Strategic Asset Alliance Insurer Investment Forum XIII Cliff

Strategic Asset Alliance Insurer Investment Forum XIII Cliff Noreen, President – Babson Capital March 21, 2013

Table of Contents Babson Capital Section 1: Mass. Mutual and Babson Capital Management Overview 2 Section 2: Global Economy 5 Section 3: Credit Markets 31 Section 4: Insurance Industry Challenges 40 Section 5: Insurance Solutions/Asset Allocation 47 Appendix: Important Information 71 13/358 1

Mass. Mutual and Babson Capital Management Overview

Mass. Mutual Investment Platform § Over $508 billion in assets under management 1 § $52 billion 1 in assets under management § MML company assets in excess of $167 billion 1 § $160 billion 1 in assets under management § MML is a highly rated, 160 year old financial institution AA+, Aa 2, AA+)2 (A++, § $195 billion 1 in assets under management 1. As of December 31, 2012 2. Ratings: A++ (Superior) A. M. Best Company; AA+ (Very Strong) Fitch Ratings; Aa 2 (Excellent) Moody’s Investor Service; AA+ (Very Strong) Standard & Poor’s. Ratings as of January 1, 2013. Ratings are subject to change. Babson Capital 13/358 3

Babson Overview $160 Billion in AUM Babson Capital 1 High Yield Global $39 B Sr. Secured Loans: (par & distressed) – U. S. & European High Yield Bonds Fixed Income $22. 2 B $6. 5 B Structured Credit: $10. 0 B – CLO Debt and Equity portfolio management – Investment Grade CDOs Cornerstone $36 B $123 B Global $63 B Primary Strategies: $58 B – Short Duration – Long Duration – Core / Core Plus – Corporate Bonds – Inflation-Protected Bonds Securitized: – RMBS – ABS Alternatives: – Event Driven – Multi-Strategy $1. 5 B Private Placements Mezzanine & Private Equity: – U. S. , Europe & Australia Global $21 B $15. 5 B $5. 1 B Real Estate $36 B $0. 3 B $1 B Real Assets CMBS Agricultural Real$1 B Estate Comm Mtg Loans Infrastructure Res Whole Loans Transportation Core Equity Entertainment Intellectual Property – Film & music copyrights Core Mortgage Equity: $1. 4 B – Disciplined Growth – Disciplined Value Investment Professionals 202 Private Finance Wood Creek Mezzanine Debt RE Securities Value-Added Equity Other Investment Professionals 120 Investment Professionals 12 As of December 31, 2012 1. Includes subsidiaries Babson Capital 13/358 4

Global Economy

U. S. GDP Accounts For 22% Of $71 Trillion Global Economy Top 10 World Economies Fiscal Year 2012 ($Trillions) Source: IMF 10/9/2012 WEO Database Babson Capital 13/358 6

U. S. Public Companies Comprise 33% Of Global Equity Value U. S. & Europe Market Capitalization Vs. Rest of World January 2005 – March 2013 Babson Capital 13/358 7

U. S. Corporations Are Very Healthy • Corporations have strong earnings and balance sheets • Cash balances are historically high • Strong free cash flow generation • M&A activity increasing in 2013 • Access to capital flowing • Investment grade market • High yield bond market • High yield loan market • Corporate default rates are low Valuable Leading Companies Company Market Cap • • • Apple $400 B Exxon $400 B Google $276 B Berkshire Hathaway $254 B General Electric $247 B Source: U. S Census Bureau, CIA Fact Book, Bloomberg 3/7/2013 Babson Capital 13/358 8

2013 M&A Off To A Quick Start Mergers will top $1 T in 2013 at current pace § § § § § Target Acquirer Deal Size Heinz Virgin Media Berkshire Hathaway Liberty Global Dell NBC Universal Clearwire Copano Energy Cole Credit Albertsons LBO/PE ( CEO Michael Dell) $18 B Comcast $17 B Dish $8 B Kinder Morgan $4 B Spirit Realty Capital $4 B LBO/PE (Cerberus) $3 B Tysabri US Airways Biogen American Airlines $27 B $21 B $3 B Total U. S. M&A activity YTD = $152 B Source: Bloomberg 2/20/13 Babson Capital 13/358 9

