Tag Archives: Executive Compensation

INTERNAL REVENUE CODE SECTION 409A

May 13, 2016 By in Employment Contracts, Uncategorized Tags: , , , Leave a comment

 

BY G. A. FINCH

If your employment agreement has deferral of compensation provisions, you may very well see a section or paragraph captioned “Internal Revenue Code Section 409A” or simply “409A.”  Its official citation is 26 U.S. Code Section 409A – Inclusion in gross income of deferred compensation under nonqualified deferred compensation plans.

This section is too complex and tedious for most lay person executives to understand and figure out.  Your reading Section 409A of the IRS Code is certainly an instant cure for insomnia.080914_jmanscratchhead_tnb

At the outset, before you execute an employment agreement, your retaining an attorney is necessary to interpret and apply Section 409A to the various scenarios of deferral of compensation to ascertain whether such compensation adheres to Section 409A’s deferrals and distributions timing rules.

Failure to comply with the rules concerning deferred compensation has onerous consequences of 1) inclusion of such deferred compensation as gross income for the subject taxable year, 2) payment of the amount of interest on the underpayments, and 3) a penalty amount equal to 20% of the deferred compensation which is required to be included in gross income.IRS_tnb

Accordingly, employers often have a Section 409A provision in the employment agreement that allows the employer to adjust payments under the agreement to comply with Section 409A and allows the employer to disclaim any liability to the employee.

A typical provision can be lengthy paragraphs and include some language like the following:

 

“Anything in this Agreement to the contrary notwithstanding, the parties intend that   all payments and benefits under this Agreement comply with Section 409A of the Code and the regulations promulgated thereunder and, accordingly, to the maximum extent permitted by law, this Agreement shall be interpreted in a manner in compliance therewith.  To the extent that any provision hereof is modified in order to comply with Section 409A, such modification shall be made in good faith and shall, to the maximum extend reasonably possible, maintain the original intent and economic benefit to you  and the Employer of the applicable provision without violating the provisions of Section 409A.  Notwithstanding the foregoing, the Employer shall not be required to assume any increased economic burden in connection therewith.  Although the Employer intends to administer this Agreement so that it would be exempt or comply with the requirements of Code Section 409A, the Employer does not represent or warrant that this Agreement will be exempt from, or otherwise comply with, Code Section 409A or any other provision of applicable law.  Neither the Employer, its affiliates, nor their respective directors, officers, employees or advisers shall be liable to you (or any other individual claiming a benefit through you) for any tax, interest, or penalties you may owe as a result of compensation paid out pursuant hereto, and the Employer shall have no obligation to indemnify or otherwise protect you from the obligation to pay taxes pursuant to Code Section 409A.”

 

The point of this blog post is that your deferred compensation provisions could trigger 409A tax consequences and your employer, through its employment contract with you, is shifting the risk to you as employee.

POWER WORD PLAY (A Term, Word, or Concept an Executive Ought to Know): UNIT APPRECIATION RIGHTS

August 19, 2015 By in Compensation, Equity Based Compensation, Executive Glossary, General Tags: Leave a comment

BY G. A. FINCH

Unit Appreciation Rights (for limited liability companies and known as Stock Appreciation Rights for corporations) are a form of executive compensation tied to the performance of a set amount of units or shares within a set time period.  They could include only compensation tied to the amount of increase in the value of equity,  or compensation that comprises both such increase and the original value of the equity.

The compensation may be cash payments or equity equivalent based on the original full value of a number of units that an executive holds and/or any increase in value (the difference between the price of the units at the time of grant and the price of the units upon exercisability). When an executive exercises his right, a company’s Unit Appreciation Rights Plan may allow the company to pay in cash or real common equity of the company or a combination thereof.

The units granted under Unit Appreciation Rights are not real units of ownership in a company entity, but rather are hypothetical “Phantom Units”. The company will grant an executive a number of units, e.g. 3,000 which will have an initial price per Phantom Unit, e.g. $30.00. The units will vest after a set period, e.g. two years after the date of grant while the executive is still employed. After vesting and before any expiration date, the Unit Appreciation Right becomes exercisable by the executive either in partial amounts or in the full amount depending on the terms and conditions of the company’s Unit Appreciation Rights Plan. If not exercised during the executive’s lifetime and assuming that an expiration date has not occurred, then any person empowered under the deceased executive’s estate ordinarily could exercise the Unit Appreciation Right.

