Highland Associates Inc

FEES AND COMPENSATION

brokerage fees, please refer to the section of this Brochure entitled “Brokerage Practices. “In addition,
from time to time, clients may ask Highland to do ad hoc projects that are not directly related to
services described above. In these instances, a one-time fee may be negotiated with clients for these
services. In the event that a Client holds investments in certain Cahaba Partners Funds and elects to
terminate their discretionary investment management agreement with Highland, such termination
shall not preclude Highland from continuing to assess and collect applicable fees beyond the
termination date, to the extent necessary to facilitate the orderly liquidation or wind-down of
investment positions.

TYPES OF CLIENTS

DESCRIPTION

Highland provides investment advice to institutional investors such as endowments/foundations,
pensions, and nonprofit operating entities.

In addition, as described elsewhere in this Brochure, Highland provides investment advisory services
to the Cahaba Partners LLC Series.

ACCOUNT MINIMUMS

Other than for the Cahaba Partners LLC Series, Highland does not have any requirements regarding
minimum account size. Please consult the Fund Offering Documents for information regarding the
minimum investment requirements for the Cahaba Partners LLC Series.

                         METHODS OF ANALYSIS, INVESTMENT SERVICES AND RISK OF LOSS

ASSET ALLOCATION PHILOSOPHY

At the very core of Highland's asset allocation model is the concept of matching assets to a known
liability stream. Whether it is cost of debt, spending policy, or an actuarial return, the liability, once
defined, helps determine the overall objective for the portfolio and Highland can begin to overlay
our capital market assumptions to build the optimal portfolio.

Organizational Inputs:

Highland's process for crafting an asset allocation consists of two key steps. Step one is to identify a
client's risk tolerance. At the onset of every engagement, Highland conducts a risk survey with each
client's committee and management. The feedback helps quantify and qualify the emotional risk
tolerance of the organization. Step two is to establish a benchmark that accurately aligns assets to
mission of the organization.

Capital Market Evaluation:

Highland approaches capital markets strategy using two overlapping frameworks: Our strategic asset
allocation framework and our tactical asset allocation framework.

Our strategic framework involves developing the through-cycle (~10 year) asset class level capital
markets expectations (CMEs), including return and volatility forecasts, which inform our strategic asset
allocation (SAA) process. That framework is based on three key inputs:

   •   Fundamentals: We monitor fundamental drivers including underlying cash flows and cash flow
       growth across asset classes.

   •   Valuations: We track how asset classes trade relative to each other and their long-term
       histories. Valuation regression towards the mean is a key driver in several of our capital market
       expectations models.

   •   Surveys: We collect and compare Long-Term CMEs from various asset management firms to
       form a broader market view of expectations. These views are compared against our internal
       assumptions and debated amongst the team to determine where our internal views may differ
       from the market and why.

                        METHODS OF ANALYSIS, INVESTMENT SERVICES AND RISK OF LOSS

    •   Historic Experience: We augment our fundamental CME models with models calibrated
        around historic realized returns, including regression models and like period observation
        models. We characterize this approach as an outside view modeling exercise, borrowing a
        phrase from Daniel Kahneman (Thinking, Fast and Slow).

The capital markets expectations that emerge from this framework form a cornerstone of our portfolio
construction process. These expectations are developed by the Multi-Asset Solutions team. The team’s
process is proprietary and grounded in fundamental analysis and the belief that future expectations
can most accurately be derived by calculating the intrinsic value of the asset class.

Meanwhile, our tactical framework helps us identify tactical asset allocation (TAA) opportunities that
could contribute to returns or help clients manage risk over shorter horizons. (e.g., 6 months to 3 years.)

That framework is based on overlapping inputs including:

    •   Momentum: We monitor asset classes’ absolute and relative momentum, in a bid to identify
        potential inflection points or changes in leadership.

    •   Economic Views: Inputs like our Highland Diffusion Index (HDI) inform our views on the market
        regime. Our understanding of the market and economic cycle, in turn, helps us triage
        potentially attractive cross asset allocation opportunities.

    •   Fundamentals:     We monitor fundamental inflection points and instances where markets
        appear to be pricing in extreme or unrealistic fundamental outcomes.

    •   Manager Insight: We work with our partner managers to better understand the root causes of
        market dislocations and other TAA opportunities. More generally, conversations with
        managers can help us understand how asset class dynamics and return prospects are
        evolving.

These tools allow us to help clients deviate from their strategic asset allocation targets to capitalize on
market dislocations or shifts in the economic cycle.

Portfolios are built and customized to meet the specific needs of each client. We do not run model
portfolios or assume a “one size fits all” approach for our clients. Consultants utilize our Portfolio Tools
program to design customized portfolios. Allocations are run and then stress tested for different market

                        METHODS OF ANALYSIS, INVESTMENT SERVICES AND RISK OF LOSS

scenarios to understand the impact an allocation has on the organization and its ability to fund the
mission.

ASSET ALLOCATION PROCESS

At the very core of Highland’s asset allocation model is the concept of matching assets to a known
liability stream. Whether it is cost of debt, spending policy, or an actuarial return, the liability, once
defined, helps determine the overall objective for the portfolio, and Highland can begin to overlay
our capital market assumptions to build a long -term strategic allocation. We then overlay our Diffusion
Index and momentum indicators tactically shift based on near-term market dynamics.

Highland believes that an asset allocation for a portfolio has a strategic and a tactical component.
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