Kennebec Valley Community College Foundation RFI...by MTC Holding Corporation ... KSB and FCI will work with the Kennebec Valley Community College Foundation

Kennebec Valley Community

College Foundation

&

Investing for the future

Investment Management Proposal

Presented March 3, 2017

TABLE OF CONTENTS

TAB 1 Responses to Request for Information TAB 2 Investment Review Reports (Samples) TAB 3 Disaster Recovery Plan Summaries TAB 4 Asset Allocation Strategy TAB 5 Value Equity Composite Intermediate Fixed Income Composite Pro Forma Peformance for Growth

Allocation TAB 6 Comprehensive Banking Relationship

Tab 1

Responses to Request for Information


Kennebec Valley Community College Foundation

Request for Information Investment Management Services

March 3, 2017

The Kennebec Valley Community College Foundation (Foundation) is soliciting proposals from qualified firms that perform Investment Management Services. The purpose of this Request for Information (RFI) is to explore and assess investment management options that may be available to the KVCC Foundation. Through this process of periodic review, the Foundation may elect to initiate a Request for Proposal (RFP) process to further explore opportunities that become apparent as a result of the initial RFI process.

KVCCF will consider investment management services from firms that:

a. Are registered investment advisors under the Investment Company Act of 1940. b. Have been in business for a minimum of five years. c. Agree to disclose all conflicts of interest, all sources of revenue and all affiliations.

OVERVIEW Kennebec Valley Community College is one of seven community colleges which operates under the authority of the Maine Community College System Board of Trustees, located on a seventy-acre campus in Fairfield, Maine and a 600 acre campus in Hinckley, Maine. Approximately 2,500 full and part-time students are enrolled at KVCC in credit courses for the 2015-2016 academic year.

The Kennebec Valley Community College Foundation was established in 1991 for the purpose of providing support for the College and the students served. The mission of the KVCC Foundation is to engage supporters to invest in students, faculty, and programs to empower individuals and to build stronger communities.

KVCCF’s fiscal year runs from July 1 through June 30. At the end of the most recent fiscal year, 6/30/16 KVCCF was managing $3.9 million in invested funds. Invested funds are managed under the guidance of the KVCCF Investment and Spending Policies and are subject to regular review of the KVCCF Finance Committee and KVCCF Board of Trustees. The Investment Manager is required to provide in-person performance and management presentations on a quarterly or bi-annual basis, at the request of the Foundation; monthly performance reports are required.

RFI REQUIREMENTS

1. General Information:

1.1 Name of firm, firm history, ownership structure, and firm's target market in terms of plan size.

Indicate if the firm is registered with the SEC or state agency.

This proposal is submitted jointly by Kennebec Savings Bank (“KSB”), a state chartered mutual savings bank headquartered in Augusta, Maine and FCI Advisors (FCI), an SEC Registered Investment Advisor that serves KSB’s high net worth and institutional clients. KSB’s partnership with FCI expands our investment expertise to a team of more than thirty investment professionals while continuing our commitment to local decision making and local service. Kennebec Savings Bank Information KSB was formed and incorporated on March 7, 1870. Ever since that time, KSB has played an important role with the community, demonstrating unwavering commitment and support for its customers and community at large in greater Kennebec County. In 1992, KSB opened its Winthrop branch. In 1995, through a merger with Waterville Savings and Loan Association, the Waterville branch was established. In 2009, the Bank opened its Gardiner branch and, in 2012, relocated this branch to Farmingdale. Kennebec Savings Bank has withstood the test of time and remained true to the original principles upon which it was founded 147 years ago. The KSB Trust Department was established in 2000 and has grown to presently serve as fiduciary for approximately $130 million in assets under management, the vast majority of which are owned by Maine people and organizations. FCI serves KSB as a sub-advisor and in that capacity provides the Bank with client specific investment recommendations, including asset allocation guidance and selection of securities, research and economic analysis. FCI was established in 1966 and is an S-corporation wholly owned by MTC Holding Corporation (MTCHC) which is 98% owned by employees and directors. FCI is registered with the Securities and Exchange Commission (SEC) as a Registered Investment Advisor (RIA) under the Investment Advisors Act of 1940. FCI brings intimate knowledge of the opportunities and challenges that exist in today’s volatile and rapidly changing securities markets. Paired with KSB’s understanding of your individual circumstances, risk tolerance, and concerns, our combined expertise provides you with a powerful team that is uniquely qualified to help you in the pursuit of your financial goals. Our partnership will provide you with a shared commitment to excellence, integrity, and service and will deliver world-class investment capabilities to your personalized investment portfolio.

KSB and FCI will work with the Kennebec Valley Community College Foundation (KVCCF) to understand the specific investment objectives for the Foundation’s account and to develop appropriate investment programs intended to achieve the goals for the Foundation. KSB’s partnership with FCI enables our locally-owned bank to utilize FCI’s broad range of investment expertise to help meet your investment needs. KSB will be the main point of contact for the KVCCF as KSB has a fiduciary responsibility to review and approve FCI’s investment recommendations. Both KSB and FCI operate with a fiduciary-level standard of care and are held to the highest standards in the industry.

1.2 Discuss your firm’s expertise in offering services to non-profits with endowments. How many years has your firm provided investing services to non-profits? Please provide a list of at least three current nonprofit endowment clients.

KSB has provided a full range of investment management and trust/fiduciary services for non-profits with endowments since the beginning of 2000. We currently manage three dozen endowment/investment funds for local non-profit organizations totaling about $27 million in assets under management. We’ve listed three of those local non-profit organizations: Mane Children’s Home Attention: Diana Rafuse, Finance Director 93 Silver Street Waterville, Maine 04901 207-873-4253 Maine Dartmouth Family Medicine Residency Attention: B Roy, Assistant to the Administrator 15 East Chestnut Street Augusta, Maine 04330 207-626-1890 Elsie and William Viles Foundation Attention: Patsy West, Executive Director PO Box 319 Augusta, Maine 04332-0319 207-622-1124 FCI serves foundations, endowments, public and municipal entities, employee benefit plans, corporations, and also provides sub-advisory services to banks and trust companies. FCI has $7.2 billion in assets under management (as of 12/31/2016). FCI began managing assets for nonprofit organizations in the early 1970s and still has relationships with some of their original not-for-profit clients. FCI currently manages $531.4 million for Foundations and Endowments. One of the main services we can offer the KVCC Foundation is the development of an Investment Policy Statement (IPS) if needed. Our process is very hands-on. Through discussions with the client we gather as much information as we can about goals, objectives and constraints. This enables us to carefully consider, with the client, expected returns, legal and fiduciary obligations, liquidity needs, investment restrictions, the financial and psychological ability to take risks and, where appropriate, payout assumptions. In working with foundations, we believe that the spending policy is one of the most crucial components to consider. An extremely high spending policy vis-à-vis expected return typically requires assuming additional risk to meet the spending goal. Normally we believe that we can factor a foundation’s desire to spend into a continuing

liability and then design a portfolio which strategically utilizes appropriate asset classes to meet that need. We then formulate a draft of the IPS for review with the client. We use several tools, including Monte Carlo Simulation software, historical Ibbotson data, and efficient frontier charting capabilities to help determine the most appropriate asset allocation targets and ranges. In addition to using historical risk and reward data, we believe it is very important to factor in our own capital market assumptions about the current environment and future expectations, rather than relying only on information about historical averages as many investment managers do. We also believe that it is critical to specifically outline target allocations for the major asset classes with appropriate ranges to work within. Markets are very dynamic and forward looking and we feel strongly about being able to add value to our clients’ portfolios through the use of tactical asset allocation shifts.

1.3 Describe your client service model including typical meeting schedule, communication, and reporting style and structure. Include an example report. KSB’s trust advisors would be available to come to Fairfield or Hinckley as needed to meet with the KVCCF Finance Committee. KSB’s trust advisors, FCI portfolio managers and client service representatives are available for conference calls when clients have questions or concerns about their investments. We are also available to review the Foundation’s investment policy as it applies to its investment goals and spending policy. KSB and FCI collectively strive to provide the highest possible level of personal service to our clients. KSB will provide monthly account statements and performance reports. Please see sample investment review statements provided with this RFI under Tab 2. We can also provide an array of research materials, weekly market updates and monthly economic outlooks which can be distributed to your employees and board members, at your discretion.

1.4 Describe your staffing model including total number of staff, qualifications and experience of the staff typically assigned to similar clients. The KSB Trust Department currently employs four full time investment/trust personnel with over 60 years of combined investment and trust experience managing money for individual investors, not for profit organizations, endowments and private foundations. The trust team includes two Certified Trust Financial Advisors (CTFA), a Certified Financial Planner (CFP) and a Certified Wealth Strategist (CWS).

If KSB is chosen as the Foundation’s advisor, Amos Byron, a Vice President and Trust Officer at KSB, would serve as the primary contact for the KVCCF investment portfolio.

FCI is celebrating its 50th anniversary serving clients as an investment advisor. FCI has a staff of 60 which includes 30 investment professionals who average over 20 years of industry experience and includes 16 CFAs, 15 MBAs and 3 CFPs. Of their 30 investment professionals 22

are portfolio managers. FCI’s portfolio managers are organized in teams each of which is dedicated to the outstanding execution of a specific investment strategy. This approach ensures that all strategies receive the benefit of multiple viewpoints and continuity of approach as they are not dependent on a single professional. Each FCI investment professional is supported by a team of colleagues with complementary skills.

