oppenheimer q3 2012 charts

7/29/2019 Oppenheimer Q3 2012 Charts

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Not FDIC Insured May Lose Value Not Bank Guaranteed

2012 OppenheimerFunds Distributor, Inc.

CapitalMarkets

Q42012Market Charts

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as of 9/30/12


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Special RisksInvestments in securities of growth companies may be especially volatile. Value investing involves the risk thatundervalued securities may not appreciate as anticipated.

Small and mid-sized company stock is typically more volatile than that of larger, more established businesses, as these

stocks tend to be more sensitive to changes in earnings expectations and tend to have lower trading volumes thanlarge-cap securities, creating potential for more erratic price movements. It may take a substantial period of time torealize a gain on an investment in a small or mid-sized company, if any gain is realized at all.

There is no guarantee that the issuers of stocks held by mutual funds will declare dividends in the future, or thati dividends are declared, they will remain at their current levels or increase over time.

Foreign investments may be volatile and involve additional expenses and special risks, including curr ency f uctuations,foreign taxes and political and economic factors. Investments in emerging and developing markets may beespecially volatile.

Fixed income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall,

and a Funds share prices can fall. Below-investment-grade (high yield or junk) bonds are more at risk of defaultand are subject to liquidity risk.

Asset-backed and mortgage-backed securities are also subject to prepayment risk.

Senior loans are typically lower rated (more at risk of default) and may be illiquid investments (which may not havea ready market).

A portion of a municipal bond funds distributions may be taxable and may increase taxes for investors subject to thealternative minimum tax (AMT). Capital gains distributions are taxable as capital gains.

Investing in the commodity markets involves potentially higher volatility and greater risk of loss of principal thantraditional equity or debt securities. Commodity-linked investments are considered speculative and have substantial

risks, including the risk o loss o a signi cant portion of their principal value.Investing in a limited number of sectors, such as gold, oil and real estate, can increase volatility and exposure to issuesaffecting that sector.

Investments in securities of real estate and small-cap companies may be especially volatile. Because they do not havean active trading market, shares of Real Estate Investment Trusts (REITs) may be illiquid. The lack of an active tradingmarket may make it dif cult to value or sell shares of REITs promptly at an acceptable price.

Diversi cation does not guarantee pr o t or protect against loss.

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Index DefnitionsThe Barclays Capital Global Emerging Markets Index represents globalemerging market bonds.

The Barclays Capital U.S. Aggregate Bond Index is an investment-gradedomestic bond index.

The Barclays Capital U.S. Credit/Corporate/Investment Grade Bond Indexrepresents primarily investment-grade corporate bonds within the BarclaysCapital U.S. Aggregate Bond Index.

The Barclays Capital U.S. Government Bond Index is composed of all publiclyissued, non-convertible, domestic debt of the U.S. Government or anyagency thereof, quasi-federal corporation or corporate debt guaranteed.

The Barclays Capital U.S. Aggregate Treasury Index represents public obli gationsof the U.S. Treasury with a remaining maturity of one year or more.

The Citigroup Non-U.S. World Government Bond Index (USD Unhedged) iscomposed of foreign government bonds with maturities over one year.

The Consumer Price Index (CPI) program produces monthly data on changesin the prices paid by urban consumers for a representative basket of goodsand services.

The Credit Suisse High Yield Bond Index is designed to mirror the investableuniverse of the $U.S.-denominated high yield debt market.

The Credit Suisse Leveraged Loan Index tracks the performance of seniorloans.

The FTSE National Association of Real Estate Investment Trusts (NAREIT)Equity REITs Index is an index consisting of certain companies that ownand operate income-producing real estate that have 75% or more oftheir respective gross invested assets in the equity or mortgage debt ofcommer cial properties.

The JPMorgan U.S. Dollar Tradable Currency Index is based on trade-weighted exchange rate indices and tracks performance versus 16 majortrading partners of the U.S. determined by 2000 trade data.

The JPMorgan Domestic High Yield Index is an index composed of non-investment-grade corporate bonds.

The JPMorgan ELMI+ Index tracks total returns for local-currency-denominated money market instruments in the emerging markets.

The JPMorgan EMBI Global Diversi ed Bond Index is a uniquely weightedversion of the EMBI Global Index, which limits the weights of those countrieswith larger debt stocks by only including speci ed portions of thesecountries eligible current face amounts of debt outstanding.

The JPMorgan GBI-EM Global Diversi ed Unhedged Index is a global localemerging markets index, consisting of r egularly traded, liquid xed rate,domestic currency government bonds.

The Merrill Lynch AAA and BBB Municipal Indices measure the performanceof U.S. tax-exempt bonds rated AAA and BBB, respectively.

The Merrill Lynch Municipal Airport, Revenue and Tobacco Indices measurethe performance of U.S. tax-exempt airport, revenue and tobacco bonds,respectively.

The Merrill Lynch Municipal Master Index is a broad-based measure of theperformance of the U.S. tax-exempt bond market.


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Index Defnitions (continued) The Morgan Stanley Capital International (MSCI) All Country World Index(ACWI) is designed to measure the equity market performance of developedand emerging markets.

The MSCI ACWI ex-U.S. Small Cap Index is designed to measure theperformance of global small-capitalization stocks excluding the U.S.

The MSCI EAFE (Europe, Australasia, Far East) Index is designed to measuredeveloped market equity performance, excluding the U.S. and Canada.

The MSCI Emerging Markets (EM) Index is designed to measure globalemerging market equity performance.

The MSCI World Index is designed to measure global developed marketequity performance.

The MSCI Argentina, MSCI Australia, MSCI Brazil, MSCI Canada, MSCIChina, MSCI European Union, MSCI France, MSCI Germany, MSCI India,MSCI Indonesia, MSCI Italy, MSCI Japan, MSCI Mexico, MSCI Netherlands,MSCI Russia, MSCI Saudi Arabia, MSCI South Africa, MSCI South Korea,MSCI Turkey, MSCI UK and MSCI USA represent equity market performancein those countries or regions.

The MSCI World Index Ex-U.S. is designed to measure the equity marketperformance of developed markets and excludes the U.S.

The NCREIF Property Index measures investment performance of a very largepool of individual commercial real estate properties.

The Philadelphia Gold & Silver Index is an index of 16 precious metal-miningcompanies that trade on the Philadelphia Stock Exchange.

The Russell 1000 Value Index, Russell 1000 Index and Russell 1000 GrowthIndex are indices that measure the performance of large-capitalizationvalue stocks, large-capitalization stocks and large-capitalization growthstocks, r espectively.

The Russell 2000 Value Index, Russell 2000 Index and Russell 2000 GrowthIndex are indices that measure the performance of small-capitalizationvalue stocks, small-capitalization stocks and small-capitalization growthstocks, r espectively.The Russell Midcap Value Index, Russell Midcap Index and Russell MidcapGrowth Index are indices that measure the performance of mid-capitalizationvalue stocks, mid-capitalization stocks and mid-capitalization growthstocks, r espectively.

The U.S. Import Price Index measures data on changes in the prices ofnon-military goods and services traded between the U.S. and the rest ofthe world.

The S&P 500 Index is a broad-based measure of domestic stock market

performance.The S&P GSCI is a composite index of commodity sector returnsrepresenting unleveraged, long-only investment in commodity futures across24 commodities.

The U.S. 10-Year Treasury Yield is generally considered to be a barometer forlong-term interest rates.

The U.S. Dollar Index is a measure of the value of the U.S. dollar relative toa basket of foreign currencies that includes the euro, Japanese yen, Britishpound, Canadian dollar, Swedish krona and Swiss franc.

Each index is unmanaged and cannot be purchased directly by investors.Index performance is shown for illustrative purposes only and doesnot predict or depict the performance of any Oppenheimer fund.Past performance does not guarantee futur e results.


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Executive Summaryas of 8/31/12

Economic & Financial Market Overview . . . . . . . . . . . . . . . . . . 621The U.S. continues to grow sluggishly, while much of the Eurozone facesprolonged recession. Emerging market growth has slowed (in many cases bydesign), but it generally still outpaces that of the developed world. Financialmarkets improved over the summer as fears over a Eurozone breakup began tosubside, but valuations remain attractive across many asset classes.

Domestic Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2229U.S. stocks rebounded after the extreme risk aversion of the second quartercreated attractive opportunities for patient and discerning investors. Marketsalso cheered mildly better U.S. economic data and European Central Bank actionto stem the worst of the Eurozone crisis. Corporate balance sheets and (to alesser extent) earnings power remain robust, and while stocks valuations haverisen, they remain below their historical averages.

International Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3037Many developed international markets bounced back after a tough secondquarter, as the president of the European Central Bank vowed to preserve thesingle currency. With investors willing to assume more risk, many emergingmarket (EM) stocks also posted decent gains. Valuations for both developedmarket and emerging market equities remain below historical averages. Despitethe gain in international equities, plenty of opportunities remain to own sharesin leading companies with global operations.

Taxable Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3850Treasury yields remained near record lows, while credit spreads to treasuriesnarrowed, as investors grew more comfortable with risk. High yield andemerging market debt have been the top performing sectors year to date, whilehigher quality domestic and international government bonds have lagged.Many investors, still wary following the nancial crisis, appear to have excessiveexposure to treasuries and other high quality bonds that pay little yield and risklosses when rates eventually rise.

