CASH BALANCE PLAN INSTITUTIONAL SOLUTIONS

5900 Southwest Parkway | Building 1 | Austin, Texas | 78735 | t: 512.327.5530 | w: www.sageadvisory.com

CASH BALANCE PLAN

INSTITUTIONAL SOLUTIONS

June 2019

OVERVIEW

SECTION ONE

3

ABOUT OUR FIRM

Organized for Institutional Success

Overview• Registered Investment Advisor based in Austin, Texas

• Founded in 1996 by Bob Smith and Mark MacQueen

• 100% employee owned

• 48 employees, 18 Investment Professionals

• $13.4 Billion AUM/AUA as of 3/31/2019

Strategies and Services• Taxable Fixed Income Strategies

• Tax-Exempt Fixed Income Strategies

• Global Tactical ETF Strategies

• Asset/Liability Services

• ESG Strategies

Core Firm Beliefs• Investment solutions must be crafted based on purpose

• Ensure that simplicity, liquidity and transparency permeate everything we do

• Evaluate what can go wrong before we determine what can go right

• Well-informed clients make better investment decisions

TOTAL FIRM ASSETS

BY CLIENT TYPE (3/31/2019)

Public Funds

3%

Corporate

29%

Health Care 6%

Insurance

20%

Taft-Hartley

14%

Sub Advised

1%

High Net Worth

23%

Endowments &

Foundations 4%

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Cash ManagementShort Term

Moderate TermIntermediate TermInt. Term Corporate

Core AggregateCore Gov/Credit

SpecialtyGovernment Only

Insurance

TAXABLE FIXED INCOME

Total ReturnModerate Term

Intermediate TermCore

Laddered Maturity

Target Yield

SpecialtyState Specific

State Preferred

Core Plus Fixed IncomeAll Cap Equity Plus

Target Risk Conservative

ModerateModerate Growth

Growth

SpecialtyMulti Asset Income

Target Date Strategies

TACTICAL ETF

Liability Driven InvestingCorporate Defined Benefit

Cash Balance PlansPublic Defined Benefit

Taft Hartley Defined BenefitTarget Date Strategies

Fiduciary Services

RETIREMENT PLAN SOLUTIONS

TAX-EXEMPT FIXED INCOME

ABOUT OUR FIRM

Strategies and Services

ESG Short Term Fixed IncomeESG Intermediate Term Fixed Income

ESG Credit Fixed IncomeESG Tax-Sensitive Fixed IncomeESG Core Plus Fixed Income ETF

