r · pdf fileinformation that you provided about your assets, financial goals, and personal...

John and Jane Smith

December 03, 2012

LifeView® Financial Plan

Prepared by:

Morgan StanleyFinancial AdvisorSAMPLE

jonathan.jerome

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This is a Sample LifeView Financial Plan only. It is intended to demonstrate the type of analysis your Financial Advisor can create for you. Your actual Financial Plan will be based on information provided by you and will therefore differ from this Sample Plan.

jonathan.jerome

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CRC# 475298 Revised 12/12

Table Of Contents

IMPORTANT DISCLOSURE INFORMATION 1 - 8

Summary of Goals and Resources

Personal Information and Summary of Financial Goals 9 - 10

Net Worth Summary - All Resources 11

Net Worth Detail - All Resources 12

Resources Summary 13 - 14

Current Portfolio Allocation 15 - 16

Risk and Portfolio Information

Target Band 17

Results

Worksheet Detail - Allocation Comparison 18 - 19

Results - Current and Recommended 20 - 22

What If Worksheet 23 - 28

Worksheet Detail - Combined Details 29 - 32

Worksheet Detail - Retirement Distribution Cash Flow Chart 33 - 41

Worksheet Detail - Sources of Income and Earnings 42

Worksheet Detail - Inside the Numbers Final Result 43

Worksheet Detail - Special Asset Test 44

Worksheet Detail - Portfolio Probability Matrix 45

Worksheet Detail - Social Security Maximization 46

Employer Stock Plans

Stock Options 47 - 48

Stock Options Summary 49 - 52

Risk Management

Life Insurance Needs Analysis 53

Life Insurance Needs Analysis Detail 54 - 56

Disability Needs Analysis - John 57 - 59

Disability Needs Analysis - Jane 60 - 62

Long-Term Care Needs Analysis - John 63

Estate Analysis

Estate Introduction 64 - 65

Estate Assumptions 66

Estate Analysis Results Combined Summary 67 - 68

Estate Analysis Results Flowchart 69 - 72

Estate Analysis What If Results Combined Summary 73 - 74

Estate Analysis What If Results Flowchart 75 - 78

Appendix

Risk Assessment 79 - 81

Tax and Inflation Assumptions 82

Return Methodology 83 - 85

Glossary of Terms 86 - 89

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IMPORTANT DISCLOSURE INFORMATION

12/03/2012

Prepared for : John and Jane Smith Prepared by: Morgan Stanley

Page 1 of 89

Information that you provided about your assets, financial goals, and personal situation arekey assumptions for the calculations and projections in this Financial Plan. Please review allthe information thoroughly to ensure that it is correct and complete. In particular, pleasereview the Financial Plan sections titled "Personal Information and Summary of FinancialGoals", "Current Portfolio Allocation", and "Tax and Inflation Assumptions" to verify theaccuracy of these assumptions. If any of the assumptions are incorrect, you should notifyyour Financial Advisor. Even small changes in assumptions can have a substantial impact onthe results shown in this Financial Plan. The information provided by you should be reviewedperiodically and updated when either the information or your circumstances change.Morgan Stanley has no responsibility and is under no obligation to monitor or update thisFinancial Plan in the future unless expressly engaged by you to do so at that time.

Information Provided by You

Assumptions and Limitations

IMPORTANT: The projections or other information generated by LifeView® Advisorregarding the likelihood of various investment outcomes (including any assumedrates of return) are hypothetical in nature, do not reflect actual investment results,and are not guarantees of future results.

Every individual’s financial circumstances, needs and risk tolerances are different. ThisLifeView® Financial Plan (the "Financial Plan") is based on the information you provided tous, the assumptions you have asked us to make and the other assumptions indicated hereinas of the date of the Financial Plan. It is not an official account statement. The purpose oftaking the time to organize your financial life is to gain better control of your financialfuture. This Financial Plan should be considered a working document that can assist youwith this objective. You should carefully review the information and suggestions found inthis Financial Plan and then decide on future steps.

Any asset allocation information presented herein, which may take into account your assetsin one or more Employee Retirement Income Security Act of 1974, as amended("ERISA")-covered employee benefit plans and/or one or more individual retirementaccounts, is for general asset allocation education and information purposes only, andshould not be viewed as fiduciary investment advice or specific recommendations withrespect to any particular investment or asset allocation mix under the Investment AdvisersAct of 1940 as amended, ERISA, the Internal Revenue Code or any other applicable law. Inapplying any particular asset allocation model to your individual circumstances, you shouldconsider your other assets, income and investments, in addition to any interest(s) you mayhave in ERISA-covered employee benefit plans or individual retirement accounts. Thus, it isvery important for you to insure that you review this Financial Plan to make sure that itincludes all of your assets, income and investments.

Asset Allocation Information

LifeView Advisor Assumptions and Limitations

LifeView Advisor offers several methods of calculating results, each of which provides oneoutcome from a wide range of possible outcomes. LifeView Advisor does not purport torecommend or implement an investment strategy. Financial forecasts, rates of return, risk,inflation, and other assumptions may be used as the basis for illustrations in LifeViewAdvisor. They should not be considered a guarantee of future performance or a guaranteeof achieving overall financial objectives. All results use simplifying estimates andassumptions that are not tailored to your specific circumstances. No Financial Plan has theability to accurately predict the future, eliminate risk or guarantee investment results. Asinvestment returns, inflation, taxes, and other economic conditions vary from the LifeViewAdvisor assumptions, your actual results will vary (perhaps significantly) from thosepresented in this Financial Plan.

The assumed return rates in LifeView Advisor are not reflective of any specific investmentand do not include any fees or expenses that may be incurred by investing in specificproducts. The actual returns of a specific investment may be more or less than the returnsused in LifeView Advisor. The return assumptions are based on historic rates of return ofsecurities indices which serve as proxies for the broad asset classes. It is not possible todirectly invest in an index. Moreover, different forecasts may choose different indices as aproxy for the same asset class, thus influencing the return of the asset class. LifeViewAdvisor results may vary with each use and over time.

LifeView Advisor is powered by MoneyGuidePro™

Your Morgan Stanley Financial Advisor should have provided you with the ADVbrochure, the brochure supplement, and the Privacy Notice at the back of thisFinancial Plan. Please contact your Financial Advisor if you have not received thesedisclosure documents.

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Morgan Stanley cannot give any assurances that any estimates, assumptions orother aspects of the analyses will prove correct. They are subject to actual knownand unknown risks, uncertainties and other factors that could cause actual resultsto differ materially from those shown.

These analyses speak only as of the date of this Financial Plan. Morgan Stanleyexpressly disclaims any obligation or undertaking to update or revise anystatement or other information contained herein to reflect any change in pastresults, future expectations or circumstances upon which that statement or otherinformation is based.

Rate of Return Methodology

The analysis contained in the financial plan is conducted using the Morgan Stanley WealthManagement Global Investment Committee’s Strategic Return Estimates (“GIC Estimate”).GIC Estimate approved returns are generated based on proprietary formulas which includestudying historical return averages of the broad market indices and making strategicadjustments for more recent market conditions and other factors deemed relevant by theforecaster. The Return Methodology section includes a description of the returnmethodology that has been used to prepare this Financial Plan. The methodology should becarefully considered in evaluating the results presented to you.

LifeView Advisor is powered by MoneyGuidePro™

Hypothetical performance results have inherent limitations. There are frequently largedifferences between hypothetical and actual performance results subsequently achieved byany particular asset allocation or trading strategy. Hypothetical performance results do notrepresent actual trading and are generally designed with the benefit of hindsight. Theycannot account for all factors associated with risk, including the impact of financial risk inactual trading or the ability to withstand losses or to adhere to a particular trading strategyin the face of trading losses. There are numerous other factors related to the markets ingeneral or to the implementation of any specific trading strategy that cannot be fullyaccounted for in the preparation of hypothetical performance results and all of which canadversely affect actual trading results.

The return assumptions used in this Financial Plan are estimates based on average annualreturns for the index used as a proxy for each asset class. The portfolio returns arecalculated by weighting individual return assumptions for each asset class according to yourportfolio allocation. During the preparation of these analyses, your Morgan Stanley FinancialAdvisor may have refined the asset allocation strategy to develop a strategy which optimizesthe potential returns that could be achieved with the appropriate level of risk that youwould be willing to assume. Asset classes not included may have characteristics similar orsuperior to those being analyzed.

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LifeView Advisor Methodology

This Report provides a snapshot of your current financial position and can help you to focuson your financial resources and goals, and to create a plan of action. Because the resultsare calculated over many years, small changes can create large differences in future results.You should use this Report to help you focus on the factors that are most important to you.This Report does not provide legal, tax, or accounting advice. Before making decisions withlegal, tax, or accounting ramifications, you should consult appropriate professionals foradvice that is specific to your situation.

Report Is a Snapshot and Does Not Provide Legal, Tax, or Accounting Advice

LifeView Advisor offers several methods of calculating results, each of which provides oneoutcome from a wide range of possible outcomes. The methods used are: “AverageReturns,” “Bad Timing,” “Class Sensitivity,” and “Monte Carlo Simulations.”

Results Using Average Returns

The Results Using Average Returns are calculated using one average return for yourpre-retirement period and one average return for your post-retirement period. AverageReturns are a simplifying assumption. In reality, investment returns can (and often do) varywidely from year to year and vary widely from a long-term average return.

What If Worksheets allow you to review and compare the results of your LifeView Advisor.The Worksheets provide you with tools to consider alternative solutions.

What If Scenarios

Results with Bad Timing

Results with Bad Timing are calculated by using low returns in one or two years, andaverage returns for all remaining years of the Plan. For most Plans, the worst time for lowreturns is when you begin taking substantial withdrawals from your portfolio. The Resultswith Bad Timing assume that you earn a low return in the year(s) you select and then anAdjusted Average Return in all other years. This Adjusted Average Return is calculated sothat the average return of the Results with Bad Timing is equal to the return(s) used incalculating the Results Using Average Returns. This allows you to compare two results withthe same overall average return, where one (the Results with Bad Timing) has low returns inone or two years.

The default for the first year of low returns is two standard deviations less than the averagereturn, and the default for the second year is one standard deviation less than the averagereturn.

The Results Using Class Sensitivity are calculated by using different return assumptions forone or more asset classes during the years you select. These results show how your Planwould be affected if the annual returns for one or more asset classes were different thanthe average returns for a specified period in your Plan.

Results Using Class Sensitivity

Monte Carlo simulations are used to show how variations in rates of return each year canaffect your results. A Monte Carlo simulation calculates the results of your Plan by runningit many times, each time using a different sequence of returns. Some sequences of returnswill give you better results, and some will give you worse results. These multiple trialsprovide a range of possible results, some successful (you would have met all your goals) andsome unsuccessful (you would not have met all your goals). The percentage of trials thatwere successful is shown as the probability that your Plan, with all its underlyingassumptions, could be successful. In LifeView Advisor, this is the Probability of Success.Analogously, the percentage of trials that were unsuccessful is shown as the Probability ofFailure. The Results Using Monte Carlo Simulations indicate the likelihood that an eventmay occur as well as the likelihood that it may not occur. In analyzing this information,please note that the analysis does not take into account actual market conditions, whichmay severely affect the outcome of your goals over the long-term.

Results Using Monte Carlo Simulations

LifeView Advisor Presentation of Results

The Results Using Average Returns, Bad Timing, and Class Sensitivity display the resultsusing an “Estimated % of Goal Funded” and a “Safety Margin.”

LifeView Advisor uses a specialized methodology called Beyond Monte Carlo™, a statisticalanalysis technique that provides results that are as accurate as traditional Monte Carlosimulations with 10,000 trials, but with fewer iterations and greater consistency. BeyondMonte Carlo™ is based on Sensitivity Simulations, which re-runs the Plan only 50 to 100times using small changes in the return. This allows a sensitivity of the results to becalculated, which, when analyzed with the mean return and standard deviation of theportfolio, allows the Probability of Success for your Plan to be directly calculated.SAMPLE


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Estimated % of Goal Funded

For each Goal, the “Estimated % of Goal Funded” is the sum of the assets used to fund theGoal divided by the sum of the Goal’s expenses. All values are in current dollars. A result of100% or more does not guarantee that you will reach a Goal, nor does a result under100% guarantee that you will not. Rather, this information is meant to identify possibleshortfalls in this Plan, and is not a guarantee that a certain percentage of your Goals will befunded. The percentage reflects a projection of the total cost of the Goal that was actuallyfunded based upon all the assumptions that are included in this Plan, and assumes that youexecute all aspects of the Plan as you have indicated.

The Safety Margin is the estimated value of your assets at the end of this Plan, based on allthe assumptions included in this Report. Only you can determine if that Safety Margin issufficient for your needs.

Safety Margin

Bear Market Loss and Bear Market Test

The Bear Market Loss shows how a portfolio would have been impacted during the worstbear market since the Great Depression. Depending on the composition of the portfolio,the worst bear market is either the "Great Recession" or the "Bond Bear Market."

The Great Recession, from November 2007 through February 2009, was the worst bearmarket for stocks since the Great Depression. In LifeView Advisor, the Great RecessionReturn is the rate of return, during the Great Recession, for a portfolio comprised of cash,bonds, and stocks, with an asset mix equivalent to the portfolio referenced.

The Bond Bear Market, from July 1979 through February 1980, was the worst bear marketfor bonds since the Great Depression. In LifeView Advisor, the Bond Bear Market Return isthe rate of return, for the Bond Bear Market period, for a portfolio comprised of cash,bonds, and stocks, with an asset mix equivalent to the portfolio referenced.

The Bear Market Loss shows: 1) either the Great Recession Return or the Bond Bear MarketReturn, whichever is lower, and 2) the potential loss, if you had been invested in thiscash-bond-stock portfolio during the period with the lower return. In general, mostportfolios with a stock allocation of 20% or more have a lower Great Recession Return, andmost portfolios with a combined cash and bond allocation of 80% or more have a lowerBond Bear Market Return.

The Bear Market Test, included in the Stress Tests, examines the impact on your Plan resultsif an identical Great Recession or Bond Bear Market, whichever would be worse, occurredthis year. The Bear Market Test shows the likelihood that you could fund your Needs,Wants and Wishes after experiencing such an event.

Regardless of whether you are using historical or projected returns for all other LifeViewAdvisor results, the Bear Market Loss and Bear Market Test use returns calculated fromhistorical indices. If you are using historical returns, the indices in the Bear Market Loss andthe Bear Market Test may be different from indices used in other calculations. These resultsare calculated using only three asset classes – Cash, Bonds, and Stocks. Alternative assetclasses (e.g., real estate, commodities), if applicable, are included in the Stocks asset class.The indices and the resulting returns for the Great Recession and the Bond Bear Market are:

Because the Bear Market Loss and Bear Market Test use the returns from asset class indicesrather than the returns of actual investments, they do not represent the performance forany specific portfolio, and are not a guarantee of minimum or maximum levels of losses orgains for any portfolio. The actual performance of your portfolio may differ substantiallyfrom those shown in the Great Recession Return, the Bond Bear Market Return, the BearMarket Loss, and the Bear Market Test.

AssetClass

Index Great RecessionReturn

11/2007 – 02/2009

Bond Bear MarketReturn

07/1979 – 02/1980

Cash Ibbotson U.S. 30-dayTreasury Bills

1.97% 7.08%

Bonds Ibbotson Intermediate-TermGovernment Bonds – TotalReturn

10.90% -8.89%

Stocks Ibbotson Large CompanyStocks – Total Return

-48.81% 14.61%

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A Note on Tax-Qualified/Tax-Deferred Assets

If your portfolio contains assets which are tax-qualified or tax-deferred under the InternalRevenue Code, you should consider the tax effects of any portfolio withdrawal from suchamounts, as opposed to from fully taxable accounts, with your tax and/or legal advisor(s).Generally speaking, the withdrawal of tax-qualified or tax-deferred amounts can result inincome tax liability where no such liability would exist if the amounts had been withdrawnfrom a taxable account. Furthermore, (a) tax penalties can occur when such assets arewithdrawn prior to age 59½, (b) such withdrawals can have detrimental effects on specifictax planning strategies (e.g., “72(t) payments”), and (c) certain qualified or tax-deferredassets are eligible for or receive special treatment upon withdrawal (e.g., net unrealizedappreciation treatment, eligibility for rollover). In light of the foregoing, we stronglyrecommend that you consult your tax and/or legal advisors in connection with this FinancialPlan and any withdrawals that you make from your portfolio.

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IMPORTANT NOTES AND DISCLOSURES FROM MORGAN STANLEY

Morgan Stanley provides its existing and prospective customers with a number of financialtools that produce certain reports to assist customers in managing their wealth and assets.This LifeView Financial Plan was generated by using a computer software programdeveloped by MoneyGuidePro, a third party software provider. Results may vary with eachuse of the software and over time. Enhancements and changes to the software may bemade in the future. Morgan Stanley is not responsible for the accuracy of the assumptionsmade in the Financial Plan, or the calculations in the analysis. Future Financial Plans that aregenerated may contain information capabilities, and other content, that is more expansiveor otherwise different from the content of this Financial Plan.

This Financial Plan does not constitute an offer to buy, sell, or recommend any particularinvestment or asset, nor does it recommend that you engage in any particular investment,manager or trading strategy. It reflects only allocations among broad asset classes. Allinvestments have risks. The decisions as to when and how to invest are solely yourresponsibility.