Municipal Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5156Munis continued to perform well year-to-date, after a solid run in 2011. Theyield gap (spread) between treasuries and most types of municipal bonds hasnarrowed, but opportunities remain with treasury yields near all-time lows.Lower rated and longer maturity bonds remain outperformers, as subsidingfears over falling tax revenues have helped support the asset class, along with acompelling history of very few defaults and solid demand for new issues.

Alternative Asset Classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5764Commodities underperformed REITs, stocks and gold in th e rst eight monthsof the year, as lackluster global growth sapped demand for raw materials.REITs remained star performers, having signi cantly outpaced the other threecategoriesand the in f ation ratethus far in 2012. Among currencies, theeuro staged a rebound as it became clear the European Central Bank wasprepared to act forcefully to protect the single currency. Given the potential forcontinued volatility from an array of sources, alternative asset classes remain animportant source of potential diversi cation for investors.

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Economic &

Financial Market Overview

7 Global Economic Forecast

8 World GDP Growth

9 Global Purchasing Managers Indices (PMIs)

10 Key U.S. Economic Indicators

11 What Is the Fiscal Cli ?

12 Eurozone Sovereign Bond Spreads Remain Elevated

13 Mutual Fund Flows

14 Earnings Yield on Stocks Higher than Yield onU.S. Treasuries

15 U.S. Equity Valuations16 European Stocks Appear to be Attractively Valued

17 Favorable Secular Trends in Emerging Markets

18 U.S. Equity Dividend Yields vs. Treasury Yields

19 Many Fixed Income Yields Are Uncompetitive

20 Credit Spreads Still Elevated

21 Real Yields Abroad May Be More Attractive

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Economic & Financial Market Overview7 1234

Global Economic Forecast

Interest Rates Borrowing costs for corporations and households are extraordinarily low. More policy accommodations from theU.S. Fed and European Central Bank are in the of ng.

In ationU.S. inf ation is rolling over but expectations remain within the Feds perceived 2.0%2.5% comfort zone.Modest aggr egate emerging market inf ation is supportive of additional stimulus.

U.S. Housing Prices are rising as affordability remains near record levels. Inventories have been halved. The sector is nowcontributing to growth.

Global GrowthU.S. economy continues to muddle along as Europe remains mired in a recession. Growth in select emergingeconomies appears poised to r eaccelerate as stimulus takes hold, though rising inf ation in key countries could bea headwind.

U.S. Corporate Sector Balance sheets are healthy but companies remain reluctant to deploy their record levels of cash. Earnings growthis slowing considerably. Many companies appear to be fully valued.

U.S. Credit Banks continue to ease lending standards but aggregate loan demand remains modest. Expanding credit for autosand homes supports recovery in those sectors.

U.S. Consumer Spending has been resilient despite the still-weak employment environment. W aning consumer con dencesuggests consumption may weaken in the coming months.

Eurozone Crisis Steps have been taken to prevent a collapse of the Eurozone and the dreaded Lehman moment. Tail risks willlikely once again weigh on sentiment but most likely outcome is still more Europe, not less.

U.S. PoliticsOutcome of November election is still too close to call. A last-minute compromise to extend the most severecomponents o the scal cliff is still likely but the remaining scal drag will weigh heavily on an alreadyweak economy.

SUNNY

CLOUDY

STORMY


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Canada 2.5%

Mexico 4.1%

Brazil0.5%

United States 2.3%

United Kingdom 0.5%

South Africa 2.7%

Australia* 4.3%

Indonesia 6.4%

Germany 1.0%France 0.3%

Greece 6.2%

Vietnam 4.5%

Russia 4.0%

Japan 3.6%China 7.5%

India 3.9%

Thailand 4.2%

*Australia as o 3/31/12.Source o chart data: Haver Analytics, 6/30/12. GDP (Gross Domestic Product) is the total value o all fnal goods and services produced in a countryin a given year.

World GDP GrowthEurozone fears continue to overshadow relatively solid economic growth in other parts of the world. While the Eurozone continues to grapple withits sovereign debt crisis and austerity measures, the U.S. continues to grow at a modest pace, though the impending scal cliff puts growth at risk.Expansion has slowed in large emerging countries like Brazil, Russia, India and China, albeit to more sustainable levels, while many other emergingmarkets continue to grow at a robust pace.

GDP GrowthYear-over-Year Change (6/30/12)


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Economic & Financial Market Overview9 1234Source o chart data: Haver Analytics, 8/31/12.Past per ormance does not guarantee uture results.

Global Purchasing Managers Indices (PMIs) as of 8/31/12PMIs, a measure of manufacturing activity, have fallen below 50the threshold between expansion and contractionin many of the worlds largesteconomies. Uncertainty surrounding the Eurozone crisis and the $600 billion scal cliff has led to a slowdown in activity in the U.S., while the Eurozoneand the UK continue to feel the effects of the debt crisis and austerity. Chinas slowdown was largely manufactured by the government, but falling U.S.and Eurozone demand for exports is clearly weighing heavily on Chinas growth.

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35

40

45

50

55

60

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I n d e x L e v e

l

2006 2007 2008 2009 2010 2011 2012

U.S. UK China Eurozone

Expansion

Contraction

Global PMIs


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1. Source o chart data: Haver Analytics and the Bureau o Labor Statistics as o 7/31/12.2. Source o chart data: Haver Analytics and Federal Reserve Board as o 7/31/12.3. Source o chart data: Federal Reserve Bank o St. Louis and Haver Analytics as o 7/31/12.4. Source o chart data: Bureau o Economic Analysis and Haver Analytics as o 7/31/12.

Key U.S. Economic Indicators as of 7/31/12Measures of U.S. employment, industrial production, retail sales and personal income growth all point to modest growth ahead, but the economyremains highly vulnerable. A major shockwhether related to the scal cliff, geopolitical events or something elsecould tip the economyinto recession.

1,000800600400200

0200400600

201220112010200920082007

8

4

0

4

8%

201220112010200920082007

80

85

90

95

100

105

201220112010200920082007

12108642

02468%

201220112010200920082007

T h o u s a n

d s

I n d e x L e v e

l

Employees on Non arm Payrolls1

Month-over-Month Net Change

Real Retail Sales 3Year-over-Year % Change

Personal Disposable Income 4Year-over-Year % Change

Industrial Production2

Seasonally Adjusted Level


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Economic & Financial Market Overview11 1234*Includes 3.8% tax surcharge rom Patient Protection and A ordable Care Act.

Source o chart data: Congressional Budget O fce, 8/31/12.

What Is the Fiscal Cli ?Roughly $600 billion worth of tax increases and spending cuts are set to come into effect on January 1, 2013, unless Congress acts to prevent thematall order considering how contentious these issues are. If Congress fails, the economy could go over a scal cliff, and fall back into recession. Even ifCongress manages to avoid the worst of the cliff, signi cant scal drag from the remainder is still possible.

Expiration o the Bush-era Tax Cuts

2012 2013

Ordinary income 35.0% 43.4%*

Dividends 15.0 43.4

Capital gains 15.0 23.8

Payroll tax (employee) 4.2 6.2

Estate and gift taxes 35.0 55.0Estate and gift tax exemption amounts $5.12M $1.0M

Expiration o the Alternative Minimum Tax Patch 2009 Stimulus Spending Rolling Over Sequestered Spending Tax Cuts Come into E ect

Potential Drag on GDP


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Economic & Financial Market Overview12 1234Source o chart data: FactSet, 8/31/12.Past per ormance does not guarantee uture results.

Eurozone Sovereign Bond Spreads Remain Elevated as of 8/31/12Investors seeking safety amid the Eurozone crisis have been piling in to German bunds, driving yields down to record lows. The result is that spreadsover bunds have been reaching highs not seen since the period before the introduction of the common currency. While 10-year government bond yieldsacross much of Europe remain elevated, shorter term rates began to moderate from panic levels as the European Central Bank prepared to take decisiveaction to stem the crisis.

1

0

1

2

3

4

5

6

7

8%

201220102008200620042002200019981996199419921990

Introduction of the Euro Lehman Collapse

Spain Italy France

10-Year Government Bond Spreads Over German Bunds


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Mutual Fund Flows as of 7/31/12Investors continue to pour money into xed income unds amid persistently acute risk aversion. Within xed income, sa e-haven government securitiesare experiencing the highest infows, indicating that investors are willing to accept tiny, or even negative, real yields in exchange or the perceived sa ety othese assets. Over time, this could prove to be a costly strategy, especially i interest rates rise.

80

70

60

50

40

30

20

10

0

10

20

30

40

50

60

201220112010200920082007200620052004200320022001200019991998

U . S .

$ B

i l l i o n s

Tech Boom Fear Trade

n Equity Fundsn Fixed Income Funds

Net Flows to Equity and Fixed Income Mutual Funds

Source of chart data: Investment Company Institute, 7/31/12.


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Economic & Financial Market Overview14 1234Source o chart data: FactSet, 8/31/12. The earnings yield is calculated as earnings divided by price. The earnings yield spread is the di erence between the MSCI World Index earnings yieldand the 10-year U.S. Treasury yield. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Earnings Yield on Stocks Higher than Yield on U.S. Treasuries as of 8/31/12Stocks earnings yield (the inverse of the price-to-earnings ratio) is substantially higher than the yield on the 10-year Treasury. The spread is especially highby historical standards, suggesting stocks should be a much more attractive prospect than treasuries in coming years.

