Asset Allocation Analysis - Morningstar, Inc.

Asset Allocation Analysis

Efficient Frontier: Arithmetic Mean vs. Standard Deviation

Arithmetic Mean

13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0

6.0

8.0

10.0

12.0

14.0

Risk: Standard Deviation

Frontier Assets

100.0

90.0

80.0

70.0

Weights (%)

60.0

50.0

40.0

30.0

20.0

10.0

7.1

8.0

8.8

9.7

10.5

11.4

12.2

Risk: Standard Deviation

Source: Morningstar Direct

16.0

18.0

13.1

13.9

14.8

US Stock Sector Stock International Stock Taxable Bond Commodities Same Risk Conservative Aggressive Current Portfolio

US Stock Sector Stock International Stock Taxable Bond Commodities

Asset Allocation Analysis

Portfolio Allocations Same Risk

Conservative

Aggressive

Current Portfolio

US Stock Taxable Bond

US Stock Sector Stock International Stock Taxable Bond Commodities

Portfolio Statistics

Time Period: 10/31/2007 to 10/31/2012

Arithmetic Mean Standard Deviation Sharpe Ratio Source: Morningstar Direct

Same Risk

67.17 0.00 0.00 32.83 0.00

Sector Stock Commodities

Conservative

42.25 0.00 0.00 57.75 0.00

Same Risk

10.45 11.59 0.86

Conservative

9.17 9.00 0.96

International Stock

Aggressive 87.86 0.00 0.00 12.14 0.00

Aggressive 11.51 14.09 0.78

Current Portfolio

15.00 15.00 20.00 30.00 20.00

Current Portfolio

8.08 11.56 0.67

Asset Allocation Analysis

Monte Carlo Simulation: Wealth Forecast (With Cash Flows)

250

200

150

Wealth (USD)

100

50

0

-50

-100

-150

-200

Year

5 Year

Same Risk Conservative Aggressive Current Portfolio

10 Year

Same Risk Conservative Aggressive Current Portfolio

15 Year

Same Risk Conservative Aggressive Current Portfolio

20 Year

Same Risk Conservative Aggressive Current Portfolio

Source: Morningstar Direct

5 Year

10 Year

5th

13.80 14.13 13.30 12.12

8.18 8.80 7.02 3.51

-36.42 -34.59 -39.76 -44.12

-139.94 -125.18 -153.42 -142.78

15 Year

Percentile 50th

20.23 19.30 20.86 18.13

24.73 21.06 27.46 17.40

-1.70 -9.89 5.32 -17.18

-54.44 -66.94 -40.91 -76.21

20 Year

5th 50th 95th Same Risk Conservative Aggressive Current Portfolio

95th

30.55 26.54 34.14 26.95

53.56 40.65 68.34 40.96

63.92 30.22 103.56 27.91

81.65 7.14 169.60 0.79

Asset Allocation Analysis

Monte Carlo Simulation: Cash Flows

Same Risk

5

Flows (USD)

0

-5

-10

5

10

Aggressive

Flows (USD)

10

5

0

-5

-10

5

Year 10

Year

5 Year

Same Risk Conservative Aggressive Current Portfolio

10 Year

Same Risk Conservative Aggressive Current Portfolio

15 Year

Same Risk Conservative Aggressive Current Portfolio

20 Year

Same Risk Conservative Aggressive Current Portfolio

Source: Morningstar Direct

5th

0.61 0.64 0.59 0.55

0.69 0.72 0.64 0.49

-1.20 -1.14 -1.32 -1.55

-5.50 -5.03 -6.03 -5.86

Conservative

5

Flows (USD)

0

-5

15

20

-10

5

Current Portfolio

5

Flows (USD)

0

-5

15

20

-10

5

Inflows

50th

0.88 0.85 0.91 0.81

1.40 1.27 1.51 1.11

0.26 -0.11 0.57 -0.42

-2.06 -2.65 -1.48 -3.11

95th

1.27 1.13 1.40 1.16

2.63 2.10 3.19 2.08

3.13 1.68 4.81 1.53

3.75 0.63 7.37 0.37

10

15

Year

5th Inflow 50th Inflow 95th Inflow 5th Outflow 50th Outflow 95th Outflow 20

10 Year

5th

15

20

Outflows 50th

95th

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

-7.00 -7.00 -7.00 -7.00

Asset Allocation Analysis

Monte Carlo Simulation: Return Forecast

Same Risk

Conservative

Annual Return (%)

Annual Return (%)

75.0

75.0

50.0

50.0

25.0

25.0

0.0

0.0

-25.0

5

10

15

20

-25.0

5

10

15

Year

Year

Aggressive

Current Portfolio

Annual Return (%)

Annual Return (%)

75.0

75.0

50.0

50.0

25.0

25.0

0.0

0.0

-25.0

-25.0

5

10

15

20

5

10

15

Year

Year

5 Year

Same Risk Conservative Aggressive Current Portfolio

10 Year

Same Risk Conservative Aggressive Current Portfolio

15 Year

Same Risk Conservative Aggressive Current Portfolio

20 Year

Same Risk Conservative Aggressive Current Portfolio

Source: Morningstar Direct

5th

1.62 2.12 0.81 -1.13

3.95 4.27 3.43 1.63

5.00 5.09 4.70 2.60

5.72 5.65 5.51 3.18

Percentile 50th

10.10 9.04 10.82 7.61

10.24 9.10 11.17 7.78

10.25 9.12 11.02 7.60

10.15 9.09 11.00 7.66

5th 50th 95th

20

20

95th 19.99 16.55 22.78 16.92 16.75 14.32 19.19 14.25 15.70 13.39 17.82 13.09 15.12 12.87 16.82 12.46

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