By providing you this Financial Plan, neither Morgan Stanley nor your FinancialAdvisor is acting as a fiduciary for purposes of ERISA or section 4975 of the Codewith respect to any ERISA-covered employee benefit plan or any individualretirement account in either the planning, execution or provision of this analysis.Unless otherwise provided in a written agreement between you and MorganStanley, Morgan Stanley, its affiliates and their respective employees, agents andrepresentatives, including your Financial Advisor: (a) do not have discretionaryauthority or control with respect to the assets in any ERISA-covered employeebenefit plan or any individual retirement account included in this Financial Plan, (b)will not be deemed an "investment manager" as defined under ERISA, or otherwisehave the authority or responsibility to act as a "fiduciary" (as defined under ERISA)with respect to such assets, and (c) will not provide "investment advice," as definedby ERISA and/or section 4975 of the Code, as amended, with respect to such assets.

This Financial Plan will be deemed to create an investment advisory relationship betweenyou and Morgan Stanley that begins upon delivery of the Financial Plan to you and endsthirty days later, during which time your Financial Advisor is available to review the LifeViewFinancial Plan with you. This advisory relationship means that the services we offer aregoverned by different laws and separate contracts than those relating to a brokeragerelationship. Our investment advisory relationship is separate and distinct from anybrokerage relationship that you may have with Morgan Stanley on any of your accounts.When Morgan Stanley is acting in its capacity as your broker, Morgan Stanley is governedby securities laws which regulate broker-dealers such as the Securities Exchange Act of 1934and the Securities Act of 1933. However, when acting in an advisory capacity, MorganStanley will be subject to different laws which govern investment advisers, such as theInvestment Advisers Act of 1940. For example, investment advisers, unlike brokers, arerequired to disclose to their advisory clients if any of the investment adviser’s affiliatesreceive any additional compensation as a result of the advisory relationship. Additionally,investment advisers may have an obligation to monitor their clients’ advisory accounts andto make ongoing recommendations to them, while a broker has no such obligations. Whenpreparing a Financial Plan, Morgan Stanley may take into consideration assets held in yourMorgan Stanley brokerage accounts. However, those accounts will remain brokerageaccounts and will not become advisory accounts as a result of the Financial Plan. Thatmeans that Morgan Stanley will not have advisory duties on those accounts and that youwill continue to be responsible for monitoring and making all investment decisions withrespect to those accounts. For additional answers to questions about the differencebetween our investment advisory and brokerage services, please visit our web site athttp://www.morganstanley.com/ourcommitment/ or contact us at 866-866-7426.

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IMPORTANT NOTES AND DISCLOSURES FROM MORGAN STANLEY (continued)

Morgan Stanley is both a registered broker-dealer and investment adviser and its FinancialAdvisors act in dual capacities as broker-dealer and investment advisory representatives.Many Morgan Stanley Financial Advisors may use the designation Certified Financial Planneror "CFP," a certification mark owned by the Certified Financial Planner Board of Standards,Inc. Each of these Financial Advisors also is licensed to act as a broker-dealer representativeon behalf of Morgan Stanley. When any of these Financial Advisors assists clients byproviding them a Financial Plan, he/she is doing so as a CFP and investment advisoryrepresentative of Morgan Stanley. However, in providing other services to customers, suchas assisting customers in implementing a Financial Plan once it has been delivered, providingfinancial tools/reports to customers, or effecting transactions for the customer's brokerageaccount, the Financial Advisor carrying a CFP designation is only acting as a broker-dealerrepresentative unless the Financial Advisor and client have entered into a written agreementthat creates an investment advisory relationship.

4) you understand and accept each of the terms of the attached Engagement Agreement.

Powered by MoneyGuidePro™ and MoneyGuidePro™ are marks of PIEtech, Inc.

© 2012 Morgan Stanley Smith Barney LLC. Member SIPC.

3) you understand that Morgan Stanley and your Financial Advisor are not fiduciaries underERISA or the Internal Revenue Code with respect to this Financial Plan or your use or our use(on your behalf) of the software which generated this Financial Plan, or your IRA andretirement plan accounts unless otherwise provided in a written agreement between youand Morgan Stanley. The information in this Financial Plan is provided to you on theunderstanding that, for purposes of ERISA and the Code, it is intended to be educationalmaterial, will not form a primary basis for any investment decision made by you or on yourbehalf, and will not be viewed for ERISA or Code purposes as fiduciary investment advice orspecific recommendations with respect to asset allocation or any particular investment, andthat (unless otherwise provided in a written agreement) you remain solely responsible foryour assets and all investment decisions with respect to your assets; and

Please keep in mind that Morgan Stanley is not a tax or legal advisor and this Financial Plandoes not constitute tax, legal or accounting advice. You should discuss any tax and legalinformation outlined in this document with your accounting, tax and legal advisors prior totaking action. Your Morgan Stanley Financial Advisor can work with you and these advisorsto answer your questions and, if you choose, help you implement the options you decideupon. There is no requirement, however, that you implement any strategies at all. Inaddition, you are not obligated to implement any options shown in this Financial Plan or tootherwise conduct business through Morgan Stanley or its affiliates.

Timing for implementing, monitoring and adjusting your strategies is a critical element inachieving your financial objectives. You are responsible for implementing, monitoring andperiodically reviewing and adjusting your investment strategies.

By accepting delivery of this Financial Plan, you are deemed to acknowledge and agree that:

1) you have reviewed and accept the information contained within this Financial Plan andunderstand the disclaimers, assumptions and methods included with it;

2) you believe that all information provided by you is complete and accurate to the best ofyour knowledge;

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Engagement Agreement for your LifeView Financial Plan

This agreement is designed to provide you with information that will ensure that youunderstand the nature of your financial planning relationship with Morgan Stanley SmithBarney LLC (“MSSB”). There are certain items that reflect limitations on the duration ofyour financial planning relationship, which are designed to ensure that MSSB will be able tocontinue to service your brokerage or other advisory needs with maximum flexibility. If anyof these items do not reflect your understanding, you should immediately contact yourFinancial Advisor or PWM Private Wealth Advisor (together referred to herein as your“Financial Advisor”) as applicable.

• The LifeView Financial Plan is a financial planning service for which MSSB may charge afee as agreed to by you and your Financial Advisor. If a fee is charged, you will be providedwith a Financial Planning Fee Consent Form that will set forth the fee amount and paymentoptions for the LifeView Financial Plan.

• The LifeView Financial Plan is reliant on the information you provide to MSSB. The qualityof the plan MSSB prepares for you is dependent on the completeness and accuracy of thisinformation. Furthermore, your Financial Advisor and MSSB will only be responsible forcorrecting and updating the information you provided and/or the LifeView Financial Plan(e.g., to reflect future changes in your life, financial situation, goals, and market oreconomic conditions) if you engage them to do so. As a result, the LifeView Financial Planmay very well become outdated or inaccurate as these factors change over time, unless youtake steps to work with your Financial Advisor to correct and update the LifeView FinancialPlan.

• All investments have risks. The performance and attainment of financial objectives is notguaranteed. All estimates and assumed data, including returns, are hypothetical and do notrepresent a guarantee or promise of future results.

• An investment advisory relationship is created between you and MSSB that begins upondelivery of the financial plan to you and ends thirty days later, during which time yourFinancial Advisor is available to review the LifeView Financial Plan with you. This advisoryrelationship is separate from the relationship(s) created by other accounts and services thatyou may have with MSSB. You and your Financial Advisor can reopen the planningrelationship at any time.

• When preparing the LifeView Financial Plan, MSSB may consider assets held in your MSSBbrokerage accounts. However, those accounts will remain brokerage accounts and will notbecome advisory accounts as a result of the LifeView Financial Plan. You will continue to beresponsible for monitoring and making all investment decisions for those accounts.

• In order to ensure that your brokerage accounts remain as such, and thus you can takeadvantage of the full range of services and investment products offered through thoseaccounts, please understand that if the assets of any ERISA-covered employee benefit plan,Keogh Plan or IRA (“Retirement Assets”) are taken into account in the LifeView FinancialPlan, all information and materials provided in the LifeView Financial Plan are (a) as notedabove, based upon the information provided by you, and various assumptions, (b) intendedfor educational purposes only, and (c) provided to you by MSSB with the understandingthat, for the purposes of ERISA and the Internal Revenue Code, the reports are general innature, and will not form a primary basis for any investment decision made by you or onyour behalf. These understandings are designed to ensure that MSSB and its FinancialAdvisors, in providing this product, are not and will not be viewed (by you or anyone else) asfiduciary investment advice or specific recommendations with respect to asset allocation orany particular investment for those Retirement Assets, and thus MSSB and its FinancialAdvisors will not be acting as a fiduciary under either ERISA or the Internal Revenue Codewith respect to such assets.

• You understand that MSSB and its Financial Advisors do not provide tax or legal advice,and that you should consult with your personal advisors with respect to the tax and legalimplications of the LifeView Financial Plan, as appropriate.

• An assignment of this Engagement Agreement and financial planning relationship to anew investment adviser firm will not be made without your prior consent, which may beobtained by providing you at least seven days’ prior notice of the assignment.

• You have sole responsibility for making all investment decisions with respect to theimplementation of the LifeView Financial Plan. You may implement the LifeView FinancialPlan at MSSB or at another firm. If you engage or have engaged MSSB, it will act as yourbroker, unless you ask it, in writing, to act as your investment adviser on any particularaccount.

As noted above, if the foregoing does not reflect your understanding of your relationshipwith MSSB and your Financial Advisor and the nature of the firm’s financial planningservices, including the services that are provided to in connection with the preparation ofyour LifeView Financial Plan, you should immediately contact your Financial Advisor.

© 2012 Morgan Stanley Smith Barney LLC. Member SIPC.

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Summary of Goals and Resources

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Personal Information and Summary of Financial Goals

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See IMPORTANT DISCLOSURE INFORMATION at the beginning of this document for explanations of assumptions, limitations, and methodologies.

John and Jane Smith

Needs

Retirement - Living Expense10

JohnJaneBoth Retired (2026-2051)Jane Alone Retired (2052-2055)

65 / 202663 / 2026$225,000$175,000Base Inflation Rate (2.00%)

College - Jimmy8

4 years starting in 2016Attending College - Average All

$26,832Base Inflation Rate plus 4.00% (6.00%)

Wants

Travel7

When John retiresRecurring every year for a total of 20 times

$15,000Base Inflation Rate (2.00%)

Wishes

Leave Bequest3

End of Jane's plan $500,000No InflationSAMPLE

Personal Information and Summary of Financial Goals

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Personal Information

John

Male - born 05/10/1961, age 51

Jane

Female - born 10/05/1963, age 49

Married, US Citizens living in NY

Employed - $250,000

Employed - $250,000

• This section lists the Personal and Financial Goal information you provided, which willbe used to create your Report. It is important that it is accurate and complete.

Participant Name Date of Birth Age Relationship

Jimmy 07/07/1998 14 Child

ABC Charity 0 Charity

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Net Worth Summary - All Resources

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This is your Net Worth Summary as of 12/03/2012. Your Net Worth is the difference between what you own (your Assets) and what youowe (your Liabilities). To get an accurate Net Worth statement, make certain you have entered all of your Assets and Liabilities.

+ $1,375,000Other Assets

Investment Assets $1,550,000

Total Liabilities $400,000

Net Worth $2,525,000

$2,925,000Total Assets

-

Description Total

Investment Assets

Employer Retirement Plans $650,000

Individual Retirement Accounts $75,000

College Saving Plans $125,000

Taxable and/or Tax-Free Accounts $700,000

Total Investment Assets: $1,550,000

Other Assets

Personal Asset : $750,000

Business and Property : $400,000

Cash Value Life : $200,000

Stock Options $25,000

Total Other Assets: $1,375,000

Liabilities

Personal Real Estate Loan: $400,000

Total Liabilities: $400,000

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Net Worth Detail - All Resources

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This is your Net Worth Detail as of 12/03/2012. Your Net Worth is the difference between what you own (your Assets) and what you owe(your Liabilities). To get an accurate Net Worth statement, make certain you have entered all of your Assets and Liabilities.

Description TotalJointJaneJohn

Investment Assets

John's 401k $350,000$350,000

Jane's 401k $300,000$300,000

Jane's IRA $75,000$75,000

Jimmy's 529 Plan $125,000$125,000

John's Investments $200,000$200,000

Joint Investment Account $500,000$500,000

Total Investment Assets: $1,550,000$675,000 $375,000 $500,000

Other Assets

NY Home $750,000$750,000

Real Estate Investment $400,000$400,000

Life Insurance - John $200,000$200,000

Morgan Stanley $25,000$25,000

Total Other Assets: $1,375,000$225,000 $0 $1,150,000

Liabilities

Mortgage $400,000$400,000

Total Liabilities: $400,000$0 $0 $400,000

Net Worth: $2,525,000

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Resources Summary

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Description Owner Current Value Additions Assign to Goal

Investment Assets

JaneJane's 401k $300,000 $25,000 Fund All Goals

$300,000Account Total

JaneJane's IRA $75,000 Fund All Goals


JohnJimmy's 529 Plan $125,000 College - Jimmy


JohnJohn's 401k $350,000 $23,400 Fund All Goals


JohnJohn's Investments $200,000 Fund All Goals

$100,000Cash

$50,000Morgan Stanley

$50,000Toronto-Dominion Bank

Joint SurvivorshipJoint Investment Account $500,000 $10,000 Fund All Goals

$500,000Taxable Account Total

$1,550,000Total Investment Assets :

Description Owner Current Value Future Value Assign to Goal

Other Assets

NY Home Joint $750,000 Not Funding Goals

Real Estate Investment Joint $400,000 $500,000 at John'sretirement

Fund All Goals

Life Insurance - John John $200,000 Not Funding Goals

$1,350,000Total of Other Assets :

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Resources Summary

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Annual Premium Cash ValueDescription Owner BeneficiaryInsured Death Benefit Premium Paid

Insurance Policies

Cash Value Life Insurance Policies Summary (included in Assets)

$1,200 $200,000Life Insurance - John Other Asset

John Co-Client of Insured- 100%

John $1,000,000 For 10 years

$1,000,000Total Death Benefit of All Policies :

If the assets include a Variable Life Investment Asset, the value shown for this policy in the Premium column reflects only the assumedannual increase in the cash value of the insurance policy and not the total premium.

Social Security

Description Value Assign to GoalOwner File Status

Social Security John $30,634 starting At John'sFull Retirement Age

Fund All GoalsNormal

Social Security Jane $30,634 starting At Jane'sFull Retirement Age

Fund All GoalsNormal

Retirement Income

Description Value Assign to GoalOwner Increase Rate

Pension Income John $15,000 from John'sRetirement to End of Plan(100% to Survivor)

Fund All GoalsNo

Type Outstanding Balance Monthly PaymentDescription Interest RateOwner

Liabilities

1st Mortgage Mortgage $400,000 $1,5006.00%Joint

$400,000Total Outstanding Balance :

SAMPLE

Current Portfolio Allocation

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Total Stock61%

This page shows how your Investment Assets are currently allocated among the different Asset Classes. It includes only those Assets youhave identified to fund Goals in this Plan.

Projected Assumptions

Total Return 7.19%

Base Inflation Rate 2.00%

Real Return 5.19%

Standard Deviation 9.31%

Bear Market Returns

Great Recession November 2007 thru February 2009 -29%

Bond Bear Market July 1979 thru February 1980 10%

Asset Class Rate of ReturnValue % of Total Assets

Investment Portfolio

31%$478,7503.00%Cash - USD (90-day Tbills)

8%$125,0005.60%Global Corporate/Securitized Bonds (hedged to USD)

32%$498,7509.30%US Large-Cap Value Stocks

2%$25,0009.30%US Large-Cap Growth Stocks

7%$113,7509.90%US Mid-Cap Value Stocks

5%$82,50010.30%US Small-Cap Value Stocks

2%$31,25010.30%US Small-Cap Growth Stocks

9%$142,5008.90%Developed Markets ex US Stocks (unhedged)

3%$52,50011.10%Global Emerging Market Stocks (unhedged)

Total : 100%$1,550,000

Effect of Stock Options

Value of Vested Stock Options (before tax) $25,000

Value of Portfolio with Vested Stock Options $1,575,000

Total Stock Including Stock Options 62%

SAMPLE

Current Portfolio Allocation

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Tax-Free Rates of Return

2.30%Cash - USD (90-day Tbills)

3.90%Global Govt / Govt-Related Bonds (hedged toUSD)

3.10%Global Short-Term Government Bonds (hedged toUSD)

SAMPLE

Risk and Portfolio Information

SAMPLE

Target Band

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The Risk-Based Portfolio was selected from this list of Model Portfolios, based upon the answers you provided in your Risk ToleranceQuestionnaire. The Target Portfolio was selected based on your investment objectives and risk tolerance. The Target Portfolio will be thesame as the Risk Based Portfolio unless you choose a Alternative Portfolio or Model Portfolio. The Average Real Return is equal to theAverage Total Return minus the inflation rate of 2.00%.

RiskBased

TargetBand

Name TotalStock RealCurrent

Average Return

StandardDeviation

BondCash Alternative

Model 1 4.47%0% 2.47% 2.19%75%25% 0%

Model 2 5.91%16% 3.91% 4.05%60%13% 11%

Model 3 6.84%28% 4.84% 6.18%48%8% 16%

Current 7.19%61% 5.19% 9.31%8%31% 0%

Model 4 7.42%35% 5.42% 7.79%40%5% 20%

Model 5 7.97%44% 5.97% 9.53%32%3% 21%

Model 6 8.61%58% 6.61% 11.67%18%2% 22%

Model 7 9.27%75% 7.27% 13.75%0%0% 25%

Model 8 9.39%75% 7.39% 14.10%0%0% 25%

Return vs. Risk Graph

This graph shows the relationship of return and risk for each Portfolio in the chart above.

