(Comparisons Charts) IFS-A76904 Charts 1-10 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, 2002 unless otherwise noted
Index Values (USD) 60.0 S&P 500 vs. EAFE Growth of A Dollar 1970 to 2002 31.4 25.6 10.0 1.0 0.8 Sep 1970 S&P 500 TR 1975 1980 MSCI EAFE TR 1985 Time 1990 1995 2000 2002 Source: Ibbotson. Data as of 12/31/02. 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. IFS A76904 Chart #1
Index Values (USD) 50.0 S&P 500 vs. NAREIT Growth of A Dollar 1971 to 2002 10.0 24.9 15.7 1.0 0.4 1971 S&P 500 TR 1975 1980 NAREIT-All TR 1985 Time 1990 1995 2000 2002 Source: Ibbotson Associates. S&P 500 & NAREIT are total returns. NAREIT (National Association of Real Estate Investment Trusts) includes both equity & mortgages. Past performance is not indicative of future results. 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. See Glossary of Indices for and disclosure pages for additional information. IFS A76904 Chart #2
Returns 30.0% Growth vs. Value Quarterly Returns Comparison 1979 to 2002 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 1979 1980 1985 1990 Time 1995 2000 2002 Russell 1000 Growth Russell 1000 Value Source: Ibbotson. Data as of 12/31/02. 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. IFS A76904 Chart #3
Returns 40.0% 35.0% 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 1970 S&P 500 1975 MSCI EAFE Domestic vs. International Quarterly Returns Comparison 1970 to 2002 1980 1985 Time 1990 1995 2000 2002 Source: Ibbotson. Data as of 12/31/02. 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. IFS A76904 Chart #4
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 1979 1980 Small Cap vs. Large Cap Quarterly Returns Comparison 1979-2002 1985 Russell 1000 Russell 2000 1990 Time Source: Ibbotson. Data as of 12/31/02. 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. IFS A76904 Chart #5 1995 2000 2002
S&P 500 Sector Weightings Changes Over Time 1977 to 2002 100 90 80 70 60 50 40 30 20 10 0 Transportation Utilities Industrials Commercial Services Basic Materials Consumer Services Energy Consumer Non- Cyclicals Consumer Cyclicals Telecom Health Care Financial Services Technology 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only and does not reflect the performance of any specific investment. The index is presented to provide you with an understanding of the markets historic longterm performance, and is not presented to illustrate the performance of any security. Individual Investors cannot directly purchase an index. Past performance does not guarantee future results. Please see disclosure pages for additional information. IFS A76904 Chart #6
1970 $850 Billion* 2002 $13.2 Trillion** Non-U.S. 34% Non-U.S. 54% U.S. 66% U.S. 46% Source: Brandes Investments 12/31/02. *Estimated market cap of the countries in the MSCI World Index. **Estimated market cap of the countries in the MSCI All Country World Index. Investing in foreign/international securities presents certain unique risks not associated w/ domestic investments, such as currency fluctuations & political, social, and economic changes. This may result in greater price share volatility. IFS A76904 Chart #7
30 20 10 0-10 -20-30 Last Three Years 2000 2001 2002-40 S&P 500 EAFE Small Cap Value MidCap Value Large Cap Value SmallCap Growth MidCap Growth LargeCap Growth Source: F.Russell. Past performance is not a guarantee of future results. Individual investor results will vary. An index is unmanaged and can not be directly invested in. Investing in foreign/international securities presents certain unique risks not associated w/ domestic investments, such as currency fluctuations & political, social, and economic changes. This may result in greater price share volatility. See Glossary of Indices for index descriptions. IFS A76904 Chart #8
How long does it take for markets to recover? 1979 to January 2003 Corrections Bear Markets All Periods -10% + < -20% -20% + line % -13.23-27.11-15.73 Duration (mths) 2.17 3.32 2.92 Trough to new Peak 3.17 11.22 3.17 Peak to Peak 4.62 23.10 5.98 Numbers represent the median number of months for each of the periods. Market is represented by the S&P 500. 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 for descriptions. Source: Crandall Pierce & Co. 2001 IFS A76904 Chart #9
Growth Vs. Value: Trading Places Jan. 1980 -. 2002 *Standard deviation ranges are represented by the different colored lines. Growth/Value 50% 40% Russell 1000 Growth Outperformed Less than 1% probability 3SD = 31.2% Return Difference 30% 20% 10% 0% -10% -20% -30% Average Return Differential 2SD = 20.8% 1SD = 10.4% 1SD = -10.4% 2SD = -20.8% -40% -50% Jan-80-80 Nov-81 Oct-82 Sep-83 Aug-84 Jul-85 Jun-86 May-87 Apr-88 Mar-89 Feb-90 Jan-91-91 Nov-92 Oct-93 Sep-94 Aug-95 Jul-96 Jun-97 May-98 Apr-99 Mar-00 Feb-01 Jan-02-02 Russell 1000 Value Outperformed Less than 1% probability 3SD = -31.2% Source: Russell. Return difference of the Russell 1000 Growth & Russell 1000 Value. Past performance is not a guarantee of future results. This information has been gathered from sources considered to be reliable, however its accuracy cannot be guaranteed. IFS A76904 Chart #10
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 a guarantee of future results. Individual investor results will vary. Small Stocks: For 1982-2002, 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 1926-1980 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. 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. Long-Term Corporate Bonds: For 1969-2002, 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 1926-1968, the total returns were calculated by summing the capital appreciation returns and the income returns. For the period 1946-1968, Ibbotson and Sinquefeld backdated the Salomon Brothers Index, using Salomon Brothers monthly yield data with a methodology similar to that used by Salomon for 1969-1991. 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 1926-1945, 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 1977-2002 are constructed with data from the Wall Street Journal. Over 1926-1976, data are obtained from the Government s file at the Center Source: Ibbotson Associates, Chicago Revised 03/03 continued - next page
(continued from previous page) 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. T-Bills: For the U.S. Treasury Bill Index, data from the Wall Street Journal are used form 1977-2002; the CRSP U.S. Government Bond File is the source until 1976. 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. 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 1970-2002. 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. 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. Source: Ibbotson Associates, Chicago Revised 03/03
(continued from previous page) 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. Lehman Brothers Government 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. 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. 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. Source: Ibbotson Associates, Chicago Revised 03/03
(continued from previous page) 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. 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. 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. 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 Source: Ibbotson Associates, Chicago Revised 03/03
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 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. Securities products & investment advisory services offered through Prudential Securities Incorporated and Pruco Securities Incorporated both Prudential Companies. Prudential Financial is a service mark of The Prudential Insurance Company of America, Newark, NJ and its affiliates.