1. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 LCN200803-2013997 Stocks and Bonds

2. Investing in Stocks © 2008 Morningstar, Inc. All rights reserved. 3/1/2008  Ownership in a corporation  Voting rights  Historically higher returns  More risk

3. Stock Market Performance 1926–2007 Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 12.5% 10.4 Compound annual return $100k 10k 1k 100 10 1 0.10 199620061986197619661956194619361926 $15,091 $3,246 Small stocks Large stocks

4. Small Stock Annual Returns Relative to Large Stocks 1926–2007 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 -60 -40 -20 0 20 40 60 80 100% Excess return 199620061986197619661956194619361926 Small stocks outperform large stocks Large stocks outperform small stocks

5. –20 –10 0 10 20 30 40 50% 1996 1998 2003 2005 1961 1963 1968 1970 1975 1977 1982 1984 1989 1991 1926 1928 1933 1935 1940 1942 1947 1949 1954 1956 Small and Large Stock Performance Tends to Go in Cycles 36-month rolling period returns 1926–2007 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Small stock excess return Jan Dec

6. Risk of Stock Market Loss Over Time 1926–2007 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 One-year returns 5-year annualized returns 15-year annualized returns Each bar represents the average return for the preceding 5-year time period. Each bar represents the average return for the preceding 15-year time period. 50% 0 0 0 192619361946195619661976198619962006 Periods with gain Periods with loss 72% 28% 87% 13% 100%

7. Do Stock Winners Repeat? Top ten performing stocks 1986–2007 Past performance is no guarantee of future results. Annualized returns of an equally weighted portfolio of top 10 stocks by three-year return and return in subsequent three-year period (excluding the smallest 20% of the market). This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 –50 0 50 100 150 200 250 199519961997199819992000200120022004199019911992199319941986198719881989 150.9% 4.7 Average return First 3 years Subsequent 3 years 300% Annualized return 2003

8. Stock Diversification Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 1 2 4 6 81630501001000 Risk Company risk Market risk Number of stocks in portfolio

9. Benefits of Bonds in a Portfolio © 2008 Morningstar, Inc. All rights reserved. 3/1/2008  Potential growth  Historically lower risk  Diversification benefits  Income generation  Expand efficient opportunities

10. Bond Market Performance 1926–2007 Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 1926. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 $20.19 $33.48 $78.78 $105.86 $220.19 $3,246.39 $10,000 1,000 100 10 1 0.10 10.4% 6.8 5.9 5.5 4.4 3.7 Compound annual return Stocks High-yield corp bonds Corporate bonds Government bonds Municipal bonds Treasury bills 192619361946195619661976198619962006

11. Relationship Between Bond Prices and Yields When yields increase, bond prices decrease Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 2 4 6 8 10 12 14 16% 0 0.20 0.40 0.60 0.80 1.00 1.20 1.40 $1.60 199620061986197619661956194619361926 Bond prices ($) Bond yields (%)

12. Bonds Produced Greater Income 1970–2007 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 StocksBonds Capital appreciation Income 27% 71% 2% 80% 15% 5% Reinvestment of income

13. Bonds Expand Efficient Opportunities 1970–2007 Past performance is no guarantee of future results. Risk is measured by standard deviation. Risk and return are based on annual data over the period 1970–2007. Portfolios presented are based on modern portfolio theory. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 5% Risk791113 15 1719212325 17% Return 16 15 14 13 12 11 10 9 8 Stock portfolios Stock and bond portfolios Small stocks Large stocks Bonds

14. Adding a Bond Allocation to Diversify 1970–2007 Past performance is no guarantee of future results. Risk is measured by standard deviation. Risk and return are based on annual data over the period 1970–2007. Portfolios presented are based on modern portfolio theory. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 55% 40% 5% Return10.4% Risk10.0% Lower risk portfolio 30% 70% Return10.4% Risk11.7% Original portfolio Stocks Bonds Cash

15. Risk Versus Return Stocks, bonds, and bills 1926–2007 Past performance is no guarantee of future results. Risk and return are measured by standard deviation and compound annual return, respectively. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 14% Return 12 10 8 6 4 2 0 0% Risk5101520253035 Small stocks Large stocks Treasury bills Long-term government bonds Intermediate-term government bonds

16. 2007 11.6 9.9 5.5 4.7 –5.2 19931994199519961997199819992000200120022003200420052006 32.98.137.423.133.428.629.821.522.817.860.720.714.026.9 21.03.934.517.622.820.327.35.93.81.639.218.47.816.2 18.23.131.76.415.913.121.0–3.63.7–13.328.710.95.715.8 10.01.311.65.25.34.94.7–9.1–11.9–15.71.48.54.94.8 2.9–7.85.6–0.92.1–7.3–9.0–14.0–21.2–22.11.01.23.01.2 Asset Class Winners and Losers Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Highest return Lowest return Small stocks Large stocks International stocks Long-term government bonds Treasury bills