DISEÑO DE UN PRODUCTO ESTRUCTURADO COMO ALTERNATIVA DE INVERSIÓN INSTITUCIONAL EN EL MERCADO BURSÁTIL COLOMBIANO DIANA CAROLINA GÓMEZ VILLARREAL

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1 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 DISEÑO DE UN PRODUCTO ESTRUCTURADO COMO ALTERNATIVA DE INVERSIÓN INSTITUCIONAL EN EL MERCADO BURSÁTIL COLOMBIANO DIANA CAROLINA GÓMEZ VILLARREAL UNIVERSIDAD DE LA SALLE FACULTAD DE CIENCIAS ADMIISTRATIVAS Y CONTABLES PROGRAMA DE ADMINISTRACIÓN DE EMPRESAS BOGOTA

2 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 DISEÑO DE UN PRODUCTO ESTRUCTURADO COMO ALTERNATIVA DE INVERSIÓN INSTITUCIONAL EN EL MERCADO BURSÁTIL COLOMBIANO DIANA CAROLINA GÓMEZ VILLARREAL Trabajo de Grado Director: Javier Dario Neira Ariza UNIVERSIDAD DE LA SALLE FACULTAD DE CIENCIAS ADMIISTRATIVAS Y CONTABLES PROGRAMA DE ADMINISTRACIÓN DE EMPRESAS BOGOTA

3 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 TABLA DE CONTENIDO INTRODUCCIÓN 1. TEMA TITULO LINEA DE INVESTIGACIÓN SUB LINEA DE INVESTIGACIÓN RELACIÓN CON LA ADMINISTRACIÓN DE EMPRESAS PROBLEMA PLANTEAMIENTO FORMULACIÓN OBJETIVOS OBJETIVO GENERAL OBJETIVOS ESPECIFICOS PROPÓSITOS COMUNICACIÓN Y DIVULGACIÓN DE RESULTADOS JUSTIFICACIÓN HIPÓTESIS HIPÓTESIS DE PRIMER GRADO HIPÓTESIS DE SEGUNDO GRADO HIPÓTESIS DE TERCER GRADO MARCO DE REFEFENCIA MARCO TEÓRICO Relación Rentabilidad Riesgo La Diversificación La Eficiencia del Mercado de Capitales El Valor Temporal del Dinero MARCO ESPACIAL MARCO TEMPORAL Reseña Histórica Evolución y Generaciones Panorama Internacional Panorama Nacional MARCO LEGAL Autoridades de Control y Vigilancia Regímenes y Normas Vigentes MARCO CONCEPTUAL Herramientas de Análisis

4 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Conceptos Estadísticos y Económicos Conceptos Financieros Indicadores Financieros Productos Financieros Instrumentos Financieros Tipos de Mercado Tipos de Operación DISEÑO METODOLÓGICO TIPO DE INVESTIGACIÓN MÉTODOS DE INVESTIGACION Método de Inducción Método Deductivo Método de Análisis Método de Síntesis FUENTES DE INFORMACIÓN Fuentes Primarias Fuentes Secundarias POBLACIÓN Y MUESTRA Población Muestra DISEÑO DE UN PRODUCTO ESTRUCTURADO COMO ALTERNATIVA DE INVERSIÓN INSTITUCIONAL EN EL MERCADO BURSÁTIL COLOMBIANO DELIMITACIÓN DE LA INVESTIGACIÓN DIAGNOSTICO Descripción General del Mercado Financiero Local Estructura del Mercado Bursátil Definición de Variables Críticas Desarrollo de los Mercados DISEÑO DEL PRODUCTO ESTRUCTURADO Descripción del Diseño Descripción de Instrumentos Correlaciones y Rentabilidades Calculo de la prima de la opción Colocación de la inversión en el mercado Diseño final del producto estructurado MECANISMOS DE EVALUACIÓN DEL DISEÑO Modelo de Monitoreo Rentabilidad del Plus RENTABILIDADES Y COMPARACIÓN DEL PRODUCTO Análisis de rentabilidades Comparación con otro activo

5 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Conclusiones de la evacuación ACEPTACION DEL PRODUCTO EN EL MERCADO Ficha técnica de la entrevista Tabulación y análisis de la entrevista Conclusiones finales del resultado de las entrevistas CONCLUSIONES BIBLIOGRAFÍA 91 ANEXOS 5

6 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 LISTA DE ILUSTRACIONES Figura 1. Grafico Relación Rentabilidad-Riesgo Figura 2. Composición del Sector Financiero en Colombia. 18 Figura 3. Clasificación del Sector Financiero en Colombia. 19 Figura 4. Composición del mercado Bursátil 44 Figura 5. Volumen de operaciones de Opciones Peso-Dólar.. 45 Figura 6. Rentabilidades del Fondo Obligatorio de Pensiones 46 Figura 7. Rentabilidades del Fondo de Pensiones y Cesantías. 47 Figura 8. Rentabilidades del Fondo de Pensiones Voluntarias. 49 Figura 9. Consolidado de Rentabilidades de los tres Fondos 50 Figura 10. Estructura del Mercado Financiero.. 51 Figura 11. Mercados del Sistema Financiero Colombiano. 52 Figura 12. Mercado Monetario en Colombia.. 53 Figura 13. Mercado de Capitales en Colombia. 53 Figura 14. Sectores del Mercado de Capitales. 55 Figura 15. Comportamiento de la Inflación y Producción.. 62 Figura 16. Comportamiento de Monedas Figura 17. Comportamiento de Tasa Figura 18. Comportamiento de las Curvas de los Tesoros Figura 19. Spread de Bonos de Deuda Soberana Figura 20. Condiciones del Subyacente Figura 21. Condiciones del Plus Figura 22. Lista de ETF Recomendados por MS, 2008/05/15 72 Figura 23. Composición del Productos Estructurado LISTA DE ANEXOS Anexo 1. Formato y resultado de las entrevistas. Anexo 2. Tabla: Rentabilidades de mercado bursátil Anexo 3. Tabla: Tasas mensuales de las AFPs Anexo 4. Tabla: Volumen de operaciones en SEN Anexo 5. Informe de Morgan Stanley. Anexo 6. Reglamento y Prospecto de la cartera colectiva. Anexo 7. Matriz de correlaciones, histogramas y cálculos. Anexo 8. Ficha técnica de los ETFs seleccionados. Anexo 9. Modelo de valoración de la inversión. 6

7 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 INTRODUCCIÓN Con la globalización vivida en el mundo actualmente, se crea la necesidad de desarrollar mercados competitivos con altos estándares de calidad y costos justos. Esto implica, no solo la optimización de procesos internos de las empresas si no la creación de nuevas alternativas de inversión para aquellos que de alguna forma contribuya con la profundización y desarrollo del sector financiero de un país. La naturaleza del Mercado Bursátil Colombiano, en las últimas décadas, se ha centrado en la conformación de portafolios de renta fija a corto plazo para desplazar los niveles de ahorro doméstico por la transformación de activos financieros que apalancan actividades económicas en el país. Sin embargo, a pesar de poseer todas las características de un mercado netamente de dinero, se ha concentrado en procesos de apertura, internacionalización y globalización económica. Contrario a la tendencia mundial se puede plantear como hipótesis inicial, el mercado Bursátil en Colombia debe presentar una constante en la oferta de instrumentos que permitan ampliar la gama de activos utilizados en las decisiones de los administradores de portafolios y por ende en el ofrecimiento de rentabilidades a los inversionistas. Al tener en cuenta lo anterior, es necesario identificar la gama de productos e instrumentos financieros con que cuentan los agentes del mercado de capitales, realizar un análisis de la evolución y aporte de estos a la economía a través de la historia y poder determinar la importancia de la creación e innovación de productos estructurados, para aplicar la técnica conocida como ingeniería financiera. Adicionalmente, es importante identificar y analizar algunas de las variables y/ó factores que han influido en el comportamiento y estabilidad del mercado financiero tanto en épocas de crecimiento como en épocas de crisis. Finalmente, se dará respuesta al por qué, cómo y cuándo crear un producto estructurado para así ofrecer alternativas de inversión a los inversionistas institucionales del mercado Bursátil local e implícitamente contribuir a mejorar las rentabilidades ofrecidas por los mismos. 7

8 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano TEMA 1.1 TITULO Diseño de un producto estructurado como alternativa de inversión institucional en el mercado bursátil colombiano. 1.2 LINEA DE INVESTIGACIÓN Desarrollo Empresarial 1.3 SUB-LINEA DE INVESTIGACIÓN Finanzas a nivel nacional e internacional. 1.4 RELACIÓN CON LA ADMINISTRACIÓN DE EMPRESAS El proyecto de investigación se basa tanto en conocimientos teóricos como prácticos aprendidos a través de toda la carrera. Destacando los principios básicos de esta ciencia, tal como la planeación, organización, ejecución y control; los cuales fueron llevados a cabo en el desarrollo de esta investigación. De igual forma, los conocimientos administrativos adquiridos permiten que la investigación ofrezca alternativas de solución de todo tipo (social, económico, cultural) en el sector financiero, clasificado como uno de los sectores vitales para el crecimiento y desarrollo de cualquier país; promulgando así, el interés de inversionistas (nacionales y extranjeros) para atraer sus recursos económicos. 8

9 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano PROBLEMA 2.1 PLANTEAMIENTO DEL PROBLEMA La economía Colombiana ha presentado algunos contratiempos debido a que, por una parte, está incluida en el grupo de economías emergentes tanto a nivel continental como mundial, razón por la cual es susceptible a cualquier situación ó cambio significativo (repentino) de las economías desarrolladas en el mundo; y por otro parte, en un afán por tratar de hacer parte de una economía global, ha dejado de lado una correcta planeación y preparación para afrontar y competir con potencias mundiales y por supuesto los resultados han sido devastadores. Desafortunadamente, los aspectos indicados anteriormente han dejado la economía colombiana muy debilitada (en menor grado al pasar el tiempo) y lo que ha reflejado, es que tiene gran dependencia de economías desarrolladas tal como la de Estados Unidos; la cual ha pasado por épocas de contracción económica de las que el país (Colombia) se viene recuperando lentamente buscando otros mercados internacionales para transar bienes y servicios, incrementando el desarrollo de algunos sectores de la economía que encontraron mercado en países de América Latina, Europa y Asia. Al analizar el mercado bursátil Colombiano, se observa que gira en función de instrumentos de renta fija, con una pequeña participación en instrumentos de renta variable (acciones colombianas) y en instrumentos derivados; razón por la cual en este mercado Bursátil no se ofrecen diferentes alternativas de inversión, lo que genera, que muchos de los recursos sean invertidos en otros sectores de la economía dejando de lado el mercado bursátil. Adicionalmente, es importante tener presente que esta composición es contraria a la de economías desarrolladas, donde el mercado de renta variable es muy desarrollado y que a pesar de generar mayores riesgos también genera mayores rentabilidades. No obstante, La Superintendencia Financiera, El Banco de la República, el Ministerio de Hacienda y Crédito Público y los gremios bancarios, fiduciarios, de pensiones, de leasing y las aseguradoras han llevado al mercado colombiano a nuevas instancias en materia de desarrollo del mercado financiero, cuyas bases reposan en la ley 9

10 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 marco del mercado de valores 1. La Bolsa de Valores de Colombia junto con el Autorregulador del Mercado de Valores (AMV) han determinado la nueva reglamentación para el desarrollo del mercado de derivados en Colombia y fue creada la Cámara de Riesgo Central de Contraparte 2 para que en conjunto con la Bolsa de Valores de Colombia, le den las bases necesarias a la reglamentación realizada en materia de Instrumentos derivados; circunscritos a través del reescrito capítulo XVIII de la circular 100 de 1995, que inició vigencia a partir de 1 de Septiembre de 2008 para todas las entidades que hacen parte del sector financiero en Colombia 3. Los desarrollos reglamentarios mencionados anteriormente, soportan la base normativa que sustenta el planteamiento objetivo de este trabajo de investigación, que se centra en el desarrollo de productos estructurados basados en la combinación de instrumentos financieros de Renta Fija y de Renta Variable encapsulados como una nota estructurada; siendo consecuentes con las nuevas reglas de juego del mercado de capitales, la apertura del mercado organizado de derivados en Colombia, las nuevas reglas para la celebración de contratos marco que permitan a los actores del sector financiero invertir en productos estructurados y también normas relacionadas con la valoración y contabilización diaria de los mismos. Con esto, los productos estructurados constituyen una alternativa de inversión que proporciona rentabilidad, flexibilidad y diversificación, con un nivel de riesgo controlado. 2.2 FORMULACIÓN Cómo diseñar un producto estructurado que sirva como alternativa de inversión en el mercado bursátil Colombiano? 1 Ley 964 de Institución que centraliza las operaciones con el objetivo de disminuir el riesgo de contraparte. 3 Información EN: 2008/04/30. 10

11 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano OBJETIVOS 3.1 OBJETIVO GENERAL Diseñar un producto estructurado que sirva como alternativa de inversión en el mercado Bursátil Colombiano, haciendo uso de instrumentos y/o activos existentes en el sector financiero. 3.2 OBJETIVOS ESPECIFICOS i. Hacer un estudio con el objetivo de identificar los productos e instrumentos financieros existentes en el sector financiero colombiano. ii. Realizar una investigación en la que recopile información relacionada con la funcionalidad, ventajas y desventajas de los productos estructurados. iii. Determinar los procedimientos legales, políticas y normativa en los que se incurre para la puesta en marcha de un producto estructurado. iv. Elaborar un estudio administrativo por medio de la planeación, organización, ejecución y control para la definición de pautas para el diseño de productos estructurados, basados en instrumentos existentes en el mercado bursátil colombiano. 3.3 PROPÓSITOS Empresarial: Aplicación de conceptos gerenciales para permitan la ampliación de alternativas de inversión por medio de investigación de mercados nacionales y extranjeros. Financiero: ampliar la gama de instrumentos de inversión con el fin de lograr un equilibrio en la relación rentabilidad riesgo. Comercial: se pretende abarcar la demanda insatisfecha, generando así el aumento de credibilidad en el sector financiero por parte de los inversionistas. Investigativo: desarrollar un proyecto enfocado en el sector financiero del país, aplicando conocimientos adquiridos en la 11

12 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 carrera y experiencia con el fin de contribuir con la profundización del sector. Académico: contribuir con el desarrollo profesional de la investigadora y aportar conocimientos prácticos al área financiera de la facultad. 3.4 COMUNICACIÓN Y DIVULGACIÓN DE RESULTADOS Los resultados de la presente investigación serán puestos a disposición del Programa de Administración de Empresas de la Facultad de Administración de Ciencias Administrativas y Contables, de forma física y por medio magnético, con el fin de contribuir con futuras investigaciones realizadas por el área de finanzas. Igualmente, la información contenida en la misma se considerará como la base para la sustentación del trabajo de grado. 12

13 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano JUSTIFICACIÓN Dado que la situación económica del país atraviesa por una etapa de corrección, indicadores macroeconómicos aceptables y expectativas de crecimiento y desarrollo favorables, la creación de nuevos productos con un amplio alcance puede contribuir a esta economía. La idea es seguir el ejemplo de algunos de los países considerados como potencias en el mercado financiero que aunque con situaciones y circunstancias diferentes, lograron crear productos que hoy en día son fundamentales en sus economías. Igualmente, se deben tener en cuenta las reacciones del mercado, los planes de contingencia y las consecuencias del mismo después de las crisis económica, tal como se presentó en la década de los ochenta y noventa debilitando el mercado con la vasta caída del nivel de producción, el aumento desaforado de la tasa de desempleo (20% al final de ) y por supuesto la necesidad de asignar presupuesto nacional para auxiliar al sector. O lo que se vivió en la crisis del 2002, en la cual se presentaron problemas con los títulos de deuda pública y en la del 2006 la cual fue una crisis internacional que afecto el mercado local. En el 2007, volvió a afectarse la economía como consecuencia de la crisis de Estados Unidos provocada por la flexibilidad en los estándares de crédito (procesos) de los bancos con la asignación de créditos hipotecarios mal calificados, poco análisis de riesgos y el consumo desbordado de los norteamericanos (subprime). Esto por supuesto, afectó a los países emergentes teniendo en cuenta el grado de incertidumbre relacionada con una entrada en recesión de Estados Unidos, por tanto dichos países entraron en nerviosismo y comenzaron a tratar de salir de estos activos; mientras que Estados Unidos realizaba ventas masivas provocando bajas en los precios de los activos. A nivel local, el Banco de la República, en una demostración de autonomía con respecto al Gobierno Nacional, aumentó las tasas de interés motivado por un nivel de crecimiento alto y expectativas de futuras inflaciones altas, que dieron como uno de sus resultados frenar el consumo colombiano y por ende frenar el crecimiento del país. 4 Información EN: 2008/02/25. 13

14 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 En términos generales, el Gobierno Nacional no ha profundizado en el problema del mercado local, por tanto hasta no dar solución radical se presentarán problemas con consecuencias relevantes como por ejemplo la salida de capital extranjero. En consecuencia, la creación de nuevas alternativas de inversión que permitan darle un respiro al mercado bursátil local con relación a los instrumentos y valores existentes y por supuesto contribuir con su crecimiento y desarrollo; es una de las iniciativas con bastante fuerza y una buena opción para lograrlo. En síntesis, se pretende crear un producto estructurado, en aras de investigación y poca práctica en el mercado bursátil local; a pesar de tener aplicabilidad en mercados extranjeros. Para el desarrollo de esta investigación se realizará una descripción general del mercado Financiero en Colombia y se dará a conocer la estructura del mismo al tomar como referencia eventos trascendentales a lo largo de la historia de algunos productos e instrumentos. Adicionalmente, se hará uso de herramientas tales como análisis de mercados, modelos y análisis estadísticos, económicos y financieros a fin de obtener conocimientos del comportamiento y evolución del mercado bursátil colombiano. 14

15 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano HIPÓTESIS 5.1 HIPÓTESIS DE PRIMER GRADO El sector financiero constituye uno de los sectores más importante de la economía de un país. El aumento de confianza de los inversionistas genera estabilidad económica. La creación de nuevas alternativas de inversión genera equilibrio en el mercado bursátil. 5.2 HIPÓTESIS DE SEGUNDO GRADO La profundización del sector financiero contribuye con el desarrollo y optimización de recursos para la financiación de proyectos y por ende el crecimiento de un país. Contar con inversionistas satisfechos, contribuye con el desarrollo de proyectos, ya que, permiten que sus recursos sean utilizados con fines específicos a cambio de rentabilidades significativas y sostenidas a lo largo del tiempo. La creación de nuevas alternativas de inversión, haciendo uso de instrumentos existentes en el mercado bursátil evita la saturación del mercado y contribuye con la innovación y globalización del mercado. 5.3 HIPÓTESIS DE TERCER GRADO Es necesaria la creación de nuevos productos o instrumentos financieros que ofrezcan mayores alternativas de inversión, rentabilidades más atractivas y eficientes que permitan cubrir la inversión del riesgo, amortizando, disminuyendo ó compensando las fluctuaciones de los papeles negociables y sobre todo, satisfacer las necesidades de los inversionistas ofreciéndoles estabilidad y equilibrio en la relación riesgorentabilidad. 15

16 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano MARCO DE REFERENCIA 6.1 MARCO TEÓRICO Cuatro aspectos importantes y de aplicabilidad en el desarrollo de la presente investigación, basados en monografías de Juan Mascareñas 5, son Relación Rentabilidad Riesgo. La relación de la Rentabilidad con el Riesgo, se fundamenta en: El riesgo es inherente a cualquier actividad de inversión. Sus comportamientos están directamente relacionados, es decir, a mayor rentabilidad esperada es inevitable asumir un mayor nivel de riesgo. Sin embargo, dependiendo de la inversión, es ó no proporcional su relación. Figura 1. Grafico Relación Rentabilidad-Riesgo La diversificación: La diversificación, consiste en: Todos los recursos no se pueden invertir en un solo proyecto o activo. Mediante la diversificación, se puede reducir el riesgo pero no eliminarlo. 5 INFORMACION EN: 2009/01/15 16

17 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Se debe realizar un análisis cuantificable, para establecer el porcentaje apropiado de inversión en cada proyecto ó activo. La diversificación, depende fundamentalmente de las expectativas y el perfil de riesgo del inversionista La eficiencia del Mercado de Capitales. El tema de la eficiencia del mercado de capitales, hace referencia a: El precio de los activos corresponde al resultado de negociaciones (compra y venta) realizadas sobre estos. Un mercado es eficiente cuando tiene la capacidad de asimilar la información reflejada en los precios de forma rápida y oportuna. Los mercados de capitales, se distinguen por ser eficientes gracias a que están mejor organizados, los costos de transacción son bajos, existe flexibilidad operativa, tienen un gran número de participantes y una competencia más intensa. Los precios en el mercado financiero reflejan las expectativas sobre un activo, las cuales dependen a su vez de la información disponible en el mercado El valor temporal del dinero. El tema del valor temporal del dinero, se divide en tres puntos específicos: Corresponde a lo que un inversionista está dispuesto a recibir por entregar sus recursos para la ejecución de un proyecto ó activo especifico (prestar la plata) y por tanto está estrechamente relacionado con el costo de oportunidad (comparativo entre tener los recursos invertidos en una u otra cosa). Adicionalmente, el rendimiento de los recursos debe ser coherente con la inflación; partiendo del principio del valor del dinero en el tiempo. Finalmente, los recursos son sujeto de valoración, la cual refleja el valor presente del proyecto ó activo de acuerdo a diferentes variables del mercado. 6.2 MARCO ESPACIAL El Sistema Financiero en Colombia da sus primeros indicios a mediados del siglo XIX, cuando los Jesuitas comenzaron a recoger dineros de los campesinos bajo la iniciativa del ahorro. 17

18 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Hacia finales del mismo siglo, el gobierno en un intento de formalización del sector financiero creó el Banco de la República, el cual tuvo dos intentos fallidos en los años 1880 y 1895, esto debido a su estructura descentralizada y autonomía, lo cual no permitía un control correcto del mismo. Finalmente, en el año 1923 logró consolidar el Banco de la República con lo cual se dio formalismo al Sistema Financiero Colombiano. Antes de 1991 era el único que podía realizar negociaciones de compra y venta sobre divisas. El sector Financiero, está compuesto por tres grandes grupos de establecimientos: Establecimientos de Crédito, Compañías de Servicios Financieros y el Sector Asegurador en los cuales hacen parte las siguientes entidades. Figura 2. Composición del Sector Financiero en Colombia Establecimientos de credito Establecimientos bancarios y comerciales. Bancos Hipotecarios. Cia financiamiento comercial. Corporaciones financiera. Cooperativas. Cia Servicios Financieros Sociedades administradoras de pensiones y cesantias. Sociedades Fiduciarias. Compañias de Leasing. Almacenes generales de deposito. Capitalizadoras. Comisionistas de Bolsa. Sector Asegurador Enfocados en Servicios. Participa tan solo en el 1% del PIB. Las reaseguradoras son de capital extranjero. Fuente: Pagina web Universidad Nacional de Colombia 6 Adicional, a la composición indicada anteriormente, el Sector Financiero está dividido en dos partes: Sector Bancario y el de Instrumentos. 6 Información EN: 2008/05/15. 18

19 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Figura 3. Clasificación del Sector Financiero en Colombia Bancario Instrumentos: - Intermediado. - Corto Plazo. Instrumento Instrumentos: - No Intermediado. - Largo Plazo. Compuesto por: - Ahorrador. - Intermediarios. - Usuarios de creditios. Compuesto por: - Inversionista. - Facilitador. - Emisor. Fuente: Pagina web Universidad Nacional de Colombia 7 El Bancario es el que se conoce comúnmente como sector real 8 el cual tiene como objeto social captar y colocar recursos; y el de Instrumentos por su parte, tiene como objeto social, ofrecer alternativas de inversión a inversionistas institucionales. 6.3 MARCO TEMPORAL Reseña histórica. Los productos estructurados se estima aparecieron en 1985 gracias a las innovaciones de la ingeniería financiera y como consecuencia de la saturación de instrumentos poco rentables, atractivos e inflexibles para el inversionista en la década de los ochenta y noventa. Según Juan Mascareñas 9, los productos estructurados son activos financieros de renta fija ligados a instrumentos derivados. Es por esto, que una de las características de los productos estructurados es que son diseñados a la medida de las necesidades de los inversionistas, ofrecen mejorar sus rentabilidades y suplen sus necesidades con diferente grado de 7 Información EN: 2008/05/15. 8 Información EN: 2008/12/22. El sector real se puede definir como una agrupación de actividades económicas dentro de las cuales se encuentran las del sector primario, las del sector secundario y algunas actividades del sector terciario. 9 MASCAREÑAS, Juan. Universidad Complutense de Madrid, Actualidad Financiera No. 31 de 1995 EN: 2008/03/20. 19

20 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 complejidad. Algunas de las ventajas más importantes de estos productos son: el plazo, la calidad crediticia y la posibilidad de acceder a mercados que resulta en ocasiones imposible. Dentro de los diferentes factores que impactan la volatilidad del precio y el comportamiento de los productos estructurados, es importante señalar los más relevantes: el apalancamiento entendido como el grado de exposición a las variaciones de un índice, es decir, que la relación apalancamiento y sensibilidad del rendimiento es directamente proporcional; el plazo del título donde se debe tener en cuenta que los productos estructurados son más sensibles a los tipos de interés entre más largo sea la emisión y el riesgo base el cual va ligado por la relación directa de las variables determinantes del rendimiento y los índices de referencia utilizados para medir el comportamiento de todo el portafolio Evolución y Generaciones: Basados en el escrito de Juan Mascareñas 10, con relación a la evolución y la clasificación de productos estructurados, hace una división de los mismos basada en la evolución del mercado y la época en la cual se desarrollaron. Primera Generación: Surge en 1985, su éxito radica en la facilidad del diseño e interpretación de la misma y se caracteriza por: Tener un único índice de tipos de interés variable. La fecha de liquidación y pago deben ser las mismas que las fechas del producto estructurado. El índice de referencia y el producto deben estar expresados en la misma moneda. No puede contener opciones exóticas 11 ó no convencionales. Segunda Generación: su éxito radica en que los característicos flujos proporcionan mayores rendimientos que la generación anterior pero con un mayor riesgo y volatilidad. Se caracteriza por: La fecha de liquidación y pagos pueden ser diferentes a las fechas del producto estructurado. 10 MASCAREÑAS, Juan. Universidad Complutense de Madrid, Actualidad Financiera No. 31 de 1995 EN: 2008/03/ Definición de opciones exóticas: su finalidad es abaratar el costo de las primas y ajustarse de forma más adecuada a las cambiantes situaciones de los mercados de capitales. 20

21 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 El interés del activo financiero surge de la combinación de varios índices. El índice de referencia y el producto estructurado pueden estar expresados en diferente moneda. Se pueden incluir opciones exóticas. Requiere elevadas cotas de apalancamiento, buscar recursos de terceros para invertir mucho arriesgando poco. Tercera Generación: la principal característica de esta generación y a diferencia de las dos anteriores, es que los rendimientos del producto están basados en índices del mercado de renta variable ó en instrumentos diferentes a renta fija. En esta generación los inversionistas persiguen alguno de los siguientes objetivos: Arbitraje de capital con riesgo: según el activo que respalde la inversión, se asigna un porcentaje equivalente al riesgo de cada instrumento. Requerimientos de Cobertura: el inversionista cubre sus riesgos con un elemento implícito en el producto estructurado, cuando por cuestiones legales no permita hacerlo de otra forma. Asignación de Activos: ofrecer alternativas a la inversión en mercados subyacentes. Dentro de esta generación, se establecen las siguientes categorías: Cupones indexados a divisas. Cupones indexados a activos físicos. Cupones ligados a índices de renta variable. Cupones ligados a índices de renta fija Panorama Internacional. El bajo crecimiento del mercado accionario colombiano, coincide con el bajo desarrollo de otros mercados financieros que en otras latitudes (Estados Unidos, Europa, Australia, Japón, etc.) han alcanzado un desarrollo significativo, los cuales utilizan principalmente para la cobertura de riesgos. Los instrumentos derivados constituyen hoy en día el eje principal del mundo financiero y sus operaciones diarias ascienden a sumas cuantiosas, como por ejemplo en el mercado Forex se transa diariamente más de USD

22 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Millones 12. De estos, los más importantes son sobre futuros, Swap (intercambio de papeles) y opciones (sobre divisas y/o contratos futuros). El mercado de opciones se desarrolló originalmente sobre activos de acciones y en la actualidad se ha extendido a commodities, a monedas, a tasas de interés y a contratos futuros. Los productos estructurados en el tablero de opciones de la bolsa de Chicago - Bolsa de productos y futuros más grande e importante, establecida en EEUU y referente para el mercado de opciones y futuros -, representan un nuevo tipo de vehículo de inversión, estos son similares a las opciones dado que poseen una fecha de expiración, y como las opciones, están indexadas y tienen un cumplimiento o liquidación. Cada uno de los productos estructurados que se referencia en las listas de Chicago Board Options Exchange (CBOE) tiene composición única e individual, se negocian como vía estandarizada en el sistema y deben cumplir con algunas condiciones para que puedan ser admitidos en el sistema de trading de acciones; además tienen un número limitado y disponible de contratos al público (inversionistas institucionales) y están supervisados a través de la National Security Clearing Corporation (NSCC); contrario a las opciones, las cuales están supervisadas a través de la Options Clearing Corporation (OCC) 13. La división de mercados de capitales en la CBOE desarrolla y valora el instrumento, provee la guía reguladora, trae el producto al mercado y disemina la información de productos innovadores Panorama Nacional. En el cual hacen parte el sector financieros y otros sectores. Sector Financiero: La utilización de productos derivados en sector financieros de Colombia ha sido muy baja, remontándose principalmente a la negociación de algunos contratos forwards sobre dólares ó de opciones sobre dólares, por parte de importadores y/o exportadores con establecimientos de crédito con miras a cubrir 12 Información EN 2008/05/ Información EN: 2008/05/15. Versión en ingles. 22

23 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 el riesgo cambiario. También se encuentran las opciones emitidas por el Banco de la República para propósitos de control de la tasa de cambio y de acumulación de reservas 14. Sin embargo, la modificación de la Circular 100 de 1995, Capítulos I y XVIII sobre valoración de inversiones y derivados y el Régimen de Inversiones de la Superintendencia Financiera de Colombia sobre la administración de liquidez y lineamientos en materia de tasa de interés y tasa de cambio, ha puesto en evidencia la necesidad de desarrollar un mercado de cobertura para proteger los riesgos de tasas de interés y de tasa de cambio. Para lo cual, la Bolsa de Valores de Colombia junto con la Superintendencia Financiera, el Ministerio de Hacienda y Crédito público y los diferentes gremios del sector, unieron fuerzas y recursos para ampliar la reglamentación dirigida a la negociación, cumplimiento, valoración y control de riesgos del mercado de derivados permitiendo así que dicho mercado en un futuro cercano se profundice y desarrolle en el país. Otros Sectores: Actualmente, existen en Colombia dos bolsas adicionales a la Bolsa de Valores de Colombia; tales como la Bolsa Nacional Agropecuaria y la Bolsa de Energía. La Bolsa Nacional Agropecuaria: se constituyo en Agosto de 1979 y su objetivo es brindar las condiciones necesarias para el desarrollo de un mercado publico de productos agropecuario y con ello contribuir a dinamizar la comercialización agropecuaria en Colombia. Esta bolsa está bastante consolidada y con relación al tema de cubrimiento, se apoyaron en la Bolsa de Comercio de Chicago en la cual introdujeron contratos de futuros y opciones sobre diferentes productos. La Bolsa de Energía: se constituyo el 20 de julio de 1995, es administrada por la Interconexión Eléctrica S.A. (ISA) y su objetivo es operar y administrar el mercado eléctrico nacional mediante un esquema libre de oferta y demanda. Inicialmente, se realizaron contratos básicos como el de compra venta (Pague lo Contratada y Pague lo Demandado). Sin embargo, el mercado ha evolucionado en los últimos diez años, lo cual ha permitido que la complejidad de los contratos aumente y sean 14 SERRANO, Javier. Mercados Financieros; Pág

24 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 aplicados mecanismos de cobertura (Futuros, Futuros Implícitos y Exóticos) MARCO LEGAL Autoridades de Control y Vigilancia. Banco de la República: Es la institución que emite y administra la moneda legal y ejerce la función de banquero de bancos. Además, controla los sistemas monetario (el dinero), crediticio (las tasas de interés) y cambiario (la tasa de cambio) del país. Sus principales funciones son: i) actuar como banco del Estado; ii) controlar la emisión de moneda; iii) recibir consignaciones y otorgar préstamos a los bancos comerciales y al Gobierno; iv) manejar la política monetaria (control de la inflación) y financiera del país, y v) efectuar las transferencias de divisas con los demás países del mundo, entre otras funciones 16. Superintendencia Financiera de Colombia: es un organismo técnico adscrito al Ministerio de Hacienda y Crédito Público, con personería jurídica, autonomía administrativa y financiera y patrimonio propio. Tiene por objetivo supervisar el sistema financiero colombiano con el fin de preservar su estabilidad, seguridad y confianza, así como, promover, organizar y desarrollar el mercado de valores colombiano y la protección de los inversionistas, ahorradores y asegurados 17. Autorregulador del Mercado de Valores (AMV): entidad nueva originada en virtud de la Ley 964 de 2005 y originada por la independencia del departamento de vigilancia de la Bolsa de Valores de Colombia (BVC). Se enfoca en el control y vigilancia de operaciones realizadas en los sistemas de negociación Regímenes y Normas vigentes. Dentro de toda la normativa vigente y aplicable en el sector financiero, vale la pena destacar las siguientes por su relevancia e impacto en la investigación: 15 INFORMACION EN: com.htm#cultura /01/ Información EN: 2008/03/ Información EN: 2008/03/10. 24

25 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 La Circular 100 de 1995 (con todas sus modificaciones): en la cual la Superintendencia Financiera de Colombia estipula los métodos de valoración, contabilización y riesgo de cobertura de títulos valores de renta fija, renta variable y derivados, entre otras cosas. La anterior, se modifica mediante la Circular 025 de 2007, relacionada con la celebración de negociaciones y valoración de instrumentos derivados y productos estructurados, con lo cual se da vía libre a los agentes del mercado para realizar dichas negociaciones. Capitulo XVII: Producto Estructurado. Está compuesto por uno o más instrumentos financieros no derivados y uno o más instrumentos financieros derivados, los cuales pueden ser transferibles por separado o no y tener contrapartes diferentes o no, por cada uno de los instrumentos financieros que lo componen 18. Resolución 400 de 1995: en la cual la Superintendencia Financiera fija los parámetros y requisitos a cumplir por las empresas que pretenden realizar emisión de valores 19. Resolución 1200 de 1995: en la cual la Superintendencia Financiera determinar las disposiciones de los diferentes integrantes del sector financiero 20 Ley 964 de 2005: por la cual se dictan normas generales y se señalan en ellas los objetivos y criterios a los cuales debe sujetarse el Gobierno Nacional para regular las actividades de manejo, administración e inversión de recursos captados del público que se efectúen mediante valores y se dictan otras disposiciones 21. Decreto 2175 de 2007: en el cual se regula la administración y gestión de las carteras colectivas Información EN: 2008/12/22. Capitulo XVIII, numeral Información EN: 2008/12/ Información EN: 2008/12/ Información EN: 2008/12/ Información EN: 2009/02/15. 25

26 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano MARCO CONCEPTUAL Técnica y teóricamente para el análisis de datos e información se utilizaran algunas herramientas y/o teorías estadísticas, financieras y económicas. A continuación se definen algunas de las más importantes Herramientas de Análisis 23. Análisis Fundamental o Estructural: enfoque de análisis del mercado accionario, en el que se estudian todos los factores relevantes que pueden influir sobre el comportamiento futuro de las utilidades y dividendos de las empresas y por tanto del precio de sus acciones. Análisis Técnico: enfoque de análisis del mercado accionario, en el que se estudian todos los factores relacionados con la oferta y demanda real de las acciones. Riesgo de Contraparte: asociado al incumplimiento del acreditado respecto a las obligaciones adquiridas al contratar un crédito. Es cuantificable. Riesgo de Crédito: se refiere a la pérdida potencial en la que incurre quien otorga un crédito, debido a la posibilidad de que la contraparte no cumpla con sus obligaciones. Es cuantificable. Riesgo de Emisor: la pérdida en que se incurre por la posición de un activo financiero, debido al incumplimiento de la empresa, banco o institución que emitió el instrumento. Es cuantificable. Riesgo de Liquidez: se refiere a las posibles pérdidas o menor utilidad por acceso a las fuentes de financiación del flujo de caja. Es cuantificable. Riesgo de Mercado: posibilidad de incurrir en pérdidas asociadas a la disminución del valor de un valor (portafolios), ocurridos como consecuencia de cambios en el precio de los 23 PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 26

27 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 instrumentos financieros en los cuales se mantienen posiciones dentro o fuera del balance. Es cuantificable. Riesgo Legal: posibilidad de pérdida en que incurre una entidad el ser sancionada u obligada a indemnizar daños como resultado del incumplimiento de normas o regulaciones y obligaciones contractuales. No cuantificable. Riesgo Operacional: posibilidad de incurrir en pérdidas por deficiencias, fallas o inadecuaciones, en el recurso humano, los procesos, la tecnología, la infraestructura o por la ocurrencia de acontecimientos externos. No cuantificable. Riesgo Reputacional: posibilidad de pérdida en que incurre una entidad por desprestigio, mala imagen, publicidad negativa, cierta o no, respecto de la institución y sus prácticas de negocios, que cause pérdida de clientes, disminución de ingresos o procesos judiciales. No cuantificable Conceptos Estadísticos y Económicos 24. Correlación: es una medida sobre el grado de relación entre dos variables, sin importar cuál es la causa y cuál es el efecto. El coeficiente de correlación sirve para medir la relación o la asociación estadística existente entre dos variables, si es cercana a uno (1), existe una relación directa, si es cercano a menos uno (-1), existe una relación indirecta. Covarianza: es una medida de relación entre las dispersiones de una variable (los precios de una acción) y otra variable influenciadas por el coeficiente de correlación. En la construcción de portafolios de inversión en el mercado accionario es bastante utilizada por lo que se recomienda su manejo constante. Desviación Estándar: es una medida de dispersión y es equivalente a la raíz cuadrada de la varianza. Es utilizada para medir el riesgo de un activo. 24 PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 27

28 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Determinación: es el cuadrado del coeficiente de correlación, mide la independencia entre dos variables y oscila entre 0 y 1, donde el 0 muestra independencia y el 1 lo contrario. Devaluación: corresponde a la pérdida de valor de una moneda local frente a una extranjera. Como consecuencia de esta disminución del valor de la moneda de un país, las monedas extranjeras quedan revalorizadas con respecto al país que ha devaluado. La revaluación es el comportamiento contrario. Inflación: es el aumento sostenido y generalizado del nivel de precios de bienes y servicios, medido frente a un poder adquisitivo estable. Se define también como la caída en el valor de mercado o del poder adquisitivo de una moneda en una economía en particular. Varianza: medida estadística que muestra la variabilidad de un valor (como el precio de una acción por ejemplo). A mayor varianza mayores variaciones con respecto al promedio y en consecuencia mayor volatilidad Conceptos Financieros 25. Activos de Renta Fija: títulos que permiten conocer la rentabilidad de la inversión antes del momento de la redención, ya que este monto no depende del desempeño de la entidad emisora. Se clasifican en tasa Fija los cuales tienen un rendimiento constante y tasa variable los cuales sus rendimientos dependen de la variación de algún indicador financiero. Activos de Renta Variable: títulos o conjunto de valores que reconoce derechos de propiedad sobre un activo y cuya rentabilidad depende de las fluctuaciones de dicho activo y su rendimiento solo es conocido al momento de su redención. Ejemplo: Acciones, titularizaciones. Cobertura: es una operación que pretende reducir los distintos riesgos de una inversión. Los productos derivados son utilizados habitualmente con este fin. 25 PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 28

29 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Cupón: es el interés periódico que genera la posesión de un activo financiero de renta fija y que representa el tipo de interés nominal del título. Emisión: conjunto de títulos o valores, efectos de comercio, que se crean para ponerlos en circulación. Acto de emitir dinero por el Banco Emisor o títulos cuando se trata de una sociedad. Especulación: consistente en asumir un riesgo superior al corriente con la finalidad de obtener beneficios aprovechando las discrepancias entre los precios actuales y los precios futuros esperados. Índice: es un indicador que tiene por objeto medir las variaciones de un fenómeno económico o de otro orden referido a un valor que se toma como base en un momento dado. Relación de precios, de cantidades, de valores entre dos períodos dados. Interés: es el costo que se paga a un tercero por utilizar recursos monetarios de su propiedad. Es la remuneración por el uso del dinero. Nominal: es el valor facial de un activo, el valor que representa. Habitualmente no coincide con el valor de mercado ó valor de la emisión. Portafolio de Inversión: combinación de activos financieros poseídos por una misma persona, natural o jurídica. Un portafolio de inversión es diversificado cuando en el conjunto de activos se combinan especies con rentabilidades, emisores, modalidades de pago de intereses y riegos diferentes. Precio: es el resultado del descuento de los flujos futuros de un título a una tasa de descuento. Cuando en el precio se reconozcan los intereses corridos desde el último pago de cupón hasta la fecha se hablará de Precio Sucio, en caso contrario corresponderá al Precio Limpio. Rentabilidad: es la relación entre la utilidad proporcionada por un título y el capital invertido en su adquisición. Riesgo: es la probabilidad de que una amenaza se convierta en un desastre ó se materialice. En términos generales se puede esperar que, a mayor riesgo, mayor rentabilidad de la inversión. 29

30 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Spread: diferencia entre los precios de compra y de venta de un activo. Margen o puntos adicionales de papeles de tasa variable. Tasa de Interés: es la expresión porcentual del interés aplicado sobre un capital. Las tasas de interés pueden estar expresadas en términos nominales o efectivos. La tasa de Captación es la tasa que se reconoce a quien deposita recursos en una entidad financiera y la de Colocación es la tasa que se cobra a quien solicita recursos de una entidad financiera. Tasa Interna de Retorno (TIR): herramienta para el análisis de rentabilidad de flujos de fondos, que se define como la tasa de descuento de los flujos en la que el valor presente neto se hace igual a cero. Corresponde a la rentabilidad que obtendría un inversionista de mantener el instrumento financiero hasta su extinción, bajo el supuesto que reinvierte los flujos de ingresos a la misma tasa. Valor: todo derecho de naturaleza negociable que haga parte de una emisión, cuando tenga por objeto o efecto la captación de recursos del público. Valor Futuro: es la cantidad de dinero que se tendría en una fecha futura si se invierte hoy una cantidad y se capitalizase a un tipo de interés. Valor Presente: también llamado valor actual. Es el valor actual de unos flujos de fondos futuros, obtenidos mediante su descuento. En otras palabras, es la cantidad de dinero que se necesitaría invertir hoy para obtener dichas cantidades en el futuro. Volatilidad: es una medida de la incertidumbre en el rendimiento obtenido con un activo HULL, John C., Introducción a los mercados de futuros y opciones, 4ta Edición. Pag

31 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Indicadores Financieros 27. Depósito a Termino Fijo (DTF): tasa promedio ponderada de las captaciones en certificados de Depósito a Término -CDT's - de los bancos, las corporaciones financieras, las compañías de financiamiento comercial y las corporaciones de ahorro y vivienda. Generalmente, esta tasa se da en modalidad trimestre anticipado. Su cálculo es semanal y refleja la tasa de interés una semana atrás. Duración: medida de la sensibilidad de un activo a una variación de los tipos de interés. También se entiende como el tiempo necesario en recuperar la inversión realizada y su coste. Indicador Bancario de Referencia (IBR): es una tasa de interés indicativa de la liquidez del mercado monetario colombiano, la cual ha sido desarrollada por el sector privado y ha contado con el respaldo del Banco de la República, entre otras entidades. Índice Accionario de Capitalización (COLCAP): es un indicador que refleja las variaciones de los precios de las 20 acciones más liquidas de la Bolsa de Valores de Colombia (BVC), donde el valor de la Capitalización Bursátil Ajustada de cada compañía determina su nivel de ponderación. Índice Accionario de Liquidez (COL20): es un indicador de rentabilidad o liquidez que refleja las variaciones de los precios de las veinte (209 acciones más liquidas de la Bolsa de Valores de Colombia (BVC), donde el nivel de liquidez de cada compañía determina su ponderación. Índice de Precios al Consumidor (IPC): es un indicador que mide la variación de precios de una canasta de bienes y servicios representativos del consumo de los hogares del país. Índice General de la Bolsa de Colombia (IGBC): es el resultado de ponderar las acciones más liquidas y de mayor capitalización que se negocian en la Bolsa, es decir aquellas que tienen una mayor rotación y frecuencia PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/ Información EN: 2008/06/20. 31

32 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 London Interbank Offer Rate (LIBOR): es la tasa de interés anual vigente para los préstamos interbancarios de primera clase en Londres. Prime Rate (Tasa prima): Intereses cargados por los bancos de los Estados Unidos a sus mejores clientes sobre los préstamos considerados más seguros desde el punto de vista crediticio. Se diferencia de la LIBOR, porque aunque a veces también es aplicada transacciones interbancarias, es básicamente una tasa para clientes. Además, es una tasa establecida por propia decisión de cada banco individualmente. Tasa Representativa del Mercado (TRM): Promedio aritmético simple de operaciones de compra y venta de divisas en el mercado financiero Productos Financieros 29. Acción: Título de propiedad de carácter negociable representativo de una parte alícuota del patrimonio de una sociedad o empresa. Otorga a sus titulares derechos que pueden ser ejercicios colectivamente y/o individualmente. Se clasifican en Acciones Ordinarias, Preferenciales y Privilegiadas. Bonos: Son títulos que representan una parte de un crédito constituido a cargo de una entidad emisora. Su plazo mínimo es de un año; en retorno de su inversión recibirá una tasa de interés que fija el emisor de acuerdo con las condiciones de mercado, al momento de realizar la colocación de los títulos. Por sus características estos títulos son considerados de renta fija. Además de los bonos ordinarios, existen en el mercado bonos de prenda y bonos de garantía general y específica y bonos convertibles en acciones. Carteras Colectivas: según la definición del Decreto 2175 de 2007, se entiende por cartera colectiva todo mecanismo o vehículo de captación o administración de sumas de dinero y otros activos, integrado con el aporte de un numero plural de personas determinables una vez la cartera colectiva entre en 29 PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 32

33 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 operación, recursos que serán gestionados de manera colectiva para obtener resultados económicos también colectivos. Certificados de Depósito a Término Fijo (CDTs:): un titulo valor que emite un banco a un cliente que ha hecho un depósito de dinero. La tasa de interés por su depósito está determinada por el plazo y condiciones del mercado al momento de su constitución, son nominativos y no se pueden redimir antes de su vencimiento. Commodities: Bienes primarios que se transan internacionalmente. Por ejemplo: granos, metales, productos energéticos (petróleo, carbón, etc.) y suaves (café, algodón, etc.). Divisas: Medio de cambio cifrado en una moneda distinta a la nacional o doméstica. Exchange Trade Fund (ETF): una cesta de valores o activos financieros cuyo valor cotiza en algun mercado organizado, se comportan como una accion, permite negociar varias acciones como si fueses una sola y replica sobre un indice 30. Títulos de Tesorería (Tes): son títulos de deuda pública interna emitidos por el gobierno nacional, hay dos clases de títulos, clase A y clase B, los primeros fueron emitidos con el objeto de sustituir la deuda contraída en las operaciones de mercado abierto realizadas por el Banco de la República. Los segundos se emiten para obtener recursos para apropiaciones presupuestales y efectuar operaciones temporales de la Tesorería del Gobierno nacional. En la actualidad solo se emiten los de clase B. Se crearon en la ley 51 de Instrumentos Financieros 31. Derivados: Son contratos referenciados a un activo o a una variable económica para ser liquidado en una fecha futura, y en función de las cuales se manejan los riesgos de un portafolio de inversión son valores cuyo precio depende del valor de una o 30 Información EN: 2008/04/ PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 33

34 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 más variables, haciendo posible aislar o concentrar un riesgo existente y transferido al mercado. Término genérico que se aplica a una gran variedad de instrumentos financieros cuyo precio se deriva de un activo subyacente, de una tasa de referencia o de un índice. Por ejemplo: los futuros y las opciones. Forwards: Contrato privado que representa la obligación de comprar (o vender) un determinado activo en una fecha futura determinada, en un precio preestablecido al inicio del período de vigencia del contrato. Existen dos tipos de forwards, uno con entrega física del activo (delivery) y otro sin entrega física del activo (Non-Delivery) en el cual se realiza liquidación que corresponde a la utilidad o perdida del negocio. Futuros: Es aquella transacción efectuada en un mercado secundario formal donde se negocia un contrato estandarizado de compra o de venta de un activo determinado, acordándose la cantidad del activo, su precio y el vencimiento del contrato, asumiendo las partes la obligación de celebrarlo y el compromiso de pagar o recibir las pérdidas o ganancias producidas por las diferencias de precio del contrato, durante la vigencia del mismo y su liquidación. Opciones: En el mercado a plazo, el derecho de comprar (call) o de vender (put), en un tiempo estipulado y a precio fijo, una materia prima o un producto financiero. El derecho que tiene el comprador de la opción se ejerce a su discreción, mientras que para el emisor existe una obligación contingente hasta la expiración de la opción. Productos Estructurados: Es una combinación de activos de renta fija y/o variable, y productos derivados sobre dichos activos, otros activos, o índices, que permite al adquiriente de producto, realizar una inversión con rentabilidad variable en función de la evolución de uno o varios subyacentes, rentabilidad que así mismo puede ser acotada superior o inferiormente en función de la estructura de la que ha decidido dotar al producto. Swap: Son contratos privados entre dos entidades para intercambiar flujos de caja en el futuro, de acuerdo con condiciones preestablecidas. Pueden ser considerados como contratos Forward. 34

35 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Tipos de Mercado 32. De Capitales: Es el conjunto de mecanismos a disposición de una economía para cumplir la función básica de la asignación y distribución, en el tiempo y en el espacio, de los recursos de capital, los riesgos, el control y la información asociados con el proceso de transferencia del ahorro a la inversión. Financiero: Es el conjunto de instituciones y mecanismos utilizados para la transferencia de recursos entre agentes económicos. En el Mercado Financiero se efectúan transacciones con títulos de corto, medio y largo plazo, generalmente destinados para el financiamiento de capital de trabajo permanente o de capital fijo de las empresas, del gobierno y sus entes descentralizados. Primario: Se conoce también por Mercado de Emisión, es donde todos los activos se negocian por primera vez y donde el emisor recibe esta nueva financiación. Secundario: es el mercado en el que se pueden seguir negociándose activos emitidos con anterioridad. Spot: Mercado spot, también conocido como mercado a la vista o mercado cash o mercado de contado, corresponde al mercado tradicional en el cual se reúnen compradores y vendedores para ejecutar las correspondientes transacciones de contado; Cada mercado establece lo que se reconoce como una operación spot o de contado, ya que la misma puede determinar unos pocos días para ejecutar los términos acordados en la transacción Tipos de Operación 33 : Operación a Plazo: Es la operación de compra o venta en la que al celebrarse se pacta un cumplimiento en una fecha posterior a la que correspondería si se hubiese pactado de 32 PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/ PINILLA, Roberto; operaciones Financieras en el mercado Bursátil, Pág Glosario EN: y 2008/03/20. 35

36 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 contado, pero no después de 365 días calendario. Pueden ser de cumplimiento efectivo (se entregan los valores), o de cumplimiento financiero (sólo se entrega real diferencial de precios). Operación de Contado: Es la operación de compra ó venta cuyo cumplimiento tiene un plazo máximo de (3) tres días hábiles después de la celebrada. 36

37 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano DISEÑO METODÓLOGICO Para la organización, manejo y presentación de la información requerida en el desarrollo de esta investigación se van a tener en cuenta las siguientes teorías metodológicas las cuales se van a desarrollar en diferentes puntos de la investigación. 7.1 TIPO DE INVESTIGACIÓN Estudio Descriptivo: Según Carlos E. Méndez 34, el tipo de estudio descriptivo, es el que identifica características del universo de investigación, señala formas de conducta, establece comportamientos concretos, descubre y comprueba asociación entre variables. Será aplicado este tipo de estudio a la investigación, pues se requiere de recopilación y análisis de cálculos estadísticos, económicos y financieros cuantitativos y cualitativos; identificación y selección de instrumentos del mercado bursátil en distintos escenarios, para luego ser combinados y diseñar así un producto estructurado. 7.2 MÉTODOS DE INVESTIGACIÓN Proceso lógico para el desarrollo de esta investigación Método de Inducción. Según Carlos Méndez 35, La inducción es ante todo una forma de raciocinio o argumentación, además es un proceso de conocimiento que se inicia por la observación de fenómenos particulares con el propósito de llegar a conclusiones y premisas generales que pueden ser aplicadas a situaciones similares a la observada. La inducción permite al investigador partir de la observación de fenómenos ó situaciones particulares que enmarcan el problema de investigación, concluir proposiciones y, a su vez, premisas que expliquen fenómenos similares al analizado, así, los resultados obtenidos pueden ser la base teórica sobre la cual se 34 MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pag MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág

38 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 fundamenten observaciones, descripciones, y explicaciones posteriores de realidades con rasgos y características semejantes a la investigada. Se realizará un análisis general del mercado bursátil Colombiano, mencionando sus variables, instrumentos, evolución y crisis que se han presentado en el mismo y su impacto en la economía colombiana Método Deductivo. Carlos Méndez 36, menciona el conocimiento deductivo permite que las verdades particulares contenidas en las verdades universales se vuelvan explicitas, esto es, que a partir de situaciones generales se lleguen a identificar explicaciones particulares contenidas explícitamente en la situación general, de este modo, de la teoría general acerca un fenómeno ó situación, se explican hechos o situaciones particulares, y aunque no son los únicos métodos, el conocimiento de realidades económicas, administrativas y contables se han fundamentado en el empleo de dichos métodos. Se realizará una labor de recolección, selección, organización e ilustración de indicadores, índices e instrumentos más representativos del mercado Bursátil Colombiano a fin de dar a conocer en términos generales el comportamiento y tendencia de los mismos. Igualmente, se aplicará el mismo procedimiento para los instrumentos de renta variable negociados en el mercado bursátil de Estados unidos. Para ello se utilizarán tres ciencias importantes como los son, la estadística para analizar los datos existentes, la economía para sustentar el comportamiento del mercado bursátil y la administración financiera para sustentar las causales de las diferentes tendencias, impactos, evoluciones y comportamientos del mercado de capitales a fin de consolidarlos y aplicarlos en el diseño del producto estructurado. 36 MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág

39 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Método de Análisis. Análisis y síntesis son procesos que permiten al investigador conocer la realidad 37, el conocimiento de la realidad puede obtenerse a partir de la identificación de las partes que conforman el todo (análisis) o como resultado de ir aumentando el conocimiento de la realidad iniciando con los elementos más simples y fáciles de conocer para ascender poco a poco, gradualmente, al conocimiento de lo más complejo; el análisis inicia su proceso de conocimiento por la identificación de cada una de las partes que caracterizan una realidad, de este modo podrá establecer las relaciones causa efecto entre los elementos que componen su objeto de investigación. La estructura del producto estructurado, tendrá dos componentes: el subyacente y el plus de la inversión; para lo cual es importante realizar un análisis detallado de los instrumentos que puedan cumplir con las condiciones que se requieren para cada elemento. Para el subyacente se tendrá en cuenta los instrumentos de renta fija del mercado bursátil colombiano y para el plus se tendrá en cuenta los instrumentos de renta variable negociados en Estados Unidos Método de Síntesis. La síntesis implica que a partir de la interrelación de los elementos que identifican su objeto, cada uno de ellos pueda relacionarse con el conjunto en la función que desempeñan con referencia al problema de investigación, el análisis descompone el todo en sus partes y las identifica, mientras que la síntesis relaciona los elementos componentes del problema y crea explicaciones a partir de su estudio, en consecuencia, análisis y síntesis son dos procesos que se complementan en uno en el cuál al análisis debe seguir la síntesis 38. Finalmente, una vez organizada y analizada la información indicada en los numerales anteriores se procederá a realizar el diseño del producto estructurado, para lo cual se hace necesario aplicar algunas herramientas estadísticas tal como la 37 MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág

40 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 variación, las correlaciones, la distribución de probabilidades y cálculo de rentabilidades. Adicionalmente, se requiere dividir el proceso en dos partes. Para el caso del subyacente se tendrá en cuenta el volumen de negociaciones del instrumento en el mercado bursátil colombiano y para el caso del plus se requiere limitar la muestra, identificar y seleccionar los instrumentos que compondrán la canasta y definir las cantidades ó pesos de cada elemento de la canasta basados en modelos estadísticos. Por último se estimará la rentabilidad del producto, el nivel de riesgo del mismo y se diseñará un modelo de monitoreo del producto que aplique durante el ciclo de vida del mismo. 7.3 FUENTES DE INFORMACIÓN Las fuentes son hechos o documentos a los que acude el investigador y que le permitan obtener información. Las técnicas son los medios empleados para recolectar la información Fuentes Primarias. Teniendo en cuenta las técnicas existentes para la recopilación de información, se utilizarán como fuentes primarias: Entrevistas: con personas especializadas e involucradas en el sector financiero colombiano, con el objeto de adquirir conocimientos relacionados con la práctica y aplicación real del tema en el sector. La observación: Permite identificar los datos e información importante que se requiere recolectar para su respectivo análisis. Sera definida como observación simple Fuentes Secundaria. Según Mendez: Toda investigación implica acudir a este tipo de fuentes, que suministran información básica. Las bibliotecas por ejemplo, lugares en donde son esenciales los libros, periódicos y otros materiales 39 MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág

41 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 documentales, como trabajos de grado, revistas especializadas, enciclopedias, diccionarios y anuarios 40. Por esto, se van a tener en cuenta los siguientes: Textos: Los textos empleados y consultados durante el desarrollo del proyecto, son propios de los autores, algunos son propios de la biblioteca de la Universidad de la Sallé, de la Universidad Nacional, de la Universidad de los Andes y de la Universidad Externado de Colombia, estos son de tipo administrativo profundizados en administración financiera y otros netamente financieros con el objetos de manipular de la manera más correcta y eficiente la información recolectada, además de apoyar teóricamente la manera más apropiada, técnica y profesional de crear las pautas necesarias para diseñar este tipo de producto. Internet: Este medio, esencial para tomar los datos numéricos y no numéricos que se requiera para análisis y desarrollo de la presente. Ejemplo: CBOE (Chicago Board Options Exchange), London Exchange y páginas relacionadas con el sector financiero (Finance y Bloomberg). Revistas, periódicos y publicaciones: Revistas y periódicos especializadas en el ámbito financiero como Dinero, Portafolio, La República, La Revista del Banco de La República, Cambio, al igual que publicaciones y reportes actualizados de la Bolsa de Valores de Colombia, FENALCO, la Superintendencia Financiera de Colombia, y otras. 7.4 POBLACION Y MUESTRA Población: una población es un conjunto de todos los elementos que estamos estudiando, acerca de los cuales intentamos sacar conclusiones 41. Para efectos del desarrollo de esta investigación el mercado objetivo corresponde a todos los profesionales certificados ante el Autor-regulador del Mercado de Valores (AMV), teniendo en cuenta que estos son los únicos personajes autorizados, ante las diferentes instancias 40 MÉNDEZ, Carlos E. Metodología, Diseño y Desarrollo del Proceso de Investigación. Bogota Colombia, 3 Edición. Pág LEVIN y RUBIN, Estadística para Administradores, 6ª. ed., Ed. Prentice-Hall Hispanoamericana, México

42 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 de control y vigilancias, para operar en el mercado de valores de Colombia y por ende son los especialistas y conocedores del mismo Muestra: la muestra por su parte es una colección de algunos elementos de la población, pero no de todos 43. Para la selección de la muestra se utilizará el método de muestreo aleatorio simple, en el cual garantiza que cada uno de los elementos de la población tienen la misma oportunidad de ser elegidos. Aplicando la siguiente fórmula para calcula la muestra (n): 4 p q N n: e 2 N p q Y teniendo en cuenta los siguientes valores para cada variable: Población (N) = 3,416. Nivel de confianza = 95% Probabilidad de ocurrencia (p) = 50% Probabilidad de no ocurrencia (q) = 50% Error (e) = 10%, justificado en que la población cambia continuamente (salen y entran operadores en las estadísticas) Se obtiene que: 4 50% 50% 3416 n: 10% % 50% n: INFORMACION EN: Link: Certificación / Profesionales Certificados. 2009/02/ LEVIN y RUBIN, Estadística para Administradores, 6ª. ed., Ed. Prentice-Hall Hispanoamericana, México

43 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano DISEÑO DE UN PRODUCTO ESTRUCTURADO COMO ALTERNATIVA DE INVERSIÓN INSTITUCIONAL EN EL MERCADO BURSÁTIL COLOMBIANO 8.1 DELIMITACIONES DE LA INVESTIGACIÓN Teniendo en cuenta que el mercado bursátil es demasiado extenso, la presente investigación se limitará en los siguientes aspectos: I. Para el análisis del comportamiento de los mercados, se tomarán como referencia indicadores relevantes de dos economías emergentes y dos desarrollados. II. La evolución de los mercados, se analizará para las últimas tres décadas dado que, un análisis más extenso y detallado se tornaría algo complejo para la investigación. III. Para la selección de instrumentos a utilizar para el diseño del producto estructurado se tendrá en cuenta, por una parte los instrumentos de renta fija del mercado Bursátil colombiano para la conformación del subyacente y los instrumentos de renta variable negociados en el mercado bursátil de Estados Unidos. IV. Dado que el mercado de renta variable en Estados Unidos es amplio y complejo, se enfocará la búsqueda de instrumentos en los Exchange Trade Fund (ETF). Adicionalmente, se tomará como referencia el reporte de una de las compañías especializadas en este tema, en el cual, recomienda una lista de ETF con mejor comportamiento. V. El diseño del producto estructurado estará enfocado para ser negociado por inversionistas instituciones en el mercado Bursátil Colombiano. 8.2 DIAGNOSTICO: Descripción General del Mercado Bursátil Local. Actualmente el mercado bursátil Colombiano está compuesto por papeles de renta fija, renta variable y por derivados únicamente expresados en peso-dólar, los cuales ofrecen rentabilidades algunos altas 43

44 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 (22%) y otros bajas (0%) 44, cumpliendo con una parte de la demanda de los inversionistas institucionales; sin embargo, el resto de liquidez del mercado es invertido en otros sectores que a pesar de aumentar el riesgo ofrecen rentabilidades mucho más gratificantes a mediano y largo plazo que oscilan entre el 22% y 35% 45. Figura 4. Composición del mercado Bursátil Fuente: / link Operaciones negociadas 2008/05/15. Cálculos propios. Por otro lado, la utilización de productos derivados en Colombia ha sido muy baja, concentrándose principalmente en la negociación de algunos contratos forwards sobre dólares y de opciones sobre dólares; realizadas por parte de importadores y/o exportadores con establecimientos de crédito a fin de cubrirse del riesgo cambiario. También se encuentran las opciones emitidas por el Banco de la República 46 para propósitos de control de la tasa de cambio y de acumulación de reservas. 44 Basados en las rentabilidades históricas de deuda pública y privada, acciones colombianas y derivados de los últimos seis meses (Dic-07 a May-08) periodo en el cual se presento bastante turbulencia en el mercado. En el Anexo 2 se muestran los cálculos y estadísticas de las mismas. 45 Inversión en sectores productivos de la economía nacional con alto nivel de crecimiento (Ej: sector textil, etc). Datos de crecimiento en la página web del Banco de la República (www.banrep.gov.co), Departamento de impuestos y Aduanas Nacionales (www.dian.gov.co) y Superintendencia de Sociedades (www.supersociedades.com.co). 46 Información EN: economicos/ine_inf_opderi.htm, 2008/05/15. 44

45 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Figura 5. Volumen de operaciones de Opciones Peso-Dólar Fuente: datos de la página web del Banco de la República. Grafico propio. Como se observa, no existen muchas alternativas nuevas de inversión - diferentes a las de renta fija del mercado bursátil local - que permita el intercambio de flujos de diferente naturaleza, compensados y cubiertos que puedan generar rentabilidades interesantes (niveles del 12% y 15%) 47, minimizando los diferentes riesgos asociados a la inversión. Tal situación obedece a factores políticos, económicos, sociales y culturales, ya que, el sentido del ahorro y la inversión no es solo la tenencia de un capital (inversionista natural), sino la experiencia y capacidad estratégica (inversionista institucional) para su administración a fin de lograr sobrepasar las barreras de un mercado complejo y saturado. Sin mencionar, las consecuencias de las crisis económicas de las que el mercado local viene recuperándose. Al analizar las rentabilidades en los últimos cinco años (incluido lo corrido del año 2008) de las seis Administradoras de Fondos de Cesantías, Pensiones Obligatorias y Pensiones Voluntarias AFP s (cuyo origen fue en los años 90s) más grandes del país y que por ende conforman el top ten (mejor rentabilidad) a nivel nacional 48 se observa que: Fondos Privados de Pensiones Obligatorias: definido por el Gobierno Nacional como un ahorro de carácter obligatorio 47 Rentabilidades esperadas en el mercado bursátil. 48 información EN: 2008/05/15. 45

46 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 dando sus primeros inicios con la Ley 100 de 1993, reglamentado en el Código Laboral y pensado para implementar el ahorro a largo plazo y en cierta forma proteger la integridad de las personas que no tengan la capacidad ó edad para producir. Mensualmente se aporta el 15.50% del salario básico para asalariados y el 10% de los ingresos de personas independiente) 49. El promedio de las rentabilidades mensuales de los últimos cinco años y corrido del 2008 se observan a continuación en el siguiente grafico: Figura 6. Rentabilidades del Fondo Obligatorio de Pensiones Fuente: Informes mensuales de rentabilidades ASOFONDOS. Como se observa, la rentabilidad del año 2002 considerada una tasa bastante interesante (más alta que la IPC: 7.07% EA) pero tuvo un declive en el 2003 un poco mayor a los 300 pb pero que se recuperó alcanzando los mismos niveles que el año 2002 y lograr superarlos en casi 600 pb para el Sin embargo, para el año 2006 tuvo un declive de más de 1600 pb manteniendo su tendencia para el año 2007, la cual supera por algunos puntos los niveles del IPC para este año (5.41% EA). Para lo corrido del 2008 (primer trimestre), se observa una rentabilidad negativa. 49 Se liquida el 15.50% sobre el salario bruto (donde el empleado paga el 25% y el empleador el 75%) y para personas independientes, pagan el porcentaje total sobre el 10% de sus ingresos. 46

47 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Esto ha generado gran controversia entre todos los cotizantes, dado que a pesar de no conocer la teoría y técnicas del mercado bursátil colombiano no encuentran razonable que su capital (su futura pensión) se vea disminuida por el comportamiento del mercado y que a pesar de seguir realizando sus aportes a lo largo de los años su pensión no sea equivalente en términos aritméticos. Finalmente, lo que ellos quieren es que la suma de sus aportes sea reconocida en el momento de reclamarla. Fondo de Cesantías: definido como una prestación laboral de carácter obligatorio para los empleadores, que dio sus primeros inicios en los años 90s y se reglamentó en el código laboral. Su objetivo es amparar al trabajador, vinculado a través de un contrato laboral, en el momento en que quede cesante o desempleado; en el cual se reconoce un salario mensual adicional en el año. El comportamiento promedio de las seis AFP s más grandes del país en los últimos años y corrido del 2008, se observa a continuación: Figura 7. Rentabilidades del Fondo Pensiones y Cesantías Fuente: Informes mensuales de rentabilidades ASOFONDOS. El fondo de Cesantías ha tenido el mismo comportamiento que el fondo Obligatorio pero en menor proporción, es decir, en el año 2002 tuvo una rentabilidad promedio interesante (mayor al IPC) la cual se vio disminuida en más o menos 250 pb en el año 2003 pero que rápidamente se recuperó para el 2004; 47

48 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 superando los niveles del 2002 y continuando la tendencia de crecimiento hasta finalizar el 2005 con 230 pb con relación al año anterior. Para el año 2006 se presentó un declive de más de 1200 pb continuando con su tendencia para el año 2007, la cual no alcanzó niveles cercanos al IPC. En lo corrido del 2008 (primer trimestre), se observa una rentabilidad negativa. Sin embargo, este es un fondo que presenta un comportamiento estacional, es decir, los aportes que los empleadores hacen en el mes de febrero de cada año no se mantienen dado los múltiples retiros que hacen los trabajadores en el transcurso del año (disfrazándolos muchas veces como legítimas 50 causales de retiro en complicidad de los empleadores) para sufragar sus gastos corrientes. Finalmente, dicho comportamiento refleja la disminución del valor de los fondos de cesantías sumado a las fluctuaciones en los precios de los títulos de deuda. Como se observa, este fondo tiene varios contratiempos, tales como: la cultura del poco ahorro (fiel característica de la mayoría de colombianos) y el bajo entendimiento del mercado bursátil por parte de un porcentaje alto de la sociedad; que finalmente se traduce en un reto para las AFP s en la búsqueda de alternativas de inversión que permitan la diversificación de los portafolios buscando así minimizar el riesgo inherente en los cambios de precios 51. Cabe aclarar que el Gobierno Nacional, a través de la Superintendencia Financiera de Colombia reglamenta la composición (control de límites legales) y rentabilidades mínimas 52 para los fondos de Pensiones y Cesantías; las cuales tienen cumplimiento obligatorio por parte de las AFP s. Para el caso de las rentabilidades mínimas se deben cumplir en un periodo no mayor a tres años y de no ser así, las sociedades administradoras deben colocar de su capital los recursos necesarios para cumplir con estas. Esta es una razón más para resaltar los beneficios de los productos estructurados, dado que contribuiría a cubrir ó minimizar el riesgo que las sociedades administradoras tienen para el cumplimiento de las rentabilidades mínimas. 50 Según lo dispuesto en el Artículo 102 de la Ley 50 de Información EN: 2008/04/ Información EN: 2008/04/30. 48

49 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Fondo Voluntario de Pensiones: como complemento del fondo obligatorio de pensiones y para implementar una alternativa de inversión diferente a la que ofrecía en su época (años 90s) el sector real, se crearon los fondos voluntarios de pensiones en los que los inversionistas dan en administración a diferente entidades privadas y vigiladas por la superintendencia sus excesos de capital, el cual ofrece flexibilidad en aportes, retiros y manejo de fondo. La rentabilidad promedio de los últimos cinco años y corrido del 2008, se observa a continuación: Figura 8. Rentabilidades del Fondo de Pensiones Voluntarias Fuente: Informes mensuales de rentabilidades ASOFONDOS. Como se observa, tiene el mismo comportamiento que los dos fondos anteriores, es decir, una tasa superior a la de referencia (IPC) para el año 2002 con una leve caída de 150 pb para el 2003, el cual es corregido para finales del 2004 y superado a finales de 2005 en 500 pb aproximadamente. Igualmente, para el año 2006 presenta una caída de más de 600 pb continuando con la tendencia en lo corrido del 2007, en el cual finalmente termina en niveles inferiores al IPC. En conclusión, la correlación de los tres fondos es directas, es decir, con comportamientos similares pero con diferentes magnitudes (siendo coherentes con el volumen de cada uno de estos); lo cual en ultimas es el reflejo de las crisis de 2002, la reactivación y crecimiento del 2005, la gran crisis de y finalmente la crisis de los Estados Unidos del 2007 (la cual afecta a los países emergentes); y de la que a la fecha no se ha 49

50 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 recuperado el mercado bursátil colombiano en su totalidad. En Anexo 3. Se encuentran las estadísticas. Figura 9. Consolidado de Rentabilidades de los tres Fondos Fuente: Informes mensuales de rentabilidades ASOFONDOS. De seguir con esta tendencia el mercado financiero nacional quedará estancado en su crecimiento y desarrollo como consecuencia de la desmotivación del inversionista natural y por ende la falta de ingreso de capital en el inversionista institucional, lo que a su vez afectará directamente la disminución de alternativas, opciones y oportunidades para el financiamiento de las empresas y/o Gobierno Nacional. Contrarrestando este efecto y de alguna manera ampliando el campo de inversión en materia legal, las entidades de control y vigilancia del país han realizado cambios sustanciales en la regulación del mercado Financiero, con lo cual, por una parte se logro incorporar un sistema de autorregulación (que permite controlar y vigilar las actividades de los agentes que intervienen, velar por la transparencia de sus operaciones y brindar protección a los inversionistas 53 ) y por otra parte, ampliar el marco regulatorio de inversión a fin de incursionar en mercados no desarrollados en el país (mercado de instrumentos de derivados). Las opciones para generar mejores rentabilidades hacen que la creación de nuevos productos ó instrumentos de negociación sea una alternativa de crecimiento y desarrollo del mercado 53 Ley 964 del

51 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 nacional, las cuales deben ir acompañadas con un cambio de cultura de inversión en el país Estructura del Mercado Bursátil. En términos generales la estructura del mercado bursátil está determinada por tres integrantes, los cuales están relacionados directa o indirectamente en pro de su propio beneficio. Figura 10. Estructura del Mercado Financiero Grafico autoría propia El inversionista natural (IN) pone a disposición del inversionista institucional (II) una cantidad de recursos ó activos para su administración - en su condición de persona natural no puede acceder directamente al mercado bursátil - a cambio de unos rendimientos estimados desde un inicio. El segundo por su parte (II), es el encargado de estudiar el comportamiento del mercado bursátil (MB), de crear estrategias y tomar decisiones de inversión a fin de cumplir con los compromisos pactados con sus inversionistas y para asegurar sus propios beneficios. Por 54 El crecimiento de inversión en Colombia es demasiado pobre lo cual es consecuencia de tres factores fundamentalmente: 1. Bajos ingresos de las personas, 2. Falta de conocimiento del mercado bursátil y 3. Bajas rentabilidades ofrecidas por el sector financiero. Sin embargo, hay un factor más relevante y al mismo tiempo muy difícil de manejar. Es la cultura de inversión ya que el consumismo desbordado del pueblo colombiano ha dejado de lado la concientización de ahorro personal, razón por la cual las personas en vez de ahorrar parte de sus ingresos prefieren sacar créditos y pagar intereses. 51

52 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 su parte, el mercado bursátil (MB) es el espacio que pone a disposición sistemas de negociación en los que los agentes realizan todas las negociaciones. Todos, los anteriores, están regulados por entidades de vigilancia para su completa transparencia. Lo anterior, conforma lo que es conocido como el Sistema Financiero colombiano, el cual está dividido en cuatro mercados: Figura 11. Mercados del Sistema Financiero Colombiano Fuente: Pagina web Universidad Nacional de Colombia 55 El mercado de capitales es el conjunto de mecanismos a disposición de una economía para la asignación y distribución de los recursos de capital y se caracteriza por ser el más desarrollado del sector, seguido por el mercado monetario que se define como el mercado netamente de dinero y está relacionado directamente con las tasas de interés; y el mercado de divisas que es en el que se realizan todas las operaciones sobre las diferentes monedas en mercado spot y futuro. En el rubro de otros mercados, esta todo lo diferente a lo mencionado en este párrafo. Estos últimos cobran poca importancia para el desarrollo de esta investigación, por tanto se va a realizar una explicación detallada de los dos mencionados inicialmente. El Mercado Monetario está definido, así: 55 Información EN: 2008/05/15. 52

53 DEFINICIÓN: FUNCIONES: INSTRUMENTOS: IMPORTANCIA: Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Figura 12. Mercado Monetario en Colombia Agrupa la deuda a plazos inferiores a 1 año emitida por el Gobierno Nacional, intermediarios financieros y entidades privadas y públicas. El BR sumista liquidez de acuerdo a las metas inflacionarias. Mercado muy líquido y bajos costos de transacción. Facilitar financiación de emisores de deuda. Permitir ejecución de la política monetaria. Contribuir con la formación de las tasas de interés. Títulos Valores: TES a corto plazo (90 y 180 días), CDT a 1 año a tasa por lo general de DTF y Papeles comerciales para financiar su tesorería. Préstamos Interbancarios: préstamos realizados entre bancos para financiar sus tesorerías con muy bajo riesgo, generalmente el plazo es a un día y la tasa de interés es la TIB. Prestamos de Títulos: intercambio temporal de títulos por dinero ó títulos por títulos. Ejemplo: Repos, Simultáneas y TTV, donde el prestamista obtiene una rentabilidad a cambio. Invierten recursos en instrumentos con bajo riesgo y alta liquidez. Minimizar el riesgo de pérdidas de recursos comprometidos. Protección ante perdidas en valorización por efecto de subida de tasas de interés. Banco república lo utiliza para regular la liquidez de la economía. Construir las tasas de intereses, conocidas como la parte corta de la curva de rendimientos. Estas tasas se utilizan en operaciones de derivados. Permite mejor ar administración del riesgo de otros mercados. Fuente: Pagina web Banco República link de documentos/publicaciones 56 Por su parte, la estructura del Mercado de Capitales está dividida en el mercado Intermediado y No intermediado: Figura 13. Mercado de Capitales en Colombia Mercado de Capitales Intermediado No Intermediado Bancos Corp. Financieras Soc. Fiducarias. C.A.V. Renta Fija Acciones Derivados Otros Bolsa Valores Sist. Negociacion Mdo Mostrador C.F.C. Fuente: Pagina web Universidad Nacional de Colombia Información EN: 2008/05/ Información EN: 2008/05/15. 53

54 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Entiéndase como mercado Intermediado el conjunto de instituciones que actúan como intermediarias entre los agentes con excesos de recursos y los agentes con necesidad de recursos y como mercado No Intermediado (ó mercado de instrumentos) la emisión, suscripción, intermediación y negociación de valores emitidos mediante oferta pública que otorga a sus titulares derecho de crédito ó participación. Adicional a esta estructura, el mercado de Capitales tiene una subdivisión por sectores y de allí los instrumentos que manejan, tal como se observa en la siguiente grafica. 54

55 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Figura 14. Sectores del Mercado de Capitales Sector Público: Toda entidad que tenga participación total o parcial del gobierno nacional o entidades adscritas al mismo, no es productor es básicamente consumidor. Deuda Pública Interna: Emitida por la Tesorería Nacional y se denominan Títulos de Tesorería más conocidos como TES, administrados por el Banco de la República y su objeto es el manejo de liquidez del estado, regular el mercado monetario y constituyen principal mecanismo de consecución de deuda pública interna y los emitidos por otras entidades con participación estatal descritas en el Decreto 2681 del 93 y Ley 80 del 93 que se denominan otros Nación Externa: constituida por deuda pública que tiene el Ministerio de Hacienda y Crédito Público denominado en moneda extranjera. Estos son los Yankees y Tes Globales. Sector Privado: compuesto por las empresas productivas y de servicios, es a quien le corresponde la producción creciente y eficiente, de bienes y servicios, que cada día satisfaga más y mejor las necesidades de toda la población. Sector Real: compuesto por el sector productivo y de servicios. Acciones: valores nominativos vinculados a una sociedad de capital y confieren un derecho de participación en su patrimonio. Bonos: valores con contenido crediticio y su principal característica es que son emitidos a largo plazo. Papeles Comerciales: pagares ofrecidos en el mercado de valores, emitidos por ciertas entidades (anónimas, limitadas o públicas que no tenga vigilancia de la Superintendencia Financiera de Colombia) y con plazo máximo de un año. Sector Financiero: compuesto por entidades bancarias, corporaciones financieras, sociedades fiduciarias, C.F.C., AFP, sociedades comisionistas, entre otras. Acciones: igual al anterior. Bonos: igual al anterior. Pap. Comercial: igual al anterior. CDT: expedidos por una entidad bancaria en cualquier momento como mecanismo de captación de recursos, con plazo mínimo de un mes e irredimibles antes de su vencimiento. CDAT: expedidos por entidades financieras y compañías de financiamiento comercial, con reconocimiento de un pago fijo al final del periodo, no es endosable. CDM: lo expide un depósito de mercancía como constancia de propiedad sobre las mismas. Aceptación Bancaria: letras de cambio emitidas por empresas a su propia orden, aceptadas por instituciones de Banca Múltiple con base en créditos que estas Instituciones conceden a dichas empresas Titularizaciones: herramienta moderna de financiamiento. Fuente: Pagina web Universidad Nacional de Colombia Definición de Variables Críticas. En todas las economías bien sea desarrolladas o emergentes, existen índices ó variables que determinan el comportamiento de la misma y que en últimas 58 Información EN: 2008/05/15. 55

56 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 son los que reflejan los momentos de crisis o desarrollo de un país. Colombia hace parte de los países con economías emergente, es decir, que es un país en vía de desarrollo visto internacionalmente con expectativas de crecimiento y con un nivel de confianza considerablemente aceptado por los demás. Para el caso de Colombia, existen muchos factores que determinan el comportamiento del mercado. Sin embargo, hay dos de estos que cobran más relevancia, tales como son: las variables fundamentales de la economía y las expectativas de las ganancias de las empresas para el caso de la bolsa. Cuando se habla de variables fundamentales de la economía ó también conocida como las tasas de interés, se entiende que es el porcentaje al que están invertidos los recursos durante un periodo de tiempo, las cuales son fijadas por el banco central de un país 59 a las demás entidades bancarias que a su vez las fijan a sus usuarios. Es todo lo relacionado con el costo de las inversiones en el sector financiero, como es el caso de la inflación que determina el nivel de crecimiento de precios de una economía basados en la canasta básica de bienes y servicios, la devaluación que expresa el grado de disminución del valor de una moneda frente a otra, el crecimiento económico y las tasas de desempleo que se convierten en un punto importante al medir el nivel de productividad de un país; entre otras. Por su parte, la bolsa está directamente relacionada con el cumplimiento o no de las expectativas de ganancias de las empresas reportadas previamente, las cuales generan incertidumbre en el mercado y por ende lo tornan sensible a cualquier movimiento que se presente. Esto puede llegar a afectar completamente un mercado en el transcurso de la negociación diaria. Finalmente, la política fiscal es una política económica en la que participa el Estado activamente y que utiliza el gasto público y los impuestos como variables de control para asegurar y mantener la estabilidad económica (déficit ó superávit). Los 59 Información EN: 2008/04/20 Banco Central: Es la institución que emite y administra la moneda legal y ejerce la función de banquero de bancos. Además, controla los sistemas monetario (el dinero), crediticio (las tasas de interés) y cambiario (la tasa de cambio) del país. 56

