Turnkey Asset Allocation Options

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1 Turnkey Asset Allocation Options How can Prudential Annuities asset allocation options best help you attain a client s personal financial goals in today s ever-changing market environment? Consider the investment strategies employed by different options. To help manage investment risk and increase your client s potential for positive returns, Prudential Annuities SM offers 18 portfolios spanning four investment strategies: n Traditional n Quantitative n Alternative n Tactical n 18 turnkey allocation options n 4 diverse investment strategies n A broad spectrum of potential riskreturn characteristics Beyond differences in strategies, each turnkey portfolio has been constructed with its own set of potential investment risk and return characteristics. This presents a wide array of options to consider. Each portfolio has been constructed with the goal of being highly efficient. However, Prudential Annuities also allows your client to blend portfolios to build a customized portfolio. If appropriate for a client s needs, a customized portfolio can combine strategies, like traditional, quantitative and alternative to gain desired exposure to different asset classes and different management styles. POTENTIAL RETURN (%) AST AGGRESSIVE AST FT CAPITAL APPRECIATION TARGET AST CAPITAL GROWTH FRANKLIN TEMPLETON VIP AST FOCUS FOUR PLUS AST NIEMANN CAPITAL GROWTH AST HORIZON GROWTH AST CLS GROWTH AST Academic Strategies AST FT BALANCED TARGET AST ADVANCED STRATEGIES AST BALANCED AST T. ROWE PRICE AST HORIZON MODERATE AST CLS MODERATE AST Schroders multi-asset AST UBS DYNAMIC ALPHA AST PRESERVATION traditional strategies QUANTITATIVE STRATEGIES ALTERNATIVE STRATEGIES TACTICAL STRATEGIES POTENTIAL RISK (%) This illustration is hypothetical and is based on how we might expect these portfolios to perform over time, based on their risk and return characteristics as measured by standard deviation. Please note that past performance is not indicative of future results. IFS-A ED. 07/2008 1

2 Traditional Asset Allocation Within the traditional asset allocation strategy, Prudential Annuities offers your clients portfolios that are multi-managed Dynamic Asset Allocation Portfolios, and those that are managed by a single manager Franklin Templeton VIP Founding Funds Allocation Fund and AST T. Rowe Price Asset Allocation Portfolio. Multi-Manager Portfolios The investment objective of each Dynamic Asset Allocation Portfolio is to obtain the highest potential total return consistent with its specified level of risk tolerance. The Aggressive Portfolio has the highest risk tolerance while the Preservation Portfolio has the lowest risk tolerance. Each Dynamic Asset Allocation Portfolio is funds of funds, which means that it invests primarily in one or more investment options on the Prudential Annuities investment platform. These investments in other investment options provide exposure to hundreds of securities across the equity and debt asset classes. Quantitative Management Associates LLC is primarily responsible for the strategic asset allocation and day-to-day management for these Portfolios. Prudential Investments LLC is primarily responsible for selecting weighted combinations of investment options. Single Manager Portfolios Franklin Templeton VIP Founding Funds Allocation Fund is managed by Franklin Templeton Investments, which is a global investment management organization AST Aggressive Asset Allocation Portfolio* 99.50% Equities 0.50% Fixed Income Multi-Manager Large-Cap Growth / 40.00% Large-Cap Value / 28.30% Mid-Cap Growth / 1.30% Mid-Cap Value / 1.00% Small-Cap Growth / 2.10% Small-Cap Value / 1.50% Specialty / 3.30% International Growth / 12.00% International Value / 10.00% Cash / 0.50% AST Marsico Capital Growth/24.00% AST T. Rowe Price Large-Cap Growth/16.00% AST Large-Cap Value/14.10% AST AllianceBernstein Growth & Income/14.20% AST Neuberger Berman Mid-Cap Growth AST Mid-Cap Value AST Federated Aggressive Growth AST Small-Cap Value AST T. Rowe Price Natural Resources AST International Growth AST International Value * Please note that you may not select the AST Aggressive Asset Allocation Portfolio with certain optional benefits. Please see the annuity prospectus for additional details. AST Capital Growth Asset Allocation Portfolio 79.50% Equities 20.50% Fixed Income Multi-Manager Large-Cap Growth / 31.50% AST Marsico Capital Growth / 18.90% AST T. Rowe Price Large-Cap Growth / 12.60% Large-Cap Value / 22.60% AST Large-Cap Value / 11.25% AST AllianceBernstein Growth & Income / 11.35% Mid-Cap Growth / 1.00% AST Neuberger Berman Mid-Cap Growth Mid-Cap Value / 0.70% AST Mid-Cap Value Small-Cap Growth / 2.00% AST Federated Aggressive Growth Small-Cap Value / 1.20% AST Small-Cap Value Specialty / 2.80% AST T. Rowe Price Natural Resources International Growth / 9.50% AST