1. We “Watch-ovia” Your Money By: Frank Bruno Matthew Cohen Kevin Connelly Matthew DiCroce

2. Family Background Family of four – Father works for Wachovia as bank executive – Mother works as professor at Law School – Two children, ages 12 & 10 – 401(K) plans with 5 & 8% matching – Wachovia stock options – Minimal Savings – $2,000 mortgage payment

3. Financial Overview Maximize 401(K) savings – Lowers taxable income and provides additional savings through company matching program 529 Plan for both children Various Moderate Risk Mutual and Retirement Funds Pay down mortgage

4. Second Home Due to minimal savings and high first mortgage rate. Invest in Tax beneficial plans – 401(K) To buy house, you would need approximately 20% down payment.

5. Household Income Household pre-tax earnings = $200,000 Less ($28,000) 401K contributions = $172,000

6. Mortgage Interest Deductions Interest payment components of mortgages are tax deductible. To find the interest portion, we set up an amortization table and find the interest components for this year, then deduct them from our pre-tax income.

7. Mortgage Interest Deductions Starting Pre-tax income = $172,000 Less ($22,108) Interest = $149,892

8. Taxes 28% Federal Tax Bracket, 3% State, Plus local and property taxes. All rounded to 35%. Pre-Tax Income $149,892 Less Income Tax Expense ($56,462.50) NET INCOME = $97,430

9. Mortgage Payment Payments contributing to principle are NOT tax deductible. Net Income = $97,480 Less Mortgage Payment (non interest) ($1893) INCOME LEFT = $95,537

10. Other Expenses Health Insurance = $1,200 Car Payments = $9,600 Car Insurance = $4,000 Gas = $3,600 Food = $10,000 Clothes = $6,000 Utilities = $6,000 INCOME LEFT = $55,137

11. Misc. Expenses We estimated that the family will spend around $20,000 in other everyday costs. (Holidays, Birthdays, Vacations, Medicines, Summer Camps, Kid Expenses, Etc.) INCOME LEFT = $35,137

12. College Plan Family will invest in a 529 College Plan to cover 60% of 2 college educations. Cost: $15,360 / yr INCOME LEFT: $19,777

13. Savings Of the left over income, we will allocate about 30% for savings. Funds Available for Investment: $13,777

14. Allocation Mutual Funds: $6,300 Stocks: $3,000 Bonds: $4,477

15. Mutual Fund Investment $6,300 Dollar Allotment for Mutual Funds Vanguard as Fund Manager – Reliable – Proven Performer – Quality Customer Service

16. Types of Funds No-Load Index Funds – Minimal maintenance fees – Provide broad market exposure for low income investors – Reduce risk – $3,000 Minimal Investment 2 funds per year Indexes Covered – Large Cap Stocks, Emerging Markets, Growth Stocks, Real Estate, Bond Markets

17. First Year Vanguard Large Cap Index Fund – $20.44 share – 5.06% after tax return since inception in 2004 – Holdings: Exxon Mobil and J&J Vanguard Long Term Treasury Fund – $11.67 share – 5.88% annual return last 10 years – Holdings: 10-30 year bonds

18. Second Year Vanguard Small Cap Index Fund – $24.91 – Holdings: Reliant Energy and DeVita Inc. – 9.13% after tax annual return past 10 years Vanguard Emerging Market Index Fund – $14.67 – Holdings: China Mobil and Samsung – 5.28% annual after tax return 17.44% most recent year

19. Third Year Vanguard Money Market Fund – $1.00 fixed cost – Holdings: short term money market products – 3.74% 10 year annual return REIT Index Fund – $17.88 – Holdings: Real estate and capital growth stocks – 14.97% after tax annual returns

20. Bond Investments After other expenses and investments – $4,477 for bond investments What bonds to invest? – Low risk – Long-term return – Treasury bonds – Municipal bonds

21. Bond Investments BondPrice Coupon RateYTM %Rating T-Bond option 1$1,108.1013.875%11.35%AAA T-Bond option 2$1,254.8012.000%7.772%AAA Montgomery County G.O. BDS muni-bond$1,098.105.375%3.595%AAA PA State muni-bond$987.704.250%4.346%AAA

22. Equity Investments After other expenses and investments – $3,000 for equity investments Stock options at Wachovia – Can exercise 1,000 shares at $60 – Currently valued at $50.26 as of 4/26/05

23. What to Invest in? Minimal Savings Need to save for college and retirement Type of Equities to consider – Low to Moderate Risk – Different Sectors – Strong earnings

24. Consider This Market Cap Beta P/E Ratio Dividend payout or stock split

25. Careful Consideration Stock NameStock SymbolBetaP/E RatioMarket CapDividend Paid General Electric Co.GE0.89522.14385.84B0.88 ING Group NV ADSING1.5927.5260.65B0.99 Apple Computer IncAAPL1.85739.9429.59B0 Microsoft CorpMSFT1.43427.25271.90B0.32

26. Stocks Stock NameStock SymbolSharesStock PriceBetaPortfolio WeightPortfolio Beta General Electric Co.GE20$36.180.8950.206190.18454 ING Group NV ADSING26$27.951.5920.268040.42672 Apple Computer IncAAPL25$36.191.8570.257730.47861 Microsoft CorpMSFT26$24.761.4340.268040.38437 97 1.000001.47424

27. Family Equity Portfolio Overall Beta of Portfolio – 1.474 Diversification- 4 Sectors – Technology – Conglomerate – Life Insurance – Computer Software