CAPSTONE
Building Wealth, Controlling Risk
INVESTING IN RETIREMENT
THE GAME HAS CHANGED … OR HAS IT?
(713) 260-9000
5847 San Felipe, Suite 4100, Houston, Texas 77057
(800) 262-6631
(713) 260-9025(Fax)
CAPSTONE
Building Wealth, Controlling Risk
Sources of Retirement Income:
 19% Social Security
 21% Pension
 18% Investments
 40% Earned Income
 2% Other
CAPSTONE
Building Wealth, Controlling Risk
50% chance of one spouse surviving
25% chance of one spouse surviving
Male age 65
85
92
Female age 65
88
94
Couple (both age 65)
92
97
65
70
75
80
85
90
Source: Annuity 2000 Mortality Table; Society of Actuaries. Figure assumes a person is in good health.
95
100
CAPSTONE
Building Wealth, Controlling Risk
$60,000
$50,000
$50,000
Dollars
$40,000
$30,477
$30,000
$23,880
2% inflation
3% inflation
4% inflation
$20,000
$18,756
$10,000
$0
Today
5 years
10 years
15 years
20 years
25 years
Years from retirement start date
All numbers were calculated based on hypothetical rates of inflation of 2%, 3%, and 4% (historical average from 1926 to 2006 was 3%) to
show the effects of inflation over time; actual inflation rates may be more or less and will vary.
Source: Retirement Income Planning – America’s Lifetime Income Challenge, Fidelity Investments Insight, June 2008.
CAPSTONE
Building Wealth, Controlling Risk
Dollars Remaining
How a couple retiring in 1972 with $500,000 is affected.
For a 65-year-old couple, there is a 94% chance that
at least one spouse will need income at age 80.
4%
$1,000,000
5%
10%
$100,000
9%
8%
7%
6%
A couple, both age 65,
would have run out of
money at age 88 if they
had withdrawn 5%,
adjusted upwards for
inflation each year.
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Hypothetical
Couple
(Both Age 65)*
100%
at
Age 65
99%
at
Age 70
98%
at
Age 75
94%
at
Age 80
83
at
Age 85
63%
at
Age 90
35%
at
Age 95
Source: Fidelity Investments. Hypothetical value of assets held in an untaxed account of $500,000 invested in a portfolio of 50% stocks, 40% bonds, and 10% shortterm investments with inflation-adjusted withdrawal rates as specified. This chart’s hypothetical illustration uses historical monthly performance from January 1972
through December 2006 from Ibbotson Associates: stocks, bonds, and short-term investments are represented by S&P 500, U.S. Intermediate-Term Government Bonds,
and U.S. 30-day T-bills. This chart is for illustrative purposes only and is not indicative of any investment. Past performance is no guarantee of future results. *
Probability of a couple surviving to various ages is based on Annuity 2000 Mortality Table from Society of Actuaries. Figures assume you are in good health. See
“Methodology and Information” at the end of this presentation for further details about indexes and methodology used to produce the chart.
The Value Of Diversification
CAPSTONE
Building Wealth, Controlling Risk
CAPSTONE
Building Wealth, Controlling Risk
Current Income Portfolio “CIP”
Investment Profile
CAPSTONE
Building Wealth, Controlling Risk
Current Income Portfolio seeks to:
 Provide the highest current yields available
on investment grade, coupon and dividendpaying, U.S. investments;
 Utilize a high degree of issuer
diversification and asset allocation
strategic management;
 Establish a defined investment horizon to
safeguard investment principal;
 Maintain the highest possible real
(inflation adjusted) returns.
Investment Profile
CAPSTONE
Building Wealth, Controlling Risk
Current Income Portfolio invests in:
 One to fifteen year corporate issues,
predominately rated A/A2 to BBB/BAA2;
 U.S. Agencies (with call and step-up
provisions);
 Corporate inflation protection (floating
rate) securities;
 Seasoned mortgage-backed securities; and
 Listed preferred stocks.
“CIP” Portfolio Characteristics
6/30/09
CAPSTONE
Building Wealth, Controlling Risk
Capstone
BCIGC**
Duration
4.13*
3.87
Current Yield
6.01%
4.14%
Yield to Maturity
5.26%
3.21%
Average Quality
A
* Does not include preferred stocks
** Barclay’s Capital Intermediate Government Credit Index
Agency
“CIP” Portfolio Sector Weightings
CAPSTONE
Building Wealth, Controlling Risk
6/30/09
“CIP” Yield Advantage
6/30/09
CAPSTONE
Building Wealth, Controlling Risk
Current Yield Advantage**
5.50
4.75
5.40
4.54
5.71
4.74
6.19
5.00
4.14
4
4.53
5.96
6.01
Percent
6
6.11
5.00
8
2
0
Jun-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Dec-03
CIP Current Yield
*
**
Barclay’s Capital Intermediate Government/Credit Bond Index
Source: Informa Investment Solutions – PSN using gross calculations
BCIGC* Current Yield
CAPSTONE
Building Wealth, Controlling Risk
Theta Growth
Theta Growth
CAPSTONE
Building Wealth, Controlling Risk
This Strategy Offers Investors:
 Conservative equity portfolio:
The portfolio is composed of large cap stocks.
 Price appreciation potential:
The portfolio seeks to achieve price appreciation from the stocks held.
 The potential for attractive cash flows:
Combined option premium income and dividend yield is better than current
broad bond market yields and does not have interest rate risk.
 Moderation of volatility on equity returns:
The portfolio utilizes covered calls and is therefore less volatile than an equityonly strategy.
Theta Growth Characteristics
CAPSTONE
6/30/09
Building Wealth, Controlling Risk
Projected Average annual cash flow:
Number of stocks held:
Number of options sold:
Average option duration:
* Combined option premium income and dividend yield estimate.
8 - 10%*
35 - 45
70 - 100% written
Market directed
(average 6 months)
Theta Growth Sector Characteristics
CAPSTONE
Building Wealth, Controlling Risk
6/30/09
Theta Growth 3 Year Risk vs. Return*
CAPSTONE
Building Wealth, Controlling Risk
2.0%
-1.0%
more return
less risk
Annual Return
Capstone Theta Growth
-4.0%
BXM Buy Write Index
-7.0%
S&P 500 Index
-10.0%
-13.0%
-16.0%
14.0%
17.0%
20.0%
Annual Risk (Standard Deviation)
*
Source: Informa Investment Solutions – PSN using gross calculations
23.0%
Theta Growth Portfolio Cash Flow
6/30/09
CAPSTONE
Building Wealth, Controlling Risk
0.50%
0.77%
1.15%
1.53%
5%
9.18%
9.17%
10%
5.96%
13.77%
15%
0%
Q2 2009 2009 2008 2008 2007 2007 2006 2006
M onthly
M onthly
M onthly
M onthly
Avg.
Avg.
Avg.
Avg.
Capstone Theta Growth
Theta Growth Performance
CAPSTONE
Building Wealth, Controlling Risk
1 Year
Capstone Theta Growth
*
2 Years
3 Years
BXM Buy Write Index
Source: Informa Investment Solutions – PSN using gross calculations
-2.01
-2.51
-5.45
-3.79
-3.99
-8.22
6/30/2009
-12.06
-11.15
-19.94
15.48
10.57
15.93
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-15.36
-18.34
-26.22
Percent
Trailing Returns*
Since
Inception
S&P 500