International Growth International Value / 8.10% AST International Value Core Bonds / 19.00% AST PIMCO Total Return Bond / 16.10% AST Western Asset Core Plus Bond / 2.90% Global Bonds / 1.10% AST T. Rowe Price Global Bond Cash / 0.50% Franklin Templeton VIP Founding Funds Allocation Fund 74.38% Equities 25.62% Fixed Income Single Manager Franklin Income Securities Fund / 33.33% Focuses on undervalued dividend-paying stocks and bonds across a variety of industries. Templeton Growth Securities Fund / 33.33% Seeks to invest primarily in undervalued stocks and, to a lesser extent, distressed securities and merger arbitrage. Mutual Shares Securities Fund / 33.33% Searches worldwide for stocks selling at low prices relative to managers appraisal of value. 2

3 comprised of world-class investment management groups Franklin, Templeton and Mutual Series each operating autonomously and offering their investment perspectives. This fund combines three portfolios each run independently by the three management groups to create a portfolio offering diversification across multiple asset classes and the potential for attractive, long-term results. The allocation is monitored and automatically rebalanced to adapt to market movements to help maintain equal exposure to the distinct investment strategies in any market environment. AST T. Rowe Price Asset Allocation Portfolio provides a diversified investment within one portfolio by using a risk-controlled asset allocation process with a long-term approach as its foundation. Each underlying investment style in the portfolio offers strict adherence to its respective style throughout market cycles with the objective of offering solid performance relative to its benchmark and peers. The underlying baskets of securities are actively managed in each asset class. The asset allocation decisions are based on a long-term investment time horizon with strategic and measured re-allocations at 6- to 18-month intervals to allow themes to materialize. The composition of the four Dynamic Asset Allocation Portfolios and the T.Rowe Price Asset Allocation Portfolio is as of December 31, The composition of the Franklin Templeton VIP Founding Funds Allocation Fund reflects targeted allocations at its May 1, 2008 launch. Portfolio composition can change without notice at any time in response to market conditions. AST Balanced Asset Allocation Portfolio 69.60% Equities 30.40% Fixed Income Multi-Manager Large-Cap Growth / 27.70% AST Marsico Capital Growth /16.60% AST T. Rowe Price Large-Cap Growth /11.10% Large-Cap Value / 19.80% AST Large-Cap Value /9.90% AST AllianceBernstein Growth & Income /9.90% Mid-Cap Growth /0.90% AST Neuberger Berman Mid-Cap Growth Mid-Cap Value / 0.70% AST Mid-Cap Value Small-Cap Growth / 1.70% AST Federated Aggressive Growth Small-Cap Value / 1.00% AST Small-Cap Value Specialty / 2.30% AST T. Rowe Price Natural Resources International Growth / 8.30% AST International Growth International Value / 7.20% AST International Value Core Bonds / 28.00% AST PIMCO Total Return Bond /24.00% AST Western Asset Core Plus Bond /4.00% High Yield Bonds / 0.20% AST High Yield Global Bonds / 1.70% AST T. Rowe Price Global Bond Cash / 0.50% AST T. Rowe Price Asset Allocation Portfolio 62.10% Equities 37.90% Fixed Income Single Manager U.S. Large-Cap Equities / 47.90% U.S. Small-Cap Equities / 2.90% International Equities / 11.30% Investment Grade Fixed Income / 31.80% High Yield Fixed Income / 2.40% Cash / 3.70% AST Preservation Asset Allocation Portfolio 39.50% Equities 60.50% Fixed Income Multi-Manager Large-Cap Growth / 16.0% AST Marsico Capital Growth / 9.5% AST T. Rowe Price Large-Cap Growth / 6.5% Large-Cap Value / 11.2% AST Large-Cap Value / 5.6% AST AllianceBernstein Growth & Income / 5.6% Mid-Cap Growth / 0.5% AST Neuberger Berman Mid-Cap Growth Mid-Cap Value / 0.3% AST Mid-Cap Value Small-Cap Growth / 0.8% AST Federated Aggressive Growth Small-Cap Value / 0.6% AST Small-Cap Value Specialty / 1.3% AST T. Rowe Price Natural Resources International Growth / 4.8% AST International Growth International Value / 4.0% AST International Value Core Bonds / 55.4% AST PIMCO Total Return Bond / 46.1% AST Western Asset Core Plus Bond / 9.3% High Yield Bonds / 0.4% AST High Yield Global Bonds / 3.6% AST T. Rowe Price Global Bond Cash / 1.1% 3

