AllocationMaster Report

Transcription

1 Report Prepared for (Main Scenario) December 12, 2005 Provided by Piper Jaffray Financial Advisor Piper Jaffray 800 Nicollet Mall Minneapolis, MN 55402

2 Table of Contents Title Page... 1 Table of Contents... 2 Disclosure... 3 Introduction Page... 5 Risk Tolerance... 6 Data Inputs... 9 Efficient Frontier - Present Efficient Frontier - Proposed Mix Comparison - Composite Mix Comparison - Non-Qualified Mix Comparison - Qualified Histories - Risk vs Return Scenario Assumptions Glossary This asset allocation analysis is provided to you for informational purposes only. Actual investment results may be materially different from the projected performance results portrayed. This report uses information that is considered reliable, but it does not represent that the information is accurate or complete, and the report may not be relied upon as such. The report is not intended to be either an expressed or implied guaranty of actual performance. It is not intended to supply tax or legal advice. There is no solicitation to buy or sell securities. The deduction of advisory fees, brokerage or other commissions, and any other expenses that would have been paid may not be reflected in the analysis. The results portrayed reflect the reinvestment of dividends and other earnings. Prepared by Piper Jaffray Financial Advisor 2 Piper Jaffray

3 Report Disclosure The following Asset Allocation analysis report has been prepared with information provided by you to guide you in selecting an appropriate asset allocation strategy. It may contain asset allocation models that reflect broad generalizations and are not intended as investment recommendations. Each of the allocation models represents one possible asset allocation strategy, which is based on responses to questions regarding personal circumstances, financial goals and investment risk tolerance. The use of the terms financial forecast, expected return, and risk (standard deviation) are not intended to be either an expressed or implied guarantee of actual performance. Past performance does not guarantee future results. An Asset Allocation Analysis is a tool that may assist you in determining if you have the right mix of investments for your personal situation. Development of a personalized Asset Allocation Analysis is designed to assist you in positioning your assets based on your financial objectives, time horizons and risk tolerance. The following report is a hypothetical illustration using assumed rates of return that are based on information you have provided to your advisor and from sources we believe to be reliable. Depicted rates of return are not representative of the actual rate of return that you will experience with any particular insurance or financial product. This illustration is based on the concepts of Modern Portfolio Theory, which states that through diversification you may be able to minimize the effects of investment risks and that gains in one investment class may help offset losses in another. There is no certainty that any investment or strategy will be profitable or successful in achieving your specific investment objectives. The illustrations shown should not be considered as a prediction of any investment results. Principal values of your investments will fluctuate and when redeemed, may be worth more or less than your original investment. Asset allocation does not ensure a profit or protect against losses in a declining market. Asset mixes presented throughout this analysis are derived using available historical information for each asset class based on the selected index for that class. They are meant only to illustrate the relative experience between asset classes and portfolios. Other asset classes and indices may have characteristics similar or superior to those being analyzed here. IMPORTANT: The projections or other information generated by AllocationMaster regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The results of this analysis may vary with each use and over time. Monte Carlo Simulation is a mathematical model for computing the probability of an outcome by testing hundreds upon hundreds of possible results. Monte Carlo simulation takes into investment returns, volatility, correlations, and other factors, all based on historical statistical estimates. The simulation is created by running a large number of projections utilizing randomly selected rates of return to illustrate variable future economic conditions. The process selects random rates of return for each year of each projection to simulate a large number of possible future financial market environments. By using random rates from a statistically appropriate collection of probable returns, and repeating the process hundreds of times, the resulting projections can be viewed as a representative set of potential future results. MUTUAL FUNDS, UNIT INVESTMENT TRUSTS OR VARIABLE ANNUITIES If any mutual fund, unit investment trust, or variable annuity is mentioned in this report, this report must be preceded or accompanied by the investment product's current prospectus. The prospectus contains more complete information, including fees, expenses, investment objectives, and risks. Please read the prospectus carefully before investing or sending money. Investment return and principal will fluctuate with market conditions and you may have a gain or a loss when you sell the investment product(s). ALTERNATIVE INVESTMENTS Prepared by Piper Jaffray Financial Advisor 3 Piper Jaffray