When deciding how to invest your money, you must determine the amount of risk you arewilling to assume to pursue a desired return. The Return versus Risk Graph reflects a set ofportfolios that assume a low relative level of risk for each level of return, or conversely anoptimal return for the degree of investment risk taken. The graph also shows the position ofthe Current, Target, Risk-Based, and Alternative Portfolios. The positioning of theseportfolios illustrates how their respective risks and returns compare to each other as well asthe optimized level of risk and return represented by the Portfolios.SAMPLE

Results

SAMPLE

Worksheet Detail - Allocation Comparison

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Current Portfolio

These charts compare your Current Portfolio with the Target Portfolio you selected and show the allocation changes you should consider.

Target PortfolioModel 6

Projected Assumptions

7.19% Total Return 8.61%

2.00% Base Inflation Rate 2.00%

5.19% Real Return 6.61%

9.31% Standard Deviation 11.67%

Bear Market Returns

-29% Great Recession -38%

10% Bond Bear Market 10%

Asset Class % of Total Target AmountCurrent Amount % of Total

Portfolio Comparison with Allocation Changes

Increase / (Decrease)

Cash - USD (90-day Tbills) 2% $31,00031%$478,750 -$447,750

Global Govt / Govt-Related Bonds (hedged toUSD)

2% $31,0000%$0 $31,000

Global Corporate/Securitized Bonds (hedgedto USD)

1% $15,5008%$125,000 -$109,500

Global Short-Term Government Bonds(hedged to USD)

3% $46,5000%$0 $46,500

Global High Yield Bonds (hedged to USD) 6% $93,0000%$0 $93,000

Global Emerging Markets Local Debt(unhedged)

4% $62,0000%$0 $62,000

US Large-Cap Value Stocks 10% $155,00032%$498,750 -$343,750

US Large-Cap Growth Stocks 10% $155,0002%$25,000 $130,000

US Mid-Cap Value Stocks 2% $31,0007%$113,750 -$82,750

US Mid-Cap Growth Stocks 2% $31,0000%$0 $31,000

US Small-Cap Value Stocks 2% $31,0005%$82,500 -$51,500

US Small-Cap Growth Stocks 2% $31,0002%$31,250 -$250

Developed Markets ex US Stocks (unhedged) 23% $356,5009%$142,500 $214,000

Scenario: Model 6 - Target

SAMPLE

Worksheet Detail - Allocation Comparison

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Asset Class % of Total Target AmountCurrent Amount % of Total

Portfolio Comparison with Allocation Changes

Increase / (Decrease)

Global Emerging Market Stocks (unhedged) 7% $108,5003%$52,500 $56,000

Global REITs (unhedged) 4% $62,0000%$0 $62,000

Commodities 3% $46,5000%$0 $46,500

Global Inflation-Linked Securities (unhedged) 2% $31,0000%$0 $31,000

Broad Fund of Hedge Funds 10% $155,0000%$0 $155,000

Managed Futures 5% $77,5000%$0 $77,500

$1,550,000 $1,550,000

Scenario: Model 6 - Target

SAMPLE

Results - Current and Recommended

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Results Current Scenario Recommended Scenario

Average Return Bad Timing Average Return Bad Timing

100% 100% 100% 100%Estimated % of Goals Funded

Likelihood of Funding All Goals

Probability of Success: 64%

Below Confidence Zone


In Confidence Zone

Your Confidence Zone: 70% - 90%

Results Current Scenario Model 6 - Target Change In Value

Retirement

Retirement Ages

65 in 202665 in 2026John

63 in 202663 in 2026Jane

Planning Ages

90 in 205190 in 2051John

92 in 205592 in 2055Jane SAMPLE


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Goals

Needs

$225,000$175,000

$225,000$175,000

10 Retirement - Living ExpenseBoth RetiredJane Alone Retired

$26,8324

2016

$26,8324

2016

8 College - JimmyYears of SchoolStart Year

Wants

$15,000At John's retirement

120

$15,000At John's retirement

120

7 TravelStartingYears between occurrencesNumber of occurrences

Wishes

$500,000End of Jane's plan

$500,000End of Jane's plan

3 Leave BequestStarting

$7,457,328$7,457,328Total Spending for Life of Plan

Savings

$48,400$48,400Qualified

$10,000$10,000Taxable

$58,400$58,400Total Savings This Year SAMPLE


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Investments

$1,550,000$1,550,000Portfolio Value

3% Less StockModel 6CurrentAllocation Before Retirement

58%61%Percentage Stock

8.61%7.19%Total Return

11.67%9.31%Standard Deviation

-38%-29%Great Recession Return 11/07 - 2/09

10%10%Bond Bear Market Return 7/79 - 2/80

3% Less StockModel 6CurrentAllocation During Retirement

58%61%Percentage Stock

8.61%7.19%Total Return

11.67%9.31%Standard Deviation

-38%-29%Great Recession Return 11/07 - 2/09

10%10%Bond Bear Market Return 7/79 - 2/80

2.00%2.00%Inflation

SAMPLE

What If Worksheet

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This Worksheet allows you to analyze and compare the results of one or more scenarios that you created by varying the Plan assumptions.

Goals


Current Scenario Model 6 - Target Model 5 - Risk Based Incl. LTC Premiums

Average Return Bad Timing Average Return Bad Timing Average Return Bad Timing Average Return Bad Timing

Needs

100% 100% 100% 100% 100% 100% 100% 100%10 Retirement

N/A N/A N/A N/A N/A N/A 100% 100%9 LTC for John

124% 124% 134% 134% 130% 130% 134% 134%8 College - Jimmy

Wants

100% 100% 100% 100% 100% 100% 100% 100%7 Travel

Wishes

100% 100% 100% 100% 100% 100% 100% 100%3 Leave Bequest

$2,689

$6,427

Current dollars (in thousands) :

Future dollars (in thousands) :

$7,646

$18,274

Safety Margin (Value at End of Plan)

$5,199

$12,425

$7,570

$18,093

$248

$592

$5,507

$13,162

$3,284

$7,849

$5,345

$12,775


Below Confidence Zone


In Confidence Zone


In Confidence Zone


In Confidence Zone

Your Confidence Zone: 70% - 90%

Likelihood of Funding All GoalsMonte Carlo Results

Indicates different data between the Scenario in the first column and the Scenario in any other column.

SAMPLE

What If Worksheet

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Key Assumptions Current Scenario Model 6 - Target Model 5 - Risk Based Incl. LTC Premiums

Stress Tests

Method(s) Bad Timing Program Estimate Years of bad returns: 2026: -11.43% 2027: -2.12%

Bad Timing Program Estimate Years of bad returns: 2026: -14.74% 2027: -3.06%



False 0

Funding Order

Assets - Ignore Earmark No No No No False 1

Retirement Income - Ignore Earmark No No No No False 1

Hypothetical Average Rate of Return

Before Retirement : Current Model 6 Model 5 Model 6 False 1

Total Return : 7.19% 8.61% 7.97% 8.61% False 1

Standard Deviation : 9.31% 11.67% 9.53% 11.67% False 1

Total Return Adjustment : 0.00% 0.00% 0.00% 0.00% False 1

Adjusted Real Return : 5.19% 6.61% 5.97% 6.61% False 1

After Retirement : Current Model 6 Model 5 Model 6 False 1

Total Return : 7.19% 8.61% 7.97% 8.61% False 1

Standard Deviation : 9.31% 11.67% 9.53% 11.67% False 1

Total Return Adjustment : 0.00% 0.00% 0.00% 0.00% False 1

Adjusted Real Return : 5.19% 6.61% 5.97% 6.61% False 1

Base inflation rate : 2.00% 2.00% 2.00% 2.00% False 1

Tax-Free Options

Before Retirement True 1

Reallocate a portion of bonds to tax-free: No No No No False 1

Percent of bond allocation to treat as tax-free: 0.00% 0.00% 0.00% 0.00% False 1

After Retirement True 1

Reallocate a portion of bonds to tax-free: No No No No False 1

Percent of bond allocation to treat as tax-free: 0.00% 0.00% 0.00% 0.00% False 1


SAMPLE

What If Worksheet

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Goals

Living Expense True 1

Retirement Age True 1

John 65 65 65 65 False 1

Jane 63 63 63 63 False 1

Planning Age True 1

John 90 90 90 90 False 1

Jane 92 92 92 92 False 1

One Retired True 1

John Retired and Jane Employed $79,200 $79,200 $79,200 $79,200 False 1

Jane Retired and John Employed $79,200 $79,200 $79,200 $79,200 False 1

Both Retired True 1

Both Retired $225,000 $225,000 $225,000 $225,000 False 1

One Alone - Retired True 1

Jane Alone Retired $175,000 $175,000 $175,000 $175,000 False 1

John Alone Retired $127,200 $127,200 $127,200 $127,200 False 1

One Alone - Employed True 1

John Alone Employed $79,200 $79,200 $79,200 $79,200 False 1

Jane Alone Employed $79,200 $79,200 $79,200 $79,200 False 1

College - Jimmy True 1

Year : 2016 2016 2016 2016 False 1

Years of Education : 4 4 4 4 False 1

Annual Cost : $26,832 $26,832 $26,832 $26,832 False 1

Travel True 1

Year : At John's retirement At John's retirement At John's retirement At John's retirement False 1

Cost : $15,000 $15,000 $15,000 $15,000 False 1

Is recurring : Yes Yes Yes Yes False 1

Years between occurrences : 1 1 1 1 False 1

Number of occurrences : 20 20 20 20 False 1


SAMPLE

What If Worksheet

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Goals

Leave Bequest True 1

Cost : $500,000 $500,000 $500,000 $500,000 False 1

Retirement Income

Pension Income True 1

Annual Income : $15,000 $15,000 $15,000 $15,000 False 1

Start Year : John's retirement John's retirement John's retirement John's retirement False 1

Select when income will end : End of plan End of plan End of plan End of plan False 1

Year to end retirement income : 2055 2055 2055 2055 False 1

Survivor Benefit : 100% 100% 100% 100% False 1

Social Security True 1

Select Social Security Strategy At FRA At FRA At FRA At FRA False 1

John True 1

Select Filing Method: Normal Normal Normal Normal False 1

Select when benefits will begin: At John's Full RetirementAge

At John's Full RetirementAge



False 1

Age to begin retirement benefits: 67 yrs 0 mos 67 yrs 0 mos 67 yrs 0 mos 67 yrs 0 mos False 1

Select benefit to use: Use the Program Estimate Use the Program Estimate Use the Program Estimate Use the Program Estimate False 1

Social Security Amount: $30,634 $30,634 $30,634 $30,634 False 1

Widower annual benefit: $0 $0 $0 $0 False 1

Reduce benefits by: 0% 0% 0% 0% False 1

Jane True 1

Select Filing Method: Normal Normal Normal Normal False 1

Select when benefits will begin: At Jane's Full RetirementAge

At Jane's Full RetirementAge



False 1

Age to begin retirement benefits: 67 yrs 0 mos 67 yrs 0 mos 67 yrs 0 mos 67 yrs 0 mos False 1

Select benefit to use: Use the Program Estimate Use the Program Estimate Use the Program Estimate Use the Program Estimate False 1

Social Security Amount: $30,634 $30,634 $30,634 $30,634 False 1

Widower annual benefit: $0 $0 $0 $0 False 1

Reduce benefits by: 0% 0% 0% 0% False 1


SAMPLE

What If Worksheet

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Asset Additions

John's 401k 10.00% 10.00% 10.00% 10.00% True 1

Roth: 0.00% 0.00% 0.00% 0.00% False 1

Maximum contribution each year: No No No No False 1

% Designated as Roth: 0.00% 0.00% 0.00% 0.00% False 1

Plan addition amount: $23,400 $23,400 $23,400 $23,400 False 1

Year additions begin: 2012 2012 2012 2012 False 1

John - Fund All Goals False 1

Jane's 401k 5.00% 5.00% 5.00% 5.00% True 1

Roth: 0.00% 0.00% 0.00% 0.00% False 1

Maximum contribution each year: No No No No False 1

% Designated as Roth: 0.00% 0.00% 0.00% 0.00% False 1

Plan addition amount: $25,000 $25,000 $25,000 $25,000 False 1


Jane - Fund All Goals False 1

Joint Investment Account True 1

After-Tax Addition: $10,000 $10,000 $10,000 $10,000 False 1

Tax-Free Addition: $0 $0 $0 $0 False 1


Joint - Fund All Goals False 1

Extra Savings by Tax Category

John's Qualified $0 $0 $0 False 1

Jane's Qualified $0 $0 $0 False 1

John's Roth $0 $0 $0 False 1

Jane's Roth $0 $0 $0 False 1

John's Tax-Deferred $0 $0 $0 False 1

Jane's Tax-Deferred $0 $0 $0 False 1

Taxable $0 $0 $0 False 1


SAMPLE

What If Worksheet

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Stock Options

Morgan Stanley True 1

Include in plan : Yes Yes Yes Yes False 1

Exercise Scenario : Exercise Scenario 2 Exercise Scenario 2 Exercise Scenario 2 Exercise Scenario 2 False 1

Select Special Amount : Expected Expected Expected Expected False 1

Vesting Termination Year : 2022 2022 2022 2022 False 1

Return : 9.30% 9.30% 9.30% 9.30% False 1

Other Assets

Real Estate Investment True 1

Include in Plan : Yes Yes Yes Yes False 1

Select special amount : Expected Expected Expected Expected False 1

When received : John's retirement John's retirement John's retirement John's retirement False 1

Amount of cash received : $500,000 $500,000 $500,000 $500,000 False 1

Insurance Premiums

Buy Long Term Care Policy for John True 1

Include in Plan? No No Yes False 1

Benefits : $200/day for 10 years $200/day for 10 years $200/day for 10 years False 1

Annual Premium : $1,000 $1,000 $1,000 False 1

When payments stop : At end of John's Plan At end of John's Plan At end of John's Plan False 1

Tax Options

Include Tax Penalties : Yes Yes Yes Yes False 1

Change Tax Rate? No No No No False 1

Year To Change : False 1

Change Tax Rate by this % (+ or -) : 0.00% 0.00% 0.00% 0.00% False 1


SAMPLE

Worksheet Detail - Combined Details

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Total Portfolio Value Graph

These pages provide a picture of how your Investment Portfolio may hypothetically perform over the life of this Plan. The graph shows theeffect on the value of your Investment Portfolio for each year. The chart shows the detailed activities that increase and decrease yourInvestment Portfolio value each year including the funds needed to pay for each of your Goals. Shortfalls that occur in a particular year aredenoted with an 'X' under the Goal column.

Scenario : Model 6 - Target using Average Returns

x - denotes shortfall

SAMPLE


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Event or Ages Year

Beginning Portfolio Value

Earmarked Fund AllGoals

AdditionsTo Assets

OtherAdditions

StockOptions

PostRetirement

Income

InvestmentEarnings

Taxes

Funds Used

Retirement College -Jimmy

Travel LeaveBequest

EndingPortfolio

Value

51/49 2012 125,000 1,425,000 58,400 0 0 0 138,483 22,070 0 0 0 0 1,724,813

52/50 2013 135,763 1,589,051 58,918 0 0 0 153,579 24,248 0 0 0 0 1,913,062

53/51 2014 147,452 1,765,611 59,936 0 0 0 169,875 25,881 0 0 0 0 2,116,992

54/52 2015 160,147 1,956,845 60,954 0 0 0 187,521 27,602 0 0 0 0 2,337,866

55/53 2016 173,936 2,163,930 61,472 0 0 0 203,666 29,416 0 33,875 0 0 2,539,713

56/54 2017 152,120 2,387,592 62,990 0 0 0 221,001 31,329 0 35,907 0 0 2,756,468

57/55 2018 126,219 2,630,249 64,008 0 95,029 0 247,748 36,381 0 38,062 0 0 3,088,810

58/56 2019 95,748 2,993,062 65,026 0 51,351 0 272,493 40,311 0 40,345 0 0 3,397,024

59/57 2020 60,172 3,336,852 65,544 0 0 0 298,127 42,813 0 0 0 0 3,717,882

60/58 2021 65,353 3,652,529 67,062 0 0 0 325,884 45,451 0 0 0 0 4,065,377

61/59 2022 70,980 3,994,397 68,080 0 0 0 355,891 48,232 0 0 0 0 4,441,116

62/60 2023 77,092 4,364,024 69,616 0 0 0 388,374 51,163 0 0 0 0 4,847,942

63/61 2024 83,729 4,764,213 70,634 0 0 0 423,489 54,254 0 0 0 0 5,287,812

64/62 2025 90,938 5,196,874 71,652 0 0 0 461,450 57,511 0 0 0 0 5,763,403

John & JaneRetire

2026 98,768 5,664,635 0 500,000 0 15,000 513,305 38,016 296,883 0 19,792 0 6,437,017

66/64 2027 107,272 6,329,745 0 0 0 15,000 527,708 33,481 302,820 0 20,188 0 6,623,235

67/65 2028 116,508 6,506,727 0 0 0 57,054 546,530 39,885 308,877 0 20,592 0 6,857,466

68/66 2029 126,539 6,730,926 0 0 0 57,895 566,200 35,577 315,054 0 21,004 0 7,109,926

69/67 2030 137,435 6,972,491 0 0 0 102,507 590,574 42,997 321,355 0 21,424 0 7,417,231

70/68 2031 149,268 7,267,964 0 0 0 104,257 614,392 71,889 327,783 0 21,852 0 7,714,356

71/69 2032 162,120 7,552,236 0 0 0 106,042 639,310 71,913 334,338 0 22,289 0 8,031,168

72/70 2033 176,078 7,855,090 0 0 0 107,863 665,898 72,017 341,025 0 22,735 0 8,369,152

73/71 2034 191,238 8,177,913 0 0 0 109,720 690,352 124,177 347,845 0 23,190 0 8,674,012