1.5 Provide the levels of insurance coverage for fiduciary and professional liability insurance your firm carries. Is the coverage on a per client basis, or is the dollar figure applied to the firm as a whole? KSB has Trust Liability Coverage of $3 million per claim and $45 million per year provided by Berkley FinSecure. FCI has $10 million of Financial Services Liability coverage which encompasses the following risks: a) Directors and Officers Liability, b) Trust Errors & Omissions Liability and c) Investment Advisors Errors and Omissions Liability. The retention under these coverages is $750,000 per occurrence. This coverage is shared with affiliated companies. FCI also has Employee Dishonesty and Cyber Security coverage of $10 million and $5 million, with retentions of $250,000 and $50,000, respectively. Financial Services Liability coverage is provided by XL Specialty Insurance Company. Employee Dishonesty coverage is provided by Federal Insurance Company (a/k/a Chubb). Cyber Security coverage is provided by BCS Insurance Company.

1.6 Describe your disaster recovery plans and facilities.

All Trust-related functions at KSB are performed via non-data storing software that communicates with a SQL Server located at Union Bank & Trust (UBT). Should an emergency or disaster occur rendering the Bank’s Trust software or communication inoperative, the UBT Trust Department will provide services, with the assistance of KSB Trust personnel, until normal operations are restored. In the event that UBT suffers a disaster rendering its operations center inoperable, its Disaster Recovery plan would be placed into effect. These processes are described in the KSB Business Continuity/Disaster Recovery Summary (Tab 3). Union Bank and Trust (UBT) provides back office services for the Kennebec Savings Bank Trust Department. UBT’s Disaster Recovery Plan is one component of the more comprehensive Business Continuity Plan. These processes are described in the UBT Business Recover Plan Summary (Tab 3). FCI’s Business Continuity and Disaster Recovery processes are described in the Executive Summary provided (Tab 3).

2. Investment Management Capabilities:

2.1 Please describe your firm's investment philosophy and process for arriving at investment decisions.

Overall Investment Philosophy

Our investment philosophy is to provide clients with superior long-term returns while controlling risk. We believe the primary tool for implementing this philosophy is asset allocation management

based on each client’s unique situation. Structure and Philosophy We provide a variety of investment strategies to satisfy the needs of a broad range of client types. Our investment professionals are organized in teams, each of which is committed to excellence in a specific investment discipline. For example, the professionals on our Asset Allocation Committee are engaged in continual oversight of global capital markets and the forces that drive them. Insights they glean from such oversight are used to determine strategic and tactical allocations to the major and sub-asset classes within each of our 8 asset allocation objectives. We manage four equity portfolio strategies each with its own philosophy and process and each managed by a different team of professionals. We also offer an array of individual bond portfolios managed by our team of fixed income experts. The determination of which is the most appropriate strategy or strategies for a client is based on an assessment of that client’s needs, circumstances and goals. When designing an investment program for a client our investment professionals analyze that client’s goals and circumstances and then select the strategies best suited to achieve that client’s investment goals. An ongoing exploratory dialogue with clients is a critical component of our investment management services. Equity Management Our equity investment processes are team based. Each member of an Equity Investment Team is responsible for monitoring the economy, themes and trends that could benefit our clients. Each Team establishes an investable universe for its strategy that is winnowed down through a series of quantitative and qualitative analyses to an approved list of individual stocks suitable for its strategy. Team members are also responsible for determining sector allocations for their strategy. Although each member is directly responsible for monitoring an assigned economic sector of the market on a day-to-day basis, all members of each Team contribute investment ideas for consideration. Value Equity For the individual security equity component of the KVCCF investment portfolio, we would recommend utilizing our Value Equity portfolio strategy. Philosophy The goal of the Value Equity strategy is to build fully-diversified portfolios that own stocks we believe are undervalued by the marketplace. We seek companies that show consistency in balance sheet strength, revenue and cash flow. Disciplined diversification helps to lessen downside risk and provide consistency of returns. Investment Objective Our objective is to provide consistent total returns for clients through price appreciation and dividend income. Through proper diversification and stock selection, our portfolio managers strive to outperform the Russell 3000 Value and S&P 500 indices.

Process The Value Equity investment team employs a multi-cap value screening process consisting of both fundamental and technical research. Our stock selections are primarily the result of five selection screens:

• Cash flow: We seek companies that trade at 10 times cash flow or less. • Insiders: There are many reasons insiders may sell company stock. However, there is

usually only one reason they buy it – they expect it to appreciate over time. We take notice when a firm’s legal insiders are buying their company’s stock.

• Debt: Too much debt is risky. We believe companies with clean balance sheets are more likely to be successful.

• Inventories: We steer clear of companies where inventories and/or receivables are growing faster than sales.

• Taxes: A simple review of a firm’s history of actual income tax payments as opposed to tax accruals can help us avoid financial surprises.

Fixed Income Management For the individual security fixed income component of the KVCCF investment portfolio, we would recommend utilizing our Intermediate Government/Credit portfolio strategy. Our fixed income investment process is also team based and focuses on the continual analysis and assessment of the variables that influence bond prices. The Team seeks to add value through duration, sector allocation and issue selection decisions, utilizing our expertise in technical and fundamental analysis and overlaying the process with our emphasis on behavioral finance as an investment tool. Interpretation of this dynamic mix of inputs changes as the business cycle matures, requiring a flexible investment approach grounded in market experience and wisdom. The fixed income investment process decisions are based on the work of our Fixed Income Investment Team. The Team holds open discussions to determine duration, yield curve and sector strategies. Based on the outcome of these decisions portfolio managers will implement policy decisions for the accounts they oversee. With the average industry experience of our investment professionals at more than 20 years, our investment processes are structured in a way that allows this wealth of knowledge in various economic and market environments to be used to the fullest extent possible to benefit our clients. Our processes ensure that the wisdom that comes with long experience and the vitality of new ideas is combined with our disciplined screening processes to make and implement investment decisions. Asset Allocation Our asset allocation process combines extensive knowledge of historical market tendencies with an assessment of the current market environment. The professionals on our Asset Allocation Committee are engaged in continual oversight of global capital markets and the forces that drive them. Insights they glean from such oversight are used to determine strategic and tactical

allocations to the major and sub-asset classes within each of our 8 asset allocation objectives. Utilizing eight strategic asset allocation models for various risk and volatility levels, asset allocation decisions are driven by our Asset Allocation Committee, made up of several senior investment professionals from both our equity and fixed income Investment Committees. We believe that having representatives from both investment disciplines is beneficial to the process and provides specialized insight into the various asset classes utilized in our strategies. Our asset allocation process is very rigorous and disciplined, using some of the most sophisticated asset allocation tools available. By utilizing all of these tools as well as our own skill, professional knowledge and experience, our goal is to provide our clients with an investment program that can provide better risk-adjusted returns over a full market cycle. At KSB the asset allocation is a three-step process. The first step involves establishing the weight assigned to each asset class included in each of our eight long-term, strategic asset allocation models. This step considers the historical relative valuation of asset classes, recent changes in such relative valuations, and the correlation of their returns. We use a variety of proprietary and independent research as well as third party software tools to determine the efficient frontier for each of our 8 strategic asset allocation models. Independent research is primarily provided by Ibbotson, recognized as an industry leader in asset allocation work, and we also use Monte Carlo simulations when determining efficient frontiers. In the second step of our asset allocation process we evaluate current market conditions and investment indicators to strategically shift or tilt our asset-class weightings versus the weightings in our longer-term strategic asset allocation models. These tactical decisions are incremental, made opportunistically and are designed to increase potential returns or avoid shorter-term risks. Such tactical shifts are not an attempt to time the market – we believe that attempts to time the market typically fail. The final step is client-centric. We begin by gaining a thorough understanding of each client’s short-term and long-term goals - including return expectations, income needs, time horizon and risk tolerance - to determine where they might fall within the parameters of our various asset allocation strategies. After this crucial step, we will recommend a blend of investment vehicles to achieve the allocation strategy selected for a client

2.2 Asset Allocation Optimization:

a. Describe your investment management software and investment research resources. At FCI, independent research firms, such as Crandall Pierce, Insider Score, Ned Davis, Standard & Poor’s, Market Trend and Value Line, are valuable research resources for our investment professionals. The committees have technical analysis capabilities as well, employing resources such as BondEdge, Bloomberg, Morningstar and Telemet. In addition, the members of various committees maintain contact with leading business managers and have access to an extensive array of publications. Access to this wide array of research sources means FCI’s investment professionals are well informed on macro and microeconomic issues, on sector, industry and company details and about economic, social and demographic trends that may impact our clients’ portfolios.

b. What benchmarks do you use to monitor performance? We closely monitor the performance of all of the accounts we manage and calculate and compare returns to those of predetermined, appropriate benchmark(s). The benchmark(s) for an account are determined after a thorough examination of the account owner’s investment guidelines and risk tolerance. We have the systems capability to design and maintain custom-blended benchmarks, where appropriate for an account, in addition to maintaining stand-alone benchmark data. Performance is calculated by Advent’s APX portfolio accounting system. A typical performance report includes account-level total return, a comparison of that return to the return of a stand-alone benchmark, or an agreed upon blended benchmark comprised of various indices, and performance by asset class versus the performance of an index that is appropriate for each asset class. Time periods typically include quarter-to-date, year-to-date, last 12 months, 3-year, 5-year and since inception. The performance of each of our investment strategies, as presented in its Performance Composite, is compared to a pre-determined, industry-standard benchmark that is appropriate for its style.

c. Describe your firm’s experience and philosophy as it relates to alternative investments. We invest only in high-quality, liquid individual equity and fixed income securities. We then complement those individual security strategies with investments in mutual funds and/or ETFs for exposure to traditional and alternative satellite asset classes to enhance portfolio diversification, income and potential return. This approach provides clients with unsurpassed transparency regarding holdings within their portfolio and ready access to their funds should that be necessary.