6

4

2

0

2

4

6

8%

20122008200420001996199219881984198019761972

MSCI World Index Earnings Yield Spread Over 10-Year U.S. Treasury Yield


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Economic & Financial Market Overview15 1234Source o chart data: Bloomberg, 8/31/12. Table is or i llustrative purposes only and is not intended to depict or predict the per ormance o the S&P 500 Index or any particularinvestment. Index defnitions can be ound on pages 34. Earnings per share is the portion o a companys proft allocated to each outstanding share o common stock.Price-to-earnings ratio is a valuation ratio o a companys current share price compared to its actual per-share earnings over the last 12 months.Past per ormance does not guarantee uture results.

U.S. Equity ValuationsEntering September, stocks appeared reasonably valued at roughly 13.45x trailing twelve-month earnings. Stocks may have further room for upsideif 2013 earnings projections pan out, but companies have bee n nding it dif cult to meet revenue targets amid so much uncertainty. Any relief fromkey sources of uncertainty, such as the scal cliff and the Eurozone crisis, could encourage investors to assign stocks a higher valuation, potentiallydriving prices higher.

S&P 500 Index Earnings Per Share (EPS)Price-to-Earnings (P/E) Multiple

11x 12x 13x 14x 15x 16x

Recession Scenario*$88

968 1,056 1,144 1,232 1,320 1,408

Trailing 12-month Earnings$99

1,085 1,183 1,282 1,380 1,479 1,578

Wall Street Estimates 2013$103

1,134 1,237 1,340 1,443 1,547 1,650

*Assumes average 15% decline in EPS in post-WWII recessions excluding 2008.


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0

1

2

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4

5x

2012200620001994198819820

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3

4x

201220062000199419881982

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5x

2012200620001994198819820

1

2

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5x

201220062000199419881982

Source o chart data: FactSet, 8/31/12. Price-to-Book Ratio calculated using respective MSCI country indices. Index defnitions can be ound onpages 34.Past per ormance does not guarantee uture results.

European Stocks Appear to Be Attractively Valued as of 8/31/12Amid the Eurozone crisis, European stocks are trading at a lower price-to-book ratio than they were at the market bottom in March 2009. Investors maybe overlooking the fact that outstanding global companies are sometimes based in struggling countries like Spain and Italyand that the location of acompanys customers is more important than the location of its headquarters.

France

ItalySpain

Price-to-Book Ratios 19828/31/12

Netherlands

1.3x1.1x

0.9x 0.7x


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Economic & Financial Market Overview17 1234Source o chart data: Bloomberg, World Bank, International Monetary Fund World Economic Outlook, UN Population Division, Haver Analytics, 8/31/12 (unless otherwise indicated). Price-to-Earnings Ratio is a valuation ratio o a companys current share price compared to its actual per-share earnings over the last 12 months. Index defnitions canbe ound on pages 34.Past per ormance does not guarantee uture results.

Favorable Secular Trends in Emerging MarketsEmerging markets continue to enjoy powerful, secular growth trends that look set to continuewith some bumps along the wayfor many years tocome. Today, many EM countries show key similarities to the U.S. in 1982, when it was on the verge of a great secular expansion. While past performanceis no guarantee of future results, the data look promising.

U.S. Emerging MarketsDeveloped

International Markets19821 Today Today Today

Price-to-Earnings9.0x

(S&P 500 Index)13.5x

(S&P 500 Index)11.7x

(MSCI EmergingMarkets Index)

14.0x(MSCI EAFE Index)

GDP Growth 1.4% 2.3% 6.2% 2 2.3% 4

Debt-to-GDP 41% 69% 2 36% 2 108% 2

Population Over 54 as % o Working Age (2554) Population 55% 60% 3 33% 3 80% 3

1. As o 1/1/82.2. As o 4/30/12 (latest data available).3. As o 12/31/10 (latest data available).4. IMF projections or 2012 as o 4/30/12 (latest data available).


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U.S. Equity Dividend Yields vs. Treasury Yields as of 8/31/12The percentage of S&P 500 companies with a dividend yield above the 10-year U.S. Treasury rate is near historically high levels, as investors preference forthe perceived safety of government bonds drives down bond yields.

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60%

20122008200420001996199219881984198019761972 0

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18%

Source o chart data: Bloomberg, Ned Davis Research, 8/31/12. Index defnitions can be ound on pages 34. There is no guarantee that the issuers o stocks held by mutual unds will declaredividends in the uture, or that i dividends are declared, they will remain at their current levels or increase over time.Past per ormance does notguarantee uture results.

% S&P 500 Stocks with DividendYields Greater than 10-Year TreasuryYields (le t axis)

10-Year Treasury Yield (right axis)


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Many Fixed Income Yields Are UncompetitiveWith yields on investment-grade bonds so low, real (ne t o inf ation) yields are minimaland even negative on shorter maturity government bonds.Investors are having dif culty nding the income in xed income, unless theyre willing to assume more credit risk.

*Implied yield calculated by adding the index option-adjusted spread to the 3-month LIBOR rate.Source o chart data: Barclays Capital, FactSet, Credit Suisse and JPMorgan, 8/31/12. CPI as o 7/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

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JP MorganDomestic HighYield Index

Credit SuisseLeveraged LoanIndex*

Merrill Lynch BBBMunicipalBond Index

Barclays CapitalU.S. Credit/Corporate/Investment Grade Bond Index

Barclays CapitalU.S. AggregateBond Index

10-YearU.S. Treasury

CPI = 1.4%1.61.8

2.9

4.7

6.46.7

Yields


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Credit Spreads Still Elevated as of 8/31/12Spreadsin this case, the yield premium markets assign below-investment-grade bonds above Treasury yieldshave narrowed this year, but remain wideby historical standards, largely due to lingering fears over issuers creditworthiness. These fears are likely overdone, however, as corporate balance sheetsand pro tability remain in very good shape.

Source o chart data: Credit Suisse Research, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

0

500

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2010200620021998199419901986

Fully Valued

Panic

Basis Points (bps) Lehman Bankruptcy

Tech BubbleDrexel Burnham

Collapses

High Yield Bond and Senior Loan Spreads

Credit Suisse High Yield Bond Index Spread Over Treasuries1/31/86 to 8/31/12 Credit Suisse Leveraged Loan Index Spread Over LIBOR1/31/92 to 8/31/12


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Economic & Financial Market Overview21 1234Source of chart data: Bloomberg, 8/31/12. CPI data is most recent available, as of 7/31/12 for all countries except Australia, which is as of 6/30/12. Nominal yields are that of eachcountrys on-the-run (most recently issued) 10-year government bond. Real yield is equal to the countrys 10-year sovereign bond rate minus the year-over-year change in thecountrys consumer price index.Past performance does not guarantee future results.

Real Yields Abroad May Be More AttractiveLocal-currency bonds issued by many emerging markets tend to provide substantially higher real yields than their developed market counterparts, despitea general trend in the developing world toward stronger institutions, improved governance, rapid growth and policy fexibility.

Indonesia

South Africa

Brazil

Mexico

4.42%

1.02%5.55%

U.S.A.

0.14%1.41%

1.55%

4.58%

1.68%

6.26%

3.28%1.42%

4.70%

5.20%

4.40%

9.60%

4.90%

2.15%

7.05%Peru

Australia1.20%1.89%

3.09%

Nominal 10-Year Sovereign Bond Rate Real Yield Consumer Price Index Year-over-Year Percent Change


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Domestic Equities

23 Equity Size and Style Returns

24 S&P 500 Index and GICS Sector Returns

25 Market Valuation

26 High Pairwise Correlations: Risk-On/Risk-O PatternContinues

27 Equity Dividend Yield vs. Treasury Yields

28 The Power o Dividends

29 Many U.S. Companies Provide International Exposure

22 1234


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Domestic Equities23 1234

Diversifcation does not guarantee proft or protect against loss.Source o chart data: FactSet, 8/31/12. Equity style boxes are based on targeted equity styles as determined by valuation measures. Large Value, Large Core and Large Growth are represented byRussell 1000 Value, Russell 1000 and Russell 1000 Growth Indices, respectively. Mid Value, Mid Core and Mid Growth are represented by Russell Midcap Value, Russell Midcap and Russell MidGrowth Indices, respectively. Small Value, Small Core and Small Growth are represented by Russell 2000 Value, Russell 2000 and Russell 2000 GrowthIndices, respectively. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Equity Size and Style Returns as of 8/31/12A summer rally propelled domestic stocks higher, as investors grew more willing to take on investment risk. As is typical in a risk-on environment, growthoutperformed value, with large-cap growth leading the way. Over the past decade, however, small- and mid-cap stocks have outperformed large caps,albeit often with greater volatility.

