AGENDA Budget and Finance Investment Committee

Meeting Date: February 6, 2020 Meeting Time: 10:30 – 12:00 PM Location: Salem Convention Center, Conference Room Santiam 3 Chair: John Grant Members: Eric Foster, Bik-Na Han, Rob Milesnick, Michael Rondeau, David Wade, Eddie Medina (alt). Member Liaison: Keith Palevsky ______

1. Snapshot overview of current portfolio position and recent trends in the market. Exhibit Inform

2. Presentation by Washington Trust. Summary of 2019 performance and 12 – 18 month horizon. (30 minutes) Exhibit Inform

3. Presentation by Becker Capital (Columbia Trust). Summary of 2019 performance and 12-18 month horizon outlook. Exhibit Inform

4. Review status and adequacy of reserves. Exhibit Inform

5. Cy Pres Request for Proposal response summary. Exhibit Inform

6. September 27th meeting minutes for approval by the Investment Committee. Exhibit Action OREGON STATE BAR Budget and Finance Investment Committee

Meeting Date: February 6, 2020 From: Keith Palevsky, Chief Financial Officer Subject: Investment Portfolio – Current Position

% Change (Adj) Value $ 2/20/19 4/5/19 5/10/19 6/19/19 7/15/19 8/30/19 12/31/19 1/31/20 since 5/10 S&P 500 Index 2780 2893 2880 2926 3014 2926 3231 3244 12.6% Washington Trust$ 3,007 $ 2,775 $ 2,515 $ 2,558 $ 2,597 $ 2,572 $ 2,693 $ 2,702 7.4% Becker Capital$ 2,993 $ 2,533 $ 2,414 $ 2,474 $ 2,520 $ 2,450 $ 2,640 $ 2,624 8.7% Total OSB Portfolio$ 6,000 $ 5,308 $ 4,929 $ 5,032 $ 5,117 $ 5,022 $ 5,333 $ 5,326 LGIP$ 800 $ 1,100 $ 1,100 $ 1,100 $ 1,100 $ 1,100 $ 1,100 Earned Interest *$ 2.4 $ 5.3 $ 8.6 $ 10.8 $ 14.5 $ 24.3 $ 30.6 2.52% Grand Total$ 6,000 $ 6,110 $ 6,035 $ 6,141 $ 6,228 $ 6,136 $ 6,458 $ 6,456 7.60% Note(*): LGIP interest rate changed from 2.75% to 2.60% on August 9, 2019. LGIP interest rate changed from 2.60% to 2.45% on September 24, 2019. LGIP interest rate changed from 2.45% to 2.25% on November 15, 2019.

S&P 500 Trend Line (Feb 20 – Jan 30):

US Treasury Note Yield Curve 10-Year v 3-Month (Feb 20 – Jan 30):

Washington Trust Bank

February 2020 Performance Review

A Tradition Of Trust Since 1902

Table of Contents

Portfolio Summary …………………………………………………. 1-2

Asset Allocation ………………………………………………...... 3

Growth Since Inception ……………………………………………. 4

Performance by Allocation ………………………………...... 5-6

Equity Risk Analysis ………………………………………………….. 7

Portfolio Holdings ……………………………………………….. 8-10 By major asset class, alphabetized Portfolio Holdings .……………………………………………. 11-12 By major and minor asset class Wealth Management Insights ……………………………. 13-18

Oregon State Bar #618684013 Quarterly investment review 09/01/2019 – 12/31/2019

Portfolio Summary

Long Term Investment Portfolio:

Investment Objective: Balanced Growth Target Asset Allocation: 60% Equity / 39% Fixed / 1% Cash Allocation as of 12/31/2019: 60% Equity/ 37.7% Fixed/ 2.3% Cash Market Value as of 12/31/2019: $2,693,307.11 Performance as of 12/31/2019 Year to 12/31/19: 16.02%; 2 year: 4.26%; Inception to Date: 6.18% Blended Benchmark: Year to 12/31/19: 16.35%; 2 year: 5.93%; Inception to Date: 6.26%

Investment Strategy and Changes: Washington Trust Bank’s investment philosophy is to remain fully invested in diversified, high-quality securities. All of the investment holdings in the Oregon State Bar account are monitored daily and replaced when analysis and/or performance warrants a change.

Accordingly, our portfolio management group has maintained its commitment to managing both risk and return and by doing so, managed an optimized portfolio for Oregon State Bar. Quarter to date changes in the portfolio are detailed below:

 Domestic Large-cap Strategy: We continue to reassess this area of the portfolio in light of economic and political uncertainty. Previously, we had reviewed our positioning in the financials sector and specified that we had sold both Prudential Financial (PRU) and Invesco LTD (IVZ). The proceeds for each were directed to cash while we researched suitable replacements. As of September of 2019, we purchased Intercontinental Exchange Inc. (ICE) and Progressive Corp. (PGR), respectively.

In October and December, we also made the following changes:

October: Sold FedEx Corp (FDX) and purchased Union Pacific Corp. (UNP) December: Sold Cisco Systems Inc. (CSCO) and purchased Palo Alto Networks Inc. (PANW)

Market Outlook: Like the majority of 2019, the fourth quarter was strong. The S&P 500 returned 9.06% for Q4 and 31.5% for the entire year. Notably, consumer confidence was robust, wages increased, and retail sales ticked up from the prior year. In regard to the global backdrop, trade tensions with China eased with optimism about a Phase 1 deal, and uncertainty around Brexit subsided with Boris Johnson achieving a clear mandate to exit the EU.

As we look forward, 2020 has the potential to be a very interesting year. The US economy’s expansion is the longest on record and, notably, turns 11 in June. It is a presidential election year with an impeachment backdrop, and there are new trade negotiations in the works between the U.S. and the EU and the U.S. and the UK. If negotiations with those two areas become anything like they were with China, we could see renewed and intermittent volatility.

We still have concerns about the global economy, such as, a synchronized economic slow-down coupled by geopolitical tensions. As such, we continue to manage the portfolio with an emphasis on managing risk, while also actively looking for opportunities to maximize return.

Questions to Answer for Each Quarterly Report to OSB Budget & Finance Committee

1. Are there any corporate bonds with one issuer above $100,000? No 2. Are there any transactions that directly involve short sales or derivatives? No 3. Are there any bonds that exceed 84 months to maturity? No 4. Are there any Federal Agency Obligations with one issue that exceed $250,000 or exceed 25% of total invested assets? No 5. Are there any investments in one specific security or issuer which represent 10% of the portfolio’s assets? (Bequests of stocks or bonds to the Fund may necessitate short-term deviations from this guideline.) No 6. Any non-publicly traded limited partnerships in the portfolio? No 7. Is there any non-publicly traded real estate in the portfolio? No 8. Are there any securities purchased with borrowed funds or on margin? No 9. Do any of the investments represent more than 5% of the available securities of the issuer? No 10. Are there any direct investments in mortgage-backed securities? No

Annual Withdrawals and Cash Flow Summaries  No regular distributions are being made.  No disbursements made between Sep 2019 and Dec 2019  Bond Maturities Sep 2019-Dec 2019 o $50,000 Ally Bank 1.7% October 7, 2019  Bond Maturities to occur in 2020 o $30,000 JPMorgan Chase & Co 4.95% March 25, 2020 o $15,000 Morgan Stanley Private Bank 2.65% April 27, 2020 o $30,000 Goldman Sachs Bank USA 2.45% July 24, 2020 o $40,000 Synchrony Bank 2.2% September 4, 2020

Sarie Crothers Rick Cloutier Vice President & Relationship Manager Vice President & Chief Investment Strategist Wealth management & advisory services Wealth Management & Advisory Services (503) 778-7071 (509) 353-4074 [email protected] [email protected]

Asset Allocation Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

Investment Objective: Balanced Growth The Balanced Growth investment objective has dual purposes: to both preserve capital and to also obtain capital growth. This investment objective indicates a need for a balance between capital preservation and long-term growth and the strategy is to position high quality fixed rate securities, equity components and risk protections for a portfolio that will accomplish both growth and income over a longer period of time.

% of Market Value Mkt Val 2.3

Growth Assets 1,619,948 60.0 Income Assets 1,016,297 37.7 Cash and Equivalents 62,009 2.3 Total 2,698,254 100.0 37.7

60.0

3 Growth Since Inception Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

Year Inception to Date to Date Market Value (1 Year) 1 Year 2 Years 3 Years 5 Years 06/01/2010

Total Managed 2,698,254 16.02 16.02 4.26 7.23 5.31 6.18 Asset Class Benchmark 16.35 16.35 5.93 7.85 5.56 6.26 Equities 1,064,188 29.01 29.01 7.64 13.58 9.74 12.30 Fixed Income 938,181 7.46 7.46 3.36 3.79 3.03 2.16 Alternatives 633,876 10.75 10.75 -.43 1.89 1.33 3.45 Cash and Equivalents 62,009 3.12 3.12 2.84 2.18 1.37 .74

4 Performance by Allocation Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

Year Inception to Date to Date Market Value (1 Year) 1 Year 2 Years 3 Years 5 Years 06/01/2010

Total Managed 2,698,254 16.02 16.02 4.26 7.23 5.31 6.18

Equities 1,064,188 29.01 29.01 7.64 13.58 9.74 12.30

Energy 29,675 20.67 20.67 -3.61 -1.37 3.78 7.76 Materials 16,721 25.84 25.84 7.93 15.03 8.67 8.06 Industrials 55,407 23.27 23.27 4.95 7.16 .08 6.49 Consumer Discretionary 63,741 33.37 33.37 17.56 18.77 16.45 20.63 Consumer Staples 45,935 27.24 27.24 2.88 10.74 8.01 13.83 Health Care 89,189 24.12 24.12 18.34 21.90 13.32 18.29 Financials 76,345 27.27 27.27 -3.44 3.68 6.68 9.11 Information Technology 145,809 45.31 45.31 14.75 21.82 17.35 16.79 Communication Services 62,205 40.44 40.44 16.72 18.89 14.46 15.82 Utilities 20,831 21.10 21.10 23.53 41.31 21.13 19.12 Real Estate 18,110 35.33 35.33 13.77 16.71 Domestic Equity Funds 145,370 31.77 31.77 9.77 12.38 9.97 13.34 International Equity Funds 294,849 22.97 22.97 .95 10.41 5.67 7.66

Fixed Income 938,181 7.46 7.46 3.36 3.79 3.03 2.16

Treasuries 50,715 Agencies 141,966 4.35 4.35 3.01 2.25 1.75 Corporates 158,639 4.68 4.68 3.24 2.83 2.35 1.89 Taxable Funds 77,979 High Yield 111,183 15.42 15.42 6.94 7.62 7.71 International Bonds 173,029 14.11 14.11 3.05 6.59 3.62 Marketable CDs 224,669 4.48 4.48 2.64 2.12 1.87

Alternatives 633,876 10.75 10.75 -.43 1.89 1.33 3.45

Diversified Commodities 74,762 7.21 7.21 -3.00 -1.44 -4.17 -2.98 Diversified Real Estate 73,207 25.68 25.68 10.00 8.49 7.08 10.97 Global Infrastructure 79,467 29.68 29.68 9.42 12.71 7.62 Market Neutral 150,781

5 Performance by Allocation Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

Year Inception to Date to Date Market Value (1 Year) 1 Year 2 Years 3 Years 5 Years 06/01/2010

Hedged Equity 102,841 11.12 11.12 3.19 5.39 4.84 5.45 Managed Futures 74,703 Global Macro 78,115

Cash and Equivalents 62,009 3.12 3.12 2.84 2.18 1.37 .74

6 Equity Risk Analysis Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

Total Account Asset Class Benchmark

Return 7.23 7.85 Standard Deviation 6.12 5.80 Beta 1.05 Alpha -.83 R-Squared .98 Sharpe Ratio .91 1.06 Treynor Ratio 5.29 6.17 Risk-Free Benchmark 1.68

Risk-Free Benchmark: BB 3-Month US Treasury Bellwether Index (USD)

What this information means to you... Return is an indication of the past performance of your account. Standard Deviation is a measure of the volatility and risk of your account. A low Standard Deviation indicates a account with less volatile returns and therefore less inherent risk. Beta is a measure of your account's risk relative to a benchmark. An account with a Beta of 1.5, for example, would be expected to return roughly 1.5 times the benchmark's return. A high Beta indicates a riskier account. Alpha is a measure of risk-adjusted performance. R-Squared measures the portion of the risk in your account that can be attributed to the risk in the benchmark. Sharpe Ratio is a measure of risk-adjusted return that calculates the return per unit of risk, where risk is the Standard Deviation of your account. A high Sharpe ratio indicates that the account is benefiting from taking risk. Treynor Ratio measures the performance of a sector relative to risk by dividing the return of the sector in excess of the risk-free return by the sector's Beta. The higher the Treynor Ratio, the better the return relative to risk.

Ratios represent last 3 years from date of the report.

