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1
James B. McHugh Actualmente ocupa el puesto de
Vice-Presidente de INTECH siendo responsable del
área de ventas y servicio del grupo.
Anteriormente desarrolló gran parte de su
carrera profesional con Seguros Prudential,
desempeñándose de 1982 a 1994, como Portfolio
Manager de PDI Strategies, donde tuvo a su cargo
la estructura de activos e inversión balanceada
para fondos de pensiones. Posterior a esto, en
1994, se unió a HSBC Asset Management Americas
Inc. para desempeñar el cargo de Director de
Servicios de Inversión al Cliente. Al igual que
en Prudential, dentro de HSBC fue responsable de
la estructura de activos para los US Balanced
Portfolios, adicionalmente también estuvo a cargo
del área de Relación con Inversionistas
Norteamericanos. En 1998, el Sr. McHugh regresó a
Prudential como Vice-Presidente de Mercadotecnia
y Ventas Institucionales, y como responsable de
los Taft-Hartley Benefit Funds. El Sr. McHugh
cuenta con una Licenciatura en Ciencias de la
Universidad del Estado de Montclair y un M.B.A.
de la Universidad de Seton Hall.
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2
James B. McHugh Vice President
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3
Overview
Risk Managed Strategies
Large Cap Growth Large Cap Core
Enhanced Index Large Cap Value

• SP/BARRA Value
• Russell 1000 Value
• 15.9 Million AUM

• SP 500
• Russell 1000
• 6.2 Billion AUM

• SP/BARRA Growth
• Russell 1000 Growth
• 9.4 Billion AUM

• SP 500
• Russell 1000
• 1.5 Billion AUM

• INTECH strategies have historically added value
  using natural stock price volatility through a
• mathematically based, risk controlled
  process.
• INTECH strategies attempt to provide consistent
  upside potential with limited relative
• risk.
• INTECH began managing institutional assets on
  June 30, 1987 and currently manages approximately
  
• 17.6 billion in assets.

Risk Management is a Primary Focus of INTECH
As of June 30, 2004
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4
Summary of Modern Portfolio Theory

• Portfolio Selection
• CAPM

• Harry Markowitz, 1952
• William Sharpe, 1964

RP

• The Evolution of Modern Portfolio Theory
• Consideration of covariance can reduce risk
  (Markowitz)
• Efficient markets exist and the SP 500 is an
  efficient portfolio (Sharpe)
• An investor cannot generate a return higher than
  the market portfolio without taking on additional
  risk (Sharpe)

?

• CAPM Assumptions
• Time horizon
• Expected stock behavior
• Borrowing and lending
• No short sale penalties/costs

Normative Theories Vs. Descriptive Theories
If these assumptions dont hold, CAPM fails
(noted by Markowitz and others) Therefore,
there is no theoretical impediment to creating a
portfolio with market risk, but above market
expected return
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5
A New Methodology for Portfolio Construction
INTECH

e.r.
RMP
RF
e.r. excess return above the bench- mark index
?

• We believe it is possible to create a portfolio
  of greater efficiency than the market portfolio.
  The technique involves considering the variance
  and covariance of stocks, and adjusting stock
  weights to achieve a more efficient combination
  than the benchmark index.

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6
Normal Distribution of Relative Logarithmic
Returns

• All large stocks have about the same
  expected growth rate

of Stocks
Low Returns
High Returns
The normalized annual logarithmic relative
returns of the SP 500 stocks from 1967 through
1999. Source SP Corporation
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7
Stochastic Portfolio Theory

• Stochastic Portfolio Theory and Stock Market
  Equilibrium, E. Robert Fernholz, The Journal of
  Finance, May, 1982
• Each of INTECH's mathematical investment
  strategies has produced excess returns net of
  fees since their respective inception dates.

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1
Weighted Average Relative Stock Variance
Portfolio Variance
Excess Growth Rate








2
Past performance does not guarantee future
results. See Presentation Notes Excess return
denotes logarithmic returns
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8
INTECHS Investment Philosophy
WE BELIEVE WE CAN ADD VALUE USING NATURAL STOCK
PRICE VOLATILITY THROUGH A MATHEMATICALLY BASED,
RISK CONTROLLED PROCESS

• VOLATILITY CAPTURE
• INTECH does not pick individual stocks or stock
  alphas, but uses natural stock price volatility
  and correlation characteristics to attempt to
  generate an excess return. Essentially, INTECH
  adjusts the cap weights of an index portfolio to
  potentially more efficient combinations.
• RISK MANAGED
• Risk management is at the heart of INTECHs
  investment process.
• STYLE CONSISTENCY
• Structured process results in virtually no style
  drift.