U. S. Corporate Profits Have Rebounded To Near All-Time Highs Inflation Adjusted Net Profits of U. S. Corporations January 1953 to September 2012 Source: Federal Reserve Economic Database Babson Capital 13/358 10

Wages Are At Historical Lows as Earnings Hit Historical Highs Wages and Corporate Profits January 1952 – September 2012 Source: Federal Reserve Economic Database 1/9/13 Babson Capital 13/358 11

Quality of GDP Growth Rate in U. S. is Artificially Supported by: • Negative real short term interest rates (ZIRP-0% interest rate policy) • QE 1, QE 2, Operation Twist, QE 3 (now) • Deficit ($1. 3 T in 2011, $1. 1 T 2012, and $. 88 T 2013 Proj) • $3. 54 T of spending vs. $2. 45 T of revenue • Support for housing (Mortgages, FHA, Fannie, Freddie) Source: CBO Babson Capital 13/358 12

Federal Debt Has Grown Over $10 Trillion Since 2002 Gross Federal Debt December 2002 to February 2013 $16. 7 T Babson Capital 13/358 13

U. S. Government Revenues by Source 2001 to 2012 Federal Revenue $2. 45 T Source: Budget of the United States Government 2013 Babson Capital 13/358 14

U. S. Government Outlays By Use U. S. Government Outlays 2001 to 2012 Federal Spending $3. 54 T Source: Budget of the United States Government 2013 Babson Capital 13/358 15

Social Programs Dominate the Budget Federal Spending on Social Programs January 2001 – December 2012 Source: Bureau of Economic Analysis and Babson Capital 13/358 16

U. S. Budget Receipts, Outlays, Deficits 2001 -2012 U. S. Deficit 2001 to 2012 Source: Budget of the United States Government 2013 Babson Capital 13/358 Recessions 17

Fiscal Cliff Largely Avoided But Governing By Fire Drill Continues Approximately $300 B in Tax increases 2% of GDP Approximately $87 Billion in Tax Increases on High Earners $85 B In spending cuts in 2013 Good News 80%+ of Bush Tax Cuts Made Permanent Capital Gains Unchanged For Most Worst Of The Tax Increases Avoided Bad News Gov’t shut down possible March 27 th Debt Ceiling hits in May Top Income Taxpayers Hit Hard Did Not Help Reduce The Deficit Source: Congressional Budget Office 5/12 Babson Capital 13/358 18

Entitlement Cliff • Average 401 K balance for people 55 -64 is • • $120, 000 Enough to purchase an annuity for less than $600 a month State Pensions are underfunded by U. S. Corporate Pensions are underfunded by Medical care in the U. S. is 19% of the economy • • $1. 4 T $360 B $2. 8 T Larger than all but the largest 3 countries GDP U. S. Spends $8, 900 person on health care. More than double the developed world average of $3, 200(OECD) • Simple Math… • People are living longer now than when Social Security (1935) and Medicare (1965) were created • Baby Boomers are retiring at a rate of nearly 4 million a year, the number of workers available to support them is falling. Source: Budget of the United States Government 2013, PEW , Boston College, Bloomberg, Bureau of Economic Analysis, Kaiser Foundation Babson Capital 13/358 19

Federal Medicare & Medicaid Spending Medicare and Medicaid Spending January 2001 – December 2012 Source: St. Louis Federal Reserve, Centers for Medicare and Medicaid Services Babson Capital 13/358 20

Food Stamps Use At All Time High Food Stamps vs. Millionaires 2001 Using - 2012 Food Stamps U. S. Households 47. 5 Million (15%) of U. S. Population are on Food Stamps as of November 2012 Source: USDA /Spectrem Group Babson Capital 13/358 21

