Our Beliefs And Capabilities

Investment Presentation
Contents

1   Firm and Mission Prepared for: Our Beliefs and Capabilities
March 19, 2012
2   LPL Financial: The Organization
3   Investment Principles
4   Client Discovery
5   Ongoing Consulting and Communication
Prepared by:
LEWIS B WALKER Jr.; CERTIFIED FINANCIAL PLANNER ™
LPL Financial
153-17 Cross Island Parkway
Whitestone, NY 11357 | Phone: (718)746-2220

Securities, advisory services & insurance product offered through LPL Financial and its affiliates, Member FINRA/SIPC.Not FDIC/NCUA Insured  Not Bank/Credit Union Guaranteed
May Lose Value   Not Guaranteed by any Government Agency  Not a Bank/Credit Union Deposit
Tracking # 429093

The importance of financial guidance
Building an investment portfolio designed to address
your unique long-term goals and financial dreams
is a complex process that requires knowledge, skill,
dedication and expertise. For investors in today’s needs and
ever-changing financial markets, a professional
financial advisor can provide expert advice to help
goals
you pursue your financial goals. retirement
• Analysis of needs and goals income
• Asset allocation strategies
• Manager selection
• Retirement income
• Investment strategies
• Ongoing monitoring and maintenance of
investments
• Ongoing education
• Tax management
tax
• Long-term capital appreciation management
• Wealth structuring portfolio
• Trust services
• Education savings programs
construction
• Wealth transfers
• Socially responsible issues

FIRM & MISSION

The Investing Consulting Process
As your investment partner, we are committed to helping you accomplish your unique financial goals and objectives. After developing a thorough
understanding of your risk tolerance and short- and long-term goals, we will work together to create a customized investment portfolio designed for you.
In order to accomplish this, we will take you through the investment consulting process, which is designed to help us determine how to best address your
financial goals and dreams.
Review Discover
• Quarterly performance reports • What are your hopes and dreams?
• Ongoing due diligence of investment managers w 1D • Do you have a high or low tolerance for risk?
• Periodic reviews evie i • Do you have any specific tax considerations?

sc
4R
• Investment newsletters • What is your investment objective?

ov
er
• Tax harvesting • What is your time horizon?
• Portfolio rebalancing Designed For You
Recommend
Implement

3 Im
• Investment portfolio recommendations

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• Account opening paperwork • Customized asset allocation strategies

en
• Funding pl em • Wealth management services

m
en om
t 2 Re c • Diversification

FIRM & MISSION

Practice Summary

What I believe I believe that the goals and dreams of families are important. The pursuit of those goals and
dreams is the fabric that has made America great. As a CERTIFIED FINANCIAL
PLANNER ™ professional; I am proud to assist in helping families pursue and accomplish
their goals. Planning is the essential cornerstone that lays the framework for intelligent
financial decision making and financial success. Whether the goal is the education of a child
or a financially secure retirement; I believe that having a financial roadmap will create a more
proactive and disiplined approach to your pursuits. I believe the process should encompass
the following:

• An analysis of your current financial circumstances.
• An understanding of your financial goals.
• An investment plan that includes analytical, goal based recommendations
   and a formally defined risk tolerance.
• A structure of accountability and review as it relates to your financial
   pursuits.

I believe that my approach and the collaboration that it creates allows families to focus on
the other important aspects of life....their passions and each other.

Contact Information:

Contact Lewis B. Walker Jr., CFP®
Information: CERTIFIED FINANCIAL PLANNER ™
Financial Consultant

LPL Financial
153 -17 Cross Island Parkway
Whitestone, New York. 11357

Phone: (718) 746-2220
Email: lewis.walker@lpl.com

Your total wealth management solution

Lewis B. Walker

Comprehensive Wealth Management Services

College Planning Retirement Planning Investment Planning Financial Planning Estate Planning

529 Plans Defined Contribution Plans Asset Allocation Financial Threat Analysis Will Planning*

Education IRAs Defined Benefit Plans Diversification Asset Protection Trust Planning*

UGMA's Income Planning Risk Assessment Long-term Care Wealth Transfer Strategies

Financial Aid Planning Annuities Tax Consequences Life Insurance Charitable Giving

Coverdell ESAs IRAs Portfolio Strategies Disability Insurance Leveraged Gifting

Zero Coupon Bonds Fixed Income Portfolios Inter Generational Planning

* Please consult a qualified tax or legal advisor.

FIRM & MISSION

LPL Financial: The Organization

Providing you with advice for life
• Largest independent broker/dealer in the country* About LPL Financial
• More than $280 billion in assets under management and 2.7 million
• LPL Financial registers and supports more than 12,000 independent
client accounts
financial advisors in over 7,000 offices nationwide. LPL Financial was built
• 20 years of consecutive earnings growth, in both up and down markets
on the premise that achieving your financial goals depends on unbiased
• No capital markets, trading, investment bank or proprietary products
financial advice, timely research and easy access to the investments and
services that best fit your specific needs.
• With over 40 years of industry leadership and innovation, LPL Financial
serves the growing needs of independent financial advisors and their
clients. LPL Financial was formed in 1989 through the merger of two
brokerage firms — Linsco (established in 1968) and Private Ledger
(founded in 1973).
• Today the firm is a leading diversified financial services company and
the nation’s largest independent broker/dealer* with headquarters in
Boston, Charlotte and San Diego.

* As reported in Financial Planning magazine 1996 - 2011, based on total revenue.