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9
How the Process Captures Volatility


PASSIVE PORTFOLIO
240

• Passive portfolio produces no net gain. Stocks
  have volatility but opportunity to generate
  excess return has not been exploited.
• INTECH applies its mathematical formula to
  establish potentially more efficient weights.
  Dynamic process of maintaining and
  re-establishing those weights produces the
  potential excess return.

120
120
1
80
80
2
40
200
280
200
No Excess Return
INTECH PORTFOLIO
200
125

100
62.50
1
100
250.00
2
125
312.50
200
50
Rebalance
Excess Return 112.50
Note Mathematically, the optimal weighting for a
2 stock portfolio with similar growth
rates is 50/50. See Presentation Notes
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10
Investment Process - Volatility CaptureCriteria
for hypothetical illustration 2 stock portfolio,
perfect negative correlation, each move by a
factor of 2
Lower Volatility (Factor of 1.25)
Higher Volatility (Factor of 2)
150
240
1201
1201
120
120
802
80
802
80
64
40
214
200
200
280
200
200
125
102.50
200
125
1001
1001
82.00
62.50
1002
128.13
1002
250.00
80
102.50
50
125
200
210.13
200
312.50
Rebalance
Rebalance
Excess return of 10.13
Excess return of 112.50
Note Mathematically, the optimal weighting for
a 2 stock portfolio with similar growth rates is
50/50. See Presentation Notes
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11
How the Investment Process is Implemented

• Target weights determined each week.
• Rebalancing to target weights occurs every 6
  business days only if stock weights move more
  than 10 from target
• weights.

10
STOCK WEIGHT
Sell
Sell
Sell
Target Weight



-10
No trade necessary
Stock weight at optimization
Buy
Begin
6 Days
6 Days
6 Days
6 Days
6 Days


TIME
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Hypothetical illustration
12
Investment Process Overview
Step 1
Establish Eligible Universe
Step 2
Bankruptcy Liquidity Screen

• Mathematical Process
• Analyzing relative
• volatility and correlation,
• we attempt to build a more
• efficient portfolio.
• Robust and resistant
• statistical techniques are
• employed using proprietary
• models

Step 3
More Efficient Portfolio
Step 4
As of June 30, 2004 See Presentation Notes
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13
Investment Process

• Step One Establish Eligible Universe
• Capitalization-weighted benchmark index
• Large Cap Core
• SP 500 Index (500 stocks)1
• Russell 1000 Index (999 stocks)1
• Enhanced Index
• SP 500 Index (500 stocks)1
• Large Cap Growth
• SP BARRA Growth Index (165 stocks)1
• Russell 1000 Growth Index (621 stocks)1
• Large Cap Value
• SP BARRA Value Index (335 stocks)1
• Global
• MSCI World Index

Step 1
Establish Eligible Universe
Step 2
Bankruptcy Liquidity Screen

• Mathematical Process
• Analyzing relative
• volatility and correlation,
• we attempt to build a more
• efficient portfolio.
• Robust and resistant
• statistical techniques are
• employed using proprietary
• models

Step 3
More Efficient Portfolio
Step 4
1As of June 30, 2004 See Presentation Notes
Trading system allows a slightly greater
maximum deviation around benchmark weights.
Portfolio weights may slightly exceed the maximum
differential over time due to market action.
Global product expected availability First
Quarter, 2005
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14
Investment Process

• Step Two Liquidity and Bankruptcy Screen
• Objective, quantitative screen eliminates index
  members that are
• Ranked Value Line 5/5
• Priced less than 7-10 per share
• Represent less than 1 basis point of index
• Trading less than 1 million per day
• Large Cap Core
• SP 500 Index (500 stocks ? 480 stocks)1
• Russell 1000 Index (999 stocks ? 922 stocks )1
• Enhanced Index
• SP 500 Index (500 stocks ? 480 stocks)1
• Large Cap Growth
• SP BARRA Growth Index (165 stocks ? 159 stocks)1
• Russell 1000 Growth Index (621 stocks ? 570
  stocks)1
• Large Cap Value
• SP BARRA Value Index (335 stocks ? 321 stocks)1

Step 1
Establish Eligible Universe
Step 2
Bankruptcy Liquidity Screen

• Mathematical Process
• Analyzing relative
• volatility and correlation,
• we attempt to build a more
• efficient portfolio.
• Robust and resistant
• statistical techniques are
• employed using proprietary
• models

Step 3
More Efficient Portfolio
Step 4
1As of June 30, 2004 See Presentation Notes
Trading system allows a slightly greater maximum
deviation around benchmark weights. Portfolio
weights may slightly exceed the maximum
differential over time due to market action.
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15
Investment Process

• Step Three Apply Mathematical Process
• Statistical techniques are employed using
  proprietary models that analyze relative
  volatility and correlation. Risk controls
  include
• Limit deviation from index weights. Position
  limits will vary by strategy (i.e. enhanced core
  strategy lesser of 1 or 8x benchmark weight).
• Minimize absolute standard deviation or maximize
  information ratio.
• Constrain beta to less than or equal to benchmark
  index.
• Capitalization distribution of portfolio
  approximately equal to that of the benchmark
  index.

