ABOUT SENTINEL INVESTMENTS

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2 ABOUT SENTINEL INVESTMENTS Headquartered in Montpelier, Vermont; offices in New York, Philadelphia and San Francisco Six independent portfolio management teams 14 mutual funds in four major asset classes Nearly $16 billion in assets under management, as of December 31, 2008 Common Stock celebrating 75 years Committed to sustainable investing SENTINEL INVESTMENTS

3 Few funds or fund groups in the industry can boast a track record reaching all the way back to can through its Common Stock. We have long recognized that we cannot rest on our past achievements. We must continually reaffirm and expand on our historic, firm-wide commitment to competitive performance, investment quality and risk protection. This is why, over the last several years, we have made significant enhancements to our company. We have added seasoned portfolio managers in disciplines that include growth stock management, mid cap growth and international equity investing. We introduced risk management tools, developed new analytical tools and invested in some of the most talented people in the industry. We ve recently added capabilities in sustainable investing. We believe the themes of global warming, population and resource imbalances, and community citizenship will drive corporate and investor behavior for years to come. And we will be in the vanguard. We maintain an exceptional organization built around independent teams. Each of these teams is expert in its discipline. Each is supported by seasoned research and trading professionals. Each is empowered to follow its own investment process. Each is held accountable for its own results. You will meet them in the following pages. They are our company. They share in a firm-wide philosophy. As members of the organization, they pursue investment strategies founded on fundamental research, and they emphasize quality companies and reasonably priced securities. They manage risk through a focus on quality and by diversifying across sectors and securities. They are unwavering in their commitment to delivering competitive returns while managing downside risk. If the stock market is a voting machine in the short term and a weighing machine in the long term, we are more interested in substance and knowledge, not polls and caprice. We invite you to learn more about our organization and our investment teams in the pages that follow. s history, long-term performance, commitment to sound investment management principles and quality shareholder services offer exceptional benefits to investors. Christian W. Thwaites President and Chief Executive Officer Asset Management, Inc. THE ESSENTIAL ELEMENTS OF INVESTING 1

4 How we protect and grow investors capital Focused Focused, independent teams No single investment team can manage all strategies. On the contrary, in-depth, specialized expertise is critical in understanding the risks and opportunities that each asset class or investment strategy entails. As a result, we have built our organization out of discreet, independent teams, each with a long track record and deep insight into a specialty. These teams are supported by dedicated analysts, who understand the managers disciplines and can provide tailored, relevant research. Yet while these teams are autonomous, they are not isolated. All members of our investment teams participate in regular calls and meetings, through which they share insights and benefit from each other s perspectives. Our structure ensures that our teams of specialized, experienced investment professionals have the freedom to pursue their best ideas, and have the support of a larger investment organization. 2 SENTINEL INVESTMENTS

5 Repeatable Dependable, repeatable investment disciplines Successful investment strategies are built on rigorous, well-defined processes that seek opportunities in a consistent way, regardless of market sentiment or events. At Investments, all of our investment teams employ bottom-up, fundamental research to uncover opportunities. They monitor risk carefully as they construct portfolios, making sure that no investment strategy is overly exposed to single securities or market sectors. We strive to keep our portfolios in line with their stated goals for market capitalization, duration and other investment characteristics, yet we take no extreme style bets. And, though we offer strategies that span a range of asset classes and styles, we emphasize the basics stocks, bonds, international securities and cash rather than more esoteric alternative portfolios. Sustainable A commitment to sustainable performance Our overarching goal, across all portfolios, is to seek the benefit of market upturns while also limiting risk during downturns. Ideally, our portfolios should capture most of bull market performance, while limiting bear market exposure to between 60% and 80% of the downturn. We do this by buying quality securities at attractive valuations, a strategy which, in itself, limits risk in the portfolio. Our focus on strong, independent research, diversification and value provides investors with two essential elements of successful long-term investing: the opportunity for growth while managing downside risk. THE ESSENTIAL ELEMENTS OF INVESTING 3

6 LARGE CAP TEAM Daniel J. Manion, CFA Portfolio Manager Dan leads the Large Cap Team and is also the director of equity research. He joined in 1993, and was named Vice President in He received his undergraduate degree from the University of Oklahoma and his MBA from the University of Bridgeport. He is a member of the New York Society of Security Analysts, the Vermont CFA Society and the CFA Institute. He has more than 21 years of investment management experience. 4