4 Quantitative Asset Allocation With the AST First Trust Target Portfolios and the AST Focus Four Plus Portfolio, your clients have the comfort of knowing that investments are made through defined, mathematical models that annually screen for what are believed to be superior-performing securities. The portfolios are managed objectively on the basis of fundamentals, valuation and management quality. First Trust s quantitative approach to investing identifies securities with characteristics that have outperformed the markets over long periods of time and seeks to select investments based upon those characteristics. Unique strategies for quantitative turnkey options Dow Jones Target Income Invests in a diversified portfolio of investment-grade corporate fixed income securities from the Dow Jones Corporate Bond Index (available in the Target portfolios only). NYSE International Target 25 Invests in 25 stocks of foreign companies selected from the NYSE International 100 Index that are expected to provide capital appreciation. Global Dividend Target 15 Invests in 15 common stocks issued by companies that are components of the DJIA, the Financial Times Industrial Ordinary Share Index and the Hang Seng Index that are expected to provide total return through income and capital appreciation (available in the Target portfolios only). Value Line Target 25 Invests in 25 of the 100 common stocks that Value Line gives a #1 ranking for Timeliness, which have recently exhibited certain positive financial attributes and whose objective is growth of capital. Target Small Cap Invests in 40 common stocks issued by U.S. companies that are profitable and growing with market capitalization between $150 million and $1 billion (available in the Target portfolios only). The Dow Target Dividend Invests in 20 common stocks issued by companies from the Dow Jones Select Dividend Index that are expected to provide income and have the potential for capital appreciation (available in the Balanced Target and Focus Four Plus portfolios only). NASDAQ Target 15 Invests in 15 common stocks issued by companies from a subset of the stocks included in the NASDAQ 100 Index that are expected to have the potential for capital appreciation (available in the Capital Appreciation Target portfolio only). S&P Target SMid 60 Invests in 30 stocks from the S&P MidCap 400 Index and 30 stocks from the S&P SmallCap 600 Index, giving the mid-cap stocks approximately twice the weight of the small-cap stocks, that are expected to have the potential for capital appreciation (available in the Focus Four Plus portfolio only). Western Asset Core Plus Bond Portfolio Invests primarily in U.S. fixed income securities and other debt instruments of domestic and foreign entities, including corporate bonds, securities issued or guaranteed by the U.S. government, mortgaged-backed securities and money market instruments (available in the Focus Four Plus portfolio only). 4

5 These asset allocation portfolios incorporate the independent research of Value Line and are based upon broader market indices of Dow Jones, The New York Stock Exchange, NASDAQ and Standard & Poor s. The composition of the Target portfolios is as of December 31, The composition of the Focus Four Plus portfolio reflects its targeted allocations at its July 21, 2008 inception. Portfolio composition can change without notice at any time in response to market conditions. AST First Trust Capital Appreciation Target Portfolio 79.90% Equities 20.10% Fixed Income Dow Jones Target Income / 19.30% NYSE International Target 25 / 10.90% Global Dividend Target 15 / 20.40% Value Line Target 25 / 21.20% Target Small Cap / 12.00% NASDAQ Target 15 / 15.40% Cash / 0.80% AST Focus Four Plus Portfolio 75.00% Equities 25.00% Fixed Income Dow Jones Target Dividend / 22.50% NYSE International Target 25 / 7.50% Value Line Target 25 / 22.50% S&P Target SMid 60 / 22.50% Western Asset Core Plus Bond / 25.0% AST First Trust Balanced Target Portfolio 64.80% Equities 35.20% Fixed Income Dow Jones Target Income / 34.50% NYSE International Target 25 / 11.20% Global Dividend Target 15 / 15.90% Value Line Target 25 / 16.50% Target Small Cap / 4.20% NASDAQ Target 15 / 17.00% Cash / 0.70% 5

6 Alternative Asset Allocation Prudential Annuities features four alternative asset allocation options that apply concepts used by institutional and endowment fund managers to offer exposure to traditional and non-traditional asset classes with a lower level of correlation to the overall market. These include REITS (Real Estate Investment Trusts), TIPS (Treasury Inflation-Protected Securities), ETFs (Exchange-Traded Funds), and Commodities. In addition, these portfolios also provide exposure to alternative strategies such as holding both long and short positions and focusing on absolute returns. AST Academic Strategies Asset Allocation Portfolio will use the latest academic research and strategies used by leading endowment fund managers to provide exposure to traditional and non-traditional asset classes and investment strategies. The portfolio offers an innovative asset allocation option consisting of approximately 60% traditional asset classes and 40% alternative asset classes. We believe that the traditional asset classes and strategies will provide investors with exposure to a globally diversified pool of equity and fixed-income securities. At the same time, we hope that the nontraditional asset classes and strategies will complement the performance of the