57 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 objetivos más importantes de la política fiscal son la plena ocupación (relacionada con las tasas de desempleo), control de la demanda agregada (mediante impuestos y gasto público) y por supuesto controlar el déficit ó superávit. Existe dos clases de política fiscal: la expansiva que estimula la demanda agregada especialmente cuando la economía se encuentra en un periodo de recesión y necesita de un impulso para expandirse, como resultado se tiende al déficit e incluso provoca inflación; y la restrictiva que por el contrario frena la demanda agregada cuando la economía está en excesiva expansión y necesita frenar la inflación, como resultado se tiende al superávit Desarrollo de los Mercados. Este tema de desarrollo de mercados, se va a dividir en tres partes importantes en la economía colombiana. Primero se realizará una descripción a nivel general de la economía colombiana, luego se analizará el comportamiento de algunos indicadores más relevantes y finalmente, se darán a conocer la evolución y cambios importantes en el sector financiero colombiano. Análisis de la Economía Resumiendo algunos aspectos relevantes de la economía Colombia de las últimas tres décadas, destacando algunas de las causas y consecuencias de las crisis vividas en las mismas y basados en una publicación de la Universidad Autónoma de Colombia, se determina lo siguiente 61 : AÑO ACONTECIMIENTO Durante la mitad de la segunda parte del siglo XX, se presento un aumento sostenido en la actividad económica del 5-6%. La tendencia de los últimos años es disminuir el ritmo de crecimiento a nivel mundial, en algunas economías emergentes se han mantenido tasas por encima del 5% en 80s y 90s. En el lapso poco menos de año y medio (marzo 1990-junio 1991) se efectuaron cuatro reformas arancelarias que redujeron la tasa promedio de impuestos. Se liberó la casi totalidad del universo arancelario de controles administrativos, mediante la eliminación de las listas de prohibida importación y de licencia previa. Paralelamente a la apertura comercial se dio la apertura financiera que, en términos generales, implicó la liberación del mercado cambiario, con la eliminación del monopolio que tenía el 60 Información EN: 2008/04/ Información EN: 2008/04/01. 57

58 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano banco central para el manejo de las divisas y la determinación de la tasa de cambio, mayor presencia de los intermediarios financieros en las relaciones monetarias con el exterior. La apertura financiera fue más perjudicial para la economía que la apertura comercial, por los efectos que produjo sobre la tasa de cambio, la tasa de interés y el comportamiento monetario. En el lapso se concentra la criticada apertura de una sola vía, pero estimulada más por una persistente revaluación del peso colombiano que por cambios en el arancel y la política aduanera. Revista Dinero: la apertura de comienzo de los años noventa ocurrió más en los discursos que en la realidad. De acuerdo con el economista agrícola CARLOS FELIPE JARAMILLO no fue la apertura, sino la revaluación del peso, la causa de que el sector redujera su crecimiento a 1,2% promedio anual entre 1990 y 2001, luego de crecer 2,9% en los años ochenta. El Estado colombiano ha sido más activo en proteger el mercado interno, que en estimular una oferta que sea competitiva en el mercado externo. En la protección aduanera, los medios utilizados no cumplieron con la finalidad prevista en cuanto a precios, calidad y oportunidad de la oferta disponible; generando mercados cautivos para productores protegidos, lo que desembocó en un mercado interno cerrado y monopolizado, con precios altos y baja calidad, a costa de unos consumidores desprotegidos con ingresos precarios. El déficit no puede explicarse sólo por la apertura comercial, o sea por los cambios arancelarios y para-arancelarios realizados en los dos primeros años ( ) del gobierno GAVIRIA TRUJILLO, sino en especial por la apertura financiera, esto es, facilidades para el ingreso de capital dinerario por diversos medios, ejecutada al mismo tiempo. Pero no todo el déficit de la cuenta corriente corresponde al comercio de bienes (importaciones y exportaciones) después del ajuste cambiario efectuado por el gobierno de BELISARIO BETANCUR. La mezcla explosiva de desorden discal y endeudamiento externo que viene suministrándole al gobierno central al país desde 1994, tiene el doble efecto de empobrecer a la población colombiana y comprometer el bienestar de las generaciones futuras (Ex ministro de hacienda BOTERO 2002). El crecimiento de la minería es lo que explica el aumento de la producción primaria por encima de la población. Los dos primeros años ( ) las importaciones tenían todavía el estímulo de la revaluación del peso colombiano. En la crisis de crecimiento económico, que se agudiza en la segunda parte de los noventa, tienen más peso factores internos, estructurales, que los factores externos, más coyunturales, sin que esto signifique desconocer que los cambios en las relaciones económicas con el exterior tengan algún efecto. Cifras analizadas muestran que las importaciones tendrían menos culpa en la recesión crónica de la que les achaca el discurso contrario a la búsqueda de un mercado más abierto y menos monopolizado, discurso muy popular en Colombia. Y que más bien 58

59 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 es la recesión, con una disminución drástica en la demanda, en especial para inversión, lo que explica la caída en las importaciones. Es decir, las importaciones tuvieron el comportamiento convencional de décadas anteriores: crecieron mientras la economía crecía, sin que quiera decirse que son la causa eficiente del crecimiento, y se estancaron y disminuyeron cuando la economía entró en recesión. Igual fenómeno se observa respecto a la revaluación: las importaciones crecían mientras se mantuvo la revaluación y disminuyeron cuando se corrigió y pasamos a una devaluación efectiva. Pastrana Arango bajo la tasa de crecimiento del PIB del 2% en el primer año de su administración. Debido a la recesión crónica que se inicia en 1998 y a un mayor precio interno del dólar, las importaciones se desestimulan y muestran una disminución. El déficit comercial de 1993 a 1998, que llegó a más de US$ millones, con el predecible efecto pobre la producción nacional, no es tanto producto de la apertura comercial (disminución de aranceles y cambios en las normas de importación) cuanto de la 1998 apertura financiera (facilidades para el ingreso de capital-dinero, incluidos préstamos para el gobierno nacional) que revaluó el peso y, por ende, abarató las importaciones y encareció las exportaciones Durante , seis años, la cuenta corriente fue deficitaria en más de US$ millones, lo que obligó al país a buscar o a atraer recursos del exterior para mantener el saldo de las reservas internacionales en niveles normales para tranquilidad de los acreedores externos Sería el peor año de las últimas tres cuartas partes del siglo XX. A comienzos siglo XXI parece difícil pensar en crecimientos económicos entre 5%-6%. A medida que la producción se contraía, también caía el aumento 2000 anual de los precios, pues de incremento superior al 30% a principios de la década de los noventa se llego a tasas de un digito a comienzos del siglo XXI. ROBERTO STEINER: director del Centro de Estudios Económicos de la Universidad de los Andes en 2001, se crea un círculo vicioso, porque país que no ahorra no crece y país que no crece no ahorra. Pero la menor inversión de hoy no sólo afecta la capacidad de reproducción de mañana, con lo grave que es para la productividad y la competitividad, sino que afecta también la demanda de hoy por 2001 bienes de capital y otros insumos que se incorporan a la inversión, reduciéndose el crecimiento económico en las ramas que sustentan esta oferta con producción nacional, al tiempo que cambia el contenido de las importaciones y disminuye su valor. Es decir, la baja inversión no sólo afecta la reproducción ampliada en el futuro sino que también es un problema de demanda en el presente. Menos valor agregado generado por la economía, o sea menor riqueza creada. Aumento de la población en 6 millones de personas La economía colombiana tiene el potencial para crecer al 5%-6% anual y necesita hacerlo, para comenzar a pensar en la reducción de altos niveles de desempleo y pobreza. 59

60 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 El crecimiento de la producción agropecuaria está por debajo (con respecto a 1994) de la tasa de incremento poblacional. La actividad secundaria ó industrial perdió participación en el PIB (con respecto a 1994). La actividad terciaria o de servicios incremento su participación en el PIB de manera sostenida (con respecto a 1994). El país se mueve en un entorno de bajo crecimiento, un enorme desajuste fiscal, cierre de los mercados internacionales, una necesidad de mayor gasto en seguridad y el propósito de acabar con las viejas costumbres políticas y administrativas. Todo esto llevo a un déficit fiscal, al aumento desproporcionado de la deuda, al desplome de la inversión, la contracción del ingreso, así como un mayor desempleo, analfabetismo y pobreza (Portafolio 21 Oct-02 p. 32). El retroceso se debe a una caída de la productividad relacionada con la criminalidad, que desvía el capital y el trabajo hacia otras actividades improductivas o perjudiciales (Ex ministro Mauricio Cardenas Santamaría). Lo cierto es que el país creció durante mucho tiempo en medio del conflicto, por lo que debe haber otras razones explicativas de la situación actual. Esto no niega que la violencia y la criminalidad afectan la productividad y se amplía cuando la guerra interna se contagia con el problema global de la producción y transporte de narcóticos para un mercado mundial de enfermos por la droga en crecimiento. URRUTIA afirma: Una menor acumulación de capital en los últimos años, reduce el potencial de crecimiento de la economía. Para aumentar la productividad es fundamental también mejorar la calidad de la inversión, al tiempo que es un error proteger sectores ineficientes de baja productividad. URRUTIA presenta varias razones con relación a la disminución de la inversión: reducción de la inversión estatal debido al déficit fiscal; disminución de la financiación externa, tanto directa como indirecta, para proyectos de inversión; fuga del ahorro de los colombianos para inversiones en el exterior, y el bajo crecimiento de la demanda, que lleva a un exceso de capacidad instalada y, por consiguiente, se estimula la inversión en maquinaria y equipo. La caída en la inversión guarda una relación muy estrecha con la disminución del ahorro, pues en una economía cerrada la inversión tiende a ser igual al ahorro. Pero como en recesión las empresas y las familias no invierten, la caída de la inversión se vuelve una bola de nieve que arrastra al ahorro. Si bien las importaciones no crecieron durante el lapso a los ritmos que dan a entender quienes creen que es nuestra modesta apertura la causa de la pérdida de la dinámica económica, pues en pesos colombianos constantes lo hicieron. Las reservas internacionales ( ) no disminuyeron debido a la compensación que produjo la cuenta de capital, en especial por incremento del endeudamiento externo, la llegada de inversión extranjera y algún capital golondrina, cuyos poseedores parecen más bien buitres. Como efecto de la disparada de las importaciones a mediados de los noventa, pero para el año 2002 vuelven a bajar. Estas cifras permiten reiterar que la economía colombiana no tiene una fuerte 60

61 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano apertura comercial hacia fuera. El estancamiento en la producción de bienes y servicios, incluso en las importaciones, obedece a factores que han llevado a una fuerte contracción de la demanda interna, a lo que se agrega el peligro latente de un estancamiento con deflación en Estados Unidos y Europa, así como la crisis permanente de Japón, lo que puede llevar a una recesión mundial. Colombia atraviesa un buen momento desde la perspectiva internacional. Frente a tanto desorden en la región, Colombia sobresale como país serio, capaz de manejarse a sí mismo y con grandes expectativas sobre su crecimiento. Sin embargo, la economía colombiana aun no levanta cabeza y está enfrentada a grandes vulnerabilidades. Por cuenta de la baja demanda mundial y la crisis política de Venezuela, las exportaciones están deprimidas y posiblemente sigan cayendo en el La demanda interna, no tiene como crecer mientras el desempleo siga en niveles tan altos y mientras la gente que tiene empleo siga agobiada por el temor a perderlo en el corto plazo. Solo cuando esas condiciones cambien la gente podrá consumir e invertir tranquilamente. (Dinero 2-May-03). Si no hay consumo, no hay posibilidades de que la economía crezca y no hay empleo. Ante las volatilidades de nuestras exportaciones, el consumo interno es la opción más importante. (Portafolio 8-Abr-03 p. 38 Mario Hernandez Zambrano). Hay que tener en cuenta que mientras en los países desarrollados los gobiernos sufragan los subsidios proteccionistas, con cargo a los impuestos, en un país como Colombia son los consumidores quienes los pagan a través de los precios finales. Por tanto, hay que buscar mecanismos más transparentes, democráticos y equitativos para proteger la producción que deba ser protegida, con acciones estatales que ayuden a elevar la productividad y la competitividad y no a preservar mercados cautivos, lo que lleva a mayor concentración del ingreso. El origen de la crisis se encuentra en la política de apertura de la cuenta de capital de principio de los años noventa, lo que generó una avalancha de dólares. Esa avalancha provoca una revaluación que, junto con la apertura de las importaciones y la reducción de los aranceles, le dan un golpe mortal a la industria y la agricultura nacional. Allí está la génesis de la crisis. (Lecturas Dominicales, El Tiempo, 25 de mayo de 2003, p. 4). Amartya Sen: La globalización es un proceso histórico que ha ofrecido en el pasado abundantes oportunidades y dividendos visibles, y continúa haciéndolo hoy. ( ) El problema central no es la globalización en sí, ni la utilización del mercado en cuanto institución económica, sino la ( ) distribución desigual de los dividendos de la globalización misma. La pregunta, por tanto, no reside en si los pobres del mundo pueden obtener o no algo del proceso de globalización, sino bajo qué condiciones pueden obtener una parte realmente justa. Urge ( ) erradicar los errores que resultan tanto de las omisiones como de las constricciones que tienden a reducir drásticamente las oportunidades de los pobres en todo el mundo. La globalización merece una defensa Universidad 61

62 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Autónoma de Colombia razonada, pero también requiere una reforma razonable. (Portafolio, 15 de julio de 2003). A raíz de la eventual constitución del ALCA, o mercado libre de las Américas, así como de un posible acuerdo bilateral de Colombia con Estados Unidos, se ha reanudado la discusión sobre la forma más adecuada de proteger a la producción nacional, en especial a la agropecuaria, ante la competencia externa y sobre los estímulos adecuados para aumentar y diversificar las exportaciones, con el propósito de integrarse mejor a la economía mundial. Comportamiento de indicadores: Una vez analizados estos hechos importantes, es necesario realizar un análisis del comportamiento de los indicadores más impactantes de una economía y compararlo con el comportamiento de otras. Inflación y Producción: Con relación al tema de inflación, basado en la gráfica siguiente, se observa que definitivamente la inflación de los Estados Unidos ha tenido un comportamiento sostenido en el trascurso del siglo XXI acompañado de una producción con un comportamiento bastante volátil y que se ha afectado considerablemente en el transcurso del presente año (2008) debido a la crisis hipotecaria por la cual atraviesa el mismo. Por el lado de Colombia, se observa una inflación decreciente en lo corrido del siglo XXI, lo cual, es algo preocupante dado que refleja que no es una economía sostenida y susceptible a cualquier situación relevante en economías emergentes y sobre todo en desarrolladas. Figura 15. Comportamiento de la Inflación y Producción FUENTE: Datos de Bancolombia y Grafico autoría propia. 62

63 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 En lo corrido del año 2008, la inflación ha estado por encima de las expectativas del Banco de la República. Con relación a la producción, Colombia ha tenido un crecimiento del 79% durante el periodo comprendido entre el 2000 y 2007; lo cual refleja que existe una reactivación de los sectores productivos de la economía Colombia con intensiones de seguir con el mismo comportamiento. Monedas: En el tema de monedas, se observa un comportamiento completamente volátil (característica natural de las mismas) del Yen, el Euro y el Dólar Americano. Como se observa en la grafica el Euro y el Yen tienen correlaciones negativas (comportamientos inversos) y en la misma proporción (inversamente proporcionales), mientras que el Dólar Americano intenta seguir lentamente y con menor proporción el comportamiento del Euro. Figura 16. Comportamiento de las Monedas FUENTE: Datos de Bancolombia y Grafico autoría propia. Lo anterior, quiere decir que: Europa (únicamente los países que manejan como moneda el EURO): se fortaleció significativamente durante el año 2001, pero tuvo un decrecimiento lento hasta el 2004 tocando su punto mínimo en el 2005, el cual trato de recuperar en el Sin embargo, en el 2007 y lo trascurrido del 2008 presenta otra vez una tendencia negativa (devaluación) de la moneda. 63

64 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Japón: Como se mencionó anteriormente, con el mismo comportamiento que el EUR pero de forma inversa (teniendo en cuenta la relación entre estos). En el último año, ha tratado de recuperarse pero lo ha hecho de forma muy lenta. Estados Unidos: Tuvo un fortalecimiento de la moneda en el año 2002 mayor a la del Euro. Sin embargo, tuvo una caída más rápida y acelerada con relación al Euro tocando su nivel minino en el A partir de este año ha tratado de recuperarse sin mucho sostenimiento gracias a la crisis hipotecaria que dio sus primeros indicios en el 2007 y se materializó en el Tasa de Interés: Al analizar el comportamiento de algunas de las tasas de interés más relevantes del mercado bursátil, se observa que a nivel local, las tasas del Banco de la República y DTF tienen un comportamiento similar (correlaciones directas) en lo trascurrido del siglo XXI, lo cual es completamente lógico si se tiene en cuenta que el sector financiero se rige por las decisiones del Banco de la República sobre tasas de interés. En ambos casos, DTF y BR, la tendencia ha sido decreciente hasta finales del 2005; debido a la reactivación de la economía colombiana, con un cambio de tendencia a partir del 2006 a la fecha, debido a la contracción de la misma. Figura 17. Comportamiento de Tasas FUENTE: Datos de Bancolombia y Grafico autoría propia. Por su parte; la LIBOR y PRIME presentan comportamientos similares (correlaciones directas) a las tasas de la FED, teniendo los mismos niveles a esta ultima la LIBOR. Las correlaciones entre las tasas locales y extranjeras es inversa en 64

65 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 la mayor parte del siglo XXI, lo cual no es tan positivo para la economía colombiana si se tiene en cuenta que es una economía emergente y que debería procurar seguir en algunos aspectos las economías desarrolladas. Tesoros: La curva de Tesoros de Estados Unidos y Brasil presenta un comportamiento directo en diferentes niveles. De las tres, la que está en niveles más bajos es la de Estados Unidos, seguida por la de Brasil y finalmente la de Colombia. Si se tiene en cuenta que entre más alto y volátil se encuentre la curva, es un país con mayor riesgo y viceversa. Con esto, se observa que Colombia ha tratado de mejorar para ser considerado un país seguro para la inversión y sobre todo cambiar su percepción a nivel internacional. Figura 18. Comportamiento de las Curvas de Tesoros FUENTE: Datos de Bancolombia y Grafico autoría propia. Al comparar la curva de Colombia con otras economías emergentes de América Latina, se observa que presentan la misma tendencia en los últimos seis años, generando así uniformidad en la confianza de inversión a nivel internacional en países latinos. 65

66 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Figura 19. Spread de Bonos de Deuda Soberana FUENTE: vbecontent/newsdetail.asp?id=5610&idcompany=20 Creadores de Mercado: Finalmente, es importante analizar la evolución a nivel local del sector financiero y así lograr entender los beneficios generados de los mismos. CREADORES DE MERCADO Definición: La Resolución 3331 de 2004 dispone que los Creadores y Aspirantes a Creadores de Mercado son las entidades encargadas de las labores de compra, distribución y estudio de la deuda pública interna de la Nación y su finalidad es fomentar unas adecuadas condiciones de financiación para la Nación en el mercado de capitales interno por medio del desarrollo del mercado local de títulos. Esquema: Compuesta por 21 entidades: 10 Creadores y 10 Aspirante. Designación: Anual Tienen acceso a las subastas de TES Tienen acceso al primer escalón en SEN. ANTES DESPUES La Dirección de Crédito Público del Ministerio de Hacienda se desarrolló en En la Circular Externa 06 las autoridades determinaron los parámetros de este esquema. Integrantes: Bancos, Corporaciones Financieras y Sociedades 1996 El 80% de las colocaciones de TES estaba en manos de instituciones públicas. El sector financiero tan solo participaba con el 14%. Los precios del mercado primario no podían ser considerados como referentes de mercado, por lo que 62 Información EN: 2008/03/15. 66

67 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 el segundo escalón contaba con Comisionistas de Bolsa un precario desarrollo. Condiciones: Calificación >= A- En las subastas, en promedio, tan Patrimonio Técnico mínimo y solo el 10% era adjudicado. Participación mínima en colocaciones primarias. BENEFICIOS 63 Organizar un mercado de títulos de deuda pública interna, capaz de inyectarle liquidez y profundidad al mercado financiero y de valores. Los establecimientos de crédito aumentaron su portafolio de deuda pública en 1953% ( ). Crecimiento del 367% ( ) en el saldo subastado en TES. Impulso la creación de sistemas electrónicos de negociación, permitiendo mayo eficiencia y transparencia del mercado. El gobierno nacional ha tenido financiación interna con costos más bajos. Gracias a la sistematización de las subastas, existe referencia de mercado para diversos plazos de activos financieros. Disminuyó el riesgo de activos financieros emitidos por agentes soberanos, lo que genera incentivo para inversionistas extranjeros. Profundización de la inversión de portafolios financieros y en la ampliación de opciones de inversión para los agentes. Llegada de inversionistas extranjeros. En Colombia han permitido que las entidades financieros jueguen un rol moderno y eficiente para financiar al gobierno. Los administradores financieros se han convertido en un juez de la política fiscal y el manejo de la deuda. Se convirtió en una de las políticas públicas implementadas para desarrollar el mercado de valores en el largo plazo y mantener una política monetaria ordenada. Gracias a esta iniciativa, en pocos años se ha registrado un incremento sustancial en los volúmenes de negociación de títulos de deuda pública 8.3 DISEÑO DEL PRODUCTO ESTRUCTURADO: Descripción del Diseño. Como se ha mencionado en los puntos anteriores, el mercado bursátil local tiene bastantes insuficiencias que se han tratado de identificar pero no han logrado solucionar totalmente y que en últimas está afectando la motivación de los inversionistas. Por ello, se hace tan necesaria la creación de instrumentos que permitan a los inversionistas institucionales la combinación de los ya existentes y así rescatar su verdadera importancia; aumentando la rentabilidad y protegiendo el nivel de riesgo. 63 Información EN: 2008/03/15. 67

68 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Para el diseño del producto estructurado es indispensable identificar variables y seguir un proceso que incluya los siguientes pasos: o Identificar los instrumentos no derivados (subyacente y plus) a utilizar. o Identificar los instrumentos derivados (cobertura) a utilizar. o Identificar variables, factores ó indicadores que determinen el comportamiento de estos instrumentos o Recolectar datos históricos de los instrumentos no derivados a utilizar. o Aplicar la teoría de correlaciones e interpretar la correlación existente. o Estructurar el producto. o Realizar escenarios de prueba para determinar el comportamiento del producto frente a otro instrumento existente en el mercado o Definir las condiciones para la asignación de rentabilidades según las expectativas del comportamiento de los instrumentos en el futuro Descripción de Instrumentos. El producto estructurado a desarrollar en la investigación está compuesto por dos partes: el capital protegido y el plus de la inversión, los cuales están sujetos a las siguientes condiciones. a. Subyacente de la inversión: 68

69 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano er Condoción Figura 20. Condiciones del Subyacente Condición: Protección total del capital, es decir, al final de la inversión (vencimiento) se garantiza el 100% del capital del inversionista Deducción: Respaldado por uno ó varios valores de renta fija. 2da Condición Condición: El instrumento debe ser riesgo cero y estar expresado en moneda local, es decir, debe ser emitido por el Gobierno Nacional. Deducción: Valores del sector publico, es decir, un TES ó un bono público. 3er Condición Condición: El producto estructurado reconoce intereses periódicos, los cuales están determinados por los cobros de interés del subyacente. Deducción: Valor con accidentes ó flujos financieros. 4ta Condición Condición: El vencimiento y flujos de interés del producto estructurado esta determinado por el vencimiento del instrumento referenciado. Deducción: Valor a tasa fija con accidentes ó flujos financieros periodicos. 5ta Condición: Condición: Definición del plazo de la inversion teniendo en cuenta que entre mayor sea el plazo mayor es la sensibilidad de los rendimientos de la misma. Deducción: Inversion a mediano plazo, es decir con vencimiento de uno a tres años. Con las condiciones mencionadas anteriormente y según estadísticas basadas en los diferentes sistemas electrónicos de negociación e información 64 se concluye que el subyacente del producto estructurado son los Títulos de Tesorería TES (basado en estadísticas y análisis del Anexo 4). Esto en razón a las siguientes características, bondades, debilidades y conclusiones del análisis de las estadísticas de los títulos de tesorería (TES): i. Características: o Son emitidos por el Gobierno Nacional. o Representan títulos de deuda pública interna. o Están divididos en dos grupos: en los Clase B definidos en tasa fija y variable y en Otros que constituyen los Mixtos y Globales. o Los TES tasa fija son los valores más líquidos del mercado. o En los TES tasa fija, se encuentran los expresados en pesos colombianos, en dólar americano y en unidades de 64 SISTEMA ELECTRÓNICO DE NEGOCIACIÓN (SEN) y de BLOOMBERG. Sistemas de negociación. 2009/05/15. 69

70 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 valor real (UVR), de los cuales, los primeros son más líquidos de este grupo. ii. iii. iv. Bondades: o Las negociaciones de TES están respaldadas por los creadores de mercado. o Son emitidos por el gobierno nacional, lo cual supone son riesgo cero (mientras que el país no entre en default 65 ). o Ofrecen mayor rentabilidad con relación a los pagos de intereses. o La mayoría de TES tienen alta liquidez, es decir, son transados diariamente en los sistemas de negociación del mercado Bursátil. o Representan el mayor porcentaje de negociación diaria (98% según estadísticas del Banco de la República en SEN). Debilidades: o En el momento en que el país entre en default todos los papeles emitidos por el mismo generan incumplimiento de pagos de las obligaciones financieras. La probabilidad que Colombia entre en default es del 29% 66, lo cual representa un porcentaje bastante bajo. o Desplazamiento de la curva de rendimientos hacia arriba, lo cual equivale que el precio de los mismos disminuya. o Presentan altas volatilidades. Análisis Estadísticas: o Después de analizar la liquidez de los TES tasa fija expresados en pesos colombianos, se observa que las cinco emisiones más líquidas son: Julio de 2020, Noviembre de 2010, Mayo de 2009, Julio de 2009 y los Agosto de o De estas cinco emisiones, la que cumple con la quinta condición relacionada con un plazo de uno a tres años es la de Noviembre del o En conclusión, se utilizará como subyacente de la inversión la emisión de TES tasa fija expresada en pesos 65 Información EN: (http://www.proexport.com.co/vbecontent/newsdetail.asp?id=5610&idcompany=20). 2009/02/15. La calificación de riesgo país para Colombia es BB+, lo cual indica que tiene muchas expectativas para convertirse en grado de inversión. 66 Información EN: 2008/12/22. 70

71 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 colombianos, con cupón anuales del 7.50% E.A. y con vencimiento el 24 de Noviembre de b. Plus de la Inversión: Figura 21. Condiciones del Plus 6ta Condición: Condición: El Plus de la inversión corresponde a otorgarar al inversionista al final de la inversión unos rendimientos adicionales siempre y cuando cumpla con unos niveles predefinidos. Deducción: Respaldado por uno o varios valores de renta variable, a fin de tener volatilidades. 7ma Condición: Condición: Plus compuesto por una canasta de instrumentos de renta variable en moneda extranjera. Deducción: Lo que ofrece el mercado internacional son los ETF, ETN ó Fondos Mutuos. Adicionalmente, se tendra en cuenta la revaluacion ó devaluacion de la moneda en la cual este expresado. 8va Condición: Condición: Definir una canasta cuya volatidad se mantenga dentro de unos rangos mínimos y máximos predefinidos. Deducción: Canasta de valores con correlaciones inversas o muy cercanas a cero, a fin de equilibrar sus volatilidades. El plus de la inversión estará compuesto por una canasta de instrumentos de renta variable, así: I. Actualmente, lo que ofrece el mercado internacional en instrumentos de renta variable expresados en moneda extranjera son los Exchange Trade Fund (ETF), Exchange Trade Note (ETN) y Fondos Mutuos 67. II. Los ETF s son activos que permiten tomar posiciones sobre un índice y se transan en las bolsas más grandes del mundo (NYSE, NYBOT, CBOE, CBOT, etc.). III. Se estima que existe más de mil ETFs, los cuales representan diferentes segmentos de mercado, gremios, industria y demás. Sin embargo, en esta investigación no se dispone del tiempo para analizar cada uno de estos. IV. Por lo anterior, la selección de ETF estará basada la lista de recomendados del informe que publica periódicamente Morgan Stanley 68 titulado ETF Listings Growth Continues, 67 Información EN: 2008/09/30. Entiéndase por ETF: (Exchange traded fund) y ETN (Exchange traded Note) una cesta de valores o activos financieros cuyo valor cotiza en algun mercado organizado, se comportan como una accion, permite negociar varias acciones como si fueses una sola y replica sobre un indice y por Fondos Mutuos participaciones en empresas 68 Morgan Stanley: entidad de origen estadounidense y reconocido en el mercado de valores a nivel internacional, quienes se especializan (entre otras cosas) en el análisis de ETFs. 71

72 US Fixed-Income US Equity Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Assets Hold Steady as Equity Markets Decline con autoría de Paul Mazilli. V. En el informe de Morgan Stanley con corte al 15 de Mayo de 2008 (Anexo 5), en la sección FAVORED ETF INVESTMENT IDEAS, dicha entidad recomienda los indicados en la tabla siguiente: Figura 22. Lista de ETF Recomendados por MS, 2008/05/15. MERCADO DESCRPCION SECTOR NOMBRE ETF In the US, our strategists Diamonds (DIA) expect the S&P 500 to Large-Cap ishares S&P 100 remain range bound (OEF) between 1260 and Amid increased uncertainty and heightened volatility, our strategists continue to favor large-cap stocks over small-cap stocks. In addition to providing greater earnings support from growth outside of the US, large-cap stocks continue to appear relatively more attractive than small or mid-cap stocks on a number of valuation measures. See page 78 for details on our outlook for the US equity market. Dividend Income Large-Cap Sectors Industry Our strategists currently favor higher quality assets including mortgagebacked securities and investment grade credit. See page 283 for details on our outlook. ishares DJ Select Dividend Index Fund (DVY) WisdomTree High- Yielding Equity Fund (DHS) Energy Select Sector SPDR (XLE) Health Care Select Sector SPDR (XLV) Consumer Staples Select Sector SPDR (XLP) ishares DJ US Aerospace & Defense (ITA) ishares DJ US Oil & Gas Exploration & Production (IEO) ishares DJ US Oil & Gas Equipment & Services (IEZ) SPDR S&P Biotech ETF (XBI) Claymore S&P Global Water Index ETF (CGW) PowerShares WilderHill Clean Energy Portfolio (PBW) Vanguard Total Market Bond Fund (BND) ishares Lehman MBS Fund (MBB) ishares iboxx $ Investment Grade Corp. Bond Fund (LQD) ishares Lehman TIPS Bond Fund (TIP) 72

73 Commodities and Currencies International Equity Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Our strategists have a neutral outlook on Broad most major International developed markets. However, they are Emerging slightly overweight Markets Asia and the Emerging Markets. In our opinion, most Regional investors remain too International focused on domestic stocks. ETFs provide diversified and low cost vehicles for many investors to gain access to international equities, Country-Specific which currently make International up 58% of the MSCI All country World Index. See page 215 for details on our outlook for international markets. We currently favor three ways to get commodity exposure with ETFs: Gold as a core commodity holding to provide portfolio diversification; ETFs with diversified exposure to energy and other commodities; and agricultural commodities related to global growth and emerging market demand. See page 300 for details on our outlook for the commodity and currency markets. ishares MSCI EAFE Index Fund (EFA) Vangaurd Europe Pacific ETF (VEA) Vanguard Emerging Markets ETF (VWO) Vanguard European ETF (VGK) Vanguard Pacific ETF (VPL) ishares MSCI Hong Kong (EWH) ishares MSCI Singapore (EWS) ishares MSCI South Korea (EWY) ishares MSCI Taiwan (EWT) StreetTRACKS Gold Trust (GLD) PowerShares DB Com. Index Tracking Fund (DBC) PowerShares DB Agriculture Fund (DBA) c. Cobertura: Teniendo en cuenta que los Exchange Trade Fund (ETF) seleccionados para la composición de la canasta hacen parte del mercado de renta variable y por ende tiene una alta volatilidad, se hace necesario el cubrimiento de dichas volatilidades a fin de minimizar el riesgo de pérdida por una posible disminución en el valor de unidad de los mismos. Para lo anterior, el mismo día en que compran las posiciones de ETF seleccionado de la canasta, se constituye una opción americana put de compra sobre la misma con cumplimiento igual a la fecha de vencimiento del producto. La opción se ejerce en el momento en que el precio de la misma toque el punto de equilibrio de la opción. En este orden de ideas, se limita la perdida a 0. 73

74 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Por otra parte, se debe cubrir la exposición a la moneda que se tiene en la posición de la canasta, ya que los cuatro ETF están expresados en dólar americano (USD) y según análisis realizados por algunos especialistas en el tema, la tendencia es alcista. Para cubrir esta exposición se constituirá un Forward Non delivery de Venta COP/USD equivalente al monto en dólares de la posición de la canasta con una devaluación ofrecida en el mercado para un plazo de dos (2) años aproximadamente, cuyo vencimiento sea el mismo día de vencimiento de la inversión. Con dicho Forward, lo que se pretende es compensar la valoración de la canasta dada por diferencia en cambio con la valoración del Forward; a fin de llegar a un efecto cero Correlaciones y Rentabilidades. Identificado el subyacente de la estructura y limitando las posibilidades para la constitución de la canasta de Exchange Trade Fund (ETF), se lleva a cabo el siguiente procedimiento para la correcta selección de los ETFs que harán parte del plus de la inversión: 74

75 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 i. De la pagina web de FINANCE 69, se obtiene la serie histórica del valor de unidad (NAV Cierre ajustado) de cada ETF, para un periodo de dos años (2007/05/ /05/15). ii. De la pagina web de INFOVAL 70, se obtiene la serie histórica del precio sucio del TES tasa fija con vencimiento 24 de Noviembre del 2010, para un periodo de dos años (2007/05/ /05/15). iii. Con estas series históricas, se calcula la variación diaria (aplicando la función de logaritmo natural, teniendo en cuenta que esta suaviza la media). Con el resultado de este cálculo se diseña la matriz de correlaciones. iv. Con esta misma serie y según la teoría Distribución de probabilidades, se calcula el rendimiento esperado de los ETF. v. Para la selección del ETF que conformaran la canasta, se tuvieron en cuenta tres variables. Primero, se selecciona un ETF de cada tipo de mercado. Con lo cual se garantiza diversificar la composición. Segundo, para la selección se tendrá en cuenta que la correlación del ETF y el TES sea inversa (negativa). Tercero, se selecciona el ETF cuyo rendimiento esperado sea el más alto de cada grupo. vi. Después de ejecutar los pasos indicados anteriormente, realizar los cálculos pertinentes y analizar los resultados, se concluye que la canasta de ETF estará compuesta por cuatro elementos: SECTOR US Equity US Fixed-Income International Equity Commodities Currencies and ETF SPDR S&P Biotech ETF (XBI) ishares Lehman MBS Fund (MBB) Vanguard Emerging Markets ETF (VWO) PowerShares DB Com. Index Tracking Fund (DBC) vii. viii. Finalmente, para la asignación de pesos de estos cuatro elementos dentro de la canasta, se realizaron tantos escenarios como combinaciones posibles existieran, teniendo en cuenta los siguiente parámetros: La canasta debe estar conformada por los cuatro elementos. La participación mínima de cada ETF es de 10%. Para cada escenario se calculó el Riesgo y Rentabilidad esperada del portafolio (canasta), basados en el modelo de 69 Información EN: 70 Información EN: Sistema de Información para Valoración. 2008/04/30. 75

76 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Markowitz y finalmente se seleccionó la mejor combinación basados en un equilibrio de la relación riesgo rentabilidad, así: Se realiza una pre-selección de combinaciones con menor nivel de riesgo (menor a 12%) De esta pre-selección, se selecciona la que mayor rentabilidad esperada ofreciera Calculo de la prima de la opción: para determinar el valor de la prima se consulta en la página web de Finance 71, el link de opciones, del cual se obtiene el valor de la prima de los diferentes tipos de opciones (call y put) y de las diferentes posiciones (Bid y Ask). Para este caso en particular, se seleccionará el valor de la prima de cada contrato partiendo del hecho que la relación entre el strike y el precio de mercado, sea cercana a uno (1), es decir, at the Money. El valor total de la prima de la canasta de ETF es: ETF Prima Ud x Contrato Prima x Ud XLI (30%) 1.30% MBB (50%) 1.20% VWO (10%) 9.20% DBC (10%) TOTAL PRIMA DE LA CANASTA Colocación de la inversión en el mercado. Finalmente, se determina que la forma como se va a presenta esta alternativa de inversión en el mercado, es a través de la constitución de una Cartera Colectiva la cual estará administrada por una Sociedad Fiduciaria legalmente facultada para lo mismo. De acuerdo con el Decreto 2175 de , en el Anexo 6 se presenta el Reglamento de la Cartera Colectiva Producto Estructurado Corto Plazo y posteriormente su Prospecto; en los cuales se dejan los espacios en blanco correspondiente a la información de la sociedad administradora, haciendo la 71 INFORMACION EN: 2009/01/ Por el cual se regula la administración y gestión de las carteras colectivas. Decreto 2175 de 2007 actualizado en la página web de Superintendencia Financiera de Colombia 76

77 CARTERA COLECTIVA CERRADA PRODUCTO ESTRUCTURADO Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 salvedad que debe estar facultada legalmente para administrar esta cartera colectiva Diseño final del producto estructurado: el producto estructurado diseñado en esta investigación estará compuesto por un subyacente y un plus, el cual estará cubierto con un instrumento derivado. Figura 23. Composición del Producto Estructurado LIQUIDEZ SUBYACENTE PLUS Recursos en cuenta de ahorros ($) Inversion en renta fija en moneda local Protege Capital Inversion en renta variable en moneda extranjera Rentabilidad diaria 6% EA TES Tasa fija Vcto: Cupón: 7.50% US Equity => XBI: 30% US Fixed income => MBB: 50% International Equity => VWO: 10% Commod & Currencies => DBC: 10% DERIVADO Instrumentos de cobertura * Opción americana put de compra * NDF COP/USD El plus de la inversión estará conformado por una canasta diversificada de ETFs, la cual a su vez estará cubierta tanto la volatilidad del precio como la diferencia en cambio de la moneda. En el Anexo 7 están los cálculos indicados en este punto y en el Anexo 8 están las fichas técnicas de los ETF. 8.4 MECANISMOS DE EVALUACIÓN DEL DISEÑO: Complementando el diseño del producto estructurado definido en los numerales anteriores, es importante crear un mecanismo que determine si la estructura de inversión cumple con las expectativas y en qué proporción, para lo cual se requiere por un lado implementar un modelo para monitorear el comportamiento del subyacente y el plus 77

78 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 de la inversión y por otra, establecer unos rangos (mínimo y máximo) para así condicionar y limitar el reconocimiento del pago de la rentabilidad del plus de la inversión. Por último, se presentará el prospecto del producto estructurado Modelo de Monitoreo. Este modelo consiste en alimentar diariamente en un archivo de Excel el precio sucio del subyacente y el NAV de la los activos de la canasta de ETFs (componentes del plus) a fin de valorarlos a mercado y registrar periódicamente la causación de la inversión conforme a la ley expresa de valoración planteada en la Circular 100 de Vr Mercado Inversion = Vr Mercado Subyacente + Vr Mdo Plus + Vr Fw Vr Mdo Subyacente = Vr Nominal PS 1 Vr Mdo Plus = 4(ETF NAV TRM wi) En el Anexo 9 se presentan los cálculos respectivos, desde la fecha de emisión del producto a la fecha de corte de los datos ( ) Rentabilidad del plus. La asignación de rendimientos, producto del comportamiento del plus de la inversión, estará determinada por la rentabilidad de la inversión el día del vencimiento de la misma (Anexo 7). La definición de los puntos mínimo y máximo que se reconocerán al inversionista al final, está determinada por la siguiente fórmula: Asignacion Puntos = Rendimiento Esperado ± Desviación Estandar 2 Donde; Rendimiento esperado: % Desviación Estándar: 8.892% Por tanto; Rendimiento Mínimo: 7.48% Rendimiento Máximo: 16.37% En este orden de ideas, si el rendimiento del plus tres días hábiles antes del vencimiento de la inversión está: 78

79 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 i. Entre el rango mínimo (ó por debajo) y el rendimiento esperado menos un punto básico, únicamente se pagará el cupón del subyacente y el capital de la inversión. ii. Entre el rendimiento esperado y el rango máximo (ó por encima) se pagará el cupón del subyacente, el capital de la inversión y la diferencia entre el rendimiento esperado y el rango máximo expresado en puntos básicos (445 pb) sobre el valor nominal inicial de la inversión. La TRM utilizada para liquidar el rendimiento del plus será la vigente para el mismo día de evaluación del rendimiento. 8.5 RENTABILIDADES Y COMPARACIÓN DEL PRODUCTO: Análisis de rentabilidades: al calcular la rentabilidad del producto estructurado para lo corrido del año 2009 (fecha de corte ), se observa lo siguiente: El producto estructurado ha tenido una rentabilidad en pesos del 34.53% EA (Anexo 9). El dólar americano ha corregido frente al peso colombiano; sin embargo, este efecto no se ve reflejado en la inversión dado que la causación del forward y la causación por moneda de la canasta de ETFs, se compensan entre sí. 1, , , Vr Mercado Inversión Vr Mercado Inversión 79

80 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Comparación con otro activo: para lograr determinar la competitividad del producto estructurado desarrollado en la presente investigación frente a otros activos, se hace necesaria la comparación con un activo que tenga características similares al producto diseñado. Para esto, se realiza una comparación entre un inversionista que destina todo sus recursos para la compra de un TES (mismo subyacente del producto) y otro que destina sus recursos para invertir en la cartera colectiva diseñada en este trabajo. DATOS TES C.C.C Producto Estructurado Emisión: 2005/11/ /01/02 Plazo Emisión: 180 meses 23 meses Vencimiento: 2010/11/ /11/24 Base: 365 días 365 días Tasa facial: Tasa fija 7.50% EA. Tasa fija 7.50% EA. Rendimiento adicional: Ninguno Liquidez: Rendimiento mensual según tasas de interés. Plus: 4.45% sobre el monto de la inversión, siempre y cuando cumplan con rendimientos esperados. Al comparar las dos inversiones se observa lo siguiente: Si un inversionista decide invertir sus recursos únicamente en el TES utilizando como subyacente en el producto, al final de la inversión (vencimiento) esperará recibir por cada $100 invertidos, un total de $107.50, de los cuales $7.50 corresponden a los rendimientos causados en un año. Pero por el contrario, si el inversionista decide invertir sus recursos en el producto estructurado desarrollado en la presente investigación, al final de la inversión, esperará recibir por cada $100 invertidos, el cupón del subyacente (7.50% anual), los rendimientos generados por una cuenta de ahorros donde se depositaron los recursos líquidos (6% anual en promedio) y adicionalmente tiene la posibilidad de recibir rendimientos equivalente al 4.45% EA sobre el valor total de la inversión, producto de la rentabilidad del plus de la inversión. 80

81 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano Conclusiones de la evaluación: después de realizar los cálculos pertinentes relacionados con la rentabilidad del productos estructurado diseñado en esta investigación se concluye: Es un producto competitivo en el mercado bursátil colombiano, ya que sus rentabilidades son comparables con otros activos. Es una inversión, que ofrece una rentabilidad adicional (a la esperada) al final de la inversión. Es una inversión que está respaldada por un activo con riesgo soberano. Es una inversión que está protegida de las volatilidades del precio de los instrumentos de renta variable extranjero, a través de un instrumento financiero derivado (opción), cuya pérdida máxima se puede establecer con certeza y se tiene la potestad de decidir en qué momento hacerlo. Es una inversión que está protegida de las fluctuaciones de la diferencia en cambio del dólar americano, a través de un instrumento financiero derivado (forward). Es una inversión, cuya aceptabilidad en el sector es buena (según los resultados de las entrevistas) pese a que actualmente no existen inversiones con características similares emitidas por entidades nacionales. 8.6 ACEPTACION DEL PRODUCTO EN EL MECADO Finalmente, se realiza un tanteo de la aceptación del producto diseñado en la presente investigación en el mercado de valores, a través de entrevistas realizadas a los profesionales certificados por el Autorregulador del Mercado de Valores (AMV) Ficha Técnica De La Entrevista: En el Anexo 1 se presenta el formato utilizado y el resultado de las entrevistas realizadas en la cual se solicito información relacionada con opiniones generales y la aceptabilidad, por parte del mercado, del producto estructurado sujeto de la investigación. Igualmente, se encuentra la tabulación de las entrevistas y el análisis de los resultados. 81

82 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Dirección y Ejecución Población Muestra Tipo de Encuesta FICHA TECNICA La dirección y ejecución de las entrevistas fue realizada por la investigadora Diana Carolina Gomez, egresada no graduada de la Facultad de Ciencias Administrativas y Contables, programa Administración de Empresas de la Universidad de la Salle. 3,416 profesionales del sector financiero. Características Profesionales certificados para operar en el mercado de valores de Colombia. Tipo Aleatorio Simple. Estratificación Para la aplicación de la entrevista se escogieron profesionales de las ciudades de Bogotá y Cali. Tamaño 97 profesionales. Las entrevistas se realizaron telefónica y personalmente en la medida de las posibilidades y disposición de tiempo de los profesionales Tabulación y análisis del resultado de las entrevistas: El resultado de las entrevistas se presenta a continuación, realizando un análisis de cada respuesta Pregunta # 1: Usted hace parte del sector financiero? Todos los entrevistados, hacen parte del grupo de operadores activos del sector financiero; por lo están certificados como profesionales y hace parte del sector financiero Colombiano. 82

83 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Pregunta # 2: A qué tipo de entidad pertenece? El 68% de los entrevistados, laboran en Comisionistas de Bolsa (dependiente o independiente) y en Administradoras de Fondos de Pensiones. Pregunta # 3: Considera que los productos estructurados son una buena alternativa de inversión? El 89% de los entrevistados considera que los productos estructurados son una buena alternativa de inversión y adicionalmente, que tienen bastantes ventajas pero que al mismo tiempo es un producto/instrumentos actualmente inexplorado en el mercado local. 83

84 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Pregunta # 4: Si le ofrecieran un producto estructurado con las siguientes características: o Subyacente TES tasa fija del o Plus canasta (cubierta volatilidad del precio y diferencia en cambio) compuesta por los siguientes Exchange Trade Fund (ETF): 30% de XBI: Large Cap Sectors 50% de MBB: US Fixed Inconme 10% de VWO: Emerging Markets 10% de DBC: Commodities o Pagos Paga cupón al final de la inversión (Nov/2010). Al final de la inversión reconoce un spread de 4.45% sobre el monto de la inversión, le interesaría? Esta pregunta aplica únicamente para las personas que contestaron afirmativamente la pregunta # 3, ya que no tiene sentido que la respondan quienes consideren que los productos estructurados no son una buena alternativa de inversión. Se observa una aceptación generalizada (89%) del producto estructurado indicado anteriormente, principalmente porque es una propuesta nueva e interesante para el sector financiero. 84

85 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Pregunta # 5: Que le cambiaria o adicionaría? Esta pregunta aplica únicamente para las personas que contestaron afirmativamente la pregunta # 4, ya que si no se acepta la propuesta de inversión indicada no es lógico que le quieran realizar algún cambio. Dentro de las cítricas que tuvo el producto, sobresale por un lado, el spread ofrecido principalmente porque a los entrevistados les gustaría un spread más alto; y por el otro los pagos, ya que a algunos entrevistados les gustaría tener un pago de cupón intermedio. Pregunta # 6: Que spread le interesaría? Esta pregunta aplica únicamente para las personas que contestaron afirmativamente la pregunta # 4. 85

86 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 El objetivo de esta pregunta es indagar en el mercado sobre las expectativas de spread que tienen las personas, con situaciones actuales del mercado. Adicionalmente, ratificando el resultado de la pregunta anterior, se observa que la mayoría de los entrevistados consideran importante tener un spread acorde con el ofrecido en el producto. Pregunta # 7: Cuanto estaría dispuesto a invertir en este producto? Esta pregunta aplica únicamente para las personas que contestaron afirmativamente la pregunta # 4. Se observa que el 95% de los entrevistados estaría dispuesto a invertir en el producto estructurado propuesto, de los cuales casi la mitad estaría dispuesta a invertir hasta el 10% del valor de sus portafolios. Lo anterior es bastante disiente con respecto a la aceptación que los entrevistados mostraron frente al producto Conclusiones finales del resultado de las entrevista: En términos generales, se concluye lo siguiente: Se ratifica que fue una excelente decisión el haber entrevistado a personas activas del mercado bursátil, ya que finalmente son ellas quienes pueden dar ideas específicas de la dinámica del mercado. 86

87 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Se observa una atracción generalizada de los productos estructurados en mercado bursátil colombiano. Se observa una muy buena aceptación del producto estructurado propuesto en esta investigación, pese a que no existen productos similares emitidos por entidades nacionales en el mercado bursátil y que por ende podría generar cierto rechazo. Algunas de las fuertes críticas recibidas del producto diseñado, está relacionada con el spread ofrecido, ya que, a muchos de los entrevistados les gustaría obtener una mejor tasa. Sin embargo, esta es una práctica generalizada del mercado, es decir, los inversionistas institucionales siempre quieren mejor spread. Finalmente, se observa una posible consideración de inversión (por parte de los entrevistados) al haber afirmado que una parte importante de los portafolios administrados por ellos podría estar invertida en este producto. 87

88 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano CONCLUSIONES Como resultado de esta investigación se concluye: En Colombia, el mercado Bursátil es un mercado realmente débil y con muchas deficiencias en relación a normativa y estructuración en comparación con otros mercados de economías emergentes y obviamente de las economías desarrolladas. A pesar de tener un crecimiento significativo durante las últimas cinco décadas (Colombia), con mayor aceleramiento después de la recesión de los noventa (90s), no ha logrado cambiar su tendencia y cultura de inversión limitándose a inversión de deuda privada/pública, dejando de lado otras alternativas. Se logró comprobar que la ingeniería financiera apoyada con ciencias económicas, estadísticas y matemáticas es completamente flexible y acoplable a las necesidades individuales de los inversionistas, lo cual debería ser una herramienta de éxito para las múltiples entidades que ofrecen y estructuran (ó pretender hacerlo) alternativas de inversión diferentes a las utilizadas durante los últimos veinte años en el mercado. A lo largo de la investigación se obtuvo un modelo de inversión (entre muchos otros) con el cual se puede ofrecer a los inversionistas alternativas de inversión diferentes a las existentes, con un equilibrio en la relación riesgo rentabilidad. Se crea un producto estructurado con el objeto de: ofrecer diferentes alternativas de inversión, las cuales se ajustan a las necesidades propias de los inversionistas combinando diferentes riesgos en función de la rentabilidad, crear una gama de alternativas que conforme a los diferentes perfiles de riesgo de los inversionistas institucionales y generar un ambiente propicio para desarrollar profundidad en los mercados locales. Existen infinidad de alternativas y/o estrategias para la creación de un producto estructurado dado que las limitaciones están determinadas por el objetivo ó utilidad del mismo. Lo importante, es estar basados en las diferentes teorías, herramientas y principios de las diferentes ciencias 88

89 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 (matemática, estadística, económica y financiera) y crearlo para que cumpla con las expectativas propuestas. Hoy en día, la Superintendencia Financiera de Colombia en función de la reciente Circular 025 de 2008, proporciona un ambiente adecuado para que una banca de inversión incursione en la combinación de instrumentos activos con instrumentos derivados, crear nuevas alternativas a ser evaluadas por la SFC con los análisis y perspectivas correctas; sembrado así la semilla de nuevos mercados locales. Es importante entonces invitar a todos los actores del sector financiero para que a partir de la entrada en vigencia de esta circular (1 de Septiembre de 2008), incursionen en negociaciones de esas nuevas alternativas que la ley ha reglamentado. Un producto estructurado se puede crear en cualquier momento, lo ideal es crearlo con el fin de anticiparse a los posibles riesgos y/o cambios inesperados del mercado/economía ó en su defecto aprovechar un momento dramático para hacerlo algo eficiente. Algo importante (que se ha comprobado en varias oportunidades) es que la historia se repite, lo cual es completamente válido y útil para crear un producto estructurado. A nivel local, ahora es el momento de comenzar a estructurar nuevos productos dando alcance a las siguientes ventajas: Los actores institucionales vigilados por la SFC fueron facultados a incursionar en instrumentos derivados diversos (plain vanilla y derivados exóticos). Los regímenes de inversión de los diferentes fondos se están adecuando a la nueva reglamentación. El mercado local está saturado con los instrumentos tradicionales, al punto de estar con ocupaciones sobre los límites permitidos por la reglamentación. No existe gran variedad en las tasas locales (DTF, IPC e IBR). La diversificación del riesgo, basado en el punto anterior, es muy concentrada por tasa. Finalmente y cumpliendo con el objetivo propuesto en la investigación, se crea un producto estructurado el cual está compuesto por tres partes: Subyacente, Plus y Derivado. 89

90 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 El subyacente tiene como fin proteger el capital invertido, es decir, que con un porcentaje alto de la inversión (y equivalente al valor de la inversión en el futuro) se destinará para la compra de un activo emitido por el Gobierno nacional, con riesgo cero y líquido en el mercado bursátil. Por su parte, el plus de la inversión, corresponde al porcentaje restante de la inversión, el cual se destinará para la compra de un conjunto de activos de renta variable, expresados en dólares e identificados como Exchage Trade Fund. Finalmente, el derivado permite generar estrategias de cobertura frente al riesgo de la volatilidad del precio de los activos de renta variable y minimiza el risgo de las fluctuaciones de la diferencia en cambio. 90

91 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Fuentes Fisicas: BIBLIOGRAFÍA MORGAN STANLEY. Informe mensual Exchange Trade Fund. Edición del 14 de Noviembre de HULL, JOHN C. Introducción a los Mercados de Futuros y Opciones. 4ta Edición. DE LARA HARO, ALFONSO. Medición y control de riesgos financieros. DE LARA HARO, ALFONSO. Productos Derivados Financieros. VENEGAS MARTINEZ, FRANCISCO. Riesgos Financieros y Económicos: productos derivados y decisiones económicas bajo incertidumbre. Autor:. BEJARANO BARRERA, HERNÁN. Estadística Descriptiva. Editorial UNISUR - Universidad Nacional A Distancia 1995 Bogotá Colombia 6 Edición. CORDOBA BUENO M. Análisis Financiero De Los Mercados Monetarios Y De Valores. Editorial Ac Thomson Madrid España 3 Edición. MARIO TAMAYO Y TAMAYO. El Proceso de la Investigación Científica. Editorial LIMUSA Noriega Editores 2002 México 4 Edición. MENDEZ A., CARLOS E. Metodología, Diseño y Desarrollo del Proceso De Investigación. Editorial MAC GRAW HILL, 2001 Bogotá Colombia 3 Edición. MARK, MOBIUS. Guia Del Inversor En Mecados Emergentes. Editorial Financial Times Folio 1994 España 1 Edición. Normas ICONTEC. Compendio Tesis Y Otros Trabajos De Grado. Norma 1486, Quinta Actualización; Norma 1075, Segunda Actualización; Norma 1487, Segunda Actualización; Norma PINILLA ROBERTO, VALERO LUIS ANTONIO y GUZMAN ALEXANDER. Operaciones Financieras En El Mercado Bursátil. 91

92 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Universidad Externado de Colombia 2003 BOGOTÁ COLOMBIA 2 Edición. SERRANO RODRÍGUEZ JAVIER. Mercados Financieros. Editorial planeta colombiana S.A Universidad de los Andes - facultad de administración, comité de publicaciones 2005 Bogotá Colombia 1 Edición. Otras Fuentes: Banco de la República: Bolsa de valores de Colombia: Superintendencia Financiera de Colombia: Finances: Bloomberg: y sistema electrónico. Chicago Board Options Exchange: CORFINSURA. Pagina web actualizada a Julio del año Sitio desarrollado por Intergroup. La marca Corfinsura hace parte del grupo Bancolombia. INVERTIA. Pagina web la cual utiliza el portal de TELEFONICA DE ESPAÑA. MONEDAS ON LINE. Pagina web empresa dedicada a proveer herramientas y estrategias para participar en mercado de divisas. Filial de SAVING TRUST S.A. NORMAS APA. 92

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94 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 ANEXOS

95 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 1. Formato y resultado de las entrevistas.

96 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 2. Tabla: Rentabilidades de mercado bursátil

97 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 3. Tabla: Tasas mensuales de las AFPs

98 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 4. Tabla: Volumen de operaciones en SEN

99 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 5. Informe de Morgan Stanley.

100 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 6. Reglamento y Prospecto de la cartera colectiva.

101 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 7. Matriz de correlaciones, histogramas y cálculos.

102 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 8. Ficha técnica de los ETFs seleccionados.

103 Diseño de un producto estructurado como alternativa de inversión institucional en el Mercado bursátil colombiano 2009 Anexo 9. Modelo de valoración de la inversión.

104 FORMATO ENTREVISTA No. Marque con una X la respuesta que prefiera. 1. Usted hace parte del sector financiero? SI NO 2. A qué tipo de entidad pertenece? Comisionista de Bolsa o Independiente Fiduciaria Banco AFPs Otra. Cual? 3. Considera que los productos estructurados son una buena alternativa de inversión? SI NO 4. Si le ofrecieran un producto estructurado con las siguientes características: Subyacente TES tasa fija del Plus se constituye una opción call sobre una canasta compuesta por los siguientes Exchange Trade Fund (ETF): o 20% de XLE: Large Cap Sectors o 40% de TIP: US Fixed Inconme o 20% de VWO: Emerging Markets o 20% de GLD: Commodities Pagos o Paga cupón al final de la inversión (Jul/2009). o Al final de la inversión reconoce un spread de 2.97% sobre el monto de la inversión, le interesaría? SI NO

105 5. Que le cambiaria o adicionaría? El subyacente El plus El spread Los pagos La opción Otro, Qué? 6. Que spread le interesaría? 1.50% 2.00% 2.00% 2.50% 3.00% 3.50% Otro. Cual? 7. Cuanto estaría dispuesto a invertir en este producto? Máximo el 2% del valor de su portafolio Entre el 2% y 5% del valor de su portafolio Entre el 5% y 10% del valor de su portafolio Entre el 10% y 15% del valor de su portafolio No invertiría. VER EL ORIGINAL DE LAS ENTREVISTAS EN LA TESIS EDITADA EN PAPEL

106 Rentabilidades Instrumentos de Renta Fija Fuente: Se tomo el archivo de precios, tasas y márgenes y tasas de referencia que publica INFOVAL y los precios que publica BLOOMBERG para la valoración a mercado de los títulos de deuda (expresados en pesos colombianos, euros, dólar americano y unidades de valor real) del último día hábil de los últimos seis meses (Dic-07 a 15-May-08) los cuales fueron alimentados en el aplicativo PORFIN (software utilizado por muchas empresas para la valoración de diferentes instrumentos) para que por medio del proceso de valoración, calcule la tasa de mercado (tasa de descuento: expresada en la moneda de la inversión) de los diferentes papeles (TES, CDT, Bonos). Posteriormente se calculo por mes la rentabilidad promedio, mínima y máxima clasificados por tipo de moneda. Finalmente, se saco un promedio de las anteriores para el periodo de los seis meses. Rentabilidades Papeles RF $ Rentabilidades Papeles RF US$ Fecha Promedio Minimo Maximo Promedio Minimo Maximo 31/12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ Promedio Promedio Rentabilidades Papeles RF EUO Rentabilidades Papeles RF UVR Promedio Minimo Maximo Promedio Minimo Maximo 31/12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ Promedio Promedio

107 Rentabilidades Instrumentos de Renta Variable Colombiana Fuente: Se tomo el valor de mercado de las acciones colombianas (de la pagina web de INFOVAL) del ultimo dia de cada mes de los ultimos sieste meses (Nov-07 a 15-May-08) para calcular la rentabilidad mensual de cada. Posteriormente, se calculo el promedio, minimo y maximo de estas rentabilidades por mes de todo el grupo de acciones. PROMEDIO -3.32% -0.94% 0.05% -0.19% 0.30% 0.15% MINIMO % -2.46% -0.64% -0.91% -1.98% -0.05% MAXIMO 15.92% 0.18% 1.62% 0.49% 2.62% 0.50% Dias Acciones Colombianas 28/12/ /01/ /02/ /03/ /04/ /05/2008 APR Bancolombia -0.54% -1.06% -0.19% 0.49% 0.56% 0.22% APR Banco de Credito (CD) 0.00% -2.46% 0.29% -0.66% -0.35% 0.34% AOR ACH COLOMBIA (CD) -0.13% 0.00% -0.29% 0.25% -0.32% 0.15% AOR Grupo Aval (CD) -0.34% -0.72% -0.09% -0.62% 0.03% 0.37% AOR Bco Bogotá (CD) -0.31% -0.77% -0.24% -0.12% -0.10% -0.01% AOR Bancolombia (CD) -0.51% -1.22% -0.19% 0.23% 0.69% 0.20% AOR Bco Occidente (CD) 0.31% -0.36% -0.28% -0.06% -0.55% 0.00% AOR Valorem (CD) 0.33% -1.20% 0.88% -0.83% -0.21% 0.01% AOR Corficolombiana (CD) -0.15% -1.71% -0.29% -0.91% 0.25% 0.32% AOR Ecopetrol (CD) % -1.42% 1.11% 0.41% 1.78% 0.23% AOR Exito (CD) -0.43% -1.64% 0.12% -0.28% -0.18% 0.21% AOR Inverseguros (CD) 1.61% 0.00% 0.00% 0.00% 2.62% 0.00% AOR Isagen (CD) % 0.18% 0.07% -0.33% 0.25% 0.00% AOR ISA (CD) -6.96% -0.63% 0.51% -0.01% 0.72% 0.09% AOR Edatel (CD) % 0.00% 0.00% 0.10% 0.00% 0.00% AOR Promigas (CD) 5.88% 0.03% -0.19% 0.12% -0.11% -0.05% AOR Chocolates (CD) -0.72% -0.45% -0.64% 0.05% 0.39% 0.18% AOR Suramericana (CD) 0.72% -1.75% -0.20% -0.48% 1.10% 0.30% AOR Tecnibanca (CD) % 0.00% 0.56% 0.02% 0.13% 0.04% AOR Bco AV VILLAS (CD) % 0.00% -0.32% -0.13% 0.52% -0.03% AOR Cem Argos Split (CD) -5.27% -1.38% -0.47% -0.47% 0.66% 0.10% AOR Inver Argos (CD) -3.13% -2.02% 0.10% -0.77% 0.65% 0.20% AOR ETB (CD) % -2.13% 1.62% -0.49% 0.13% 0.50% AOR Cia Colombiana Inver (CD) 2.40% -1.91% -0.02% -0.81% 0.61% 0.20% AOR Deceval (CD) 15.92% 0.00% 0.00% 0.25% -1.98% 0.14% AOR BVC sin Dividendos 0.39% -1.91% -0.45% 0.13% 0.41% 0.06%

108 Fuente: ICAP SECURITIES S.A Rentabilidades Instrumentos Derivados FORWARD y NDF SOBRE DIVISA (COP/USD) diciembre 28, 2007 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward. enero 31, 2008 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward. febrero 29, 2008 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward.

109 marzo 31, 2008 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward. abril 30, 2008 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward. mayo 15, 2008 Plazo PUNTOS FORWARD* DEVALUACION PRECIO COMPRA VENTA COMPRA VENTA MEDIO * Pesos aproximados, por encima del precio spot del COP/USD en cada momento del dia, SPOT ** Tasa efectiva de devaluación equivalente a los puntos forward.

110 Fuente: Informes mensuales de rentabilidades de los fondos de pensiones en ASOFONDOS FONDO DE PENSIONES OBLIGATORIAS RENTABILIDADES MENSUALES E.A. DIAS MES SKANDIA SANTANDER COLFONDOS PROTECCIÓN PORVENIR HORIZONTE PROMEDIO MES AÑOS T.E.A. 31 ene % 16.06% 12.89% 13.71% 17.10% 6.51% 10.23% 12.75% 28 feb % 11.47% 20.33% 13.86% 19.73% 24.89% 18.41% 18.11% 31 mar % 12.77% 7.64% 12.01% 8.47% 14.42% 5.91% 10.20% 30 abr % 12.31% 17.28% 12.29% 17.26% 17.09% 15.71% 15.33% 31 may % 20.36% 22.47% 19.22% 27.67% 34.78% 17.96% 23.74% 30 jun % 30.41% 35.75% 25.03% 42.65% 51.15% 27.04% 35.34% 31 jul % 12.12% 36.43% 32.06% 31.71% 13.29% 34.28% 26.65% 31 ago % 7.04% 3.32% 18.07% 3.60% 5.97% 7.66% 7.61% 30 sep % 11.38% 10.84% 17.47% 21.34% 15.45% 18.36% 15.81% 31 oct % 17.43% 11.72% 9.01% 18.06% 6.97% 10.81% 12.33% 30 nov % 15.65% 27.78% 19.44% 33.84% 6.34% 18.98% 20.34% 31 dic % 21.62% 24.16% 30.74% 33.93% 30.72% 30.22% 28.57% 31 ene % 17.03% 15.50% 14.31% 11.99% 20.02% 13.54% 15.40% 28 feb % 16.82% 23.10% 15.07% 17.94% 19.08% 21.40% 18.90% 31 mar % 14.94% 2.52% 10.93% 11.78% 10.31% 10.47% 10.16% 30 abr % 22.85% 14.03% 14.46% 17.83% 11.31% 8.43% 14.82% 31 may % 23.45% 21.21% 21.59% 37.49% 17.62% 16.82% 23.03% 30 jun % 20.98% 19.13% 21.41% 21.07% 15.29% 27.39% 20.88% 31 jul % 13.55% 13.16% 16.92% 17.54% 19.72% 15.42% 16.05% 31 ago % 12.58% 7.56% 10.37% 5.53% 8.88% 8.27% 8.87% 30 sep % 13.19% 14.49% 16.25% 21.45% 17.08% 14.71% 16.20% 31 oct % 16.41% 11.12% 16.19% 14.81% 15.31% 10.87% 14.12% 30 nov % 15.84% 10.93% 13.79% 18.09% 11.34% 10.64% 13.44% 31 dic % 17.78% 11.48% 14.22% 19.74% 11.05% 10.77% 14.17% 31 ene % 22.65% 23.46% 19.54% 34.06% 18.74% 14.67% 22.19% 29 feb % 22.46% 21.07% 24.17% 26.72% 17.94% 25.06% 22.90% 31 mar % 32.35% 20.19% 27.45% 33.75% 20.27% 25.06% 26.51% 30 abr % 13.81% 4.62% 3.44% 1.25% 4.49% 7.77% 5.90% 31 may % 3.29% -3.12% -2.04% % 0.30% -9.08% -3.72% 30 jun % 7.13% 7.75% 8.67% 10.81% 12.14% 8.05% 9.09% 31 jul % 11.92% 12.24% 5.64% 5.01% 8.82% 10.20% 8.97% 31 ago % 18.45% 19.57% 14.14% 17.23% 15.09% 15.72% 16.70% 30 sep % 18.48% 27.81% 27.20% 38.92% 25.98% 25.15% 27.26% 31 oct % 16.96% 13.99% 19.90% 22.05% 17.01% 15.97% 17.65% 30 nov % 24.16% 16.20% 28.36% 44.87% 19.91% 24.89% 26.40% 31 dic % 49.98% 11.29% 40.50% 42.62% 57.46% 49.47% 41.89% 31 ene % 16.82% 15.38% 14.71% 11.15% 11.39% 15.86% 14.22% 28 feb % 31.36% 34.39% 37.02% 48.49% 27.24% 36.43% 35.82% 31 mar % % % % % % % % 30 abr % 27.07% 31.79% 31.12% 37.61% 27.64% 32.38% 31.27% 31 may % 16.90% 14.11% 16.48% 12.34% 16.21% 13.06% 14.85% 30 jun % 34.69% 37.05% 40.83% 54.89% 42.69% 44.14% 42.38% 31 jul % 29.90% 43.67% 33.71% 40.61% 29.01% 34.88% 35.30% 31 ago % 21.92% 22.35% 23.76% 24.64% 21.97% 23.06% 22.95% 30 sep % 66.43% 68.59% 59.34% 59.14% 61.92% 59.91% 62.55% 31 oct % 3.43% 10.59% 1.21% 1.64% 3.86% 5.21% 4.32% 30 nov % 38.30% 46.21% 36.45% 55.85% 30.16% 36.92% 40.65% 31 dic % 26.14% 35.32% 32.81% 50.63% 18.08% 30.15% 32.19% 31 ene % 47.50% 61.02% 48.49% 55.32% 51.98% 48.33% 52.11% 28 feb % 23.50% 28.68% 14.98% 27.96% 11.62% 21.61% 21.39% 31 mar % -3.86% % -6.19% -3.04% 8.56% -9.20% -4.53% 30 abr % % -9.14% -9.22% -5.17% -5.89% % -9.30% 31 may % % % % % % % % 30 jun % % % % % % % % 31 jul % 49.77% 52.62% 40.40% 50.40% 44.45% 43.90% 46.92% 31 ago % 20.51% 34.37% 27.07% 36.64% 26.20% 28.41% 28.87% 30 sep % 4.08% 2.13% 6.62% 3.59% 8.55% 5.10% 5.01% 31 oct % 24.72% 28.50% 34.78% 30.74% 26.08% 24.06% 28.15% 30 nov % 1.70% 6.84% 5.25% 4.34% 7.93% 1.76% 4.64% 31 dic % 29.69% 38.03% 34.24% 33.51% 26.00% 28.54% 31.67% 31 ene % % % -9.15% % -7.77% -8.81% % 28 feb % -6.04% % % % -4.92% % % 31 mar % 9.43% 3.82% 6.27% 6.88% 5.81% 5.80% 6.33% 30 abr % 4.94% 7.34% -0.55% -1.12% 0.28% 2.49% 2.23% 31 may % 5.77% 2.71% -0.94% -0.05% 1.61% 0.31% 1.57% 30 jun % 11.24% 14.13% 18.25% 18.80% 9.93% 8.03% 13.40% 31 jul % 15.26% 18.38% 15.59% 18.01% 13.43% 14.52% 15.86% 31 ago % 3.10% -5.81% 4.72% -1.44% 3.66% 0.71% 0.82% 30 sep % 7.09% 8.92% 5.07% 7.65% 11.21% 6.10% 7.67% 31 oct % 15.59% 14.17% 13.84% 18.80% 20.41% 16.42% 16.40% 30 nov % 21.22% 22.76% 22.30% 32.07% 17.31% 24.32% 23.33% 31 dic % 28.40% 16.11% 11.92% 14.04% 15.92% 16.78% 17.20% 31 ene % % % % % % % % 29 feb % 11.69% 6.79% 6.87% 6.77% 6.64% 7.01% 7.63% 31 mar % -0.03% -0.71% -0.58% 2.78% 3.36% 2.53% 1.23% % % % % % % %

111 Fuente: Informes mensuales de rentabilidades de los fondos de pensiones en ASOFONDOS FONDO DE CESANTÍAS RENTABILIDADES PROMEDIO MES. TODOS LOS MESES DIAS MES SKANDIA SANTANDER COLFONDOS PROTECCIÓN PORVENIR HORIZONTE PROMEDIO MES AÑOS T.E.A. 31 ene % 8.82% 3.69% 6.96% 10.83% 4.27% 8.08% 28 feb % 15.73% 8.38% 9.31% 14.65% 15.84% 12.74% 31 mar % -0.15% 7.18% 5.05% 10.03% 6.67% 6.12% 30 abr % 15.88% 8.17% 13.24% 13.32% 13.69% 12.47% 31 may % 17.40% 11.71% 23.90% 27.61% 14.67% 18.03% 30 jun % 34.71% 13.70% 40.74% 38.48% 20.42% 26.84% % 31 jul % 35.76% 23.88% 16.29% 3.99% 27.28% 20.00% 31 ago % -8.36% 19.51% -7.37% -7.40% -0.24% -1.31% 30 sep % 10.37% 8.57% -0.16% 11.04% 10.66% 6.88% 31 oct % 3.34% 9.38% 19.29% 7.49% 11.32% 10.70% 30 nov % 21.54% 18.13% 38.72% 11.10% 13.71% 22.37% 31 dic % 16.67% 23.27% 28.86% 26.69% 27.09% 25.19% 31 ene % 9.80% 11.43% 5.33% 20.83% 7.89% 11.13% 28 feb % 11.68% 15.28% 15.18% 11.93% 31.38% 17.35% 31 mar % 0.59% 6.28% 8.91% 9.00% 1.59% 5.92% 30 abr % 3.46% 10.71% 8.77% 10.41% 2.64% 7.43% 31 may % 15.67% 12.70% 21.57% 13.98% 14.62% 16.62% 30 jun % 14.07% 17.78% 20.59% 12.24% 17.22% 16.69% % 31 jul % 7.01% 12.01% 8.07% 15.94% 13.14% 10.97% 31 ago % 4.26% 3.13% 8.38% 9.84% 5.04% 6.94% 30 sep % 11.85% 12.06% 13.68% 14.68% 13.58% 12.99% 31 oct % 9.07% 8.79% 7.52% 24.84% 5.94% 12.29% 30 nov % 8.58% 10.40% 14.51% 3.98% 8.33% 10.82% 31 dic % 5.84% 21.56% 15.98% 9.84% 8.73% 12.31% 31 ene % 21.74% 15.06% 17.38% 18.83% 18.15% 18.56% 29 feb % 21.30% 18.18% 24.07% 31.07% 24.48% 24.69% 31 mar % 17.07% 9.93% 21.13% 11.62% 13.45% 17.22% 30 abr % -8.52% 4.03% % -5.21% 3.80% -0.39% 31 may % 3.10% -4.35% -9.40% -4.65% % -3.46% 30 jun % 2.73% 2.57% 8.81% 12.40% 3.75% 5.47% % 31 jul % 5.93% 7.10% 3.93% 15.72% 7.15% 7.24% 31 ago % 16.25% 14.75% 18.76% 9.29% 15.91% 13.87% 30 sep % 19.71% 17.52% 21.23% 11.11% 16.08% 16.50% 31 oct % 7.90% 12.45% 15.67% 52.22% 15.23% 19.35% 30 nov % 8.39% 17.73% 18.51% 11.06% 17.50% 14.11% 31 dic % 21.99% 72.20% 47.15% 57.55% % 57.91% 31 ene % 10.06% 10.21% 8.16% 4.54% 17.24% 10.22% 28 feb % 19.88% 17.76% 11.13% 14.23% 20.20% 16.57% 31 mar % % % % % % % 30 abr % 21.12% 22.27% 22.79% 21.92% 20.48% 21.53% 31 may % 13.99% 13.31% 12.22% 14.97% 11.63% 13.63% 30 jun % 23.33% 24.53% 27.27% 33.96% 26.51% 26.13% % 31 jul % 23.58% 15.18% 15.82% 33.60% 28.25% 23.10% 31 ago % 20.08% 12.96% 10.87% 22.66% 15.62% 16.64% 30 sep % 63.29% 52.20% 57.31% 55.23% 66.30% 58.70% 31 oct % 7.48% -5.53% % 5.05% -2.01% -1.19% 30 nov % 28.63% 29.51% 24.56% 34.41% 30.79% 28.56% 31 dic % 15.84% 18.72% 20.24% 12.09% 17.79% 17.85% 31 ene % 38.21% 40.09% 38.71% 59.62% 41.57% 44.31% 28 feb % 28.49% 13.76% 22.21% 20.43% 18.58% 21.19% 31 mar % % % % -8.61% -8.90% % 30 abr % -8.41% % % % % % 31 may % % % % % % % 30 jun % % % % % % % % 31 jul % 40.69% 24.17% 37.42% 36.70% 18.17% 31.10% 31 ago % 28.67% 12.94% 27.89% 17.29% 19.17% 19.86% 30 sep % 2.44% 3.20% 5.07% 3.89% 3.05% 3.92% 31 oct % 22.31% 24.69% 19.51% 20.24% 16.65% 19.45% 30 nov % 6.70% 2.97% 2.89% 6.71% -0.47% 4.62% 31 dic % 26.73% 26.26% 19.28% 20.51% 13.72% 20.38% 31 ene % % % -1.63% -8.81% % -8.70% 30 feb % % % % % % % 31 mar % 0.93% 3.68% -0.23% 7.23% 0.80% 3.11% 30 abr % -0.90% 3.69% 1.19% -3.29% -0.67% -0.08% 31 may % 3.19% 4.12% 1.46% 0.50% 5.58% 3.71% 30 jun % 9.97% 14.02% 11.77% 7.58% 1.57% 8.43% % 31 jul % 13.02% 7.61% 6.84% 8.21% 4.02% 7.90% 31 ago % 4.72% 4.60% 5.15% 0.06% -4.99% 1.38% 30 sep % 13.61% 4.40% 5.84% 0.45% 3.07% 5.57% 31 oct % 13.52% 10.70% 13.34% 11.80% 8.45% 10.58% 30 nov % 16.67% 12.87% 12.48% 13.67% 13.08% 13.57% 31 dic % 9.21% 3.79% 5.16% 7.46% 7.43% 6.67% 31 ene % % % % % % % 29 feb % 3.22% 4.70% 2.38% 1.55% 4.01% 3.47% % 31 mar % 1.63% -1.71% -0.59% 4.89% 0.18% 0.46%

112 Fuente: Informes mensuales de rentabilidades de los fondos de pensiones en ASOFONDOS FONDO DE PENSIONES VOLUNTARIAS RENTABILIDADES PROMEDIO MES. TODOS LOS MESES DIAS MES MANAGED SANTANDER HORIZONTE PORVENIR PROTECCIÓN COLFONDOS INV COLOMBIA PROMEDIO MES AÑOS T.E.A. 31 ene % 9.47% 2.92% 13.68% 16.48% 0.00% 8.51% 28 feb % 17.74% 17.94% 12.33% 12.04% 6.38% 13.29% 31 mar % 4.60% 6.82% 7.64% 10.69% 12.63% 8.48% 30 abr % 15.80% 16.16% 25.19% 10.07% 9.24% 15.29% 31 may % 13.01% 25.74% 24.06% 15.24% 15.53% 18.72% 30 jun % 23.05% 25.29% 25.57% 29.60% 18.77% 24.46% % 31 jul % 5.60% 21.55% 13.36% 1.99% 21.30% 12.76% 31 ago % % -8.03% 9.76% % 5.10% -4.32% 30 sep % 4.58% -4.63% 7.82% 1.69% -3.15% 1.26% 31 oct % 13.57% 28.86% 5.27% 11.95% 11.13% 14.16% 30 nov % 16.30% 19.85% 11.25% 15.15% 19.67% 16.44% 31 dic % 8.12% 27.64% 12.37% 10.00% 17.93% 15.21% 31 ene % 10.94% 9.44% 11.42% 7.25% 4.91% 8.79% 28 feb % 11.43% 21.38% 11.70% 11.28% 16.60% 14.48% 31 mar % 6.00% 8.23% 7.00% 10.30% 0.80% 6.47% 30 abr % 10.11% 11.59% 18.64% 9.84% 10.19% 12.07% 31 may % 11.34% 15.58% 9.96% 16.89% 13.00% 13.35% 30 jun % 10.29% 10.67% 26.13% 15.04% 19.09% 16.24% % 31 jul % 11.11% 14.54% 16.06% 7.56% 9.49% 11.75% 31 ago % 9.04% 0.14% 14.20% 13.51% 3.08% 7.99% 30 sep % 8.01% 16.56% 20.28% 10.73% 11.20% 13.36% 31 oct % 8.10% 2.94% 9.42% 13.24% 10.94% 8.93% 30 nov % 8.40% 6.73% 4.43% 12.19% 9.79% 8.31% 31 dic % 7.66% 3.41% 10.54% 8.08% 7.65% 7.47% 31 ene % 11.71% 13.32% 14.07% 13.86% 14.24% 13.54% 29 feb % 17.92% 9.01% 16.38% 14.39% 13.35% 14.24% 31 mar % 10.97% 14.42% 15.32% 38.83% 21.60% 20.18% 30 abr % 6.50% 1.01% 0.34% 2.59% 2.80% 3.60% 31 may % 1.75% -9.55% -5.23% -2.39% -2.44% -1.98% 30 jun % 8.30% 0.26% 4.70% 8.06% 4.97% 5.33% % 31 jul % 10.13% 9.46% 12.15% 8.49% 4.65% 8.74% 31 ago % 14.27% 28.71% 28.07% 7.33% 14.46% 17.64% 30 sep % 11.11% 26.04% 8.43% 13.55% 17.08% 14.77% 31 oct % 9.63% 17.19% 12.89% 11.76% 10.64% 11.96% 30 nov % 11.87% 26.87% 15.64% 8.06% 10.29% 14.48% 31 dic % 12.24% 27.41% 26.52% 31.83% 21.27% 25.23% 31 ene % 16.55% 16.40% 12.90% 8.71% 18.61% 14.11% 28 feb % 18.12% 15.22% 16.98% 12.48% 15.94% 15.25% 31 mar % 0.11% % -3.32% % -7.13% -6.92% 30 abr % 21.86% 25.88% 19.01% 25.78% 20.54% 21.08% 31 may % 11.87% 14.49% 15.77% 10.26% 14.07% 13.65% 30 jun % 19.37% 22.90% 23.69% 25.31% 19.75% 21.57% % 31 jul % 25.88% 18.28% 27.94% 19.06% 14.32% 20.73% 31 ago % 16.35% 19.77% 15.27% 13.77% 11.89% 14.72% 30 sep % 52.59% 54.85% 40.04% 51.33% 44.75% 48.01% 31 oct % 13.69% 15.55% 0.92% -5.74% -4.77% 3.94% 30 nov % 19.52% 19.75% 35.13% 14.70% 16.48% 44.20% 23.81% 31 dic % 12.63% 12.69% 9.29% 13.29% 13.55% 24.91% 14.08% 31 ene % 28.16% 29.46% 45.50% 19.25% 21.06% 53.10% 32.75% 28 feb % 22.41% 21.65% 8.40% 21.35% 12.80% 50.91% 22.92% 31 mar % % -0.78% -4.20% % -8.53% % -7.86% 30 abr % -1.95% % -9.41% % % % % 31 may % % % % % % % % 30 jun % % % % % % 3.92% % % 31 jul % 54.41% 10.53% 7.08% 23.04% 5.61% 27.93% 21.43% 31 ago % 37.20% 21.82% 16.39% 22.55% 4.09% 14.29% 19.39% 30 sep % 13.69% 3.77% 2.83% 7.36% 8.17% 11.23% 7.84% 31 oct % 19.49% 7.61% 10.34% 16.44% 15.12% 16.03% 14.17% 30 nov % 3.91% 1.41% 6.18% 0.96% 2.91% 4.78% 3.36% 31 dic % 20.63% 4.32% 8.18% 10.01% 11.84% 19.06% 12.34% 31 ene % -3.93% -3.21% -5.86% 0.35% -6.00% -2.55% -3.53% 28 feb % -6.51% -6.07% -6.70% -4.84% -4.44% -2.70% -5.21% 31 mar % 5.68% -0.07% 0.31% -4.39% 4.28% 6.06% 1.98% 30 abr % 2.56% -0.32% -0.26% -0.04% -2.25% 3.20% 0.48% 31 may % 5.55% 0.20% -0.20% 8.11% 7.47% 8.45% 4.93% 30 jun % 7.83% -0.27% 6.85% -3.57% 8.00% 3.65% 3.75% % 31 jul % 9.34% 0.44% 9.06% 3.26% 6.04% 6.91% 5.84% 31 ago % 1.07% 5.79% -3.35% 0.33% 5.84% -5.78% 0.65% 30 sep % 22.53% 7.46% 9.00% 6.01% 4.11% 7.09% 9.37% 31 oct % 11.31% 11.00% 10.81% 12.00% 6.51% 10.00% 10.27% 30 nov % 12.56% 8.65% 17.96% 4.97% 7.28% 12.89% 10.72% 31 dic % 7.32% 5.94% 11.54% 0.27% 3.89% 7.74% 6.12% 31 ene % 1.00% % % -1.05% 4.71% 1.32% -5.78% 29 feb % 5.68% 7.04% 0.37% 8.00% 3.10% 5.37% 4.93% % 31 mar % 8.49% 2.87% 2.87% 3.25% 6.15% 4.81% 4.74%

113 ANALISIS DEL VOLUMEN DE OPERACIONES EN SEN Basados en el informe de operaciones publicado en la página web del Banco de República 1 realizadas en el Sistema Electrónico de Negociación (SEN) 2 para el periodo comprendido entre Enero de 2007 a Abril de 2008, se realizan los siguientes cálculos, representados gráficamente con su respectivo análisis, según las clasificaciones indicadas. Agrupación por Tipo de Rueda: Entendiendo la Rueda como el tipo de operación realizada tal como operación Spot, de contado (cumplimiento t+1 ó t+2), simultaneas (operación spot con un compromiso futuro - inferior a un año - de la operación contraria) y TRD, se observa que la concentración de ruedas se encuentran en operaciones spot con una participación del 72% y por las simultaneas con una participación del 28%. Agrupación por Tipo de Instrumento: Al realizar agrupaciones por tipo de instrumento, se observa que la concentración del 60% aprox. del volumen de operación se encuentra en los TES tasa fija con 2009/05/14 (23.95%), 2020/07/24 (23.16%) y 2010/11/24 (12.52%); por tanto se consideran los TES mas líquidos del mercado más líquidos del mercado SEN: Este sistema agrupa las negociaciones realizadas sobre TES de los creadores de mercado y aspirantes a creadores de mercado, según definición de la Resolución 998 de 2003

114 Agrupación por Moneda. Al realizar agrupaciones por tipo de moneda, resultan dos grandes grupos: los expresados en Pesos Colombianos (COP) y en Unidades de Valor Real (UVRs); donde los primeros concentran el 93.31% de negociaciones y el segundo tan solo el 6.69%. Agrupación por Tasa. Al realizar agrupaciones por tipo de tasa, se observa una concentración del 99.79% en los TES expresados a tasa Fija.