74/72 2035 207,704 8,466,308 0 0 0 111,614 715,508 131,939 354,802 0 23,653 0 8,990,739

75/73 2036 225,587 8,765,152 0 0 0 113,547 741,610 140,692 361,898 0 24,127 0 9,319,178

76/74 2037 245,010 9,074,168 0 0 0 115,518 768,597 150,513 369,136 0 24,609 0 9,659,034

77/75 2038 266,106 9,392,928 0 0 0 117,528 796,518 161,153 376,519 0 25,101 0 10,010,307

78/76 2039 289,018 9,721,289 0 0 0 119,578 825,319 173,343 384,049 0 25,603 0 10,372,208

79/77 2040 313,902 10,058,306 0 0 0 121,670 855,018 186,069 391,730 0 26,115 0 10,744,981



SAMPLE


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Event or Ages Year

Beginning Portfolio Value

Earmarked Fund AllGoals

AdditionsTo Assets

OtherAdditions

StockOptions

PostRetirement

Income

InvestmentEarnings

Taxes

Funds Used

Retirement College -Jimmy

Travel LeaveBequest

EndingPortfolio

Value

80/78 2041 340,929 10,404,052 0 0 0 123,803 885,532 200,589 399,565 0 26,638 0 11,127,526

81/79 2042 370,283 10,757,243 0 0 0 125,980 916,834 216,097 407,556 0 27,170 0 11,519,516

82/80 2043 402,164 11,117,351 0 0 0 128,199 948,864 233,145 415,707 0 27,714 0 11,920,012

83/81 2044 436,791 11,483,222 0 0 0 130,463 981,536 251,852 424,022 0 28,268 0 12,327,870

84/82 2045 474,398 11,853,471 0 0 0 132,772 1,014,749 272,545 432,502 0 28,833 0 12,741,511

85/83 2046 515,244 12,226,267 0 0 0 135,128 1,050,964 295,792 441,152 0 0 0 13,190,658

86/84 2047 559,606 12,631,051 0 0 0 137,530 1,087,666 321,019 449,975 0 0 0 13,644,861

87/85 2048 607,789 13,037,072 0 0 0 139,981 1,124,806 347,511 458,975 0 0 0 14,103,162

88/86 2049 660,119 13,443,043 0 0 0 142,481 1,162,227 376,008 468,154 0 0 0 14,563,708

89/87 2050 716,955 13,846,753 0 0 0 145,030 1,199,726 406,500 477,517 0 0 0 15,024,447

John's Plan Ends 2051 778,685 14,245,762 0 0 0 147,631 1,237,294 437,513 487,068 0 0 0 15,484,792

-/89 2052 845,730 14,639,062 0 1,000,000 0 82,642 1,365,608 490,591 386,407 0 0 0 17,056,044

-/90 2053 918,547 16,137,496 0 0 0 83,995 1,412,846 525,394 394,135 0 0 0 17,633,356

-/91 2054 997,634 16,635,721 0 0 0 85,374 1,460,594 561,835 402,018 0 0 0 18,215,471

Jane's Plan Ends 2055 1,083,531 17,131,940 0 0 0 86,782 1,465,707 583,534 410,058 0 0 500,000 18,274,368



SAMPLE


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Notes

• IMPORTANT: The projections or other information generated by this tool regarding thelikelihood of various investment outcomes are hypothetical in nature, do not reflect actualinvestment results, and are not guarantees of future results.

• Results may vary with use and over time.

• The return assumptions used are estimates based on average annual returns for the indexused as a proxy for each asset class. The portfolio returns were calculated by weightingindividual return assumptions for each asset class according to the portfolio allocationselected by you or your Financial Advisor. The portfolio returns may have also been modifiedby your Financial Advisor to reflect the outcome of a different return by conducting a TotalReturn Adjustment or selecting an Alternative Portfolio. For a explanation of themethodology used to calculate returns, please review the Important Disclosure Informationand Return Methodology sections.

• The return assumptions in this tool are not reflective of any specific product and do notinclude any fees or expenses that may be incurred by investing in specific products. Theactual returns of a specific product may be more or less than the returns used in this tool.

• No investment strategy or allocation can eliminate risk or guarantee investment results.

• Additions and withdrawals occur at the beginning of the year.

• Other Additions come from items entered in the Other Assets section and any applicableproceeds from insurance policies.

• Stock Options and Restricted Stock values are after-tax and based on the Exercise Scenarioselected.

• Strategy Income is based on the particulars of the Goal Strategies selected. StrategyIncome from immediate annuities and 72(t) distributions is pre-tax. Strategy Income fromNet Unrealized Appreciation (NUA) is after-tax.

• Post Retirement Income includes the following: Social Security, pension, annuity, rentalproperty, royalty, alimony, part-time employment, trust, and any other retirement income asentered in the Plan.

• If either Social Security Program Estimate or Use This Amount and Evaluate Annually isselected for a participant, the program will default to the greater of the selected benefit orthe age adjusted spousal benefit based on the other participant's benefit.

• Investment Earnings are calculated on all assets after any withdrawals for 'Goal Expense','Taxes on Withdrawals' and 'Tax Penalties' are subtracted.

• The taxes column is a sum of (1) taxes on retirement income, (2) taxes on strategy income,(3) taxes on withdrawals from qualified assets for Required Minimum Distributions, (4) taxeson withdrawals from taxable assets' untaxed gain used to fund Goals in that year, (5) taxeson withdrawals from tax-deferred or qualified assets used to fund goals in that year, and (6)taxes on the investment earnings of taxable assets. Tax rates used are detailed in the Taxand Inflation Options page. (Please note, the Taxes column does not include any taxesowed from the exercise of Stock Options or the vesting of Restricted Stock.)

• Tax Penalties can occur when Qualified and Tax-Deferred Assets are used prior to age59½. If there is a value in this column, it illustrates that you are using your assets in thisPlan in a manner that may incur tax penalties. Generally, it is better to avoid tax penaltieswhenever possible.

• These calculations do not incorporate penalties associated with use of 529 Planwithdrawals for non-qualified expenses.

• Funds for each Goal Expense are used first from Earmarked Assets. If sufficient funds arenot available from Earmarked Assets, Fund All Goals Assets will be used to fund theremaining portion of the Goal Expense, if available in that year.

• All funds needed for a Goal must be available in the year the Goal occurs. Funds fromEarmarked Assets that become available after the goal year(s) have passed are not includedin the funding of that Goal, and accumulate until the end of the Plan.

• Ownership of Qualified Assets is assumed to roll over to the surviving spouse at the deathof the original owner. It is also assumed the surviving spouse inherits all assets of theoriginal owner.


SAMPLE

Worksheet Detail - Retirement Distribution Cash Flow Chart

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202665/63

202766/64

202867/65

202968/66

203069/67

203170/68

203271/69

203372/70

YearAge (John / Jane)

Income and Earnings Assign To

Pension Income 15,000Fund All Goals 15,000 15,000 15,000 15,000 15,000 15,000 15,000

Social Security - John 0Fund All Goals 0 42,054 42,895 43,753 44,628 45,521 46,431

Social Security - Jane 0Fund All Goals 0 0 0 43,753 44,628 45,521 46,431

Life Insurance - John 0Fund All Goals 0 0 0 0 0 0 0

Real Estate Investment 500,000Fund All Goals 0 0 0 0 0 0 0

Investment Earnings 513,305 527,708 546,530 566,200 590,574 614,392 639,310 665,898

Total Income and Earnings 1,028,305 542,708 603,584 624,096 693,081 718,648 745,352 773,761

Cash Used To Fund Goals

Retirement - Living Expense 296,883100% 302,820 308,877 315,054 321,355 327,783 334,338 341,025

Travel 19,792100% 20,188 20,592 21,004 21,424 21,852 22,289 22,735

Leave Bequest 0100% 0 0 0 0 0 0 0

Total Goal Funding (316,675) (323,008) (329,469) (336,058) (342,779) (349,635) (356,627) (363,760)

Total Taxes and Tax Penalty (38,016) (33,481) (39,885) (35,577) (42,997) (71,889) (71,913) (72,017)

Cash Surplus/Deficit (Net Change in Portfolio) 673,614 186,218 234,230 252,460 307,305 297,125 316,812 337,983

Portfolio Value

Future Dollars

Beginning Value 5,763,403 6,437,017 6,623,235 6,857,466 7,109,926 7,417,231 7,714,356 8,031,168

Cash Surplus/Deficit 673,614 186,218 234,230 252,460 307,305 297,125 316,812 337,983

Investment Asset Additions 0 0 0 0 0 0 0 0

Ending Value 6,437,017 6,623,235 6,857,466 7,109,926 7,417,231 7,714,356 8,031,168 8,369,152

Current Dollars

Ending Value 4,782,798 4,824,668 4,897,345 4,978,081 5,091,416 5,191,540 5,298,770 5,413,494


Taxes

Total Taxes 38,016 33,481 39,885 35,577 42,997 71,889 71,913 72,017


SAMPLE


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202665/63

202766/64

202867/65

202968/66

203069/67

203170/68

203271/69

203372/70


Tax Penalty 0 0 0 0 0 0 0 0

Federal Marginal Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 28.00% 28.00% 28.00%

State Marginal and Local Tax Rate 6.85% 6.85% 6.85% 6.85% 6.85% 6.85% 6.85% 6.85%

Estimated Required Minimum Distribution (RMD)

John 0 0 0 0 0 100,114 108,324 117,191

Jane 0 0 0 0 0 0 0 0

Portfolio Withdrawal Rate 4.82% 4.78% 4.16% 4.10% 3.53% 3.63% 3.57% 3.50%


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203473/71

203574/72

203675/73

203776/74

203877/75

203978/76

204079/77

204180/78


Income and Earnings


Social Security - John 47,360Fund All Goals 48,307 49,273 50,259 51,264 52,289 53,335 54,402

Social Security - Jane 47,360Fund All Goals 48,307 49,273 50,259 51,264 52,289 53,335 54,402


Real Estate Investment 0Fund All Goals 0 0 0 0 0 0 0

Investment Earnings 690,352 715,508 741,610 768,597 796,518 825,319 855,018 885,532

Total Income and Earnings 800,072 827,122 855,156 884,114 914,046 944,897 976,688 1,009,336



Travel 23,190100% 23,653 24,127 24,609 25,101 25,603 26,115 26,638

Leave Bequest 0100% 0 0 0 0 0 0 0




Portfolio Value

Future Dollars

Beginning Value 8,369,152 8,674,012 8,990,739 9,319,178 9,659,034 10,010,307 10,372,208 10,744,981



Ending Value 8,674,012 8,990,739 9,319,178 9,659,034 10,010,307 10,372,208 10,744,981 11,127,526

Current Dollars

Ending Value 5,500,676 5,589,736 5,680,327 5,772,039 5,864,659 5,957,533 6,050,631 6,143,183


Taxes

Total Taxes 124,177 131,939 140,692 150,513 161,153 173,343 186,069 200,589


SAMPLE


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203473/71

203574/72

203675/73

203776/74

203877/75

203978/76

204079/77

204180/78


Tax Penalty 0 0 0 0 0 0 0 0




John 126,765 137,102 148,256 160,289 172,447 186,372 200,343 215,265

Jane 142,606 154,279 166,885 180,492 195,176 211,017 227,024 245,356



SAMPLE


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204281/79

204382/80

204483/81

204584/82

204685/83

204786/84

204887/85

204988/86


Income and Earnings


Social Security - John 55,490Fund All Goals 56,600 57,732 58,886 60,064 61,265 62,490 63,740

Social Security - Jane 55,490Fund All Goals 56,600 57,732 58,886 60,064 61,265 62,490 63,740


Real Estate Investment 0Fund All Goals 0 0 0 0 0 0 0

Investment Earnings 916,834 948,864 981,536 1,014,749 1,050,964 1,087,666 1,124,806 1,162,227

Total Income and Earnings 1,042,814 1,077,063 1,111,999 1,147,521 1,186,092 1,225,197 1,264,787 1,304,708



Travel 27,170100% 27,714 28,268 28,833 0 0 0 0

Leave Bequest 0100% 0 0 0 0 0 0 0




Portfolio Value

Future Dollars

Beginning Value 11,127,526 11,519,516 11,920,012 12,327,870 12,741,511 13,190,658 13,644,861 14,103,162



Ending Value 11,519,516 11,920,012 12,327,870 12,741,511 13,190,658 13,644,861 14,103,162 14,563,708

Current Dollars

Ending Value 6,234,891 6,325,155 6,413,312 6,498,529 6,595,693 6,689,027 6,778,134 6,862,233


Taxes

Total Taxes 216,097 233,145 251,852 272,545 295,792 321,019 347,511 376,008


SAMPLE


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204281/79

204382/80

204483/81

204584/82

204685/83

204786/84

204887/85

204988/86


Tax Penalty 0 0 0 0 0 0 0 0




John 231,187 248,156 266,215 285,405 303,695 322,825 342,771 363,489

Jane 263,748 283,393 304,354 326,692 350,467 375,731 399,809 424,994



SAMPLE


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205089/87

205190/88

2052-/89

2053-/90

2054-/91

2055-/92


Income and Earnings

Pension Income 15,000Fund All Goals 15,000 15,000 15,000 15,000 15,000

Social Security - John 65,015Fund All Goals 66,315 0 0 0 0

Social Security - Jane 65,015Fund All Goals 66,315 67,642 68,995 70,374 71,782

Life Insurance - John 0Fund All Goals 0 1,000,000 0 0 0

Real Estate Investment 0Fund All Goals 0 0 0 0 0

Investment Earnings 1,199,726 1,237,294 1,365,608 1,412,846 1,460,594 1,465,707

Total Income and Earnings 1,344,757 1,384,925 2,448,250 1,496,841 1,545,968 1,552,489


Retirement - Living Expense 477,517100% 487,068 386,407 394,135 402,018 410,058

Travel 0100% 0 0 0 0 0

Leave Bequest 0100% 0 0 0 0 500,000

Total Goal Funding (477,517) (487,068) (386,407) (394,135) (402,018) (910,058)

Total Taxes and Tax Penalty (406,500) (437,513) (490,591) (525,394) (561,835) (583,534)

Cash Surplus/Deficit (Net Change in Portfolio) 460,739 460,345 1,571,252 577,312 582,115 58,897

Portfolio Value

Future Dollars

Beginning Value 14,563,708 15,024,447 15,484,792 17,056,044 17,633,356 18,215,471

Cash Surplus/Deficit 460,739 460,345 1,571,252 577,312 582,115 58,897

Investment Asset Additions 0 0 0 0 0 0

Ending Value 15,024,447 15,484,792 17,056,044 17,633,356 18,215,471 18,274,368

Current Dollars

Ending Value 6,940,517 7,012,914 7,573,058 7,675,873 7,773,794 7,646,009

Cash Surplus/Deficit 212,838 208,486 697,652 251,306 248,429 24,642

Taxes

Total Taxes 406,500 437,513 490,591 525,394 561,835 583,534


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205089/87

205190/88

2052-/89

2053-/90

2054-/91

2055-/92


Tax Penalty 0 0 0 0 0 0

Federal Marginal Tax Rate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

State Marginal and Local Tax Rate 8.97% 8.97% 8.97% 8.97% 8.97% 8.97%


John 384,916 403,389 0 0 0 0

Jane 451,252 478,527 886,440 928,981 971,597 1,013,869

Portfolio Withdrawal Rate 2.62% 2.59% 2.01% 1.99% 1.96% 4.69%


SAMPLE


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• The Income section includes Retirement Income, Strategy Income, Stock Options,Restricted Stock, Other Assets, proceeds from Insurance Policies, and any remaining assetvalue after 72(t) distributions have been completed.

• Retirement Income includes the following: Social Security, pension, annuity, rentalproperty, royalty, alimony, part-time employment, trust, and any other retirement income asentered in the Plan.

• Additions and withdrawals occur at the beginning of the year.



• The return assumptions used are estimates based on average annual returns for the indexused as a proxy for each asset class. The portfolio returns were calculated by weightingindividual return assumptions for each asset class according to the portfolio allocationselected by you or your Financial Advisor. The portfolio returns may have also been modifiedby your Financial Advisor to reflect the outcome of a different return by conducting a TotalReturn Adjustment or selecting an Alternative Portfolio. For a explanation of themethodology used to calculate returns, please review the Important Disclosure Informationand Return Methodology sections.

• The return assumptions in this tool are not reflective of any specific product and do notinclude any fees or expenses that may be incurred by investing in specific products. Theactual returns of a specific product may be more or less than the returns used in this tool.

• No investment strategy or allocation can eliminate risk or guarantee investment results.

• The values shown for income and investment earnings are estimates based on theassumptions included in this report, such as rates of return, inflation rate, asset values, assetadditions, tax rates, income sources and amounts, and goal expenses. Any changes inassumptions will also change these values.

• Strategy Income is based on the particulars of the Goal Strategies selected. StrategyIncome from immediate annuities and 72(t) distributions is pre-tax. Strategy Income fromNet Unrealized Appreciation (NUA) is after-tax.

Notes

• Stock Options and Restricted Stock values are after-tax and based on the Exercise Scenarioselected.

• Income from Other Assets and proceeds from Insurance Policies are after-tax values. Anyremaining asset value after 72(t) distributions have been completed is a pre-tax value.

• Investment Earnings are calculated on all assets after any withdrawals for funding goals,taxes on withdrawals, and tax penalties, if applicable, are subtracted.

• Shortfalls that occur in a particular year are denoted with an 'x' in the Cash Used to FundGoals section of the chart.