7 Portfolio Holdings Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

% of Units Unit Cost Total Cost Price Market Value Accrual Mkt Val Unrealized Gain/Loss

Equities

AbbVie Inc 198.000 44.23 8,758.45 88.540 17,530.92 .00 .7 8,772.47 Adobe Inc 79.000 300.63 23,749.75 329.810 26,054.99 .00 1.0 2,305.24 Alphabet Inc 11.000 571.83 6,290.16 1,339.390 14,733.29 .00 .5 8,443.13 Altria Group Inc 321.000 47.92 15,382.46 49.910 16,021.11 269.64 .6 638.65 American Tower Corp 71.000 89.71 6,369.48 229.820 16,317.22 71.71 .6 9,947.74 Anthem Inc 57.000 196.10 11,177.46 302.030 17,215.71 .00 .6 6,038.25 Apple Inc 98.000 38.41 3,764.60 293.650 28,777.70 .00 1.1 25,013.10 Applied Materials Inc 456.000 21.87 9,971.10 61.040 27,834.24 .00 1.0 17,863.14 Artisan International Value Fund 1,075.685 25.93 27,897.13 37.020 39,821.86 .00 1.5 11,924.73 BlackRock Mid-Cap Growth Equity Portfolio 2,454.136 25.08 61,549.74 30.200 74,114.91 .00 2.8 12,565.17 Booking Holdings Inc 8.000 1,259.39 10,075.14 2,053.730 16,429.84 .00 .6 6,354.70 Cisco Systems Inc .000 .00 .00 .000 .00 .00 .0 .00 Constellation Brands Inc 70.000 86.18 6,032.63 189.750 13,282.50 .00 .5 7,249.87 Costco Wholesale Corp 56.000 58.53 3,277.60 293.920 16,459.52 .00 .6 13,181.92 Deere & Co 80.000 148.85 11,908.13 173.260 13,860.80 60.80 .5 1,952.67 Digital Realty Trust Inc 68.000 99.66 6,776.78 119.740 8,142.32 73.44 .3 1,365.54 Eastman Chemical Co 100.000 78.84 7,884.15 79.260 7,926.00 66.00 .3 41.85 Facebook Inc 77.000 76.22 5,869.24 205.250 15,804.25 .00 .6 9,935.01 Goldman Sachs Group Inc 70.000 133.45 9,341.38 229.930 16,095.10 .00 .6 6,753.72 Halliburton Co 290.000 30.80 8,930.82 24.470 7,096.30 .00 .3 -1,834.52 Home Depot Inc/The 68.000 31.99 2,175.20 218.380 14,849.84 .00 .6 12,674.64 Intercontinental Exchange Inc 140.000 92.22 12,911.23 92.550 12,957.00 .00 .5 45.77 JPMorgan Chase & Co 127.000 34.95 4,438.81 139.400 17,703.80 .00 .7 13,264.99 Kinder Morgan Inc/DE 375.000 18.22 6,833.40 21.170 7,938.75 .00 .3 1,105.35 Linde PLC 41.000 179.40 7,355.46 212.900 8,728.90 .00 .3 1,373.44 Medtronic PLC 142.000 73.83 10,484.33 113.450 16,109.90 76.68 .6 5,625.57 Microsoft Corp 161.000 26.14 4,209.12 157.700 25,389.70 .00 .9 21,180.58 NRG Energy Inc 256.000 16.19 4,144.30 39.750 10,176.00 .00 .4 6,031.70 NextEra Energy Inc 44.000 48.23 2,122.20 242.160 10,655.04 .00 .4 8,532.84 PNC Financial Services Group Inc/The 106.000 57.38 6,081.84 159.630 16,920.78 .00 .6 10,838.94 Palo Alto Networks Inc 69.000 224.81 15,512.17 231.250 15,956.25 .00 .6 444.08 Pioneer Natural Resources Co 44.000 129.77 5,709.80 151.370 6,660.28 19.36 .2 950.48 Procter & Gamble Co/The 131.000 64.41 8,437.15 124.900 16,361.90 .00 .6 7,924.75 Progressive Corp/The 175.000 76.70 13,422.12 72.390 12,668.25 .00 .5 -753.87 Prologis Inc 111.000 53.21 5,906.33 89.140 9,894.54 .00 .4 3,988.21 Raytheon Co 71.000 114.32 8,116.84 219.740 15,601.54 .00 .6 7,484.70 Republic Services Inc 165.000 50.99 8,413.85 89.630 14,788.95 66.83 .5 6,375.10

8 Portfolio Holdings Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

% of Units Unit Cost Total Cost Price Market Value Accrual Mkt Val Unrealized Gain/Loss

Starbucks Corp 182.000 12.46 2,266.86 87.920 16,001.44 .00 .6 13,734.58 Templeton Institutional Funds Inc - Foreign S 5,141.058 18.85 96,896.11 21.400 110,018.64 .00 4.1 13,122.53 Thermo Fisher Scientific Inc 58.000 180.23 10,453.19 324.870 18,842.46 11.02 .7 8,389.27 Union Pacific Corp 61.000 171.66 10,471.23 180.790 11,028.19 .00 .4 556.96 UnitedHealth Group Inc 66.000 30.24 1,996.00 293.980 19,402.68 .00 .7 17,406.68 Valero Energy Corp 85.000 39.26 3,337.46 93.650 7,960.25 .00 .3 4,622.79 Victory Sycamore Established Value Fund 1,778.276 29.61 52,657.65 40.070 71,255.52 .00 2.6 18,597.87 Virtus Opportunities Trust Emerging Mkts Oppt 8,726.056 8.52 74,371.18 11.550 100,785.95 .00 3.7 26,414.77 Visa Inc 116.000 176.15 20,433.97 187.900 21,796.40 .00 .8 1,362.43 WCM Focused International Growth Fund 2,338.590 14.87 34,774.84 18.910 44,222.74 .00 1.6 9,447.90 Walt Disney Co/The 105.000 32.18 3,379.23 144.630 15,186.15 92.40 .6 11,806.92 Total:Equities 682,318.07 1,063,380.42 807.88 39.5 381,062.35

Fixed Income

Artisan High Income Fund 3,261.159 9.30 30,323.56 9.790 31,926.75 176.57 1.2 1,603.19 BlackRock High Yield Bond Portfolio 10,115.217 7.44 75,284.59 7.780 78,696.39 382.84 2.9 3,411.80 Colgate-Palmolive Co 2.1% 01 May 2023 30,000.000 94.90 28,468.87 100.982 30,294.70 105.00 1.1 1,825.83 Discover Bank 2.2% 06 Dec 2021 40,000.000 99.41 39,762.48 100.935 40,374.00 62.68 1.5 611.52 EnerBank USA Inc 1.55% 28 Jul 2022 10,000.000 93.79 9,379.30 99.427 9,942.70 1.70 .4 563.40 Federal Home Loan Mortgage Corp 2.75% 19 Jun 30,000.000 99.52 29,856.00 103.860 31,158.00 27.50 1.2 1,302.00 Federal National Mortgage Association 1.375% 25,000.000 99.83 24,958.00 99.620 24,905.04 80.21 .9 -52.96 Federal National Mortgage Association 1.625% 25,000.000 99.31 24,827.00 100.003 25,000.75 180.56 .9 173.75 Federal National Mortgage Association 1.75% 0 30,000.000 99.08 29,723.70 100.114 30,034.20 252.29 1.1 310.50 Federal National Mortgage Association 1.875% 30,000.000 99.88 29,964.30 100.644 30,193.30 134.38 1.1 229.00 Goldman Sachs Bank USA/New York NY 2.45% 24 J 30,000.000 99.17 29,752.20 100.434 30,130.20 324.20 1.1 378.00 JPMorgan Chase & Co 4.95% 25 Mar 2020 30,000.000 101.48 30,444.67 100.674 30,202.22 396.00 1.1 -242.45 Microsoft Corp 2.4% 06 Feb 2022 30,000.000 99.79 29,935.50 101.414 30,424.09 290.00 1.1 488.59 Morgan Stanley Private Bank NA 2.65% 27 Apr 2 15,000.000 100.00 15,000.00 100.322 15,048.30 72.97 .6 48.30 Payden Emerging Markets Bond Fund 4,981.698 13.13 65,420.13 13.750 68,498.35 .00 2.5 3,078.22 Payden Emerging Markets Local Bond Fund 15,862.080 5.80 92,065.23 6.590 104,531.11 .00 3.9 12,465.88 PepsiCo Inc 1.7% 06 Oct 2021 30,000.000 99.87 29,959.80 100.044 30,013.17 120.42 1.1 53.37 Sallie Mae Bank 2.65% 04 Apr 2022 25,000.000 99.86 24,963.75 102.008 25,502.00 163.36 .9 538.25 Synchrony Bank 2.2% 04 Sep 2020 40,000.000 100.31 40,122.36 100.395 40,158.00 286.90 1.5 35.64 UBS Bank USA 3% 14 Jun 2021 15,000.000 100.00 15,000.00 101.891 15,283.65 23.42 .6 283.65 UBS Bank USA 3.35% 27 Oct 2022 20,000.000 100.00 20,000.00 104.252 20,850.40 3.67 .8 850.40 United States Treasury Note/Bond 1.875% 31 Au 50,000.000 101.53 50,765.63 100.797 50,398.44 316.80 1.9 -367.19 Voya FDS TR GNMA INCM FD I 9,181.177 8.54 78,386.21 8.470 77,764.57 214.60 2.9 -621.64 Walmart Inc 2.85% 08 Jul 2024 35,000.000 104.47 36,564.94 103.755 36,314.12 479.35 1.3 -250.82

9 Portfolio Holdings Reporting Period Ending December 31, 2019

Oregon State Bar Managed since: June 01, 2010

% of Units Unit Cost Total Cost Price Market Value Accrual Mkt Val Unrealized Gain/Loss

Wells Fargo Bank NA 3.55% 14 Dec 2023 25,000.000 105.62 26,404.85 105.590 26,397.50 43.77 1.0 -7.35 Total:Fixed Income 907,333.07 934,041.95 4,139.19 34.7 26,708.88

Alternatives

AQR Managed Futures Strategy Fund 8,989.472 8.28 74,432.83 8.310 74,702.51 .00 2.8 269.68 Credit Suisse Commodity Return Strategy Fund 16,112.486 4.55 73,252.64 4.640 74,761.94 .00 2.8 1,509.30 Eaton Vance Global Macro Absolute Return Fund 8,846.590 8.58 75,903.75 8.830 78,115.39 .00 2.9 2,211.64 Gateway Fund 2,966.283 25.04 74,286.85 34.670 102,841.03 .00 3.8 28,554.18 Nuveen Equity Market Neutral Fund 6,488.015 23.45 152,147.53 23.240 150,781.47 .00 5.6 -1,366.06 Nuveen Invt Fds Inc Glob Infrast I 6,970.755 9.72 67,777.46 11.400 79,466.61 .00 3.0 11,689.15 Nuveen Real Estate Securities Fund 3,555.443 19.95 70,932.83 20.590 73,206.57 .00 2.7 2,273.74 Total:Alternatives 588,733.89 633,875.52 .00 23.5 45,141.63

Cash and Equivalents

Federated Government Obligations Fund 59,194.780 1.00 59,194.78 1.000 59,194.78 .00 2.2 .00 US Uninvested Cash 2,814.440 1.00 2,814.44 1.000 2,814.44 .00 .1 .00 Total:Cash and Equivalents 62,009.22 62,009.22 .00 2.3 .00