4 Report Alternative Investments such as fund of hedge funds, managed futures funds are intended only for investors who meet certain minimum qualifications. Alternative Investments are allowed to use aggressive, complex strategies, and they are not subject to the same regulatory requirements as other investments. They carry risks and concerns not always associated with other investments, including restricted liquidity, less regulatory oversight, tax inefficiency, delays in distributing tax information and higher fees. An investment in a hedge fund is speculative and involves a high degree of risk, which each investor must carefully consider. Returns generated from an investment in a hedge fund may not adequately compensate investors for the business and financial risks assumed. No assurance can be given that the hedge fund will achieve its investment objectives or avoid substantial losses including loss of all or a substantial amount of his or her investment. Fund of hedge funds are subject to many market risks including market volatility fund of hedge funds employ certain trading techniques, such as, the use of leveraging and other speculative investment practices that may increase the risk of investment loss. Other risks associated with fund of hedge funds investments include, but are not limited to, the fact that fund of hedge funds: Can be highly illiquid are not required to provide periodic pricing or valuation information to investors may involve complex tax structures and delays in distributing important tax information are not subject to the same regulatory requirements as mutual funds often charge higher fees and the high fees may offset the fund's trading profits may have a limited operating history can have performance that is volatile may have a fund manager who has total trading authority over the fund and the use of a single adviser applying generally similar trading programs could mean a lack of diversification, and consequentially, higher risk may not have a secondary market for an investor's interest in the fund and none may be expected to develop may have restrictions on transferring interests in the fund and may trade a substantial portion of their trades on foreign exchanges. INDEX BENCHMARKS Index benchmarks are provided for illustrative purposes only. Comparisons to benchmarks have limitations because benchmarks have volatility and other material characteristics that may differ from the underlying investment product they track. Benchmarks are not managed and you can not invest directly in an index. Because of these differences, benchmarks should not be relied upon as an accurate measure of comparison. You cannot invest directly in these indices, which include no expenses or transaction charges. You are under no obligation to act upon, or implement all or any portion of the guidance contained in this report. If you elect to act upon, or implement any of the guidance in this report, you are under no obligation to effect any resulting transaction through or purchase any products or services from Piper Jaffray. To the extent that you do implement in whole or in part any of the guidance in the report by executing transactions through Piper Jaffray as a broker or purchasing other products or services offered by Piper Jaffray, a potential conflict of interest may arise between your interest and the interest of Piper Jaffray and its financial advisors. For example, in connection with any transactions that you may effect through Piper Jaffray or other products or services you may purchase from Piper Jaffray, Piper Jaffray will collect asset-based fees, commissions, transaction fees, mark-ups and mark-downs, and receive other compensation. In addition, Piper Jaffray may be the investment banker or the company whose securities you purchase or sell or have a financial interest in products or services you purchase. Piper Jaffray, in addition to acting as investment banking, acts as a market maker, which may result in Piper Jaffray's interests conflicting with your interests. This report is not intended to offer tax or legal advice. There is no solicitation and no recommendation for any action based upon its results. The report is based on data obtained from sources we consider to be reliable however, it is not guaranteed as to accuracy and does not purport to be complete. Piper Jaffray & Co. Since Member SIPC and NYSE. Prepared by Piper Jaffray Financial Advisor 4 Piper Jaffray

