Our Mission and Standards

LPL Financial Research:Independent Advice for the Retirement Plan Market

LPL FINANCIAL RESEARCH

For Plan Sponsor or Investment Professional Use Only • Not For Participant Use • Not For Client Distribution

2



Our Mission and Standards

Our Mission We strive to deliver outstanding investment performance and service We aim to provide comprehensive research and advice We hope to be a key resource and component of our advisors’ investment decision making to help them better serve you—their client

Our Standards Freedom: A broad range of advice and communications that your advisor can selectively choose from to help meet your needs

Communication: Key commentaries on a variety of topics for your advisor, you, and your participants

Service: Dedicated Research-focused service team for your advisor Approach: Time-tested, rigorous analytical methods strengthened by a research environment that fosters integrity

Commitment: Provide resources for your advisor so they have more time and resources to dedicate to you

3



Our Role and Independence

To provide conflict-free, objective, timely, actionable, investment research and advice by:

Identifying above-average investment opportunities, conducting ongoing and thorough due diligence, while providing quality advice with complete transparency,

Performing quantitative analysis, performance measurement, attribution, and appraisal of our advice, and

Delivering timely communications and service

To accomplish this, we: Have no proprietary products to sell

Have no investment banking relationships to promote Have no other business conflicts to get in the way of providing unbiased

recommendations Are compensated based on performance of our recommended investments and

advice, not revenue-sharing arrangements

4



Our Structure

5



Investment Analysis Scorecard: Overview

Basic Premise Designed to help you and your advisor establish and monitor your plan’s

investment line up Can assist in helping you fulfill your fiduciary responsibilities as set forth under

ERISA Review data from the past 5 years and analyze 12 factors in a pass-fail system

and equally weight the factors Maximum total score = 12

o 10 or greater the investment earns Blue Ribbon status

o 6 or below the investment falls onto the Watch List

o 7 through 9 the investment is suitable

We believe… Investments should be evaluated on more than just historical returns The process should be consistent, simplistic yet sophisticated, and repeatable

6



Investment Analysis Scorecard: Methodology Snapshot

7



Investment Analysis Scorecard: Factor Details

Style-Related Factors (16.7% of total score)

Style drift* < 20

o When selecting an investment, you want to know that it has provided a relatively “true” exposure to the category in which it falls

o A style drift score of less than 20 implies that the divergence of an investment portfolio from its stated investment style or objective as measured by the drift from the Morningstar category is minimal

R2 ≥ 80%

o When selecting an investment, you want to know how correlated the investment’s returns are with its benchmark index

o This value of R2 implies that the investment’s return moves in the same direction as the index 80% or more of the time

* Please note: For target date funds, style drift is expected and therefore, not a useful statistic to evaluate. For these funds, instead of style drift, we use the risk/return ratio. If the return/risk ratio is greater than 1, the investment receives a score of 1.

8




Return-Based Factors (33.3% of total score)

1-, 3-, and 5-year return > peer group median

o When selecting an investment, you want to know that it has demonstrated an ability to outperform relative to its peers

o A total return greater than the peer group median implies that the investment has outperformed more than half of other investments in its same category

o The investment can potentially receive 1 point for each time period: 1-, 3-, and 5-years

Up capture/Down capture > 1

o When selecting an investment, you want to know that it “captures” more than 100% of market returns in up markets and helps “cushion” the loss in down markets by capturing less than 100% of the fall

o A ratio of greater than 1 implies that the investment captures more when the market is up than when it is down

9




Risk-Based Factors (33.3% of total score)

3- and 5-year Information Ratio > 0

o When selecting an investment, you want to know how its returns compare to the index and to the amount of risk it took to generate those returns

o An Information Ratio greater than 0 implies that the investment outperformed its benchmark index

0.75 < 3- and 5-year Beta < 1.15

o When selecting an investment, you want to know how much risk the manager takes on relative to their benchmark index. You want managers to take some risk—as you need to take some risk to generate decent returns—but, not so much risk that it is egregious.

o A Beta of 1 means that the manager is taking on the same level of risk as the benchmark index

o A Beta between 0.75 and 1.15 implies that the manager is taking on risk that is between 75% and 115% of the benchmark index

10




Qualitative Factors (16.7% of total score)

Gross expense ratio ≤ category average

o When selecting an investment, you want to know how much it costs as total fees reduce the total return captured by the investor

o An expense ratio less than the category average implies that the fund charges no more than the average of all others that fall into the same category

Longest manager tenure > category average

o When selecting an investment, you want to know that the track record being reviewed is primarily one from the current management team

o A tenure greater than the category average implies that the manager has been on the investment team for a relatively long period of time

11



Key Communications to Keep You Informed

Weekly Market Commentary

Market Insight

Overarching market commentaries

2011 Outlook Weekly Economic Commentary

Bond Market Perspectives

Overarching forward-looking viewpoint for the

entire year Weekly updates on specific areas

Quarterly recap of the previous quarter (available in the FIRM template or PDF with accompanying letter)

12



Key Communications to Keep You Informed

Highlighting specific areas of focus

Tracking overall market conditions

Current Conditions Index

Sector Strategy LettersPortfolio Compass

Detailing equity sectors Boiling down key events Quantifying our viewpoint on different areas of the economy

and markets

13



Thank you for your businessLPL FINANCIAL RESEARCH

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such

entity.

Our Mission and Standards

Documents

Transcript of Our Mission and Standards