Characteristics of the Stocks and Bonds in 7Twelve

In general terms, the 7Twelve portfolio consists of roughly 60% equity and diversifying assets and approximately 40% fixed income (26% bonds and about 14% cash) as of December 31, 2007.

Equity

The characteristics of the equity portion of the 7Twelve portfolio are outlined in the table below. Seven of the 12 funds in the 7Twelve portfolio are equity (or stock) funds. When blending seven different equity funds together, it is helpful to understand how the equity holdings are distributed in what is called the "Morningstar Style Box".

As of December 31, 2007, 19% of the equity (including US stock and non-US stock) in the 7Twelve portfolio was classified as large cap stock with a "value" orientation. The term "cap" refers to market capitalization where market capitalization is computed by multiplying the current price of a companies stock by the number of shares that have been sold in the market. The term "value" indicates that a stock's price is undervalued relative to its true market worth.

Twenty-two percent (22%) of the stocks in the 7Twelve portfolio were categorized as large cap "growth" stocks. Growth stocks tend to have higher price-to-earnings ratios and, as a result, are typically more volatile than "value" stocks. Growth stocks often have very high returns in the good years and discouraging low returns in the bad years.

Twenty-three percent (23%) of the stocks in the 7Twelve portfolio (as of December 31, 2007) were categorized as large cap "core" stocks. The term core refers to stocks that do not fit into the value or growth category.

In summary, as of year-end 2007, the equity portion of the 7Twelve portfolio was comprised of 64% large cap stocks, 18% midcap stocks, and 18% small cap stocks. The style orientation was 30% value, 40% core, and 30% growth, representing a well balanced approach with a large cap bias (in keeping with the market cap of the aggregate world equity market) and a slight value bias among midcap and small cap stocks. The equity attributes of a portfolio such as the 7Twelve are dynamic through time but will generally be similar to the allocation as shown in the table above.

Bonds

There are three bond funds in the 7Twelve portfolio. All three funds focus on bonds of the highest quality, that is, bonds with AAA and AA rating (see table below). Collectively, about two-thirds of the bond portion of the 7Twelve portfolio is categorized as having intermediate maturity, with the remaining one-third classified as long-term bonds.

7Twelve is a logical blend of
investment assets and investing styles.

The above is an excerpt from the 7Twelve Report.