POWER WORD PLAY (A Term, Word, or Concept an Executive Ought to Know): VESTING

March 19, 2015 By in Compensation, Executive Glossary Tags: , Leave a comment

BY G. A. FINCH

 

As the saying goes, the only dumb question is the unasked question. Sometimes employees and sophisticated executives are unsure about the concept of “vesting.” The terms “vest” and “vested” are part and parcel of any employee benefits system. It pertains to when an employee’s right to a benefit becomes ripe and irrevocable.

 
For example, “vest” is a term that is used in describing and accessing employee benefits like retirement payments or grants of stock to employees.

 
Vesting is the time when specified benefits provided to an employee become certain and complete and are no longer contingent on the employee continuing to work for the employer.  When vested, the entitlement to the benefit becomes an absolute right.  Obviously, this right to a benefit may not mean much if the employer  becomes insolvent.

 
When an executive leaves his employment for any reason, he must scrutinize his benefits materials, employment contract, if any, and his separation agreement, if any, to ascertain what benefits to which he is entitle and which benefits have vested. If the benefits materials are dense and confusing, then he should consult his benefits or human resources department to ensure his understanding. If the employee has engaged an attorney to represent him in his separation, the attorney may also help the employee to evaluate what benefits have or have not vested.

MANAGEMENT SUCCESSION PLANNING: BE LIKE A BOY SCOUT AND BE PREPARED

September 21, 2011 By in General, Management Succession Planning Tags: , , , Leave a comment

By G. A. FINCH

A client recently asked for advice concerning its creation of a management succession plan.  Given the recent tenth anniversary of 9/11, it was a timely request for assistance.

Who Is Doing Succession Planning

I wanted to update my knowledge of the best practices for management succession and started my due diligence by canvassing four Fortune 500 general counsels, a CEO of a manufacturing company and three management consultants on their management succession plan templates.    This was not a very scientific sampling, but the polling  gave me a sense of what companies were doing or not doing concerning planning for management succession.

Only one of the four Fortune 500 companies had a management succession plan. The other three and the non-Fortune 500 company did not.  Two management consultant companies did not have any templates or experience advising companies on succession plans and the third was working on developing one.

Of course everyone contacted thought it was a good idea to have one and some felt a little sheepish in admitting to not having a plan.  A few of the ones who did not have a management succession plan said that there were occasional conversations at board meetings about resident executive “talent” that could be potential candidates for CEO succession.

Risk Management

We all have heard about major companies whose CEO became seriously ill or suddenly died.  We also have heard where top layers of management have been decimated by catastrophic incidents like the 9/11 terrorist attacks on the World Trade Center Towers.   Hurricane Katrina and the Japanese earthquake/tsunami nuclear power plant meltdown are additional reminders of how unanticipated disasters can wreak havoc on an unprepared company and its region.

Stockholders, investors, employees and major customers certainly want to know what happens in “what if?” scenarios.

Mechanics Of Doing A Plan

In my updated research on management succession plans, I found that there are three avenues a company can take: 1) do its own plan; 2) buy software to do a plan; or 3) hire an outside consultant to help create a plan.

Basically, there are three degrees of planning: A) create a list of successors for important positions and ensure the successors have the leadership/management skills that are aligned with the mission, culture and business strategy of the organization; B) develop an ongoing spreadsheet identifying, evaluating, and training/grooming executives and employees in multiple layers for many critical positions in the company;  or C) set up an elaborate system of back-up infrastructure and contingency plans for command and control in the event of emergencies.

Any one of the above degrees of planning requires a process that ultimately results in a document to which a company can refer when there is an incident of succession.

Do What You Must Do

I suspect many executives and corporate boards feel about succession plans the way many individuals feel about estate planning:  it is an unpleasant reminder of one’s mortality that can be put off until tomorrow.  No one likes to dwell on the time when one will not be around or no longer relevant.

I would wager that when Steve Jobs stepped down from Apple, there was a succession plan in place to ensure a smooth transition.

Does your company have a succession plan?  If not, when?

Executive leadership is doing the tasks that others will not or cannot do.

P.S.: On September 21st, I was at a breakfast seminar on “evaluating board members” and it was pointed out by the panelists that boards of directors are notorious for not doing succession planning.