115 Negociación TES Tasa fija en Pesos. Al analizar las negociaciones realizadas sobre TES tasa fija expresados en pesos Colombianos, se observa que los mas líquidos del mercado son los que tienen vencimiento 2009/05/14 (25.74%), 2020/07/24 (24.89%), 2010/11/24 (13.45%) y 2008/08/22 (9.32%). Distribución Tes Tasa Fija en COP. Al realizar análisis de los Tes tasa fija más líquidos del mercado se tiene que encabeza la lista los Julios del 2020, seguidos por los Noviembres del 2010, Mayos y Julios del 2009 y los Agostos del 2008.

116 GLOBAL WEALTH MANAGEMENT NORTH AMERICA Morgan Stanley & Co. Incorporated Paul J. Mazzilli +1 (1) Dominic Maister +1 (1) ETF Listings Growth Continues, Assets Hold Steady as Equity Markets Decline This is our comprehensive quarterly report on US-listed ETFs. It includes a summary of investment applications, excerpts from our strategy reports, our outlook for related markets, index data, and individual profiles for the 227 ETFs in our coverage universe. Assets in US ETFs have held steady this year despite a recent decline in equities. Almost 70% of US-listed ETFs have been issued since the beginning of 2006; however, the largest 50 ETFs account for the vast majority of volume and assets. The US listed ETF market is now $600 billion in assets as new inflows have roughly offset the decline in equities. Markets accessible through ETFs include US and international equities and fixed income, commodities, and currencies. ETFs provide access to our favorite markets and sectors. On a global basis, Morgan Stanley s strategists currently prefer larger-cap stocks and the Energy, Health Care and Consumer Staples Sectors in the US. Many of our analysts favored industries including Aerospace & Defense, Oil & Gas equipment and services and Clean Energy can be accessed with ETFs. Our global strategists are neutral on most international developed markets and are slightly overweight Asia and the Emerging Markets. Total Assets ($Bil) Assets ($Bil) Total ETFs US-Listed ETF Growth Assets ($Bil) Total ETFs Source: Bloomberg, Morgan Stanley as of 5/9/ Number of ETFs David Perlman Mitchell Schorr Michael Ronzio What s New With over 466 new ETFs listed in the US since the beginning of 2006, it is no longer practical to provide research on every ETF. We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across each market segment representing a large majority of ETF assets. Basic data on all available US listed ETFs is still included on pages 4-14 where we highlight in bold our favored ETFs in each market segment of our coverage universe. Selection criteria for favored ETFs include Morgan Stanley s market outlook, index composition and ETF expenses and liquidity. Report Overview Recent Industry Developments (15-16) Overview and Strategies (17-23, 63-74) US Equity ETF Profiles (79-210) International Equity ETF Profiles ( ) Fixed-Income ETF Profiles ( ) Commodity and Currency ETF Profiles ( ) Recent Strategy Reports Targeting Industry Exposure with ETFs (24-56) Year-Over-Year Listing Growth Slows in Q (57-62) Prices as of May 12, 2008, unless otherwise indicated. As with any investment, ETFs have risks. These include the general risks associated with investing in the underlying assets, potential tracking error, and the possibility that particular indexes may lag other market segments or active managers. (See Investment Concerns on page 314.) ETFs include index-linked funds regulated under the Investment Company Act of 1940 that trade on US securities exchanges under exceptive relief from the Securities and Exchange Commission (SEC) as well as grantor trusts consisting of a basket of stocks and marketed as HOLDRS. US-listed, open-end fund ETFs must be offered under and sold only pursuant to a Prospectus. US-listed ETFs may not be marketed or sold in a number of jurisdictions and may not be suitable for all investors. Morgan Stanley Sales Personnel should check with the Law Division to clarify whether they may market the ETFs in a particular jurisdiction. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

117 GLOBAL WEALTH MANAGEMENT Table of Contents Favored ETF Investment Ideas 3 List of Available US-Listed 4-14 Industry Developments, Market Overview & Investment Applications Implementing Morgan Stanley Asset Allocation Models with ETFs Global Wealth Management (GWM) Asset Allocation Frameworks Global Wealth Management (GWM) Fixed-Income Asset Allocation Frameworks 22 Morgan Stanley US Large-Cap Sector Asset Allocation Model 23 Featured Strategy Reports Ready, Aim, Fire: Targeted Industry Exposure with Industry ETFs Year-Over-Year Listings Growth Slows in First Quarter of Strategies Using Index-Linked ETFs Core/Satellite 63 Core Equity Investments 64 Market Cap Investing 65 Style Diversification 66 Sector and Industry Investing 67 International Investing 68 Dividend Investing 69 Leveraged & Inverse Investing 70 Investing in Commodities 71 Investing in Foreign Currencies 72 Recognizing Losses Using ETFs 73 Prospective Tax Planning with ETFs 74 US Equity Market Performance, Outlook & Individual US Equity ETF Profiles International Equity Market Performance, Outlook & Individual International Equity ETF Profiles Fixed-Income Market Performance, Outlook & Fixed-Income ETF Profiles Commodities and Currencies Market Performance, Outlook & Individual Commodity and Currency ETF Profiles Appendices Investment Concerns 314 A Closer Look at ETF Structures 315 ETF In-Kind Creation/Redemption Process 316 Selected Index Descriptions Disclosures 322 2

118 GLOBAL WEALTH MANAGEMENT FAVORED ETF INVESTMENT IDEAS This list highlights ETFs that, in our opinion, best target Morgan Stanley s global research recommendations. US Equity In the US, our strategists expect the S&P 500 to remain range bound between 1260 and Amid increased uncertainty and heightened volatility, our strategists continue to favor large-cap stocks over small-cap stocks. In addition to providing greater earnings support from growth outside of the US, large-cap stocks continue to appear relatively more attractive than small or mid-cap stocks on a number of valuation measures. See page 78 for details on our outlook for the US equity market. Large-Cap Diamonds (DIA) ishares S&P 100 (OEF) Dividend Income ishares DJ Select Dividend Index Fund (DVY) WisdomTree High-Yielding Equity Fund (DHS) Large-Cap Sectors Energy Select Sector SPDR (XLE) Health Care Select Sector SPDR (XLV) Consumer Staples Select Sector SPDR (XLP) Industry ishares DJ US Aerospace & Defense (ITA) ishares DJ US Oil & Gas Exploration & Production (IEO) ishares DJ US Oil & Gas Equipment & Services (IEZ) SPDR S&P Biotech ETF (XBI) Claymore S&P Global Water Index ETF (CGW) PowerShares WilderHill Clean Energy Portfolio (PBW) US Fixed Income Our strategists currently favor higher quality assets including mortgage-backed securities and investment grade credit. See page 283 for details on our outlook. Vanguard Total Market Bond Fund (BND) ishares Lehman MBS Fund (MBB) ishares iboxx $ Investment Grade Corp. Bond Fund (LQD) ishares Lehman US TIPS (TIP) International Equity Our strategists have a neutral outlook on most major developed markets. However, they are slightly overweight Asia and the Emerging Markets. In our opinion, most investors remain too focused on domestic stocks. ETFs provide diversified and low cost vehicles for many investors to gain access to international equities, which currently make up 58% of the MSCI All Country World Index. See page 215 for details on our outlook for international markets. Broad International ishares MSCI EAFE Index Fund (EFA) Vangaurd Europe Pacific ETF (VEA) Emerging Markets Vanguard Emerging Markets ETF (VWO) Regional International Vanguard European ETF (VGK) Vanguard Pacific ETF (VPL) Country-Specific International ishares MSCI Hong Kong (EWH) ishares MSCI Singapore (EWS) ishares MSCI South Korea (EWY) ishares MSCI Taiwan (EWT) Commodities and Currencies We currently favor three ways to get commodity exposure with ETFs: Gold as a core commodity holding to provide portfolio diversification; ETFs with diversified exposure to energy and other commodities; and agricultural commodities related to global growth and emerging market demand. See page 300 for details on our outlook for the commodity and currency markets. StreetTRACKS Gold Trust (GLD) PowerShares DB Com. Index Tracking Fund (DBC) PowerShares DB Agriculture Fund (DBA) 3

119 GLOBAL WEALTH MANAGEMENT US-Listed 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. Page US Major Market ETFs Broad Market ishares DJ US Total Market IYY IYYIV 1, Y 79 ishares Russell 3000 IWV IWVIV 2, , Y 80 Vanguard Extended Market ETF VXF EAH 3, Y 81 Vanguard Total Stock Market ETF VTI TSJ 3, , Y 82 Fidelity Nasdaq Composite ONEQ ONEQI 2, Y * First Trust Value Line 100 ETF FVL FVLIV N * ishares NYSE Composite NYC NYCIV 1, Y * ishares S&P 1500 ISI ISIIV 1, N * PowerShares FTSE RAFI 1500 Sml-Mid PRFZ PRFZIV 1, N * SPDR DJ Wilshire Total Market TMW FFY Y * WisdomTree Earnings Index EXT EXTIV N * WisdomTree Total Dividend DTD DTDIV Y * Large-Cap Diamonds DIA DXV ,813 14,398 Y 83 ishares Russell 1000 IWB IWBIV ,734 1,178 Y 84 ishares S&P 100 OEF OEFIV ,012 1,896 Y 85 ishares S&P 500 IVV IVVIV ,405 3,145 Y 86 PowerShares QQQ QQQQ QXV , ,257 Y 87 PowerShares FTSE RAFI US 1000 PRF PRFIV 1, Y 88 Rydex Russell Top 50 XLG XLGIV Y 89 Rydex S&P 500 Equalweight RSP RSPIV , Y 90 S&P Depositary Receipts (SPDR) SPY SXV , ,805 Y 91 Vanguard Large-Cap ETF VV BVH , Y 92 WisdomTree LargeCap Dividend DLN DLNIV Y 93 First Trust Large Cap Core AlphaDEX FEX FEXIV N * First Trust NASDAQ-100 Eq. Wght. QQEW QQEWI Y * ishares NYSE 100 NY NYIV Y * PowerShares Dynamic Large Cap PJF PJFIV N * RevenueShares Large Cap ETF RWL RWLIV na N * SPA MarketGrader Large Cap 100 Fund SZG SZGIV N * SPDR DJ Wilshire Lagre Cap ELR EZR Y * Vanguard Mega Cap 300 ETF MGC MGCIV N * WisdomTree Dividend Top 100 DTN DTNIV Y * WisdomTree Earnings 500 Index EPS EPSIV N * WisdomTree Earnings Top 100 Index EEZ EEZIV N * Mid-Cap ishares Russell MidCap IWR IWRIV , Y 94 ishares S&P MidCap 400 IJH IJHIV , Y 95 Mid Cap S&P Depository Receipts MDY MXV ,596 4,716 Y 96 Vanguard Mid-Cap ETF VO BVO , Y 97 Claymore/Zacks Mid-Cap Core ETF CZA CZAIV N * First Trust Mid Cap Core AlphaDEX FNX FNXIV N * PowerShares Dynamic Mid Cap PJG PJGIV Y * PowerShares NASDAQ Next-Q Portfolio PNXQ PNXQIV na N * RevenueShares Mid Cap ETF RWK RWKIV na na N * SPA MarketGrader Mid Cap 100 Fund SVD SVDIV N * SPDR DJ Wilshire Mid Cap EMM EYM Y * WisdomTree MidCap Dividend DON DONIV Y * WisdomTree MidCap Earnings Index EZM EZMIV N * Small-Cap ishares Russell 2000 IWM IWMIV 1, ,895 75,380 Y 98 ishares S&P SmallCap 600 IJR IJRIV ,359 1,581 Y 99 Vanguard Small-Cap ETF VB BVP 1, , Y 100 First Trust Small Cap Core AlphaDEX FYX FYXIV N * PowerShares Dynamic Small Cap PJM PJMIV Y * PowerShares FTSE NASDAQ Small Cap PQSC PQSCIV 1, na N * PowerShares Zachs SC Portfolio PZJ PZJIV Y * RevenueShares Small Cap ETF RWJ RWJIV na na N * SPA MarketGrader Small Cap 100 Fund SSK SSKIV N * SPDR DJ Wilshire Small Cap DSC DVC 1, Y * WisdomTree SmallCap Dividend DES DESIV Y * WisdomTree SmallCap Earnings Index EES EESIV N * Micro-Cap ishares Russell Micro-Cap Index Fund IWC IWCIV 1, Y 101 First Trust DJ Select MicroCap FDM RDM Y * PowerShares Zachs Micro-Cap PZI HXZ Y * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 4

120 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. US Style ETFs Broad Market Growth/Value ishares Russell 3000 Growth IWZ IWZIV 1, Y 102 ishares Russell 3000 Value IWW IWWIV 1, Y 103 First Trust Multi Cap Growth AlphaDEX FAD FADIV N * First Trust Multi Cap Value AlphaDEX FAB FABIV N * Large-Cap Growth/Value/Core ishares Morningstar Large Growth JKE JKEIV N 104 ishares Russell 1000 Growth IWF IWFIV ,751 3,224 Y 105 ishares S&P 500 Growth IVW IVWIV ,136 1,239 Y 106 PowerShares Dyn. Large-Cap Growth PWB BWW Y 107 Vanguard Growth ETF VUG PVJ , Y 108 Claymore/Great Companies LC Growth XGC XGCIV N * First Trust LC Growth Opp. AlphaDEX FTC FTCIV N * First Trust LC Value Opp. AlphaDEX FTA FTAIV N * First Trust NASDAQ-100 Ex-Technology QQXT QQXTI N * First Trust Strategic Value Index Fund FDV HDX N * Rydex S&P 500 Pure Growth RPG RPGIV Y * SPDR DJ Wilshire Lagre Cap Growth ELG FLG N * Vanguard Mega Cap 300 Growth ETF MGK MGKIV N * ishares Morningstar Large Value JKF JKFIV N 109 ishares Russell 1000 Value IWD IWDIV ,953 2,194 Y 110 ishares S&P 500 Value IVE IVEIV , Y 111 PowerShares Dyn. Large-Cap Value PWV DBW Y 112 Vanguard Value ETF VTV PVW , Y 113 Rydex S&P 500 Pure Value RPV RPVIV Y * SPDR DJ Wilshire LC Value ELV FLV N * Vanguard Mega Cap 300 Value ETF MGV MGVIV N * WisdomTree Low P/E Index EZY EZYIV N * ishares Morningstar Large Core JKD JKDIV N * Mid-Cap Growth/Value/Core ishares Morningstar Mid Growth JKH JKHIV N 114 ishares Russell MidCap Growth IWP IWPIV , Y 115 ishares S&P MidCap 400 Growth IJK IJKIV , Y 116 PowerShares Dyn. Mid-Cap Growth PWJ GBW Y 117 Vanguard Mid Cap Growth ETF VOT BVG Y 118 PowerShares Dyn. Aggressive Grth. Port. PGZ PGZIV Y * Rydex S&P MidCap 400 Pure Growth RFG RFGIV Y * SPDR DJ Wilshire Mid Cap Growth EMG EDG Y * ishares Morningstar Mid Value JKI JKIIV N 119 ishares Russell MidCap Value IWS IWSIV ,348 1,029 Y 120 ishares S&P MidCap 400 Value IJJ IJJIV , Y 121 Vanguard Mid Cap Value ETF VOE BVS Y 122 PowerShares Dyn. Deep Value Port. PVM PVMIV N * PowerShares Dyn. Mid-Cap Value PWP HWBIOPV Y * Rydex S&P MidCap 400 Pure Value RFV RFVIV Y * SPDR DJ Wilshire Mid Cap Value EMV EYV Y * ishares Morningstar Mid Core JKG JKGIV N * Small-Cap Growth/Value/Core ishares Russell 2000 Growth IWO IWOIV 1, ,993 2,897 Y 123 ishares S&P SmallCap 600 Growth IJT IJTIV , Y 124 Vanguard Small-Cap Growth ETF VBK HVK Y 125 ishares Morningstar Small Growth JKK JKKIV N * PowerShares Dyn. Small-Cap Growth PWT DWBIOPV Y * Rydex S&P SmallCap 600 Pure Growth RZG RZGIV Y * SPDR DJ Wilshire Small Cap Growth DSG PSG N * ishares Russell 2000 Value IWN IWNIV 1, ,542 2,491 Y 126 ishares S&P SmallCap 600 Value IJS IJSIV , Y 127 Vanguard Small-Cap Value ETF VBR PVY Y 128 ishares Morningstar Small Value JKL JKLIV N * PowerShares Dyn. Small-Cap Value PWY RWBIOPV Y * Rydex S&P SmallCap 600 Pure Value RZV RZVIV Y * SPDR DJ Wilshire Small Cap Value DSV PSV N * ishares Morningstar Small Core JKJ JKJIV N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 5

121 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. US Sector and Industry ETFs Consumer Discretionary Cons Discretionary Sel. Sector SPDR XLY YXV ,693 Y 129 ishares DJ US Consumer Services IYC IYCIV Y 130 Vanguard Consumer Discretionary ETF VCR HVAX Y 131 First Trust Consumer Disc. AlphaDEX FXD FXDIV Y * PowerShares Dynamic Consumer Disc. PEZ PEZIV Y * Rydex S&P Eq. Wght. Cnsmr. Disc. RCD RCDIV N * Retail HOLDRS RTH IRH 18 0* 496 6,706 Y 132 SPDR S&P Retail ETF XRT KZR ,347 Y 133 ishares DJ US Home Construction ITB ITBIV ,174 Y 134 SPDR S&P Homebuilder ETF XHB HBM ,599 Y 135 FocusShares ISE Homebuilders Index Fund SAW SAWIV Y * FocusShares ISE-Revere Wal-Mart Supplier Index F WSI WSIIV Y * Market Vectors-Gaming ETF BJK BJKIV N * PowerShares Dyn. Bldg. & Construction PKB HKBETF Y * PowerShares Dynamic Leisure & Ent. PEJ DJBETF Y * PowerShares Dynamic Media PBS MJK Y * PowerShares Dynamic Retail PMR HKP Y * PowerShares FTSE RAFI Cnsmr Goods PRFG PRFGIV N * PowerShares FTSE RAFI Cnsmr Serv. PRFS PRFSIV N * Consumer Staples Consumer Staples Sel. Sector SPDR XLP PXV ,303 3,186 Y 136 ishares DJ US Consumer Goods IYK IYKIV Y 137 Vanguard Consumer Staples ETF VDC HVP Y 138 First Trust Consumer Staples AlphaDEX FXG FXGIV Y * PowerShares Dynamic Cnsmr. Staples PSL PSLIV Y * Rydex S&P Eq. Wght. Cnsmr. Stpls. RHS RHSIV N * PowerShares Dynamic Food & Beverage PBJ FJW Y * Energy Energy Select Sector SPDR XLE EXX ,591 23,344 Y 139 ishares DJ US Energy IYE IYEIV , Y 140 Vanguard Energy ETF VDE DVO Y 141 First Trust Energy AlphaDEX Fund FXN FXNIV Y * PowerShares Dynamic Energy PXI PXIIV Y * PowerShares FTSE RAFI Energy PRFE PRFEIV N * Rydex S&P Eq. Wght. Engergy RYE RYEIV N * ishares DJ US Oil Equipment & Serv. IEZ IEZIV N 142 ishares DJ US Oil & Gas Exp. & Prod. IEO IEOIV N 143 Oil Service HOLDRS OIH OXH 16 0* 2,520 7,269 Y 144 PowerShares Dyn. Oil & Gas Services PXJ HKM Y 145 SPDR S&P Oil & Gas Expl. & Drilling XOP KZO Y 146 First Trust ISE-Revere Natural Gas FCG FCGIV Y * PowerShares Dyn. Energy & Exp. PXE HKC Y * SPDR S&P Oil & Gas Equip. & Services ETF XES KZK Y * Financials Financial Select Sector SPDR XLF FXV , ,888 Y 147 ishares DJ US Financial IYF IYFIV ,167 Y 148 Vanguard Financials ETF VFH HVF Y 149 First Trust Financial AlphaDEX Fund FXO FXOIV N * PowerShares Dynamic Financial PFI PFIIV Y * PowerShares FTSE RAFI Financials PRFF PRFFIV N * Rydex S&P Eq. Wght. Financials RYF RYFIV N * ishares DJ US Broker Dealers IAI KOC ,297 Y 150 ishares DJ US Financial Services IYG IYGIV Y 151 KBW Bank ETF KBE KHE ,416 Y 152 KBW Regional Banking ETF KRE KZE ,392 Y 153 Regional Bank HOLDRS RKH XRH 19 0* 308 1,218 Y 154 ishares DJ US Insurance IAK KSF N * ishares DJ US Regional Banks IAT KAT Y * KBW Capital Mkts. ETF KCE KPE Y * KBW Insurance ETF KIE KIH Y * PowerShares Dynamic Banking Portfolio PJB PJBIV Y * PowerShares Dynamic Insurance PIC HKI Y * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 6

122 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. US Sector and Industry ETFs Cont'd Health Care- Broad Based Health Care Select Sector SPDR XLV NXV ,323 2,804 Y 155 ishares DJ US Healthcare IYH IYHIV Y 156 Vanguard Health Care ETF VHT HVH Y 157 First Trust Health Care AlphaDEX Fund FXH FXHIV N * PowerShares Dynamic Healthcare PTH PTHIV Y * PowerShares FTSE RAFI Health Care PRFH PRFHIV N * Rydex S&P Eq. Wght. Health Care RYH RYHIV N * ishares DJ Medical US Devices IHI IHIIV N 158 HealthShares Cardio Devices ETF HHE HHEIV N * HealthShares Dermatology & Wound HRW HRWIV N * HealthShares Diagnostics ETF HHD HHDIV Y * HealthShares Enabling Technologies ETF HHV HHVIV N * HealthShares Patient Care Services ETF HHB HHBIV N * ishares DJ US Healthcare Providers IHF IHFIV N * PowerShares Dynamic Hlthcr. Services PTJ PTJIV Y * Health Care- Biotechnology Biotech HOLDRS BBH IBH 15 0* Y 159 ishares Nasdaq Biotechnology IBB IBBIV ,142 1,630 Y 160 SPDR S&P Biotech XBI BIS Y 161 First Trust Amex Biotechnology FBT EBT Y * HealthShares Autoimmune-Inflamation HHA HHAIV N * HealthShares Cancer ETF HHK HHKIV N * HealthShares Cardiology ETF HRD HRDIV N * HealthShares Composite ETF HHQ HHQIV N * HealthShares Emerging Cancer ETF HHJ HHJIV Y * HealthShares GI/Gender Health ETF HHU HHUIV N * HealthShares Infectious Disease ETF HHG HHGIV N * HealthShares Metabolic-Endocrine HHM HHMIV N * HealthShares Neuroscience ETF HHN HHNIV N * HealthShares Opthamology ETF HHZ HHZIV N * HealthShares Orthopedic Repair ETF HHP HHPIV N * HealthShares Respiratory/Pulmanory HHR HHRIV N * PowerShares Dyn. Biotech & Genome PBE BJD Y * Health Care- Pharmaceuticals Pharmaceutical HOLDRS PPH IPH 19 0* Y 162 ishares DJ US Pharmaceuticals IHE IHEIV N * PowerShares Dynamic Pharmaceuticals PJP AJT Y * SPDR S&P Pharmaceuticals ETF XPH KZP Y * Industrials Industrial Select Sector SPDR XLI TXV ,548 6,168 Y 163 ishares DJ US Industrial IYJ IYJIV Y 164 Vanguard Industrials ETF VIS DVL Y 165 First Trust Industrials AlphaDEX Fund FXR FXRIV N * PowerShares Dynamic Industrials PRN PRNIV Y * PowerShares FTSE RAFI Industrials PRFN PRFNIV N * Rydex S&P Eq. Wght. Industrials RGI RGIIV N * ishares DJ Transportation Average IYT IYTIV ,542 Y 166 ishares DJ US Aerospace & Defense ITA ITAIV N 167 PowerShares Aerospace & Defense PPA HKR Y 168 Information Technology- Broad Based ishares DJ US Technology IYW IYWIV , Y 169 ishares Goldman Sachs Technology IGM IGMIV Y 170 Morgan Stanley Technology ETF MTK JMT N 171 Technology Select Sector SPDR XLK KXV ,291 4,523 Y 172 Vanguard Information Technology ETF VGT HVI Y 173 First Trust NASDAQ-100-Tech. Sector QTEC QTECI N * First Trust Technology AlphaDEX Fund FXL FXLIV Y * NYSE Arca Tech 100 ETF NXT NXTIV Y * PowerShares Dyn. Hrdwre & Cons. Elec. PHW HKH Y * PowerShares Dynamic Technology PTF PTFIV Y * PowerShares FTSE RAFI Telcm.& Tech. PRFQ PRFQIV N * Rydex S&P Eq. Wght. Technology RYT RYTIV N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 7

123 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. US Sector and Industry ETFs Cont'd Information Technology- Internet B2B Internet HOLDRS BHH 0.46 BUXB 2 0* 3 22 N * First Trust DJ Internet Index Fund FDN HDN Y * Internet Architecture HOLDRS IAH XAH 19 0* Y * Internet HOLDRS HHH HHI 12 0* Y * Internet Infrastructure HOLDRS IIH 4.06 YIH 9 0* N * Information Technology- Networking ishares Goldman Sachs Networking IGN IGNIV Y * Broadband HOLDRS BDH XDH 17 0* Y * PowerShares Dynamic Networking PXQ EJR Y * Information Technology- Semiconductor ishares S&P N.A. Technology-Semiconductors IGW IGWIV Y 174 Semiconductor HOLDRS SMH XSH 18 0* 1,228 10,725 Y 175 PowerShares Dynamic Semiconductors PSI SJG Y * SPDR S&P Semiconductor ETF XSD SCY Y * Information Technology- Software ishares Goldman Sachs Software IGV IGVIV Y 176 PowerShares Dynamic Software PSJ CJK Y * Software HOLDRS SWH XWH 13 0* Y * Materials ishares DJ US Basic Materials IYM IYMIV Y 177 Materials Select Sector SPDR XLB BXV ,660 14,538 Y 178 Vanguard Materials ETF VAW HVW Y 179 First Trust Materials AlphaDEX Fund FXZ FXZIV Y * Powershares Dynamic Basic Materials PYZ PYZIV Y * PowerShares FTSE RAFI Materials PRFM PRFMIV N * Rydex S&P Eq. Wght. Materials RTM RTMIV N * Market Vectors Steel Sector ETF SLX KLX Y 180 Natural Resources ishares S&P Natural Resource IGE IGEIV , Y 181 Market Vectors Gold Miners ETF GDX GMI ,844 3,562 Y 182 SPDR S&P Metals & Mining ETF XME KZD ,253 Y 183 Real Estate ishares Cohen & Steers Realty ICF ICFIV ,637 1,418 Y 184 ishares DJ US Real Estate IYR IYRIV ,076 8,734 Y 185 SPDR DJ Wilshire REIT RWR EWR , Y 186 Vanguard REIT ETF VNQ NVZ , Y 187 Adelante Shares RE Classics ETF ACK ACKIV N * Adelante Shares RE Composite ETF ACB ACBIV N * Adelante Shares RE Growth ETF AGV 23 AGVIV N * Adelante Shares RE Kings ETF AKB AKBIV N * Adelante Shares RE Shelter ETF AQS AQSIV N * Adelante Shares RE Value ETF AVU AVUIV N * Adelante Shares RE Yield Plus ETF ATY ATYIV N * First Trust S&P REIT Index Fund FRI FRIIV N * ishares FTSE EPRA/NAREIT North America IFNA IFNAIV N * ishares FTSE NAREIT Industrial/Office FIO FIOIV N * ishares FTSE NAREIT Mortgage REITs REM REMIV N * ishares FTSE NAREIT Real Estate 50 FTY FTYIV N * ishares FTSE NAREIT Residential REZ REZIV N * ishares FTSE NAREIT Retail RTL RTLIV N * Telecommunication Services ishares DJ US Telecommunications IYZ IYZIV Y 188 Vanguard Telecom Services ETF VOX DVT Y 189 PowerShares Dyn. Telecom & Wireless PTE HKZ Y * Telecom HOLDRS TTH ITH 13 0* Y * Wireless HOLDRS WMH IWH 18 0* 33 6 N * Utilities ishares DJ US Utilities IDU IDUIV Y 190 Utilities Select Sector SPDR XLU UXV ,414 5,322 Y 191 Vanguard Utilities ETF VPU HVJ Y 192 First Trust Utilities AlphaDEX Fund FXU FXUIV Y * PowerShares Dynamic Utilities PUI HKV Y * PowerShares FTSE RAFI Utilities PRFU PRFUIV N * Rydex S&P Eq. Wght. Utilities RYU RYUIV N * Utilities HOLDRS UTH XUH 18 0* Y * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 8

124 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. US Specialty Market ETFs Dividend Income ishares DJ Select Dividend DVY DVYIV , Y 193 PowerShares HY Equity Dividend Ach. PEY HEY Y 194 SPDR S&P Dividend ETF SDY SYW Y 195 Vanguard Dividend Appreciation ETF VIG GIG Y 196 WisdomTree High-Yielding Equity DHS DHSIV Y 197 Claymore/Zacks Dividend Rotation ETF IRO IROIV N * Claymore/Zacks Yield Hog ETF CVY CYM Y * First Trust Morningstar Div. Leaders FDL RDL Y * First Trust Value Line Dividend FVD FVDIV N * PowerShares Dividend Achievers PFM FKO Y * PowerShares High Grth. Rate Div. Ach. PHJ FKM Y * The Claymore/BBD High Income Index LVL LVLIV N * Vanguard High Dividend Yield VYM VYMIV Y * Custom PowerShares Dynamic Mkt Portfolio PWC FZM Y 198 PowerShares Water Resource PHO JDP , Y 199 PowerShares WilderHill Clean Energy PBW BWH , Y 200 Claymore/Clear Spinoff ETF CSD CSDIV Y * Claymore/Dorchester US-1 Capital Markets Index UEM UEMIV N * Claymore/Morningstar Information ETF MZN na MZNIV N * Claymore/Morningstar Manufacturing ETF MZG MZGIV N * Claymore/Morningstar Services ETF MZO MZOIV N * Claymore/Ocean Tomo Growth Index OTR na OTRIV N * Claymore/Ocean Tomo Patent ETF OTP OTPIV Y * Claymore/Robb Report Global Luxury ROB ROBIV N * Claymore/Sabrient Defender ETF DEF DEFIV Y * Claymore/Sabrient Insider ETF NFO NFAIV Y * Claymore/Sabrient Stealth ETF STH STBIV Y * Claymore/Zacks Sector Rotation ETF XRO XUO Y * FocusShares ISE-CCM Homeland Security Index Fu MYP na MYPIV Y * FocusShares ISE SINdex Fund PUF PUFIV Y * First Trust IPOX-100 Index Fund FPX XPT Y * First Trust ISE Water Index Fund FIW FIWIV Y * First Trust NASDAQ Clean Edge QCLN QCLNI N * First Trust Value Line Equity Allocation FVI FVIIV N * ishares KLD 400 Social Index Fund DSI DSIIV Y * ishares KLD Select Social Index Fund KLD KLDIV Y * Mactor Vectors-Envitonmental Services ETF EVX HVX Y * PowerShares Buyback Achievers PKW PKWIV N * PowerShares Cleantech Portfololio PZD PZDIV Y * PowerShares DWA Technical Leaders PDP PDPIV Y * PowerShares Dynamic MagniQuant PIQ PIQIV Y * PowerShares Dynamic OTC Portfolio PWO FZO Y * PowerShares Listed Private Equity PSP PSPIV Y * PowerShares Lux Nanotech PXN JDT Y * PowerShares S&P 500 BuyWrite Portfolio PBP MNV N * PowerShares Value Line Indstry Rotation PYH PYHIV N * PowerShares Value Line Timeliness PIV JDV Y * PowerShares WH Progressive Enegy PUW PUWIV Y * SPA MarketGrader 100 Fund SIH SIHIV N * SPA MarketGrader 200 Fund SNB na SNBIV N * SPA MarketGrader 40 Fund SFV na SFVIV N * TDAX Independence 2010 ETF TDD TDDIV na N * TDAX Independence 2020 ETF TDH TDHIV na N * TDAX Independence 2030 ETF TDN TDNIV na N * TDAX Independence 2040 ETF TDV TDVIV na N * TDAX Independence In-Target ETF TDX TDXIV na N * US Active ETFs PowerShares Active Alpha Multi-Cap Fund PQZ PQZIV na N * PowerShares Active AlphaQ Fund PQY PQYIV na N * PowerShares Active Mega-Cap Portfolio PMA PMAIV na N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 9

125 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. Leveraged Ultra S&P500 ProShares SSO SEV ,032 8,185 Y 201 Ultra QQQ ProShares QLD ECJ ,083 12,360 Y 202 Rydex 2x S&P 500 ETF RSU RSUIV N * Ultra Dow30 ProShares DDM DKB ,439 Y * Rydex 2x S&P MidCap 400 ETF RMM RMMIV N * Ultra MidCap400 ProShares MVV MXR Y * Rydex 2x Russell 2000 ETF RRY RRYIV 1, N * Ultra Russell2000 ProShares UWM UWMIV 2, ,020 Y * Ultra SmallCap600 ProShares SAA SAAIV N * Ultra Russell1000 Growth ProShares UKF UKFIV N * Ultra Russell1000 Value ProShares UVG UVGIV N * Ultra Russell MidCap Growth ProShares UKW UKWIV N * Ultra Russell MidCap Value ProShares UVU UVUIV N * Ultra Russell2000 Growth ProShares UKK UKKIV 1, N * Ultra Russell2000 Value ProShares UVT UVTIV 1, N * Ultra Financials ProShares UYG UYGIV ,043 10,179 Y 203 Ultra Basic Materials ProShares UYM UYMIV N * Ultra Consumer Goods ProShares UGE UGEIV N * Ultra Consumer Services ProShares UCC UCCIV N * Ultra Health Care ProShares RXL RXLIV N * Ultra Industrials ProShares UXI UXIIV N * Ultra Oil & Gas ProShares DIG DIGIV Y * Ultra Real Estate ProShares URE UREIV Y * Ultra Semiconductors ProShares USD USDIV na N * Ultra Technology ProShares ROM ROMIV N * Ultra Telecommunications ProShares LTL LTLIV na N * Ultra Utilities ProShares UPW UPWIV N * Inverse Short Dow30 ProShares DOG DHJ Y * Short S&P500 ProShares SH SJA Y * Short QQQ ProShares PSQ EJP N * Short MidCap400 ProShares MYY MKJ Y * Short SmallCap600 ProShares SBB SBBIV N * Short Russell2000 ProShares RWM RWMIV 2, N * Leveraged Inverse UltraShort Dow 30Proshares DXD DHK ,127 Y 204 UltraShort S&P500 ProShares SDS SJB ,462 23,541 Y 205 UltraShort QQQ Proshares QID EJM ,541 35,340 Y 206 UltraShort Russell2000 ProShares TWM TWMIV 2, ,485 Y 207 Rydex Inverse 2x S&P 500 ETF RSW RSWIV N * Rydex Inverse 2x Russell 2000 ETF RRZ RRZIV 2, N * Rydex Inverse 2x S&P MidCap 400 ETF RMS RMSIV N * Ultra Short MidCap 400 Proshares MZZ MKD Y * Ultra Short Russell1000 Grth ProShares SFK SFKIV N * UltraShort SmallCap600 ProShares SDD SDDIV N * Ultra Short Russell1000 Value ProShares SJF SJFIV N * Ultra Short Russell MidCap Grth ProShares SDK SDKIV N * Ultra Short Russell MidCap Value ProShares SJL SJLIV N * Ultra Short Russell2000 Growth ProShares SKK SKKIV 1, N * Ultra Short Russell2000 Value ProShares SJH SJHIV 2, N * UltraShort Basic Materials ProShares SMN SMNIV Y * UltraShort Consumer Goods ProShares SZK SZKIV N * UltraShort Consumer Services ProShares SCC SCCIV N * UltraShort Financials ProShares SKF SKFIV ,070 10,319 Y 208 UltraShort Health Care ProShares RXD RXDIV N * UltraShort Industrials ProShares SIJ SIJIV N * UltraShort Oil & Gas ProShares DUG DUGIV ,571 7,775 Y 209 UltraShort Real Estate ProShares SRS SRSIV ,776 Y 210 UltraShort Semiconductors ProShares SSG SSGIV na N * UltraShort Technology ProShares REW REWIV N * UltraShort Telecommunications ProShares TLL TLLIV na N * UltraShort Utilities ProShares SDP SDPIV N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 10

126 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options International Region & Country ETFs Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. Broad Vanguard FTSE All-World ex-us ETF VEU VEUIV 2, , Y 216 SPDR S&P International Small Cap ETF GWX GWXIV Y 217 ishares MSCI ACWI ex-us Index Fund ACWX ACWXIV na N * ishares FTSE Developed Small Cap ex-n. Amer. IFSM IFSMIV N * SPDR MSCI ACWI ex-us ETF CWI CWIIV N * Developed Markets ishares MSCI EAFE EFA EFAIV ,382 11,918 Y 218 ishares MSCI EAFE Growth EFG EFGIV , N 219 ishares MSCI EAFE Value EFV EFVIV , Y 220 Vanguard Europe Pacific ETF VEA VEAIV 1, , Y 221 WisdomTree DEFA DWM DWMIV N 222 WisdomTree DEFA High-Yielding DTH DTHIV N 223 WisdomTree Int'l LC Dividend DOL DOLIV N 224 WisdomTree Int'l MC Dividend DIM DIMIV N 225 WisdomTree Int'l SC Dividend DLS DLSIV N 226 WisdomTree Int'l Dividend Top 100 DOO DOOIV N 227 ishares MSCI EAFE Small Cap Index Fund SCZ SCZIV N * BLDRS Developed Markets 100 ADR ADRD ADRDI N * Claymore/Robeco Developed Int'l Equity EEN EENIV N * Claymore/Zacks Country Rotation ETF CRO CROIV N * PowerShares Dynamic Developed Int'l PFA PFAIV N * PowerShares DWA Dvlpd. Mkts. Technical Ldrs. PIZ PIZIV N * PowerShares FTSE RAFI Dev. Ex-US Samll/Mid PDN PDNIV 1, N * PowerShares FTSE RAFI Dvpld. Mkts ex-us PXF PXFIV 1, N * SPDR S&P World ex-us ETF GWL GWLIV N * Emerging Markets BLDRS Emerging Markets 50 ADR ADRE ADREI Y 228 Claymore/BNY BRIC ETF EEB EED , Y 229 ishares MSCI Emerging Markets EEM EEMIV ,883 18,617 Y 230 Vanguard Emerging Markets ETF VWO HVO , Y 231 SPDR S&P BRIC 40 ETF BIK BIKIV Y 232 ishares MSCI BRIC Index Fund BKF BKFIV N * PowerShares DWA Emg. Mkts. Technical Ldrs. PIE PIEIV N * PowerShares FTSE RAFE Emg. Mkts. PXH PXHIV Y * SPDR S&P Emerging Markets ETF GMM GMMIV Y * WisdomTree Emerging Markets HY Equity DEM DEMIV N * WisdomTree Small Cap EM Dividend DGS DGSIV N * International Dividend PowerShares Int'l Dividend Achievers PID FKJ Y 233 SPDR S&P International Dividend ETF DWX DWXIV na N * Claymore/Zacks International Yield Hog HGI HGIIV N * First Trust Dow Jones Global Select Div. FGD FGDIV N * First Trust DJ STOXX Select Dividend 30 FDD na FDDIV N * ishares Dow Jones EPAC Select Dividend IDV IDVIV N * International Region Leveraged/Inverse Short MSCI EAFE ProShares EFZ EFZIV N * EFU UltaShort MSCI EAFE ProShares EFU EFUIV Y * Short MSCI Emerging Markets ProShares EUM EUMIV N * UltraShort MSCI Emerging Markets ProShares EEV EEVIV Y * International Country Leveraged/Inverse UltraShort FTSE/Xinhua China 25 ProShares FXP FXPIV ,693 Y 234 UltraShort MSCI Japan ProShares EWV EWVIV N * Asia/Pacific ishares MSCI Pacific ex-japan EPP EPPIV , Y 235 Vanguard Pacific ETF VPL SVY , Y 236 BLDRS Asia 50 ADR ADRA ADRAI Y * ishares S&P Asia 50 Index Fund AIA AIAIV N * PowerShares Dynamic Asia Pacific PUA PUAIV N * PowerShares FTSE RAFI A.P. ex-jpn. Small/Mid PDQ PDQIV Y * PowerShares FTSE RAFI Asia Pac. ex-jpn PAF na PAFIV N * SPDR S&P Emerging Asia Pacific ETF GMF GMFIV Y * WisdomTree Pacific ex-jpn High-Yldg Div. DNH DNHIV N * WisdomTree Pacific ex-jpn. Total Div. DND DNDIV Y * First Trust ISE Chindia Index Fund FNI FNIIV Y * ishares MSCI Australia EWA EWAIV ,480 2,043 Y 237 ishares FTSE/Xinhua China 25 FXI FXIIV ,669 7,997 Y 238 PowerShares Gldn Drgn China PGJ TGJ Y 239 ishares MSCI Hong Kong EWH EWHIV ,222 7,078 Y 240 WisdomTree India Earnings Fund EPI EPIIV na Y 241 ishares MSCI Malaysia EWM EWMIV ,060 4,121 Y 242 ishares MSCI Singapore EWS EWSIV ,975 4,110 N 243 ishares MSCI South Korea EWY EWYIV ,785 2,996 Y 244 ishares MSCI Taiwan EWT EWTIV ,058 13,088 Y 245 * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 11

127 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. Asia/Pacific (Continued) ishares MSCI Thailand Index Fund THD THDIV na N * Claymore/AlphaShares China Small Cap HAO HAOIV N * Claymore/AlphaShares China Real Estate ETF TAO TAOIV N * NETS S&P/ASX 200 Index Fund AUS AUSIV na na Y * NETS Hang Seng Index Fund HKG HKGIV na na Y * SPDR S&P China ETF GXC GXCIV 1, Y * PowerShares India Portfolio PIN PINIV na na Y * Europe ishares S&P Europe 350 IEV IEVIV , Y 246 Vanguard European ETF VGK SVK , Y 247 BLDRS Europe 100 ADR ADRU ADRUI N * Europe 2001 HOLDRS EKH na EKI 37 0* 15 4 Y * PowerShares Dynamic Europe Portfolio PEH PEHIV N * PowerShares FTSE RAFI Europe Portfolio PEF PEFIV N * PowerShares FTSE RAFI Europe Small/Mid PWD PWDIV N * SPDR Dow Jones STOXX 50 FEU FEUIV N * WisdomTree Europe Total Dividend DEB DEBIV N * WisdomTree Europe HY Equity DEW DEWIV N * WisdomTree Europe SC Dividend DFE DFEIV N * ishares MSCI EMU EZU EZUIV , Y 248 SPDR DJ Euro STOXX 50 FEZ FEZIV Y 249 SPDR S&P Emerging Europe ETF GUR GURIV N * ishares MSCI Austria EWO EWOIV N 250 ishares MSCI Belgium EWK EWKIV N 251 ishares MSCI France EWQ EWQIV N 252 ishares MSCI Germany EWG EWGIV ,875 2,215 Y 253 ishares MSCI Italy EWI EWIIV N 254 ishares MSCI Netherlands EWN EWNIV N 255 ishares MSCI Spain EWP EWPIV Y 256 ishares MSCI Sweden EWD EWDIV Y 257 ishares MSCI Switzerland EWL EWLIV Y 258 ishares MSCI United Kingdom EWU EWUIV , Y 259 Market Vectors Russia ETF RSX RSXIV , Y 260 NETS CAC 40 Index Fund FRC FRCIV na na Y * NETS DAX Index Fund DAX DAXIV na na Y * NETS FTSE 100 Index Fund LDN LDNIV na na Y * ishares MSCI Turkey Index Fund TUR TURIV na N * Japan ishares MSCI Japan EWJ EWJIV ,044 21,595 Y 261 ishares S&P/TOPIX 150 ITF ITFIV Y * NETS TOPIX Index Fund TYI TYIIV na na N * ishares MSCI Japan Small Cap Index Fund SCJ SCJIV N * PowerShares FTSE RAFI Japan Portfolio PJO PJOIV N * SPDR Russell/Nomura Japan Small Cap JSC JSCIV Y * SPDR Russell/Nomura Prime Japan JPP JPPIV Y * WisdomTree Japan HY Equity DNL DNLIV N * WisdomTree Japan SC Dividend DFJ DFJIV N * WisdomTree Japan Total Dividend DXJ DXJIV N * Latin America ishares S&P Latin America 40 ILF ILFIV , Y 262 SPDR S&P Emerging Latin America ETF GML GMLIV N * ishares MSCI Brazil EWZ EWZIV ,221 14,989 Y 263 ishares MSCI Mexico EWW EWWIV ,407 4,133 Y 264 ishares MSCI Chile Index Fund ECH ECHIV N * North America ishares MSCI Canada EWC EWCIV ,061 1,386 Y 265 Middle East & Africa SPDR S&P EM Middle East & Africa GAF GAFIV Y * ishares MSCI Israel Capped Index Fund EIS EISIV na N * ishares MSCI South Africa EZA EZAIV Y 266 International Sector & Industry ETFs SPDR DJ Wilshire Int'l Real Estate RWX RWXIV , Y 267 Claymore/SMW Canadian Energy Income ENY ENYIV N * HealthShares Eur. Medical Prod. & Dev. HHT HHTIV N * HealthShares European Drugs ETF HRJ HRJIV N * ishares S&P World ex-u.s. Property WPS WPSIV N * ishares FTSE Global Real Estate ex-u.s. IFGL IFGLIV N * ishares FTSE EPRA/NAREIT Europe IFEU IFEUIV N * ishares FTSE EPRA/NAREIT Asia IFAS IFASIV N * PowerShares International Listed Private Equity PFP PFPIV Y * PowerShares FTSE RAFI Int'l Real Estate PRY PRYIV N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 12

128 GLOBAL WEALTH MANAGEMENT US-Listed, Continued 5/12/2008 Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. International Sector & Industry ETFs (Continued) WisdomTree Int'l Cnsmr. Cyclical DPC DPCIV N * WisdomTree Int'l Communications DGG DGGIV N * WisdomTree International Energy DKA DKAIV N * WisdomTree International Financial DRF DRFIV N * WisdomTree International Health Care DBR DBRIV N * WisdomTree International Industrial DDI DBRIV N * WisdomTree International Real Estate DRW DDIIV N * WisdomTree International Technology DBT DBTIV N * WisdomTree International Utilities DBU DBUIV N * WisdomTree Int'l Basic Materials DBN DBNIV N * WisdomTree Int'l Cnsmr. Non-Cyclical DPN DPNIV N * Global ETFs Broad Market ishares S&P Global 100 IOO IOOIV , Y 268 ishares MSCI ACWI Index Fund ACWI ACWIIV na N * ishares MSCI Kokusai Index Fund TOK TOKIV 1, N * Market HOLDRS MKH XKH 56 0* 26 1 N * SPDR DJ Global Titans ETF DGT UGT Y * ishares S&P Global Infrastructure Index Fund IGF IGFIV N * SPDR/Global Infrastructure 100 ETF GII GIIIV Y * Global Sectors Claymore/S&P Global Water ETF CGW CGWIV Y 269 ishares S&P Global Energy IXC IXCIV , Y 270 ishares S&P Global Financial IXG IXGIV Y 271 ishares S&P Global Healthcare IXJ IXJIV Y 272 ishares S&P Global Materials Sector MXI MXIIV N 273 ishares S&P Global Staples Sector KXI KXIIV N 274 ishares S&P Global Technology IXN IXNIV Y 275 ishares S&P Global Telecom IXP IXPIV Y 276 ishares S&P Global Utilities Sector JXI JXIIV N 277 Market Vectors Agribusiness ETF MOO MOOIV ,783 1,163 Y 278 Market Vectors-Coal ETF KOL KOLIV Y 279 Market Vectors Global Alternative Energy GEX GEXIV N 280 PowerShares Global Water Portfolio PIO PIOIV Y 281 Claymore/Clear Global Timber Index ETF CUT CUTIV N * Market Vectors Solar Energy ETF KWT KWTIV na N * Market Vectors Nuclear Energy ETF NLR NLRIV N * ishares S&P Global Industrial Sector EXI EXIIV N * ishares S&P Global Consumer Disc. RXI RXIIV N * First Trust FTSE Global Real Estate FFR FFRIV N * Claymore/MAC Global Solar Energy TAN TANIV na Y * Claymore/Clear Global Exch. Brkrs & A.M. EXB EXBIV Y * PowerShares Global Clean Energy PBD PBDIV N * PowerShares Global Nuclear Energy Portfolio PKN PKNIV na N * US Fixed Income ETFs Broad Market ishares Lehman Aggregate AGG AGGIV , Y 284 Vanguard Total Bond Markets ETF BND BNDIV 3, , Y 285 Claymore/Dorchester - Capital Markets Bond Index UBD UBDIV N * SPDR Lehman Aggregate Bond ETF LAG LAGIV N * Bear Stearns Current Yield Fund YYY YYYIV na N * Claymore/Dorchester Micro-Term Fixed Income ULQ ULQIV N * PowerShares Active Low Duration Portfolio PLK PLKIV na N * Treasury ishares Lehman Short Treasury SHV SHVIV N 286 ishares Lehman 1-3 Year Treasury SHY SHYIV , Y 287 ishares Lehman 7-10 Year Treasury IEF IEFIV , Y 288 ishares Lehman 20+ Year Treasury TLT TLTIV ,779 3,042 Y 289 SPDR Lehman 1-3 Month T-Bill ETF BIL BILIV Y * Ameristock/Ryan 1 Year Treasury ETF GKA GKAIV N * Ameristock/Ryan 2 Year Treasury ETF GKB GKBIV N * ishares Lehman 3-7 Year Treasury IEI IEIIV N * Ameristock/Ryan 5 Year Treasury ETF GKC GKCIV N * Ameristock/Ryan 10 Year Treasury ETF GKD GKDIV Y * SPDR Lehman Intermediate Term Treasury ITE ITEIV Y * ishares Lehman Year Treasury TLH TLHIV N * Ameristock/Ryan 20 Year Treasury ETF GKE GKEIV Y * PowerShares 1-30 Year Laddered Treasury PLW PLWIV N * SPDR Lehman Long Term Treasury ETF TLO TLOIV Y * Vanguard Extended Duration Treasury ETF EDV EDVIV Y * Treasury Inflation Protected Securities ishares Lehman TIPS TIP TIPIV , Y 290 SPDR Barclays Capital TIPS ETF IPE IPEIV Y * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 13

129 GLOBAL WEALTH MANAGEMENT US-Listed, Continued Intraday Approx # Expense Total Avg Daily Trading Price NAV Securities Ratio Assets Volume Options Symbol ($) Symbol in Fund (%) ($ Mil) (1000/shrs) Avail. Treasury / Investment Grade Vanguard Short-Term Bond ETF BSV BSVIV Y 291 ishares Lehman Intermediate Gov/Credit GVI GVIIV N * Vanguard Intermediate-Term Bond ETF BIV BIVIV Y 292 ishares Lehman Gov/Credit GBF GBFIV N * Vanguard Long-Term Bond ETF BLV BLVIV Y * Mortgage ishares Lehman MBS Bond Fund MBB MBBIV Y 293 US Fixed Income ETFs Continued Corporate Investment Grade ishares iboxx Inv. Grade Corporate Bond LQD LQDIV , Y 294 ishares Lehman 1-3 Year Credit CSJ CSJIV N * ishares Lehman Intermediate Credit CIU CIUIV N * ishares Lehman Credit Bond Fund CFT CFTIV N * High Yield ishares iboxx $ High Yield Corporate HYG HYGIV Y 295 SPDR Lehman High Yield Bond ETF JNK JNKIV Y 296 PowerShares High Yield Corporate Bond PHB PHBIV N * Preferred Income ETFs ishares S&P U.S. Preferred Stock PFF PFFIV N 297 PowerShares Financial Preferred Port. PGF PGFIV Y * PowerShares Preferred Portfolio PGX PGXIV N * Municipal Income ishares S&P National Municipal Bond MUB MUBIV N 298 Market Vectors-LB AMT-Free Short Municipal SMB SMBIV na N * Market Vectors Intermediate Municipal Index ETF ITM ITMIV na N * Market Vectors-Lehman AMT-Free Long Muni MLN MLNIV na N * PowerShares VRDO Tax-Free Weekly Port. PVI PVIIV N * SPDR Lehman Short Term Municipal Bond SHM SHMIV N * PowerShares Insured Municipal Bond PZA PZAIV N * SPDR Lehman Municipal Bond ETF TFI TFIIV Y * ishares S&P California Municipal Bond CMF CMFIV N * PowerShares Insured California Muni Bond PWZ PWZIV N * SPDR Lehman California Municipal Bond CXA CXAIV N * ishares S&P New York Municipal Bond NYF NYFIV N * PowerShares Insured New York Muni Bond PZT PZTIV N * SPDR Lehman New York Municipal Bond INY INYIV N * International Developed Fixed Income SPDR Lehman International Treasury BWX BWXIV na N 299 SPDR DB Int'l Gvrnmt. Inflation-Protected Bond WIP WIPIV na N * International Emg. Mkts. Fixed Income ishares JPMorgan USD Emerging Markets Bond Fu EMB EMBIV N * PowerShares EM Sovereign Debt PCY PCYIV N * Commodity ETFs ishares GSCI Commodity-Indexed Trust GSG GSGIV na Y 301 PowerShares DB Commodity Index Fund DBC DBCIIV na ,643 1,165 Y 302 PowerShares DB Agriculture Fund DBA DBAIV na ,644 3,072 Y 303 ishares COMEX Gold Trust IAU IAUIV na , N 304 streettracks Gold Trust GLD GLDIV na ,372 12,292 N 305 United States Natural Gas Fund LP UNG UNGIV na ,175 Y 306 United States Oil Fund USO UOI na ,509 Y 307 ishares Silver Trust SLV SLVIV na ,190 1,171 N 308 GreenHaven Continous Commodity GCC GCCIV na Y * PowerShares DB Base Metals Fund DBB DBBIV na Y * PowerShares DB Energy Fund DBE DBEIV na Y * PowerShares DB Gold Fund DGL DGLIV na Y * PowerShares DB Oil Fund DBO DBOIV na Y * PowerShares DB Precious Metals Fund DBP DBPIV na Y * PowerShares DB Silver Fund DBS DBSIV na Y * United States Gasoline Fund LP UGA UGAIV na Y * United States Heating Oil Fund UHN UHNIV na N * United States 12 Month Oil Fund LP USL USLIV na Y * Currency ETFs PowerShares DB G10 Currency Harvest DBV FBV na Y 309 CurrencyShares Euro Trust FXE FXENV na , Y 310 CurrencyShares Japanese Yen Trust FXY FXYIV na Y 311 CurrencyShares Swiss Franc FXF FXFNV na Y 312 CurrencyShares Australian Dollar FXA FXANV na Y * CurrencyShares British Pound Sterling FXB FXBNV na Y * CurrencyShares Canadian Dollar FXC FXCNV na Y * CurrencyShares Mexican Peso FXM FXMNV na Y * CurrencyShares Swedish Krona FXS FSXNV na Y * PowerShares DB US Dollar Index Bullish UUP UUPIV na N 313 PowerShares DB US Dollar Index Bearish UDN UDNIV na N * * We now only publish one-page profiles on a coverage universe of larger and more liquid ETFs with attractive investment attributes across market segments representing the majority of ETF assets. 14

130 GLOBAL WEALTH MANAGEMENT Recent Industry Developments The evolution of the ETF industry is as impressive as its continued growth. Almost 70% of the 675 ETFs now available in the US have been listed since the beginning of 2006 (Exhibit 1). Along with the increased issuance has come increased complexity as ETFs have moved beyond providing broad-based stock exposure and now offer access to more highly concentrated industries, fundamentally weighted indices, and thematically based market segments. In addition, ETFs can be used to provide exposure to currencies, commodities, fixed income, and leveraged and inverse products. While we believe that many recently issued ETFs are attractive and that investors may benefit from implementing them in well-diversified portfolios, we also believe their increasing complexity heightens the need for insight and analysis. Some new ETFs are more highly concentrated, with higher fees and turnover, and tax complications have increased considerably for ETFs using leverage, derivatives, and futures. The following sections highlight developing industry trends that we believe warrant additional attention: Industry ETFs: Equity ETF issuance has moved from sectors to industries, which has created complications regarding diversification. The SEC mandates that no holding can exceed 25% of assets at rebalancing and all stock weightings over 5% cannot exceed 50%. The net result requires at least 20 holdings per equity ETF. These rules have led to different approaches by the various ETF providers in terms of their sector and industry ETFs. Barclays Global Investors (BGI) ishares and Vanguard ETFs have generally focused on market-cap weighted indices and utilize optimization techniques where they underweight larger stocks and overweight smaller stocks. State Street Global Advisors (SSgA) uses modified cap-weighted S&P 500 sector indices, but as there are less than 20 telecom names in the S&P 500, one sector SPDR combines technology and telecom. Most of SSgA s industry ETFs are based on equally weighted indices which favor mid- and small-cap stocks. Rydex also offers nine sector ETFs based on S&P 500 sectors that equally weight stocks and results in a smaller-cap value bias. Rydex combines utilities and telecom into one sector ETF as a result of diversification requirements. PowerShares offers many sector and industry ETFs that generally use tiered weightings and select stocks using proprietary rules based methodologies, and WisdomTree s international sector ETFs weight stocks based on dividends. We analyzed 45 different ETFs in 14 industries in a report titled Ready, Aim, Fire: Targeting Industry Exposure with ETFs, published May 5, Fundamental Indexing: ETFs based on fundamental or enhanced indices use methods other than market capitalization (such as earnings, dividends, or book value) to select and weight companies. The proponents of fundamental indexing believe markets are less efficient and attempt to avoid overvalued situations such as growth stocks in the late 1990s. Some fundamental indices are reconstituted and rebalanced more frequently than traditional indices, possibly resulting in higher transaction costs and lower tax efficiency. Although fundamental indices seek to outperform traditional market indices, we believe indices that outperform in certain environments can underperform in others. To look at these relationships, we studied selected indices in four market cap segments in a report titled The Value of Fundamental Indexing, published April 23, We found that all of the fundamental indices in our study had a high correlation with traditional value indices and have historically outperformed traditional cap-weighted indices when value stocks outperform and lag when growth stocks are leading the market. Our analysis also indicates that fundamental indexing results in different sector and market-capitalization exposure. Thematic ETFs: Thematic ETFs is a term we use to describe ETFs that focus on specific investment concepts or themes or use rules-based models for stock selection. Many are highly specific and concentrated and are based on less transparent or proprietary indices. Examples of ETFs using rules base models include country, sector or industry rotation ETFs or those based on timeliness factors. Other ETFs under the thematic category include insider buying, IPOs and spin-offs. Many thematic ETFs focus on highly specific market segments such as those providing exposure to specific diseases, nanotechnology, or progressive energy. While these ETFs may offer opportunities, they should also be expected to have above-average volatility as a result of their more concentrated investment methodology. Leveraged / Inverse ETFs: ProShares and Rydex have issued 66 ETFs providing leveraged and inverse (short) daily performance. The leveraged ETFs seek to provide two times daily market exposure and the short ETFs seek to provide one or two times daily inverse returns. They utilize common stocks, equity swaps, index futures and T-Bills. Equity swaps and index futures are adjusted constantly, which may create capital gains/losses for the ETF, and investors may receive sizeable capital gain distributions. Costs of these ETFs include the expense ratios of basis points plus borrowing costs. We believe these ETFs 15

131 GLOBAL WEALTH MANAGEMENT have become popular because they enable accounts that are not allowed to margin or go short to gain leveraged or inverse exposure. Investors should be aware that these products are designed to provide double long or short returns on a daily basis. However, longer period returns may vary widely from cumulative daily returns due to interest costs or credits and the effects of compounding. For further detail, see our report titled Doubling Up or Doubling Down with Leveraged ETFs, published October 11, Fixed Income ETFs: The number of fixed income ETFs has grown dramatically, as 47 of the 59 now available have been issued since Most of the taxable indices are rebalanced monthly, have fairly constant maturities, and the ETFs based on them typically have low fees and provide monthly dividends equal to approximately 1/12 of the ETF s current yield. Barclays Global Investors (BGI) is the current market leader, with 21 fixed income ETFs. BGI s newer offerings include ETFs for investment grade mortgages, high yield corporates, municipals, US dollar denominated emerging market debt and preferred stocks. Vanguard offers four bond ETFs with expense ratios of 11 basis points, the largest of which is the Total Bond Market ETF tracking the Lehman Aggregate Index State Street Global Advisors (SSgA) offers 12 bond ETFs, including the first to be issued on International Treasuries and International TIPS, and four municipal bond ETFs. PowerShares offers 10 fixed income ETFs including, municipal, high yield, emerging market debt and preferred ETFs. Ameristock and Van Eck have also recently entered the market. Commodity ETFs: ETFs provide exposure to commodities by investing in the physical commodity or through futures contracts. ETFs holding physical commodities are treated as collectibles by the IRS and are subject to maximum 28% tax rate. Capital gains and losses are only realized when an investor sells the ETF. ETFs holding physical commodities include the streettracks Gold Trust (GLD), ishares COMEX Gold Trust (IAU), and the ishares Silver Trust (SLV), ETFs ETFs utilizing commodity futures contracts should be less tax efficient. The contracts in these ETFs are rolled before delivery, which may create a taxable event even if the investor does not sell the ETF. The contracts are also marked to market at year-end and gains are taxed at 60% long-term and 40% short-term rates and the collateral posted (typically short-term Treasuries) generates taxable interest income. ETFs that use futures are subject to significant tracking error between the futures and spot or cash markets. Some of the ETFs utilizing futures contracts include the ishares GSCI Commodity Indexed Trust (GSG) that holds 5-year contracts on an index of 24 commodities. The United States Oil Fund (USO) tracks the returns of the near-month contract on West Texas Light Crude and United States Natural Gas Fund (UNG) tracks the returns of the near-month Natural Gas future. The PowerShares DB Series include ETFs based on an Index of 6 commodities (DBC), agriculture (DBA), base metals (DBB), energy (DBE), precious metals (DBP), silver (DBS), gold (DBL), and oil (DBO). Finally, GreenHaven offers a futures based ETF tracking an equally-weighted basket of 17 commodities. Currency ETFs: As of April 30, 2008, eleven ETFs provided currency exposure. Eight, known as CurrencyShares, provide pure exposure to major currencies including the euro, British Pound, and Japanese Yen. They invest in local time deposits, typically pay monthly distributions based on overnight lending rates of the target currency, and are structured such that a weaker US Dollar leads to an increase in the price of the ETF. PowerShares has three futures-based currency ETFs, two of which are long or short the US Dollar versus a basket of major foreign currencies, and a third uses futures to be long high-yielding and short low-yielding currencies. After our April 30, 2008 cut-off, WisdomTree issued new ETFs on currencies including the Chinese Yuan, Indian Rupee and the Brazilian Real. Exhibit 1 Issuance Trends by Market Segment New ETFs by Type Total ETFs Assets ($ Mil) Market Share (%) US Equity , % International Equity , % Global Equity , % Leveraged/Inverse , % Commodity , % Currency , % Fixed Income , % Total , % Source: Bloomberg, Morgan Stanley Research as of 5/9/08. 16

132 GLOBAL WEALTH MANAGEMENT ETF Market Overview and Advantages Index-linked ETFs may serve as attractive investment alternatives. In our view, ETFs are compelling investments for exposure to many asset classes due to their broad diversification, low expense ratios, high tax efficiency, competitive long-term performance versus active managers, and trading flexibility. Index-linked ETFs are passively managed portfolios designed to provide exposure to specific indices, baskets of stocks, currencies or commodities. Some ETFs offer relatively low-risk, broadly diversified portfolios, which investors may find attractive as the core equity components of their portfolios. Others offer diversified investments in particular styles, sectors, industries, regions, countries, or commodities. There are currently 414 ETFs that provide exposure to US equity markets. The largest ETF managers include Barclays Global Investors (ishares), State Street Global Advisors (SPDRs), Vanguard, PowerShares, Merrill Lynch (HOLDRs), ProShares, Rydex, and WisdomTree. Several ETFs offer exposure to duplicate or similar indices; however, there are structural differences in the products and indices. We believe investors should favor ETFs that best meet their investment objectives with the lowest operating expenses and reasonable liquidity. US equity ETF profiles begin on page 79 There are 173 ETFs that provide international and global equity exposure. Many international ETFs are ishares based on MSCI Indices, but others are based on S&P, Bank of New York ADR, Dow Jones STOXX, WisdomTree, and other proprietary indices. International equity ETF profiles begin on page 216 There are 59 ETFs that offer fixed-income exposure. They invest in US and International Treasuries, emerging market, municipal, mortgage, and high yield bonds as well as preferred securities. Fixed-Income ETF profiles begin on page 284 There are 29 ETFs that provide exposure to alternative asset classes including commodities and currencies. Three commodity ETFs hold physical gold or silver, while 16 other ETFs utilize futures for exposure to individual or baskets of commodities. The currency ETFs invest in foreign time deposits or currency futures. Commodity/Currency profiles begin on page 2301 ETF Advantages Index-linked ETFs trade on major exchanges. This allows investors to buy and sell them at stated market prices. In contrast to open-end funds that price once a day at the close, ETFs are available to all investors at market prices throughout the day. This reduces the uncertainty of buying shares intraday at prices to be determined at the close. Most index-linked ETFs can be easily shorted, providing extra flexibility for hedging or market-timing. They can be bought on margin, purchased using limit and stop loss orders, and many have listed options. This open trading prevents opportunities for market timing in which some investors buy open-end funds investing in foreign markets that closed before US trading started. For example, on a day when the US market is higher, ETFs based on a Japan index usually trade up in anticipation of higher prices in Japan overnight. In this case, open-end funds investing in Japan may be priced based on the previous day s close. Index-linked ETFs have some of the lowest expenses of any registered investment product. ETF expense ratios are significantly lower than those of open-end mutual funds, but the range has widened as some providers cut fees and many newer products have higher fees. Higher cost ETFs have increased the numerical average fee, but weighted average fees remain low as the majority of assets are in ETFs with lower fees (Exhibit 2). For example, the Vanguard Total Stock Market Index Fund (VTI) has an expense ratio of seven basis points (bps), while the average actively managed domestic Exhibit 2 Expense Ratios of ETFs vs. Open-End Mutual Funds (bps) Average Range Wgt. Avg. *: US Major Market ETFs US Specialty Market ETFs US Style ETFs US Sector/Industry ETFs All US Equity ETFs International Equity ETFs All Equity ETFs Fixed-Income ETFs Open-end Mutual Funds**: Actively Managed Domestic Equity 145 Actively Managed International Eq. 167 Passive/Indexed Domestic Equity 70 Passive/Indexed International Equity 95 Passive/Indexed Fixed-Income 43 Source: Company data, Morgan Stanley Research. *Average expense ratio, excluding HOLDRS as of 1/31/08. **Morningstar 12/31/07. Although these investment vehicles may be similar to ETFs, they are not identical and may offer additional benefits to investors over ETFs, such as increased returns and customized management. 17

133 GLOBAL WEALTH MANAGEMENT equity open-end fund has 145 bps in expenses. ETF expense ratios also compare favorably to the average expense ratio of 70 bps for passive/indexed domestic equity open-end mutual funds. ETFs also typically have much lower portfolio and investor turnover, which leads to lower internal transaction and processing costs. The buying and selling of securities within a fund leads to costs including commissions, bid-ask spreads, and market impact. Investor turnover also increases processing and reporting costs, which are borne by long-term investors. ETF investors, however, generally have to pay commissions to buy or sell shares. ETF and open-end fund expenses are deducted from net asset values, which may lead to underperformance over time relative to their benchmarks. Passively managed index-linked ETFs tend to be more tax-efficient than actively managed funds. Since ETFs track indices, there tends to be less portfolio turnover and realization of capital gains than with actively managed funds. We believe there is a low risk that investor flight will cause capital gains. In falling markets, many open-end mutual fund investors seek redemptions, which forces a fund to sell stock and may create capital gains tax liabilities, which are passed on to remaining shareholders. ETFs reduce this tax liability through an in-kind redemption mechanism, whereby baskets of stocks change hands, as opposed to cash. The redemption process is not a taxable transaction for ETFs, so there is no realization of gains that must be distributed to shareholders. Exhibit 3 contains a comparison of capital-gains distributions made by the oldest ETF, SPY, versus the open-end funds designed to track the same S&P 500 Index. While SPY s distributions were almost nonexistent, the open-end funds had average distributions equal to 1.63% of NAV. Exhibit 3 Capital Gains Distributions as a Percentage of NAV* S&P 500 SPDR Open-End S&P 500 ETF (SPY) Index Fund Avg.** Average * Year-end NAV. **Average open-end S&P 500 fund. Source: Bloomberg Exhibit 4 Open-end Funds that Underperformed Benchmark Value Blend Growth Large 71% 59% 34% Medium 71% 62% 47% Small 65% 73% 64% Based on Lipper data for the past 10 years, ending December 31, MSCI Indices were used comparisons. Sources: Lipper, MSCI, Vanguard. Historically, actively managed open-end funds have underperformed their benchmarks. According to Lipper, the majority of open-end funds underperformed representative benchmarks over the past ten years (Exhibit 4). This was most prevalent for large- and mid-cap funds, where 71% of value managers underperformed. If these returns were calculated on an after-tax basis, active manager underperformance would be even more dramatic, in our view. The market price and net asset value (NAV) of index-linked ETFs are designed to stay close to each other. Authorized participants (APs) can create ETF shares by delivering a set amount of securities in the underlying portfolio to a custodian bank. In return, the AP receives a corresponding number of ETF shares (usually a block of 50,000 or 100,000 shares, called Creation Units). Similarly, ETF shares can be redeemed by delivering them in Creation Unit size to the custodian and receiving a basket of underlying securities. This creation and redemption process helps to keep the difference between an ETF s market price and NAV small, as any divergence would create an arbitrage opportunity. When an ETF is trading at a significant premium or discount to NAV, APs can buy or sell the ETF and place offsetting buy or sell trades in the underlying basket of component securities. Intraday NAV estimates can enhance the pricing efficiency of index-linked ETFs. Exchanges calculate and disseminate estimated ETF underlying portfolio values throughout the trading day. This information helps keep investors aware of the approximate market price/nav relationship when making purchase and sale decisions. It also can facilitate the arbitrage process through which professional traders can create or redeem shares if the price moves out of line with NAV. Intraday estimates of NAVs can be accessed through most quotation systems by using specific tickers, listed on pages 4 14 and on the individual ETF profile pages. 18

134 GLOBAL WEALTH MANAGEMENT ETF Investment Applications ETFs have many investment applications. Broad-based ETFs can serve as diversified core holdings, while style, sector and industry ETFs can be used to complete parts of a portfolio or for tactical strategies. We believe ETFs generally work well within asset allocation models. They provide efficient ways to diversify into international markets, fixed-income and alternative assets. Another benefit is that ETFs are complementary to most other investment vehicles. They can be used together with common stocks, bonds, privately managed assets, and other fund products. ETFs based on broad-market indices can serve as good core holdings. We believe it is important to have core equity holdings. Since no sector, style, or manager consistently outperforms, we believe having core holdings invested in broad-market indices can help to reduce portfolio volatility and achieve competitive returns. ETFs can be used to efficiently implement asset allocation models. Morgan Stanley currently maintains Global Wealth Management (GWM) Asset Allocation Frameworks. The equity portion of the Frameworks can be implemented using six US style and three international equity ETFs (Exhibits 5-6). In our view, these frameworks have two primary applications: 1) The construction of an entire equity portfolio. Investors desiring a complete asset-allocation strategy may find this appealing, as they merely have to purchase appropriate investments for each market segment in their proper weightings and occasionally rebalance. 2) The core equity portion of a portfolio. Investors seeking an active trading approach may find a core/satellite investment strategy appropriate. In this case, the frameworks could be the core. In an effort to increase returns, shorter-term tactical strategies, such as stock, sector, style, or country overweights may be employed as satellite investments. Core holdings can help ensure that a portfolio s performance does not deviate widely from established benchmarks, while satellite investments constitute active strategies that seek to enhance returns. Morgan Stanley also has a GWM Fixed Income Model. The model includes five fixed income market segments, four of which can currently be accessed with ETFs. The implementation of the model is shown in Exhibit 7. Finally, Morgan Stanley also has a US large-cap sector model. Ten ETFs can be used to closely replicate US strategist Abhijit Chakrabortti s recommended sector weights in the S&P 500 (Exhibit 8). ETFs offer an efficient way to gain international exposure. Most ETFs are well diversified and thus we believe they are typically less volatile than individual stocks. They can also provide convenient investments in markets that might be inaccessible. Investors seeking simple core international equity exposure might use ETFs based on the MSCI EAFE, Europe, Pacific, or Emerging Markets Indices. Others might choose to design a portfolio of regional or single-country ETFs. ETFs also offer simple ways to gain exposure to fixed-income and alternative investments. ETFs are available for short- and long-maturity Treasuries as well as the Corporate, Aggregate, Treasury Inflation Protected (TIPs) and the national and single-state municipal market. In addition, ETFs can also provide exposure to gold and silver bullion, oil, and broad-based commodity indices and foreign currency. We believe ETFs provide relatively low-cost, liquid trading vehicles. They can be used by market timers wishing to gain or reduce exposure to entire markets or sectors throughout the trading day. They also can be used for targeted asset allocation or sector rotation strategies. Many Index-linked ETFs can be shorted throughout the trading day subject to the availability of stock borrows. ETFs may be sold short to hedge a portfolio of stocks, bonds, or mutual funds. This allows investors to preserve a portfolio while protecting it from overall market losses. In a market decline, profits on an ETF short position could offset losses incurred by the portfolio. Listed options are available on many ETFs and can also be used to implement various hedging or investment strategies. ETFs can serve as a cash management tool. Investors can purchase ETFs to equitize cash inflows that could eventually be invested in securities. Unlike futures, ETFs can be bought in smaller sizes, do not require any special documentation or accounts, and do not have roll costs or margin needs. ETFs track many indices on which futures are not available. ETFs may offer efficient tax management strategies. ETFs can be used to create losses to offset realized or future capital gains. The wash-sale rules, which disallow a loss on a security if the same security is repurchased within 30 days, apply in a slightly different manner to ETFs. For example, an investor could take a loss on one sector ETF and immediately establish a position in another ETF in the same sector, provided that the underlying stocks in each ETF are not substantially identical. ETFs also may be used to hedge and defer income. Investors should check with their tax advisors to ascertain any ETF tax consequences (please see pages 73-74). 19

135 GLOBAL WEALTH MANAGEMENT Morgan Stanley Global Wealth Management (GWM) Asset Allocation Frameworks A number of GWM Asset Allocation Frameworks are available. David Darst, GWM Chief Investment Strategist, and Barbara Reinhard, Deputy Chief Investment Strategist, maintain GWM Asset Allocation Frameworks reflecting the views of the Morgan Stanley GWM Asset Allocation Committee. These frameworks are primarily designed for Morgan Stanley s Global Wealth Management (GWM) clients. They are based on three investor risk tolerances (conservative, moderate, and aggressive) and four segments of investable assets. Exhibit 5 lists the twelve suggested tactical allocations for taxable investors. Exhibit 5 The suggested equity allocations of these frameworks can be achieved by purchasing nine ETFs. Exhibit 6 includes an example of the approximate number of shares of each ETF that a taxable investor would need to purchase to replicate the equity portion of the moderate framework with $1 million. This example includes our favored ETF for each asset class. Criteria for our selection of ETFs include underlying index composition, performance, expense ratios, size and liquidity. Morgan Stanley s GWM Tactical Asset Allocation Frameworks for Taxable US Individual Investors Tactical Taxable US Dollar/US Oriented Investors Investible Assets < $100,000 $100,000 to $1 Mil $1 Mil to $20 Mil > $20 Mil Con Mod Agg Con Mod Agg Con Mod Agg Con Mod Agg Asset Class (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) Equity US Equity Large Cap Growth Large Cap Value Mid Cap Growth Mid Cap Value Small Cap Growth Small Cap Value Non-US Equity Europe Developed Asia Emerging Markets Fixed Income US Fixed Income Investment Grade Short-Term Investment Grade High Yield Non-US Fixed Income International Emerging Markets Alternative Investments Real Estate & REITs Real Assets Private Equity/Venture Capital Managed Futures Funds Hedge Funds or Funds of Funds Inflation-Indexed Securities Cash/Cash Equivalent U.S. Dollar Total Source. Morgan Stanley GWM Asset Allocation Group. Data are as of May 9, Certain frameworks may combine or separate small- and mid-cap market segments according to financial market outlook, investor preference, and the universe of available investments for each respective size, market-cap, and style category 20

136 GLOBAL WEALTH MANAGEMENT ETFs can also be used to gain exposure to some of the non-equity portions of the frameworks. We favor the Vanguard Total Bond Market ETF (BND) for US investment-grade fixed-income, the ishares Lehman 1 3 Year Treasury Bond Fund (SHY) for short-term US investment-grade fixed income, the Vanguard REIT ETF (VNQ) for real estate, the ishares Goldman Sachs Natural Resources (IGE) and the streettracks Gold Trust (GLD) or the PowerShares DB Commodity Fund (DBC) for real assets, the ishares Lehman TIPS Bond Fund (TIP) for inflation protection. Small- and mid-cap style segments may be combined. Investors may wish to combine the growth and value allocations within the small- and mid-cap market segments of the frameworks because of their small relative size (1 2%). This may appeal to investors particularly when growth and value weights are the same. This can be accomplished by using two instead of four ETFs. To gain exposure to a blend of growth and value, we favor the ishares S&P 400 Index Fund (IJH) for mid-cap equities and the ishares S&P 600 Index Fund (IJR) for small-cap equities. These funds have lower expense ratios (by 5 bps) and offer higher liquidity than their component growth and value ETFs. Global Wealth Management (GWM) Market Outlook Changes to the GWM Asset allocation Model were last made on December 17, Allocations to mid- and small-cap US equities, European equities and real estate & REITs were decreased by 2% for those with more than $1 million in investable assets. The offset was a 4% addition to the cash/cash equivalent asset class as well as a 2% increase to the hedge fund/fund of funds asset class. Frameworks for smaller amounts had no allocation to real estate or hedge funds/fund of funds and reductions were made of 2% each to mid and small-cap US and European equities with a 4% increase in cash. The tactical reduction to global equities reflected the Committee s opinion that the difficulties in the financial markets increase recession risks in Their concerns include US housing market weakness, slower corporate earnings, tighter credit conditions, and softening capital spending. The Committee believed that while many of the stresses related to subprime mortgage lending and the knock-on effects of slowing growth were well known, equity markets had not adequately priced in Morgan Stanley s recession scenario. As a result, they believed that US small/mid cap and European equities were vulnerable. Fixed income markets seemed to be embracing the recession view, thus the proceeds from the tactical reduction to equities were reallocated to the cash and cash/equivalent asset class. Exhibit 6 Implementation of Equity Portion of the GWM Tactical Framework* with ETFs - $1 Million Portfolio Portfolio Equity Price ($) No. of Dollars ($) Asset Class Wgt (%) Wgt (%) Representative ETF Sym 5/8/08 Shares Invested Equity ,000,000 US Equity Large Cap Growth ishares S&P 500 Growth IVW , ,333 Large Cap Value ishares S&P 500 Value IVE , ,714 Mid Cap Growth ishares S&P MidCap 400 Growth IJK ,667 Mid Cap Value ishares S&P MidCap 400 Value IJJ ,667 Small Cap Growth ishares S&P SmallCap 600 Growth IJT ,143 Small Cap Value ishares S&P SmallCap 600 Value IJS ,143 Total US Equity ,667 International Equity Europe Vanguard European ETF VGK , ,476 Developed Asia Vanguard Pacific ETF VPL ,434 95,238 Emerging Markets Vanguard Emerging Markets ETF VWO ,619 Total International Equity ,333 Total ,000,000 Source: Morgan Stanley GWM Asset Allocation Group, FactSet. *For a taxable US dollar/us oriented investor with a moderate risk profile and $1 million -$20 million in investable assets. Recommended weights as of May 9,

