MarketPandelirium

MarketPandelirium

A Look Back and A Look Forward At These Crazy Financial Markets

How Participants Are Feeling

Bear Market Months % Decline Years toDuration Break Even

9/29 - 6/32 33 87% 257/34 - 3/35 20 34% 23/37 - 3/38 12 54% 911/38 - 4/42 41 46% 65/46 - 3/48 22 28% 48/56 - 10/57 14 22% 212/61 - 6/62 6 28% 22/66 - 10/66 8 22% 111/68 - 5/70 18 36% 31/73- 10/74 21 48% 811/80 - 8/82 21 27% 28/87 - 12/87 4 34% 27/90 - 10/90 3 20% 0.54/00 - 10/02 31 45% 7.5

Average 18 38% 5.3Exclude 1929 17 34% 3.8

Bear Markets Should Be Expected

401k Toolbox®

vs. Target Date

Funds

401k Toolbox®

vs. Target Date

Funds

Manage It For Me®

Active Asset AllocationAbility to reduce equity exposure

Cost of Manage It For Me® vs. Target Date funds

20bps solicitor compensation to Financial Advisor

401k Toolbox ® Customer Service Representatives

Give participant adviceChange investment objective

Asset Allocation Strategies. PMFM provides two types of asset allocation strategies for the Lincoln Director product: Active Account Management and Passive Account Management.

Active Account Management. The Active Account Management strategy uses a “Core/Satellite” structure. This strategy maintains a “core” position, or approximately a 50% to 60% blend of equity, fixed, and short term investments with the blend depending on the risk profile of the participant. The remaining percentage, or “satellite,” exposure is tactically allocated with the 401k Toolbox Satellite Funds. The Satellite funds invest in Exchange Traded Funds (ETFs) and short term investments based upon market conditions and risk levels of the market as determined by PMFM’s propriety risk model as well as the risk profile of the participant. Prior to 12/07 the Satellite portion was tactically allocated using the pooled investment options available to plan participants.

Passive Account Management. The Passive Account Management strategy uses strategic asset allocation based on the principles of Modern Portfolio Theory.

In both the Active Account Management and Passive Account Management strategies, the equity exposure is typically highest in the Growth profile and lowest in the Conservative profile.Performance shown is for representative accounts funded by PMFM and managed on the Lincoln Director recordkeeping platform using the strategy indicated (each a "Representative Account”).Prior to the 3rd quarter of 2004, PMFM’s Active Account Management Strategy used a tactical asset allocation philosophy under which equity exposure ranged from 0% to 100% within each account. Representative Accounts have access to all fund options available under the Lincoln Director product. Some 401k plans offer different funds to select from, and managed 401k account performance will vary because of this difference in fund choices.Representative Accounts had no external cash flows (deposits or withdrawals) during the reporting period.Returns for the Representative Accounts are time weighted, total returns and are net of (i) PMFM's investment advisory fees (assumed to be 1.5% per year for Active Account Management and 0.45% for Passive Account Management, although actual fees may be less) and (ii) the fees and expenses of underlying funds.Returns for the Representative Accounts and Market Indexes assume reinvestment of all dividends and distributions.PMFM’s Investment strategies are not managed against a benchmark. However, the performance of the S&P 500 and blended indexes of the S&P 500 and the Barclays Capital U.S. Aggregate Bond Indexes are provided under “Market Indexes” for comparison purposes. The S&P 500 is a market-weighted index that represents the performance of a group of stocks of 500 companies chosen by Standard & Poor's based on market size, liquidity, and industry group representation. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that is generally considered representative of U.S. bond market activity. The S&P 500 and the Barclays Capital U.S. Aggregate Bond Index are not available for direct investment and there are no trading expenses associated with the index. Inception dates provided for the market indexes are shown for comparative purposes only. Actual inception dates of each index vary.Past performance is no guarantee of future results.Investment management services are provided by PMFM, Inc., a registered investment advisor.

Performance Disclosures

-21.9%

-38.8%

-40.4%

-38.6%

-36.1%-37.0%

-45.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

401k Toolbox Growth Fidelity Freedom 2040 John Hancock 2040-R2 Principal 2040-R2 American Funds 2040-R2 S&P 500 Index

401k Toolbox® Growth 1 Year as of 12.31.2008

-3.9%

-25.3%

-29.8%-30.8%

-28.0%

-37.0%

-40.0%

-35.0%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

401k Toolbox Conservative Fidelity Freedom 2010 John Hancock 2010-R2 Principal 2010-R2 American Funds 2010-R2 S&P 500 Index

401k Toolbox® Conservative 1 Year as of 12.31.2008

The “Industry’s” Response

Bear TrapsBear Traps

The S&P 500 December 30, 2006 – November 26, 2007

“A GREAT buying opportunity!”

“A GREAT buying opportunity!”

-10.09%

or . . .

Buy and Hold investors finally break even from the last bear

market

New All-Time High

The S&P 500 December 30, 2006 – January 22, 2008

-16.27%

“Don’t worry, this is just a correction”

“Don’t worry, this is just a correction”

The S&P 500 December 30, 2006 –March 10, 2008

-18.64%

“It’s ok. You’re in it for the long-term”

“It’s ok. You’re in it for the long-term”

The S&P 500 December 30, 2006 – May 19, 2008

+12.04%

“See, aren’t you glad you didn’t miss this rally”

“See, aren’t you glad you didn’t miss this rally”

The S&P 500 December 30, 2006 – September 30, 2008

-25.48%

“Might as well ride it out now. The worst is over. Remember, it’s not a loss unless you sell it”

“Might as well ride it out now. The worst is over. Remember, it’s not a loss unless you sell it”

2008’s Historic

4th Quarter

2008’s Historic

4th Quarter

The S&P 500 September 30, 2008 – October 9, 2008

-21.88%

Since Oct. 9, 2007(Peak): - 41.86%

The S&P 500 October 13, 2008 – October 27, 2008

-15.39%

Since Oct. 9, 2007(Peak): -45.76%

The S&P 500 November 4, 2008 – November 20, 2008

-25.19%

Since Oct. 9, 2007(Peak): -51.93%

The S&P 500 September 30, 2008 – December 31, 2008

-35.40% - To Market Bottom

-22.56%

Since Oct. 9, 2007 (Peak): -42.29%

“The worst is over”

The S&P 500 October 9, 2007 – December 31, 2008

- 42.29%

The S&P 500 December 31, 2007 – December 31, 2008

-38.49%

The Lost Decade

Stocks Always Good in the Long Term?

December 31, 1998

S&P 500 – 1,469

December 31, 2008

S&P 500 - 903

The Run UpNASDAQ January 1998 – March 2000

+229.04%

The Draw DownNASDAQ March 2000 – October 2002

-78.16%

The Run UpNASDAQ October 2002 – October 2007

+158.30%

The Draw DownNASDAQ October 2007 – December 2008

-43.91%

Final Bear Trap:

The Market HAS To Go Up The Market HAS To Go Up NowNow

-8.57%

S&P 500, January 2009 (worst January in history)

ALERT: Eventually the stock market will go back up, and when it does we’ll

participate!

A Sensible Approach for Good and Bad Markets

Capture Most of the Good Capture Most of the Good TimesTimes

Miss Most of the Bad TimesMiss Most of the Bad Times

Thank You

Questions?

Thank You

Questions?