Step 1
Establish Eligible Universe
Step 2
Bankruptcy Liquidity Screen

• Mathematical Process
• Analyzing relative
• volatility and correlation,
• we attempt to build a more
• efficient portfolio.
• Robust and resistant
• statistical techniques are
• employed using proprietary
• models

Step 3
More Efficient Portfolio
Step 4
1As of June 30, 2004 See Presentation Notes
Trading system allows a slightly greater
maximum deviation around benchmark weights.
Portfolio weights may slightly exceed the maximum
differential over time due to market action.
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16
Investment Process

• Step Four Establish and Maintain the Portfolio
• Re-weight the index to a potentially more
  efficient combination and review holdings at
  regular intervals
• Re-optimize weekly to determine new efficient
  weights for each stock in the index
• Re-balance every six trading days in an attempt
  to capture volatility and maintain portfolio
  characteristics
• Large Cap Core
• SP 500 Index (480 stocks ? 415 stocks)1
• Russell 1000 Index (922 stocks ? 679 stocks )1
• Enhanced Index
• SP 500 Index (480 stocks ? 332 stocks)1
• Large Cap Growth
• SP BARRA Growth Index (159 stocks ? 115 stocks)1
• Russell 1000 Growth Index (570 stocks ? 365
  stocks)1
• Large Cap Value
• SP BARRA Value Index (321 stocks ? 283 stocks)1

Step 1
Establish Eligible Universe
Step 2
Bankruptcy Liquidity Screen

• Mathematical Process
• Analyzing relative
• volatility and correlation,
• we attempt to build a more
• efficient portfolio.
• Robust and resistant
• statistical techniques are
• employed using proprietary
• models

Step 3
More Efficient Portfolio
Step 4
As of June 30, 2004 See Presentation Notes
Trading system allows a slightly greater
maximum deviation around benchmark weights.
Portfolio weights may slightly exceed the maximum
differential over time due to market action.
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17
How Much Value Can a 1 Deviation Add?

• Over time, we believe a strategy that is
  constrained to a maximum of 1 deviation from
  benchmark weights can add significant value.
• Three INTECH strategies employ such a constraint
• Large Cap Core
• Broad Large Cap Core
• Enhanced Index

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See Presentation Notes. Returns for Large Cap
Core strategy are composite returns on a
gross-of-fees basis.
18
Summary

• Our process is unique, based on well known and
  published mathematical principles and has been in
  place for 17 years.
• Three strategies with multi-year track records
  are consistent with AFORE benchmark constraints
• We believe we can also successfully run
  strategies within the growth, value and global
  strategies with similar constraints
• We utilize state of the art technology and
  techniques.
• INTECHs portfolio implementation process is
  precise, leading to identifiable and limited
  relative risk.
• We bring an impressive and stable team of
  professionals to our clients.

See Presentation Notes
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19
Appendix
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20
Risk Considerations Covariance Stability
Covariance Estimation Accuracy

• Covariance structure of the
• market is relatively stable over
• long periods of time
• This is the only estimate made
• by INTECH

• 20 month smoothed covariance estimate accuracy
  evidenced by the ratio of tracking error of
• portfolio using forward looking estimate
  versus tracking error of portfolio using backward
  looking estimate.
• Stability of tracking error over long term
  provides support for INTECHs ability to
  reasonably estimate covariance.

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Chart data through 12/31/01.
21
Performance Attribution - Market Diversity

• Size Exposure More volatile stocks are
  usually smaller
• Relative returns will be influenced by this
  reality
• Historically neutral over the long term

Variation in Diversity CRSP Market Database
Change in Diversity
Variation in Diversity SP 500 Stocks
Change in Diversity
Charts are cumulative through June 30,
2004 Modified CRSP Database - Center for
Research in Security Prices University of Chicago
Source - CRSP
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22
Stock Volatility

• The methodology used calculates the weighted
  average relative variance of the stocks in the
  SP 500.
• Using either monthly or annual volatility,
  there is no statistically significant correlation
  between excess performance and the
• level of stock volatility.

