FIRST QUARTER 2020 EXECUTIVE SUMMARY METROPOLITAN … · 2020-05-28 · Summary Totals $299,967,175...

BOSTON | ATLANTA | CHARLOTTE | CHICAGO | DETROIT | LAS VEGAS | PORTLAND | SAN FRANCISCO

METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY 457 PLAN

FIRST QUARTER 2020EXECUTIVE SUMMARY

May 27, 2020

Dan Beaton, ConsultantKristen Colvin, CAIA, Partner

COVID-19

Key Messaging from NEPC

Key Messaging for Your DC Plan

CARES Act

Market Observations

Plan Assets & Performance

Appendix

MEETING TOPICS

March 31, 2020

2

NEPC, LLC

COVID-19 KEY MESSAGING FROM

NEPC

3

Stay diversified

Rebalance towards targets

Be ready to act on new opportunities

Consider holding one quarter of spending needs in cash

NEPC website address for updateshttps://info.nepc.com/covid-19

KEY MESSAGES FROM NEPC ACROSS PLAN TYPES AND ASSET POOLS

March 31, 2020

4

Fiduciaries Stay the Course In regard to the immediate economic environment and financial market turbulence, there are no asset classes or Plan investment options that we recommend you add, remove, or address at this time.

KEY MESSAGING FOR YOUR DC PLANCOVID-19 & MARKET SELL-OFF

March 31, 2020

At times like these, Committees ask us whether there are special actions they should be taking with regard to their defined contribution plans. Should they issue special communications or meet more regularly? Here’s our advice:

Your primary responsibilities as fiduciaries are to ensure the safekeeping and oversight of plan assets, and effective administration of the plan.

At present (and unlike the great recession), there are no known material issues with either.

If your plan has a stated intention to comply with §404(c) of ERISA, or you follow general best practices, it’s your responsibility to ensure that participants have access to a broad range of investment options and make it possible for them to easily view and control their investments.

Meet to consider any extraordinary events planned or in process (e.g., fund changes, record keeper changes) and whether delays or special communications are warranted.

Review the plan’s investment policy statement for any compliance infractions. If there are any, avoid mechanistic triggers and document the reason(s) for non‐compliance.

Your Fiduciary ResponsibilitiesPlan Operations are Functioning Despite disruptions caused by COVID-19, record keepers have been maintaining call centers and internet transactional access, issuing communications, and continuing to administer plan services including loans, hardship and now “CRD” withdrawals.

Investment Policy Statement ComplianceAt the timing of this report, no prescriptive steps are required per the terms of your Investment Policy Statement.

Other AdvisementsThe protocol for Committee meetings may change during this time. As your Consultant, we are engaging with your record keeper and fund managers, and will advise you of operational or investment-related issues as they arise.

Participants have the Right ToolsParticipants have access to a range of investments with distinct risk/reward characteristics, and importantly, a safe haven investment. They have the ability to transact in their accounts and access to sufficient information to make informed decisions.

5

Highlights of messaging from selected record keepers

Uniformly they communicated only a small percentage of participants made changes to their accounts in the first quarter

In the second quarter we will be able to report the activity related to the CARES Act

KEY MESSAGING FOR YOUR DC PLANCOVID-19 AND PARTICIPANT ACTIVITY

March 31, 2020

Source: Alight 401k Index, Empower, Fidelity, and T. Rowe Price as of March 2020

6

KEY MESSAGING FOR YOUR DC PLANCOVID-19 & TARGET DATE FUNDS

Target date funds were criticized in 2008 for the large losses experienced by investors – particularly those in or near retirement. In 2009, the US Senate Special Aging Committee held hearings reviewing the recession's effect on older American's retirement income, and issued a special investigative report on target date retirement funds. Their work and the ensuing work of the GAO (US Government Accountability Office) led to the adoption of common terminology (e.g., “to” vs “through”) to describe TDFs, and guidance for fiduciaries in selecting and monitoring the funds.

For us, a natural question is, how have target date funds done this time around? Have they performed in line with expectations, or will investors and plan sponsors be surprised again? Below are our observations.

This sell‐off has not been nearly as punishing as 2008. Nonetheless, all target date funds generated losses for retirees and near retirees (and for younger workers). Displayed are 2020 funds, but 2005‐2015 and Income funds had losses too.

The largest losses were generated by managers with higher allocations to equities in their glide paths. This highlights the importance of understanding the risk/return trade‐off of your target date manager.

Target Date Funds

The 2020 vintage of a target date series is generally designed for investors between the ages 63 and 67, or who expect to take distributions from their retirement account at or around this year. Displayed is the performance of the 2020 target date fund universe, where the 1st quartile represents the best performers and the 4th quartile represents the worst performers.

The 2050 vintage of a target date series is generally designed for investors between the ages 33 and 37. Displayed is the performance of the 2050 target date fund universe, where the 1st quartile represents the best performers and the 4th quartile represents the worst performers.

Q1 returns-2.7% to -14.3%

75% of the 2020 universe had losses greater than 8.8%

2008 returns-10.7% to -41.8%

The 2008 returns reference the comparable 2010 funds at that time

Q1 returns-8.7% to -23.1%

75% of the 2050 universe had losses greater than 19%

2008 returns-31.2% to -41.9%

The 2008 returns reference the comparable 2040 funds at that time

March 31, 2020

7

KEY MESSAGING FOR YOUR DC PLANCOVID-19 & ACTIVE MANAGEMENT

In concert with our Research Team, NEPC’s DC consulting team recommends hitting the pause button on manager replacements, “Watch Lists” or other Policy actions triggered (or exacerbated) by recent market performance. Allow the markets to stabilize rather than make decisions about active managers’ performance on the basis of short term results.

In our view, benchmarking against indexes and peer group universes has informational value in market shocks, but generally should not drive Committee actions. In the absence of business continuity risks, or other contravening events, NEPC does not expect to issue manager termination recommendations at this time.

The accompanying figures indicate that the majority of active managers underperformed representative index benchmarks during the first quarter. One area that looked very much like 2008 was the performance of active fixed income, as the great majority of intermediate term bond strategies (both “core” and “core plus”) underperformed the Bloomberg Barclays US Aggregate Bond Index.

