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Agenda
Why diversify
The basics of investing
Your Plan’s investment options
Managing your account
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Why diversify
Owning a variety of investments helps reduce the impact of a decline in any one area
Diversification helps provide a balance for the good and bad times
Diversification does not guarantee a profit or protect against a loss. It is possible to lose money in a diversified portfolio.
4
First…some investment basics
Stocks– Shares or part ownership of a company– Offer the opportunity to build wealth
Bonds– IOUs from a company or government– Offer the potential for greater stability
Capital preservation instruments– Short-term investments (e.g., U.S. Treasury bills)– Seek stability of principal and liquidity
5
Stock sizes Small-cap
– Small companies that offer innovative products and services– Because of their small size, these companies may present
volatility and liquidity risks
Mid-cap– Mid-size companies may have a faster growth rate than larger
companies– May also have more stability than smaller companies
Large-cap– Larger companies tend to be the most stable because of their
asset size– May offer proven products and services but slower potential
growth rate– May fall out of favor and underperform small or mid-cap stocks
Small- and mid-cap stocks historically have been more volatile than large-cap stocks.
6
Past performance is no guarantee of future results. Hypothetical value of $1 invested at the end of 1978. Small stocks are represented by the Russell 2000 Index, large stocks are represented by the S&P 500 Index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. S&P 500 Index includes 500 leading companies in leading industries of the U.S. economy. Although theS&P 500 focuses on the large cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. 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.
Stock market performance1978–2008
$0
$10
$20
$30
$40
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
$21.70$22.89
Small-cap stocksLarge-cap stocks
GROWTH OF $1.00 INVESTMENT
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Stock styles
Growth stocks– Pursue rapidly rising profits– Can have higher volatility– Have high long-term growth expectations
Value stocks– Known as “cheap stocks” – Are for investors hoping for a rebound– Have potentially higher yields; can pay dividends
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Past performance is no guarantee of future results. Based on the years 1984–2008. Growth stocks are represented by the Russell 3000 Growth Index, value stocks are represented by the Russell 3000 Value Index. The Russell 3000 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000 Value Index measures the performance of the broad value segment of U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.
Growth and value by decadeCompound annual rates of return by year
-50-40-30-20-10
01020304050
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Growth stocks Value stocks
(%)
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Investing globally
Domestic– U.S. companies
International– Non-U.S. companies – Generally greater risk
Risks of international investing– Currency fluctuations– Economic and political instability– Illiquidity and volatility
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Global household names
– Coca-Cola– Ford– General Electric– Harley-Davidson– Home Depot– McDonald’s– Microsoft– Nike– Proctor & Gamble– Starbucks– Wal-Mart– Walt Disney
– Adidas (Germany)– Electrolux (Sweden)– Hyundai (S. Korea)– Michelin (France)– Nestle (Switzerland)– Nintendo (Japan)– Nokia (Finland)– Samsung (S. Korea)– Sony (Japan)– Tom Tom (Netherlands)– Toyota (Japan)– Volkswagen (Germany)
Source: The 2008 Global 2000, Forbes.com.
Domestic International
11
Global investing1978–2008
Past performance is no guarantee of future results. International stocks are represented by the MSCI EAFE Index. U.S. stocks are represented by the S&P 500 Index. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. S&P 500 Index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap section of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. This is for illustrative purposes only and is not indicative of any investment. An investment cannot be made directly in an index.
-50
-40
-30
-20
-10
0
10
20
30
40
1978 1983 1988 1993 1998 2003 2008
ANNUAL RETURN
International stocksU.S. Stocks
(%)
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Types of bonds and capital preservation instruments
BondsU.S. Treasury and agency securities– T-bills, bonds, and notes– Mortgage-backed bondsCorporate bonds– Investment-grade – High-yield
Capital preservation– Guaranteed investment
contracts (GICs)– Certificates of deposit (CDs)– Money market instruments*
*Money market funds are not insured or guaranteed by the Federal Deposit Insurance Corp. (FDIC) or any other government agency. Although the fund seeks to maintain a constant share price of $1.00, it is still possible to lose money in this fund.
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Long-term portfolio performance1978–2008
$0
$10
$20
$30
$40
1978 1983 1988 1993 1998 2003 2008
$22.89$21.21$18.52$15.32$12.04
GROWTH OF A $1.00 INVESTMENT Portfolio 1 (100% Stocks) Portfolio 2 (75% Stocks, 25% Bonds) Portfolio 3 (50% Stocks, 50% Bonds) Portfolio 4 (25% Stocks, 75% Bonds) Portfolio 5 (100% Bonds)
Past performance is no guarantee of future results. Hypothetical value of $1.00 invested at the end of 1978. Stocks are represented by the S&P 500 Index. Bonds are represented by the Barclay’s U.S. Aggregate Bond Index. S&P 500 Index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. Barclay’s U.S. Aggregate Bond Index covers the USD-denominated, investment-grade, fixed-rate, taxable bond market of SEC-registered securities. 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.
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What is a fund?
An investment that allows a group of investors to pool their money together with a predetermined investment objective
Typically invests in a combination of stocks, bonds, and/or capital preservation instruments
Professionally managed
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What are the Plan’s investment options? The Plan offers two ways to invest
Choose a ready-mixed portfolioMake a single investment choice to professionally diversify your Plan account across an array of funds
Mix your own portfolioChoose your own diversified combination of individual funds in the Plan
Diversification does not guarantee a profit; you can still lose money in a diversified portfolio.