• The Total Taxes are a sum of (1) taxes on retirement income, (2) taxes on strategy income,(3) taxes on withdrawals from qualified assets for Required Minimum Distributions, (4) taxeson withdrawals from taxable assets' untaxed gain used to fund Goals in that year, (5) taxeson withdrawals from tax-deferred or qualified assets used to fund goals in that year, and (6)taxes on the investment earnings of taxable assets. Tax rates used are detailed in the Taxand Inflation Options page. (Please note, the Total Taxes do not include any taxes owedfrom the exercise of Stock Options or the vesting of Restricted Stock.)

• Tax Penalties can occur when Qualified and Tax-Deferred Assets are used prior to age59½. If there is a value in this row, it illustrates that you are using your assets in this Plan ina manner that may incur tax penalties. Generally, it is better to avoid tax penalties wheneverpossible.

• The Cash Surplus/Deficit is the net change in the Portfolio Value for the specified year.This value is your income and earnings minus what was spent to fund goals minus taxes.

• The Ending Value of the Portfolio in Current Dollars is calculated by discounting theEnding Value of the Portfolio in Future Dollars by the Base Inflation Rate for this Plan.

• The Cash Surplus/Deficit in Current Dollars is calculated by discounting the CashSurplus/Deficit in Future Dollars by the Base Inflation Rate for this Plan.

• These calculations do not incorporate penalties associated with use of 529 Planwithdrawals for non-qualified expenses.

• Ownership of Qualified Assets is assumed to roll over to the surviving spouse at the deathof the original owner. It is also assumed the surviving spouse inherits all assets of theoriginal owner.

SAMPLE

Worksheet Detail - Sources of Income and Earnings

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This graph shows the income sources and earnings available in each year from retirement through the End of the Plan.

• All Retirement Income, Immediate Annuity Strategy Income, 72(t) Strategy Income, theremaining asset value after 72(t) distributions, and Investment Earnings are pre-tax, futurevalues.


• NUA Strategy Income, Stock Options, Restricted Stock, Other Assets, and proceeds fromInsurance Policies are after-tax future values.

Notes



• Sources of Income can include Retirement Income, Strategy Income, Stock Options,Restricted Stock, Other Assets, proceeds from Insurance Policies, and any remaining assetvalue after 72(t) distributions have been completed.

• Investment Earnings are calculated on all assets after any withdrawals for funding goals,taxes on withdrawals, and tax penalties, if applicable, are subtracted.


SAMPLE

Worksheet Detail - Inside the Numbers Final Result

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In Confidence Zone

Simulation Equivalent to10,000 Trials

• The graph below shows the results for a Sample of 100 Monte Carlo Trials, but that is not enough Trials to determine your Probability of Success.• Your Probability of Success, as shown by the meter, uses a mathematical simulation, equivalent to 10,000 Trials, to calculate your Final Result.• Your Probability of Success represents the percentage of 10,000 Trials in which you could expect to attain all your Goals.

Final Result

(70% - 90%)

In the Sample of 100 Trials table, the trials are ranked from best to worst (from 1 to 100)based on the End of Plan value. For each trial listed (1st, 25th, 50th, 75th and 100th), thecorresponding portfolio values for that trial will be illustrated in the years of the trial thatare indicated.

The table below is a numerical representation of the above Sample of 100 trials. It isprovided for informational purposes to illustrate the general range of results you mightexpect. However, neither the graph nor the table reflects the Final Result, which is yourProbability of Success as shown by the meter to the right.

Trials Year 5 Year 10 Year 15 Year 20 Year 25 End of Plan Year Money Goes to $0

Best $2,915,290 $5,626,061 $11,410,253 $20,628,194 $46,830,532 $247,104,247

25th $2,083,197 $2,361,125 $5,458,787 $7,722,823 $12,469,675 $21,956,981

50th $3,293,423 $6,847,228 $9,791,390 $10,277,983 $9,354,163 $10,327,307

75th $2,010,362 $3,843,657 $5,705,477 $5,153,942 $5,379,916 $0 2055

Worst $1,505,420 $1,572,677 $2,205,963 $377,044 $0 $0 2032

Inside the Numbers - Final Result For Model 6 - Target

SAMPLE

Worksheet Detail - Special Asset Test

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Likelihood of Funding Goals

Low Expected High


In Confidence Zone


In Confidence Zone


In Confidence Zone

Description When SoldLow Expected High

Future Amounts

$500,000$300,000 at John's retirementReal Estate Investment $700,000

$146,380$71,7012018Morgan Stanley $179,774

$95,029$57,0222018 Cash Schedule: $111,798

$51,351$14,6802019 $67,977

It is often difficult to predict the value that will be received from the sale of assets in the future. This creates a hidden risk to your plan.

These results show your Probability of Success using the three estimates you provided for the amount of after-tax cash you might receivefrom the sale of each Special Asset shown in the table. For each result calculated, all assets are assumed to receive the Low, Expected orHigh amount. All other assumptions in the plan remain unchanged.

There is a Risk that you will receive the Low values (or less than the Low values). If this causes your Probability of Success to fall below yourConfidence Zone, you should consider what adjustments might be necessary.

Special Asset Test for Model 6 - Target

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Worksheet Detail - Portfolio Probability Matrix

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Risk BasedPortfolio

Both before and during Retirement withsame portfolio Probability of

SuccessGreat Recession

Return

Portfolio used inModel 6 - Target Safety Margin

(Current Dollars)Bond Bear Market

Return

Results Bear Market Loss

12%< 40%Model 1 $24,993 -5%

-4%< 40%Model 2 $89,861 0%

-15%63%Model 3 $1,530,026 3%

-29%64%Current $2,689,052 10%

-22%88%Model 4 $3,486,724 5%

-28%88%Model 5 $5,198,603 7%

-38%86%Model 6 $7,646,009 10%

-51%82%Model 7 $10,860,503 15%

-51%82%Model 8 $11,534,791 15%

Portfolio Probability Matrix for Model 6 - Target

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Worksheet Detail - Social Security Maximization

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Social Security StrategyStrategy Usedin Model 6 -

TargetAt retirement At FRA At age 70

John begins atage 70 and

Jane begins atFRA

Johnfiles/suspends,Jane restricted

application

Janefiles/suspends,John restricted

application

Start age John Jane

6767

6563

6767

7070

7067

7067

6970

First year benefit in current dollars John Jane

$30,634$30,634

$26,550$22,976

$30,634$30,634

$37,987$37,987

$37,987$30,634

$37,987$15,317

$15,317$37,987

Maximization Based on Cash Received

Total lifetime benefit in current dollars $1,531,714 $1,393,860 $1,531,714 $1,671,406 $1,623,617 $1,717,358 $1,686,724

Break Even Point John Jane

N/AN/A

8078

8280

8179

8078

8179

Maximization Based on Overall Plan Result

Probability of success 86% 85% 86% 86% 86% 86% 86%

Notes

• The Program does not include Social Security benefits prior to a recipient’s retirement age. TheStart Age for each Social Security Strategy is the earliest the Program will include a Social Securitybenefit for each recipient.

Social Security Maximization for Model 6 - Target

SAMPLE

Employer Stock Plans

SAMPLE

Stock Options

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- Beginning in the exercise start year, vested options thatequal or exceed the minimum percentage gain are exercised. After the exercise start year,remaining options are exercised in the year they expire if they are in-the-money by anyamount.

- Currently vested options that are in-the-money by any amountare exercised now; all remaining options are lost.

- Currently vested options that equal or exceed the minimumpercentage gain are exercised now. Remaining options are either exercised in the first yearthey are both vested and exceed the minimum percentage gain or are exercised in the yearthey expire if they are in-the-money by any amount.

- Currently vested options that equal or exceed the minimumpercentage gain are exercised now. All remaining options are exercised in the year theyexpire if they are in-the-money by any amount.

- Beginning in the exercise start year, vested options that equalor exceed the minimum percentage gain are exercised. After the exercise start year,remaining options are either exercised in the first year they are both vested and exceed theminimum percentage gain or are exercised in the year they expire if they are in-the-moneyby any amount.

- One advantage of an ISO is that no regular income tax isrecognized upon exercising the option. In addition, if the acquired stock is held for twoyears from the date of grant and one year from the date of exercise, favorable long-termcapital gains rates will apply to all of the appreciation (between the strike price and saleprice) upon the subsequent sale of the stock. The sale of any shares prior to satisfyingeither of these holding period requirements will be treated as a "disqualifying disposition."If the acquired stock is not held for one year from exercise, the bargain element (thedifference between the value of the stock on exercise and the strike price, also referred toas "spread") is treated as ordinary income and any post-exercise gain is short-term capitalgain. If the stock is held for one year from exercise but not two years from grant, thebargain element (or spread) is ordinary income and any post-exercise gain is long-termcapital gain.

Introduction to Your Stock Options Although the exercise of an ISO is generally not a taxable event for regular tax purposes,the difference between the strike price and the stock price on the date of exercise isconsidered a preference item for federal, and possibly state, alternative minimum tax(AMT) purposes. Depending on the circumstances, the exercise of ISOs can cause ataxpayer to be subject to the AMT and incur a higher tax liability even though shares havenot yet been sold and gains have yet to be realized.

Exercise Scenarios

Available Timing Methods

• Now - All Vested Only

This section of your report summarizes your Stock Option plan and calculates your currentoption equity value for all fully vested shares. It also calculates an estimate of the potentialfuture option equity values, that may be available to help fund your goals each year basedupon the assumptions you have made.

We believe this information is an important step in a financial goal plan. We look forwardto helping you make informed decisions regarding your stock option strategy.

This Report is for your information only and does not constitute the solicitation to purchaseor sell any specific security.

General Discussion

Your stock options can be a significant component of your financial portfolio. Stock optionscan give you the opportunity to benefit from the potential appreciation in your company'sstock. As with any other investments, there are certain risks associated with stock optionswhich you should take into consideration. Therefore, it is critical that you are familiar withyour stock options, how they function, and the financial implications they may have on youroverall portfolio. Stock options provide employees with the right to buy company stock at aspecified price, known as the strike price, within a certain period of time. A company cangrant two types of stock options - incentive stock options (ISOs) and non-qualified stockoptions (NQOs).

Incentive Stock Options (ISOs)

Nonqualified Stock Options (NQOs) - Unlike ISOs, the spread on NQOs is immediatelyrecognized as compensation income upon exercise, for regular tax purposes, and istherefore subject to federal, and possibly state income tax, as well as Medicare and FICAtax. If the stock is held after exercise, any subsequent appreciation is treated as capitalgain (long-term, if held for more than one year) when the stock is sold.

The future potential after-tax option equity cash flows illustrated in this analysis, for eachexercise scenario, were calculated based on selecting one or more Timing Methods andcertain assumptions described below:

All exercise scenarios assume a cashless exercise strategy.

• Now and As Vested

• Now and At Expiration

• Start Year and As Vested

• Start Year and At Expiration

- Options are exercised in the year they expire if they are in-the-money byany amount.

• At Expiration

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Stock Options

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- The projected return for the asset class categoryselected, unless otherwise indicated by you. If a Stock Option Plan with Exercise Scenarios istreated as a Special Asset, the return assumption for this stock includes three growth rates-- labeled Low, Expected and High returns. The Program default for all three returns is theprojected return for the asset class category selected, and can be changed by you. Thisapproach can help illustrate financial risk not otherwise reflected in the Plan results.

Other Assumptions

• Return assumption for this Stock

- A year in which it is assumed that vesting ends prematurely.All remaining unvested options are lost.

- The minimum percentage gain in the stock priceabove the exercise price that is required before exercising options. Applying this minimumdefers the exercise of options with only relatively small spread between the stock price andthe option price.

• Minimum percentage gain to exercise

• Vesting Termination Year

- A year in which it is expected that you will begin to exercise vestedoptions, if different than the current year.

• Exercise Start Year

- If it is indicated that ISO shares are not to be "Held for OneYear", then it is assumed that the ISO shares are disqualified and a Regular Tax Rate isapplied. If it is indicated that ISO shares are to be "Held for One Year", it is assumed thatthose shares will have been held for at least two years from the date of grant and over oneyear from the date of exercise, thus qualifying for long-term capital gains treatment and theLong-Term Tax Rate is applied.

• Hold ISO for One Year

General Assumptions

• The Long-Term Tax Rate is the estimated tax rate applied to the potential option equity onany ISO shares sold that were held for more than one year after exercise (as well as twoyears from date of grant). This rate should be the total estimate for all applicable taxes,including Federal, State, and Local Income taxes.

• The possible impact of the Alternative Minimum Tax (AMT) is not reflected in anycalculations. Since the exercise of ISOs can have substantial AMT consequences, you shouldconsult with your personal tax advisor.

• The Regular Tax Rate is the estimated tax rate applied to the potential option equity on allNQOs exercised and sold and on any ISO shares sold that were not held for one year. Thisrate should be the total estimate for all applicable taxes, including Federal, State, and LocalIncome taxes. Unless included in this rate, Medicare and FICA taxes are not appliedseparately to NQO equity.

• The after-tax calculations within the Option Equity Schedule and Price Sensitivity Analysisassume that all ISOs are disqualified and the Regular Tax Rate is applied. In addition, theVesting Schedule does not calculate whether ISO grants meet the $100,000 limitation.

• Exercise costs for NQOs and ISOs have not been considered nor have any dividends thatmight have been received from ISOs that are exercised and held for one year.

• Grants expected to be received in the future are not represented in this Stock OptionSummary.

Cash Receipt Schedule

The future potential after-tax option equity cash flows illustrated in this analysis, for eachCash Receipt Schedule, are the amounts you entered, based on your own calculations.

Assumptions

• The Current Value should represent the current value of all vested stock options in thisStock Option Plan.

• The Value if the Owner dies today should represent the value to be paid by the StockOption Plan if the owner dies today.

• The Cash Receipts Table shows expected after-tax amounts for one or more years in thefuture, based on your own calculations and as entered by you.

• If a Stock Option Plan with a Cash Receipt Schedule is treated as a Special Asset, the CashReceipts Table shows the Low, Expected, and High after-tax amounts for each year in thefuture, based on your own calculation and as entered by you. This approach can helpillustrate financial risk not otherwise reflected in the Plan results.

• The possible impact of the Alternative Minimum Tax (AMT) and any other cost and taxesassociated with exercising Stock Options are not reflected in any calculations, unless itsimpact was taken into account, by you, when entering the cash receipt amounts.

SAMPLE

Stock Options Summary

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Morgan Stanley (MS)

Owner : John

Options

Granted :

Exercised :

Outstanding Options

Vested :

Not Vested :

20,000

0

16,000

4,000

Regular Tax Rate : 40.0%

Long-Term Tax Rate : 20.0%

Assumptions

Option Equity After Tax : $15,000

Market Price* :

Options Vest at Death :

$16.75 on 12/03/2012

Yes

Asset Class : US Large-Cap Value Stocks

* Security prices included in the stock option analysis are based on the market price that you entered for the date referenced and are included onlybecause the system requires it for analysis purposes. This Report is for your information only and does not constitute the solicitation to purchase orsell any specific security and you should not rely on the information presented when making an investment or liquidation decision. We make nowarranty with respect to any security price and do not guarantee that the price listed will be available to you should you choose to exercise youroptions. The actual price available to you should you choose to exercise your options may be more or less than indicated on the report.

Special Asset : Yes

Vesting Schedule

The Vesting Schedule below is a summary showing the percentage of each option grant that becomes exercisable over time according to theinformation you have provided.

Name % Vested by Year

1 2 3 4 5 6 7 8 9 10

MS Vest 20% 20% 20% 20% 20% 0% 0% 0% 0% 0%SAMPLE


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Option Equity Schedule

The Option Equity Schedule below shows a summary of your stock option grants and calculates the pre-tax and after-tax option equity value for allvested stock options based on the current market price. These values are calculated using the information you provided for each grant, your taxrate assumption and the current market price of the stock as indicated by you. If your plan includes ISOs, the After Tax Option Equity value assumesthat all ISOs are immediately disqualified and the regular tax rate is applied. This Report does not constitute the solicitation to purchase or sell anyspecific security.

Name Date Price Type ExpirationDate

Granted Exercised Vested Not Vested Pre-Tax Tax at 40.0%

Grant

VestingSchedule

Options Outstanding Options

After Tax

Option Equity - Vested OnlyMarket Price $16.75

2007 Grant 01/01/2007 $14.25 ISO 01/01/2017 MS Vest 10,000 0 10,000 0 $25,000 $10,000 $15,000

2009 Grant 01/01/2009 $20.00 NQO 01/01/2019 MS Vest 10,000 0 6,000 4,000 $0 $0 $0

20,000 0Total : 16,000 4,000 $25,000 $10,000 $15,000

Option Equity Value if Die Today - All Options Vested at Death

The option equity value if John dies today is $25,000 pre-tax. Based upon a tax rate of 40.0%, the after-tax value of the options vested at death is $15,000.

Price Sensitivity Analysis

The Price Sensitivity Analysis shows a summary of your stock option grants and calculates the potential after-tax option equity values for all vestedstock options based on the current market price as indicated by you as well as a variety of higher and lower assumed prices. Understanding theimpact of potential stock price changes on the after-tax option equity value of particular grants can play an important role in determining optionexercise strategies. If your plan includes ISOs, the After Tax Option Equity value assumes that all ISOs are immediately disqualified and the regulartax rate is applied.


