Single stock and core capital tables: how single stock affects core capital requirements.

These tables show how holdings of a single stock are likely to affect the amount of core capital needed by a couple at different ages with different stock/bond allocations other than the single stock. The table on the left assumes the single stock has medium volatility characteristics, and the table on the right assumes a stock with high volatility. (*) The numbers represent required core capital per $100,000 of annual spending, for ease of calculating higher spending amounts. For example, to determine core capital needs for a couple spending $400,000 annually, simply multiply the table's numbers by 4. In each table, the single-stock concentration is shown in the left column (0% through 75%), and the stock/bond allocation of the remaining portion of the portfolio is shown across the top[dagger]

With Single stock of medium volatiltiy % Stock/% Bond Allocation of Remaining Portfolio Single-Stock 0/100 20/80 40/60 60/40 80/20 100/0 Concentration 0% $6.7 5.0 4.3 4.2 4.2 4.2 Mil. Age 55 25% 6.3 5.3 4.8 4.5 4.5 4.8 50% 7.7 6.7 6.7 5.9 5.9 6.3 75% 11.1 10.0 9.1 9.1 9.1 9.1 0% 5.9 4.5 4.0 3.7 3.7 3.8 25% 5.6 4.8 4.3 4.3 4.3 4.8 Age 60 50% 6.7 6.3 5.6 5.6 5.6 5.9 75% 10.0 9.1 8.3 8.3 8.3 9.1 0% 5.0 4.0 3.4 3.4 3.4 3.4 Age 65 25% 4.8 3.8 3.8 3.8 3.8 3,8 50% 5.9 5.3 5.0 5.0 5.0 5.0 75% 9.1 8.3 7.7 7.7 7.7 7.7 0% 4.2 3.4 3.1 3.0 3.0 3.1 Age 70 25% 4.0 3.7 3.4 3.3 3.3 3.4 50% 5.0 4.S 4.5 4.3 4.3 4.5 75% 7.7 7.1 6.7 6.7 5.7 5.7 With single stock of High volatility % Stock/% Bond Allocation of Remaining Portfolio Single-Stock 0/100 20/80 40/60 60/40 80/20 100/0 Concentration 0% $6.7 5.0 4.3 4.2 4.2 4.2 Mil. Age 55 25% 6.7 5.6 5.0 4.8 4.8 5.0 50% 8.3 7.1 6.7 6.3 6.3 6.7 75% 14.3 12.5 11.1 11.1 11.1 11.1 0% 5.9 4.5 4.0 3.7 3.7 3.8 25% 5.9 5.0 4.5 4.3 4.3 4.8 Age 60 50% 7.7 6.7 6.3 5.9 5.9 5.9 75% 12.5 11.1 10.0 10.0 10.0 10.0 0% 5.0 4.0 3.6 3.4 3.4 3.4 Age 65 25% 5.0 4.3 4.0 3.8 4.0 4.0 01

1. Purpose and Description of Wealth Forecasting System

   Bernstein's Wealth Forecasting System [SM] is designed to assist investors in making long-term investment decisions regarding their allocation of investments among categories of financial assets. Our new planning tool consists of a four-step process: 1) Client Profile Input: the client's asset allocation, income, expenses, cash withdrawals, tax rate, risk-tolerance level, goals, and other factors; 2) Client Scenarios: in effect, questions the client would like our guidance on, which may touch on issues such as when to retire, what his/her cash-flow stream is likely to be, whether his/her portfolio can beat inflation long term, and how different asset allocations might impact his/her long-term security; 3) The Capital Markets Engine: Our proprietary model, which uses our research and historical data to create a vast range of market returns, takes into account the linkages within and among the capital markets, as well as their unpredictability; and finally 4) A Probability Distribution of Outcomes: Based on the assets invested pursuant to the stated asset allocation, 90% of the estimated ranges of returns and asset values the client could expect to experience are represented within the range established by the 5th and 95th percentiles on "box and whiskers" graphs. However, outcomes outside this range are expected to occur 10% of the time; thus, the range does not establish the boundaries for all outcomes. Expected market returns on bonds are derived taking into account yield and other criteria. An important assumption is that stocks will, over time, outperform long bonds by a reasonable amount, although this is in no way a certainty. Moreover, actual future results may not meet Bernstein's estimates of the range of market returns, as these...