traditional asset classes and help reduce volatility due to their low market correlation. The overall asset allocation strategy for the Academic Strategies Asset Allocation Portfolio will be determined by Quantitative Management Associates (QMA) and PI in consultation with Advanced Quantitative Consulting, LLC (AQC). AQC was founded by Dr. Christopher C. Geczy and Dr. Jeffrey F. Jaffe. In addition to their work at AQC, Dr. Christopher Geczy is an Adjunct Associate Professor of Finance at the Wharton School and Dr. Jeffrey F. Jaffe is an Associate Professor of Finance at The Wharton School. AST Advanced Strategies Portfolio offers a multi-tiered approach that allows investors to benefit from: n The use of traditional and non-traditional asset classes n Investment managers with experience and deep knowledge in their asset class n Active management of the asset class/subadvisor mix The portfolio invests in traditional asset classes such as the equity and debt securities of domestic and international issuers. The portfolio also provides exposure to REITS, TIPS and commodities in an attempt to provide a hedge against inflation. Likewise, most of the international bonds in the portfolio are hedged to reduce the risk that the relevant currency will decline in value relative to the U.S. dollar. AST Schroders Multi-Asset World Strategies Portfolio offers an innovative asset allocation option consisting of approximately 80% traditional asset classes and 20% alternative asset classes. Schroders, a London-based firm with an established global perspective on world markets, is the portfolio s subadvisor. The Schroder family, who continues to play a major role today, founded Schroders over 200 years ago. The firm employs over 2,900 personnel in 28 countries, including over 320 portfolio managers and analysts. The portfolio provides a broad diversification platform through the utilization of equity and debt securities, domestic and international equity futures, exchangetraded funds, exchange-traded notes, and retail funds. AST UBS Dynamic Alpha Portfolio provides active asset allocation across a wide range of global markets and asset classes in pursuit of an absolute return goal of earning positive, more consistent returns whether the overall market is up or down. One of the largest global institutional asset managers, UBS Global Asset Management (Americas) Inc., is the portfolio s subadvisor. Because the portfolio is not managed to a securities benchmark, it has the flexibility to adjust exposures to markets, securities and currencies, if they appear overvalued, by taking short positions. This flexibility may result in lower volatility and risk to the portfolio which can lead to more consistent returns. The potential to benefit in both up and down markets may better position the portfolio to generate positive returns, and in turn may help you to be in a better position to fund your personal retirement objectives. QMA manages the allocation of assets among asset classes and relevant investment managers based upon its research and examination of markets. Once they create the asset allocation composition, the relevant investment managers are responsible for buying and selling the securities within their asset class. 6

7 The composition of the AST Advanced Strategies Portfolio is as of December 31, The composition of the AST Academic Strategies Asset Allocation Portfolio and the AST Schroders Multi-Asset World Strategies Portfolio reflects targeted allocations at their July 21, 2008 inception. Portfolio composition can change without notice at any time in response to market conditions. AST Academic Strategies Asset Allocation Portfolio Domestic Equity / 20.00% Domestic Large-Cap / 15.00% Domestic Mid-Cap / 3.00% Domestic Small-Cap / 2.00% International Equity / 20.00% Developed Markets / 15.00% Emerging Markets / 5.00% Traditional Fixed Income / Domestic Investment Grade / 10.00% High-Yield Debt / 5.00% International Fixed-Income (Un-Hedged) / 3.50% Emerging Markets Fixed-Income / 1.50% Real Estate / 10.00% Domestic Real Estate / 8.00% International Real Estate / 2.00% Real Return / 15.00% Commodities / 7.00% Inflation-Indexed Securities / 5.00% Global Infrastructure / 3.00% Alternative / 15.00% Long/Short Market-Neutral / 4.00% Global Tactical Asset Allocation / 4.00% Absolute Return Volatility Income Strategy / 4.00% Overlay / 3.00% AST Advanced Strategies Portfolio U.S. Large-Cap Growth / 19.20% U.S. Large-Cap Value / 16.20% International Growth / 10.40% International Value / 7.40% U.S. Bond / 13.50% Hedged International Bond: Developed Markets / 8.60% Hedged International Bond: Emerging Markets / 4.90% Commodities / 4.90% REITS / 1.00% TIPS / 4.00% ETF / 9.20% Cash / 0.70% Marsico T. Rowe Price William Blair LSV PIMCO PIMCO PIMCO PIMCO PIMCO PIMCO SIRG AST Schroders Multi-Asset World Strategies Portfolio Equity Investments / 50.00% Investment Grade Fixed-Income Investments / 20.00% Alternative Investments / 20.00% Cash and Other Short-Term Investments / 10.00% AST UBS Dynamic Alpha Portfolio Due to the short positions held by AST UBS Dynamic Alpha Portfolio we are not including the portfolio weighting and composition in the pie chart. This portfolio puts emphasis on active asset allocation across global markets in pursuit of an absolute return goal that is unconstrained by a benchmark index. It has the flexibility to invest wherever opportunities are believed to exist across a wide range of global markets and asset classes, including U.S. and international stocks, bonds, cash and currencies. 7

