HR Specialty Products & Services Catalogue Executive Summary A No Frills Distillation of Vendor’s Marketing Collateral Thomas A Ference President & CEO Human Resources Mining & Distribution Co Locating, Validating and Accelerating HR Innovation Office: Cell: Fax: Website: Proprietary Methodologies-Based Combined Investment and Taxation Optimization Service for Rabbi Trusts

Combined Investment and Taxation Optimization Service for Rabbi Trusts Typical “funding” approaches for Rabbi trust-funded NQP’s that deploy life insurance and /or off-the-shelf mutual funds can be rife with cost and tax inefficiencies caused by the inadequate matching of assets and liabilities and the mis- considerations of corporate tax implications. This service combines the extensive modeling and monitoring capabilities of a renowned NQP consultancy with the sophisticated tax analytics, portfolio optimization and volume- based separate account purchasing capabilities of a large, brand name financial institution. The model first analyzes all current trust investments to determine the true after tax rate of return by asset class while considering all sources of expense plus the taxation / ”tax drag” factors.

Combined Investment and Taxation Optimization Service for Rabbi Trusts Newly-established employer financial and funding objectives are used to drive asset and liability modeling / matching with overlaid tax analyses in order to optimize current funding of the Rabbi trust. Ongoing performance monitoring assures ongoing NQP trust optimization. Results include improved after-tax rates of return and thus, improved financial statement results.

Typical NQP Funding Inadequacies Cost-ineffective COLI funding Tax-inefficient mutual funds Lack of integrated liability assessment. Little or no: -duration analysis, -liquidity planning, -sensitivity testing, -asset class tax-attribution analysis, etc. Lack of advanced “tax overlay” capabilities Inadequate coordination between HR, finance and treasury for prudent plan / funding management

Problems with COLI Frictional Costs Mortality Charges Carrier Profit Commissions M&E Expenses Premium Tax DAC Tax Investment Drains Substandard investment performance per benchmarks Retail (or higher) asset management fees Neglected asset/liability matching and inappropriate asset allocation policy

Problems with Mutual Funds Tax DrainsInvestment Drains Substandard investment performance per benchmarks Retail asset management fees Reduced yields for munis vs. taxable bonds High transaction costs from participant rebalancing Tax on dividends and income Tax on realized gains from: -Participant reallocations -Fund turnover/rebalancing -Fund distributions No cross-fund tax management

Case Study of COLI Policy Audit Results within Rabbi Trust Policy issued 2005 Current Cash Value = $234,987M Cash on Cash Return Years: Death at Age 83 Death at Age 86 Carrier Projected Crediting Rate = 7% Internal Rate of Return = % Notes: -Although policy had market losses, the key problem was excessive loads. -Expense “drain” from a 7% crediting rate produced a 2-3% actual IRR -Analysis of mutual funds can produce similar results Actual After Tax Internal Rate of Return Ranges from 2% to3% vs. 7% projected

Model for Optimization of Investments and Taxes  Separately Managed Accounts  ETFs  Company Stock  Alternative Investments Tactical Integration  High Turnover Equities  Optional COLI Portfolio  Fixed Income  Other Highly-Taxed Classes Tax Overlay

Proprietary Process Followed to Achieve the Results Actuarial liability analysis/sensitivity testing Liquidity and liability duration analysis Asset/liability studies Investment policy/asset allocation recommendations Investment-manager research/selection COLI audit, analysis and performance optimization services Tax-overlay analytics Global market analyses Disciplined ongoing rebalancing services In-depth, after-tax, ongoing performance review

Next Steps This product/service is contained in the HR Specialty Products & Services Catalogue™ Operational level details about this particular service provider can be obtained in conference with the vendor The HR Mining &Distribution Co. is an independent and contracted representative of the vendor Upon your request, we will arrange for an introduction that can range from a simple, quick conference call to a services overview / system demo Tom Ference (Chicagoland area) or Thank you for your potential interest in this fresh thinking