SAY ON PAY: DODD-FRANK ACT

August 11, 2011 By in Compensation Tags: , , Leave a comment

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) had a recent first anniversary (it became law on July 21, 2010).  The legislation responded to the financial meltdown that occurred toward the end of the last decade and contains the greatest federal legislative financial reforms since the Great Depression of the 1930s.

Dodd-Frank covers a lot of ground.  Noteworthy for executives of public companies are its provisions concerning shareholders’ approval of executive compensation.

At least once every three years, Dodd-Frank gives shareholders the right to an advisory vote on the compensation of “named executive officers,” who are the principal executive officer, the principal financial officer and the three most highly compensated executive officers other than the principal executive officer and principal financial officer.  This vote on executive compensation is commonly called “Say on Pay.”

At least once every six years, Dodd-Frank also authorizes shareholders to have an advisory vote to determine the frequency of shareholders’ vote on executive compensation of a public company, i.e. whether the Say-on-Pay vote should take place every one, two or three years.

Finally, Dodd-Frank provides shareholders an advisory vote on all severance compensation paid to named executive officers (the top five executives mentioned above) upon an acquisition, merger, consolidation or a proposed sale or disposition of all or  substantially all the assets of a public company.  In other words, this is Dodd-Frank’s provision for shareholder approval of so-called “Golden Parachute” compensation.  Dodd-Frank specifically requires the vote on this shareholders’ resolution to approve Golden-Parachute compensation to be separate from any shareholder vote to approve an acquisition, merger, consolidation, etc.

As a result of Dodd-Frank, corporate board compensation committees must be much more rigorous in setting and justifying the compensation paid to the top executives of their respective companies.

DO YOU KNOW ABOUT RESTRICTED STOCK AND AN IRS SECTION 83(b) ELECTION?

July 23, 2011 By in Compensation, Equity Based Compensation Tags: , Leave a comment

We have noted in other blog articles how “restricted stock” is a widely used form of executive compensation.  Restricted stock is a grant of stock that vests over time and may or may not be tied to performance measures like year-end profitability. Restricted stock is frequently tied to length of time working for an employer.   A typical grant provides that the shares will vest at the end of a fixed period, e.g., five years from the date of grant, if the executive remains employed by the company.

Any Executive who is eligible to receive restricted stock ought to know about the availability of an Internal Revenue Code Section 83(b) election.  Not knowing about a Section 83(b) election could result in serious tax consequences to the Executive.

An Executive who is about to receive restricted stock should immediately consult a tax accountant or tax attorney.

I asked my law firm tax partners, Richard Sawdey and Richard Harbaugh, to give me an updated primer on Section 83(b) and they contributed substantially to this post.  Here is a snapshot of Section 83(b) and why it is so important.

When a company transfers restricted stock to an Executive in connection with employment, Section 83 provides that the Executive will recognize ordinary income in an amount equal to the excess of the fair market value of the stock as of the date when they are no longer subject to a real risk of forfeiture over the amount, if any, paid for the stock.

In the example we are discussing, the Executive’s restricted shares are subject to a substantial risk of forfeiture until the five-year vesting period has expired.  Thus, under Section 83, the fair market value of the stock at the end of the five-year period will be the amount of taxable income resulting from the grant.

Section 83(b) permits the executive to make an election, instead, to include the fair market value of the shares in income in the year in which the award was made.  If this election is made, the amount of income is determined based on the then value of the shares without regard to the possible forfeiture of the shares.

A major caveat is that the Executive must make the election within 30 days of the Executive’s receiving the stock.  The election form must be sent to the IRS office with which the Executive files his personal income tax return.  Also, the election form should be sent by certified mail (return receipt requested) to ensure the executive has a record that the IRS has received it.

A Section 83(b) election requires careful consideration of the possible benefits and risks.  The possible benefit is a saving of income taxes if the value of the shares at the end of the five-year vesting period is higher than their value at the time of grant.  The Executive will have shielded from ordinary income tax rates the entire amount of the appreciation during the vesting period.  Upon a later sale of the shares, the appreciation that took place during the vesting period will instead be taxed as capital gain.

However, the election also carries significant risks.  If the Executive’s employment is terminated  during the vesting period and a Section 83(b) election was made, the Executive will forfeit the shares but will not be entitled to a deduction for the income taxes paid in the year of the grant. Thus, taxes will have been paid on shares that never will be received.