-25%$12.56

-15%$14.24

Market*$16.75

+15%$19.26

Grant

VestedOptions

+25%$20.94

Option Equity Sensitivity - After Tax for Vested Options Only

2007 Grant 01/01/2007 $14.25 ISO 01/01/2017 10,000 $0 $0 $15,000 $30,075 $40,125

2009 Grant 01/01/2009 $20.00 NQO 01/01/2019 6,000 $0 $0 $0 $0 $3,375

$0 $0 $15,000 $30,075 $43,500Total :

Change In Value: -$15,000 -$15,000 $0 $15,075 $28,500

* Security prices included in the stock option analysis are based on the market price that you entered for the date referenced and are included onlybecause the system requires it for analysis purposes. This Report is for your information only and does not constitute the solicitation to purchase orsell any specific security and you should not rely on the information presented when making an investment or liquidation decision. We make nowarranty with respect to any security price and do not guarantee that the price listed will be available to you should you choose to exercise youroptions. The actual price available to you should you choose to exercise your options may be more or less than indicated on the report.

SAMPLE


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Full Vesting Schedule

The Full Vesting Schedule illustrates the amount of stock options that are currently vested and calculates any additional amounts that vest in futureyears based on the applicable Vesting Schedule.


2012 2013 2014 2015

Grant

VestingSchedule

2016

Options Vesting Each Year

CurrentlyVested

Beyond

2007 Grant 01/01/2007 $14.25 ISO 01/01/2017 MS Vest 0 0 0 0 010,000 0

2009 Grant 01/01/2009 $20.00 NQO 01/01/2019 MS Vest 0 2,000 2,000 0 06,000 0

0 2,000 2,000 0 016,000 0Total :

Exercise Scenarios

The Exercise Scenarios show a summary of your stock option grants and, for each scenario, the timing method(s) and other assumptions outlined inthe Stock Options Introduction that will be used to calculate future potential after-tax option equity as summarized in the Cash Flow Schedule.


Timing HoldISO?

Timing HoldISO?

Grant

VestingSchedule

Timing

Scenario 1

Vested Not Vested

Outstanding Options

HoldISO?

Scenario 2 Scenario 3

2007 Grant 01/01/2007 $14.25 ISO 01/01/2017 MS Vest Now And AsVested

Yes At Expiration Yes Start Year andAs Vested

10,000 0 Yes

2009 Grant 01/01/2009 $20.00 NQO 01/01/2019 MS Vest Now And AsVested

N/A At Expiration N/A Start Year andAs Vested

6,000 4,000 N/A

16,000 4,000Total :

Accelerated Expiration Year : 2022 2022 2022

Minimum percentage gain to exercise : 8.00% 8.00% 8.00%

Exercise Start Year : 2012 2012 2012

Special Growth Rates

Since this Stock Option Plan with Exercise Scenarios is being treated as a Special Asset, theGrowth Rates table shows the Low, Expected and High return assumption applied to eachexercise scenario.

Low Expected High

Growth Rates : 5.00% 9.30% 11.00%

SAMPLE


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Cash Flow Schedule

The Cash Flow Schedule below shows the future potential after-tax option equity value for each scenario indicated, on a year-by-year basis. Theseare only estimates based on current information and not guarantees that you will obtain a specific value or tax benefit upon exercise of the StockOptions. This Report does not constitute the solicitation to purchase or sell any specific security.

Year Assign to Goals Scenario 1 - Option Equity (after-tax) Scenario 2 - Option Equity (after-tax) Scenario 3 - Option Equity (after-tax)

2012 Fund All Goals

2013 Fund All Goals $32,462$32,462

2014 Fund All Goals

2015 Fund All Goals $11,228$11,228

2016 Fund All Goals

2017 Fund All Goals

2018 Fund All Goals $95,029

2019 Fund All Goals $51,351

2020 Fund All Goals

$43,690 $146,380 $43,690Total :

Important Note on Alternative Minimum Tax (AMT): If your plan includes ISOs, the possible impact of AMT is not reflected in these calculations.Since the exercise of ISOs can have substantial AMT consequences, you should consult with your personal tax advisor. Also, the possible impact ofthe value of ISOs becoming first exercisable during a single year and exceeding the $100,000 limitation, causing the excess ISOs to be disqualified, isnot reflected in these calculations.

SAMPLE

Risk Management

SAMPLE

Life Insurance Needs Analysis

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Life insurance can be an important source of funds for your family in the event of your premature death. In this section, we analyzewhether there are sufficient investment assets and other resources to support your family if you were to die this year and, if there is adeficit, what additional life insurance may be required to provide the income needed by your survivors.

If John Dies

Living Expenses covered until Jane is 92

If Jane Dies

Living Expenses covered until John is 90

Life Insurance Needed

Existing Life Insurance

Additional Needed

$2,240,156

$1,000,000

$1,240,156

$2,187,926

$0

$2,187,926

Scenario : Model 6 - Target

SAMPLE

Life Insurance Needs Analysis Detail

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$1,000,000 Existing Life Insurance $0

Liabilities and Final Expenses

$400,000 Debts Paid Off $400,000

$10,000 Final Expenses and Estate Taxes $10,000

$0 Bequests $0

$0 Other Payments $0

If John Dies If Jane Dies

$0 Additional Death Benefit $0

Life Insurance


Living Expenses for Survivors

Jane's Age Event John's Age

63 Retirement 65

92 Plan Ends 90

$250,800 Annual Expense (current dollars, after-tax) $250,800

92 Cover expense until Co-Client is this age 90

$0 Annual Expense (current dollars, after-tax) $0

0 Cover expense until Co-Client is this age 0


First Living Expense

Second Living Expense

Checked boxes indicate goals to be funded upon death.

Financial Goals


College - Jimmy

Travel

Leave Bequest


SAMPLE


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Amount of cash provided by sale of Assets (after tax)$0 $0


Sell Other Assets

Your Assets that are not being sold to fund goals are listed below.

Description Current Value

NY Home $750,000

Checked boxes indicate Other Assets that will be included in this analysis and used to fund goals.


Real Estate Investment

Checked boxes indicate stock options to be included in Life Insurance.

Stock Options and Restricted Stock


Include John's Stock Options


SAMPLE


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Annual Other Income Amount

(current dollars before tax)

Will this amount inflate?

$0 $0

No No


Other Income (Income other than employment income)

Include Amount IncludeAmount


Description

Pension Income$15,000 $15,000

Use this Rate Year Federal State

Current rate

Change rate in

Local

2012 33.00% 7.85% 0.00%

0 0.00% 0.00% 0.00%

Tax Rate (Estimated average tax rate)

Use Return in the Plan you selected Rate of Return

8.61%

Rate of Return

Dependents

Name Date of Birth Age Relationship

Jimmy 07/07/1998 14 Both Are Parents


SAMPLE

Disability Needs Analysis - John

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Disability Insurance can provide an important source of funds during the time when you are unable to work due to a prolonged illness orinjury. This section compares your income needs to your income sources for various disability periods. If there is an Income Shortfall, youmay want to consider the purchase of a Disability Insurance Policy.

IncomeNeeded

EmploymentIncome

Other Income Social SecurityBenefit

Group*Insurance

PersonalInsurance

Surplus or(Shortfall)

Length ofDisability

1 year(s) $500,000 $250,000 $0 $0 $0 $0 -$250,000

2 year(s) $510,004 $255,000 $0 $0 $0 $0 -$255,004

5 year(s) $541,220 $270,608 $0 $0 $0 $0 -$270,612

10 year(s) $597,551 $298,773 $0 $0 $0 $0 -$298,778

15 year(s) $659,745 $329,870 $0 $0 $0 $0 -$329,875

* The benefit amount may include an after-tax portion that has been grossed up to reflect its pre-tax value.

If John is Disabled

SAMPLE


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Do you want to include Social Security Disability Benefits in the analysis?

Social Security

No

Refine Needs Analysis

Income Needed (pre-tax, current dollars)

During the first year During these years

Month 1

Month 2 & 3

Month 4 & 5

Month 6 - 12

Year 2

Year 3 - 5

Year 6 to Age 65

$41,674 per month

$41,666 per month

$41,666 per month

$41,666 per month

$41,667 per month

$41,667 per month

$41,667 per month

$500,004 per year

$500,004 per year

$500,004 per year

All amounts in this table are monthly, pre-tax amounts.

Surplus or Shortfall During First Year

IncomeNeeded

EmploymentIncome


Group*Insurance

PersonalInsurance


First Year -Month

1 $41,674 $20,833 $0 $0 $0 $0 -$20,841

2 $41,666 $20,833 $0 $0 $0 $0 -$20,833

3 $41,666 $20,833 $0 $0 $0 $0 -$20,833

4 $41,666 $20,833 $0 $0 $0 $0 -$20,833

5 $41,666 $20,833 $0 $0 $0 $0 -$20,833

6 $41,666 $20,833 $0 $0 $0 $0 -$20,833

7 $41,666 $20,833 $0 $0 $0 $0 -$20,833

8 $41,666 $20,833 $0 $0 $0 $0 -$20,833

9 $41,666 $20,833 $0 $0 $0 $0 -$20,833

10 $41,666 $20,833 $0 $0 $0 $0 -$20,833

11 $41,666 $20,833 $0 $0 $0 $0 -$20,833

12 $41,666 $20,833 $0 $0 $0 $0 -$20,833


If John is Disabled

SAMPLE


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All amounts in this table are annual, pre-tax amounts.

Surplus or Shortfall by Age

IncomeNeeded

EmploymentIncome


Group*Insurance

PersonalInsurance


Age

52 $510,004 $255,000 $0 $0 $0 $0 -$255,004

53 $520,204 $260,100 $0 $0 $0 $0 -$260,104

54 $530,608 $265,302 $0 $0 $0 $0 -$265,306

55 $541,220 $270,608 $0 $0 $0 $0 -$270,612

56 $552,045 $276,020 $0 $0 $0 $0 -$276,025

57 $563,086 $281,541 $0 $0 $0 $0 -$281,545

58 $574,347 $287,171 $0 $0 $0 $0 -$287,176

59 $585,834 $292,915 $0 $0 $0 $0 -$292,920

60 $597,551 $298,773 $0 $0 $0 $0 -$298,778

61 $609,502 $304,749 $0 $0 $0 $0 -$304,753

62 $621,692 $310,844 $0 $0 $0 $0 -$310,849

63 $634,126 $317,060 $0 $0 $0 $0 -$317,066

64 $646,808 $323,402 $0 $0 $0 $0 -$323,407

65 $659,745 $329,870 $0 $0 $0 $0 -$329,875


• Disability benefits may be subject to an elimination period or benefit age cap.

• Income Needed is the amount you have indicated is necessary to maintain your standard of living during the disability period.

Notes

If John is Disabled

SAMPLE

Disability Needs Analysis - Jane

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Disability Insurance can provide an important source of funds during the time when you are unable to work due to a prolonged illness orinjury. This section compares your income needs to your income sources for various disability periods. If there is an Income Shortfall, youmay want to consider the purchase of a Disability Insurance Policy.

IncomeNeeded

EmploymentIncome


Group*Insurance

PersonalInsurance


Length ofDisability

1 year(s) $500,000 $250,000 $0 $0 $0 $0 -$250,000

2 year(s) $510,000 $255,000 $0 $0 $0 $0 -$255,000

5 year(s) $541,216 $270,608 $0 $0 $0 $0 -$270,608

10 year(s) $597,546 $298,773 $0 $0 $0 $0 -$298,773

17 year(s) $686,393 $343,196 $0 $0 $0 $0 -$343,196


If Jane is Disabled

SAMPLE


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Do you want to include Social Security Disability Benefits in the analysis?

Social Security

No

Refine Needs Analysis

Income Needed (pre-tax, current dollars)

During the first year During these years

Month 1

Month 2 & 3

Month 4 & 5

Month 6 - 12

Year 2

Year 3 - 5

Year 6 to Age 65

$41,674 per month

$41,666 per month

$41,666 per month

$41,666 per month

$41,667 per month

$41,667 per month

$41,667 per month

$500,000 per year

$500,000 per year

$500,000 per year

All amounts in this table are monthly, pre-tax amounts.

Surplus or Shortfall During First Year

IncomeNeeded

EmploymentIncome


Group*Insurance

PersonalInsurance


First Year -Month

1 $41,674 $20,833 $0 $0 $0 $0 -$20,841

2 $41,666 $20,833 $0 $0 $0 $0 -$20,833

3 $41,666 $20,833 $0 $0 $0 $0 -$20,833

4 $41,666 $20,833 $0 $0 $0 $0 -$20,833

5 $41,666 $20,833 $0 $0 $0 $0 -$20,833

6 $41,666 $20,833 $0 $0 $0 $0 -$20,833

7 $41,666 $20,833 $0 $0 $0 $0 -$20,833

8 $41,666 $20,833 $0 $0 $0 $0 -$20,833

9 $41,666 $20,833 $0 $0 $0 $0 -$20,833

10 $41,666 $20,833 $0 $0 $0 $0 -$20,833

11 $41,666 $20,833 $0 $0 $0 $0 -$20,833

12 $41,666 $20,833 $0 $0 $0 $0 -$20,833


If Jane is Disabled

SAMPLE


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All amounts in this table are annual, pre-tax amounts.

Surplus or Shortfall by Age

IncomeNeeded

EmploymentIncome


Group*Insurance

PersonalInsurance


Age

50 $510,000 $255,000 $0 $0 $0 $0 -$255,000

51 $520,200 $260,100 $0 $0 $0 $0 -$260,100

52 $530,604 $265,302 $0 $0 $0 $0 -$265,302

53 $541,216 $270,608 $0 $0 $0 $0 -$270,608

54 $552,040 $276,020 $0 $0 $0 $0 -$276,020

55 $563,081 $281,541 $0 $0 $0 $0 -$281,541

56 $574,343 $287,171 $0 $0 $0 $0 -$287,171

57 $585,830 $292,915 $0 $0 $0 $0 -$292,915

58 $597,546 $298,773 $0 $0 $0 $0 -$298,773

59 $609,497 $304,749 $0 $0 $0 $0 -$304,749

60 $621,687 $310,844 $0 $0 $0 $0 -$310,844

61 $634,121 $317,060 $0 $0 $0 $0 -$317,060

62 $646,803 $323,402 $0 $0 $0 $0 -$323,402

63 $659,739 $329,870 $0 $0 $0 $0 -$329,870

64 $672,934 $336,467 $0 $0 $0 $0 -$336,467

65 $686,393 $343,196 $0 $0 $0 $0 -$343,196


• Disability benefits may be subject to an elimination period or benefit age cap.

• Income Needed is the amount you have indicated is necessary to maintain your standard of living during the disability period.

Notes

If Jane is Disabled

SAMPLE

Long-Term Care Needs Analysis - John

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This graph shows what would happen to your portfolio if John enters a Nursing Home at age 80 for 10 years at an annual cost, in CurrentDollars, of $130,670 inflating at 6.00%.

Total Cost of Long-Term Care : $9,332,276


Total of Existing Long-Term Care PolicyBenefits :

$0

Total Benefits from purchasing a newLong-Term Care Policy* :

$3,697,056

Amount offset by expense reductionduring care period :

$486,125

Net Cost of care to be paid fromPortfolio :

$5,149,095

One of the greatest threats to the financial well-being of many people over 50 is the possible need for an extended period of Long-TermCare, either at home, in an Assisted Living Facility or in a Nursing Home. This Section demonstrates how these expenses could adverselyaffect your Investment Portfolio and how you might protect it with a Long-Term Care policy.

* Assumptions for new LTC policy are 10 year Benefit Period,100-day Elimination Period, $200 Daily Benefit Amount, 100%Home Care Benefit, and Compounded Inflation at 5%.

SAMPLE

Estate Analysis

SAMPLE

Estate Introduction

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This section of your report provides a general overview of your current estate situation andshows the projected value of your estate at death. It includes an estimate of Federal Estatetaxes, expenses, and the amounts to be received by your beneficiaries. If appropriate, thisreport also illustrates one or more estate planning strategies that you may want to consider.

Important Note: This analysis is intended solely to illustrate potential estate analysis issues.Prior to taking any action, we recommend that you review the legal and/or tax implicationof this analysis with your personal legal and/or tax advisor.

You have told us the following about your current Estate situation;

• Both John and Jane have Wills.

• Both John and Jane have Medical Directives.

• Both John and Jane have Power Of Attorney.

This Estate Analysis assumes that you both maintain valid Wills that bequeaths all assets toeach other (Simple Will). This Estate Analysis may not accurately reflect your current estatewhere one or both of you does not have a Simple Will.

It is important that both of you have a Will that is valid and up-to-date. Your Wills should beperiodically reviewed by your legal advisor. You should also discuss the appropriateness of aMedical Directive and Power of Attorney with your legal advisor.

You have indicated that you have not made provisions for a Bypass Trust. When this analysisillustrates the potential benefit of a Bypass Trust, it assumes that your assets will be properlytitled and appropriate to fully fund the amount shown.

The Need for Estate Planning

It is often said that you cannot take your money with you; however, it is somewhatcomforting to know that you can determine what happens to it after you're gone. Awell-designed estate plan can not only help make sure that your assets go where you wantthem to, but also make the process simpler, faster, less expensive, and less painful. Suchplanning followed by an orderly transition of your estate can have a positive impact on thepeople you care about.

How Will You Be Remembered?

This Estate Analysis assumes that you both maintain valid Wills that bequeaths all assets toeach other (Simple Will). This Estate Analysis may not accurately reflect your current estatewhere one or both of you does not have a Simple Will.

It is important that both of you have a Will that is valid and up-to-date. Your Wills shouldbe periodically reviewed by your legal advisor. You should also discuss the appropriatenessof a Medical Directive and Power of Attorney with your legal advisor.

You have indicated that you have not made provisions for a Bypass Trust. When thisanalysis illustrates the potential benefit of a Bypass Trust, it assumes that your assets will beproperly titled and appropriate to fully fund the amount shown.

