Each Director who is not an officer or employee of Prudential Financial receives an annual retainer fee of $85,000. The chairperson of each committee receives an additional annual retainer fee of $10,000. Three Directors each received $6,000 in 2001 for a special committee assignment. We currently intend to adopt a compensation plan for non-employee Directors that will cause at least one-half of each Director's compensation to be paid in the form of restricted stock grants payable upon retirement or other stock-based compensation. Such changes are anticipated to take effect on or after January 1, 2003.

Directors' Deferred Compensation and Pension Plans

The Deferred Compensation Plan for Non-Employee Directors provides a method of deferring payment to non-employee Directors of their fees until termination of their services on the Board of Directors or a certain date selected by the Director. Fees deferred under this plan are deemed to accrue interest at the same rate as in effect from time to time under the Fixed Rate Fund under the Prudential Employee Savings Plan.

The Pension Plan for Non-Employee Directors provides retirement income for non-employee Directors after completion of their services on the Board of Directors. It provides an annual benefit for the life of the Director equal to the lower of the basic annual retainer fee as of the date a Director retires and $30,000. We currently intend to terminate this plan by the end of 2002 in exchange for providing current Directors a one-time grant of restricted stock (valued at the then current market price) payable upon retirement in consideration of termination of the plan.

We intend the Deferred Compensation and Pension Plans to be unfunded plans maintained for the purpose of providing deferred compensation and retirement benefits for the non-employee Directors, and we administer them as such. They are not "employee benefit plans" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

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