5 Introduction An Asset Allocation Plan will help you determine if you have the right mix of investments for your personal situation. This report has been prepared to assist you in this important decision. Development of a personalized Asset Allocation Plan provides a disciplined and systematic approach to investing. It guides you from defining your personal investment objectives to determining a suitable portfolio. With all of the investment choices available, this plan helps you evaluate the many choices and create a well-designed plan specific to your needs. The purpose of an Asset Allocation Plan is to determine how your investment assets will be divided among the available investment alternatives. Your plan will usually depend on your financial objectives, time horizon, risk tolerance, and present financial situation. The Asset Allocation Plan presented in this report is based on the Nobel-prize winning concepts of Modern Portfolio Theory, which state that through intelligent diversification you can minimize the effects of investment risk. This is because the way you allocate your investment dollars outweighs the potential effects of security selection and market timing. Through diversification, gains in one investment class may help offset losses in another. Throughout this plan, you will see references to "expected returns", "standard deviation" and other financial planning terms that you may not be familiar with. All terms are fully explained in the glossary. Where references are made to expected returns, please remember that this is not intended as a guarantee or meant to reflect the performance of any investment product. It is simply a historical return based on an index. An index is used to show benchmarks for the performance of various asset classes. Investors may not make direct investments into any index. It is important to keep in mind that the focus of this Asset Allocation Plan is based on your long-term objectives. These are usually plans that have been made for five years or more. It means taking a reasonable amount of investment risk in the expectation of higher returns. And, since time has a moderating effect on investment risk, the longer your investment time horizon, the more likely you will earn a positive return. Following your Asset Allocation Plan can be a critical element in reaching your financial objectives. It should be carefully determined. And, it should be reviewed and rebalanced periodically. Prepared by Piper Jaffray Financial Advisor 5 Piper Jaffray

6 Risk Tolerance Analysis 1 In determining your asset allocation, you may choose to consider assets you own outside of this account. Please indicate one of the following: a. My answers to this questionnaire apply only to the assets in this account. b. I wish to allocate my account with respect to my overall investable assets. 2 What percentage of your total investment portfolio (stocks, bonds, mutual funds, CDs, annuities, etc.) do you intend to invest initially in your account? a. up to 25% b. 25% to 50% c. 50% to 75% d. 75% to 100% 3 Choose one category on the scale below that best identifies your primary investment objective. a. Income b. Income & Growth c. Growth & Income d. Growth e. Aggressive Growth 4 Some people will use this investment program to help them meet a specific goal (e.g., a college education, retirement, etc.). These people are not necessarily concerned with maximizing returns but are more concerned with meeting a specific goal. How accurately does this describe your situation? a. Very accurately b. Moderately accurate c. Not accurately 5a 5b Some people need their investment program to generate current income to meet ongoing needs. In certain markets this may require a withdrawal from principal. Do you require income from this account? If yes, how soon?. a. immediately b. in 1-5 years c. in 5-10 years d. in more than 10 years e. No. I have no requirement for current income How much income do you require from this account?. a. more than 5% b. 4% - 5% c. 2% - 3% d. I have no requirement for current income. Prepared by Piper Jaffray Financial Advisor 6 Piper Jaffray

7 6 Investing encourages you to consider your time horizon. Time is a key element in investment risk and reward. This is particularly important when investing in stocks. History has shown that returns on stocks do not accrue evenly over time. Investment success cannot be measured over short time periods. Strategies must be given time to work. Investors have different time horizons. What is your time horizon for investing these assets (how long do you anticipate investing these assets)? (Note: If you choose a, stocks may not be an appropriate strategy.) a. 0-3 years b. 3-5 years c years d years e. more than 15 years 7 What is your attitude toward investment volatility with regard to this account? Remember, history has shown the returns of the various asset classes (e.g., stocks and bonds) fluctuate over time. That is why it is important to consider your time horizon as well as your risk tolerance when investing. a. I cannot accept any loss of principal at any time. Note: If you choose a, your risk tolerance is low and a portfolio consisting primarily of cash equivalents and short-term fixed-income securities will likely be suitable. b. I am more concerned with preserving my investment than maximizing investment gains. I can tolerate infrequent and moderate negative returns. c. I understand that by pursuing higher returns, I may have to tolerate periods of longer, more frequent and greater negative returns. However, I prefer risk of loss be limited to approximately that of commonly used indices. d. My main concern is maximizing investment gains. I can tolerate risk of loss greater than that of commonly used indices. 8 Assume you had a portfolio worth $100,000. What percentage decline could you endure in one year before you change your investment strategy, such as selling your securities? ( Note: If you choose f, your risk tolerance is low and a portfolio consisting primarily of cash equivalents and short-term fixed-income securities will likely be suitable) a. 25% or larger decline (resulting in a portfolio value of $75,000 or less). b % decline (resulting in a portfolio value between $76,000 - $80,000). c % decline (resulting in a portfolio value between $81,000-85,000). d % decline (resulting in a portfolio value between $86,000-90,000) e. 5-9% decline (resulting in a portfolio value between $91,000-95,000) f. 0-4% decline (resulting in a portfolio value greater than $96,000) Prepared by Piper Jaffray Financial Advisor 7 Piper Jaffray