It is often said that you cannot take your money with you; however, it is somewhatcomforting to know that you can determine what happens to it after you're gone. Awell-designed estate plan can not only help make sure that your assets go where you wantthem to, but also make the process simpler, faster, less expensive, and less painful. Suchplanning followed by an orderly transition of your estate can have a positive impact on thepeople you care about.

SAMPLE

Estate Introduction

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When it comes to estate taxes, the tax law seemingly penalizes those who fail to planproperly. Failure to properly plan can sometimes lead to greater estate taxes due. Awell-designed estate plan can potentially reduce taxes substantially, and leave more moneyfor your heirs.

Goal Planning is Important

• When should they get it - all at once or over time?

• Do you want to place restrictions on some assets such as a business or property?

• How much should go to charity?

• Who gets important tangible assets (e.g. wedding rings, family heirlooms)?

• Which assets do you want sold? Which assets should never be sold?

• Will there be enough liquidity to pay taxes?

Probate - Expense and Delays

Probate is the legal process for settling your Estate, which basically means that all your debtsand taxes are paid and remaining assets are distributed. Probate can be time consumingand expensive, and is open to public review. A well-designed estate plan can reduce thecosts of probate, save time, and even avoid probate for many assets.

Your Beneficiaries - Leaving More

The desire to control the ultimate disposition of that which we accumulate during ourlifetime and to provide for those we care about is a strong motivation in most people. Inthis regard, there are many questions to answer:

• Who should get the money, and how much?

• Who will manage the money?

You - Having Enough

Estate Planning focuses on what happens after you die and includes strategies you canemploy to increase the amount of your assets that pass to your beneficiaries. Some ofthese strategies, such as gifting and purchasing life insurance, can cost you a significantamount of money during your lifetime. While this is certainly financially helpful for yourheirs, is it financially sound for you? A good estate plan also considers the impact of thesestrategies on you, while you're alive. You want to make sure that you will have enoughmoney to support your own lifestyle, before spending money to help your heirs.

SAMPLE

Estate Assumptions

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This analysis makes a number of assumptions that could significantly affect your resultsincluding, but not limited to, the following:

Important Information on Assumptions

• State inheritance, estate or gift taxes have not been incorporated.

• Gift taxes are not calculated every year, but are totaled and settled at the death of thedonor.

• Generation-skipping taxes, if applicable, have not been calculated.

• All custodial accounts (UGMA and/or UTMA) are not included in the estate calculations.

• Both of you are U.S. Citizens.

• All amounts contributed to 529 Savings Plans are treated as completed gifts and there isno recapture provision for any 5-year pre-funding contribution elections.

• Prior gifts above the annual exclusion and for which no taxes have been paid are includedin your Taxable Estate. Prior gifts above the annual exclusion and for which taxes have beenpaid are not included in your Taxable Estate.

• All Qualified Retirement Plans, IRAs and Tax-deferred Annuities are assumed to have thespouse as the Beneficiary and its value is available to fund goals after the first death. Thecontingent Beneficiary is the estate.

• Financial Goals such as "Gift or Donation" or "Leave a Bequest" are not reflected in theEstate Analysis.

• Bequests stipulated in your will, including charitable bequests, are not reflected in theEstate Analysis.

• If applicable, reverted gifts and/or life insurance proceeds transferred to a Trust orthird-party within three years of death are included in your Gross Estate and Taxable Estate.

• In certain calculations, the Bypass Trust may not be fully funded to the available estateexemption equivalent amount due to prior gifts, titling of assets, insufficient resources,and/or other bequests.

• The current values of vested stock options are included in the gross estate. The currentvalues of unvested stock options are included if you indicated, on the Stock Options page,that the options vest at death.

• In the event Qualified Retirement Plans, IRAs, and Tax-deferred Annuities are used to fundthe Bypass Trust, the program assumes the spouse has disclaimed the assets and thecontigent beneficiary is a 'qualified' trust.

• In the event Other Assets, such as a Primary Residence or Personal Property, are used tofund the Bypass Trust, the program assumes these assets have a specific value and can infact be used to fund the Bypass Trust.

• If applicable, the value of any payment that continues past death created by theImmediate Annuity Goal Strategy is not included in the estate calculations.

• The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010("the Act") modified several provisions of the Federal Estate & Gift Tax for 2011 and 2012.As specified in the Act, this analysis incorporates the 35% estate tax rate, the $5 million perperson applicable exclusion amount, and the unification of the Gift Tax and Estate Taxsystems for the $5 million exclusion amount. In addition, the portability of the deceasedspouse’s unused estate exclusion amount (DSUEA) to the surviving spouse is reflected in thisanalysis. If Congress amends or extends the Act, or amends other provisions of the FederalEstate & Gift Tax, any analysis for future years should be reviewed by you and your taxadvisors.

SAMPLE

Estate Analysis Results Combined Summary

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Amount to Heirs : $8,625,201 $9,427,189

Federal Estate Tax** : $9,773,467 $9,041,053

Estate Expenses : $478,550 $408,975

Additional Value to Heirs : $801,989

Amount to Heirs

Net Estate Value : $8,625,201 $8,035,702

Bypass Trust : $0 $1,391,487

Life Insurance in Trust : $0 $0

Total : $8,625,201 $9,427,189

Cash Needed to Pay Tax and Expenses

Shortfall at First Death : $0 $0

Existing Estate Existing Estate

Other Life Insurance : $0 $0

Total Estate : $18,877,218 $18,877,218

Will without Bypass Trust Will with Bypass Trust

Shortfall at Second Death : $0 $0

Bypass Trust Funding

Funding Shortfall : $0 $0

** State Estate Taxes are not included. In some states, the tax may be substantial.

Using Model 6 - Target - Both Die at life expectancy - John Predeceases Jane

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Estate Analysis Results Combined Summary

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• Prior gifts are not included in the amount to heirs.

Notes


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Estate Analysis Results Flowchart

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John'sGross Estate

1st DeathTaxes and Expenses

Marital Deduction Bypass Trust

Jane'sGross Estate

2nd DeathTaxes and Expenses

Other Life Insurance

Total Amount to Heirs

ILITPolicies Owned by Other

$10,046,436

$32,867

$10,013,568

$18,844,350

$0

$10,219,150

$0

$8,625,201 $0+ $0+

$8,625,201=

$0+

Transfer : $0

To Heirs : $0

Existing Estate without Bypass Trust using Model 6 - Target - Both Die at life expectancy - John Predeceases Jane

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Notes

• Gross Estate amounts may include the value of reverted gifts.

• Gross Estate amounts do not include the value of prior gifts.

• Other Life Insurance includes policies where the first person to die is the owner andinsured and the beneficiary of the policy is not the co-client or estate.

• The Bypass Trust may not be fully funded to the available estate exemption equivalentamount due to prior gifts, titling of assets, insufficient resources, and/or other bequests.


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John'sGross Estate



Jane'sGross Estate





$10,046,436

$32,867

$9,013,568

$17,452,863

$0

$9,417,161

$0

$8,035,702 $1,391,487+ $0+

$9,427,189=

$0+

Transfer : $1,000,000

To Heirs : $1,391,487

Existing Estate with Bypass Trust using Model 6 - Target - Both Die at life expectancy - John Predeceases Jane

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Notes






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Estate Analysis What If Results Combined Summary

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Federal Estate Tax** : $9,773,467 $8,988,412

Estate Expenses : $478,550 $403,937

Additional Value to Heirs : $1,766,895

Amount to Heirs and Charities

Net Estate Value : $8,625,201 $8,000,608

Bypass Trust : $0 $1,391,487

Life Insurance in Trust : $0 $1,000,000

Total : $8,625,201 $10,392,095

Cash Needed to Pay Tax and Expenses

Shortfall at First Death : $0 $0

Existing Estate Estate Scenario 1

Other Life Insurance : $0 $0

Total Estate : $18,877,218 $19,784,444

Amount to Heirs : $8,625,201 $10,392,095

Shortfall at Second Death : $0 $0

Bypass Trust Funding

Funding Shortfall : $0 $0

If you include in your Estate What-If scenario a change in ownership strategy where the insurance death benefit will not revert at death, theGross and Taxable Estate will not include the death benefits from life insurance policies that were transferred within three years of death -this option is for illustrative and comparison purposes only.


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Estate Analysis What If Results Combined Summary

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Results for your Goal Plan include the Estate Strategies selected as shown below.


Existing Estate Estate Scenario 1Goal

Second to Die Policy N/A 100%

Retirement - Living Expense 100% 100%

Buy Long Term Care Policy for John N/A N/A

College - Jimmy 134% 134%

Travel 100% 100%

Leave Bequest 100% 100%

$7,646,009

$18,274,368

Current dollars :

Future dollars :

$7,607,124

$18,181,430

Safety Margin (Value at End of Plan)

Include IncludeStrategy Description

Bypass Trust

Second to Die PolicySecond to Die - $1,000,000$500 premium per year

Wealth Transfer (ILIT)

** State Estate Taxes are not included. In some states, the tax may be substantial.

• Prior gifts are not included in the amount to heirs.

Notes



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Estate Analysis What If Results Flowchart

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John'sGross Estate



Jane'sGross Estate





$10,046,436

$32,867

$10,013,568

$18,844,350

$0

$10,219,150

$0

$8,625,201 $0+ $0+

$8,625,201=

$0+

Transfer : $0

To Heirs : $0

Existing Estate without Bypass Trust using Model 6 - Target - Both Die at life expectancy - John Predeceases Jane

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Notes






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John'sGross Estate



Jane'sGross Estate





$10,005,123

$32,447

$8,972,676

$17,360,510

$0

$9,359,902

$1,000,000

$8,000,608 $1,391,487+ $0+

$10,392,095=

$1,000,000+

Transfer : $1,000,000

To Heirs : $1,391,487

Estate Scenario 1 using Model 6 - Target - Both Die at life expectancy - John Predeceases Jane

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Notes






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Appendix

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Risk Assessment

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Investment Account

Other

Current Income

Educational Planning

Major Purchase

Retirement

Yes

No

Less than 2%

Greater than 2%, but less than 4%

Greater than 4%, but less than 6%

Greater than 6%

Over 20 years

11 - 20 years

6 - 10 years

1 - 5 years

Immediately

I am primarily concerned with maximizing the returns of my investments. I amwilling to accept high risk and high chance of loss to maximize my investment returnpotential.

I am willing to accept moderate risk and chance of loss in order to achieve moderatereturns. Limiting risk and maximizing return are of equal importance to me.

I am most concerned with limiting risk. I am willing to accept lower expectedreturns in order to limit my chance of loss.

1. What is your primary purpose for investing in this account?

2. Do you need current income (that is, will you take regular withdrawals from thisaccount)?

If yes, approximately what percentage of the accounts current value do you needannually?

3. In approximately how many years will you begin withdrawing funds for yourinvestment objective?

Over 20 years

11 - 20 years

6 - 10 years

1 - 5 years

Lump Sum

4. Once you begin to withdraw funds for your primary investment objective, over howlong a period do you anticipate the withdrawals to continue?

5. Which of the following statements best describes your attitude towards the trade-offbetween risk and return?

Updated : 11/29/2012

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Risk Assessment

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Updated : 11/29/2012

Portfolio X

Portfolio Y

Portfolio Z

6. The following graphs show the historical year by year returns for three hypotheticalportfolios over a 20 year period. The average annual return over the 20-year period isalso indicated. Again, please note that these are examples only, actual results may vary.

Given your investment goals for this account, which portfolio would you choose?

Portfolio XAverage Annual Return=6%

Portfolio YAverage Annual Return=9%

Portfolio ZAverage Annual Return=11%

7. The risk of a portfolio suffering a decrease in value (having a negative return) is often aprimary concern for investors. To achieve potentially higher returns, however, aninvestor must be willing to accept greater risk. The following table portrays fourdifferent hypothetical $100,000 portfolios. For each portfolio, the expected value atthe end of 1 year is shown along with the probabilities of suffering a decline that year,rather than a gain. Given your investment objective, in which of the 4 hypotheticalportfolios would you be most comfortable investing?

Portfolio A

Portfolio B

Portfolio C

Portfolio D

Portfolio Expected value of $100,000 after 1year

Portfolio A

Portfolio B

Portfolio C

Portfolio D

Chance of losing moneyafter 1 year

$107,000

$108,000

$109,000

$110,000

19%

23%

26%

28%

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Risk Assessment

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Updated : 11/29/2012

8. Each bar below shows a range of possible one-year ending values for a $100,000 initialinvestment in one of four hypothetical portfolios. The assumed value of the averagereturn for that portfolio is shown in the center of the bar. For example, at the end of agiven year, Portfolio A could have an ending value anywhere between $115,000 (areturn of 15%) and $93,000 (-7% return). The average ending value is approximately$107,000 (7% return). It is important to remember that the hypothetical portfolios aremore likely to achieve the average return over long-term holding periods. The four barsrepresent the four hypothetical portfolios. (Please note that these are only examples --actual results will vary). Given the possible average, best, and worst outcomes for eachportfolio, please indicate which of the four options would be most suitable for thisaccount:

Portfolio A

Portfolio B

Portfolio C

Portfolio D

9. Inflation can greatly erode the return on your investments, especially over time. Forexample, in a typical year with a 3.5% inflation rate, a 6% return before inflationwould have a real return of only 2.5% (6% - 3.5% = 2.5%). Please specify which ofthe following best summarizes your attitudes regarding investing and inflation.

I prefer portfolio returns that are expected to return substantially more thaninflation over the long run and I am willing to accept large short-term fluctuations invalue (and a greater potential for loss) to achieve this goal.

I prefer a portfolio that is expected to moderately exceed inflation over the long runand I am willing to accept moderate short-term fluctuations in value (and amoderate potential for loss) to achieve this goal.

I prefer to minimize short-term fluctuations in portfolio value (and the potential forloss) as much as possible, even if it means that my portfolio is expected to only keeppace with or slightly exceed inflation.

10. Sometimes investment losses are permanent, sometimes they are prolonged, andsometimes they are short-lived. How might you respond when you experienceinvestment losses?

I would sell my investments immediately if they suffered substantial declines.

Although declines in investment value make me uncomfortable, I would wait one totwo quarters before adjusting my portfolio.

I can endure significant declines in the value of my investments and would wait atleast one year before adjusting my portfolio.

Even if my investments suffered a significant decline over several years, I wouldcontinue to follow my long-term investment strategy and not adjust my portfolio.

11. What is your current level of investable assets?

Less than $1,000,000

$1,000,000 to $19,999,999

Greater than $20,000,000

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Tax and Inflation Assumptions

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Base Inflation Rate

Inflation rate : 2.00%

Social Security Inflation rate : 2.00%

Tax Assumption Inflation rate : 2.00%

Tax Rates : 35.00%

Federal

7.85%

State

0.00%

Local

Marginal Tax Rates Before Retirement

Untaxed Gain on Taxable Earnings - Before Retirement

What portion of your Annual Taxable InvestmentEarnings will not be taxed until withdrawn?

0.00%

What portion of your Taxable Investment Earningswill be taxed as Long Term Capital Gains?

20.00%

Long Term Capital Gains rate : Use Program estimate

Long Term Capital Gains (LTCG) - Before Retirement

Tax Rates During Retirement

Local rate : 0.00%

Deduction estimate : Use standard deductions

Let the Program calculate taxes each year

0.00%

Untaxed Gain on Taxable Earnings - During Retirement

What portion of your Annual Taxable InvestmentEarnings will not be taxed until withdrawn?

Long Term Capital Gains (LTCG) - During Retirement

What portion of your Taxable Investment Earningswill be taxed as Long Term Capital Gains?

20.00%

Long Term Capital Gains rate : Use Program estimate

Taxation of Social Security

What portion of Social Security will be taxed? 85.00%

Tax Penalty

Include penalties in Plan? : Yes

Tax Relief Acts of 2001/2010 - Options

Use the new Tax Rates for the entire Plan.

Use Tax-Free returns by Asset Class,Marginal Tax Rate to use during Retirement is 40.00%

Tax Free Earnings - Options

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Return Methodology

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“Rebalancing” describes the discipline of selling assets and buying others to match the target weightings of an asset allocation model.Because assets increase and decrease in value over time, the percentage amounts of assets invested in each class will tend to vary from theiroriginal target weightings.

Morgan Stanley Wealth Management Global Investment Committee StrategicReturn Estimates Methodology

This tool incorporates a methodology for making hypothetical financial projections approvedby the Morgan Stanley Wealth Management Global Investment Committee. Opinionsexpressed in this presentation may differ materially from those expressed by otherdepartments or divisions or affiliates of Morgan Stanley.

About Strategic Return Estimates, Rate of Return, Standard Deviation, and AssetClass Indices

Strategic Return Estimates (SREs)

What are SREs?

These Strategic Return Estimates (SREs) represent one set of assumptions regarding rates ofreturn for specific asset classes approved by the Morgan Stanley Wealth ManagementGlobal Investment Committee. However, this tool allows you to modify the SREs in what-ifscenarios and/or stress testing to include your own assumptions about the rates of returnyou may expect to receive on various asset classes. Changing these assumptions can changethe program results.

How are SREs derived?

These assumptions are made using a proprietary methodology using a building blockapproach. Our SREs reflect expectations for a number of long-term economic andmarket-related factors we expect to influence capital market returns, such as populationgrowth, productivity, earnings expectations, etc.

Index returns are used for calculation of volatility and correlations. For most indices we usedata since 1990. Regarding several types of alternative investments such as hedge funds,private equity and real estate, we apply significant statistical adjustments to historicalreturns in order to correct for distortions such as survivorship biases, selection biases andprice staleness.

What else is important to know?

It is important to remember that future rates of return can't be predicted with certainty andthat investments that may provide higher rates of return are generally subject to higher riskand volatility. The actual rate of return on investments can vary widely over time. Thisincludes the potential loss of principal on your investment.