CoreValue

Large

Mid

Small

GrowthQTD

3.23% 3.64% 4.07%

3.49% 3.39% 3.28%

2.03% 1.91% 1.78%

Large

Mid

Small

CoreValue Growth1-Year

17.30% 17.33% 17.37%

14.80% 13.30% 11.72%

14.08% 13.40% 12.72%

Large

Mid

Small

CoreValue Growth3-Year (Annualized)

12.08% 13.82% 15.59%

15.09% 15.57% 16.12%

12.24% 13.89% 15.49%

Large

Mid

Small


0.85% 1.47% 3.69%

1.78% 2.47% 2.92%

0.73% 1.90% 2.94%

Large

Mid

Small


6.57% 6.86% 7.02%

9.54% 9.88% 9.97%

8.49% 9.00% 9.40%

Large

Mid

Small

CoreValue GrowthYTD

12.19% 13.37% 14.55%

11.54% 11.63% 11.65%

10.43% 10.60% 10.75%

Highest Return in Style Box Lowest Return in Style Box


24/65

Domestic Equities24 1234Source o chart data: FactSet, 8/31/12. The Global Industry Classifcation Standard (GICS) methodology has been widely accepted as an industry analysis ramework or investment research,port olio management and asset allocation. The GICS structure consists o 10 sectors above. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

S&P 500 Index and GICS Sector Returns as of 8/31/12Despite plenty of volatility, the S&P 500 Index has notched solid gains year to date. All sectors have risen, but telecom, technology, consumer discretionaryand nancial stocks have outperformed, despite concerns over consumer spending and the potential for greater nancial regulation. Warm weather and coolgrowth prospects weighed on utilities and energythe best-performing sector over the last decade, on average. Sector leadership changes frequently, as theeconomic cycle progresses and investor sentiment shifts.

Total Return 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD as of 8/31/12Consumer Discretionary 23.82% 37.41% 13.24% 6.36% 18.64% 13.21% 33.49% 41.30% 27.66% 6.13% 17.60%

Consumer Staples 4.26 11.57 8.16 3.58 14.36 14.18 15.43 14.89 14.11 13.99 11.05

Energy 11.13 25.63 31.54 31.37 24.21 34.40 34.87 13.82 20.46 4.72 4.07

Financials 14.64 31.03 10.89 6.48 19.19 18.63 55.32 17.22 12.13 17.06 17.58

Healthcare 18.82 15.06 1.68 6.46 7.53 7.15 22.81 19.70 2.90 12.73 13.31

Industrials 26.34 32.20 18.03 2.32 13.29 12.03 39.92 20.93 26.73 0.59 9.33

In ormation Technology 37.41 47.23 2.56 0.99 8.42 16.31 43.14 61.72 10.19 2.41 20.30

Materials 5.46 38.19 13.19 4.42 18.63 22.53 45.66 48.59 22.20 9.75 7.84

Telecomm. Services 34.11 7.08 19.85 5.63 36.80 11.94 30.49 8.93 18.97 6.27 21.01

Utilities 29.99 26.26 24.28 16.84 20.99 19.38 28.98 11.91 5.46 19.91 3.06

S&P 500 Index 22.10 28.68 10.88 4.91 15.79 5.49 37.00 26.46 15.06 2.11 13.51

Highest Return or Period Lowest Return or Period


25/65

Domestic Equities25 1234Source o chart data: FactSet, 8/31/12. Price/Earnings Ratio (last 12 months) is a valuation ratio o a companys current share price compared to its actualper-share earnings over the last 12 months. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Market Valuation 12/31/65 through 8/31/12The price/earnings ratio for U.S. stocks has crept higher year to date, but it remains below its average since 1965. Investors are assigning a greater riskpremium to stocks given the uncertain global macro environment, but valuations nonetheless appear reasonable.

5

10

15

20

25

30

35

40

45

50x

2010200520001995199019851980197519701965

P / E R a t

i o ( L T M

)

Average:15.78x

13.45x

S&P 500 Index Price-to-Earnings (P/E)


26/65

Domestic Equities26 1234Source o chart data: Ned Davis Research, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

High Pairwise Correlations: Risk-On/Risk-O Pattern Continues as of 8/31/12Pairwise correlationsthe degree to which stocks are correlated with one anotherhave trended higher since the beginning of the nancial crisis,illustrating the binary, risk-on/risk-off nature of todays markets. Pairwise correlations are well off their recent highs, but remain elevated by historicalstandards, making stock-picking ability increasingly important.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

20102008200620042002200019981996199419921989

Average:0.48

Median 3-Month (63-Day) Correlation o S&P 500 Stocks to the S&P 500 Index


27/65

Domestic Equities27 1234Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.There is no guarantee that the issuers o stocks held by mutual unds will declare dividends in the uture, or that i dividends are declared, they willremain at their current levels or increase over time.

Equity Dividend Yield vs. Treasury Yields 1/31/62 through 8/31/12The S&P 500 Indexs dividend yield remains above that of the 10-year Treasury, as the 10-year yield f irts with record lows. Dividend-paying stocks appearmore attractive than treasuries, as they offer investors not only a competitive and potentially growing income stream, but the opportunity for greaterlong-term capital appreciation, as well.

0

5

10

15

20%

2010200620021998199419901986198219781974197019661962

2012201120102009

S&P 500 Index Dividend Yield2.12% U.S. 10-Year Treasury Yield1.55%


28/65


Source o chart data: Ned Davis Research, Inc. Further distribution prohibited without prior permission. Copyright 2012 Ned Davis Research, Inc. All rights reserved, 8/31/12. Based onequal-weighted geometric average o total return o dividend-paying and non-dividend-paying historical S&P 500 Index stocks, rebalanced annually. Uses actual annual dividends to identi ydividend-paying stocks and changes on a calendar-year basis. The per ormance shown represents the risk-return characteristics o each o the fve categories with annual standard deviation(measure o risk) measured on the x-axis and average annualized return measured on the y-axis. The per ormance shown is or illustrative purposes only and does not predict or depict theper ormance o any Oppenheimer und.Past per ormance does not guarantee uture results.There is no guarantee that the issuers o stocks held by mutual unds will declare dividends in the uture, or that i dividends are declared, they willremain at their current levels or increase over time.

The Power o Dividends 12/31/72 through 8/31/12Stocks that pay and grow dividends have historically outperformed those that do not, with less risk. Dividend growers tend to have relatively strongbalance sheets, which may help them outperform in a modest-growth environment. Additionally, domestic xed income yields that are likely to stay lowfor an extended period make dividend-growers potentially attractive compared to bonds.

15 20 25 304

0

4

8

12

A v e r a g e A n n u a

l R e t u r n

( % )

Annualized Standard Deviation

Dividend Growers and Initiators(16.60, 9.51)

All Dividend-paying Stocks(17.09, 8.70)

Dividend Payers with No Change(18.43, 7.03)

Non-dividend-paying Stocks(25.64, 1.53)

Dividend Cutters or Eliminators(25.70, 0.26)

Risk and Return


29/65


ForeignNot-Specifed17.1%

Europe11.1%

UnitedStates53.7%

Asia7.2%

North AmericaEx-U.S. 4.4%

A rica3.7%

South America2.6%

Australia0.2%

Source o chart data: Standard & Poors S&P 500 2011 Global Sales Report, 8/31/12. Index defnitions can be ound on pages 34.

Many U.S. Companies Provide International ExposureAmong companies in the S&P 500 Index, approximately 46.3% of revenues come from overseas, highlighting the increasingly globalized nature of U.S.businesses. Indeed, the location of a companys headquarters is becoming less relevant than the location of its customers. Of course, owning internationalstocks remains crucial in order to gain exposure to the worlds leading companies.

S&P 500 Index Geographic Distribution o Sales


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International Equities

31 Developed Markets Per ormance

32 Emerging Markets Per ormance

33 Country Risk and Return

34 Valuation o Major World Markets

35 International and Emerging Markets Share oGlobal Capitalization

36 Correlation o Major Indices

37 Dividend Yields Higher Abroad

30 1234


31/65

International Equities31 1234Diversifcation does not guarantee proft or protect against loss.Source o chart data: FactSet, 8/31/12. Country returns are based on each countrys respective MSCI Index. Index defnitions can be ound onpages 34.Past per ormance does not guarantee uture results.

Developed Markets Per ormance Select D eveloped Markets as of 8/31/12Developed international markets are all positive year to date (barely, in Japans case) despite fears over global growth and the Eurozone crisis. Germany,the largest and among the healthiest of the Eurozone economies, has been the biggest gainer in dollar terms. Over the past decade, Australia has beena signi cant outperformer, but its focus on commodity exports may weigh as Chinese demand cools.

Best

Worst

YTD as of8/31/12

Germany 15.24%

Japan 0.03%

UK 8.12%

Australia 11.48%

France 9.21%

2002

Australia 0.28%

France 20.83%

UK 15.23%

Japan 10.11%

Germany 32.90%

2003

Australia 51.36%

UK 32.06%

Japan 36.15%

France 41.03%

Germany 64.79%

2004

Australia 31.95%

Japan 15.95%

France 19.22%

UK 19.57%

Germany 16.66%

2005

Australia 17.54%

UK 7.38%

France 10.59%

Japan 25.63%

Germany 10.52%

2006

Australia 32.51%

Japan 6.33%

UK 30.66%

France 35.42%

Germany 36.79%

2007

Australia 29.79%

Japan 4.14%

UK 8.39%

France 14.03%

Germany 35.93%

2008

Australia 49.96%

Japan 29.11%

UK 48.32%

France 42.71%

Germany 45.50%

2010

Australia 14.73%

France 3.23%

Japan 15.59%

UK 8.80%

Germany 9.32%

2009

Australia 76.77%

Japan 6.39%

UK 43.37%

France 33.26%

Germany 26.56%

Japan 14.19%

Germany 17.45%

France 16.00%

UK 2.52%

Australia 10.79%

2011

MSCI EAFE15.66%

MSCI EAFE39.17%

MSCI EAFE20.70%

MSCI EAFE14.02%

MSCI EAFE26.86%

MSCI EAFE11.63%

MSCI EAFE43.06%

MSCI EAFE32.46%

MSCI EAFE8.21%

MSCI EAFE11.73%

MSCI EAFE7.38%

S&P 50022.10%

S&P 50028.68%

S&P 50010.88%

S&P 5004.91%

S&P 50015.79%

S&P 5005.49%

S&P 50037.00%

S&P 50026.46%

S&P 50015.06%

S&P 5002.11%

S&P 50013.51%


32/65

International Equities32 1234Diversifcation does not guarantee proft or protect against loss.Source o chart data: FactSet, 8/31/12. Country returns are based on each countrys respective MSCI Index. Index defnitions can be ound onpages 34.Past per ormance does not guarantee uture results.