Active Manager PerformanceActive Management Success Rate by Category1Q 2020Domestic equity

Value Blend Growth

Sm

all

Mid

Larg

e

1Q 2020Fixed Income and International Equity

Success rates represent the percentage of unique mutual funds as categorized by Morningstar that outperformed the index benchmark returns above, which for US equity represented the Russell styles indices with the exception of the large blend category, which is based on the S&P 500 index. Index benchmark returns for Intermediate Bond and Core Plus Bond are Bloomberg Barclays US Aggregate Bond Index; HY Bond is the Bloomberg Barclays HY Index; while the international equity benchmarks are MSCI EAFE and MSCI EME, accordingly.

Intermediate Bond

Core Plus Bond

High Yield Bond

Intl Developed

Equity

Emerging Markets Equity

-26.7%

53%

-19.6%

29%

-14.1%

42%

-31.7%

45%

-27.2%

36%

-20.0%

56%

-25.8%

61%

-30.6%

28%

-35.7%

39%

Index Return

Success Rate

Legend

3.1%

20%3.1%

4%-12.7%

46%-22.8%

47%-23.6%

32%

March 31, 2020

8

KEY MESSAGING FOR YOUR DC PLANSAFE HAVEN INVESTMENTS

In July 2009, we released a paper titled, “Stable Value on the Brink, But Surviving”. Here’s a recap of events at that time:

Nearly every stable value offering in the marketplace was under pressure in 2008.

Defined contribution plan participants could have experienced losses on their stable value assets in 2008 if things had worsened with the insurance contract providers. Market value to book value ratios at a point in time were mostly between 0.87 and 0.95, i.e., portfolio assets were valued at 87 to 95 cents on the dollar across most stable value funds.

Some money market funds were at risk of “breaking the buck” and were backstopped by the US Treasury.

This time, the 2008 crisis‐era playbook and learnings are mostly working:

Most DC plans offer government money market funds which are exempt from floating NAVs and liquidity fees/redemption gates.

The Federal Reserve invoked its emergency authority to backstop primemoney market funds. Government money market assets ballooned nearly a trillion dollars, causing many to close to protect their yields for current investors.

Stable value fund portfolios are healthy, i.e., their asset portfolios have capital gains, not losses. Insurance contract issuer capacity remains robust, with no increases to pricing.

Safe Haven Investments are Safe & Flush with Inflows

The market-to-book-value ratio of a stable value fund — the ratio of the market value of a stable value fund’s underlying assets to the carrying value of its stable value contracts — is a key indicator in assessing the overall “health” of a stable value fund. The market value of a fund’s holdings fluctuate. Any time the ratio recedes to a level less than 1, it means that the holdings have declined in value relative to their purchase prices. Those market value losses are not “insured”; they serve to reduce the yield (or crediting rate) that participants investing in the fund receive.

NEPC “1” Rated Stable Value Funds

Scale: Billions TOTALTAX-EXEMPT

MM GOV'T MM PRIME MM12/04/2019 3,578,966 138,748 2,663,552 776,666 04/01/2020 4,396,941 129,942 3,612,688 654,311 04/15/2020 4,522,350 139,353 3,714,657 668,340

QUARTER CHANGE ($) 817,975 (8,806) 949,136 (122,355)QUARTER CHANGE (%) 23% -6% 36% -16%

Money Market Fund Asset Update

Source: ICI.org. Totals above include institutional and retail money market assets.

0.99

1

1.01

1.02

1.03

10/1/2019 1/1/2020 4/1/2020

Market Value/Book Value Ratios

High Low Median

March 31, 2020

Net inflows and fixed income gains

9

KEY MESSAGING FOR YOUR DC PLANSCARES ACT

March 31, 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on Friday, March 27, 2020. It provides participants affected by COVID-19 with expanded access to their retirement plan assets.

NEPC has highlighted some of the relevant provisions affecting defined contribution plans.

• Tax Favored Withdrawals: A participant may take a “coronavirus-related distribution” from a qualified DC plan, subject to the following rules:

– No Penalty: The 10% additional tax on early distributions from qualified retirement plans shall not apply.

– Expanded Limit: The aggregate amount of distributions received for any taxable year shall not exceed $100,000. Note that this limit applies across all plans maintained by the employer (and any member of any controlled group of corporations).

– Restoration: A participant who receives a coronavirus-related distribution may repay the amount within 3 years of receipt with a single or multiple contributions. It appears repayments may be made to any eligible retirement plan to which the individual is a beneficiary as long as the plan accepts rollovers.

– Timing: The rules apply to coronavirus-related distributions made on or after January 1, 2020, and before December 31, 2020.

– Participants: Individuals, spouses, or dependents diagnosed with SARS-CoV-2 or COVID-19 by a test approved by the CDC, or those who experience adverse financial consequences as a result of being quarantined, laid-off, reduced work hours reduced, lack of child care, etc.

– Certification: The plan administrator may rely on an employee’s certification that the conditions have been satisfied.

– Taxation: The coronavirus-related distribution required to be included in gross income shall be included ratably over the 3-taxable year period beginning with the taxable year of receipt, unless the taxpayer elects not to.

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KEY MESSAGING FOR YOUR DC PLANSCARES ACT CONT’D

March 31, 2020

• New Loans: The legislation has effectively doubled the existing rules related to borrowing from a qualified DC plan:

– Expanded Limits: Participants may borrow up to the lesser of:• $100,000; or• 100% of the vested account balance.

– Applicability Period: Applies to any loan made during the 180-day period beginning on the date of enactment of the Act.

• New and Existing Loans: The legislation provides a grace period for repayment:

– Extension of Amortization Schedule: If the due date of the loan occurs between the date of enactment and December 31, 2020, the due date shall be delayed for one year. Repayments shall be adjusted to reflect the delay in the due date.

– Five Year Maximum Loan Term: The extension of the amortization schedule shall not be taken into account when determining whether the 5-year maximum loan period has been exceeded.

• Required Minimum Distributions (RMDs): The legislation suspends any RMD that ordinarily would have been required in 2020.

• Plan Amendments: Plan amendments will be required on or before the last day of the first plan year beginning on or after January 1, 2022, or such later date as the Secretary of the Treasury may prescribe.

We typically talk with sponsors about the importance of keeping assets in DC programs and the opportunity costs associated with loans and cash outs. However, these are unusual times and certain participants may need access to their savings. The majority of plan sponsors we spoke to within weeks of the legislation’s release expected to add the Act’s relief provisions.