137 GLOBAL WEALTH MANAGEMENT Morgan Stanley Global Wealth Management (GWM) Fixed Income Allocation Kevin Flanagan, Global Wealth Management s (GWM) Fixed Income Strategist, maintains four fixed income asset allocation models. The models focus on the various fixed income sectors, including but not limited to US Treasuries, mortgage backed securities (MBS), corporate bonds, preferred stock, and international bonds. The first three are conservative, moderate, and aggressive taxable fixed income models and the fourth is a tax-advantaged model. A variety of investment vehicles may be used to create portfolios consistent with his model. However, we believe that ETFs offer advantages due to their trading flexibility, diversification, low cost, and transparency. Exhibit 7 illustrates the implementation of the moderate model using ETFs. Implementation The ishares Lehman MBS Bond Fund (MBB) provides exposure to high-quality mortgage-backed securities (MBS). It tracks the Lehman Brothers US MBS Index, which primarily consists of investment-grade, mortgage-backed pass-through securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae. The index may also include hybrid adjustable-rate mortgages that have at least one year remaining before their initial reset. All securities in the index must have a remaining maturity of at least one year and have more than $250 million or more of outstanding face value. The index is market-cap weighted and pays and rebalances monthly. MBB has an expense ratio of 25 bps. For investment grade corporate bonds, the ishares iboxx $ Investment Grade Corporate Bond Fund (LQD) can serve as a proxy. The index it tracks seeks to provide a balanced representation of the US dollar investment grade corporate market by investing in the most liquid securities. It is a rules based index that typically contains 100 corporate bonds across the following industry sectors: Consumer, Financial, Telecommunication & Technology, and Industrials & Materials. Holdings in the index are equally weighted and the index is rebalanced monthly. LQD will generally hold all of the securities in roughly the same weights as the index but may use optimization techniques. It has an expense ratio of 15 bps. Preferred stocks may be represented by the ishares S&P US Preferred Stock Index Fund (PFF). PFF tracks the S&P US Preferred Stock index, which is a modified market-cap weighted index that is rebalanced annually. To be included in the index, a preferred must be listed on the NYSE, AMEX, or NASDAQ, have a capitalization of over $100 million, have a minimum trading volume of 250,000 shares for each of the previous six months, and cannot have a mandatory conversions or a scheduled maturity within the next 12 months. The index must also contain at least 15 trust preferreds and no more than three preferred stocks per issuer can be included in the index. PFF typically invests in a representative sampling of its benchmark, has an expense ratio of 48 bps, and pays a monthly dividend. The SPDR Lehman International Treasury Bond ETF (BWX) provides exposure to non-usd, sovereign debt. BWX tracks the Lehman Global Treasury ex-us Capped Index, which provides exposure to the fixed-rate local currency sovereign debt markets of investment grade rated countries outside the US. BWX does not hedge its currency exposure, which results in currency movements being a major contributor to performance. BWX s index has roughly a correlation to the USD index. To track its benchmark, the ETF relies on optimization techniques to invest in a representative sampling of the index. The index is modified market-cap weighted in order to increase its diversity. As a result of the modification, Japan exposure is capped at 23%. BWX has an expense ratio of 50 bps. There is no ETF currently available that provides exposure to federal agencies. Exhibit 7 Implementation of GWM s Moderate Model with ETFs - $1 Million Portfolio Asset Class Representative ETF Symbol Yield (%)* Price ($) 5/9/08 Portfolio Wgt (%) No. of Shares Dollars ($) Invested MBS ishares Lehman MBS MBB 2.56** , ,000 Inv. Grade Corp ishares iboxx $ Investment Grade Corporate LQD , ,000 Federal Agencies No Available ETF for Federal Agencies na na na 15 na 150,000 Preferreds ishares S&P US Preferred Stock PFF , ,000 Non-USD Sov. SPDR Lehman International Treasury BWX ,000 Total 1,000,000 Source: FactSet, Company Data, Morgan Stanley Research. *30-day SEC Yields as of 5/09/08 except for PFF, which is as of 4/30/08. **SEC-Yield does not include income earned from TBA rolls 22

138 GLOBAL WEALTH MANAGEMENT Morgan Stanley US Large-Cap Sector Asset Allocation Model US strategist, Abhijit Chakrabortti, maintains a US sector-based model. The overweight and underweight positions in this model are relative to the sector weights in the S&P 500 Index. This model might be attractive to investors seeking US large-cap exposure tilted towards favored sectors or to more aggressive investors seeking long or short positions in overweight or underweight sectors. The sector-based allocation model can be closely replicated with ten ETFs. As illustrated in Exhibit 7, Morgan Stanley s suggested sector allocations may be achieved by purchasing ten sector-based ETFs. Our model uses the sector ETFs that, in our view, provide the best exposure to each of the ten sectors rated by our strategists. The exhibit includes the approximate number of shares of each ETF that an investor would need to purchase to replicate the model for a $1 million investment, based upon closing prices as of May 9, The ETFs that provide exposure to sector-based indices are well diversified, containing roughly 30 to 200 stocks and have expense ratios, ranging from 23 to 48 basis points. For exposure to eight of the ten sectors, we favor Select Sector SPDRs. Our strategists sector weightings are based upon the S&P 500 Index. Companies are allocated to sectors using the Global Industry Classification Standard (GICS), which was developed jointly by MSCI and Standard & Poor s in order to add consistent sector classifications to major indices worldwide. Select Sector SPDRs offer pure sector plays on eight of the ten sectors in the S&P 500. Because there are only nine Select Sector SPDRs, these ETFs do not provide pure exposure to the Information Technology or Telecom Services sectors, which are combined in the Technology Select Sector SPDR. Select Sector SPDRs also offer good liquidity and have low relative expense ratios at 24 basis points. For exposure to technology and telecom, we favor ishares. The ishares DJ US Technology Sector Index Fund (IYW) offers pure exposure to information technology stocks and closely tracks the S&P 500 GICS Information Technology Index. The ishares DJ US Telecom Sector Index Fund (IYZ) offers pure exposure to telecom stocks and closely tracks the S&P 500 GICS Telecommunications Services Index. Notable Overweight Sectors Energy: Our strategists recommend a 16.5% position relative to the 14.1% that the sector makes up in the S&P 500. The sector is trading at a relative trailing P/E ratio of 0.75 vs. the S&P 500 ex-energy, which is a discount to its long-run average. Our strategists think a P/E valuation re-rating will likely be driven by sustained high energy prices and sector earnings. Health Care: Our strategy team recommends a 15.0% position relative to the sector s 11.3% weight in the S&P 500. Our strategists believe that Pharmaceutical companies offer reasonable earnings growth, relative earnings safety and yield. They prefer biotech companies with late-stage pipelines versus those that may need to raise capital. Consumer Staples: Our strategists recommend a 12.0% weight in the sector relative to its 10.4% weight in the S&P 500. Staples are a relative safe haven, offer attractive yields, and many companies are likely to gain share in emerging markets. Exhibit 8 Implementation of US Sector Model with ETFs $1 Million Portfolio Morgan Basis S&P 500 Stanley S&P 500 Points Price ($) No. of Dollars ($) GICS Sector Wgt (%) Wgt (%) Over/Under Representative ETF Sym 5/9/08 Shares Invested Consumer Disc (30) Consumer Discretionary SPDR XLY ,578 83,000 Consumer Staples Consumer Staples SPDR XLP , ,000 Energy Energy SPDR XLE , ,000 Financials (400) Financial SPDR XLF , ,000 Health Care Healthcare SPDR XLV , ,000 Industrials (220) Industrials SPDR XLI ,484 95,000 Info Tech (310) ishares DJ US Technology IYW , ,000 Materials (110) Materials SPDR XLB ,000 Telecom Services ishares DJ US Telecom IYZ ,091 54,000 Utilities Utilities SPDR XLU ,174 47,000 Total 1,000,000 Source. Morgan Stanley Research, ETF Providers and Trustees, Bloomberg, Thompson 23

139 GLOBAL WEALTH MANAGEMENT Ready, Aim, Fire: Targeted Industry Exposure With ETFs This section is an excerpt from out May 5, 2008 report, Ready, Aim, Fire: Targeted Industry Exposure with ETFs. It details the methodologies and exposure achieved through different ETFs and the index families on which they are based. ETF Holdings in this excerpt may differ from the profiles later in this report as our analysis was concluded before a quarterly rebalancing. Industry ETFs provide targeted exposure to specific market segments. As of May 1, 2008, there were 107 ETFs providing exposure to over 30 different industries ranging from Regional Banks to Aerospace & Defense. Combined, US-listed industry ETFs now have over $32 billion in total assets and average daily volume exceeding $5.2 billion. This report focuses on 45 ETFs within 14 industries that, in our opinion, have meaningful investor interest and multiple ETFs. Our analysis indicates important differences among industry ETFs as underlying index methodologies vary widely. Understanding the difference between major index families and other propriety indices is essential as it may alter industry, capitalization and stock exposure dramatically. The most notable differences include the breadth of exposure achieved through both the number of holdings and the weighting methodology applied (cap, equal, or tiered). There are also significant differences in terms of ETFs that track traditional indices, versus those that track passive baskets of stocks (HOLDRs). Due to varying methodologies, we found many anomalies in exposure among what appear to be similar ETFs. In banking, the five ETFs had the widest range of weighted average market caps ranging from $1.8 to $71 billion and, due to acquisitions, the Regional Bank HOLDRS has the largest weighted average market cap with 50% of its holdings in four major banks. Both retail and homebuilders are in the consumer discretionary sector, which tends to be more cyclical in nature. Our work shows that one retail ETF excludes Home Depot and Lowe s while one Homebuilder ETF includes both. This makes one less of a pure play on retail and the other less of a pure play on homebuilders. In addition, an equal-weighted retail ETF has much more cyclical exposure due to very heavy exposure to apparel, while another retail ETF has a heavy weight in Wal-Mart, which is classified as Consumer Staples by S&P due to its less cyclical food and staples businesses. Now, the world don t move to the beat of just one drum, and what might be right for you may not be right for some. Investing in industry ETFs, reminds us of the late 1970 s/early 80 s sitcom Diff rent Strokes. The variety of industry ETFs available provides investors with many choices as to how to access the various industries. This report often stops short of highlighting one ETF as better or worse for accessing a given industry, but we believe that once investors have determined the type of exposure they are seeking, the ETF that provides the best fit is generally evident. Industry ETFs concentrated exposure should generally lead to higher levels of volatility and risk. We note that the beta of the 45 industry ETFs we examined, relative to the S&P 500, ranged from 0.68 to 2.2 with a median of 1.1 and an average of 1.2. The most important factor in selecting industry ETFs is composition, in our opinion. Within each industry, we have compared the holdings of each ETF by market capitalization, industry classification according to the Global Industry Classification Standard (GICS), stock concentration and overlapping holdings. We also note material company exclusions from particular ETFs. Investors should place less emphasis on historical performance, in our opinion. While we have analyzed and included historical index correlations, annualized returns, standard deviations and Sharpe Ratios (a measure of excess return per unit of risk), we believe investors should place less emphasis on these results. This is a result of the major drivers of outperformance and/or underperformance having been largely related to capitalization, breadth of exposure, and weights applied to top holdings. Going forward we continue to expect that capitalization bias and stock concentration will be a meaningful driver of relative returns and risks. As a result, we believe that investors should select ETFs that have a composition in-line with their own outlook for stock performance and risk tolerance. Morgan Stanley currently has a large-cap bias within the US equity market. This is a result of the currently higher levels of volatility and the perceived defensive nature of larger-cap stocks. We highlight the following ETFs as they provide diversified large-cap exposure to industries currently rated Attractive by Morgan Stanley research analysts: ishares DJ US Oil Equipment & Services (IEZ) ishares DJ US Oil & Gas Exploration & Production (IEO) ishares DJ Aerospace & Defense (ITA) Market Vectors Global Alternative Energy (GEX) PowerShares WilderHill Clean Energy (PBW) Claymore/S&P Global Water ETF (CGW) PowerShares Water Resources (PHO) 24

140 GLOBAL WEALTH MANAGEMENT Exhibit 9 Selected US Industry ETFs 5/1/2008 Approx # Weighted Top 10 Expense Total Avg Daily Trading Price Securities Weighting Average Holdings Ratio Assets Volume Options Symbol ($) in Fund Method Cap ($ Bil) % of Total (%) ($ Mil) (1000/shrs) Avail. US Industry ETFs Consumer Discretionary - Homebuilders ishares DJ US Home Construction ITB Modified-Cap ,213 Yes SPDR S&P Homebuilder ETF XHB Equal ,075 8,068 Yes Consumer Discretionary - Retail Retail HOLDRS RTH Passive * 694 7,258 Yes SPDR S&P Retail ETF XRT Equal ,481 Yes Energy - Oil Equipment & Services ishares DJ US Oil Equipment & Serv. IEZ Modified-Cap No Oil Service HOLDRS OIH Passive * 2,286 7,298 Yes PowerShares Dyn. Oil & Gas Services PXJ Tiered Yes SPDR S&P Oil & Gas Equip. & Services XES Equal Yes Energy - Oil Exploration ishares DJ US Oil & Gas Exp. & Prod. IEO Modified-Cap No PowerShares Dyn. Energy & Exp. PXE Tiered Yes SPDR S&P Oil & Gas Expl. & Drilling XOP Equal Yes Financials - Banks ishares DJ US Regional Banks IAT Modified-Cap Yes KBW Bank ETF KBE Modified-Cap ,398 Yes KBW Regional Banking ETF KRE Modified-Equal ,436 Yes PowerShares Dynamic Banking Portfolio PJB Tiered Yes Regional Bank HOLDRS RKH Passive * 293 1,325 Yes Financials - Financial Services ishares DJ US Broker Dealers IAI Modified-Cap ,374 Yes KBW Capital Mkts. ETF KCE Modified-Cap Yes Financials - Insurance ishares DJ US Insurance IAK Modified-Cap No KBW Insurance ETF KIE Modified-Cap Yes PowerShares Dynamic Insurance PIC Tiered Yes Financials - Real Estate ishares Cohen & Steers Realty ICF Modified-Cap ,626 1,614 Yes ishares DJ US Real Estate IYR Modified-Cap ,122 9,284 Yes SPDR DJ Wilshire REIT RWR Modified-Cap , Yes Vanguard REIT ETF VNQ Modified-Cap , Yes Health Care- Biotechnology Biotech HOLDRS BBH Passive * Yes First Trust Amex Biotechnology FBT Equal Yes ishares Nasdaq Biotechnology IBB Modified-Cap ,360 1,671 Yes PowerShares Dyn. Biotech & Genome PBE Tiered Yes SPDR S&P Biotech XBI Equal Yes Health Care- Pharmaceuticals ishares DJ US Pharmaceuticals IHE Modified-Cap No Pharmaceutical HOLDRS PPH Passive * Yes PowerShares Dynamic Pharmaceuticals PJP Tiered Yes Industrials - Aerosapce & Defense ishares DJ US Aerospace & Defense ITA Modified-Cap No PowerShares Aerospace & Defense PPA Modified-Cap Yes Information Technology- Semiconductor ishares S&P N.A. Tech.-Semiconductors IGW Modified-Cap Yes PowerShares Dynamic Semiconductors PSI Tiered Yes Semiconductor HOLDRS SMH Passive * 1,236 11,418 Yes SPDR S&P Semiconductor ETF XSD Equal Yes Specialized Industry - Clean Energy Market Vectors Global Alternative Energy GEX Modified-Cap No PowerShares Global Clean Energy PBD Modified-Equal No PowerShares WilderHill Clean Energy PBW Modified-Cap ,482 1,018 Yes Specialized Industry - Water Claymore/S&P Global Water ETF CGW Modified-Cap Yes PowerShares Global Water Portfolio PIO Modified-Equal Yes PowerShares Water Resource PHO Modified-Equal , Yes Weighted Average Cap and Top 10 Holdings as of 3/28/08 *HOLDR expense ratios equivalent to $2 per 100 shares annually. Source: Bloomberg, Morgan Stanley Research 25

141 GLOBAL WEALTH MANAGEMENT Industry ETFs: Index Methodologies The majority of ETFs included in this study are based on indices from four providers. These include Dow Jones (10) S&P (7), Intellidex (7), and Keefe, Bruyette & Woods (4). Also included in our study were HOLDRs (6), which have no underlying benchmark, and one ETF from each of five other index providers. This section reviews methodologies of the four major index families included in our analysis. Dow Jones Select Industry Indices are modified market-capitalization weighted and based on the Industry Classification Benchmark (ICB) that was jointly developed by Dow Jones and FTSE. It assigns companies into 1 of 104 subsectors based on their primary sources of revenue. Companies that fall into the top 90% of cumulative market cap of each sector and have a float-adjusted capitalization of more than $75 million are eligible for inclusion. The minimum capitalization requirement is waived for the Telecom and Homebuilding subsectors. The indices are modified market-capitalization weighted such that, at a quarterly rebalancing, the weight of any holding is restricted to 25%, the aggregate weight of securities with weights of 5% or more is restricted to 45%, and the weight of the five largest companies is restricted to 65%. Eight ishares Industry ETFs included in our study are based on the Dow Jones Select Sector Indices. S&P Select Industry Indices are equally weighted and based on the Global Industry Classification Standard (GICS), which was jointly developed by Standard & Poor s and MSCI Barra. GICS classifies companies into 1 of 147 sub-industries based on principal business activities. Revenues are a significant factor in determining classification, but earnings analysis and market perception are also important factors. Each Select Industry Index contains a minimum of 21 liquid securities with market capitalizations over $500 million. If necessary, large stocks from relevant, highly correlated supplementary sub-industries will be added to reach the 21-security threshold. The indices are equally weighted and rebalanced quarterly, resulting in a smaller-cap bias. Six SPDR ETFs included in our study are based on S&P Select Industry Indices. Intellidex Indices are tiered weighted and use proprietary methodologies that begin with the 2,000 largest stocks. Companies eligible for inclusion must derive at least 50% of revenues from said industry. Stocks are sorted by market cap into quintiles, with larger stocks included in the first quintile. Based on a proprietary 25 factor model that includes seven valuation, seven fundamental, six timeliness and five risk factors, the top eight larger-cap stocks are selected for inclusion, as are the top 22 ranked smaller stocks. A tiered weighting is applied such that the eight larger companies each receive a 5% weight (40% total) and the 22 smaller companies each receive a 2.7% weight (60% total). This is applied quarterly resulting in a smaller-cap bias. Holdings in Intellidex Indices change more frequently and are less predictable as companies making up a large percentage of an industry s market capitalization may be excluded. Seven PowerShares industry ETFs based on Intellidex Indices are included in this study. Keefe, Bruyette & Woods (KBW) has both modified market capitalization and modified equally weighted Index methodologies. Their Banks, Insurance, and Capital Markets Indices are modified capitalization weighted, while their Regional Bank Index is equally weighted. Companies are selected for inclusion in a KBW Index based on both relevance to the market sector and certain trading criteria including, but not limited to, market capitalization, average daily volume, and stock price correlation to a relevant index. The Bank, Insurance, and Capital Market Indices are reviewed quarterly and a rebalancing will occur if any holding exceeds 10% of the index and/or the collective weight of all holdings over 5% exceeds 48%. The Regional Bank Index is also reviewed quarterly and a rebalancing will occur if any holding exceeds 3% of the index. Following the Regional Bank s rebalancing, the largest holdings will represent no more than 2% of the index. HOLDRs are not based on an underlying index. HOLDRs are trust issued receipts that represent beneficial ownership of a specified group of stocks in an industry, sector, or group. Their holdings are not rebalanced or reconstituted and do not change except for defined events such as mergers or acquisitions, which can result in stocks being eliminated from the basket and/or cash distributions. They also differ in that investors retain the voting rights on the underlying stocks, which would otherwise revert to the investment advisor, and they need to be bought or sold in round lots of 100 shares. Expense ratios consist of $2 per 100 shares annually. Some market participants do not categorize HOLDRs as ETFs, but others continue to be attracted to them for their relatively high liquidity. Six HOLDRs are included in this study. Some ETFs included in this study are based on other methodologies. This includes four modified cap-weighted REIT ETFs, two biotechnology ETFs (one, which includes only NASDAQ listed stocks and is cap-weighted, and one which is equally weighted), a Semiconductor ETF and one Aerospace & Defense ETF, which is modified cap-weighted. We also include four water and three clean energy ETFs. 26

142 GLOBAL WEALTH MANAGEMENT Industry ETFs: Summary Observations & Conclusions This section summarizes our analysis of the exposure provided by 45 different US-listed industry specific ETFs in 14 industries with multiple ETFs that, in our opinion, have significant investor interest and meaningful liquidity. We have excluded industries where there is currently only one related ETF in market segments such as medical devices, natural resources, steel, coal, gold miners and metals & mining. Our work in this and the following sections is organized by the major market sectors within which each industry falls. Consumer Discretionary Homebuilders For a pure play on homebuilders, the ishares Dow Jones US Home Construction Index (ITB) is a better choice. The SPDR S&P Homebuilders ETF (XHB) provides a more diversified play on consumer spending related to both home construction and ongoing expenses (furnishings and home improvement). Retail For a large-capitalization focused ETF with exposure to predominately well-known companies, the Retail HOLDRS (RTH) is the best choice. However, the SPDR S&P Retail ETF (XRT) provides broader exposure across the capitalization curve and may be more cyclical in nature as it has 42% exposure to apparel. Energy Oil Equipment & Services Many investors are attracted to the Oil Services HOLDRS (OIH) for its higher average liquidity. However, for longer-term investors less concerned about daily trading volume, we believe the ishares Dow Jones US Oil Equipment & Services Index (IEZ) may be a better alternative for large-cap exposure as it is not based on a passive index, is more broadly diversified, and does not need to be traded in round lots of 100 shares. To increase exposure down the capitalization curve, the SPDR S&P Oil & Gas Equipment & Services ETF (XES) and the PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) provide comparable exposure with the main difference being PXJ s broader capitalization diversification and proprietary selection methodology. Oil Exploration & Production We believe the ishares Dow Jones US Oil & Gas Exploration & Production Index (IEO) offers the purest play on oil exploration and production, regardless of whether the GICS or ICB classification methodology is used. Since it omits the super-majors, IEO also has the lowest weighted average market capitalization exposure. Financials Banks The KBW Bank ETF (KBE) offers the purest play on major banks while the ishares DJ US Regional Banks Index (IAT) and the KBW Regional Banking ETF (KRE) are pure plays on regional banks. However, due to equal weighting, KRE has the smallest average market cap. The PowerShares Dynamic Banking Portfolio (PJB) provides broad market cap and industry exposure but has low liquidity. Finally, due to acquisitions, the Regional Bank HOLDRs (RKH) appears to be regional in name only, as it has around 50% of its holdings in four large national banks. Capital Markets While the two Capital Markets ETFs are similar, we believe the ishares Dow Jones US Broker-Dealers Index (IAI) is a purer play on traditional investment banks and brokerage houses. The KBW Capital Markets ETF (KCE) offers a more diversified sample of the broader financial services industry, yet with a larger-cap bias and four less holdings. Insurance We believe the ishares Dow Jones US Insurance Index (IAK) offers the broadest exposure to the US insurance market. The KBW Insurance ETF (KIE) and the PowerShares Dynamic Insurance Portfolio (PIC) provide more targeted exposure to specific segments of the insurance industry. For example, KIE provides the most exposure to Life & Health companies, while PIC currently offers the most exposure to Property & Casualty companies. Investors should note that only KIE has developed meaningful size and liquidity. Real Estate Three of the REIT ETFs we analyzed the Vanguard REIT ETF (VNQ), ishares Dow Jones US Real Estate Index Fund (IYR), and Dow Jones Wilshire REIT ETF (RWR) show very similar market caps, portfolios, and returns. However, VNQ offers a much lower expense ratio. The ishares Cohen & Steers Realty Majors Index Fund (ICF) has a greater large-cap exposure, smaller number of holdings and appears preferable for investors looking to overweight large-cap REITs. Investors seeking liquidity should consider IYR. 27

143 GLOBAL WEALTH MANAGEMENT Industry ETFs: Summary Observations & Conclusions (Continued) Health Care Biotechnology The Biotechnology HOLDRs (BBH) offers a large-cap play, however, 75% of the portfolio is in three companies and it only has exposure to 15 companies in total. The SPDR S&P Biotechnology ETF (XBI) offers the purest play on biotechnology, but does so with an equal-weight methodology that provides exposure down the capitalization curve, which increases its volatility. The First Trust AMEX Biotechnology Index Fund (FBT) is also equally weighted, and includes fewer companies than XBI. The ishares Nasdaq Biotechnology Index Fund s (IBB) exclusion of non-nasdaq listed stocks may limit its appeal to investors seeking at least some exposure to all large-cap biotech stocks, which may also be a concern for the PowerShares Dynamic Biotechnology & Genome Portfolio (PBE) because of its proprietary selection methodology. Pharmaceuticals The Pharmaceutical HOLDRs (PPH) and the ishares Dow Jones US Pharmaceuticals ETF (IHE) offer the purer plays. PPH and IHE provide very similar industry exposure, with IHE providing significantly better diversification among number of companies and across the capitalization curve. PPH offers higher liquidity, but three stocks make up 50% of its holdings. The PowerShares Dynamic Pharmaceuticals Portfolio (PJP) is not a pure play on pharmaceuticals, but it may appeal to investors seeking a diversified ETF with exposure to both pharma and biotech. Industrials Aerospace & Defense We believe the ishares Dow Jones US Aerospace & Defense Index (ITA) offers the purest play for aerospace & defense-related exposure. Its index methodology limits the scope of sub industries in which it can invest. The PowerShares Aerospace & Defense Portfolio (PPA) holds all of the major aerospace & defense-related companies that are included in ITA and provides additional exposure to a wider range of more loosely related sub industries. Investors should also consider desired capitalization exposure as PPA has more large-cap exposure, while ITA has broader mid and small cap representation. Information Technology Semiconductors Based on the GICS methodology, the SPDR S&P Semiconductor ETF (XSD) offers the purest play on semiconductors, while the other ETFs also provide exposure to semiconductor capital equipment. Many investors are attracted to the Semiconductor HOLDRs (SMH) for its larger size and greater liquidity, but in our opinion, the ishares S&P North American Technology Semiconductor Index Fund (IGW) provides much broader cap-weighted exposure to the semiconductor industries. Through their equal and tiered weighting methodologies, XSD and the PowerShares Dynamic Semiconductor Portfolio (PSI) both provide broader exposure down the capitalization curve, with transparency of their respective methodologies a key differentiator. Specialized Industries Clean Energy ETFs offer diverse exposure to many segments of the clean energy industry ranging from 50% solar and 21% wind in the Market Vectors Global Alternative Energy (GEX) to 27% power systems and 9% bio-fuels in the PowerShares WilderHill Clean Energy (PBW). Their weighting methodologies result in exposure down the cap curve, with GEX providing the most large-cap exposure and the PowerShares Global Clean Energy (PBD) and PBW more equally spread across the market cap range. An additional differentiator is geographic exposure with GEX and PBD providing the most international exposure, particularly in Europe. Water ETFs offer diverse exposure to many sub-industries of the broad water industry. Their weighting methodologies result in exposure down the capitalization curve, with the Claymore S&P Global Water ETF (CGW) providing the most large-cap exposure and PowerShares Global Water Portfolio (PIO) the least. Perhaps the most important decision for investors in water ETFs is the choice between US versus global focus, with PIO providing the most exposure to companies domiciled outside the US, while PowerShares Water Resources Portfolio s (PHO) holdings are almost entirely US-listed. 28

144 GLOBAL WEALTH MANAGEMENT Homebuilder Industry Index and ETF Observations We analyzed the Dow Jones U.S. Select Home Construction Index, which can be tracked with the ishares ETF (ITB) and the S&P Homebuilding Select Industry Index, which can be tracked with the SPDR ETF (XHB). Index Descriptions: The Dow Jones U.S. Select Home Construction Index is designed to track companies in the Dow Jones Wilshire 2500 Index that are constructors of residential, mobile and/or prefabricated homes. The index is modified market-capitalization weighted and rebalanced quarterly. The S&P Homebuilding Select Industry Index is designed to track the homebuilding sub-industry of the S&P Total Market Index. This includes companies engaged in homebuilding, home furnishings and home improvement. The index is equally-weighted at its quarterly rebalancing. Market Capitalization The SPDR S&P Homebuilder ETF (XHB), which tracks the S&P Homebuilding Select Industry Index, has a larger-cap bias versus the ishares DJ U.S. Home Construction Index Fund (ITB). XHB includes 21 companies and has a weighted average market capitalization of $5.4 billion, versus $1.7 billion for ITB, which includes just 23 stocks. Roughly 13% of XHB s weighting is in companies with market capitalizations over $5 billion versus 0% exposure for ITB (Exhibit 11). We note that all of XHB s exposure to these larger-cap companies is through home improvement companies (Home Depot, Lowes and Sherwin Williams). ITB s lower median and weighted average market capitalization is a result of its concentrated exposure to pure-play homebuilders, whose values have declined significantly with the slowdown in the housing market. Exhibit 11 GICS Sub-Industry Allocation of Homebuilder ETFs XHB ITB Home Furnishings 21% 0% Home Improvement Retail 13% 0% Homebuilding 66% 100% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 Industry and Company Composition According to the GICS classification system, ITB has exposure to just one sub-industry, while XHB has exposure to three (Exhibit 11). The two ETFs have 14 holdings in common that make up 61% of XHB and 75% of ITB (Exhibit 12) The vast majority of the holdings that are in XHB but not ITB are home furnishing or home improvement companies, while the companies in ITB, but not in XHB are generally smaller homebuilders. The top 10 holdings of XHB and ITB make up 45 and 57% of their holdings, respectively. Exhibit 12 Overlapping Holdings in ETFs Ranked by Mkt. Cap. % of ETF Holdings Market Company XHB ITB Cap. ($Bil) Home Depot Lowe's Sherwin-Williams Mohawk Industries DR Horton Pulte Homes Toll Brothers Lennar NVR Centex Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 10 Market Capitalization Breakdown of Homebuilder Industry ETFs Weighted Trading Median Mkt. Avg. Mkt. Market Cap Ranges Name Symbol Cap ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion SPDR S&P Hombuilders XHB % 48% 38% ishares DJ US Home Construction ITB % 51% 49% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 29

145 GLOBAL WEALTH MANAGEMENT Historical Performance The correlation of the S&P Homebuilding Select Industry Index (XHB s underlying index) and the Dow Jones U.S. Select Home Construction Index (ITB s underlying index) historically has been relatively strong. We analyzed relative performance from January 2000 through February 2008 and, based on monthly data, found a correlation of However, over that same time period, on an annualized basis, XHB s underlying index returned 8.8% versus a 12.1% increase for ITB (Exhibits 13 and 14). Exhibit 13 Performance of Homebuilder ETF Indices XHB ITB Annual Return 8.8% 12.1% Standard Dev. 28.6% 31.9% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 1/00-2/08. Underlying index returns were used in all cases. Conclusions For a pure play on homebuilders, ITB is a better choice. XHB provides a more diversified play on consumer spending related to both home construction and ongoing expenses (furnishings and home improvement). Exhibit 14 Performance of Homebuilder Indices XHB ITB Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 1/00-2/08. Exhibit 15 Homebuilder ETF Composition and General Data Homebuilder ETFs ITB XHB ETF/ Index Characteristics Weighting Methodology Modified Cap. Equal Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) 431 1,075 Avg. Daily Volume ($ Mil) Turnover (Days) 17 6 Short Interest (%) Options Yes Yes 2007 Tracking Error vs. Benchmark (bps) 57 9 Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08 30

146 GLOBAL WEALTH MANAGEMENT Retail Industry Index and ETF Observations We analyzed the Retail HOLDRs Trust (RTH) and the S&P Retail Select Industry Index, which can be tracked with the SPDR S&P Retail ETF (XRT). Index Descriptions: The S&P Retail Select Industry Index is designed to track the retail sub-industry portion of the S&P Total Market Index as defined by the Global Industry Classification Standard (GICS). It includes companies listed on major U.S. exchanges and is equally-weighted at a quarterly rebalancing. The Retail HOLDRs Trust represents ownership in a basket of stocks that sell merchandise to consumers. RTH has no underlying index and its holdings will not change except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket and/or cash distributions. The weights of RTH s components are not rebalanced, but do adjust with changes in relative performance. Market Capitalization The SPDR S&P Retail ETF (XRT), which tracks the S&P Select Industry Index, has a distinct smaller-cap bias versus the Retail HOLDRs Trust (RTH). XRT includes 53 companies and has a weighted average market capitalization of $10.4 billion, versus $64.1 billion for RTH, which includes just 18 stocks. Fully 60% of XRT s weighting is in companies with market capitalizations under $5 billion versus just 7% for RTH (Exhibit 16). We note that four of the nation s largest retailers (Wal-Mart, Home Depot, Target and Walgreens) make up almost 50% of RTH, but just 6% of XRT. This is a result of XRT s broader index and equal-weight methodology, which provides greater exposure down the capitalization curve. XRT also has a significantly smaller median market capitalization at $2.8 billion versus $15.6 billion for RTH. Industry and Company Composition According to the GICS classification system, there are nine different sub-industries represented in XRT and RTH (Exhibit 17). XRT s higher exposure to apparel and lower exposure to Exhibit 17 GICS Sub-Industry Allocation of Retail ETFs Sub-Industry RTH XRT Apparel Retail 9% 42% Catalog Retail 0% 2% Computer & Electronics Retail 5% 6% Department Stores 6% 9% Drug Retail 14% 4% Food Retail 7% 9% General Merchandise Stores 9% 4% Home Improvement Retail 19% 0% Hypermarkets & Super Centers 26% 4% Internet Retail 6% 0% Specialty Stores 0% 21% Source. Fund Company Data, Morgan Stanley Research as of 3/28/08 drug retail and hypermarkets/super centers (Wal-Mart and Costco) provides a significant cyclical tilt relative to RTH. However, this is partially offset by RTH s 19% weight in home improvement, which is excluded from XRT. The overlapping holdings in RTH and XRT and the respective weights of each holding can be seen in Exhibit 18. In total, there are 14 companies that appear in both RTH and XRT. The top 10 holdings of RTH and XRT make up 81 and 20% of their respective holdings. Exhibit 18 Overlapping Holdings in ETFs Ranked by Mkt. Cap. % of ETF Holdings Market Company RTH XRT Cap ($Bil) Wal-Mart CVS Caremark Home Depot Target Walgreens Lowe's Costco Best Buy Kroger The Gap Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 16 Market Capitalization Breakdown of Retail Industry ETFs Weighted Trading Median Mkt. Avg. Mkt. Market Cap Ranges Name Symbol Cap ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion Retail HOLDRs Trust RTH % 7% 0% SPDR S&P Retail XRT % 43% 17% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 31

147 GLOBAL WEALTH MANAGEMENT Historical Performance The correlation of RTH to the S&P Retail Select Industry Index has been quite high, but there has been a notable difference in relative performance. We analyzed relative performance or RTH (which has no benchmark index) to XRT s underlying index from June 2001 through February Using monthly returns, we observed a 0.87 correlation. However, over that same time period, XRT s underlying index returned 5.1% annualized versus an average 1% decline for RTH (Exhibits 19 & 20). In our opinion, a portion of RTH s underperformance can be explained by looking at Home Depot (HD), which made up almost 20% of RTH s holdings in 2001 and has returned -7.0% annualized, since that time. Exhibit 19 Performance of Retail Indices/HOLDRs XRT RTH Annual Return 5.4% -1.0% Standard Dev. 20.5% 16.3% Sharpe Ratio Source: Fund Company Data, Morgan Stanley Research. Data from 6/01-2/08. For XRT, index data was used. For RTH, which has no benchmark index, actual ETF returns were used. Conclusions For a large-capitalization focused ETF with exposure to predominately well-known companies, RTH is the best choice. However, XRT provides broader exposure across the capitalization curve and may be more cyclical in nature. Exhibit 20 Performance of Retail Indices & HOLDRs XRT RTH 0 May-01 Mar-02 Jan-03 Nov-03 Sep-04 Jul-05 May-06 Mar-07 Jan-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index (XRT) and ETF data (RTH) from 6/01-2/08. Exhibit 21 Retail ETF Composition and General Data Retail ETFs RTH XRT ETF / Index Characteristics Weighting Methodology Passive Equal Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) 0* 0.35 Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) 1 2 Short Interest (%) Options Yes Yes 2007 Tracking Error vs. Benchmark (bps) na 32 Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08 * See HOLDRs description page 5. 32

148 GLOBAL WEALTH MANAGEMENT Oil Equipment & Services Industry Index and ETF Observations We analyzed the Oil Service HOLDRs (OIH),the PowerShares Dynamic Oil & Gas Services (PXJ), the ishares DJ US Oil Equipment & Services (IEZ) and the SPDR S&P Oil & Gas Equipment & Services (XES) ETFs. Index Descriptions: The Oil Services HOLDRs Trust (OIH) represents ownership in a basket of stocks that provide products and services related to the oil service industry. OIH has no underlying index and its holdings will not change except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket and/or cash distributions. OIH s constituent weightings are not rebalanced, but do adjust with changes in relative performance. PXJ tracks the Dynamic Oil Services Intellidex Index. The Index consists of 30 companies that assist in the production, processing and supply of oil and gas. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. IEZ tracks the Dow Jones U.S. Oil Equipment & Services Index, which includes companies in the Dow Jones Wilshire 2500 Index that are suppliers of equipment or services to oil field and offshore platform companies. The index is modified market-capitalization weighted and rebalanced quarterly. XES tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which represents the oil and gas equipment and services sub-industry portion of the S&P Total Market as defined by the Global Industry Classification Standard (GICS). It includes companies listed on major U.S. exchanges and is equally-weighted at a quarterly rebalancing. Market Capitalization OIH and IEZ have distinct larger-cap biases. Although OIH has significantly higher median market-capitalization exposure, the modified cap-weighted methodology of IEZ versus the passive weighting of OIH leads to comparable weighted Exhibit 23 GICS Sub-Industry Allocation of Oil Equipment & Services ETFs OIH PXJ IEZ XES Industrial Conglomerates 0% 5% 0% 0% Oil & Gas Drilling 41% 24% 30% 36% Oil & Gas Equipment & Services 59% 71% 69% 64% Oil & Gas Exploration & Production 0% 0% 1% 0% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 average market capitalization of their holdings (Exhibit 22). PXJ and XES have comparable weighted average cap exposure and both have significantly more exposure to companies down the capitalization curve. Industry and Company Composition According to the GICS classification system, two different sub-industries make up the vast majority of the ETFs assets (Exhibit 23). In total, the four ETFs have eleven holdings in common, most of which tend to be among the larger companies in the industry (Exhibit 24). OIH is the most heavily concentrated with its Top 10 holdings making up over 80% of its portfolio versus XES, which has only 41% exposure to its top 10 holdings. As a result of its proprietary selection methodology, PXJ did not have exposure to two of the largest cap companies in the industry (Transocean and Weatherford). Exhibit 24 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company OIH PXJ IEZ XES Cap. ($Bil) Schlumberger Transocean Halliburton Weatherford Baker Hughes National Oilwell Varco Diamond Offshore Drilling Smith Intl Inc Noble Corporation Cameron International Exhibit 22 Market Capitalization Breakdown of Oil Equipment & Services Industry ETFs Trading Median Mkt. Cap Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion Oil Service HOLDRS OIH % 4% 0% PowerShares Dynamic Oil & Gas Services PXJ % 44% 6% ishares DJ US Oil Equip. & Services IEZ % 22% 4% SPDR S&P Oil & Gas Equip. & Services XES % 36% 0% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08 33

149 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Oil Equipment & Services indices/holdrs range from 0.97 to 1.0. We analyzed relative performance of their underlying indices from February 2001 through February 2008 using monthly data. Although the Dynamic Oil Services Intellidex Index, which can be tracked with PXJ, had the strongest historical returns and highest Sharpe Ratio, we note that all of the outperformance was achieved prior to October 2005 when PXJ was actually launched (Exhibit 25). Since that time, we found that the Dow Jones U.S. Oil Equipment & Services Index, which can be tracked with IEZ, had the highest annualized returns at 24.6% annualized and the best Sharpe Ratio at 0.9. The long-term returns of the four indices are displayed in Exhibit 26. Exhibit 2 Performance of Oil Equipment & Services Indices/HOLDRs PXJ XES OIH IEZ Annual Return 15.3% 11.7% 10.5% 13.5% Standard Dev. 28.2% 29.7% 29.0% 28.1% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 2/01-2/08. Index returns were used in all cases. Exhibit 27 Exhibit 26 Performance of Oil Equipment & Services Indices PXJ OIH XES IEZ Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 2/01-2/08 Conclusions Many investors are attracted to OIH for its higher average liquidity. However, for longer-term investors less concerned about daily trading volume, we believe IEZ may be a better alternative for large-cap exposure as it is not based on a passive index, is more broadly diversified, and does not need to be traded in round lots of 100 shares. To increase exposure down the capitalization curve, XES and PXJ provide comparable exposure with the main difference being PXJ s broader capitalization diversification and proprietary selection methodology. Oil Equipment & Services ETF Composition and General Data Oil Equipment & Services ETFs OIH PXJ IEZ XES ETF / Index Characteristics Weighting Methodology Passive Tiered Modified Cap. Equal Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) 0* Total Assets ($ Mil) 2, Avg. Daily Volume ($ Mil) 1, Turnover (Days) Short Interest (%) Options Yes Yes No Yes 2007 Tracking Error vs. Benchmark (bps) na Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. * See HOLDRs description page 5. 34

150 GLOBAL WEALTH MANAGEMENT Oil Exploration & Production Industry Index and ETF Observations We analyzed SPDR S&P Oil & Gas Exploration & Production ETF (XOP), ishares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO), and the PowerShares Dynamic Energy Exploration & Production Portfolio (PXE) and their underlying indices. Index Descriptions: XOP tracks the S&P Oil & Gas Exploration Index, which represents the oil and gas exploration and production sub-industry portion of the S&P Total Market as defined by the Global Industry Classification Standard (GICS). It includes companies listed on major US exchanges and is equally weighted at a quarterly rebalancing. IEO tracks the Dow Jones U.S. Select Oil Exploration & Production Index, which includes companies in the Dow Jones Wilshire 2500 index that are classified as exploration and production by the Industry Classification Benchmark (ICB). The index is modified market-capitalization weighted and rebalanced quarterly. PXE tracks the Dynamic Energy Exploration & Production Intellidex Index. The Index consists of 30 companies that are principally engaged in the exploration, extraction, and production of crude oil and natural gas. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. Market Capitalization Despite its modified market-cap weighted methodology, IEO has the lowest median and weighted average cap exposure of the three ETFs. This is a result of IEO s benchmark index excluding three mega-cap companies Exxon Mobil (XOM), ConocoPhillips (COP) and Chevron (CVX) as they are not classified as E&P by the Industry Classification Benchmark (ICB) methodology. However, because XOP s equal-weight methodology and PXE s tiered weighting are both designed to enhance exposure down the capitalization curve, XOP and PXE have more exposure to companies with capitalizations below $5 billion (Exhibit 28). Exhibit 29 GICS Sub-Industry Allocation of E&P ETFs XOP IEO PXE Gas Utilities 0% 0% 6% Independent Power Producers & Energy Traders 0% 1% 1% Integrated Oil & Gas 11% 10% 24% Oil & Gas Exploration & Production 76% 78% 61% Oil & Gas Refining & Marketing 13% 10% 9% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 Industry and Company Composition According to the GICS classification system, three different sub-industries make up the bulk of exposure in XOP, IEO and PXE. Interestingly, according to the ICB system, there is no exposure to Integrated Oil & Gas companies in IEO. However, according to GICS, it has 10% exposure (Exhibit 29). The ETFs have 18 overlapping holdings in common, which make up roughly 50% of each ETF. Their ten largest holdings, ranked by market capitalization are displayed in Exhibit 30. Three major oil stocks, XOM, COP, and CVX, which are only in XOP and PXE, have average market capitalizations exceeding $250 Billion and make up roughly 8% of XOP and 15% of PXE. The top 10 holdings of IEO, PXE and XOP make up 55, 46, and 30% of their portfolios, respectively. Exhibit 30 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company XOP IEO PXE Cap. ($Bil) Exxon Mobil Corp Chevron Corp New Conocophillips Occidental Petroleum Devon Energy Apache XTO Energy Anadarko Petroleum EOG Resources Valero Energy Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 28 Market Capitalization Breakdown of Oil Exploration & Production ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion SPDR S&P Oil & Gas Exploration & Drilling XOP % 41% 0% ishares DJ US Oil & Gas Eploration & Production IEO % 26% 2% PowerShares Dynamic Energy & Exploration PXE % 41% 5% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 35

151 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Oil Exploration and Production indices are relatively tight, ranging from 0.96 to We analyzed relative performance of their underlying indices from February 2000 through February 2008 using monthly data. For five of the eight years in our study ( ), large-cap stocks underperformed small and mid-cap. This partially explains the weaker performance of IEO as it has the highest exposure to companies with capitalizations over $5 billion at 71% of current assets. However, since 2005, as performance across the capitalization curve has been more even, IEO has been the best performer. The annualized and long-term returns of the three indices are displayed in Exhibits 31 and 32. Exhibit 31 Performance of Oil Exploration & Production Indices PXE XOP IEO Annual Return 26.7% 29.8% 22.4% Standard Dev. 25.3% 26.5% 26.6% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 2/00-2/08. Index returns were used in all cases. Exhibit 32 Performance of Oil Exploration & Production Indices PXE XOP IEO Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 2/00-2/08. Conclusions We believe IEO offers the purest play on oil exploration and production, regardless of whether the GICS or ICB classification methodology is used. Since it omits the super-majors, IEO also has the lowest weighted average market cap. Exhibit 33 Oil Exploration & Production ETF Composition and General Data Exploration & Production ETFs XOP IEO PXE ETF / Index Characteristics Weighting Methodology Equal Modified Cap. Tiered Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes No Yes 2007 Tracking Error vs. Benchmark (bps) Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 36

152 GLOBAL WEALTH MANAGEMENT Banking Industry Index and ETF Observations We analyzed the ishares DJ Regional Bank (IAT), KBW Bank (KBE), KBW Regional Bank (KRE) PowerShares Dynamic Bank (PJB) and the Regional Bank HOLDRs (RKH). Index Descriptions: IAT tracks the Dow Jones U.S. Select Regional Banking Index, which includes companies in the Dow Jones Wilshire 2500 Index that are classified as regional banks by the Industry Classification Benchmark (ICB). The index is modified market-cap weighted and rebalanced quarterly. KBE tracks the KBW Bank Index, which measures the performance of national and leading regional banks. The index is float-adjusted and modified market-capitalization weighted such that no holding exceeds 10% of the index. KRE tracks the KBW Regional Banking Index, which measures the performance of regional banks. The index is modified equally-weighted and rebalanced quarterly to ensure no holding exceeds 3% of the index. PJB tracks the Dynamic Banking Intellidex Index. The Index consists of 30 companies that are principally engaged in banking. Stocks are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. The Regional Bank HOLDRS Trust (RKH) tracks a basket of bank stocks. RKH has no underlying index and its holdings will not change except for defined reconstitution events. As a result of mergers in the bank industry, RKH is regional in name only. Holdings are not rebalanced, but do reflect changes in relative performance. Market Capitalization Bank ETFs have the most pronounced market capitalization differences in our study. This occurs because KRE only includes smaller regional banks and applies an equal weighting. At the other extreme, RKH has more concentrated exposure to some of the largest banks, due to Exhibit 35 GICS Sub-Industry Allocation of ETFs KBE RKH KRE IAT PJB Asset Management & Custody Banks 12% 15% 0% 5% 5% Consumer Finance 4% 0% 0% 0% 0% Diversified Banks 22% 38% 0% 20% 14% Other Diversified Financial Services 24% 25% 0% 0% 5% Regional Banks 33% 22% 91% 64% 62% Thrifts & Mortgage Finance 4% 0% 9% 11% 14% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 acquisitions. KBE focuses primarily on national banks, but its modified cap weighting leads to a lower weighted average cap than RKH (Exhibit 35). Similar to KRE, ITA focuses on regional banks, but its modified cap weighting leads to a larger cap bias relative to KRE. PJB s tiered weighting and inclusion of national and regional banks results in the most diversified cap exposure. Industry and Company Composition According to the GICS classification, three sub-industries (Regional Banks, Diversified Financials, and Diversified Banks) make up the majority of these ETFs portfolios. KRE is the purest play on regional banks, while PJB and IAT provide broader exposure to the entire banking industry (Exhibit 35). The difference in methodologies between the various bank ETFs is so vast that there are no holdings that appear in all of the ETFs (Exhibit 36). Concentration among top ten holdings also varies widely from 85% for RKH to 26.7% for KBE. Exhibit 36 Overlapping Holdings of Bank ETFs Ranked by Market Capitalization % of ETF Holdings Market Large-Cap Banks KBE RKH KRE IAT PJB Cap. ($Bil) Bank of America JPMorgan Chase Citigroup Small-Cap Banks Hudson City Bancorp Unionbancal Corp Sovereign Bancorp Inc Source: Fund Company Data as of 3/28/08. Exhibit 34 Market Capitalization Breakdown of Bank ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion KBW Bank KBE % 4% 0% Regional Bank HOLDRS RKH % 1% 0% KBW Regional Banking KRE % 61% 35% ishares DJ US Regional Banks IAT % 24% 5% PowerShares Dynamic Banking PJB % 42% 19% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 37

153 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of bank indices are generally weaker than other industries we analyzed, which can be explained by their vastly different methodologies and exposure. We analyzed relative performance of their underlying indices from December 2003 through February 2008 using monthly data and found correlations ranging from 0.74 for KRE/KBE to 0.97 for KBE/RKH. Considering their vast differences, the annualized returns were more tightly clustered than we anticipated. With the exception of KBE, the other four bank indices had returns that were within 3% of each other with generally comparable standard deviations (Exhibits 37 & 38). We note that if this study had been conducted prior to cracks forming in the financial markets (April of 2007) the annualized returns for financial indices would have ranged from 5.5% (KBE) to 8.0% (IAT). Exhibit 37 Performance of Bank Indices/HOLDRs PJB KBE KRE RKH IAT Annual Return -1.6% -4.0% -1.9% -2.0% 1.0% Standard Dev. 11.5% 12.5% 13.6% 11.9% 12.7% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 3/03-2/08. Index returns were used in all cases. Exhibit 38 Performance of Bank Indices PJB KBE KRE RKH IAT 0.8 Dec-03 Oct-04 Aug-05 Jun-06 Apr-07 Feb-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 3/03-2/08. Conclusions KBE offers the purest play on major banks while IAT and KRE are pure plays on regional banks. However, due to equal weighting, KRE has the smallest average market cap. PJB provides broad market cap and industry exposure but has low liquidity. Finally, due to acquisitions, RKH appears to be regional in name only as it has around 50% of its holdings in four large, national banks. Exhibit 39 Bank ETF Composition and General Data Banking ETFs KBE RKH KRE IAT PJB ETF / Index Characteristics Weighting Methodology Modified Cap. Passive Equal Modified Cap. Tiered Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) * Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes Yes Yes Yes 2007 Tracking Error vs. Benchmark (bps) 1 na Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 38

154 GLOBAL WEALTH MANAGEMENT Capital Markets Industry Index and ETF Observations We analyzed the ishares DJ US Broker Dealers Fund (IAI) and the KBW Capital Markets ETF (KCE) and their underlying indices. Index Descriptions: IAI tracks the Dow Jones U.S. Select Investment Services Index, which includes companies in the Dow Jones Wilshire 2500 Index that are classified as financial service providers by the Industry Classification Benchmark (ICB). They include securities brokers and dealers, investment banks, asset managers, online brokers, and securities/commodities exchanges. The index is modified market-capitalization weighted and is rebalanced quarterly. KCE tracks the KBW Capital Markets Index, which measures the performance of participants in the US capital markets industry. It includes broker-dealers, investment banks, asset managers, custody banks, and stock exchanges. The index is float-adjusted and modified market-capitalization weighted such that no holding exceeds 10% of the index. Market Capitalization IAI has a much smaller median and slightly lower weighted average market capitalization than KCE. This is a result of its inclusion of six companies with market caps below $750 million, which make up a combined 8% of its holdings. As the weights applied to these smaller stocks are relatively low, the ETFs have more comparable weighted average cap exposure than their median capitalizations would imply (Exhibit 40). The fund s largest holdings and weights are roughly comparable, with the exception of only KCE including State Street, which is a custody bank. Both funds place roughly the same weight on mid-cap companies. Exhibit 41 GICS Sub-Industry Allocation of Capital Markets ETFs IAI KCE Asset Management & Custody Banks 8% 25% Investment Banking & Brokerage 69% 52% Specialized Finance 23% 23% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 Industry and Company Composition According to the GICS classification system, three different sub-industries make up the portfolios of IAI and KCE (Exhibit 41). IAI has a 17% larger weight to Investment Banking & Brokerage, while KCE holds more companies in the Asset Management & Custody Banks sub-industry. Note that IAI has 8% exposure to Asset Managers and no exposure to Custody Banks. IAI holds a more diversified group of investment banks and brokers with 20 stocks, compared to KCE s 12. In total, the ETFs have 19 overlapping holdings in common, representing about 81% of IAI and around 78% of KCE. Their ten largest holdings, ranked by market capitalization, are displayed in Exhibit 42. Four companies (Morgan Stanley, Goldman Sachs, Merrill Lynch, and CME Group) make up the top holdings of both ETFs and account for roughly 30% of each portfolio. Exhibit 42 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company IAI KCE Cap. ($Bil) Goldman Sachs Morgan Stanley Merrill Lynch CME Group State Street Lehman Brothers Franklin Resources Charles Schwab NYSE Euronext Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 40 Market Capitalization Breakdown of Capital Markets ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion ishares DJ US Broker Dealers IAI % 23% 8% KBW Capital Markets KCE % 20% 0% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 39

155 GLOBAL WEALTH MANAGEMENT Historical Performance The correlation of the two Capital Markets indices is very tight, at The high correlation is not surprising, as overlapping holdings make up about 80% of each ETF. We analyzed relative performance of their underlying indices from January 2004 through February 2008 using monthly data. We believe IAI has outperformed because of its larger weighting in the Investment Banks & Brokerages sub-industry, which largely posted stellar returns (albeit with higher volatility) from 2004 to However, since the summer of 2007, KCE has narrowed the performance gap between the two ETF as the less volatile asset mangers and custody banks have generally outperformed investment banks and brokerage companies. The annualized and long-term returns of the two indices are displayed in Exhibits 43 and 44. Exhibit 43 Performance of Capital Markets Indices KCE IAI Annual Return 7.4% 8.7% Standard Dev. 16.4% 17.6% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 01/04-2/08. Index returns were used in all cases. Conclusions While the two Capital Markets ETFs are similar, we believe IAI is a purer play on traditional investment banks and brokerage houses. KCE offers a more diversified sample of the broader financial services industry, yet with a larger-cap bias and four less holdings. Exhibit 44 Performance of Capital Markets Indices Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 1/04-2/08. Exhibit 45 Capital Markets ETF Composition and General Data Financial Services ETFs IAI KCE ETF / Index Characteristics Weighting Methodology Modified Cap. Modified Cap. Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) 3 4 Short Interest (%) Options Yes Yes Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 40

156 GLOBAL WEALTH MANAGEMENT Insurance Industry Index and ETF Observations We analyzed the KBW Insurance ETF (KIE), ishares DJ US Insurance Fund (IAK), and the PowerShares Dynamic Insurance Portfolio (PIC) and their underlying indices. Index Descriptions: KIE tracks the KBW Insurance Index. The index seeks to provide appropriate representation of the insurance industry s sub-sectors, including personal and commercial lines, property/casualty, life insurance, reinsurance, brokerage and financial guarantee. Its components account for about 75% of the market capitalization of the US public insurance companies. It is float-adjusted, modified market-capitalization weighted such that no holding exceeds 10% of the index. IAK tracks the Dow Jones U.S. Select Insurance Index, which includes companies in the Dow Jones Wilshire 2500 Index that are classified as insurance by the Industry Classification Benchmark (ICB). The index is modified market-capitalization weighted and rebalanced quarterly. PIC tracks the Dynamic Insurance Intellidex Index. The Index consists of 30 companies that are principally engaged in underwriting and distribution of life, health, and property/casualty insurance. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. Market Capitalization PIC has the lowest weighted average market capitalization by a significant margin (Exhibit 46). This is largely the result of American International Group (AIG) not being in its index at the time of our analysis and its tiered weighting methodology. Roughly 50% of KIE and IAK consist of companies with market caps greater than $20 billion, while only 25% of PIC s holdings are that large. IAK s substantial 16% weighting in AIG (market capitalization: $109 billion) accounts for its dramatically larger weighted average market capitalization versus KIE and PIC. Despite its higher weighted average cap, IAK has the lowest median cap as it includes twice as many companies (albeit with much smaller weights) than either KIE or PIC. Exhibit 47 GICS Sub-Industry Allocation of Insurance ETFs KIE IAK PIC Insurance Brokers 9% 0% 5% Life & Health Insurance 36% 31% 13% Multi-line Insurance 13% 29% 10% Property & Casualty Insurance 39% 39% 55% Reinsurance 3% 1% 16% Thrifts & Mortgage Finance 1% 0% 0% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 Industry and Company Composition According to the GICS classification system, the Property & Casualty and Life & Health sub-industries provide the majority of exposure for each insurance ETF (Exhibit 47). Compared to its peers, PIC has noticeably more exposure to Property & Casualty and less to Life & Health. Only PIC has meaningful exposure to the Reinsurance sub-industry. The three ETFs have seven overlapping holdings in common, which make up roughly 32-39% their portfoios (Exhibit 48). All but one of the overlaps are between large-cap companies, as KIE holds only four mid-cap stocks and no small-caps. Conversely, PIC lacks a few of the largest insurers (like AIG, MetLife, and Hartford) which are included in the other two ETFs. We note that 18 of KIE s 24 holdings are also found in IAT. The top 10 holdings of KIE, IAK, and PIC make up 62, 61, and 46% of their portfolios, respectively. Exhibit 48 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company KIE IAK PIC Cap. ($Bil) American International Group MetLife Prudential Financial Aflac Inc Travelers Companies Allstate Hartford Financial Loews Corporation Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 46 Market Capitalization Breakdown of Insurance ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion KBW Insurance KIE % 6% 0% ishares DJ US Insurance IAK % 18% 2% PowerShares Dynamic Insurance PIC % 49% 6% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 41

157 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Insurance indices are relatively tight, ranging from 0.90 to We analyzed relative performance of their underlying indices from October 2003 through February 2008 using monthly data. While it is hard to pinpoint specific causes of PIC s long-term outperformance as the proprietary methodology of the index allows frequent changes, its outperformance in 2008 appears to be related to its lack of exposure to AIG and larger weighting of Property & Casualty and smaller weighting of Life & Health. According to our insurance industry analysts, as of mid-february 2008, Property & Casualty insurance companies had outperformed the S&P 500 by about three percent while Life & Health Insurance companies had underperformed by around 4%. The annualized and long-term returns of the three indices are displayed in Exhibits 49 and 50. Exhibit 49 Performance of Insurance Indices PIC KIE IAK Annual Return 11.1% 6.6% 7.4% Standard Dev. 10.7% 11.6% 5.0% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 10/03-2/08. Index returns were used in all cases. Exhibit 50 Performance of Insurance Indices PIC KIE IAK 9/31/03 9/30/2004 9/30/2005 9/29/2006 9/28/2007 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 10/03-2/08. Conclusions We believe IAK offers the broadest exposure to the US insurance market. KIE and PIC provide more targeted exposure to specific segments of the insurance industry. For example, KIE provides the most exposure to Life & Health companies, while PIC currently offers the most exposure to Property & Casualty companies. Investors should note that only KIE has developed meaningful size and liquidity. Exhibit 51 Insurance ETF Composition and General Data Insurance ETFS KIE IAK PIC ETF / Index Characteristics Weighting Methodology Modified Cap. Modified Cap. Tiered Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes No Yes 2007 Tracking Error vs. Benchmark (bps) Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 42

158 GLOBAL WEALTH MANAGEMENT Real Estate Investment Trust (REIT) Industry Index and ETF Observations We analyzed Vanguard REIT ETF (VNQ), ishares Cohen & Steers Realty ETF (ICF), ishares DJ US Real Estate ETF (IYR), SPDR DJ Wilshire REIT ETF (RWR) and their indices. Index Descriptions: VNQ tracks the Morgan Stanley REIT Index, which seeks to represent 85% of the US REIT universe. It includes actively traded REITs that meet minimum market capitalization standards. The index is market-capitalization weighted and free-float adjusted with a quarterly rebalancing. ICF tracks the Cohen & Steers Realty Major Index, which includes relatively large and actively traded US-listed REITs, which are chosen by committee based on several factors like management, portfolio quality, and sector and geographic concentration. The index is modified market-capitalization weighted and rebalanced quarterly so no REIT represents over 8% of the index. IYR tracks the Dow Jones U.S Real Estate Index. The index is a sub-set of Dow Jones U.S. Financials Index. Most of the holdings are REITs but it may also include real estate holding and development stocks. The index is float-adjusted market-capitalization weighted and rebalanced quarterly. RWR tracks the Wilshire REIT Index. The index includes equity owners and operators of commercial or residential real estate. It does not include mortgage, health care, finance companies, homebuilders, hybrid REITs, or landowners. At least 75% of a company's revenue must be derived from the ownership and operation of real estate. The index is float-adjusted market cap weighted and rebalanced quarterly. Market Capitalization Except for one outlier, ICF, the REIT ETFs have similar market capitalization statistics. Median market capitalizations range from $1.52 billion to $2.36 billion, except for ICF at $5.05 billion. Weighted average market capitalization ranges from $7.52 billion to $7.70 billion, except for ICF at Exhibit 53 GICS Sub-Industry Allocation of REIT ETFs VNQ ICF IYR RWR Diversified REITs 8% 9% 7% 8% Industrial REITs 9% 11% 8% 10% Mortgage REITs 0% 0% 4% 0% Office REITs 16% 13% 15% 16% Real Estate Mngmnt & Dev. 0% 0% 6% 0% Residential REITs 15% 19% 14% 16% Retail REITs 29% 31% 24% 28% Specialized REITs 23% 17% 23% 22% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 $9.56 billion. Again, large-cap exposure is fairly comparable and ranges from 54% to 56% (except ICF, at 75%). For market cap breakdowns by ETF, see Exhibit 52. Industry and Company Composition According to the GICS classification system, four different sub-industries make up the bulk of exposure in REIT ETFs, with Retail REITs receiving the heaviest weight (Exhibit 53). Other sub-industries with meaningful representation include Residential REITs and Office REITs. The ETFs have 29 overlapping holdings, which make up roughly 65% to 72% of each ETF, except ICF, at 99% (Exhibit 54). The top 10 holdings of VNQ, ICF, IYR and RWR make up 43, 60, 40, and 45% of their portfolios, respectively. Exhibit 54 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company VNQ ICF IYR RWR Cap. ($Bil) Simon Property Group ProLogis Public Storage Vornado Realty Trust Boston Properties Equity Residential Kimco Realty General Growth Properties Host Hotels & Resorts AvalonBay Communities Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 51 Market Capitalization Breakdown of REIT ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion Vanguard REIT VNQ % 39% 6% ishares Cohen & Steers Realty ICF % 24% 0% ishares DJ US Real Estate IYR % 43% 2% SPDR DJ Wilshire REIT RWR % 38% 5% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. Market Cap Ranges 43

159 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of the four REIT indices are quite tight, ranging from 0.92 to We analyzed relative performance of their underlying indices from January 2000 through February 2008 using monthly data. The funds traded in virtual lock-step until January 2003, when some return spread began to show. Mirroring the tight return statistics, annualized standard deviations are also virtually identical. The annualized and long-term returns of the four indices are displayed in Exhibits 55 and 56. Exhibit 56 Performance of REIT Indices RWR ICF VNQ IYR Exhibit 55 Performance of REIT Indices RWR VNQ ICF IYR Annual Return 12.3% 15.5% 16.6% 14.8% Standard Dev. 15.8% 15.3% 16.2% 15.1% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 01/00-2/08. Index returns were used in all cases. 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 1/00-2/08. Conclusions Three of the REIT ETFs (VNQ, IYR, and RWR) show very similar market caps, portfolios, and returns. However, VNQ offers a much lower expense ratio. ICF has a greater large-cap exposure, smaller number of holdings and appears preferable for investors looking to overweight large-cap REITs. Investors seeking liquidity should consider IYR. Exhibit 57 REIT ETF Composition and General Data Real Estate Investment Trust (REIT) ETFs VNQ ICF IYR RWR ETF / Index Characteristics Weighting Methodology Modified Cap. Modified Cap. Modified Cap. Modified Cap. Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) 2,873 2,626 2,122 1,423 Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes Yes Yes 2007 Tracking Error vs. Benchmark (bps) Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 44

160 GLOBAL WEALTH MANAGEMENT Biotechnology Industry Index and ETF Observations We analyzed the ishares NASDAQ Biotechnology Fund (IBB), Biotech HOLDRS Trust (BBH), SPDR S&P Biotech ETF (XBI), PowerShares Dynamic Biotech Portfolio (PBE), and First Trust Amex Biotechnology ETF (FBT.) Index Descriptions: IBB tracks the NASDAQ Biotechnology Index. The index includes NASDAQ-listed companies classified by the Industry Classification Benchmark as biotechnology or pharmaceutical and are primarily engaged in biomedical research for the discovery of new treatments for human diseases. The index is modified market-cap weighted and rebalanced quarterly. The Biotech HOLDRS Trust (BBH) represents ownership in a basket of biotechnology and biomedical research companies. BBH has no underlying index and its holdings will not change except for defined reconstitution events such as mergers or acquisitions. BBH s constituent weightings are not rebalanced, but do adjust with changes in relative performance. XBI tracks the S&P Biotechnology Select Industry Index. The index consists of companies in the biotechnology sub-industry of the S&P Total Market Index, as classified by the Global Industry Classification Standard (GICS). The index is equally weighted and rebalanced quarterly. PBE tracks the Dynamic Biotechnology & Genome Intellidex Index, which is composed of 30 biotechnology and genome companies. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. FBT tracks the AMEX Biotechnology Index, which is designed to measure a cross section of companies in the biotechnology industry primarily engaged in biological process designed to develop products or design services. The index is equally-dollar weighted and rebalanced quarterly. Market Capitalization Biotech ETFs offer a broad range of market cap exposure. BBH is almost entirely large-cap, while XBI has mostly mid-cap Exhibit 58 GICS Sub-Industry Allocation of Biotechnology ETFs IBB BHH XBI PBE FBT Biotechnology 69% 93% 100% 58% 80% Health Care Equipment 1% 0% 0% 3% 0% Life Science Tools & Svcs. 9% 4% 0% 29% 20% Pharmaceuticals 21% 3% 0% 5% 0% Specialty Chemicals 0% 0% 0% 5% 0% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 and IBB and PBE have 25% small-cap exposure. IBB has 164 holdings, which is five times greater than any other biotech ETF and explains its lower median market cap. However, its modified cap-weighting leads to a weighted average cap more in line with its peers. Conversely, BBH has concentrated positions in four large-cap companies, which explains a weighted average cap exposure that is three times larger than any other ETF in the industry (Exhibit 58). Industry and Company Composition According to GICS, the Biotechnology sub-industry makes up the majority of exposure in each ETF (Exhibit 59). PBE also has 29% exposure in Life Sciences and 13% in other sub-industries, while XBI and BBH offer the purest exposure. Only two of the largest biotechnology stocks appear in all five of the ETFs (Exhibit 60). This is largely a result of IBB including only NASDAQ listed stocks, PBE s proprietary methodology, and BBH s passive basket of just 15 stocks. Concentration among top holdings varies considerably ranging from 39% for XBI to BBH, which has 75% exposure to three stocks. Exhibit 60 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company IBB BBH XBI PBE FBT Cap. ($Bil) Genentech Gilead Sciences, Inc Amgen Celgene Corporation Genzyme Biogen-Idec Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 58 Market Capitalization Breakdown of Biotechnology ETFs Median Weighted Trading Mkt. Cap Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion ishares Nasdaq Biotechnology IBB % 36% 22% Biotech HOLDRS BBH % 3% 1% SPDR S&P Biotech XBI % 78% 0% PowerShares Dynamic Biotech PBE % 46% 24% First Trust Amex Biotechnology FBT % 53% 13% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 45

161 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Biotechnology indices/holdrs are very tight and range from 0.86 (between BBH and XBI) to 0.96 (between several pairs). We analyzed relative performance of their underlying indices from January 2000 through February 2008 using monthly data. BBH and XBI are the least correlated as BBH has the most large-cap exposure and XBI has the least. BBH has 75% exposure to Genentech, Gilead Sciences and Amgen, while XBI has just 10%. IBB s underpeformance can be linked to its exclusion of non-nasdaq-listed stocks such as Genentech which has been a top performer for other ETFs. XBI has the least large-cap exposure and the highest volatility, while, interestingly, BBH, has lowest volatility, despite its more concentrated portfolio. FBT, which tracks the AMEX Biotechnology Index (generally used by many investors as a benchmark) has the highest annualized returns and Sharpe ratio. The annualized and long-term returns can be seen in Exhibits 61 & 62. Exhibit 61 Performance of Biotechnology Indices PBE XBI BBH IBB FBT Annual Return 3.8% 0.9% 1.9% -1.4% 7.8% Standard Dev. 35.7% 44.7% 31.8% 33.9% 38.9% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 01/00-2/08. Index returns were used in all cases except BBH, where ETF data was used. Exhibit 62 Performance of Biotechnology Indices PBE XBI BBH IBB FBT Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 2/00-2/08 except for BBH, which used ETF data. Conclusions BBH offers a large-cap play, however, 75% of the portfolio is in three companies and it only has exposure to 15 companies in total. XBI offers the purest play on biotechnology, but does so with an equal-weight methodology that provides exposure down the capitalization curve, which increases its volatility. FBT is also equally weighted, and includes fewer companies than XBI. IBB s exclusion of non-nasdaq listed stocks may limit its appeal to investors seeking at least some exposure to all large-cap biotech stocks, which may also be a concern for PBE because of its proprietary selection methodology. Exhibit 63 Biotechnology ETF Composition and General Data Biotechnology ETFs IBB BBH XBI PBE FBT ETF / Index Characteristics Weighting Methodology Modified Cap. Passive Equal Tiered Equal Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) * Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes Yes Yes Yes 2007 Tracking Error vs. Benchmark (bps) 21 na 53 5 na Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. * See HOLDRs description page 5. 46

162 GLOBAL WEALTH MANAGEMENT Pharmaceutical Industry Index and ETF Observations We analyzed the Pharmaceutical HOLDRS (PPH), PowerShares Dynamic Pharmaceuticals Portfolio (PJP), and ishares Dow Jones U.S. Pharmaceuticals Index Fund (IHE). Index Descriptions: The Pharmaceutical HOLDRS Trust (PPH) tracks a basket of stocks that research, develop and market medications and health care equipment and services. PPH has no underlying index and its holdings will not change except for defined reconstitution events. PPH s constituent weightings are not rebalanced, but do reflect changes in relative performance. PJP tracks the Dynamic Pharmaceuticals Intellidex Index. The Index consists of 30 companies that are principally engaged in the research, development, sale and/or marketing of pharmaceuticals and medical drugs. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. IHE tracks the Dow Jones U.S. Select Pharmaceuticals Index, which includes companies in the Dow Jones Wilshire 2500 index that are classified as pharmaceutical-related by the Industry Classification Benchmark (ICB). The index is modified market-capitalization weighted and rebalanced quarterly. Market Capitalization PPH s weighted average and median capitalization is much higher than its peers because of its concentrated exposure to three of the largest US drug companies (Johnson & Johnson, Pfizer and Merck), which make up 54% of its portfolio (Exhibit 64). PJP and IHE have nearly identical weighted average cap exposure, but vastly different medians. This is a result of IHE including more stocks, but with smaller weights. Exhibit 64 Market Capitalization Breakdown of Pharmaceutical ETFs Exhibit 65 GICS Sub-Industry Allocation of Pharma ETFs PPH PJP IHE Biotechnology 0% 28% 7% Health Care Equipment 3% 0% 3% Health Care Services 3% 0% 0% Personal Products 0% 2% 0% Pharmaceuticals 94% 70% 90% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 Industry and Company Composition According to the GICS classification system, the Pharmaceuticals sub-industry makes up the vast majority of exposure in all four ETFs. Only PJP has any significant exposure in another sub-industry, with 28% of its portfolio in Biotechnology (Exhibit 65). The ETFs have eleven overlapping holdings in common. The ten largest overlapping holdings, ranked by market capitalization are displayed in Exhibit 66. The top ten holdings of PPH, PJP and IHE make up between 46% (PJP) to 93% (PPH) of their portfolios. IHE includes the most stocks (38), while PPH includes the least (19). Exhibit 66 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company PPH PJP IHE Cap. ($Bil) Johnson & Johnson Pfizer Inc Abbott Laboratories Merck & Co. Inc Genentech Eli Lilly & Co Wyeth Gilead Amgen Bristol-Myers Squibb Co Source: Fund Company Data as of 3/28/08. Trading Median Mkt. Cap Weighted Avg. Mkt. Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion Pharmaceutical HOLDRS PPH % 2% 0% PowerShares Dynamic Pharma PJP % 29% 11% ishares DJ US Pharmaceuticals IHE % 29% 10% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08 Market Cap Ranges 47

163 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Pharmaceutical indices/holdrs range from 0.71 (between PJP and PPH) to 0.90 (between PJP and IHE). PJP and PPH have vastly different weightings and industry exposure, which explains their weaker correlations. PJP and IHE s stronger correlation can be attributed to their more comparable weighted average market cap exposure. We analyzed relative performance of the underlying pharmaceutical indices from February 2000 through February 2008 using monthly data. For most of this time period, biotechnology indices outperformed pharmaceutical indices which partially explains the stronger performance of PJP. We believe that much of the outperformance can be attributed to once stock, Genentech. However, since PJP s index is based on a proprietary selection methodology and changes regularly, it is difficult to calculate how much biotechnology exposure PJP had over the entire period. The annualized and long-term returns of the three indices are displayed in Exhibits 67 and 68. Exhibit 67 Performance of Pharmaceutical Indices/HOLDRs PJP PPH IHE Annual Return 7.3% -1.3% 1.2% Standard Dev. 14.9% 15.0% 14.6% Sharpe Ratio Exhibit 68 Performance of Pharmaceutical Indices PJP PPH IHE 0 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 2/00-2/08 except for PPH, where ETF data was used. Conclusions PPH and IHE offer the purer plays. PPH and IHE provide very similar industry exposure, with IHE providing significantly better diversification among number of companies and across the capitalization curve. PPH offers higher liquidity, but three stocks make up 50% of its holdings. PJP is not a pure play on pharmaceuticals, but it may appeal to investors seeking a diversified ETF with exposure to both pharma and biotech. Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 2/00-2/08. Index returns were used in all cases except PPH where ETF data was used. Exhibit 69 Pharmaceutical ETF Composition and General Data Pharmaceutical ETFS PPH PJP IHE ETF / Index Characteristics Weighting Methodology Passive Tiered Modified Cap. Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) 0* Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes No 2007 Tracking Error vs. Benchmark (bps) na Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. * See HOLDRs description page 5. 48

164 GLOBAL WEALTH MANAGEMENT Aerospace & Defense Industry Index and ETF Observations We analyzed the ishares Dow Jones U.S. Aerospace & Defense Index Fund (ITA) and the PowerShares Aerospace & Defense Portfolio (PPA) and their underlying indices. Index Descriptions: ITA tracks the Dow Jones U.S. Select Aerospace & Defense Index, which includes companies in the Dow Jones Wilshire 2500 Index that are manufacturers and distributors of aircraft and aircraft parts, military aircraft, radar equipment, and/or weapons. The index is modified market cap weighted at a quarterly rebalancing. PPA tracks the SPADE Defense Index, which includes publicly-traded companies involved in the US defense, military, space, and homeland security marketplace. The index is modified market-capitalization weighted and no stock may exceed 10% of the index following a quarterly rebalancing. Market Capitalization Given similar modified market cap weighting methodologies, ITA and PPA exhibit comparable portfolio holdings data. Median market capitalizations are $1.8 billion and $1.4 billion for ITA and PPA respectively. Both ETFs include the major, large-cap players in the aerospace & defense industries, including United Technologies, Boeing, Lockheed Martin, General Dynamics, Raytheon, and Northrop Grumman. The total portfolio weights of these six companies are also similar (44% for ITA versus 37% for PPA), which is a major reason why the weighted average market capitalizations of the two funds are nearly identical. Weighted average market capitalizations are $22.6 billion and $22.7 billion for ITA and PPA respectively. The two funds do vary in terms of market capitalization distribution as PPA has about 10% more exposure to large-cap companies (Exhibit 70). Industry and Company Composition According to the GICS classification system, the aerospace & defense sub-industry makes up the vast majority of exposure in ITA and PPA (Exhibit 71). ITA has roughly 11% combined Exhibit 71 GICS Sub-Industry Allocation of Aerospace & Defense ETFs ITA PPA Aerospace & Defense 89% 70% Communications Equipment 0% 3% Construction & Engineering 0% 1% Construction & Farm Machinery & Heavy Trucks 0% 1% Consumer Electronics 0% 4% Data Processing & Outsourced Services 0% 3% Electronic Equipment Manufacturers 3% 3% Electronic Manufacturing Services 0% 1% Industrial Conglomerates 5% 4% Industrial Machinery 2% 4% IT Consulting & Other Services 1% 5% Metal & Glass Containers 0% 2% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 exposure to four other sub-industries while PPA has 30% combined exposure to another eleven. The broader investment mandate of PPA s index helps to explain its additional exposure to other sub-industries. For example, as defined by GICS, PPA includes five IT consulting service companies and two communications equipment firms, while ITA s index is more confined to aircraft and weaponry. The ETFs have 28 overlapping holdings in common, which make up roughly 88% of ITA and 66% of PPA. Their ten largest holdings, ranked by market capitalization are displayed in Exhibit 72. The top 10 holdings of ITA and PPA make up 61% and 56% of their portfolios, respectively. Exhibit 72 Overlapping Holdings in ETFs Ranked by Mkt.Cap. % of ETF Holdings Market Company ITA PPA Cap. ($Bil) United Technologies Boeing Lockheed Martin General Dynamics Raytheon Northrup Grumman Precision Castparts Textron L-3 Communications Rockwell Collins Source: Fund Company Data as of 3/28/08, Morgan Stanley Research Exhibit 70 Market Capitalization Breakdown of Aerospace & Defense ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion ishares DJ US Aerospace & Defense ITA % 24% 11% PowerShares Aerospace & Defense PPA % 19% 6% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 49

165 GLOBAL WEALTH MANAGEMENT Historical Performance Given the large percentage of overlapping holdings, the correlation between the two Aerospace & Defense indices is fairly strong, at We analyzed relative performance of their underlying indices from February 1998 through February 2008 using monthly data. Although PPA outperformed ITA for most of the period before February 2006, the return spread of the two indices has since tightened considerably. Also, their average annualized returns are almost identical. ITA s greater standard deviation can be attributed to its larger weighting of historically more volatile mid- and small-cap stocks. The annualized and long-term returns of the two indices are displayed in Exhibits 73 and 74. Exhibit 73 Performance of Aerospace & Defense Indices PPA ITA Annual Return 10.7% 10.9% Standard Dev. 17.2% 20.9% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 02/98-2/08. Index returns were used in all cases. Exhibit 74 Performance of Aerospace & Defense Indices PPA ITA 0 Feb-98 Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Source: Fund Company Data, Morgan Stanley Research. Total returns based on underlying index data from 2/98-2/08. Conclusions We believe ITA offers the purest play for aerospace & defense-related exposure. Its index methodology limits the scope of sub industries in which it can invest. PPA holds all of the major aerospace & defense-related companies that are included in ITA and provides additional exposure to a wider range of more loosely related sub industries. Investors should also consider desired capitalization exposure as PPA has more large-cap exposure, while ITA has broader mid and small cap representation. Exhibit 75 Aerospace & Defense ETF Composition and General Data Aerospace & Defense ETFs ITA PPA ETF / Index Characteristics Weighting Methodology Modified Cap. Tiered Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) Avg. Daily Volume ($ Mil) 4 2 Turnover (Days) Short Interest (%) Options No Yes 2007 Tracking Error vs. Benchmark (bps) Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. 50