8 9 Which portfolio would you prefer? a. Portfolio A. b. Portfolio B. c. Portfolio C. d. Portfolio D. e. Portfolio E. 10 Is there additional information that you feel your Financial Advisor should know prior to making an investment strategy recommendation, such as an anticipated substantial withdrawal, change in lifestyle or an aversion to a particular type of investment? (Note: If yes, please explain and discuss with your Financial Advisor.) a. Yes. b. No. 11 Do you have any preferences regarding the percentage invested in any class of security? a. Yes b. No 12 Do you have any restrictions such as risk or credit quality of the equity and fixed-income securities in your portfolio? a. Yes b. No 13 Are international purchases limited to ADR only? a. Yes b. No 14 Do you want tax-favored income? a. Yes b. No Your Risk Profile: Income & Growth Use of risk tolerance analysis is one approach for helping you select a suitable portfolio. Your risk profile has been determined based on your responses to the risk questionnaire. This information was used to identify a range of portfolios on the Efficient Frontier that may be appropriate for your risk profile. Prepared by Piper Jaffray Financial Advisor 8 Piper Jaffray

9 Client Data Inputs Client Birthdate: 10/04/1946 Spouse Birthdate: 08/23/1947 Federal Income Tax Rate: State Income Tax Rate: Federal Capital Gains Tax Rate: State Capital Gains Tax Rate: Future Federal Income Tax Rate: Future State Income Tax Rate: Future Federal Capital Gains Tax Rate: Future State Capital Gains Tax Rate: Starting Year: 27.00% 0.00% 15.00% 0.00% 27.00% 0.00% 20.00% 0.00% 2010 Non-Qualified Assets Market Cost Account Asset Class Product Name Value Basis Number Hold Symbol Cash CASH $5,000 $5,000 No Small/Mid-Cap Value ALLIED HEALTHCARE $10,000 $10,000 No AHPI PRODS INC Large Growth Stocks MEDTRONIC INC $10,000 $10,000 No MDT Cash $100,000 $100,000 No Cash CASH $250,000 $250,000 No Cash $10,000 $10,000 No HD Large Value Stocks ATT CORP $5,000 $5,000 No T Large Growth Stocks GROWTH FD OF $75,000 $75,000 No AGTHX AMERICA Cash CASH $7,708 $7,708 No MMF Municipal Bonds AUSTIN MN $52,146 $50,000 No K99 Municipal Bonds MN ST HSG $48,344 $50,433 No60415NKT8 Municipal Bonds MN ST HI ED $24,516 $25,000 No60416HCH Municipal Bonds MN ST REF UT $26,503 $25,260 No H43 Cash CASH $15,798 $15,798 No MMF Municipal Bonds STILLWTR MN $41,106 $40,000 No NF4 Corporate Bonds CFB CAPITAL IV PFD 7.6% $25,900 $25,000 No CFBXM Municipal Bonds TODD MRRIS MN3.15 $52,993 $55,632 No BC Municipal Bonds CHASKA MN $26,022 $25,179 No LP4 Government Bonds UST STRIP INT $74,171 $32,172 No ZC08A Municipal Bonds CROW WING MN $49,732 $50,762 No EH4 Government Bonds UST STRIP INT 0.0 $117,625 $62,688 No ZC06C Prepared by Piper Jaffray Financial Advisor 9 Piper Jaffray