Emerging Markets Per ormance Select Emerging Markets as of 8 /31/12Emerging market stocks have not been immune to developed-world turmoil but are generally in positive territory year to date. Developing marketgrowth has slowed (intentionally in some cases), but policy f exibility and positive demographic trends help support long-term prospects. Valuationsremain below their historical average and the secular story for emerging market growth generally remains intact.

India 9.36%

Mexico 14.27%

Brazil 5.77%

China 2.32%

Russia 5.80%

YTD as of8/31/12

Mexico 13.31%

Russia 15.71%

Brazil 30.65%

China 14.05%

India 8.37%

2002

Mexico 32.81%

Russia 75.94%

Brazil 115.01%

India 78.36%

China 87.57%

2003

Russia 5.69%

Mexico 48.32%

China 1.89%

India 19.11%

Brazil 36.47%

2004

Mexico 49.11%

Russia 73.77%

China 19.77%

India 37.57%

Brazil 57.05%

2005

Mexico 41.44%

Russia 55.93%

China 82.87%

Brazil 45.80%

India 51.00%

2006

Mexico 12.15%

Russia 24.79%

Brazil 79.99%

China 66.24%

India 73.11%

2007

Mexico 42.94%

Russia 73.83%

India 64.63%

Brazil 56.06%

China 50.83%

2008

Mexico 56.63%

Russia 104.91%

China 62.63%

India 102.81%

Brazil 128.62%

2009

Mexico 27.61%

Russia 19.40%

Brazil 6.81%

China 4.83%

India 20.95%

2010

Brazil 21.59%

Mexico 12.11%

Russia 19.30%

China 18.24%

India 37.17%

2011

Best

Worst

MSCI EM(Emerging Markets)

6.00%


56.28%


25.95%


34.54%


32.59%


39.78%


53.18%


79.02%


19.20%


18.17%


5.92%S&P 50022.10%

S&P 50028.68%

S&P 50010.88%

S&P 5004.91%

S&P 50015.79%

S&P 5005.49%

S&P 50037.00%

S&P 50026.46%

S&P 50015.06%

S&P 5002.11%

S&P 50013.51%


33/65

International Equities33 1234Source o chart data: FactSet, 8/31/12. Standard deviation is a statistical measure o per ormance uctuations. Generally, the higher the standard deviation, the greater the expected volatilityo returns. It is calculated using historical period returns around a mean and cannot be used to predict und per ormance. Country returns are based oneach countrys respective MSCI Index. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Country Risk and Return 10 years as of 8/31/12Returns of emerging market equities have signi cantly outpaced those in the developed world over the past 10 yearsalbeit with greater volatility.Competitive growth rates in the emerging world are likely to provide a tailwind not only for companies domiciled in the emerging world but fordeveloped market companies with sales exposure to the developing world.

15 20 25 30 35 400

5

10

15

20

25

30

A v e r a g e A n n u a

l R e t u r n

( % )


Brazil

India

ChinaMexico

France

Australia

EM

UK

Germany

Russia

EAFE

U.S.

Japan


34/65

International Equities34 1234

0

10

20

30

40

50

60

70

80x

201020052000199519901985198019751972

P / E R a t

i o ( L T M

)

Source o chart data: FactSet, 8/31/12. Price/Earnings Ratio (last 12 months) is a valuation ratio o a companys current share price compared to its actualper-share earnings over the last 12 months. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Valuation o Major World Markets 12/31/72 through 8/31/12International equity valuations have risen year to date, but they remain comfortably below their long-term averages. Both developed and emergingmarkets stocks appear poised to outperform bonds over the coming years, given low interest rates in much of the developed world and the ongoing(though by no means hiccup-free) rise of emerging markets.

20122011

S&P 500 Index (12/31/72 to 8/31/12)Current 13.5xAverage15.6x

Price-to-Earnings (P/E) Ratio

MSCI EAFE Index (12/31/72 to 8/31/12)Current 14.0xAverage19.3x

MSCI Emerging Markets Index (1/31/95 to 8/31/12)Current 11.7xAverage15.7x


35/65

International Equities35 12341. Data based on MSCI World Index until the inception o MSCI All Country World Index on 12/31/87.Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

International and Emerging Markets Share o Global Capitalization as of 8/31/12Though many U.S. investors still have only modest exposure to international equities, foreign marketsparticularly fast-growing emerging marketsmake up an increasing share of global market capitalization. In addition, a growing number of the worlds most pro table companies are headquarteredoutside of the U.S.

Share o World Market Capitalization 1

August 1972

International vs. U.S. Developed vs. Emerging Markets

August 1972August 2012 August 2012

32.5%67.5% 45.8% 54.2%

12.3%

87.7%100.0%

International U.S. Developed Markets Emerging Markets


36/65

International Equities36 1234Diversifcation does not guarantee proft or protect against loss.Source o chart data: FactSet, 8/31/12. Correlation expresses the strength o relationship between distribution o returns o two sets o data. The correlation coe fcient is always between +1(per ect positive correlation) and 1 (per ect negative correlation). A per ect correlation occurs when the two series being compared behave in exactlythe same manner. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Correlation o Major Indices 10 years as of 8/31/12Because they are imperfectly correlated with U.S. equities, adding exposure to international stocks in a diversi ed portfolio may enhance performancewhile lowering overall risk.

MSCI EAFE Index S&P 500 Index Russell 2000 Index MSCI World Index MSCI EM IndexMSCI ACWI Ex-U.S.

Small Cap Index

MSCI EAFE Index 1.00 0.90 0.83 0.98 0.91 0.96

S&P 500 Index 0.90 1.00 0.91 0.97 0.82 0.84

Russell 2000 Index 0.83 0.91 1.00 0.89 0.78 0.81

MSCI World Index 0.98 0.97 0.89 1.00 0.89 0.93

MSCI EM Index 0.91 0.82 0.78 0.89 1.00 0.93

MSCI ACWI ex-U.S.Small Cap Index

0.96 0.84 0.81 0.93 0.93 1.00


37/65

International Equities37 1234

0

1

2

3

4

5%

A u s t r a l i

a B r a z

i l I t a

l y F r a n c

e E U U K R u s s

i a

G e r m a n

y C h i n

a

S o u t h A f r i c

a

S a u d i A

r a b i a

C a n a d a

J a p a n

I n d o n e s

i a T u r k e

y

A r g e n t i n

a U . S

. I n d i

a M e x i c

o

S o u t h K o r e

a

1.291.251.44

2.212.45 2.49

2.692.59

2.993.11 3.19

3.433.55 3.66

3.89 3.964.01 4.05

4.704.88

Source o chart data: Bloomberg (Argentina data only), FactSet (all other countries), 8/31/12. Dividend yields calculated using each countrys respectiveMSCI Index. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Dividend Yields Higher Abroad as of 8/31/12Though foreign stocks potential for providing income is sometimes overlooked, their dividend yields are generally higher than those of U.S. stocks.Additionally, in times of a weakening U.S. dollar, such dividend yields may prove even more competitive.

Dividend Yields o G20 Countries


38/65

Taxable Fixed Income

39 10-Year Treasury Yields

40 Short-term Interest Rates Over Time

41 U.S. Interest Rate Yield Curve

4243 Fixed Income Spreads Over Treasuries

44 Sector Per ormance

45 Yield and Duration o Various Fixed Income Sectors

46 Senior Loans and High Yield Bonds Have HistoricallyOutper ormed in Rising Rate Environments

47 Sector Correlations

48 Risk/Return Profle o International Bonds

49 Global Bond Indices

50 Emerging Markets: High Yields and ComparativelyLow Debt Levels

38 1234


39/65

39 1234Taxable Fixed Income

0

5

10

15

20%

201020052000199519901985198019751970

Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

10-Year Treasury Yields as of 8/31/12Demand for U.S. Treasuries continued to push yields to near record-low levels, as the European crisis and the impending U.S. scal cliff helpedsafe haven assets maintain their appeal. The Federal Reserve has made clear that it intends to keep interest rates low for an extended period, therebyanchoring the short end of the yield curve at close to zero. Investors continue to prefer the low or negative real yields of treasuries to the potential ofhigher real returns in other asset classes.

