Presentation to Rivanna Investments Wealth Management March 25, 2016 Jess Ellington, Chief Investment Officer

Wealth Management Agenda 1.Background 2.Investment Insight/Economic Outlook 3.Union Investment Methodology 4.Review of Rivanna Portfolio 5.Questions 2

Wealth Management Background 3

Wealth Management Investment Insight 4

Wealth Management Diversification and the Average Investor 65 GTM – U.S.

Wealth Management Life Expectancy and Pension Shortfall 63 GTM – U.S.

Wealth Management S&P 500 Index at Inflection Points 4 GTM – U.S.

Wealth Management Annual Returns and Intra-year Declines 13 GTM – U.S.

Wealth Management Stock Market Since GTM – U.S.

Wealth Management Time is on Your Side

Wealth Management Asset Class Returns 56 GTM – U.S.

Wealth Management Economic Outlook Not just a central bank driven market but… US Economy is the driver again Bull Market Long in the Tooth DEBT is our greatest enemy Valuations are OK 12

Wealth Management Central Bank Driven Market Fixed Income Fed’s Balance Sheet: Liabilities $ trillions Fed’s Balance Sheet: Assets $ trillions Other U.S. Treasuries Agency MBS Excess Reserves Required Reserves Other Liabilities Source: Federal Reserve, FactSet, J.P. Morgan Asset Management. Federal Reserve Summary of Economic Projections Federal Funds Rate Expectations FOMC and market expectations for the Fed Funds rate Federal Funds Rate FOMC Long Run Projection FOMC Year-End Estimates Market Expectations 32 GTM – U.S. Long Run

Wealth Management Central Bank Driven Market 34 GTM – U.S.

Wealth Management US Economy is the driver again 8 GTM – U.S.

Wealth Management US Economy is the driver again 12 GTM – U.S.

Wealth Management US Economy is the driver again 17 GTM – U.S.

Wealth Management US economy is the driver again 19 GTM – U.S.

Wealth Management US economy is the driver again 20 GTM – U.S.

Wealth Management | 20 Bull Market Long in the tooth 15

Wealth Management Debt is our greatest enemy 37 GTM – U.S.

Wealth Management Debt is our greatest enemy 46 GTM – U.S.

Wealth Management Valuations are OK 7 GTM – U.S.

Wealth Management Union Investment Methodology 24

Wealth Management Critical to every investment strategy is asset allocation, as each individual client has different and specific needs and objectives. Our role is to identify the client’s goals, risk tolerance, time horizon, income needs, and special circumstances so we can properly allocate the portfolio into the various investment asset classes. We will use the following to construct the most efficient portfolio: Asset Classes Employed Domestic Large Cap Dividend Growth Stocks Mid and Small Cap Stocks International/Emerging Markets Stocks Diversified Bonds – Taxable and Tax-Free Alternative Investments (low correlation to traditional asset classes) - Proper allocation between multiple asset classes is the single most important determinate of a portfolio’s long-term performance and variability. - Broad diversification across various asset classes helps reduce the overall portfolio volatility, while increasing the potential for improved performance. Asset Allocation is the Most Important Decision Investment Philosophy 25

Wealth Management

27 Investment Philosophy Asset Class Returns

Wealth Management Risk-Reward Scatterplot 28

Wealth Management Dividend Growth 29 Dividend Growth

Wealth Management Large Cap Equity Selection Process Companies are evaluated through a rigorous proprietary analysis*, which focuses on the following areas: Dividend Growth: seeking stocks that pay attractive dividends and have generally increased their dividend over the last ten years. Dividend-growing stocks have delivered better total returns than non- payers and better than the market averages over time with less risk. Consistently growing dividends are a clear signal of corporate health and a significant source of total return (nearly 40% since the 1930’s). Intrinsic value: looking for stocks selling below their intrinsic values as determined by discounting the expected future free cash flows (FCF) generated by the company. FCF cannot be manipulated and is a more reliable indicator of a stock’s performance than earnings per share. Good companies become good investments only when they can be bought below their intrinsic values. Commitment to Portfolio Growth and to Portfolio Income: we seek total return growth, but not at the expense of delivering income, too. Substituting one for the other will result in either too little growth or too little safety. Demographic trends also favor dividend stocks with baby boomers aging into retirement. There will be an increasing demand and need for growth with income and safety. Risk Control: investing in stocks that pay dividends addresses the twin pillars of enduring investment success – growth and volatility tolerance. Success requires good returns during good years and the ability to tolerate and survive volatility in the bad years. Dividends have helped buffer portfolio losses when equity prices declined. Additionally, there are fewer alternative income options with the yields of high-quality fixed income investments having steadily dropped. * Based on a partnership with Thomas Partners’ research Investment Philosophy 30

Wealth Management Union Dividend Growth Strategies Seek to Provide Dividend Income Every Month Dividend Income Growth Every Year Competitive Total Returns Over Time

Wealth Management (1926 – 2013) Source: Ibbottson Stocks, Bonds, Bills & Inflation ; Bloomberg The S&P 500 ® Total Return Index assumes reinvestment of dividends, includes capital gains and does not reflect the effect of taxes and fees. Indexes are unmanaged and not available for direct investment. Past performance is not indicative of future results. Contribution of Dividends to the S&P500 ® Total Return

Wealth Management Our Approach – Dividend-Paying Stocks Source: ThomasPartners research with data from the CRSP® 1962 U.S. Stock Database. ©2014 Center for Research in Security Prices (CRSP), University of Chicago Booth School of Business. For additional information see “Notes and Disclosures”. Past performance is not indicative of future results.

Wealth Management Estimated Income Growth Since Inception Period-End Estimated Annual Income The Estimated Income Growth Since Inception chart assumes that a client invested $1 million in the ThomasPartners Dividend Growth Strategy on March 31, 2003 (the strategy's inception date). Each period’s estimated annual income shown is the product of that initial $1 million investment times the cumulative returns since the inception date, times the strategy’s annualized dividend yield. The strategy’s annualized dividend yield at each indicated point in time is derived by taking the last dividend paid for each stock in the portfolio, dividing that dollar amount by the price of the stock on the measurement date, and then annualizing the resulting amount. Information shown is supplemental to the GIPS presentation shown at the end of this document. Past performance is not indicative of future results.

Wealth Management Alternatives’ 35 Alternatives’

Wealth Management 36 Why Alternatives’  Provide downside protection  Weave low or negatively correlated assets into the portfolio  Drive increased returns without more risk  Capture pricing arbitrage within the Capital Markets  Invest in asset classes with Binary Outcomes  Invest Long Term In Thematic Equity Asset Classes with positive alpha and less than.75 correlation to equities

Wealth Management 37 Portfolio Diversification Why Alternatives’?

Wealth Management 38 Correlations Between Asset Classes

Wealth Management 39 Alternatives’ Blend

Wealth Management Market Cycle Analysis

Wealth Management 41 Risks associated with Alternative investing  Past Performance is not indicative of future success  Limited return history for 40 Act funds  Very few low or negatively correlated funds  Correlations tend to move towards 1.0 in times of crisis/risk-off  Liquid Alt PM talent versus private (compensation)  High expenses  Lack of Understanding of the products  Liquidity  Counter-party Solvency RiskReward Due Diligence

Wealth Management

Rivanna Portfolio Review Morningstar Handout Bloomberg Attribution 46

Wealth Management Questions 47