ESG Asset Allocation Conservative ETFESG Asset Allocation Growth ETF

ESG Global Equity ETF

ESG

5 ■Investment Committee

OUR ORGANIZATION

Robert D. Williams, CFA ■Principal, Managing Director

Komson Silapachai, CFAVice President

Meghan P. Elwell, J.D., AIFA®

Vice President

Doug A. BenningResearch Analyst

Jae Y. SongResearch Analyst

Emma L. Smith Research Analyst

John R. SamaResearch Analyst

Andrew S. PoredaResearch Analyst

Mark C. MacQueen ■Principal, Managing Director

Thomas H. Urano, CFA ■Principal, Managing Director

Jeffery S. Timlin, CFA, CMT ■Principal, Managing Director

Robert C. Peck, Jr. ■Principal

Gregory H. CobbVice President

Dustin G. Qualley, CFA Vice President

Seth B. Henry, CFAVice President

Andrew K. Demand, CFAVice President

Nicholas C. Erickson, CFAVice President

Ryan C. O’Malley, CFAVice President

Matthew L. CleavengerAssociate

Gregory J. Figaro, AIF®

Principal, Managing Director

Michael D. Walton, AIF®

Principal, Managing Director

Sean F. McSheaExecutive Vice President

L. Dustin FinleyVice President

John R. Teramana, CAIAVice President

Robert G. Smith, III, AIF® & CIMC ■

PRESIDENT & CIO, PRINCIPAL

RESEARCH & STRATEGY INSTITUTIONAL TEAM PRIVATE CLIENT TEAMPORTFOLIO MANAGEMENT

Bob W. Moser, CIMA®, CRPC, CFIPSenior Vice President, National Sales Director

Arthur L. CherchesVice President, National Accounts

Zachary T. SooterRegional Director – Midwest

Kim F. Sowers, CIMA®

Regional Director – South

Deborah D. DraegerRegional Director – Southeast

Brian C. Larson Regional Director – Northeast

Lily A. AtilanoRegional Consultant

Ashley R. PottsRegional Consultant

MARKETING SERVICESOPERATIONS

ADMINISTRATION

Sean C. KrasanPrincipal, Managing Director

Allison C. HartmanPerformance Analyst

Erica G. MassAssistant Vice President, Portfolio Administration

Mark J. WelpAssociate

Jessica A. McHughDirector of Marketing Communications

Kari K. EdgarAssociate

Jessica N. Hernandez Associate

Clemence KelmanAssociate

Jacqueline M. OlveraSalesforce Administrator

Cameron R. LaddChief Technology Officer

Corey B. CarterAssociate

INFORMATION TECHNOLOGY John R. SlaisPrincipal, CFO & CCO

Wade T. Uloth, IACCPVice President, Compliance

Annette S. KennedyOffice Administration

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A REPRESENTATIVE CLIENT LIST*Taft-Hartley FundsMachinists Retiree Investment Trust, CAResilient Floor Covering, CAPlumbers & Pipefitters Union Local 74, DEMiami Ironworkers Local 272, FLPeace Officers’ Annuity & Benefit Fund, GAI.B.E.W. Local 697, INUnited Steelworkers of America, KYI.U.O.E. Pipeline Employers H&W Fund, MD Flint Area Sheet Metal Workers Local 7-4, MIUAW GM Center Human Resources, MIUAW Retirees of Mack Trucks Health Benefit Fund, MIGulfport Steamship Companies ILA, MSElevator Constructors Local No. 1, NJI.B.E.W. Local 400, NJLocal 18 International Union of Police & Protection, NJPlumbers Local 14, NJMetro – ILA, NJNo. NJ Teamsters Local 723, NJTeamsters Industrial Employees, NJTeamsters Local 73, NJTrucking Employees of New Jersey, NJWWEC Teamsters Local 863, NJATU Local 1342, NYI.B.E.W. Local #86, NYI.U.O.E. Local 15, NYOhio Carpenters’ Health Plan, OHUAW Northwest Ohio Area Industries, OHUAW Retirees of Daimler Trucks North America, ORSteamfitters Local Union No. 420, PATexas Iron Workers, TX

Foundations & EndowmentsNational Association for Biomedical Research, DCNFL Players Association Endowment, DCFlorida United Methodist Foundation, Inc., FLH. Lee Moffitt Cancer Center & Research Institute Fdn., FLDetectives Endowment Association Administrative Fund, NYAllied Services Foundation, PAWestern Pennsylvania School for the Deaf Endowment, PAThe Catholic Foundation for the Diocese of Greensburg, PALutheran Foundation of Texas, TX

Insurance InstitutionsAmerican Longshore Mutual Association, ALState of Alabama DORM, AL Development Insurance Group, Inc., AZNorthwestern Arizona Regional Insurance Co., AZValley Schools Insurance Group, AZLivingstone Reinsurance, Ltd., BarbadosCapstone Insurance Company, Ltd., BermudaSeaview Insurance Company, CACPA Mutual Insurance Company, FLMCNA Insurance Company, FLPrepared Insurance Company, FLGeorgia Auto Dealers Association, GAGeorgia Hospital Association Workers' Compensation, GA3MP Insurance Company, Ltd., Grand CaymanPioneer Reinsurance Group Ltd., Grand CaymanOxford Insurance Company TN, LLC, MDMississippi Windstorm Underwriting Association, MSCrossFit Risk Retention Group, MTSynergy Insurance Company, NC Affinity Health Plan, Inc., NYElderServe Health, Inc., NYEmblemHealth, Inc., NYEmpire Bonding & Insurance Company, NY American Fidelity Corporation, OKAegis Security Insurance Company, PAAmerican Sentinel Insurance Company, PALackawanna Insurance Group, PAMultinational Insurance Company, Puerto RicoTitan Insurance Company, SCCronus Insurance Company, TXEthos Group Incorporated, TX Service Group Insurance & Financial Services, TXTexas Lawyers’ Insurance Exchange, TX