LPL FINANCIAL: THE ORGANIZATION

Account protection and oversight
Account protections Oversight
• Securities Investor Protection Corporation (SIPC) Insurance applies in • The Private Trust Company, NA an affiliate of LPL Financial is a
the event that an SIPC member firm fails financially and is unable to meet nondepository national banking association, which is regulated and
obligations to securities clients, but it does not protect against losses from reviewed by the Office of the Controller of the Currency (OCC).
the rise and fall in the market value of investments. LPL Financial’s SIPC
membership provides account protection up to a maximum of $500,000
per customer, of which $100,000 may be in cash. For an explanatory
brochure, visit www.sipc.org.
• Additionally, through Lloyds of London, LPL Financial accounts have
securities protection to cover the net equity of customer accounts up to
an overall aggregate firm limit of $750 million, subject to conditions and
limitations.
• Balances invested in the Insured Cash Account are protected by Federal
Deposit Insurance Corporation (FDIC) up to a maximum of $1.5 million for a
single account holder, $3 million for a joint account.


LPL Financial Services

Advisor

Advisory Financial Wealth
Consulting Planning Management
Services Group Services

LPL The Private LPL
Financial Trust Insurance
Client Research Company Associates

Alternative Structured Lending
Investments Investments Capabilities


Advisory Consulting Services
Keeping up with increasingly complex financial markets demands a high level of expertise and extensive resources
Experienced team of professionals: Partners with LPL Financial Research — Design and assistance with:
• Members average more than a decade in the investment industry • Asset allocation strategies
• Assists with designing asset allocation strategies and implementing the • Portfolio construction and manager selection
ongoing consulting process • Analysis on the markets
• Provides tools and resources to enhance the client investing experience • Tax management services

Innovative investment platforms — Building and maintaining investment
strategies to address your goals:
• Strategic Asset Management
• Optimum Market Portfolios*
• Model Wealth Portfolios
• Personal Wealth Portfolios
• Manager Select

* The Optimum Market Portfolios advisory accounts utilize the Optimum Funds, a sub-advised family of funds from Delaware Management Holdings, Inc. and its subsidiaries. Delaware Management
Company, a series of Delaware Management Business Trust, is the manager and Delaware Distributors, LPL Financial is the distributor of the Optimum Funds.


LPL Financial Planning Group
We have access to the LPL Financial Planning Group,
a dedicated team devoted to helping us structure your About WealthVision
investments, answer financial planning questions and
WealthVision is a powerful, Web-based wealth-planning tool that offers account
implement tax-efficient strategies. The LPL Financial
aggregation, modular and comprehensive financial goal planning, and an online
Planning Group has the expertise, tools and resources
document storage facility that helps you store and keep track of your valuable files, all
to help us succeed, including access to a powerful
accessible through your own personalized website.
financial planning software called WealthVision. The
team routinely designs cases and devises unique
planning solutions based on your specific situation.


LPL Financial Wealth Management Services
LPL Financial offers a wide range of products and services that are specifically designed to address the goals and
needs of affluent clients.
Legacy and philanthropic planning — Design and assistance with: Financial and estate planning — Effective and long-term wealth
management, preservation/enhancement and asset transfer:
• Donor advised funds
• Endowment funds • Wealth protection
• Pooled income funds • Tax reduction and potential deferral
• Family foundations • Customized estate and inheritance planning
• Fiduciary custody services • Legacy and business succession planning
• Charitable remainder trusts
Management of concentrated stock positions — Offering options for
Insurance planning — Design and case analysis for sophisticated liquidity, diversification, preservation of capital:
strategies from a combination of internal resources and industry • Hedging, option strategies
experts. • Monetization
Lending — Margin lending and collateralized loan capabilities. • Diversification, exchange funds


LPL Financial Research
About LPL Financial Research The LPL Financial Research team
LPL Financial Research works continuously to help your financial advisor The LPL Financial Research team consists of seasoned and accomplished
interpret and adjust to the latest developments in the world’s capital markets. industry veterans, comprising one of the largest and most experienced
research groups among independent brokerage firms.
As the industry’s leading independent brokerage firm*, LPL Financial has no
proprietary products to sell, no investment banking relationships to promote, The goal of LPL Financial Research is to be your advisor’s trusted partner.
nor any other business conflicts to get in the way of providing unbiased In order to be successful, it is critical that all LPL Financial advisors have
recommendations. The breadth of LPL Financial research coverage — access superior unbiased investing ideas, timely market perspective, and
mutual funds, separate accounts, fixed income, exchange traded funds, ongoing support. The delivery of timely, in-depth, unbiased research on
alternative investments, variable annuity sub-accounts and more — reflects a varying investment products, asset allocation strategies, and the financial
focus on helping meet the needs of clients, rather than “pushing product” or markets is designed to provide your financial advisor with a powerful tool that
moving inventories of securities. is a distinct advantage in helping them achieve your financial objectives.

LPL Financial Research

Research Organization
Portfolio Strategy Portfolio Strategy expertise truly sets LPL Financial Research apart from its competitors. LPL Financial Research Analysts determine the asset
allocation models based on investment objectives and the strong relationship between risk and return in the portfolios and then select the models
and combinations of managers for each portfolio based on a variety of characteristics and corresponding performance in over 300 different market
conditions using their proprietary statistical SAT tool.
Investment Manager Investment manager selection and due diligence efforts for mutual funds, money managers, and alternative investment strategies is based on a
Recommendations strong and thorough investment discipline. LPL Financial Research’s recommendations are unbiased. As an independent firm, you and your advisor
can be confident LPL Financial Research is making decisions based solely on recommending the best investment option for a specific purpose.
The research process combines quantitative and qualitative screening factors and analysis that do not include or consider in any way any financial
arrangements or business relationships that may or may not exist between LPL Financial and the manager.
Quantitative Analysis The function of the Research Analytic Group is to perform quantitative analysis, performance measurement, attribution, and appraisal of LPL Financial
Research’s recommendations and platforms, while managing the underlying data and application usage of products and services within the team.
Investment and Market The Investment Strategy Group is focused on delivering timely, efficient, and accurate communication of the team’s investment advice to help you
Communications and your advisor stay informed. The ASK Research service desk, a dedicated team of research professionals, is ready to address your financial
advisor’s market and investment advice questions.

