Capital Markets Charts 2004 Series

Transcription

1 Capital Markets Charts 2004 Series (Comparisons Charts) Charts 1-4 Reminder: You must include the Glossary of Indices and disclosure pages with all charts you select to use, either individually or as a group. Information as of ember 31, 2003 unless otherwise noted

2 Returns 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Mar Growth vs. Value Quarterly Return Comparison 1979 to Russell 1000 Growth Russell 1000 Value Source: Ibbotson Associates, Chicago. Data as of 12/31/03. Past performance is not indicative of future results. Presented to provide you with an understanding of historic long-term performance, and is not presented to illustrate the performance of any security. Investors can not directly purchase an index. See Glossary of Indices and disclosure pages for additional information. This chart indicates the volatility of both large cap growth and large cap value returns. In addition, one can see if the investment styles had returns in tandem with one another (positive correlation) or opposite of one another (negative correlation).

3 Returns 40% 36% 33% 30% 27% 24% 21% 18% 15% 12% 9% 6% 3% 0% -3% -6% -9% -12% -15% -18% -21% -24% -27% -30% Mar Domestic vs. International Quarterly Return Comparison 1970 to S&P 500 TR MSCI EAFE TR Source: Ibbotson Associates, Chicago. Data as of 12/31/03. Past performance is not indicative of future results. Presented to provide you with an understanding of historic long-term performance, and is not presented to illustrate the performance of any security. Investors can not directly purchase an index. See Glossary of Indices and disclosure pages for additional information. This chart indicates the volatility of both domestic and international equity returns. In addition, one can see if these asset classes had returned in tandem with one another (positive correlation) or opposite of one another (negative correlation). Investing in foreign/international securities presents certain unique risks not associated with domestic investments, such as currency fluctuation and political, social, and economic changes.

4 Return 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% Mar Small Cap vs. Large Cap Quarterly Return Comparison 1979 to Russell 2000 Russell 1000 Source: Ibbotson Associates, Chicago. Data as of 12/31/03. Past performance is not indicative of future results. Presented to provide you with an understanding of historic long-term performance, and is not presented to illustrate the performance of any security. Investors can not directly purchase an index. Small stocks represented by the R2000 and large stocks by the R1000. See Glossary of Indices and disclosure pages for additional information. This chart indicates the volatility of both large cap and small cap returns. In addition, one can see if the capitalization sizes had returned in tandem with one another (positive correlation) or opposite of one another (negative correlation). The price of small company stocks are generally more volatile than those of larger, more established companies.

5 Glossary of Indices The indices are presented to provide you with an understanding of their historic long-term performance, and are not presented to illustrate the performance of any security. Investors cannot directly purchase any index. Past performance is not indicative of future results. Individual investor results will vary. Inflation: The Consumer Price Index for all Urban Consumers (CPI-U), not seasonally adjusted, is used to measure inflation, which is the rate of change of consumer good prices. All of the security returns are measured from one month-end to the next month-end. CPI commodity returns are collected during the month. Thus, measured inflation rates lag the other series by about one-half month. Prior to January 1978, the CPI (as compared with CPI-U) was used. Both inflation measures are constructed by the U.S. Department of Labor, Bureau of Labor Statistics. International Stocks: The returns for International Stocks are based on the Morgan Stanley Capital International Europe, Australia, Far East Index (MSCI EAFE) for the period MSCI EAFE is a market value-weighted average of over 900 securities listed on stock exchanges in the developed countries in the regions listed above. The index includes reinvestment of gross dividends before deduction of withholding taxes. Large Stocks: The large stock total return index is based upon the Standard and Poor s composite index. The S&P 500 is an unmanaged weighted index of 500 stocks providing a broad indicator of price movement. Lehman Brothers Credit Bond Index: Composed of all publicly issued, fixed rate, nonconvertible, and investment-grade corporate debt. Issues are rated at least Baa by Moody s Investors Service or BBB by Standard & Poor s, if unrated by Moody s. Collateralized Mortgage Obligations (CMO s) are not included. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. Lehman Brothers Credit - Intermediate Bond Index: A subset of the Lehman Brothers Corporate Bond Index covering all corporate, publicly issued, fixed-rate, nonconvertible US debt issues rated at least Baa by Moody s or BBB by Standard & Poor s with at least $50 million principal outstanding and maturity greater than 10 years. Lehman Brothers Government Bond Index: Composed of all publicly issued, nonconvertible, domestic debt of the US Government or any agency thereof, quasifederal corporations, or corporate debt guaranteed by the US Government, flower bonds and pass-through issues are excluded. Total return compromises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. Lehman Brothers Government Intermediate Bond Index: Composed of all publicly issued, nonconvertible, domestic debt of the US Government or any agency thereof, quasi-federal corporations, or corporate debt guaranteed by the US Government, flower bonds and pass-through issues are excluded, with maturities between one and 9.99 years. Total return compromises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization.