1970s Nasdaq Opens First Dayo Trading

Dow Closes Above 1,000 U.S. Abandons the GoldStandard

OPEC Oil Shock &Nixon Resigns

Eurodollar Market Crisis European MonetarySystem Created

1980s Iran/Iraq War Begins Mexican Debt Crisis Reagan Tax Re orm

Black Monday Berlin Wall Falls

1990s Japanese Banks Are Largestin the World

Collapse o the Soviet Union WTC Bombed First Internet Stock Trade Dow Tops 5,000 Real-time Stock Tickers FirstIntroduced on Cable

Asian Financial Crisis Russian Bond De ault Dow Tops 10,000

2010s QuantitativeEasing 2

EuropeanSovereignDebt Crisis

Arab Spring U.S. DebtRatingDowngrade

2000s Tech Bubble Bursts 9/11 Attacks Enron & WorldCom Collapse U.S. Invades Iraq Hurricane Katrina Senate Confrms BenBernanke

Subprime Crisis Begins World Economic Collapse Bear Stearns Collapse Lehman Bankruptcy GM Bankruptcy

High: 10.72% Oct. 1979Low: 5.53% Mar. 1971

High: 15.84% Sept. 1981Low: 6.95% Aug. 1986

High: 9.04% Apr. 1990Low: 4.44% Sept. 1998

High: 6.68% Jan. 2000Low: 2.25% Dec. 2008

1.55%


40/65


0

1

2

3

4

5

6

7

8

9

10

11

20122010200820062004200220001998199619941992199019881986

Source o chart data: FactSet, 8/31/12. The Fed Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other fnancialinstitutions, usually overnight. The London InterBank O ered Rate (LIBOR) is the interest rate that banks charge each other or loans (usually in eurodollars). The LIBORis o fcially fxed once a day by a small group o large London banks, but the rate changes throughout the day.Past performance does notguarantee future results.

Short-term Interest Rates Over Time as of 8/31/12The Fed Funds Rate and LIBOR remain at historically low levels and are likely to remain so or some time, thanks to accommodative monetary policy. A terrising sharply in the ourth quarter o 2011 amid the Eurozone debt crisis, U.S. interbank lending rates ell steadily in the frst eight months o the year asmarket stresses eased.

Big BangLondon Stock Exchange

87 Stock Market Crash

Junk BondCollapse

Savings & Loan Crisis

Mexican Peso Crisis

DOW Crosses 5,000

DOW Crosses 10,000

Treasury Bond Yields 5%or First Time Since 1967

Asian Financial Crisis

EnronCollapses

Subprime CrisisStarts

Bear StearnsCollapses

LehmanBankruptcy

GMBankruptcy

Asian Tsunami

R a t e

( % )

U.S. Federal Funds RateBBA LIBORUSD 3-Month


41/65


8/31/11 8/31/12 Basis Points (bps) change

Fed Funds 0.25% 0.25% 0 bps

2-Year 0.20 0.23 3

10-Year 2.23 1.55 68

30-Year 3.60 2.67 98

U.S. Interest Rate Yield Curve as of 8/31/12With the Fed still anchoring short-term interest rates effectively at zero and driving long-term rates down, the yield curve remains f atter than it was a yearago, and it is becomi ng f at from a historical perspective. The current curve indicates that while liquidity is ample, demand for safe haven assets acrossthe maturity spectrum remains high amid continued macroeconomic concerns.

Source o chart data: FactSet, 8/31/12; logarithmic trend line; data shown are on-the-run treasury yields.Past per ormance does not guaranteeuture results.

0

1

2

3

4

5%

30-Yr10-Yr7-Yr5-Yr3-Yr2-Yr1-Yr

8/31/128/31/11


42/65

0

200

400

600

800

2012201120102009200820072006200520042003

50

0

50

100

150

200

2012201120102009200820072006200520042003

0

50

100

150

200

2012201120102009200820072006200520042003

0

300

600

900

1,200

1,500

2012201120102009200820072006200520042003

O p t

i o n - a

d j u s t e d S p r e a d

( b p s

)

O p t

i o n - a


( b p s

)

O p t i o n - a


( b p s )

O p t i o n - a


( b p s )

U.S. Corporate Investment-grade Debt

2003 to 8/31/12 Average: 1742008 High: 607Current (as o 8/31/12): 172


2003 to 8/31/12 Average: 2222008 High: 1,270Current (as o 8/31/12): 134

AAA Commercial Mortgage-backed Securities (CMBS) U.S. Agency Mortgage-backed Securities (MBS)


U.S. Agency Debt

42 1234Taxable Fixed IncomeSource o chart data: Barclays Capital Live, 8/31/12. Option-adjusted Spread (OAS) is the at spread which has to be added to the treasury yield curve in a pricing model (that accounts orembedded options) to discount a security payment to match its market price.Past per ormance does not guarantee uture results.

Fixed Income Spreads Over Treasuries as of 8/31/12Credit spreads to treasuries have narrowed steadily since the start of the year as investors grew more comfortable with credit risk in a low real-yieldenvironment. With spreads in some higher quality categories no longer so wide, investors must become even more willing to assume credit ri sk to ndyield opportunities.


43/65

0

200

400

600

800

1,000

2012201120102009200820072006200520042003

200

0

200

400

600

800

1,000

1,200

2012201120102009200820072006200520042003

0

500

1,000

1,500

2,000

2012201120102009200820072006200520042003

0

300

600

900

1,200

1,500

2012201120102009200820072006200520042003

S p r e a d o v e r T r e a s u r i e s

( b p s )

O p t

i o n - a


( b p s

)

D i s c o u n t M a r g

i n ( b p s ) 4

O p t i o n - a


( b p s )

Emerging Market Debt 1




Senior Loans 3 Municipals 1


U.S. High Yield Bonds 2

43 1234Taxable Fixed Income1. Source o chart data: FactSet, 8/31/12.2. Source o chart data: JPMorgan Research, 8/31/12.3. Source o chart data: Credit Suisse Research Online/Bond.hub, 8/31/12.4. Loan spreadis typically defned as the discount margin under the assumption o a three-year average li e. Discount margin is the yield-to-re unding o the acility less the current 3-month LIBOR rate.Option-adjusted Spread (OAS) is the at spread which has to be added to the treasury yield curve in a pricing model (that accounts or embeddedoptions) to discount a security payment to match its market price.Past per ormance does not guarantee uture results.

Fixed Income Spreads Over Treasuries as of 8/31/12 (continued)Credit spreads to treasuries have narrowed steadily since the start of the year as investors grew more comfortable with credit risk in a low real-yieldenvironment. With spreads in some higher quality categories no longer so wide, investors must become even more willing to assume credit ri sk to ndyield opportunities.


44/65

44 1234Taxable Fixed IncomeDiversifcation does not guarantee proft or protect against loss.Source o chart data: FactSet, Bloomberg, JPMorgan, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee

uture results.

Sector Per ormance as of 8/31/12Credit-oriented xed income sectors have outperformed year to date, with high yield bonds gaining the most, and U.S. and international government bondslagging. Over the past decade, high yield and emerging market bonds have been the best performers, though both categories have been volatile. Despitepaltry (or negative) real yields, investor appetite for the relative safety of government bonds remains strong amid lingering fears o nancial market turmoil.

Credit Suisse Leveraged Loan Index Barclays Capital U.S. Aggregate Bond Index JPMorgan Domestic High Yield Index JPMorgan EMBI Global Diversifed Bond Index

Citigroup Non-U.S. World Government Bond Index (USD Unhedged) Barclays Capital U.S. Aggregate Treasury Index Barclays Capital U.S. Credit/Corporate/Investment Grade Bond Index

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD as of

8/31/12Intl Bonds

21.99%High Yield26.80%

EmergingMarkets22.97%




Treasuries13.74%

High Yield58.17%


Treasuries9.81%

High Yield10.68%

Treasuries11.79%

Intl Bonds18.52%

Intl Bonds12.14%

Senior Loans5.69%

High Yield11.56%

Intl Bonds11.45%

Intl Bonds10.11%

Senior Loans44.87%

High Yield14.74%

I.G. Corporates8.15%


U.S. Aggregate10.25%


High Yield11.10%

Treasuries2.79%

Senior Loans7.33%

Treasuries9.01%

U.S. Aggregate5.24%


Senior Loans9.97%

U.S. Aggregate7.84%


I.G. Corporates

10.12%

Senior Loans

11.01%

Senior Loans

5.60%

U.S. Aggregate

2.43%

Intl Bonds

6.94%

U.S. Aggregate

6.97%

I.G. Corporates

4.94%

I.G. Corporates

18.68%

I.G. Corporates

9.00%

High Yield

6.97%

Senior Loans

6.65%

High Yield3.20%



High Yield2.42%

U.S. Aggregate4.33%



U.S. Aggregate5.93%

U.S. Aggregate6.54%

Intl Bonds5.17%

U.S. Aggregate3.85%

Senior Loans1.12%

U.S. Aggregate4.10%

U.S. Aggregate4.34%



High Yield2.58%

High Yield26.55%

Intl Bonds4.39%

Treasuries5.87%

Senior Loans1.82%

Treasuries2.40%

EmergingMarkets

N/A

Treasuries2.24%

Treasuries3.54%

Intl Bonds9.20%

Treasuries3.08%

Senior Loans1.88%

Senior Loans28.75%

Treasuries3.57%

Intl Bonds5.21%


Intl Bonds2.04%

Best

Worst

H i s t o r i c a

l T o t a

l R e t u r n s

( % )


45/65


0 1 2 3 4 5 6 7 80

2

4

6

8

10%

Source o chart data: Barclays Capital Research, JPMorgan Research, Credit Suisse Research, 8/31/12. Index defnitions can be ound on pages 34. Duration is a weighted average termto maturity o the securitys cash ows expressed in years. Duration helps measure a securitys and port olios price sensitivity to changes in interestrates. Past per ormance does not guarantee uture results.