KSB does not recommend investing in hedge funds or non-marketable alternative investments due to their high fees, lack of transparency and illiquidity. The relatively poor performance of hedge funds, particularly during recent years, reinforces our belief they should be avoided by most investors.

3. Case Scenario:

For the next several questions please assume the following: • A nonprofit client; • An endowment fund of $4 million; • An investment time horizon of 10+ years; • An average annual effective spending rate of 4.5%

3.1 Please describe the investment strategy you would propose including the asset allocation and the primary investment assets to be used in the portfolio. We would recommend a “growth” strategy for the overall portfolio which has a targeted asset allocation of 60% equity and 40% fixed income. Within this strategy we propose using our Value

Equity portfolio and individual corporate and government bonds. Further diversification to other asset classes would be provided using institutional share class mutual funds or Exchange Traded Funds. Please see the Growth Asset Allocation Strategy report for more details on our asset allocation ranges and tactical allocations (Tab 4).

3.2 Please present investment performance results for comparable clients for the 1, 5 and 10-year periods ending 12/31/2016. (Please indicate whether the investment performance results presented are actual client account results or hypothetical results). If the investment performance results are hypothetical, please describe the method of calculating and reporting. The performance for our Value Equity Composite, Intermediate Fixed Income Composite and Pro Forma for Growth Allocation is provided below for time periods requested ending 12/31/2016. The Value Equity and Intermediate Fixed Income Composites represent actual accounts managed by FCI and returns are gross of management fees. For the most detailed performance information for each portfolio, including disclosures, please see the composite performance reports provided (Tab 5). 2016 5 year 10 year Value Equity 17.48% 12.27% 8.34% Intermediate G/C 2.55% 2.24% 4.44% Pro Forma Growth 10.13% 8.21% 6.18% 4. Fees:

4.1 Please provide a list of all fees and costs that are typically charged to a client portfolio including investment management fees, custodial fees, mutual fund fees, sub-manager fees, transaction fees, wrap fees, etc. KSB Stated Fee Schedule Annual rates are expressed as a percentage of account market value and are computed and charged monthly at the following rate: 1.00% on the first $750,000 managed. 0.75% on the next $750,000 managed. 0.50% thereafter Less: 25% discount for qualifying non-profit organizations. Managed account services included in base fee: Management of investments according to client objective. Consolidation and transfer of assets from prior manager/financial institution. Custody, income collection and safekeeping of securities. Daily reinvestment of all principal and income into money market funds. Monthly remittance or direct deposit into your bank account. Monthly statement of assets and transactions. Periodic conferences at client discretion. Quarterly performance reports. On-Line capabilities to view investment holdings, transactions and statements.

Additional Transactional Costs: Depending on account size, mutual funds and exchange traded funds (ETFs) may be utilized to broaden diversification. There is an additional cost associated with investing in mutual funds and ETFs. All funds we utilize are no- load (no sales charge), institutional share class. Each fund and ETF has an expense ratio that is determined by the fund manager and is charged to the investor. Brokerage commissions on security trades are charged to the client’s account. Any volume discounts received on trades are passed on to the account involved. We receive no commission on trades. We currently trade individual securities at $.025 per share. Note: FCI fees are included in the KSB Stated Fee Schedule 4.2 Please provide an annual estimate of fees for a nonprofit client with a $4 million portfolio. Our estimated annual fees to manage the $4 million KVCCF investment portfolio would be $19,000.

5. Community Engagement:

5.1 Please provide a description of your firms “niche” in the community. What role do you feel that the firm plays in building a stronger/greater community? Examples might include policy development, volunteerism, philanthropy, project development/management, leadership, and education. We feel the “niche” that sets us apart in our community is the bank’s three core values. Service: Delivering a superior experience that exceeds expectations. Teamwork: Leveraging our experience to achieve mutual success. Community: Enhancing the communities that we serve through unparalleled support. Every year, through our Community Dividends program, KSB donates over $600,000 across the 30 communities we serve, and our employees put in over 6,000 volunteer hours. We help support healthcare, sports and recreation, education, community development, the arts and numerous social causes – in total, over 300 local organizations. In 2016, Kennebec Savings Bank maintained a Bauer Financial 5-Star rating for its 27th consecutive year; a ranking enjoyed by less than 6% of banks nationwide. A five-star rating is “Superior”, and means that the Bank is on the company’s “recommended” report. The Bank is also proud to have been named one of the top 75 community banks in the nation by Independent Banker Magazine. We have included a list of banking services that KVCC Foundation may be interested in to complement our investment and fiduciary offerings (tab 6). This letter is not able to cover each and every detail but, rather, is intended to provide an overview of services available. At your Board’s direction, Kennebec Savings Bank will work with you to customize the services that best fit your current and future needs.

6. RFI Process Schedule:

a) Responses to this request for information must be received no later than 4:00 pm on March 3, 2017.

b) Information may be sent by post, email, or in person to the attention of:

Michelle Robicheau, Executive Director Kennebec Valley Community College Foundation 92 Western Ave Fairfield ME 04937

[email protected] KVCC Carter Hall Room 306, Fairfield

Questions: 207-453-5020 or [email protected]

c) After a review of information, the KVCC Foundation Finance Committee may elect to initiate

a formal RFP process which may include an in person presentation and question and answer session.

mailto:[email protected]

mailto:[email protected]

Tab 2

Investment Review Reports (Samples)


SAMPLE ACCOUNT REVIEW XYZ FOUNDATION

ACCT 000KENNEBEC SAVINGS BANK

Investment Report

September 30, 2016

Trust Officer: Amos Byron

Prepared By: FCI Advisors

SAMPLE ACCOUNT REVIEW September 30, 2016

ASSET ALLOCATION

0.9%

71.1%

28.0%

Cash and Equivalents (5.0%) 0.9 Fixed Income (999.0%) 71.1 Equities (999.0%) 28.0

SUMMARY

Security Est. Ann.

Type Market Value Pct Assets Income Yield

Cash and Equivalents

CASH AND RECEIVABLES 39,560.48 0.86 0.00 0.0

39,560.48 0.86 0.00 0.0

Equities

COMMON STOCK 811,677.93 17.74 28,395.82 3.5

EXCHANGE TRADED FUNDS - EQUITY 174,342.45 3.81 2,647.96 1.5

INTERNATIONAL ETFs 300,641.55 6.57 7,735.19 2.6

1,286,661.93 28.13 38,778.97 3.0

Fixed Income

MUNICIPAL BONDS 3,081,534.76 66.97 61,576.25 2.0

PREFERRED STOCK 184,655.60 4.04 10,312.24 5.6

3,266,190.36 71.01 71,888.49 2.2

Other

UNSUPERVISED OTHER ASSETS 17.63 0.00 0.00 0.0

17.63 0.00 0.00 0.0

TOTAL PORTFOLIO 4,592,430.40 100.00 110,667.45 2.4

TWR FOR SELECTED PERIODS

GROSS OF FEES


Annualized Annualized Annualized

Quarter Year Latest 1 Latest 3 Inception Since

To Date To Date Year Year To Date 08-31-2012

Account 1.51 5.21 7.47 5.82 4.89 4.89

Simple Conservative

Blend

1.50 5.40 6.76 4.58 4.90 4.90

Fixed Income 0.72 2.89 4.04 4.73 1.93 1.93

ML Muni 1-10 A-AAA -0.05 2.22 2.89 2.62 2.02 2.02

Equities 3.51 11.47 17.35 8.46 11.04 11.04

Global Equity Blend 4.71 7.74 13.97 8.20 11.45 11.45

The Simple Conservative Blend Benchmark is a blend of:70% Barclays Intermediate Gov/Credit Index23% S&P 1500 Composite Total Return Index7% MSCI ACWI Ex US Net Index

The Global Equity Blend Benchmark is a blend of:75% S&P 1500 Composite Total Return Index25% MSCI ACWI Ex US Net Index


SECTOR ALLOCATION

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

EQUITY SECTORS

Security Est. Ann.