Total 2,240,394.25 2,693,307.11 4,947.07 100.0 452,912.86

10 Portfolio Holdings Account Name: Oregon State Bar As of December 31st, 2019 By Major and Minor Asset Class

Major Asset Class Minor Asset Class Asset Name CUSIP Ticker Cost Quantity Price Market Value Accrued Income Equities Domestic Equity Common Stock AbbVie Inc 00287Y109 ABBV $8,758.45 198 88.54 $17,530.92 0 Equities Domestic Equity Common Stock Adobe Inc 00724F101 ADBE $23,749.75 79 329.81 $26,054.99 0 Equities Domestic Equity Common Stock Alphabet Inc 02079K305 GOOGL $6,290.16 11 1339.39 $14,733.29 0 Equities Domestic Equity Common Stock Altria Group Inc 02209S103 MO $15,382.46 321 49.91 $16,021.11 269.64 Equities Domestic Equity Common Stock American Tower Corp 03027X100 AMT $6,369.48 71 229.82 $16,317.22 71.71 Equities Domestic Equity Common Stock Anthem Inc 36752103 ANTM $11,177.46 57 302.03 $17,215.71 0 Equities Domestic Equity Common Stock Apple Inc 37833100 AAPL $3,764.60 98 293.65 $28,777.70 0 Equities Domestic Equity Common Stock Applied Materials Inc 38222105 AMAT $9,971.10 456 61.04 $27,834.24 0 Equities International Equity Funds Artisan International Value Fund 04314H857 APHKX $27,897.13 1075.685 37.02 $39,821.86 0 Equities Domestic Equity Funds BlackRock Mid-Cap Growth Equity Portfolio 09258N604 BMGKX $61,549.74 2454.136 30.2 $74,114.91 0 Equities Domestic Equity Common Stock Booking Holdings Inc 09857L108 BKNG $10,075.14 8 2053.73 $16,429.84 0 Equities Domestic Equity Common Stock Constellation Brands Inc 21036P108 STZ $6,032.63 70 189.75 $13,282.50 0 Equities Domestic Equity Common Stock Costco Wholesale Corp 22160K105 COST $3,277.60 56 293.92 $16,459.52 0 Equities Domestic Equity Common Stock Deere & Co 244199105 DE $11,908.13 80 173.26 $13,860.80 60.8 Equities Domestic Equity Common Stock Digital Realty Trust Inc 253868103 DLR $6,776.78 68 119.74 $8,142.32 73.44 Equities Domestic Equity Common Stock Eastman Chemical Co 277432100 EMN $7,884.15 100 79.26 $7,926.00 66 Equities Domestic Equity Common Stock Facebook Inc 30303M102 FB $5,869.24 77 205.25 $15,804.25 0 Equities Domestic Equity Common Stock Goldman Sachs Group Inc/The 38141G104 GS $9,341.38 70 229.93 $16,095.10 0 Equities Domestic Equity Common Stock Halliburton Co 406216101 HAL $8,930.82 290 24.47 $7,096.30 0 Equities Domestic Equity Common Stock Home Depot Inc/The 437076102 HD $2,175.20 68 218.38 $14,849.84 0 Equities Domestic Equity Common Stock Intercontinental Exchange Inc 45866F104 ICE $12,911.23 140 92.55 $12,957.00 0 Equities Domestic Equity Common Stock JPMorgan Chase & Co 46625H100 JPM $4,438.81 127 139.4 $17,703.80 0 Equities Domestic Equity Common Stock Kinder Morgan Inc/DE 49456B101 KMI $6,833.40 375 21.17 $7,938.75 0 Equities Domestic Equity Common Stock Linde PLC G5494J103 LIN $7,355.46 41 212.9 $8,728.90 0 Equities Domestic Equity Common Stock Medtronic PLC G5960L103 MDT $10,484.33 142 113.45 $16,109.90 76.68 Equities Domestic Equity Common Stock Microsoft Corp 594918104 MSFT $4,209.12 161 157.7 $25,389.70 0 Equities Domestic Equity Common Stock NextEra Energy Inc 65339F101 NEE $2,122.20 44 242.16 $10,655.04 0 Equities Domestic Equity Common Stock NRG Energy Inc 629377508 NRG $4,144.30 256 39.75 $10,176.00 0 Equities Domestic Equity Common Stock Palo Alto Networks Inc 697435105 PANW $15,512.17 69 231.25 $15,956.25 0 Equities Domestic Equity Common Stock Pioneer Natural Resources Co 723787107 PXD $5,709.80 44 151.37 $6,660.28 19.36 Equities Domestic Equity Common Stock PNC Financial Services Group Inc/The 693475105 PNC $6,081.84 106 159.63 $16,920.78 0 Equities Domestic Equity Common Stock Procter & Gamble Co/The 742718109 PG $8,437.15 131 124.9 $16,361.90 0 Equities Domestic Equity Common Stock Progressive Corp/The 743315103 PGR $13,422.12 175 72.39 $12,668.25 0 Equities Domestic Equity Common Stock Prologis Inc 74340W103 PLD $5,906.33 111 89.14 $9,894.54 0 Equities Domestic Equity Common Stock Raytheon Co 755111507 RTN $8,116.84 71 219.74 $15,601.54 0 Equities Domestic Equity Common Stock Republic Services Inc 760759100 RSG $8,413.85 165 89.63 $14,788.95 66.83 Equities Domestic Equity Common Stock Starbucks Corp 855244109 SBUX $2,266.86 182 87.92 $16,001.44 0 Equities International Equity Funds Templeton Institutional Funds Inc - Foreign Smaller Companies Series 880210877 TFSCX $96,896.11 5141.058 21.4 $110,018.64 0 Equities Domestic Equity Common Stock Thermo Fisher Scientific Inc 883556102 TMO $10,453.19 58 324.87 $18,842.46 11.02 Equities Domestic Equity Common Stock Union Pacific Corp 907818108 UNP $10,471.23 61 180.79 $11,028.19 0 Equities Domestic Equity Common Stock UnitedHealth Group Inc 91324P102 UNH $1,996.00 66 293.98 $19,402.68 0 Equities Domestic Equity Common Stock Valero Energy Corp 91913Y100 VLO $3,337.46 85 93.65 $7,960.25 0 Equities Domestic Equity Funds Victory Sycamore Established Value Fund 92646A831 VEVIX $52,657.65 1778.276 40.07 $71,255.52 0 Equities International Equity Funds Virtus Vontobel Emerging Markets Opportunities Fund 92828W361 HIEMX $74,371.18 8726.056 11.55 $100,785.95 0 Equities Domestic Equity Common Stock Visa Inc 92826C839 V $20,433.97 116 187.9 $21,796.40 0 Equities Domestic Equity Common Stock Walt Disney Co/The 254687106 DIS $3,379.23 105 144.63 $15,186.15 92.4 Equities International Equity Funds WCM Focused International Growth Fund 461418444 WCMIX $34,774.84 2338.59 18.91 $44,222.74 0 $1,063,380.42 807.88 Equities Total Market Value $1,064,188.30

11 Portfolio Holdings Account Name: Oregon State Bar As of December 31st, 2019 By Major and Minor Asset Class

Major Asset Class Minor Asset Class Asset Name CUSIP Ticker Cost Quantity Price Market Value Accrued Income Fixed Income High Yield Artisan High Income Fund 04314H568 APHFX $30,323.56 3261.159 9.79 $31,926.75 176.57 Fixed Income High Yield BlackRock High Yield Bond Portfolio 09260B614 BRHYX $75,284.59 10115.217 7.78 $78,696.39 394.38 Fixed Income Core Taxable Fixed Income Colgate-Palmolive Co 2.1% 01 May 2023 19416QEC0 $28,468.87 30000 100.98% $30,294.70 105 Fixed Income Marketable CDs Discover Bank 2.2% 06 Dec 2021 254673HM1 $39,762.48 40000 100.94% $40,374.00 62.68 Fixed Income Marketable CDs EnerBank USA Inc 1.55% 28 Jul 2022 29266N3A3 $9,379.30 10000 99.43% $9,942.70 1.7 Fixed Income Core Taxable Fixed Income Federal Home Loan Mortgage Corp 2.75% 19 Jun 2023 3137EAEN5 $29,856.00 30000 103.86% $31,158.00 27.5 Fixed Income Core Taxable Fixed Income Federal National Mortgage Association 1.375% 07 Oct 2021 3135G0Q89 $24,958.00 25000 99.62% $24,905.04 80.21 Fixed Income Core Taxable Fixed Income Federal National Mortgage Association 1.625% 21 Jan 2020 3135G0A78 $24,827.00 25000 100.00% $25,000.75 180.56 Fixed Income Core Taxable Fixed Income Federal National Mortgage Association 1.75% 02 Jul 2024 3135G0V75 $29,723.70 30000 100.11% $30,034.20 252.29 Fixed Income Core Taxable Fixed Income Federal National Mortgage Association 1.875% 05 Apr 2022 3135G0T45 $29,964.30 30000 100.64% $30,193.30 134.38 Fixed Income Marketable CDs Goldman Sachs Bank USA/New York NY 2.45% 24 Jul 2020 38147JJK9 $29,752.20 30000 100.43% $30,130.20 324.2 Fixed Income Core Taxable Fixed Income JPMorgan Chase & Co 4.95% 25 Mar 2020 46625HHQ6 $30,444.67 30000 100.67% $30,202.22 396 Fixed Income Core Taxable Fixed Income Microsoft Corp 2.4% 06 Feb 2022 594918BW3 $29,935.50 30000 101.41% $30,424.09 290 Fixed Income Marketable CDs Morgan Stanley Private Bank NA 2.65% 27 Apr 2020 61760AKM0 $15,000.00 15000 100.32% $15,048.30 72.97 Fixed Income International Bonds Payden Emerging Markets Bond Fund 704329531 PYEMX $65,420.13 4981.698 13.75 $68,498.35 0 Fixed Income International Bonds Payden Emerging Markets Local Bond Fund 704329275 PYELX $92,065.23 15862.08 6.59 $104,531.11 0 Fixed Income Core Taxable Fixed Income PepsiCo Inc 1.7% 06 Oct 2021 713448DL9 $29,959.80 30000 100.04% $30,013.17 120.42 Fixed Income Marketable CDs Sallie Mae Bank 2.65% 04 Apr 2022 7954502C8 $24,963.75 25000 102.01% $25,502.00 163.36 Fixed Income Marketable CDs Synchrony Bank 2.2% 04 Sep 2020 87164YJZ8 $40,122.36 40000 100.40% $40,158.00 286.9 Fixed Income Marketable CDs UBS Bank USA 3% 14 Jun 2021 90348JCU2 $15,000.00 15000 101.89% $15,283.65 23.42 Fixed Income Marketable CDs UBS Bank USA 3.35% 27 Oct 2022 90348JFD7 $20,000.00 20000 104.25% $20,850.40 3.67 Fixed Income Core Taxable Fixed Income United States Treasury Note/Bond 1.875% 31 Aug 2024 9128282U3 $50,765.63 50000 100.80% $50,398.44 316.8 Fixed Income Core Taxable Fixed Income Voya FDS TR GNMA INCM FD I 92913L734 LEINX $78,386.21 9181.177 8.47 $77,764.57 214.6 Fixed Income Core Taxable Fixed Income Walmart Inc 2.85% 08 Jul 2024 931142EL3 $36,564.94 35000 103.75% $36,314.12 479.35 Fixed Income Marketable CDs Wells Fargo Bank NA 3.55% 14 Dec 2023 949763VU7 $26,404.85 25000 105.59% $26,397.50 43.77 $934,041.95 4150.73 Fixed Income Total Market Value $938,192.68

Major Asset Class Minor Asset Class Asset Name CUSIP Ticker Cost Quantity Price Market Value Accrued Income Alternatives Managed Futures AQR Managed Futures Strategy Fund 00203H859 AQMIX $74,432.83 8989.472 8.31 $74,702.51 0 Alternatives Diversified Commodities Credit Suisse Commodity Return Strategy Fund 22544R305 CRSOX $73,252.64 16112.486 4.64 $74,761.94 0 Alternatives Global Macro Eaton Vance Global Macro Absolute Return Fund 277923728 EIGMX $75,903.75 8846.59 8.83 $78,115.39 0 Alternatives Hedged Equity Gateway Fund 367829884 GTEYX $74,286.85 2966.283 34.67 $102,841.03 0 Alternatives Market Neutral Nuveen Equity Market Neutral Fund 670729748 NIMEX $152,147.53 6488.015 23.24 $150,781.47 0 Alternatives Global Infrastructure Nuveen Invt Fds Inc Glob Infrast I 670690510 FGIYX $67,777.46 6970.755 11.4 $79,466.61 0 Alternatives Diversified Real Estate Nuveen Real Estate Securities Fund 670678507 FARCX $70,932.83 3555.443 20.59 $73,206.57 0 $633,875.52 0 Alternatives Total Market Value $633,875.52

Major Asset Class Minor Asset Class Asset Name CUSIP Ticker Cost Quantity Price Market Value Accrued Income Cash and Equivalents Cash and Equivalents Federated Government Obligations Fund 608919718 GOFXX $59,194.78 59194.78 1 $59,194.78 0 Cash and Equivalents Cash and Equivalents US Dollar 2814.44 $2,814.44 0 $62,009.22 0 Cash and Equivalents Total Market Value $62,009.22

12 Fourth Quarter 2019 | Wealth Management Insights Management Wealth 2019 Quarter Fourth |

ECONOMIC REVIEW Steve Scranton, CFA Chief Investment Ofcer and Economist • Some of the uncertainty was reduced when the US The story for the economy in the 4th quarter and China announced that an agreement had been remains true for what played out for most reached on the Phase One trade agreement but the agreement is not scheduled to be signed until Jan. of the year: it’s all about the consumer. 15, 2020. Skepticism remains over whether the trade Consumer spending continues to be the engine agreement will hold or whether a new round of that is powering economic growth for the US. tarifs might be in store in 2020.

Consumers Summary

• So far, the consumer has been relatively unfazed • Even though much of the social and traditional media by the political drama and the trade dispute. What content was focused on political issues during the appears to be keeping the consumer confdent and 4th quarter, the economy appears to have continued willing to spend is: on a steady pace in the 4th quarter. – New jobs continue to be created; • We will not get the frst estimate of 4th quarter – Wages continue to increase; Gross Domestic Product (GDP) until the last week of January, but preliminary estimates are projecting 4th – Net worth continues to increase as home values quarter GDP to come in close to 2% again. and investment portfolios continue to rise. – Tis would give us three consecutive quarters of • Consumer confdence remains near historically growth around the 2% level. high levels and this has translated into the – If 4th quarter GDP plays out the way the spending that supported economic growth in the forecasts estimate, then we will end up with full 4th quarter and throughout the year. year GDP just over 2%. Tat is slower than last • Reports from retailers indicate that this year’s year but in line with the average growth rate holiday spending was solid. for this expansion.

Businesses

• As a whole, business spending remained constrained in the 4th quarter due to uncertainty over the outlook for trade policy and the impact of tarifs. National surveys of both business CEOs and CFOs continued to refect high levels of concern over the outlook for the economy. TABLE OF CONTENTS – Te bright spot from a business spending perspective is that small businesses had a far more positive outlook on the economy. Tis Economic Review ...... 1 translated into increased spending on wages, Alternative Strategies ...... 2 equipment and buildings. Domestic Equities ...... 3 • Te industrial side of the economy continued Fixed Income ...... 3 to be hit by the negative impacts of tarifs and

uncertainty over what US trade policy will be International Review ...... 4 for the future. Contact ...... 4

13 ALTERNATIVE STRATEGIES Rick Cloutier, CFA Chief Investment Strategist

At the close of 2018, investors were feeling a Real return strategies had an impressive year as well. little different. The S&P 500 just lost over 13% Real estate investors were rewarded with values surging in the 4th quarter; but, by the end of March, 28.7%. Infrastructure investors enjoyed gains of about 27.0%. Commodity prices rose 7.7%. Within the group, the markets gave investors back their 4th energy prices were mixed: oil surged over 30%, but natural quarter losses. gas declined about 25%.

Absolute return strategies, which serve to reduce equity So, we started the year with a positive quarter and risk, highlighted by their overall rise when the market continued to move up for the remainder of the year. declined last December, produced returns which varied Large cap domestic stocks led the rally with the S&P 500 greatly among the strategies. Global macro strategies returning 31.5%. Small cap and international stocks weren’t produced nearly double digit returns whereas market far behind with small caps gaining 25.5%, international neutral strategies lost value. Overall, the returns were in stocks returning 22.0%, and emerging market stocks line with bond returns with the group producing growth climbing 18.4%. of close to 4%. Bond investors also had something to cheer. Due to the So, investors enjoyed a stellar year — a reversal of last year Fed cutting rates three times, bond values appreciated. Core which saw over 90% of asset classes lose value. Along with bonds were up over 4%, with shorter maturities gaining our investors, we celebrate these gains; however, as always, less than longer maturities. High yield and emerging we stress caution. Over-exuberance can lead to excessive market bond investors were also rewarded earning 14.1% risk taking and a lack of prudence. For most, investing and 13.5%, respectively. During the year, the yield curve is a long-term endeavor replete with incredible gains inverted, which portends a coming recession, but before and unfortunate losses. year’s end the curve returned to a positive slope. Yields were of last year’s close by about ¾% to 1%.