10 Municipal Bonds DULUTH MN $28,319 $29,428 No26444CGH Municipal Bonds WATONWAN MN 5.75 $26,220 $25,000 No942588DA Government Bonds FHLB BOND $99,550 $99,933 No3133X8KX9 Large Growth Stocks TARGET CORP $10,000 $10,000 No TGT - Not Assigned - $50,000 $0 No Total $1,191,653 Qualified Assets Market Cost Account Asset Class Product Name Value Basis Number Hold Symbol Large Growth Stocks GROWTH FUND OF $25,000 $0 401K No AGTHX AMER Intl. Developed AMER FDS $25,000 $0 401K No AEPGX EUROPACIFIC GR Cash MMF $5,000 $0 401K No Large Growth Stocks Various Funds $145,000 $0 No Small/Mid-Cap Growth KOPP EMERGING $2,000 $0 No KOPPX GROWTH Intl. Developed HARTFORD GLBL LEAD $3,231 $0 No HALAX CL A Intl. Developed HARTFORD GLBL LEAD CL B $2,532 $0 No HGLBX Small/Mid-Cap Value HARTFORD MID CAP $3,366 $0 No HMVAX VALUE A Small/Mid-Cap Value HARTFORD MID CAP VALUE B $2,933 $0 No HMVBX Large Value Stocks HARTFORD MUT $8,504 $0 No ITTAX ADVSRS CL A Large Value Stocks HARTFORD MUT $7,886 $0 No IHABX ADVSRS CL B Large Value Stocks HARTFORD MUT CAP $3,096 $0 No ITHAX APPR A Cash CASH $0 $0 No MMF Large Value Stocks HARTFORD MUT CAP $6,587 $0 No IHCAX APPR B Large Value Stocks DAVIS NEW YORK $3,294 $0 No NYVCX VENTURE C Large Value Stocks HARTFORD MUT DIV $4,876 $0 No IHGIX GR A Large Value Stocks HARTFORD MUT DIV $10,782 $0 No ITDGX GR B Cash CASH $128 $0 No MMF Large Growth Stocks HARTFORD FORTIS GRWTH A $3,572 $0 No HGWAX Large Growth Stocks HOME DEPOT INC $7,696 $0 No HD Small/Mid-Cap Growth KOPP EMERGING GRWTH CL C $4,896 $0 No KEGCX Prepared by Piper Jaffray Financial Advisor 10 Piper Jaffray

11 Large Growth Stocks MICROSOFT CORP $4,642 $0 No MSFT Large Value Stocks U S BANCORP DE NEW $6,796 $0 No USB - Not Assigned - $100,000 $0 No Total $286,817 Non-Qualified Tax-Deferred Assets Market Cost Account Asset Class Product Name Value Basis Number Hold Symbol - Not Assigned - $0 $0 No - Not Assigned - IRA $90,000 $0 No - Not Assigned - DD $50,000 $50,000 No Total $0 Liabilities Responsible Current Periodic Payment Description Party Balance Payment Frequency Client $50,000 $12,000 Annual Total Liabilities $50,000 Financial Goals Education Goals (Pre-Retirement) Years Until Student Need Years of Need Annual Amount Inflation Rate Portion to Fund Baby Jane 18 4 $27, % % Retirement Annual Spending Goal Annual retirement spending goal $225,000 Portion of annual retirement spending goal to fund for surviving spouse (retirement planning only) 80.00% Prepared by Piper Jaffray Financial Advisor 11 Piper Jaffray

12 Efficient Frontier - Present Mix Efficient Frontier Conservative Income Income Income & Growth Growth & Income Growth Aggressive Growth Present Mix Proposed Mix Suggested Mix Present Asset Allocation Total 100% $1,478,470 Present Mix Before-Tax Annual Return 6.02% After-Tax Annual Return 5.36% Standard Deviation (Risk) 5.14% Sharpe Ratio 0.46 Annual Yield 3.18% Return information is not a projection of the performance of any particular investment you may own or future investment. Information provided is based on your responses to the Investment Profile; however, sections of the Profile that were not completed are not taken into consideration when developing the Proposed Asset Allocation Model. Partial completion of your Profile may limit our ability to provide a complete analysis of your financial situation. Prepared by Piper Jaffray Financial Advisor 12 Piper Jaffray