Public FundsTuscaloosa Police and Firefighters, ALCity of Danbury, CTCity of Deerfield Beach, FLCity of Marietta, GAGeorgia Firefighters’ Pension Fund, GASt. Charles Fire Fighters Pension Fund, ILCity of Jackson Act 345 Policemen's Firemen's RP, MIMetropolitan Library Systems, OK Texas State University, TX

Retirement PlansHolland & Hart LLP, COPLI Holdings, Inc., FLDLA Piper LLP, ILHitachi High Technologies America, Inc., ILScholle Corporation, ILTrueValue Corporation, ILEdw. C. Levy Co., MIRobins Kaplan LLP, MNConcord Electric Corporation, NYPaul, Weiss, Rifkind, Wharton & Garrison, NYTurley, Redmond, Rosasco & Rosasco, LLP, NYBaker Botts, LLP, TXBrazos Electric Power Cooperative, TXGuadalupe Valley Telephone Cooperative, TXMary Kay, Inc., TXOverland Partners, Inc., TXThe Fordyce Company, TXUrgent Surgery Associates, TXFoss Maritime Company, WANintendo of America, Inc, WASEH America, Inc., WAAlliance Laundry Systems LLC, WI

Healthcare InstitutionsKingman Hospital, Inc., AZAllHealth Network, COBaptist Health Systems of South Florida, FLTift Regional Health System, Inc. , GAKing’s Daughters’ Hospital, INBryan Health, NEDeborah Heart and Lung Center, NJAsante Healthy System, ORLancaster General Hospital, PA The Princeton Community Hospital Assoc., WV

*This is a partial representative client list that shows some of Sage Advisory’s clients without regard to either performance-based criteria or type of investment strategy utilized.Inclusion on this list is not intended as an endorsement by any such client of Sage Advisory or the advisory services provided to such client. June 2019

CASH BALANCE SOLUTIONS

SECTION TWO

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Access to Institutional Expertise• Sage CB plan experts partner with consultants to construct the appropriate solution for their client

• Interact directly with Sage investment professionals who perform the analysis and invest the assets

• Planning, portfolio construction, and ongoing management is collaborative and customized

Comprehensive Approach to Risk Management• Identify and quantify plan-related risks through asset/liability study

• Measure ability to meet benefit obligations and the impact of market changes to plan health and contributions

• Develop custom liability focused investment solution based on client’s unique goals and risk tolerance

Communication and Client Service• A unique client service, communication, and portfolio review program is developed for each client

• Reports are tailored to client needs and reflective of a custom, open-architecture approach

• All analysis and investment commentary is delivered in straight-forward language the client willunderstand


Overview

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Overview

Asset/Liability Analysis

CustomStrategy

Ongoing Monitoring

- Work collaboratively with all key parties including plan actuary

- Produce comprehensive asset/liability diagnostic

- Develop customized scenario testing and analysis

- Unique portfolio design balancing accounting and economic concerns

- Determine appropriate assetallocation and de-risking glide path

- Construct tailored portfolio using individual bonds & equity ETFs

- Provide comprehensive quarterly reporting

- Monitor progress relative to custom liability benchmark

- Interact with Sage to resolve complex plan-related issues

Cash Balance Investing Approach• Evaluate key aspects of plan design including interest crediting rate (ICR), contribution policy, and investment

approach

• Conduct asset/liability study and scenario analysis to understand cash flows and key risks facing the plan