Fixed Income Diversiÿcation Real Return (In˜ation Protection) Diversiÿcation Year-to-Date Performance Year-to-Date Performance 18% 30%

15% 25% Fourth Quarter 2019 | Fourth Quarter 2019 Wealth Management Insights

12% 20%

9% 15%

6% 10%

3% 5%

0% 0% Barclays Global Floating High Emerging Emerging Bloomberg Commodities Consumer TIPS Real Global Intermediate Macro Rate Yield Mkt Bond Mkt Bond Commodities Fund Price Fund Estate Infrastructure Govt/Credit Fund Fund Fund USD Fund Local Fund Index Index Fund Fund Index YTD 6.80% 9.76% 6.86% 14.10% 16.41% 13.92% YTD 5.44% 6.99% 1.40% 4.94% 25.56% 29.69%

Domestic Diversiÿcation International Diversiÿcation Year-to-Date Performance Year-to-Date Performance 40% 40% 35% 30% 32% 25% 20% 24% 15% 10% 16% 5% 0% 8% -5% -10% 0% MSCI Russell Managed Market Hedged Large Cap Mid Cap Mid Cap MSCI Large Cap Large Cap Intl. Emerging ACWI 3000 Futures Neutral Equity Equity Growth Value ACWI Intl. Value Intl. Growth Small Cap Mkts Index Index Fund Fund Fund Strategy Fund Fund Index Index Fund Fund Fund

YTD 27.30% 31.01% 1.93% -8.63% 11.12% 31.19% 36.26% 28.77% YTD 27.30% 24.20% 35.00% 22.86% 18.34% 14 Fourth Quarter 2019 | Wealth Management Insights Management Wealth 2019 Quarter Fourth |

DOMESTIC FIXED EQUITIES INCOME Gayle Sprute Brian Brill, CFA Senior Portfolio Manager Senior Portfolio Manager

What a diference a year can make. In contrast to The 4th quarter started out all doom and last year’s difcult 4th quarter, domestic stocks gloom but an optimistic ray of light soon took delivered a nice 4th quarter rally this year. hold to move interest rates higher.

The technology laden Nasdaq Composite provided Impetus for the doom and gloom centered on the leadership, up 12.5%, followed by the small cap oriented ongoing trade dispute between the US and China and its Russell 2000, up 9.9%, the S&P 500, up 9.1%, and the negative effects on the global economy. The weakness Dow Jones Industrial Average, up 6.7%. was clearly evident in the manufacturing sector with Europe leading the way. But the manufacturing sector Gains were fueled in large part by a de-escalation in the US was also under pressure. The big fear was that in trade dispute gamesmanship that began in this weakness would start to negatively affect the US September. While the negotiations ebbed and flowed, consumer, which up to this point had escaped the brunt by quarter-end the equities market had all but priced of the damage. in the successful completion of a Phase One deal, even though an agreement has yet to be formally signed. A hard Brexit was also another source of concern as This hopefulness was a powerful catalyst for market investors feared the ramifications of the UK leaving the performance during the quarter. European Union without a trade deal. A change in policy by the Federal Reserve (Fed) also had But the 4th quarter saw changes on both fronts. an effect on market behavior during the quarter. The Tensions between the US and China began to ease as stock market has long been addicted to accommodative the likelihood of a Phase One trade deal took hold. monetary policy. So, the central bank’s signal in And finally, clear direction came to Brexit with the September that it might be done cutting rates for now resounding victory by Boris Johnson. It is basically was not what the market wanted to hear. However, as the certain that the UK will leave the EU with at least some quarter proceeded, the Fed reinforced that it viewed the form of negotiated deal instead of the feared “hard economy as stable and that it would consider lowering Brexit” which would have seen the UK leave the EU rates if warranted by economic data. This appeased without any deal. Global de-escalation in the form of concern about monetary policy (and the economy) for movement on Brexit and US/China trade seemed to be the time being. the impetus for investors that had grown accustomed At the sector level, 10 of the 11 sectors delivered positive to negative news. performance. Leaders and laggards showed that “risk on” was the theme. Defensive sectors were at the back With the escalation of negativity easing, economic data of the pack: real estate down 0.5%, utilities up 0.8% and also began to follow suit. Caterpillar’s CFO Andrew consumer staples up 3.5%. The best performers were Bonfield stated it succinctly, “Our customers are not information technology, up 14.4%, health care up 14.4%, facing financial difficulties. It’s more that they seem and financial services up 10.4%. From a style perspective, to be waiting to see what happens with the economic value, up 9.9%, beat growth, up 8.3%. outlook before making decisions.”

The 4th quarter capped off a strong year and decade Taking the cue, the US Federal Reserve and the EU for stocks and which saw the major equity indices seemed to move monetary policy to the pause switch. surge to new all-time highs. Stocks start 2020 at a rich After cutting the Fed Funds rate in late October, valuation level. The current price/earnings (P/E) multiple Chairman Jay Powell indicated that it would take a is 18.3X forward earnings estimates. Investors will be “material reassessment” of the committee’s economic closely watching the global and domestic economies, outlook to alter its bias toward a pause, but also added corporate America’s earnings results, the next steps that it would take a “serious” increase in inflation to in trade negotiations, the presidential election, and consider an increase in rates. the Fed’s communications.

15 INTERNATIONAL REVIEW Derrick Wilson Portfolio Manager

There were some turbulent times in the global equity markets in 2019, but equity markets ended on a very positive note before ringing in the New Year. Social unrest in Hong Kong lingered on. In November, violence overwhelmed the campus of Hong Kong Europe closed out the year up 29.36%. Japan saw an increase Polytechnic University as protesters battled surrounding of 20.6%. China surged 39.19% over the course of year. Taking police. Demonstrators further supported these acts nearby. center stage in Europe, once again, was the UK and Brexit. Tere has clearly been an economic impact since protests An early general election saw Boris Johnson retain his position started as the Hong Kong economy contracted 2.9% in the as Prime Minister, winning by a great margin. Markets took 3rd quarter. Notably, this is the frst contraction since Q3 2009. this result as confrmation there will be an exit from the EU with some sort of agreement. Te current deadline is set for Investors had plenty to celebrate closing out the quarter, January 31, 2020. the year and, fnally, the decade. On the frst trading day of 2020, equity markets stayed on the same path as they Economic data within Europe continues to show the continued to move higher on renewed optimism. Ten came weakness in manufacturing, although it looks as if it may be the US airstrike targeting and killing a high-ranking Iranian bottoming, with results better than expected being reported military general. Global equity markets have since taken an throughout the quarter. On watch over past quarters was about-face leaving investors a new situation to worry about Germany, which avoided a recession. over the coming months. Fourth Quarter 2019 | Fourth Quarter 2019 Wealth Management Insights Another major breakthrough was the Phase One trade deal between the US and China which helped push equities higher around the globe. While this deal may not put an end to the Additional and expanded information to this newsletter discussion may be obtained by contacting your Relationship Manager. We will entire ordeal, it eased investor concerns about the ongoing be happy to expand our discussion with you to meet your individual trade dispute and the potential to drag on with no resolution. requirements as a client of Wealth Management & Advisory Services.

Contact Our Advisors

Western Spokane Southern Idaho/ Boise Washington 717 West Sprague Avenue, Suite 900 945 West Bannock Street Spokane, WA 99201 Boise, ID 83702 Seattle 509.353.3898 · 800.725.4449 208.345.3343 601 Union Street, Suite 4747 Seattle, WA 98101 206.667.8954 · 888.254.0622 Portland North Idaho 760 SW Ninth Avenue, Suite 1900 218 Lakeside Avenue Bellevue Portland, OR 97205 Coeur d’Alene, ID 83814 10500 NE 8th Street, Suite 1100 503.778.7060 208.667.7993 Bellevue, WA 98004 425.467.1781 · 888.445.7166 watrust.com/wealth-management 16 Fourth Quarter 2019 | Wealth Management Insights Management Wealth 2019 Quarter Fourth | H i gh l i gh t ECONOMIC OUTLOOK Steve Scranton, CFA Chief Investment Ofcer & Economist

Summary Tarifs Even though a Phase One trade agreement was reached, Economic growth slowed in 2019 compared to 2018 and it did not remove the existing tarifs on imported goods will probably continue to slow in 2020. At this point the from China. Te tarifs imposed in May remain in place economic indicators are not pointing to a recession in at their existing rate. US businesses are still paying over 2020, but the risk remains and should not be ignored. $70 billion in tarifs. Although the economy is slowing, it is still growing at Consumer Debt this time and that cannot be ignored. Let us start with Non-mortgage debt continues to rise faster than personal understanding the drivers of economic growth. income. As a result, the debt service ratio for debt other than mortgages is on the rise. Tis is currently not an issue Drivers of Growth but needs to be monitored, since any reductions in income Job Growth (i.e., reduced work hours or job loss) would force consumers To give some perspective, through November (last data to cut back on spending in order to make the debt payments. available when this newsletter went to print) the US created Business Spending 1,977,000 jobs in 2019. Business spending was negative in both the 2nd and 3rd Wage Growth quarter, and it may be negative again in the 4th quarter Based on the increase in weekly pay through November, when that data is released. Te risk is if business leaders wages for the average American worker rose $21.8 billion in become more cautious due to the recent geopolitical 2019. Tis is the fuel that supports spending. event and the US political events (impeachment, election campaigns), then they could slow production and/or hiring. Net Worth (Assets minus Liabilities) Growth Tis would impact the consumer via potential reduced work Household net worth grew by 3.1% through the end of the hours and income. 3rd quarter compared to 3rd quarter of 2018. Psychologically, a rise in net worth helps buoy confdence, and confdence Conclusion supports spending. 2020 may be the year of uncertainty and volatility. We could Government Spending well see this economic expansion continue through 2020 or Congress passed the spending bills for this fscal year we may see events unfold that fnally derail the expansion. and the President signed the legislation. Tis means For now, make sure that you have a plan to deal with the that government spending will continue to contribute to next recession whenever it arrives but remain focused on the economic growth. fundamentals of your business or personal situation rather than doing nothing or hiding under the proverbial desk. Treats to Growth Tose who have prepared will be able to take advantage of Geopolitical Risk opportunities that arise from uncertainty and volatility. Te recent events in Iraq are still too new to be evaluated for the true economic impact. One of the big threats is cyberattacks that damage or shut down US businesses rather than military attacks. Anything that shuts down or damages US businesses’ ability to conduct business would have a negative impact to GDP growth.

17 Fourth Quarter 2019 | Wealth Management Insights Barclays US Treasury Bill 1-3 Mon Bill USD TR US Treasury Barclays 3Yr. Municipal Barclays Index 1Yr. Municipal Barclays Index Index Diversifed JPM GBI Global IndexRussell 3000 31, of December 2019as Periods Cumulative BOAML US High Yield Master II Index Index II Yield Master US BOAML High Index TIPS US Treasury Barclays Index Cap Small EAFE MSCI World All ACWI Index MSCI Index Commodity Bloomberg Index REITs Equity All NAREIT FTSE Index 2000 Russell Index Cap Mid Russell Index 500 S&P Barclays Govt/Credit 1-5 Yr. Govt/Credit Barclays Index Index EM MSCI Index MSCI EAFE

Market Overview Overview Market Year-to-Date Year-to-Date 28.66 28.66 26.60 26.60 22.01 22.01 31.02 31.02 30.54 30.54 24.96 18.42 18.42 25.52 25.52 13.47 13.47 14.41 14.41 31.49 31.49 2.46 2.46 2.21 2.21 3.67 3.67 5.01 5.01 7.69 7.69 5.08 5.08 watrust.com/wealth-management 1 Year 3 Years 5 Years 10 Years Years 10 Years 5 Years 3 Year 1 28.66 28.66 26.60 26.60 22.01 22.01 31.02 31.02 30.54 30.54 24.96 18.42 18.42 25.52 25.52 13.47 13.47 14.41 14.41 31.49 31.49 2.46 2.46 2.21 2.21 3.67 3.67 5.01 5.01 7.69 7.69 5.08 5.08 12.44 12.44 10.29 10.29 14.57 14.57 12.06 12.06 -0.94 -0.94 15.27 15.27 10.92 10.92 11.57 11.57 2.54 2.54 2.33 2.33 9.56 9.56 1.61 1.61 1.71 2.07 2.07 6.32 6.32 8.59 7.03 7.03 Annualized 11.24 11.24 -3.92 -3.92 11.70 11.70 2.03 2.03 8.43 1.64 1.64 1.20 1.20 8.41 8.41 5.67 5.67 1.02 1.02 8.23 8.23 8.85 8.85 1.84 1.84 2.78 2.78 5.61 5.61 6.13 6.13 9.33 9.33 12.59 12.59 13.42 13.56 -4.73 -4.73 11.83 11.83 13.19 5.50 0.55 0.55 8.79 8.79 2.13 1.79 1.79 1.10 1.10 3.68 3.68 2.71 2.71 1.73 7.50 8.74

18 OREGON STATE BAR Portland (Main Office) 1211 SW 5th Avenue, Suite 2185 FEBRUARY 6, 2020 Portland, OR 97204 (503) 223-1720 beckercap.com PRESENTED BY: JAY DYER Seattle: ANDY MURRAY, CFA 1201 Third Avenue, Suite 5030 Seattle, WA 98101 DEIDRA KRYS-RUSOFF (206) 829-7747

VALUE DRIVEN Account Performance December 31, 2019

Since Inception Net of Fees 4Q19 1 Year 3 Years 5 Years 2/19/10 Oregon State Bar 4.5% 15.5% 6.4% 5.0% 7.6% Equities 7.4% 24.6% 9.7% 7.9% 12.3% Equity ETFs 9.9% 21.3% 7.1% 5.9% - Fixed Income 0.4% 4.2% 2.4% 1.9% 2.1%

Index Returns S&P 500 9.1% 31.5% 15.3% 11.7% 13.8% Russell 3000 Value 7.5% 26.3% 9.3% 8.2% 11.8% Barclays G/C Int. 0.4% 6.8% 3.2% 2.6% 3.0% Market Performance Russell 2000 Value 8.5% 22.4% 4.8% 7.0% 11.9% Intl. Developed - EAFE 8.3% 22.8% 10.2% 6.3% - Intl. Emerging Mkts. - MXEF 11.8% 18.4% 12.7% 6.3% - Hedge Fund - HFRXEH 2.6% 10.7% 3.3% 1.5% - • Results are presented after the deduction of commissions and investment advisory fees. This past record is not meant to imply future results. This performance report is intended for use on a one-on-one basis only.

