Envestnet Brochures

Implementation of Tax Overlay Tracking error As is the case with all tax-managed accounts, there is a trade-off between realizing gains and adhering to the manager's model. Any difference between how our tax-managed account is managed and the manager's model is measured by tracking error (TE). Envestnet PMC seeks to limit the amount of TE while also balancing the tax implications of each transaction within a client's account. Ultimately, PMC strives to replicate the manager's model as closely as possible, subject to the client's specific tax situation. Proposed Asset Transition Summary (PATS Report) PMC provides a hypothetical report summarizing how taxable accounts with large embedded gains may transition into an account that is using Tax Overlay Services. A PATS report illustrates PMC's tax management capabilities for accounts with legacy assets, and is not intended to be used as an actual transition plan. Coordinating taxes across managers The selected investment managers act as subadvisors on your clients' accounts, who provide their portfolio models to PMC. Since PMC has discretionary control over the account, we can deliver a customized tax solution at the individual client account level. Gain/loss matching In certain circumstances, PMC attempts to offset Net Short Term Gains within an account by matching gains with losses, when possible, or selling at a loss later to offset previous gains. For Net Long Term Gains, PMC only seeks to Gain/Loss match to reduce Net Long Term Gains if the client's Long Term Gain Budget (if applicable) has been exceeded. Deferring gains If no losses are available, PMC can potentially defer the sale of securities, which otherwise would result in short- term gains, until they reach a favorable long-term gain status. Establishing tax budgets PMC seeks to minimize net short term capital gains realization, and manages the amount of net long term capital gains realization if the client has elected to apply a desired tax budget on long term capital gains. Diversifying concentrated equity portfolios With our Diversification Solution, PMC can facilitate the diversification of concentrated, low-cost basis equity portfolios by allowing highly tax averse investors to take up to seven years to conform to PMC's traditional tracking error guidelines, thereby distributing their tax bill in a manageable way. Transitioning equity mutual fund and ETFs For qualifying mutual funds and ETFs, PMC may allow their retention of not-in-model holdings in an eligible managed product sleeve, which allows these holdings to be sold over multiple years rather than fully liquidating them at the account's inception. For more information on what is an eligible managed product sleeve, please contact a member of the Overlay Services team. 4 FOR HOME OFFICE AND ADVISOR USE ONLY. NOT FOR USE WITH THE INVESTING PUBLIC. 20250609-4562819 █████████████████ Ì2000096MJQÎ

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