Dramatic Fall Off in Housing Related Purchases Hurt Overall GDP Household Durable Goods Spending and Residential Investment March 1991 – December 2012 Babson Capital 13/358 22

Housing Starts Have Improved Significantly from Lows U. S. Housing Starts May 2009 – January 2013 Babson Capital 13/358 23

But are Less than Half of The Long Term Average U. S. Housing Starts January 1963 – January 2013 Babson Capital 13/358 24

Financial Assets Fully Recovered, Real Estate Assets Improving Household Financial & Real Estate Assets September 2002 to December 2012 Source: Federal Reserve Flow of Funds Babson Capital 13/358 25

Booming Oil Production Reducing Foreign Dependence Domestic vs. Imported Oil January 2008– December 2012 Source: EIA. gov Babson Capital 13/358 26

The U. S. Energy Boom is Real and Should Drive U. S. Growth • By 2015 the U. S. will be the largest natural gas producer in the world • By 2020 the U. S. could be the worlds largest oil producer in the world • Natural gas is dramatically cheaper in the U. S. Benefits to U. S. Since 2010 • Lower U. S. dependence on foreign oil • Gas production is at all time high, up 35% • Will reduce trace deficit • Oil production is at 20 year high, up 26% • Creates jobs (both in energy and indirectly) • Extraction jobs are plentiful, up 24% • Improves international competitiveness (Due to cheap gas) • Improving state revenue (TX, ND, VA, PA) Source: ISI Group Babson Capital 13/358 27

Peripheral Europe Country Data Red=Deteriorating Green =Improving Source: Bloomberg, Eurostat, IMF World Economic Database 9/1/12, and Babson Capital As of 2/13/2013 Babson Capital 13/358 28

Yield on European Debt Has Fallen Dramatically LTRO: € 2 T ESM: € 80 B OMT: Open Ended Source: Fact. Set/Bloomberg 3/7/2013 Babson Capital 13/358 29

Economic Recap • Global growth below trend – U. S. , Euro zone, China and Japan expected to grow below long term average rate • Central bank intervention in markets – Fed, ECB, BOE and BOJ balance sheets total nearly $9 trillion • Extended low rate environment – major developed economy policy rates at all-time lows • Financial repression creates the search for yield – real yields on high quality assets hover around 0% Babson Capital 13/358 30

Credit Markets

Investment Grade Bond Spreads - One Year U. S. Investment Grade Index February 2012 – March 2013 Source: Barclays Capital as of March 6, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 32

Investment Grade Bond Spreads – Long Term U. S. Investment Grade Index February 1990 – March 2013 Source: Barclays Capital as of March 6, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 33

High Yield Bond Spreads - One Year U. S. High Yield Index February 2012 – March 2013 Source: Barclays Capital as of March 6, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 34

High Yield Bond Spreads – Long Term U. S. High Yield Index February 1994 – March 2013 Source: Barclays Capital as of March 6, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 35

Bank Loan Spreads - One Year Credit Suisse Leveraged Loan Index February 2012 – March 2013 Source: Credit Suisse as of March 8, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 36

Bank Loan Spreads – Long Term Credit Suisse Leveraged Loan Index February 2002 – March 2013 Source: Credit Suisse as of March 8, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 37

CLO Spreads - One Year U. S. CLO Spread History February 2012 – March 2013 Source: Citigroup as of March 8, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. CLO – Collateralized Loan Obligation. Babson Capital 13/358 38

CLO Spreads – Long Term U. S. CLO Spread History February 2004 – March 2013 Source: Citigroup as of March 8, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 39

Insurance Industry Challenges

“Low Rates For Longer” – Investment Implications • Declining book yields, lower investment earnings • Traditional business lines/products are more likely to experience a loss • Conventionally safe assets, such as government bonds and bank debt, have become less stable • Need to proactively evaluate investment programs to gauge the impact of an extended low interest rate environment and potential solutions Babson Capital Think Outside The Box 13/358 41