8 Tactical Asset Allocation Tactical asset allocation portfolios employ active management styles and provide asset allocation based on shorter-term views of capital markets. They look to capture potential performance everywhere in the markets by investing in traditional asset classes and ETFs to overweight or gain exposure to specific investment themes. Prudential Annuities has three experienced boutique management firms to provide strategic asset allocation and select ETFs for its tactical allocation portfolios. Niemann Capital Management (Niemann) Niemann seeks to identify the best risk/reward relationships currently at work within the market. They increase or decrease their exposures in positions based on the analysis of current market conditions with capital preservation as the cornerstone of their methodology. Niemann s daily analytical process may allow them to take advantage of thematic opportunities in the markets when they present themselves, and uncover positive trending themes. AST Niemann Capital Growth Asset Allocation Portfolio 59.66% Equities 40.34% Fixed Income Mid- and Large-Cap Value / 14.91% AST Large-Cap Value / 7.00% AST AllianceBernstein Growth & Income / 7.00% AST Mid-Cap Value / 0.91% Mid- and Large-Cap Growth / 36.11% AST Marsico Capital Growth / 21.00% AST T. Rowe Price Large-Cap Growth / 14.00% AST Neuberger Berman / LSV Mid-Cap Value / 1.11% International Value /.80% AST International Value International Growth / 6.94% AST International Growth Fixed Income / 10.12% AST PIMCO Total Return / 9.00% AST Western Asset Core Plus Bond / 1.12% Money Market / 30.22% AST Money Market ETFs /.90% U.S. Oil Fund Ishares Dow Jones U.S. Utilities Ishares Lehman Treasuries AST Horizon Growth Asset Allocation Portfolio 70.26% Equities 29.74% Fixed Income Mid- and Large-Cap Value / 15.30% AST Large-Cap Value / 7.00% AST AllianceBernstein Growth & Income / 7.00% AST Mid-Cap Value / 1.30% Mid- and Large-Cap Growth / 30.54% AST Marsico Capital Growth / 18.00% AST T. Rowe Price Large-Cap Growth / 12.00% AST Neuberger Berman / LSV Mid-Cap Value / 0.54% International Value / 6.00% AST International Value International Growth / 8.46% AST International Growth Fixed Income / 27.14% AST PIMCO Total Return / 24.00% AST Western Asset Core Plus Bond / 3.14% Money Market / 2.60% AST Money Market ETFs / 9.96% Powershares CleanTech Portfolio / 3.00% Powershares Commodity Index / 3.00% Ishares MSCI Germany / 2.00% MarketVectors / 1.96% AST CLS Growth Asset Allocation Portfolio 73.82% Equities 26.18% Fixed Income 8 Mid- and Large-Cap Value / 18.51% AST Large-Cap Value / 9.00% AST AllianceBernstein Growth & Income / 9.00% AST Mid-Cap Value / 0.51% Mid- and Large-Cap Growth / 27.92% AST Marsico Capital Growth / 16.00% AST T. Rowe Price Large-Cap Growth / 11.00% AST Neuberger Berman / LSV Mid-Cap Value / 0.92% International Value / 7.26% AST International Value International Growth / 11.19% AST International Growth Fixed Income / 12.49% AST PIMCO Total Return / 11.00% AST Western Asset Core Plus Bond / 1.49% Money Market / 13.69% AST Money Market ETFs / 8.94% Ishares MSCI Emerging Market / 3.00% Ipath Dow Jones / 2.00% Ishares S&P Global Energy / 3.94%

9 Horizon Investments, LLC (Horizon) Horizon uses academic research and forecasting models from leading U.S. universities when constructing portfolios. They shift the asset mix of a portfolio in response to changing market conditions by overweighting, underweighting, or avoiding trends in the global capital markets. They attempt to invest in market leadership while avoiding market laggards, and seek to anticipate market movements by watching and measuring the market fundamentals. Horizon s risk monitoring approach organizes the investing periods in short increments and provides the framework for forecasting on market dynamics, event risk, and return objectives. CLS Investment Firm, LLC (CLS) CLS believes risk budgeting is critical in creating portfolios because it can help to manage the overall level of risk within the portfolio. Rather than viewing risk in a traditional way with stocks being more risky than bonds, CLS views risk on a continuum, allowing them the opportunity to capitalize on areas of growth while maintaining a consistent level of risk. As