166 GLOBAL WEALTH MANAGEMENT Semiconductor Industry Index and ETF Observations We analyzed the Semiconductor HOLDRS Trust (SMH), ishares Goldman Sachs North American Technology Semiconductor Index Fund (IGW), SPDR S&P Semiconductor ETF (XSD), PowerShares Dynamic Semiconductor Portfolio (PSI). Index Descriptions: The Semiconductors HOLDRS Trust (SMH) represents ownership in a basket of stocks of semiconductor and technology companies. SMH has no underlying index and its holdings will not change except for defined reconstitution events, which can result in stocks being eliminated from the basket and/or cash distributions. SMH s holdings are not rebalanced, but do reflect changes in relative performance. IGW tracks the S&P North American Technology Semiconductors Index. It includes companies that produce capital technology equipment, chips, and/or wafers. The index is modified market-capitalization weighted such that no holding will exceed 8.5% of the index at a semi-annual rebalancing. XSD tracks the S&P Semiconductor Select Industry Index. It represents the Semiconductor sub-industry of the S&P Total Market Index as defined by the Global Industry Classification System (GICS). It is equal-weighted and rebalanced quarterly. PSI tracks the Dynamic Semiconductors Intellidex Index. The Index consists of 30 companies in the semiconductor industry. Stocks in the index are selected based on a proprietary methodology and are tiered weighted to increase exposure down the capitalization curve. Market Capitalization The weighted average market caps vary widely because of the variance in weighting methodologies as well as the number of stocks included in each ETF. SMH has the highest median and weighted average cap exposure as it includes the fewest stocks, and almost all of them are large-cap (Exhibit 76). XSD has the lowest weighted average exposure as it equally- Exhibit 77 GICS Sub-Industry Allocation of ETFs SMH IGW XSD PSI Computer Storage & Peripherals 2% 0% 0% 0% Semiconductor Equipment 24% 31% 0% 28% Semiconductors 74% 69% 100% 72% Source: Fund Company Data, Morgan Stanley Research as of 3/28/08 weights its holdings, but it has no small-cap exposure, which raises its median. IGW s cap weighting gives it higher weighted average exposure, but it includes many more small-cap companies (albeit with smaller weights), which leads to a relatively low median. PSI s tiered methodology gives it the most exposure to small-cap stocks, which results in the lowest median capitalization. Industry and Company Composition According to the GICS classification system, the Semiconductor sub-industry makes up the majority of each ETF ranging from 69% of IGW to 100% of XSD (Exhibit 77). Almost all exposure in SMH, IGW and PSI that is not pure semiconductor is semi-equipment related. The ETFs have six overlapping holdings in common, which make up roughly 25 30% of each ETF, except SMH at 62%. The overlaps, ranked by market capitalization are displayed in Exhibit 78. The top 10 holdings of SMH, IGW, PSI, and XSD make up 91, 61, 46, and 46% of their portfolios, respectively. Exhibit 78 Overlapping Holdings of Semiconductor ETFs Ranked by Market Capitalization % of ETF Holdings Market Company SMH IGW XSD PSI Cap. ($bil) Intel Corp Texas Instruments Inc Applied Materials MEMC Electronic Materials NVIDIA Corporation Broadcom Analog Devices Inc Source: Fund Company Data as of 3/28/08. Exhibit 76 Market Capitalization Breakdown of Semiconductor ETFs Trading Median Mkt. Cap Weighted Avg. Mkt. Market Cap Ranges Name Symbol ($bil) Cap ($bil) > $5 billion $1-5 billion < $1 billion Semiconductor HOLDRS SMH % 13% 0% ishares Goldman Sachs Semi IGW % 29% 4% SPDR S&P Semiconductor XSD % 61% 0% PowerShares Dynamic Semi PSI % 38% 23% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 3/28/08. 51

167 GLOBAL WEALTH MANAGEMENT Historical Performance The correlations of Semiconductor indices/holdrs are relatively tight, ranging from 0.95 to We analyzed relative performance of their underlying indices from June 2000 through February 2008 using monthly data. The annualized and long-term returns of the various indices are displayed in Exhibits 79 and 80. It is difficult to explain PSI s outperformance, the bulk of which occurred from December 2002 to December 2003, as its proprietary selection process and quarterly reconstitution results in a higher level of turnover in its portfolio. Exhibit 79 Performance of Semiconductor Indices/HOLDRs PSI XSD SMH IGW Annual Return -7.5% -13.1% -13.0% -11.5% Standard Dev. 43.0% 46.6% 40.6% 39.8% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 01/00-2/08. Index returns were used in all cases. Exhibit 80 Performance of Semiconductor Indices PSI SMH XSD IGW Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Source: Fund Company Data, Morgan Stanley Research. Returns based on underlying index data from 1/00-2/08. Conclusions Based on the GICS methodology, XSD offers the purest play on semiconductors, while the other ETFs also provide exposure to semiconductor capital equipment. Many investors are attracted to SMH for its larger size and greater liquidity, but in our opinion, IGW provides much broader cap-weighted exposure to the semiconductor industries. Through their equal and tiered weighting methodologies, XSD and PSI both provide broader exposure down the capitalization curve, with transparency of their respective methodologies a key differentiator. Exhibit 81 Semiconductor ETF Composition and General Data Semiconductor ETFs SMH IGW XSD PSI ETF / Index Characteristics Weighting Methodology Passive Modified Cap. Equal Tiered Top 10 Holdings (%) Approximate Number of Holdigns Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) 0* Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes Yes Yes 2007 Tracking Error vs. Benchmark (bps) na Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 3/28/08. * See HOLDRs description page 5. 52

168 GLOBAL WEALTH MANAGEMENT Clean Energy Industry and ETF Observations We analyzed Market Vectors Global Alternative Energy ETF (GEX), PowerShares Global Clean Energy Portfolio (PBD), PowerShares Wilder Clean Energy Portfolio (PBW), and their underlying indices. Index Descriptions: GEX tracks the Ardour Global Index, which includes global companies involved in alternative power production and supporting technologies. It will always have at least 30% of assets in non-us companies located in at least three different countries. It is modified market-cap weighted so that no single stock makes up over 20% of the index and total stocks with a weight of 4.5% will not account for more than 50% of holdings. PBD tracks the WilderHill New Energy Global Innovation Index. Its components are involved in renewable energy production, technologies, or the production of advanced power systems. At least 50% of the companies in the index are listed on stock exchanges outside the U.S. The index uses a modified equal dollar weighting and no single stock may exceed 5% of the index at a quarterly rebalancing. PBW tracks the WilderHill Clean Energy Index, which primarily includes US-listed companies involved in greener and generally renewable sources of energy and technologies facilitating cleaner energy. The index is modified market-capitalization weighted and rebalanced quarterly. No single stock may exceed 3% after rebalancing. Market Capitalization GEX has the highest weighted average market capitalization exposure as a result of its modified cap-weighted methodology that caps individual holdings at 20%. PBD and PBW have less large-cap exposure as they cap top holdings at 5% and 3% respectively, which results in their holdings being more equally spread across the market cap range. Roughly 50% of PBD s portfolio is made up of companies in the $1 5 billion range and 42% of PBW s holdings are under $1 billion in size (Exhibit 82). Exhibit 82 Market Capitalization Breakdown of Clean Energy ETFs Trading Symbol Median Mkt. Cap ($bil) Exhibit 83 GICS Sub-Industry & Alternative Energy Weights GEX PBD PBW Electric Utilities 5% 7% 5% Electrical Components & Equip. 50% 31% 35% Heavy Electrical Equipment 23% 10% 1% Indep. Power Producers & Traders 1% 10% 6% Semiconductor Equipment 0% 1% 10% Semiconductors 8% 8% 8% Clean Energy Category Bio-Fuel 4% 8% 9% Electricity 6% 7% 11% Power Systems 14% 17% 27% Solar 50% 38% 34% Wind 21% 20% 0% Source: Fund Company Data, Morgan Stanley Research as of 4/22/08 Industry, Company and Regional Composition According to GICS, the Electrical Components & Equipment sub-industry are the largest plurality of each ETFs portfolio (Exhibit 83). Many of the stocks included in these sub-industries design and produce advanced power systems. In Exhibit 84, we have also listed the exposure of each ETF to our own clean energy categories. The ETFs have 14 overlapping holdings, which make up roughly 21 43% of each ETF (Exhibit 84). Exhibit 85 lists the geographical breakdown of the three ETFs. Exhibit 84 Overlapping Holdings Ranked by Mkt. Cap. % of ETF Holdings Market Company GEX PBD PBW Cap. ($Bil) First Solar 8.9% 1.8% 3.8% 23.4 Vestas Wind Systems 11.5% 2.3% Renewable Energy Corp. 5.7% 1.9% MEMC Electronic Materials - 1.2% 2.6% 17.0 Gamesa Corporacion Tecnologica 6.5% 2.3% Verbund AG 4.9% 0.9% SunPower Corp. 4.1% 1.7% 3.5% 7.6 Suntech Power Holdings Co. 5.2% 1.7% 3.8% 7.4 Source: Fund Company Data as of 4/22/0 Weighted Avg. Mkt. Cap ($bil) Market Cap Ranges > $5 billion $1-5 billion < $1 billion Name Market Vectors Global Alternative Energy GEX % 30% 9% PowerShares Global Clean Energy PBD % 49% 25% PowerShares Wilder Clean Energy PBW % 37% 42% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 4/22/08. 53

169 GLOBAL WEALTH MANAGEMENT Exhibit 85 Geographical Breakdown of Clean Energy ETFs GEX PBD PBW USA 32% 28% 75% Europe 45% 50% 0% Asia 20% 14% 21% Other 3% 8% 4% Source: Fund Company Data, Morgan Stanley Research as of 4/24/08. Historical Performance The correlations of Clean Energy indices range from 0.87 to We analyzed the relative performance of their underlying indices from December 2001 through February 2008 using monthly data. PBW underperformed for most of this period, which we largely attribute to its lower international weighting, currently around 25% (Exhibit 81). Global stocks have outperformed US stocks in recent years, as a weaker dollar has boosted their returns in USD terms. The returns of the three indices are displayed in Exhibits 86 and 87. Exhibit 86 Performance of Clean Energy Indices GEX PBD PBW Annual Return 10.87% 19.73% 4.02% Standard Dev % 20.44% 20.44% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 12/01-2/08. Index returns were used in all cases. Exhibit 87 Performance of Clean Energy Indices PBD PBW GEX Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Source: Fund Company Data, Morgan Stanley Research. Returns based on underlying index data from 12/01-2/08. Conclusions ETFs offer diverse exposure to many segments of the clean energy industry, ranging from 50% solar and 21% wind in GEX to 27% power systems and 9% bio-fuels in PBW. Their weighting methodologies result in exposure down the cap curve, with GEX providing the most large-cap exposure and PBD and PBW more equally spread across the market cap range. An additional differentiator is geographic exposure with GEX and PBD providing the most international exposure, particularly in Europe. Exhibit 88 Clean Energy ETF Composition and General Data Clean Energy ETFs GEX PBD PBW ETF / Index Characteristics Weighting Methodology Modified Cap. Equal Modified Cap. Top 10 Holdings (%) Top 10 Holding (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Expense Ratio (%) Total Assets ($ Mil) Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options No No Yes 2007 Tracking Error vs. Benchmark (bps) na na 117 Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 4/22/08 54

170 GLOBAL WEALTH MANAGEMENT Water Industry and ETF Observations We analyzed Claymore S&P Global Water Fund (CGW), PowerShares Water Resources Portfolio (PHO), PowerShares Global Water Portfolio (PIO), and their underlying indices. Index Descriptions: CGW tracks the S&P Global Water Index, which uses a scoring method based on the relative importance of water to a company s overall business. Stocks with the 50 top scores listed on developed exchanges with over $250 million in market cap are included. The index is modified market-cap weighted with no holding exceeding 10% at an annual rebalancing. PHO tracks the Palisades Water Index. It includes US-listed companies involved in water supply, treatment, and technologies or services associated with the water industry. At least 80% of components must derive at least 50% of revenues from water-related activities. The index uses a modified equal dollar weighting and rebalances quarterly. PIO tracks the Palisades Global Water Index, which includes global companies involved in water supply, treatment, and technologies or services associated with the water industry. At least 80% of components must derive at least 50% of revenues from water-related activities. The index uses a modified equal dollar weighting and rebalances quarterly. Market Capitalization CGW s modified market-cap weighting leads to its higher concentration among larger-cap companies despite its inclusion of the highest number of small-cap companies (21 under $1 billion). Despite their modified equal-weighted approach, PHO and PIO exhibit large weighted average market capitalizations (Exhibit 89). This is the result of PowerShares including large companies such as General Electric and Siemens in their portfolios, which may generate a small portion of their total revenues and earnings from water-related businesses. Exhibit 90 GICS Sub-Industry Allocation of Water ETFs CGW PHO PIO Building Products 9% 3% 5% Construction & Engineering 0% 11% 14% Electrical Components & Equipment 1% 9% 0% Electronic Equipment Manufacturers 4% 8% 7% Environmental & Facilities Services 2% 8% 10% Industrial Conglomerates 0% 6% 3% Industrial Machinery 30% 31% 34% Multi-Utilities 30% 4% 11% Specialty Chemicals 8% 3% 3% Water Utilities 14% 7% 8% Source: Fund Company Data, Morgan Stanley Research as of 4/22/08 Industry, Company and Regional Composition According to the GICS classification system, the Industrial Machinery sub-industry makes up the large plurality of each ETF with weights ranging from 30 to 40% (Exhibit 90). This sub-industry includes many producers of water-related auxiliary equipment, like filtration systems, pumps, and tanks. Only 7 15% of any ETF is composed of Water Utility companies, while Multi-Utilities makes up 30% of CGW. The ETFs have nine overlapping holdings in common, which make up roughly 24-38% of each ETF (Exhibit 91). The top ten holdings of CGW, PHO, and PIO make up 60, 44, and 41% of their portfolios, respectively. Exhibit 92 lists geographical breakdowns indicating that PHO invests primarily in the US while CGW and PIO are mostly invested outside the US. Exhibit 91 Overlapping Holdings Ranked by Mkt. Cap. % of ETF Holdings Market Company CGW PHO PIO Cap. ($Bil) General Electric Co % 1.4% Siemens AG - 3.1% 1.7% SUEZ SA 11.5% Veolia Environnement S.A. 8.3% 4.2% 3.8% Danaher Corp. 5.1% 3.9% 2.3% United Utilities 5.8% - 1.1% Agilent - 4.0% 2.4% ITT Corp. 4.7% 2.9% 2.4% Source: Fund Company Data as of 4/22/08. Exhibit 89 Market Capitalization Breakdown of Water ETFs Trading Median Mkt. Weighted Avg. Market Cap Ranges Name Symbol Cap ($bil) Mkt. Cap ($bil) > $5 billion $1-5 billion < $1 billion Claymore S&P Global Water CGW % 40% 10% PowerShares Water Resources PHO % 47% 26% PowerShares Global Water PIO % 60% 17% Source: Fund Company Data, Bloomberg, Morgan Stanley Research as of 4/22/08. 55

171 GLOBAL WEALTH MANAGEMENT Exhibit 92 Geographical Breakdown of Water ETFs CGW PHO PIO US 37% 90% 29% Europe 48% 7% 46% Asia 10% 0% 16% Other 5% 2% 10% Source: Fund Company Data, Morgan Stanley Research as of 4/24/08. Historical Performance The correlations of Water indices range from 0.79 to We analyzed the relative performance of their underlying indices from December 2001 through February 2008 using monthly data. PIO has outperformed for most of this time period, which we partially attribute to its higher international weighting, currently around 70% (Exhibit 81). Global stocks have outperformed US stocks in recent years, as a weaker dollar has boosted their returns in USD terms. The returns of the three indices are displayed in Exhibits 93 and 94). Exhibit 93 Performance of Water Indices CGW PHO PIO Annual Return 19.01% 15.75% 22.38% Standard Dev % 14.98% 15.30% Sharpe Ratio Source: Fund Company Data, FactSet, Morgan Stanley Research. Data from 12/01-2/08. Index returns were used in all cases. Exhibit 94 Performance of Water Indices CGW PIO PHO Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Source: Fund Company Data, Morgan Stanley Research. Returns based on underlying index data from 12/01-2/08. Conclusions ETFs offer diverse exposure to many sub-industries of the broad water industry. Their weighting methodologies result in exposure down the capitalization curve, with CGW providing the most large-cap exposure and PIO the least. Perhaps the most important decision for investors in water ETFs is the choice between US versus global focus, with PIO providing the most exposure to companies domiciled outside the US, while PHO s holdings are almost entirely U.S.-listed. Exhibit 95 Water ETF Composition and General Data Water ETFs CGW PIO PHO ETF / Index Characteristics Weighting Methodology Modified Cap Equal Equal Top 10 Holdings (%) Approximate Number of Holdings Weighted Avg. Market Cap. ($ Bil) Median Market Cap. ($ Bil) ETF Market Data Price ($) Yield (%) Expense Ratio (%) Total Assets ($ Mil) ,269.5 Avg. Daily Volume ($ Mil) Turnover (Days) Short Interest (%) Options Yes Yes Yes 2007 Tracking Error vs. Benchmark (bps) na na 345 Source: Fund Company Data, Bloomberg, Morgan Stanley Research. Market data as of 5/1/08. Capitalization data as of 4/22/08. 56

172 GLOBAL WEALTH MANAGEMENT Year-Over-Year ETF Listings Growth Slows In First Quarter of 2008 This section is an excerpt from our May 7, 2008 report Year-Over-Year ETF Listing Growth Slows in First Quarter of It details the growth of the US-listed ETF market including an analysis of fund flows and market composition. Data, such as cash flows, total assets, average daily dollar volume, turnover, and short interest are available in the full report for 675 ETFs. The US ETF market continues to expand in term of listings, although market declines have led to slower net cash inflows. During the first quarter of 2008, 25 new ETFs were launched and industry net cash inflows were almost $7 billion. However, net inflows were not great enough to offset declines in market values, as total assets declined from almost $620 billion at the end of 2007 to roughly $614 million as of May 2, Another 16 were launched in April, and there are now 675 US-Listed ETFs with an average daily trading volume of over $81 billion. Importantly, the first quarter of 2008 also witnessed the first signs of rationalization since December of 2002, as 11 ETFs that had failed to gain traction were delisted. The evolution of the ETF industry is as impressive as its continued growth. From inception in 1993, ETFs were designed for investors to achieve returns comparable to established equity indices and to provide liquidity for active traders. Older ETFs were generally based on broad market cap-weighted indices and had low costs, low turnover, and high tax efficiency. Newer ETFs include those based on indices with new approaches to weightings, indices using rules-based models for stock selection, and thematic indices. ETFs also provide exposure to leveraged and inverse returns, foreign currencies, and commodities. Many newer ETFs have higher relative fees and turnover and potential tax complications. The range of new ETFs is changing the complexity of the industry. ETFs now track new or less well-known benchmarks. This has heightened the importance of industry insight and analysis to help differentiate among products. We believe investors should carefully consider the investment objectives, design and structure of ETFs as their performance might deviate meaningfully from established benchmarks. For example, some newer fundamental or rules based indices may have a tilt towards small- or large-cap or growth or value stocks that have shown historical outperformance when these market segments outperformed. However, this can lead to underperformance when these market segments lag. Two providers still account for the vast majority of industry assets. As of May 2, 2008, Barclays Global Investors (BGI) had $327 billion in ETF assets, for a 53.3% market share, followed by State Street Global Advisors (SSgA) which had $138 billion in assets or a 22.5% market share (Exhibit 96). Vanguard continues to gain market share and now has over $49 billion in ETF assets for an 8.0% share. The other 21 providers each had a 5.4% share or less and, combined, they had about $148 billion in total assets. A number of sponsors had significant net cash inflows in the first quarter of ProShares and Vanguard had the strongest net inflows whereas Barclays and SSgA, the two largest ETF providers, saw net outflows. DB Commodity Services and Van Eck & Associates also had largel inflows. US-listed ETFs based on traditional equity indices saw the largest net outflows this past quarter. ETFs targeting international stocks, broad equity markets, and US large, mid, and small cap stocks generated over $95 billion of net new assets in However, these segments saw the largest outflows in the first quarter of 2008 (Exhibit 97) whereas ETFs targeting US sectors & industries, leveraged/inverse, fixed income, and commodities saw the strongest net inflows. Leveraged/Inverse ETFs had $5.8 billion in net inflows this past quarter, which is equivalent to 74% of the total net inflows they received in 2007, when they were the fastest growing ETF segment on a year-over-year basis. The issuance growth of each market segment is shown in Exhibit 98. ETFs tracking US financials and commodities had the strongest net cash inflows during the first quarter. Heightened volatility within the financial sector led to ETFs providing long, leveraged, and leveraged inverse financials exposure being among two of the top four and three of the top 13 ETFs in net inflows. The Financials Select Sectors SPDR (XLF) led all ETFs taking in $2.5 billion in the first quarter, while the UltraShort Financials ProShares took in almost $1.3 billion. The streettracks Gold Trust (GLD) continues to lead net inflows into commodity ETFs with $1.5 billion last quarter and the PowerShares DB Agriculture Fund (DBA) had the fifth strongest net inflows at $1.2 billion (Exhibit 99). There were also notable cash outflows. The two largest ETFs, SPDR S&P 500 (SPY) and ishares MSCI EAFE Index Fund (EFA), which took in the most assets in 2007, had the largest outflows in the first quarter of We note that this is a seasonal pattern for SPY, in which first quarter outflows typically follow large fourth quarter inflows as, in our opinion, asset managers may be locking in relative performance. The ishares Japan ETF continued to lose assets with roughly -$2.0 billion in net outflows in the first quarter. The ten largest ETFs currently account for over 41% market share and the top 20 account for almost 55% (Exhibit 100). These numbers have declined as the number of ETFs has increased. However, there are currently 133 ETFs 57

173 GLOBAL WEALTH MANAGEMENT that have less $10 million in assets or less and, combined, they account for only 0.1% of industry assets. Daily ETF dollar volume is near $82 billion, but remains concentrated. Exhibit 101 shows the top 20 ETFs by average daily dollar volume. Three ETFs account for 54% of the industry s daily dollar volume and the ten most active ETFs account for almost 72%. However, these numbers are down significantly from , when three ETFs tracking the S&P 500, Dow Jones Industrial Average and NASDAQ-100 together averaged up to 90% of total volume. Some ETFs have notable short interest. Short interest has more than doubled since year-end 2006, from roughly $59 billion to over $130 billion as of May 2, Exhibit 102 contains a list of 20 ETFs with the highest short interest as a percent of market cap. Currently, there are 13 ETFs with short interest greater than 100%, indicating more shares are held short than are outstanding, due to multiple borrowings. However, the majority of ETFs (481) have short interest of less than 5% and the average short interest among US-listed ETFs of 10% is in line with levels from a year ago. Several ETFs experience a high level of turnover. Exhibit 1032 includes a list of the 20 ETFs with the highest turnover (measured in days as a ratio of market cap relative to daily dollar volume). The average ETF sees its assets turn over approximately every 66 days, but 29 ETFs experience much more rapid turnover at less than 5 days, and one sees 100% of its shares turn over more than once a day. Leveraged and Inverse ETFs, which have daily return targets, now account for three of the five ETFs with the most rapid turnover. In our view, many of these ETFs are used by aggressive investors to gain exposure or hedge positions over very short time horizons. Developments by Issuer (in order of total assets) Barclays Global Investors (BGI) is the largest provider of US listed ETFs. BGI currently has 159 US-listed ETFs with $327 billion in assets, which equates to a 53% market share. They had a net cash outflow this past quarter of -$6.9 billion as nine of their 10 largest ETFs had net outflows, of which four had net outflows ranging from -$1.2 to -$2.3 billion. BGI issued five new ETFs in the US in the first quarter of 2008 which expanded on its single-country and broad international listings. State Street Global Advisors (SSgA) is the second largest ETF provider. SSgA currently has 67 US-listed ETFs with $138 billion in assets, which equates to a 22.5% share, down from 24.2% last year. They had net cash outflows of -$2.8 billion in the first quarter of SSgA issued two new ETFs during the first quarter, one which targets international dividend paying stocks and another that targets international inflation protection, which has generated over $85 million in assets. Vanguard is the third largest US listed ETF provider. Vanguard currently has 37 US-listed ETFs with $49 billion in assets, which equates to an 8.0% share, up from 7.2% at the end of last year. Vanguard did not issue any new ETFs in the first quarter, but had the second largest net cash inflows at almost $5.6 billion. Interestingly, of the top five ETF providers, Vanguard has the lowest percentage of ETFs with net cash outflows at 5%, which we partially attribute this to their lower fees, which leads to stickier assets, in our opinion. PowerShares Capital Management is the fourth largest ETF provider. PowerShares has 109 US-listed ETFs with $33 billion in assets, which equates to a 5.4% share. Their net cash outflows in the first quarter of 2008 were -$1.4 billion. PowerShares issued one new ETF in the US in the first quarter that provides exposure to India s equity market and has generated $34 million in assets. In April, PowerShares launched the industries first actively managed equity ETFs. ProShares is the fifth largest ETF provider. They currently have 60 US-listed ETFs with $16.7 billion in assets, for a 2.7% market share. Their net cash inflows last quarter were the strongest in the industry at $5.8 billion. ProShares launched two ETFs that provide leveraged and leveraged inverse exposure to Telecom. All of the ProShares ETFs target daily returns equivalent to either 200%, minus 100%, or minus 200% of a stated benchmark. ProShares ETFs are some of the most aggressively traded in the market and are primarily used for short-term tactical trading or hedging strategies, in our opinion. World Gold Trust Services (WGS) is the sixth largest ETF provider. WGS has one ETF, the streettracks Gold ETF (GLD) that has almost $15.9 billion in assets and is the sixth largest US-listed ETF. GLD had net cash inflows of approximately $1.5 billion this past quarter, the largest inflows within commodity ETFs and the third most overall. DB Commodity Services (DBCS) is the seventh largest ETF provider. DBCS has 11 US-listed ETFs with $6.6 billion in assets, which equates to a 1.1% share. Their net cash inflows in the first quarter of 2008 were $2.0 billion, which already equates to 86% of DBCS s total net inflows for DBCS did not launch a new ETF in the first quarter of Rydex Investments is the eighth largest ETF provider. Rydex has 31 US-listed ETFs with $6.0 billion in assets, which equates to a 1.0% share. Their net cash inflows in the first quarter 2008 were $0.5 billion. The vast majority of Rydex s net cash inflows occurred in four CurrencyShares (Yen, euro, Swiss Franc and Australian Dollar), which track a foreign currency in terms of US Dollars such that an appreciation of the target currency leads to an increase in the ETF s market price. Rydex did not launch a new ETF in the first quarter of

174 GLOBAL WEALTH MANAGEMENT Merrill Lynch is the ninth largest ETF provider. Their 17 HOLDRs have assets of $5.8 billion and had net inflows of $0.8 billion in the first quarter. Several HOLDRs continue to represent the largest or most liquid ETF-type product by which investors can access a given industry. However, more efficient ETF structures have been created since HOLDRs were launched, and no new ones have been issued since HOLDRs had net outflows of almost $4 billion last year. Van Eck Associates is the tenth largest ETF provider. Van Eck has 13 US-listed ETFs with $5.5 billion in assets, which equates to a 0.9% share. Van Eck had $1.4 billion in total net in flows in the first quarter. Of the four new ETFs that Van Eck listed in the first quarter, their coal industry ETF has generated the most interest and now has $209 million in total assets. WisdomTree Asset Management is the eleventh largest ETF provider. WisdomTree has 40 US-listed ETFs with $4.7 billion in assets, which equates to a 0.8% share. Their net cash inflows last quarter were $144 million. WisdomTree issued one ETF in the first quarter of 2008, which is an earnings-weighted India ETF and has generated over $258 million in assets. Exhibit 96 ETF Advisor/Trustee Market Share and Fund Flow Data Claymore Advisors is the 12th largest provider. Claymore currently has 30 US-listed ETFs with $2.1 billion in assets, which equates to a 0.3% market shares. Their net cash inflows in the first quarter of 2008 were $35 million. Claymore issued four new ETFs in the US in the first quarter of 2008 and liquidated 11 ETFs that had failed to gain traction. Victoria Bay Asset Management (VBAM) is the 13th largest ETF provider. VBAM currently has five US-listed ETFs with $1.2 billion in assets, which equates to a 0.2% share. VBAM had net cash outflows in the first quarter of -$17 million. VBAM launched one ETF in the first quarter that seeks to track the front month futures contract for gasoline. First Trust Advisors is the 14th largest ETF provider. They have 36 US-listed ETFs with $0.8 billion in assets, which equates to a 0.2% share up by 0.1% from the end of The firm did not launch any new ETFS in the first quarter of 2008 and had net cash inflows of $191 million. Ten other ETF providers have 59 ETFs combined with assets totaling roughly $554 million. Most of the ETFs issued by these six firms have yet to gain meaningful traction. 5/2/08 Market #er Net Cash Flow ($Mil) Assets Share ETF Advisor/Trustee Funds Q ($Mil) (%) Barclays Global Investors (ishares) 159 (6,856) 58,306 49,393 44, , State Street Global Advisors (SPDRs, StreetTRACKS) 67 (2,830) 46,656 (776) 7, , Vanguard 37 5,576 18,071 8,634 4,916 49, Powershares 109 (1,435) 4,737 (6,848) , ProShares 60 5,835 7,916 2, , World Gold Trust Services 1 1,537 3,474 3,602 2,502 15, DB Commodity Services 11 1,966 2, , Rydex (Currency Shares) ,627 1, , Bank of New York/Merrill Lynch (HOLDRS) (3,899) 526 (954) 5, Van Eck Associates 13 1,427 2, , WisdomTree ,066 1, , Claymore Advisors , , Victoria Bay Asset Management 5 (17) (40) , First Trust , Xshares Advisors LLC 31 (0) Fidelity 1 0 (0) Bear Sterns Northern Trust GreenHaven Commodity Services VTL Associates London & Capital Asset Management FocusShares Ameristock Corp 5 0 (13) Ziegler Capital Management Total 675 6, ,805 61,916 59, , Source: Bloomberg, ETF Advisors and Trustees. Note: Data aggregated by entities that most directly manage assets. 59

175 GLOBAL WEALTH MANAGEMENT Exhibit 97 US-Listed ETF Cash Flows by Objective Net Cash Flow ($Mil) 5/2/08 Assets Market Investment Objective Funds Q ($mil) Share (%) Broad-Market ,739 1,381 1,677 16,629 3 Large-Cap 43 (10,498) 48,215 (302) 9, , Mid-Cap 30 (1,691) 4, ,915 31,589 5 Small-Cap 27 (1,978) (306) 6, ,456 5 Micro-Cap 3 (124) Custom ,503 2,476 1,096 7,505 1 Dividend Income 14 (540) ,814 8,337 1 Leveraged/Inverse 66 5,901 7,987 2, ,880 3 Sector & Industry 175 6,816 12,266 8,897 6,476 72, International 134 (2,902) 42,360 25,440 22, , Global 27 1,020 3, ,488 1 Fixed Income 59 5,371 13,360 5,767 6,782 43,419 7 Commodity 18 4,339 6,067 7,016 2,800 28,396 5 Currency , ,634 1 Total 675 6, ,805 61,916 59, , Source: Bloomberg, ETF Advisors and Trustees Exhibit 98 Issuance by Market Segment and Provider New ETFs by Type Total ETFs Assets ($ Mil) Market Share (%) US Equity , % International Equity , % Global Equity , % Leveraged/Inverse , % Commodity , % Currency , % Fixed Income , % Total , % New ETFs by Issuer Total ETFs Assets ($ Mil) Market Share (%) Barclays , % State Street , % Vanguard , % PowerShares , % ProShares , % World Gold Trust Services , % DB Commodity Services , % Rydex , % Bank of NY/Merrill (HOLDRs) , % Van Eck , % Wisdom Tree , % Claymore , % Victoria Bay , % First Trust , % Xshares Advisors LLC % Fidelity % Bear Sterns % Northern Trust % GreenHaven Commodity Services % London & Capital Asset Manag % FocusShares % Ameristock Corp % VTL Associates % Ziegler Capital Management % Total , % Source: Morgan Stanley Research, Bloomberg. Assets and Market Share as of 05/02/08 60

176 GLOBAL WEALTH MANAGEMENT Exhibit 99 US-Listed ETFs with Net Cash Inflows or Outflows Greater Than $500 Million During Q Inflows Outflows Net Cash Flow ($Mil) Mkt Cap 05/02/08 ETF Name Sym Price ($) Q ($Mil) Financials Select Sectors SPDR XLF ,467 3, ,374 Diamonds DIA ,610 1,627 (1,797) (230) 9,375 streettracks Gold Trust GLD ,537 3,474 3,602 2,502 15,994 UltraShort Financials ProShares SKF , ,026 PowerShares DB Agriculture Fund DBA , ,546 ishares Lehman TIPS Bond Fund TIP ,160 1, ,875 6,698 ishares S&P Latin America 40 Index Fund ILF , ,138 Vanguard Emerging Markets ETF VWO ,721 1, ,287 ishares Lehman Aggregate Bond Fund AGG ,755 1,992 1,947 8,827 UltraShort Oil & Gas ProShares DUG ,496 Retail HOLDRS RTH (189) (428) 544 Vanguard REIT ETF VNQ ,869 Ultra Financials ProShares UYG ,001 Ultra S&P500 ProShares SSO ,103 SPDR Lehman International Treasury Bond ETF BWX Market Vectors Agribusiness ETF MOO ,683 Vanguard Total Stock Market ETF VTI , ,102 10,673 ishares Silver Trust SLV , ,129 SPDR S&P 500 SPY (7,777) 30,750 (1,079) 3,716 78,622 ishares MSCI EAFE Index Fund EFA (2,330) 11,781 8,028 6,960 47,769 ishares MSCI Japan Index Fund EWJ (1,976) (2,886) 281 4,262 8,102 Energy Select Sectors SPDR XLE (1,974) 2,708 (96) 2,074 4,706 PowerShares QQQ QQQQ (1,667) 231 (10,562) (2,545) 18,508 ishares Russell 1000 Value Index Fund IWD (1,293) 1,645 1,711 1,247 9,043 ishares Russell 1000 Growth Index Fund IWF (1,181) 6,986 1,628 2,065 13,717 MidCap SPDR Trust MDY (1,097) 1,036 (1,706) (42) 8,826 ishares MSCI Emerging Markets Index Fund EEM (992) 8,378 2,082 4,441 26,890 ishares Russell 2000 Index Fund IWM (859) (1,807) 4,226 (8) 11,132 ishares DJ Select Dividend Index Fund DVY (549) (188) (513) 2,232 6,100 Source: Bloomberg, ETF Advisors and Trustees 61

177 GLOBAL WEALTH MANAGEMENT Exhibit 100 Top 20 Largest US Listed ETFs by Net Assets ETF Sym Net Assets ($Mil) SPDR S&P 500 SPY 78,550 ishares MSCI EAFE Index Fund EFA 47,794 ishares MSCI Emerging Markets Index Fund EEM 26,754 ishares S&P 500 Index Fund IVV 19,088 PowerShares QQQ QQQQ 18,497 streettracks Gold Trust GLD 15,920 ishares Russell 1000 Growth Index Fund IWF 13,709 ishares Russell 2000 Index Fund IWM 11,115 Vanguard Total Stock Market ETF VTI 10,665 ishares Lehman 1-3 Year Treasury Bond Fund SHY 9,943 Diamonds DIA 9,359 ishares Russell 1000 Value Index Fund IWD 9,044 MidCap SPDR Trust MDY 8,819 ishares Lehman Aggregate Bond Fund AGG 8,771 ishares MSCI Brazil Index Fund EWZ 8,482 Financials Select Sectors SPDR XLF 8,344 ishares MSCI Japan Index Fund EWJ 8,042 ishares FTSE/Xinhua China 25 Index Fund FXI 7,693 Vanguard Emerging Markets ETF VWO 7,218 ishares Lehman TIPS Bond Fund TIP 6,696 Source: Bloomberg 05/02/08 Exhibit 101 Top 20 US Listed ETFs Daily Dollar Volume ETF Sym Avg Daily Vol ($Mil) SPDR S&P 500 SPY 30,993 PowerShares QQQ QQQQ 7,084 ishares Russell 2000 Index Fund IWM 5,756 Financials Select Sectors SPDR XLF 3,491 ishares MSCI Emerging Markets Index Fund EEM 2,961 Diamonds DIA 1,938 Energy Select Sectors SPDR XLE 1,937 ishares MSCI Brazil Index Fund EWZ 1,440 Oil Services HOLDRS OIH 1,427 UltraShort QQQ Proshares QID 1,417 UltraShort S&P 500 ProShares SDS 1,343 ishares FTSE/Xinhua China 25 Index Fund FXI 1,322 Ultra QQQ ProShares QLD 1,050 streettracks Gold Trust GLD 1,048 ishares MSCI EAFE Index Fund EFA 956 UltraShort Financials ProShares SKF 935 MidCap SPDR Trust MDY 728 Retail HOLDRS RTH 711 ishares DJ U.S. Real Estate Index Fund IYR 653 Materials Select Sector SPDR XLB 621 Source: Bloomberg 05/02/08 Exhibit 102 US Listed ETFs with Highest Short Interest ETF Sym Short Interest (%) Retail HOLDRS RTH SPDR S&P Retail ETF XRT PowerShares Dynamic Retail Portfolio PMR KBW Capital Markets ETF KCE Fidelity Nasdaq Composite Index Tracking Stock ONEQ United States Oil Fund USO ishares Russell 2000 Index Fund IWM ishares DJ U.S. Real Estate Index Fund IYR Oil Services HOLDRS OIH Currency Shares British Pound Sterling Trust FXB ishares Lehman 20+ Year Treasury Bond Fund TLT Regional Bank HOLDRS RKH ishares DJ Transportation Index Fund IYT ishares Dow Jones US Broker-Dealers Index FundIAI 98.2 ishares MSCI Israel Capped Index Fund EIS 93.0 Energy Select Sectors SPDR XLE 89.9 Materials Select Sector SPDR XLB 71.3 KBW Regional Banking ETF KRE 64.9 ishares Nasdaq Biotechnolgy Index Fund IBB 62.9 Consumer Discretionary Select Sectors SPDR XLY 58.5 Source: Bloomberg 05/02/08 Exhibit 103 US Listed ETFs with Quickest Turnover in Days ETF Sym Turnover (Days) Retail HOLDRS RTH 0.8 UltraShort QQQ Proshares QID 1.0 Ultra QQQ ProShares QLD 1.0 United States Oil Fund USO 1.1 UltraShort Russell2000 ProShares TWM 1.5 Oil Services HOLDRS OIH 1.6 Regional Bank HOLDRS RKH 1.8 Ultra S&P500 ProShares SSO 1.8 UltraShort S&P 500 ProShares SDS 1.8 SPDR S&P Retail ETF XRT 1.8 ishares Russell 2000 Index Fund IWM 1.9 UltraShort Dow30 Proshares DXD 1.9 UltraShort Financials ProShares SKF 2.2 Financials Select Sectors SPDR XLF 2.4 Energy Select Sectors SPDR XLE 2.4 ishares DJ U.S. Financial Sector Index Fund IYF 2.4 SPDR S&P 500 SPY 2.5 Ultra Russell2000 ProShares UWM 2.6 PowerShares QQQ QQQQ 2.6 ishares Dow Jones US Broker-Dealers Index FundIAI 2.8 Source: Bloomberg 05/02/08 62

178 GLOBAL WEALTH MANAGEMENT Core/Satellite Strategies Index-linked exchange-traded funds can be efficient tools used in core/satellite investment strategies. Many institutional and retail investors favor a strategy of diversification and risk control that is built upon a fairly constant allocation to one or more core holdings. They then seek to enhance performance by managing allocations to satellite investments that are built around the core (Exhibit 104). Satellite investments could include growth versus value, large-cap versus small-cap, sector and industry focus, and individual stocks. Traditionally, investors used separate managers or open-end mutual funds for core holdings and style and sector plays. However, for many investors, index-linked ETFs may be more attractive core and satellite investments due to their relatively low costs, high tax efficiency, and trading liquidity. Index-linked ETFs may serve as core holdings for investors. A core holding can help to ensure that a portfolio s performance does not deviate widely from an established benchmark. Currently, there are ETFs available on a variety of broad-based market indices, including the Dow Jones Industrial Average, S&P 500, S&P 1500, Russell 1000, Russell 3000, Dow Jones US Total Market, Dow Jones Wilshire 5000 and MSCI Prime Market 750 and Broad Market Indices. ETFs based on the broader indices tend to have very low expense ratios, good tax efficiency, and high liquidity. Core/satellite investment strategies may reduce overall portfolio volatility. Exhibit 105 is an equity risk pyramid, which reflects our findings that ownership of individual stocks results in the highest risk/reward profile, while ownership of broad- Exhibit 104 Core/Satellite Asset Allocation Strategy Individual Stocks Industry Large-Cap Source: Morgan Stanley Research Value Core Investments Growth Alternative Investments Small-Cap Sector Exhibit 105 Equity Risk Pyramid Source: Morgan Stanley Research Single Stock ETFs Sector/Industry ETFs Large-, Mid-, and Small-Cap ETFs Growth and Value ETFs Broad Market ETFs based index funds results in the lowest relative risk profile among equity products. The majority of a core/satellite portfolio s assets are contained in the base of the pyramid, benchmarked to broad-based or growth and value style indices. A proportionally smaller amount is dedicated to specific sector and industry ETFs and individual stocks in an effort to outperform the broad market. Market leadership tends to change. Sector and style allocations can add diversification and provide opportunities to enhance the performance of an equity portfolio. Many studies have shown that asset allocation decisions can add more value to a portfolio on a risk-adjusted basis than individual stock picking. Market leadership among both sectors and styles has changed significantly each year over the past ten years with no single sector or style exhibiting consistent outperformance relative to its peers. Investors with the ability to efficiently rotate their satellite investments among sectors and styles may enhance their overall performance. Other investments can be an important part of the core/satellite strategy. Having a majority of an equity portfolio in equity index funds allows an investor to take some risks in the rest of the portfolio with more aggressive actively managed funds, separate accounts, individual stock selection, or alternative investments. The broad diversification of the core, style, and sector and industry funds enables equity investors to focus on stocks in companies they can research and understand. 63

179 GLOBAL WEALTH MANAGEMENT Core US Equity ETF Investments We view core holdings as a fundamental part of sound portfolios. As an anchor to the portfolio, a core holding invested in a broad market index can lower overall portfolio risk through diversification and can help to ensure that performance tracks that of the overall US market. While active managers can outperform benchmark indices in any given year, we believe the performance advantage of market indices is compelling over the long term. Moreover, market leadership among sectors and styles change significantly each year. Since no single sector, style, or individual stock has consistently outperformed its peers, we believe that keeping a fairly constant portion of a portfolio invested in ETFs linked to broad market indices not only helps reduce volatility but also can achieve competitive returns for the overall portfolio. There are nine broad-based indices that we believe can serve as excellent core holdings the Dow Jones Industrial Average, S&P 500, MSCI Prime Market 750, Russell 1000, S&P 1500, Dow Jones US Total Market, Russell 3000, MSCI Broad Market, and Dow Jones Wilshire ETFs are available for all of these indices, most of which offer broad diversification, low expense ratios (averaging 15 basis points), tax efficiency, and high liquidity. Exhibit 106 provides data on the composition and performance of these nine indices and the ten ETFs that can be used to track them (two ETFs track the S&P 500 index). We currently favor the Russell 3000 and the MSCI US Broad Market Indices for their broad diversification. Diversification is important to any core investment, as it aims to lower volatility of the overall portfolio. The Russell 3000 and MSCI US Broad Market Indices provide broad exposure, each accounting for 98% or more of the US equity market. Applicable ETFs are the ishares Russell 3000 Index Fund (IWV) and Vanguard Total Stock Market ETF (VTI). VTI is the largest broad market ETF and has the lowest expense ratio at 7 basis points. The Dow Jones Industrial Average (DJIA) is the only non-market-cap weighted index in this comparison, but it has some of the strongest performance. It outperformed the other indices over the past one and three years and was the top performer over the past 10 years. Despite its low number of stocks, the DJIA includes some of the highest-quality, blue-chip companies in major segments of the US economy. Its long-term historical performance is also highly correlated with other broad US market indices, but it tends to exhibit less volatility. The applicable ETF for the DJIA is the Diamonds (DIA). Exhibit 106 Index Composition and Performance DJ Ind S&P MSCI Pr Russell S&P DJ US Russell MSCI DJ Wilshire Average 500 Mkt Totl Mkt 3000 Brd Mkt 5000 Market Exposure (as of 12/31/07) Approx. number of companies ,000 1,500 1,530 3,000 3,845 4,843 Total Market Cap. ($trillion) % Total Market Cap % Median Market Cap ($billion) Total Return (through 04/30/08) 1-Yr 0.5% -4.7% -4.1% -3.3% -4.6% -4.4% -3.8% -4.8% -4.9% 3-Yr Annualized 10.5% 8.2% 8.9% 9.2% 8.5% 9.00% 9.3% 8.9% 8.9% 5-Yr Annualized 11.1% 10.6% 11.3% 11.6% 11.1% 11.4% 11.8% n/a 11.8% 10-Yr Annualized 5.6% 3.9% 4.2% 4.3% 4.4% na 4.4% n/a 4.3% Representative ETF(s) Symbol DIA SPY/IVV VV IWB ISI IYY IWV VTI TMW Expense Ratio (bps) 18 9/ Source: Morgan Stanley Research, Bloomberg, FactSet, Frank Russell Co., Standard & Poor s, Dow Jones, Wilshire Associates 64

180 GLOBAL WEALTH MANAGEMENT Market-Capitalization Investing with ETFs We believe ETFs offer an attractive way to gain exposure to various market-cap segments. Currently, there are 47 index-linked ETFs that specifically target the large-, mid-, and small-cap segments of the US equity market. There are also three ETFs based on micro-cap indices. They trade throughout the day as single stocks on US securities exchanges. They are well diversified, which reduces company-specific risk associated with individual stocks. In addition, they generally have lower expense ratios, greater tax efficiency, and provide more trading flexibility than open-end mutual funds with similar objectives. Capitalization-based ETFs can be used to implement a core/satellite investment strategy. Historically, large-, mid-, and small-cap stocks outperform at different times in the economic cycle. Holding a mixture of ETFs across different market-cap segments in a core portfolio may help reduce overall volatility. In an effort to increase returns, short-term tactical strategies may be employed as satellite investments, by overweighting favored market-cap segments. ETFs may provide efficient access to small- and mid-cap market segments. Small caps represent the largest equity universe in terms of number of companies. Today, there are approximately 4,400 US-listed companies not included in the S&P 500 Index. These stocks have an aggregate market cap of roughly $4.0 trillion, which comprises roughly 25% of the total US equity market capitalization. In addition, smaller-cap stocks have had higher price volatility, greater idiosyncratic Exhibit 107 Ten-Year Annualized Index Performance Annualized Return (%) S&P Russell MSCI Large Cap Mid Cap Small Cap 7.9 risk, and less of a following by research analysts. ETFs can enable investors to overcome these obstacles and help obtain a diversified exposure to small- and mid-cap stocks, in our view. We favor IJH and IJR as a way to invest down the capitalization curve. We believe that both the ishares S&P MidCap 400 (IJH) and the ishares S&P SmallCap 600 Index Fund (IJR) are very well diversified. They are designed to track the S&P MidCap 400 and SmallCap 600 Indices, which have shown superior long-term historical performance relative to their Russell counterparts. As illustrated in Exhibit 107, the S&P Indices outperformed their Russell peers in the mid- and small-cap market segments over the past ten years by 1.1% and 1.9% per year, respectively. Vanguard ETFs also offer investors access to market-cap segments. The Vanguard Mid-Cap ETF (VO) and Small-Cap ETF (VB) represent pure plays on MSCI US Equity Indices. In contrast, their Large-Cap ETF (VV) provides exposure to the MSCI Prime Market 750 Index, which combines the large- and mid-cap market segments. These ETFs may be attractive to investors due to their low expenses and the attractive attributes of the MSCI Indices, such as low expected turnover. The MSCI Small-Cap Index has offered superior long-term returns. Mid-cap indices have generally outperformed on a long-term basis. The outperformance of mid-cap indices is evident in the S&P, MSCI and Russell indices. Over the past ten years, each index provider s mid-cap index outperformed its respective large- and small-cap indices. The performance difference between indices may be due to different selection criteria and rebalancing techniques. Russell and MSCI select the stocks to be included in their indices based primarily on market capitalization, while the S&P uses selection criteria that include financial viability and consistency of earnings and dividends. In addition, Russell indices are rebalanced annually in June, which can generate significant turnover and volatility for stocks being added or deleted. On the other hand, S&P rebalances as necessary throughout the year, with minimal disruptions, and MSCI has quarterly index reviews. MSCI also uses buffer zones in an effort to reduce turnover and the migration of stocks among indices. Source: Standard & Poor s, Russell, MSCI. Ten year annualized returns as 04/30/08. 65

181 GLOBAL WEALTH MANAGEMENT Style Diversification with ETFs ETFs can provide an efficient way to gain exposure to growth and value investment styles. Currently, there are 59 US equity style ETFs. They offer exposure to nine index families covering various segments of the US equity market, as classified by market capitalization and style, and are very well diversified, containing between 40 and over 1,900 separate stocks. They generally have lower expense ratios, greater tax efficiency, and provide more trading flexibility than open-end mutual funds. As indicated in Exhibit 108, ETFs based on major index families offer varying and incomplete degrees of exposure to each market segment. However, most segments have at least two ETFs, which may facilitate tax swap strategies. Significant differences exist among style indices targeting similar market segments. Each index family, including Dow Jones, Morningstar, MSCI, PowerShares, Russell, S&P and S&P Pure, has unique characteristics and definitions of growth and value. The following paragraphs summarize some of our conclusions after analysis of index compositions and historical returns. The S&P family of indices offers two different approaches to growth and value investing. In December of 2005, the original S&P Barra indices transitioned to S&P/Citigroup methodology, which uses a seven-factor approach (three growth/four value) to determine style. These indices are market-cap weighted with approximately 50% of the indices capitalization in the growth and 50% in the value index. Stocks that do not exhibit predominant growth or value characteristics are split between the two. Six ishares are based on the S&P/Citigroup growth and value indices. Exhibit 108 Style ETFs by Index Family and Market Exposure DJ Mstar MSCI PwrShrs Rusell S&P S&P Pure Large-Cap Blend ELR - VV* IWB* SPY/IVV - Growth ELG JKE VUG* PWB IWF* IVW RPG Value ELV JKF VTV* PWV IWD* IVE RPV Core - JKD Blend EMM - VO Mid-Cap - IWR MDY/IJH - Growth EMB JKH - PWJ IWP IJK RFG Value EMV JKI - PWP IWS IJJ RFV Core - JKG Small-Cap Blend DSC - VB - IWM IJR - Growth DSG JKK VBK PWT IWO IJT RZG Value DSV JKL VBR PWY IWN IJS RZV Core - JKJ Broad Market Cap Blend IYY - VTI - IWV ISI - Growth IWZ - - Value IWW - - Core Source: Morgan Stanley Research. *Also include Mid-Cap stocks. S&P/Citigroup also offer Pure Growth and Value indices. These use the same seven-factor model to identify those companies with strong growth or value characteristics. Stocks exhibiting the strongest growth characteristics representing one-third of the market cap of the base index are included in the growth segment and vice-versa for value. The middle third of the index, those with the least pronounced growth or value characteristics, are excluded. Component stocks in each Pure Index are weighted according to their style scores. As a result, the pure growth and value indices offer a more targeted exposure relative to many other growth and value indices. We favor using S&P/Citigroup Style Indices for strategic exposure. For investors seeking strategic exposure to blend, growth and value market segments, particularly within asset allocation models, we favor the S&P/Citigroup Style Indices. They are widely used benchmarks that provide exposure to large-, mid-, and small-cap growth and value segments of the equity market. They offer complete exposure to all three major market cap segments and avoid overlap by including each stock in only one market cap segment. Although they double count some stocks by splitting them between growth and value indices, the growth and value indices each approximate 50% of the broader S&P indices by market cap segment. These indices offer exposure to stocks with characteristic growth/value attributes and competitive performance, in our view. Our primary concerns regarding other index families includes overlapping market cap segments (Russell, MSCI and Dow Jones Wilshire) and the exclusion of stocks that do not possess strong growth or value characteristics (Morningstar, PowerShares and S&P/Citigroup Pure Style). ETFs based on the S&P/Citigroup Style are also liquid and have competitive expense ratios. For targeted exposure, we prefer Morningstar Growth and Value indices. Their omission of core stocks that do not have strong growth or value attributes helps provide purer style plays. These indices may be more appropriate for aggressive investors seeking targeted exposure. Over the past eight years, the average annual difference between Morningstar Growth and Value Indices were usually significantly higher than the differences among those of the other index providers across most market cap segments analyzed. We had expected greater differences for S&P/Citigroup Pure Style Indices, but this did not occur in most observations. Investors should be aware that some of the ETFs tied to style Indices have yet to develop significant assets or liquidity. 66

182 GLOBAL WEALTH MANAGEMENT Sector and Industry Investing with ETFs Index-linked ETFs offer efficient ways to implement sector and industry strategies. They can be used for the tactical portion of a portfolio, as investors rotate in and out of various sectors to enhance returns. They can also serve as building blocks for asset-allocation models or ways to gain exposure to sectors under-represented in a portfolio. Most ETFs can be easily shorted and can be used to hedge parts of a portfolio or by aggressive investors seeking short exposure. A variety of sector- and industry-specific ETFs are currently available. There are now 69 US-listed ETFs investing in 10 US sectors. The underlying indices can be categorized into five families: AMEX Select Sector Indices used for Select Sector SPDRs, the Dow Jones US Sector Indices used for many ishares, the MSCI US Equity Sector Indices used for Vanguard ETFs, S&P 500 Equal-weight Sectors used for Rydex ETFs and proprietary indices used for several different ETF families. Proprietary sector indices include the Goldman Sachs and Morgan Stanley Technology Indices, two HOLDRS and PowerShares Intellidex and RAFI methodologies. While there are also many US industry-specific and international and global sector and industry ETFs available, the focus of this section is on US sector ETFs. For large-cap sector exposure, we favor ETFs tracking the S&P 500 GICS sector indices. Most investors, strategists, and technicians base their sector work on the ten S&P 500 indices, which follow Global Industry Classification Standard (GICS) sector definitions. The GICS structure was developed jointly by MSCI and Standard & Poor s to add consistent industry classifications to major indices worldwide. The MSCI and Dow Jones US Sector Indices each have ten sectors, with MSCI based on GICS and Dow Jones sorted according to the industry classification Benchmark (ICB) shared with FTSE. Each covers a broader market than the S&P. Typically, the MSCI and Dow Jones Indices have two to three times as many companies as the S&P 500 sector indices, but the extra names usually represent only 15 20% of each index. We favor Select Sector SPDRs for exposure to eight of the ten S&P 500 GICS sectors. Eight Select Sector SPDRs offer pure plays on S&P 500 GICS Sector Indices, while the Technology Select SPDRs includes companies from both the information technology and telecom services sectors. The Select Sector SPDRs based on these eight indices are likely more appropriate for investors employing strategic asset-allocation models and tactical strategies. Their expense ratios are 23 basis points. For exposure to technology and telecom services, investors may prefer ETFs based on other indices for purer sector exposure. ishares based on Dow Jones US Sector Indices offer broad sector exposure. They are available on ten sectors similar to the S&P 500 GICS sector indices, but use ICB and not GICS sector definitions. Their expense ratios are 48 basis points. The Dow Jones Sector Indices include large-, mid-, and small-cap stocks that make up the Dow Jones US Total Market Index. Vanguard ETFs based on MSCI US Sector Indices provide the broadest exposure and the lowest expense ratios at 22 basis points. While the Select Sector Indices, collectively hold 500 securities, and the Dow Jones Sector Indices, represent over 1,600 stocks, the MSCI Sector Indices offer broader diversification, collectively holding 2,500 securities. Each of the 2,500 companies in the MSCI US Investable Market Index (IMI) is assigned to one of ten sectors using GICS sector definitions. Nine Rydex S&P Equal Weight ETFs offer alternative exposure to S&P 500 stocks. They are available on eight of the ten pure GICS sectors and combine utilities and telecommunications for a ninth index. They assign each stock in the S&P 500 an equal-weight at quarterly rebalancings, leading to a smaller-cap and value bias. Their expense ratios are 50 basis points. HOLDRs offer exposure to the telecom and utility sectors. HOLDRs (HOLding Company Depository ReceiptS) are concentrated and static portfolios focused on large-cap stocks in a particular industry. A HOLDR is a trust that offers many of the benefits of individual stock ownership. However, investors should be aware that HOLDRs only trade in incremental units of 100 share round lots, which may make them less desirable for smaller portfolios or for use in asset allocation models. PowerShares also offers US equity sector and industry ETFs. They are based on Intellidex and other proprietary indices that utilize rules-based quantitative analysis to select securities. These indices have special weightings, and usually will not closely track the cap-weighted S&P GICS Indices. Sector and industry PowerShares have relatively high expense ratios of basis points and investors should be aware that many have yet to develop significant liquidity. 67

183 GLOBAL WEALTH MANAGEMENT International Investing with ETFs Morgan Stanley suggests at least a 9% allocation to international equities. We believe US investors should have exposure to international equities, as approximately 58% of the world s total market cap exists outside the United States (Exhibit 109). Including international equities in a portfolio may reduce risk and enhance returns. In addition, ETFs do not hedge their currency exposure, which provides an additional level of diversification and has significantly boosted returns for many ETFs as the US dollar has weakened over the past few years. Morgan Stanley s Global Wealth Management (GWM) Tactical Asset Allocation Frameworks for taxable US dollar/us oriented individual investors currently have international equity allocations between 9% and 18%. We believe US investors should have exposure to diversified international investments. Market leadership among countries can change significantly. Since no single country has consistently outperformed its peers, investing in broad-based international index-linked ETFs can help not only to reduce volatility, but also to achieve competitive returns for the overall portfolio. In the past ten years, the US portion of the MSCI ACWI has only been among the top five performing countries once (1998). Diversified international investments also eliminate the need for investors to consistently select countries that outperform in order to maintain competitive performance. Index-linked ETFs provide a way to gain international equity exposure. There are 173 US-listed ETFs that provide exposure to international equities. We categorize these indices as broad-based, regional, country-specific, leveraged/inverse or global. ETFs based upon many of these indices can serve as core international holdings within an investor s portfolio because they are well diversified, which we believe reduces risks associated with individual stocks, sectors, or countries. These ETFs also have relatively low expense ratios, ranging from 12 to 95 basis points. As discussed below, some ETFs tracking global indices have significant US exposure and may not be attractive for international diversification. There are 46 ETFs offering broad exposure across non-us markets. ETFs based on these indices are diversified by country and sector. The broadest based ETFs give exposure to complete market segments across developed and emerging markets. Some may be attractive as core international holdings or for investors seeking international diversification in one product. The broadest ETFs track the MSCI ex-us, S&P World ex-us, FTSE all-world Ex-US, MSCI EAFE and MSCI Exhibit 109 World Market Capitalization MSCI USA 42% Source. MSCI, FactSet. Data as 5/1/08. MSCI Canada 4% MSCI EAFE 43% MSCI EM 11% Emerging Markets indices. Other ETFs that cut across multiple markets and sectors include those that track the MSCI EAFE growth and value, S&P International Small Cap and WisdomTree DIEFA, LargeCap, MidCap, SmallCap and high dividend Indices. There are 21 ETFs offering international Sector and Industry exposure. These ETFs are diversified by company and generally provide exposure to multiple countries. These include ETFs tied to the International Real Estate Indices, HealthShares European Drugs, 10 WisdomTree sector Indices, a Canadian Energy Index, and an index of international private equity companies. There are 28 ETFs based on regional indices. ETFs based on regional indices are diversified by country and sector and may be attractive for investors seeking exposure to favored regions. Currently, there are ETFs based on 14 European, eleven Asian, two Latin American and one Middle-Eastern regional indices. ETFs based on 48 country-specific indices are also available. Although less diversified than other international ETFs, single-country ETFs are usually diversified by companies and sectors. They may be attractive to investors seeking targeted exposure to specific countries or customized portfolios of groups of countries. There are 30 global ETFs. ETFs based on the MSCI All Country, S&P Global, and Dow Jones Global Titans Indices provide exposure to large-cap leading companies worldwide. The Market HOLDRS holds a passive basket of 55 companies. There are ten ETFs tied to S&P Global Sector Indices and 12 other ETFs that offer exposure to global industries. Investors should be aware that large-cap US companies may dominate these indices and they may not be attractive to investors seeking pure international ETFs. 68

184 GLOBAL WEALTH MANAGEMENT Dividend Investing with ETFs As of April 30, 2008, there were 12 ETFs that provide pure exposure to higher-yielding domestic common stocks. These ETFs currently have annual dividend yields that range from % with most, if not all, of the distribution qualifying for the current 15% maximum tax rate. In our opinion, ETFs may serve as attractive investments to access dividend-paying stocks as their costs may be lower than other investment vehicles targeting similar exposure. In addition to diversification, these ETFs offer high tax efficiency and are actively traded throughout the day on US exchanges. There are also four ETFs focused on higher yielding international stocks. The Jobs and Growth Tax Relief Reconciliation Act of 2003 significantly increased the demand for dividend income. Among other changes the Act reduced the maximum tax rate on qualified dividend income (QDI) to 15%. Unless extended, the current preferential treatment of QDI will expire in QDI generally includes dividends paid on common and certain preferred stocks, subject to certain holding period and hedging requirements. To the extent that an ETF receives QDI, the distribution that it passes through to investors will also be taxed at a maximum 15% rate. Dividends have historically contributed meaningfully to investor returns. From January 1926 through December 2004, dividends accounted for fully 40% (4.2%) of the S&P 500 s 10.4% annualized return. Furthermore, stocks paying dividends have meaningfully outperformed non-dividend payers since 1970 returning an average of 10.2% versus 4.4%. We expect the trend to continue as older investors typically have higher allocations to dividend paying stocks and the fastest growing segment of the population over the next decade is expected to be years old. The first equity dividend-income focused ETF was launched in November 2003, just six months after the maximum 15% tax rate on QDI become effective. Barclays Global Investors (BGI) launched the ishares DJ Select Dividend Index Fund (DVY) in November DVY remains the largest and most liquid dividend focused ETF with over $6.5 billion in assets and average daily volume of approximately $80 million. Another eleven ETFs that focus on higher dividend paying US stocks have been launched since DVY. Dividend ETFs have more differences than we originally anticipated. In a report titled Dividend-Focused ETFs Provide Diversified Exposure to Higher-Yielding Equities, dated March 27, 2007, we analyzed seven ETFs and found that there were significant differences in terms of the ETFs targeting either higher current yields or future dividend growth. In addition, there were large variations in sector and market cap exposure as well as the number of overlapping holdings and degrees of concentration. Despite their differences, the dividend focused ETFs we analyzed have recently exhibited strong correlations. Our analysis included seven ETFs (FDL, DVD, DVY, PEY, SDY VIG, DHS) that had at least $75 million in assets and focused on US common stocks. Most dividend-focused ETFs were issued in 2005 and 2006, which results in limited performance history. However, from July 2006 through February 2007 the underlying indices we analyzed had correlations of monthly returns ranging from 0.33 to 0.99, with a median correlation of Excluding one ETF, which utilizes a safety screen (FVD), and a second ETF that screens for dividend growth potential (VIG), the correlations ranged from 0.74 to The highest-yielding large-cap stocks appear in most dividend ETFs. We were not surprised to see companies such as Altria, Bank of America, AT&T, Pfizer and Citigroup among several of the funds top holdings. With the exception of Vanguard Dividend Appreciation Index Fund (VIG), which puts a greater emphasis on dividend growth potential, and DHS, which has almost 50% more holdings than any other dividend ETF we analyzed, over 50% of every ETF s holdings appeared in at least one other ETF. The ETFs are typically significantly overweight Financials and Utilities and underweight Information Technology and Energy. While these ETFs do provide diversified exposure to higher-yielding equities, they fall short of providing broad market exposure. Our analysis reveals that Vanguard Dividend Appreciation Index Fund (VIG) has the closest sector replication of the S&P 500, while PowerShares High Yield Equity Dividend Achievers Portfolio (PEY) has the most variance. Based on their sector skewings, we believe that these ETFs are best suited for targeted exposure to equities with higher yields or above-average dividend growth, rather than as the core portion of a well-diversified portfolio. In conclusion, investors should consider their investment objectives when investing in dividend focused ETFs. Although in may be tempting to select the highest yielding or the most liquid dividend focused ETF, there are several other factors that should be taken into account. Sector positioning, dividend growth potential, market capitalization focus, and weighting methodology should all be taken into consideration when choosing among dividend ETFs. 69

185 GLOBAL WEALTH MANAGEMENT Leveraged and Inverse Investing with ETFs Leveraged, inverse and leveraged inverse ETFs have been among the fastest-growing segments in the US ETF market place. As of April 30, 2008, 60 ETFs issued by ProShares provided exposure to either the leveraged, inverse or leveraged inverse returns of a benchmark index. Other providers have also entered the market, but ProShares remains the largest provider. ProShares ETFs are available in three different series. The Ultra Series is designed to deliver 200% of the daily return of its benchmark index, while the Short and the UltraShort series are designed to deliver minus 100% (the inverse) and minus 200% (leveraged inverse) returns, respectively. In aggregate, as of May 2, 2008 ProShares ETFs had $16.7 billion in assets and have average daily trading volume of $7.5 billion. Leveraged and Inverse (L&I) ETFs appeal to a number of investors. The majority of interest is a result of short-term tactical trading or hedging strategies, in our opinion. Similar to other ETFs, L&I ETFs are listed on a US stock exchange and can be traded throughout the day enabling investors to gain access to broad markets, value and growth styles, targeted sectors or individual industries in a single trade. Their structure enables accounts without access to margin to gain short exposure (through buying the inverse ETFs) or to obtain leverage. We reviewed the ProShares structure with a focus on how well they deliver their targeted returns. In order to continue attracting capital, these ETFs will need to deliver performance close to their target benchmarks, in our opinion. Most traditional equity ETFs mitigate tracking error (defined as the difference between the return of an ETF and its target index) by owning most of the underlying stocks in roughly the same weights as the index. However, in order to deliver the leveraged or inverse returns of an index, ProShares also utilize futures and equity swap agreements. The use of these derivative instruments enhances the possibility of tracking error, raises costs, and reduces the tax efficiency of an ETF. The ProShares we analyzed generally delivered near their expected returns on a daily basis. We analyzed four ETFs that are designed to track twice the daily performance of the Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), the S&P MidCap 400 (MID) or the NASDAQ-100 (NDX). We also examined the returns of the four ETFs designed to provide double the inverse of the daily returns of these same indices. We compared daily market price total returns of each ProShares to the daily 200% or minus 200% targeted return of its benchmark index. For example, if the Dow Jones Industrial Average was up 2% in a given day, what percentage of the 4% expected return did the Ultra Dow30 ProShares deliver? We found that, on a market price basis, the ETFs usually deliver % of their expected return and, on average, were 97% correlated to their underlying benchmark. The daily tracking on each ETF is considerably stronger when its target index has an absolute daily move exceeding 0.075%. On a longer-term basis, returns for the ETFs varied more widely from their respective benchmarks. The interest costs of leveraging (for the double long ETFs) or the interest credits (for the double inverse ETFs) were the primary drivers of tracking error, in our opinion. We believe that the effects of compounding, followed by internal expense ratios, were the other notable contributors to longer-term tracking error. Investors implementing longer-term strategies with ProShares should expect that the UltraLong ETFs are likely to underperform a 200% return of an index, while the UltraShort ETFs are likely to outperform a minus 200% return of an index. Interest costs and/or credits are the major source of L&I ETF tracking error. Ultra ProShares are, in effect, borrowing securities and pay margin, but UltraShort ProShares have a net interest credit. This results from the fact that their equity swap and futures agreements are tantamount to lending securities. Both L&I ETFs post collateral for the equity swap and futures positions that generate ordinary interest income. The effects of compounding also leads to tracking error over time. For example, if $100,000 is invested in an index that increases in value by 1% on day one and then decreases in value by 1% on day two, the investment will be worth $101,000 at the end day one and $99,990 after day two. However, the value of a security that doubles the daily performance of the index would be worth $102,000 on day one and $99,960 after day two. Thus, the index is down 0.01% after two days, a doubling of which would be down 0.02%. However, the security attempting to double the return of the index is down 0.04%. Investors should consider the potential impact over longer time periods with higher levels of volatility. Leveraged and Inverse ETFs make quarterly and annual distributions. Interest income from securities posted as collateral and any dividend income ( a large portion of which may be subject to the current maximum 15% rate) is distributed quarterly. ProShares may realize gains and losses on their futures and equity swap positions throughout the year. Any net gains are distributed annually towards the end of December and were has high as 6% of net asset value (NAV) in

186 GLOBAL WEALTH MANAGEMENT Commodity Investing with ETFs Eighteen ETFs provide commodity exposure in two ways. The relatively low cost of storing a bar of gold enables the streettracks Gold Trust (GLD) and the ishares COMEX Gold Trust (IAU) to invest in and store physical gold bullion. The same is true for ishares Silver Trust (SLV), which invests in silver bullion. However, it is less practical to store oil, industrial metals, agricultural or livestock. As a result, the United States Oil (USO), 12-Month Oil (USL), Natural Gas (UNG) Heating Oil (UHN) and Gasoline (UGA) Funds, the ishares GSCI Commodity-Indexed Trust (GSG), eight PowerShares DB ETFs, and a GreenHaven ETF (GGC) utilize the futures markets to track their benchmark indices. Providing exposure to gold or silver is relatively simple. GLD, IAU, and SLV hold the physical bullion in which they invest. The prices of these ETFs are designed to reflect the value of the assets owned by the trust at any point in time. The two gold ETFs were initially priced at 1/10th of an ounce of gold but we expect this relationship to weaken slightly over time as a result of expenses. In the case of SLV, each share was initially issued at a price equivalent to 10 ounces of silver. The futures markets can be utilized to provide commodity exposure when storage is less practical. Some commodities are perishable or are impractical to store. When that is the case, ETFs utilize the futures markets. The ETF gains the desired exposure by entering into agreements to buy commodities at a specified price on a specified date. However, before the contract is settled, the ETF will roll its exposure into a contract with a later expiration date, thereby maintaining market exposure, but never actually taking delivery of the commodity. Eleven ETFs give commodity exposure utilizing futures contracts. The first was USO that tracks futures on west Texas intermediate light sweet crude. UNG, USL, UHN and UGA use a similar structure. The ishares GSCI Commodity-Indexed Trust (GSG) tracks a production-weighted index of 24 commodities whereas GCC is an equally weighted basket of 17 commodities. The PowerShares DB series gives exposure to an Index of 6 Commodities (DBC), Agriculture (DBA), Base Metals (DBB), Energy (DBE), Precious Metals (DBP), Silver (DBS), Gold (DBL) and Oil (DBO). When futures contracts are purchased, Treasuries are bought simultaneously. At the time an investor buys or sells a futures contract, they are required to post US Treasuries as collateral. The Treasuries generate interest income that can be used to offset expenses. However, income exceeding ETF expenses will be taxed as ordinary income to the investor. Using commodity futures can lead to significant tracking error. Most commodity ETFs track indices based on the performance of commodity futures. These indices may not always move in line with the cash markets for the underlying commodities. The process of continually rolling futures contracts can also lead to losses and tracking error versus both the cash and futures markets. The ETF creation/redemption process differs, but involves an authorized participant (AP). GLD, IAU and SLV can be created or redeemed by an AP in creation unit blocks of shares in exchange for gold or silver. The PowerShares DB series, USO and UNG are created or redeemed in cash in exchange for shares. GSG can be created or redeemed in exchange for Commodity Excess Return Futures (CERFs) and cash. APs are major broker-dealers or specialists which have creation/redemption agreements with the ETF advisor. Investors can buy or sell the ETFs on an exchange in units as small as one share. Commodity ETFs lead to unique tax treatments. According to their advisors, GLD, IAU and SLV will be treated as a collectables for capital gains purposes. As such, the maximum tax rate will be 28% if the ETF is held longer than one year, but gains are generally ordinary income if they are short-term. Gains or losses on these ETFs are only realized when an investor decides to sell. The tax treatment of ETFs investing in commodity futures is different. For most ETF investing in commodity futures, gains can be realized during the year as positions are rolled or liquidated. In addition, at year-end, the value of their futures positions are treated as section 1256 contracts and are marked-to-market. Gains are then realized as 60% long-term and 40% short-term. Unlike ETFs that hold securities, gains may be realized each year even if the ETF is not sold. We believe that GSG may have a tax advantage in that 5-year CERFs are not section 1256 contracts and not subject to interim mark-to-markets. However, they may have tax consequences upon their ultimate roll. The net interest income generated from the collateral will be taxed as Treasury ordinary income even if the ETF does not make a distribution. Most of the commodity futures based ETFs will issue K-1 statements to investors at year-end. Investors in most commodity- related ETFs utilizing futures will be informed of their tax liability with a K-1. 71

187 GLOBAL WEALTH MANAGEMENT Currency Investing with ETFs As of April 30, 2008, eleven ETFs provided direct exposure to foreign currency price movements relative to the US Dollar. Rydex Investments offers eight CurrencyShares, which are designed to track the price of individual foreign currencies relative to the US Dollar. In addition, PowerShares DB offers three ETFs based on baskets of currencies. After our April 30, 2008 cut-off, WisdomTree issued new ETFs on currencies including the Chinese Yuan, Indian Rupee and the Brazilian Real. CurrencyShares are available on the Australian Dollar, British Bound, Canadian Dollar, euro, Japanese Yen, Mexican Peso, Swedish Krona, and Swiss Franc. They reflect changes in the target currency relative to the US Dollar. For example, a weakening of the US dollar vs. the euro leads to an appreciation in the price of the Euro Currency Trust (FXE) and vice-versa. In the case of the euro, Australian and Canadian Dollars, British Pound and Swiss Franc, the price of the ETF is equivalent to roughly 100 units of the base currency. For the Mexican Peso and Swedish Krona, the price reflects roughly 1,000 units of the base currency. For the Japanese Yen, the price reflects roughly 10,000 units per US dollar. CurrencyShares may be attractive to gain currency exposure. They enable investors to make tactical plays in foreign currencies or to hedge foreign currency exposure. In our view, the costs for many investors associated with currency ETFs may be lower than the costs associated with trading and investing in other currency related investments. In addition, ETFs provide liquidity throughout the day as they are traded like stocks on US exchanges and can be easily shorted, as they are exempt from the uptick rule. These ETFs are not leveraged, do not utilize derivative instruments and their currency holdings are held by an insured depository. CurrencyShare assets are invested in time deposits that generate interest income. JP Morgan Bank maintains two accounts for each CurrencyShare that are denominated in the currency the Trust tracks. The vast majority of Trust assets are held in an account that generates interest income accrued daily based on a stated overnight rate listed in each Trust s Prospectus and is quoted daily on the Trusts website (www.currencyshares.com). In the case of FXE, interest accrues based on the Euro OverNight Index Average (EONIA), which is calculated by the European Central Bank less a 27-basis-point fee charged by JP Morgan. Each CurrencyShare has a second account that holds interest income. Interest earned is held in a separate non-interest paying account. At the end of each month, the CurrencyShare will pay a dividend that is equivalent to the interest income that has been earned minus fund expenses of 1/12 of the 40 basis points of annual operating expense. The net asset value (NAV) of each CurrencyShare reflects only the value of the primary interest earning account. Interest income that is generated by the Trust and held in the second account is essentially a funded, but unpaid liability. As a result, the interest income is both an asset and liability of the Trust, which cancel out each other, and is therefore not factored in NAV. The creation and redemption process for currency ETFs involves time deposits in exchange for ETF shares. Each CurrencyShare can be created or redeemed by Authorized Participants (APs) in blocks of 50,000 shares or multiples thereof. APs are major broker-dealers or specialists with creation/redemption agreements in place with the ETF advisor (Rydex). Investors can buy or sell the ETFs on an exchange in units as small as a single share. Investors in CurrencyShares are subject to two types of ordinary income tax. Each year, investors will receive Grantor Trust Letters, directly or through their broker dealer, that will indicate the amount of ordinary interest income they have received. In addition, when an investor in CurrencyShares decides to sell a position, they will realize a gain (or loss) that will be taxable as ordinary income. Three other ETFs provide foreign currency exposure. The PowerShares DB US dollar Index Bullish (UUP) and Bearish (UDN) use currency futures to track and index designed to replicate the performance of being long or short the US dollar against a basket of six major currencies. The PowerShares DB G10 Currency Harvest Fund (DBV) seeks to exploit the potential of high yielding currencies to appreciate versus lower yielding currencies. It goes long futures contracts on three G10 currencies with highest interest rates and shorts futures contracts on three G10 currencies with lowest interest rates. These ETFs are collateralized with Treasury Bills, which generate taxable interest income. Similar to commodity ETFs using futures, gains can be realized during the year as positions are rolled or liquidated. In addition, at year-end, the value of futures positions are marked-to-market and gains are realized as 60% long-term and 40% short-term. 72

188 GLOBAL WEALTH MANAGEMENT Recognizing Losses Using ETFs Morgan Stanley does not render advice on tax and tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under US federal tax laws. Investors should consult their personal tax advisors before making any tax-related investment decisions. We believe significant tax-planning opportunities may exist. Investors owning stocks, mutual funds, or exchange-traded funds with unrealized losses due to volatility in the equity markets might benefit from tax-management strategies. We believe there are several tax-planning strategies that can be employed using ETFs, including tax-swap and fund-substitution transactions to trigger tax losses. Losses may be used to improve a portfolio s tax efficiency by offsetting realized or future capital gains. Tax planning can occur throughout the year. Historically, most investors wait until the fourth quarter to undertake trades to recognize desired gains or losses. However, investors can harvest gains or losses throughout the year at opportune times. Currently, many market segments, particularly technology indicies, remain well below the highs reached earlier this decade. Delaying the use of tax-planning strategies until year-end could cause investors to miss the opportunities that currently exist. A tax swap involves the sale of one security and the simultaneous purchase of a similar investment. The sale of a security purchased at a higher price may trigger a loss, which can be used to offset gains realized elsewhere in a portfolio. This may help to reduce taxes due for the current year or allow an investor to undertake other sales to realize gains, which could be offset by the loss. In addition, losses can be carried forward and used to offset gains in future years. Most important, tax swaps enable investors to maintain or alter their desired market exposure when they take a loss. Tax swaps on ETFs with similar objectives can be structured to comply with the wash-sale rule. These swaps are allowed because individual ETFs are different entities, which are often managed by different advisors and which usually do not hold the same portfolios. For example, an investor should be able to take a loss on one sector ETF and immediately establish a position in another ETF in the same sector that is managed by a different advisor, provided the underlying stocks are not substantially identical. The wash-sale rule may apply to different ETFs based on the same underlying index or holding the same assets. A tax swap involving two separate S&P 500 index funds may be a concern because these funds should hold the same securities. However, investors can establish a position in another broad-based index fund that is not substantially similar, but that may have a high correlation of movement to general market trends. For example, an investor can take a loss on an S&P 500 index fund and establish a position in a Russell 1000 index fund, which also tracks the performance of large-cap stocks. In this case, the investor could sell the S&P 500 Depositary Receipts (SPY) and buy the ishares Russell 1000 Index Fund (IWB). Index-linked ETFs can also be used for tax-substitution strategies. Investors with unrealized losses can sell individual positions or large portfolios to recognize tax losses. To establish exposure in similar market sectors, they can purchase comparable ETFs. For example, an investor with a loss on a portfolio of telecom stocks could sell the securities and then purchase a telecom sector ETF such as the ishares Dow Jones US Telecom Fund (IYZ), provided the underlying stocks are not substantially identical. Smaller investors might choose to maintain the ETF investment for its diversification benefits. Investors with large stock portfolios may wish to sell stocks to recognize losses and buy ETFs to maintain market exposure (and possibly reacquire all or a portion of their original positions after 30 days). These investors may seek baskets of ETFs tailored to best track their desired stock portfolio. Swaps of open-end mutual funds for ETFs may have two tax benefits. Investors could have a tax benefit from redeeming open-end fund positions to recognize a loss now and to avoid future capital-gains distributions. Purchasing an index-linked ETF with the same objective as the open-end mutual fund would allow them to regain exposure immediately, while potentially improving their tax position. For example, an investor with a loss on a technology open-end fund may sell the position and then purchase a technology-sector ETF such as the ishares Dow Jones US Technology Fund (IYW), provided the underlying stocks are not substantially identical. For additional information, please see our full report, 2007 Year-End ETF and CEF Tax Strategies, published on November 1,

189 GLOBAL WEALTH MANAGEMENT Prospective Tax Planning with ETFs We believe a basket of index-linked ETFs can provide personalized tax planning strategies. An investor seeking broad market exposure can create returns that resemble a major market index by buying a basket of sector ETFs. By acquiring individual sector ETFs in the proper amounts, an investor can replicate a major index such as the S&P 500. Exhibit 110 shows how a basket of ten ETFs with proper weightings could create an overall portfolio similar to the S&P 500 Index. The sector basket strategy can be market-neutral or weighted toward favored sectors. A relatively simple model can be used to get weightings in each sector ETF that should produce results similar to the desired major market index. However, investors may seek to enhance the performance of a portfolio by customizing weightings. For example, a basket could be designed to replicate the weightings in Morgan Stanley s US Sector Model. Alternatively, investors may adjust the weightings of the sector ETF basket to adjust for holdings in other parts of their portfolios (e.g., an investor with a lot of individual technology stocks might want to underweight a technology sector fund). Finally, style ETFs that focus on growth or value stocks within various large-, mid-, or small-cap stock indices or international ETFs can be incorporated into this strategy. Over time, a dispersion of returns should create gains or losses in individual sector ETFs. At year-end, these gains or losses can be realized by selling some of the ETFs to offset a taxable position in other parts of a portfolio. Gains can be recognized by selling one ETF and then buying the same or another similar ETF immediately (gains are generally not subject to wash-sale rules). To recognize a loss, an investor may be able to sell one sector ETF and purchase another similar ETF and not be subject to the IRS wash-sale rules. This is allowed, provided that the two ETFs are not composed of substantially identical securities. To re-establish a position in the same ETF, an investor could purchase a similar ETF and hold it for 30 days and then switch back to the original ETF. because of the tax consequences of selling low-basis stock. Such investors could use an ETF tax planning strategy within other parts of their portfolios. Losses recognized on the sale of ETFs could be used to offset gains resulting from the sale of the investors concentrated low-basis positions. The proceeds from the sale of the investors concentrated positions could then be invested in additional ETFs in order to obtain a more diversified overall portfolio, while providing further tax planning opportunities. These strategies may also apply to style, market-cap, industry-specific, or international ETFs. Over time there are also significant divergences of performance between growth versus value and different levels of market capitalization (large-, mid-, and small-cap) and different industries. The wide range of available ETFs in each of these market segments may allow additional tax planning opportunities. Tax planning with this strategy can occur throughout the year. Traditionally, most investors wait until the fourth quarter to undertake trades to recognize desired gains or losses. With this ETF sector strategy, investors can harvest gains or losses throughout the year as various sectors perform in different directions. Exhibit 110 Replication of Major Market Index with Sector ETFs Materials Information Technology Industrials Source: S&P as of 1/31/08. Telecommunic ation Services Health Care Utilities Consumer Discretionary Financials Consumer Staples Energy This strategy may be attractive to investors with concentrated positions of low-basis stock. Many investors with long-term holdings that represent a significant part of their net worth are reluctant to undertake diversification strategies 74

