Enhanced MACS Combo Platform

Enhanced MACS Manager Combos Bringing together 3 SIRG inputs: Economic and Market Outlook Investment Manager Research Views Quantitative Methods for Identifying and Managing Risk

1. SIRG Economic & Market Outlook Current Outlook: Consensus economic forecasts are likely to disappoint Near-term equity market returns are likely to be weak Neutral on investment style (i.e. growth versus value)

2. Manager Research Views Focus on Select List Managers (i.e. managers receiving internal rating of 4 or 5) May use favorably viewed non-Select List managers to fulfill on specific investment criteria

3. Quantitative Analysis Identify multiple risk factors Macroeconomic risk exposures Investment style bias CAPM beta & volatility Construct combo recommendations to take on desired risk characteristics based on market outlook

Combo Comparisons Measuring Business Cycle Risk TCW LCG 27% less exposed to Bus. Cycle risk than S&P LA/TCW Combo S&P 500 Fayez LCG LA/Fayez Combo Lord Abbett LCV Lord Abbett LCV Source: Strategic Investment Research Group, BIRR Analytics

Understanding Manager Sub-Styles Domestic Equity Value Core Growth Deep Traditional Relative GARP Momentum Large X Mid Small Value Tilt

Resources for Constructing Manager Combos in MACS MACS Combo Matrix Guide Investor tool for building a custom combo Recommendations on which strategy to combine with your existing manager MACS Combo Focus List Menu of SIRG highlighted combinations Risk exposures consistent with SIRG’s economic and market view Select List or favorably viewed non-Select List strategies Focus mainly on where to put new assets to work

Macs Custom Combo Matrix— Example Using LCV – Alliance & Berkley

Macs Custom Combo Matrix— Example Using LCG – Fayez & TCW

MACS Combo Focus List LARGE CAP Combination Strategies Strategy Risk SIRG Comments Rittenhouse Financial Services MFS Financial Management Large Growth (Traditional) Large Value Moderately Conservative - Approximately 30% less business cycle risk than S&P500 index 15 25% portfolio overlap Rittenhouse typically has underweight in tech relative to style R1000 growth MFS is a Select List Manager Furman Selz Capital Management Rorer Asset Management LLC Large Growth (GARP) (Relative) Approximately 20% less business cycle risk than S&P 500 20 30% portfolio overlap Furman may have significant underweight in tech and/or health care periodically relative to the R1000Growth Both Select List Managers Fayez Sarofim & Co. Lord Abbett & Co. Moderate 20% less business- cycle risk than S&P 500 – Fayez typically has very low weight in tech relative to R1000

MACS Combo Focus List (cont.) LARGE CAP Combination Strategies Strategy Risk SIRG Comments - 20% more business cycle risk exposure than S&P 500, but low relative to other possible moderately aggressive TCW Investment Management Co. Large Growth Moderately combinations (Traditional) Aggressive - Tempered growth bias Rorer Asset Management LLC Large Value - 15 – 25% portfolio overlap (Traditional) - TCW is aggressive growth manager with high tech weighting relative to R1000 growth - Both Select List Managers SMALL/MID CAP - 35% less exposure to business Moderately Aggressive cycle risk relative to Russell Small Small Growth Cap Index WestCap Investors (Traditional) - – 5% portfolio overlap Earnest Partners Small Value - Market oriented to slight growth (Relative) bias - Both Select List Managers - Exposure to business cycle risk in line with Russell Mid–Cap Index Calamos Investment Mid - Cap Growth Aggressive - – 5 percent portfolio overlap Management (Traditional) - Market oriented (slight growth bias) TCW Investment Mid - Cap Value Management Co. (Relative) - Both Select List Managers

Defining the Macro Economic Risk Factors Confidence Risk: Exposure to this factor reflects a stock’s sensitivity to unexpected changes in investor confidence. Most assets have a positive exposure to Confidence Risk. Thus, having a high exposure to this factor helps when consumer confidence is rising. Time Horizon Risk: Exposure to this factor reflects a stock’s sensitivity to unexpected changes in investors’ willingness to invest for the long term. An increase in time horizon tends to benefit growth stocks, while a decrease tends to benefit income stocks. Inflation Risk: Exposure to this factor reflects a stock’s sensitivity to unexpected changes in the inflation rate. Unexpected increases in the inflation rate put a downward pressure on stock prices, so most stocks have a negative exposure to Inflation Risk. Business Cycle Risk: Exposure to this factor reflects a stock’s sensitivity to unexpected changes in the growth rate of business activity. Stocks of companies such as retail stores that do well in times of economic growth have a higher exposure to Business Cycle Risk than those that are less affected by the business cycle, such as utilities or government contractors. Market Timing Risk: Exposure to this factor reflects a stock’s sensitivity to moves in the stock market as a whole that cannot be attributed to the other factors. Sensitivity to this factor provides information similar to that of the CAPM Beta about how a stock tends to respond to changes in the broad market. This multi factor approach to risk is based on the Arbitrage Pricing Theory, which enjoys wide academic and practitioner support. The multi factor approach allows a much richer understanding of the economic factors that drive equity returns.

Since no one manager/investment program is suitable for all type of investors, this information is provided for informational purposes only. The managers presented here may or may not be included as an option based upon information your client provided in the MACS questionnaire. Past performance is not indicative of future results. The principal value of investments and investments returns will fluctuate with changes in market conditions. An Investor’s MACS account, when liquidated, may be worth more or less than its initial value. MACS is distributed by Prudential Investment Management Services LLC (PIMS), Three Gateway Center, 14th Floor, Newark, NJ 07102-4077, and offered through Pruco Securities Corporation, 751 Broad Street, Newark, NJ 07102-3777. Both are Prudential Financial companies and members SIPC.   Prudential Financial and the Rock logo are registered service marks of The Prudential Insurance Company of America, Newark, NJ, and its affiliates. IFS-A083785 Ed. 10/1/2003