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

2. Types of Risk © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Market timing Inflation Risk Credit Industry/company Market Interest rateCall/reinvestment Liquidity Political/economic Currency

3. 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

4. Risk Tolerance Spectrum © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 High risk Low risk Small stocks International stocks Large stocks Corporate bonds Government bonds Cash equivalents High return Low return

5. Asset Class Returns Highs and lows: 1926–2007 Past performance is no guarantee of future results. Each bar shows the range of annual total returns for each asset class over the period 1926– 2007. 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 Compound annual return: 12.5% 10.4% 5.5%5.3% 3.7% Small stocks Large stocks Long-term government bonds Intermediate-term government bonds Treasury bills 150% 100 50 0 –50–50 –100 142.9% –58.0% –43.3% –9.2% –5.1% 0.0% 14.7% 29.1% 40.4% 54.0%

6. Reduction of Risk Over Time 1926–2007 Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1926–2007. 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 stocksLarge stocksGovernment bondsTreasury bills –60 –30 0 30 60 90 120 150% 1-year Holding period 5-year20-year1-year5-year20-year1-year5-year20-year1-year5-year20-year Compound annual return: 12.5% 10.4% 5.5% 3.7%

7. 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

8. Ibbotson ® SBBI ® Summary statistics 1926–2007 Past performance is no guarantee of future results. *The 1933 small company stock total return was 142.9%. 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 Compound annual return Arithmetic annual return Risk (standard deviation) Large stocks Small stocks* Government bonds Treasury bills Inflation 10.4% 12.5% 5.5% 3.7% 3.0% 12.3% 17.1% 5.8% 3.8% 3.1% 20.0% 32.6% 9.2% 3.1% 4.2% –90 0 90

9. Stock and Bond Volatility Varies 1926–2007 Past performance is no guarantee of future results. Monthly returns in percent from 1926–2007. 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 19261946196619861926194619661986 50% 40 30 20 10 0 –10–10 –30–30 –20–20 StocksBonds

10. Risk Changes Over Time Five-year rolling periods 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 0 80 70 60 50 40 30 20 10 90% Standard deviation Dec 1930 Jan 1926 1940 1936 1950 1946 1960 1956 1970 1966 1980 1976 1990 1986 2000 1996 Small stocks Large stocks Long-term government bonds Treasury bills

11. Inflation Risk: Stocks Versus Fixed Income Range of average inflation-adjusted returns over 20-year periods 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 17.2% 4.0% 13.3% 0.8% 8.6% –3.1% –3.0% 2.9% Treasury bills Government bonds Large stocks Small stocks 20% Return 15 10 5 –5–5 0

12. Fixed Income Maturity Risk 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 15% 10 5 0 –5–5 –10–10 Long-term government bond Intermediate-term government bond Short-term government bond 1.6% 5.9% 9.2% –7.7% –3.8% –1.3% Average rise in price during declining interest rate periods Average decline in price during rising interest rate periods

13. Liquidity Risk Average daily stock trading volume as of December 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 0.33 0 1 2 4 $5 mil Large-cap stocksMid-cap stocksSmall-cap stocks 3 4.10 1.70

14. Market-Timing Risk The effects of missing the best month of annual returns 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 –40 –30 –20 –10 0 10 20 30 40% Return 1988199420002006198219761970 Annual return Annual return minus best month