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When severe weather poses a threat to an electric cooperative, can a mutual fund company step in to help?

Saving for a Rainy Day —or a Hurricane Cooperative Partnership Case Study

The Challenge

Situated in Virginia’s Chesapeake Bay region, Northern Neck Electric Cooperative is surrounded by history and pristine water views. The beauty in this area is remarkable — and so is its weather.

Violent thunderstorms, tornadoes, hurricanes and winter storms impact Virginia on a regular basis. As natural disasters occur, co-ops like Northern Neck Electric Cooperative must anticipate the devastation and potential power outages they bring.

As Northern Neck discovered, when cooperatives don’t have cash on hand to deal with emergencies or other large capital outlays, their financing options aren’t always ideal. FEMA grants become bottlenecks, and loans can turn into costly, long-term liabilities.

EARLYCAREER

Set up an emergency fund

Set up an emergency fund

Prepare for the big purchases

JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Consider shifting your investment mix

Save for a celebration

Take advantage of retirement plans

Start thinking about college

LATECAREER

I’M THINKING ABOUT...

Prepare for the big purchases

Take advantage of retirement plans

Start thinking about college

Continue to fund your retirement savings

Save for a major purchase or special event

Review your investment mix

Save for a celebration

Consider systematic redemptions

Giving to othersIn the last 15 years, 14 hurricanes have

hit Virginia, with five directly creating outages in the Northern Neck region.

[Design note: Can the following facts be represented in a timeline using infographic icons? Graphic title: 2018: A Year of Divergent Natural Disasters]• January – Mudslides in Montecito, CA• March – Nor’easter winter storm in New England• May – Drought in the Southern Plains• May – Flooding in Ellicott City, MD• September – Hurricane Florence hits North and South Carolina• October – Hurricane Michael hits Florida, Georgia and the Carolinas• November – Wildfires in Southern and Northern California

JANUARY

MUDSLIDESin Montecito, CA

MARCH

NOR’EASTER winter storm in New England

MAY

DROUGHTin the Southern Plains

MAY

FLOODINGin Ellicott City, MD

SEPTEMBER

HURRICANEFLORENCE

hits North and South CarolinaOCTOBER

HURRICANEMICHAEL

hits Florida, Georgia and the CarolinasNOVEMBER

WILDFIRESin Southern and Northern California

In the last 15 years,

14HURRICANES

HAVE HITVIRGINIA

FIVEdirectly creating outages in the

Northern Neck region

2018: A YEAR OF DIVERGENT NATURAL DISASTERS

MUDSLIDES in Montecito,

CA

NOR’EASTERwinter storm

in New England

DROUGHT in the

Southern Plains

FLOODINGin Ellicott City,

MD

HURRICANEFLORENCE

hits North and South

Carolina

HURRICANEMICHAELhits Florida, Georgia and the Carolinas

WILDFIRESin Southern

and Northern California

JANUARY

MUDSLIDES in Montecito,

CA

MARCH

NOR’EASTERwinter storm

in New England

MAY

DROUGHTin the

Southern Plains

MAY

FLOODINGin Ellicott City,

MD

SEPTEMBER

HURRICANEFLORENCE

hits North and South

Carolina

OCTOBER

HURRICANEMICHAELhits Florida, Georgia and the Carolinas

NOVEMBER

WILDFIRESin Southern

and Northern California

JANUARY MARCH MAY MAY SEPTEMBER OCTOBER NOVEMBER

In the last 15 years,

14HURRICANES

HAVE HITVIRGINIA

FIVEdirectly creating outages in the

Northern Neck region

Sources: CNBC, Vox, ABC News, CNN and the National Integrated Drought Information System

Saving for a Rainy Day — or a Hurricane | Cooperative Partnership Case Study

• Northern Neck identified the source of funding and determined how and when the money could be used.• Homestead representatives provided guidance in establishing the mix of funds in the portfolio, using an

approach that allows the co-op to benefit from market growth while meeting risk tolerance needs.

Today, Homestead continues to work with Northern Neck by providing performance metrics and regular check-ins that help ensure investment risk and liquidity needs are balanced as funds move in and out of the account.

The ResultsWith savings set aside, Northern Neck remains a reliable source of power for its customers — regardless of Mother Nature’s unpredictability.

“Over the years Northern Neck has developed an extensive plan to restore power to our members in a timely and efficient manner after major weather events. Establishing this reserve account with Homestead helps ensure that we can carry out that plan without an impact on the financial integrity of the cooperative.”

This case study is for illustrative purposes only and is not meant to guarantee that any individual’s needs or objectives will be met. This case study should not be construed as a testimonial. Other clients may not have received the same or similar results.

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

Investing in mutual funds involves risk, including the possible loss of principal. Past performance does not guarantee future results.

Investors should carefully consider fund objectives, risks, charges and expenses before investing. The prospectus contains this and other information about the funds and should be read carefully before investing. To obtain a prospectus, call 800.258.3030 or visit homesteadfunds.com.

Homestead Funds’ investment advisor and/or administrator, RE Advisers Corporation, and distributor, RE are indirect wholly owned subsidiaries of NRECA. RE Investment Corporation, Distributor 10/19.

homesteadfunds.com | 800.258.3030

— Greg White, President & CEO, Northern Neck Electric Cooperative

The PartnershipNorthern Neck approached Homestead Funds with the idea of establishing a reserve fund that it could build over time and tap into when needed. Northern Neck chose Homestead because it has a long history of working with cooperatives. Homestead shared ideas of how other cooperatives have used low-cost, moderate-risk investments in Homestead Funds to establish reserves for emergencies, equipment purchases and many other large-scale spends.

Together, Homestead and Northern Neck developed a solution that took advantage of each partner's strengths. By allocating across a mix of Homestead Funds, Northern Neck established a diversified portfolio that meets their needs for liquidity while providing the potential for long-term asset growth. So when storms wreak havoc in the area, the co-op can respond quickly to customer needs while reducing the impact on its financial statement.

The SolutionNorthern Neck established a corporate reserve account with Homestead Funds.

Let's partner together to support your communities. Contact us at800.258.3030, option 3.