* As reported in Financial Planning magazine 1996 - 2011, based on total revenue.


LPL Financial Research team
Areas of expertise:
• Asset allocation
• Asset class and sector research
• Capital markets analysis
• Economic analysis
Burt White, • Investment manager evaluation, recommendations
• Overlay services
Managing Director and Chief
• Portfolio construction
Investment Officer
• Mutual funds
• Provides strategic guidance for the LPL Financial Research group, directs team of analysts • Separate accounts
and investment professionals providing in-depth research on the global economy and • Fixed income
markets, portfolio optimization and construction, mutual funds, separate accounts, fixed • Alternative investments
income, alternative investments and exchange traded funds • Exchange traded funds
• Served as the Chairman of the Manager Strategy Group Investment Committee at Wachovia • Variable annuity subaccounts
• Responsible for all due diligence of third-party investment managers and mutual funds,
including more than 1,200 company meetings and on-site reviews

Jeffrey Kleintop,
CFA, Chief Market Strategist
• Leads the development and articulation of LPL Financial Research’s market and investment
strategies, leveraging his expertise in the analysis of global financial markets and asset
allocation strategy
• Former chief investment strategist at PNC Wealth Management
• Recognized economic strategist
• One of “Wall Street’s Best and Brightest” — Wall Street Journal


The Private Trust Company
The Private Trust Company N.A. (PTC) is an affiliate of Key trust facts
LPL Financial. PTC manages trusts and family assets
A trust is a legal entity that holds assets, such as securities or mutual funds, for the benefit of a
for high net worth clients and is licensed in all 50 states
person, family, or organization.
under its 1995 national banking charter to administer
the trusts and implement the estate plans of affluent
families. The bank does not engage in lending or When establishing a trust, you designate one or more trustees. A trustee can be an
deposit taking; it specializes solely in providing individual, often including yourself, or a bank with a trust charter. By law, your trustee is
fiduciary solutions. responsible for:
• Managing and protecting the trust’s assets and seeing they are diversified appropriately
As its primary mission, PTC provides trust services • Assuring your wishes are followed and all of your beneficiaries are treated fairly
to clients of LPL Financial advisors as well as to local • Ensuring accurate records and accounting for all transactions
clients in Cleveland, Ohio, where it is headquartered. • Complying with tax reporting regulations
PTC is also the custodian of all of the LPL Financial • Good planning will prompt the designation of a successor trustee — one who assumes
IRA accounts. responsibilities for an individual trustee who becomes disabled or dies.
• Unlike a relative, friend or business associate, a professional trustee fields a team of experts
that operates your trust with care and objectivity for as long as you desire.

For more information, visit www.theprivatetrustcompany.com


LPL Insurance Associates
LPL Financial offers full-service insurance solutions and Irrevocable Life Insurance Trusts (ILITs)
dedicated support through its life insurance agency,
Using insurance inside a trust can have a powerful impact on your estate planning strategy.
LPL Insurance Associates, Inc. It is able to offer our firm
Common client goals achieved by using an ILIT include:
the carriers and products to fulfill all of your fixed and
variable life insurance needs with more than 24 quality, • Helping to avoid forced liquidation to pay estate taxes on an asset a family wants to retain,
name brand companies on its platform. such as a family business or real estate
• Helping to provide a safety net for potential long-term care needs in later years
• Helping to minimize estate tax liability at the time assets transfer to heirs
The full suite of life insurance solutions includes:
• Helping to offer an opportunity to enhance charitable contributions, in addition to
• Term life providing for heirs
• Whole life • Helping to ensure an equitable distribution of assets to heirs
• Universal life • Helping to provide for greater control of assets
• Variable universal life
LPL Insurance and The Private Trust Company work together to help us implement this powerful
planning tool for you.


Alternative investments
As investors’ needs become increasingly complex Alternative investments Complex tax and regulatory requirements can
and sophisticated, a growing number of alternative make sorting through and selecting the right
• Managed futures
investment products have been introduced. LPL investments difficult. We are committed to
• Fund of hedge funds
Financial has responded to this need with a range of helping you navigate the world of alternative
• Private equity
innovative products designed for formulating, supporting investments.
• Real estate (REITS, limited partnerships)
or supplementing specific strategies.
• 1031 exchange programs
• Concentrated equity solutions (Exchange LPL Financial provides information and
funds, Collars, Pre-paid forwards) educational materials from key resources,
• Oil and gas partnerships including a dedicated team of consultants,
• Equipment leasing the LPL Financial Research department
• Structured products and product sponsors, to help us determine
which alternative investments are the most
appropriate options for you.

Investing in alternative investments may not be suitable for all investors and involves special risks such as the risk associated with leveraging the investment, potential adverse market forces, regulatory
changes and potential illiquidity. There is no assurance that the investment objectives will be attained.