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CliffsNote version, what is the CARES Act?The Coronavirus Aid, Relief and Economic Security (CARES) Act is a ginormous aid bazooka that’s never been fired before. It helps individuals affected by COVID-19 access up to $100,000 of their retirement plan assets without early withdrawal penalty and delay their loan payments, if they’ve taken a plan loan, for up to one year. On the opposite side of the spectrum, it enables older participants to defer the 2020 required minimum distributions (RMD) from their retirement accounts and not sell assets at depressed prices.

What are the decisions that plan sponsors have to make?Employers have decisions of whether to offer “coronavirus related distributions” (“CRDs”), loan repayment relief, and temporarily increased loan limits to $100,000 to qualified individuals. We read the Act to say that loan relief is an employer decision, although the language is unclear. Some record keepers view loan repayment relief as required and are making it available without employer consent.

How is loan relief administered?Any qualified individual with an existing loan can contact their plan administrator or record keeper and delay loan repayments for one year. The delay period will extend the term of the loan. Repayments will be adjusted to reflect the delay in due date and any interest accruing during the delay.

How does the Act define a COVID-19 qualified individual?The Act outlines the criteria (see our summary) and record keepers are preparing Q&A for their phone representatives and communication materials for their websites and plan sponsors’ intranets.

Self-certification, what’s my liability as a plan sponsor?The burden is on participants, not on employers, to demonstrate if they are audited that they met the criteria for a CRD or loan relief. Self-certification will vary by record keeper but likely will ask that the participant verify that they have not requested more than the allowable aggregate amount across their retirement plans and IRAs.

What are clients doing?It is early days and there have been varied reactions. Some record keepers made the business decision to implement Coronavirus-Related Distributions (CRDs) unless plan sponsors opted out. Others are having conversations with clients about the Act and what their choices are with adoption. Anecdotally, some clients are authorizing (CRDs), some are increasing their loan limits, some are doing both. While plan sponsors can be thoughtful about adoption, the relief measures are temporary, so there is some urgency to making a decision.

Does a participant have to take a loan before taking a Coronavirus-Related Distributions (CRD)? No, CRDs aren’t your typical hardship withdrawal. Unlike hardship withdrawals, CRDs can be repaid to an IRA or retirement plan (treated as a rollover) within three (3) years after the distribution. Repayment does not go through payroll, and can be made in a single or multiple payment, partial or full amount. CRDs can be taken by a participant in lieu of a loan.

Can we limit CRDs to only active participants?Yes, you can offer these accommodations to active plan participants only or all plan participants regardless of employment status. Practically, however, terminated participants could request a rollover to an IRA where they could then take a CRD.

FAQS – WHAT PLAN SPONSORS ARE ASKINGABOUT THE CARES ACT

March 31, 2020

12

Can we limit CRDs and the increased loan limits to something less than $100,000?The maximum amount for an individual is $100,000 aggregated across retirement plans and IRAs. In an effort to get this up and running quickly, some record keepers have made the business decision to program only for that amount and not lower amounts. Others are allowing plan sponsors to authorize CRDs in incremental amounts, for example, up to $50,000, $75,000 or $100,000.

Can we limit CRDs by money source?Again, yes. Hardship withdrawals, for example, prior to new rules which took effect in 2019 were often limited to the contributions a participant made to their account and not to employers' contributions plus any investment gains. Plan sponsors can elect to open up CRDs to all money sources or mirror each plan’s existing hardship withdrawal source availability.

Does a terminated or furloughed participant get Coronavirus-related loan relief?Multiple record keepers have indicated that the guidance is unclear on whether qualified individuals that have terminated employment are eligible for the suspension of loan repayments. Our read is if the plan is amended to offer this relief, terminated or furloughed participants should get it unless the employer is more restrictive.

Do distribution fees and loan fees apply?Many record keepers are waiving them. Check with your provider.

How practical is a $100,000 loan taken over a 60 month term?The typical plan participant does not have $100,000 in retirement assets to draw upon. An affected participant taking a loan of this amount would face monthly installment payments of almost $1,800 starting next year, which practically is a high financial burden for any participant, particularly one currently experiencing the virus or the financial consequences of it. We expect CRDs will be more common.

Our plan offers one loan. How does the Coronavirus-related loan relief apply? The CARES Act doubles the loan amount that participants can take—from $50,000 to $100,000, or 50% of their account balance to 100%, whichever is less. So whether your plan offers one loan or multiple loans, if you adopt this provision, affected participants can temporarily access a greater amount (for the period March 27th to September 23rd). If they already have a loan outstanding, and their plan only offers one loan, they could potentially refinance at the higher amount per the rules of the plan, or prepay and take a new loan. Plans may have frequency restrictions or required waiting periods between loans that will apply unless those rules are amended.

FAQS – WHAT PLAN SPONSORS ARE ASKINGABOUT THE CARES ACT

March 31, 2020

13

NEPC, LLC

MARKET OBSERVATIONS

14

INDEX PERFORMANCE SUMMARYAS OF MARCH 31, 2020

* 35% LC, 10% SC, 12% Int'l, 3% Emerging, 25% FI, 5% HY, 5% Global FI, 5% REITS**As of 12/31/2019