If the Executive believes the stock will rise in value, believes there is little risk of forfeiture of the stock, and knows that the income that will be reported upon election will be modest, then there may be a strong case to make the Section 83(b) election.

In the context of a restricted stock grant with a five-year vesting period, in our example, the safest, lowest risk course is to forgo a Section 83(b) election and recognize the income in the year when the grant vests.  The Executive knows in that case that he is paying tax on stock that he owns and that he has avoided the out-of-pocket tax cost that could have resulted had he paid the income tax when he received the stock followed by forfeiture of the very same stock.

Again, the Executive should immediately consult with a tax accountant or tax attorney to analyze the Executive’s particular employment situation and stock restrictions to determine whether a Section 83(b) election makes sense and to accomplish the election in a timely fashion when the election is warranted.

HOW EXECUTIVES CAN MAKE THE MOST OF THEIR SHARE-BASED COMPENSATION

July 8, 2011 By in Equity Based Compensation, General Tags: , Leave a comment

G. A. Finch interviews Brian D. Wodar who is a Director of the Wealth Management Research at Bernstein Global Wealth Management.  Although Mr. Wodar has several areas of expertise, Mr. Finch sought to obtain his insights into concentrated single-stock exposure and stock option exercise planning.  After having had a private meeting with Wodar’s colleagues, David D. Spieske and John M. Patnaude, about Bernstein’s strategies for concentrated stock exposure, Finch learned that Wodar was one of Bernstein’s in-house gurus.  Below is an interview to hear what Wodar has to say on these topics.

 

FINCH:     Brian, we know that the usual mix of executive compensation comprises cash, restricted stock and stock options.  What are the investment questions an executive should be asking at the outset for these three buckets of compensation?

WODAR:     The most important questions at the outset regard the executive’s financial goals. For example, is he or she still building wealth for retirement, or about to retire?  Investment goals, tolerance for risk, tax situation, and other factors will also play a role. So the first question should be: What are my financial goals at this stage in my life—and how can my share-based compensation help me achieve those goals?

FINCH:     How does Bernstein define its investor profile?

WODAR:     We’re an investment firm with all types of clients, from individuals to small foundations and endowments, so there is no single profile. However, we do have many executive clients, and we work closely with them and their other professional advisors to create wealth planning strategies.  Besides our investing expertise, what we bring to the table is a focus on planning, and a powerful planning tool we call the Wealth Forecasting System.

FINCH:     For the executive investor profile, what kind of scenarios have you contemplated for Bernstein’s Wealth Forecasting
System?

WODAR:     We recently completed a major research study on executive compensation and how to manage it, so we used our Wealth Forecasting System to model all types of scenarios. For the sake of illustration, we created three hypothetical executives in different situations: a 50-year-old considering a new job offer with stock options; a 55-year-old who has amassed millions in company stock and is wondering whether to reduce her risk profile; and a 65-year-old preparing for retirement and considering wealth transfer strategies.

For each one of these scenarios, we were able to show how the executive would apply different strategies to grants of company stock and stock options.  But these simply stand as interesting examples.  Our goal is to provide a customized analysis for individual executives so each of them can make well-informed decisions about their assets.  And I should add that we don’t charge for such an analysis regardless of whether someone is or is not our client.

FINCH:     I understand that Bernstein’s Wealth Forecasting System accommodates current and expected future grants of  share-based compensation, integrates effect of inflation, taxes and spending, and integrates multiple investment vehicles such as taxable or retirement accounts and trusts.  You then use 10,000 simulated observations resulting in distribution of 10,000 outcomes and a probability distribution.  Pretty impressive stuff.  So what can it tell us, probability wise, about the things that can happen with an executive’s allocation of investments of cash, restricted stock and stock options?

WODAR:     Thank you, G.A. It is impressive, and it’s how we are able to conduct this research. One of the first things we did was a simple comparison of the risk/reward characteristics of these three types of compensation.

