuation
      • 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)
    • 14. Large Cap U.S. Equity: Research Focused Strategies * As of March 31, 2005 Note: 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 Structured strategies Active strategies Large Cap Core, Value, Growth Large Cap Core Plus
    • 15. Style neutrality is tightly maintained Zephyr StyleADVISOR 36-month moving windows, computed monthly Manager Style January 1999 – December 2004 Large Cap Core Equity Russell Generic Corners Zephyr StyleADVISOR: JPMorgan Asset Management rvalue rgrowth r2value r2growth Small -1 0 1 Large Value -1 0 1 Growth
    • 16. DDR Spread Last Date 2/28/2005
    • 17. 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.
    • 18. JPMorgan Asset Management 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. 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.