March 31, 2020

Domestic Equity Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Large Core S&P 500 -19.6% -7.0% 5.1% 6.7% 10.5%Small Core Russell 2000 -30.6% -24.0% -4.6% -0.2% 6.9%Small Growth Russell 2000 Growth -25.8% -18.6% 0.1% 1.7% 8.9%Small Value Russell 2000 Value -35.7% -29.6% -9.5% -2.4% 4.8%Large Core Russell 1000 -20.2% -8.0% 4.6% 6.2% 10.4%Large Growth Russell 1000 Growth -14.1% 0.9% 11.3% 10.4% 13.0%Large Value Russell 1000 Value -26.7% -17.2% -2.2% 1.9% 7.7%Mid Core S&P Mid Cap 400 -29.7% -22.5% -4.1% 0.6% 7.9%REIT NAREIT Composite -25.5% -18.1% -0.9% 1.5% 8.1%Int'l Equity Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.International Developed MSCI EAFE -22.8% -14.4% -1.8% -0.6% 2.7%Emerging Equity MSCI EM -23.6% -17.7% -1.6% -0.4% 0.7%Small Cap Int'l S&P EPAC SmallCap -27.6% -18.3% -3.1% 0.7% 4.9%World ex-US MSCI ACWI ex-US -23.4% -15.6% -2.0% -0.6% 2.1%Domestic FI Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Core Bonds Barclays Aggregate 3.1% 8.9% 4.8% 3.4% 3.9%Municipal Bond Barclays Municipal -0.6% 3.8% 4.0% 3.2% 4.1%High Yield Barclays US High Yield -12.7% -6.9% 0.8% 2.8% 5.6%Intermediate Gov/Cred Barclays Interm. Gov/Credit 2.4% 6.9% 3.8% 2.8% 3.1%Long Gov/Credit Barclays Long Gov/Credit 6.2% 19.3% 9.7% 6.0% 8.1%Long Credit Barclays Long Credit -4.7% 9.0% 6.6% 4.7% 7.3%Long Treasuries Barclays US 20+ Yr Treas 21.5% 33.5% 13.8% 7.4% 9.5%Cash ICE BofAML US 3M T-Bill 0.6% 2.3% 1.8% 1.2% 0.6%Inflation Barclays US TIPS 1-10 Yr 0.3% 4.5% 2.5% 2.2% 2.5%STRIPS Barclays 20+ Yr STRIPS 30.0% 47.8% 18.9% 9.6% 13.5%Global FI Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.World Gov. Bonds FTSE WGBI 2.0% 6.2% 4.3% 3.0% 2.2%Em. Mkt. Bonds (Local) JPM GBI-EM Glob. Div. -15.2% -6.5% -0.8% 0.3% 0.5%Global Inflation Barclays Global ILB -2.7% 1.2% 2.6% 1.9% 3.1%Diversified Benchmark Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Diversified Diversified* -14.4% -5.9% 2.4% 3.4% 6.5%Alternative Benchmarks Qtr. 1 Yr. 3 Yr. 5 Yr. 10 Yr.Commodities Bloomberg Commodity Index -23.3% -22.3% -8.6% -7.8% -6.7%Real Estate NCREIF Property Index** 1.6% 6.4% 6.7% 8.2% 10.2%

15

-1.4%

-3.3%

-11.4%

-17.9%

10.4%

-19.4%

-1.0%

-17.2%

-52.4%

-0.6%

-10.8%

-13.5%

-17.0%

-19.3%

-26.1%

-11.9%

-27.0%

-12.7%

-32.0%

-50.5%

-12.7%

-19.3%

Utilities (3.6%)

Comm. Services (10.7%)

Real Estate (3.0%)

Materials (2.4%)

Info. Tech. (25.5%)

Industrials (8.2%)

Healthcare (15.4%)

Financials (10.9%)

Energy (2.7%)

Consumer Staples (7.8%)

Consumer Disc. (9.8%)

3 Months 1 Year

S&P 500 INDEX (DOMESTIC EQUITY MARKETS)

MSCI ACWI EX USA INDEX(INTERNATIONAL EQUITY MARKETS)

INDEX SECTOR PERFORMANCE

-8.4%

-9.5%

-25.4%

-22.2%

1.5%

-16.5%

4.9%

-24.4%

-37.8%

-9.4%

-12.8%

-15.8%

-13.9%

-27.4%

-27.3%

-17.5%

-26.1%

-8.8%

-30.9%

-38.1%

-14.7%

-24.2%

Utilities (3.7%)

Comm. Services (7.5%)

Real Estate (3.0%)

Materials (7.0%)

Info. Tech. (10.2%)

Industrials (11.4%)

Healthcare (10.5%)

Financials (19.1%)

Energy (5.2%)

Consumer Staples (10.5%)

Consumer Disc. (11.8%)

3 Months 1 Year

March 31, 2020

(%) allocations represent weight in Index Data source Morningstar Direct

16

NEPC, LLC

PLAN ASSETS & PERFORMANCE

17

9%

91%

3 Month Change: Down $49.3 Million

Target DateOptions

Core Funds

EXECUTIVE SUMMARY

March 31, 2020

PLAN ASSETS: $300 MILLION

Performance

• The World Health Organization declared Coronavirus COVID-19 a pandemic on March 12, 2020. The global stock markets had already reacted to the crisis, with the Dow Jones Industrial Average’s three worst point drops in history occurring on March 9th, 12th and 16th. Only two other dates in history had larger one-day percentage falls: Black Monday on Oct. 19, 1987 (22.6% decline) and Dec. 12, 1914 (23.52% decline. The disruptions to the global economy from this health crisis are unprecedented.

Manager Due Diligence

• Please refer to the Due Diligence Monitor for material announcements from your Plan managers.

PLAN PERFORMANCE: QUARTER

RANGE OF CORE FUND RETURNS

RANGE OF TARGET DATE FUND RETURNS

2.2% to -32.1% -6.9% to -21.5%PIMCO Total Return Instl

Voya Small Company Port I

Today 20502055

QUARTERLY UPDATES RECENT ACTIONS/RECOMMENDATIONS

Recent Actions & Recommendations

• NEPC is not recommending any actions as it relates to the Plan’s managers at this time either in view of the recent quarter’s developments or any of the longer-term trending data in this report.

• Please see our special messaging for DC Plans this quarter.

CAPITAL MARKETS PERFORMANCE: QUARTER

BONDS DOMESTIC EQUITY

FOREIGNEQUITY

INCOME TARGET

DATE

2060+ TARGET

DATE

3.1%

BarCap Agg Index

-19.6%

S&P 500 Index

-23.4%

MSCI ACWI ex U.S. Index

-6.7%

S&P TDF Retirement

Index

-20.9%

S&P TDF 2060+ Index

18

FIDUCIARY CALENDAR | ACTION PLAN*

Category Fiduciary Practice Recommended Review Frequency Last/Next Review Date

Investments

Review investment performance Quarterly Q1 2020 Report

Review investment structure Every 2 – 3 years Completed Q3 2019 / Q3 2021

Review the Plans’ Target Date Periodically -

Fees and Expenses

Evaluate investment expenses Annually Completed Q3 2019 / Q3 2020

Evaluate record keeping expenses RFI/RFP every 3-5 years or with contract expiry Completed Q3 2019 / Q3 2020

Governance

Review Plan Document Periodically Completed Q2 2019

Review Investment Policy(s) Annually Completed Q2 2019 / Q2 2020

Provide fiduciary training as needed Periodically Ongoing

• The Fiduciary Calendar | Action Plan as shown above is intended to be a “living document”, refreshed quarterly to capture the timing of certain planned items and Committee decisions, and record changes and/or revisions as necessary.