7 Hilary Roper, CFA Vice President, Helena Ocampo Vice President, Jason D. Wulff Investors often like to put strategies into growth or value boxes. I believe, though, for long-term investment success, you need to incorporate elements of both styles into your approach. That s what we ve done in the Large Cap Team. We look for large, established companies with sound business models and we pay careful attention to valuation. We re not looking for growth at any price, but we are also not buying beaten-up stocks that may never appreciate. It s a blend strategy, which offers the benefits of both styles. Most people don t realize how concentrated their growth and value strategies are. For instance, how many people poured money into value funds in late 2007, only to find that financial stocks made up 30% to 35% of their portfolios? On the other side, how many people understand how heavily their growth funds invest in technology? We diversify across industries and sectors, and we tend not to get caught up in short-term market trends. That s because we like to buy one decision stocks, or high-quality companies we can own over several years companies that have the potential to earn high returns. They are well positioned competitively. Their managers are seasoned and capable. They have decent balance sheets and are attractively valued so there is significant upside potential. We find these stocks through fundamental research. We use multifactor analysis to narrow our universe, then focus stock by stock on the most attractive opportunities. We divide up the universe by sector. I follow energy, industrials, basic materials and utilities. Helena, Jason and Hilary cover health care and consumer stocks, financials and technology/media and telecomm. Our approach works well in most environments, but it has the potential to really shine during volatile markets, when a highquality bias and diversified portfolio may make a difference. Team facts Location: Montpelier, VT s managed: Common Stock Sustainable Core Opportunities Balanced (co-managed) Conservative Allocation (co-managed) Common Stock was established in Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Ba Go Large-company stocks as a group could fall out of favor with the market and underperform investments that focus on small and mid-sized company stocks. THE ESSENTIAL ELEMENTS OF INVESTING 5

8 LARGE CAP GROWTH TEAM Elizabeth R. Bramwell, CFA Portfolio Manager Elizabeth leads s Large Cap Growth investment team. Elizabeth joined in March 2006 after more than 12 years as president of Bramwell Capital Management, Inc., which she founded in She began her career at Morgan Guaranty Trust Company in 1967, and has more than four decades of experience in securities analysis and portfolio management, encompassing an extensive range of market environments. 6 SENTINEL INVESTMENTS

9 William H. Symon Vice President, Sanil V. Daptardar Vice President, Wendy S. Ruhm Assistant Vice President, In more than 40 years of investing, one thing I ve learned is that you have to follow your portfolio every day. With the volatility in the market now and constantly changing conditions, a single day can make a huge difference in placing trades. In short, you have to pay attention. Staying abreast of the markets requires fundamental research. We constantly analyze companies, looking for those with capable management, conservative balance sheets and, especially, strong organic growth. When we find these companies, we dig deeper. We ask how these companies grow and how they increase their sales. We re looking for companies driving toward, if not already occupying, a top position in their industries. We focus our research around investment themes, or broader trends that we believe will drive performance over time. For instance, one theme that has worked well for us has been increasing international sales. We think that non-u.s. economies will grow faster than our own for some time to come, and that U.S. companies that pursue international markets have the potential to outperform. We use spreadsheets to look for companies whose international sales are increasing more rapidly than their domestic sales. Another theme is the increased demand for commodities. The United States now has to compete against the rest of the world for food, oil and other commodities, and this creates opportunities in agricultural, energy and basic materials companies. We invest primarily in U.S.-based companies, but we get an enormous amount of international exposure through them. It s really a more conservative approach to global investing. We re buying large American companies, subject to U.S. accounting rules, with a significant presence overseas. We may not get the same gigantic returns that are possible when investing directly in foreign companies, but it removes some of the volatility. Team facts Location: New York, NY s managed: Capital Growth Growth Leaders Sustainable Growth Opportunities Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Ba Go Large-company stocks as a group could fall out of favor with the market and underperform investments that focus on small and mid-sized company stocks. Growth Leaders is non-diversified and will hold fewer securities than a diversified portfolio. The may be more affected by the performance of a particular stock, either positively or negatively, than a more broadly diversified fund. THE ESSENTIAL ELEMENTS OF INVESTING 7