Fixed Income Trading
The LPL Financial Fixed Income Trading Team is Products and Services Best Efforts Execution
compromised of professional traders who:
• Government Agencies • Before a bond is bought or sold a team of
• Build fixed income investment strategies specific to • U.S. Treasuries more than 40 fixed income professionals
your goals • Mortgage Backed Securities and CMOs works to make sure best execution
• Offer unique solutions • Municipals standards are met. We work hard to
• Conduct buy and sell orders on a best efforts basis • Corporates provide the best prices available whether a
• Structured Products client is buying or selling bonds.
• Fixed Income Trading’s online execution
Customized Reports include system shows the combined inventories
of dozens of first tier broker dealers, wire
• Strategies to achieve income goals
houses, middle market and boutique bond
• Portfolio diversification
shops ensuring that a competitive market
• Bond maturity and income schedule
place is maintained.
proposals

FIXED INCOME TRADING

Structured Investments
Structured investment products are complicated investments that help provide investment
exposure that cannot be accessed through traditional assets, and some protection from
downside risk in exchange for the investor’s forgoing some upside potential to achieve that
protection. Structured products typically have two components, a note and derivative and have
a fixed maturity. Structured products combine traditional investments, such as bonds, stocks
and commodities, with financial instruments, including options and swap agreements. The
most common structured products are used to gain exposure to an asset class while providing
protection at maturity. Principal protection may vary from partial to 100%. If the option (derivative)
turns out to be valuable, investors can gain exposure to the upside of the asset class.

Structured investments with tailored terms and a risk/reward profile are designed to help clients:
• Optimize returns and diversify portfolio holdings
• Provide leverage
• Derive tax efficiencies
• Minimize volatility and provide downside protection

JPMorgan, DWS Scudder, HSBC, and Credit Suisse provide new monthly offerings, which may
include principal protection, equity indexed notes and more.

An investment in structured products involves significant risks. Investing in structured notes is not equivalent to investing directly in the underlying indices. No assurance can be given that the
investment strategy used to construct any return enhanced structured note will be successful or that the structured notes will outperform any alternative basket that might be constructed from the
constituent sub indices. Investment value prior to maturity will be influenced by many economic and market factors that may either offset or magnify each other, including interest rates, the level of the
underlying, implied volatility and the time remaining to maturity. Investors should carefully review the risks in the offering documents. Structured products are intended as “buy and hold” investments
and may not be liquid instruments prior to maturity.


Cycle of investor emotions
“Behavioral finance scientists have studied investor behavior and concluded investors go through a multi-phase
internal process before they decide to react to bad news.”*

Euphoria

Anxiety
Thrill
Prices
High Denial

Excitement Fear
Optimism

Desperation
Optimism
Panic Prices Relief
Low
Hope
Capitulation
Depression
Despondency

*Source: Ken Kivenko, 7/29/05, The Fund Library.
Investor Emotion Chart. Source: Index Funds: The 12-Step Program, M.T. Hebner, 2004.
Graph courtesy of Goldman Sachs.

INVESTMENT PRINCIPLES

Common investor challenges
Not having a clearly defined investment objective Not investing globally
Whether building a new house or an investment portfolio, you first need A well-diversified portfolio should include assets with low correlation to each
to establish a solid foundation. Gaining an in-depth understanding of other. Some American investors may tend to lean toward domestic securities
your unique financial goals is key to this process. Your personal portfolio and avoid global investing opportunities altogether. By investing only in U.S.
investment objective will take into account your risk tolerance and time stocks, you could miss out when foreign stocks perform well.
horizon. Specific strategies can be created to address a single objective or a
combination of objectives simultaneously. Being led by your emotions
Every day you hear new theories or speculation about the direction of
Improperly judging risk the stock market from the media, friends, family and coworkers. It can be
In general, the longer the time horizon of your investments, the more risk challenging to sort through differing opinions, filter out the noise and stay
you can take on. Many investors, fearing even a little amount of risk, focus focused on your long-term investing goals. Many investors find themselves
only on investments that address short-term volatility even though their time preoccupied with the fear of investment losses and mistakenly make costly
horizon may be 20 years or more. The result is a poorly performing portfolio investment decisions.
in relation to their investing goals and time horizon.
Paying too much in taxes
Being overconfident in a single stock or sector Structuring your investments properly by mitigating the effect of taxes
Relying solely on your intuition or creating attachments to specific stocks on your portfolio can help preserve and ultimately grow more of your
or sectors without reading impartial analyses and reports can lead to poor investments over time. Not using tax-efficient money managers or strategies
investing decisions. For example, employees of a firm will often make where appropriate may cause you to pay taxes unnecessarily.
excessively large allocations to their employer’s stock, believing they can
better predict the stock price because of their intimate knowledge of their
firm. This is not always true, as demonstrated by cases such as Enron.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. There is no guarantee that a diversified portfolio will enhance
overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.


Why does the average investor underperform?
• Markets have performed well
• Individual investors have underperformed
– Wrong decisions, wrong time

Annualized total returns for 20 years

10%
9.14%

8% S&P 500

6%
3-Month Treasury bills

3.83% Inﬂation
4%
2.57%
Average equity fund investor
2% 1.01%

0%

Sources: Dalbar 2010 Quantitative Analysis of Investor Behavior Study, S&P 500, Consumer Price Index, Citigroup BIG Treasury Bill (3M). Average stock investor, average bond investor and average
asset allocation investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets
after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any
other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: total investor return rate and annualized investor return rate. Total return rate is
determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions and exchanges for the period. Indices are unmanaged and cannot be invested into directly. Past
performance is not a guarantee of future results.


