Our Blended Benchmarks - Morningstar, Inc.

Morningstar Investment Services, Inc.

May 2010

Page 1 of 4

Our Blended Benchmarks

A Research Report from Morningstar Investment Services For Financial Advisor Use Only

In May 2010, we introduced a series of changes to the blended indexes we use to benchmark the performance of our diversified mutual fund and ETF strategies. We believe that the new blended benchmarks, which consist of far fewer, more recognizable component indexes, should be easier to grasp, while still faithfully representing the broad asset classes in which our strategies invest.

Why Did We Make the Changes? The new blended benchmarks facilitate performance evaluation. The former blended benchmarks hindered performance evaluation in a few ways. First, advisors and clients found the old blended benchmarks unwieldy, as they consisted of numerous component indexes. This made performance attri bution more of a chore, as an advisor had to keep track of the weightings of these various component indexes and the role they played, a tall order. Second, some of the component indexes in the former blended benchmarks were not household names. That made it difficult for advisors to determine the role these indexes played and, in turn, why a strategy might have performed as it did. Because the new blended benchmarks consist of fewer, more-familiar compo nent indexes, we believe that performance attribution will be simpler and more intuitive for advisors and clients to perform.

The new blended benchmarks better reflect the work we do to diversify a client's assets. Advisors are often seeking our help to further diversify a client's assets. For instance, a client's assets might be concentrated in a particular area due to overlap of investments. However, the granularity of our former blended bench marks assumed the opposite--that the portfolios advisors brought us were already thoroughly diversified. In that sense, we believe the new blended benchmarks better reflect our efforts to further diversify a client's assets.

We did not make these changes with the express hope of improving each strategy's relative performance. In fact, about six months ago when we decided to adopt the new blended benchmarks and began preparing to imple ment the changes, our investment performance looked only slightly better versus the new blended benchmarks. Since then, our relative investment performance has improved versus the new benchmarks.

The benchmark changes will not affect the way we manage the strategies concerned. For instance, the changes do not impact our strategic asset allocation, i.e., the target weightings of the various asset classes and sub-asset classes in which these strategies invest. Nor will it alter the way we evaluate, select, and monitor mutual funds. It is strictly a measurement change.

What Changed? The new blended benchmarks for our mutual fund and ETF strategies combine just a handful of component indexes [Fig. 1]. The weighting we assign to a component index is a function of how much the strategy invests in the asset class concerned. For instance, if a strategy invested 80% of its assets in U.S. stocks, then that strategy's blended benchmark would accord 80% of its weight to the S&P 500 Index, and so forth.

?2010 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Managed Portfolios is offered by Morningstar Investment Services, Inc., a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., and is intended for citizens or legal residents of the United States or its territories. This program can only be offered by a registered investment advisor or investment advisor representative. 052010

Morningstar Investment Services, Inc.

May 2010

Page 2 of 4

Figure 1

Benchmark Composition

Asset Class U.S. Stocks Foreign Stocks Bonds Cash

Mutual Fund?Taxable Strategies

Mutual Fund?Tax-Deferred, Retirement Income, and ETF Strategies

S&P 500 Index

S&P 500 Index

MSCI EAFE Index

MSCI EAFE Index

Barclays Capital 1-10 Year Municipal Bond Index Barclays Capital Aggregate Bond Index

Morningstar Municipal Money Market

Citigroup 90-Day Treasury Bill Index

How Does Performance Compare Under the New Benchmarks? The following table compares the performance of each affected strategy versus our former blended benchmarks and the new blended benchmarks for the year-to-date through April 30, 2010 and various trailing periods [Fig. 2]. The numbers shown represent a strategy's relative outperformance (i.e., a positive figure) or underperformance (i.e., a neg ative figure) gross of our maximum program fee. Please see important disclosures about performance on page 4.