13 Efficient Frontier - Proposed Mix Efficient Frontier Conservative Income Income Income & Growth Growth & Income Growth Aggressive Growth Present Mix Proposed Mix Suggested Mix Proposed Asset Allocation - Income & Growth Total 100% $1,478,470 Present Proposed Before-Tax Annual Return 6.02% 7.20% After-Tax Annual Return 5.36% 6.71% Standard Deviation (Risk) 5.14% 7.24% Sharpe Ratio Annual Yield 3.18% 3.69% Return information is not a projection of the performance of any particular investment you may own or future investment. Information provided is based on your responses to the Investment Profile; however, sections of the Profile that were not completed are not taken into consideration when developing the Proposed Asset Allocation Model. Partial completion of your Profile may limit our ability to provide a complete analysis of your financial situation. Prepared by Piper Jaffray Financial Advisor 13 Piper Jaffray

14 Asset Mix Comparison - Composite Assets Present Asset Mix Proposed Asset Mix Present Asset Mix Proposed Asset Mix Adjustment Cash $393, % $0 0.00% ($393,634) Government Bonds $291, % $108, % ($182,356) Municipal Bonds $375, % $703, % $327,174 Corporate Bonds $25, % $60, % $34,332 Large Value Stocks $56, % $206, % $150,165 Large Growth Stocks $280, % $206, % ($73,924) Small/Mid-Cap Value $16, % $51, % $35,447 Small/Mid-Cap Growth $6, % $51, % $44,850 Intl. Developed $30, % $88, % $57,945 Total $1,478, % $1,478, % Before-Tax Annual Return 6.02% 7.20% After-Tax Annual Return 5.36% 6.71% Standard Deviation (Risk) 5.14% 7.24% Sharpe Ratio After-Tax Annual Yield 3.18% 3.69% Income (Annual $) $47,016 $54,496 Return information should not be construed as a projection of the performance of any particular investment you may own or any future investment. The option of completing some or all of the sections on the Investment Profile is at your discretion. However sections of the Investment Profile that are incomplete are not taken into consideration when developing your Proposed Asset Allocation Model. Without taking into consideration all factors of your entire investment profile, we can only offer an asset allocation proposal based on the information you have provided. This may limit our ability to provide a complete analysis of your financial situation. Prepared by Piper Jaffray Financial Advisor 14 Piper Jaffray

15 Asset Mix Comparison - Non-Qualified Assets Present Asset Mix Proposed Asset Mix Present Asset Mix Proposed Asset Mix Adjustment Cash $388, % $0 0.00% ($388,506) Government Bonds $291, % $0 0.00% ($291,346) Municipal Bonds $375, % $703, % $327,174 Corporate Bonds $25, % $0 0.00% ($25,900) Large Value Stocks $5, % $166, % $161,831 Large Growth Stocks $95, % $166, % $71,831 Small/Mid-Cap Value $10, % $41, % $31,708 Small/Mid-Cap Growth $0 0.00% $41, % $41,708 Intl. Developed $0 0.00% $71, % $71,499 Total $1,191, % $1,191, % Before-Tax Annual Return 4.99% 7.05% After-Tax Annual Return 4.17% 6.44% Standard Deviation (Risk) 4.09% 7.35% Sharpe Ratio After-Tax Annual Yield 3.48% 3.52% Income (Annual $) $41,511 $41,904 Return information should not be construed as a projection of the performance of any particular investment you may own or any future investment. The option of completing some or all of the sections on the Investment Profile is at your discretion. However sections of the Investment Profile that are incomplete are not taken into consideration when developing your Proposed Asset Allocation Model. Without taking into consideration all factors of your entire investment profile, we can only offer an asset allocation proposal based on the information you have provided. This may limit our ability to provide a complete analysis of your financial situation. Prepared by Piper Jaffray Financial Advisor 15 Piper Jaffray