Underperformance is a result of investors who buy high/sell low
Investors chase returns – Wrong decisions, wrong time

50 80

40
60

30

40
Equity Mutual Fund Flow ($ billions

20

MSCI World Index (%)
10 20

0 Source: Investment Company Institute and Morgan
0
Stanley Capital International 2010.
-10 (1) he return on equities is measured as the year-over-
T
MSCI World Index (%) year change in the MSCI All Country World Index.
-20
Equity Mutual F und Flow s ($ bil lions)
(2) et new cash flow to equity funds is plotted as a
N
-20
six-month moving average. Past performance is no
-40 guarantee of future results.
-30 (3) SCI World Index is an unmanaged index which
M
cannot be invested into directly. Past performance is
-40 -60
no guarantee of future results.
Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10


Your losses hurt more than your gains
• Constructing a portfolio that helps minimize losses % Loss % Appreciation to break even Years to break even at 8% annual return
can significantly affect your portfolio value over time. 15% 17.6% 2 years, 1 month
• To bring a portfolio back to its initial value after a loss
25% 33.3% 3 years, 9 months
takes a return greater than the loss.
• For example — a 15% loss would take an
appreciation of over a year of 17.6% to break even.
Assuming an 8% annual return, the break even would
take 2 years and 1 month.

Past performance is no guarantee of future results. This is a hypothetical example. Your results will vary. The assumed 8% annual return used does not reflect the deduction of the fees and charges
inherent to investing in securities.


The emotional rollercoaster
Headline buzz words detail the emotional rollercoaster that is a market downturn and upswing

7850 6/20/97
Level of the Dow Jones Industrial Average

7650
Optimistic Emotion Says to Buy Here

7450
“Euphoria”
(3/12/97 - 6/20/97)

7250

7050 3/12/97 “Excitement”

6850
“Anxiety”
6650
“Fear”
6450 Emotion Tells Investors to Sell Here
“Panic”
6250 4/11/97

Source: Zephyr, LPL Financial Research. Past performance is no guarantee of future results. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and
widely held by individuals and institutional investors. The Dow Jones is an unmanaged index which cannot be invested into directly. Stock investing involves risk including loss of principal.


To invest or not to invest
Every year has a reason to say “no”

Even through many market conditions, $10,000 invested in the SP 500 Index in December 1933 would have been worth $1,272,910 by December 2008.

1986 Dow Nears 2000,
1960 Russia Down U-2 Plane 1973 Energy Crisis 1999 Y2K
Market Too High

1961 Berlin Wall Erected 1974 Steepest Market Drop in four decades 1987 October “Mini-Crash” 2000 Tech Bubble Bursts

2001 Weak Corporate Earnings / Terrorist
1962 Cuban Missile Crisis 1975 Clouded Economic Prospects 1988 Economic Growth Slows
Attacks

1963 Kennedy Assassination 1976 Russia Launches Sputnik 1989 Invasion of Kuwait 2002 Corporate Accounting Scandals

1964 Gulf of Tonkin 1977 Market Slumps 1990 Gulf War 2003 War in Iraq

1965 Civil Right Marches 1978 Interest Rates Rise 1991 Communism Tumbles with Berlin Wall 2004 Fed Begins to Raise Rates

1966 Vietnam War Escalates 1979 Oil Prices Skyrocket 1992 Global Recession 2005 High Commodities Prices

2006 Dow Hits Highest Level
1967 Newark Race Riots 1980 Interest Rates at All-Time High 1993 Health Care Reform
at 11,727

1968 USS Pueblo Seized 1981 Steep Recession Begins 1994 Fed Raises Interest Rates Six Times 2007 Subprime Mortgage Meltdown

1969 Money Tightens, Markets Fall 1982 Worst Recession in 40 Years 1995 Dow Tops 5000 2008 Lehman Brothers Collapses

2009 National Unemployment Rate Exceeds
1970 U.S. Bombs Cambodia 1983 Market Hits New Highs 1996 Dow Tops 6400
10%

1971 Wage and Price Freeze 1984 Record Federal Deficits 1997 Dow Drops 554 Points in One Day 2010 BP Oil Spill

1972 Largest U.S. Trade Deficit Ever 1985 Economic Growth Slows 1998 Russia Long-Term Capital 2011 Greece Bailout

Source: FactSet as of 12/31/10
Note: This is a hypothetical example and is not representative of any specific situation. Your results will vary. The SP 500 Composite Index is an unmanaged index and cannot be invested into directly.
Investing in stocks involves risk including loss of principal.
The Standard Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value
of 500 stocks representing all major industries. The SP 500 is an unmanaged index which cannot be invested into directly.
Stock investing involves risk including loss of principal. Past performance is no guarantee of future results.


Why Patience is a Virtue
Percent of time stocks have provided positive returns
(1977 – 2010)

78%
Over a one-year
83%
Over a three-year
86%
Over a five-year
91%
Over a ten-year
time period time period time period time period

Negative Returns
Positive Returns

Source: FactSet, LPL Financial Research
Note: Based on SP 500 Monthly Total Return. Average Annual Rolling period returns 1977 - 2010. Past performance is no guarantee of future results. The Standard Poor’s 500 Index is a capitalization-
weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The SP
500 is an unmanaged index which cannot be invested into directly. Stock investing involves risk including loss of principal.


The worse we feel, the better the gains
Consumers feel the worst prior to large gains in the market

Consumer Sentiment SP 500 Price Gain Over Next Twelve Months
Less than 60 +23.1%
Less than 70 +18.5%
Less than 80 +13.1%
87 (average) +10.8%
Greater than 90 +10.8%
Greater than 100 +8.1%
Greater than 110 -1.2%

Source: Bloomberg, LPL Financial. Past performance is no guarantee of future results.
Note: In interpreting the consumer sentiment survey, the lower the number, the worse consumer sentiment is. The Standard Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed
to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The SP 500 is an unmanaged index which
cannot be invested into directly. Stock investing involves risk including loss of principal.