Type Market Value Pct Assets Income Yield

Consumer Discretionary 76,406.90 9.41 2,911.60 3.81

Consumer Staples 86,009.50 10.60 2,985.12 3.47

Energy 72,424.05 8.92 2,651.95 3.66

Financials 99,044.65 12.20 2,984.40 3.01

Health Care 117,728.45 14.50 3,672.47 3.12

Industrials 35,424.90 4.36 984.20 2.78

Information Technology 93,046.40 11.46 2,765.20 2.97

Materials 26,784.35 3.30 1,006.60 3.76

Real Estate 83,500.65 10.29 3,665.40 4.39

Telecommunication Services 50,631.93 6.24 2,230.98 4.41

Utilities 70,676.15 8.71 2,537.90 3.59

TOTAL STOCK PORTFOLIO 811,677.93 100.00 28,395.82 3.50

SAMPLE ACCOUNT REVIEWSTOCK PORTFOLIO

As of 9-30-2016

Est. Past 5 Yr Past

Current Market Pct Ann. Est. Est. 5 Yr EPS 5 Yr

Qty. Security Ticker S & P Price Value Assets Inc. PE EPS Div Gr Grth ROE

COMMON STOCK

Consumer Discretionary

1,460 FORD MTR CO F B- 12.07 17,622.20 1.37 876 10.11 1.59 NA -14.42 NA

140 HASBRO INC HAS A 79.33 11,106.20 0.86 286 19.75 3.27 16.54 3.77 23.51

250 KOHLS CORP KSS B+ 43.75 10,937.50 0.85 500 16.89 4.55 NA 6.22 15.15

125 MCDONALDS CORP MCD A 115.36 14,420.00 1.12 470 19.84 4.92 9.59 1.02 35.58

325 TARGET CORP TGT A+ 68.68 22,321.00 1.73 780 18.24 4.55 24.32 NA 11.47

Consumer Discretionary Total 76,406.90 5.94 2,912

Consumer Staples

215 PEPSICO INC PEP A+ 108.77 23,385.55 1.82 647 20.78 4.65 7.80 0.32 30.67

240 PHILIP MORRIS INTL

INC

PM NR 97.22 23,332.80 1.81 998 18.37 4.25 11.56 6.10 NA

235 PROCTER & GAMBLE

CO

PG A+ 89.75 21,091.25 1.64 629 21.05 3.98 7.90 5.08 17.85

386 REYNOLDS

AMERICAN INC

RAI B+ 47.15 18,199.90 1.41 710 19.75 3.81 8.90 10.62 24.94

Consumer Staples Total 86,009.50 6.68 2,985

Energy

205 CHEVRON CORP CVX A 102.92 21,098.60 1.64 877 28.95 3.75 9.73 10.94 18.20

520 ENBRIDGE INC ENB A 44.23 22,999.60 1.79 842 28.47 2.26 13.38 NA 10.54

125 ENERGY SECTOR

SPDR

XLE NR 70.61 8,826.25 0.69 230 NA NA 14.08 NA NA

410 TRANSCANADA

CORP

TRP A- 47.56 19,499.60 1.52 703 22.30 2.50 3.48 6.91 9.42

Energy Total 72,424.05 5.63 2,652

Financials

125 AMERIPRISE

FINANCIAL INC

AMP NR 99.77 12,471.25 0.97 375 12.98 9.75 27.82 25.05 13.79

55 BLACKROCK INC BLK B+ 362.46 19,935.30 1.55 504 18.41 20.16 19.00 29.61 10.08

495 J P MORGAN CHASE

& CO

JPM B+ 66.59 32,962.05 2.56 950 10.86 5.82 51.57 18.50 9.75

285 PRUDENTIAL

FINANCIAL INC

PRU B+ 81.65 23,270.25 1.81 798 8.24 9.72 25.97 NA 4.90

235 WELLS FARGO & CO WFC A- 44.28 10,405.80 0.81 357 12.97 4.15 47.58 19.22 12.71

Financials Total 99,044.65 7.70 2,984

Health Care

320 ABBVIE INC ABBV NR 63.07 20,182.40 1.57 730 14.72 4.18 NA NA NA

195 JOHNSON &

JOHNSON

JNJ A+ 118.13 23,035.35 1.79 624 16.32 6.17 7.39 0.53 20.47

345 MERCK & CO INC MRK B 62.41 21,531.45 1.67 635 17.11 3.38 3.21 NA 11.46

390 NOVARTIS ADR NVS NR 78.96 30,794.40 2.39 898 19.91 5.19 6.47 -2.31 14.19

655 PFIZER INC PFE B 33.87 22,184.85 1.72 786 16.89 2.08 9.94 92.38 15.84

Health Care Total 117,728.45 9.15 3,672

Industrials

735 GENERAL ELECTRIC

CO

GE A- 29.62 21,770.70 1.69 676 16.17 1.72 17.61 17.10 10.84

140 UNION PACIFIC CORP UNP A 97.53 13,654.20 1.06 308 16.54 6.47 30.00 24.90 20.10

Industrials Total 35,424.90 2.75 984

1

Est. Past 5 Yr Past



Information Technology

770 CISCO SYS INC CSCO B+ 31.72 24,424.40 1.90 801 12.87 2.16 NA 19.99 16.18

600 INTEL CORP INTC B+ 37.75 22,650.00 1.76 624 14.27 2.22 9.64 16.80 22.58

370 MICROSOFT CORP MSFT B+ 57.60 21,312.00 1.66 577 16.66 2.49 17.81 -0.94 34.47

360 QUALCOMM INC QCOM B 68.50 24,660.00 1.92 763 13.77 5.01 19.83 20.11 18.93

Information Technology Total 93,046.40 7.23 2,765

Materials

165 DOW CHEM CO DOW B 51.83 8,551.95 0.66 304 17.08 2.86 21.37 NA 13.64

380 INTERNATIONAL

PAPER CO

IP B 47.98 18,232.40 1.42 703 14.33 3.85 71.88 NA 13.93

Materials Total 26,784.35 2.08 1,007

Real Estate

225 CROWN CASTLE

INTL CORP

CCI C 94.21 21,197.25 1.65 855 63.42 1.18 0 0 -0.48

245 DIGITAL RLTY TR INC DLR NR 97.12 23,794.40 1.85 862 64.12 1.02 15.57 NA 6.76

790 RLJ LODGING TRUST RLJ 21.03 16,613.70 1.29 1,043 17.32 1.81 NA NA 2.44

310 VENTAS INC VTR B+ 70.63 21,895.30 1.70 905 26.96 2.75 3.64 8.98 6.18

Real Estate Total 83,500.65 6.49 3,665

Telecommunication Services

435 AT&T CORP T B+ 40.61 17,665.35 1.37 853 12.98 2.52 2.30 NA 11.31

200 ROGERS

COMMUNICATIONS

INC

RCI B 42.42 8,484.00 0.66 290 14.32 2.99 7.94 7.87 38.43

471 VERIZON

COMMUNICATIONS

VZ B 51.98 24,482.58 1.90 1,088 13.42 3.67 2.95 NA 16.99

Telecommunication Services Total 50,631.93 3.94 2,231

Utilities

185 CMS ENERGY CORP CMS B 42.01 7,771.85 0.60 229 18.52 1.88 15.94 82.58 13.11

305 DOMINION RES INC

VA

D B 74.27 22,652.35 1.76 854 19.43 3.69 6.70 NA 13.11

200 DUKE ENERGY CORP DUK B 80.04 16,008.00 1.24 684 16.69 4.66 2.12 -8.67 6.02

335 SCANA CORP SCG B+ 72.37 24,243.95 1.88 771 14.83 3.69 2.38 3.68 10.61

Utilities Total 70,676.15 5.49 2,538

COMMON STOCK Total 811,677.93 63.08 28,396

EXCHANGE TRADED FUNDS - EQUITY

Mid Cap Funds

225 SPDR S&P MIDCAP

400

MDY NR 282.27 63,510.75 4.94 850 NA NA 12.67 NA NA

510 VANGUARD MID

CAP ETF

VO NR 129.44 66,014.40 5.13 953 NA NA 17.69 NA NA

Mid Cap Funds Total 129,525.15 10.07 1,803

Small Cap Funds

405 VANGUARD INDEX

FDS SM CP VAL

VBR NR 110.66 44,817.30 3.48 845 NA NA 12.21 NA NA

EXCHANGE TRADED FUNDS - EQUITY Total 174,342.45 13.55 2,648

2

SAMPLE ACCOUNT REVIEWSTOCK PORTFOLIO

As of 9-30-2016

Est. Past 5 Yr Past



INTERNATIONAL ETFs

International

5,915 VANGUARD FTSE

DEVELOPED

MARKETS ETF

VEA NR 37.41 221,280.15 17.20 6,122 NA NA 7.24 NA NA

Emerging Markets

1,740 ISHARES CORE MSCI

EMERGING MARKET

IEMG 45.61 79,361.40 6.17 1,613 NA NA NA NA NA

INTERNATIONAL ETFs Total 300,641.55 23.37 7,735

TOTAL STOCK PORTFOLIO 1,286,661.93 100.00 38,779

3

SAMPLE ACCOUNT REVIEW STOCK PORTFOLIO

As of 9-30-2016

Summary Information

Totals Weighted Averages

Par Value 2,985,000 Average Curr. Yld 2.01

Market Value 3,081,534.76 Average Maturity (yrs) 3.85

Total Cost 3,053,478.30 Average Coupon (%) 2.06

Net Gain/Loss 28,056.46 Average Duration 3.65

Annual Income 61,576.25

Accrued Interest 17,774.16

Number of Issues 28

Distribution by Maturity

% Bond Average Average Average

Maturity Number Mkt Value Holdings Curr. Yld Coupon Duration

Under 1 Yr 4 324,882.03 10.5 2.5 2.532% 0.5

1 Yr - 3 Yrs 5 322,902.15 10.5 1.9 1.975% 2.0

3 Yrs - 5 Yrs 14 1,770,837.84 57.5 1.9 1.973% 3.8

5 Yrs - 7 Yrs 5 662,912.74 21.5 2.1 2.119% 5.7

SAMPLE ACCOUNT REVIEWFIXED INCOME DISTRIBUTION

As of 9-30-2016

Current Effect. 09-30-16 09-30-16 Accrued Annual

Quantity Security Coupon Maturity Price Market Value Interest Income Yield S & P Moody