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Your investment options Ready-mixed investment options
PUTNAM ASSET ALLOCATION:GROWTH PORTFOLIO
PUTNAM ASSET ALLOCATION:BALANCED PORTFOLIO
PUTNAM ASSET ALLOCATION:CONSERVATIVE PORTFOLIO
See following slide for additional information on how funds are ranked.
Higher risk/higher potential reward
Lower risk/lowerpotential reward
Putnam Asset Allocation Funds are ranked according to market and credit risk. Market risk measures how sensitive a fund may be to economic and market changes. Market risk is generally higher for funds that invest heavily in stocks. Credit risk measures how susceptible a fund’s income holdings may be to the nonpayment of principal or interest by the issuer. These rankings are relative only to the funds on the previous slide and should not be compared with the rankings of other investments. The information is not meant as investment advice. There can be no assurance that any one fund will have less risk or more reward than any other fund. Diversification does not guarantee a profit; you can still lose money in a diversified portfolio. Some of the underlying funds held by Putnam Asset Allocation Funds invest in international securities, which involve risks such as currency fluctuations, economic instability, and political developments. Some of the underlying funds invest some or all of their assets in small and/or midsize companies, which increases the risk of greater price fluctuations. Some of the underlying funds also invest a significant portion of their assets in bonds. Mutual funds that invest in bonds are subject to certain risks including interest rate risk, credit risk, and inflation risk. As interest rates rise, bond prices fall. Long-term bonds have more exposure to interest rate risk than short-term bonds. Lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses.
18
Consider these sample investor profiles
30%
30%
5%5%
30%
20%
20%
20%
10%
30%
15%
15%
35%
15%
20%
10%
50%
20%10%
10%
Growth
Blend
Value
Income
Capitalpreservation
TYPICAL ALLOCATION
TIME HORIZON
RISK TOLERANCE
5 years or less
Low to moderate
Income and inflation protection
5–10 years
Moderate
Conservative growth
10–20 years
High to moderate
Growth
20 years or more
High
Maximum growthGOAL
The sample profiles take into consideration the time remaining until anticipated retirement at age 65, historical inflation rates, and risk and potential return relationships of the asset classes shown. You should not consider this investment advice. No other assumptions have been made. In applying the sample profiles to your individual situation, consider your assets, income, and investments (e.g., the equity in your home, other retirement plan and IRA assets, and your savings) in addition to your Plan account. You may wish to consult a financial advisor to review your financial situation. Call your Plan’s toll-free number if you have any questions.
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Your investment options Mix your own portfolio options
* An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Lower risk/lower potential
reward
Higher risk/higher potential
reward
GROWTHAmerican Funds The Growth Fund of AmericaArtisan Mid Cap FundTCW Galileo Select Equities Fund
BLENDColumbia Acorn FundHarbor Capital International FundNorthern Trust Daily S&P 500 Equity Index Fund
VALUEJanus Perkins Mid Cap Value FundAllianz NFJ Small Cap Value FundVanguard Value Index Fund
INCOMEFederated Total Return Government Bond Fund
CAPITAL PRESERVATIONPutnam Money Market Fund*
The previous slide is intended not as investment advice but rather as a general guide to investment style risk/potential reward profiles. The funds are listed in alphabetical order under each style category; categories are ranked according to market and credit risk. Because blend funds have the flexibility to invest in both growth and value stocks in varying proportions, at any given time they may have a higher or lower risk/potential reward profile than growth or value funds. The funds may invest in international securities, which involve risks such as currency fluctuations, economic instability, and political developments. Some of the funds may invest some or all of their assets in small and/or midsize companies, which increases the risk of greater price fluctuations. Mutual funds that invest in bonds are subject to certain risks including interest rate risk, credit risk, and inflation risk. As interest rates rise, bond prices fall. Long-term bonds are more exposed to interest rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. These risks apply to any fund with a significant portion of its holdings in bonds. There can be no assurance that any fund will experience less volatility or greater reward than any other fund.
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The role of rebalancing
* Compounded monthly. This hypothetical illustration does not reflect the actual performance of funds in your Plan, which will fluctuate. Rebalancing does not guarantee a profit or prevent a loss in declining markets.
INITIALALLOCATION
1/1/2008PERFORMANCE
1/1/2007–12/31/2008*
YEAR-ENDALLOCATION
12/31/2008
Growth fund A 60% $600 -20% 52.2% $480
Value fund B 20% $200 +14% 24.8% $228
Income fund C 10% $100 +8% 11.7% $108
Capital preservation fund D 10% $100 +4% 11.3% $104
Initial allocation Year-end allocation
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How can I manage my Plan account?
1. www.ibenefitcenter.com available virtually 24/7
2. Automated phone service available virtually 24/7 by calling 1-800-752-2697
3. Service Representatives available at the above number between 8:00 a.m. and 10:00 p.m. Eastern Time, any business day
Mercer Securities
A division of MMC Securities Corp., Member FINRA/SIPC
Before investing, consider the funds’ or investment options’ investment objectives,
risks, charges and expenses. Call 1-800-752-2697 for a prospectus and, if
available, a summary prospectus, or an offering circular containing this and other
information. Read it carefully.
M256837 1/10