Market comebacks
Often when times are bleak, years that follow show significant total market returns.
Market returns after consecutive down years (SP 500 Index)
200%

150% 148%

100%
100%

67%
57%
50% 39%

0%

-17%
-50% -38%
-42% -40%

-100% -78%

1929-32 / 1933-36 1940-41 / 1942-45 1973-74 / 1975-76 2002-03 / 2003-07 2008 / 2009-10
The Great World War II Oil crisis Internet bubble/ The Great
Depression War on terrorism Recession

Source: JPMorgan Asset Management, Standard Poor’s. The market returns are represented by the SP 500 Index return (price only). Returns reflect calendar year returns and not peak to trough.
The example is for illustrative purposes only. Past performance is not a guarantee of future returns. Updated as of 12/31/10. SP 500 is an unmanaged index which cannot be invested into directly. Past
performance is no guarantee of future results.


Benefits of patience
Despite starting at the “worst times,” markets reward investors

Portfolio begins with Portfolio gets as low as: Portfolio Value as
$100,000 on: of April 2010:
Dec 1972 $58,173 (Sep 1974) $3,316,940
Nov 1980 $83,479 (July 1982) $1,911,915
Sep 1987 $70,419 (Nov 1987) $603,270
Feb 1990 $92,129 (Oct 1990) $555,762
Oct 2008 $58,827 (March 2009) $105,674

Source: Zephyr, LPL Financial Research
Note: Past performance is no guarantee of future results
The hypothetical portfolio is assumed to be invested in the SP 500 and does not reflect the deduction of the fees and charges inherent to investing in securities. The SP 500 index is an unmanaged
index and cannot be invested into directly. Your results will vary.
Stock investing involves risk including loss of principal.
The Standard Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of
500 stocks representing all major industries. The SP 500 is an unmanaged index which cannot be invested into directly.


Market resilience
When markets rebound following a bear market, gains are captured quickly. Not being invested when these rebounds begin can lead to not recouping all
possible gains.

45%

40% 03/09/2009
03/11/2003
35%
SP 500 percentage gain

10/08/1998
10/11/1998
30%

25%
Source:
Bloomberg, LPL Financial Research
20%
Note: Past performance is no guarantee of future results. Stock
investing involves risk including loss of principal.
15% The Standard Poor’s 500 Index is a capitalization-weighted index of
500 stocks designed to measure performance of the broad domestic
10% economy through changes in the aggregate market value of 500 stocks
representing all major industries. The SP 500 is an unmanaged index
which cannot be invested into directly.
5%

0%
0 10 20 30 40 50 60 70 80 90
Trading Days From End of Bear Market


Missing the best days of the market can significantly reduce your returns
$10,000 invested in the Dow Jones Industrial Average (9/30/87–9/30/07)
For example:
By staying fully invested over the past 20 years, you would have earned almost twice as much as someone who missed only 10 of the market’s best days.

$100,000 11.48%

$80,000 Stayed fully invested

Missed 10 best days
$60,000 8.45%
Missed 20 best days

$40,000 6.30% Missed 30 best days

4.54% Missed 40 best days
$20,000 2.94%

Annualized total return

Source: Putnam Investments. Data is historical. The example is for illustrative purposes only. Past performance is not a guarantee of future results. There can be no assurance with respect to predicting
market lows. Dow Jones Industrial Average is an unmanaged index which cannot be invested into directly.


The Case for Style Diversification
• Some investors fall into the trap of chasing what is hot.
• Returns fluctuate in the various asset classes from year to year.
• By diversifying and rebalancing regularly, you will be managing your risk and return, without sacrificing potential return.
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Small Small Inter- Inter- Large Large Large Large Large Small
Best

HFRI Small Small Bonds Small Small Inter- Inter- Large
Growth Value national national Value Growth Value Growth 44.2% Value Value 10.3% Growth Value national national Growth Bonds Growth Growth
51.2% 29.1% 33.0 % 8.1% 38.3% 23.1% 35.2% 38.7% 22.8% 14.0% 48.5% 22.3% 14.0% 26.9% 11.8% 5.2% 37.2% 29.1%

Small HFRI HFRI Large SP SP SP SP Small Bonds Bonds HFRI Small Inter- HFRI Small Inter- Small Small
Value 21.3% 27 %
.9 Growth 500 500 500 500 Growth 11.6% 8.4% -4.7% Value national 10.6% Value national HFRI Growth Value
41.7% 2.7% 37.6% 22.9% 33.4% 28.8% 43.1% 46.0% 20.7% 23.5% 11.6% -27.7% 34.5% 24.5%

Large Large Small HFRI Large HFRI Small Inter- Large HFRI HFRI Small Inter- Large Large Large HFRI Small Inter- Large
Growth Value Value 2.6% Growth 21.7% Value national Growth 9.1% 0.4% Value naitonal Value Value Value 10.7% Value national Growth
41.2% 13.8% 23.9 % 37.2% 31.8% 20.3% 33.1% -11.4% 39.2% 16.5% 7.1% 22.3% -28.9% 32.5% 16.7%

HFRI Small Large SP Small Large Large HFRI Inter- Large Large Large Large Small Large SP Small Large SP Large
40.1% Growth Value 500 Growth Value Growth 16.0% national Value Value Value Value Growth Growth 500 Growth Value 500 Value
7.8% 18.1 % 1.3% 31.0% 21.6% 30.5% 27.3% 7.0% -5.6% -15.5% 30.0% 14.3% 5.3% 15.8% 7.1% -36.9% 26.5% 15.5%

SP SP Small Small HFRI Small HFRI Large SP SP Small Inter- Large SP SP Small Bonds HFRI SP
500 500 Growth Value 31.0% Value 23.4% Value 500 500 Growth national Growth 500 500 Growth 7.0% SP 500 500
-37.0% 24.5%
30.5% 7.6% 13.4 % -1.5% 21.4% 15.6% 21.0% -9.1% -9.2% -15.7% 29.8% 10.9% 4.9% 13.4% 15.1%