6 Glossary of Indices (continued from previous page) Long-Term Corporate Bonds: For , corporate bond total returns are represented by the Salomon Brothers Long-Term High Grade Corporate Bond Index. The index includes nearly all Aaa and Aa rated bonds. Over , the total returns were calculated by summing the capital appreciation returns and the income returns. For the period , Ibbotson and Sinquefeld backdated the Salomon Brothers Index, using Salomon Brothers monthly yield data with a methodology similar to that used by Salomon for Capital appreciation returns were calculated from yields assuming a 20-year maturity, a bond price equal to par, and a coupon equal to the beginning of the period yield. For the period , the Standard & Poor s monthly High Grade Corporate Composite Yield data were used, assuming a 4% coupon and a 20-year maturity. The conventional present value formula for bond price was used for the beginning and end of the month prices. Long-Term Government Bonds: The total returns on long-term government bonds from are constructed with data from the Wall Street Journal. Over , data are obtained from the Government s file at the Center for Research in Security Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a one-year bond portfolio with a term of approximately 20 years and a reasonably current coupon and whose returns did not reflect potential tax benefits, impaired negotiability, or special redemption or call privileges, was used. Where callable bonds had to be used, the term of the bond was assumed to be a simple average of the maturity and first call dates minus the current date. The bond was held for the calendar year and returns were computed. NAREIT Share Price Equity Index: All of the data is based upon the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market weighted. The total return calculation is based upon the weighting at the beginning of the period depending upon whether it is one month, three months, or 12 months. Only those REITS listed for the entire period are used in the total return calculation. Dividends are included in the month based upon their payment date. There is no smoothing of income. Liquidating dividends, whether full or partial, are treated as income. This has the effect of negatively biasing the price appreciation component of the index but results in accurate realized income and total return numbers. The annualized return numbers are market weighted with the most recent dividend annualized plus any extraordinary dividends included, divided by the most recent price Russell 3000 Index: The Russell 3000 Index is composed of the 3,000 largest US securities, as determined by total market capitalization Russell 2000 Index: Consists of the smallest 2,000 securities in the Russell 3000 Index. This is the Frank Russell Company s small capitalization index that is widely regarded in the industry as the premier measure of small capitalization stocks. Russell 1000 Index: Consists of the 1,000 largest securities in the Russell 3000 Index. This large capitalization (market-oriented) index represents the universe of stocks from which most active money managers typically select. The Russell 1,000 is highly correlated with the S&P 500 Index. Russell 1000 Growth: Measures the performance of those Russell 1000 Companies with higher price-to-book rations and higher forecasted growth values. Russell 1000 Value: Measures the performance of those Russell 1000 companies with lower price-to-book rations and lower forecasted growth values Russell Midcap Index: Measures the performance of the 800 smallest companies in the Russell 1000 Index.

7 Glossary of Indices (continued from previous page) Russell 2000 Value Index: Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index consists of the smallest 2,000 securities in the Russell 3000 Index. The Russell 3000 Index is composed of the 3,000 largest U.S. securities, as determined by total market capitalization. Russell 2000 Growth Index: Measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index consists of the smallest 2,000 securities in the Russell 3,000 Index. Small Stocks: For , the small company stock return series is the total return achieved by the Dimensional Fund Advisors (DFA) Small Company 9/10 Fund. This fund is a market value-weighted index of the ninth and tenth deciles of the New York Stock Exchange (NYSE), plus stocks listed on the American Stock Exchange (AMEX) and over the counter (OTC) with same or less capitalization as the upper bound of the NYSE ninth decile. The equities of smaller companies from are represented by the historical series developed by Professor Rolf W. Banz. This is composed of stocks making up the fifth quintile of the NYSE. For 1981, Dimensional Fund Advisors, Inc. updated the returns using Professor Banz s methods. S & P 500 Index: The S&P Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index (stock price times number of shares outstanding), with each stock s weight in the Index proportionate to its market value. The 500 is one of the most widely used benchmarks of US equity performance. S&P BARRA Growth and Value Indices: Companies in each US index are split into two groups based on price-to-book ratio to create growth and value indices. The Value index contains companies with lower price-to-book ratios, while the Growth index contains those with higher ratios. T-Bills: For the U.S. Treasury Bill Index, data from the Wall Street Journal are used form ; the CRSP U.S. Government Bond File is the source until Each month, a one-bill portfolio containing the shortest-term bill having not less than one month to maturity is constructed. To measure holding period returns for the one-bill portfolio, the bill is priced as of the last trading day of the current month. Source: Ibbotson Associates, Chicago Revised 02/04 Disclosures Government bonds and Treasury bills are guaranteed by the US Gov t and, if held to maturity, as with all bonds offer a fixed rate of return and principal. Stocks are not guaranteed, represent ownership in a company and offer long term growth potential but may fluctuate more and provide less current income than other investments. Standard deviation represents the amount, over a period of time, that a portfolio s return deviates from the mean or average annual return that the portfolio has Experienced. The price of small company stocks generally are more volatile than those of large company stocks. Managed Accounts Consulting Group Is affiliated with Prudential Investments LLC.