Ivesting a FINANCIAL RESEARCH ‘a road ‘recovery The markets are currently experiencing extreme volatility, and asset prices have declined substantially. While current markets offer attractive buying opportunities for investors, we also see continued volatility for the foreseeable future. It is important to keep the lines of communication open in times like these. LPL Financial Research believes we will have a potential multi-stage market recovery spanning across the next few quarters and possibly years. Detailed below are what we believe those stages will be and our implementation plans. Liquidity Returns, Bull Market for Volatility We beliove we are in the beginning of this stage, during which LPL Financial Research is using The three stages: a two-pronged approach. On the equity side, we recommend mutual fund investment stratoges Stage 1 that potentially benefit from volatility, such as Covered Calls, Global Macro, and Opportunistic Liquidity Returns; Balanced strategies. Keep in mind such strategies are subject to increased risk duo tothe Bull Market for use of derivatives and futures, may not be suitable for all investors and should be considered Volatility a5 an investment for the risk captal portion of the portfolio. The strategies employed in the Stage 2 management of atemative investments may accelerate the velouty of potential losses. As We'Ve Light at the End seen before, strong ales ae followed by down drafts that r-test and eventually help to shape ane tunnel the market's bottom, Stage 3 (On the fixed income side, unprecedented valuations and potential opportunities are present The Next Bull across the fixed income spectrum, as volatility has spiked among many bond asset classes. ‘Market Begins Consequently, we recommend allacating assets from relatively more aggressive to relatively less aggressive fixed income sectors, but remain positioned to benefit when liquidity returns, ‘Attractive opportunities exist in Municipal Bonds, investment-grade Corporate Bonds, High Yield Bonds, Bank Loans, and Preferred Stocks Light at the End of the Tunnel We anticipate Stage 2 will begin sometime in eatly-to mid-2009. LPL Financial Research intends to manage this second stage of the recovery with an increased allocation to relatively more aggressive equities, as the markets react to seeing the economic growth “light” at the end of the recession” tunnel. In this stage, we want to be invested in equities that can help in strong up markets. We will allocate out of some of the volatility thriving, less aggressive equity strategies that benefited in Stage 1 but retain the relatively more aggressive fixed income exposure that will potentially continue to pay off in this stage. Companies and sectors that can take advantage of such markets but do not depend on economic expansion to drive sales and earnings include "recession-proof" sectors such as Healthcare: ‘and Consumer Staples. They are sort of “motorboat” investments, as opposed to “sailboat investments that depend on economic expansion to fill their sails. il LPL FinancialINVESTING INSIGHTS. a The Next Bull Market Begins x ] " ‘This isthe last and final stage of the recovery. Stage 1 saw liquidity improve Stage 1 saw liquidity and Stago 2 sav the stock market improve. Stago 3 willbe marked by the ; d Jeconomy improving, which we believe may begin n the second haf of 008, IMprove and Stage 2 LPL Financial Research wil use Stage 3to shift our recommendations from sayy the stot ren the "mototboats” used in Stage 2 to "sailboats" in Stage 3 Investments that S ‘ potentially benefit from an economic expansion that fills their sails include improve. Stage ill cyclical sectors like Energy and Industrials, as well as REITs, Commodities, and Emerging Markets, Using these sailboats during the economic expansion @ Marked by the ‘hat accompanies the next bull market should pay off in this stage economy improving, : which we believe what's may begin in the the p | an f second half of 2009. ‘Any changes LPL Financial Research makes to our models are designed to help investors with the current markt volatility, quit, and other conditions. These timely adjustments help investors stay on track to address their long-term investment goals. As the markets move through the thee stages of recovery, LPL Financial Research will continue to look for ways to position portfolios. appropriately for the given market conditions. 2008 has provided a challenging market for investment professionals and the ents we serve. LPL Financial Research remains dedicated to finding ways to help our advisors provide the best advice possible to you inthis, as in any, market environment Covered Calls: These stateies tly bald lrg patio teks and then sell coveadcals, are covered al stratgie then by putea futher oes agent doe ik Tenet reupload tthe broader markets, ut wth siicany ss vl, Global Macro: Thus funds are sina to Managed Futures uns but use fundrentl inputs focused on toa laa ecsnami theme tet models a wl as technica for pie ‘lata inputs. Global Maco furds aya bees systematic than the pia Managed Futures fur Historical the beet of Managed Futures ad lebal Mara has ben soi long-term retus wih very law coelation to equi ad ued income secures Opportnise Balanced suatgis: Blea funds ivestinstoks, fed icone ecu, nd sometimes, money arts. 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