Large Bonds SP Large Small Small Small Bonds Large Inter- SP SP SP Large Small HFRI SP Large Small HFRI
Value 7.4% 500 Value Value Growth Growth 8.7% Value national 500 500 500 Growth Value 11.7% 500 Growth Value 10.5%
24.6% 10.1 % -2.0% 25.8% 11.3% 13.0% 7.3% -14.0% -11.9% -22.1% 28.7% 6.3% 4.7% 5.5% -38.4% 20.6%

Bonds Large Bonds Small Bonds Inter- Bonds Small Bonds Small Large Large HFRI Bonds Small Large Large Small Large Inter-
16.0% Growth 9.8 % Growth 18.5% national 9.7% Growth -0.8% Growth Growth Growth 20.9% 4.3% Growth Growth Value Growth Value national
5.0% -2.4% 6.4% 1.2% -22.4% -20.4% -27.9% 4.2% 9.1% -0.2% -38.5% 19.7% 8.2%

Inter- Inter- Large Bonds Inter- Bonds Inter- Small Small Large Inter- Small Bonds HFRI Bonds Bonds Small Inter- Bonds Bonds
national national Growth -2.9% national 3.6% national Value Value Growth national Growth 4.1% 2.2% 2.4% 4.3% Value national 5.9% 6.5%
Worst

12.5% -11.8% 2.9 % 11.6% 2.1% -6.4% -1.5% -22.4% -21.2% -30.4% -9.8% -43.1%

Sources
• Bonds:
Barclays Aggregate Bond Index
• Large Value:
Russell 1000 Value Index
• Small Value:
Russell 2000 Value Index
• HFRI:
HFRI Equity Hedge Index

• Large Growth:
Large
Russell 1000 Growth Index
Growth
• Small Growth:
Russell 2000 Growth Index
• International:
MSCI EAFE Index
• SP 500:
Standard and Poor's 500 Stock Index
37.21%
The Standard Poor’s 500 Stock Index (SP 500) is an unmanaged index generally representative Bond Index is composed of securities from Barclays Government/Credit Bond Index, Mortgage-
of the U.S. Stock Market, without regard to company size. The Russell 2000 Growth Index is an Backed Securities Index and Asset-Backed Securities Index. The Russell 1000 Growth Index
unmanaged index comprised of those Russell 2000 companies with higher price-to-book ratios is an unmanaged index comprised of those Russell 1000 companies with higher price-to-book
and higher forecasted growth values. Russell 2000 Value Index measures the performance of ratios and higher forecasted growth values. Russell 1000 Value Index measures the performance
those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth
values. The Morgan Stanley Capital International (“MSCI”) Europe, Australasia, Far East Index values. Small-cap stocks may be subject to higher degree of risk than more established
(“EAFE”) is an unmanaged index of over 900 companies, and is a generally accepted benchmark companies’ securities. The illiquidity of the small-cap market may adversely affect the value of
for major overseas markets. Index weightings represent the relative capitalizations of the major these investments. International investing involves special risks such as currency fluctuation and
overseas makers included in the index on a U.S. dollar adjusted basis. The index is calculated political instability and may not be suitable for all investors. There is no guarantee that a diversified
separately; without dividends, with gross dividends reinvested and estimated tax withheld, and portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does
with gross dividends reinvested, in both U.S. Dollars and local currency. The Barclays Aggregate not ensure against market risk.


Importance of Rebalancing
As a result of the market fluctuations of one asset class versus another over a given period, all portfolios drift over time from their original asset allocation.
Rebalancing is an essential component of any comprehensive investment strategy and will help you avoid undue shifts in your portfolio due to financial market
trends resulting in risk outside of your desired investment objective.

Original Allocation Non-rebalanced Portfolio Rebalanced Portfolio

15%
Bonds

40% 40%
Bonds Bonds
60% 85% 60%
Equities Equities Equities

In the example above, a slightly If the performance of the investment By rebalancing, your portfolio could
aggressive portfolio begins with an pushes that mix to 85% stocks and avoid this type of market-driven
asset allocation of 60% stocks and 15% bonds, the portfolio is now change and keep it in line with your
40% bonds. riskier than the desired allocation. objectives and risk tolerance.

This example is intended to demonstrate the effects of rebalancing and is not intended to project performance. No strategy assures success or protects against loss. Such strategy may involve tax
consequences. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price. Stock investing
involves risk including loss of principle.


Fund of hedge funds
What is a fund of hedge funds? Potential benefits include:

A fund of hedge funds invests in a portfolio of different • Accessibility to professional hedge fund managers whose funds are hard to access
hedge funds to provide broad exposure to the hedge • Reduced correlation to stocks/bonds
fund industry and to diversify the risks associated with a • Attractive risk-adjusted returns
single investment fund. Funds of hedge funds managers • Diversification
select hedge funds and construct portfolios based upon • Multiple investment styles
their selections.
Potential risks include:

They are actively managed portfolios of investments that • Lack of transparency
use advanced investment strategies, such as leveraged, • Additional layer of fees (above hedge fund manager fees)
long, short and derivative positions, in both domestic • Fund of hedge funds can be illiquid
and international markets with the goal of generating • May employ leverage
high returns (either in an absolute sense or over a • May employ aggressive tax strategies that may pose tax risks for investors and require
specified market benchmark). filing extensions

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management
of alternative investments may accelerate the velocity of potential losses. Long positions may decline as short positions rise, thereby accelerating potential losses to the investor. Derivatives/options are
not suitable for all investors and certain options strategies may expose investors to significant potential losses such as losing entire amount paid for the option.

