1. Strategic Investment Research Group July 2002

2. 2Q 2002 Broad Market Overview
Recent themes continued as stocks took a beating
Value beat growth AND smaller was better than larger
Russell 2000 Value -2.1%, Russell 1000 Growth -18.7%
Negative returns across sectors
Tech and healthcare caused the most damage
The second quarter’s results showed a continuation of recent themes such as the outperformance of small cap and value, but results were much more negative.
There was a very big difference between small value and large growth. This shows up in the –2% return of the Russell 2000 Value Index and the –19% return of the Russell 1000 Growth index.
For the most part, all sectors produced negative returns across the board. REITs in the small cap space were the only notable exception to this.
Tech and healthcare caused the most damage, especially technology, which continued its slide.
*Past performance is no guarantee of future results

3. 2Q 2002 Broad Market Overview
Small Cap outperformed Large Cap but both were weak
Small Cap Value fell less than SC Growth
R2V -2.1% versus R2G -15.7%
Once again, extremely large difference
Continuing tech wreck hurt Growth the most (tech down 33%)
Next largest sector losses in healthcare and producer durables
REITs eked out gains in both the R2V and R2G indexes
The margin of outperformance between small and large cap was about 5% during the quarter
All capitalization categories suffered as negative performance was produced on all fronts.
BUT there were continuing disparities in the performance of value and growth.
The differences show up when you look at the Russell 2000 Value’s loss of roughly 2% vs. the Russell 2000 Growth’s loss of 16%.
Technology positions continue to hurt growth results across the board, and healthcare and producer durables were also big losers.
REITs produced gains for both small cap growth and small cap value in the second quarter..
The margin of outperformance between small and large cap is seen in the Russell 2000’s return of –8.35% vs. the Russell 1000’s return of %.
*Past performance is no guarantee of future results

4. 2Q 2002 Broad Market Overview
Large Cap (Russell and S&P)
Value outperformed growth by 10%, but both fell
R1V –8.5% versus R1G –18.7%
Tech, healthcare, and consumer discretionary hurt most
Mid range market cap down least
R1’s largest detractors this year: GE, INTC, AOL, IBM, C
S&P 500’s detractors include all of the above plus TYC
The quarter also contained a number of disasters: Worldcom, Global Crossing, and of course, Tyco
*Past performance is no guarantee of future results
In the large cap space value also outperformed growth, but once again both were negative.
Technology, healthcare, and consumer discretionary were the biggest detractors for both the S&P AND the Russell 1000.
Also, both indices showed better returns in the mid range of their market cap deciles in the quarter.
The Russell 1000 was hurt the most this year by GE, Intel, AOL, IBM, and Citigroup. The S&P was also hurt by all of those, but Tyco came in second worst.

5. 2Q: In Summary
As a result of the market’s performance, we would expect;
Value/deep value to outperform core with a value tilt
Core with a growth tilt to outperform aggressive/momentum
Small to slightly outperform mid and large – not much differential here
Remember:
Diversification and Asset Allocation Wins the race
This quarter, if you were invested in: Return
S&P %
50% large cap growth/ 50% large cap value %
40% LCV, 40% LCG, 10% SCG, 10% SCV %
*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. Individual investors cannot directly purchase an index. Past performance does not guarantee future results.

6. Strategic Investment Manager Research
Thank You
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This document and information provided is unaudited. We do not represent that the information is complete or accurate. All opinions are subject to change. In addition, the portfolio holdings are subject to change at any time. The investment advisory services described herein may not be available in some states or countries.
The document has been prepared by the Strategic Investment Research Group of Prudential Investments Fund Management LLC (PIFM). Securities products and investment services are offered through Prudential Securities Incorporated, 199 Water Street, New York, NY 10292, and Pruco Securities Corporation, 751 Broad Street, Newark, NJ 07102, the sponsors of the Managed Assets Consulting Services (MACS) Program. PIFM, Prudential Securities Incorporated and Pruco Securities, are Prudential companies. Pruco Securities Corporation conducts advisory business under the name Prudential Financial Planning services. For more information, please contact the Investment Management Research analyst who prepared this report. Prudential Financial is a service mark of the Prudential Insurance Company of America, Newark, NJ, and its affiliates. For more information, please contact the research analyst who prepared this report.
*Past performance is not indicative of future results. The principal value of an investment and investment returns will fluctuate with changes in market conditions. An investor’s MACS Program account, when liquidated, may be worth more or less than its initial value.
S&P 500 Index
The S&P 500 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 U.S. equity performance.
The performance of an index does not reflect the fees and expenses of investing, including the costs of the MACS program. Investors cannot directly purchase an index.
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