market conditions change and the risk associated with the holdings in the portfolio vary, CLS will adjust the allocations to help keep the risk level constant while seeking opportunities to outperform the market. The composition of the portfolios is as of December 31, Their composition can change without notice at any time in response to market conditions. AST Horizon Moderate Asset Allocation Portfolio 44.08% Equities 55.92% Fixed Income Mid- and Large-Cap Value / 10.57% AST Large-Cap Value / 5.00% AST AllianceBernstein Growth & Income / 5.00% AST Mid-Cap Value / 0.57% Mid- and Large-Cap Growth / 20.22% AST Marsico Capital Growth / 11.00% AST T. Rowe Price Large-Cap Growth / 8.00% AST Neuberger Berman / LSV Mid-Cap Value / 1.22% International Value / 2.64% AST International Value International Growth / 3.53% AST International Growth Fixed Income / 41.73% AST PIMCO Total Return / 38.00% AST Western Asset Core Plus Bond / 3.73% Money Market / 14.19% AST Money Market ETFs / 7.12% Powershares CleanTech Portfolio / 2.00% Powershares Commodity Index / 2.00% Ishares MSCI Germany / 2.00% MarketVectors / 1.12% AST CLS Moderate Asset Allocation Portfolio 57.25% Equities 42.73% Fixed Income Mid- and Large-Cap Value / 9.86% AST Large-Cap Value / 5.00% AST AllianceBernstein Growth & Income / 4.00% AST Mid-Cap Value / 0.86% Mid- and Large-Cap Growth / 23.95% AST Marsico Capital Growth / 14.00% AST T. Rowe Price Large-Cap Growth / 9.00% AST Neuberger Berman / LSV Mid-Cap Value / 0.95% International Value / 5.50% AST International Value International Growth / 8.70% AST International Growth Fixed Income / 27.52% AST PIMCO Total Return / 24.00% AST Western Asset Core Plus Bond / 3.52% Money Market / 15.21% AST Money Market ETFs / 9.26% Ishares MSCI Emerging Market / 3.00% Ipath Dow Jones / 2.00% Ishares S&P Global Energy / 4.26% 9

10 Important Information No assurance can be given that the subaccounts objectives will be achieved. An investment in a portfolio containing equity securities should be made with an understanding of the risks involved, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general conditions of the stock market. Commodities Investments in commodity-related instruments may subject a portfolio to greater volatility than investments in traditional securities. The value of commodity-related instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs, acts of terrorism, and international economic, political and regulatory developments. Derivatives - A Portfolio s investments in derivatives may rise or fall more rapidly than other investments. For some derivatives, it is possible for the Portfolio to lose more than the amount it invested in the derivative instrument. The use of derivatives may not succeed for various reasons, including unexpected changes in the value of the derivatives or the assets underlying them. The use of derivatives may accelerate the velocity of losses in a Portfolio. Exchange Traded Funds - An investment in an exchange-traded fund involves risks similar to those of investing in a broadly based portfolio of equity securities traded on exchange in the relevant securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. The investment return and principal value of ETF investments will fluctuate, so that an investor s ETF shares, if or when sold, may be worth more or less than the original cost. Global or International Portfolios Investments in securities of non-u.s. companies and governments involve considerations and potential risks not typically associated with equity investments in domestic corporations and obligations issued by the U.S. government or U.S. corporations. Allocations to an international/global/ emerging markets variable subaccount could be subject to risks associated with changes in currency values, economic, political and social conditions, the regulatory environment of the countries in which the subaccount invests, as well as the difficulties of receiving current and accurate information. The securities markets of many of the emerging markets in which the portfolio may invest are substantially smaller, less developed, less liquid and more volatile than the securities markets of the United States and other more developed countries. High-Yield Bond Portfolios Invest primarily in below investment grade securities. High-risk, high-yield securities are considered to be speculative with respect to the payment of interest and the return of principal, and involve greater risks than higher-grade issues. They are especially subject to adverse changes in general market conditions and in the industries in which the issuers are engaged, to changes in the financial conditions of the issuers and to price fluctuations in response to changes in interest rates. International Bond Portfolios Seek income and price appreciation by investing in bonds issued by foreign corporations and governments. Subject to