To do this, we assumed equal grants of $100,000: one paid in cash, one paid in restricted stock, and one paid in 10-year stock options. And we modeled the probable results after 10 years—after taxes and adjusted for inflation. For a fair comparison, we assumed the cash was re-invested in diversified global stocks, and we used similar vesting assumptions for all three grants.  (For all the details of our modeling and tax assumptions, I’d recommend your readers get a copy of our research report titled “Executive Decisions.” The results were striking: After ten years, the cash grant (invested in global stocks) generated the highest median return. That means, in typical market conditions, it is the safest form of compensation. It also provided the best return in poor market conditions. But its upside, compared to restricted stock or options, was limited. The restricted stock provided a wider array of returns. Its potential downside was lower, but its upside was much greater. However, its median return after ten years was 25% less than the cash grant.

Finally, the stock options, not surprisingly, had tremendous upside—you could quadruple your initial grant in ten years, if the stock performed in the upper decile of outcomes. But the downside risk was also tremendous. In almost half the outcomes the options expired worthless. And the median result was the lowest of the three grants.

Brian D. Wodar

But here’s an important point: This simple comparison assumed a passive management strategy—in other words, holding the restricted stock after it vested, and holding the options until just before their expiration. The most important conclusion of our research is that by employing an active strategy to stock-based compensation, you can tremendously increase the chances of meeting your financial goals.

FINCH:     I like Bernstein’s notion of goal-based planning and establishing priorities.  Could you outline those concepts for our readers?

WODAR:     Sure. We apply what we call a “core and excess” framework as a simple but effective way to segregate wealth for planning purposes. Core capital is the amount you need to live the lifestyle you want for the rest of your life, calculated to a very high degree of confidence. Once you have enough core capital, excess capital is everything beyond that—your financial legacy. It is wealth you intend to leave to heirs, or give away to charity, or spend on completely discretionary activities, or invest more aggressively.

This framework can help you determine how to best manage company stock or stock options. For example, when building your core capital, our analysis shows that it’s generally best to sell restricted stock as soon as it vests and reinvest the proceeds in a diversified portfolio. All else being equal, the risks associated with single-stock concentration reduce the likelihood of meeting retirement spending goals. However, if you have already accumulated your core capital in a diversified portfolio, the higher reward potential of restricted stock may justify holding it.

Generally speaking, excess capital can be invested more aggressively, creating the opportunity to take on greater risk with stock-based compensation.

FINCH:     Tell us how age and spending can affect core capital.

WODAR:     Dramatically. Put simply, the less you spend in retirement, the lower your core capital requirement will be. And as you grow older, your core capital number shrinks, because your remaining lifespan, unfortunately, is growing shorter.

The core and excess framework provides a more nuanced guide for spending in retirement than common rules of thumb like 3% or 4% of your assets. In fact, we’ve compiled tables that show the core capital requirements for an individual or couple spending different levels annually, at different ages.  (Again, our research report provides the details of this analysis, including mortality assumptions.)

So for example, a 60-year-old couple spending $200,000 annually will have a core capital requirement of $7.4 million. (This is calculated to a 95% degree of confidence, which is very conservative.) That would mean this couple is spending 2.7% of their wealth annually. But the same couple at age 70, spending the same amount, will have a core capital need of $6.1 million. That would be a 3.3% rate.  At age 80, their core declines to $4.5 million, or a 4.4% rate. This may have ramifications on their estate planning, because if their assets are growing faster than their core needs, they will have excess capital that could be subject to estate taxes.

FINCH:     How does single stock volatility affect the equation in determining core capital?

WODAR:     Again: dramatically. The numbers I just outlined assumed the couple held their wealth in a diversified portfolio of 60%  stocks and 40% bonds. But if a single stock represented one-quarter of a 60-year-old couple’s portfolio, their core need would increase to $8.7 million! That’s an 18% jump. If a single stock represented half of their portfolio—which is not unusual for senior executives—their core need increases to $11.1 million!

The culprit is volatility. Single stocks will almost always be more volatile than a diversified portfolio, and if you are calculating your core capital requirement, you have to take that volatility into account. We call the effect of this volatility “risk drag,” because it represents a drag on your expected returns—despite the attractive potential upside of single stock. And since we calculate core capital requirements in light of very challenging investment experiences, those challenges can be much more difficult the more concentrated the portfolio is.

FINCH:     To what degree would cash or bonds offset single stock risk?