Yield and Duration o Various Fixed Income Sectors as of 8/31/12Senior loans, though high in the capital structure, tend to offer very competitive yields with relatively low interest rate risk, or duration. Additionally, theirinterest rates usually reset frequently along with prevailing policy rates, making them potentially attractive investments in rising rate environments.

Duration (years)

Senior Loans(0.25, 6.38)

High Yield(3.66, 6.69)

I.G. Corporates(7.19, 2.90)

Credit Suisse Leveraged Loan Index Barclays Capital U.S. Aggregate Bond Index JPMorgan Domestic High Yield Index

Barclays Capital U.S. Aggregate Treasury Index

Barclays Capital U.S. Credit/Corporate/Investment Grade Bond Index Citigroup Non-U.S. World Government Bond Index (USD Unhedged) JPMorgan EMBI Global Diversifed Bond Index

Treasuries(5.69, 0.80)

Y i e l d

U.S. Aggregate(5.02, 1.75)

Emerging Mkts(4.68, 5.86)

Intl Bonds(7.32, 1.57)


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Senior Loans and High Yield Bonds Have Historically Outperformed in Rising Rate EnvironmentsComparatively low interest-rate sensitivity, or duration, has helped senior loans and high yield bonds outper orm when interest rates have risen. Given thatrising rates o ten accompany a generally strengthening economy, lower quality fxed income sectors have tended to beneft as de ault risk ears eased.

Source o chart data: Bloomberg, 8/31/12. Index defnitions can be ound on pages 34.Past performance does not guarantee future results.

10

0

10

20

30

40

50

60%

12/0812/095/036/069/981/0012/958/969/9311/94*

10.70

6.81

3.256.57

0.93

41.47

3.57

1.842.703.70

58.17

9.37

2.74

6.24

Returns During Periods of Rising Rates

n Credit Suisse Leveraged Loan Indexn Barclays Capital U.S. Treasury Indexn JPMorgan Domestic High Yield Index

*The JPMorgan Domestic High Yield Index does not begin until 1/31/95.


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Source o chart data: Bloomberg, 8/31/12. Correlation expresses the strength o the relationship between distribution o returns o two sets o data. The correlation coe fcient is always betwee+1 (per ect positive correlation) and 1 (per ect negative correlation). A per ect correlation occurs when the two series being compared behave in exactly the same manner.Diversifcation does not guarantee proft or protect against loss.Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Sector Correlations 10 years as of 8/31/12By owning instruments with low correlations and varying exposures to interest rate risk, credit risk and currencies, a strategically diversi ed portfolio of

xed income holdings seeks to generate higher total returns for a given level of risk.

BarCap U.S.Aggregate Govt

Bond Index

BarCap U.S.AggregateCredit/Corp./

I.G. Index

BarCap U.S.Aggregate Bond

Index

JPMorganDomestic High

Yield Index

Credit SuisseLeveraged Loan

Index

CitigroupNon-U.S. WGBI(USD Unhedged)

United StatesDollar Index

Barclays Capital U.S. AggregateGovernment Bond Index 1.00 0.55 0.90 0.21 0.37 0.53 0.18

Barclays Capital U.S. AggregateCredit/Corporate/I.G. Index

0.55 1.00 0.83 0.58 0.37 0.54 0.43

Barclays Capital U.S. Aggregate Bond Index 0.90 0.83 1.00 0.19 0.02 0.61 0.34

JPMorgan Domestic High Yield Index 0.21 0.58 0.19 1.00 0.87 0.21 0.44

Credit Suisse Leveraged Loan Index 0.37 0.37 0.02 0.87 1.00 0.04 0.24Citigroup Non-U.S. WGBI (USD Unhedged) 0.53 0.54 0.61 0.21 0.04 1.00 0.84

United States Dollar Index 0.18 0.43 0.34 0.44 0.24 0.84 1.00


48/65


2 4 6 8 104

6

8

10

12

Source o chart data: FactSet, Bloomberg, JPMorgan, 8/31/12. The per ormance shown represents the risk-return characteristics with annualized standard deviation (measure o risk) measured othe x-axis and average annualized return measured on the y-axis. Index defnitions can be ound on pages 34. Chart compares the average annual total return over the 10-year period ended8/31/12 and annualized standard deviation over the same period or a blended fxed income port olio composed o an equal weight in Barclays Capital U.S. Aggregate Bond Index, JPMorganDomestic High Yield Index and Citigroup Non-U.S. WGBI (USD Unhedged) versus the individual indices themselves.Past per ormance does notguarantee uture results.

Risk/Return Profle o International Bonds 10 years as of 8/31/12A portfolio consisting of equal allocations of core xed income, international bonds and high yield bonds may provide a higher yield and less risk thaninternational bonds or high yield bonds alone.

A v e r a g e A n n u a l R e t u r n

( % )


JPMorgan Domestic High Yield(9.95, 10.51)

Blended Fixed Income Port olio(7.37, 7.71)

Barclays Capital U.S. Aggregate Bond(3.60, 5.48)

Citigroup Non-U.S. WGBI (USD Unhedged)(8.56, 7.13)


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50

100

150

200

250

300

20122011201020092008200720062005200420032002

Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Global Bond IndicesLocal-currency international bonds have posted solid gains year to date, with emerging market bonds outperforming their developed market (ex-U.S.)counterparts. Locally denominated international bonds have historically helped offset rising U.S. prices of imported goods, making them a potentiallyvaluable tool for protecting purchasing powerespecially in a weakening dollar environment.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011YTD as of 8/31/12

Citigroup Non-U.S. WGBI (USD Unhedged) 21.99% 18.52% 12.14% 9.20% 6.94% 11.45% 10.11% 4.39% 5.21% 5.17% 2.04%

JPMorgan EMBI Global Diversifed Index 13.65 22.21 11.62 10.25 9.86 6.16 12.03 29.82 12.24 7.35 12.41

JPMorgan GBI-EM Global Diversifed Unhedged Index N/A 16.92 22.97 6.27 15.22 18.11 5.22 21.98 15.68 1.75 9.26

Citigroup Non-USD WGBI (USD)JP Morgan EMBI Global Diversifed

Import Price Index

I n d e x L e v e

l


50/65

50 1234Taxable Fixed IncomeSource o chart data: Bloomberg, 8/31/12 (10-Year Sovereign Yields). IMF World Economic Outlook, 12/31/11. (Debt as % o GDP.Note: Debt statisticused is Gross Debt, data is only available through 2011.)Past per ormance does not guarantee uture results.

Emerging Markets: High Yields and Comparatively Low Debt Levels as of 8/31/12Emerging market bonds generally continue to offer higher yields than most developed market debt, despite emerging markets often having moresustainable public debt levels. This mismatch is a legacy of decades past, when emerging market central banks were far less disciplined. Today, manyof these central banks have established themselves as responsible and independent, while governments have increasingly resisted the temptation torun up unsustainable debt levels.

0 50 100 150 200 2500

5

10

15

Y i e l d ( % )

Public Debt (% GDP)

JapanU.S.

Brazil

Portugal

Italy

TurkeyIndia

IndonesiaSouth A rica

Peru

Germany UKFrance

Mexico

Public Debt as a Percentage o GDP (2011) vs. 10-Year Sovereign Yield (8/31/12)


51/65

Municipal Bonds

52 Municipal Bond Yield Ratios

53 Municipal Bond Sector Per ormance

54 Municipal vs. Corporate De ault Rates

55 U.S. Municipal Bond Issuance

56 Municipal Tax Collections

51 1234


52/65

52 1234Municipal Bonds

Municipal Bond Yield Ratios as of 8/31/12The gap between treasury yields and those of most types of municipal bonds have continued to narrow since the beginning of the year, but with treasuryyields near all-time lows, lower quality munis spreads to treasuries remain wider than their average historical level. Fears of mass municipal defaults largelysubsided by the end of 2011, but concerns still remain, keeping the yield differential between lower and higher rated munis signi cant.

Source o chart data: FactSet, Bloomberg, Merrill Lynch, 8/31/12. AAA and BBB are represented by Merrill Lynch Municipal indices which are derived rom data points on the Merrill LynchMunicipal AAA Yield to Worst and Merrill Lynch Municipal BBB Yield to Worst, respectively. The yield ratio indicates the relationship between the Merrill Lynch Municipal Master Index andthe U.S. 10-Year Treasury. The option-adjusted spread (OAS) is the at spread which has been added to the treasury yield curve in a pricing model (that accounts or embedded options)to discount a security payment to match its market price. Per ormance is shown or illustrative purposes only and does not predict or depict theper ormance o any Oppenheimer und. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

50

100

150

200

250%

201220102008200620042002

100

150

200

250%

201220102008200620042002

10505

101520253035

201220102008200620042002

Y i e l d R a t

i o

O p t

i o n - a


( b p s

)

Y i e l d R a t

i o

Municipal/Treasury Yield Ratio

20022012 Avg.: 1242008 High: 233Current (as o 8/31/12): 214


BBB/AAA Yield Ratio

AAA Munis OAS

0

100

200

300

400

500

201220102008200620042002 O

p t i o n - a


( b p s )

BBB Munis OAS




53/65

Best

Worst

H i s t o r i c a

l T o t a l R e t u r n s

( % )

