HISTORICAL DATA OBSERVATIONS

Over the almost 25-year period from January 1, 1985, to June 30, 2010, an investment of $100 in the S&P 500 multiplied more than 11 times to $1,143, if no money was withdrawn and all dividends were reinvested. This growth represents a remarkable 10.0% annualized compound return over a period of dramatic market changes, upheavals and challenges.

The mid-1980s marked the beginning of an extraordinary bull market that accelerated through the Internet boom of the late 1990s. Prior to this time, value investing was viewed as the favored long-term strategy. But, during this period, value investing fell out of favor and growth dominated.

Between 2000 and 2002, the Internet bubble collapsed and the September 11, 2001, attacks on the World Trade Center brought further market declines. The weak markets of the early 2000s were followed by a new bull market in which value investing moved back into favor. But, all gains were erased with the so-called Great Recession that began in 2007.

Exhibit 3.1 plots the growth paths of hypothetical $100 investments in the S&P 500 Index and in the Russell 1000 Value Index. In a more subtle way, these paths underscore the challenges inherent in market forecasting. On January 1, 1985, no market observer could possibly have foreseen the unfolding of events that would rock the market. For reference, the exhibit also includes a smooth 10% growth path with the same beginning point and approximately the same end point as the market ...

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