WODAR:     This was a fascinating aspect of our research. You would expect that a simple way to hedge against single stock risk  is by offsetting the stock with an equal amount of ultra-conservative holdings, such as short-term Treasury bonds.  But when we crunched the numbers, we learned that this strategy simply doesn’t work.  If you hold 50% of your portfolio in a single stock, it hardly matters how many bonds you put in the rest of your portfolio—the likelihood of a severe loss (anywhere from 20% to 50% from peak to trough) during a 20-year period is roughly the same. The problem is that this “barbell” approach to investing doesn’t address the real issue: A large exposure to company stock in a portfolio remains the dominant driver of investment results, regardless of how the remaining half of the portfolio is allocated.

FINCH:     Should an executive diversify to meet his goals?

WODAR:     It depends on what the goals are. If your goal is to build up your core capital or protect it, then yes, diversification helps reduce single-stock risk and can help you build and preserve capital faster. And you should always keep your core capital well-diversified. Of course, once the executive’s core capital has been securely funded, the rest of the concentrated portfolio can remain as concentrated as the executive would like.  If that stock skyrockets thereafter, they’ll be very wealthy.  But if the stock plummets for any reason, the executive will know that their core capital will be unimpeded.  Furthermore, if your goal is to transfer wealth to children or charity, single stock lends itself well to certain wealth transfer strategies.

It’s also worth noting that most executives face obstacles to selling company stock.  There may be company-imposed restrictions, and there are securities regulations regarding when stock can be sold.  But that’s why it’s all the more important to define one’s goals and actively manage your company stock and options to reach those goals.

FINCH:     What are the perils of a passive hold strategy?

WODAR:     The main risk is that you won’t reach your financial goals, or that it will take longer to reach them than you want.

The outlier risk—but a very real one, as we saw in 2008—is that even the healthiest-seeming company can see its stock value plunge, or even go to zero.  If your wealth is tied up in company stock, that’s a chilling scenario. I think that before 2008, most executives thought this could never happen to their company. Nowadays, people have a more realistic attitude toward risk.

FINCH:     What is the case for active management of restricted stock?

WODAR:     It’s about applying the best strategy to your goals. Our research shows that when building core capital, it’s generally best to sell restricted stock as soon as it vests and reinvest the proceeds in a diversified portfolio. But if you’ve already accumulated your core capital in a diversified portfolio, then the reward potential of the restricted stock may justify holding it.

FINCH:     What is the case for active management of your stock options?

WODAR:     Again, it’s about the best strategy for your goals. When building core, we found that the optimal time to exercise stock options is when their time value has declined to approximately 30% of their total value.   Above core, you can afford to wait until the time value is 10% of total value. But waiting to exercise options until just before expiration results in significantly poorer risk-adjusted returns. The calculations for time value of stock options can be complex, but a good financial advisor can help you with that.

 Brian D. Wodar may be reached at 312-696-7886 and brian.wodar@bernstein.com or his colleague, David Spieske, may be reached at 312-696-7819 and david.spieske@bernstein.com. 

LEGAL, INVESTMENT AND TAX NOTICE:
THIS INFORMATION IS NOT INTENDED TO BE AND SHOULD NOT BE TREATED AS LEGAL ADVICE, INVESTMENT ADVICE, ACCOUNTING ADVICE OR TAX ADVICE.  READERS, INCLUDING PROFESSIONALS, SHOULD UNDER NO CIRCUMSTANCES RELY UPON THIS INFORMATION AS A SUBSTITUTE FOR THEIR OWN RESEARCH OR FOR OBTAINING SPECIFIC LEGAL, ACCOUNTING OR TAX ADVICE FROM THEIR OWN ADVISORS OR COUNSEL.  THIS POST DOES NOT ESTABLISH AN ATTORNEY-CLIENT RELATIONSHIP AND  DOES NOT CONSTITUTE AN ENDORSEMENT.

Note on Bernstein’s Wealth Forecasting System:

The Bernstein Wealth Forecasting System (WFS) uses a Monte Carlo Model that simulates 10,000 plausible paths of return for each asset class and inflation and produces a probability distribution of outcomes. The model does not draw randomly from a set of historical returns to produce estimates for the future. Instead, Bernstein’s forecasts (1) are based on the building blocks of asset returns, such as inflation, yields, yield spreads, stock earnings and price multiples; (2) incorporate the linkages that exist among the returns of various asset classes; (3) take into account current market conditions at the beginning of the analysis; and (4) factor in a reasonable degree of randomness and unpredictability.

Copyright © 2011 by G. A. Finch. All rights reserved.

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