Investment Considerations/Constraints • Liquidity – need to assess the % of portfolio in illiquid instruments • Risk-based capital, capital requirements, credit quality • Liability matching • Access to opportunity Babson Capital 13/358 42

Investment Considerations - Liquidity Return Potential More Mezzanine Debt Junior CLO Liabilities Commercial Mortgage Loans Private Placement Debt High Yield Bonds Bank Loans Senior CLO Liabilities Investment Grade Corporate Bonds Treasuries Liquidity Less Babson Capital More 13/358 43

Investment Considerations – Risk-Based Capital Requirements NAIC Rating S&P Rating P&C Risk-Based Capital Life Risk-Based Capital 1 A- to AAA . 3% . 4% 2 BBB- to BBB+ 1. 0% 1. 3% 3 BB- to BB+ 2. 0% 4. 6% 4 B- to B+ 4. 5% 10. 0% 23. 0% 30. 0% CCC- to CCC+ 5 6 D to CC Source: National Association of Insurance Commissioners and Standard and Poor’s. See appendix for S&P rating definitions. Babson Capital 13/358 44

Investment Considerations – Liability Matching • Re-price insurance products • Change insurance product mix • Increase asset duration as liability durations extend • Increase investment allocation to risky assets Babson Capital 13/358 45

Investment Considerations – Access to Opportunities • Size of investment market • Minimum investment levels • Investment policy limitations • Availability of competent investment management Babson Capital 13/358 46

Insurance Solutions/Asset Allocation

Solutions For Addressing Declining Book Yields Higher Yielding, High Quality Assets EST. GLOBAL MARKET SIZE • Private Placement Debt • Commercial Mortgage Loans $1, 400 • Senior CLO Liabilities $1, 200 1, 329 $1, 000 • High Yield Bonds 796 $800 Billions Higher Yielding, Lower Quality Assets $600 • Leveraged Loans 500 384 $400 • Junior CLO Liabilities (Mezzanine and Equity Tranches) $200 73 Pr iv t D in e Lo M ez z an nk Ba t. eb an s Bo nd s Yi el d ig h H In s D LO at e Pl a ce m • Mezzanine Debt and Private Equity C en t. B Higher Yielding Private Market Assets eb t on ds $0 $2. 2 T commercial mortgages outstanding, $272 B held by life cos. Source: Credit Suisse, SIFMA, Preqin, Federal Reserve and Babson Capital as of February 28, 2013. Babson Capital 13/358 48

Solutions Objective • Capture incremental yield • Seek to improve diversification, • Adequate compensation for additional risk • Understand role and fit of new investments within existing program • Interest rate hedge (floating rate) Babson Capital 13/358 49

Investment Options Investment Strategy Current Yield Estimate Investment Rationale Senior CLO Debt 1. 5 -4. 0% Attractive yield in A or higher, relative value, decent liquidity Private Placement Debt 3. 5 -4. 5% Yield premium, meaningful covenants, diversification Commercial Mortgage Loans 4. 0 -5. 0% Yield premium, customized duration targets, low losses Bank Loans 5. 0 -7. 0% Interest rate hedge, attractive yields, senior secured High Yield Bonds 6. 0 -8. 0% Attractive yield, good liquidity, diversification 4. 0 -9. 0%/10+% Attractive yield, relative value, higher return potential CLO Mezzanine Debt/Equity Mezzanine Debt 13. 0 -16. 0% Attractive yield, current income, low correlation Source: Babson Capital, based on market data as of March 6, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Babson Capital 13/358 50

Private Placement Bonds - Attributes • Primarily investment grade (NAIC rated 1 or 2) • Meaningful covenants • Fixed rate coupon • Offers yield premium over comparable public market corporate debt • Added diversification by issuer, industry, geography and maturity Babson Capital 13/358 51

