® ©Copyright 2001, Financeware, Inc. All rights reserved Using Wealthcare to Unlock Concentrated Stock Positions

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 2 Main Issues Clients With Concentrated Holdings Need Wealthcare Too… Its Just Harder For Them to Pull the Trigger Wealthcare is About Making the Most of The One Life Investors Have Without Needless Compromises And Without Unnecessary Investment Risk If You Connect On the Value Proposition… If You Understand Their Goals If You Understand How They Prioritize Their Goals They Will Buy Your Recommendation

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 3 Risk of Single Stocks vs. the “Market”

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 4 Problems With Obtaining Standard Deviation Pop Quiz: What is the Standard Deviation of the S&P 500? A) 15%B) 18%C) 20%D) 30% S&P500IBMGEMO* 52 WK High32%40%40%95% 52 WK Low11%18%18%17% What Standard Deviation Do You Use? *MO – Philip Morris

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 5 Financeware Asset Allocation Page Alternative / Other Assets Concentrated Large Cap Standard Dev and Arithmetic Mean And Their Impact on the Geometric Mean

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 6 Arithmetic vs. Geometric Returns 1st Example: Starting With $100 Year 1 Return +100%$100 + ($100 * 1) = $200 Year 2 Return -50%$200 + ($200 * -.5) = $100 Ending Value $100 Geometric Return ((Ending Value - Starting Value) - Starting Value) / Starting Value = 0% Arithmetic Return (Year 1 Rtn + Year 2 Rtn) / 2 = 25% The Geometric Return Reflects Compounding…

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 7 Arithmetic vs. Geometric 2nd Example ABAB Arithmetic Mean12%12% Standard Deviation18%54% Resulting Geometric Mean10.58%0.89% The Higher The Volatility, The Greater The Delta Between The Geometric & Arithmetic Means Arithmetic Means Are Used In Monte Carlo Simulation Geometric Means Are Used In Most Marketing Material

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 8 Measuring Confidence Against Inflation What are the ODDS of beating INFLATION over a 10 Year Time Horizon? Any One Stock: 42%

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 9 Measuring Confidence Against Inflation What are the ODDS of beating INFLATION over a 10 Year Time Horizon? Any One Stock: 42%Entire Universe of Stocks: 94%

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 10 Measuring Confidence Against Inflation What are the ODDS of beating INFLATION over a 10 Year Time Horizon? Any One Stock: 42%Entire Universe of Stocks: 94%Balanced (60/40): 98%

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 11 Why Wealthcare? » We Know The Risk Of Holding is High » But, The Tax Cost to Diversify Can Be High » And The Emotional Cost To Sell Can Be High » With the deck stacked against us, how can we provide Comfort?

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 12 Case Study – Gary and Terrie Jones » Gary – Age 58 & Terrie – Age 56 -no children, but love their pets » Household Income $325,000 (Gary – Circuit City Executive & Terrie – Veterinarian) » Total Investment Assets IRAs (saving $30k per year) $2,250,000 Brokerage Accounts (saving $10k per year) $1,200,000 Comfortable With Current Savings Levels ($40k per year) Current Bear Market Has Been PAINFUL Looking Forward To A “RELAXING RETIREMENT”

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 13 » GOALS: 60, but no later than 65 Spend $140k, but $120k would be enough Reduce Savings by $10k, but could save $10k more Ideally Spend Month In Australian Outback ($30k) Minimum Vacation of a Week ($10k) Leave Large Estate (To Build an Animal Shelter) preferably $1,000,000, but at least $250,000 Minimize Investment Risk Case Study – Gary and Terrie Jones » GOALS: 60, but no later than 65 Spend $140k, but $120k would be enough Reduce Savings by $10k, but could save $10k more PRIORITIES: Ideally Spend Month In Australian Outback ($30k) Minimum Vacation of a Week ($10k) Leave Large Estate (To Build an Animal Shelter) preferably $1,000,000, but at least $250,000 Minimize Investment Risk

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 14 Case Study – Gary and Terrie Jones

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 15 Case Study – Gary and Terrie Jones Because you focused on what they valued most, THEY BUY YOUR ADVICE… Knowing their Goals and Priorities, building a Recommendation is Simple…

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 16 Implementation Portfolio Components Your Recommended Portfolio: » Risk Averse Allocation Gary Reminds You Of His Employer: CIRCUIT CITY …and that in March 2000, CC was $43.48 per share …and now in January 2004, CC is $10.35 per share While he indicated his goal was “Minimize Investment Risk!” and it was a Priority …he does not want to sell their stock for such a loss… DOES THIS SOUND FAMILIAR?

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 17 Comparison of Recommendations 6 Times Standard Deviation 10 Times Downside Risk Recommended = Comfort Concentrated = Uncertain

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 18 Using Our Crystal Ball… What Does the Future Hold for The Jones Family? Their Stock Could Help Them Leave $60 Million More

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 19 Using Our Crystal Ball… What Does the Future Hold for The Jones Family? Their Stock Could Help Them Leave $60 Million MoreOr…The Results Could Be The Same, But With More Pain

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 20 Using Our Crystal Ball… What Does the Future Hold for The Jones Family? Their Stock Could Help Them Leave $60 Million MoreOr…The Results Could Be The Same, But With More Pain Or…they could run out of age 85

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 21 Using Our Crystal Ball… What Does the Future Hold for The Jones Family? Their Stock Could Help Them Leave $60 Million MoreOr…The Results Could Be The Same, But With More Pain Or…they could run out of age 85Or…they could run out of age 73 Which Market Will Occur?

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 22 Comparison of Recommendations To Have Comfort… >>Work 3 Years Longer >>Spend $60,000 Less >>Lose the Animal Shelter >>Save $70,000 More >>No More Safari Trips What Would It Cost Them To Keep Their Stock?

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 23 In Conclusion Don’t Let Your Clients Gamble Their Future…Use Wealthcare To Unlock Their Highly Concentrated Positions With Concentrated Positions… Experience Unnecessary Pain (and likely Un-Rewarded Pain) Confidence and Comfort Compromised (Coin-Flip) Contradictory to Making The Most of Their Life With Wealthcare… Avoid Unnecessary Investment Risk Achieve Comfort and Confidence Live Life Without Needless Sacrifice

Applying Wealthcare: Concentrated Stock Positions ® © WEALTHCARE CAPITAL MANAGEMENT 2004 ALL RIGHTS RESERVEDPAGE 24 Questions?