75.00 AEGON NV 6.375% 25.44 1,908.00 119.53 6.26 BBB Baa1

285.00 ALLSTATE CORP 6.625% 27.16 7,740.60 472.03 6.10 BBB- Baa3

72.00 ARES MANAGEMENT LP 26.00 1,872.00 126.00 6.73 BBB- BBB-

70.00 BANC OF CALIFORNIA INC PREF 26.28 1,839.60 122.50 6.66

115.00 BANK AMER CORP DEP SHS

PFD EE

26.26 3,019.90 172.50 5.71

85.00 BANK AMER CORP SERIES W

6.625%

27.07 2,300.95 140.78 6.12 BB Baa3

320.00 BB&T CORP 5.2% 25.52 8,166.40 416.00 5.09 BBB-

175.00 CAPITAL ONE FINL CO 5.375% 25.50 4,462.50 227.50 5.10

155.00 CAPITAL ONE FINL CORP 26.99 4,183.45 240.25 5.74

255.00 CHS INC CLASS B SER 4 7.5% 29.53 7,530.15 478.13 6.35

135.00 CITIGROUP INC DEP SHS 1/1000

C

25.93 3,500.55 195.75 5.59 BB+

135.00 CITIGROUP INC DEP SHS

PREFERRED S

26.78 3,615.30 212.63 5.88 BB+ Ba1

310.00 DISCOVER FINANCIAL SVS 6.5% 26.08 8,084.80 503.75 6.23 BB B1

115.00 FIRST REPUBLIC BANK PREF

SHARE

27.12 3,118.80 163.88 5.25

115.00 FIRST REPUBLIC BANK SAN

FRANCISCO PFD G

26.91 3,094.65 158.13 5.11

110.00 GOLDMAN SACHS GROUP INC

DEP

27.10 2,981.00 173.25 5.81

110.00 GOLDMAN SACHS GROUP INC

SHS D 1/1000

23.35 2,568.50 112.45 4.38

225.00 HUNTINGTON BANCSHARES

PREF D 6.25%

27.54 6,196.50 351.56 5.67 NA Baa3

70.00 IBERIA BANK CORP PREF SHARE 27.21 1,904.70 115.94 6.09

70.00 ING GROEP NV 6.125% 25.63 1,794.10 107.19 5.97 BBB- Ba1

315.00 JP MORGAN CHASE & CO 6.15% 27.16 8,555.40 484.31 5.66 BBB-

155.00 LEGG MASON INC 5.45% 25.04 3,881.20 211.19 5.44

325.00 METLIFE INC 4% VRN 25.45 8,271.25 332.22 4.02 BBB-

85.00 MONMOUTH REIT PERFERRED

STOCK 6.125%

25.87 2,198.95 130.16 5.92

265.00 MORGAN STANLEY PREF SHARE 27.87 7,385.55 422.35 5.72

195.00 NATIONAL GEN HLDGS CORP 25.97 5,064.15 365.63 7.22

305.00 NORTHERN TR CORP 5.85% 27.19 8,292.95 446.06 5.38

310.00 PNC FINL SVCS GROUP INC

5.375%

25.51 7,908.10 416.56 5.27 BBB Baa3

115.00 PUBLIC STORAGE SER D 25.81 2,968.15 142.31 4.79 BBB+ Baa1

160.00 REGIONS FINL CORP A 6.375% 25.90 4,144.00 255.00 6.15 BB B1

155.00 REGIONS FINL CORP NEW DEP

SHS PFD B

28.95 4,487.25 247.03 5.51

160.00 SCHWAB CHARLES CORP 27.22 4,355.20 238.00 5.46

155.00 SCHWAB CHARLES CORP 6% 27.53 4,267.15 232.50 5.45 BBB

155.00 STATE STR CORP DEP SHS PFD G 26.81 4,155.55 207.31 4.99

150.00 STATE STREET 5.9% 27.79 4,168.50 221.22 5.31

320.00 SUNTRUST BKS INC E 5.875% 26.46 8,467.20 470.00 5.55 BB+ Ba1

105.00 US BANCORP SERIES H 5.15%

PERP REDEMPTION 7/15/2018

26.57 2,789.85 135.19 4.85 BBB+

185.00 VALIDUS HOLDINGS LTD 25.65 4,745.25 271.72 5.73

160.00 WELLS FARGO & CO 6% 26.77 4,283.20 240.00 5.60

170.00 WELLS FARGO PFD 25.79 4,384.30 233.75 5.33 BBB BAA2E

50,000 HENDERSONVILLE TN UTIL

DIST WTR AND SWR

3.00 02-01-17 100.87 50,436.50 245.83 1,500.00 2.97 AA

120,000 KNOXVILLE TN GAS REV 3.00 03-01-17 101.14 121,369.20 290.00 3,600.00 2.97 AA Aa2

100,000 WILSON CNTY TN SCH IMPT 2.00 04-01-17 100.76 100,764.00 994.44 2,000.00 1.98 AA

50,000 COOKEVILLE TN 2.00 06-01-17 100.90 50,451.50 330.56 1,000.00 1.98

45,000 LAKELAND TN GO CAP 2.00 03-01-18 101.22 45,547.65 72.50 900.00 1.98

40,000 ROBERTSON COUNTY TN 2.00 05-01-18 101.96 40,783.60 35.56 800.00 1.96 AA

100,000 PLATEAU UTIL DIST MORGAN

CNTY REV

2.00 06-01-18 102.29 102,291.00 661.11 2,000.00 1.96 A2

50,000 LAKELAND TN GO 2.00 03-01-19 103.00 51,500.00 80.56 1,000.00 1.94

1

SAMPLE ACCOUNT REVIEWBOND PORTFOLIO

As of 9-30-2016

Current Effect. 09-30-16 09-30-16 Accrued Annual

Quantity Security Coupon Maturity Price Market Value Interest Income Yield S & P Moody