Figure 2

Please note: We retained the benchmarks on our Focused mutual fund strategies as well as our Select Stock Basket strategies due to the fact that these strategies are typically benchmarked against a single index, not a blended index.

Strategy Performance vs. Old and New Benchmarks

Mutual Funds Taxable Aggressive Growth Growth Moderate Growth III Income & Growth Conservative

YTD % Old New 0.04 2.40 -1.00 0.68 -0.61 0.47 0.19 0.66 0.04 -0.10

1 Year %

-1.27 4.15 -2.84 0.59 1.43 3.45 2.62 2.59 1.75 0.69

3 Year Annualized % -0.28 0.66 -1.82 -1.50 -0.68 -0.64 0.04 -0.57 0.41 -0.76

5 Year Annualized % -0.10 0.74 -0.91 -0.53 -- -- 0.38 0.08 0.60 -0.09

Since Inception Annualized % 0.45 1.08 0.06 0.43 -0.13 0.12 0.74 0.55 0.43 -0.41

Inception Date 10-31-2001 10-31-2001 08-31-2005 10-31-2001 10-31-2001

Mutual Funds Tax-Deferred Aggressive Growth Growth Moderate Growth Moderate Growth III Income & Growth Conservative

YTD % 0.51 2.28 -0.39 0.84 -0.10 0.57 -0.16 0.51 0.86 0.86 1.00 0.25

1 Year % -0.26 4.15 -1.44 2.20

2.12 4.96 2.05 4.89 4.18 5.18 4.58 4.27

3 Year Ann. % 0.16 0.62 -1.29 -1.25 0.15 0.05 0.24 0.14 0.49 0.02 1.12 0.21

5 Year Ann. % 0.17 0.70 -0.61 -0.33 0.31 0.46 -- -- 0.55 0.46 0.91 0.57

Since Inc. Ann. % 0.55 0.99 -0.15 0.20 0.28 0.59 0.24 0.55 0.83 0.70 0.61 -0.27

Inc. Date 10-31-2001 10-31-2001 10-31-2001 08-31-2005 10-31-2001 10-31-2001

Retirement Income Long Range Mid Range Short Range Ultra-Short Range

YTD % 0.85 0.84 1.13 0.57 1.04 0.69 0.85 0.00

1 Year % 5.43 7.47 4.75 6.11 3.16 7.79 3.81 3.07

3 Year Ann. % -0.70 -1.56 -0.86 -1.52 -0.85 -1.68 -- --

5 Year Ann. % -0.23 0.05 -0.41 -0.15 -- -- -- --

Since Inc. Ann. % -0.03 1.21 -0.01 0.46 -0.17 -0.75 3.56 3.25

Inc. Date 02-28-2003 02-27-2004 11-30-2006 02-27-2009

ETF Aggressive Growth Growth Moderate Growth Income & Growth Conservative

YTD % -1.50 0.27 -1.40 -0.03 -1.67 -0.75 -1.40 -1.02 -0.51 -0.80

1 Year % -3.11 1.30 -3.09 0.99 -5.03 -1.14 -3.16 -1.15 -1.59 -0.32

3 Year Ann. % -- -- -- -- -- -- -- -- -- --

5 Year Ann. % -- -- -- -- -- -- -- -- -- --

Since Inc. Ann. % -0.87 0.51 -0.89 0.45 -2.25 -0.62 -0.37 0.36 -0.08 0.36

Inc. Date 10-31-2007 10-31-2007 10-31-2007 10-31-2007 10-31-2007

?2010 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Managed Portfolios is offered by Morningstar Investment Services, Inc., a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., and is intended for citizens or legal residents of the United States or its territories. This program can only be offered by a registered investment advisor or investment advisor representative. 052010

Morningstar Investment Services, Inc.

May 2010

Page 3 of 4

Relative performance improved, generally speaking, when we adopted the new blended benchmarks. This happened for a couple of reasons.