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD as of 5/31/12

Munis 712 yrs11.46%

Baa Munis8.35%

Baa Munis8.48%

Baa Munis8.33%

Baa Munis7.60%

Munis 37 yrs5.28%

Munis 37 yrs5.92%

Baa Munis26.09%

Munis 712 yrs4.03%

Munis 1222 yrs13.41%

Baa Munis6.63%


Munis 1222 yrs6.57%

Munis 1222 yrs6.15%

Munis 1222 yrs4.37%

Munis 1222 yrs5.33%

Munis 712 yrs4.78%

Munis 712 yrs2.23%


Baa Munis3.75%

Munis 712 yrs12.48%

Munis 1222 yrs5.16%

Master Index10.74%

Master Index6.18%

Master Index5.45%

Master Index3.94%

Master Index4.96%

AAA Munis3.84%

AAA Munis1.61%

Master Index14.45%

Munis 37 yrs3.35%

Baa Munis11.84%

Master Index4.17%

Munis 37 yrs10.10%

Munis 712 yrs5.63%

Munis 712 yrs4.24%

AAA Munis3.13%

AAA Munis4.63%

Master Index3.29%

Master Index3.95%

Munis 712 yrs9.81%

Master Index2.25%

Master Index11.19%

Munis 712 yrs2.73%

AAA Munis10.02%

AAA Munis5.37%

AAA Munis4.21%

Munis 712 yrs2.76%

Munis 712 yrs4.61%

Munis 1222 yrs2.93%

Munis 1222 yrs6.25%

AAA Munis9.06%

AAA Munis2.03%

AAA Munis8.75%

AAA Munis2.60%

Baa Munis8.90%

Munis 37 yrs4.22%

Munis 37 yrs2.91%

Munis 37 yrs1.27%

Munis 37 yrs3.42%

Baa Munis2.73%

Baa Munis21.33%

Munis 37 yrs7.16%

Munis 1222 yrs1.80%

Munis 37 yrs6.89%

Munis 37 yrs1.76%

53 1234Municipal BondsDiversifcation does not guarantee proft or protect against loss. Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Municipal Bond Sector Per ormance as of 8/31/12Lower rated municipal bonds continued to outperform throughout the summer, continuing 2011s pattern. Munis notched their best performance since2009 last year, as fears over waning tax revenues subsided and investors searched for competitive yields. Because relative performance varies widely fromyear to year, diversi cation remains important.

Merrill Lynch Municipal Master Index Merrill Lynch AAA Municipal Index Merrill Lynch BBB Municipal Index Merrill Lynch Municipals Revenue Index Merrill Lynch Municipals Airport Index Merrill Lynch Municipals Tobacco Index

Best

Worst

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD as of 8/31/12

AAA Munis11.29%

BBB Munis7.63%

BBB Munis9.20%

Tobacco Munis13.33%

BBB Munis7.66%

AAA Munis3.80%

AAA Munis0.13%

BBB Munis30.33%

BBB Munis3.67%

Airport Munis13.57%

BBB Munis9.00%

Airport Munis11.12%

Airport Munis7.21%

Revenue Munis5.54%

BBB Munis8.88%

Tobacco Munis7.59%

Master Index3.29%

Master Index3.95%

Tobacco Munis28.40%

Master Index2.25%

BBB Munis12.77%

Airport Munis6.55%

Revenue Munis10.78%

AAA Munis6.40%

Master Index5.45%

Airport Munis4.53%

Airport Munis5.50%

Revenue Munis2.98%

Revenue Munis5.73%

Airport Munis23.85%

Revenue Munis2.16%

Revenue Munis11.38%

Revenue Munis6.50%

Master Index10.74%

Revenue Munis6.33%

Airport Munis4.86%

Revenue Munis4.32%

Revenue Munis5.17%

Airport Munis2.36%

Airport Munis11.95%

Revenue Munis16.32%

AAA Munis2.11%

Master Index11.19%

Master Index6.00%

BBB Munis9.66%

Master Index6.18%

AAA Munis4.72%

Master Index3.94%

Master Index4.96%

Tobacco Munis0.22%

Tobacco Munis17.60%

Master Index14.45%

Airport Munis1.34%

AAA Munis9.12%

Tobacco Munis5.83%

Tobacco MunisN/A

Tobacco MunisN/A

Tobacco MunisN/A

AAA Munis3.62%

AAA Munis4.71%

BBB Munis1.44%

BBB Munis22.38%

AAA Munis9.02%

Tobacco Munis0.01%

Tobacco Munis7.37%

AAA Munis3.83%


54/65

54 1234Municipal BondsSource o chart data: Moodys Investors Services. Data regarding de ault rates is rom a study titled U.S. Municipal Bond De aults and Recoveries, 1970-2011, dated March 2012.The above fgures provide cumulative de ault rates or Moodys-rated Corporate and Municipal debt rated Baa. For example, obligations in the BaaMunicipal category had a de ault rate o 0.01% within one year o the initial rating, 0.04% within two years, etc.

Municipal vs. Corporate De ault RatesHistorically, municipal bonds have had far lower default rates than corporate bonds, a fact many investors overlook amid concerns over municipalitiescreditworthiness.

Municipal De ault Rates, Average Cumulative Issuer-weighted, Moodys Rated Baa* Only, 19702011

Time Horizon (in years rom date o issuance)Rating Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Baa Municipals 0.01% 0.04% 0.07% 0.11% 0.14% 0.19% 0.24% 0.28% 0.33% 0.37%

Baa Corporates 0.18% 0.50% 0.91% 1.38% 1.89% 2.42% 2.92% 3.44% 4.03% 4.71%

*Moodys Baa is equivalent to Standard & Poors rating o BBB. Baa/BBB is a medium-quality, investment-grade bond rating assigned to a corporation based on the issuers ability to pinterest and repay principal upon maturity.Past per ormance does not guarantee uture results.


55/65


0

100

200

300

400

$500

YTDas of 8/31/12

201120102009200820072006200520042003

25.442.4

56.2 51.379.7

72.8 61.955.0

51.146.8262.7

98.5

90.2110.6

86.5108.6

75.979.2130.988.4

95.3

95.4146.4

279.8261.3

208.2

274.3258.4221.2228.9

Source o chart data: The Bond Buyer, 8/31/12.

U.S. Municipal Bond Issuance as of 8/31/12Muni bond issuance is tracking slightly higher than last years levels, but much of total issuance has been for refunding outstanding bonds, which does notadd any new supply to the market and can improve an issuers credit quality. What new supply was added was met with strong investor demand, helpingto support muni bond prices.

Combined Re unding New Money

% o Total Issuance

2003 2004 2005 2006 2007 2008 2009 2010 2011YTD as of 8/31/12

New Money 69% 64% 54% 66% 64% 53% 64% 65% 51% 38%

Re unding 25 25 32 20 18 28 21 23 31 44

Annual U.S. Municipal Bond Issuance

U S D B

i l l i o n s


56/65


15

10

5

0

5

10

15

20

25

30%

201220102008200620042002200019981996199419921990

Source o chart data: U.S. Census Bureau, 3/31/12.

Municipal Tax Collections as of 3/31/12Quarterly municipal tax collections continued to risealbeit at a decelerating pacecompared to the same year-ago period, a trend that has beenin place since the end of 2009. The growth in tax collections and th e f exibility to reduce spending indicates that state and local governments shouldcontinue to be able to meet their debt repayment obligations.

Quarterly State and Local Tax CollectionsYear-over-Year Percent Change


57/65

Alternative Asset Classes

58 Alternative Asset Class Returns

59 Alternatives May Help Protect Purchasing Power

60 Correlation of Alternative Asset Classes

61 REITs Have Historically Provided Solid Yields

62 Ratio of Philadelphia Gold & Silver Index to Gold Price63 Components of the S&P GSCI Index

64 Global Currencies

57 1234


58/65

58 1234Alternative Asset ClassesDiversifcation does not guarantee proft or protect against loss.*CPI is the year-over-year percent change as o 8/31/12 which represents latest available data.Source o chart data: FactSet, 8/31/12. Index defnitions can be ound on pages 34.Past per ormance does not guarantee uture results.

Alternative Asset Class Returns as of 8/31/12Commodities underperformed REITs, stocks and gold in the rst eight months of the year, as lackluster global growth sapped demand for raw materials.Over time, however, commodities have served as an effective inf ation hedge, having outperformed the CPI in seven out of the last 11 years. Gold hasremained a steady store of value throughout the past decade, and remains a popular asset class when monetary easing appears imminent. REITs have beensolid performers, too, having consistently outpaced U.S. stocks on an annual basis in each of those years except 2007 and 2008.

Commodities: S&P Goldman Sachs Commodity Index Gold: Dollar spot price o one troy ounce REITs: FTSE NAREIT Equity REIT Index Stocks: S&P 500 Index Bonds: Barclays Capital U.S. Aggregate Bond Index

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD as of 8/31/12

Commodities32.07%

REITs37.13%

REITs31.58%

Commodities25.55%

REITs35.06%

Commodities32.67%

Gold5.92%

REITs27.99%

Gold29.67%

Gold10.23%

REITs17.18%

Gold24.72%

Stocks28.68%

Commodities17.28%

Gold18.19%

Gold22.84%

Gold31.44%

Bonds5.24%

Stocks26.46%

REITs27.96%

REITs8.29%

Stocks13.51%

Bonds10.25%

Commodities20.72%

Stocks10.88%

REITs12.16%

Stocks15.79%

Bonds6.97%

Stocks37.00%

Gold23.96%

Stocks15.06%

Bonds7.

oppenheimer q3 2012 charts

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