March 31, 2020

19

The items below summarize the recent quarter’s performance and any changes or announcements from your Plan managers/funds. A “-” indicates there were no material announcements. A “Yes” indicates there was an announcement and a summary is provided separately. NEPC’s Due Diligence Committee meets every two weeks to review events as they relate to investment managers and determines if any action should be taken by NEPC and/or by our clients. They rate events: No Action, Watch, Hold, Client Review or Terminate. With respect to Performance, a “-” indicates the manager/fund performed in line with the majority of managers/funds in the category; only outliers (placement in the Top or Bottom Quartile) are highlighted. Your Consultant’s Recommendation is refreshed quarterly in view of the recent quarter’s developments (performance, manager events, and any of the longer-term trending data). NEPC considers ourselves to be a fiduciary, as ERISA defines the term in Section 3(21).

DUE DILIGENCE MONITOR

March 31, 2020

Plan Manager/FundPerformance

(Recent Quarter)

Manager Changes/Announcements (Recent Quarter)

NEPC Due Diligence Committee Recommendations

NEPC Consultant Recommendations/Comments for your Plan

Wells Fargo Target Funds R6 Bottom Quartile (2055) - - No action recommended

Voya Fixed Plus Account III - - - No action recommended

PIMCO Total Return Instl Top Quartile - - No action recommended

PIMCO Dynamic Bond Instl - - - No action recommended

Principal Diversified Real Asset Instl - - - No action recommended

Dodge & Cox Stock - Yes No Action No action recommended

Vanguard Institutional Index I - - - No action recommended

Vanguard PRIMECAP Adm Bottom Quartile - - No action recommended

Vanguard Mid Cap Index Institutional Top Quartile - - No action recommended

Voya Small Company Port I - - - No action recommended

Dodge & Cox International Stock Bottom Quartile Yes No Action No action recommended

Vanguard Total Intl Stock Idx Adm - - - No action recommended

American Funds Cap Wrld Gr&Inc R6 - - - No action recommended

Nuveen Real Estate Securities R6 - - - No action recommended

20

Due Diligence Commentary

Dodge & Cox

• Effective May 1, 2020, Wendell Birkhofer (63), Senior Vice President, and Diana Strandberg (60), Senior Vice President and Director of International Equity, will be leaving the U.S. Equity Investment Committee. Mr. Birkhofer will also be retiring from the firm at the end of the year, after a distinguished 33-year career. Ms. Strandberg will continue to focus her time on the International and Global Equity Investment Committees and firm leadership responsibilities. After these changes, the Committee will have eight members, with average tenure of 22 years at Dodge & Cox.

• Prior to these departures, the U.S. Equity Committee was comprised of ten team members. With Mr. Birkhofer'sretirement and and Ms. Strandberg's departure from this committee there are now eight committee members making investment decisions as a team. The global research team interacts daily with the investment committee to make decisions. The committee works to reach consensus on investment recommendations. Each member has the opportunity to provide input.

• NEPC has no concerns with the retirement of Mr. Birkhofer and departure of Ms. Strandberg from the U.S. Equity Committee because of the depth of the team and the investment decision making process and recommends ‘No Action’.

DUE DILIGENCE MONITOR

March 31, 2020

21

ASSET SUMMARY

March 31, 2020

Periods Ending Beginning Year Beginning Quarter End Quarter31-Mar-20 ($000) (%) ($000) (%) ($000) (%)

Composite $349,253 100% $349,253 100% $299,967 100%

Target Date Funds $33,594 10% $33,594 10% $27,400 9%

Wells Fargo Target Today R6 $193 0% $193 0% $171 0%Wells Fargo Target 2010 R6 $55 0% $55 0% $136 0%Wells Fargo Target 2015 R6 $764 0% $764 0% $713 0%Wells Fargo Target 2020 R6 $1,023 0% $1,023 0% $949 0%Wells Fargo Target 2025 R6 $4,372 1% $4,372 1% $3,870 1%Wells Fargo Target 2030 R6 $3,225 1% $3,225 1% $1,987 1%Wells Fargo Target 2035 R6 $7,801 2% $7,801 2% $6,544 2%Wells Fargo Target 2040 R6 $3,033 1% $3,033 1% $2,550 1%Wells Fargo Target 2045 R6 $7,197 2% $7,197 2% $5,797 2%Wells Fargo Target 2050 R6 $3,981 1% $3,981 1% $3,126 1%Wells Fargo Target 2055 R6 $1,889 1% $1,889 1% $1,492 0%Wells Fargo Target 2060 R6 $60 0% $60 0% $65 0%

Core Funds $314,767 90% $314,767 90% $271,940 91%

Voya Fixed Plus Account III $115,111 33% $115,111 33% $118,156 39%PIMCO Total Return Instl $7,137 2% $7,137 2% $7,842 3%PIMCO Dynamic Bond Instl $971 0% $971 0% $1,012 0%Principal Diversified Real Asset Instl $290 0% $290 0% $233 0%Dodge & Cox Stock $14,647 4% $14,647 4% $10,185 3%Vanguard Institutional Index I $28,467 8% $28,467 8% $23,163 8%Vanguard PRIMECAP Adm $75,473 22% $75,473 22% $58,689 20%Vanguard Mid Cap Index Institutional $39,449 11% $39,449 11% $28,407 9%Voya Small Company Port I $11,096 3% $11,096 3% $7,514 3%Dodge & Cox International Stock $2,049 1% $2,049 1% $1,564 1%Vanguard Total Intl Stock Index Admiral $1,673 0% $1,673 0% $1,277 0%American Funds Capital World Gr&Inc R6 $13,735 4% $13,735 4% $10,733 4%Nuveen Real Estate Securities R6 $4,669 1% $4,669 1% $3,165 1%

TD Ameritrade - Brokerage $892 0% $892 0% $627 0%

22

PERFORMANCE - TARGET DATE

March 31, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile.

