Jan. 14, 2004 — Out of the nine equity investment style categories, active fund managers within five outperformed their relative indices for calendar 2003.

Of the remaining, the corresponding indices bettered active funds in three style categories, and one investment style, mid-cap blend, came in at dead heat in 2003, according to Standard & Poor’s data.

The five investment styles which triumphed over their benchmarks comprised all the growth categories and all the small-cap categories.

Specifically, in 2003, 55.3% of actively managed large-cap growth funds, 68.3% of mid-cap growth funds and 64.8% of small-cap growth funds outperformed their relative benchmarks — the S&P/BARRA 500 Growth Index, S&P/BARRA MidCap 400 Growth Index, and S&P/BARRA 600 SmallCap Growth Index, respectively.

Actively managed funds from three category styles — large-cap blend, large-cap value and mid-cap value — failed to beat their indices in a vast majority of cases.

With respect to broader investment styles for calendar 2003, the S&P 500 beat 64.6% of actively managed large-cap funds, and the S&P MidCap 400 outpaced 56.4% of actively managed mid-cap funds. However, an impressive 61.2% of small-cap active funds beat the S&P SmallCap 600 Index.

Among sector funds, active managers beat indices in seven out of eight sectors in 2003, with utilities funds being the sole exception. Indeed, 76.7% of utility funds failed to beat their benchmark for the year.

Over the longer term, the indices demonstrated a distinct advantage over actively-managed portfolios. Indeed, for the five-year period through 2003, in only one investment style (large-cap growth), did the majority of actively managed funds beat their benchmark. An impressive 54.8% of active large-cap stockpickers beat the benchmark over that period.

Active mid-cap managers did the worst over the long-term with 94.9% of mid-cap value funds underperforming their index for the five years through 2003.

Over the last five years, the S&P 500 has outperformed 53.2% of large-cap funds, the S&P MidCap 400 has beaten 81.7% of mid-cap funds, and the S&P SmallCap 600 has bettered 69.8% of small-cap funds.

Similarly, over the past three years, the S&P 500 has outperformed 63.7% of large-cap funds, the S&P MidCap 400 has outperformed 73.3% of mid-cap funds, and the S&P SmallCap 600 has outperformed 68.6% of small-cap funds.

“Performance in 2003 was dominated by returns in growth segments such as technology (+47%) and consumer discretionary (+37%),” notes Rosanne Pane, Mutual Fund Strategist at Standard & Poor’s. “Active fund managers who were overweight in these sectors outperformed their benchmarks.”

“Standard & Poor’s continues to see active funds underperforming indices over longer time horizons such as three and five years,” adds Srikant Dash, index strategist at Standard & Poor’s. “This pattern is noticeable across large-, mid-, and small-cap categories, and has held across the diverse market environments of the past few years.”

Standard & Poor’s SPIVA report also determined that small-cap funds with smaller asset sizes have done better than funds with larger assets under management. This is shown by the equal-weighted average returns of small-cap funds outperforming the asset-weighted average returns over the last one-, three- and five-year horizons. This holds true across the small-cap value, growth and blend categories.

“In the small cap sector, liquidity is an issue for active managers,” adds Pane. “Funds with smaller asset sizes can be more efficient in trading and managing their investment process.”

Taking into account the liquidation and mergers of funds, this latest quarterly report tracked the performance of 2479 actively managed funds.

The complete year-end 2003 SPIVA Scorecard is available at www.standardandpoors.com/spiva.