Global Market Outlook_0303_BO.ppt 0 The road from war

Global Market Outlook_0303_BO.ppt 1 The Benign Case : 40%-60% Probability, 4-6 weeks – Iraqi regime collapses – Limited deaths or collateral damage – No loss of oil output/exports by OPEC – No use of weapons of mass destruction – No major factional divisions Brent Crude price declines to $30 in Q2, averages $25 in H2 and $24 in 2004 Source: Center for Strategic and International Studies, Oxford Economic Forecasting Model, JPMFAM Benign Scenario USAEurolandUKJapan GDP Growth av. y/y % Inflation av. y/y % Assumptions: Some wage flexibility with respect to oil price impact. Fed funds at 3.6% by end Year treasury yields at 4.7% by end Modest appreciation in US dollar from current levels Scenarios covering Iraqi conflict I

Global Market Outlook_0303_BO.ppt 2 Scenarios covering Iraqi conflict II The Intermediate Case : 30-40% Probability, 6-12 weeks – Unexpected military resistance, clashes persist – Major covert terror threat discovered – Moderate deaths, negative press – Limited damage to oil facilities – Limited use of weapons of mass destruction Brent Crude price peaks at $45 in Q2, averages $37 in H2 and $28 in 2004 Source: Center for Strategic and International Studies, Oxford Economic Forecasting Model, JPMFAM Intermediate Scenario USAEurolandUKJapan GDP Growth av. y/y % Inflation av. y/y % Assumptions: Some wage flexibility with respect to oil price impact. Fed funds at 3.8% by end Year treasury yields at 4.9% by end Modest appreciation in US dollar from current levels

Global Market Outlook_0303_BO.ppt 3 Scenarios covering Iraqi conflict III The Worst Case : 5-10% Probability, 3-6 months – Protracted resistance, intense urban conflict – Significant casualties, collateral damage – Rising Arab hostility to US, Britain – Significant damage to oil facilities – Israel drawn into conflict Brent Crude price peaks at $65 in Q3, averages $55 in 2004 Source: Center for Strategic and International Studies, Oxford Economic Forecasting Model, JPMFAM Worst Scenario USAEurolandUKJapan GDP Growth av. y/y % Inflation av. y/y % Assumptions: Some wage flexibility with respect to oil price impact. Fed funds at 4.4% by end Year treasury yields at 5.5% by end Modest appreciation in US dollar from current levels

Global Market Outlook_0303_BO.ppt 4 Source: Macroeconomic Advisers, LLC, After an attack on Iraq: The Economic Consequences, Dec 2002 Estimated based on between 250, ,000 US troops operating in the Gulf region (only half the level deployed in 1991) Gulf War I cost roughly $80 Bn at current prices These estimates do not include the potential cost of Re-construction, Humanitarian Aid or “Nation Building”by the US.Realistic estimates of a comprehensive 6 year package of Marshall style aid with humanitarian assistance are in the region of $35-75 Bn. We predict that expenditure will be at the lower end of this range. Budgetary implications of Iraqi war and occupation: ScenarioDurationCost in 2003 $BnCost in 2004 Benign4-6 weeks Intermediate6-12 weeks Worst3-6 months Type of ActionCost Military deployment to the Gulf$9-13 Bn Prosecuting of War$6-9 Bn per month Cost of returning troops$5-7 Bn Occupation post War$1-4 Bn per month

Global Market Outlook_0303_BO.ppt 5 Macro Peace Dividend: Reduced Defence Spending Technology Transfer to the private sector Reduced Taxation Micro Peace Dividend: Opening up of low cost labour markets Technological advancement Transportation management advancement Outsourcing of both human and physical Trade Disruption: Industrial Peace Dividend Disappearing ?

Global Market Outlook_0303_BO.ppt 6 Ansprechpartner: Berndt May – Head of Asset Management Austria Tel: +43 (1) Herbert Eisner – Vice President Tel: +43 (1) Any forecasts or opinions expressed are JPMorgan Fleming’s own at the date of this document and may be subject to change. The economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Issued by J.P. Morgan Fleming Asset Management (UK) Limited (Regulated by FSA). 10 Aldermanbury, London EC2V 7RF.