2 Asset Allocation December 31, 2019

Oregon State Bar

Equity ETFs $134,495 5%

Fixed Income $928,365 35% Equities $1,487,138 56%

Cash $98,296 4%

Total $2,648,293.25

Oregon State Bar Market Value Market Value - 2/19/2010 $1,841,918.48 Net Contributions/withdrawals $(1,066,905.25) Market Value - 12/31/2019 $2,648,293.25 Investment Return $1,873,280.02

Estimated Annual Income $63,637.79

3 Equity Portfolio Characteristics December 31, 2019

Oregon Characteristics State Bar S&P 500 Russell 3000 Value

Price/Earnings (LTM) 17.1x 22.9x 18.2x Price/Book 1.9x 3.5x 2.0x Dividend Yield 2.3% 1.8% 2.4% Est 3-5 Year EPS Growth 7.7% 6.6% 9.4% Operating Margin 15.7% 22.2% 19.3% LT Debt to Capital 39.4% 41.5% 38.8% Market Cap ($Bil) $139,791.4 $291,317.6 $122,707.2 Median Market Cap ($Bil) $28,762.4 $23,850.7 $1,678.2

Top Ten Holdings Ending Weight

JPMorgan Chase & Co. 3.09% Citigroup Inc. 2.61% ViacomCBS Inc. Class B 2.43% Berkshire Hathaway Inc. Class B 2.36% Portland General Electric Company 2.34% Newmont Corporation 2.24% Cisco Systems, Inc. 2.23% Astrazeneca PLC Sponsored ADR 2.20% AT&T Inc. 2.19% Allstate Corporation 2.16%

9/30/2019 to 12/31/2019

Top 5 Contributors Avg. Weight Contribution Bottom 5 Contributors Avg. Weight Contribution

Apple Inc. 2.34% 0.67% Noble Energy, Inc. 0.93% -0.13% JPMorgan Chase & Co. 2.98% 0.56% American International Group, Inc. 1.61% -0.13% Leggett & Platt, Incorporated 1.60% 0.53% IMAX Corporation 1.58% -0.11% Citigroup Inc. 2.52% 0.41% Danone SA ADR 1.86% -0.11% Jefferies Financial Group Inc. 1.58% 0.37% Howard Hughes Corporation 2.05% -0.08%

4 Equity Portfolio Sector Breakdown December 31, 2019

24% Fin 13% 25%

15% Tech 23% 7%

14% CnStp 7% 8%

11% Comm 10% 8%

11% Health 14% 12%

7% Indus 9% 10%

7% Matrls 3% 4%

6% CnDisc 10% 6%

4% Util 3% 7% Oregon State Bar Real 3% 3% Estate 6% S&P 500

0% Russell 3000 Value Energy 4% 8%

0% 5% 10% 15% 20% 25% 30% 5 Fixed Income Portfolio December 31, 2019

Account Name/Index Average Quality Effective Duration Yield to Worst Oregon State Bar Aa2 2.7 Years 1.79 Barclays G/C Int. Aa2 3.9 Years 1.93

Quality 90% 80%

70% 61.5% 60% 52.8% 50% 40% 30% 26.6% 20.6% 16.2% 20% 13.3% 10% 5.5% 3.5% 0.0% 0.0% 0.0% 0% Treasury Agency Aaa Aa A Baa/Other Oregon State BarMaturityBarclays G/C Int. 90% 80% 70% 60% 50% 38.0% 38.8% 40% 35.9% 27.3% 30% 18.6% 20% 15.9% 16.2% 9.5% 10% 0.0% 0.0% 0.0% 0.0% 0% < 1 Years 1 - 3 Years 3 - 5 Years 5 - 7 Years 7 - 10 Years 10+ Years Oregon State Bar Barclays G/C Int. 6 Standard Holdings December 31, 2019 Standard Holdings Expanded Portfolio: ORSTBAR Currency: USD Pricing Date: 12/31/2019 Representative: Table 1 : Excl. Table 2 Hldgs

Mkt Val % Held Par (000) Identifier Issuer Name Sect Industry Mdys S&P Coupon Maturity Price (000) (MV) YTW Mod Dur Eff Dur Conv 30 17275RAH CISCO SYS INC IND Electrncs A1 AA- 4.450 01/15/20 100.086 31 3.30 2.192 0.041 0.041 0.000 50 9128283Y UNITED STATES TREAS NTS TSY TSY TSY TSY 2.250 02/29/20 100.092 50 5.43 1.678 0.163 0.163 0.001 35 0258M0DX AMERICAN EXPRESS CR CORP MTNFIN Bank A2 A- 2.600 09/14/20 100.368 35 3.81 1.998 0.692 0.635 -0.020 30 46625HHU JPMORGAN CHASE & CO FIN Bank A2 A- 4.250 10/15/20 101.777 31 3.32 1.966 0.774 0.773 0.005 35 94974BEV WELLS FARGO CO MTN BE FIN Bank A2 A- 4.600 04/01/21 103.245 37 3.94 1.957 1.208 1.207 0.010

30 037833AR APPLE INC IND Electrncs Aa1 AA+ 2.850 05/06/21 101.543 31 3.30 1.686 1.318 1.315 0.012 25 038222AF APPLIED MATLS INC IND Electrncs A3 A- 4.300 06/15/21 103.482 26 2.79 1.864 1.414 1.413 0.014 30 06406HBY BANK NEW YORK MTN BK ENT FIN Bank A1 A 3.550 09/23/21 102.744 31 3.35 1.848 1.664 1.585 0.016 30 91324PBV UNITEDHEALTH GROUP INC FIN Insr-Hlth A3 A+ 2.875 03/15/22 101.953 31 3.32 1.853 2.120 1.901 0.007 30 68389XBB ORACLE CORP IND Info Tech A1 A+ 2.500 05/15/22 101.313 30 3.28 1.889 2.293 2.166 -0.002

35 589331AT MERCK & CO INC IND Pharmctls A1 AA 2.400 09/15/22 101.560 36 3.86 1.748 2.599 2.412 -0.008 85 9128283C UNITED STATES TREAS NTS TSY TSY TSY TSY 2.000 10/31/22 101.098 86 9.29 1.602 2.738 2.740 0.045 25 912828M8 UNITED STATES TREAS NTS TSY TSY TSY TSY 2.000 11/30/22 101.129 25 2.73 1.602 2.820 2.821 0.047 25 037833DE APPLE INC IND Electrncs Aa1 AA+ 2.400 01/13/23 101.661 26 2.77 1.819 2.889 2.835 0.030 35 084670BJ BERKSHIRE HATHAWAY INC DEL FIN Insr-P&C Aa2 AA 3.000 02/11/23 103.298 37 3.94 1.903 2.938 2.941 0.052

100 912828Y6 UNITED STATES TREAS NTS TSY TSY TSY TSY 2.750 07/31/23 103.844 105 11.31 1.641 3.376 3.377 0.068 125 912828WE UNITED STATES TREAS NTS TSY TSY TSY TSY 2.750 11/15/23 104.082 131 14.06 1.657 3.663 3.668 0.079 30 912828WJ UNITED STATES TREAS NTS TSY TSY TSY TSY 2.500 05/15/24 103.473 31 3.35 1.673 4.128 4.134 0.100 30 912828D5 UNITED STATES TREAS NTS TSY TSY TSY TSY 2.375 08/15/24 103.063 31 3.36 1.684 4.338 4.347 0.111 30 24422ETC DEERE JOHN CAP CORP MTNS BE IND ConstMach A2 A 3.400 09/11/25 106.272 32 3.47 2.221 5.138 5.155 0.156

25 654106AF NIKE INC IND Retail A1 AA- 2.375 11/01/26 101.674 26 2.75 2.101 6.266 6.190 0.172 30 912828U2 UNITED STATES TREAS NTS TSY TSY TSY TSY 2.000 11/15/26 101.160 30 3.28 1.820 6.386 6.416 0.232 900 Aa2 AA 2.824 2.922 102.432 928 100.00 1.786 2.762 2.738 0.053

BondEdge - 1/29/2020 Page 1 of 1 Dubravko Lakos-Bujas Global Quantitative & Derivatives Strategy (1-212) 622-3601 16 January 2020 [email protected]

Style Valuations and Correlations with Value Low Vol vs. Value: Forward PE Spreads (at 11.4, 100%ile) and Negatively Correlated this cycle Figure 32: Low Vol Expensive vs Value, at Unsustainable levels Figure 33: Low Vol - Value Completely Disconnected This Cycle 12.0 0.20 Fwd. P/E Spread, S&P 500, Low Vol vs. Value Correl: Low Vol vs. Value, S&P 500

10.0 0.10 0.00 8.0 -0.10 6.0 -0.20 Dubravko Lakos-Bujas Global Quantitative & Derivatives Strategy (1-212) 622-3601 16 January 2020 4.0 [email protected] -0.30

2.0 -0.40

Valuation Dispersion at extremes: A bubble0.0 in Low-Vol and Growth stocks? -0.50 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Style Valuations and Correlations with Value Low Vol vs. Value: Forward PE Spreads (at 11.4, 100%ile) and NegativelyGrowth Correlatedvs. Value: thisPE Spreadscycle (at 7.6x from 9.0x peak) and Correlation (rising from trough) Figure 32: Low Vol Expensive vs Value, at Unsustainable levels FigureFigure 33: Low 34 Vol: Gr -owthValuevs Completely Value—Forward Disconnected PE Spread This Cycle Figure 35: Growth/Value Correlation near 20 year lows 12.0 0.20 12.0 0.10 Fwd. P/E Spread, S&P 500, Low Vol vs. Value Correl:Fwd. LowP/E Spread,Vol vs. Value, S&P 500, S&P Growth 500 vs. Value Correl: Growth vs. Value, S&P 500 0.05 0.10 10.0 10.0 0.00 0.00 -0.05 8.0 8.0 -0.10 -0.10 6.0 6.0 -0.15 -0.20 -0.20 4.0 4.0 -0.30 -0.25 -0.30 2.0 -0.40 2.0 -0.35 0.0 -0.50 0.0 -0.40 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '86 '88'86'90'88'92'90'94 '92'96'94'98 '96'00'98'02 '00'04 '02'06 '04'08 '06'10 '08'12 '10'14 '12'16 '14'18 '16'20 '18 '20 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20

Source: J.P. Morgan US Equity Strategy and Quantitative Research

Growth vs. Value: PE Spreads (at 7.6x from 9.0x peak) and Correlation (rising from trough) Figure 34: Growth vs Value—Forward PE Spread FigureQu 35: alityGrowth vs./Value Value: CorrelationPE Spreads near 20 (near year lowspeak, 9.8x) and Correlation (at inflection point) 12.0 0.10 Figure 36: Quality vs Value—Forward PE Spread Figure 37: Quality/Value Correlation near 10 year lows Fwd. P/E Spread, S&P 500, Growth vs. Value Correl: Growth vs. Value, S&P 500 14.0 0.00 0.05 Fwd. P/E Spread, S&P 500, Quality vs. Value Correl: Quality vs. Value, S&P 500 10.0 0.00 -0.05 12.0 -0.05 -0.10 8.0 -0.10 10.0 -0.15 -0.20 6.0 -0.15 8.0 -0.20 -0.25 6.0 4.0 -0.25 -0.30 -0.30 4.0 -0.35 2.0 -0.35 -0.40 2.0 0.0 -0.40 -0.45 8 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '86 0.0'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 -0.50 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Source for All Charts: J.P. Morgan US Equity Strategy and Quantitative Research

Quality vs. Value: PE Spreads (near peak, 9.8x) and Correlation (at inflection point) Figure 36: Quality vs Value—Forward PE Spread Figure 37: Quality/Value Correlation near 10 year lows 14.0 0.00 Fwd. P/E Spread, S&P 500, Quality vs. Value Correl: Quality vs. Value, S&P 500 -0.05 7 12.0 -0.10 10.0 This-0.15 document is being provided for the exclusive use of ERIC VAUGHN at JPMorgan Chase & Co. and clients of J.P. Morgan. -0.20 8.0 -0.25 6.0 -0.30

4.0 -0.35 -0.40 2.0 -0.45 0.0 -0.50 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 Source for All Charts: J.P. Morgan US Equity Strategy and Quantitative Research

This document is being provided for the exclusive use of ERIC VAUGHN at JPMorgan Chase & Co. and clients of J.P. Morgan. Sell the Rally?

