© 2008 Morningstar, Inc. All rights reserved. 3/1/2008 LCN Growth and Value Investing

Equity Investment Classification © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Large-cap  9,500 Mutual funds  283 Stocks Mid-cap  2,486 Mutual funds  701 Stocks Small-cap  2,066 Mutual funds  4,908 Stocks

What are Growth and Value Stocks? © 2008 Morningstar, Inc. All rights reserved. 3/1/2008 Growth stocks  High growth rate of earnings, sales  Low book-to-price, high price-to- earnings ratios  Paying lower or no dividends Risks  Future growth does not occur as expected  Book-to-price ratios rise unexpectedly, price-to-earnings ratio decline unexpectedly Value stocks  Slower growth of earnings and sales  High book-to-price, low price-to- earnings ratios  Higher dividend yields  Turnaround opportunities Risks  Evaluation of stocks as good value is misread  Difficult to stick to value policy when prices are beaten down

Risk and Return by Size and Style Growth and value stocks 1969–2007 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 Large value Mid value Small value Large growth Mid growth Small growth % Compound annual return 15% Standard deviation

Range of Annual Returns Growth and value stocks 1969–2007 Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1969–2007. 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/ % Return –20–20 –40–40 Large growthLarge value Mid growth Mid value Small growth Small value 47.6% –32.4% 39.4% –22.1% 10.8% 51.3% –33.0% 9.7% 61.2% –20.8% 13.6% 60.5% –40.6% 9.1% 58.3% –24.4% 14.8% Compound annual return: 9.2%

Growth and Value Investing 1969–2007 Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 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/ % Compound annual return Small value Large value Large growth Small growth $ $55.22 $31.02 $29.69 $1,

Growth and Value Investing 1998–2007 Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of 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 $1.53 $1.75 $1.84 $ % Compound annual return $ Small value Large value Small growth Large growth

One-Year Growth and Value Cycles 1969–2007 Past performance is no guarantee of future results. Performance differential measures the outperformance of each asset class over one another on a 12-month rolling basis. Each 12-month rolling return represents the annualized return over the prior 12 months. 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/ month rolling returns 40% Large growth Large value Performance differential 75% – Jan–Dec 1974 Jan–Dec 2004 Jan–Dec 1999 Jan–Dec 1994 Jan–Dec 1989 Jan–Dec 1984 Jan–Dec 1979 Jan–Dec

Three-Year Growth and Value Cycles 1969–2007 Past performance is no guarantee of future results. Performance differential measures the outperformance of each asset class over one another on a 36-month rolling basis. Each 36-month rolling return represents the annualized return over the prior 36 months. 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 Performance differential 36-month rolling returns Large value Large growth % % Dec Jan 1969 –25 0

Growth and Value by Decade Compound annual rates of return by decade Past performance is no guarantee of future results. *Based on the years 1928–1929. **Based on the years 2000–2007. 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/ s*1930s1940s1950s1960s1970s1980s1990s2000s** –5–5 Growth stocks Value stocks 25% Return

Moving With the Market Annual performance comparison 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 Large growth Large value S&P % –10 –20 –

Bull Market Performance Booming 1990s: 1995–1999 Past performance is no guarantee of future results. Hypothetical value of $1,000 invested at the beginning of 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 $4,500 3,500 2,500 1, GrowthValue Small growth: Compound annual return: 17.6 Mid growth: 23.2 Large growth: 34.4% $4,379 $2,842 $2,249 Compound annual return: Large value: Mid value: Small value: 24.8% $3,033 $2,258 $2,136

Bear Market Performance Early 2000s bear market: July 2000–December 2003 Past performance is no guarantee of future results. Hypothetical value of $1000 invested at the beginning of July 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 $1,800 1,400 1, July 2000 July 2001 July 2002 July 2003 July 2000 July 2001 July 2002 July 2003 Small growth: Compound annual return: –5.8% Mid growth: –7.3 Large growth: –14.5 $577 $767 $812 Compound annual return: Large value: Mid value: Small value: – % $1,705 $1,568 $969 GrowthValue

Blending Growth and Value © 2008 Morningstar, Inc. All rights reserved. 3/1/2008  Balance growth investments with those that produce income  Invest in both large and small companies, as well as a mix of well established and new companies  Consider investments that are currently out of favor but have potential to increase in value  Blending effectively may cushion against the many ups and downs in the market

Style Winners and Losers 1998–2007 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 Highest returns Lowest returns Large growth (LG) Large value (LV) Mid growth (MG) Mid value (MV) Small growth (SG) Small value (SV) Diversified portfolio (DP) 12.1 LG 8.7 MG 7.4 SG 4.1 DP 2.5 LV 0.4 MV –5.6 SV 47.6% LG 16.6 LV 10.7 DP 6.4 MG 2.3 SG 0.8 MV –4.1 SV 51.3 MG 39.3 SG 29.8 LG 23.2 DP 13.1 LV 4.8 MV 4.6 SV 25.4 MV 22.7 SV –3.0 LV –3.4 DP –18.5 MG –22.0 LG –22.6 SG 14.8 SV 3.9 MV –0.4 SG –2.9 DP –7.2 MG –8.8 LV –20.1 LG –12.8 MV –13.3 SV –19.8 DP –20.1 LV –21.5 MG –23.9 LG –27.8 SG 48.4 SG 47.9 SV 43.9 MV 40.3 MG 39.0 DP 29.9 LV 24.8 LG 21.1 SV 20.8 MV 19.6 SG 15.8 DP 13.4 LV 13.1 MG 6.7 LG 14.0 MV 9.2 SV 8.8 MG 7.9 DP 7.0 LV 4.7 SG 3.3 LG 23.2 SV 22.1 LV 15.3 DP 13.9 MG 13.0 MV 10.8 SG 8.9 LG