190 GLOBAL WEALTH MANAGEMENT US EQUITY INDEX-LINKED ETFS The following section highlights selected US equity ETFs and their underlying indices. It includes historical performance, valuations, correlations, our market outlook, and individual ETF profiles. Following several strong years of absolute performance, US equity indices deteriorated sharply in the fourth quarter of 2007 and, this year, the major markets we monitor have all moved lower through April 30, 2008 (Exhibit 111). While neither growth nor value has outperformed across the capitalization curve or among providers, mid-cap indices have generally outperformed both large- and small-cap indices. Exhibit 111 US Year-to-Date Performance through April 30, 2008 (%) Major Market Indices From a sector perspective, strong commodity prices have generally been supportive of Energy and Basic Materials stocks, while concerns about economic growth and a credit crunch have contributed to the weaker performance of Financials and Information Technology. Stock specific issues among some of the largest constituent companies have hampered Health Care and Telecom, both traditionally defensive sectors. Market Cap Indices DJIA -2.6 S&P DJ U.S. Tot Mkt -4.9 S&P S&P Russell Russell Wilshire S&P Nasdaq S&P Nasdaq Comp -9.0 Russell Style Indices S&P 500 GICS Sector Indices S&P Midcap Growth -1.7 Energy 2.9 S&P Midcap Val -1.9 Materials 2.3 Russell MidCap Value -3.1 Consumer Dis -1.9 S&P Smallcap Growth -3.5 Consumer St -2.4 Russell 2000 Value Russell 2000 Growth S&P Smallcap Val Russell 1000 Val Russell MidCap Growth S&P 500 Growth Russell 1000 Gr Industrials S&P 500 Utilities Financials Info Tech Telecom Services S&P 500 Value -5.6 Healthcare Source: Bloomberg, Morgan Stanley Research 75

191 GLOBAL WEALTH MANAGEMENT Exhibit 112 US Index Historical Returns by S&P 500 GICS Sectors (%) Best Performance Information Technology 79.7% Materials 25.6% Consumer Discretionary 24.8% Industrials 19.8% Telecom Services 18.9% Energy 18.2% Financials 3.8% Utilities -9.3% Healthcare -10.3% Consumer Staples -15.5% Utilities 57.1% Healthcare 25.6% Financials 24.8% Consumer Staples 19.8% Energy 15.5% Industrials 4.9% Materials % Consumer Discretionary -20.0% Telecom Services -38.8% Information Technology -40.6% Consumer Discretionary 2.0% Materials 1.0% Industrials -7.3% Consumer Staples -8.3% Financials -10.7% Energy -12.3% Healthcare -12.4% Telecom Services -13.7% Information Technology -25.9% Utilities -32.5% Consumer Staples -4.4% Materials -7.2% Energy -11.0% Financials -14.3% Healthcare -19.0% Consumer Discretionary -23.4% Industrials -25.7% Utilities -30.1% Telecom Services -34.2% Information Technology -37.6% Information Technology 46.6% Consumer Discretionary 36.1% Materials 34.8% Industrials 29.7% Financials 27.9% Energy 22.4% Utilities 21.1% Healthcare 13.3% Consumer Staples 9.2% Telecom Services 3.3% Energy 31.5% Utilities 24.3% Telecom Services 19.8% Industrials 18.0% Consumer Discretionary 13.3% Materials 13.2% Financials 10.9% Consumer Staples 8.2% Information Technology 2.6% Healthcare 1.7% Energy 31.7% Utilities 16.2% Financials 6.5% Healthcare 6.1% Materials 4.3% Consumer Staples 3.3% Industrials 2.1% Information Technology 1.0% Telecom Services -6.0% Consumer Discretionary -6.6% Telecom Services 36.8% Energy 24.2% Utilities 21.0% Financials 19.2% Consumer Discretionary 18.6% Materials 18.6% Consumer Staples 14.4% Industrials 13.3% Information Technology 8.4% Healthcare 7.5% Energy 34.4% Materials 22.5% Utilities 19.4% Information Technology 16.3% Consumer Staples 14.2% Industrials 12.08% Telecom Services 11.9% Healthcare 7.1% Consumer Discretionary -13.2% Financials -18.6% Worst Source: Morgan Stanley Data, Bloomberg, Index Providers. YTD Data as of April 30, 2008 Exhibit 113 US Index Historical Returns by Style (%) Energy 2.9% Materials 2.3% Consumer Discretionary -1.9% Consumer Staples -2.4% Industrials -2.6% Utilities -5.2% Financials -8.3% Information Technology -9.3% Telecom Services -9.6% Healthcare -10.2% 2008 YTD Best Growth 33.2% Bonds 11.6% Bonds 8.4% Bonds 10.3% Small Cap 47.3% Intl 20.7% Intl 14.0% Intl 26.8% Growth 11.8% Bonds 2.8% Intl 25.3% Mid Cap 8.2% Small Cap 1.0% Value -15.5% Mid Cap 40.1% Mid Cap 20.2% Mid Cap 12.7% Value 22.3% Intl 11.6% Mid Cap -3.7% Small Cap 21.3% Value 7.0% Mid Cap -7.0% Intl -15.9% Intl 39.2% Small Cap 18.3% Value 7.05% Small Cap 18.4% Bonds 7.0% Intl -3.8% Performance Large Cap 21.0% Mid Cap 18.2% Value 7.3% Small Cap -3.0% Large Cap -9.1% Intl -15.2% Value -7.4% Large Cap -13.0% Growth -20.9% Mid Cap -16.2% Small Cap -20.5% Large Cap -22.1% Value 30.0% Growth 29.8% Large Cap 26.4% Value 16.5% Large Cap 10.9% Growth 6.3% Growth 5.26% Large Cap 4.9% Small Cap 4.6% Large Cap 15.8% Mid Cap 15.3% Growth 9.1% Mid Cap 5.6% Large Cap 5.5% Value -0.2% Value -4.3% Growth -5.5% Large Cap -5.6% Bonds -0.8% Growth -22.4% Intl -22.6% Growth -27.9% Bonds 4.1% Bonds 6.8% Bonds 2.43% Bonds 4.3% Small Cap -1.6% Worst Small Cap -6.1% YTD 2008 Source: Morgan Stanley Data, Bloomberg, Index Providers. Indices include MSCI EAFE for International, Russell 1000 Growth for Growth, S&P 500 for Large-Cap, Russell 1000 Value for Value, Russell Mid-Cap for Mid-Cap, Russell 2000 for Small-Cap, and Lehman Aggregate for Bonds. YTD Data as of April 30,

192 GLOBAL WEALTH MANAGEMENT Exhibit 114 US Index Major Market and Style Correlation Matrix Russell 3000 DJ US Total Market S&P 500 Russell 1000 DJIA S&P 100 Nasdaq-100 S&P 400 Midcap Russell DJ US Total Market S&P Russell DJIA S&P Nasdaq S&P 400 Midcap Russell Midcap S&P 600 Smallcap Russell Russell 1000 Growth Russell 1000 Value Russell 2000 Growth Russell 2000 Value S&P 500 Growth S&P 500 Value S&P Mid Cap Growth S&P Mid Cap Value S&P Small Cap Grwoth S&P Small Cap Value Russell Midcap S&P 600 Smallcap Russell 2000 Russell 1000 Growth Russell 1000 Value Russell 2000 Growth Russell 2000 Value S&P 500 Growth S&P 500 Value S&P Mid Cap Growth S&P Mid Cap Value S&P Small Cap Grwoth S&P Small Cap Value Source: FactSet. Correlations based upon weekly total returns from 04/29/05 to 04/25/08. Exhibit 115 US Sector Correlation Matrix Dow Jones US Sector Indexes S&P 500 GICS Sector Indexes Dow Jones US Sector Indexes S&P 500 GICS Sector Indexes S&P 500 Dow Jones Tot Mkt Basic Materials Consumer Services Consumer Goods Oil & Gas Financial Healthcare Industrial S&P Dow Jones Total Market Basic Materials Consumer Services Consumer Goods Energy Financial Healthcare Industrial Technology Telecom Utilities Consumer Discretionary Consumer Staples Energy Financial Healthcare Industrials Information Technology Materials Telecom Services Utilities Technology Telecom Utilities Consumer Disc Consumer Staples Energy Financial Healthcare Industrials Information Tech Materials Telecom Services Utilities Source: FactSet. Correlations based upon weekly total returns from 04/29/05 to 04/25/08. 77

193 GLOBAL WEALTH MANAGEMENT US Equity Market Outlook & Favored ETFs Our US strategy team, led by Abhijit Chakrabortti, sees no strong case for a decisive move to the upside in equities. Equities are currently pricing in a lot of good news with the S&P 500 hovering around the top of its recent trading range ( ), in their view, despite continued cuts to earnings estimates (10% thus far in 2008). They believe that we are about 60% of the way through the 2008 earnings downgrade cycle and that earnings will end up 15-20% below consensus expectations taken at the beginning of the year. In order for the market to move higher, our strategy team needs to see a substantial decline in oil price, a bottoming out in housing, and a steady improvement in labor conditions. The downside risks to equities lie in a significant weakening in Eurozone growth, a spreading of earnings weakness to sectors beyond financials, and further strong increases in energy prices, in their view. Amid increased uncertainty and heightened volatility, our strategists continue to favor large-cap stocks over small-cap stocks. In addition to providing greater earnings support from growth outside of the US, large-cap stocks continue to appear relatively more attractive than small or mid-cap stocks on a number of valuation measures. Favored Large-Cap ETFs Diamonds (DIA) ishares S&P 100 (OEF) Earnings deliverability and yield will be the key drivers of sector performance during 2008, in our strategist s opinion. Dividend income: Defensively biased stocks with high dividend yields, low earnings volatility and dividend sanctity is a key theme in Additionally, with the current favorable tax treatment of qualified dividends and the aging of the American population, dividend income has taken on increased importance for many investors. Favored Dividend Income ETFs ishares DJ Select Dividend Index Fund (DVY) WisdomTree High-Yielding Equity Fund (DHS) The following are sector and industry ETFs we favor: Energy: The sector currently trades at a relative price-to-earnings ratio (P/E) of 0.75 vs. the S&P 500 ex-energy on a trailing 12-month basis. This represents a roughly 20% discount to the long-run average discount of As a result, driven by proof of the sustainability of higher for longer energy prices and well supported earnings, our strategy team believes that an increase in the sectors P/E ratio is likely. Favored Energy Sector ETFs Energy Select Sector SPDR (XLE) Health Care: Our strategy team believes Pharmaceutical companies offer reasonable earnings growth, relative earnings safety and yield. Additionally, they believe that the catalysts for a meaningful US$ rally are finally in place, which favors many health care companies. They also favor biotechnology companies with late-stage pipelines versus those that may need capital and liquidity. Favored Health-Care Sector ETFs Health Care Select Sector SPDR (XLV) Consumer Staples: In an environment characterized by increased earnings risk, our strategy team believes that consumer staples are a relative safe haven, as earnings deliverability remains high. Furthermore, many large-cap consumer staples companies continue to benefit from higher economic growth outside of the US, particularly within the emerging markets. Favored Consumer Staples Sector ETF Consumer Staples Select Sector SPDR (XLP) Our industry analysts and strategists have identified several important investment themes, which they expect will play out in 2008 and beyond. Favored Industry ETFs ishares DJ US Aerospace & Defense Index Fund (ITA) SPDR S&P Biotech ETF (XBI) ishares DJ US Oil & Gas Exp. & Production (IEO) ishares DJ US Oil & Gas Equip. & Services (IEZ) PowerShares WilderHill Clean Energy Portfolio (PBW) Claymore S&P Global Water Index ETF (CGW) PowerShares Water Resource Portfolio (PHO) 78

194 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Total Market Index Fund (IYY) BROAD MARKET Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYY Intraday Nav Ticker IYYIV Benchmark Index Ticker (Bloomberg) DJUS Market Cap ($Mil) 588 Outstanding Shares (Mil) 8.6 Avg Daily Trading Volume (Shares) 67,705 Expense Ratio (%) 0.20 Focus Broad Market Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1512 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Total Market Index Fund (IYY) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Total Market Index. The index seeks to measure the performance of the US equity broad markets and serves as the underlying index for the Dow Jones US sector Indexes. It is designed to represent over 95% of the US equity market by investing in a broad selection of stocks that meet objective and rules based criteria and it consists of approximately 1,600 stocks. To avoid less liquid small cap stocks, companies that fall within the bottom 1% by free-float market capitalization or within the bottom.01% of stocks by turnover are omitted. It is float-adjusted market cap-weighted and is reconstituted quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Information Technology 16.7 Energy 13.9 Industrials 11.5 Health Care 11.4 Consumer Staples 9.7 Consumer Discretionary 8.9 Utilities 3.9 Materials 3.9 Telecommunication Services 3.4 Top Ten Holdings (%) Exxon Mobil Corp 3.5 General Electric 2.4 Microsoft Corporation 1.8 At & T Inc 1.7 Chevron Corp 1.5 Procter & Gamble 1.5 Johnson&johnson 1.4 International Business Machines Corp 1.3 Bank Of America 1.2 Apple Inc 1.2 Top Ten Total 17.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 79

195 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 3000 Index Fund (IWV) BROAD MARKET Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWV Intraday Nav Ticker IWVIV Benchmark Index Ticker (Bloomberg) RAY Market Cap ($Mil) 2,912 Outstanding Shares (Mil) 35.8 Avg Daily Trading Volume (Shares) 426,343 Expense Ratio (%) 0.20 Focus Broad Market Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 2884 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 3000 Index Fund (IWV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell 3000 Index. Components of the Russell 3000 Index are determined by ranking U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The index is floatadjusted market cap-weighted and represents approximately 98% of the investable U.S. equity market. The index excludes stocks trading below $1.00, pink sheet and bulletin board stocks, non-us.. incorporated stocks, foreign stocks, ADRs, closed-end mutual funds, limited partnerships, and royalty trusts. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 17.0 Information Technology 16.3 Energy 13.6 Industrials 11.9 Health Care 11.3 Consumer Staples 9.7 Consumer Discretionary 9.0 Utilities 3.9 Materials 3.9 Telecommunication Services 3.3 Top Ten Holdings (%) Exxon Mobil Corp 3.4 General Electric 2.4 Microsoft Corporation 1.8 At & T Inc 1.7 Chevron Corp 1.5 Procter & Gamble 1.5 Johnson&johnson 1.4 International Business Machines Corp 1.2 Bank Of America 1.2 Jpmorgan Chase & Co 1.2 Top Ten Total 17.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 80

196 G L O B A L W E A L T H M A N A G E M E N T Vanguard Extended Market ETF (VXF) BROAD MARKET Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VXF Intraday Nav Ticker EAH Benchmark Index Ticker (Bloomberg) SPCMI Market Cap ($Mil) 602 Outstanding Shares (Mil) 5.8 Avg Daily Trading Volume (Shares) 95,354 Expense Ratio (%) 0.08 Focus Broad Market Investment Advisor The Vanguard Group Inception Date 1/4/2002 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 3182 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Extended Market ETF (VXF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Completion Index. The index measures the performance of all stocks in the S&P Total Market Index with the companies in the S&P 500 removed, providing exposure to mid-, small- and micro-cap companies. It is market capweighted and rebalanced to reflect changes to the S&P 500 and Total Market Indexes which can be made by the S&P Index Committee as necessary throughout the year. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 20.4 Information Technology 14.6 Industrials 13.8 Health Care 12.1 Consumer Discretionary 11.2 Energy 10.8 Utilities 6.8 Materials 5.4 Consumer Staples 2.6 Telecommunication Services 2.3 Top Ten Holdings (%) Genentech 2.0 The Mosaic Co 1.2 Mastercard Inc 1.2 Sw Energy Co 0.9 Bunge Ltd 0.9 Ultra Petroleum Inc 0.8 Mcdermott Intl 0.8 Invesco Ltd 0.7 Intuitive Surg 0.7 First Solar Inc 0.7 Top Ten Total 9.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 81

197 G L O B A L W E A L T H M A N A G E M E N T Vanguard Total Stock Market ETF (VTI) BROAD MARKET Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VTI Intraday Nav Ticker TSJ Benchmark Index Ticker (Bloomberg) MSCIBM Market Cap ($Mil) 10,694 Outstanding Shares (Mil) 76.5 Avg Daily Trading Volume (Shares) 503,539 Expense Ratio (%) 0.07 Focus Broad Market Investment Advisor The Vanguard Group Inception Date 5/31/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 3521 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Total Stock Market ETF (VTI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Broad Market Index. The index contains large, mid, small and micro cap companies and targets for inclusion over 99% of the US market cap. It is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 16.7 Financials 16.6 Energy 13.6 Industrials 11.8 Health Care 11.4 Consumer Staples 9.5 Consumer Discretionary 9.3 Materials 3.9 Utilities 3.8 Telecommunication Services 3.3 Top Ten Holdings (%) Exxon Mobil Corp 3.5 General Electric 2.4 Microsoft Corporation 1.8 At & T Inc 1.7 Chevron Corp 1.5 Procter & Gamble 1.5 Johnson&johnson 1.4 International Business Machines Corp 1.2 Bank Of America 1.2 Apple Inc 1.2 Top Ten Total 17.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 82

198 G L O B A L W E A L T H M A N A G E M E N T Diamonds (DIA) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DIA Intraday Nav Ticker DXV Benchmark Index Ticker (Bloomberg) INDU Market Cap ($Mil) 8,854 Outstanding Shares (Mil) 69 Avg Daily Trading Volume (Shares) 14,397,815 Expense Ratio (%) 0.18 Focus Large-Cap Investment Advisor State Street Global Advisors Inception Date 1/20/1998 Portfolio Structure Unit Investment Trust Approx. Number of Stocks in Fund 30 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Monthly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Diamonds (DIA) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones Industrial Average. The Index contains 30 blue chip US companies that are generally leaders in their industries with strong histories of successful growth. The Dow Jones Industrial is the only major US index that is price-weighted such that a companys stock price determines its weighting in the index and not its market capitalization. Thus, companies with higher stock prices may have greater impact on daily movements of the index. The editors of the Wall Street Journal select the components in the index. Composition changes are rare and usually occur only after corporate acquisitions or dramatic shifts in an index components core business occur. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrials 22.2 Information Technology 14.5 Financials 12.5 Energy 11.8 Consumer Staples 11.4 Consumer Discretionary 9.1 Health Care 8.0 Materials 5.7 Telecommunication Services Top Ten Holdings (%) International Business Machines Corp 8.0 Chevron Corp 6.2 Exxon Mobil Corp 5.6 The Boeing Company 5.3 Caterpillar Inc 5.3 3M 4.9 United Technologies Corp 4.7 Johnson&johnson 4.2 Procter & Gamble 4.1 Mcdonalds Corp 3.8 Top Ten Total 52.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Diamonds current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 83

199 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 1000 Index Fund (IWB) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWB Intraday Nav Ticker IWBIV Benchmark Index Ticker (Bloomberg) RIY Market Cap ($Mil) 3,756 Outstanding Shares (Mil) 48.9 Avg Daily Trading Volume (Shares) 1,178,018 Expense Ratio (%) 0.15 Focus Large-Cap Investment Advisor Barclays Global Investors Inception Date 5/15/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 995 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 1000 Index Fund (IWB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell 1000 Index. All Russell U.S. equity indexes are subsets of the Russell 3000 Index that ranks U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The Russell 1000 Index measures the performance of the 1000 largest companies in the Russell 3000 Index. The index is float-adjusted market cap-weighted and represents over 90% of the total market capitalization of the Russell 3000 Index. The Russell U.S. Equity indexes exclude stocks trading below $1.00, pink sheet and bulletin board stocks, non-u.s. incorporated stocks, foreign stocks, ADRs, closed-end mutual funds, limited partnerships, and royalty trusts. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.7 Information Technology 16.2 Energy 13.9 Industrials 11.8 Health Care 11.2 Consumer Staples 10.0 Consumer Discretionary 9.0 Utilities 3.9 Materials 3.9 Telecommunication Services 3.4 Top Ten Holdings (%) Exxon Mobil Corp 3.6 General Electric 2.5 Microsoft Corporation 1.8 At & T Inc 1.8 Chevron Corp 1.6 Procter & Gamble 1.5 Johnson&johnson 1.4 International Business Machines Corp 1.3 Bank Of America 1.2 Jpmorgan Chase & Co 1.2 Top Ten Total 18.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 84

200 G L O B A L W E A L T H M A N A G E M E N T ishares S&P 100 Index Fund (OEF) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker OEF Intraday Nav Ticker OEFIV Benchmark Index Ticker (Bloomberg) OEX Market Cap ($Mil) 4,007 Outstanding Shares (Mil) 62 Avg Daily Trading Volume (Shares) 1,895,763 Expense Ratio (%) 0.20 Focus Large-Cap Investment Advisor Barclays Global Investors Inception Date 10/23/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 100 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P 100 Index Fund (OEF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P 100 Index. The index is market cap-weighted and is a subset of the S&P 500 Index consisting of 100 major large-cap blue chip stocks across diverse industry groups. The index is adjusted to reflect changes to the S&P Indexes which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 18.6 Financials 16.4 Energy 14.9 Consumer Staples 13.1 Industrials 11.9 Health Care 10.4 Consumer Discretionary 5.7 Telecommunication Services 5.1 Materials 2.0 Utilities 1.9 Top Ten Holdings (%) Exxon Mobil Corp 6.6 General Electric 4.5 Microsoft Corporation 3.3 At & T Inc 3.3 Chevron Corp 2.8 Procter & Gamble 2.8 Johnson&johnson 2.6 International Business Machines Corp 2.4 Bank Of America 2.3 Apple Inc 2.3 Top Ten Total 33.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 85

201 G L O B A L W E A L T H M A N A G E M E N T ishares S&P 500 Index Fund (IVV) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IVV Intraday Nav Ticker IVVIV Benchmark Index Ticker (Bloomberg) SPX Market Cap ($Mil) 18,389 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 3,144,541 Expense Ratio (%) 0.09 Focus Large-Cap Investment Advisor Barclays Global Investors Inception Date 5/15/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 500 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P 500 Index Fund (IVV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P 500 Index. The index measures the performance of the large-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Committee for market size, liquidity and industry group representation. The goal of the Index Committee is to ensure that the S&P 500 remains a leading indicator of US equities reflecting the risk and return characteristics of the broader large-cap universe. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Information Technology 16.3 Energy 14.1 Industrials 11.8 Health Care 11.3 Consumer Staples 10.4 Consumer Discretionary 8.6 Materials 3.7 Utilities 3.6 Telecommunication Services 3.4 Top Ten Holdings (%) Exxon Mobil Corp 3.9 General Electric 2.7 Microsoft Corporation 2.0 At & T Inc 1.9 Chevron Corp 1.7 Procter & Gamble 1.7 Johnson&johnson 1.6 International Business Machines Corp 1.4 Bank Of America 1.4 Apple Inc 1.3 Top Ten Total 19.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 86

202 G L O B A L W E A L T H M A N A G E M E N T PowerShares QQQ (QQQQ) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker QQQQ Intraday Nav Ticker QXV Benchmark Index Ticker (Bloomberg) NDX Market Cap ($Mil) 17,871 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 139,257,024 Expense Ratio (%) 0.20 Focus Large-Cap Investment Advisor PowerShares Capital Inception Date 3/10/1999 Portfolio Structure Unit Investment Trust Approx. Number of Stocks in Fund 100 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares QQQ (QQQQ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Nasdaq-100 Index. The index is composed of 100 of the largest and most actively traded non-financial companies listed on the Nasdaq Stock Market. The index is reconstituted annually in a December Ranking Review based on market capitalization rankings. To reduce turnover, securities ranked 101 to 125 are retained in the index if they were in the top 100 eligible securities in the previous Ranking Review. The index uses a modified capitalization weighted methodology and is rebalanced quarterly. Upon rebalancing, the weight of any single stock is limited to 24% of the index and the combined weight of all securities with individual weights of more than 4.5% is limited to 48% of the index. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 64.4 Health Care 13.7 Consumer Discretionary 12.8 Industrials 5.1 Telecommunication Services 1.7 Consumer Staples 1.4 Materials Top Ten Holdings (%) Apple Inc 13.6 Microsoft Corporation 5.7 Qualcomm Inc 5.1 Google Inc 5.0 Research In Motion 4.7 Cisco Systems 3.3 Gilead Sciences, Inc. 2.9 Intel Corp 2.8 Oracle Corp 2.7 Comcast Corp Class A 1.9 Top Ten Total 47.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for QQQQ current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 87

203 G L O B A L W E A L T H M A N A G E M E N T PowerShares FTSE RAFI US 1000 Portfolio (PRF) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PRF Intraday Nav Ticker PRFIV Benchmark Index Ticker (Bloomberg) FR10 Market Cap ($Mil) 882 Outstanding Shares (Mil) 15.9 Avg Daily Trading Volume (Shares) 82,446 Expense Ratio (%) 0.60 Focus Custon Investment Advisor PowerShares Capital Inception Date 12/19/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1005 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares FTSE RAFI US 1000 Portfolio (PRF) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the FTSE RAFI US 1000 Index. The Index is designed to track the performance of the largest U.S. equities, selected based on the following four fundamental measures of firm size: latest available book value and cash flow, sales and dividends averaged over the prior five years. An overall weight is calculated for each firm by equally-weighting each fundamental measure. For companies that have never paid dividends, that measure will be excluded from the average. Each of the 1000 equities with the highest fundamental weight are than selected and assigned a weight equal to its fundamental weight. The index is reconstituted annually in March. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 24.3 Consumer Discretionary 12.2 Industrials 10.4 Information Technology 10.3 Energy 10.3 Consumer Staples 10.1 Health Care 8.9 Utilities 5.6 Telecommunication Services 4.4 Materials 3.4 Top Ten Holdings (%) Exxon Mobil Corp 3.0 Citigroup Inc 2.6 General Electric 2.5 Bank Of America 2.0 Microsoft Corporation 1.9 Jpmorgan Chase & Co 1.8 Chevron Corp 1.8 At & T Inc 1.7 Wal-mart Stores 1.5 Verizon Communications 1.5 Top Ten Total 20.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 88

204 G L O B A L W E A L T H M A N A G E M E N T Rydex Russell Top 50 ETF (XLG) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLG Intraday Nav Ticker XLGIV Benchmark Index Ticker (Bloomberg) RTOP50 Market Cap ($Mil) 583 Outstanding Shares (Mil) 5.7 Avg Daily Trading Volume (Shares) 67,888 Expense Ratio (%) 0.20 Focus Large-Cap Investment Advisor Rydex Investments Inception Date 5/10/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 54 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Rydex Russell Top 50 ETF (XLG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell Top 50 Index. The index is market cap-weighted and consists of the 50 largest US companies in the Russell 3000 Index. These mega-cap companies can represent over 40% of the total market-cap of the Russell 3000 Index. The index is rebalanced annually in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 22.1 Energy 16.2 Financials 15.9 Health Care 12.8 Consumer Staples 12.6 Industrials 9.2 Telecommunication Services 6.4 Consumer Discretionary Top Ten Holdings (%) Exxon Mobil Corp 8.1 General Electric 5.7 Microsoft Corporation 4.2 At & T Inc 4.1 Chevron Corp 3.6 Procter & Gamble 3.5 Johnson&johnson 3.3 International Business Machines Corp 2.9 Bank Of America 2.8 Jpmorgan Chase & Co 2.7 Top Ten Total 40.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for RSP current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 89

205 G L O B A L W E A L T H M A N A G E M E N T Rydex S&P Equal Weight ETF (RSP) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker RSP Intraday Nav Ticker RSPIV Benchmark Index Ticker (Bloomberg) SPXEWI Market Cap ($Mil) 1,389 Outstanding Shares (Mil) 30.1 Avg Daily Trading Volume (Shares) 329,035 Expense Ratio (%) 0.40 Focus Large-Cap Investment Advisor Rydex Investments Inception Date 4/30/2003 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 500 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Rydex S&P Equal Weight ETF (RSP) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P 500 Equal Weight Index. The index has the same constituents as the S&P 500 Index but each company is allocated an equal fixed weight of 0.20% at quarterly rebalancings. This generally results in a greater weighting of small-cap and value stocks than in the S&P 500 which is market-cap weighted. The index is also adjusted to reflect changes to the S&P 500 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 17.2 Consumer Discretionary 16.7 Information Technology 14.7 Industrials 11.6 Health Care 9.8 Energy 8.2 Consumer Staples 7.7 Utilities 6.3 Materials 5.8 Telecommunication Services 1.9 Top Ten Holdings (%) Broadcom Corp 0.3 Safeco Corp 0.3 United States Steel 0.3 Sprint Nextel Corp 0.3 National Oilwell Varco Inc 0.3 Ford Motor Co 0.3 Peabody Energy 0.3 Consol Energy 0.3 Sandisk Corp 0.3 Apple Inc 0.3 Top Ten Total 2.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for RSP current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 90

206 G L O B A L W E A L T H M A N A G E M E N T Standard & Poor's Depositary Receipts (SPY) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SPY Intraday Nav Ticker SXV Benchmark Index Ticker (Bloomberg) SPX Market Cap ($Mil) 73,412 Outstanding Shares (Mil) 523 Avg Daily Trading Volume (Shares) 212,805,360 Expense Ratio (%) 0.09 Focus Large-Cap Investment Advisor State Street Global Advisors Inception Date 1/29/1993 Portfolio Structure Unit Investment Trust Approx. Number of Stocks in Fund 500 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Standard & Poor's Depositary Receipts "SPDRs" (SPY) are shares of an exchange-traded fund registered with the SEC under the Investment Company Act of 1940 is designed to track the performance of the S&P 500 Index. The index measures the performance of the large-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Index Committee for market size, liquidity and industry group representation. The goal of the Committee is to ensure that the S&P 500 remains a leading indicator of US equities reflecting the risk and return characteristics of the broader large-cap universe. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Information Technology 16.3 Energy 14.1 Industrials 11.8 Health Care 11.3 Consumer Staples 10.4 Consumer Discretionary 8.6 Materials 3.7 Utilities 3.6 Telecommunication Services 3.4 Top Ten Holdings (%) Exxon Mobil Corp 3.9 General Electric 2.7 Microsoft Corporation 2.0 At & T Inc 1.9 Chevron Corp 1.7 Procter & Gamble 1.7 Johnson&johnson 1.6 International Business Machines Corp 1.4 Bank Of America 1.4 Apple Inc 1.3 Top Ten Total 19.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPY current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 91

207 G L O B A L W E A L T H M A N A G E M E N T Vanguard Large-Cap ETF (VV) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VV Intraday Nav Ticker BVH Benchmark Index Ticker (Bloomberg) MZUSP Market Cap ($Mil) 1,545 Outstanding Shares (Mil) 24.5 Avg Daily Trading Volume (Shares) 298,893 Expense Ratio (%) 0.07 Focus Large-Cap Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 728 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Large-Cap ETF (VV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Prime Market 750 Index. The index consists of the 750 largest stocks within the broader MSCI Investable Market Index and includes large and mid-cap stocks. It is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 16.8 Financials 16.4 Energy 14.0 Industrials 11.5 Health Care 11.3 Consumer Staples 9.9 Consumer Discretionary 8.9 Utilities 3.8 Materials 3.8 Telecommunication Services 3.5 Top Ten Holdings (%) Exxon Mobil Corp 3.7 General Electric 2.5 Microsoft Corporation 1.9 At & T Inc 1.8 Chevron Corp 1.6 Procter & Gamble 1.5 Johnson&johnson 1.5 International Business Machines Corp 1.3 Bank Of America 1.3 Apple Inc 1.2 Top Ten Total 18.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 92

208 G L O B A L W E A L T H M A N A G E M E N T WisdomTree LargeCap Dividend Fund (DLN) LARGE-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DLN Intraday Nav Ticker DLNIV Benchmark Index Ticker (Bloomberg) WTLDITR Market Cap ($Mil) 325 Outstanding Shares (Mil) 5.9 Avg Daily Trading Volume (Shares) 86,678 Expense Ratio (%) 0.28 Focus Large-Cap Value Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 296 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree LargeCap Dividend Fund (DLN) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree LargeCap Dividend Index. The index is a sub set of the WisdomTree Dividend Index which measures the performance of all U.S. companies that pay regular cash dividends, are listed on the NYSE, AMEX or NASDAQ, and meet certain liquidity requirements. The LargeCap index consists of the 300 largest companies, ranked by market capitalization, within the WisdomTree Dividend Index. Companies in the index are weighted based on their projected cash dividends by annualizing the last regularly declared dividend per share and multiplying that figure by the number of outstanding shares. The index is reconstituted annually, at which time each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund generally invests in all of the securities comprising its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 29.2 Industrials 11.8 Consumer Staples 11.6 Health Care 10.2 Energy 9.4 Information Technology 6.3 Consumer Discretionary 5.9 Telecommunication Services 5.8 Utilities 5.1 Materials 4.7 Top Ten Holdings (%) Bank Of America 4.5 General Electric 4.5 Citigroup Inc 3.8 At & T Inc 3.7 Exxon Mobil Corp 3.3 Pfizer Inc 3.0 Jpmorgan Chase & Co 2.4 Chevron Corp 2.3 Johnson&johnson 2.1 Verizon Communications 1.9 Top Ten Total 31.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 93

209 G L O B A L W E A L T H M A N A G E M E N T ishares Russell Midcap Index Fund (IWR) MID-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWR Intraday Nav Ticker IWRIV Benchmark Index Ticker (Bloomberg) RMC Market Cap ($Mil) 3,743 Outstanding Shares (Mil) 36.3 Avg Daily Trading Volume (Shares) 355,038 Expense Ratio (%) 0.20 Focus Mid-Cap Investment Advisor Barclays Global Investors Inception Date 7/16/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 790 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell Midcap Index Fund (IWR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell Midcap Index. All Russell U.S. equity indexes are subsets of the Russell 3000 Index that ranks U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The Russell 1000 Index includes the 1000 largest companies in the Russell 3000 Index and the Russell Midcap Index measures the performance of the 800 smallest companies in The Russell 1000 Index. The Midcap index is float-adjusted market cap-weighted and represents approximately 25% of the total market capitalization of the Russell 1000 Index. The Russell U.S. Equity indexes exclude stocks trading below $1.00, pink sheet and bulletin board stocks, non-u.s. incorporated stocks, foreign stocks, ADRs, closed-end mutual funds, limited partnerships, and royalty trusts. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.4 Information Technology 14.0 Consumer Discretionary 13.6 Energy 13.3 Industrials 13.0 Utilities 8.5 Health Care 7.5 Consumer Staples 6.0 Materials 5.4 Telecommunication Services 2.3 Top Ten Holdings (%) Hess Corporation 0.9 National Oilwell Varco Inc 0.9 Weatherford Intl 0.8 Chesapeake Energy Corp 0.8 Csx Corp 0.7 Mastercard Inc 0.7 Williams Cos Inc 0.6 Air Prods & Chem 0.6 United States Steel 0.6 The Mosaic Co 0.6 Top Ten Total 7.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website:www.ishares.com. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 94

210 G L O B A L W E A L T H M A N A G E M E N T ishares S&P MidCap 400 Index Fund (IJH) MID-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJH Intraday Nav Ticker IJHIV Benchmark Index Ticker (Bloomberg) MID Market Cap ($Mil) 5,019 Outstanding Shares (Mil) 58 Avg Daily Trading Volume (Shares) 535,285 Expense Ratio (%) 0.20 Focus Mid-Cap Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 399 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P MidCap 400 Index Fund (IJH) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P MidCap 400 Index. The index measures the performance of the mid-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Index Committee for market size, liquidity and industry group representation. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 22.4 Energy 16.1 Information Technology 13.6 Health Care 13.2 Industrials 12.6 Utilities 9.2 Consumer Discretionary 6.9 Materials 3.6 Consumer Staples 1.4 Telecommunication Services 1.0 Top Ten Holdings (%) Sw Energy Co 2.6 Intuitive Surg 2.0 Fmc Technologies 1.7 Equitable Resources 1.6 Activision Inc 1.6 Arch Coal Inc 1.6 Joy Global 1.5 Newfield Exploration Co 1.5 Amphenol Corp A 1.4 Denbury Rsc 1.4 Top Ten Total 16.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 95

211 G L O B A L W E A L T H M A N A G E M E N T S&P MidCap 400 Depository Receipts (MDY) MID-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker MDY Intraday Nav Ticker MXV Benchmark Index Ticker (Bloomberg) MID Market Cap ($Mil) 8,855 Outstanding Shares (Mil) 56.2 Avg Daily Trading Volume (Shares) 4,715,746 Expense Ratio (%) 0.25 Focus Mid-Cap Investment Advisor State Street Global Advisors Inception Date 5/4/1995 Portfolio Structure Unit Investment Trust Approx. Number of Stocks in Fund 400 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description S&P MidCap 400 Depository Receipts (MDY) are shares of an exchange-traded fund registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P MidCap 400 Index. The index measures the performance of the midcap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Index Committee for market size, liquidity and industry group representation. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 22.4 Energy 16.1 Information Technology 13.6 Health Care 13.2 Industrials 12.6 Utilities 9.2 Consumer Discretionary 6.9 Materials 3.6 Consumer Staples 1.4 Telecommunication Services 1.0 Top Ten Holdings (%) Sw Energy Co 2.6 Intuitive Surg 2.0 Fmc Technologies 1.7 Equitable Resources 1.6 Activision Inc 1.6 Arch Coal Inc 1.6 Joy Global 1.5 Newfield Exploration Co 1.5 Amphenol Corp A 1.4 Denbury Rsc 1.4 Top Ten Total 16.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for MDY current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 96

212 G L O B A L W E A L T H M A N A G E M E N T Vanguard Mid-Cap ETF (VO) MID-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VO Intraday Nav Ticker BVO Benchmark Index Ticker (Bloomberg) MZUSM Market Cap ($Mil) 1,134 Outstanding Shares (Mil) 15.2 Avg Daily Trading Volume (Shares) 190,637 Expense Ratio (%) 0.13 Focus Mid-Cap Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 426 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Mid-Cap ETF (VO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Mid-Cap 450 Index. The index consists of the 450 smallest stocks within the broader MSCI Prime Market 750 Index, which contains the largest 750 stocks in the MSCI US Investable Market Index. It is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Industrials 16.1 Information Technology 13.6 Energy 12.8 Consumer Discretionary 12.5 Health Care 8.6 Utilities 6.8 Materials 5.5 Consumer Staples 4.5 Telecommunication Services 2.7 Top Ten Holdings (%) United States Steel 1.0 Noble Corporation 0.8 Noble Energy Inc 0.8 Consol Energy 0.8 Smith Intl Inc 0.8 T Rowe Price Group Inc 0.8 Memc Electronic 0.8 Murphy Oil Corp 0.7 Sw Energy Co 0.7 Bunge Ltd 0.7 Top Ten Total 8.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 97

213 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 2000 Index Fund (IWM) SMALL-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWM Intraday Nav Ticker IWMIV Benchmark Index Ticker (Bloomberg) RTY Market Cap ($Mil) 8,013 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 75,380,240 Expense Ratio (%) 0.20 Focus Small-Cap Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1894 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 2000 Index Fund (IWM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell 2000 Index. All Russell U.S. equity indexes are subsets of the Russell 3000 Index that ranks U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index. The index is float-adjusted market cap-weighted and represents under 10% of the total market capitalization of the Russell 3000 Index. The Russell U.S. Equity indexes exclude stocks trading below $1.00, pink sheet and bulletin board stocks, non-u.s. incorporated stocks, foreign stocks, ADRs, closed-end mutual funds, limited partnerships, and royalty trusts. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 23.0 Information Technology 18.7 Industrials 15.8 Health Care 12.8 Consumer Discretionary 11.4 Energy 5.9 Utilities 4.4 Materials 4.1 Consumer Staples 3.6 Telecommunication Services 0.5 Top Ten Holdings (%) Hologic Inc 1.1 Priceline.com 1.0 Flir Systems 0.9 Exterran Holdings Inc 0.9 Illumina 0.8 Natwide Health 0.7 Ansys Inc 0.7 Alexandria Re Eq 0.7 Nuance Communications Inc 0.6 Atwood Oceanics 0.6 Top Ten Total 7.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 98

214 G L O B A L W E A L T H M A N A G E M E N T ishares S&P SmallCap 600 Index Fund (IJR) SMALL-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJR Intraday Nav Ticker IJRIV Benchmark Index Ticker (Bloomberg) SML Market Cap ($Mil) 4,371 Outstanding Shares (Mil) 68.4 Avg Daily Trading Volume (Shares) 1,580,632 Expense Ratio (%) 0.20 Focus Mid-Cap Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 599 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P SmallCap 600 Index Fund (IJR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P SmallCap 600 Index. The index measures the performance of the small-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Index Committee for market size, liquidity and industry group representation. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrials 18.2 Information Technology 17.9 Financials 16.5 Consumer Discretionary 12.1 Energy 11.6 Health Care 11.4 Utilities 5.1 Consumer Staples 3.5 Materials 3.5 Telecommunication Services 0.2 Top Ten Holdings (%) Cabot Oil Gas 1.3 Massey Energy 1.0 Flir Systems 1.0 Trimble Nav 0.8 Oceaneering Intl 0.8 Shaw Group 0.8 Ansys Inc 0.7 Unit Corp 0.7 Helix Energy Solutions Group Inc 0.7 Southern Union 0.7 Top Ten Total 8.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 99

215 G L O B A L W E A L T H M A N A G E M E N T Vanguard Small-Cap ETF (VB) SMALL-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VB Intraday Nav Ticker BVP Benchmark Index Ticker (Bloomberg) MZUSS Market Cap ($Mil) 1,188 Outstanding Shares (Mil) 17.7 Avg Daily Trading Volume (Shares) 218,645 Expense Ratio (%) 0.10 Focus Small-Cap Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1710 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Small-Cap ETF (VB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Small-Cap 1750 Index. The index consists of the 1750 smallest stocks within the broader MSCI US Investable Market Index, which contains 2500 stocks. It is market capweighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund may use optimization techniques, however, it will generally hold all of the stocks in the index in proportionately the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 23.6 Information Technology 17.9 Industrials 14.4 Health Care 11.5 Consumer Discretionary 11.4 Energy 8.3 Utilities 5.5 Materials 4.1 Consumer Staples 2.5 Telecommunication Services 0.8 Top Ten Holdings (%) Cabot Oil Gas 0.8 Priceline.com 0.7 Massey Energy 0.7 Illumina 0.6 Flir Systems 0.6 Ryder System Inc 0.6 Healthcare Reit 0.6 Oceaneering Intl 0.6 Synopsys Inc 0.5 Nalco Holding 0.5 Top Ten Total 6.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 100

216 G L O B A L W E A L T H M A N A G E M E N T ishares Russell Microcap Index Fund (IWC) MICRO-CAP Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWC Intraday Nav Ticker IWCIV Benchmark Index Ticker (Bloomberg) RMICRO Market Cap ($Mil) 310 Outstanding Shares (Mil) 6.4 Avg Daily Trading Volume (Shares) 176,302 Expense Ratio (%) 0.60 Focus Micro-Cap Investment Advisor Barclays Global Investors Inception Date 8/16/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1384 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell Microcap Index Fund (IWC) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Russell Microcap Index. The index measures the performance of the microcap segment that represents less than 3% of the U.S. equity market. Russell ranks U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The Russell Microcap Index includes the 1,000 smallest securities in the small-cap Russell 2000 Index plus the next 1000 smaller securities. The index is float-adjusted market cap-weighted and excludes stocks trading below $1.00, pink sheet and bulletin board stocks, non-u.s. incorporated stocks, foreign stocks, ADRs, closed-end mutual funds, limited partnerships, and royalty trusts. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 25.7 Financials 21.0 Industrials 15.1 Health Care 14.7 Consumer Discretionary 7.5 Energy 6.5 Consumer Staples 3.4 Materials 2.9 Utilities 2.1 Telecommunication Services 1.1 Top Ten Holdings (%) Concur Tech Inc 2.2 Lindsay Corp 1.8 Savient Pharmaceuticals 1.8 Amer Supercond 1.6 Petroleum Dvel 1.6 Robbins &mey 1.6 Cybersource Cp 1.6 Petroquest Energy Inc 1.4 Amer Cmps Comm 1.3 Synaptics Inc 1.3 Top Ten Total 16.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 101

217 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 3000 Growth Index Fund (IWZ) BROAD MARKET GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWZ Intraday Nav Ticker IWZIV Benchmark Index Ticker (Bloomberg) RAG Market Cap ($Mil) 358 Outstanding Shares (Mil) 7.6 Avg Daily Trading Volume (Shares) 48,756 Expense Ratio (%) 0.25 Focus Broad US Growth Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1888 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 3000 Growth Index Fund (IWZ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell 3000 Growth Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the Russell 3000 Index. However, on a market cap basis the combined growth and value indexes equal the Russell 3000 Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 28.1 Health Care 15.1 Industrials 13.1 Consumer Discretionary 10.8 Consumer Staples 10.6 Energy 9.8 Financials 6.8 Materials 3.5 Utilities 1.5 Telecommunication Services 0.7 Top Ten Holdings (%) Microsoft Corporation 3.4 Apple Inc 2.2 Cisco Systems 2.1 Intel Corp 1.9 International Business Machines Corp 1.9 Google Inc 1.8 Hewlett-packard 1.7 Schlumberger Ltd 1.7 Pepsico Inc 1.5 Wal-mart Stores 1.4 Top Ten Total 19.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 102

218 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 3000 Value Index Fund (IWW) BROAD MARKET VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWW Intraday Nav Ticker IWWIV Benchmark Index Ticker (Bloomberg) RAV Market Cap ($Mil) 615 Outstanding Shares (Mil) 6.2 Avg Daily Trading Volume (Shares) 77,368 Expense Ratio (%) 0.25 Focus Broad US Value Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1887 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 3000 Value Index Fund (IWW) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell 3000 Value Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the Russell 3000 Index. However, on a market cap basis the combined growth and value indexes equal the Russell 3000 Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 28.1 Energy 17.9 Industrials 10.7 Consumer Staples 8.7 Health Care 7.1 Consumer Discretionary 7.1 Utilities 6.6 Telecommunication Services 6.1 Materials 4.3 Information Technology 3.3 Top Ten Holdings (%) Exxon Mobil Corp 5.7 General Electric 4.5 At & T Inc 3.6 Chevron Corp 3.2 Bank Of America 2.5 Jpmorgan Chase & Co 2.4 Conocophillips 2.2 Pfizer Inc 2.1 Procter & Gamble 1.9 Citigroup Inc 1.9 Top Ten Total 29.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 103

219 G L O B A L W E A L T H M A N A G E M E N T ishares Morningstar Large Growth Index Fund (JKE) LARGE-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker JKE Intraday Nav Ticker JKEIV Benchmark Index Ticker (Bloomberg) MLGR Market Cap ($Mil) 512 Outstanding Shares (Mil) 7.4 Avg Daily Trading Volume (Shares) 75,361 Expense Ratio (%) 0.25 Focus Large-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/2/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 111 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Morningstar Large Growth Index Fund (JKE) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Morningstar Large Growth Index. This Index measures the performance of largecap stocks that are expected to grow at a faster pace than the rest of the market as measured by forward earnings, historical earnings, book value, cash flow and sales. Morningstar defines the large-cap segment as 70% of the US market and splits it one third each into growth, value, and core indexes. Stocks are classified by a ten-factor model and are only assigned to one style index. The component growth, value and core indexes can be combined to equal their broad market index. The index is float-adjusted market cap-weighted and is rebalanced quarterly. Stocks are added or removed semi-annually and buffer zones are used to reduce turnover. To track the index, the fund generally will invest in all of the stocks in the index in proportion to their weightings in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 40.1 Health Care 14.3 Consumer Discretionary 12.1 Energy 11.8 Financials 6.7 Materials 5.0 Industrials 4.9 Consumer Staples 4.2 Telecommunication Services 0.5 Utilities 0.4 Top Ten Holdings (%) Microsoft Corporation 7.1 Apple Inc 4.6 Cisco Systems 4.4 Intel Corp 3.9 Google Inc 3.9 Schlumberger Ltd 3.5 Oracle Corp 2.4 Qualcomm Inc 2.0 Goldman Sachs 1.9 Monsanto 1.9 Top Ten Total 35.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 104

220 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 1000 Growth Index Fund (IWF) LARGE-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWF Intraday Nav Ticker IWFIV Benchmark Index Ticker (Bloomberg) RLG Market Cap ($Mil) 13,783 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 3,223,994 Expense Ratio (%) 0.20 Focus Large-Cap Growth Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 686 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 1000 Growth Index Fund (IWF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell 1000 Growth Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S long-term growth forecast to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the Russell 1000 Index. However, on a market cap basis the combined growth and value indexes equal the Russell 1000 Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 28.3 Health Care 14.9 Industrials 12.9 Consumer Staples 10.9 Consumer Discretionary 10.6 Energy 9.9 Financials 6.6 Materials 3.6 Utilities 1.5 Telecommunication Services 0.7 Top Ten Holdings (%) Microsoft Corporation 3.5 Apple Inc 2.3 Cisco Systems 2.2 Intel Corp 2.0 International Business Machines Corp 2.0 Google Inc 1.9 Hewlett-packard 1.8 Schlumberger Ltd 1.7 Pepsico Inc 1.6 Wal-mart Stores 1.5 Top Ten Total 20.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 105

221 G L O B A L W E A L T H M A N A G E M E N T ishares S&P 500 Growth Index Fund (IVW) LARGE-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IVW Intraday Nav Ticker IVWIV Benchmark Index Ticker (Bloomberg) SGX Market Cap ($Mil) 6,154 Outstanding Shares (Mil) 91.1 Avg Daily Trading Volume (Shares) 1,239,242 Expense Ratio (%) 0.18 Focus Large-Cap Growth Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 301 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P 500 Growth Index Fund (IVW) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P 500/Citigroup Growth Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 500 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 24.7 Energy 22.7 Health Care 13.6 Consumer Staples 11.4 Industrials 9.4 Consumer Discretionary 8.1 Financials 6.4 Materials 3.1 Utilities 0.6 Telecommunication Services 0.1 Top Ten Holdings (%) Exxon Mobil Corp 7.5 Microsoft Corporation 3.8 Johnson&johnson 3.0 Apple Inc 2.6 Cisco Systems 2.4 Conocophillips 2.2 Procter & Gamble 2.2 Google Inc 2.1 International Business Machines Corp 1.9 Schlumberger Ltd 1.9 Top Ten Total 29.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 106

222 G L O B A L W E A L T H M A N A G E M E N T PowerShares Dynamic Large-Cap Growth Portfolio (PWB) LARGE-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PWB Intraday Nav Ticker BWW Benchmark Index Ticker (Bloomberg) ILH Market Cap ($Mil) 683 Outstanding Shares (Mil) 38.4 Avg Daily Trading Volume (Shares) 250,679 Expense Ratio (%) 0.60 Focus Large-Cap Growth Investment Advisor PowerShares Capital Inception Date 3/3/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Dynamic Large Cap Growth Portfolio (PWB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dynamic Large Cap Growth Intellidex Index. The Style Intellidexes apply a rules-based ten factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. This process occurs quarterly in February, May, August and November. The Large Cap Growth index consists of 50 stocks selected from the 250 largest U.S. stocks. The Index is calculated using a tiered weighting methodology. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 39.4 Health Care 18.1 Consumer Discretionary 9.4 Materials 7.7 Industrials 7.1 Consumer Staples 6.0 Financials 4.6 Utilities 3.9 Energy Top Ten Holdings (%) Apple Inc 4.6 Google Inc 3.8 Schlumberger Ltd 3.7 Intel Corp 3.7 Oracle Corp 3.6 Microsoft Corporation 3.4 Cisco Systems 3.3 Monsanto 3.2 Qualcomm Inc 3.2 News Corp Ltd A 3.1 Top Ten Total 35.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 107

223 G L O B A L W E A L T H M A N A G E M E N T Vanguard Growth ETF (VUG) LARGE-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VUG Intraday Nav Ticker PVJ Benchmark Index Ticker (Bloomberg) MZUSPG Market Cap ($Mil) 3,638 Outstanding Shares (Mil) 57.9 Avg Daily Trading Volume (Shares) 395,934 Expense Ratio (%) 0.10 Focus Large-Cap Growth Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 419 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Growth ETF (VUG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Prime Market Growth Index. The index consists of large and mid-cap stocks with growth characteristics within the MSCI US Prime Market 750 Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 30.6 Industrials 13.4 Health Care 11.5 Consumer Discretionary 11.4 Consumer Staples 10.4 Energy 10.3 Financials 6.7 Materials 3.9 Utilities 0.9 Telecommunication Services 0.8 Top Ten Holdings (%) Microsoft Corporation 3.7 International Business Machines Corp 2.5 Apple Inc 2.4 Cisco Systems 2.3 Wal-mart Stores 2.1 Intel Corp 2.0 Google Inc 2.0 Hewlett-packard 1.9 Schlumberger Ltd 1.8 Pepsico Inc 1.6 Top Ten Total 22.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 108

224 G L O B A L W E A L T H M A N A G E M E N T ishares Morningstar Large Value Index Fund (JKF) LARGE-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker JKF Intraday Nav Ticker JKFIV Benchmark Index Ticker (Bloomberg) MLVL Market Cap ($Mil) 258 Outstanding Shares (Mil) 3.4 Avg Daily Trading Volume (Shares) 40,410 Expense Ratio (%) 0.25 Focus Large-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/2/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 72 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Morningstar Large Value Index Fund (JKF) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Morningstar Large Value Index. The Morningstar Large Value Index measures the performance of large-cap stocks with relatively low prices given anticipated per-share earnings, book value, cash flow, sales and dividends. Morningstar defines the large-cap segment as 70% of the US market and splits it one third each into growth, value, and core indexes. Stocks are classified by a ten-factor model and are only assigned to one style index. The component growth, value and core indexes can be combined to equal their broad market index. The index is float-adjusted market cap-weighted and is rebalanced quarterly. Stocks are added or removed semi-annually and buffer zones are used to reduce turnover. To track the index, the fund generally will invest in all of the stocks in the index in proportion to their weightings in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 34.8 Energy 28.5 Telecommunication Services 10.9 Health Care 6.4 Consumer Staples 6.0 Utilities 5.6 Consumer Discretionary 3.4 Materials 2.6 Industrials 1.2 Information Technology 0.6 Top Ten Holdings (%) Exxon Mobil Corp 14.9 At & T Inc 7.3 Chevron Corp 6.3 Bank Of America 5.2 Jpmorgan Chase & Co 5.0 Pfizer Inc 4.2 Conocophillips 4.0 Citigroup Inc 3.8 Verizon Communications 3.4 Wells Fargo & Co 2.9 Top Ten Total 56.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 109

225 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 1000 Value Index Fund (IWD) LARGE-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWD Intraday Nav Ticker IWDIV Benchmark Index Ticker (Bloomberg) RLV Market Cap ($Mil) 8,960 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 2,194,175 Expense Ratio (%) 0.20 Focus Large-Cap Value Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 618 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 1000 Value Index Fund (IWD) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell 1000 Value Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S long-term growth forecast to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the Russell 1000 Index. However, on a market cap basis the combined growth and value indexes equal the Russell 1000 Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 27.9 Energy 18.4 Industrials 10.5 Consumer Staples 8.9 Health Care 7.2 Consumer Discretionary 7.1 Utilities 6.6 Telecommunication Services 6.3 Materials 4.2 Information Technology 3.0 Top Ten Holdings (%) Exxon Mobil Corp 6.0 General Electric 4.7 At & T Inc 3.8 Chevron Corp 3.3 Bank Of America 2.6 Jpmorgan Chase & Co 2.5 Conocophillips 2.3 Pfizer Inc 2.2 Procter & Gamble 2.0 Citigroup Inc 1.9 Top Ten Total 31.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 110

226 G L O B A L W E A L T H M A N A G E M E N T ishares S&P 500 Value Index Fund (IVE) LARGE-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IVE Intraday Nav Ticker IVEIV Benchmark Index Ticker (Bloomberg) SVX Market Cap ($Mil) 3,957 Outstanding Shares (Mil) 54.5 Avg Daily Trading Volume (Shares) 913,957 Expense Ratio (%) 0.18 Focus Large-Cap Value Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 352 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P 500 Value Index Fund (IVE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P 500/Citigroup Value Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 500 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 28.1 Industrials 14.3 Consumer Staples 9.4 Consumer Discretionary 9.3 Health Care 8.8 Information Technology 7.3 Telecommunication Services 7.0 Utilities 6.8 Energy 4.8 Materials 4.3 Top Ten Holdings (%) General Electric 5.6 At & T Inc 4.0 Bank Of America 2.8 Jpmorgan Chase & Co 2.7 Pfizer Inc 2.3 Citigroup Inc 2.1 Verizon Communications 1.9 Wells Fargo & Co 1.7 Chevron Corp 1.5 Philip Morris 1.2 Top Ten Total 25.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website:www.ishares.com. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 111

227 G L O B A L W E A L T H M A N A G E M E N T PowerShares Dynamic Large Cap Value Portfolio (PWV) LARGE-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PWV Intraday Nav Ticker DBW Benchmark Index Ticker (Bloomberg) ILW Market Cap ($Mil) 256 Outstanding Shares (Mil) 13.1 Avg Daily Trading Volume (Shares) 83,129 Expense Ratio (%) 0.60 Focus Large-Cap Value Investment Advisor PowerShares Capital Inception Date 3/3/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Dynamic Large Cap Value Portfolio (PWV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dynamic Large Cap Value Intellidex Index. The Style Intellidexes apply a rules-based ten factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. This process occurs quarterly in February, May, August and November. The Large Cap Value index consists of 50 stocks selected from the 250 largest U.S. stocks. The Index is calculated using a tiered weighting methodology. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 32.1 Energy 17.7 Consumer Staples 9.9 Health Care 9.9 Telecommunication Services 6.9 Information Technology 6.5 Consumer Discretionary 6.5 Utilities 5.9 Industrials Top Ten Holdings (%) Jpmorgan Chase & Co 3.7 Chevron Corp 3.6 Goldman Sachs 3.6 At & T Inc 3.6 Mcdonalds Corp 3.5 International Business Machines Corp 3.5 Johnson&johnson 3.4 Conocophillips 3.4 Verizon Communications 3.3 Exxon Mobil Corp 3.3 Top Ten Total 34.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 112

228 G L O B A L W E A L T H M A N A G E M E N T Vanguard Value ETF (VTV) LARGE-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VTV Intraday Nav Ticker PVW Benchmark Index Ticker (Bloomberg) MZUSPV Market Cap ($Mil) 2,404 Outstanding Shares (Mil) 38.2 Avg Daily Trading Volume (Shares) 382,349 Expense Ratio (%) 0.10 Focus Large-Cap Value Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 382 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Value ETF (VTV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Prime Market Value Index. The index consists of large and mid-cap stocks with value characteristics within the MSCI US Prime Market 750 Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 26.9 Energy 18.1 Health Care 11.1 Industrials 9.5 Consumer Staples 9.4 Utilities 7.0 Telecommunication Services 6.3 Consumer Discretionary 6.2 Materials 3.7 Information Technology 1.8 Top Ten Holdings (%) Exxon Mobil Corp 7.7 General Electric 5.2 At & T Inc 3.7 Chevron Corp 3.3 Johnson&johnson 3.0 Bank Of America 2.6 Jpmorgan Chase & Co 2.6 Pfizer Inc 2.2 Conocophillips 2.1 Citigroup Inc 1.9 Top Ten Total 34.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 113

229 G L O B A L W E A L T H M A N A G E M E N T ishares Morningstar Mid Growth Index Fund (JKH) MID-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker JKH Intraday Nav Ticker JKHIV Benchmark Index Ticker (Bloomberg) MMGR Market Cap ($Mil) 504 Outstanding Shares (Mil) 5.1 Avg Daily Trading Volume (Shares) 64,405 Expense Ratio (%) 0.30 Focus Mid-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/2/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 218 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Morningstar Mid Growth Index Fund (JKH) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Morningstar Mid Growth Index. The Morningstar Mid Growth Index measures the performance of mid-cap stocks that are expected to grow at a faster pace than the rest of the market as measured by forward earnings, historical earnings, book value, cash flow and sales. Morningstar defines the mid-cap segment as 20% of the US market and splits it one third each into growth, value, and core indexes. Stocks are classified by a ten-factor model and are only assigned to one style index. The component growth, value and core indexes can be combined to equal their broad market index. The index is floatadjusted market cap-weighted and is rebalanced quarterly. Stocks are added or removed semi-annually and buffer zones are used to reduce turnover. To track the index, the fund generally will invest in all of the stocks in the index in proportion to their weightings in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 26.5 Energy 19.1 Industrials 14.2 Health Care 12.7 Financials 9.2 Consumer Discretionary 7.7 Telecommunication Services 4.3 Utilities 2.7 Materials 2.6 Consumer Staples 0.9 Top Ten Holdings (%) Consol Energy 2.1 Smith Intl Inc 2.0 Sw Energy Co 1.9 Ultra Petroleum Inc 1.6 Mcdermott Intl 1.5 Crown Castle International Corp 1.4 Cameron International Corporation 1.4 Intuitive Surg 1.4 Intercontinentalexchange Inc 1.4 C H Robinson Ww 1.3 Top Ten Total 15.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 114

230 G L O B A L W E A L T H M A N A G E M E N T ishares Russell Midcap Growth Index Fund (IWP) MID-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWP Intraday Nav Ticker IWPIV Benchmark Index Ticker (Bloomberg) RDG Market Cap ($Mil) 3,078 Outstanding Shares (Mil) 27.4 Avg Daily Trading Volume (Shares) 876,402 Expense Ratio (%) 0.25 Focus Mid-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/16/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 542 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell Midcap Growth Index Fund (IWP) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell Midcap Growth Index. The index comes from the Russell Midcap Index that includes the 800 smallest companies in The Russell 1000 Index. Russell uses a twofactor model to assign stocks to growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. This results in the number of companies in the combined growth and value indexes being greater than in the Russell Midcap Index. However, on a market cap basis the combined growth and value indexes equal the Russell Midcap Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 19.8 Energy 15.4 Industrials 15.2 Consumer Discretionary 14.5 Health Care 11.5 Financials 7.8 Consumer Staples 4.9 Materials 4.4 Utilities 3.9 Telecommunication Services 2.6 Top Ten Holdings (%) National Oilwell Varco Inc 1.6 Weatherford Intl 1.4 Mastercard Inc 1.2 Yum! Brands Inc 1.0 Williams Cos Inc 0.9 Peabody Energy 0.9 Amer Tower Sys 0.9 Precision Cast 0.9 Consol Energy 0.8 Noble Corporation 0.8 Top Ten Total 10.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 115

231 G L O B A L W E A L T H M A N A G E M E N T ishares S&P MidCap 400 Growth Index Fund (IJK) MID-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJK Intraday Nav Ticker IJKIV Benchmark Index Ticker (Bloomberg) MIDG Market Cap ($Mil) 2,208 Outstanding Shares (Mil) 24.2 Avg Daily Trading Volume (Shares) 235,056 Expense Ratio (%) 0.25 Focus Mid-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 236 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P MidCap 400 Growth Index Fund (IJK) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P MidCap 400/Citigroup Growth Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 400 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Energy 24.0 Health Care 20.6 Information Technology 17.8 Industrials 15.4 Consumer Discretionary 9.8 Financials 3.9 Utilities 3.2 Materials 3.1 Consumer Staples Top Ten Holdings (%) Sw Energy Co 5.3 Intuitive Surg 4.0 Fmc Technologies 3.5 Joy Global 3.0 Newfield Exploration Co 2.9 Amphenol Corp A 2.9 Denbury Rsc 2.8 Pioneer Natural Resources 2.8 Harris Corp 2.8 Western Digital 2.4 Top Ten Total 32.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 116

232 G L O B A L W E A L T H M A N A G E M E N T PowerShares Dynamic Mid Cap Growth Portfolio (PWJ) MID-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PWJ Intraday Nav Ticker GBW Benchmark Index Ticker (Bloomberg) ILJ Market Cap ($Mil) 413 Outstanding Shares (Mil) 17.7 Avg Daily Trading Volume (Shares) 145,718 Expense Ratio (%) 0.60 Focus Mid-Cap Growth Investment Advisor PowerShares Capital Inception Date 3/3/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 74 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Dynamic Mid Cap Growth Portfolio (PWJ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dynamic Mid Cap Growth Intellidex Index. The Style Intellidexes apply a rules-based ten factor style isolation process to objectively segregate companies into their appropriate investment style and size universe. This process occurs quarterly in February, May, August and November. The Mid Cap Growth index consists of 75 stocks selected from the 750 stocks following the 250 largest U.S. stocks ranked by market capitalization. The Index is calculated using a tiered weighting methodology. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 35.6 Industrials 18.7 Energy 13.8 Health Care 10.4 Consumer Discretionary 9.0 Utilities 7.0 Financials 5.0 Telecommunication Services 0.5 Consumer Staples 0.0 Materials 0.0 Top Ten Holdings (%) Fmc Technologies 4.5 Autodesk Inc 4.3 Noble Corporation 4.3 C H Robinson Ww 4.3 Amphenol Corp A 4.2 Gamestop Corp 4.1 Cameron International Corporation 4.1 Netapp Inc 4.0 Fluor Corp 3.9 Harris Corp 3.9 Top Ten Total 41.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 117

233 G L O B A L W E A L T H M A N A G E M E N T Vanguard Mid-Cap Growth ETF (VOT) MID-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VOT Intraday Nav Ticker BVG Benchmark Index Ticker (Bloomberg) MZUSMG Market Cap ($Mil) 521 Outstanding Shares (Mil) 8.2 Avg Daily Trading Volume (Shares) 145,071 Expense Ratio (%) 0.13 Focus Mid-Cap Growth Investment Advisor The Vanguard Group Inception Date 8/24/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 226 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Mid-Cap Growth ETF (VOT) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Mid Cap 450 Growth Index. The index consists of the 450 smallest stocks with growth characteristics within the broader MSCI Prime Market 750 Index, which contains the largest 750 stocks in the MSCI US Investable Market Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 19.9 Industrials 19.9 Energy 17.4 Health Care 13.5 Consumer Discretionary 10.8 Financials 5.9 Materials 4.1 Utilities 3.4 Telecommunication Services 2.9 Consumer Staples 2.1 Top Ten Holdings (%) Noble Corporation 1.6 Consol Energy 1.6 Smith Intl Inc 1.6 T Rowe Price Group Inc 1.5 Memc Electronic 1.5 Sw Energy Co 1.5 Fluor Corp 1.4 Ultra Petroleum Inc 1.3 Cummins Inc 1.3 Mcdermott Intl 1.2 Top Ten Total 14.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 118

234 G L O B A L W E A L T H M A N A G E M E N T ishares Morningstar Mid Value Index Fund (JKI) MID-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker JKI Intraday Nav Ticker JKIIV Benchmark Index Ticker (Bloomberg) MMVL Market Cap ($Mil) 138 Outstanding Shares (Mil) 1.8 Avg Daily Trading Volume (Shares) 45,198 Expense Ratio (%) 0.30 Focus Mid-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/2/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 226 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Morningstar Mid Value Index Fund (JKI) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Morningstar Mid Value Index. The Morningstar Mid Value Index measures the performance of mid-cap stocks with relatively low prices given the anticipated per-share earnings, book value, cash flow, sales and dividends. Morningstar defines the mid-cap segment as 20% of the US market and splits it one third each into growth, value, and core indexes. Stocks are classified by a ten-factor model and are only assigned to one style index. The component growth, value and core indexes can be combined to equal their broad market index. The index is float-adjusted market cap-weighted and is rebalanced quarterly. Stocks are added or removed semi-annually and buffer zones are used to reduce turnover. To track the index, the fund generally will invest in all of the stocks in the index in proportion to their weightings in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 30.6 Consumer Discretionary 20.3 Utilities 12.9 Materials 10.9 Consumer Staples 9.1 Industrials 4.7 Energy 4.1 Information Technology 4.0 Telecommunication Services 2.8 Health Care 0.7 Top Ten Holdings (%) United States Steel 2.8 El Paso Corp 1.9 Aon Corp 1.7 Conagra Foods 1.6 Progress Energy 1.5 Ppg Industries 1.4 Genworth Finl 1.4 Electronic Data Systems 1.4 Sara Lee Corp 1.3 Xcel Energy Inc 1.3 Top Ten Total 16.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 119

235 G L O B A L W E A L T H M A N A G E M E N T ishares Russell Midcap Value Index Fund (IWS) MID-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWS Intraday Nav Ticker IWSIV Benchmark Index Ticker (Bloomberg) RMV Market Cap ($Mil) 3,351 Outstanding Shares (Mil) 23.9 Avg Daily Trading Volume (Shares) 1,029,281 Expense Ratio (%) 0.25 Focus Mid-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/16/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 484 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell Midcap Value Index Fund (IWS) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell Midcap Value Index. The index comes from the Russell Midcap Index that includes the 800 smallest companies in The Russell 1000 Index. Russell uses a twofactor model to assign stocks to growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it is growth, value, or both. Than 70% are classified all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. This results in the number of companies in the combined growth and value indexes being greater than in the Russell Midcap Index. However, on a market cap basis the combined growth and value indexes equal the Russell Midcap Index upon annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 28.1 Utilities 14.8 Consumer Discretionary 12.3 Energy 10.6 Industrials 10.0 Consumer Staples 7.6 Materials 6.7 Information Technology 6.1 Telecommunication Services 1.9 Health Care 1.9 Top Ten Holdings (%) Hess Corporation 2.2 Csx Corp 1.5 United States Steel 1.4 American Electric Power Company 1.2 Ford Motor Co 1.2 Spectra Energy Corp 1.2 Edison Intl 1.2 Murphy Oil Corp 1.1 Sempra Energy 1.0 Parker-hannifin 1.0 Top Ten Total 12.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 120

236 G L O B A L W E A L T H M A N A G E M E N T ishares S&P MidCap 400 Value Index fund (IJJ) MID-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJJ Intraday Nav Ticker IJJIV Benchmark Index Ticker (Bloomberg) MIDV Market Cap ($Mil) 2,274 Outstanding Shares (Mil) 28.2 Avg Daily Trading Volume (Shares) 126,432 Expense Ratio (%) 0.25 Focus Mid-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 294 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P MidCap 400 Value Index Fund (IJJ) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P MidCap 400/Citigroup Value Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 400 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 40.5 Utilities 15.2 Industrials 10.0 Information Technology 9.5 Energy 8.4 Health Care 5.9 Consumer Discretionary 4.1 Materials 4.1 Telecommunication Services 1.9 Consumer Staples 0.6 Top Ten Holdings (%) Pride Pet 2.6 New York Community Bancorp 2.1 Everest Re Grp 2.0 Amb Property 2.0 Wisconsin Ener 2.0 Manpower Inc 1.9 Macerich 1.8 Oneok Inc 1.8 Arch Coal Inc 1.7 Fed Rlty Inv Tr 1.6 Top Ten Total 19.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 121

237 G L O B A L W E A L T H M A N A G E M E N T Vanguard Mid-Cap Value ETF (VOE) MID-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VOE Intraday Nav Ticker BVS Benchmark Index Ticker (Bloomberg) MZUSMV Market Cap ($Mil) 361 Outstanding Shares (Mil) 6.8 Avg Daily Trading Volume (Shares) 99,256 Expense Ratio (%) 0.13 Focus Mid-Cap Value Investment Advisor The Vanguard Group Inception Date 8/24/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 249 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Mid-Cap Value ETF (VOE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Mid Cap 450 Value Index. The index consists of the 450 smallest stocks with value characteristics within the broader MSCI Prime Market 750 Index, which contains the largest 750 stocks in the MSCI US Investable Market Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 27.9 Consumer Discretionary 14.3 Industrials 12.2 Utilities 10.2 Energy 8.2 Information Technology 7.2 Materials 6.9 Consumer Staples 6.9 Health Care 3.7 Telecommunication Services 2.6 Top Ten Holdings (%) United States Steel 2.0 Noble Energy Inc 1.6 Bunge Ltd 1.4 Parker-hannifin 1.4 El Paso Corp 1.4 L-3 Comms Hldgs 1.4 Boston Ppty 1.2 Dover Corp 1.0 Murphy Oil Corp 1.0 Mirant 1.0 Top Ten Total 13.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 122

238 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 2000 Growth Index Fund (IWO) SMALL-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWO Intraday Nav Ticker IWOIV Benchmark Index Ticker (Bloomberg) RUO Market Cap ($Mil) 3,000 Outstanding Shares (Mil) 38 Avg Daily Trading Volume (Shares) 2,897,376 Expense Ratio (%) 0.25 Focus Small-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1248 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 2000 Growth Index Fund (IWO) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Russell 2000 Growth Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it is growth, value, or both. Than 70% are classified as all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the related broad index. However, on a market cap basis the combined growth and value indexes equal their broad market index upon an annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 25.1 Health Care 19.9 Industrials 16.6 Consumer Discretionary 15.1 Financials 11.4 Energy 6.3 Consumer Staples 2.7 Materials 2.5 Utilities 0.4 Telecommunication Services 0.1 Top Ten Holdings (%) Hologic Inc 2.1 Priceline.com 2.1 Flir Systems 1.7 Illumina 1.7 Ansys Inc 1.3 Nuance Communications Inc 1.2 Natwide Health 1.2 Atwood Oceanics 1.1 Itron Inc 1.1 Micros Sys 1.0 Top Ten Total 14.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 123

239 G L O B A L W E A L T H M A N A G E M E N T ishares S&P SmallCap 600 Growth Index Fund (IJT) SMALL-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJT Intraday Nav Ticker IJTIV Benchmark Index Ticker (Bloomberg) SMLG Market Cap ($Mil) 1,301 Outstanding Shares (Mil) 9.9 Avg Daily Trading Volume (Shares) 284,289 Expense Ratio (%) 0.25 Focus Small-Cap Growth Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 345 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P SmallCap 600 Growth Index Fund (IJT) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P SmallCap 600/Citigroup Growth Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 600 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 21.8 Energy 16.8 Industrials 16.4 Health Care 15.9 Consumer Discretionary 15.8 Financials 7.7 Consumer Staples 3.0 Materials 2.2 Telecommunication Services 0.3 Utilities 0.1 Top Ten Holdings (%) Cabot Oil Gas 2.5 Flir Systems 1.9 Trimble Nav 1.7 Oceaneering Intl 1.7 Ansys Inc 1.4 Unit Corp 1.4 Helix Energy Solutions Group Inc 1.4 Idexx Labs 1.3 St Mary Land 1.3 Pediatrix Med 1.2 Top Ten Total 15.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 124

240 G L O B A L W E A L T H M A N A G E M E N T Vanguard Small-Cap Growth ETF (VBK) SMALL-CAP GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VBK Intraday Nav Ticker HVK Benchmark Index Ticker (Bloomberg) MZUSSG Market Cap ($Mil) 891 Outstanding Shares (Mil) 12.9 Avg Daily Trading Volume (Shares) 193,853 Expense Ratio (%) Focus Small-Cap Growth Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 923 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Small-Cap Growth ETF (VBK) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Small Cap Growth Index. The index consists of small-cap stocks with growth characteristics within the MSCI US Small Cap 1750 Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 26.7 Health Care 19.0 Consumer Discretionary 15.0 Industrials 14.1 Energy 12.4 Financials 5.4 Materials 3.5 Consumer Staples 2.2 Telecommunication Services 1.2 Utilities 0.4 Top Ten Holdings (%) Priceline.com 1.6 Massey Energy 1.5 Illumina 1.4 Flir Systems 1.3 Oceaneering Intl 1.2 Nalco Holding 1.1 Covanta Holding Corporation 1.1 Ansys Inc 1.1 Hanesbrands Inc 1.0 Sba Comms Corp 1.0 Top Ten Total 12.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 125

241 G L O B A L W E A L T H M A N A G E M E N T ishares Russell 2000 Value Index Fund (IWN) SMALL-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IWN Intraday Nav Ticker IWNIV Benchmark Index Ticker (Bloomberg) RUJ Market Cap ($Mil) 3,542 Outstanding Shares (Mil) 51 Avg Daily Trading Volume (Shares) 2,490,862 Expense Ratio (%) 0.25 Focus Small-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 1282 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Russell 2000 Value Index Fund (IWN) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Russell 2000 Value Index. Russell uses a two-factor model to assign stocks to its growth and value indexes. Each stock in a broad index earns a score based on its Price-to-Book ratio and I/B/E/S forecast long-term growth mean to determine if it growth, value, or both. Than 70% are classified as all value or all growth and 30% having both attributes are weighted proportionately to both growth and value indexes. For example, a stock that has a 40% weight in a value index will have a 60% weight in a growth index. This results in the number of companies in the combined growth and value indexes being greater than in the related broad index. However, on a market cap basis the combined growth and value indexes equal their broad market index upon an annual rebalancing in June. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 35.0 Industrials 14.9 Information Technology 12.0 Utilities 8.4 Consumer Discretionary 7.6 Materials 5.7 Energy 5.5 Health Care 5.4 Consumer Staples 4.6 Telecommunication Services 0.9 Top Ten Holdings (%) Exterran Holdings Inc 1.8 Realty Income 1.0 Senior Housing Properties Trust 0.9 Apollo Invstmnt 0.8 Piedmont Natural 0.8 Watson Wyatt & Co 0.8 Stone Energy Cp 0.8 Biomed Realty Trust Inc 0.8 Commerce Grp 0.7 Nicor Inc 0.7 Top Ten Total 9.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 126

242 G L O B A L W E A L T H M A N A G E M E N T ishares S&P SmallCap 600 Value Index Fund (IJS) SMALL-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IJS Intraday Nav Ticker IJSIV Benchmark Index Ticker (Bloomberg) SMLV Market Cap ($Mil) 1,449 Outstanding Shares (Mil) 21.1 Avg Daily Trading Volume (Shares) 236,534 Expense Ratio (%) 0.25 Focus Small-Cap Value Investment Advisor Barclays Global Investors Inception Date 7/24/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 452 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P SmallCap 600 Value Index Fund (IJS) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the S&P SmallCap 600/Citigroup Value Index. S&P/Citigroup uses a multifactor approach (three growth/four value) to determine style. The indexes are market cap weighted with the growth and value subindexes approximating 50% of the broader market-cap based index. One-third of the market cap in the broader index will be fully allocated to growth, one-third fully to value, and the remaining stocks which do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indexes. The index is rebalanced annually and adjusted to reflect changes to the S&P 600 Index which are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 25.4 Industrials 20.0 Information Technology 14.0 Utilities 10.1 Consumer Discretionary 8.3 Health Care 6.9 Energy 6.3 Materials 4.8 Consumer Staples 4.1 Telecommunication Services 0.2 Top Ten Holdings (%) Massey Energy 2.0 Southern Union 1.4 Essex Prop Tr 1.3 Ugi Corp Hlds 1.2 Atmos Energy 1.1 Senior Housing Properties Trust 0.9 Shaw Group 0.9 Acuity Brands Wi 0.9 Lennox 0.9 Piedmont Natural 0.8 Top Ten Total 11.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 127

243 G L O B A L W E A L T H M A N A G E M E N T Vanguard Small-Cap Value ETF (VBR) SMALL-CAP VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VBR Intraday Nav Ticker PVY Benchmark Index Ticker (Bloomberg) MSCISV Market Cap ($Mil) 925 Outstanding Shares (Mil) 14.3 Avg Daily Trading Volume (Shares) 216,240 Expense Ratio (%) 0.11 Focus Small-Cap Value Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 974 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Small-Cap Value ETF (VBR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Small Cap Value Index. The index consists of small-cap stocks with value characteristics within the MSCI US Small Cap 1750 Index. MSCI assigns stocks to growth and value indexes using eight factors including three for value and five for growth. Stocks having both styles are allocated to each index in proportionate weights. In each market segment, the component growth and value indexes can be combined to equal their broad market index. The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. MSCI uses buffer zones in an effort to reduce turnover and manage the migration of companies from one index to another during quarterly reviews. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 39.0 Industrials 14.6 Information Technology 10.4 Utilities 9.8 Consumer Discretionary 8.4 Health Care 5.1 Energy 4.7 Materials 4.6 Consumer Staples 2.9 Telecommunication Services 0.4 Top Ten Holdings (%) Ryder System Inc 1.1 Healthcare Reit 1.1 Cabot Oil Gas 1.0 Synopsys Inc 0.9 Cms Energy Corp 0.9 Rayonier 0.9 Natwide Health 0.9 Alexandria Re Eq 0.9 Perkinelmer 0.9 Snap-on Inc 0.8 Top Ten Total 9.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 128

244 G L O B A L W E A L T H M A N A G E M E N T Consumer Discretionary Select Sector SPDR (XLY) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLY Intraday Nav Ticker YXV Benchmark Index Ticker (Bloomberg) IXY Market Cap ($Mil) 879 Outstanding Shares (Mil) 26.7 Avg Daily Trading Volume (Shares) 5,693,182 Expense Ratio (%) 0.23 Focus Consumer Discretionary Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 86 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Consumer Discretionary Select Sector SPDR (XLY) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Consumer Discretionary Select Sector Index. The index is weighted on a modified market-cap basis and encompasses those industries that tend to be the most sensitive to economic cycles such as automobiles, household durable goods, apparel, leisure equipment, hotels, restaurants, media and consumer retailing. It consists of large cap stocks within the S&P 500 Index classified in the Consumer Discretionary Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Movies & Entertainment 18.0 Broadcasting & Cable Tv 11.7 Restaurants 10.2 Home Improvement Retail 8.5 Department Stores 4.7 General Merchandise Stores 4.6 Hotels, Resorts & Cruise Lines 4.1 Apparel Retail 3.3 Internet Retail 3.0 Automobile Manufacturers 2.8 Top Ten Holdings (%) Mcdonalds Corp 6.6 Comcast Corp Class A 6.3 Walt Disney Co 6.2 Time Warner Inc 5.4 Home Depot 4.5 Target 4.1 News Corp Ltd A 4.1 Lowes Companies 3.4 Nike Inc Cl B 2.4 Viacom Cl B 2.4 Top Ten Total 45.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 129

245 G L O B A L W E A L T H M A N A G E M E N T ishares DJ US Cons. Services Sector Index Fund (IYC) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYC Intraday Nav Ticker IYCIV Benchmark Index Ticker (Bloomberg) DJUSCY Market Cap ($Mil) 208 Outstanding Shares (Mil) 3.4 Avg Daily Trading Volume (Shares) 95,993 Expense Ratio (%) 0.48 Focus Consumer Discretionary Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 225 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Consumer Services Sector Index Fund (IYC) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Consumer Services Sector Index. The index is a sub set of Dow Jones US Total Market Index that seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the consumer services sector by the Industry Classification Benchmark (ICB) and include food and drug retail, general retail, media and travel and leisure companies. The index is float-adjusted market capweighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Movies & Entertainment 13.7 Hypermarkets & Super Centers 12.4 Broadcasting & Cable Tv 11.0 Restaurants 8.1 Drug Retail 6.7 Home Improvement Retail 5.9 Apparel Retail 3.5 Department Stores 3.3 Hotels, Resorts & Cruise Lines 3.2 General Merchandise Stores 3.2 Top Ten Holdings (%) Wal-mart Stores 10.1 Mcdonalds Corp 4.9 Walt Disney Co 4.3 Cvs Caremark Corp 4.2 Time Warner Inc 4.1 Home Depot 3.3 Comcast Corp Class A 2.9 Target 2.8 Lowes Companies 2.5 Ebay Inc 2.5 Top Ten Total 41.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 130