10 MID CAP VALUE TEAM Michael A. Steinberg (right) Managing Partner, Portfolio Manager/Analyst Steinberg Asset Management, LLC Michael is the founder of Steinberg Asset Management, the New York City-based investment manager that subadvises the Mid Cap Value. He has more than 40 years of investment management experience. William S. Auslander (left) Managing Director, Portfolio Manager/Analyst Steinberg Asset Management, LLC Bill has 25 years of investment experience. Previously, he served as a managing director and portfolio manager for Sandell Asset Management and a managing director and portfolio manager at Morgan Stanley Investment Management. He also served as a senior analyst for 10 years, working for Carl Icahn at Icahn & Co. 8 SENTINEL INVESTMENTS

11 Lisa G. Shaplen Vice President, Analyst Our objective is to identify a portfolio of companies that offer extraordinary risk/reward characteristics, limiting risk to invested capital while providing the opportunity for outsized returns. We view every company from a private investor s point of view that is, we try to determine what we would pay for a business if we were buying the whole company. To identify that value, we examine factors like cash flow quality, management strength, asset value and franchise value. We look for companies that are selling at or below the private market value of their business while controlling absolute risk. We also search for an event or transaction that may unlock unrealized value in the company. These events might have to do with a company s operations for instance, a firm might be planning new products or a cost-cutting campaign. Or, they may be tied to financial occurrences, such as a dividend declaration or share repurchase, which suggest that there may be spin-offs or acquisitions ahead. We integrate the strategic call, as well as the basic value of the business, into our analysis of company risk and reward characteristics, structuring our portfolio to provide maximum upside potential with limited downside risk. Then, we construct a focused portfolio, representing 35 to 45 of our best ideas, with diversification across sectors and securities. Team facts Location: New York, NY managed: Mid Cap Value Two lead portfolio managers have more than 65 years aggregate experience. Steinberg Asset Management has an investment history of more than 25 years. Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Ba Go Mid-sized company stocks can be more volatile than large-company stocks. Mid Cap Value is non-diversified and will hold fewer securities than a diversified portfolio. The may be more affected by the performance of a particular stock, either positively or negatively, than a more broadly diversified fund. THE ESSENTIAL ELEMENTS OF INVESTING 9

12 SMALL/ MID CAP TEAM Charles C. Schwartz, CFA Portfolio Manager Chuck is the Small/Mid Cap Team lead, and is Lead Manager of Small Company. He joined in 1996 and has more than 17 years of investment experience. Betsy G. Pecor, CFA Portfolio Manager Betsy is Lead Manager of Small/Mid Cap and Mid Cap Growth. She has more than 11 years of investment experience. Prior to joining in 2000, she was affiliated with Catalyst Ventures, Inc., and Raymond James Financial/Eagle Asset Management, Inc. 10 SENTINEL INVESTMENTS

13 Carole M. Hersam, CFA Vice President, Matthew J. McGeary, CFA Vice President, Matthew R. Spitznagle, CFA Assistant Vice President, We like small caps because the market is more inefficient, and the companies are less discovered. You feel like you can add more value. We have a conservative approach to managing small and mid cap stocks. Many small cap funds make drastic bets on high growth sectors and industries. We ve always taken a balanced sector approach, looking for companies in all industries. We re also very strict about buying stable, growing companies, not high flying, momentum plays. We like companies with management teams that execute well and do what they say they re going to do. We start by screening for companies that produce consistent and growing cash flows not just earnings, because earnings can be manipulated. Cash flows are, in our view, the best indicator of whether a company is doing business well and whether management is executing well. Then, you ve got to roll up your sleeves and do the research. You look at how volatile cash flows have been over time, how steadily they have grown and how consistently management has been able to achieve its targets. You can also enhance returns by seeking out sound companies that have had a minor problem recently. Small caps are so volatile that even a minor piece of bad news can be enough to give us an attractive price on a good company. We ve found over time that the small cap names we follow are still interesting investment opportunities as they move up the market cap spectrum into the mid cap space. Through the Small/ Mid Cap and the Mid Cap Growth, we are able to hold onto those companies we know well and seek out mid cap companies that meet our investment criteria. Our team takes advantage of opportunities, but we are not momentum traders. We follow basic investment principles, and we hold stocks for a relatively long time. This approach helps us reduce volatility, and over time, it s helped us protect investor assets in difficult markets, while participating in growth. Team facts Location: Montpelier, VT s Managed: Small Company Small/Mid Cap Mid Cap Growth All three funds are co-managed by Chuck Schwartz and Betsy Pecor, with Chuck taking the lead role on the Small Company and Betsy having primary responsibility for the Small/Mid Cap and Mid Cap Growth. Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Small- and mid-sized company stocks can be more volatile than large-company stocks. Ba Go THE ESSENTIAL ELEMENTS OF INVESTING 11