• Build custom investment strategy that incorporates asset allocation assumptions and time horizon

• Provide ongoing monitoring and reporting, including customized quarterly asset/liability reports

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ICR TYPE ALLOWABLE ICRS ASSET MANAGEMENT CONSIDERATIONS

Fixed Rate

Fixed Rate Up To 6% ICR dictates the asset allocation

If ICR is not met, contributions beyond pay credits are required

ICR does not reflect the current market environment

Bond-Based andIRS Segment Rates

30-Year Constant Maturity Treasury

Shorter Treasuries or CPI + Applicable Spreads

Pension Protection Act funding segment rates (with or without adjustment for HATFA)

Optional annual floor of 4%

ICR dictates the asset allocation

If ICR is not met, contributions beyond pay credits are required

Challenging to invest: achieve a yield of a 30-year instrument with a 1-year time horizon

Investment-Based

Actual Return On Plan Assets

Return of Diversified Mutual Fund

Optional cumulative floor of 3%

Client risk tolerance dictates asset allocation and ICR

Low funded status and contribution volatility

Contributions beyond pay credits required only if asset returns are consistently negative (only for preservation of capital rule)

Interest Crediting Rate (ICR) Options: Fixed Rate, Bond-Based, or Investment-Based • 30-year Constant Maturity Treasury and safe harbor; other bond yields plus applicable spread

• Actual return on plan assets and fixed rates; regulations proposed in 2010 and finalized in 2014

• All ICRs include a “preservation of capital” rule, essentially, a cumulative 0% floor on all pay-based contributions


Regulatory Landscape

This is not an exhaustive list of permitted crediting rates. Ceiling applies to all crediting rates. Various blends and “greater of” rates may be permitted.

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Key Considerations

Pure Cash Balance or Legacy DB

Interest Crediting Rate

Cash Flow Needs

Plan Design

Potential Investment Solutions

Accounting-BasedSimilar to LDI

Interest CreditingRate Matching

Total ReturnTraditional Approach

Regulations

Market Conditions

Economic Conditions

Additional Considerations

Client Type

Risk Tolerance

Contribution Policy

Plan Sponsor Objectives

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Analysis Process and Investment Solution

Client Type and Focus Drives Investment Solution• The funding liability (PPA funding target), the accounting liability (projected benefit obligation (PBO), and the

sum of participants’ hypothetical account balances are all different

• Different types of clients have different approaches to their cash balance plans

Accounting-Based ICR Matching Total Return

CORPORATE PLAN SPONSORSPARTNERSHIPS AND

CLOSELY HELD COMPANIES

TRADITIONAL APPROACH

UNDERFUNDED PLANS

PROJECTED BENEFIT OBLIGATION (PBO)1

Maintain (or increase) PBO fundedstatus, reduce balance sheet volatilityand pension expense

SUM OF HYPOTHETICAL ACCOUNT BALANCES

Ensure that market value of assets isequal to (or greater than) the sum ofhypothetical account balances

Account for all ICR floors, including thepreservation of capital

HIGH RISK-ADJUST RETURN

Achieve high risk-adjusted return,regardless of ICR

Shortfalls are made up throughcontributions by the plan sponsor

1 The PBO liability is determined by the plan’s Actuary by projecting account balances forward to retirement with future service credits and an assumedfixed ICR, pro-rating based on service to valuation date, and discounting back to present value using a high quality corporate bond curve

13

CONDUCT INITIAL PLAN EVALUATION

Identify plan structure, interest crediting rate, cash flows, and plan sponsor objectives

DETERMINE AND IMPLEMENT STRATEGY

Based on analysis, select an investment strategy and implement

PERFORM SCENARIO ANALYSIS

Analyze asset allocations, interest crediting rates, and liability changes in various market scenarios

CASH BALANCE INVESTMENT PROCESS


Analysis Process and Investment Solution

ANNUALLY

Select asset allocation based on ICR, risk tolerance, capital market assumptions, etc.

