2002 outlook FFG Global Investment Research February 2002

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A a long road to recovery Recovery underway consumer demand housing and construction inventory correction But it may be a bumpy ride excess capacity unemployment on the rise corporate profits depressed global recovery delayed

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 3 The Recovery Consumption remains healthy - near LT average Confidence appears to have stabilized –expectations component steadily increasing

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 4 The Recovery Low financing costs keep housing market bouyant –Durable goods sales appear steady in January Construction spending maintained

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 5 The Recovery Inventory Correction is nearing its end –Largest decline in post war history Businesses are becoming more Positive

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 6 The Headwinds Unemployment on the rise –historically rises long after GDP bottom Personal Income growth continues to slow –Is the consumer out of gas?

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 7 The Headwinds Capex Lag –Capex trails Industrial Production bottom by 3-9 months Capacity Utilisation near all time lows –Tech sector extremely depressed, together argues for longer lag this time around US CAPEX vs. IP Mar-71Mar-74Mar-77Mar-80Mar-83Mar-86Mar-89Mar-92Mar-95Mar-98Mar-01 % change annual 3 month lag 6 month lag 9 month lag6 month lag ?? Capex IP

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 8 The Headwinds Depressed Corporate Profits –Little cash for expansion of business spending Fed is pushing on a String –Low rates not enticing borrowing yet. US Corporate Profits % change

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 9 The Headwinds Global Economy in a recession –lagging US trends Europe continues to falter –Employment and growth continue to fall Jan-90Jan-93Jan-96Jan-99Jan-02 EU Business Climate

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 10 Conclusion Economy –Recovery will be slow Inventory led growth in Q1 Lull into Q2/3 as end demand lags Capex begins to recover in late real year of acceleration US leads EU growth by at least 1 quarter Euro remains weak until 2nd half of year

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 11 Markets Equity Valuation –Early recovery priced in Long term DDM indicates fair value at these levels Short term risk as temporary economic lull may be coming Implied Growth in Tech sector still too high Yield Curve –Interest rate have likely bottomed in the US, close in Europe –Look for higher short term rates by year end 25% 21% 12% 13% 0% 5% 10% 15% 20% 25% 30% Technology Implied Estimate Non-Tech Implied Growth Analysis

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 12 Asset Allocation –Underweight market slightly - await second leg of correction –Fixed Income allocation focused on 2-4 years, and increased exposure to lower grade corporate bonds Sector Allocation (focus on) –Consumer cyclical Favor electronics and apparel for second half 2002 –Valuations favourable, (Radio Shack, Abercrombie & Fitch) –Energy Favor large cap Integrated and Oil Services –Valuations depressed, earnings growth implied too low (Total Fina, Schlumberger, BJ Services) –Technology Telecom equipment no recovery until late in 2002 Favor software, enterprise networking, wireless operators, semi-equipment (Oracle, Cisco, Vodafone, KLA tencor) Markets

FFG February 2002 FORUM FINANCE GROUP S.A Global Investment Research Investment Perspectives Outlook Copyright Forum Finance Group S.A. 13 Conclusion Markets –Underweight slightly in asset allocation -risk of correction Focus on Select technology, Energy and Consumer cyclicals Equities should outperform in 2nd half 2002 Increase equity weighting in event of market sell off. –Overweight near term maturities and corporate debt in fixed income allocation