Data as of December 31, 1996 is simulated post
represents actual data. Data through June 30,
2004 Source INTECH
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23
Trading Process Systems
Total Roundtrip Cost of all Trades by Six Month
Period

• Maximum 2 cents per share commission
• No soft dollars are used or captured by INTECH.
• Brokers are reviewed and retained on the
  basis of low
• cost execution and efficient back office
  operations only.
• 100 trade affirmation on T 1 96 on trade
  date
• Totally electronic, straight-through processing
  with all brokers for order entry and confirmation
• Over 275,000 trades completed in 2003 with zero
• trade errors
• Clear cost advantage vs. Capital Resource
  Advisors universe

Cents Per Share
6/30/2002
12/31/2002
6/30/2003 12/31/2003
67.50 10.44 4.39
-8.39 -48.62 -33.27
Highest 25th Percentile Median 75th
Percentile Lowest INTECH
71.77 14.35 1.55 -4.57 -44.10 -20.15
40.72 25.08
13.13
16.67 6.48 9.15
-1.32 -2.15
-21.68 -38.25 -21.68
-19.98
Percent Rank 94
94 100
92
Trade cost calculation based on 178 billion and
over 7.3 billion shares traded for six month
period ending 12/31/03.
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Source Capital Resource Advisors, Inc.
24
Presentation Notes