THROUGHOUT THE YEAR

Adjust asset allocation based on progress toward achieving ICR, market outlook, etc.

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100% FI

60% FI

100% FI

30% FI

88% FI

30% FI

69% FI

60% FI

18%

21%

24%

27%

30%

33%

35% 40% 45% 50% 55% 60%

Pro

bab

ility

of

Ne

gati

ve R

etu

rn

Probability of Achieving Desired ICR

Cash Balance Efficient Frontier (1-Year Horizon)

Next Year's ICR (3.10%) This Year's ICR (3.80%)

Interest Crediting Rate and Contribution Policy• Understand ICR, including any applicable floors

• Understand contribution policy relative to ICR and the time horizon for achieving ICR

• Ascertain baseline asset allocation and consider hedging options


Conduct Initial Plan Evaluation

Sample plan; returns are based on sample near-term capital market assumptions.

15

0

5

10

15

20

25

2014 2019 2024 2029 2034 2039

Estimated Expected Benefit Payments (Current Account Balances)

Age 65 Age 66-69 Age 70+

Cash Flow Needs• Due to portability provisions, near-term cash flow security is of great importance to cash balance plan sponsors

• Understand expected, and potentially unexpected, plan outflows and inflows

• Incorporate sensitivity of liability cash flows to liability-related assumptions, such as participant group


Conduct Initial Plan Evaluation

While expected cash flows are relatively moderate,the vested deferred and post-age-65 participantswith account balances represent potentiallysignificant cash flow drawdown risk

Sample plan, assuming accrued benefit only (no future pay- or interest-based credits). All amounts are in millions.

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Deterministic and Stochastic Modeling: Expected Returns • Understand and quantify plan sponsor objectives and risk tolerances over a one-year and multi-year periods

• Consider several potential investment solutions that may be expected to achieve (or exceed) the ICR

• Develop probabilistic rate and market scenarios including the probability of achieving ICR over a 1-3 year period


Perform Scenario Analysis

Sample plan, assuming 3.8% target ICR (30-year CMT as of November, 2013), no interest rate shifts, and sample capital market assumptions.

-10%

-5%

0%

5%

10%

15%

20%

100% 90% 80% 70% 60%

Fixed Income Allocation

1-Year ReturnAssuming No Interest Rate Shifts

-3%

-2%

-1%

0%

1%

2%

3%

No Change Rates Up 0.5% Rates Up 1.0%

1-Year Fixed Income ReturnsVarious Interest Rate Shifts

T-Bill Short Treasuries Short IG Moderate IG Int IG

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Adjust Investment Strategy As Needed• Continuously measure success in terms of reaching ICR, applicable floors, etc.

• Review market scenarios for the next 3-6 months and adjust asset allocation or investment strategy as needed

• If ICR is reached, consider significantly reducing market exposure or even going to 100% cash

• Repeat the plan evaluation, scenario analysis, and asset allocation process annually as the ICR is reset


Continuously Monitor Strategy

0.0%

1.0%

2.0%

3.0%

4.0%

3/31/2014 6/30/2014 9/30/2014 12/31/2014

Contribution to Return YTD

Fixed Income Equities Total Target Return

3.80%

1.61%

2.15%

0.0% 1.0% 2.0% 3.0% 4.0%

Annual Target

YTD Return(Total

Portfolio)

RequiredReturn

For Rest ofYear

Return Goal Progress YTD

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Research, Reporting, and Ongoing Commentary