Morningstar Universe Three Month

Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Target Date Funds

Wells Fargo Target Today R6 US Fund Target-Date Retirement -6.9 50 -0.2 43 2.5 55 2.1 70 3.2 86

Wells Fargo Target Today Blend Index -7.0 -0.1 2.8 2.3 3.5Wells Fargo Target 2010 R6 US Fund Target-Date 2000-2010 -7.0 36 -0.3 42 2.7 57 2.2 92 3.5 96

Wells Fargo Target Date 2010 Blend Index -7.3 -0.3 2.9 2.4 4.0Wells Fargo Target 2015 R6 US Fund Target-Date 2015 -8.2 25 -1.4 33 2.6 58 2.3 84 4.0 98


Wells Fargo Target Date 2020 Blend index -10.1 -2.7 2.9 2.8 4.9Wells Fargo Target 2025 R6 US Fund Target-Date 2025 -12.4 42 -4.7 52 2.2 64 2.5 80 5.1 85






Wells Fargo Target Date 2050 Blend Index -21.4 -12.9 0.6 2.4 6.6Wells Fargo Target 2055 R6 US Fund Target-Date 2055 -21.5 76 -13.1 86 0.2 81 2.0 75 n/a

Wells Fargo Target Date 2055 Blend Index -21.4 -12.9 0.6 2.4 6.6Wells Fargo Target 2060 R6 US Fund Target-Date 2060+ -21.5 69 -13.1 84 0.1 83 n/a n/a

Wells Fargo Target Date 2060 Blend Index -21.4 -12.9 0.6 2.4 6.6

Annualized Returns

23

PERFORMANCE – CORE

March 31, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile. 1Diversified Real Asset Strategic Index is composed of 35% BBgBarc US Treasury US TIPS TR, 15% Bloomberg Commodity TR, 10% FTSE EPRA/NAREIT Developed NR, 20% S&P Global Infrastructure NR, and 20% S&P Global Natural Resources NR.


Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Capital Preservation

Voya Fixed Plus Account III 0.7 2.9 3.0 n/a n/aRL 3 Yr GIC 0.6 2.4 1.8 1.6 1.7

Fixed Income

PIMCO Total Return Instl US Fund Intermediate Core-Plus Bond 2.2 10 7.6 7 4.5 8 3.2 14 4.1 32

BBgBarc US Agg Bond TR USD 3.1 8.9 4.8 3.4 3.9PIMCO Dynamic Bond Instl US Fund Nontraditional Bond -5.2 39 -2.8 45 1.6 19 2.1 19 2.4 51

ICE LIBOR 3 Month USD 0.5 2.4 2.0 1.4 0.9

Real Assets

Principal Diversified Real Asset Instl US Fund World Allocation -19.5 71 -14.8 82 -3.2 85 -2.7 93 1.8 90

Diversified Real Asset Strategic Index1 -18.9 -14.3 -2.3 -1.0 1.1

Large Cap Equity

Dodge & Cox Stock US Fund Large Value -29.2 74 -19.8 68 -2.5 58 2.7 29 8.1 22

Russell 1000 Value TR USD -26.7 -17.2 -2.2 1.9 7.7Vanguard Institutional Index I US Fund Large Blend -19.6 33 -7.0 26 5.1 19 6.7 12 10.5 7

S&P 500 TR USD -19.6 -7.0 5.1 6.7 10.5Vanguard PRIMECAP Adm US Fund Large Growth -20.2 88 -7.8 80 6.2 73 7.6 55 11.7 38

Russell 1000 Growth TR USD -14.1 0.9 11.3 10.4 13.0

Annualized Returns

24

PERFORMANCE – CORE, CONT.

March 31, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile. 2The Vanguard Mid Cap Spliced Index is comprised of the S&P MidCap 400 Index through May 16, 2003; MSCI US Mid Cap 450 Index through January 30, 2013; CRSP US Mid Cap Index thereafter. 3The Vanguard total Int’l Stock Custom Index is comprised of the MSCI EAFE + Emerging Markets Index through December 15, 2010; MSCI ACWI ex USA IMI Index through June 2, 2013; and FTSE Global All Cap ex US Index thereafter.


Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Small-Mid Cap Equity

Vanguard Mid Cap Index Institutional US Fund Mid-Cap Blend -25.7 24 -16.6 20 -0.2 12 2.1 12 8.9 7

Vanguard Mid Cap Spliced Index2 -25.7 -16.7 -0.2 2.1 8.9Voya Small Company Port I US Fund Small Blend -32.1 46 -25.1 43 -8.0 70 -1.0 37 6.4 45

Russell 2000 TR USD -30.6 -24.0 -4.6 -0.2 6.9

International Equity

Dodge & Cox International Stock US Fund Foreign Large Value -30.5 76 -22.3 59 -7.4 74 -4.4 79 1.6 31

MSCI EAFE NR USD -22.8 -14.4 -1.8 -0.6 2.7Vanguard Total Intl Stock Index Admiral US Fund Foreign Large Blend -24.3 67 -16.6 66 -2.5 56 -0.7 37 2.1 60

Vanguard Total Int'l Stock Custom Index3 -24.0 -16.0 -2.3 -0.5 2.2American Funds Capital World Gr&Inc R6 US Fund World Large Stock -20.3 41 -10.7 42 1.6 43 2.9 41 6.3 38

MSCI ACWI NR USD -21.4 -11.3 1.5 2.8 5.9

Real Estate

Nuveen Real Estate Securities R6 US Fund Real Estate -23.0 27 -16.9 43 -1.2 42 0.6 37 8.0 37

MSCI US REIT NR USD -27.2 -22.0 -4.2 -1.7 6.1

Annualized Returns

25

INVESTMENT FEE REVIEWExpense ratios and administrative fee credits (labeled revenue sharing) are shown below for the plan’s current investment options. Asset balances are as of March 31, 2020 unless labeled otherwise. Administrative fee credits are sourced from the service provider. Expense ratios are sourced from Morningstar, the investment manager(s) directly, and/or the service provider and represent total annual operating expenses including any applicable waivers, caps or reimbursements. Peer group reflects Morningstar institutional medians, with the exception of stable value which represents pooled fund fees from strategies actively followed by NEPC Research.

March 31, 2020

Revenue Sharing [E] is refunded to plan participants.