• INTECH is a Janus Capital Group company. Past
  performance cannot guarantee future results. Your
  principal may be at risk during certain market
  periods. Performance of the portfolio reflects
  reinvestment of dividends and other earnings. The
  gross performance results presented include the
  effect of transaction costs (commissions,
  exchange fees, etc.) but do not reflect deduction
  of investment management fees. Client returns
  will be reduced by such management fee and other
  contractual expenses, if any, as described in the
  individual contract and Part II of INTECHs Form
  ADV. For example, had the Large Cap Growth
  performance returns been reduced by INTECHs
  maximum annual fee of 55 basis points, returns
  since inception date through June 30, 2004 would
  have been reduced from 17.40 to 16.76 had the
  Broad Large Cap Growth performance returns been
  reduced by INTECHs maximum annual fee of 55
  basis points, returns since inception date
  through June 30, 2004 would have been reduced
  from -4.72 to -5.24 had the Large Cap Value
  performance returns been reduced by INTECHs
  maximum annual fee of 39 basis points, returns
  since inception date through June 30, 2004 would
  have been reduced from 12.80 to 12.36 had the
  Enhanced Index performance returns been reduced
  by INTECHs maximum annual fee of 35 basis
  points, returns since inception date through June
  30, 2004 would have been reduced from 3.69 to
  3.32 had the Large Cap Core performance returns
  been reduced by INTECHs maximum annual fee of 39
  basis points, returns since inception date
  through June 30, 2004 would have been reduced
  from 12.30 to 11.87 had the Broad Large Cap
  Core performance returns been reduced by INTECHs
  maximum annual fee of 39 basis points, returns
  since inception date through June 30, 2004 would
  have been reduced from 4.91 to 4.50. Portfolio
  results shown are the time-weighted rates of
  return using daily valuation. Performance
  information for this presentation is based on
  those portfolios benchmarked against the
  respective SP indexes and Russell 1000 indexes.
  Performance information for portfolios
  benchmarked against other indexes is available
  upon request. If you have not already received
  INTECH performance reports prepared and presented
  in compliance with the Performance Presentation
  Standards of AIMR-PPSTM, the U.S. and Canadian
  version of GIPSTM, within the last year, the
  complete results are attached. If you have
  already received them, but would like a current
  copy, please call 1-561-775-1100.
• INTECH uses mathematical investment strategies to
  construct portfolios designed to outperform their
  particular benchmarks. The implementation
  involves periodic portfolio optimizations using
  proprietary software. The optimizations seek to
  establish optimal weightings for the component
  securities of a portfolio. Between optimizations,
  the portfolios are rebalanced at certain
  intervals to maintain the actual security
  weightings close to the optimal weightings as
  determined by INTECH. Portfolio rebalancing
  decisions involve consideration of the effect of
  transaction costs on the portfolio. Daily
  supervisory oversight is exercised to assure
  optimal implementation of the process, timing of
  securities transactions, measurement of market
  liquidity, and allocation of brokerage
  transactions.
• Portfolio holdings and characteristics This
  Supplemental Information complements the INTECH
  Presentation of Investment Performance of
  Composites. Portfolio holdings and composition
  are subject to change. This information should
  not be considered a recommendation to purchase or
  sell any particular security. It should not be
  assumed that any of the securities holdings
  listed in this presentation were or will prove to
  be profitable, or that investment recommendations
  or decisions that we make in the future will be
  profitable.
• Callan Associates Inc.s software has been used
  by INTECH to create the performance and risk
  related exhibits. A fee was paid to the firm for
  the use of the software. The results are
  presented gross of fees and are annualized for
  periods of one year or longer. The risk
  statistics for INTECH Large Cap Growth are
  relative to the SP/BARRA Growth Index. There
  were 46 managers in the Large Cap Growth universe
  as of the portfolios inception date. The risk
  statistics for INTECH Broad Large Cap Growth are
  relative to the Russell 1000 Growth Index. There
  were 58 managers in the Broad Large Cap Growth
  universe as of the portfolios inception date.
  The risk statistics for INTECH Large Cap Core are
  relative to the SP 500 Index. There were 16
  managers in the Large Cap Core universe as of the
  portfolios inception date. The risk statistics
  for INTECH Broad Large Cap Core are relative to
  the Russell 1000 Index. There were 38 managers in
  the Broad Large Cap Core universe as of the
  portfolios inception date. The risk statistics
  for INTECH Large Cap Value are relative to the
  SP/BARRA Value Index. There were 53 managers in
  the Large Cap Value universe as of the
  portfolios inception date. The risk statistics
  for INTECH Enhanced Index are relative to the SP
  500 Index. There were 22 managers in the Enhanced
  Index universe as of the portfolios inception
  date.
• Zephyr Style Advisor is an outside vendor whose
  software has been used by INTECH to create these
  exhibits. A fee was paid to Zephyr for the use of
  the software. Manager results are presented gross
  of fees and are annualized for periods of one
  year or longer.  
• The index returns shown are the total return of
  the stocks in the respective Standard Poors
  Index, including reinvestment of dividends for
  the period indicated. The Standard Poors
  Composite Stock Index (the SP 500 Index) is
  composed of 500 common selected stocks, over 95
  of which are listed on the New York Stock
  Exchange (NYSE). Standard Poors Corporation
  (Standard Poors, Standard Poors 500 and
  500 are trademarks of The McGraw-Hill
  Companies, Inc.) chooses the stocks to be
  included in the index on a statistical basis
  taking into account market values and industry
  diversification. Inclusion in the index in no way
  implies an opinion by Standard Poors
  Corporation as to a stocks attractiveness as an
  investment, and Standard Poors Corporation is
  not in any way affiliated with any INTECH
  portfolio. The Russell 1000 Growth Index is
  derived from the Russell 1000 stocks,
  concentrating in Growth stocks. Russell 1000 is
  a trademark of the Frank Russell Company.
  Dividends are reinvested. Source of Index Data
  Frank Russell Company.
• The SP/BARRA Growth and Value Indexes are
  capitalization-weighted indexes. Standard
  Poors and Barra have employed a price-to-book
  value calculation to divide the market
  capitalization of the SP 500 equally between two
  mutually exclusive groups, growth stocks and
  value stocks. The SP/BARRA Growth Index has
  firms with the higher price-to-book ratios. The
  SP/BARRA Value Index has firms with lower
  price-to-book ratios. The indexes are rebalanced
  twice per year.
• The hypothetical illustrations contained in this
  presentation are provided to demonstrate INTECHs
  investment process. Trading costs and other
  expenses are not contemplated in the
  illustrations.

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25
Disclaimer This is not a solicitation for the
sale of shares and nothing herein is intended to
amount to investment advice. Past performance is
not a guarantee of future results. The rate of
return will vary and the principal value of an
investment will fluctuate due to market and
foreign exchange movement. Shares, if redeemed,
may be worth more or less than their original
cost. The distribution of this document or the
information contained in it may be restricted by
law and may not be used in any jurisdiction or
any circumstances in which its use would be
unlawful. Should the broker/dealer wish to pass
on this document or the information contained in
it to any third party, it is the responsibility
of the broker/dealer to investigate the extent to
which this is permissible under relevant law, and
to comply with all such law. Janus is not
responsible for any unlawful distribution of this
document to any third parties. The shares have
not been registered or approved by any government
or any securities or other regulatory agency in
Argentina, the Bahamas, Bahrain, Bermuda, Brazil,
Cayman Islands, Chile, Colombia, Curacao, Monaco,
Panama, Peru, Uruguay, United Kingdom, United
States and Venezuela. INTECH is a subsidiary of
Janus Capital Group, Inc.
C-0904-42 10.15.04
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