14 INTERNATIONAL TEAM Katherine Schapiro, CFA Portfolio Manager Kate joined in December 2005, assuming management of the International Equity. Before joining, Kate was an international equities portfolio manager at Strong Capital Management in San Francisco. Prior to her tenure with Strong, she was a managing director at Wells Capital Management, also in San Francisco. Over the course of her more than 27-year investment career, Kate has managed international and domestic equity portfolios for institutional, mutual fund and high net worth investors at various firms based in San Francisco and London. 12 SENTINEL INVESTMENTS

15 Jamie Chui, CFA Assistant Vice President, Lawrence Lee, Jr., CFA Assistant Vice President, The key for us is the experience of the team. I have more than 27 years myself, and both of my analysts have more than 15 years each. That s important because, in this business, you learn a lot over time. We ve also all lived overseas. We understand very personally that when you re investing globally, you do have to adopt a perspective that s not necessarily the U.S. perspective. Our process really has three elements. First, we identify themes that we think will drive the markets over the short and long term. Second, we analyze stocks that fit these themes according to five qualitative and quantitative factors. Finally, we continue to monitor our investments according to all these measures, and sell them when they no longer fit our criteria. Theme identification is the top-down element of our approach, determining which sectors and markets we will be focusing on. For instance, right now we think that many countries have significantly underspent on their infrastructure. That s a reason to own utilities, or companies that make construction equipment. We believe that these are the new growth stories. Themes help concentrate the stock selection process on the right areas of the market. Then we look at five factors: growth, value, management quality, risk and market sentiment. Because we weight each of these factors equally, the portfolio is balanced between growth and value stocks. It s a blend strategy. We manage volatility partly through diversification and partly by truly analyzing and understanding the risks that we re taking. If we ve underweighted a sector, we periodically go back and reexamine our assumptions. We ll question whether this is a risk we still want to be taking. The answer may be yes, or it may be no. But the process forces us to think about risk in a disciplined way. Team facts Location: San Francisco, CA s managed: International Equity Conservative Allocation (co-managed) Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Ba Go International stocks are subject to political influences, currency fluctuations and economic cycles that may be unrelated to those affecting domestic markets and may experience wider price fluctuations. THE ESSENTIAL ELEMENTS OF INVESTING 13

16 FIXED INCOME TEAM David M. Brownlee, CFA Portfolio Manager David joined in 1993, and has more than 25 years of investment experience. David received his undergraduate degrees in mathematics and economics from American International College. He is a member of the CFA Institute and the Vermont CFA Society. 14 SENTINEL INVESTMENTS

17 Jason Doiron Vice President, Credit and Equity Derivatives Trader Kenneth J. Hart Vice President, Corporate Bond Trader People invest in bond funds for two main reasons: to generate income and to provide stability for their portfolios. That s why my main focus is income and principal protection. My team maximizes shareholder income through a relative value approach. We continually compare the value of securities all along the yield curve to determine which offer the best risk-adjusted return potential. We compare values across sectors Treasuries, corporates and mortgage-backed securities to identify opportunities. And, we intensively analyze each individual security before we invest in it, making sure that we understand its structure and unique characteristics. Still, while we are always looking for ways to add yield to the portfolio, we are also very aware of risk. As a result, we focus on high-quality bonds that we can evaluate and understand. For instance, during the sub-prime crisis of late 2007, many fixed income managers got caught holding exotic securities that declined sharply in value when liquidity dried up. We bought only the securities that we were comfortable with primarily governmentbacked bonds. When the market collapsed, we were able to protect investor capital to a large degree. My team trades investor portfolios continually, looking to exploit short-term opportunities that we see in the market. We are constantly trying to position our portfolios to offer the best combination of return, income and risk for our shareholders. Team facts Location: Montpelier, VT s managed: Government Securities Short Maturity Government Balanced (co-managed) Conservative Allocation (co-managed) Cs Cg Gl Sc Mg Sm Mv Gs Ca Sg Co Ie Ba Go Fixed income securities are subject to credit and interest rate risks. Bond values will generally increase when interest rates fall and generally decrease when interest rates rise. A fund s investments in mortgage-backed securities are subject to pre-payment risks. These risks may result in greater share price volatility. shares are not insured or guaranteed by the U.S. government or its agencies. THE ESSENTIAL ELEMENTS OF INVESTING 15