INVESTMENT STRATEGY AND PROPOSAL

Fund of hedge funds
The value of fund of hedge funds You might consider a fund of hedge funds if you are:

Fund of hedge funds show low correlation to traditional • Not concerned with liquidity of investment
investments and may offer the potential for capital • Seeking diversification, rebalancing or reduction of volatility in their portfolios
preservation in down markets, thereby improving • Looking for professional money management
the portfolio’s risk/return profile and reducing its
overall volatility.

Fund of hedge funds strategy
If you are a long-term investor with no immediate need
for liquidity, investing a portion of your portfolio in a fund
of hedge funds may be a suitable investment choice for
you. With a fund of hedge funds, you will have access
to quality hedge fund managers and you can benefit
from an investment that has low correlation to the
equity and fixed income market, with the potential
for capital appreciation.

of alternative investments may accelerate the velocity of potential losses. Long positions may decline as short positions rise, thereby accelerating potential losses to the investor. Derivatives/options are
not suitable for all investors and certain options strategies may expose investors to significant potential losses such as losing entire amount paid for the option.


Managed future funds
What is a managed futures fund? Potential benefits include: Potential risks include:

A managed futures fund is a pool of money from various • Professional management • Futures and forward trading is speculative
investors. Professional managers, known as commodity • Lack of historical correlation with almost all and leveraged, and can be volatile
trading advisors, specialize in trading futures and other investment classes • Trading occurs on foreign exchanges which
forward contracts, and invest the money pool using a • Potential to profit in advancing markets and could mean higher risk
proprietary trading system, or a discretionary method, declining markets, since they can hold both • Futures and forward markets can be illiquid
that may involve going long or short in futures contracts long and short positions or disrupted
in areas such as metals (gold, silver), grains (soybeans, • A way to increase portfolio diversification • Diversification does not assure a
corn, wheat), equity indexes (SP futures, Dow futures, beyond what other common stocks profit or guarantee against loss in a
NASDAQ 100 futures), soft commodities (cotton, cocoa, and fixed income securities can offer declining market
coffee, sugar), foreign currency and U.S government by themselves • Limited ability to liquidate investment
bond futures. • Exposure to broad, global markets units (monthly)

of alternative investments may accelerate the velocity of potential losses.


Managed future funds
The value of managed futures funds You might consider a managed futures fund if you are:

Managed futures funds show negative correlation • Not concerned with liquidity of investment
to other asset classes, meaning that its investment • Seeking diversification, rebalancing or reduction of volatility in their portfolios
performance is independent of other investments. • Looking for exposure to a wide range of global markets

Managed futures strategy
Investing a portion of your portfolio in a managed futures
fund may be a suitable investment for you if you are a
long-term investor with little need for liquidity. Managed
futures funds are an investment that has low-correlation
to the equity and fixed income market, with potential
for capital appreciation and exposure to broad,
global markets.

of alternative investments may accelerate the velocity of potential losses.


What is a non-traded REIT?
A Real Estate Investment Trust (REIT) is an alternative Potential benefits include:
to direct ownership of real estate. An investment in
• Professional management
a REIT allows small investors to share in the many
• Dividend yields typically higher than other equities
benefits associated with real estate while reducing the
• Long-term capital appreciation
overall risks that accompany property ownership.
• Diversification from common stocks and fixed income
• Flexible tax treatment by claiming depreciation

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will
be attained.


The value of non-traded REITs
LPL Financial offers access to a broad non-traded You might consider a non-traded REIT if Benefits of diversification*
REIT platform that includes some of the highest quality you are: (low correlation)
sponsors in the market. Non-traded REITs show a low or negative
• A long-term investor (investment horizon
of 10-15 years or more) correlation to other asset classes over
• Not concerned with the liquidity of long periods, meaning that the investment
an investment performance is independent of other
• Seeking income and/or capital appreciation investments. This low correlation means that
• Seeking diversification, rebalancing, or when other investments are down, non-traded
reduction of volatility in your portfolio REITs may continue to perform. Simply put,
low correlation can help contribute to less
volatility in an investment portfolio.

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will
be attained.
* There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.


Risks with non-traded REITs
• Shares in a non-traded REIT are generally considered illiquid until the REIT’s exit strategy
either returns investors’ principle or lists on a public exchange. No public market exists
for shares of common stock of a non-traded REIT. Even if investors can sell their shares
through a secondary market, it is likely that they will have to sell them at a significant
discount from the public offering price.
• The REIT may not achieve its desired diversification or investment objectives, or be able
to pay dividends.
• The shares may be worth more or less than the offering price.
• If the value of the assets in which the fund invests declines, investors’ shares may
lose value.
• The REIT could be vulnerable to economic and geopolitical conditions. For example, a
REIT that invests in the office sector may be negatively affected by an economic downturn
that leads to tenant defaults or vacancies.


Defining your needs and goals
The first and most important step in the investment
consulting process is Discovery. We will help you
clearly identify your short- and long-term investing
goals, tolerance for risk and wealth management
1D
iew
needs. Perhaps you have always wanted to
purchase a second home, start a new business
or establish a charitable foundation. Whatever
ev i

sc
your needs may be, we can help you get there

4R

ov
by defining your investment objectives and then
customizing a portfolio designed to address your

er
unique situation.

Discovery About You Designed For You
What are your hopes and dreams?

3 Im
Are there investments you’d like to avoid as a matter
of principle?

d
en
What are your income needs?

pl e
Do you have any specific tax considerations?
m

m
What sort of risk and return characteristics are you en o m
looking for?
Do you have any short-term cash needs?
t 2 Re c
What other investments do you have?
What has your experience been with other
financial advisors?

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