1

Investors should carefully consider several important factors when making asset allocationdecisions using projected investment performance data based on assumed rates of return ofindices:

Indices illustrate the investment performance of instruments that have certain similarcharacteristics and are intended to reflect broad segments of an asset class. Indices do notrepresent the actual or hypothetical performance of any specific investment, including anyindividual security within an index. Although some indices can be replicated, it is notpossible to directly invest in an index. It is important to remember the investmentperformance of an index does not reflect deductions for investment charges, expenses, orfees that may apply when investing in securities and financial instruments such ascommissions, sales loads, or other applicable fees. Also, the stated investment performanceassumes the reinvestment of interest and dividends at net asset value without taxes, andalso assumes that the portfolio is consistently “rebalanced” to the initial target weightings.Asset allocations which deviate significantly from the initial weightings can significantlyaffect the likelihood of achieving the projected investment performance.

1

Another important factor to keep in mind when considering the historical and projectedreturns of indices is that the risk of loss in value of a specific asset, such as a stock, a bondor a share of a mutual fund, is not the same as, and does not match, the risk of loss in abroad asset class index. As a result, the investment performance of an index will not be thesame as the investment performance of a specific instrument, including one that iscontained in the index. Such a possible lack of “investment performance correlation” mayalso apply to the future of a specific instrument relative to an index.

For these reasons, the ultimate decision to invest in specific instruments should not bepremised on expectations that the historical or projected returns of indices will be the sameas those for specific investments made.

Rates of Return, Standard Deviation, and Asset Class Indices

Standard deviation is a common risk measurement that estimates how much aninvestment’s return will vary from its predicted average. Generally, the higher aninvestment’s standard deviation, the more widely its returns will fluctuate, implying greatervolatility. In the past, asset classes that have typically provided the highest returns have alsocarried greater risk. For purposes of this report, the standard deviation for the asset classesshown below are calculated using data going back to 1990.

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Return Methodology

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Morgan Stanley Wealth Management Global Investment Committee StrategicReturn Estimates Methodology (continued)

It is important to note that the rates of return of the listed indices may be significantlydifferent than the SRE or your own assumptions about the rates of return used in thereport. As always, keep in mind that past performance is no guarantee of future results.SREs are for illustrative purposes only and are not indicative of the future performance ofany specific investment.

Performance of an asset class within a portfolio is dependent upon the allocation ofsecurities within the asset class and the weighting or the percentage of the asset classwithin that portfolio. Potential for a portfolio’s loss is exacerbated in a downward trendingmarket. A well-diversified portfolio is less vulnerable in a falling market. Asset allocation anddiversification, however, do not assure a profit or protect against loss in a declining market.

Asset class returns and standard deviations of returns projections are based on reasonedestimates of drivers of capital market returns and historical relationships. As with anyforecasting discipline, the assumptions and inputs underlying Morgan Stanley WealthManagement’s forecasting process may or may not reconcile with, or reflect, each investor’sindividual investment horizon, risk tolerance, capital markets outlook, and world view. Forthese reasons, and because forecasting methods are complicated, investors are encouragedto discuss forecasting with a Morgan Stanley Financial Advisor.

As described, financial forecasting involves developing a methodology for extractingexpected returns and standard deviations of returns from historical data. Each forecastingmethodology is developed by selecting objective and subjective factors that vary amongthose developing the forecast model. Morgan Stanley Wealth Management has formulatedseveral different methodologies and makes its forecasts available to Morgan Stanleycustomers. Customers may choose one of Morgan Stanley Wealth Management'sforecasting models or, instead, if using a different financial planning tool, a forecastingmethodology developed by a third party. Differences exist between the variousmethodologies because different objective and subjective factors are incorporated into eachmethodology. These differences can include: the indices used as proxies for various assetcategories and classes, the length of time historical index data is input into the calculations,and the resulting expected returns and volatility for each asset class. Each model may covera greater or lesser number of asset classes than other models, the indices used as asset classrepresentations may be different for certain classes of assets in the models, and MorganStanley Wealth Management has more asset classes in the Alternative Investments assetcategory than are available in other models. Additionally, other differences may develop inthe future as these methodologies are dynamic in nature and are likely to change over time.

While Morgan Stanley Wealth Management has not designed its forecasting methodologiesto match or address its inventory as a broker-dealer of financial products, an appearance ofa conflict of interest could exist in which the Morgan Stanley Wealth Managementforecasts, if followed, guide investors in directions that support Morgan Stanley WealthManagement's inventory. To the extent this is a concern to customers, they should requestthat a forecast be prepared using a different third party methodology, either alone or inconjunction with a Morgan Stanley Wealth Management model for comparison purposes.A Morgan Stanley Financial Advisor is available to explain the different methodologies andcan compare and contrast different models upon request.

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Return Methodology

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Return IndexAsset Class

Cash - USD (90-day Tbills) Bloomberg US Generic Government 3 Month Yield

Global Govt/Govt-Related Bonds (hedged to USD) Barclays Capital Global Aggregate: Govt/Govt-Related (hedged to USD)

Global Corporate/Securitized Bonds (hedged toUSD)

Barclays Capital Global Aggregate: Corporate/Securitized (hedged to USD)

Global Short-Term Government Bonds (hedged toUSD)

Barclays Capital Global Treasury (1-3 Year) (hedged to USD)

Global High Yield Bonds (hedged to USD) Barclays Capital Global High Yield (hedged to USD)

Global Emerging Markets Local Debt (unhedged) JPM GBI-EM Global Diversified Composite (unhedged USD)

US Large-Cap Value Stocks Russell 1000 Value

US Large-Cap Growth Stocks Russell 1000 Growth

US Mid-Cap Value Stocks Russell Mid Cap Value

US Mid-Cap Growth Stocks Russell Mid Cap Growth

US Small-Cap Value Stocks Russell 2000 Value

US Small-Cap Growth Stocks Russell 2000 Growth

Developed-Market ex US Stocks (unhedged) MSCI World ex US IMI

Global Emerging Market Stocks (unhedged) MSCI EMF IMI

Global REITs (unhedged) FTSE EPRA NAREIT Global Total Return

Commodities DJ/UBS Commodity Total Return

Global Inflation-Linked Securities (unhedged) Barclays Capital Universal Govt Inflation-Linked All Maturities (unhedged)

Broad Fund of Hedge Funds MS AIP, HFRI Fund of Funds Composite

Managed Futures Barclay BTop50

US Private Equity Venture Economics

US Private Real Estate Funds NCREIF Townsend

Source: Morgan Stanley Wealth Management Global Investment Committee

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Glossary of Terms

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Asset Allocation is the process of determining what portions of your portfolio holdings areto be invested in the various asset classes.

Asset Allocation

Alternative Portfolio

Your Alternative Portfolio is a modification of the Risk Based Portfolio. In order for theAlternative Portfolio to be selected as the Target Portfolio, it must fall within the definedconstraints.

Adjusted Real Return

Adjusted Real Return is the Real Return minus the Total Return Adjustment.

Asset Class is a standard term that broadly defines a category of investments. The threebasic asset classes are Cash, Bonds, and Stocks. Bonds and Stocks are often furthersubdivided into more narrowly defined classes. Some of the most common asset classes aredefined below.

Asset Class

Cash

Cash and Cash Alternatives are investments of high liquidity and safety with a knownmarket value and a very short-term maturity. Examples are treasury bills and money marketfunds. (See "Money Market Funds" in the "Key Asset Class Risk Considerations" sectionof this report for a summary of the risks associated with investing in Money MarketFunds.)

Bonds

Bonds are either domestic (U.S.) or global debt securities issued by either privatecorporations or governments. (See “Fixed Income" in the "Key Asset Class RiskConsiderations" section of this report for a summary of the risks associated with investingin bonds. Bonds are also called “fixed income securities.”)

Domestic government bonds are backed by the full faith and credit of the U.S.Government and have superior liquidity and, when held to maturity, safety of principal.Domestic corporate bonds carry the credit risk of their issuers and thus usually offeradditional yield. Domestic government and corporate bonds can be sub-divided basedupon their term to maturity. Short-term bonds have an approximate term to maturity of 1to 5 years; intermediate-term bonds have an approximate term to maturity of 5 to 10years; and, long-term bonds have an approximate term to maturity greater than 10 years.

Domestic stocks are equity securities of U.S. corporations. Domestic stocks are oftensub-divided based upon the market capitalization of the company (the market value of thecompany's stock). "Large cap" stocks are from larger companies, "mid cap" from themiddle range of companies, and "small cap" from smaller, perhaps newer, companies.Generally, small cap stocks experience greater market volatility than stocks of companieswith larger capitalization. Small cap stocks are generally those from companies whosecapitalization is less than $500 million, mid cap stocks those between $500 million and $5billion, and large cap over $5 billion.

Stocks are equity securities of domestic and foreign corporations. (See "Stocks" in the"Key Asset Class Risk Considerations" section of this report for a summary of the risksassociated with investing in stocks.)

Stocks

Large cap, mid cap and small cap may be further sub-divided into "growth" and "value"categories. Growth companies are those with an orientation towards growth, oftencharacterized by commonly used metrics such as higher price-to-book andprice-to-earnings ratios. Analogously, value companies are those with an orientationtowards value, often characterized by commonly used metrics such as lower price-to-bookand price-to-earnings ratios.

International stocks are equity securities from foreign corporations. International stocks areoften sub-divided into those from "developed" countries and those from "emergingmarkets." The emerging markets are in less developed countries with emerging economiesthat may be characterized by lower income per capita, less developed infrastructure andnascent capital markets. These "emerging markets" usually are less economically andpolitically stable than the "developed markets." Investing in international stocks involvesspecial risks, among which include foreign exchange volatility and risks of investing underdifferent tax, regulatory and accounting standards.

Asset Mix

Asset Mix is the combination of asset classes within a portfolio, and is usually expressed as apercentage for each asset class.

Bear Market Loss

The Bear Market Loss shows how a portfolio would have been impacted during the GreatRecession (November 2007 through February 2009) or the Bond Bear Market (July 1979through February 1980). The Bear Market Loss shows: 1) either the Great Recession Returnor the Bond Bear Market Return, whichever is lower, and 2) the potential loss, if you hadbeen invested in this cash-bond-stock portfolio during the period with the lower return. SeeBear Market Test, Great Recession Return, and Bond Bear Market Return.

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Bear Market Test

The Bear Market Test, included in the Stress Tests, examines the impact on your Plan resultsif a Bear Market Loss occurred this year. The Bear Market Test shows the likelihood that youcould fund your Needs, Wants and Wishes after experiencing such an event. See BearMarket Loss.

Bond Bear Market Return

The Bond Bear Market Return is the rate of return for a cash-bond-stock portfolio duringthe Bond Bear Market (July 1979 through February 1980), the worst bear market for bondssince the Great Depression. LifeView Advisor shows a Bond Bear Market Return for yourCurrent, Risk-based, and Target Portfolios, calculated using historical returns of threebroad-based asset class indices. See Great Recession Return.

Cash Receipt Schedule

A Cash Receipt Schedule consists of one or more years of future after-tax amounts receivedfrom the anticipated sale of an Other Asset, exercising of Stock Options grants, or proceedsfrom Restricted Stock grants.

Current Dollars

Confidence Zone

See Monte Carlo Confidence Zone.

Concentrated Position

A Concentrated Position is when your portfolio contains a significant amount (as apercentage of the total portfolio value) in individual stock or bonds. Concentrated Positionshave the potential to increase the risk of your portfolio.

The Results of LifeView Advisor calculations are in Future Dollars. To help you comparedollar amounts in different years, we also express the Results in Current Dollars, calculatedby discounting the Future Dollars by the sequence of inflation rates used in the Plan.

Current Portfolio

Your Current Portfolio is comprised of all the investment assets you currently own (or asubset of your assets, based on the information you provided for this Plan), categorized byAsset Class and Asset Mix.

Fund All Goals

Fund All Goals is one of two ways for your assets and retirement income to be used to fundyour goals. The other is Earmark, which means that an asset or retirement income isassigned to one or more goals, and will be used only for those goals. Fund All Goals meansthat the asset or income is not earmarked to fund specific goals, and can be used to fundany goal, as needed in the calculations. The {0} default is Fund All Goals, except for 529Plans and Coverdell IRAs, which are generally used only for college goals. Fund All Goals isimplemented as either Importance Order or Time Order funding. Importance Order meansthat all assets are used first for the most important goal, then the next most important goal,and so on. Time Order means that all assets are used first for the goal that occurs earliest,then the next chronological goal, and so on.

Future Dollars

Future Dollars are inflated dollars. The Results of LifeView Advisor calculations are in FutureDollars. To help you compare dollar amounts in different years, we discount the FutureDollar amounts by the inflation rates used in the calculations and display the Results in theequivalent Current Dollars.

Great Recession Return

The Great Recession Return is the rate of return for a cash-bond-stock portfolio during theGreat Recession (November 2007 through February 2009), the worst bear market for stockssince the Great Depression. LifeView Advisor shows a Great Recession Return for yourCurrent, Risk-based, and Target Portfolios, calculated using historical returns of threebroad-based asset class indices. See Bond Bear Market Return.

Liquidity

Liquidity is the ease with which an investment can be converted into cash.

Inflation Rate

The Inflation Rate is the percentage increase in the cost of goods and services for a specifiedtime period. A historical measure of inflation is the Consumer Price Index (CPI).

Model Portfolio

These five portfolios (Conservative, Moderate Conservative, Moderate, ModerateAggressive, Aggressive) are the available models as a result of the risk questions answered inthe Risk Tolerance Questionnaire.

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Monte Carlo Probability of Success / Probability of Failure

The Monte Carlo Probability of Success is the percentage of trials of your Plan that weresuccessful. If a Monte Carlo simulation runs your Plan 10,000 times, and if 6,000 of thoseruns are successful (i.e., all your goals are funded and you have at least $1 of SafetyMargin), then the Probability of Success for that Plan, with all its underlying assumptions,would be 60%, and the Probability of Failure would be 40%.

Monte Carlo Confidence Zone

The Monte Carlo Confidence Zone is the range of probabilities that you (and/or yourfinancial advisor) have selected as your target range for the Monte Carlo Probability ofSuccess in your Plan. The Confidence Zone reflects the Monte Carlo Probabilities of Successwith which you would be comfortable, based upon your Plan, your specific time horizon,risk profile, and other factors unique to you.

Monte Carlo Simulations

Monte Carlo simulations are used to show how variations in rates of return each year canaffect your results. A Monte Carlo simulation calculates the results of your Plan by runningit many times, each time using a different sequence of returns. Some sequences of returnswill give you better results, and some will give you worse results. These multiple trialsprovide a range of possible results, some successful (you would have met all your goals) andsome unsuccessful (you would not have met all your goals).

Needs

In LifeView Advisor, you choose an importance level from 10 to 1 (where 10 is the highest)for each of your financial goals. Each importance level is defined to be a Need, Want, orWish. Needs are the goals that you consider necessary for your lifestyle, and are the goalsthat you must fulfill. Wants are the goals that you would really like to fulfill, but could livewithout. Wishes are the “dream goals” that you would like to fund, although you won’t betoo dissatisfied if you can’t fund them. In LifeView Advisor, Needs are your most importantgoals, then Wants, then Wishes.

Portfolio Set

A Portfolio Set is a group of portfolios that provides a range of risk and return strategies fordifferent investors.

Portfolio Total Return

A Portfolio Total Return is determined by weighting the return assumption for each AssetClass according to the Asset Mix. Also see “Expense Adjustments.”

Probability of Success / Probability of Failure

See Monte Carlo Probability of Success / Probability of Failure.

Real Return

The Real Return is the Total Return of your portfolio minus the Inflation Rate.

Risk

Risk is the chance that the actual return of an investment, asset class, or portfolio will bedifferent from its expected or average return.

Risk Based Portfolio

Your Risk Based Portfolio is based on the results of your Risk Tolerance Questionnaire. Youare scored into one of the Model Portfolios.

Standard Deviation

Standard Deviation is a statistical measure of the volatility of an investment, an asset class,or a portfolio. It measures the degree by which an actual return might vary from theaverage return, or mean. Typically, the higher the standard deviation, the higher thepotential risk of the investment, asset class, or portfolio.

Time Horizon

Time Horizon is the period from now until the time the assets in this portfolio will begin tobe used.

Total Return

Total Return is the assumed growth rate of your portfolio for a specified time period. TheTotal Return is either (1) determined by weighting the return assumption for each AssetClass according to the Asset Mix or (2) is entered by you or your financial advisor (on theWhat If Worksheet). Also see “Real Return.”

Target Portfolio

Your Target Portfolio is the portfolio you have selected based upon your investmentobjectives and your risk tolerance. The Target Portfolio will be the same as the Risk BasedPortfolio unless you choose an Alternative Portfolio or a Model Portfolio.

Total Return Adjustment

Total Return Adjustment allows you and your Financial Advisor to model hypotheticalWhat-If scenarios by decreasing the Total Return without adjusting the Target Portfolio orthe Standard Deviation. This may be a useful part of the analysis to help you understandthe impact of a lower Total Return.

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Glossary of Terms

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Wants

See "Needs".

Unclassified Securities

Unclassified Securities are not included in any of the pre-defined asset class categories thatserve as proxies for modeling asset allocation.

Willingness

In LifeView Advisor, in addition to specifying Target Goal Amounts, a Target SavingsAmount, and Target Retirement Ages, you also specify a Willingness to adjust these Targetvalues. The Willingness choices are Very Willing, Somewhat Willing, Slightly Willing, andNot at All.

Wishes

See "Needs".

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r · pdf fileinformation that you provided about your assets, financial goals, and personal...

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