S&P 500 Performance Following +20% Year Year Annual Performance Next Quarter's Performance Next Year's Performance

ͳͻͷͲ ʹͳǤ͹Ψ ͷǤͳΨ ͳ͸Ǥ͵Ψ ͳͻͷͶ ͶͷǤͲΨ ͳǤ͹Ψ ʹ͸ǤͶΨ ͳͻͷͷ ʹ͸ǤͶΨ ͸Ǥ͸Ψ ʹǤ͸Ψ ͳͻͷͺ ͵ͺǤͳΨ ͲǤͶΨ ͺǤͷΨ ͳͻ͸ͳ ʹ͵ǤͳΨ ǦʹǤͺΨ ǦͳͳǤͺΨ ͳͻ͸͹ ʹͲǤͳΨ Ǧ͸ǤͷΨ ͹Ǥ͹Ψ ͳͻ͹ͷ ͵ͳǤͷΨ ͳ͵ǤͻΨ ͳͻǤͳΨ ͳͻͺͲ ʹͷǤͺΨ ͲǤʹΨ ǦͻǤ͹Ψ ͳͻͺͷ ʹ͸Ǥ͵Ψ ͳ͵ǤͳΨ ͳͶǤ͸Ψ ͳͻͺͻ ʹ͹Ǥ͵Ψ Ǧ͵ǤͺΨ Ǧ͸Ǥ͸Ψ ͳͻͻͳ ʹ͸Ǥ͵Ψ Ǧ͵ǤʹΨ ͶǤͷΨ ͳͻͻͷ ͵ͶǤͳΨ ͶǤͺΨ ʹͲǤ͵Ψ ͳͻͻ͸ ʹͲǤ͵Ψ ʹǤʹΨ ͵ͳǤͲΨ ͳͻͻ͹ ͵ͳǤͲΨ ͳ͵ǤͷΨ ʹ͸Ǥ͹Ψ ͳͻͻͺ ʹ͸Ǥ͹Ψ ͶǤ͸Ψ ͳͻǤͷΨ ʹͲͲ͵ ʹ͸ǤͶΨ ͳǤ͵Ψ ͻǤͲΨ ʹͲͲͻ ʹ͵ǤͷΨ ͶǤͻΨ ͳʹǤͺΨ ʹͲͳ͵ ʹͻǤ͸Ψ ͳǤ͵Ψ ͳͳǤͶΨ Average ʹͲͳͻ ʹͺǤͻΨ ǫ ǫ % Positive ͵ǤʹΨ ͳͳǤʹΨ Historical Average ͹͹ǤͺΨ ͺ͵Ǥ͵Ψ Historical % Positive ʹǤͶΨ ͺǤͻΨ ͸͵ǤͺΨ ͹ͳǤͲΨ

Source: Strategas 9 Bear markets andHistory subsequent Suggests bull Cautious runs Optimism Warranted GTM – U.S. | 14

S&P 500 composite declines from all-time highs 0%

-20% 20% Market 4 6 5 9 decline* Equities 10 -40% 7 8 11 -60% 12 3 Recession -80% 2 1 -100% 1928 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

Characteristics of bull and bear markets Bear markets Macro environment Bull markets Market Bear Duration Commodity Aggressive Extreme Bull Bull Duration Market Corrections peak return* (months)* Recession spike Fed valuations begin date return (months) 1 Crash of 1929 - Excessive leverage, irrational exuberance Sep 1929 -86% 32 Jul 1926 152% 37 2 1937 Fed Tightening - Premature policy tightening Mar 1937 -60% 61 Mar 1935 129% 23 3 Post WWII Crash - Post-war demobilization, recession fears May 1946 -30% 36 Apr 1942 158% 49 4 Eisenhower Recession - Worldwide recession Aug 1956 -22% 14 Jun 1949 267% 85 5 Flash Crash of 1962 - Flash crash, Cuban Missile Crisis Dec 1961 -28% 6 Oct 1960 39% 13 6 1966 Financial Crisis - Credit crunch Feb 1966 -22% 7 Oct 1962 76% 39 7 Tech Crash of 1970 - Economic overheating, civil unrest Nov 1968 -36% 17 Oct 1966 48% 25 8 Stagflation - OPEC oil embargo Jan 1973 -48% 20 May 1970 74% 31 9 Volcker Tightening - Whip Inflation Now Nov 1980 -27% 20 Mar 1978 62% 32 10 1987 Crash - Program trading, overheating markets Aug 1987 -34% 3 Aug 1982 229% 60 11 Tech Bubble - Extreme valuations, .com boom/bust Mar 2000 -49% 30 Oct 1990 417% 113 12 Global Financial Crisis - Leverage/housing, Lehman collapse Oct 2007 -57% 17 Oct 2002 101% 60 Current Cycle Mar 2009 378% 129 Averages - -42% 22 - 164% 54

Source: FactSet, NBER, Robert Shiller, Standard & Poor’s, J.P. Morgan Asset Management. *A bear market is defined as a 20% or more decline from the previous market high. The related market return is the peak to trough return over the cycle. Periods of “Recession” are defined using NBER business cycle dates. “Commodity spikes” are defined as movement in oil prices of over 100% over an 18-month period. Periods of “Extreme Valuations” are those where S&P 500 last 12 months’ P/E levels were approximately two standard deviations above long-run averages, or time periods where equity market valuations appeared expensive given the broader macroeconomic environment. “Aggressive Fed Tightening” is defined as Federal Reserve monetary tightening that was unexpected and/or significant in magnitude. Bear and Bull returns are price returns. 14 Guide to the Markets – U.S. Data are as of December 31, 2019.

10 S&P 500 Index: Next 12 Month P/E Ratio - 20 Year History S&P 500 Index: Next 12 Month P/E Ratio - 20 Year History 25.00

23.00

21.00

19.00

17.00

15.00

13.00

11.00

9.00

7.00 Jul-11 Jul-12 Jul-13 Jul-15 Jul-17 Jul-16 Jul-19 Jul-18 Jul-01 Jul-10 Jul-14 Jan-11 Jul-02 Jul-03 Jul-05 Jul-07 Jan-12 Jan-13 Jan-15 Jul-06 Jul-09 Jan-17 Jul-08 Jan-16 Jan-19 Jul-00 Jul-04 Jan-18 Jan-01 Jan-10 Jan-14 Jan-02 Jan-03 Jan-05 Jan-07 Jan-06 Jan-09 Jan-08 Jan-00 Jan-04

Source: FactSet and BCM Recessions NTM P/E Average `+1 SD `-1 SD

March March 20-Year Current 2000 2009 Average Trailing P/E 29.6 13.7 20.4 18.9 Forward P/E 24.4 10.1 18.4 15.9 Price/Book Value 5.1 2 3.3 2.8 EV/EBITDA 15.7 10.1 14.5 12.6 ERP (bps) -262.3 223.1 286.2 193.4

As of 31 December 2019 Source: FactSet, Strategas ERP: Equity Risk Premium is calculated by taking the earnings yield of the S&P 500 and subtracting the 10-year Treasury yield 11 6 January 2020

Valuations

10-Year Treasury Yields vs. NTM P/Es 30 x When yields are below average, rising rates tend to drive 25 valuations higher

NTM P/E 15

% 5 0 5 10 15 P/E Multiples10-Year Yield Reasonable Given Bond Yields

Note: NTM P/E, data since 1964 Source: Federal Reserve, Standard & Poor's, Thomson Financial, FactSet, Haver Analytics®, Credit Suisse

Bond Yields vs. S&P 500 Multiples Dec. 2019 Dec. 2009 Dec. 1999

8.2% 25.8x 25.1x 1.7% 6.4% 18.2x 1.8% 15.6x 14.4x 3.9% 12.2x

Spread 6.5% 1.5% 4.6% 30-Yr 2.4%

Baa Implied Actual Baa Implied Actual Baa Implied Actual Yield P/E P/E Yield P/E P/E Yield P/E P/E

Note: Implied P/E based on the inverse of the Baa yield Source: Standard and Poor’s, Moody’s, FactSet, Thomson Financial, Credit Suisse

U.S. Equity Strategy Navigator 25

Investment Strategy ReporReportt Mon. Dec. 9, 2019 Mon. Dec. 4, 2006 Strategas Securities, LLC Jason DeSena Trennert (212) 906-0133 [email protected] Ryan Grabinski (646) 292-7910 [email protected]

SHAREHOLDER YIELD CHARTBOOK

In what would most likely be seen as both a shock and a great bar bet, about one-half of the S&P’s total return since 1926 has come from dividends. Of course, before the fig leaf of the Securities Acts of 1933 and 1934, dividends were the only true confirmation of a company’s profitability. Some traditionalists might say they still are. At any rate, dividends became less fashionable for a variety of reasons, not the least of which was the fact that the tax rate on dividends was far higher than on capital gains for decades. A perverse incentive developed in which companies, especially those run by executives granted stock options, had a far greater interest in pursuing capital appreciation at all times and regardless of business conditions. The costs of such disparate tax regimes were primarily hidden in the salad days of the 1980s and 1990s. But, the only return investors received in the aughts (‘00s), bracketed by both the tech wreck and the financial crisis, came in the form of dividends. Given the starting point of both current multiples and long and short term interest rates, we believe it is likely that shareholder yield (the value of share repurchases and dividends as a percentage of net income) will make up an increasingly large part of the total return in the years to come. As much as we would prefer dividends to share repurchases at lofty valuations, it Stocksseems unlikely vs. that Bonds dividends alone will regain the appeal they once had. The flexibility of share repurchases obviously 12/9/19 enhances their appeal for management. We’re happy to send you the data and charts if you needT.I.N.A. them REMAINS IN PLAY: S&P 500 DIVIDEND YIELD for your client presentations. Please help us help you by letting us know how we can improve these reports and the others to follow. GREATER THAN 2-YEAR TREASURY YIELD

Value of S&P 500 Buybacks + Dividends S&P 500 Dividend Yield vs. as % of Market-Cap & 10-Year Treasury Yield U.S. 2 Year Treasury Note Yield 8% 10.0 Buybacks + 7% Dividends Yield 9.0 8.0 2-Year 6% 7.0 Treasury Yield 5% 5.1% 6.0 4% 5.0 4.0 3% 10-Year Treasury Yield 3.0 2% (Monthly Avg) 2.0 S&P 500 1.8% 1% 1.0 Dividend Yield '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 0.0 '90 '94 '98 '02 '06 '10 '14 '18 PLEASE DO NOT REDISTRIBUTE 1 of 14 Please see the Appendix for important disclosures. OVER 50% OF S&P 500 COMPANIES HAVE DIVIDEND YIELDS GREATER THAN THE 10-YEAR TREASURY

% of S&P 500 Stocks with Dividend Yields Greater than the 10-Year U.S. Treasury Yield 60% 52% 50%

40%

30% 20% 13 10%

0% '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Strategas Securities, LLC – Investment Strategy 2 PLEASE DO NOT REDISTRIBUTE U.S. Unemployment and Average Hourly Earnings U.S. Unemployment and Average Hourly Earnings

12%

10%

0% Jul-14 Jan-11 Jul-93 Jul-07 Oct-12 Jul-00 Oct-19 Oct-91 Jan-18 Apr-16 Jun-17 Aug-11 Feb-15 Sep-15 Mar-12 Jun-10 Feb-01 Sep-01 Mar-19 Mar-91 Dec-13 Nov-16 Jan-97 Apr-95 Oct-05 May-13 Apr-02 Jan-90 Oct-98 Jun-03 Jun-96 Apr-09 Aug-18 Jan-04 Dec-92 Mar-05 Feb-94 Sep-94 Nov-95 Mar-98 Feb-08 Sep-08 Dec-99 Nov-02 Dec-06 Nov-09 May-92 Aug-97 May-99 Aug-90 May-06 Aug-04 Recessions U.S. Hourly Earnings - Private NFP Production & Non Supervisory Workers U3 Unemployment Source: U.S. Bureau of Labor Statistics and BCM

14 U.S. Treasury Yield Curve: Current vs. 1 Year Ago U.S. Treasury Yield Curve: Current vs. 1 Year Ago 3.50%

3.00%

2.50%

2.00%

1.50%

One Year Ago 12/31/2019

1.00% 1 Year 2 Year 3 Year 5 Year 10 Year 30 Year 3 Month 3

Maturity Source: FactSet and BCM

15 U.S. 10 Year Treasury Yield U.S. 10 Year Treasury Yield 3.50%

3.00%

2.50%

2.00%

1.50%

1.00% Jul-19 Jul-18 Jul-18 Jan-19 Oct-19 Jan-18 Apr-19 Apr-19 Oct-18 Apr-18 Jun-19 Jun-19 Jun-18 Sep-19 Feb-19 Feb-19 Sep-18 Sep-18 Feb-18 Mar-19 Mar-18 Mar-18 Dec-17 Dec-19 Nov-19 Nov-19 Dec-18 Nov-18 Nov-18 Aug-19 Aug-19 May-19 Aug-18 May-18 May-18

Source: Bloomberg Professional and BCM U.S. 10Y Treasury Yield

16 Investment Grade Corporate Spreads

6.00 5.00 4.00 Average Spread=170 bps 3.00 2.00 1.00 0.00 1/1/2007 8/1/2007 3/1/2008 5/1/2009 7/1/2010 2/1/2011 9/1/2011 4/1/2012 6/1/2013 1/1/2014 8/1/2014 3/1/2015 5/1/2016 7/1/2017 2/1/2018 9/1/2018 4/1/2019 10/1/2008 12/1/2009 11/1/2012 10/1/2015 12/1/2016 11/1/2019

High Yield Corporate Spreads 20.00 18.00 16.00 14.00 12.00 Average Spread=553 bps 10.00 8.00 6.00 4.00 2.00 0.00 1/1/2007 8/1/2007 3/1/2008 5/1/2009 7/1/2010 2/1/2011 9/1/2011 4/1/2012 6/1/2013 1/1/2014 8/1/2014 3/1/2015 5/1/2016 7/1/2017 2/1/2018 9/1/2018 4/1/2019 10/1/2008 12/1/2009 11/1/2012 10/1/2015 12/1/2016 11/1/2019

