Envestnet Case Studies

A Guide to Tax Management and ActivePassive PMC ETF Portfolios Envestnet PMC now offers Fund Strategist Tax Management for all ActivePassive PMC ETF Portfolio accounts at no additional cost.* Check out the hypothetical case study below to see how we do it. Sample Client Scenario Our Sample Client in this case study is an individual with a portfolio consisting of mostly individual stocks with a few bonds. They currently have an 87.5% equity/12.5% fixed income portfolio and are comfortable with that ratio but are worried about the risks of holding individual stocks and the tax implications. Current Portfolio Equity: 87.5% Fixed Income: 12.5% Tax Consequences of Transition Portfolio Value Cost Basis Capital Gains Potential Taxes** $213,000 $163,000 $50,000 ($8,700) **Assuming 17.5% capital gains tax rate. Selecting the Strategy We offer 7 different portfolios across the risk scale for each of our ActivePassive PMC ETF Portfolios. Our Sample Client has stated their risk tolerance at the Diversified Equity w Income level (86/14). Selecting the Tax Sensitivity Based on the Sample Client current portfolio and cost basis, they'll select their tax sensitivity based on our three levels: Very High High Moderate Below is the breakdown of the Sample Client tracking error and tax bill at each sensitivity level as well as if they were to choose no tax management. Because the Sample Client is tax sensitive but also wary of straying too far from their model, they chose to go with the high tax sensitivity option. The Personalized Outcome After going through this process, the Sample Client is ready to transition their current portfolio into their new model. Their resulting portfolio is the ActivePassive PMC ETF Portfolio - Diversified Equity w/ Income with a high tax sensitivity. Asset Class Holding Allocation Large-Cap Core ActivePassive US Equity ETF 56.4% Large-Cap Value Vanguard Value ETF 2.5% Small-Cap Core iShares Core S&P Small-Cap ETF 1.3% Int'l Developed Mkts ActivePassive International Equity ETF 25.8% Intermediate Bond ActivePassive Core Bond ETF 10.5% International Bond Vanguard Total International Bond ETF 1.5% Cash 2.0% High Tax Sensitivity Portfolio Value: $213,000 Tracking Error: 1.3% Taxes (est.): $3,100 * Envestnet receives revenue via the ActivePassive ETF fund expenses, but an explicit model management fee will not be charged. Performance results will be reduced by fees including, but not limited to, investment management fees and other costs such as custodial, reporting, evaluation and advisory services. A description of all fees, costs and expenses are found in a financial advisor's Disclosure Brochure. The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this brochure is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment vehicle. Investment decisions should always be made based on the investor's specific financial needs and objectives, goals, time horizon, and risk tolerance. Past performance is not indicative of future results. Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) funds are subject to interest rate risk which is the risk that debt securities in a fund's portfolio will decline in value because of increases in market interest rates. Neither Envestnet, Envestnet | PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor. Client must carefully determine if the use of tax overlay services is appropriate for their circumstances, risk tolerance, and investment objectives. Tax management services are limited in scope and are not designed to permanently eliminate taxes in the account. In providing tax overlay services, Envestnet will allow Client's account to deviate from Client's selected investment strategy. Client's account may experience significant performance differences from the selected investment strategy due to Client's selection of tax overlay services. Envestnet makes no guarantee that the account's performance will be within any range of the selected investment strategy or the strategy´s benchmark. If Client subsequently disables tax overlay services this may result in the recognition of significant capital gains. Diversification does not guarantee a profit or guarantee protection against losses. FOR ONE-ON-ONE USE WITH A CLIENT'S FINANCIAL ADVISOR ONLY. ©2025 Envestnet, Inc. All rights reserved. After Tax Reporting After the transition, tax management continues on an automated basis year-round. With our after tax reporting, advisors can demonstrate the potential value and tax savings from this tax management service. Below is an example of the type of report and specific data that the advisor will be able to access. Sample Tax Overlay report The [Client Name] Report Taxable Moderate Growth (72-86) Tax Overlay Benefits As of Dec 31, 2021 Overview Account Number 00000000 Name [Client Name] Managed Value $2,114,476 Approximate Annual Fee for Tax Overlay Service $2,114 Estimated Tax Cost to Remove Tax Overlay and Rebalance to Model $19,978 Tax Overlay Benefit: Capital Gain Deferral Current Amount of Unrealized Short Term Gain Deferred $17,257 Current Amount of Unrealized Long Term Gain Deferred $67,964 Potential Tax Savings Effect $19,978 Actual Performance with Tax Overlay 2024 2023 Actual Pre-Tax Return 13.25% – Actual After-Tax Return 12.62% – Account's Actual Return Lost to Taxes (0.63) – Estimated Target Allocation Performance Without Tax Overlay 2024 2023 Target Allocation Pre-Tax Return 11.21% – Target Allocation After-Tax Return 9.47% – Potential Return Lost to Taxes (1.75) – Estimated After-Tax Benefit of Tax Overlay 1.12% – Tax Overlay Benefit: Loss Harvesting Year to Date Amount of Realized Short Term Loss Harvested $5,977 Year to Date Amount of Realized Long Term Loss Harvested $1,692 Potential Tax Savings Effect $2,550 No Management Tracking Error: 0.0% Taxes (est.): $8,700 Very High Tax Sensitivity Tracking Error: 2.6% Taxes (est.): $1,700 High Tax Sensitivity Tracking Error: 1.3% Taxes (est.): $3,100 Moderate Tax Sensitivity Tracking Error: 0.5% Taxes (est.): $5,900 Income Diversified Income Balanced Balanced Equity Diversified Equity w Income Diversified Equity Capital Preservation Large-Cap Core Intermediate Bond International Bond Cash Large-Cap Value Int'l Developed Mkts Small-Cap Core High Yield 20250527-4518669 █████████████████ Ì200008T5P,Î

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