19

DISCLOSURES

This report is for informational purposes only and is not intended as investment advice or an offer or solicitation with respect to the purchase or saleof any security, strategy or investment product. Although the statements of fact, information, charts, analysis and data in this report have beenobtained from, and are based upon, sources Sage believes to be reliable, we do not guarantee their accuracy, and the underlying information, data,figures and publicly available information has not been verified or audited for accuracy or completeness by Sage. Additionally, we do not representthat the information, data, analysis and charts are accurate or complete, and as such should not be relied upon as such. The Information generatedby Sage regarding the likelihood of various investment outcomes is hypothetical in nature, does not reflect actual investment results and is not aguarantee of future results. Please note that the results generated by Sage may vary with each use and over time, and may vary depending onindividual client circumstances. Additional investments which may not have been considered in this analysis may have characteristics which aresimilar or superior to those which have been analyzed herein. All results included in this report constitute Sage’s opinions as of the date of this reportand are subject to change without notice due to various factors, such as market conditions. No part of this Material may be reproduced in any form,or referred to in any other publication, without our express written permission.

Any decision to act upon the Information described herein should be made after conducting such investigations as you deem necessary includingconsulting your own legal, actuarial, accounting and investment consultants in order to make an independent determination of the suitability andconsequences of the Information herein.

These materials contain statements and analyses that are “forward-looking statements.” These forward-looking statements are based upon certainassumptions. Actual events are difficult to predict and are beyond the preparer’s control. Actual events may differ materially from thoseassumed. All forward-looking statements included are based on information available on the date hereof and Sage, nor its respective affiliates, doesnot assume any duty to update any forward-looking statements. Accordingly, there can be no assurance that estimated returns, yields or projectionscan be realized, that forward-looking statements will materialize or that actual returns, yields or results will not be materially different than thosepresented. Market conditions will have a significant impact on the valuation of assets and the Actuarial Data. Annual, cumulative, and annualizedreturns are calculated assuming reinvestment of dividends and income plus capital appreciation. Past performance results are not necessarilyindicative of future performance.

The Information herein is confidential. Any reproduction of this Information, in whole or in part, is prohibited and you may not release thesematerials to any other person, except to your advisors and professionals who will be assisting you in evaluating the Information. Please read andunderstand this entire statement before utilizing the Information. The Information is illustrative and is not intended to predict actual results whichmay differ substantially from those reflected in the Information. You should understand the assumptions and evaluate whether they are appropriatefor your purposes. Performance results are based on mathematical models that use inputs to calculate results. As with all models, results may varysignificantly depending upon the value of the inputs given. You should consider whether the behavior of these analyses should be tested withassumptions different from those included in the Information. The Information contains data that is current as of its publication date and afterpublication may no longer be complete or current. The study does not account for taxation. Sage does not offer tax advice and urges you to consult atax adviser for specific advice about the tax implications of an investment portfolio. The study does not consider all investment opportunities availableto investors (other investments not considered may have characteristics similar or superior to those analyzed by the study).

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Investors should make their own decisions on investment strategies based on their specific investment objectives and financial circumstances. Allinvestments contain risk and may lose value. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk,political and economic risk, derivatives risk, income risk, and other investment company risk. As interest rates rise, bond prices fall. Credit risk refersto an issuer’s ability to make interest payments when due. Below investment grade or high yield debt securities are subject to liquidity risk andheightened credit risk. Foreign investments involve additional risks as noted above. Investing involves substantial risk and high volatility, includingpossible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. Our Tactical ETF strategy invests in exchange traded funds(ETFs). Investors should consider funds’ investment objectives, risks, charges, and expenses carefully before investing. The investment return andprincipal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. ETFstrade like stocks and may trade for less than their net asset value. Different types of investments involve varying degrees of risk, and there can be noassurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Past performance is not a guarantee offuture results.

Sage Advisory Services, Ltd. Co. is a registered investment adviser that provides investment management services for a variety of institutions and highnet worth individuals. For additional information on Sage and its investment management services, please view our web site atwww.sageadvisory.com, or refer to our Form ADV, which is available upon request by calling 512.327.5530.

DISCLOSURES

http://www.sageadvisory.com/

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CASH BALANCE PLAN INSTITUTIONAL SOLUTIONS