246 G L O B A L W E A L T H M A N A G E M E N T Vanguard Consumer Discretionary ETF (VCR) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VCR Intraday Nav Ticker HVAX Benchmark Index Ticker (Bloomberg) MZUSI0CD Market Cap ($Mil) 224 Outstanding Shares (Mil) 4.3 Avg Daily Trading Volume (Shares) 79,512 Expense Ratio (%) 0.22 Focus Consumer Discretionary Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 415 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Consumer Discretionary ETF (VCR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Consumer Discretionary Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the consumer discretionary sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Movies & Entertainment 15.9 Broadcasting & Cable Tv 13.3 Restaurants 10.2 Home Improvement Retail 7.2 Apparel Retail 4.2 Hotels, Resorts & Cruise Lines 3.9 Department Stores 3.9 General Merchandise Stores 3.8 Internet Retail 3.1 Apparel, Accessories & Luxury Goods 2.8 Top Ten Holdings (%) Mcdonalds Corp 5.7 Walt Disney Co 5.0 Time Warner Inc 4.6 Home Depot 3.8 Comcast Corp Class A 3.5 Target 3.4 Lowes Companies 2.9 News Corp Ltd A 2.7 Nike Inc Cl B 2.0 Amazon.com Inc 1.8 Top Ten Total 35.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 131

247 G L O B A L W E A L T H M A N A G E M E N T Retail HOLDRS (RTH) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker RTH Intraday Nav Ticker IRH Benchmark Index Ticker (Bloomberg) IRH Market Cap ($Mil) 491 Outstanding Shares (Mil) 5.1 Avg Daily Trading Volume (Shares) 6,706,468 Expense Ratio (%) 0* Focus Retail Investment Advisor Bank of New York Inception Date 5/1/2001 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 18 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Retail HOLDRS (RTH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Hypermarkets & Super Centers 27.9 Home Improvement Retail 18.9 Drug Retail 13.0 General Merchandise Stores 8.9 Apparel Retail 7.9 Food Retail 7.6 Department Stores 5.9 Internet Retail 5.4 Computer & Electronics Retail Top Ten Holdings (%) Wal-mart Stores 21.8 Home Depot 11.8 Target 8.9 Lowes Companies 7.2 Walgreen Co 7.0 Costco Wholesale 6.1 Cvs Caremark Corp 6.0 Amazon.com Inc 5.4 Kroger Co 4.2 Best Buy Co Inc 4.1 Top Ten Total 82.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 132

248 G L O B A L W E A L T H M A N A G E M E N T SPDR Retail ETF (XRT) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XRT Intraday Nav Ticker KZR Benchmark Index Ticker (Bloomberg) SPSIRETR Market Cap ($Mil) 296 Outstanding Shares (Mil) 8.9 Avg Daily Trading Volume (Shares) 4,346,913 Expense Ratio (%) 0.35 Focus Consumer Discretionary Investment Advisor State Street Global Advisors Inception Date 6/22/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 53 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR Retail ETF (XRT) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Retail Select Industry Index. The index represents the retail sub-industry portion of the S&P Total Market Index that tracks all US company common stocks listed on the NYSE, AMEX, NASDAQ and NASDAQ Small-Cap Exchanges. The Select Industry Indexes are designed to measure the performance of narrow sub-industries based on the Global Industry Classification Standard (GICS). Stocks in the Select Index are subject to certain liquidity constraints and are equally weighted when the index is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Apparel Retail 27.8 Specialty Stores 19.2 Food Retail 14.4 Department Stores 13.5 Computer & Electronics Retail 8.0 Hypermarkets & Super Centers 6.1 General Merchandise Stores 5.6 Drug Retail 5.4 Catalog Retail Top Ten Holdings (%) Supervalu Inc 3.2 Costco Wholesale 3.1 Ross Stores 3.1 Petsmart 3.1 Gymboree Corp 3.0 Office Depot 3.0 Tiffany & Co 3.0 Wal-mart Stores 3.0 Brown Shoe 3.0 Limited Brands 2.9 Top Ten Total 30.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 133

249 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Home Construction (ITB) CONSUMER DISCRETIONARY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker ITB Intraday Nav Ticker ITBIV Benchmark Index Ticker (Bloomberg) DJSHMB Market Cap ($Mil) 397 Outstanding Shares (Mil) 21.3 Avg Daily Trading Volume (Shares) 1,174,221 Expense Ratio (%) 0.48 Focus Consumer Discretionary Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 20 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Home Construction Index Fund (ITB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Home Construction Index. The index includes companies in the Dow Jones Wilshire 2500 Index that are constructors of residential, mobile and/or prefabricated homes. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Homebuilding Top Ten Holdings (%) Lennar Corp 14.7 Pulte Homes Inc 13.9 Toll Brothers 13.6 D.r. Horton Inc 13.0 Centex Corp 12.0 Kb Home 11.6 Meritage Home Corp 11.5 Champion Enterprises Inc 9.8 Levitt Corp 0.0 Mdc Holdings Inc 0.0 Top Ten Total Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 134

250 G L O B A L W E A L T H M A N A G E M E N T SPDR S&P Homebuilders ETF (XHB) MATERIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XHB Intraday Nav Ticker HBM Benchmark Index Ticker (Bloomberg) SPSIHO Market Cap ($Mil) 858 Outstanding Shares (Mil) 40.8 Avg Daily Trading Volume (Shares) 7,598,714 Expense Ratio (%) 0.35 Focus Consumer Discretionary Investment Advisor State Street Global Advisors Inception Date 2/6/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 23 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR S&P Homebuilders ETF (XHB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Homebuilders Select Industry Index. The index represents the homebuilding sub-industry portion of the S&P Total Market Index that tracks all US company common stocks listed on the NYSE, AMEX, NASDAQ and NASDAQ Small-Cap Exchanges. The Select Industry Indexes are designed to measure the performance of narrow sub-industries based on the Global Industry Classification Standard (GICS). Stocks in the Select Index are subject to certain liquidity constraints and are equally weighted when the index is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Homebuilding 55.4 Home Improvement Retail 22.6 Home Furnishings Top Ten Holdings (%) Sherwin-williams 5.4 Lowes Companies 4.8 Legget & Platt 4.7 Lennar Corp 4.7 Home Depot 4.6 Mohawk Inds Inc 4.6 Toll Brothers 4.5 Ethan Allen 4.5 D.r. Horton Inc 4.5 Meritage Home Corp 4.4 Top Ten Total 46.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRss current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 135

251 G L O B A L W E A L T H M A N A G E M E N T Consumer Staples Select Sector SPDR (XLP) CONSUMER STAPLES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLP Intraday Nav Ticker PXV Benchmark Index Ticker (Bloomberg) IXR Market Cap ($Mil) 2,250 Outstanding Shares (Mil) 80.3 Avg Daily Trading Volume (Shares) 3,186,088 Expense Ratio (%) 0.23 Focus Consumer Staples Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 40 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Consumer Staples Select Sector SPDR (XLP) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Consumer Staples Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies whose businesses are less sensitive to economic cycles such as food, beverage, tobacco, non-durable household good and personal products. It consists of large cap stocks within the S&P 500 Index classified in the Consumer Staples Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Household Products 22.2 Packaged Foods & Meats 15.2 Tobacco 14.1 Hypermarkets & Super Centers 13.7 Soft Drinks 10.8 Drug Retail 8.2 Food Retail 4.3 Brewers 4.2 Agricultural Products 2.6 Personal Products 2.0 Top Ten Holdings (%) Procter & Gamble 15.9 Wal-mart Stores 10.9 Philip Morris 8.8 Cvs Caremark Corp 5.2 Coca Cola Co 5.2 Pepsico Inc 4.3 Kraft Foods Inc 3.8 Altria Group Inc 3.5 Colgate Palmolive Company 3.1 Anheuser Busch 3.1 Top Ten Total 64.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 136

252 G L O B A L W E A L T H M A N A G E M E N T ishares DJ US Consumer Goods Sector Index Fund (IYK) CONSUMER STAPLES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYK Intraday Nav Ticker IYKIV Benchmark Index Ticker (Bloomberg) DJUSNC Market Cap ($Mil) 341 Outstanding Shares (Mil) 5.7 Avg Daily Trading Volume (Shares) 51,256 Expense Ratio (%) 0.48 Focus Consumer Staples Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 147 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Consumer Goods Sector Index Fund (IYK) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones US Consumer Goods Sector Index. The index is a sub set of Dow Jones US Total Market Index that seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the consumer goods sector by the Industry Classification Benchmark (ICB) and include automobile and parts, beverage, food producer, household goods, leisure goods, personal goods and tobacco companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Household Products 22.7 Soft Drinks 19.8 Tobacco 14.8 Packaged Foods & Meats 13.3 Brewers 3.8 Agricultural Products 3.3 Home Entertainment Software 2.4 Apparel, Accessories & Luxury Goods 2.3 Footwear 2.3 Automobile Manufacturers 2.3 Top Ten Holdings (%) Procter & Gamble 16.5 Coca Cola Co 9.8 Philip Morris 9.0 Pepsico Inc 8.9 Altria Group Inc 3.7 Kraft Foods Inc 3.6 Anheuser Busch 3.1 Colgate Palmolive Company 3.0 Kimberly-clark 2.2 Archer-daniels 2.1 Top Ten Total 62.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website:www.ishares.com. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 137

253 G L O B A L W E A L T H M A N A G E M E N T Vanguard Consumer Staples ETF (VDC) CONSUMER STAPLES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VDC Intraday Nav Ticker HVP Benchmark Index Ticker (Bloomberg) MZUSI0CS Market Cap ($Mil) 461 Outstanding Shares (Mil) 6.7 Avg Daily Trading Volume (Shares) 72,262 Expense Ratio (%) 0.22 Focus Consumer Staples Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 108 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Consumer Staples ETF (VDC) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Consumer Staples Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the consumer staples sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Household Products 20.9 Soft Drinks 16.6 Packaged Foods & Meats 14.0 Tobacco 13.5 Hypermarkets & Super Centers 12.3 Drug Retail 7.6 Food Retail 3.7 Brewers 3.7 Agricultural Products 3.2 Food Distributors 1.9 Top Ten Holdings (%) Procter & Gamble 14.7 Wal-mart Stores 9.8 Coca Cola Co 8.1 Philip Morris 7.5 Pepsico Inc 7.4 Cvs Caremark Corp 4.7 Kraft Foods Inc 3.8 Altria Group Inc 3.5 Anheuser Busch 3.0 Colgate Palmolive Company 2.9 Top Ten Total 65.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 138

254 G L O B A L W E A L T H M A N A G E M E N T Energy Select Sector SPDR (XLE) FINANCIAL Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLE Intraday Nav Ticker EXX Benchmark Index Ticker (Bloomberg) IXE Market Cap ($Mil) 6,278 Outstanding Shares (Mil) 73.5 Avg Daily Trading Volume (Shares) 23,344,106 Expense Ratio (%) 0.23 Focus Energy Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Energy Select Sector SPDR (XLE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Energy Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies involved in the exploration, production, marketing, refining and transportation of oil and gas products, coal and other consumable fuels and the provision of drilling and other energy related services and equipment. It consists of large cap stocks within the S&P 500 Index classified in the Energy Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Oil & Gas 50.8 Oil & Gas Exploration & Production 16.2 Oil & Gas Equipment & Services 15.1 Oil & Gas Drilling 7.0 Oil & Gas Storage & Transportation 4.2 Oil & Gas Refining & Marketing 3.9 Coal & Consumable Fuels Top Ten Holdings (%) Exxon 17.1 Chevron 11.5 ConocoPhillips 8.0 Schlumberger 4.9 Occidental Petroleum 4.7 Devon 3.5 Apache 3.3 Transocean 3.3 Hess 2.9 Haliburton 2.8 Top Ten Total 62.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 139

255 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Energy Sector Index Fund (IYE) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYE Intraday Nav Ticker IYEIV Benchmark Index Ticker (Bloomberg) DJUSEN Market Cap ($Mil) 1,269 Outstanding Shares (Mil) 8.6 Avg Daily Trading Volume (Shares) 505,875 Expense Ratio (%) 0.48 Focus Energy Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 85 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Energy Sector Index Fund (IYE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Oil & Gas Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the energy sector by the Industry Classification Benchmark (ICB) and include oil and gas producers and oil equipment, services and distribution companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Oil & Gas 53.3 Oil & Gas Exploration & Production 20.2 Oil & Gas Equipment & Services 17.8 Oil & Gas Drilling 6.1 Oil & Gas Refining & Marketing 2.1 Oil & Gas Storage & Transportation 0.5 Multi-utilities Top Ten Holdings (%) Exxon Mobil Corp 22.2 Chevron Corp 15.1 Schlumberger Ltd 7.0 Occidental Pete 5.4 Conocophillips 4.6 Devon Energy 3.6 Apache Corp 3.1 Anadarko Petroleum 2.7 Eog Resources 2.7 Transocean Inc 2.5 Top Ten Total 69.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ithe fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 140

256 G L O B A L W E A L T H M A N A G E M E N T Vanguard Energy ETF (VDE) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VDE Intraday Nav Ticker DVO Benchmark Index Ticker (Bloomberg) MSCIEN Market Cap ($Mil) 869 Outstanding Shares (Mil) 7 Avg Daily Trading Volume (Shares) 59,504 Expense Ratio (%) 0.22 Focus Energy Investment Advisor The Vanguard Group Inception Date 9/29/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 159 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Energy ETF (VDE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Energy Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the energy sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Oil & Gas 49.0 Oil & Gas Equipment & Services 19.0 Oil & Gas Exploration & Production 17.9 Oil & Gas Drilling 6.5 Oil & Gas Storage & Transportation 2.9 Coal & Consumable Fuels 2.8 Oil & Gas Refining & Marketing Top Ten Holdings (%) Exxon Mobil Corp 21.0 Chevron Corp 11.7 Conocophillips 7.9 Schlumberger Ltd 7.4 Occidental Pete 3.9 Devon Energy 2.6 Transocean Inc 2.5 Apache Corp 2.3 Halliburton Co 2.2 Marathon Oil Corp 2.0 Top Ten Total 63.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 141

257 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones U.S. Oil Equipment & Services (IEZ) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IEZ Intraday Nav Ticker IEZIV Benchmark Index Ticker (Bloomberg) DJSOES Market Cap ($Mil) 337 Outstanding Shares (Mil) 4.6 Avg Daily Trading Volume (Shares) 61,542 Expense Ratio (%) 0.48 Focus Energy Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Oil Equipment & Services Index Fund (IEZ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Oil Equipment & Services Index. The index includes companies in the Dow Jones Wilshire 2500 Index that are suppliers of equipment or services to oil fields and offshore platforms, such as drilling, exploration, engineering, logistics, seismic information services and platform construction. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Oil & Gas Equipment & Services 65.6 Oil & Gas Drilling 34.4 n/a3 0.0 n/a4 0.0 n/a7 0.0 n/a8 0.0 n/a9 0.0 n/a n/a5 0.0 n/a6 0.0 Top Ten Holdings (%) Schlumberger 17.0 Transocean 8.2 Haliburton 7.7 National Oil Well 6.4 Weatherford 5.8 Baker Hughes 4.6 Noble 3.8 Smith 3.7 Nabors 2.8 Cameron 2.7 Top Ten Total 0.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 142

258 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones U.S. Oil & Gas Exploration & Production (IEO) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IEO Intraday Nav Ticker IEOIV Benchmark Index Ticker (Bloomberg) DJSOEP Market Cap ($Mil) 296 Outstanding Shares (Mil) 3.7 Avg Daily Trading Volume (Shares) 139,649 Expense Ratio (%) 0.48 Focus Energy Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 61 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Oil Exploration & Production Index. The index includes companies in the Dow Jones Wilshire 2500 Index that are engaged in the exploration for and extraction, production refining, and supply of oil and gas products. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Oil & Gas Exploration & Production 77.9 Integrated Oil & Gas 12.2 Oil & Gas Refining & Marketing 8.4 Independent Power Producers & Energy Traders 1.4 Oil & Gas Storage & Transportation Top Ten Holdings (%) Occidental Pete 12.2 Devon Energy 9.0 Apache Corp 8.3 Anadarko Petroleum 7.3 Eog Resources 6.9 Xto Energy Inc 6.6 Chesapeake Energy Corp 6.0 Valero Energy 5.5 Noble Energy Inc 4.4 Sw Energy Co 4.2 Top Ten Total 70.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 143

259 G L O B A L W E A L T H M A N A G E M E N T Oil Services HOLDRS (OIH) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker OIH Intraday Nav Ticker OXH Benchmark Index Ticker (Bloomberg) OXH Market Cap ($Mil) 2,545 Outstanding Shares (Mil) 12.4 Avg Daily Trading Volume (Shares) 7,269,330 Expense Ratio (%) 0* Focus Energy Investment Advisor Bank of New York Inception Date 2/6/2001 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 16 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Oil Services HOLDRS (OIH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Oil & Gas Equipment & Services 60.1 Oil & Gas Drilling Top Ten Holdings (%) Transocean Inc 16.3 Schlumberger Ltd 11.1 Halliburton Co 10.2 Baker Hughes Inc 8.3 Weatherford Intl 7.4 Diamond Offshore 7.1 National Oilwell Varco Inc 6.7 Noble Corporation 6.7 Smith Intl Inc 6.3 Nabors Inds Inc 4.6 Top Ten Total 84.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 144

260 G L O B A L W E A L T H M A N A G E M E N T PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PXJ Intraday Nav Ticker HKM Benchmark Index Ticker (Bloomberg) DWO Market Cap ($Mil) 406 Outstanding Shares (Mil) 13 Avg Daily Trading Volume (Shares) 127,658 Expense Ratio (%) 0.60 Focus Energy Investment Advisor PowerShares Capital Inception Date 10/26/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 29 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Dynamic Oil & Gas Services Portfolio (PXJ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dynamic Oil Services Intellidex Index. The Index utilizes rules-based quantitative analysis to evaluate and select securities using a variety of investment value determinants such as fundamental growth, stock valuation, timeliness and risk factors. This process occurs quarterly in February, May, August and November. The Index consists of 30 stocks selected from the largest 2000 US stocks and is calculated using a tiered weighting methodology. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Oil & Gas Equipment & Services 70.2 Oil & Gas Drilling 24.2 Industrial Conglomerates Top Ten Holdings (%) National Oilwell Varco Inc 8.7 Smith Intl Inc 7.0 Noble Corporation 7.0 Halliburton Co 6.8 Baker Hughes Inc 6.6 Schlumberger Ltd 6.5 Diamond Offshore 6.0 Mcdermott Intl 5.6 Fmc Technologies 4.0 Lufkin Inds 4.0 Top Ten Total 62.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 145

261 G L O B A L W E A L T H M A N A G E M E N T SPDR Oil & Gas Exploration & Production ETF (XOP) ENERGY Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XOP Intraday Nav Ticker KZO Benchmark Index Ticker (Bloomberg) SPSIOP Market Cap ($Mil) 258 Outstanding Shares (Mil) 4.1 Avg Daily Trading Volume (Shares) 379,650 Expense Ratio (%) 0.35 Focus Energy Investment Advisor State Street Global Advisors Inception Date 6/22/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 35 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR Oil & Gas Exploration & Production ETF (XOP) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. The index represents the oil and gas exploration and production sub-industry portion of the S&P Total Market Index that tracks all US company common stocks listed on the NYSE, AMEX, NASDAQ and NASDAQ Small-Cap Exchanges. The Select Industry Indexes are designed to measure the performance of narrow sub-industries based on the Global Industry Classification Standard (GICS). Stocks in the Select Index are subject to certain liquidity constraints and are equally weighted when the index is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Oil & Gas Exploration & Production 76.4 Integrated Oil & Gas 15.3 Oil & Gas Refining & Marketing Top Ten Holdings (%) Pioneer Natural Resources 3.5 Sw Energy Co 3.5 St Mary Land 3.4 Penn Va Corp 3.4 Noble Energy Inc 3.4 Plains Expl 3.3 Cimarex Energy 3.3 Cabot Oil Gas 3.3 Chesapeake Energy Corp 3.2 Occidental Pete 3.2 Top Ten Total 33.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 146

262 G L O B A L W E A L T H M A N A G E M E N T Financials Select Sector SPDR (XLF) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLF Intraday Nav Ticker FXV Benchmark Index Ticker (Bloomberg) IXM Market Cap ($Mil) 7,232 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 124,888,344 Expense Ratio (%) 0.23 Focus Financials Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 92 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Financials Select Sector SPDR (XLF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Financial Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies involved in banking, consumer and specialized finance, investment banking and brokerage, asset management and custody, insurance and real estate including REFITS. It consists of large cap stocks within the S&P 500 Index classified in the Financials Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 22.0 Diversified Banks 10.9 Investment Banking & Brokerage 10.8 Multi-line Insurance 7.8 Asset Management & Custody Banks 7.7 Life & Health Insurance 7.4 Property & Casualty Insurance 6.5 Regional Banks 6.2 Consumer Finance 4.7 Thrifts & Mortgage Finance 3.6 Top Ten Holdings (%) Bank Of America 8.1 Jpmorgan Chase & Co 7.9 Citigroup Inc 6.0 Amer Intl Group 4.9 Wells Fargo & Co 4.8 Goldman Sachs 3.7 Wachovia Corp 2.9 Us Bancorp 2.9 American Express Company 2.8 Morgan Stanley 2.5 Top Ten Total 46.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 147

263 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Financial Sector Index Fund (IYF) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYF Intraday Nav Ticker IYFIV Benchmark Index Ticker (Bloomberg) DJUSFN Market Cap ($Mil) 645 Outstanding Shares (Mil) 7.5 Avg Daily Trading Volume (Shares) 3,166,830 Expense Ratio (%) 0.48 Focus Financials Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 286 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Financial Sector Index Fund (IYF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Financial Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the financial sector by the Industry Classification Benchmark (ICB) and include banks, nonlife insurance, life insurance, real estate and general finance companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 19.8 Diversified Banks 9.5 Investment Banking & Brokerage 9.4 Asset Management & Custody Banks 7.4 Regional Banks 7.1 Property & Casualty Insurance 7.1 Multi-line Insurance 6.6 Life & Health Insurance 6.1 Consumer Finance 4.0 Thrifts & Mortgage Finance 3.6 Top Ten Holdings (%) Bank Of America 7.4 Jpmorgan Chase & Co 7.0 Citigroup Inc 5.4 Wells Fargo & Co 4.2 Amer Intl Group 3.9 Goldman Sachs 3.0 Us Bancorp 2.6 Wachovia Corp 2.4 American Express Company 2.2 Bank Of New York Mellon 2.2 Top Ten Total 40.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 148

264 G L O B A L W E A L T H M A N A G E M E N T Vanguard Financials ETF (VFH) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VFH Intraday Nav Ticker HVF Benchmark Index Ticker (Bloomberg) MZUSI0FN Market Cap ($Mil) 576 Outstanding Shares (Mil) 12 Avg Daily Trading Volume (Shares) 245,141 Expense Ratio (%) 0.22 Focus Financials Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 502 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Financials ETF (VFH) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Financials Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the financials sector according to the Global Industry Classification Standard (GICS). The index is market capweighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 19.4 Diversified Banks 9.5 Investment Banking & Brokerage 8.8 Asset Management & Custody Banks 7.8 Regional Banks 7.4 Property & Casualty Insurance 7.1 Life & Health Insurance 6.9 Multi-line Insurance 6.3 Consumer Finance 4.1 Thrifts & Mortgage Finance 3.8 Top Ten Holdings (%) Bank Of America 7.1 Jpmorgan Chase & Co 7.0 Citigroup Inc 5.3 Wells Fargo & Co 4.1 Amer Intl Group 3.7 Goldman Sachs 2.9 Wachovia Corp 2.6 Us Bancorp 2.5 American Express Company 2.3 Bank Of New York Mellon 2.2 Top Ten Total 39.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 149

265 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones Broker-Dealers Index Fund (IAI) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IAI Intraday Nav Ticker IAIIV Benchmark Index Ticker (Bloomberg) DJSINV Market Cap ($Mil) 252 Outstanding Shares (Mil) 6.1 Avg Daily Trading Volume (Shares) 2,297,004 Expense Ratio (%) 0.48 Focus Financials Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 28 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Broker-Dealers Index Fund (IAI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Investment Services Index. The index includes companies in the Dow Jones Wilshire 2500 Index that provide a range of specialized financial services, including securities brokers and dealers, online brokers and securities or commodities exchanges. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Investment Banking & Brokerage 63.0 Specialized Finance 27.5 Asset Management & Custody Banks Top Ten Holdings (%) Goldman Sachs 10.6 Morgan Stanley 9.6 Merrill Lynch 9.0 Lehman Brothers 7.9 Charles Schwab 6.8 Cme Group Inc 6.7 Nyse Euronext 6.6 Intercontinentalexchange Inc 5.9 Ameriprise Financial 5.0 Legg Mason Inc 4.5 Top Ten Total 72.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 150

266 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Financial Services Index Fund (IYG) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYG Intraday Nav Ticker IYGIV Benchmark Index Ticker (Bloomberg) DJUSFV Market Cap ($Mil) 331 Outstanding Shares (Mil) 3.6 Avg Daily Trading Volume (Shares) 319,226 Expense Ratio (%) 0.48 Focus Financials Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 135 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Financial Services Index Fund (IYG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940s designed to track the performance of the Dow Jones US Financial Services Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to financial services by the Industry Classification Benchmark (ICB) and include real estate and general finance companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 30.3 Diversified Banks 14.5 Investment Banking & Brokerage 14.5 Asset Management & Custody Banks 11.3 Regional Banks 10.9 Consumer Finance 6.1 Thrifts & Mortgage Finance 5.5 Specialized Finance 5.1 Data Processing & Outsourced Services 1.4 Diversified Commercial & Professional Services 0.3 Top Ten Holdings (%) Bank Of America 11.3 Jpmorgan Chase & Co 10.8 Citigroup Inc 8.3 Wells Fargo & Co 6.4 Goldman Sachs 4.6 Us Bancorp 4.0 Wachovia Corp 3.7 American Express Company 3.4 Bank Of New York Mellon 3.4 Morgan Stanley 3.2 Top Ten Total 59.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 151

267 G L O B A L W E A L T H M A N A G E M E N T KBW Bank ETF (KBE) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker KBE Intraday Nav Ticker KHE Benchmark Index Ticker (Bloomberg) BKX Market Cap ($Mil) 513 Outstanding Shares (Mil) 12.8 Avg Daily Trading Volume (Shares) 3,416,376 Expense Ratio (%) 0.35 Focus Financials Investment Advisor State Street Global Advisors Inception Date 11/8/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 24 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description KBW Bank ETF (KBE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Keefe, Bruyette & Woods Bank Index. The index is a float adjusted modified-market cap weighted index of 24 geographically diverse companies representing national money center banks and regional banks listed on U.S. stock markets. Index components are selected to provide appropriate representation of the industry's sub-sectors. KBW indexes are reviewed and rebalanced to maintain modified market capitalization targets at the end of each calendar quarter. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Regional Banks 32.9 Other Diversified Financial Services 24.1 Diversified Banks 22.3 Asset Management & Custody Banks 12.4 Consumer Finance 4.3 Thrifts & Mortgage Finance Top Ten Holdings (%) Wells Fargo & Co 9.3 Jpmorgan Chase & Co 9.1 Bank Of America 8.3 Citigroup Inc 6.7 Wachovia Corp 5.7 Bb&t Corp 4.6 Pnc Bank Corp 4.5 Us Bancorp 4.5 Northern Trust 4.3 Capital One Financial Corp 4.3 Top Ten Total 61.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 152

268 G L O B A L W E A L T H M A N A G E M E N T KBW Regional Banking ETF (KRE) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker KRE Intraday Nav Ticker KZE Benchmark Index Ticker (Bloomberg) KRX Market Cap ($Mil) 585 Outstanding Shares (Mil) 17.1 Avg Daily Trading Volume (Shares) 3,391,896 Expense Ratio (%) 0.35 Focus Financials Investment Advisor State Street Global Advisors Inception Date 6/22/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description KBW Regional Banking ETF (KRE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Keefe, Bruyette & Woods (KBW) Regional Banking Index. The Regional Banking Index is an equal weighted index of geographically diverse companies representing regional banking institutions listed on U.S. stock markets. As of December 31, 2005, the Regional Banking Index was comprised of 50 stocks. Stocks in the index were assigned initial weights of the lessor of their actual capitalization weight or 2%. Upon quarterly rebalancings in March, June, September and December, stocks whose weights have increased beyond 3% or below 1% will be weighted back to 2%. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Regional Banks 92.1 Thrifts & Mortgage Finance Top Ten Holdings (%) Fnb Corp 5.0 Bank Of Hawaii 4.9 Svb Financial Group 4.7 Fst Comnwlth Fin 4.1 Valley Natl Bncp 3.8 Susquehanna 3.7 Prsprty Bncshrs 3.7 Assoc Banc-cp 3.7 Old Natl Bncp 3.6 Utd Bankshares 3.6 Top Ten Total 40.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 153

269 G L O B A L W E A L T H M A N A G E M E N T Regional Bank HOLDRS (RKH) FINANCIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker RKH Intraday Nav Ticker XRH Benchmark Index Ticker (Bloomberg) XRH Market Cap ($Mil) 303 Outstanding Shares (Mil) 2.5 Avg Daily Trading Volume (Shares) 1,217,671 Expense Ratio (%) 0* Focus Financials Investment Advisor Bank of New York Inception Date 6/23/2000 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 19 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Regional Bank HOLDRS (RKH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Diversified Banks 38.2 Other Diversified Financial Services 25.1 Regional Banks 21.3 Asset Management & Custody Banks 15.2 Investment Banking & Brokerage Top Ten Holdings (%) Jpmorgan Chase & Co 16.7 Us Bancorp 15.7 Wells Fargo & Co 11.6 Wachovia Corp 9.3 Bank Of America 8.4 State Street Corp 6.0 Bank Of New York Mellon 5.0 Pnc Bank Corp 4.9 Northern Trust 4.3 Suntrust Bks 4.1 Top Ten Total 86.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 154

270 G L O B A L W E A L T H M A N A G E M E N T Health Care Select Sector SPDR (XLV) HEALTH CARE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLV Intraday Nav Ticker NXV Benchmark Index Ticker (Bloomberg) IXV Market Cap ($Mil) 2,310 Outstanding Shares (Mil) 73.4 Avg Daily Trading Volume (Shares) 2,804,094 Expense Ratio (%) 0.23 Focus Health Care Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 51 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Health Care Select Sector SPDR (XLV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Health Care Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies that manufacture equipment, provide services or develop, produce and market pharmaceuticals and biotechnology products. It consists of large cap stocks within the S&P 500 Index classified in the Health Care Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Pharmaceuticals 51.1 Health Care Equipment 16.6 Biotechnology 11.8 Managed Health Care 8.7 Health Care Services 4.5 Health Care Distributors 3.5 Life Sciences Tools & Services 3.2 Health Care Technology 0.3 Health Care Facilities Top Ten Holdings (%) Johnson&johnson 13.8 Pfizer Inc 9.8 Merck & Co 6.2 Abbott Labs 5.1 Wyeth 4.4 Medtronic Inc 4.0 Gilead Sciences, Inc. 3.7 Eli Lilly & Co 3.5 Amgen 3.4 Bristol Myers Squibb 3.2 Top Ten Total 56.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 155

271 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Healthcare Sector Index Fund (IYH) HEALTH CARE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYH Intraday Nav Ticker IYHIV Benchmark Index Ticker (Bloomberg) DJUSHC Market Cap ($Mil) 857 Outstanding Shares (Mil) 13.6 Avg Daily Trading Volume (Shares) 62,141 Expense Ratio (%) 0.48 Focus Health Care Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 142 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Healthcare Sector Index Fund (IYH) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Healthcare Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the healthcare sector by the Industry Classification Benchmark (ICB) and include health care equipment and services, pharmaceutical and biotechnology companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Pharmaceuticals 48.4 Health Care Equipment 17.5 Biotechnology 14.6 Managed Health Care 8.3 Health Care Services 4.7 Life Sciences Tools & Services 4.5 Health Care Distributors 0.9 Health Care Supplies 0.7 Health Care Facilities Top Ten Holdings (%) Johnson&johnson 12.7 Pfizer Inc 9.2 Merck & Co 5.8 Abbott Labs 5.5 Wyeth 4.0 Medtronic Inc 3.7 Gilead Sciences, Inc. 3.4 Eli Lilly & Co 3.2 Amgen 3.1 Bristol Myers Squibb 2.9 Top Ten Total 53.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 156

272 G L O B A L W E A L T H M A N A G E M E N T Vanguard Health Care ETF (VHT) HEALTH CARE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VHT Intraday Nav Ticker HVH Benchmark Index Ticker (Bloomberg) MZUSI0HC Market Cap ($Mil) 500 Outstanding Shares (Mil) 9.2 Avg Daily Trading Volume (Shares) 56,884 Expense Ratio (%) 0.22 Focus Health Care Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 269 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Health Care ETF (VHT) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Health Care Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the health care sector according to the Global Industry Classification Standard (GICS). The index is market capweighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Pharmaceuticals 46.2 Health Care Equipment 16.9 Biotechnology 14.1 Managed Health Care 8.0 Health Care Services 5.1 Life Sciences Tools & Services 4.5 Health Care Distributors 3.6 Health Care Supplies 0.8 Health Care Facilities 0.4 Health Care Technology 0.4 Top Ten Holdings (%) Johnson&johnson 12.2 Pfizer Inc 8.7 Merck & Co 5.5 Abbott Labs 5.2 Wyeth 3.8 Medtronic Inc 3.5 Gilead Sciences, Inc. 3.2 Eli Lilly & Co 3.2 Amgen 3.0 Bristol Myers Squibb 2.7 Top Ten Total 51.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 157

273 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones U.S. Medical Devices Index Fund (IHI) HEALTH CARE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IHI Intraday Nav Ticker IHIIV Benchmark Index Ticker (Bloomberg) DJSMDQ Market Cap ($Mil) 302 Outstanding Shares (Mil) 5.3 Avg Daily Trading Volume (Shares) 70,623 Expense Ratio (%) 0.48 Focus Health Care Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Medical Devices Index Fund (IHI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Medical Equipment Index. The index includes companies in the Dow Jones Wilshire 2500 Index that are manufacturers and distributors of medical devices. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Medical Equipment 99.9 Other Top Ten Holdings (%) Medtronic 9.3 Covidien 6.9 Thermo Fischer 6.6 Stryker 6.1 Boston Scientific 5.9 St. Jude 4.9 Zimmer 4.9 Intuitive Surgical 4.4 Waters 4.4 Varien Medical 3.7 Top Ten Total 57.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: wwww.ishares.com. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 158

274 G L O B A L W E A L T H M A N A G E M E N T Biotech HOLDRS (BBH) HEALTH CARE- BIOTECH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker BBH Intraday Nav Ticker IBH Benchmark Index Ticker (Bloomberg) IBH Market Cap ($Mil) 673 Outstanding Shares (Mil) 4.1 Avg Daily Trading Volume (Shares) 164,756 Expense Ratio (%) 0* Focus Biotechnology Investment Advisor Bank of New York Inception Date 11/23/1999 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 15 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Biotech HOLDRS (BBH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Biotechnology 93.2 Life Sciences Tools & Services 4.0 Pharmaceuticals Top Ten Holdings (%) Genentech 36.4 Gilead Sciences, Inc Amgen 16.7 Biogen Idec Inc 10.3 Genzyme Corp 5.8 Applera Corp-applied Biosystems Grp 3.7 Shire Plc 2.1 Millennium Pharmaceuticals 1.8 Sepracor Inc 0.7 Alkermes Inc 0.3 Top Ten Total 98.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 159

275 G L O B A L W E A L T H M A N A G E M E N T ishares Nasdaq Biotechnology Index Fund (IBB) HEALTH CARE- BIOTECH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IBB Intraday Nav Ticker IBBIV Benchmark Index Ticker (Bloomberg) NBI Market Cap ($Mil) 1,130 Outstanding Shares (Mil) 14.6 Avg Daily Trading Volume (Shares) 1,629,510 Expense Ratio (%) 0.48 Focus Biotechnology Investment Advisor Barclays Global Investors Inception Date 2/9/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 158 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Nasdaq Biotechnolgy Index Fund (IBB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Nasdaq Biotechnology Index. The Index includes securities of companies exclusively listed on the Nasdaq Stock Market which are classified according to the Industry Classification Benchmark (ICB) as either Biotechnology or Pharmaceuticals and which also meet other eligibility criteria. It contains companies primarily engaged in using biomedical research for the discovery or development of new treatments or cures for human disease. The index is calculated under a modified market capweighted methodology. Eligible securities are evaluated semiannually in May and November and the index is reviewed for potential rebalancing on a quarterly basis. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Biotechnology 75.6 Pharmaceuticals 14.9 Life Sciences Tools & Services Top Ten Holdings (%) Gilead Sciences, Inc Amgen 14.2 Celgene Corporation 11.5 Teva Pharm 9.2 Biogen Idec Inc 7.1 Genzyme Corp 6.2 Illumina 3.9 Vertex Pharmaceuticals, Inc. 3.6 Shire Plc 2.9 Qiagen Nv 2.4 Top Ten Total 78.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 160

276 G L O B A L W E A L T H M A N A G E M E N T SPDR Biotech ETF (XBI) HEALTH CARE- BIOTECH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XBI Intraday Nav Ticker BIS Benchmark Index Ticker (Bloomberg) SPSIBI Market Cap ($Mil) 257 Outstanding Shares (Mil) 4.4 Avg Daily Trading Volume (Shares) 172,495 Expense Ratio (%) 0.35 Focus Biotechnology Investment Advisor State Street Global Advisors Inception Date 2/6/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 26 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR Biotech ETF (XBI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Biotechnology Select Industry Index. The index represents the biotechnology sub-industry portion of the S&P Total Market Index that tracks all US company common stocks listed on the NYSE, AMEX, NASDAQ and NASDAQ Small-Cap Exchanges. The Select Industry Indexes are designed to measure the performance of narrow sub-industries based on the Global Industry Classification Standard (GICS). Stocks in the Select Index are subject to certain liquidity constraints and are equally weighted when the index is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Biotechnology Top Ten Holdings (%) Vertex Pharmaceuticals, Inc. 5.7 Savient Pharmaceuticals 4.6 Lifecell Cp 4.5 Alkermes Inc 4.5 Regeneron Pharmaceuticals 4.4 Gilead Sciences, Inc. 4.4 Martek Bioscience 4.4 Celgene Corporation 4.1 Biogen Idec Inc 4.0 Cubist Pharmaceuticals 3.9 Top Ten Total 44.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRss current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 161

277 G L O B A L W E A L T H M A N A G E M E N T Pharmaceutical HOLDRS (PPH) HEALTH CARE- PHARMA Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PPH Intraday Nav Ticker IPH Benchmark Index Ticker (Bloomberg) IPH Market Cap ($Mil) 786 Outstanding Shares (Mil) 11.2 Avg Daily Trading Volume (Shares) 743,019 Expense Ratio (%) 0* Focus Pharmaceuticals Investment Advisor Bank of New York Inception Date 2/1/2000 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 19 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Pharmaceutical HOLDRS (PPH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Pharmaceuticals 93.6 Health Care Services 3.7 Health Care Equipment Top Ten Holdings (%) Johnson&johnson 24.7 Pfizer Inc 16.4 Merck & Co 12.4 Abbott Labs 10.6 Wyeth 7.6 Eli Lilly & Co 7.0 Bristol Myers Squibb 5.6 Medco Health Solutions 3.7 Schering-plough 3.7 Forst Laboratories, Inc. 2.0 Top Ten Total 93.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 162

278 G L O B A L W E A L T H M A N A G E M E N T Industrials Select Sector SPDR (XLI) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLI Intraday Nav Ticker TXV Benchmark Index Ticker (Bloomberg) IXI Market Cap ($Mil) 1,544 Outstanding Shares (Mil) 39.6 Avg Daily Trading Volume (Shares) 6,168,435 Expense Ratio (%) 0.23 Focus Industrial Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 56 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Industrials Select Sector SPDR (XLI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Industrial Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies involved in capital goods, aerospace and defense, construction, electrical equipment and industrial machinery and transportation services. It consists of large cap stocks within the S&P 500 Index classified in the Industrials Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Aerospace & Defense 25.9 Industrial Conglomerates 22.7 Construction & Farm Machinery & Heavy Trucks 10.6 Railroads 9.1 Industrial Machinery 8.6 Air Freight & Logistics 8.5 Electrical Components & Equipment 4.6 Construction & Engineering 2.1 Environmental & Facilities Services 1.8 Building Products 1.2 Top Ten Holdings (%) General Electric 16.3 United Technologies Corp 5.1 United Parcel Service - Cl B 5.0 The Boeing Company 4.6 3M 3.8 Caterpillar Inc 3.7 Honeywell International Inc 3.2 Emerson Electric Co 3.2 Deere & Co 2.9 Union Pacific Cp 2.8 Top Ten Total 50.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 163

279 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Industrial Sector Index Fund (IYJ) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYJ Intraday Nav Ticker IYJIV Benchmark Index Ticker (Bloomberg) DJUSIN Market Cap ($Mil) 428 Outstanding Shares (Mil) 5.9 Avg Daily Trading Volume (Shares) 76,645 Expense Ratio (%) 0.48 Focus Industrial Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 263 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Industrial Sector Index Fund (IYJ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Industrial Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the industrial sector by the Industry Classification Benchmark (ICB) and include construction and materials, aerospace and defense, general industrial, electronic and electrical equipment, engineering, industrial transportation and support service companies. The index is float-adjusted market capweighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrial Conglomerates 23.7 Aerospace & Defense 19.1 Construction & Farm Machinery & Heavy Trucks 8.2 Industrial Machinery 7.8 Railroads 6.7 Air Freight & Logistics 5.4 Data Processing & Outsourced Services 5.2 Electrical Components & Equipment 4.5 Construction & Engineering 2.6 Electronic Manufacturing Services 2.2 Top Ten Holdings (%) General Electric 18.2 United Technologies Corp 3.7 The Boeing Company 3.2 Caterpillar Inc 2.9 3M 2.8 United Parcel Service - Cl B 2.7 Emerson Electric Co 2.5 Honeywell International Inc 2.3 Union Pacific Cp 2.2 Deere & Co 2.2 Top Ten Total 42.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 164

280 G L O B A L W E A L T H M A N A G E M E N T Vanguard Industrials ETF (VIS) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VIS Intraday Nav Ticker DVL Benchmark Index Ticker (Bloomberg) MSCIIN Market Cap ($Mil) 276 Outstanding Shares (Mil) 3.8 Avg Daily Trading Volume (Shares) 40,411 Expense Ratio (%) 0.22 Focus Industrial Investment Advisor The Vanguard Group Inception Date 9/29/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 341 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Industrials ETFs (VIS) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Industrials Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the Industrials sector according to the Global Industry Classification Standard (GICS). The index is market capweighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrial Conglomerates 26.7 Aerospace & Defense 22.1 Construction & Farm Machinery & Heavy Trucks 9.3 Industrial Machinery 9.0 Railroads 7.7 Air Freight & Logistics 6.1 Electrical Components & Equipment 6.0 Construction & Engineering 2.9 Environmental & Facilities Services 2.6 Diversified Commercial & Professional Services 1.3 Top Ten Holdings (%) General Electric 20.4 United Technologies Corp 4.3 The Boeing Company 3.8 Caterpillar Inc 3.3 3M 3.2 United Parcel Service - Cl B 3.0 Emerson Electric Co 2.7 Honeywell International Inc 2.6 Deere & Co 2.4 Lockheed Martin Corp 2.3 Top Ten Total 48.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 165

281 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones Transportation Index Fund (IYT) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYT Intraday Nav Ticker IYTIV Benchmark Index Ticker (Bloomberg) TRAN Market Cap ($Mil) 675 Outstanding Shares (Mil) 7.2 Avg Daily Trading Volume (Shares) 1,542,179 Expense Ratio (%) 0.48 Focus Transportation Investment Advisor Barclays Global Investors Inception Date 10/10/2003 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 20 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones Transportation Index Fund (IYT) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones Transportation Average. The index is price-weighted like the Dow Jones Industrial Average and contains 20 transportation stocks that are industry leaders. Editors of the Wall Street Journal determine the composition of the Index, which has had very low turnover. It is rebalanced only after corporate acquisitions or other dramatic shifts in an index components core business occur. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Railroads 48.3 Air Freight & Logistics 34.8 Trucking 14.1 Airlines Top Ten Holdings (%) Union Pacific Cp 19.7 Burl Nthn Santa 14.1 Fedex Corp 11.5 United Parcel Service - Cl B 9.1 Ryder System Inc 7.2 Norfolk Southern 7.2 Csx Corp 7.2 C H Robinson Ww 7.2 Expeditors 7.0 Landstar Sys 6.9 Top Ten Total 97.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 166

282 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Aerospace & Defense (ITA) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker ITA Intraday Nav Ticker ITAIV Benchmark Index Ticker (Bloomberg) DJSASD Market Cap ($Mil) 336 Outstanding Shares (Mil) 5.2 Avg Daily Trading Volume (Shares) 50,720 Expense Ratio (%) 0.48 Focus Industrial Investment Advisor Barclays Global Investors Inception Date 5/5/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Aerospace & Defense Index Fund (ITA) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones U.S. Select Aerospace & Defense Index. The index includes companies in the Dow Jones Wilshire 2500 Index that are manufacturers, assemblers, and distributors of aircraft and aircraft parts and/or military aircraft, radar equipment, and weapons. To be included, companies must also meet certain liquidity and market capitalization requirements. The index is modified market cap weighted and is rebalanced in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Aerospace 89.0 Industrial Conglomorates 4.8 Electronic Equipment 3.2 Industrial Machinery 2.4 IT Consulting Top Ten Holdings (%) United Technologies 9.4 Boeing 9.1 Lockheed Martin 6.8 General Dynamics 6.4 Raytheon 5.9 Northrop Grumman 5.2 Precision Castparts 5.1 Textron 4.8 Rockwell Collins 4.3 Goodrich 3.9 Top Ten Total 60.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: wwww.ishares.com.. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 167

283 G L O B A L W E A L T H M A N A G E M E N T PowerShares Aerospace & Defense Portfolio (PPA) INDUSTRIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PPA Intraday Nav Ticker HKR Benchmark Index Ticker (Bloomberg) DXS Market Cap ($Mil) 262 Outstanding Shares (Mil) 12.2 Avg Daily Trading Volume (Shares) 91,859 Expense Ratio (%) 0.60 Focus Industrial Investment Advisor PowerShares Capital Inception Date 10/26/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 54 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Aerospace & Defense Portfolio (PPA) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the SPADE Defense Index. Components will include publicly traded companies involved in the US defense, military, space, and homeland security marketplace. The index is modified cap-weighted and no stock may exceed 10% of the index following its quarterly rebalance in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Aerospace & Defense 72.2 Industrial Machinery 5.1 Industrial Conglomerates 4.6 Communications Equipment 3.6 Data Processing & Outsourced Services 3.1 Consumer Electronics 3.0 Metal & Glass Containers 2.2 Electronic Equipment Manufacturers 1.9 Electronic Manufacturing Services 1.7 It Consulting & Other Services 1.3 Top Ten Holdings (%) The Boeing Company 8.5 Honeywell International Inc 8.2 United Technologies Corp 8.1 Lockheed Martin Corp 8.1 General Dynamics Corp 7.1 Raytheon Co 5.3 Precision Cast 5.2 Itt Corp 5.1 Northrop Grumman Corp 4.8 Textron Inc 4.6 Top Ten Total 64.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 168

284 G L O B A L W E A L T H M A N A G E M E N T ishares DJ US Technology Sector Index Fund (IYW) INFO TECH BROAD-BASED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYW Intraday Nav Ticker IYWIV Benchmark Index Ticker (Bloomberg) DJUSTC Market Cap ($Mil) 1,119 Outstanding Shares (Mil) 19.1 Avg Daily Trading Volume (Shares) 216,148 Expense Ratio (%) 0.48 Focus Information Technology Investment Advisor Barclays Global Investors Inception Date 5/15/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 194 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Technology Sector Index Fund (IYW) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Technology Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the technology sector by the Industry Classification Benchmark (ICB) and include software and computer service and technology hardware and equipment companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Computer Hardware 24.8 Systems Software 19.2 Communications Equipment 16.3 Semiconductors 14.2 Internet Software & Services 9.4 Application Software 4.0 Computer Storage & Peripherals 3.8 Semiconductor Equipment 3.4 Wireless Telecommunication Services 1.7 Data Processing & Outsourced Services 1.1 Top Ten Holdings (%) Microsoft Corporation 12.5 International Business Machines Corp 8.7 Apple Inc 8.1 Cisco Systems 7.6 Google Inc 6.8 Intel Corp 6.8 Hewlett-packard 5.3 Oracle Corp 4.2 Qualcomm Inc 3.6 Texas Instruments 2.1 Top Ten Total 65.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 169

285 G L O B A L W E A L T H M A N A G E M E N T ishares Goldman Sachs Technology Index Fund (IGM) INFO TECH BROAD-BASED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IGM Intraday Nav Ticker IGMIV Benchmark Index Ticker (Bloomberg) SPGSTI Market Cap ($Mil) 377 Outstanding Shares (Mil) 6.7 Avg Daily Trading Volume (Shares) 83,252 Expense Ratio (%) 0.48 Focus Information Technology Investment Advisor Barclays Global Investors Inception Date 3/13/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 225 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Goldman Sachs Technology Index Fund (IGM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Goldman Sachs Technology Sector index. The index has been developed by Goldman Sachs as an equity benchmark for US-traded technology-related stocks and component companies must meet objective criteria for inclusion. The index includes companies in the following categories: producers of sophisticated computer-related devices, electronics and networking services, producers of software and consultants for information technology. It is modified capitalization weighted and reconstituted and rebalanced semiannually in January and July. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Computer Hardware 23.1 Communications Equipment 17.7 Systems Software 14.3 Semiconductors 12.3 Internet Software & Services 9.9 Data Processing & Outsourced Services 5.9 Application Software 3.6 Computer Storage & Peripherals 2.9 Semiconductor Equipment 2.9 Internet Retail 1.7 Top Ten Holdings (%) Microsoft Corporation 8.5 International Business Machines Corp 7.8 Apple Inc 7.3 Cisco Systems 6.9 Intel Corp 6.1 Google Inc 6.0 Hewlett-packard 5.5 Oracle Corp 3.8 Qualcomm Inc 3.2 Research In Motion 3.0 Top Ten Total 58.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 170

286 G L O B A L W E A L T H M A N A G E M E N T Morgan Stanley Technology ETF (MTK) INFO TECH BROAD-BASED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker MTK Intraday Nav Ticker JMT Benchmark Index Ticker (Bloomberg) MSH Market Cap ($Mil) 246 Outstanding Shares (Mil) 4.2 Avg Daily Trading Volume (Shares) 26,003 Expense Ratio (%) 0.50 Focus Information Technology Investment Advisor State Street Global Advisors Inception Date 9/25/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 35 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Morgan Stanley Technology ETF (MTK) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Morgan Stanley Technology Index. The Index is composed purely of electronics-based technology companies. It was the first listed broad-market technology barometer dedicated exclusively to the electronics-based technology industry. The Index is comprised of US companies drawn from 11 technology sub-sectors including: computer & business services; technical software (CAD/CAM, EDA); enterprise software; Internet and PC software; telecom equipment; wireline/wireless; data networking/data security; server & enterprise hardware; PC hardware & data storage; connectors/electronics manufacturing services; semi-conductor capital equipment; and semiconductors. The index is equal-dollar weighted upon its annual rebalancing in December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Communications Equipment 20.3 Semiconductors 13.7 Application Software 11.7 Computer Hardware 11.7 Internet Software & Services 8.5 It Consulting & Other Services 5.9 Data Processing & Outsourced Services 5.8 Computer Storage & Peripherals 5.7 Systems Software 5.4 Semiconductor Equipment 3.3 Top Ten Holdings (%) Research In Motion 3.6 International Business Machines Corp 3.5 Qualcomm Inc 3.4 Lm Ericsson Telephone Spons Adr 3.4 Applied Materials 3.3 Analog Devices 3.3 Salesforce Com 3.2 Yahoo Inc 3.2 Netapp Inc 3.1 Broadcom Corp 3.0 Top Ten Total 33.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 171

287 G L O B A L W E A L T H M A N A G E M E N T Technology Select Sector SPDR (XLK) INFO TECH BROAD-BASED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLK Intraday Nav Ticker KXV Benchmark Index Ticker (Bloomberg) IXT Market Cap ($Mil) 3,281 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 4,523,416 Expense Ratio (%) 0.23 Focus Tech and Telecom Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 80 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Technology Select Sector SPDR (XLK) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Technology Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies involved in software and services, consulting, hardware and equipment, semiconductors and communications services. It consists of large cap stocks within the S&P 500 Index classified in both the Information Technology and Telecommunications Services Sectors according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Computer Hardware 19.7 Integrated Telecommunication Services 15.3 Systems Software 15.1 Communications Equipment 13.1 Semiconductors 11.2 Internet Software & Services 9.1 Data Processing & Outsourced Services 4.2 Computer Storage & Peripherals 2.4 Semiconductor Equipment 2.4 Application Software 2.1 Top Ten Holdings (%) Microsoft Corporation 10.0 At & T Inc 9.8 Apple Inc 6.8 Cisco Systems 6.4 International Business Machines Corp 5.8 Intel Corp 5.7 Google Inc 5.6 Hewlett-packard 4.7 Verizon Communications 4.3 Oracle Corp 3.6 Top Ten Total 62.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 172

288 G L O B A L W E A L T H M A N A G E M E N T Vanguard Information Technology ETF (VGT) INFO TECH BROAD-BASED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VGT Intraday Nav Ticker HVI Benchmark Index Ticker (Bloomberg) MZUSI0IT Market Cap ($Mil) 498 Outstanding Shares (Mil) 8.8 Avg Daily Trading Volume (Shares) 117,091 Expense Ratio (%) 0.22 Focus Information Technology Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 396 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Information Technology ETF (VGT) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Information Technology Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the information technology sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Computer Hardware 22.5 Systems Software 16.6 Communications Equipment 14.3 Semiconductors 12.4 Internet Software & Services 9.6 Data Processing & Outsourced Services 7.2 Application Software 3.8 Computer Storage & Peripherals 3.3 Semiconductor Equipment 3.1 Electronic Manufacturing Services 1.8 Top Ten Holdings (%) Microsoft Corporation 10.8 International Business Machines Corp 7.5 Apple Inc 7.0 Cisco Systems 6.7 Intel Corp 5.9 Google Inc 5.9 Hewlett-packard 5.5 Oracle Corp 3.8 Qualcomm Inc 3.1 Texas Instruments 1.8 Top Ten Total 58.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 173

289 G L O B A L W E A L T H M A N A G E M E N T ishares S&P N.A. Tech.-Semiconductors (IGW) INFO TECH - SEMIS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IGW Intraday Nav Ticker IGWIV Benchmark Index Ticker (Bloomberg) SPGSTISM Market Cap ($Mil) 267 Outstanding Shares (Mil) 4.8 Avg Daily Trading Volume (Shares) 360,241 Expense Ratio (%) 0.48 Focus Semiconductor Investment Advisor Barclays Global Investors Inception Date 7/10/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 49 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P North American Technology-Semiconductors Index Fund (IGW) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 is designed to track the performance of the S&P North American Technology-Semiconductors Index. The index includes companies that are producers of capital equipment or manufacturers of wafers and chips. Component companies must meet objective criteria for inclusion. The index is modified capitalization weighted and reconstituted and rebalanced semiannually in January and July. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Semiconductors 69.9 Semiconductor Equipment Top Ten Holdings (%) Applied Materials 10.7 Intel Corp 9.4 Texas Instruments 9.3 Memc Electronic 8.0 Nvidia Corp 6.5 Broadcom Corp 6.4 Analog Devices 5.3 Linear Technology Corporation 4.2 Xilinx Inc 3.9 Kla-tencor 3.8 Top Ten Total 67.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 174

290 G L O B A L W E A L T H M A N A G E M E N T Semiconductor HOLDRS (SMH) INFO TECH - SEMIS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SMH Intraday Nav Ticker XSH Benchmark Index Ticker (Bloomberg) XSH Market Cap ($Mil) 1,228 Outstanding Shares (Mil) 38.2 Avg Daily Trading Volume (Shares) 10,724,955 Expense Ratio (%) 0* Focus Semiconductor Investment Advisor Bank of New York Inception Date 5/5/2000 Portfolio Structure Grantor Trust Approx. Number of Stocks in Fund 18 Options Available Y Minimum Trade Size (Shares) 100 Distribution Frequency Ongoing Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Semiconductor HOLDRS (SMH) is an exchange-traded fund in a grantor trust format that represents an undivided beneficial ownership in the common stock of a group of specified companies. The components of the trust will not change, except for defined reconstitution events such as mergers or acquisitions, which can result in stocks being eliminated from the basket. Investing in HOLDRS is similar to the outright ownership of the underlying basket of stocks, as investors receive ongoing dividends, company reports, and have voting rights for each constituent stock. Individual investors also have the ability to redeem HOLDRS for the underlying shares, however, purchases and sales of HOLDRs can only be made in multiples of 100 shares. *Expenses for HOLDRS consist of a custody fee of $2 per round lot (100 shares) per quarter. According to the prospectus, the trustee will waive that portion of the fee which exceeds the total cash dividends and other cash distributions. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Semiconductors 75.5 Semiconductor Equipment 22.7 Computer Storage & Peripherals Top Ten Holdings (%) Intel Corp 22.1 Texas Instruments 20.6 Applied Materials 15.9 Analog Devices 6.4 Linear Technology Corporation 5.7 Altera Corp 4.3 Kla-tencor 4.1 Xilinx Inc 4.1 Natl Semiconduct 3.8 Broadcom Corp 2.5 Top Ten Total 89.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for HOLDRS current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 175

291 G L O B A L W E A L T H M A N A G E M E N T ishares Goldman Sachs Software Index Fund (IGV) INFO TECH - SOFTWARE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IGV Intraday Nav Ticker IGVIV Benchmark Index Ticker (Bloomberg) SPGSTISO Market Cap ($Mil) 404 Outstanding Shares (Mil) 8.1 Avg Daily Trading Volume (Shares) 131,567 Expense Ratio (%) 0.48 Focus Software Investment Advisor Barclays Global Investors Inception Date 7/10/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 41 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Shares Goldman Sachs Software Index Fund (IGV) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Goldman Sachs Technology Industry Software Index. The index has been developed by Goldman Sachs as an equity benchmark for US-traded softwarerelated stocks and is a sub set of the Goldman Sachs Technology Index. The index includes companies that are producers of client/server, enterprise, internet, PC and entertainment software. Component companies must meet objective criteria for inclusion. The index is modified capitalization weighted and reconstituted and rebalanced semiannually in January and July. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Systems Software 43.8 Application Software 40.7 Home Entertainment Software Top Ten Holdings (%) Oracle Corp 10.9 Microsoft Corporation 9.0 Symantec Corp 9.0 Electronic Arts Inc 8.9 Adobe Systems Inc 8.8 Autodesk Inc 4.9 Activision Inc 4.8 Intuit Inc 4.8 Ca Inc 4.8 Navteq Corp 4.0 Top Ten Total 69.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 176

292 G L O B A L W E A L T H M A N A G E M E N T ishares DJ US Basic Materials Sector Index Fund (IYM) MATERIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYM Intraday Nav Ticker IYMIV Benchmark Index Ticker (Bloomberg) DJUSBM Market Cap ($Mil) 842 Outstanding Shares (Mil) 9.9 Avg Daily Trading Volume (Shares) 610,891 Expense Ratio (%) 0.48 Focus Materials Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 72 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Basic Materials Sector Index Fund (IYM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Basic Materials Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. For the large- and mid-cap segments, 100% of eligible stocks are included versus only about 50% for the small-cap segment in order to avoid less liquid names. Stocks in the total market index are assigned to the basic materials sector by the Industry Classification Benchmark (ICB) and include chemical, forestry and paper, industrial metals and mining companies. The index is float-adjusted market capweighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Diversified Chemicals 20.4 Fertilizers & Agricultural Chemicals 16.0 Steel 10.5 Diversified Metals & Mining 10.3 Coal & Consumable Fuels 9.6 Industrial Gases 9.3 Specialty Chemicals 6.4 Aluminum 6.2 Gold 3.7 Paper Products 2.7 Top Ten Holdings (%) Monsanto 12.4 Du Pont Co 8.4 Frprt-mcm Gd 8.3 Dow Chemical Co 7.5 Alcoa Inc 6.2 Praxair Inc 5.6 Nucor Corp 4.0 United States Steel 3.8 Air Prods & Chem 3.8 Newmont Mining 3.7 Top Ten Total 63.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 177

293 G L O B A L W E A L T H M A N A G E M E N T Materials Select Sector SPDR (XLB) MATERIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLB Intraday Nav Ticker BXV Benchmark Index Ticker (Bloomberg) IXB Market Cap ($Mil) 1,540 Outstanding Shares (Mil) 34.7 Avg Daily Trading Volume (Shares) 14,538,027 Expense Ratio (%) 0.23 Focus Materials Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 28 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Materials Select Sector SPDR (XLB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Materials Select Sector Index. The index is weighted on a modified market-cap basis and encompasses a wide range of commodity related manufacturing industries including chemical, construction materials, forest products, and metals and mining. It consists of large cap stocks within the S&P 500 Index classified in the Materials Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Diversified Chemicals 24.0 Fertilizers & Agricultural Chemicals 14.8 Steel 11.3 Diversified Metals & Mining 10.3 Industrial Gases 9.2 Aluminum 7.3 Specialty Chemicals 6.3 Gold 4.1 Paper Products 3.7 Forest Products 3.1 Top Ten Holdings (%) Monsanto 14.8 Du Pont Co 9.9 Frprt-mcm Gd 9.8 Dow Chemical Co 8.7 Alcoa Inc 7.3 Nucor Corp 4.8 Praxair Inc 4.7 United States Steel 4.7 Air Prods & Chem 4.5 Newmont Mining 4.1 Top Ten Total 73.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 178

294 G L O B A L W E A L T H M A N A G E M E N T Vanguard Materials ETF (VAW) MATERIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VAW Intraday Nav Ticker HVW Benchmark Index Ticker (Bloomberg) MZUSI0MT Market Cap ($Mil) 397 Outstanding Shares (Mil) 4.2 Avg Daily Trading Volume (Shares) 129,746 Expense Ratio (%) 0.22 Focus Materials Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 116 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Materials ETF (VAW) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Materials Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the materials sector according to the Global Industry Classification Standard (GICS). The index is market capweighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Diversified Chemicals 20.5 Fertilizers & Agricultural Chemicals 16.2 Steel 10.6 Industrial Gases 9.5 Diversified Metals & Mining 8.9 Specialty Chemicals 7.4 Aluminum 6.9 Gold 3.7 Paper Products 3.6 Metal & Glass Containers 3.2 Top Ten Holdings (%) Monsanto 12.5 Du Pont Co 8.3 Frprt-mcm Gd 8.2 Dow Chemical Co 7.4 Alcoa Inc 6.5 Praxair Inc 5.5 Nucor Corp 4.4 Air Prods & Chem 4.0 United States Steel 3.8 Newmont Mining 3.7 Top Ten Total 64.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 179

295 G L O B A L W E A L T H M A N A G E M E N T Market Vectors Steel Index ETF (SLX) NATURAL RESOURCES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SLX Intraday Nav Ticker KLX Benchmark Index Ticker (Bloomberg) STEEL Market Cap ($Mil) 397 Outstanding Shares (Mil) 3.8 Avg Daily Trading Volume (Shares) 252,129 Expense Ratio (%) 0.55 Focus Materials Investment Advisor Van Eck Associates Inception Date 10/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 28 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Market Vectors Steel Index ETF (SLX) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Amex Steel Index. The Index is comprised of companies that are listed on the NYSE, AMEX or NASDAQ that are primarily involved in activities related to steel production, including the operation of mills manufacturing steel, the fabrication of steel shapes or products, or the extraction and reduction of iron ore. The Index only invests in companies with market capitalizations greater than $100 million that have average daily volume of at least $1 million over the past three months. The Index is modified market capitalization weighted so that no single stock will account for greater than 20% of the Index and all stocks with a weight of 4.5% will not account for more than a combined 50% of the Index. To track the Index, the fund generally will invest in all of the securities composing its underlying Index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Materials 99.7 Industrials Top Ten Holdings (%) Co Vale Do Rio 27.9 Companhia Sid 12.0 Gerdau Sa 11.5 United States Steel 11.1 Mechel Oao-adr 11.0 Nucor Corp 9.2 Steel Dynamics 8.2 Allegheny Tech 8.1 Castle A M & Co 0.6 Gibraltar Industries Inc 0.3 Top Ten Total Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Van Eck current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 180

296 G L O B A L W E A L T H M A N A G E M E N T ishares Goldman Sachs Natural Resources (IGE) NATURAL RESOURCES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IGE Intraday Nav Ticker IGEIV Benchmark Index Ticker (Bloomberg) SPGSSINR Market Cap ($Mil) 2,581 Outstanding Shares (Mil) 17.4 Avg Daily Trading Volume (Shares) 118,378 Expense Ratio (%) 0.48 Focus Materials Investment Advisor Barclays Global Investors Inception Date 10/26/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 128 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares S&P North American Natural Resources Sector Index Fund (IGE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P North American Natural Resources Sector Index. The index includes companies in the following categories: Extractive industries, energy companies, owners and operators of timber tracts, forestry services, producers of pulp and paper and owners of plantations. Component companies must meet objective criteria for inclusion. The index is modified capitalization weighted and reconstituted and rebalanced semiannually in January and July. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Oil & Gas 35.0 Oil & Gas Exploration & Production 19.7 Oil & Gas Equipment & Services 19.2 Oil & Gas Drilling 7.1 Oil & Gas Storage & Transportation 3.2 Coal & Consumable Fuels 2.9 Diversified Metals & Mining 2.8 Aluminum 2.1 Oil & Gas Refining & Marketing 2.0 Gold 1.2 Top Ten Holdings (%) Chevron Corp 9.0 Conocophillips 8.4 Exxon Mobil Corp 8.0 Schlumberger Ltd 7.5 Occidental Pete 4.4 Devon Energy 3.1 Transocean Inc 2.9 Apache Corp 2.7 Frprt-mcm Gd 2.6 Halliburton Co 2.5 Top Ten Total 51.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 181

297 G L O B A L W E A L T H M A N A G E M E N T Market Vectors Gold Miners ETF (GDX) NATURAL RESOURCES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker GDX Intraday Nav Ticker GMI Benchmark Index Ticker (Bloomberg) GDM Market Cap ($Mil) 1,828 Outstanding Shares (Mil) 40.2 Avg Daily Trading Volume (Shares) 3,562,391 Expense Ratio (%) 0.55 Focus Materials Investment Advisor Van Eck Associates Inception Date 5/22/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 34 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Market Vectors Gold Miners ETF (GDX) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Amex Gold Miners Index. The index is comprised of a globally diversified universe of common stocks and ADRs of publicly traded companies that are primarily involved in mining for gold and silver. The index only invests in companies with market capitalizations greater than $100 million and that have average daily volume of at least 50,000 shares during the prior six months. The index is modified market capitalization weighted so that no single stock will account for greater than 20% of the index and all stocks with a weight of 4.5% will not account for more than a combined 50% of the index. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Gold 58.7 Precious Metals & Minerals Top Ten Holdings (%) Newmont Mining 58.7 Minas Buenavent 41.3 Anglogold Ashanti Limited 0.0 Yamana Gold Inc 0.0 Aurizon Mines 0.0 Hecla Mining Co 0.0 Harmony Gold 0.0 Iamgold Corp 0.0 Barrick Gold 0.0 Agnico Eagle 0.0 Top Ten Total Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Van Eck current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 182

298 G L O B A L W E A L T H M A N A G E M E N T SPDR S&P Metals & Mining ETF (XME) MATERIALS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XME Intraday Nav Ticker KZD Benchmark Index Ticker (Bloomberg) SPSIMM Market Cap ($Mil) 425 Outstanding Shares (Mil) 5.1 Avg Daily Trading Volume (Shares) 1,252,578 Expense Ratio (%) 0.35 Focus Materials Investment Advisor State Street Global Advisors Inception Date 6/22/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 23 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR Metals and Mining ETF (XME) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P Metals and Mining Select Industry Index. The index represents the metals and mining sub-industry portion of the S&P Total Market Index that tracks all US company common stocks listed on the NYSE, AMEX, NASDAQ and NASDAQ Small-Cap Exchanges. The Select Industry Indexes are designed to measure the performance of narrow sub-industries based on the Global Industry Classification Standard (GICS). Stocks in the Select Index are subject to certain liquidity constraints and are equally weighted when the index is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Coal & Consumable Fuels 39.5 Steel 30.3 Diversified Metals & Mining 16.3 Aluminum 7.5 Gold 6.3 Precious Metals & Minerals Top Ten Holdings (%) Massey Energy 6.2 Arch Coal Inc 5.5 Peabody Energy 5.3 United States Steel 5.2 Consol Energy 5.1 Frprt-mcm Gd 4.6 Titanium Metals 4.1 Nucor Corp 4.1 Alcoa Inc 4.0 Steel Dynamics 4.0 Top Ten Total 48.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 183

299 G L O B A L W E A L T H M A N A G E M E N T ishares Cohen & Steers Realty Majors Index Fund (ICF) REAL ESTATE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker ICF Intraday Nav Ticker ICFIV Benchmark Index Ticker (Bloomberg) RMP Market Cap ($Mil) 2,638 Outstanding Shares (Mil) 30.5 Avg Daily Trading Volume (Shares) 1,417,928 Expense Ratio (%) 0.35 Focus U.S. Real Estate Investment Advisor Barclays Global Investors Inception Date 2/2/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 28 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Cohen & Steers Realty Majors Index Fund (ICF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Cohen & Steers Realty Majors Index. The index seeks to measure the performance of relatively large and actively traded US Real Estate Investment Trusts (REITs) that may benefit from future consolidation and securitization of the US real estate industry. Securities are chosen by a committee based on a review of several factors including management, portfolio quality and sector and geographic diversification. The index is modified market capitalization-weighted and is reconstituted quarterly so that no REIT represents more than 8% of the index. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Retail Reits 31.1 Residential Reits 18.7 Specialized Reits 17.1 Office Reits 13.3 Industrial Reits 11.2 Diversified Reits Top Ten Holdings (%) Simon Prop Grp 8.8 Prologis 8.1 Vornado Realty 6.7 Boston Ppty 6.0 Equity Residential 5.9 Public Storage 5.4 Gen Growth Prop 5.3 Kimco Realty Cp 5.0 Host Hotels And Resorts Inc 4.6 Avalonbay Communities Inc. 4.3 Top Ten Total 60.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 184

300 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Real Estate Index Fund (IYR) REAL ESTATE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYR Intraday Nav Ticker IYRIV Benchmark Index Ticker (Bloomberg) DJUSRE Market Cap ($Mil) 1,941 Outstanding Shares (Mil) 27.8 Avg Daily Trading Volume (Shares) 8,734,418 Expense Ratio (%) 0.48 Focus U.S. Real Estate Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 75 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Real Estate Index Fund (IYR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Real Estate Index. The index seeks to measure the performance of the real estate sector of the US equity market and is a sub set of the Dow Jones US Financials Index. Its holdings are concentrated mainly in Real Estate Investment Trusts (REITs) but also include real estate holding and development company securities. The index is float-adjusted market cap-weighted. It is reviewed and rebalanced quarterly during March, June, September, and December. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Retail Reits 25.9 Specialized Reits 23.6 Office Reits 14.3 Residential Reits 13.7 Industrial Reits 8.7 Diversified Reits 6.9 Real Estate Management & Development 4.3 Mortgage Reits Top Ten Holdings (%) Simon Prop Grp 7.7 Prologis 5.6 Vornado Realty 4.7 Boston Ppty 4.1 Equity Residential 4.0 Public Storage 3.7 Gen Growth Prop 3.4 Host Hotels And Resorts Inc 3.2 Kimco Realty Cp 3.1 Avalonbay Communities Inc. 2.7 Top Ten Total 42.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 185

301 G L O B A L W E A L T H M A N A G E M E N T SPDR DJ Wilshire REIT Index Fund (RWR) REAL ESTATE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker RWR Intraday Nav Ticker EWR Benchmark Index Ticker (Bloomberg) DWRTF Market Cap ($Mil) 1,393 Outstanding Shares (Mil) 18.5 Avg Daily Trading Volume (Shares) 558,614 Expense Ratio (%) 0.25 Focus U.S. Real Estate Investment Advisor State Street Global Advisors Inception Date 4/23/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 85 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR DJ Wilshire REIT Index Fund (RWR) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, designed to track the performance of the Dow Jones Wilshire REIT Index. This index is a subset of the Dow Jones Wilshire Real Estate Securities Index and consists of equity owners and operators of commercial or residential real estate. Excluded securities include: mortgage, healthcare, net-lease and hybrid REITs, finance companies, home builders, landowners, sub-dividers, and companies that have more than 25% of assets in direct mortgages. The index is weighted by both full market and float-adjusted capitalization. Additions and deletions to the index and share updates are made quarterly in March, June, September, and December. To track the index, the fund may use optimization techniques, however, it will generally hold all of the stocks in the index in proportionately the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Retail Reits 28.4 Specialized Reits 22.0 Office Reits 16.5 Residential Reits 15.5 Industrial Reits 9.9 Diversified Reits Top Ten Holdings (%) Simon Prop Grp 8.5 Prologis 6.1 Vornado Realty 5.0 Boston Ppty 4.4 Equity Residential 4.4 Public Storage 4.1 Gen Growth Prop 3.6 Host Hotels And Resorts Inc 3.5 Kimco Realty Cp 3.3 Avalonbay Communities Inc. 2.9 Top Ten Total 45.9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website:http://www.ssgafunds.com/etf/etf_perf_summary.jsp. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 186

302 G L O B A L W E A L T H M A N A G E M E N T Vanguard REIT ETF (VNQ) REAL ESTATE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VNQ Intraday Nav Ticker NVZ Benchmark Index Ticker (Bloomberg) RMS Market Cap ($Mil) 2,827 Outstanding Shares (Mil) 42.2 Avg Daily Trading Volume (Shares) 695,545 Expense Ratio (%) 0.10 Focus U.S. Real Estate Investment Advisor The Vanguard Group Inception Date 9/29/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 96 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard REIT ETFs (VNQ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US REIT Index. The index seeks to represent approximately 85% of the US REIT universe and contains actively traded equity REITs that meet minimum market-cap standards. It is market cap-weighted and free float-adjusted and is rebalanced quarterly beginning in February. MSCI started calculating and maintaining this index on June 20, Prior to this date, the index was known as the Morgan Stanley REIT Index and was calculated and maintained by the AMEX. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Retail Reits 29.0 Specialized Reits 22.5 Office Reits 16.1 Residential Reits 15.0 Industrial Reits 9.6 Diversified Reits Top Ten Holdings (%) Simon Prop Grp 8.2 Prologis 5.9 Vornado Realty 4.7 Boston Ppty 4.3 Equity Residential 4.2 Public Storage 4.0 Host Hotels And Resorts Inc 3.4 Gen Growth Prop 3.3 Kimco Realty Cp 3.3 Hcp Inc 3.0 Top Ten Total 44.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 187

303 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Telecom Sector Index Fund (IYZ) TELECOM SERVICES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IYZ Intraday Nav Ticker IYZIV Benchmark Index Ticker (Bloomberg) DJSTELT Market Cap ($Mil) 615 Outstanding Shares (Mil) 23.6 Avg Daily Trading Volume (Shares) 327,516 Expense Ratio (%) 0.48 Focus Telecom Investment Advisor Barclays Global Investors Inception Date 5/22/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 40 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Telecommunications Sector Index Fund (IYZ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Telecom Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the Telecommunications sector by the Industry Classification Benchmark (ICB) and include fixed-line and mobile communications companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Telecommunication Services 61.6 Wireless Telecommunication Services 26.3 Multi-sector Holdings 5.3 Alternative Carriers 3.9 Broadcasting & Cable TV Top Ten Holdings (%) At & T Inc 24.4 Verizon Communications 16.1 Sprint Nextel Corp 10.9 Nii Holdings Inc 5.3 Leucadia Natl Cp 5.3 Qwest Communications 4.2 Embarq 4.1 Level 3 Communications Inc 3.9 Windstream Corporation 3.8 Telephone & Data Systems Inc 3.2 Top Ten Total 81.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 188

304 G L O B A L W E A L T H M A N A G E M E N T Vanguard Telecom Services ETF (VOX) TELECOM SERVICES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VOX Intraday Nav Ticker DVT Benchmark Index Ticker (Bloomberg) MSCITC Market Cap ($Mil) 161 Outstanding Shares (Mil) 2.4 Avg Daily Trading Volume (Shares) 77,697 Expense Ratio (%) 0.22 Focus Telecom Investment Advisor The Vanguard Group Inception Date 9/29/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 46 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Telecommunication Services ETFs (VOX) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Telecommunication Services Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the telecommunication services sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Telecommunication Services 66.9 Wireless Telecommunication Services 30.3 Alternative Carriers Top Ten Holdings (%) Verizon Communications 25.6 At & T Inc 25.1 Sprint Nextel Corp 7.1 Amer Tower Sys 6.0 Crown Castle International Corp 4.2 Nii Holdings Inc 3.4 Qwest Communications 2.9 Embarq 2.9 Level 3 Communications Inc 2.8 Windstream Corporation 2.7 Top Ten Total 82.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 189

305 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones US Utilities Sector Index Fund (IDU) UTILITIES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker IDU Intraday Nav Ticker IDUIV Benchmark Index Ticker (Bloomberg) DJUSUT Market Cap ($Mil) 838 Outstanding Shares (Mil) 8.5 Avg Daily Trading Volume (Shares) 66,406 Expense Ratio (%) 0.48 Focus Utilities Investment Advisor Barclays Global Investors Inception Date 6/12/2000 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 75 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones U.S. Utilities Sector Index Fund (IDU) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dow Jones US Utilities Sector Index. The index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of stocks that meet rules based criteria and consists of approximately 1,600 stocks. Stocks in the total market index are assigned to the utility sector by the Industry Classification Benchmark (ICB) and include electricity, gas, water and multiutility companies. The index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Electric Utilities 47.1 Multi-utilities 27.1 Independent Power Producers & Energy Traders 10.4 Gas Utilities 8.3 Oil & Gas Storage & Transportation 6.8 Water Utilities Top Ten Holdings (%) Exelon Corp 9.8 Southern Co 4.9 Dominion Res Inc 4.6 Fpl Group Inc 4.3 Firstenergy Corp 4.1 Duke Energy Corp 4.1 Entergy Corporation 4.0 Public Service Enter 3.8 Williams Cos Inc 3.8 Ppl Corp 3.1 Top Ten Total 46.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 190

306 G L O B A L W E A L T H M A N A G E M E N T Utilities Select Sector SPDR (XLU) UTILITIES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker XLU Intraday Nav Ticker UXV Benchmark Index Ticker (Bloomberg) IXU Market Cap ($Mil) 2,394 Outstanding Shares (Mil) 59.3 Avg Daily Trading Volume (Shares) 5,321,944 Expense Ratio (%) 0.23 Focus Utilities Investment Advisor State Street Global Advisors Inception Date 12/22/1998 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 31 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Utilities Select Sector SPDR (XLU) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Utilities Select Sector Index. The index is weighted on a modified market-cap basis and encompasses companies considered electric, gas or water utilities or those that operate as independent producers or distributors of power. It consists of large cap stocks within the S&P 500 Index classified in the Utilities Sector according to the Global Industry Classification Standard (GICS). The index is rebalanced to reflect changes to the S&P 500 Index that are made by the S&P Index Committee as necessary throughout the year. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Electric Utilities 59.1 Multi-utilities 30.6 Independent Power Producers & Energy Traders 7.3 Gas Utilities Top Ten Holdings (%) Exelon Corp 12.6 Southern Co 6.4 Fpl Group Inc 6.1 Dominion Res Inc 5.9 Duke Energy Corp 5.3 Firstenergy Corp 5.3 Entergy Corporation 5.0 Public Service Enter 4.6 Ppl Corp 4.1 American Electric Power Company 4.0 Top Ten Total 59.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Select Sector SPDRss current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 191

307 G L O B A L W E A L T H M A N A G E M E N T Vanguard Utilities ETF (VPU) UTILITIES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VPU Intraday Nav Ticker HVJ Benchmark Index Ticker (Bloomberg) MZUSI0UT Market Cap ($Mil) 371 Outstanding Shares (Mil) 4.4 Avg Daily Trading Volume (Shares) 35,581 Expense Ratio (%) 0.22 Focus Utilities Investment Advisor The Vanguard Group Inception Date 1/30/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 86 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Utilities ETF (VPU) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI US Investable Market Utilities Index. The index is a subset of the MSCI US Investable Market Index which contains 2500 large, mid and small-cap stocks. It consists of all stocks within the broader MSCI US Investable Market Index classified as in the utilities sector according to the Global Industry Classification Standard (GICS). The index is market cap-weighted, adjusted quarterly beginning in February for free float and for companies that move out of its market cap range, and is rebalanced semiannually in May and November. To track the index, the fund may use an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Electric Utilities 49.8 Multi-utilities 28.9 Independent Power Producers & Energy Traders 11.3 Gas Utilities 9.2 Water Utilities Top Ten Holdings (%) Exelon Corp 10.3 Southern Co 5.1 Dominion Res Inc 4.9 Fpl Group Inc 4.7 Duke Energy Corp 4.3 Firstenergy Corp 4.3 Entergy Corporation 4.1 Public Service Enter 4.0 Ppl Corp 3.3 American Electric Power Company 3.3 Top Ten Total 48.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 192

