Strategy Tear Sheet Brian G Belski 612 303

Strategy Tear Sheet Brian G. Belski 612. 303. 1503 / brian. g. belski@pjc. com Adam J. Freeman 612. 303. 1509 / adam. j. freeman@pjc. com Most Recent Strategy Calls… Paper Champions ~ May 02, 2005 Market Pulse Earnings Scorecard ~ April 25, 2005 Small vs. Large Monthly Model Review ~ April 11, 2005 Assessing Risk ~ April 04, 2005 Warming To Consumer Discretionary ~ March 21, 2005 Fresh Fifteen ~ March 14, 2005 Earnings Believability Porridge ~ February 28, 2005 Cash Is King ~ February 14, 2005 Financial Sector Differentiation ~ January 18, 2005 Earnings Identifying Growth vs. Value Groups ~ January 10, 2005 Growth vs. Value 2005 Outlook ~ December 10, 2004 See “Market Pulse” Slide for details January Effect ~ November 22, 2004 Outside The Box ~ November 1, 2004 Technology Overweight ~ September 22, 2004 Health Care Overweight ~ September 20, 2004 Please call or e-mail for complete reports Valuation Weightings Please click on buttons for further analysis on each subject Disclaimer Updated as of: 5/02/2005

Market Pulse 2005 Outlook We believe the stock market (as defined by the S&P 500 Index) will see a peak price level of at least 1350 during the year. > As a result, stocks will likely post surprisingly positive returns for a third consecutive year. > Leadership will likely be defined by companies exhibiting quantifiable fundamental growth characteristics and results. > We believe investors should focus on growth companies relative to the value leadership of the past several years. > Differentiated fundamental trends will lead to increased micro strategies and decreased “blanket” conclusions. What CLIENTS want to talk about…. • Energy: Can leadership remain throughout 2005? S&P 500 EPS Growth Model • Tech: Does the “recovery” have staying power? • Health Care: Surprising YTD performance – Can Pharma follow through on fundamentals? • Cash levels remain HIGH Earnings Analysis Earnings are still growing… Yes, the rate of growth will most likely decelerate in 2005 (high single-digit versus low double-digit percentage growth in 2004). However, is not positive growth still positive growth? In addition, momentum remains a longer-term positive for a majority of sectors and indices. Main Page

Earnings Analysis S&P 500 Revision Model Growth Consensus projections of 10 -12% growth over the next 3 -4 quarters are likely too low. Momentum Near-term momentum models solidifying; longer-term net positive trends intact. PJC S&P 500 Projections EPS: $70. 88 – 2005 EPS: $77. 27 – 2006 2005 Price Target = 1350 Conclusions EPS Momentum + Growth - Long-term positive trends remain intact; we believe forward assumptions are too conservative, with further upward revision strength likely. Main Page

Small vs. Large Fundamentals… Large-cap valuation discounts proceed Performance… Longer-term: Potential Peak Shorter-term: Decelerating Conclusion Large-cap poised for fundamentally driven “run; ” Small-caps losing steam and increasingly “expensive” Main Page

Growth vs. Value Take-Away Russell 1000 Indices - Value outperformance likely extended; we expect growth to close the relative gap over the next 2 -3 quarters Russell 2000 Indices - Despite longer-term relative discount, value becoming progressively more expensive Fundamentals… Growth = Deep relative valuation discounts to market and value persist; growth expectations likely too conservative Performance… Value trends are testimony to defensive investing posture Conclusion Long-term focus = High-quality growth companies Main Page

Valuation Analysis Indices Overall contraction intact; small- and mid-cap still trading at premium to large-cap market Differentiation Growth sector contraction creates opportunity Conclusion Market NOT as expensive as consensus believes Conclusions S&P 500 Valuation Model S&P 500 Valuation - According to our PPV model (which takes into account P/FE, P/S, P/CF, & P/B) the S&P 500 is trading below its average 10 year multiple. Cheap or Expensive? ? - On a relative and absolute basis, small-cap multiples are trading at a premium to large-cap. Main Page

Sector Weightings S&P 500 Index 6 -12 Month Weighting Russell Mid-Cap Index 6 -12 Month Weighting Russell Small-Cap Index 6 -12 Month Weighting Consumer Discretionary Market Weight Autos & Transportation Market Weight Consumer Staples Market Weight Consumer Discretionary Market Weight Consumer Staples Market Weight Energy Underweight Financials Market Weight Energy Underweight Health Care Overweight Financials Underweight Industrials Overweight Health Care Overweight Information Technology Overweight Materials & Processing Market Weight Materials Market Weight Producer Durables Overweight Telecommunication Services Market Weight Technology Overweight Utilities Underweight The Positives ~ Sectors to Overweight Health Care: Earnings Consistency + Contracting Aggregate Multiples = Long-Term Key Overweight SPX Industrials and RMC/Rut Producer Durables: Earnings Growth Recovery + Long-Term Revision Strength + Peak P/E Valuation = Traditional Upward/Positive Change In Cycle Overweight Technology: Tech earnings are NOT as bad as consensus believes + Fundamental SEASONALITY is turning positive + Valuation contraction is attractive = Appetite for growth investing vs. current “defensive posture. ” Main Page The Negatives ~ Sectors to Underweight Small- & Mid-Cap Financials: Earnings: We believe momentum has peaked. Macro Pulse: Treasury yield spread contraction is potentially negative to forward earnings. Valuation: Small- and Mid-Cap Financials are among the most expensive areas in the market. Energy: Earnings: We believe momentum has peaked and is decelerating. Macro Pulse: The sector is very over-owned by institutions. Valuation: Multiples are volatile and not necessarily “cheap. ” Utilities: Earnings: We believe momentum is reversing (negatively). Macro Pulse: High yielding stocks have actually underperformed. Valuation: Multiples are very expensive – near historical highs.

Analyst Certification—Brian G. Belski The views expressed in this report, including the Key Points and Risk sections in particular, accurately reflect my personal views about the subject Company and the subject security. In addition, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Piper Jaffray research analysts receive compensation that is based, in part, on the firm's overall revenues, which include investment banking revenues. Piper Jaffray & Co. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. This report should be read in conjunction with important disclosure information at the following site: http: //www. piperjaffray. com/researchdisclosures. Disclaimer This material regarding the subject company is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as the primary basis of investment decisions. Because of individual client requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. It is not a representation by us or an offer or the solicitation of an offer to sell or buy any security. Further, a security described in this release may not be eligible for solicitation in the states in which the client resides. Notice to customers in the United Kingdom: Circulation of this report in the United Kingdom is restricted to investment professionals and high net worth individuals falling within Articles 19 and 49 of the Financial Services and Markets Act (Financial Promotion) Order 2001 as amended. No one else in the United Kingdom should read, rely on or act upon the information in the report. The investments and services to which the report relates will not be made available to others in the United Kingdom. Securities products and services offered through Piper Jaffray & Co. , member SIPC and NYSE, Inc. , a subsidiary of Piper Jaffray Companies. Additional information is available upon request. No part of this report may be reproduced, copied, redistributed or posted without the prior consent of Piper Jaffray & Co. © 2005 Piper Jaffray & Co. , 800 Nicollet Mall, Suite 800, Minneapolis, Minnesota 55402 -7020 Main Page