credit risk and the impact of currency fluctuations, and political, social and economic changes. Longer-Term Bond Portfolios Strive for high returns using bonds with longer maturities. May invest in lower-quality bonds. Subject to both credit risk and interest rate risk. Interest rate risk is the risk that prices of bonds generally decrease when interest rates rise. Prices of longer-term bonds generally decrease more in response to interest rate increases than prices of shorter-term bonds. Money Market Portfolio An investment in the Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the portfolio. Real Estate Investment Trusts (REITs) Portfolios Involve risks such as refinancing, economic conditions in the real estate industry, changes in property values, dependency on real estate management, and other risks associated with a portfolio that concentrates its investments in one sector or geographic region. Sector Portfolios May focus investments in certain economic sectors, thereby increasing their vulnerability to any single economic, political or regulatory development. A portfolio concentrated in consumer products company stocks is subject to additional risks, including limited diversification. The companies engaged in the consumer products industry are subject to certain risks, including global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for foreign markets. Short- and Intermediate-Term Bond Portfolios Look for current income and reasonable stability of principal using government and corporate bonds. Subject to credit risk. Shorter maturities help reduce interest rate risk. 10

11 Short Sales The primary risk associated with the use of short sales is the risk of loss if the price of the borrowed security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. Theoretically, the amount of this loss can be unlimited, although for fixed-income securities an interest rate of 0% forms an effective limit on how high a security s price would be expected to rise. Although certain portfolios intend to reduce risk by holding both long and short positions at the same time, it is possible that the portfolio s securities held long will decline in value at the same time that the value of the securities sold short increases, thereby increasing the potential for loss. Small- and Mid-Cap Portfolios Invest primarily in the securities of small- and medium-sized companies. The risks associated with investments in small- and mid-sized companies include less experienced management, limited product lines and financial resources, shorter operating histories, less publicly available information, reduced liquidity and increased price volatility. U.S. Treasury Inflation Protected Securities (TIPS) Invest in debt securities issued by the U.S. Government whose principal value is periodically adjusted according to the rate of inflation. If the CPI measuring inflation falls, the principal value of TIPS will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed by the U.S. Government. Inflation-indexed securities, including TIPS, decline in value when real interest rates rise. Real interest rates are defined as nominal or stated market interest rates minus the expected rate of inflation. In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, TIPS may experience greater losses than other fixed income securities with similar durations. AST First Trust Target Portfolios and AST Focus Four Plus Portfolio Dow Jones Corporate Bond Index An equally weighted basket of 96 recently issued investment-grade corporate bonds with laddered maturities. The objective of the Index is to capture the return of readily tradable, high-grade U.S. corporate bonds. NYSE International 100 Index SM Consists of the 100 largest non-u.s. stocks trading on the New York Stock Exchange. Dow Jones Industrial Average (DJIA) Consists of stocks chosen by the editors of The Wall Street Journal as representative of the broad market and of American industry. Financial Times Industrial Ordinary Share Index (FT Index) Comprised of 30 stocks chosen by the editors of The Financial Times as representative of British industry and commerce. Hang Seng Index Consists of 33 stocks listed on the Hong Kong Stock Exchange, and it includes companies intended to represent four major market sectors: commerce and industry, finance, properties and utilities. Value Line s #1 Ranking for Timeliness Consists of 100 stocks measured by Value Line s view of probable price performance during the next 6 to 12 months based on long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. Dow Jones Select Dividend Index Consists of stocks from dividend-paying companies in the Dow Jones U.S. Total Market Index with the best overall ranking on both the change in return on assets over the last 12 months and price to book ratio. The Dow Jones U.S. Total Market Index is a rules-governed, broad-market benchmark that represents