© 2013 Morningstar. All Rights Reserved. 3/1/2013

Downturns and Recoveries

Stock Market Contractions and Expansions1973–2012

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

1

10

$100

2009200319971991198519791973

–200

0

200

400%

0

• Contraction• Expansion• Stocks

355.1%

$41.6

–42.6% –14.3% –16.5% –29.6% –14.7% –15.4%–44.7% –50.9%

87.0%

279.6%

71.5% 62.6%108.4% 110.7%86.0%

Market Downturns and Recoveries1926–2012

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. Downturns are defined by a time period when the stock market value declined by 10% or more from its peak. © 2013 Morningstar. All Rights Reserved. 3/1/2013

–83.4%

–21.8%

–10.2%

–15.0%

–22.3%

–15.6%

–29.3%

–42.6%

–14.3%

–16.5%

–29.6%

–14.7%

–15.4%

–44.7%

% Loss

–50.9%

34 months

6 months

7 months

5 months

6 months

8 months

19 months

21 months

14 months

20 months

3 months

5 months

2 months

25 months

Downturn

16 months

151 months

35 months

5 months

7 months

10 months

6 months

9 months

21 months

5 months

3 months

18 months

4 months

49 months

37 months

3 months

Recovery

Mar 2009–Mar 2012Nov 2007–Feb 2009

Sep 1929–Jun 1932 Jul 1932–Jan 1945

Jun 1946–Nov 1946 Dec 1946–Oct 1949

Aug 1956–Feb 1957 Mar 1957–Jul 1957

Aug 1957–Dec 1957 Jan 1958–Jul 1958

Jan 1962–Jun 1962 Jul 1962–Apr 1963

Feb 1966–Sep 1966 Oct 1966–Mar 1967

Dec 1968–Jun 1970 Jul 1970–Mar 1971

Jan 1973–Sep 1974 Oct 1974–Jun 1976

Jan 1977–Feb 1978 Mar 1978–Jul 1978

Dec 1980–Jul 1982 Aug 1982–Oct 1982

Sep 1987–Nov 1987 Dec 1987–May 1989

Jun 1990–Oct 1990 Nov 1990–Feb 1991

Jul 1998–Aug 1998 Sep 1998–Nov 1998

Sep 2000–Sep 2002 Oct 2002–Oct 2006

Periods of Consecutive Negative Stock Returns1926–2012

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

20%

37%

29%

–12%

–0.4%–10%

–26%

–15%

–9%–12%

–22%

Compound annual stock market return from 19262012 was 9.8%

–50

–40

–30

–20

–10

0

10

20

30

40

50

60% Return

1939 1940 1941 1942 2000 2001 2002 20031973 1974 1975

54%

–25%

–8%

–43%

–8%

1929 1930 1931 1932 1933

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. Four market crises defined as a drop of 25% or more in the Standard & Poor’s 500® index. © 2013 Morningstar. All Rights Reserved. 3/1/2013

0.1

10

1

$100

Oil crisis

Crises and Long-Term PerformanceMarket declines in historical context, Jan. 1970–Dec. 2012

Stock market crash

The dot-com crash

Banking andcredit crisisCompound annual return 9.9%

$58.82

1970 1975 1980 1985 1995 2000 20051990 2010

0.50

$1

73 74 75 76

0.50

$1

87 88 89 07 08 09 1110 12

0.50

$1

0.50

$1

00 01 02 03 04 05 06

Stock Performance After Recessions1953–2012

Past performance is no guarantee of future results. Cumulative returns of large and small stocks after recessions 1953–2012. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2013 Morningstar. All Rights Reserved. 3/1/2013

2.8%

11.9%

After 3 yearsAfter 1 yearAfter 6 monthsAfter 1 month

0

10

20

30

40

50

60

70

80% Return

• Small stocks• Large stocks

17.4%

32.9%

44.7%

75.3%

4.8%

20.4%

The Importance of Staying InvestedEnding wealth values after a market decline

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12

50

60

70

80

90

100

$120k

110

$114,561

$54,547

$74,640

• Stay invested in stock market

• Exit market and reinvest after 1 year

• Exit market and invest in cash

• Recession (Dec 2007–Jun 2009)