Private Placement vs. Public Investment Grade Bond Spreads AAA Avg 550 bps 500 bps 450 bps 400 bps 350 bps 300 bps 250 bps 200 bps 150 bps 100 bps 50 bps 1 Q 00 3 Q 00 1 Q 01 3 Q 01 1 Q 02 3 Q 02 1 Q 03 3 Q 03 1 Q 04 3 Q 04 1 Q 05 3 Q 05 1 Q 06 3 Q 06 1 Q 07 3 Q 07 1 Q 08 3 Q 08 1 Q 09 3 Q 09 1 Q 10 3 Q 10 1 Q 11 3 Q 11 1 Q 12 3 Q 12 600 bps NAIC-2 BBB Avg 1 Q 00 3 Q 00 1 Q 01 3 Q 01 1 Q 02 3 Q 02 1 Q 03 3 Q 03 1 Q 04 3 Q 04 1 Q 05 3 Q 05 1 Q 06 3 Q 06 1 Q 07 3 Q 07 1 Q 08 3 Q 08 1 Q 09 3 Q 09 1 Q 10 3 Q 10 1 Q 11 3 Q 11 1 Q 12 3 Q 12 NAIC-1 600 bps Source: Bank of America/Merrill Lynch and Bloomberg as of December 31, 2012. Babson Capital 13/358 52

Commercial Mortgage Loans - Attributes • Secured by best in class assets with institutional sponsors • 100% current income • Very attractive spreads on a risk-adjusted basis • Simplicity in capital stack with only core mortgage and equity holder (as compared to CMBS) • Defensive play in light of aggressive equity values • Call-protected fixed income alternative • Very low loss given default Babson Capital 13/358 53

Commercial Mortgage Loans 9% 600 8% 500 6% 400 5% 300 4% 3% 200 Spread to Treasury (bps) Mortgage Rate & Treasury Yield 7% 2% 100 1% 0% 0 2002 2004 Spread 2006 2008 ACLI Contract Mortgage Rate 2010 2012 10 Year Treasury Source: American Council of Life Insurance Companies, Federal Reserve Board as December 31, 2012. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 54

Structured Credit - CLOs • U. S. market size $285 B ($65 B in BBB, BB and equity), Europe ~$100 B • Securitized credit structure backed by senior secured loans • Capital structure comprised of tranches with varying return and risk profiles • Offers flexibility to customize various investment mandates • Structural integrity – effectively weathered the credit crisis Babson Capital 13/358 55

Senior CLO Notes - Attributes • Securitized credit structure backed by senior secured loans • Senior tranches rated AAA through A (NAIC-1) • Floating rate coupon • Attractive risk attributes: structural features, subordination (25 -35%), resilient collateral, transparency • Compelling relative value vs. similar rated credit Babson Capital 13/358 56

Senior CLO Notes - Spreads SENIOR CLO TRANCHE RELATIVE VALUE 250 bps 200 bps Spread 150 bps 100 bps 50 bps AAA AA A Current Credit Rating CLO Investment Grade Corporate Source: Barclays Capital and JP Morgan as of February 28, 2013. Babson Capital 13/358 57

Junior CLO Liabilities – Mezzanine and Equity Tranches • Mezzanine tranches rated A through BB (NAIC 1 -3); still benefit from structural subordination (10 -25%) • Equity tranche unrated • Moderate-to-high return investment opportunity • Attractive relative value vs. similar rated credit Babson Capital 13/358 58

Junior CLO Liabilities – Mezzanine and Equity Tranches CLO MEZZANINE TRANCHE RELATIVE VALUE 600 bps 500 bps Spread 400 bps 300 bps 200 bps 100 bps BBB BB B Current Credit Rating CLO Bank Loans Corporate Bonds • Equity tranches provide a return profile comparable to other high return alternative assets. Source: Barclays Capital and JP Morgan as of February 28, 2013. Babson Capital 13/358 59