[A] [B] [C] [D] [E] [F] [G] [H] [I] [J]

Plan Investment OptionsProsp Net Expense Ratio

Revenue Sharing

Investment Fee [D - E]

Peer Group Median

Difference [F - G]

Voya Wrap Fee

Total Fee [D + I]

($) (%) (%) (%) (%) (%) (%) (%) (%)

Wells Fargo Target R6 Funds $27,400,108 9.1% 0.14% 0.00% 0.14% 0.53% -0.39% 0.13% 0.27%

Voya Fixed Plus Account III $118,155,999 39.4% 0.41% 0.00% 0.41% 0.44% -0.03% 0.13% 0.54%

PIMCO Total Return Instl $7,841,816 2.6% 0.71% 0.00% 0.71% 0.50% 0.21% 0.13% 0.84%

PIMCO Dynamic Bond Instl $1,012,126 0.3% 1.01% 0.00% 1.01% 0.84% 0.18% 0.13% 1.14%

Principal Diversified Real Asset Instl $232,755 0.1% 0.84% 0.10% 0.74% 0.92% -0.18% 0.13% 0.97%

Dodge & Cox Stock $10,185,291 3.4% 0.52% 0.10% 0.42% 0.72% -0.30% 0.13% 0.65%

Vanguard Institutional Index I $23,162,613 7.7% 0.04% 0.00% 0.04% 0.18% -0.15% 0.13% 0.17%

Vanguard PRIMECAP Adm $58,688,610 19.6% 0.31% 0.00% 0.31% 0.78% -0.47% 0.13% 0.44%

Vanguard Mid Cap Index Institutional $28,407,025 9.5% 0.04% 0.00% 0.04% 0.20% -0.16% 0.13% 0.17%

Voya Small Company Port I $7,514,301 2.5% 0.91% 0.30% 0.61% 0.95% -0.34% 0.13% 1.04%

Dodge & Cox International Stock $1,563,863 0.5% 0.63% 0.10% 0.53% 0.91% -0.38% 0.13% 0.76%

Vanguard Total Intl Stock Index Admiral $1,277,341 0.4% 0.11% 0.00% 0.11% 0.26% -0.15% 0.13% 0.24%

American Funds Capital World Gr&Inc R6 $10,733,178 3.6% 0.42% 0.00% 0.42% 0.90% -0.48% 0.13% 0.55%

Nuveen Real Estate Securities R6 $3,164,708 1.1% 0.88% 0.00% 0.88% 0.90% -0.02% 0.13% 1.01%

TD Ameritrade - Brokerage $627,442 0.2% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Summary Totals $299,967,175 100% 0.33% 0.01% 0.32% 0.52% -0.20% 0.13% 0.46%

NEPC Summary Finding: Plan investment fees have been documented and reviewed ted and reviewed ted and reviewed

Plan investment fees are reasonable for services provided s and fee models services provided

Asset Balances

26

NEPC, LLC

APRIL PERFORMANCE

27

PERFORMANCE - TARGET DATE

April 30, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile.

Morningstar Universe Last Month

Rank Year-to-Date

Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Target Date Funds

Wells Fargo Target Today R6 US Fund Target-Date Retirement 4.6 44 -2.6 46 3.6 33 3.9 42 3.0 71 3.6 4

Wells Fargo Target Today Blend Index 4.7 -2.7 3.7 4.2 3.2 3.9Wells Fargo Target 2010 R6 US Fund Target-Date 2000-2010 4.6 54 -2.7 34 3.5 24 4.0 47 3.0 89 3.9 4

Wells Fargo Target Date 2010 Blend Index 4.7 -2.9 3.6 4.3 3.3 4.3Wells Fargo Target 2015 R6 US Fund Target-Date 2015 5.1 72 -3.5 31 2.8 27 4.0 63 3.3 84 4.4 4

Wells Fargo Target Date 2015 Blend Index 5.1 -3.9 2.7 4.3 3.6 4.7Wells Fargo Target 2020 R6 US Fund Target-Date 2020 5.5 65 -4.8 40 1.7 29 4.1 58 3.5 77 5.0 5

Wells Fargo Target Date 2020 Blend index 5.6 -5.0 1.7 4.4 3.8 5.4Wells Fargo Target 2025 R6 US Fund Target-Date 2025 6.5 60 -6.7 51 0.1 42 4.0 69 3.7 77 5.6 6

Wells Fargo Target Date 2025 Blend Index 6.5 -6.9 0.1 4.3 4.0 6.0Wells Fargo Target 2030 R6 US Fund Target-Date 2030 7.4 62 -8.5 59 -1.6 51 3.8 75 3.9 75 6.2 6

Wells Fargo Target Date 2030 Blend Index 7.4 -8.7 -1.6 4.2 4.2 6.5Wells Fargo Target 2035 R6 US Fund Target-Date 2035 8.1 81 -10.3 66 -3.3 64 3.6 82 3.9 77 6.6 7




Wells Fargo Target Date 2050 Blend Index 9.5 -13.9 -6.6 3.3 4.1 7.4Wells Fargo Target 2055 R6 US Fund Target-Date 2055 9.6 73 -14.0 80 -6.8 84 2.8 85 3.7 n/a

Wells Fargo Target Date 2055 Blend Index 9.5 -13.9 -6.6 3.3 4.1 7.4Wells Fargo Target 2060 R6 US Fund Target-Date 2060+ 9.6 72 -13.9 75 -6.8 76 2.8 n/a n/a

Wells Fargo Target Date 2060 Blend Index 9.5 -13.9 -6.6 3.3 4.1 7.4

Annualized Returns

28

PERFORMANCE – CORE

April 30, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile. 1Diversified Real Asset Strategic Index is composed of 35% BBgBarc US Treasury US TIPS TR, 15% Bloomberg Commodity TR, 10% FTSE EPRA/NAREIT Developed NR, 20% S&P Global Infrastructure NR, and 20% S&P Global Natural Resources NR.


Rank Year-to-Date

Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Capital Preservation

Voya Fixed Plus Account III 0.2 1.0 2.9 3.0 n/a n/aRL 3 Yr GIC 0.2 0.8 2.4 1.8 1.6 1.6

Fixed Income

PIMCO Total Return Instl US Fund Intermediate Core-Plus Bond 1.8 85 4.1 12 9.4 14 4.9 15 3.7 17 4.2 4

BBgBarc US Agg Bond TR USD 1.8 5.0 10.8 5.2 3.8 4.0PIMCO Dynamic Bond Instl US Fund Nontraditional Bond 2.7 35 -2.7 30 -0.7 42 2.4 11 2.6 16 2.5 3

ICE LIBOR 3 Month USD 0.3 0.8 2.5 2.1 1.5 0.9

Real Assets

Principal Diversified Real Asset Instl US Fund World Allocation 6.3 55 -14.4 75 -10.0 77 -1.3 83 -1.9 94 2.1 2

Diversified Real Asset Strategic Index1 6.1 -13.9 -9.2 -0.5 -0.4 -0.4

Large Cap Equity

Dodge & Cox Stock US Fund Large Value 14.1 7 -19.2 63 -12.6 62 1.7 45 4.8 27 9.4 9

Russell 1000 Value TR USD 11.2 -18.5 -11.0 1.4 3.9 8.5Vanguard Institutional Index I US Fund Large Blend 12.8 43 -9.3 27 0.8 21 9.0 16 9.1 11 11.7 12

S&P 500 TR USD 12.8 -9.3 0.9 9.0 9.1 11.7Vanguard PRIMECAP Adm US Fund Large Growth 9.3 98 -12.7 96 -2.8 90 8.9 82 9.6 64 12.7 13

Russell 1000 Growth TR USD 14.8 -1.4 10.8 15.7 13.3 14.4

Annualized Returns

29

PERFORMANCE – CORE, CONT.