80,000 TN HOUSING DEV AGY 1.90 07-01-19 101.94 81,554.40 375.78 1,520.00 1.86 AA+ Aa1

175,000 CLARKSVILLE TN 2.00 01-15-20 103.37 180,897.50 729.17 3,500.00 1.93 AA2

95,000 FAYETTE CNTY TN GO 2.00 04-01-20 102.80 97,661.90 944.72 1,900.00 1.95 Aa3

175,000 MONTGOMERY CNTY TN 2.00 04-01-20 103.51 181,140.75 1,740.28 3,500.00 1.93 AA+

60,000 BRADLEY CNTY TN 2.00 06-01-20 103.43 62,059.20 396.67 1,200.00 1.93 Aa2

175,000 COLLIERVILLE TN GO 1.50 11-01-20 100.66 176,160.25 1,086.46 2,625.00 1.49 Aaa

75,000 GATLINBURG TN 2.00 05-01-20 103.20 77,402.25 620.83 1,500.00 1.94 AA

120,000 LOUDON CNTY TN 2.00 06-01-21 103.80 124,558.80 793.33 2,400.00 1.93 Aa2

65,000 TN HOUSING DEV AGY 2.35 07-01-21 104.32 67,809.95 377.63 1,527.50 2.25 AA+ Aa1

100,000 SEVIER CNTY TN GO 2.00 04-01-20 103.71 103,707.00 994.44 2,000.00 1.93 Aa2

175,000 KNOXVILLE TN 2.00 05-01-21 103.41 180,969.25 1,448.61 3,500.00 1.93 AA+ Aa1

165,000 BRISTOL TN 2.00 06-01-20 103.26 170,375.70 1,090.83 3,300.00 1.94 Aa2

105,000 GATLINBURG TN GO 2.00 06-01-20 101.58 106,663.20 694.17 2,100.00 1.97 AA

75,000 COLLIERVILLE TN GO 2.00 11-01-21 102.17 76,625.25 620.83 1,500.00 1.96 Aaa

170,000 LAVERGNE TN WTR AND SWR 2.00 03-01-23 102.66 174,522.00 273.89 3,400.00 1.95 AA

115,000 BRADLEY CNTY TN 2.00 06-01-23 102.54 117,921.00 760.28 2,300.00 1.95 Aa2

115,000 TENNESSEE HSG DEV AGY RES 2.65 01-01-23 104.80 120,522.30 753.41 3,047.50 2.53 AA+ Aa1

165,000 BARTLETT TN WTR AND SWR

REV

2.00 09-01-22 103.42 170,647.95 265.83 3,300.00 1.93 AAA Aa1

125,000 HENDERSONVILLE TN 2.13 02-01-21 102.55 128,182.50 435.33 2,656.25 2.07 AA-

100,000 JOHNSON CITY TN GO 2.00 06-01-21 101.24 101,236.00 661.11 2,000.00 1.98 Aa2

TOTAL BOND PORTFOLIO 3,248,416.20 17,774.16 71,888.49 2.21

2

SAMPLE ACCOUNT REVIEWBOND PORTFOLIO

As of 9-30-2016

Trade Settle Unit

Date Date Quantity Security Price Amount

PURCHASES

07-15-16 07-15-16 85.00 MICROSOFT CORP 53.71 4,565.27

07-15-16 07-15-16 55.00 QUALCOMM INC 54.51 2,998.00

07-15-16 07-15-16 35.00 TARGET CORP 73.43 2,570.01

07-15-16 07-15-16 510.000 VANGUARD MID CAP ETF 127.90 65,226.45

07-26-16 07-26-16 175.00 CAPITAL ONE FINL CO 5.375% 25.06 4,385.50

08-03-16 08-03-16 155.00 LEGG MASON INC 5.45% 25.05 3,882.75

08-09-16 08-09-16 130.00 NATIONAL GEN HLDGS CORP 25.89 3,365.31

08-09-16 08-09-16 135.00 VALIDUS HOLDINGS LTD 25.76 3,477.33

08-10-16 08-15-16 115.00 PUBLIC STORAGE SER D 25.19 2,896.75

08-17-16 08-17-16 110.00 GOLDMAN SACHS GROUP INC

SHS D 1/1000

22.29 2,452.32

08-17-16 08-17-16 155.00 STATE STR CORP DEP SHS PFD G 27.75 4,301.17

08-29-16 09-01-16 39.00 NATIONAL GEN HLDGS CORP 26.21 1,022.14

08-29-16 09-01-16 30.00 VALIDUS HOLDINGS LTD 26.02 780.47

08-30-16 09-02-16 26.00 NATIONAL GEN HLDGS CORP 26.20 681.19

08-30-16 09-02-16 20.00 VALIDUS HOLDINGS LTD 25.81 516.17

09-07-16 09-07-16 85.00 MONMOUTH REIT PERFERRED

STOCK 6.125%

25.03 2,127.55

09-08-16 09-08-16 40,000 ROBERTSON COUNTY TN 102.35 40,940.00

2.000% Due 05-01-18

09-14-16 09-14-16 41.00 ARES MANAGEMENT LP 25.84 1,059.27

09-15-16 09-15-16 31.00 ARES MANAGEMENT LP 26.05 807.57

148,055.22

SALES

07-15-16 07-15-16 370.00 GENERAL ELECTRIC CO 32.83 12,147.20

07-15-16 07-15-16 70.00 HASBRO INC 85.31 5,971.65

07-15-16 07-15-16 335.00 SEAGATE TECHNOLOGY 28.74 9,628.02

07-15-16 07-15-16 820.000 VANGUARD FTSE DEVELOPED

MARKETS ETF

36.12 29,618.57

07-15-16 07-15-16 130.00 ENERGY SECTOR SPDR 69.28 9,006.33

07-15-16 07-15-16 50.00 BLACKROCK INC 355.68 17,784.11

07-15-16 07-15-16 215.00 JOHNSON & JOHNSON 123.18 26,484.41

07-15-16 07-15-16 75.00 PEPSICO INC 109.53 8,214.58

07-15-16 07-15-16 500.00 PFIZER INC 36.92 18,457.59

07-26-16 07-26-16 160.00 CAPITAL ONE FINL CO 6% 26.05 4,168.60

08-03-16 08-03-16 135.00 BANK NEW YORK MELLON CORP 26.34 3,556.14

08-04-16 08-04-16 205.00 SCE TR I TR CALL 6/15/2017 5.625% 26.09 5,348.35

08-10-16 08-15-16 110.00 SCE TR I TR CALL 6/15/2017 5.625% 26.15 2,876.84

08-17-16 08-17-16 100.00 GOLDMAN SACHS GROUP INC

11/10/2017 5.95%

25.85 2,585.46

150.00 STATE STREET 5.9% 28.79 4,318.4208-17-16 08-17-16

1

SAMPLE ACCOUNT REVIEWPURCHASES AND SALE

7-1-2016 to 9-30-2016

Trade Settle Unit

Date Date Quantity Security Price Amount



09-01-16 09-01-16 5,000 TN HOUSING DEV AGY 100.00 5,000.00

1.900% Due 07-01-19

09-01-16 09-01-16 5,000 TENNESSEE HSG DEV AGY RES 100.00 5,000.00

2.650% Due 07-01-23


09-14-16 09-14-16 140.00 US BANCORP SERIES H 5.15%


26.65 3,731.02

09-14-16 09-14-16 70.00 US BANCORP SERIES H 5.15%


26.63 1,864.44

180,645.18

2

SAMPLE ACCOUNT REVIEWPURCHASES AND SALE

7-1-2016 to 9-30-2016

O U T L O O K S

October 2016

The Bureau of Economic Analysis just released its third and

final estimate of U.S. Q2 real gross domestic product (GDP)

and the revisions were mildly encouraging. The numbers

showed that the economy expanded by a 1.4% annual rate

compared to 1.1% announced with the second revision.

The upward revision was concentrated in business capital

spending, nonresidential structures and investment in

intellectual property. Inventories also witnessed a smaller

decline than previous reports, while export growth numbers

were revised higher to 1.8% from 1.2%, annualized.

Although the economic engine revved up a little during the

April to June quarter, business profitability suffered its fifth

straight decline. Corporate America is finding it harder to

boost dividends and repurchase shares out of free cash flow

and is, therefore, relying more on debt issuance to fund these

expenditures. Profit margin compression causes CFOs to

scrutinize a whole range of expenditures including headcount

and wage increases. Job growth has yet to be curtailed in any

meaningful way but salary increases in 2017 will be modest,

despite an unemployment rate below 5.0%.

One other bright spot on the U.S. economic scene has

been existing residential home sales and they have been

decelerating recently. The National Association of Realtors’

pending home sale index – a measure of existing home sales

under contract but not closed – slumped in August to 2.4%

month over month, a seven month low. This is less about

demand, which is generally strong, but about available supply,

which is very tight. Over the long haul, this condition should

enhance new home construction and bring about a better

balance in the marketplace.

PositivesISM Manufacturing Index bounces up to 51.5 from 49.4

last month

Wards total vehicle sales hit 17.65 million, up from 16.91

million last month

Advance goods trade balance was negative but better than

forecast, incrementally boosting GDP

NegativesRetail sales were down 0.3% last month and were forecast

to be flat

Capacity utilization ticked lower again this month to 75.5%

Industrial production was down by 0.4% last month and is

negative year over year

E C O N O M I C O U T LO O K

Summary

This publication is intended for use by clients of FCI Advisors and investment professionals. Factual materials obtained from sources believed to be reliable but cannot be guaranteed. Part II of Form ADV is available upon request. For further information please contact FCI at 800-615-2536 or [email protected].

O U T L O O K S

October 2016

What a difference three months can make! The third

quarter equity markets proved quite different than

conventional wisdom would have predicted for summer

seasonality. While volatility in the markets faded to almost

nil, stocks outperformed bonds, market participation

broadened and a whiff of economic resurgence was

evident in sector performance.

For the quarter, the S&P 500 posted a gain of 3.9% and is now

up 7.9% for the year. Having underperformed U.S. markets for

several years, overseas markets fared much better with the

MSCI EAFE up 6.4% and the developing economies index,

the MSCI EEM, soaring 10.2%.

Most satisfactory to market participants, however, may have

been the fact that market leadership, heretofore limited to the

defensive, dividend paying, low volatility sectors of utilities and

telecom, changed as well. These sectors retreated 6.7% and 6.6%,

respectively, while forward looking, economic sensitive sectors of

technology and financials took charge gaining 12.4% and 4.1%.

Presidential politics notwithstanding, several green shoots

appear to suggest some rebound is likely for the economy.

These include improved consumer confidence, steady new

home sales, stable incomes, inventory drawdowns, better than

expected manufacturing orders and improved service industry

surveys, to highlight just a few.

Perhaps more importantly though, were the implicit signals sent

to markets by monetary authorities in England and Japan. Their

enthusiasm for deploying more “extraordinary” policy measures,

i.e. more negative interest rate experimentation, may be waning.

U.S. companies begin their “earning season” shortly, and we

expect more attention will be paid to the outlook for the fourth

quarter, rather than rehashing what has just passed. A little

better outlook in final demand may be the surprise event few

are anticipating.

PositivesImproving economic metrics

Oil stabilized at $45 to $50 a barrel

NegativesEquity valuations are not historically cheap

Markets remain leery of interest rate normalization

UnknownElection consequences

E Q U I T Y O U T LO O K

Summary


O U T L O O K S

October 2016

With the Fed taking a pass on raising interest rates at their

September Federal Open Market Committee (FOMC) meeting,

the yield curve steepened slightly during the month. The 2-year

note stayed within a relatively narrow 8 basis point (bp) range

but ended September at 0.76%, about 4 bps lower. The 3-year

and 5-year notes ended about 5 bps lower at 0.88% and 1.15%,

respectively. The 10-year note yield moved higher by about 15

bps as the Fed’s meeting approached, but then fell back to near-

ly the same level after the announcement that they would be

patient in raising the Fed Funds rate. Similarly, the 30-year bond

rose almost 25 bps before the meeting but gave up most of

the increase and ended only 8 bps higher at 2.32%. Aggregate

spreads for investment-grade corporate bonds moved about 8

bps wider during the first few weeks of the month but recovered

about half of that move by the end.