Bank Loans - Attributes • Senior secured debt (top of the capital structure) • Strong covenant protection • Floating rate coupon offers interest rate hedge with LIBOR floors • Attractive risk attributes: relatively low volatility and downside risk Babson Capital 13/358 60

Bank Loan Returns and Yields Bank Loan Total Return and Yield January 1992– February 2013 Source: Credit Suisse as of February 28, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 61

Bank Loan Spreads and Default Rates BANK LOAN SPREADS VS. DEFAULT RATES 2, 000 1, 800 1, 600 basis points 1, 400 1, 200 1, 000 800 600 400 200 DM 3 Spread 12 20 11 20 10 20 09 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 19 98 0 LTM Default Rate Source: Credit Suisse and JP Morgan as of December 31, 2012. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 62

High Yield Bonds - Attributes • Company fundamentals are strong, corporate profits at record high • High cash coupons (compensation for added credit risk) • Institutional, relatively liquid markets • Shorter duration than investment grade corporate market with lower interest rate sensitivity • Diversification benefits – low correlation with other fixed Babson Capital 13/358 63

High Yield Bond Returns and Yields High Yield Bond Total Return and Yield January 1992– February 2013 Source: Barclay’s Capital High Yield Bond Index as of February 28, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 64

High Yield Bond Spreads and Default Rates HIGH YIELD BOND SPREADS VS. DEFAULT RATES 2, 000 1, 800 1, 600 basis points 1, 400 1, 200 1, 000 800 600 400 200 Default Rate 12 20 11 20 10 20 09 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 98 19 97 19 96 19 95 19 19 94 0 OAS Source: Barclay’s Capital High Yield Bond Index and JP Morgan as of December 31, 2012. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 65

Mezzanine Debt - Attributes • Private high yield debt (typically financing for lower middle market companies) • Subordinated, unsecured notes with high cash coupons • Attractive return and yield premium above public high yield debt (HY + 500 -700 bps) • Low correlation to liquid high yield debt and public equity markets; limited mark-to-market volatility • Fees are higher; more labor intensive investment process Babson Capital 13/358 66

Mezzanine Debt - Very stable pricing Source: Fact. Set, Barclay’s Capital High Yield Bond Index and Babson Capital as of February 28, 2013. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. It is not possible to invest directly in an index. Babson Capital 13/358 67

Multi-Asset Strategies • Markets are dynamic; constantly changing relative value, fundamentals and technicals Illustration of Multi-Asset Strategy • Flexible mandates provide opportunity to optimize exposure within a specific credit mandate (e. g. below investment grade) • Multi-asset strategies continue to provide benefits of a specific credit mandate: - incremental yield/return - diversification - interest rate/inflation hedge Babson Capital 13/358 68

Implementing Solutions/Impact on Asset Allocation • Gain incremental yield/return • Improve diversification • Ability to capture interest rate/inflation hedge • Adequate compensation for additional risk; paid for liquidity give up • Fit with investment policy objectives/constraints Babson Capital 13/358 69

Recap - Think Outside The Box • Global growth stays below trend • Lack of economic growth drivers and labor market slack keeps rates low • Central banks continue easy monetary policy • Low book yields impact investment and product decisions • Attractive risk-adjusted returns offer solutions for insurers • Capture benefits of higher yielding assets consistent with Babsoninvestment Capital policy objectives and constraints 13/358 70

Appendix Standard and Poor’s Rating Definitions: ‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating. ‘AA’—Very strong capacity to meet financial commitments. ‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances. ‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions. ‘BBB-‘—Considered lowest investment grade by market participants. ‘BB+’—Considered highest speculative grade by market participants. ‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions. ‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments. ‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments. ‘CC’—Currently highly vulnerable. ‘C’—Currently highly vulnerable obligations and other defined circumstances. ‘D’—Payment default on financial commitments. Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Index Definitions: Barclay’s Capital U. S. Investment Grade Corporate Bond Index is a broad-based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market. Barclay’s Capital U. S. High Yield Corporate Bond Index is a broad-based benchmark that measures the below-investment grade, fixed-rate, taxable, corporate bond market. Credit Suisse Leveraged Loan Index is designed to mirror the investible universe of the $US-denominated leveraged loan market. Babson Capital 13/358 71

