WEBINAR: 2014 ANNUITY PAYOUT VALUE

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WEBINAR:

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Real planning, real solutions. That’s our calling. |

1. Features of the Annuity Fund

2. Provide a Historical Analysis of the Payouts

3. 2014 Annuity Payout

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Real planning, real solutions. That’s our calling. | $40 $45 $50 $55 $60 $65 $70 $75 $80 $85 '07 '08 . . . . '09 . . . . '10 . . . . '11 . . . . '12 . . . . 13 . . . .

PAYOUT VALUE

UNIQUE VALUE

ANNUITY FUND

PAYOUT VALUES COMPARED TO UNIQUE VALUES

4

* Adjusted for 4% advanced earnings assumption. * Current month figure is not yet available.

$57.85

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Factors:

• Investment Performance

• Value of the Underlying Assets

• 4% Advanced Earnings Assumption

• Adjustment for Mortality Experience

• Deferred Investment Experience

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CALCULATING THE

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Throughout 2012, the Annuity Payout Value was $73.23, the same as it was be throughout 2013. So how did we determine the 2013 value?

Determining the payout value requires several steps, and we’ll go through them step by step – just follow the adjustments in the graph to the left.

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Throughout 2012, the Annuity Payout Value was $73.23, the same as it will be throughout 2013. So how did we determine the 2013 value?

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Real planning, real solutions. That’s our calling. | $73.23 $81.45 $50 $55 $60 $65 $70 $75 $80 $85

CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 1:

Investment Performance

As you can see, we experienced strong

investment performance in the period shown, a gain of 11.2%. However, the 2013 payout value did not

increase. Why not? First, note that the payout value must be based on the underlying value of assets.

+ 11.2%

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 2:

Underlying Value of Assets

The payout value of $73.23 exceeded the underlying value as of 9/30/2011, which was actually $67.66. This is the amount from which to begin our calculation.

+ 11.2%

$67.66

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Real planning, real solutions. That’s our calling. | $73.23 $81.45 $75.26 $50 $55 $60 $65 $70 $75 $80 $85

CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 2:

Underlying Value of Assets (Continued)

When we apply the investment performance gain of 11.2% to the underlying asset value ($67.66), the gain relative to the existing payout value ($73.23) is much less than 11.2% (2.8%, specifically).

$67.66

+ 2.8%

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 3:

4% Advanced Earnings

Since you are granted a 4% advanced earnings assumption on your investment in the Annuity Fund, the future payout value must be net of that gain.

As you can see, the resulting value is actually below the existing payout value.

$67.66

- 1.2%

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 4:

Adjustment for Mortality Experience

In order to secure the Annuity Fund, we must calculate expected payout obligations based on expected lifetimes of our annuitants. If the actuarial assumptions change, we may have to make

adjustments.

This year, an adjustment in those expectations

required a $1.26

adjustment to the annuity unit value over the course of the year.

$67.66

- 2.9%

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 5:

Deferred Investment

This represents the over payments that we have paid when the guarantees were in effect

This resulted in a $1.95 adjustment to the annuity unit value over the course of the year.

- 5.6%

$67.66

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 6:

Change in Data

May result from changes in annuitant status, census and, other.

The cumulative impact of all of these necessary adjustments resulted in a payout value calculation 6.1% below the existing payout value.

- 6.1%

$67.66

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

The MMBB Board of Managers takes action

After accounting for all of the necessary adjustments to the underlying value of assets in the Annuity Fund, the result was a 6.1%

decrease relative to the existing payout value. MMBB’s Board of

Managers felt strongly that our annuitants should not experience another

decrease in their annuity payments, so they elected to infuse the Annuity Fund with $6,000,000 to offset the 6.1% decrease and support a 2013 of payout value equal to that of 2012.

Board of Managers Action

$67.66

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Calculating the 2014

Annuity Payout Value

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CALCULATING THE 2014

ANNUITY PAYOUT VALUE

Throughout 2013, the Annuity Payout Value has been $73.23, the same as it will be throughout 2014. So how did we determine the 2014 value?

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CALCULATING THE 2014

ANNUITY PAYOUT VALUE

Step 1:

Investment Performance

As you can see, we experienced strong

investment performance in the period shown, a gain of 11.13%.

+ 11.13%

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CALCULATING THE 2014

ANNUITY PAYOUT VALUE

Step 2:

Underlying Value of Assets

The payout value of $73.23 exceeded the underlying value as of 9/30/2012, which was actually $68.80. This is the amount from which to begin our calculation.

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+ 11.13%

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CALCULATING THE 2014

ANNUITY PAYOUT VALUE

Step 2:

Underlying Value of Assets (Continued)

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CALCULATING THE 2014

ANNUITY PAYOUT VALUE

Step 3:

4% Advanced Earnings

Since you are granted a 4% advanced earnings assumption on your investment in the Annuity Fund, the future payout value must be net of that gain.

As you can see, the resulting value is slightly above the existing payout value.

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$68.80

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 4:

Adjustment for

Demographic and Other Actuarial Assumptions

Adjustments were made to reflect the demographics of plan participants and other actuarial factors.

This year, an adjustment in those expectations

required a $0.39

adjustment to the annuity unit value over the course of the year.

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$68.80

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

Step 5:

Mortality Experience

In order to secure the Annuity Fund, we must calculate expected payout obligations based on expected lifetimes of our annuitants. If the actuarial assumptions change, we may have to make

adjustments.

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- 5.6%

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CALCULATING THE 2013

ANNUITY PAYOUT VALUE

The MMBB Board of Managers takes action

After accounting for all of the necessary adjustments to the underlying value of assets in the Annuity Fund, the result was a 5.6%

decrease relative to the existing payout value. MMBB’s Board of

Managers felt strongly that our annuitants should not experience another

decrease in their annuity payments, so they elected to infuse the Annuity Fund with $6,000,000 to offset the 5.6% decrease and support a 2014 of payout value equal to that of 2013.

Board of Managers Action

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ANNUITY FUND

PAYOUT VALUES COMPARED TO UNIQUE VALUES

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* Adjusted for 4% advanced earnings assumption. * Current month figure is not yet available.

$40 $45 $50 $55 $60 $65 $70 $75 $80 $85 '07 '08 . . . . '09 . . . . '10 . . . . '11 . . . . '12 . . . . 13 . . . .

PAYOUT VALUE

UNIQUE VALUE

$57.85

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