Even without our Fed increasing the overnight rate, this month

may have marked the beginning of a slow change in central

bank monetary policy worldwide. The Bank of Japan and the

European Central Bank (ECB) both declined to lower their

deposit rates further into negative territory and each initiated

a new twist to their forward guidance. The Bank of Japan is

slowing their Japanese government bond (JGB) purchases and

targeting a zero rate on 10-year government bonds. The ECB,

while indicating it will likely extend its purchase program, has

suggested it will taper the monthly amount. Although these

changes might not mark the death knell for quantitative easing,

it could halt the progression towards the lower negative inter-

est rates that we see in Japan, Europe and Switzerland. It is

becoming increasingly obvious that negative interest rates are

not having the desired stimulative result and very well might be

inflicting more damage than gain within the business models of

financial intermediaries like banks and insurance companies.

Given the timing of occurring just a few days before the U.S.

presidential election, we do not believe that the Fed would

increase the overnight rate at that time. A December move

seems likely if the economic data, financial markets and

geopolitical landscape continue to support the conditions

necessary to further their quest to “normalize” the overnight

rate. Those are pretty big “ifs” and we are not absolutely con-

vinced that all of those conditions will still be supportive come

December 14th. Nationalist and populist movements around

the globe will hurt economic cooperation and trade, which

advances global growth and wealth. In the face of daunting

demographic headwinds, major economic powers need to

think creatively to advance trade and commerce opportunities.

The Fed can raise rates a few times over the next 18 months,

but challenges remain and we are not overly concerned that

the entire yield curve will shift substantially higher. We continue

to maintain a full duration policy with a significant allocation to

high-quality corporate bonds.

PositivesSignificant level of government debt restrict fiscal

stimulus options

The U.S. still has the highest yield and strongest currency

of any large developed nation

NegativesInvestors might sell bonds if the Fed increases the

overnight rate

Foreign central banks are realizing that monetary policy

is doing little to foster faster growth

UnknownsThe extent of the bad debt crisis in China

Bad debt and capital inadequacies across the European

banking system

F I X E D I N C O M E O U T LO O K

Summary


Tab 3

Disaster Recovery Plan Summaries


150 State Street | P.O. Box 50 | Augusta, Maine 04330 | Telephone: (207) 622-5801

Business Continuity/Disaster Recovery Management Team

The Business Continuity Management Team of Kennebec Savings Bank (KSB or “the Bank”) will be activated at the onset of any incident and will remain active throughout the course of the incident. Responsibilities include making key decisions related to recovery efforts and providing any type of support required by assigned recovery teams. The Business Continuity Management Team and the Bank’s Board of Directors have a responsibility for protecting all assets of the organization. These assets include employees, physical property, data, relationships, reputation and records relating to the Bank and its overall business operations. Additional responsibilities of the Business Continuity Management Team and Board of Directors include:

• Ensuring that all employees understand their obligation to protect the institution's assets.

• Implementing procedures which are consistent with generally accepted practice and adhere to the institution’s policies and any regulatory guidelines.

• Establishing, maintaining, coordinating, and testing the Business Continuity Plan and Disaster Recovery Plan.

The chair of the Business Continuity Management Team for the Bank is Craig Garofalo, Senior Vice President and Chief Operations Officer. In the event that he is not available, this responsibility will shift to the following individuals in the order listed below:

• Andrew Silsby, President and CEO • Jim Lagasse, Senior Vice President and Chief Technology Officer

Executive Overview

KSB has configured its core system so that its Waterville Branch provides online computer backup in a disaster or emergency situation. The Bank has installed a hardware and software configuration that can support core functions during regular business hours in an emergency situation.

Should a situation occur rendering KSB’s production computer system inoperative, the Bank will utilize the iTera transaction level replication files, which are automatically transferred to the Waterville Branch in real-time. The backup mainframe would then be brought online using

iTera, providing the capability to do business as usual until normal service can be restored at the primary data center.

Should the emergency result in corruption to current files, the backup files, which are stored offsite at the Waterville Branch, would be loaded. Any current day transactions would be lost and would have to be re-entered using transaction tickets, when the backup system becomes operational.

There would be additional considerations that relate to logistical matters, including transfer of files, personnel and paperwork among the main office and the Winthrop and Waterville Branches.

Investment Management & Trust Recovery

All Trust-related functions at KSB are performed via non-data storing software that communicates with a SQL Server located at Union Bank & Trust (UBT). Should an emergency or disaster occur rendering the Bank’s Trust software or communication inoperative, the UBT Trust Department will provide services, with the assistance of KSB Trust personnel, until normal operations are restored. In the event that UBT suffers a disaster rendering its operations center inoperable, its Disaster Recovery plan would be placed into effect.

CONFIDENTIAL

B U S I N E S S R E C O V E R Y P L A N S U M M A R Y

Union Bank & Trust Company was founded in 1917 as the Farmer's State Bank. In 1935, the name was changed to Union Bank, and in 1959, with the addition of trust powers, the company became Union Bank & Trust Company (Union Bank). In 1965, Union Bank was purchased by the Dunlaps, a long-time Nebraska banking family. Now, 50 years later, still owned and managed by the same family, Union Bank has developed into a financially diverse organization serving Nebraskans across the state, as well as the Bonner Springs and Kansas City, Kansas areas. Recognized for our innovation and progressive ideas, we've grown significantly during the past decade, both in size and diversity. Ensuring business continuity in the event of a significant interruption or disaster is of critical importance at Union Bank. Policies, procedures, and processes are in place to ensure that essential functions can continue during and after an interruption. The need to implement the plans may arise from natural disasters, system or equipment failures, utility disruptions, or any other number of causes. The goal of our Business Recovery Plan is to return the organization to normal operation levels as quickly as possible following an emergency, business interruption or disaster. The plan will strive to accomplish this objective while minimizing both service disruptions to customers and the organization’s financial losses. Union Bank’s Board of Directors is responsible for providing direction and approval of the Business Recovery Policies and Procedures, and for identifying and supporting four key positions to the recovery process: Business Recovery Administrator, Administrator Alternate, Coordinator, and Coordinator Alternate. The Administrator and/or Alternate are primarily responsible for declaring a disaster and determining the level, activating the Business Recovery Plan, identifying the location of the Command and Control Center, and maintaining communication with the Board of Directors regarding updates. The primary responsibilities of the Coordinator and/or Alternate are to carry out the Business Recovery Plan, supervise and control activities, communicate with bank staff, business partners, and regulators as appropriate. Members of the Executive and Management Committees are responsible for receiving initial disaster notification, activating communications and individual division and department plans, ensuring the plans are up-to-date and effective, monitoring ongoing operations, and communicating with the Command and Control Center. The Coordinator and Executive Committee Members are also able to declare a disaster and activate the Business Recovery Plan if the Administrators are not available. Union Bank has a Business Recovery Committee which ensures compliance with the Federal Financial Institutions Examination Council (FFIEC) Guidelines for Business Contingency Planning and provides direction for plan update formats, risk assessments, communication methods, testing, and training. A taskforce then carries out the goals of the committee and coordinates all plan updates, testing, and training. A Business Recovery Plan is in place and updated annually for each department of the bank, and is separated into Business Continuity and Disaster Recovery to identify the different actions that must take place based on the level of interruption. Annually, each department completes a Business Impact Analysis, Business Recovery Risk Assessment,in addition to other regulatorly required risk assessments to ensure vulunerabilities are identified and addressed. Critical process testing is required by all business areas which also participation in various formats of Mock Disaster Testing. The Business Recovery Plan is periodically reviewed by auditors according to the standards established in the Business Continuity Planning Examining Handbook issued by the FFIEC. In addition, the bank is subject to the State of Nebraska and FDIC annual examinations. Upon declaration of a disaster, Emergency Mode Operations are enacted and a Command and Control Center is set up to facilitate recovery and communications. Union Bank has multiple facilities at which the command center can be located, depending on the scope of the disaster. The preferred order of relocation is documented in the plan. Technology Center Industry-standard hardware from major vendors forms the core of our network. Our technology center is maintained in a secure, restricted-access environment with safeguards against intrusion and environmental disruption. In addition, the center is equipped with automated environmental monitoring and alarm tools. If temperature, humidity, or other monitored parameters fall outside of pre-established tolerance ranges, alarms are generated and personnel are dispatched to isolate and correct the problem. Leading technology including virtual servers, disk-to-disk backup, storage area network, and penetration and intrusion detection systems are utilized to facilitate business recovery and network security. Diverse item processing operations, consisting of both branch and remote capture image technology, allow for redundancy and flexibility. A diesel generator is onsite in the event of an external power failure, and is tested on a regular basis.

