MID-CAP GROWTH ACCOUNT - III 

Following is a summary of information about the Mid-Cap Growth Account III. Investors are advised to learn key data about an investment prior to making any investment decision.

Objective

The objective of this account is to seek long-term capital appreciation and income by investing mainly in the stocks of medium-sized U.S. companies, choosing stocks considered by the advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and, the advisor feels, are trading at prices that are below-average in relation to such measures as earnings and book value. It invests solely in the Vanguard ® Selected Value Fund.

Investor Profile

The Mid-Cap Growth Account III may be suitable for investors seeking long-term growth of capital by investing mainly in the stocks of medium-sized U.S. companies considered by the advisor to be undervalued. Investors must be willing and able to accept substantial change in unit price in the short, long, and very-long term.

Investment Strategy

Vanguard Selected Value Fund invests in value stocks of mid-capitalization. It focuses on stocks that are out of favor with most investors and have below-average prices in relation to such financial measures as earnings, cash flow, and net worth, or book value. The fund typically makes long-term investments in 30 or 40 companies. Because it is concentrated in a relatively small group of stocks, the fund often performs quite differently from the overall stock market.

Investment Considerations

The principal value of the Mid-Cap Growth Account III is subject to extremely wide fluctuation in price. The unusually high volatility may stem from one or more of the following strategies: a concentration of holdings in a relatively low number of individual stocks; a heavy emphasis on mid-capitalization stocks or growth stocks with relatively high market valuations; international holdings which are subject to price declines caused by changes in the U.S. dollar against foreign currencies.

PORTFOLIO DATA

Asset Allocation (as of 06-30-2008)     Stocks 93.00% Short-term Reserves 7.00%   Key Facts (as of 06-30-2008)     Number of Stocks 60 Price/Earnings Ratio 14.2x Foreign Holdings 7.7% Turnover Rate (Fiscal Year End October) 33.0% Beta (vs. Russell Midcap Value Index) 0.89 Standard Deviation as of 12-31-2007 14.26%   Top Ten Stock Holdings (as of 06-30-2008) Concentration   Range   Murphy Oil Corp. 0 %     El Paso Corp. 0 %     MDU Resources Group, Inc. 0 %     Pinnacle West Capital Corp. 0 %     Annaly Mortgage Management Inc. REIT 0 %     Ryder System, Inc. 0 %     Lorillard, Inc. 0 %     People's United Financial Inc. 0 %     Family Dollar Stores, Inc. 0 %     Avery Dennison Corp. 0 %     Ten Largest Holdings Equals 30.9% of Total Net Assets   Equity Sector Diversification (as of 06-30-2008)       Financials 19.00 % Industrials 17.80 % Consumer Discretionary 14.00 % Utilities 13.50 % Energy 12.30 % Health Care 8.50 % Consumer Staples 6.40 % Information Technology 5.70 % Materials 2.80 % Total % of Portfolio 100.00 % Vanguard Selected Value Fund* Average Annual Returns Annual Total Returns (as of 07-31-2008) (as of 12-31)           1 Month (0.24)%     3 Months (6.36)%     YTD (14.35)%     1 year (17.94)%     3 years 0.27%     5 years 9.91%     10 years 7.61%                                     1997       17.40%     1998       (11.77)%     1999       (2.72)%     2000       17.45%     2001       14.99%     2002       (9.79)%     2003       35.21%     2004       20.38%     2005       10.67%     2006       19.11%     2007       (0.23)%