© 2008 Morningstar, Inc. All rights reserved. 3/1/2008 LCN Principles of Investing

Power of Reinvesting 1988–2007 Past performance is no guarantee of future results. Hypothetical value of $1,000 invested at the beginning of Data does not account for taxes or transaction costs. 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 $20k $9,330 $5,943 $5,892 $1, % Compound annual return Stocks with reinvestment Stocks without reinvestment Bonds with reinvestment Bonds without reinvestment

Power of Compounding Hypothetical investment in stocks 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 Years contributing:10 Annual amount contributed:$2,000 Years contributing:10 Annual amount contributed:$4,000 Investor BInvestor A $40,000 $55,138 $20,000 $104,555 Total amount invested Compounded value at year-end $140k 1988– –2007

Importance of Rebalancing 1987–2007 Past performance is no guarantee of future results. Stocks: 50% large and 50% small stocks. Data is represented as of year-end 1987.Bonds: intermediate-term government bonds. 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/ % 55% 45% 69% 31% 62% 38% 73% 27% % Stock allocation Bond allocation

Controlling Risk With Portfolio Rebalancing The risk and return of rebalanced versus non-rebalanced portfolios Past performance is no guarantee of future results. Risk and return are measured by annualized 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 Return % Jan 1970– Dec 2007 Jan 1980– Dec 2007 Jan 1990– Dec 2007 Jan 1970– Dec 2007 Jan 1980– Dec 2007 Jan 1990– Dec 2007 Risk 12.6% 12.4% 10.7% 10.2% 9.8% 9.0% 11.0% 11.7% 9.1% 10.7% 11.3% 8.8% Non-rebalanced portfolio Rebalanced portfolio

2,500 Dangers of Market Timing Hypothetical value of $1 invested from 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 $3,246 $19.23$ ,000 1,500 2,000 3,000 $3,500 Stocks Stocks minus best 40 months Treasury bills

Dangers of Market Timing Hypothetical value of $1 invested from 1988–2007 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 $9.33 $2.36 $ $10 StocksStocks minus best 18 monthsTreasury bills

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 – % Return Annual return Annual return minus best month

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 – % 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%

Tax-Loss Harvesting Selling losing investments for a tax advantage Past performance is no guarantee of future results. *Assumes capital gains tax rate of 15%.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 Taxable gain (loss) Taxes paid (credit)* $5,000 $750 ($450) ($3,000) $2,000 $300 (3,500) (2,500) (1,500) (500) 500 1,500 2,500 3,500 4,500 $5,500 Investment with gain Investment with loss Results of harvesting loss

Returns Before and After Inflation 1926–2007 Past performance is no guarantee of future results. 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/ % 7.1% 5.5% 2.4% 3.7% 0.7% StocksBondsCash % Before inflationAfter inflationBefore inflationAfter inflationBefore inflationAfter inflation

Reduction of Portfolio Risk Past performance is no guarantee of future results. Risk is measured by standard deviation. 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/ % Risk Number of randomly selected assets in portfolio 12.1% 10.0% 8.9% 8.4% 8.0% 7.9% 7.7% 7.5%

Can You Stay on Track? 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 $18,439 $1,091 $37,344 $912 $60,895 $ ,000 $1, k 10k $100k Stocks 50/50 portfolio Bonds