16 Asset Mix Comparison - Qualified Assets Present Asset Mix Proposed Asset Mix Present Asset Mix Proposed Asset Mix Adjustment Cash $5, % $0 0.00% ($5,128) Government Bonds $0 0.00% $108, % $108,990 Corporate Bonds $0 0.00% $60, % $60,232 Large Value Stocks $51, % $40, % ($11,667) Large Growth Stocks $185, % $40, % ($145,756) Small/Mid-Cap Value $6, % $10, % $3,740 Small/Mid-Cap Growth $6, % $10, % $3,143 Intl. Developed $30, % $17, % ($13,554) Total $286, % $286, % Expected Annual Return 10.28% 7.80% Standard Deviation (Risk) 14.64% 7.40% Sharpe Ratio Annual Yield 1.92% 4.39% Income (Annual $) $5,505 $12,591 Return information should not be construed as a projection of the performance of any particular investment you may own or any future investment. The option of completing some or all of the sections on the Investment Profile is at your discretion. However sections of the Investment Profile that are incomplete are not taken into consideration when developing your Proposed Asset Allocation Model. Without taking into consideration all factors of your entire investment profile, we can only offer an asset allocation proposal based on the information you have provided. This may limit our ability to provide a complete analysis of your financial situation. Prepared by Piper Jaffray Financial Advisor 16 Piper Jaffray

17 Selected Indices - Scatter Plot Return Risk S&P 500 Composite 13.01% 15.85% LEHB Aggregate Bond 8.97% 7.50% FED 3-Mo T-Bill (S) 6.07% 3.04% CPI-U All Items 4.34% 3.05% The Risk vs. Return scatter plot shows the historical average annual return and risk for several market indices. This graph makes it easy to compare the relative return and risk between different types of investments. The past total returns shown include both current income and capital gains. The returns do not reflect tax and inflation effects. This illustration is for informational purposes. An investment cannot be made directly into an index. Past performance does not guarantee future results. Prepared by Piper Jaffray Financial Advisor 17 Piper Jaffray

18 Scenario Assumptions Scenario Assumptions Asset Class Index Proxy Return Risk Yield Dividend Turnover Cash CITI 3-mo T-bill 3.00% 2.00% 3.00% 0.00% % T-Notes/CDs FED 6-Month CD 3.50% 3.00% 3.50% 0.00% % Government Bonds LEHB Government Bond 5.75% 6.00% 5.75% 0.00% 40.00% Municipal Bonds LEHB Municipal Bond 4.75% 8.00% 4.75% 0.00% 40.00% Corporate Bonds LEHB Credit Bond 6.50% 8.50% 6.50% 0.00% 40.00% High Yield Bonds LEHB High Yield 9.25% 16.00% 9.50% 0.00% 40.00% International Bonds CITI NonUS WGBI-All$ 7.00% 13.25% 7.00% 0.00% 40.00% Large Value Stocks BARA S&P500 Value 9.50% 13.25% 0.00% 2.50% 40.00% Large Growth Stocks BARA S&P500 Growth 10.50% 16.25% 0.00% 1.75% 40.00% Small/Mid-Cap Value WILS Tgt Small Value 11.00% 18.75% 0.00% 2.00% 40.00% Small/Mid-Cap Growth WILS Tgt Small Grth 11.60% 21.75% 0.00% 2.00% 40.00% Intl. Developed MSCI EAFE Index-$ 11.00% 22.25% 0.00% 1.75% 40.00% Emerging Equities MSCI Emerg Free-$ 11.50% 40.25% 0.00% 0.75% 40.00% REITs NAR REITs-All 7.50% 14.00% 5.50% 0.00% 10.00% Managed Futures CISDM-Fund/Pool-$ 8.00% 30.00% 0.00% 0.00% % Hedge Funds HFRI Fund of Funds 8.50% 12.00% 2.00% 0.00% 60.00% Venture Capital/L.P. CAMB US Venture Cap 12.50% 35.25% 0.00% 0.00% 10.00% Inflation Rate: 3.00% Holding Limits Non-Qualified Assets Qualified Assets Non-Qualified Tax-Def Assets Asset Class Min % Max % Min % Max % Min % Max % Cash 0.00% 35.00% 0.00% 35.00% 0.00% 35.00% T-Notes/CDs 0.00% 20.00% 0.00% 20.00% 0.00% 20.00% Government Bonds 0.00% 60.00% 0.00% 60.00% 0.00% 60.00% Municipal Bonds 0.00% 60.00% 0.00% 0.00% 0.00% 0.00% Corporate Bonds 0.00% 35.00% 0.00% 35.00% 0.00% 35.00% High Yield Bonds 0.00% 25.00% 0.00% 25.00% 0.00% 25.00% International Bonds 0.00% 10.00% 0.00% 10.00% 0.00% 10.00% Large Value Stocks 0.00% 50.00% 0.00% 50.00% 0.00% 50.00% Large Growth Stocks 0.00% 50.00% 0.00% 50.00% 0.00% 50.00% Small/Mid-Cap Value 0.00% 50.00% 0.00% 50.00% 0.00% 50.00% Small/Mid-Cap Growth 0.00% 50.00% 0.00% 50.00% 0.00% 50.00% Intl. Developed 0.00% 25.00% 0.00% 25.00% 0.00% 25.00% Emerging Equities 0.00% 10.00% 0.00% 10.00% 0.00% 10.00% REITs 0.00% 10.00% 0.00% 10.00% 0.00% 10.00% Managed Futures 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Hedge Funds 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Venture Capital/L.P. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Scenario assumptions are based on the estimates of the future performance for each major asset class, which is represented by each of its respective market index. These estimates are based on the estimated long-term average median total annual return. These estimates do not rely solely on historical performance and past performance is not indicative of future results. Indexes are unmanaged and an investment cannot be made directly into an index. Prepared by Piper Jaffray Financial Advisor 18 Piper Jaffray

