Portfolio Diversification

Potential To Reduce Risk or Increase Return

1970-2001
Fixed Income Portfolio Cash 10%

Lower Risk Portfolio Stocks 26% Bonds 27% Return Risk 9.1% 5.8%

Higher Return Portfolio

Cash 47%

Bonds 90%
Return Risk 9.1% 8.3%

Cash 23%

Stocks 39%

Bonds 38%

Return Risk

10.2% 8.3%

Risk is measured by standard deviation. Risk and return are based on annual data over the period 1970-2001. Portfolios presented are based on Modern Portfolio Theory. This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. 3/1/2002. 2002 Ibbotson Associates, Inc.

The Case for Diversifying

50% 40% 30% 20% 10% Stocks 50/50 Portfolio Bonds Average Return 8.5% 5.5% 1.9%

Annual Return

0%
-10% -20% Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Time period illustrated is from 1956-1962.

Time Period

This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. 3/1/2002. 2002 Ibbotson Associates, Inc.

Stocks and Bonds: Risk versus Return

1970-2001
14%
13% Maximum Risk Portfolio - 100% Stocks

80% 20%

Return

12%
11% 10%

60% 40%
50% 50% 25% 75% - Minimum Risk Portfolio 100% Bonds

9% Risk 11%

12%

13%

14%

15%

16%

17%

Risk is measured by standard deviation. Return is measured by arithmetic mean. Risk and return are based on annual data over the period 1970-2001. Portfolios presented are based on Modern Portfolio Theory. This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. 3/1/2002. 2002 Ibbotson Associates, Inc.

Power of Reinvesting
1981-2001
$100,000
Stocks with Reinvestment Bonds with Reinvestment Stocks without Reinvestment Bonds without Reinvestment

Ending Wealth
$17,057 $9,807 $9,370

Average Return
15.2% 12.1% 11.8%

$10,000

$1,957

3.4%

$1,000

$100 1981

1986

1991

1996

2001

Hypothetical value of $1,000 invested at year-end 1981. This is for illustrative purposes only and not indicative of any investment. Past performance is no guarantee of future results. 3/1/2002. 2002 Ibbotson Associates, Inc.