Important Information Babson Capital Management LLC, Babson Capital Securities LLC, Babson Capital Europe Ltd, Babson Capital Australia Pty Ltd, Wood Creek Capital Management, LLC, Babson Capital Cornerstone Asia Ltd. and Cornerstone Real Estate Advisers LLC, each are affiliated financial service companies (each, individually, an “Affiliate”), together known as “Babson Capital” and members of the Mass. Mutual Financial Group*. Each Affiliate may act as introducer or distributor of the products and services of the others and may be paid a fee for doing so. ADDRESSEE ONLY: This document is issued to investment professionals and institutional investors only. It is intended for the addressee’s confidential use only and should not be passed to or relied upon by any other person, including private or retail investors. This document may not be reproduced or circulated without prior permission. NO OFFER: The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument in any jurisdiction. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research. Unless otherwise mentioned, the views contained in this document are those of the Affiliate producing it. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this presentation may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Babson Capital makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information. Any forecasts in this publication are based upon the Affiliate’s opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Past performance is not a guarantee of future results or a reliable indication of future performance. The investment results, portfolio compositions and examples set forth in this document are provided for illustrative purposes only and may not be indicative of the future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from the examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of your investment. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate. OTHER RESTRICTIONS: The distribution of this document is restricted by law. No action has been or will be taken by Babson Capital to permit the possession or distribution of the document in any jurisdiction, where action for that purpose may be required. Accordingly, the document may not be used in any jurisdiction except under circumstances that will result in compliance with all applicable laws and regulations. Any service, security, investment, fund or product outlined in this document may not be generally available or be suitable for a prospective investor or available in their jurisdiction. It is the responsibility of the prospective investor to ensure that any service, security, investment, fund or product outlined in this document is accordant with any jurisdiction specific guidelines/regulations before any approach is made regarding that service, security, investment, fund or product. INFORMATION: Babson Capital Management LLC is a registered investment adviser with the Securities and Exchange Commission under the Investment Advisers Act 1940, as amended. Babson Capital Management LLC is registered as a Commodity Trading Advisor (CTA) and Commodity Pool Operator (CPO) with the Commodity Futures Trading Commission under the Commodity Exchange Act, as amended. Babson Capital Securities LLC is a registered limited purpose broker-dealer with the Financial Industry Regulatory Authority, Inc. Babson Capital Europe Limited is authorized and regulated by the Financial Services Authority in the United Kingdom (Ref No. 194662) and is a Company registered in England Wales (No. 03005774) whose registered address is 61 Aldwych, London, WC 2 B 4 AE. Babson Capital Australia Pty Ltd (ACN 140 045 656), is authorized to offer financial services in Australia under its Australian Financial Services License (No: 342787) issued by the Australian Securities and Investments Commission. Babson Capital Cornerstone Asia Limited is licensed with the Securities and Futures Commission of Hong Kong to carry on regulated activities Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) in Hong Kong in accordance with the requirements set out in the Securities and Futures Ordinance (Cap 571). Wood Creek Capital Management, LLC is a registered investment adviser with the SEC specializing in investments in real assets. Cornerstone Real Estate Advisers LLC is a registered investment adviser with the SEC specializing in real estate related investments. COPYRIGHT: Copyright in this document is owned by Babson Capital. Information in this document may be used for your own personal use, but may not be altered, reproduced or distributed without Babson Capital’s consent *Mass. Mutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (Mass. Mutual) and its affiliated companies and sales representatives. Babson Capital 13/358 72