April 30, 2020

Notes: Performance is net of fees and is annualized for periods longer than one year. Performance is ranked within Morningstar's style-specific universes, where "1" refers to the top percentile and "100" the bottom percentile. 2The Vanguard Mid Cap Spliced Index is comprised of the S&P MidCap 400 Index through May 16, 2003; MSCI US Mid Cap 450 Index through January 30, 2013; CRSP US Mid Cap Index thereafter. 3The Vanguard total Int’l Stock Custom Index is comprised of the MSCI EAFE + Emerging Markets Index through December 15, 2010; MSCI ACWI ex USA IMI Index through June 2, 2013; and FTSE Global All Cap ex US Index thereafter.


Rank Year-to-Date

Rank LastYear

Rank ThreeYears

Rank FiveYears

Rank TenYears

Rank

Small-Mid Cap Equity

Vanguard Mid Cap Index Institutional US Fund Mid-Cap Blend 14.4 25 -15.0 13 -8.1 11 3.9 8 5.0 11 10.0 10

Vanguard Mid Cap Spliced Index2 14.4 -15.0 -8.1 3.9 5.0 10.0Voya Small Company Port I US Fund Small Blend 13.7 50 -22.8 47 -18.4 43 -4.3 71 1.9 41 7.3 7

Russell 2000 TR USD 13.7 -21.1 -16.4 -0.8 2.9 7.7

International Equity

Dodge & Cox International Stock US Fund Foreign Large Value 7.6 34 -25.3 76 -19.8 65 -5.9 75 -3.6 70 2.5 2

MSCI EAFE NR USD 6.5 -17.8 -11.3 -0.6 -0.2 3.5Vanguard Total Intl Stock Index Admiral US Fund Foreign Large Blend 8.0 24 -18.2 58 -12.3 58 -0.7 44 -0.1 39 3.0 3

Vanguard Total Int'l Stock Custom Index3 8.1 -17.8 -11.5 -0.4 0.0 3.1American Funds Capital World Gr&Inc R6 US Fund World Large Stock 9.6 65 -12.6 48 -4.7 42 4.1 45 4.3 44 7.4 7

MSCI ACWI NR USD 10.7 -12.9 -5.0 4.5 4.4 6.9

Real Estate

Nuveen Real Estate Securities R6 US Fund Real Estate 7.1 85 -17.5 37 -10.8 46 1.0 48 3.2 42 8.1 8

MSCI US REIT NR USD 8.2 -21.3 -15.3 -1.7 1.1 6.2

Annualized Returns

30

NEPC, LLC

APPENDIX

31

NEPC DUE DILIGENCE STATUS AND RATINGS

NEPC Due Diligence Committee Status

No Action Informational items have surfaced; no action is recommended.

Watch Issues have surfaced which may require increased monitoring, but which are not considered serious in the near-term.

Hold Serious issues have surfaced which we believe require increased monitoring. These issues could have long-term implications on theinvestment team’s ability to effectively execute the investment strategy.

Client Review Very serious issues have surfaced with an investment manager. Clients are advised to review their relationship with the manager.

Terminate NEPC has lost confidence in the firm or product. Clients are advised to replace the manager.

Legend keys to our ratings are provided below.

NEPC Due Diligence Ratings

1 NEPC Research views these strategies as best ideas. The strategy has a clearly articulated investment thesis and is managed by aninvestment team that is sufficiently resourced and incented to execute on the thesis.

2 NEPC has a positive view of the strategy. Strategy has a clearly articulated investment thesis. The manager is sufficiently resourced andincented to execute on the thesis.

3 NEPC has a constructive view of the strategy and believes the strategy can play an appropriate role in certain clients portfolios. NEPCmonitors the team and strategy and believes the manager is sufficiently resourced and incented to execute on their investment approach.

4 NEPC has conducted a reasonable level of due diligence on the strategy and has a relatively unfavorable view of the strategy.

5 NEPC has conducted a reasonable level of due diligence on the strategy and has significant concerns about the effectiveness or viability ofthe strategy.

Not Rated Due diligence has not been sufficiently completed in order for NEPC to develop a well informed opinion and rating on the investmentstrategy.

NEPC’s Due Diligence Committee is responsible for assigning and maintaining ratings on investment products. The Committee meets every other week to review the events of the preceding two weeks as they relate to the investment management community. NEPCDue Diligence Status are our ratings, if any, as attached to a recent corporate action, announcement or event, such as a portfolio manager change. Within this environment, the Committee maintains a “watch list” consisting of four levels of action, Watch, Hold, Client Review and Terminate, as described below.

NEPC’s Research Teams also maintain numerical ratings on investment products as described below.

March 31, 2020

32

GLOSSARY OF TERMS

March 31, 2020

33

• The opinions presented herein represent the good faith views of NEPC as of the date of this presentation and are subject to change at any time.

• The comments provided herein should be considered a general overview and do not constitute investment advice, are not predictive of any future market performance, are not provided as a sales or advertising communication, and do not represent an offer to sell or a solicitation of an offer to buy any security.

• Information used to prepare this report was obtained directly from various external sources. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within or the completeness of such information.

• Information in this report on fund returns, market indices and security characteristics is received from sources external to NEPC. While efforts are made to ensure that this external data is accurate, NEPC cannot accept responsibility for errors that may occur.

• NEPC does not generally provide legal, regulatory or tax advice. Please consult your attorney or tax advisor for assistance as needed.

• This report may contain confidential or proprietary information and may not be copied or redistributed to any party not legally entitled to receive it.

DISCLAIMERS & DISCLOSURES

March 31, 2020

34

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