Source: Bloomberg Professional 17 Election Years Since 1928: Historical Equity Market Performance

Election Year S&P Price Change Winning Candidate Party R D 1928 37.9% Herbert Hoover Republican The 202037.9% Presidential election is already upon 1932 -14.8% Franklin D. Roosevelt Democrat us. Like most things-14.8% in this environment, we 1936 27.9% Franklin D. Roosevelt Democrat expect lots of headlines,27.9% lots of rhetoric and lots of tweets. 1940 -15.1% Franklin D. Roosevelt Democrat -15.1% 1944 13.8% Franklin D. Roosevelt Democrat Historically, election13.8% years are not dissimilar 1948 -0.7% Harry S. Truman Democrat from average years-0.7% for the stock market 1952 11.8% Dwight D. Eisenhower Republican and are dependent11.8% on economic health and corporate earnings. 1956 2.6% Dwight D. Eisenhower Republican 2.6% 1960 -3.0% John F. Kennedy Democrat -3.0% 1964 13.0% Lyndon B. Johnson Democrat 13.0% 1968 7.7% Richard Nixon Republican 7.7% 1972 15.6% Richard Nixon Republican 15.6% 1976 19.1% Jimmy Carter Democrat 19.1% 1980 25.8% Ronald Reagan Republican 25.8% 1984 1.4% Ronald Reagan Republican 1.4% 1988 12.4% George H.W. Bush Republican 12.4% 1992 4.5% Bill Clinton Democrat 4.5% 1996 20.3% Bill Clinton Democrat 20.3% 2000 -10.1% George W. Bush Republican -10.1% 2004 9.0% George W. Bush Republican 9.0% 2008 -38.5% Barack Obama Democrat -38.5% 2012 13.4% Barack Obama Democrat 13.4% 2016 9.5% Donald Trump Republican 9.5%

18 Asset Allocation Considerations Time, diversification and the volatility of returns GTM – U.S. | 63

Range of stock, bond and blended total returns Annual total returns, 1950-2019 60% Annual avg. Growth of $100,000 total return over 20 years 50% Stocks 11.3% $844,684 47% Bonds 5.9% $313,758 40% 43% 50/50 portfolio 8.9% $555,161

30% 33% 28% 20% 23% 21% 19% 16% 16% 17% 10% 14% 12% 1% 6% 5% 0% 2% 1% -8% -3% -2% -1% 1% -10% -15%

-20%

-30% -39% -40%

Investing -50% principles 1-yr. 5-yr. 10-yr. 20-yr. rolling rolling rolling

Source: Barclays, Bloomberg, FactSet, Federal Reserve, Robert Shiller, Strategas/Ibbotson, J.P. Morgan Asset Management. Returns shown are based on calendar year returns from 1950 to 2019. Stocks represent the S&P 500 Shiller Composite and Bonds represent Strategas/Ibbotson for periods from 1950 to 2010 and Bloomberg Barclays Aggregate thereafter. Growth of $100,000 is based on annual average total returns from 1950 to 2019. Guide to the Markets – U.S. Data are as of December 31, 2019.

19 PORTFOLIO SUMMARY Oregon State Bar December 31, 2019

Pct. Cur. Est.Annual Security Type Adjusted Cost Market Value Assets Yield Income

Equities COMMON STOCK Communication Services 159,000.40 168,665.05 6.4 2.4 3,980.18 Consumer Discretionary 79,454.35 84,570.65 3.2 4.1 3,468.60 Consumer Staples 182,191.57 201,457.71 7.6 2.7 5,405.37 Financials 243,318.09 350,463.15 13.2 2.1 7,263.30 Health Care 127,890.05 166,528.80 6.3 2.6 4,384.75 Industrials 84,179.88 98,404.07 3.7 1.8 1,734.42 Information Technology 136,442.47 217,880.60 8.2 1.8 3,815.72 Materials 92,459.06 97,112.50 3.7 2.4 2,348.05 Real Estate 39,191.16 49,669.00 1.9 1.6 809.20 Utilities 41,188.89 52,386.25 2.0 3.1 1,644.50 COMMON STOCK 1,185,315.92 1,487,137.78 56.2 2.3 34,854.09

1,185,315.92 1,487,137.78 56.2 2.3 34,854.09

Equity ETFs EQUITY ETF U.S. Small Cap 58,216.06 58,503.90 2.2 1.9 1,124.22 International Equity 31,759.65 38,090.00 1.4 3.3 1,247.02 Emerging Markets 42,717.71 37,900.80 1.4 2.6 986.55 EQUITY ETF 132,693.42 134,494.70 5.1 2.5 3,357.79

132,693.42 134,494.70 5.1 2.5 3,357.79

Fixed Income CORPORATE BONDS 429,373.59 434,375.37 16.4 3.2 13,841.25

Account statements are sent directly to clients by the custodian on at least a quarterly basis. Clients are encouraged to compare the statements received from their custodians with the statements they receive from BCM. If you are not receiving statements directly from your custodian, please contact Stephanie Moyer at 503-223-1720. PORTFOLIO SUMMARY Oregon State Bar December 31, 2019

Pct. Cur. Est.Annual Security Type Adjusted Cost Market Value Assets Yield Income

GOVERNMENT BONDS 129,345.35 130,102.50 4.9 2.6 3,437.50 Treasury 352,146.72 357,413.54 13.5 2.3 8,137.50 GOVERNMENT 481,492.07 487,516.04 18.4 2.4 11,575.00 BONDS

Accrued Interest 6,473.66 0.2 910,865.66 928,365.07 35.1 2.8 25,416.25

Cash and Equiv. CASH AND 98,295.69 98,295.69 3.7 0.0 9.66 EQUIVALENTS 98,295.69 98,295.69 3.7 0.0 9.66

TOTAL PORTFOLIO 2,327,170.69 2,648,293.25 100.0 2.4 63,637.79

Yield Unit Total Market Annual To Pct. Quantity Security Cost Price Cost Value Income Mat Assets CASH AND EQUIVALENTS ACCRUED DIVIDENDS 1,736.32 1,736.32 0.00 0.1 MONEY MARKET FUND 96,559.37 96,559.37 9.66 3.6 TOTAL CASH AND EQUIVALENTS 98,295.69 98,295.69 9.66 0.00 3.7

TOTAL FIXED INCOME ASSETS 98,295.69 98,295.69 9.66 0.00 3.7 PORTFOLIO APPRAISAL - EQUITY ASSETS Oregon State Bar December 31, 2019

Unit Total Market Annual Pct. Quantity Security Cost Price Cost Value Income Yield Assets

COMMON STOCK Communication Services 835 AT&T INC 32.41 39.08 27,066.22 32,631.80 1,736.80 5.3 1.2 845 DISCOVERY COMMUNICATIONS C 21.88 30.49 18,484.71 25,764.05 0.00 0.0 1.0 1,050 IMAX CORP 20.77 20.43 21,810.16 21,451.50 0.00 0.0 0.8 80 MADISON SQUARE GARDEN CO- A 189.04 294.19 15,122.88 23,535.20 0.00 0.0 0.9 860 VIACOMCBS INC 46.12 41.97 39,665.87 36,094.20 825.60 2.3 1.4 1,510 VODAFONE GROUP PLC 24.40 19.33 36,850.56 29,188.30 1,417.78 4.9 1.1 Total Communication Services 159,000.40 168,665.05 3,980.18 2.4 6.4

Consumer Discretionary 340 BORG-WARNER INC 34.29 43.38 11,656.93 14,749.20 231.20 1.6 0.6 1,355 EXTENDED STAY AMERICA INC 17.28 14.86 23,420.19 20,135.30 1,246.60 6.2 0.8 1,675 FORD MTR CO DEL COM 10.62 9.30 17,788.73 15,577.50 1,005.00 6.5 0.6 315 LEGGETT & PLATT INC 40.44 50.83 12,738.24 16,011.45 504.00 3.1 0.6 330 MAGNA INTERNATIONAL CL A 41.97 54.84 13,850.26 18,097.20 481.80 2.7 0.7 Total Consumer Discretionary 79,454.35 84,570.65 3,468.60 4.1 3.2

Consumer Staples 1,790 DANONE SPONS ADR 16.90 16.59 30,245.35 29,696.99 508.88 1.7 1.1 300 INGREDION INC 85.27 92.95 25,581.76 27,885.00 756.00 2.7 1.1 190 JM SMUCKER CO 118.65 104.13 22,543.63 19,784.70 668.80 3.4 0.7 255 KELLOGG CO COM 65.18 69.16 16,621.84 17,635.80 581.40 3.3 0.7 830 KROGER CO 24.34 28.99 20,204.36 24,061.70 531.20 2.2 0.9 560 MOLSON COORS BEVERAGE CO 62.68 53.90 35,100.11 30,184.00 1,276.80 4.2 1.1 180 PROCTER & GAMBLE CO COM 83.78 124.90 15,080.90 22,482.00 537.05 2.4 0.8 28 SPECTRUM BRANDS HOLDINGS, INC. 48.94 64.29 1,370.18 1,800.12 47.04 2.6 0.1 235 WALMART INC 65.72 118.84 15,443.43 27,927.40 498.20 1.8 1.1 Total Consumer Staples 182,191.57 201,457.71 5,405.37 2.7 7.6

Financials 35 ALLEGHANY CORP 407.74 799.57 14,271.02 27,984.95 0.00 0.0 1.1 285 ALLSTATE CORP COM 28.66 112.45 8,169.24 32,048.25 570.00 1.8 1.2 430 AMERICAN INTL GROUP COM 58.59 51.33 25,191.95 22,071.90 550.40 2.5 0.8 155 BERKSHIRE HATHAWAY INC 206.51 226.50 32,009.48 35,107.50 0.00 0.0 1.3 150 CHUBB LTD 159.10 155.66 23,864.38 23,349.00 450.00 1.9 0.9 485 CITIGROUP INC COM 71.32 79.89 34,591.79 38,746.65 989.40 2.6 1.5 120 GOLDMAN SACHS GROUP INC 200.17 229.93 24,020.70 27,591.60 600.00 2.2 1.0 1,135 JEFFERIES FINANCIAL GROUP INC 22.63 21.37 25,683.16 24,254.95 567.50 2.3 0.9 PORTFOLIO APPRAISAL - EQUITY ASSETS Oregon State Bar December 31, 2019

Unit Total Market Annual Pct. Quantity Security Cost Price Cost Value Income Yield Assets

330 JP MORGAN CHASE & CO 39.52 139.40 13,043.25 46,002.00 1,188.00 2.6 1.7 170 PNC FINANCIAL SERVICES GROUP 58.03 159.63 9,865.17 27,137.10 782.00 2.9 1.0 325 US BANCORP 28.50 59.29 9,262.83 19,269.25 546.00 2.8 0.7 500 WELLS FARGO & CO NEW COM 46.69 53.80 23,345.12 26,900.00 1,020.00 3.8 1.0 Total Financials 243,318.09 350,463.15 7,263.30 2.1 13.2

Health Care 95 ALLERGAN PLC 159.73 191.17 15,174.47 18,161.15 281.20 1.5 0.7 655 ASTRAZENECA PLC 30.05 49.86 19,684.26 32,658.30 897.35 2.7 1.2 350 GILEAD SCIENCES INC 69.48 64.98 24,317.78 22,743.00 882.00 3.9 0.9 175 JOHNSON & JOHNSON COM 98.07 145.87 17,162.35 25,527.25 665.00 2.6 1.0 170 MCKESSON CORP 83.10 138.32 14,126.38 23,514.40 278.80 1.2 0.9 685 PFIZER INC COM 30.16 39.18 20,662.27 26,838.30 1,041.20 3.9 1.0 160 QUEST DIAGNOSTICS 104.77 106.79 16,762.54 17,086.40 339.20 2.0 0.6 Total Health Care 127,890.05 166,528.80 4,384.75 2.6 6.3

Industrials 685 EMBRAER SA-SPON ADR 19.43 19.49 13,311.81 13,350.65 83.28 0.6 0.5 140 FEDEX CORPORATION 165.12 151.21 23,117.33 21,169.40 364.00 1.7 0.8 140 GENERAL DYNAMICS CORP COM 179.08 176.35 25,071.33 24,689.00 571.20 2.3 0.9 265 SIEMENS AG SPONS ADR 72.90 65.41 19,319.61 17,333.12 424.33 2.4 0.7 405 SOUTHWEST AIRLINES 8.30 53.98 3,359.80 21,861.90 291.60 1.3 0.8 Total Industrials 84,179.88 98,404.07 1,734.42 1.8 3.7

Information Technology 105 APPLE COMPUTER INC COM 74.41 293.65 7,813.01 30,833.25 323.40 1.0 1.2 420 AVNET INC COM 38.16 42.44 16,029.09 17,824.80 352.80 2.0 0.7 375 CIENA CORP 22.11 42.69 8,289.64 16,008.75 0.00 0.0 0.6 690 CISCO SYS INC COM 37.58 47.96 25,930.44 33,092.40 966.00 2.9 1.2 140 COHERENT INC 138.61 166.35 19,405.52 23,289.00 0.00 0.0 0.9 1,275 HP INC 16.87 20.55 21,510.66 26,201.25 898.62 3.4 1.0 515 INTEL CORP COM 45.22 59.85 23,287.68 30,822.75 648.90 2.1 1.2 140 MICROSOFT CORP COM 36.23 157.70 5,071.85 22,078.00 285.60 1.3 0.8 185 TE CONNECTIVITY LTD 49.21 95.84 9,104.57 17,730.40 340.40 1.9 0.7 Total Information Technology 136,442.47 217,880.60 3,815.72 1.8 8.2

Materials 445 INTERNATIONAL PAPER CO 54.26 46.05 24,146.45 20,492.25 912.25 4.5 0.8 560 METHANEX CORP 43.32 38.63 24,259.56 21,632.80 806.40 3.7 0.8 PORTFOLIO APPRAISAL - EQUITY ASSETS Oregon State Bar December 31, 2019

