Return 9% annual appreciation; 1% dividend yield; 30% turnover Annualized After-Tax Return   Year Dividend Realized Gain Tax Market Value Cost Basis Bequest Liquidatic         $1,000,000 $1,000,000     1 $10,000 $ 27,000 $ 9,400 1,090,600 1,027,600 9.06% 7.80% 2 10,906 48,346 14,032 1,185,628 1,072,821 8.89 7.85 3 11,856 65,854 17,913 1,286,278 1,132,618 8.75 7.88 4 12,863 80,828 21,311 1,393,595 1,204,997 8.65 7.91 5 13,936 94,206 24,416 1,508,539 1,288,724 8.57 7.93 10 20,628 155,839 39,419 2,229,672 1,866,048 8.35 7.99 15 30,419 232,753 58,718 3,287,423 2,744,333 8.26 8.02 20 44,838 343,605 86,656 4,845,511 4,043,765 8.21 8.03 25 66,087 506,537 127,742 7,141,798 5,959,879 8.18 8.04 turnover. In this table we did not account for fees and we assumed the active manager's return was identical to the market return. In Table 32.3 reflects active management with net excess return of 2 percent per year. In each case we applied the turnover to the average level of appreciation in the portfolio. We also assumed that all realized gains were long-term. The passive portfolio grew to $8.8 million while the active portfolio grew to only $7.1 million. If the investor was operating in bequest mode (i.e., disposed of the assets through charitable giving or death), the passive portfolio's annualized return was 9.08 percent versus 8.18 percent for the active portfolio. Tax deferral added 0.90 percent to the after-tax return. If the investor was operating in liquidation TABLE 32.3 Portfolio Growth and Return for Active Management with 2% Excess Return 11 % annual appreciation; 1 % dividend yield; 30 % turnover Annualized After-Tax Return   Year Dividend Realized Gain Tax Market Value Cost Basis Bequest Liquidati'         $ 1,000,000 $1,000,000     1 $10,000 $ 33,000 $ 10,600 1,109,400 1,032,400 10.94% 9.40% 2 11,094 59,710 16,380 1,226,148 1,086,825 10.73 9.47 3 12,261 82,260 21,357 1,351,930 1,159,989 10.57 9.52 4 13,519 102,196 25,847 1,488,314 1,249,858 10.45 9.56 5 14,883 120,651 30,084 1,636,828 1,355,309 10.36 9.59 10 23,838 214,379 52,411 2,617,451 2,117,233 10.10 9.67 15 38,026 345,817 84,374 4,174,588 3,367,683 10.00 9.71 20 60,632 552,091 134,671 6,656,077 5,367,864 9.94 9.72 25 96,670 880,369 214,742 10,612,265 8,558,072 9.91 9.74