19 Glossary - Key Terms Cash - Investments of high liquidity and safety with a known market value and a very short-term maturity. Examples are Treasury bills and money market funds. T-Notes/CD's - T-Notes are negotiable debt obligations of the U.S. government with maturities of 1 to 10 years. CD's are interest-bearing debt instruments issued by banks with maturities from a few weeks to several years. Taxable Fixed Income - Investment grade debt issues of corporations, the U.S. Government and federal agencies having a maturity of 1 to 10 years. Municipal Bonds - Debt obligation of a state or local government entity. The funds may support general government needs or special projects. Exempt from federal income taxes, and from most state and local taxes. Large Value Stocks - Equity securities of large capitalization companies which have 'value' stock characteristics. Value stocks have low forecasted price-earnings ratio, low price-book ratio and high dividend yield. Large Growth Stocks - Equity securities of large capitalization companies which have 'growth' stock characteristics. Growth stocks have high forecasted sales growth, high return on equity and low dividend payout. Small/Mid-cap Value Stocks - Equity securities of small to mid-capitalization companies which have 'value' stock characteristics. Value stocks have low forecasted price-earnings ratio, low price-book ratio and high dividend yield. Small/Mid-cap Growth Stocks - Equity securities of small to mid-capitalization companies which have 'growth' stock characteristics. Growth stocks have high forecasted sales growth, high return on equity and low dividend payout. REIT - Funds that invest in various types of residential and commercial developments and raw land. International Developed - Equity securities investment in developed countries throughout the world. This requires an investor to be alert to trends in foreign currencies as well as movements in foreign markets. Emerging Equities - Equity securities investment in developing (emerging) countries throughout the world. This requires an investor to be alert to possibly illiquid markets and movements in foreign currencies. Managed Futures - A managed account or fund in which professional investment managers trade futures and forward contracts. Futures and forward contracts may represent agricultural products, bonds, cattle, currencies, financial instruments, gold, hogs, oil, silver, stock indices, and so on. They are contracts of delivery or receipt for a particular commodity between the seller and buyer of the contracts. Investors can trade these contracts individually, assuming all of the potential risk and reward for each, or invest collectively with other individuals in a managed account or fund, thus sharing the potential risk and rewards of many different contracts among investors. Hedge Funds - Private investment offerings structured as LP's or LLC's. Usually used by wealthy individuals and institutions, which are allowed to use strategies that are unavailable to mutual funds, including selling short, Prepared by Piper Jaffray Financial Advisor 19 Piper Jaffray

20 leverage, program trading, swaps, arbitrage, and derivatives. Hedge funds are exempt from many of the rules and regulations governing other traditional investment vehicles. Venture Capital / L.P. - Equity investment in single projects, or multi-project limited partnerships, that invest in new ventures. Prepared by Piper Jaffray Financial Advisor 20 Piper Jaffray