Unit Total Market Annual Pct. Quantity Security Cost Price Cost Value Income Yield Assets

1,005 MOSAIC CO 23.63 21.64 23,746.34 21,748.20 201.00 0.9 0.8 765 NEWMONT CORP 26.54 43.45 20,306.70 33,239.25 428.40 1.3 1.3 Total Materials 92,459.06 97,112.50 2,348.05 2.4 3.7

Real Estate 250 HOWARD HUGHES CORP 100.58 126.80 25,145.00 31,700.00 0.00 0.0 1.2 595 WEYERHAEUSER CO COM 23.61 30.20 14,046.16 17,969.00 809.20 4.5 0.7 Total Real Estate 39,191.16 49,669.00 809.20 1.6 1.9

Utilities 625 PORTLAND GENERAL ELECTRIC 40.35 55.79 25,219.81 34,868.75 962.50 2.8 1.3 275 SOUTHERN CO COM 58.07 63.70 15,969.08 17,517.50 682.00 3.9 0.7 Total Utilities 41,188.89 52,386.25 1,644.50 3.1 2.0 1,185,315.92 1,487,137.78 34,854.09 2.3 56.2

EQUITY ETF U.S. Small Cap 455.0000 ISHARES RUSSELL 2000 VALUE 127.95 128.58 58,216.06 58,503.90 1,124.22 1.9 2.2

International Equity 650.0000 VANGUARD FTSE EUROPE ETF 48.86 58.60 31,759.65 38,090.00 1,247.02 3.3 1.4

Emerging Markets 705.0000 ISHARES CORE EMG MKT 60.59 53.76 42,717.71 37,900.80 986.55 2.6 1.4 132,693.42 134,494.70 3,357.79 2.5 5.1

TOTAL EQUITY ASSETS 1,318,009.34 1,621,632.48 38,211.88 2.4 61.2 PORTFOLIO APPRAISAL - FIXED INCOME ASSETS Oregon State Bar December 31, 2019

Yield Unit Total Market Total Adjusted Annual To Pct. Quantity Security Cost Price Cost Value Cost Income Mat Assets

CORPORATE BONDS 30,000 CISCO SYSTEMS INC 101.73 100.09 30,519.00 30,025.79 30,016.44 1,335.00 2.05 1.1 4.450% Due 01-15-20 35,000 AMERICAN EXPRESS CR 101.37 100.37 35,480.55 35,128.86 35,120.42 910.00 2.06 1.3 2.600% Due 09-14-20 30,000 JP MORGAN CHASE & CO 103.22 101.78 30,967.35 30,533.18 30,116.17 1,275.00 1.96 1.2 4.250% Due 10-15-20 35,000 WELLS FARGO & CO 108.92 103.25 38,123.75 36,135.87 35,924.90 1,610.00 1.95 1.4 4.600% Due 04-01-21 30,000 APPLE INC 104.23 101.54 31,269.60 30,462.78 30,322.12 855.00 1.68 1.2 2.850% Due 05-06-21 25,000 APPLIED MATERIALS INC 112.20 103.48 28,049.75 25,870.60 25,575.58 1,075.00 1.86 1.0 4.300% Due 06-15-21 30,000 BANK OF NEW YORK MELLON 100.31 102.74 30,093.90 30,823.10 30,056.51 1,065.00 1.92 1.2 3.550% Due 09-23-21 30,000 UNITEDHEALTH GROUP INC 103.61 101.95 31,082.70 30,585.76 30,419.45 862.50 1.96 1.2 2.875% Due 03-15-22 30,000 ORACLE CORP 102.27 101.31 30,680.70 30,393.91 30,274.41 750.00 1.93 1.1 2.500% Due 05-15-22 35,000 MERCK & CO INC 97.33 101.56 34,064.80 35,545.82 34,375.15 840.00 1.80 1.3 2.400% Due 09-15-22 25,000 APPLE INC 99.24 101.66 24,809.50 25,415.22 24,842.09 600.00 1.83 1.0 2.400% Due 01-13-23 35,000 BERKSHRIE HATHAWAY INC 99.47 103.30 34,815.90 36,154.16 34,866.70 1,050.00 1.90 1.4 3.000% Due 02-11-23 30,000 JOHN DEERE CAPITAL CORP 106.91 106.27 32,072.70 31,881.72 32,035.00 1,020.00 2.22 1.2 3.400% Due 09-11-25 25,000 NIKE INC 101.75 101.67 25,437.75 25,418.60 25,428.66 593.75 2.11 1.0 2.375% Due 11-01-26 Accrued Interest 3,722.12 0.1 TOTAL CORPORATE BONDS 437,467.95 438,097.50 429,373.59 13,841.25 1.95 16.5

GOVERNMENT BONDS 50,000 UNITED STATES TREAS N/B 100.02 100.09 50,011.72 50,045.85 50,000.97 1,125.00 1.68 1.9 2.250% Due 02-29-20 85,000 UNITED STATES TREAS N/B 98.97 101.10 84,126.18 85,933.04 84,437.78 1,700.00 1.60 3.2 2.000% Due 10-31-22 25,000 UNITED STATES TREAS NTS 99.11 101.13 24,777.34 25,282.22 24,816.99 500.00 1.60 1.0 2.000% Due 11-30-22 PORTFOLIO APPRAISAL - FIXED INCOME ASSETS Oregon State Bar December 31, 2019

Yield Unit Total Market Total Adjusted Annual To Pct. Quantity Security Cost Price Cost Value Cost Income Mat Assets

100,000 UNITED STATES TREAS N/B 104.24 103.84 104,243.16 103,843.80 104,052.28 2,750.00 1.64 3.9 2.750% Due 07-31-23 125,000 US TREASURY N/B 103.89 104.08 129,868.16 130,102.50 129,345.35 3,437.50 1.66 4.9 2.750% Due 11-15-23 30,000 UNITED STATES TREAS N/B 97.05 103.47 29,116.41 31,041.81 29,293.54 750.00 1.67 1.2 2.500% Due 05-15-24 30,000 UNITED STATES TREAS NTS 96.55 103.06 28,966.41 30,918.75 29,156.07 712.50 1.68 1.2 2.375% Due 08-15-24 30,000 UNITED STATES TREAS NTS 101.30 101.16 30,391.41 30,348.06 30,389.08 600.00 1.82 1.1 2.000% Due 11-15-26 Accrued Interest 2,751.53 0.1 TOTAL GOVERNMENT BONDS 481,500.79 490,267.57 481,492.07 11,575.00 1.66 18.5

TOTAL FIXED INCOME ASSETS 918,968.74 928,365.07 910,865.66 25,416.25 1.79 35.1 OREGON STATE BAR K.Palevsky 1/30/2019 EON / LGIP Month End Balance Restricted Funds Position

Period Dec Scale: Good (low risk) 2017 4,211,714 Fair (medium risk) 2018 3,681,701 LGIP Low (high risk) 2019 4,547,967 LGIP Year over Year Delta B/(W) 866,266 Adequacy RESTRICTED Client Security Fund 428,736 $ 500,000 928,736 bal sheet Fair Diversity & Inclusion (43,046) (43,046) bal sheet Good Legal Services 294,516 294,516 bal sheet, state funding now quarterly Good Sections 650,373 650,373 bal sheet Good IOLTA (OLF) 37,319 37,319 bal sheet Good Total - Restricted $ 1,367,898 $ 1,867,898 BOG DESIGNATED Operating Reserve 500,000 500,000 BOG mandated Good Captial Reserve 500,000 500,000 BOG mandated Good Contract Legal Fees 312,170 312,170 bal sheet p2 - Contract Legal Services Reserve Good Landlord Contingency 308,516 308,516 bal sheet p2 - Landlord Contingency Fund Good Loan Repayment Assistance Program (LRAP) 101,087 101,087 bal sheet Good PERS Contingency 434,000 434,000 bal sheet p2 - PERS Contingency Fund Good Cy Pres 18,214,405 18,214,405 Legal Aid civil award $18.060M plus interest Good Total - BOG Designated $ 20,370,178 $ 20,370,178

Transitional Liability - Current Portion 59,700 59,700 bal sheet Good Total - All Reserves $ 21,797,776 $ 22,297,776

FUNDS AVAILABLE AND INVESTED Cash on Hand LGIP, less 2020 forecast performance, Short Term (LGIP) 400,000 400,000 plus $300K rainy day account Good Short Term (LGIP) - CSF Note 1 1,100,000 (500,000) 600,000 Good Long Term Investments 4,586,088 4,586,088 bal sheet Good Cy Pres (Legal Services) 18,214,405 18,214,405 Total - Funds Available $ 24,300,493 $ 23,800,493

Excess Funds - Funds Available less All Reserves $ 2,502,717 $ 1,502,717 Good Minutes Budget & Finance Investment Committee September 27, 2019 Oregon State Bar, Tigard

Present – Committee Members: David Wade, chair; John Grant, Keith Palevsky (staff). Not Present: Liani Reeves. Other Staff: Helen Hierschbiel.

1. Investment Portfolio current position:

Portfolio as of August 30th, 2019: % Change (Adj) Value $ 6/30/18 9/30/18 12/31/18 2/20/19 4/5/19 5/10/19 6/19/19 7/15/19 8/30/19 since 2/20 S&P 500 Index 2718 2914 2507 2780 2893 2880 2926 3014 2926 5.25% Washington Trust$ 2,991 $ 3,045 $ 2,831 $ 3,007 $ 2,775 $ 2,515 $ 2,558 $ 2,597 $ 2,572 4.67% Becker Capital$ 3,009 $ 3,091 $ 2,783 $ 2,993 $ 2,533 $ 2,414 $ 2,474 $ 2,520 $ 2,450 0.30% Total OSB Portfolio$ 6,000 $ 6,136 $ 5,614 $ 6,000 $ 5,308 $ 4,929 $ 5,032 $ 5,117 $ 5,022

LGIP$ 800 $ 1,100 $ 1,100 $ 1,100 $ 1,100 Earned Interest *$ 2.4 $ 5.3 $ 8.6 $ 10.8 $ 14.5 2.73% Grand Total$ 6,000 $ 6,110 $ 6,035 $ 6,141 $ 6,228 $ 6,136 2.27% Note(*): LGIP interest rate changed from 2.75% to 2.60% on August 9, 2019.

Since February 20th when the Investment committee approved moving $800K out of the portfolio and to the LGIP account, the LGIP account has earned 2.73%, the portfolio under management by Washington Trust has gained 4.67%, and Becker Capital (Columbia Trust) has gained 0.30%. LGIP interest rate reduced from 2.75% to 2.60% on August 9th.

In more recent years, Washington Trust has been outperforming Becker Capital in return on equities, fixed income, and total return.

2. Presentation by Washington Trust (WT): Rick Cloutier and Sarie Coruthers

Rick Cloutier presented WT’s overview of the market environment over the last six months and looking forward into 2020. Recent fund management changes were highlighted as having had positive results in the fund performance.

Rick expressed the viewpoint that in more recent years the market is displaying more volatility, and that there is a higher correlation across all asset groups which has decreased the effectiveness of diversification strategies. In response, WT is taking more of an “all-weather” approach to reduce the negative impact of volatility. Rick noted that if a filter was implemented on fossil fuels, the proceeds would be distributed pro rata over the other sectors as WT is “sector neutral”.

In general, the WT approach appears to be balanced and well measured across equities, fixed income, and alternatives with attention to movements in economic performance, interest rates, and market fundamentals.

3. Presentation by Becker Capital (Columbia Trust) Andy Murray, Deidra Krys-Rusoff, and Jay Dyer

Andy Murray presented Becker Capital’s equity overview. Becker’s current equity investment strategy is clearl weighted toward the concept of value. Value investment has not been as reliable as in the past, but may be in favor again based on a recent turn in the market.

Diedra Krys-Rusoff presented the bond and fixed income overview, and noted that the Bar’s investment policy (no instruments with a maturity greater than 7 years) is at least a little bit restrictive in that the interest rates on longer term instruments (in particular 10 yr bonds) have recently improved but cannot be included in the bar’s portfolio. She also noted the investment grade requirement (i.e. “A” and above) limited returns.

The committee noted that in the next meeting (tentatively targeted for February 2020), we may redistribute the portfolio allocation with a greater percentage to Washington Trust.

4. Sustainability Policy and Investment Portfolio

In response to an action item from the May 27th meeting, both portfolio managers have confirmed that; i) a screen out for fossil fuels would reduce portfolio volatility (albeit only slightly), and ii) that the funds would be redirected to whatever securities or sectors represented the best investment at that time.

Motion: John Grant moved, and David Wade seconded, the motion to implement a filter on direct investment in fossil fuels, and that the filter should be fully implemented by December 31, 2019. The motion passed (2-For / 0-Against).

5. Proposed Change in Investment Grade Instructions

The following change in investment instructions are being proposed to accommodate a downgrade event below “A” after purchase, and provide a more appropriate degree of flexibility to our portfolio managers.

In the event of a rating downgrade below grade “A”: - If a bond’s rating after purchase is downgraded, it will be closely managed and, if possible, sold over the next twelve months depending on market conditions. - Investments that are downgraded below A-/A3 should be evaluated by the Investment Advisor(s)/Manager(s) and sold as soon as practicable, unless a recommendation is approved by the Investment Committee to keep the holding.

Motion: John Grant moved, and David Wade seconded, the motion to implement the proposed changes to investment grade instructions. The motion passed (2-For / 0-Against).

6. Approval of the Meeting Minutes for May 17, 2019

Motion: John Grant moved, and David Wade seconded, the motion to approve the May 17th meeting minutes. The motion passed (2-For / 0-Against).

7. Next meeting

The next meeting will be held February 2020.