History of Interest RatesJuly 1954–December 2012

Past performance is no guarantee of future results. Each bar shows the range of yield for each bond over the time period July 1954 to December 2012. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2013 Morningstar. All Rights Reserved. 3/1/2013

Current

5.25%

6.47%5.92%

Average: 5.32%

0

5

10

15

20%

Federalfunds

LT governmentyield

IT governmentyield

1-yr government yield

0

2

4

6

8

10

12

14

16

18% Yield

1996 200619861976196619561946

Bond Yields During Recessions 1946–2012

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

0.16%

2.41%

Shaded regions denote economic recessions

• Short-term govt bonds (4/53–12/12)• Long-term govt bonds

Stock Returns and Monetary PolicyAnnual returns, 1955–2012

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

–40

–30

–20

–10

0

10

20

30

40% Return

1990 1995 2000 2005198519601955 1965 1975 19801970 2010

• Effective fed funds rate• Annual stock returns • Average return = 10% Gray shaded regions denote economic recessions

Correlations of Various Asset Classes with the MarketJanuary 1980–December 2012

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. © 2013 Morningstar. All Rights Reserved. 3/1/2013

Small stocks

International stocks

Commodities

REITs

Gold

Long-term corp bonds

Long-term govt bonds

Intermediate-termgovt bonds

Treasury bills

0.71

0.57

0.06

0.47

0.04

0.23

0.18

0.13

0.00

0.95

0.93

0.50

0.81

–0.06

0.33

0.03

–0.32

–0.11

0.76

0.66

0.21

0.57

0.04

0.21

0.08

0.08

0.03

• Low • Medium • High

Before recession

Jan 1980–Nov 2007

During recession

Dec 2007–Jun 2009

Entire period

Jan 1980–Dec 2012

U.S. Market Recovery After Financial CrisesCumulative return of all-stock portfolio after various events

Past performance is no guarantee of future results. Returns reflect the percentage change in the index level from the end of the month in which the event occurred to one month, six months, one year, three years and five years after. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2013 Morningstar. All Rights Reserved. 3/1/2013

40

20

0

–40

100% Return

80

60

October 1987:Stock market crash

August 1989:U.S. savings and

loan crisis

September 1998:Long-Term Capital

Management’s bailout

March 2000:The dot-com crash

September 2001:Terrorist attack

October 2008: Banking and credit crisis

–8.2%

5.5%

14.8%

34.3%

97.1%

–0.4%–4.0%–5.0%

30.1%

58.1%

8.1%

27.3%27.8%

6.2%5.1%

–3.0%–3.6%

–21.7%

–40.9%

–14.8%

40.1%

1.9%

11.0%

–20.5%

12.6%

–7.2%–8.5%

9.8%

38.3%

–20

Portfolio

100% stocks

• After 1 month

• After 6 months

• After 1 year

• After 3 years

• After 5 years

40

20

0

–20

100% Return

80

60

October 1987:Stock market crash

August 1989:U.S. savings and

loan crisis

September 1998:Long-Term Capital

Management’s bailout

March 2000:The dot-com crash

September 2001:Terrorist attack

October 2008: Banking and credit crisis

–4.8%

5.2%

14.3%

34.3%

90.1%

–0.2%–2.0%–2.3%

34.6%

59.2%

4.0%

13.2%12.3%11.3%

20.3%

–2.1%–0.7%

–8.9%

–15.3%

10.3%

42.3%

3.0%5.0%

–7.1%

19.6%

1.5%

–0.4%

11.7%

44.2%

U.S. Market Recovery After Financial CrisesCumulative return of balanced portfolio after various events

Past performance is no guarantee of future results. Returns reflect the percentage change in the index level from the end of the month in which the event occurred to one month, six months, one year, three years and five years after. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2013 Morningstar. All Rights Reserved. 3/1/2013

Portfolio

60% stocks

40% bonds

• After 1 month

• After 6 months

• After 1 year

• After 3 years

• After 5 years