approximately 95% of U.S. market capitalization. Dow Jones & Company Dow Jones Industrial Average SM, DJIA SM, Dow Industrials SM, The Dow SM and The Dow 10 SM are service marks of Dow Jones & Company, Inc. (Dow Jones) and have been licensed for use for certain purposes by First Trust Advisors L.P. (First Trust). Neither portfolio is endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. NASDAQ The Nasdaq 100, Nasdaq 100 Index, NASDAQ Stock Market and NASDAQ are trade or service marks of The NASDAQ, Inc. (with which its affiliates are the corporations) and have been licensed for use by First Trust. The portfolios have not been passed on by the corporations as to their legality or suitability. The portfolios are not issued, endorsed, sponsored, managed, sold or promoted by the corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PORTFOLIOS. The Value Line Value Line, The Value Line Investment Survey, and Value Line Timeliness Ranking System are trademarks of Value Line Securities, Inc. or Value Line Publishing, Inc. that have been licensed to First Trust. The portfolios are not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. (Value Line). Value Line makes no representation regarding the advisability of investing in the portfolios. New York Stock Exchange NYSE is a registered service mark, and NYSE International 100 Index SM is a service mark of the New York Stock Exchange, Inc. (NYSE), and have been licensed for use for certain purposes by First Trust. The portfolio is not sponsored, endorsed, sold, or promoted by NYSE and NYSE makes no representation regarding the advisability of investing in such products. Standard & Poor s The S&P SmallCap 600 is a widely-used small cap index, covering approximately 3% of the U.S. equities market. The S&P MidCap 400 is a widely-used index for mid-sized companies, covering approximately 7% of the U.S. equities market. The analytic services and products provided by Standard & Poor s are the result of separate activities in order to preserve the independence and objectivity of each analytic process. Standard & Poor s is a division of the McGraw-Hill Companies, Inc. 11

12 one corporate drive shelton, connecticut Asset allocation is a method of diversification that positions assets among major investment categories. Asset allocation can be used to manage investment risk and potentially enhance returns. However, use of asset allocation does not guarantee a profit or protect against a loss. Inclusion in asset allocation models does not indicate that any subaccount is superior to a subaccount not included in a model. Alternative investments are speculative and include a high degree of risk. An investor could lose all or a substantial amount of his/her investment without a guarantee. Alternative investments are suitable only for long-term investors who are willing to forge liquidity and put capital at risk for an indefinite period of time. Prudential Investments LLC (PI) and AST Investment Services, Inc. d/b/a/ AST serve as the investment advisors to the Dynamic Asset Allocation Portfolios. The Dynamic Asset Allocation Portfolios represent separate investment portfolios within Advanced Series Trust, a registered investment company. The Dynamic Asset Allocation Portfolios have been developed by PI and AST. All rights reserved. Investors should consider the contract and the underlying portfolios investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectuses, which can be obtained by contacting the National Sales Desk. Your clients should read the prospectuses carefully before investing. Variable annuities are appropriate for long-term investing and designed for retirement purposes. Investment return and principal value of an investment will fluctuate so that an investor s unit values, when redeemed, may be worth more or less than their original cost. Withdrawals or surrenders may be subject to contingent deferred sales charges (CDSC). Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59 ½, may be subject to an additional 10% federal income tax penalty. Withdrawals, for tax purposes, are deemed to be gains out first. Withdrawals can reduce the living benefit, death benefit and account value. Variable annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ, or by Prudential Annuities Life Assurance Corporation, Shelton, CT. All are distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. Wachovia Corporation is the majority owner and Prudential Financial, indirectly through subsidiaries, is a minority owner of Wachovia Securities, LLC. Prudential Annuities is a business unit of Prudential Financial. Prudential, Prudential Financial, the Rock logo and the Rock Prudential logo are registered service marks of The Prudential Insurance Company of America and its affiliates. ANNUITIES NOT FDIC OR GOVERNMENT AGENCY INSURED MAY LOSE VALUE NOT BANK OR CREDIT UNION GUARANTEED WO#51603 IFS-A ORD ED. 07/2008