3 The new blended benchmark uses the S&P 500 Index to represent U.S. stocks, whereas the former blended bench mark included a component index for domestic small-cap stocks. Small-caps have outperformed large-caps over most trailing periods and, thus, their exclusion from the new blended benchmark burnishes our strategies' relative performance.

3 The new blended benchmark uses the MSCI EAFE Index of developed foreign-market stocks to represent interna tional stocks, while the former blended benchmark included a component index for emerging markets stocks. Emerging markets stocks have tended to trump the returns of developed-market stocks. This, too, has aided relative performance versus the new blended benchmarks.

It's worth noting that we have been relatively bullish on large-cap stocks, versus small-cap, for some time now. Yet, because the new blended benchmarks are lighter on small-cap stocks than the former blended benchmarks, we will arguably be in a less advantageous position to gain ground on our benchmark should large beat small as we expect.

In addition, we'd point out that some of our strategies fared a bit worse versus the new blended benchmarks than the old. For instance, the relative performance of our Conservative and Income & Growth mutual fund strategies is hurt a bit by the fact that the new blended benchmarks do not carve-out an allocation for cash (the old benchmarks did so). This hampered relative performance primarily because our strategies routinely carry a modest allocation to cash and the returns on cash did not match those of longer-maturity bonds (which predominate in the Barclays Capital Aggregate Index) over the last decade or so amid declining interest.

?2010 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Managed Portfolios is offered by Morningstar Investment Services, Inc., a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., and is intended for citizens or legal residents of the United States or its territories. This program can only be offered by a registered investment advisor or investment advisor representative. 052010

Morningstar Investment Services, Inc.

May 2010

Page 4 of 4

Important Disclosure

This research report is for financial advisor use only. The information, data, analyses, and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. The indices noted are unmanaged and can not be directly invested in. The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar Investment Services shall not be responsible for any trading deci sions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use.

Portfolio Performance--The portfolio returns presented are from portfolios seeded ("Seeded Portfolios") on the incep tion dates provided. Return calculations assume all dividends and capital gains distributions are reinvested but may not be reinvested into the fund that paid the dividend/distribution, are net of fund expenses, and are based on the underly ing fund's net asset value as of close of trading on the New York Stock Exchange at the last business day of a month. Returns are gross of the Total Maximum Advisory Fee, which is currently 1.50% for Mutual Fund portfolios and 1.41% for ETF portfolios. If the advisory fee was considered, the returns would be less than those presented. The Seeded Portfolios have similar investment objectives and strategies as the portfolios recommended to individual clients. The purpose in presenting the Seeded Portfolio performance is to provide a historical indication of the performance of this portfolio's strategy. The Seeded Portfolio may not have contained and/or currently may not contain the same mutual fund holdings as the mutual fund holdings currently underlying this portfolio.

Benchmark Performance--The Benchmark returns noted next to the portfolio performance returns are of the blended benchmarks applicable to that portfolio strategy and are not one particular index (i.e. Russell 3000). The blended benchmark returns assume monthly rebalancing to benchmark target weights. The composition of the blended bench marks may change over time primarily due to a material asset class change within a portfolio. Therefore, the historical performance of the blended benchmark represents the composite performance of past and current blended benchmark components. The blended benchmark returns are derived by taking a weighted average of the returns of each underly ing index.

Past performance does not guarantee future results. In no way should the Seeded Portfolio performance be considered indicative of or a guarantee of the future performance of this portfolio, nor should it be viewed as a substitute for the actual portfolios recommended to individual clients. Results of an investment made today in the Morningstar Managed Portfolios Program may differ substantially from the historical performance shown and as a result, an individual client may incur a loss.

?2010 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. Morningstar Managed Portfolios is offered by Morningstar Investment Services, Inc., a registered investment advisor and wholly owned subsidiary of Morningstar, Inc., and is intended for citizens or legal residents of the United States or its territories. This program can only be offered by a registered investment advisor or investment advisor representative. 052010

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