Investment Perspective 2016 WAMic Directors Seminar Reference Material John Thayer - CFA Sara Walker - CFA Mark Hilgendorf - CFA Steve Pipp - CFA

Weakest expansion in post-wwii era Possible Headwinds Declining corporate profits / profit margins Declining business confidence Tightening lending standards Deteriorating foreign backdrop Source: Cornerstone Macro

Us Treasuries attractive to global investors Source: Bloomberg

318 S&P 500 stocks have higher yield than 10-year us treasury Source: Cornerstone Macro

What’s driving p/e Ratios What’s driving p/e Ratios ? as multiples have expanded over the past couple years earnings growth has declined Source: Cornerstone Macro

Bonds are expensive AA Muni Bond P/E 65.8x US Treasury Note P/E 62.9x P/E Ratio Corporate Bond P/E 37.7x Stock P/E 16.8x

September 2016 fomc “dot plot” all but 3 members want to raise rates this year – will they? Source: Cornerstone Macro, Bloomberg

Credit spreads continue to tighten Source: Barclays

Custom portfolio management After listening to your needs and objectives, and establishing the parameters of your IPS, our portfolio managers follow a process designed to leverage the investment management strengths of our organization. The team provides continuous investment monitoring and analysis based on your defined needs. Strategic Asset Allocation Tactical Asset Allocation Investment Selection Process Analyst Research, Opinions and Recommendations Fundamental Analysis Time Horizon Risk Tolerance Expectations Taxes Liquidity Income Needs Client Service Tax Planning Client Education Industry Oversight

Investment philosophy Portfolios should be built to meet expectations in all types of markets and changing economic climates using a three-phase investment process that is grounded in fundamental, prudent investment principles. Phase 1: Strategic Asset Allocation Phase 2: Tactical Asset Allocation Phase 3: Investment Selection Process Aligns your time frame, risk tolerance and investment objectives with suitability of core asset classes Designed to increase the probability of achieving your long- term goals at an appropriate level of risk Active management delivers additional value by taking advantage of opportunities as market conditions develop Involves over- or under- weighting asset classes and sectors based on: Changes in capital markets Valuation concerns A point in the economic cycle Achieve competitive returns within your risk profile Focus on selecting high- quality investments with strong risk/reward characteristics Analysis of cumulative risk resulting from individual investment decisions

Selection process focused on qualitative characteristics Long-tenured, seasoned managers that have experience in multiple economic climates A distinct investment methodology that has been consistently applied during the entire tenure of the manager Active management that does not simply mimic a benchmark Fund family that provides the structure and resources for management to thrive A disciplined, repeatable investment process that produces superior long term, risk adjusted results Maintain focus on long-term expectations

Mutual funds - Investment Manager selection process Our search process focuses on selecting world class managers in every asset class (best of class) Eliminate all potential conflicts of interests and utilize institutional share classes Analyze funds over entire market cycle Recognize that every manager will appear to be failing at some point in time To outperform the benchmarks over time, a manger must occasionally be willing to be out of step with those benchmarks

S&p 500 top members Are you getting paid to hold corporate bonds? October 2016 December 2007 Dividend Yield Yield on 10-Year Debt Yield on 10- Year Debt AT&T 4.91% 3.17% 3.42% 5.53% Procter & Gamble 3.02% 2.17% 1.85% 5.23% General Electric 3.12% 2.81% 3.10% 5.05% Johnson & Johnson 2.69% 2.16% 2.43% 5.49% JP Morgan 2.83% 3.01% 3.30% 6.02% Apple 2.02% 2.49% 0% N/A Microsoft 2.70% 2.44% 1.15% Exxon Mobil 3.44% 2.51% 1.46% Chevron 4.17% 2.59% 2.42% Source: Bloomberg * - Combination of Class A and C shares

S&p 500 top members dividends have historically grown over time 2016 Dividend per Share 2007 Dividend per Share 10-Year Annualized Growth of Dividend AT&T $1.92 $1.42 3.7% Procter & Gamble $2.68 $1.40 8.0% General Electric $0.92 $1.24 -1.0% Johnson & Johnson $3.20 $1.66 7.9% JP Morgan $1.52 3.5% Apple $2.28 $0 N/A Microsoft $1.56 $0.44 14.6% Exxon Mobil $3.00 8.9% Chevron $4.28 $2.32 7.5% Source: Bloomberg * - Combination of Class A and C shares

ELECTION IMPACT Source: Cornerstone Macro