18 The Investments Family o The Investments family of funds Our family of funds serves as the essential elements of strong, consistent, long-term investing. EQUITY Common Stock Cs Capital Growth Cg Growth Leaders Gl Mid Cap Growth Mg Mid Cap Value Mv Conservative Allocation Ca Small Company Sc Small/Mid Cap Sm Government Securities Gs Short Maturity Government Sg FIXED INCOME To learn more about, speak to your financial advisor, contact us at FUND (3863), or visit us online at sentinelinvestments.com. 16 SENTINEL INVESTMENTS Consider a fund s objectives, risks, charges and expenses carefully before investing. Th contains this and other information about the and is available from your advisor

19 f s Sustainable Core Opportunities Co International Equity Ie INTERNATIONAL e prospectus or. SPECIALTY Balanced Ba Sustainable Growth Opportunities Go Seasoned investors. Sustainable investing. At Investments, we seek to blend the performance potential that comes from experienced portfolio management with the meaningful impact of a time-tested approach to sustainable investing. Sustainable investing offers investors an opportunity to realize their financial goals while investing in a manner consistent with their values. The Essential Elements I of SICGX Investing 81728B791 SM C SCSCX For 75 years, Investments has offered the I SICWX 81728B700 sound, prudently Conservative managed A strategies SECMX that are Allocation C SMKCX the foundation of any portfolio. We deliver a range Georgia Municipal A SYGAX 81728B866 of investment Bond solutions managed I SYGIX by 81728B809 focused, Government A SEGSX dedicated teams of specialists. Though our teams Securities C SCGGX 81728B502 I SIBWX 81728B874 have varying philosophies, they share our firm s Growth Leaders A BRFOX 81728B304 most basic values: a commitment C SGLFX to 81728B403 bottom-up, I SIGLX 81728B783 fundamental research; a desire for competitive International A SWRLX returns during Equity strong market C environments SWFCX and I SIIEX 81728B775 superior relative performance in down markets; Mid Cap Growth A SNTNX C SMGCX and a commitment to results measured in years I SIMGX 81728B767 rather than days, Mid Cap weeks Value or months. A SYVAX 81728B858 Dedicated C SYVCX 81728B841 teams, repeatable disciplines I and SYVIX a commitment 81728B833 to sustainable Short performance Maturity A SSIGX at, these Government S SSSGX are the essential elements of investing. About Investments Symbol CUSIP Balanced A SEBLX C SBACX I SIBLX 81728B817 Capital Growth A BRGRX 81728B106 C SECGX 81728B205 Common Stock A SENCX Small Company A SAGWX C SSCOX I SIGWX 81728B825 Small/Mid Cap A SMSMX 81728B742 C SECSX 81728B734 I SESMX 81728B759 Headquartered in Montpelier, VT; Sustainable Core A MYPVX 81728B726 Opportunities C SRIOX 81728B718 in New York, Philadelphia and San Francisco I CVALX 81728B692 Six independent portfolio management Sustainable Growth A WAEGX 81728B684 teams Opportunities C SRISX 81728B mutual funds in four major asset classes I CEGIX 81728B668 Common Stock in 75th year A commitment to sustainable investing THE ESSENTIAL ELEMENTS OF INVESTING 17

20 The Essential Elements of Investing SM For 75 years, Investments has offered the sound, prudently managed strategies that are the foundation of any portfolio. We deliver a range of investment solutions managed by focused, dedicated teams of specialists. Though our teams have varying philosophies, they share our firm s most basic values: a commitment to bottom-up, fundamental research; a desire for competitive returns during strong market environments and superior relative performance in down markets; and a commitment to results measured in years, rather than days, weeks or months. Dedicated teams, repeatable disciplines and a commitment to sustainable performance at, these are the essential elements of investing. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE Consider a fund s objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the s and is available from your wholesaler or Please read the prospectus carefully before you invest. Investments is the unifying brand name for Financial Services Company, Asset Management, Inc., and Administrative Services, Inc. s are distributed by Financial Services Company, One National Life Drive, Montpelier, VT 05604, , sentinelinvestments.com SF0983 (0309)