CONFIDENTIAL

Contingency and Backup Procedures The bank has over 30 locations in Nebraska and Kansas with primary campuses in two metropolitan areas, providing for flexibility in the case of a disaster. Union Bank has established a dedicated Remote Disaster Site to facilitate timely recovery of the network and mainframe in a disaster situation. The entire network is backed up to an electronic storage vault outside of the region periodically throughout the day, and also saved to electronic storage and maintained in two regional locations. Much of the documentation bankwide is stored in an image format for business recovery purposes, and is included in the backup process. Identified employees have been assigned virtual private network (VPN) access for disaster recovery purposes, which allows offsite access to Union Bank’s network. In addition, many applications are browser-based and can be accessed from any facility with internet availability. Third Party Risk Management Union Bank utilizes vendor partnerships in a number of different capacities. Through the Third Party Risk Management Process, critical vendors have been identified and their Business Recovery Procedures have been reviewed for adequacy. In addition, alternate providers and communication methods have been identified in many cases in the event that the primary provider is not available. Electronic Transactions Provided the critical nature of electronic transactions in the financial industry, specific alternatives have been established to maintain ability to process these items. Union Bank utilizes the Federal Reserve to process ACH transactions, and redundant tools are in place. In the event that connectivity to the Federal Reserve is unavailable, a relationship has been established with a correspondent bank partner that is able to directly accept and process files. Wire transfers are processed through a third-party provider that also has a direct connection with the Federal Reserve. Multiple alternatives exist should this provider experience an interruption, including using the online systems of the Federal Reserve or correspondent bank partners, and calling either of the above. All of these procedures have been successfully tested and documented. Conclusion Union Bank & Trust Company understands that our customers rely on the availability of the services provided, and we have gone to great lengths to ensure that these are maintained at peak availability. Through effective risk evaluation, planning, testing, and training, the bank is prepared to address interruptions with minimal customer and business impact. Our dedication to research and evaluation of solutions with advances in technology will ensure that the effectiveness of the Business Recovery Plan will continue. Confidentiality Statement All information contained within this Business Recovery Plan Summary is considered confidential and remains the property of Union Bank & Trust Company. This information is published by Union Bank for the sole benefit of its current and prospective clients. Information in this document is not to be reproduced, distributed, or disclosed to third parties without prior written approval of Union Bank. Disclaimer Union Bank reserves the right to revise any of the policies, procedures, and processes described herein at any time without notice. Flexibility of processes and procedures are essential due to the varying nature of disaster situations which may dictate a different response than described in this document.

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Asset Allocation Strategy


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Value Equity Composite Intermediate Fixed Income

Composite Pro Forma Performance for

Growth Allocation


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Comprehensive Banking Relationship


150 State Street | P.O. Box 50 | Augusta, Maine 04330 | Telephone: (207) 622-5801

1.) Checking Services: We have a variety of checking account products that could meet your needs. FDIC insurance would collateralize the checking account up to the FDIC’s limit of $250,000 per depositor, per insured bank, for each account ownership category. The cutoff to ensure same-day ledger credit is 5:30 p.m. 2.) Insured Cash Sweep: Sweeping funds from the checking account into the Insured Cash Sweep account would allow KVCC Foundation to maximize earnings while funds remain accessible and all deposit funds would be collateralized through a single bank relationship.

3.) Other Depositor or Investment Vehicles: Alternatively, KVCC Foundation could place excess funds into our Premier Savings Account (our highest yielding account), which would produce a higher return on excess balances. Up to six (6) pre-authorized transfers (which include Internet-initiated transactions) are permitted per month; otherwise, transfers must be made in person at a branch. Should KVCC Foundation be looking for a short term investment option, Kennebec Savings Bank (KSB) offers Certificate of Deposit (CD) accounts, with a minimum balance of $500.00 available with terms ranging from six (6) months to seven (7) years. Penalties may be imposed for withdrawals before maturity. 4.) Wire Services: Wire Origination, both Domestic and International, can be submitted in person or via facsimile. Domestic online wire origination is available via our online banking service. KSB is able to provide automated confirmation of both incoming and outgoing domestic wire transfers via email.

5.) Monthly Account Statements: KSB prints its monthly account statements on the last business day of each month and mails the statements within three (3) business days via standard U.S. Postal delivery. These statements include information on all account activity, including:

• Number of checks deposited and paid • Number of deposits (cash & checks) • Average collected balance for the month • Total fees accrued and the earnings credit earned, if applicable • Check images (front of checks) sorted in numerical order

Customizable reporting capability is available via the Bank’s Internet Banking service based on parameters input by the user. Statements may also be provided electronically, if you wish. 6.) Other Services: Internet Banking: Internet Banking provides 24-hour access to real-time account information from the convenience of your computer. Multiple layers of security help keep your information safe and secure. Internet Banking provides the ability to:

• Check account balances, pay bills and make transfers • View real-time account balances, check images (both front and back) and

history • Access checking, loans and Certificate of Deposits (CD’s) any time of the

day • Export history to financial software or spreadsheets (transaction

information can be downloaded to an Excel file to assist with account reconciliation)

• Transfer funds between accounts, including recurring transfers • Request stop payments • Process ACH requests (includes EFTPS transmissions, CCD transactions

and Direct Deposit services) Information Reporting Services available through Internet Banking include:

• Export transaction information with a finance application such as Quicken, Quickbooks, or Money

• Search for a transaction or a cancelled check image by amount, date, and/or check number using the Transaction Search options on the Transaction Menu screen

• Print a snapshot of detailed financial information from your Previous Statement, Current Statement, Recent Transactions, current Business Day, and Archived Transactions from the Transaction Menu

• eStatements, electronic bank statements, can be viewed, retrieved and downloaded by selecting the Documents Menu. eStatements are available for eighteen (18) months from the date of enrollment

In order to protect the accounts, the following security procedures are in place:

• Each individual, Administrator(s) and Authorized User(s), will be assigned their own Access ID that will be used to log-in.

• Each Administrator(s) and Authorized User(s) will maintain a password known only to him/her. Passwords are case-sensitive and require a minimum of 8 alpha-numeric characters in length. One character must be a letter, and one character must be a number. It is advised that passwords be changed from time to time for security purposes.

• A multi-part authentication security procedure at log-in is required for all users. Enhanced Log-In Security uses a factor of identity authentication that may include, but is not limited to, additional login security features such as identification and verification of IP addresses computer registration, access filters, and other information. Enhanced Log-In Security will require each user to establish and utilize, in addition to log-in ID’s and passwords, his/her own individual authentication through the use of personal identifying questions and image verification as part of a multi-part credential.

• ACH services, if applicable, will require that each Authorized User, setup to use this role, be issued their own individual security token. We recommend that the “dual control” feature be used as an optional, additional layer of security when using the ACH origination feature.

ACH Processing: Kennebec Savings Bank utilizes web-based ACH initiation via our Internet Banking product. ACH details:

• Files are securely transmitted directly from your desktop to Kennebec Savings Bank

• We request 24 hours advance notice. We accept files up to 3:00 pm the business day before the scheduled transfer is to occur

• Notice to reverse or delete ACH files should be done via telephone with a signed authorization follow-up via fax

• ACH transactions may be viewed via Internet Banking as soon as items have been posted

• ACH files can be processed using an Excel file, your own NACHA compliant software, or most any software that uses a comma delineated file format

• Individual security tokens will be issued to the Administrator and any persons authorized to access and use ACH services

• Dual control features are available for an added layer of security Remote Deposit Capture: Would KVCC Foundation be interested in the ability to deposit checks directly from your office? Remote Deposit Capture makes funds available faster, saves time preparing deposits, consolidates funds from remote locations into one financial institution, and cuts/reduces costly courier fees or trips to the Bank. ACH Debit Block: Another security feature KVCC Foundation may want to consider is an ACH Debit Block/Filter. ACH Debit Block/Filter prevents unauthorized debits and minimizes potential losses. A “block” returns all ACH debits that are directed against a particular bank account while the “filter” feature allows pre-authorized items to post against a particular bank account. Health Savings Accounts: Does KVCC Foundation offer High Deductible Insurance Plans? If so, Health Savings Accounts (HSA) are available with no monthly service fee to KVCC Foundation or its employees. We offer both a checking and savings HSA product and provide a monthly bank statement. Debit cards and online access are provided on the HSA checking account to allow access to funds. Working with you, we are able to pull together the opening paperwork, including the transfer form, and deliver the package. Let us come to you! Merchant Services (Credit Card Payments): Merchant Services are provided by Basys, a third-party provider. Let KSB review your three most recent statements to determine if your current provider is doing right by you. Corporate Credit Cards: Corporate credit cards are available to authorized users with established limits as determined by KVCC Foundation.

KVCC Foundation Employee Benefits: KVCC Foundation employees would be entitled to our free Premier Checking account. These interest bearing accounts have no monthly service charges and unlimited check writing without any surcharges. Free Internet Banking, free Mobile Banking, and 24 hour/7 days a week bank-by-phone access to the account make this the best checking account around! Through a related entity, Kennebec Wealth Management, the Bank can provide 401K and 403B retirement plans for your employees. Fees vary depending upon the number of employees and the various plan options you may offer. We would welcome the opportunity to review your plans and meet with interested employees individually at your location. Commercial Loans: Our full-service commercial loan team is ready to support you. If you have a need for working capital, whether you’re financing real estate, vehicles, or simply need reserves, we’ve got the resources. Let us know how we can be of help!