308 G L O B A L W E A L T H M A N A G E M E N T ishares Dow Jones Select Dividend Index Fund (DVY) DIVIDEND-INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DVY Intraday Nav Ticker DVYIV Benchmark Index Ticker (Bloomberg) DJDVY Market Cap ($Mil) 5,951 Outstanding Shares (Mil) 99.2 Avg Daily Trading Volume (Shares) 831,412 Expense Ratio (%) 0.40 Focus Dividend Investment Advisor Barclays Global Investors Inception Date 11/7/2003 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 101 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares Dow Jones Select Dividend Index Fund (DVY) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Dow Jones Select Dividend Index. The index contains 100 of the highest dividend yielding companies (excluding REITs) in the Dow Jones Total Market Index that meet quality and liquidity screening requirements including: a positive five-year dividend growth rate, an average five-year dividend payout ratio less than or equal to 60%, and a three month average daily trading volume of more than 200,000 shares. It is rebalanced in December as suitable stocks are identified and the 100 with the highest yields can be selected. However, stocks stay in the index unless their yield drops below the top 200 securities. Although components are selected based on yield, weights are based on annualized dividends in dollars. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 45.5 Utilities 19.2 Materials 8.9 Consumer Discretionary 6.9 Industrials 6.2 Consumer Staples 5.2 Health Care 3.4 Telecommunication Services 2.4 Energy Top Ten Holdings (%) Pnc Bank Corp 3.5 Firstenergy Corp 3.4 Dte Energy 2.6 Comerica Inc 2.6 Eastman Chem 2.5 Pinnacl West Cap 2.5 At & T Inc 2.4 Keycorp New 2.3 Unitrin Inc 2.2 Regions Financial Corp 2.2 Top Ten Total 26.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data forthe fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 193

309 G L O B A L W E A L T H M A N A G E M E N T PowerShares High Yield Equity Dividend Achievers Port. (PEY) DIVIDEND-INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PEY Intraday Nav Ticker HEY Benchmark Index Ticker (Bloomberg) DAY Market Cap ($Mil) 181 Outstanding Shares (Mil) 16.1 Avg Daily Trading Volume (Shares) 102,564 Expense Ratio (%) 0.50 Focus Dividend Investment Advisor PowerShares Capital Inception Date 12/8/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Monthly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares High Yield Equity Dividend Achievers Portfolio (PEY) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the Dividend Achievers 50 Index. The index is comprised of the 50 highest yielding stocks with at least 10 years of consecutive dividend increases selected by Mergent, Inc. from the US Dividend Achievers universe. It is a subset of the Broad Dividend Achievers Index that is reconstituted annually. Components must be incorporated in the United States and must have raised annual regular cash dividend payments for at least each of the last 10 consecutive fiscal years. The index uses a modified equal weighting methodology incorporating current dividend yield and is rebalanced quarterly in January, April, July and October. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 69.8 Utilities 16.1 Consumer Discretionary 7.6 Industrials 3.7 Health Care Top Ten Holdings (%) American Capital Strategies Ltd 5.6 Prov Bkshrs Cp 5.2 Comerica Inc 3.9 Fifth Thr Bncp 3.8 Masco Corp 3.7 National City 3.7 Col Bancgroup 3.4 Keycorp New 3.2 Bank Of America 3.1 Legget & Platt 3.0 Top Ten Total 38.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 194

310 G L O B A L W E A L T H M A N A G E M E N T SPDR S&P Dividend ETF (SDY) DIVIDEND INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SDY Intraday Nav Ticker SYW Benchmark Index Ticker (Bloomberg) SPHYDA Market Cap ($Mil) 275 Outstanding Shares (Mil) 5.1 Avg Daily Trading Volume (Shares) 67,284 Expense Ratio (%) 0.35 Focus Dividend Investment Advisor State Street Global Advisors Inception Date 11/8/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR S&P Dividend ETF (SDY) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of S&P High Yield Dividend Aristocrats Index. This index is designed to measure the performance of the 50 highest yielding U.S. stocks in the S&P 1500 Composite that have consistently raised dividends for at least 25 years. S&P believes the criterion of increasing dividends every year for 25 years brings in companies from a broad range of industries, rather than being heavy into financials and utilities. The index is weighted by indicated yield and rebalanced quarterly. To prevent over concentration in individual companies, no single stock will have a weight of more than 4% of the index at each quarterly rebalancing. To track the index, the fund may use optimization techniques, however, it will generally hold all of the stocks in the index in proportionately the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 41.4 Utilities 14.5 Consumer Discretionary 10.7 Industrials 10.0 Materials 7.8 Health Care 7.7 Consumer Staples 6.2 Information Technology Top Ten Holdings (%) Keycorp New 4.2 Comerica Inc 4.1 Synovus Finan 4.1 Regions Financial Corp 4.0 Fifth Thr Bncp 3.9 Bb&t Corp 3.6 Bank Of America 3.4 Integrys Energy Group 3.4 Legget & Platt 3.2 Us Bancorp 3.1 Top Ten Total 37.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 195

311 G L O B A L W E A L T H M A N A G E M E N T Vanguard Dividend Appreciation ETF (VIG) DIVIDEND INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VIG Intraday Nav Ticker GIG Benchmark Index Ticker (Bloomberg) DVG Market Cap ($Mil) 388 Outstanding Shares (Mil) 7.1 Avg Daily Trading Volume (Shares) 42,270 Expense Ratio (%) 0.28 Focus Dividend Investment Advisor The Vanguard Group Inception Date 4/27/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 215 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Dividend Appreciation ETF (VIG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dividend Achievers Select Index. The Index is a subset of roughly 200 companies from the Mergent's Broad Dividend Achievers Index, which targets companies that have increased dividends for at least 10 consecutive years. Unlike the broad index, the Select Index excludes REITs and companies with a low potential for increasing dividends going forward. The index is rebalanced annually in December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Consumer Staples 24.1 Industrials 16.6 Health Care 12.8 Financials 11.5 Consumer Discretionary 9.3 Energy 9.0 Information Technology 6.4 Telecommunication Services 4.3 Materials 4.2 Utilities 1.7 Top Ten Holdings (%) Wal-mart Stores 4.8 International Business Machines Corp 4.8 Chevron Corp 4.8 Johnson&johnson 4.3 Exxon Mobil Corp 4.2 At & T Inc 4.2 Procter & Gamble 4.1 Coca Cola Co 3.9 General Electric 3.8 Pepsico Inc 3.5 Top Ten Total 42.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 196

312 G L O B A L W E A L T H M A N A G E M E N T WisdomTree High-Yielding Equity (DHS) DIVIDEND INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DHS Intraday Nav Ticker DHSIV Benchmark Index Ticker (Bloomberg) WTHYE Market Cap ($Mil) 153 Outstanding Shares (Mil) 3.1 Avg Daily Trading Volume (Shares) 61,997 Expense Ratio (%) 0.38 Focus Dividend Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 366 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree High-Yielding Equity Fund (DHS) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree High- Yielding Equity Index. The index is a sub set of the WisdomTree Dividend Index which measures the performance of all U.S. companies that pay regular cash dividends, are listed on the NYSE, AMEX or NASDAQ, and meet certain liquidity requirements. The High-Yielding Equity Index includes the top 30% of companies ranked by dividend yield that fall within the WisdomTree Dividend Index. Companies in the Index are weighted based on their projected cash dividends by annualizing the last regularly declared dividend per share and multiplying that figure by the number of outstanding shares. The Index is reconstituted annually, at which time each components weight is adjusted to reflect its dividend weight in the Index. To track the Index, the fund generally invests in all of the securities comprising its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 56.4 Telecommunication Services 12.5 Health Care 9.3 Utilities 7.3 Materials 6.0 Consumer Discretionary 3.7 Consumer Staples 3.2 Industrials 0.8 Energy 0.5 Information Technology 0.4 Top Ten Holdings (%) Bank Of America 9.2 Citigroup Inc 7.6 At & T Inc 7.6 Pfizer Inc 6.1 Jpmorgan Chase & Co 5.0 Verizon Communications 3.9 Wells Fargo & Co 3.7 Wachovia Corp 3.3 Us Bancorp 2.7 Southern Copper Corp 2.3 Top Ten Total 51.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 197

313 G L O B A L W E A L T H M A N A G E M E N T PowerShares Dynamic Market Portfolio (PWC) CUSTOM Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PWC Intraday Nav Ticker FZM Benchmark Index Ticker (Bloomberg) DYI Market Cap ($Mil) 629 Outstanding Shares (Mil) 12.9 Avg Daily Trading Volume (Shares) 46,045 Expense Ratio (%) 0.60 Focus Custom Investment Advisor PowerShares Capital Inception Date 5/1/2003 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 99 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Dynamic Market Portfolio (PWC) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Dynamic Market Intellidex Index. The Index utilizes rules-based quantitative analysis to evaluate and select securities using a variety of investment value determinants such as fundamental growth, stock valuation, timeliness and risk factors. This process occurs quarterly in February, May, August and November. The component stocks are selected from the 2,000 largest U.S. stocks. The Market Intellidex is a modified equal dollar weighted index comprised of 100 large, midsize and small companies with sector weightings resembling the U.S. marketplace. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 18.0 Information Technology 17.0 Energy 12.3 Industrials 11.9 Health Care 10.8 Consumer Discretionary 10.6 Consumer Staples 7.5 Utilities 4.6 Materials 4.0 Telecommunication Services 3.3 Top Ten Holdings (%) Occidental Pete 5.1 Exxon Mobil Corp 4.6 Kimberly-clark 3.5 Goodrich Corp 3.5 Colgate Palmolive Company 3.4 Sigma Aldrich 3.4 Dominion Res Inc 3.2 Lockheed Martin Corp 3.2 Northrop Grumman Corp 2.9 Intel Corp 2.8 Top Ten Total 35.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 198

314 G L O B A L W E A L T H M A N A G E M E N T PowerShares Water Resources Portfolio (PHO) CUSTOM Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PHO Intraday Nav Ticker JDP Benchmark Index Ticker (Bloomberg) ZWI Market Cap ($Mil) 2,321 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 580,880 Expense Ratio (%) 0.60 Focus Custom Investment Advisor PowerShares Capital Inception Date 11/18/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 35 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Water Resources Portfolio (PHO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Palisades Water Index. The Index, created by Hydrogen Ventures, LLC, includes US listed companies that focus on the provision of potable water, the treatment of water and technology and services related to water consumption. Components must get at least 50% of revenues from water related activities and include water utility, treatment, analysis and monitoring, infrastructure, distribution and resource management companies and conglomerates that contribute significantly to the water industry. The index uses a modified equal dollar weighting and is rebalanced and reconstituted quarterly in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrial Machinery 38.1 Electrical Components & Equipment 11.2 Environmental & Facilities Services 10.9 Electronic Equipment Manufacturers 10.2 Water Utilities 7.3 Construction & Farm Machinery & Heavy Trucks 5.4 Specialty Chemicals 3.8 Life Sciences Tools & Services 3.6 Commodity Chemicals 3.6 Industrial Conglomerates 3.3 Top Ten Holdings (%) Valmont Inds 6.7 Tetra Tech 6.6 Lindsay Corp 5.4 Agilent Technologies Inc 5.3 Danaher Corp 5.0 Itron Inc 4.8 Layne Christen 4.4 Itt Corp 4.3 Idex Corp 4.1 Emerson Electric Co 4.1 Top Ten Total 50.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 199

315 G L O B A L W E A L T H M A N A G E M E N T PowerShares WilderHill Clean Energy Portfolio (PBW) CUSTOM Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PBW Intraday Nav Ticker BWH Benchmark Index Ticker (Bloomberg) ECO Market Cap ($Mil) 1,547 Outstanding Shares (Mil) 70.9 Avg Daily Trading Volume (Shares) 989,925 Expense Ratio (%) 0.60 Focus Custom Investment Advisor PowerShares Capital Inception Date 3/3/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 47 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares WilderHill Clean Energy Portfolio (PBW) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WilderHill Clean Energy Index. The Index seeks to deliver capital appreciation through companies that focus on greener and generally renewable sources of energy and technologies facilitating cleaner energy. It includes US listed companies involved in renewable energy harvesting or production, energy conversion, energy storage, pollution prevention, improvements in energy efficiency, power delivery, energy conservation and monitoring of energy information. The index uses a modified equal dollar weighting. No single stock may exceed 3% of the index at its quarterly rebalancing in March, June, September and December. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United States 80.3 China 19.6 United Kingdom Top Sector/Industry Weightings (%) Electrical Components & Equipment 58.1 Semiconductor Equipment 8.7 Semiconductors 7.0 Independent Power Producers & Energy Traders 6.3 Electronic Equipment Manufacturers 4.5 Packaged Foods & Meats 4.4 Industrial Gases 4.3 Specialty Chemicals 3.5 Oil & Gas Refining & Marketing 3.3 Aerospace & Defense 0.0 Top Ten Holdings (%) Energy Conversion Devices 7.8 Trina Solar Ltd 7.0 Yingli Green Energy Hold Adr 6.9 First Solar Inc 6.7 Ja Solar Holding Co Ltd 6.6 Ormat Tech 6.3 Sunpower Corp Class A 6.1 Suntech Power Holdings Adr 5.9 Amer Supercond 5.7 Evergreen Solar 5.0 Top Ten Total 64.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 200

316 G L O B A L W E A L T H M A N A G E M E N T Ultra S&P500 ProShares (SSO) LEVERAGED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SSO Intraday Nav Ticker SEV Benchmark Index Ticker (Bloomberg) SPX Market Cap ($Mil) 1,030 Outstanding Shares (Mil) 13.9 Avg Daily Trading Volume (Shares) 8,185,190 Expense Ratio (%) 0.95 Focus Leveraged Investment Advisor ProShares Inception Date 6/21/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Ultra S&P500 ProShares (SSO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to double the daily performance of the S&P 500 Index. The index measures the performance of the large-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Committee for market size, liquidity and industry group representation. The goal of the Index Committee is to ensure that the S&P 500 remains a leading indicator of US equities reflecting the risk and return characteristics of the broader large-cap universe. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To achieve twice the daily performance of the S&P 500 Index, the fund will invest in a combination of equity securities, Treasury Bills and will utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Information Technology 16.3 Energy 14.1 Industrials 11.8 Health Care 11.3 Consumer Staples 10.4 Consumer Discretionary 8.6 Materials 3.7 Utilities 3.6 Telecommunication Services 3.4 Top Ten Holdings (%) Common Stock Cash Equity Swaps/derivatives N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 201

317 G L O B A L W E A L T H M A N A G E M E N T Ultra QQQ ProShares (QLD) LEVERAGED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker QLD Intraday Nav Ticker ECJ Benchmark Index Ticker (Bloomberg) NDX Market Cap ($Mil) 1,078 Outstanding Shares (Mil) 12.4 Avg Daily Trading Volume (Shares) 12,359,571 Expense Ratio (%) 0.95 Focus Leveraged Investment Advisor ProShares Inception Date 6/21/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 100 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Ultra QQQ ProShares (QLD) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to double the daily performance of the NASDAQ-100 Index. The index is composed of 100 of the largest and most actively traded non-financial companies listed on the NASDAQ Stock Market. The index is reconstituted annually in a December Ranking Review based on market capitalization rankings. It uses a modified capitalization weighted methodology and is rebalanced quarterly. Upon rebalancing, the weight of any single stock is limited to 24% of the index and the combined weight of all securities with individual weights of more than 4.5% is limited to 48% of the index. To achieve twice the daily performance of the NASDAQ-100 Index the fund will invest in a combination of equity securities, Treasury Bills and will also utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 64.4 Health Care 13.7 Consumer Discretionary 12.8 Industrials 5.1 Telecommunication Services 1.7 Consumer Staples 1.4 Materials Top Ten Holdings (%) Common Stock Cash Equity Swaps/derivatives N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 202

318 G L O B A L W E A L T H M A N A G E M E N T Ultra Financials ProShares (UYG) LEVERAGED Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker UYG Intraday Nav Ticker UYGIV Benchmark Index Ticker (Bloomberg) DJUSFN Market Cap ($Mil) 1,024 Outstanding Shares (Mil) 31.6 Avg Daily Trading Volume (Shares) 10,179,041 Expense Ratio (%) 0.95 Focus Leveraged Investment Advisor ProShares Inception Date 2/1/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 288 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Ultra Financials ProShares (UYG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to double the daily performance of the Dow Jones U.S. Financials Index. The Index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of approximately 1,600 stocks that meet rules based criteria. Stocks in the Total Market Index assigned to the financial sector by the Industry Classification Benchmark (ICB) include banks, non-life insurance, life insurance, real estate and general finance companies. The Index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To achieve twice the daily performance of the Dow Jones U.S. Financials Index, the fund will invest in a combination of equity securities, Treasury Bills and will also utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 19.4 Investment Banking & Brokerage 9.5 Diversified Banks 9.2 Regional Banks 8.9 Multi-line Insurance 7.4 Property & Casualty Insurance 7.3 Asset Management & Custody Banks 7.1 Life & Health Insurance 5.7 Thrifts & Mortgage Finance 4.2 Consumer Finance 3.6 Top Ten Holdings (%) Common Stocks Cash Equity Swaps/derivatives N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 203

319 G L O B A L W E A L T H M A N A G E M E N T UltraShort Dow30Proshares (DXD) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DXD Intraday Nav Ticker DHK Benchmark Index Ticker (Bloomberg) INDU Market Cap ($Mil) 536 Outstanding Shares (Mil) 10.4 Avg Daily Trading Volume (Shares) 5,127,299 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 7/13/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort Dow30 ProShares (DXD) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed track double the inverse of the daily performance of the Dow Jones Industrial Average (DJIA) such that the value of the ETF goes up 200% when the DJIA goes down and vice versa. The DJIA contains 30 blue chip US companies that are generally leaders in their industries with strong histories of successful growth. The Dow Jones Industrial is the only major US index that is price-weighted such that a companys stock price determines its weighting in the index and not its market capitalization. Thus, companies with higher stock prices may have greater impact on daily movements of the index. The editors of the Wall Street Journal select the components in the index. Composition changes are rare and usually occur only after corporate acquisitions or dramatic shifts in an index components core business. To achieve twice the inverse daily performance of the DJIA Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Industrials 22.2 Information Technology 14.5 Financials 12.5 Energy 11.8 Consumer Staples 11.4 Consumer Discretionary 9.1 Health Care 8.0 Materials 5.7 Telecommunication Services Top Ten Holdings (%) Cash Equity Swaps/derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 204

320 G L O B A L W E A L T H M A N A G E M E N T UltraShort S&P500 ProShares (SDS) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SDS Intraday Nav Ticker SJB Benchmark Index Ticker (Bloomberg) SPX Market Cap ($Mil) 2,466 Outstanding Shares (Mil) 43.7 Avg Daily Trading Volume (Shares) 23,541,462 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 7/13/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort S&P500 ProShares (SDS) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the S&P 500 Index such that the value of the ETF goes up 200% of what the index goes down and vice versa. The index measures the performance of the large-cap sector of the US equity market. It is capitalization-weighted and includes a broad range of securities chosen by an S&P Committee for market size, liquidity and industry group representation. The goal of the Index Committee is to ensure that the S&P 500 remains a leading indicator of US equities reflecting the risk and return characteristics of the broader large-cap universe. The Committee follows a set of published rules and meets on a regular basis. Changes to the index are made as necessary throughout the year. To achieve twice the inverse daily performance of the S&P 500 Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 16.8 Information Technology 16.3 Energy 14.1 Industrials 11.8 Health Care 11.3 Consumer Staples 10.4 Consumer Discretionary 8.6 Materials 3.7 Utilities 3.6 Telecommunication Services 3.4 Top Ten Holdings (%) Cash Equity Swaps / Derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 205

321 G L O B A L W E A L T H M A N A G E M E N T UltraShort QQQ ProShares (QID) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker QID Intraday Nav Ticker EJM Benchmark Index Ticker (Bloomberg) NDX Market Cap ($Mil) 1,546 Outstanding Shares (Mil) 39.7 Avg Daily Trading Volume (Shares) 35,339,804 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 7/13/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Yearly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort QQQ ProShares (QID) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the NASDAQ-100 Index such that the value of the ETF goes up 200% of what the index goes down on a daily basis and vice versa. The index is composed of 100 of the largest and most actively traded nonfinancial companies listed on the NASDAQ Stock Market. The index is reconstituted annually in a December Ranking Review based on market capitalization rankings. It uses a modified capitalization weighted methodology and is rebalanced quarterly. Upon rebalancing, the weight of any single stock is limited to 24% of the index and the combined weight of all securities with individual weights of more than 4.5% is limited to 48% of the index. To achieve twice the inverse daily performance of the NASDAQ-100 Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 64.4 Health Care 13.7 Consumer Discretionary 12.8 Industrials 5.1 Telecommunication Services 1.7 Consumer Staples 1.4 Materials Top Ten Holdings (%) Cash Equity Swaps/derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 206

322 G L O B A L W E A L T H M A N A G E M E N T UltraShort Russell2000 ProShares (TWM) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker TWM Intraday Nav Ticker TWMIV Benchmark Index Ticker (Bloomberg) RTY Market Cap ($Mil) 973 Outstanding Shares (Mil) 13.7 Avg Daily Trading Volume (Shares) 8,484,943 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 1/25/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort Russell2000 ProShares (TWM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the Russell 2000 Index such that the value of the ETF goes up 200% of what the index goes down and vice versa. All Russell U.S. equity indexes are subsets of the Russell 3000 Index that ranks U.S. common stocks from largest to smallest market capitalization at an annual reconstitution period at the end of May. The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index. The index is float-adjusted market capweighted and represents under 10% of the total market capitalization of the Russell 3000 Index. To achieve twice the inverse daily performance of the Russell 2000 Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 23.0 Information Technology 18.7 Industrials 15.8 Health Care 12.8 Consumer Discretionary 11.4 Energy 5.9 Utilities 4.4 Materials 4.1 Consumer Staples 3.6 Telecommunication Services 0.5 Top Ten Holdings (%) Cash Equity Swaps/derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 207

323 G L O B A L W E A L T H M A N A G E M E N T UltraShort Financials ProShares (SKF) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SKF Intraday Nav Ticker SKFIV Benchmark Index Ticker (Bloomberg) DJUSFN Market Cap ($Mil) 2,106 Outstanding Shares (Mil) 20.6 Avg Daily Trading Volume (Shares) 10,318,540 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 2/1/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort Financials ProShares (SKF) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the Dow Jones U.S. Financials Index such that the value of the ETF goes up 200% of what the Index goes down on a daily basis and vice versa. The Index is a sub set of Dow Jones US Total Market Index that is seeks to represent over 95% of the US equity market by investing in a broad selection of approximately 1,600 stocks that meet rules based criteria. Stocks in the Total Market Index assigned to the financial sector by the Industry Classification Benchmark (ICB) include banks, non-life insurance, life insurance, real estate and general finance companies. The Index is float-adjusted market cap-weighted and is rebalanced quarterly in March, June, September, and December. To achieve twice the inverse daily performance of the Dow Jones U.S. Financials Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and Index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Other Diversified Financial Services 19.8 Diversified Banks 9.5 Investment Banking & Brokerage 9.4 Asset Management & Custody Banks 7.4 Regional Banks 7.1 Property & Casualty Insurance 7.1 Multi-line Insurance 6.6 Life & Health Insurance 6.1 Consumer Finance 4.0 Thrifts & Mortgage Finance 3.6 Top Ten Holdings (%) N/a3 Cash Equity Swaps/derivatives N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 208

324 G L O B A L W E A L T H M A N A G E M E N T UltraShort Oil & Gas ProShares (DUG) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DUG Intraday Nav Ticker DUGIV Benchmark Index Ticker (Bloomberg) DJUSEN Market Cap ($Mil) 1,639 Outstanding Shares (Mil) 56.2 Avg Daily Trading Volume (Shares) 7,775,275 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 2/1/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort Oil & Gas ProShares (DUG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the Dow Jones U.S. Oil & Gas Index such that the value of the ETF goes up 200% of what the Index goes down on a daily basis and vice versa. The Index is a sub set of Dow Jones U.S. Total Market Index that is seeks to represent over 95% of the U.S. equity market by investing in a broad selection of approximately 1,600 stocks that meet rules based criteria. Stocks in the Total Market Index assigned to the oil & gas sector by the Industry Classification Benchmark (ICB) include major oil companies, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. The Index is float-adjusted, market capitalization-weighted and is rebalanced quarterly in March, June, September, and December. To achieve twice the inverse daily performance of the Dow Jones U.S. Oil & Gas Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Integrated Oil & Gas 53.3 Oil & Gas Exploration & Production 20.2 Oil & Gas Equipment & Services 17.8 Oil & Gas Drilling 6.1 Oil & Gas Refining & Marketing 2.1 Oil & Gas Storage & Transportation 0.5 Multi-utilities Top Ten Holdings (%) Cash Equity Swaps / Derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 209

325 G L O B A L W E A L T H M A N A G E M E N T UltraShort Real Estate ProShares (SRS) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker SRS Intraday Nav Ticker SRSIV Benchmark Index Ticker (Bloomberg) DJUSRE Market Cap ($Mil) 812 Outstanding Shares (Mil) 9.8 Avg Daily Trading Volume (Shares) 1,775,852 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 2/1/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort Real Estate ProShares (SRS) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the Dow Jones U.S. Real Estate Index such that the value of the ETF goes up 200% of what the Index goes down on a daily basis and vice versa. The Index seeks to measure the performance of the real estate sector of the US equity market and is a sub set of the Dow Jones US Financials Index. Its holdings are concentrated mainly in Real Estate Investment Trusts (REITs) but also include real estate holding and development company securities. The Index is float-adjusted market cap-weighted. It is reviewed and rebalanced quarterly during March, June, September, and December. To achieve twice the inverse daily performance of the Dow Jones U.S. Real Estate Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and Index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Retail Reits 25.9 Specialized Reits 23.6 Office Reits 14.3 Residential Reits 13.7 Industrial Reits 8.7 Diversified Reits 6.9 Real Estate Management & Development 4.3 Mortgage Reits Top Ten Holdings (%) Cash Equity Swaps / Derivative N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 210

326 GLOBAL WEALTH MANAGEMENT INTERNATIONAL EQUITY INDEX-LINKED ETFS The following section highlights international equity ETFs and their underlying indices. It includes historical performance, valuations, correlations, our market outlook, and individual ETF profiles. Following several years of positive absolute performance, most global equity benchmarks have declined in With the exception of Emerging Latin America (which is primarily Brazil and Mexico), the indices we monitor were all in negative territory through the end of April 2008 (Exhibit 116). The heaviest declines have been concentrated in last year s top performing indices, notably Emerging Asia, which has been led to the downside by a sharp contraction in China. Most of the country indices that we monitor have declined significantly so far in Two noticeable outliers to the upside are Brazil and Taiwan. Strength in Brazil can be largely explained by the index s combined 60% weight in Energy and Materials, while Taiwan s strength is more likely the result of recent favorable election result, and previously undemanding valuations, in our opinion. Exhibit 116 Index Performance Year-to-Date Performance Through April 30, 2008 (%) Selected MSCI Major Market Indices Selected MSCI Country Indices EM Lat Am 7.3 TAIWAN BRAZIL Japan -1.1 MEXICO 3.2 BELGIUM 2.1 ACWI ex-us -3.4 CANADA 0.7 EAFE -3.8 JAPAN SWITZERLAND ACWI -4.1 SINGAPORE NETHERLANDS Europe -4.3 SPAIN -2.5 S. AFRICA -4.2 EM -4.4 FRANCE -4.2 USA -4.8 UK ITALY EMU Asia Pac ex- Jap EM Asia KOREA MALAYSIA GERMANY CHINA HONG KONG Source: MSCI, as of April 30, 2008 Source: MSCI, as of April 30,

327 GLOBAL WEALTH MANAGEMENT Exhibit 117 Selected MSCI Country Index Annual Performance (%) Best Belgium 68.7 Sw eden 80.6 Sw itzerland 6.4 Mexico 18.5 Austria 17.3 Brazil Austria 72.3 Brazil 57.0 Brazil 45.8 Brazil 80.0 Taiw an 9.7 Italy 53.2 Mexico 80.1 Canada 5.6 Taiw an 10.5 Australia -0.3 Sw eden 66.1 Mexico 48.3 Mexico 49.1 Sw eden 44.6 Hong Kong 41.2 Brazil 9.6 Spain 50.6 Brazil 67.2 Italy -0.8 Australia 2.7 Italy -6.3 Germany 64.8 Belgium 44.9 Canada 28.9 Mexico 41.4 Germany 36.0 Mexico 3.2 France 42.1 Japan 61.8 Netherlands -3.6 Austria -5.0 Sw itzerland Spain 59.2 Sw eden 37.3 Japan 25.6 Spain 41.0 Canada 30.2 Belgium 2.1 USA 30.7 Singapore 60.2 France -4.1 Belgium Japan Austria 57.8 Brazil 36.5 Austria 25.1 Austria 37.1 Australia 29.8 Sw eden 1.5 Germany 29.9 Hong Kong 59.5 Australia -9.1 Spain Singapore Canada 55.4 Italy 33.9 Australia 17.5 Germany 36.8 Singapore 28.4 Canada 0.7 Sw itzerland 24.1 Canada 54.4 Brazil USA Canada Australia 51.4 Australia 32.0 Sw itzerland 17.1 France 35.4 Spain 24.7 Austria 0.7 Netherlands 23.9 Taiw an 52.7 Austria United Kingdom Mexico Taiw an 42.5 Spain 29.6 Netherlands 14.9 Italy 34.1 Netherlands 21.1 Japan -1.1 AC World Free 22.0 France 29.7 United Kingdom AC World Free Belgium France 41.0 Hong Kong 25.0 Singapore 14.4 Australia 32.5 France 14.0 Sw itzerland -1.4 Index Return United Kingdom 17.8 Sw eden 14.5 Australia 7.1 AC World Free 26.8 USA 22.4 Germany 20.5 USA AC World Free Hong Kong Brazil Hong Kong Canada Spain United Kingdom Hong Kong Italy 39.0 Hong Kong 38.1 Singapore 37.6 Canada 22.8 Singapore 22.3 United Kingdom 19.6 Sw eden 14.4 AC World 11.4 France 10.6 Netherlands 32.4 United Kingdom 30.7 Hong Kong 30.4 AC World 12.2 Mexico 12.2 Taiw an 9.1 Singapore -1.4 Netherlands -2.4 Spain -2.5 Japan 5.2 Australia 18.7 Germany Sw itzerland AC World Free Belgium 36.9 France 19.2 Germany 10.5 Singapore 28.9 United Kingdom 8.4 Australia -3.9 Austria 0.8 United Kingdom 12.5 Spain Netherlands Netherlands Japan 36.2 Germany 16.7 Belgium 10.2 Belgium 28.8 Italy 7.3 AC World -4.1 Hong Kong -2.9 Netherlands 7.4 Belgium Germany France Sw itzerland 35.0 Japan 16.0 Hong Kong 8.4 Sw itzerland 28.2 Sw itzerland 6.1 France -4.2 Singapore -3.6 Spain 5.3 Mexico France USA AC World Free 34.6 AC World 15.8 United Kingdom 7.4 Taiw an 20.9 USA 6.0 United Kingdom -4.7 Canada -5.7 Italy 0.2 Sw eden Singapore Taiw an Mexico 32.8 Sw itzerland 15.6 Taiw an 7.3 AC World 20.6 Austria 2.7 USA -4.8 Taiw an Sw itzerland -6.6 Singapore Italy Sw eden United Kingdom 32.1 Netherlands 13.3 USA 5.7 Canada 18.4 Sw eden 1.5 Italy -6.2 Mexico Austria -8.7 Japan Sw eden Brazil Netherlands 29.3 USA 10.7 Spain 4.9 USA 15.3 Belgium -1.9 Germany -7.6 Brazil Belgium Taiw an Japan Germany Worst USA 29.1 Taiw an 9.8 Italy 3.1 Japan 6.3 Japan -4.1 Hong Kong YTD Source: MSCI. YTD Data as of April 30,

328 GLOBAL WEALTH MANAGEMENT Exhibit 118 Global Economic Forecasts May 2, 2008 Real GDP Growth (%) CPI Inflation (%) 2007E 2008E 2009E 2007E 2008E 2009E Global Economy Industrial World Developing World North America United States Asia/Pacific Japan China Hong Kong Latin America Brazil Mexico Europe France Germany United Kingdom Source: Morgan Stanley Research; E=Morgan Stanley Research Estimates. Exhibit 119 Emerging Market Performance and Valuation Relative to the US and MSCI All Country May 2, 2008 MSCI Performance ($) % off 12-Mo. P/E Ratio EPS Growth YTD 12-Mo. High Low 2008E 2009E 2008E 2009E International Indices All Country World Index USA Emerging Market MSCI - EM Asia/Pacific China Korea Taiwan Latin America Brazil Mexico Europe / Middle East Russia South Africa Source: Morgan Stanley, IBES via FactSet. P/E Multiples and EPS growth in USD. 213

329 GLOBAL WEALTH MANAGEMENT Exhibit 120 Country-Specific Index Correlations Argentina Austria Brazil Canada France Germany HongKong India Italy Japan Korea Mexico Russia Singapore Spain Switzerland Taiwan Thailand Turkey UK USA MSCI EAFE MSCI EM Argentina 1.00 Austria Brazil Canada France Germany HongKong India Italy Japan Korea Mexico Russia Singapore Spain Switzerland Taiwan Thailand Turkey UK USA MSCI EAFE MSCI EM Source: FactSet. Correlations based upon weekly total returns from 04/29/05 to 04/25/

330 GLOBAL WEALTH MANAGEMENT International Equity Market Outlook & Favored ETFs Morgan Stanley suggests at least a 9% allocation to international equities. We believe US investors should have meaningful exposure to international equities, as approximately 58% of the All Country World Index s (ACWI s) market cap exists outside the United States. Including international equities in a portfolio may reduce risk and enhance returns. In addition, as ETFs do not hedge their currency exposure, they also provide currency diversification. Morgan Stanley s Global Wealth Management (GWM) Tactical Asset Allocation Frameworks for taxable US dollar/us-oriented individual investors currently have international equity allocations between 9% and 18%. For core international holdings, we favor indices that are diversified by region, country, and sector. The MSCI EAFE Index is broadly diversified and comprises 21 country indices and nearly 1,200 securities representing the developed markets outside of North America: Europe, Australia and the Far East. To gain added flexibility to over- or underweight the major components of EAFE and reduce fees, some investors may wish to split EAFE into its two major components: Europe and Asia Pacific. To weight the ETFs in line with their weights in the EAFE Index, investors should hold about 69% in Europe and 31% in Asia Pacific. Favored Developed Markets ETFs ishares MSCI EAFE Index Fund (EFA) Vanguard Europe Pacific (VEA) Vanguard European ETF (VGK) Vanguard Pacific ETF (VPL) Morgan Stanley s European strategy team believes that the bear market rally is over and that investors should sell into further rallies. While they think that the European equity market probably hit the low associated with this earnings recession, and thus have a neutral intermediate-term outlook, they see limited near-term upside. Indeed, MSCI Europe is now trading 1.4% higher than the team s 12-month index target of As a result, they expect a directionless but volatile market until earnings trough, possibly in the first half of With profit margins at all-time high levels, slowing top-line growth, and rising costs, the biggest certainty for the next 12-months in their view is that there will be a big earnings miss. They are forecasting a 21% peak-to-trough fall in earnings as profit margins go from peak to historical levels. Favored European ETF Vanguard European ETF (VGK) Conditions for a recovery in Japan are emerging according to our Japanese strategist. Our strategist notes that excessive pessimism has eased and many investors are starting to acknowledge undervaluation in Japan. However, he thinks that market instability can continue until early mid-2008 as uncertainty surrounding economic growth and earnings persist throughout the world. Despite our strategist s view that the TOPIX Index is unlikely to move above the current level of 1360 in the near term, he is forecasting a 12-month target of 1600 implying nearly 18% upside. Favored Japan ETFs ishares MSCI Japan Index Fund (EWJ) Vanguard Pacific ETF (VPL) (67% Japan) Despite rallying nearly 15% from their mid-march lows, Asia-Pacific ex. Japan equities still appear attractive in our strategist s opinion. Currently, MSCI Asia-Pacific ex. Japan trades at 13.9 times 12-month forward earnings. This is slightly ahead of the recent low reached in mid-march of 13.0 times, but well below the recent peak of 17.2 times reached in October As a result, driven by 8% real GDP growth, robust domestic demand, 8% earnings growth and continuing currency appreciation our strategist thinks equities can return more than 24% from current levels through the end of Favored Asian ETFs ishares MSCI Hong Kong (EWH) ishares MSCI Singapore (EWS) ishares MSCI South Korea (EWY) ishares MSCI Taiwan (EWT) Our Emerging Market strategy team reduced their recommended allocation from 4% overweight to 2%. While the team still believes in long-term Emerging Market (EM) economic and stock market decoupling, they view the near-term risk/reward tradeoff for equities to be less compelling. Five key reasons lead to their near-term cautious view. (1) The economic situation in the US and Europe continues to deteriorate. (2) The average inflation rate for the eight largest EM countries remains sticky, above 7% for the first time since (3) EM equity valuations are back to long-run average levels and MSCI EM is currently trading within 5% of the team s year-end price target of (4) Earnings revision breadth has deteriorated. (5) The US dollar has been strengthening and our currency team is now recommending taking profits in key EM currencies. Favored Broad-Based Emerging Market ETFs Vanguard Emerging Markets ETF (VWO) 215

331 G L O B A L W E A L T H M A N A G E M E N T Vanguard FTSE All-World ex-us ETF (VEU) BROAD INTERNATIONAL Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VEU Intraday Nav Ticker VEUIV Benchmark Index Ticker (Bloomberg) FTR1WXUS Market Cap ($Mil) 1,855 Outstanding Shares (Mil) 32.2 Avg Daily Trading Volume (Shares) 275,963 Expense Ratio (%) 0.25 Focus Broad International Investment Advisor The Vanguard Group Inception Date 3/12/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 2204 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Auunual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard FTSE All-World ex-us ETF (VEU) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the FTSE All-World ex US Index. The index is a free-float adjusted, market-capitalizationweighted and designed to measure the performance of international equity markets. It includes approximately 2,200 stocks of companies located in 47 countries including both developed and emerging markets. The index will be reviewed quarterly in January, March, June and September to ensure a continuous and accurate representation of the market is maintained. To track the Index, the fund uses an optimization technique to invest in a representative sample of approximately 1,200-1,300 stocks representing 95% of the market cap of its target index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 16.4 Australia 5.5 Japan 15.4 Hong Kong 5.4 France 9.3 Switzerland 5.1 Germany 7.1 Spain 3.7 Canada 6.5 Italy 3.3 Top Sector/Industry Weightings (%) Financials 27.1 Energy 12.4 Materials 11.1 Industrials 9.4 Consumer Discretionary 8.8 Telecommunication Services 7.0 Consumer Staples 6.6 Information Technology 6.2 Utilities 5.9 Health Care 4.7 Top Ten Holdings (%) Bp Plc 1.3 Hsbc Holdings 1.1 Total 1.1 Nestle Ag N 1.1 Vodafone 0.9 Rao Gazprom Ads 0.9 Samsung Elec Gdr 0.9 Bhp Billiton 0.8 Telefonica Esp 0.8 Royal Dutch Shell A Plc 0.8 Top Ten Total 9.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 216

332 G L O B A L W E A L T H M A N A G E M E N T SPDR S&P International Small Cap ETF (GWX) BROAD INTERNATIONAL Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker GWX Intraday Nav Ticker GWXIV Benchmark Index Ticker (Bloomberg) SCRT2BWU Market Cap ($Mil) 358 Outstanding Shares (Mil) 10.8 Avg Daily Trading Volume (Shares) 86,296 Expense Ratio (%) 0.60 Focus International Investment Advisor State Street Global Advisors Inception Date 4/26/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 478 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR S&P International Small Cap ETF (GWX) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P/Citigroup World ex-u.s. Small Cap Index. The Index is designed to measure the performance of the investable universe of small-cap, publicly traded companies domiciled in countries outside the U.S. It includes roughly 4,100 stocks of companies located in approximately 26 countries including both the developed and emerging markets. It is a free-float adjusted and market capitalization-weighted. The Index is rebalanced quarterly in March, June, September, and December. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying Index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Japan 51.4 Singapore 2.7 United Kingdom 18.2 France 2.0 Hong Kong 4.9 Sweden 1.9 Germany 4.0 Canada 1.9 Norway 2.9 Australia 1.7 Top Sector/Industry Weightings (%) Industrials 24.6 Financials 19.3 Consumer Discretionary 17.7 Information Technology 11.6 Materials 8.7 Health Care 6.8 Consumer Staples 4.9 Energy 4.9 n/a 1.1 Utilities 0.4 Top Ten Holdings (%) Randgold Res 0.9 Haw Par Corp Stk 0.8 Premier Oil 0.8 Nankai Electric Railway Co Ltd 0.8 Cafe De Coral 0.7 Takasago International Corp 0.7 Dana Petroleum 0.7 Eldorado Gold 0.7 Doutor Nichires Holdings Co Ltd 0.7 The Miyazaki Bank Ltd 0.7 Top Ten Total 7.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 217

333 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI EAFE Index Fund (EFA) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EFA Intraday Nav Ticker EFAIV Benchmark Index Ticker (Bloomberg) NDDUEAFE Market Cap ($Mil) 47,425 Outstanding Shares (Mil) 621 Avg Daily Trading Volume (Shares) 11,918,382 Expense Ratio (%) 0.35 Focus International Developed Investment Advisor Barclays Global Investors Inception Date 8/14/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 810 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI EAFE Index Fund (EFA) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EAFE Index. The Index is a leading benchmark used to measure international equity performance and comprises 21 MSCI country indexes representing the developed markets outside of North America: Europe, Australasia and the Far East. It consists of over 1100 securities from developed countries including Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The Index is floatadjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The index is fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 22.0 Switzerland 6.8 Japan 20.4 Spain 4.5 France 10.8 Italy 4.0 Germany 9.3 Netherlands 2.8 Australia 7.1 Sweden 2.4 Top Sector/Industry Weightings (%) Financials 26.4 Industrials 12.3 Materials 10.9 Consumer Discretionary 10.3 Energy 8.4 Consumer Staples 8.2 Health Care 6.1 Utilities 5.8 Telecommunication Services 5.5 Information Technology 5.2 Top Ten Holdings (%) Bp Plc 1.8 Hsbc Holdings 1.6 Nestle Ag N 1.4 Total 1.4 Vodafone 1.3 Bhp Billiton 1.1 Royal Dutch Shell A Plc 1.1 Toyota Motor Corp 1.1 Banco Santander Sa 1.1 Rio Tinto Plc 1.0 Top Ten Total 12.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 218

334 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI EAFE Growth Index Fund (EFG) DEVELOPED MARKETS -GROWTH Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EFG Intraday Nav Ticker EFGIV Benchmark Index Ticker (Bloomberg) NDUGEAFF Market Cap ($Mil) 1,412 Outstanding Shares (Mil) 18.4 Avg Daily Trading Volume (Shares) 139,822 Expense Ratio (%) 0.40 Focus International Developed Growth Investment Advisor Barclays Global Investors Inception Date 8/5/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 542 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI EAFE Growth Index Fund (EFG) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EAFE Growth Index. The index consists of stocks with growth characteristics, within the broader MSCI EAFE Index, which offers exposure to 21 developed market countries in Europe, Australasia, and the Far East. It is floatadjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. MSCI assigns stocks to growth and value style indexes using eight factors including three to assess value and five for growth. They target a 50% weight for each market cap segment. Stocks having both or neither style are allocated to each style index in proportionate amounts. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 22.1 Australia 7.1 Japan 19.2 Spain 4.2 Germany 10.5 Sweden 2.7 Switzerland 10.1 Italy 2.3 France 8.4 Finland 2.3 Top Sector/Industry Weightings (%) Materials 17.6 Industrials 16.7 Consumer Staples 13.0 Financials 10.9 Consumer Discretionary 10.1 Health Care 9.3 Information Technology 8.7 Utilities 5.5 Telecommunication Services 3.5 Energy 3.2 Top Ten Holdings (%) Nestle Ag N 2.8 Bhp Billiton 2.2 Telefonica Esp 1.9 Rio Tinto Plc 1.9 Glaxosmithkline Plc 1.9 E.on Ag 1.9 Novartis N 1.8 Roche Gs 1.7 Nokia 1.6 Siemens 1.5 Top Ten Total 19.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 219

335 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI EAFE Value Index Fund (EFV) DEVELOPED MARKETS-VALUE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EFV Intraday Nav Ticker EFVIV Benchmark Index Ticker (Bloomberg) NDUVEAFF Market Cap ($Mil) 1,077 Outstanding Shares (Mil) 15.6 Avg Daily Trading Volume (Shares) 89,945 Expense Ratio (%) 0.40 Focus International Developed Value Investment Advisor Barclays Global Investors Inception Date 8/5/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 535 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI EAFE Value Index Fund (EFV) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EAFE Value Index. The index consists of stocks with value characteristics, within the broader MSCI EAFE Index, which offers exposure to 21 developed market countries in Europe, Australasia, and the Far East. It is floatadjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. MSCI assigns stocks to growth and value style indexes using eight factors including three to assess value and five for growth. They target a 50% weight for each market cap segment. Stocks having both or neither style are allocated to each style index in proportionate amounts. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 21.9 Italy 5.6 Japan 21.3 Spain 4.9 France 13.3 Switzerland 3.5 Germany 8.0 Netherlands 3.4 Australia 6.9 Hong Kong 2.5 Top Sector/Industry Weightings (%) Financials 42.9 Energy 13.6 Consumer Discretionary 10.4 Telecommunication Services 7.9 Industrials 7.5 Utilities 6.1 Materials 4.1 Consumer Staples 3.2 Health Care 2.8 Information Technology 1.5 Top Ten Holdings (%) Bp Plc 3.7 Hsbc Holdings 3.2 Total 2.8 Vodafone 2.7 Royal Dutch Shell A Plc 2.3 Banco Santander Sa 2.3 Toyota Motor Corp 2.2 Royal Dutch Shell B 1.7 Eni Spa 1.6 Bnp Paribas 1.4 Top Ten Total 23.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 220

336 G L O B A L W E A L T H M A N A G E M E N T Vanguard Europe Pacific ETF (VEA) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VEA Intraday Nav Ticker VEAIV Benchmark Index Ticker (Bloomberg) NDDUEAFE Market Cap ($Mil) 1,275 Outstanding Shares (Mil) 27.2 Avg Daily Trading Volume (Shares) 344,707 Expense Ratio (%) 0.12 Focus International Developed Investment Advisor The Vanguard Group Inception Date 7/26/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 600 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Europe Pacific ETF (VEA) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EAFE Index. The Index is used to measure international equity performance and comprises 21 MSCI country indexes representing the developed markets outside of North America: Europe, Australasia and the Far East. The Index consists of over 1100 securities from developed countries including Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The Index is float-adjusted and market capitalization-weighted. MSCI targets their indices to represent about 85% of the total market capitalization by country and industry. The Index is fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August, and November. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying Index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 21.9 Switzerland 6.8 Japan 20.7 Spain 4.4 France 10.8 Italy 3.9 Germany 9.1 Netherlands 2.8 Australia 7.0 Sweden 2.4 Top Sector/Industry Weightings (%) Financials 26.1 Industrials 12.4 Materials 10.5 Consumer Discretionary 10.1 Energy 8.7 Consumer Staples 8.2 Health Care 6.2 Telecommunication Services 5.8 Utilities 5.8 Information Technology 5.6 Top Ten Holdings (%) Bp Plc 1.8 Hsbc Holdings 1.5 Nestle Ag N 1.5 Total 1.4 Vodafone 1.3 Bhp Billiton 1.2 Royal Dutch Shell A Plc 1.1 Banco Santander Sa 1.1 Toyota Motor Corp 1.0 Telefonica Esp 1.0 Top Ten Total 12.8 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 221

337 G L O B A L W E A L T H M A N A G E M E N T WisdomTree DEFA Fund (DWM) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DWM Intraday Nav Ticker DWMIV Benchmark Index Ticker (Bloomberg) WTDIEFTR Market Cap ($Mil) 469 Outstanding Shares (Mil) 7 Avg Daily Trading Volume (Shares) 61,817 Expense Ratio (%) 0.48 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 538 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree DIEFA Fund (DWM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree DIEFA Index. The index measures the performance of companies listed on 21 exchanges in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and have paid at least $5 million in cash dividends on the common stock during the year prior to the Index measurement date. Companies in the index are weighted by its share of the indicated dividend stream, which is defined as the sum of the dividends paid by each of the companies in the index over the prior 12 months. The index is reconstituted annually, at which time each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 23.6 Spain 7.7 France 13.3 Italy 7.5 Australia 9.4 Hong Kong 5.3 Japan 8.9 Switzerland 3.4 Germany 7.8 Sweden 2.9 Top Sector/Industry Weightings (%) Financials 29.7 Energy 11.5 Telecommunication Services 10.8 Utilities 8.9 Industrials 8.2 Consumer Staples 8.2 Consumer Discretionary 8.2 Materials 8.0 Health Care 4.4 Information Technology 2.0 Top Ten Holdings (%) Eni Spa 2.1 Hsbc Holdings 2.0 Telefonica Esp 1.9 Banco Santander Sa 1.9 Bp Plc 1.9 Total 1.9 China Mobile 1.7 Vodafone 1.7 Dt Telekom N 1.3 Royal Dutch Shell A Plc 1.2 Top Ten Total 17.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 222

338 G L O B A L W E A L T H M A N A G E M E N T WisdomTree DEFA High Yielding Equity Fund (DTH) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DTH Intraday Nav Ticker DTHIV Benchmark Index Ticker (Bloomberg) WTDHYTR Market Cap ($Mil) 253 Outstanding Shares (Mil) 4 Avg Daily Trading Volume (Shares) 22,488 Expense Ratio (%) 0.58 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 332 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree DIEFA High Yielding Equity Fund (DTH) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the WisdomTree DIEFA High-Yielding Equity Index. The index is a sub set of the WisdomTree DIEFA Index which measures the performance of companies listed on 21 exchanges in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and have paid at least $5 million in cash dividends on the common stock during the prior year. The High-Yielding Equity Index includes the top 30% of companies ranked by dividend yield that fall within the WisdomTree DIEFA Index. Companies in the index are weighted by their share of the indicated dividend stream, which is defined as the sum of the dividends paid by each of the companies in the index over the prior 12 months. The index is reconstituted annually, at which time each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 28.0 Germany 7.6 France 15.8 Hong Kong 3.2 Australia 12.6 Sweden 2.7 Italy 10.5 Netherlands 2.6 Spain 8.1 Belgium 2.3 Top Sector/Industry Weightings (%) Financials 40.8 Energy 14.0 Telecommunication Services 13.1 Utilities 10.7 Consumer Staples 5.2 Health Care 4.4 Consumer Discretionary 4.4 Materials 3.6 Industrials 3.6 Information Technology 0.3 Top Ten Holdings (%) Hsbc Holdings 3.5 Bp Plc 3.5 Total 3.5 Vodafone 3.1 Eni Spa 3.0 Telefonica Esp 2.6 Banco Santander Sa 2.6 Intesa Sanpaolo 2.2 Royal Dutch Shell A Plc 2.2 Bnp Paribas 1.9 Top Ten Total 28.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 223

339 G L O B A L W E A L T H M A N A G E M E N T WisdomTree International LargeCap Dividend Fund (DOL) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DOL Intraday Nav Ticker DOLIV Benchmark Index Ticker (Bloomberg) WTILDITR Market Cap ($Mil) 164 Outstanding Shares (Mil) 2.5 Avg Daily Trading Volume (Shares) 17,400 Expense Ratio (%) 0.48 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 234 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree International LargeCap Dividend Fund (DOL) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree International LargeCap Dividend Index. The index is a sub set of the WisdomTree DIEFA Index which measures the performance of companies listed on 21 exchanges in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and have paid at least $5 million in cash dividends on the common stock during the prior year. The International LargeCap index includes the 300 largest companies in the WisdomTree DIEFA Index. Companies in the index are weighted by their share of the indicated dividend stream, which is defined as the sum of the dividends paid by each of the companies in the index over the prior 12 months. The index is reconstituted annually when each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 24.8 Australia 7.8 France 14.9 Japan 6.6 Germany 8.8 Hong Kong 4.8 Spain 8.5 Switzerland 3.8 Italy 8.1 Netherlands 3.3 Top Sector/Industry Weightings (%) Financials 33.2 Energy 13.1 Telecommunication Services 12.6 Utilities 9.5 Consumer Staples 7.2 Consumer Discretionary 6.1 Materials 5.9 Health Care 5.1 Industrials 5.1 Information Technology 2.1 Top Ten Holdings (%) Hsbc Holdings 2.9 Total 2.7 Bp Plc 2.5 Eni Spa 2.5 Banco Santander Sa 2.2 Telefonica Esp 2.0 Vodafone 2.0 China Mobile 1.9 Royal Dutch Shell A Plc 1.8 Bnp Paribas 1.6 Top Ten Total 22.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 224

340 G L O B A L W E A L T H M A N A G E M E N T WisdomTree International MidCap Dividend Fund (DIM) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DIM Intraday Nav Ticker DIMIV Benchmark Index Ticker (Bloomberg) WTIMDITR Market Cap ($Mil) 214 Outstanding Shares (Mil) 3.3 Avg Daily Trading Volume (Shares) 31,192 Expense Ratio (%) 0.58 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 475 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree International MidCap Dividend Fund (DIM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the WisdomTree International MidCap Dividend Index. The index is a sub set of the WisdomTree DIEFA Index that measures performance of companies in 21 markets in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and paid at least $5 million in common stock cash dividends in the prior year. Companies in the International MidCap Index represent the top 75% of the market capitalization of the WisdomTree DIEFA Index after the 300 largest companies are removed. Index components are weighted by their share of the indicated dividend stream, which is defined as the sum of the dividends paid by each company over the prior 12 months. The index is reconstituted annually, when each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Japan 16.0 Hong Kong 6.9 United Kingdom 15.3 Germany 4.7 Australia 14.7 Spain 4.4 France 8.8 Finland 4.2 Italy 7.3 Sweden 3.8 Top Sector/Industry Weightings (%) Industrials 21.3 Financials 17.5 Consumer Discretionary 16.1 Materials 15.2 Utilities 9.1 Consumer Staples 7.8 Energy 4.3 Health Care 3.4 Information Technology 3.0 Telecommunication Services 2.3 Top Ten Holdings (%) Wesfarmers 1.8 United Utilities 1.3 Autor Par Rhin 1.1 Telecom Co Of Nz 1.0 Hk Elec Hlds 1.0 Snam Rete Gas 0.9 Bluescope Steel Ltd 0.9 Yara Internat 0.8 Alleanza Assic 0.8 Hkex Top Ten Total 10.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 225

341 G L O B A L W E A L T H M A N A G E M E N T WisdomTree International SmallCap Dividend Fund (DLS) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DLS Intraday Nav Ticker DLSIV Benchmark Index Ticker (Bloomberg) WTISDITR Market Cap ($Mil) 511 Outstanding Shares (Mil) 8.1 Avg Daily Trading Volume (Shares) 39,833 Expense Ratio (%) 0.58 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 675 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree International SmallCap Dividend Fund (DLS) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the WisdomTree International SmallCap Dividend Index. The index is a sub set of the WisdomTree DIEFA Index that measures performance of companies in 21 markets in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and paid at least $5 million in common stock cash dividends in the prior year. Companies in the SmallCap Index represent the bottom 25% of the market capitalization of the WisdomTree DIEFA Index after the 300 largest companies are removed. Index components are weighted by their share of the indicated dividend stream, which is defined as the sum of the dividends paid by each company over the prior 12 months. The index is reconstituted annually, when each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Japan 37.7 Hong Kong 4.4 United Kingdom 24.9 Netherlands 2.7 Australia 6.3 Finland 2.7 Singapore 5.3 New Zealand 2.4 Sweden 4.7 Belgium 2.4 Top Sector/Industry Weightings (%) Industrials 25.7 Consumer Discretionary 18.8 Financials 16.6 Information Technology 10.6 Materials 10.2 Consumer Staples 8.3 Health Care 4.8 Energy 2.9 Utilities 1.3 Telecommunication Services 0.6 Top Ten Holdings (%) Wing Lung Bank 1.4 Euronav 1.2 Kungsleden 1.1 Csr 1.0 Spore Pete 1.0 Stagecoach Group Plc 1.0 Bendigo And Adelaide Bank Ltd 1.0 Electrocomponent 0.9 Orion B 0.9 Smrt Corp 0.8 Top Ten Total 10.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 226

342 G L O B A L W E A L T H M A N A G E M E N T WisdomTree International Dividend Top 100 Fund (DOO) DEVELOPED MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker DOO Intraday Nav Ticker DOOIV Benchmark Index Ticker (Bloomberg) WTI100TR Market Cap ($Mil) 397 Outstanding Shares (Mil) 5.9 Avg Daily Trading Volume (Shares) 42,125 Expense Ratio (%) 0.58 Focus International Developed Investment Advisor WisdomTree Inception Date 6/16/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 95 Options Available N Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree International Dividend Top 100 Fund (DOO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree International Top 100 Index. The index is a sub set of the WisdomTree DIEFA Index which measures the performance of companies listed on 21 exchanges in developed Europe, Japan, Hong Kong, Singapore, Australia or New Zealand that meet certain liquidity requirements and have paid at least $5 million in cash dividends on the common stock during the prior year. The International Dividend Top 100 index measures the performance of the 100 highest yielding of the 300 largest companies in the WisdomTree DIEFA Index. Unlike other WisdomTree International Indexes, a component's weight in the index is determined by its indicated annual dividend yield. The index is reconstituted annually when each components weight is adjusted to reflect its dividend weight in the index. To track the Index, the fund uses an optimization technique to invest in a representative sample of securities in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) United Kingdom 21.7 Hong Kong 5.9 Australia 17.6 Sweden 4.8 France 13.0 Spain 4.1 Italy 9.2 Belgium 3.7 Germany 7.2 Netherlands 3.2 Top Sector/Industry Weightings (%) Financials 48.2 Telecommunication Services 15.6 Utilities 11.3 Energy 8.2 Consumer Staples 5.3 Consumer Discretionary 4.3 Industrials 2.8 Health Care 2.7 Materials Top Ten Holdings (%) Telstra Corp Fpo 2.3 Intesa Sanpaolo 2.1 Westpac Bkg 2.0 Enel Spa 1.8 Woodside Petrolm 1.8 Hang Seng Bk Ltd 1.7 Commonwealth Bk 1.7 Belgacom 1.6 Suncorp-metway 1.6 Dnb Nor Asa 1.6 Top Ten Total 18.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 227

343 G L O B A L W E A L T H M A N A G E M E N T BLDRS Emerging Markets 50 ADR Index Fund (ADRE) EMERGING MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker ADRE Intraday Nav Ticker ADREI Benchmark Index Ticker (Bloomberg) BKTEM Market Cap ($Mil) 938 Outstanding Shares (Mil) 16.9 Avg Daily Trading Volume (Shares) 482,379 Expense Ratio (%) 0.30 Focus Emerging Market ADRs Investment Advisor PowerShares Capital Inception Date 11/13/2002 Portfolio Structure Unit Investment Trust Approx. Number of Stocks in Fund 50 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description BLDRS Emerging Markets 50 ADR Index Fund (ADRE) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of The Bank of New York Emerging Markets 50 ADR Index. The index is market cap-weighted and includes 50 of the most actively traded companies from international emerging markets. This index is uses free float adjusted market capitalizations and is reviewed and rebalanced quarterly in March, June, September and December. ADRE is structured as a unit investment trust and must hold all of the securities in substantially the same weights as its underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Brazil 59.5 Italy 3.1 India 14.3 Taiwan 2.9 Israel 8.9 Peru 1.4 Russian Federation 6.1 Korea, Republic Of 3.8 Top Sector/Industry Weightings (%) Financials 22.0 Materials 21.4 Energy 21.2 Telecommunication Services 12.2 Health Care 8.9 Information Technology 7.9 Consumer Staples 3.0 Utilities 2.0 Industrials 1.3 Consumer Discretionary 0.0 Top Ten Holdings (%) Petroleo Brasileiro Adr 18.1 Co Vale Do Rio 12.1 Teva Pharm 8.9 Banco Bradesco 8.5 Banco Itau Sa Pr 7.2 Infosys Technologies Ltd 6.0 Companhia Sid 4.6 Icici Bank Ltd 4.1 Mobile Telesys 3.5 Gerdau Sa 3.3 Top Ten Total 76.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 228

344 G L O B A L W E A L T H M A N A G E M E N T Claymore/BNY BRIC ETF (EEB) EMERGING MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EEB Intraday Nav Ticker EED Benchmark Index Ticker (Bloomberg) BKBRIC Market Cap ($Mil) 1,244 Outstanding Shares (Mil) 22.8 Avg Daily Trading Volume (Shares) 528,860 Expense Ratio (%) 0.60 Focus Emerging Markets Investment Advisor Claymore Advisors LLC Inception Date 9/21/2006 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 88 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Claymore/BNY BRIC ETF (EEB) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the Bank of New York BRIC Select ADR Index. The index includes ADRs and GDRs from Brazil, Russia, India and China that meet certain price and liquidity requirements. The index is modified market cap weighted and is rebalanced quarterly. Additions or deletions to the index are made by the ADR index administrator and are subject to periodic review by the Bank of New York ADR Index Committee. To track the index, the fund may use optimization techniques, however, it will generally hold all of the stocks in the index in proportionately the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Brazil 67.8 Hong Kong 0.6 India 17.0 United States 0.4 Russian Federation 8.9 China, People''s Republic Of 4.1 United Kingdom 1.2 Top Sector/Industry Weightings (%) Materials 25.9 Financials 21.9 Energy 18.6 Information Technology 9.6 Telecommunication Services 9.0 Industrials 4.3 Utilities 4.0 Consumer Staples 3.8 Consumer Discretionary 2.2 Health Care 0.6 Top Ten Holdings (%) Petroleo Brasileiro Adr 18.6 Co Vale Do Rio 12.4 Banco Bradesco 8.8 Banco Itau Sa Pr 6.5 Infosys Technologies Ltd 4.8 Companhia Sid 4.8 Icici Bank Ltd 4.3 Mobile Telesys 3.6 Gerdau Sa 3.5 Comphania De Bebidas Das Americas 3.1 Top Ten Total 70.5 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Claymore ETFs current to the most recent month-end at the following website:www.claymore.com. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 229

345 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI Emerging Markets Index Fund (EEM) EMERGING MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EEM Intraday Nav Ticker EEMIV Benchmark Index Ticker (Bloomberg) NDUEEGF Market Cap ($Mil) 26,863 Outstanding Shares (Mil) 180 Avg Daily Trading Volume (Shares) 18,616,994 Expense Ratio (%) 0.75 Focus Emerging Markets Investment Advisor Barclays Global Investors Inception Date 4/7/2003 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 347 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI Emerging Markets Index Fund (EEM) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EM Index. The index seeks to measure equity market performance in the global emerging markets. It consists of over 800 securities from 26 emerging market countries including Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Index Breakdown May 12, 2008 Country Weightings (%) Brazil 16.2 South Africa 6.8 China 14.5 India 6.6 Korea 13.1 Mexico 4.7 Taiwan 11.1 Malaysia 2.3 Russia 10.3 Israel 2.3 Top Sector/Industry Weightings (%) Financials 20.6 Energy 19.1 Materials 16.7 Telecommunication Services 11.1 Information Technology 10.7 Industrials 8.1 Consumer Discretionary 4.9 Consumer Staples 4.4 Utilities 3.2 Health Care 1.5 Top Ten Holdings (%) Rao Gazprom Ads 3.9 China Mobile 2.9 Petroleo Brasileiro Adr 2.5 Samsung 2.2 Petrobras ON 2.1 Vale Do rio Doce PNA 1.8 Vale Do Rio Doce ON 1.5 America Movil 1.4 Lukoil 1.4 Taiwan Semi 1.3 Top Ten Total 21.0 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 230

346 G L O B A L W E A L T H M A N A G E M E N T Vanguard Emerging Markets ETF (VWO) EMERGING MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VWO Intraday Nav Ticker HVO Benchmark Index Ticker (Bloomberg) NDUEEGF Market Cap ($Mil) 7,372 Outstanding Shares (Mil) 71.4 Avg Daily Trading Volume (Shares) 892,389 Expense Ratio (%) 0.25 Focus Emerging Markets Investment Advisor The Vanguard Group Inception Date 3/10/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 964 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Emerging Markets ETF (VWO) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI EM Index. The index seeks to measure equity market performance in the global emerging markets. It consists of over 800 securities from 26 emerging market countries including Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Index Breakdown May 12, 2008 Country Weightings (%) Brazil 16.2 South Africa 6.8 China 14.5 India 6.6 Korea 13.1 Mexico 4.7 Taiwan 11.1 Malaysia 2.3 Russi 10.3 Israel 2.3 Top Sector/Industry Weightings (%) Financials 20.6 Energy 19.1 Materials 16.7 Telecommunication Services 11.1 Information Technology 10.7 Industrials 8.1 Consumer Discretionary 4.9 Consumer Staples 4.4 Utilities 3.2 Health Care 1.5 Top Ten Holdings (%) Rao Gazprom Ads 3.9 China Mobile 2.9 Petroleo Brasileiro Adr 2.5 Samsung Elec Gdr 2.2 Petrobras 2.2 Vale DO RIO Doce PNA 1.8 Vale DO Rio Doce ON 1.5 America Movil 1.4 Lukoil 1.4 Taiwan Semi 1.3 Top Ten Total 21.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 231

347 G L O B A L W E A L T H M A N A G E M E N T SPDR S&P BRIC 40 ETF (BIK) EMERGING MARKETS Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker BIK Intraday Nav Ticker BIKIV Benchmark Index Ticker (Bloomberg) SPTRBRIC Market Cap ($Mil) 324 Outstanding Shares (Mil) 9.9 Avg Daily Trading Volume (Shares) 97,106 Expense Ratio (%) 0.40 Focus Emerging Markets Investment Advisor State Street Global Advisors Inception Date 6/22/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 40 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description SPDR S&P BRIC 40 ETF (BIK) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the S&P BRIC 40 Index. The index includes 40 of the most actively traded American or Global Depository Receipts (ADRs or GDRs) of companies from Brazil, Russia, India, and China which trade on the Hong Kong Stock Exchange, London Stock Exchange, NASDAQ, and/or NYSE. This Index is free-float adjusted, market capitalization-weighted. It is reviewed semi-annually and typically rebalanced annually in December. To track the Index, the fund generally will invest in all of the securities composing its underlying Index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) China (Hong Kong) 38.4 Russian Federation 29.6 Brazil 26.0 India Top Sector/Industry Weightings (%) Energy 42.1 Financials 26.7 Materials 13.1 Telecommunication Services 12.0 Information Technology 2.0 Consumer Staples 1.4 Utilities 1.1 Industrials 1.0 n/a Top Ten Holdings (%) Rao Gazprom Ads 10.3 China Mobile 8.7 Petroleo Brasileiro Adr 7.4 Co Vale Do Rio 6.6 Lukoil Hldgs 5.2 Icbc 4.0 Banco Bradesco 3.8 China Life 3.6 China Construction Bank 3.5 Petrochina 3.4 Top Ten Total 56.4 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for SPDRs current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 232

348 G L O B A L W E A L T H M A N A G E M E N T PowerShares International Dividend Achievers Portfolio (PID) DIVIDEND-INCOME Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PID Intraday Nav Ticker FKJ Benchmark Index Ticker (Bloomberg) DAT Market Cap ($Mil) 556 Outstanding Shares (Mil) 28.1 Avg Daily Trading Volume (Shares) 119,442 Expense Ratio (%) 0.50 Focus International Dividend Investment Advisor PowerShares Capital Inception Date 9/15/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 97 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares International Dividend Achievers Portfolio (PID) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the International Dividend Achievers Index. The index is comprised of non-us companies selected by Mergent, Inc. as international Dividend Achievers. Components include dividend paying American Depositary Receipts (ADRs) and non-u.s. common or ordinary stocks trading on the NYSE, NASDAQ or AMEX that have increased consistently their aggregate annual regular dividend payments over the course of the last five calendar or fiscal years. The index uses a dividend yield weighting methodology incorporating current dividend yield. It is reconstituted annually and is rebalanced quarterly in January, April, July and October. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 24.0 Telecommunication Services 19.3 Energy 10.4 Consumer Staples 9.3 Consumer Discretionary 9.3 Utilities 7.7 Health Care 7.2 Industrials 5.8 Information Technology 4.4 Materials 2.5 Top Ten Holdings (%) Bt Group Plc 9.2 Ing Groep Nv 6.5 Huaneng Pow Intl 6.3 Astrazeneca 6.3 Vodafone Group 6.2 Bp Plc 6.2 Carnival Corp 5.0 Diageo Plc 4.4 Repsol S.a. 4.2 Unilever Nv 4.0 Top Ten Total 58.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 233

349 G L O B A L W E A L T H M A N A G E M E N T UltraShort FTSE/Xinhua China 25 ProShares (FXP) LEVERAGED INVERSE Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker FXP Intraday Nav Ticker FXPIV Benchmark Index Ticker (Bloomberg) FXTID Market Cap ($Mil) 644 Outstanding Shares (Mil) 9.7 Avg Daily Trading Volume (Shares) 2,692,582 Expense Ratio (%) 0.95 Focus Leveraged Inverse Investment Advisor ProShares Inception Date 11/8/2007 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund n/a Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarter Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description UltraShort FTSE/Xinhua China 25 ProShares (FXP) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 that is designed to track double the inverse of the daily performance of the FTSE/Xinhua China 25 Index such that the value of the ETF goes up 200% of what the index goes down and vice versa. The index represents the performance of the largest companies in China available to international investors and consists of 25 of the largest and most liquid Chinese stocks. It contains "H" Shares of companies incorporated in China and "Red Chip" shares of companies incorporated in Hong Kong that have the majority of their business in China. Both share types are listed and trade in Hong Kong. Components are reviewed quarterly. The index is free float adjusted and modified market cap weighted with individual component weightings capped on a declining basis with the top position capped at 10%. To achieve twice the inverse daily performance of the Index, the fund will invest in Treasury Bills and utilize derivative instruments including equity swaps and index futures. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 41.0 Energy 23.7 Telecommunication Services 21.4 Industrials 8.8 Materials 2.6 Utilities 1.9 Consumer Discretionary Top Ten Holdings (%) Cash Equity Swaps/derivatives N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 N/a3 N/a4 N/a5 N/a6 N/a7 N/a8 N/a9 N/a10 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. After one year, you may obtain performance data for ProShares ETFs current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 234

350 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI Pacific ex-japan Index Fund (EPP) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EPP Intraday Nav Ticker EPPIV Benchmark Index Ticker (Bloomberg) NDDUPFXJ Market Cap ($Mil) 4,024 Outstanding Shares (Mil) 26.6 Avg Daily Trading Volume (Shares) 283,652 Expense Ratio (%) 0.50 Focus Pacific Ex Japan Investment Advisor Barclays Global Investors Inception Date 10/26/2001 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 188 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI Pacific ex-japan Index Fund (EPP) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the MSCI Pacific ex-japan Index. The index consists of stocks from four developed market countries: Australia, Hong Kong, New Zealand, and Singapore. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Australia 66.6 Hong Kong 21.2 Singapore 11.1 New Zealand Top Sector/Industry Weightings (%) Financials 45.0 Materials 20.4 Industrials 9.2 Consumer Staples 6.1 Consumer Discretionary 4.9 Energy 4.3 Telecommunication Services 3.5 Utilities 2.8 Health Care 2.3 Information Technology 1.5 Top Ten Holdings (%) Bhp Billiton 10.8 Commonwealth Bk 4.1 Natl Aust Bank 3.8 Westpac Bkg 3.7 A N Z Bank 3.0 Rio Tinto 2.9 Woolworths 2.3 Westfield Group 2.1 Woodside Petrolm 1.9 Cheung Kong 1.8 Top Ten Total 36.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 235

351 G L O B A L W E A L T H M A N A G E M E N T Vanguard Pacific ETF (VPL) UTILITIES Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker VPL Intraday Nav Ticker SVY Benchmark Index Ticker (Bloomberg) MXPC Market Cap ($Mil) 1,684 Outstanding Shares (Mil) 25.2 Avg Daily Trading Volume (Shares) 129,328 Expense Ratio (%) 0.12 Focus Japan & Devlp'd Asia Investment Advisor The Vanguard Group Inception Date 3/10/2005 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 368 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description Vanguard Pacific ETF (VPL) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the MSCI Pacific Index. The index consists of approximately 550 common stocks of companies located in five developed market countries in the Asia Pacific region including Japan, Australia, Hong Kong, New Zealand, and Singapore. It is floatadjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The index fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund generally will invest in all of the securities in the index in proportion to their weightings in the index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Country Weightings (%) Japan 66.1 Australia 22.6 Hong Kong 7.1 Singapore 3.7 New Zealand 0.4 Top Sector/Industry Weightings (%) Financials 27.9 Industrials 16.6 Consumer Discretionary 14.1 Materials 12.9 Information Technology 9.9 Consumer Staples 5.2 Health Care 4.2 Utilities 3.9 Telecommunication Services 3.1 Energy 2.3 Top Ten Holdings (%) Bhp Billiton 3.6 Toyota Motor Corp 3.3 Mitsubishi Ufj Financial Group Inc 2.2 Commonwealth Bk 1.4 Canon Inc 1.4 Sumitomo Mitsui Financial Group Inc 1.3 Natl Aust Bank 1.3 Westpac Bkg 1.3 Honda Motor Co Ltd 1.2 Mitsubishi Corp 1.2 Top Ten Total 18.2 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for Vanguard ETFs current to the most recent month-end at the following website: https://flagship.vanguard.com/vgapp/hnw/fundsviperbyname. ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 236

352 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI Australia Index Fund (EWA) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EWA Intraday Nav Ticker EWAIV Benchmark Index Ticker (Bloomberg) NDDUAS Market Cap ($Mil) 1,484 Outstanding Shares (Mil) 50.8 Avg Daily Trading Volume (Shares) 2,042,697 Expense Ratio (%) 0.51 Focus Australia Investment Advisor Barclays Global Investors Inception Date 3/12/1996 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 87 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI Australia Index Fund (EWA) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the MSCI Australia's Index. The index consists of stocks representing Australias larger and most established public companies. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 40.8 Materials 30.1 Consumer Staples 8.6 Energy 6.4 Industrials 5.5 Health Care 3.1 Consumer Discretionary 2.7 Telecommunication Services 1.8 Utilities 0.6 Information Technology 0.4 Top Ten Holdings (%) Bhp Billiton 16.2 Commonwealth Bk 6.2 Natl Aust Bank 5.7 Westpac Bkg 5.6 A N Z Bank 4.6 Rio Tinto 4.3 Woolworths 3.5 Westfield Group 3.2 Woodside Petrolm 2.9 Wesfarmers 2.5 Top Ten Total 54.7 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 237

353 G L O B A L W E A L T H M A N A G E M E N T ishares FTSE/Xinhua China 25 Index Fund (FXI) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker FXI Intraday Nav Ticker FXIIV Benchmark Index Ticker (Bloomberg) XIN0I Market Cap ($Mil) 7,622 Outstanding Shares (Mil) 49.4 Avg Daily Trading Volume (Shares) 7,996,869 Expense Ratio (%) 0.74 Focus China Investment Advisor Barclays Global Investors Inception Date 10/8/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 27 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares FTSE/Xinhua China 25 Index Fund (FXI) is an exchangetraded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the FTSE/Xinhua China 25 Index. The index represents the performance of the largest companies in China available to international investors and consists of 25 of the largest and most liquid Chinese stocks. It contains "H" Shares of companies incorporated in China and "Red Chip" shares of companies incorporated in Hong Kong that have the majority of their business in China. Both share types are listed and trade in Hong Kong. Components are reviewed quarterly. The index is free float adjusted and modified market cap weighted with individual component weightings capped on a declining basis with the top position capped at 10%. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 42.7 Energy 24.7 Telecommunication Services 19.4 Industrials 10.0 Materials 2.0 Utilities 1.0 Consumer Discretionary Top Ten Holdings (%) China Mobile 9.8 Icbc 8.4 China Life 8.4 Petrochina 7.4 Cnooc 6.2 China Construction Bank 4.3 Bank Of China 4.2 Ping An 4.2 China Petroleum And Chemical Corp 4.1 China Merchants Bank -h 4.1 Top Ten Total 61.1 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for ishares current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 238

354 G L O B A L W E A L T H M A N A G E M E N T PowerShares Golden Dragon Halter USX China Portfolio (PGJ) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker PGJ Intraday Nav Ticker TGJ Benchmark Index Ticker (Bloomberg) HXC Market Cap ($Mil) 579 Outstanding Shares (Mil) 19.8 Avg Daily Trading Volume (Shares) 514,110 Expense Ratio (%) 0.60 Focus China Investment Advisor PowerShares Capital Inception Date 12/8/2004 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 95 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Quarterly Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description PowerShares Golden Dragon Halter USX China Portfolio (PGJ) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the Halter USX China Index. The index is comprised of securities of companies that derive a majority of their revenue from the People's Republic of China that are listed on a major US exchange. The index is calculated using a modified market-cap weighted methodology. The list of component stocks is reviewed on a monthly basis and the portfolio is rebalanced and reconstituted quarterly in March, June, September and December at the discretion of a selection committee. To track the index, the fund generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Information Technology 35.2 Industrials 27.1 Utilities 18.7 Consumer Discretionary 10.5 Health Care 8.5 Consumer Staples 0.0 Energy 0.0 Financials 0.0 Materials 0.0 Telecommunication Services 0.0 Top Ten Holdings (%) Baidu.com 24.7 Huaneng Pow Intl 18.7 Suntech Power Holdings Adr 13.4 Focus Media Holding 10.5 Mindray Medical International Ltd 8.5 Ldk Solar Co Ltd Adr 8.2 Ja Solar Holding Co Ltd 7.5 Yingli Green Energy Hold Adr 6.2 Trina Solar Ltd 2.2 Aluminum China 0.0 Top Ten Total Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 239

355 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI Hong Kong Index Fund (EWH) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EWH Intraday Nav Ticker EWHIV Benchmark Index Ticker (Bloomberg) NDDUHK Market Cap ($Mil) 2,204 Outstanding Shares (Mil) Avg Daily Trading Volume (Shares) 7,078,352 Expense Ratio (%) 0.52 Focus Hong Kong Investment Advisor Barclays Global Investors Inception Date 3/12/1996 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 53 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI Hong Kong Index Fund (EWH) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the MSCI Hong Kong Index. The index consists of stocks representing Hong Kongs larger and most established public companies. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are fully rebalanced annually in May and reviewed and rebalanced if necessary in February, August and November. To track the index, the fund uses an optimization technique to invest in a representative sample of securities in the underlying index. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Financials 56.8 Industrials 13.8 Consumer Discretionary 11.3 Utilities 10.5 Information Technology 4.7 Telecommunication Services 1.6 Consumer Staples 0.7 Materials Top Ten Holdings (%) Hutchison 7.8 Cheung Kong 7.7 Hkex Sun Hung Kai Pro 7.4 Hang Seng Bk Ltd 5.3 Esprit Hold Clp Holdings 3.6 Hk & China Gas 3.4 Swire Pacific A 3.4 Boc Hong Kong 3.3 Top Ten Total 53.6 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for the fund current to the most recent monthend at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 240

356 G L O B A L W E A L T H M A N A G E M E N T WisdomTree India Earnings Fund (EPI) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EPI Intraday Nav Ticker EPIIV Benchmark Index Ticker (Bloomberg) WTIND Market Cap ($Mil) 258 Outstanding Shares (Mil) 11.2 Avg Daily Trading Volume (Shares) n/a Expense Ratio (%) 0.88 Focus India Investment Advisor WisdomTree Inception Date 2/22/2008 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 120 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency n/a Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description WisdomTree India Earnings Fund (EPI) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940 designed to track the performance of the WisdomTree India Earnings Index. The index is comprised of a diverse mix of mostly larger Indian companies listed on a major Indian exchange that are eligible for purchase by foreign investors. Constituents must have a market cap greater than $200 million, a six-month average daily trading volume over 250,000 shares, and a P/E ratio above 2. The index uses a fundamental weighting methodology and weights companies based on prior fiscal year earnings adjusted for the shares available for foreign purchase. It is rebalanced quarterly. To track the index, the ETF generally will invest in all of the securities composing its underlying index in substantially the same weights. Price & NAV Performance Portfolio Breakdown May 12, 2008 Top Sector/Industry Weightings (%) Energy 25.1 Materials 14.9 Financials 13.1 Information Technology 12.8 Telecommunication Services 7.6 Industrials 7.5 Utilities 5.2 Consumer Discretionary 4.8 Consumer Staples 4.7 Health Care 4.3 Top Ten Holdings (%) Reliance-a 14.1 O N G C-b1 6.6 Infosys Tech B 6.3 Icici Bank-b1 5.1 Hous Dev Fin-a 3.6 Reliance Commu 2.9 Sterlite (i)-a 2.5 Satyam Comp-b1 2.3 Hind Unilever Ltd 2.0 Jindal Steel 1.9 Top Ten Total 47.3 Source: Bloomberg, Company Data, Thompson, FactSet. The performance data included herein represent past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. You may obtain performance data for WisdomTree ETFS current to the most recent month-end at the following website: ETFs do not charge sales loads or other nonrecurring fees, but you may pay a brokerage commission on the purchase or sale of ETF shares. Any performance data shown in this report does not reflect the deduction of a brokerage commission, which would reduce the performance quoted. 241

357 G L O B A L W E A L T H M A N A G E M E N T ishares MSCI Malaysia Index Fund (EWM) ASIA/PACIFIC Pricing and Fund Data 5/12/ Week High Low Price ($) Fund Ticker EWM Intraday Nav Ticker EWMIV Benchmark Index Ticker (Bloomberg) NDDUMAF Market Cap ($Mil) 1,054 Outstanding Shares (Mil) 89.8 Avg Daily Trading Volume (Shares) 4,120,516 Expense Ratio (%) 0.51 Focus Malaysia Investment Advisor Barclays Global Investors Inception Date 3/12/1996 Portfolio Structure Open-End Investment Company Approx. Number of Stocks in Fund 57 Options Available Y Minimum Trade Size (Shares) 1 Distribution Frequency Annual Annualized Performance (%) March 31, 2008 Since 3 Mo 1 Yr 3 Yr 5 Yr 10 Yr Incept Price NAV Distribution History ($) YTD 2008 Income Capital Gains Total Fund Description ishares MSCI Malaysia Index Fund (EWM) is an exchange-traded fund, registered with the SEC under the Investment Company Act of 1940, which is designed to track the performance of the MSCI Malaysia Index. The index consists of stocks representing Malaysias larger and most established public companies. It is float-adjusted and market capitalization weighted. MSCI targets that their indexes represent about 85% of total market capitalization by country and industry. The indexes are ful