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HomeMy Public PortalAbout2013 4th Quarter ReportMetropolitan St. Louis Sewer District Pension Plan 4th Quarter 2013 Performance Review 1 Performance Summary 1 2 Asset Class Diversification 17 3 Manager Evaluation 23 4 Calendar Year Performance 65 5 Capital Markets Review 67 6 Appendix 75 Table of Contents Performance Summary 1 Performance Summary - December 2013 The Metropolitan St. Louis Sewer District Pension Plan returned 3.9%, modestly trailing the Policy Benchmark return of 4.0%. Over a trailing one- year basis, the Plan advanced 10.9%, lagging the Policy Benchmark by 1.6%. Similar to the third quarter, global equity markets, in particular the domestic equity segment, experienced robust gains in the fourth quarter. The overall global fixed income markets saw muted results, capping off a relatively volatile year. Alternative strategies failed to keep pace with the strong equity markets. Asset Class Diversification Current asset allocation was within investment policy targets. The portfolio maintained underweight exposures to fixed income and alternative strategies, which benefited the Plan’s performance during the fourth quarter. Overweight allocations to the equity markets were results of market appreciation. Manager Evaluation During the fourth quarter, the following managers notably outperformed their respective benchmarks: T. Rowe Price Large-Cap Core Growth, TimesSquare Small Cap Growth, Loomis Credit Asset, PIMCO All Asset, and Wellington Diversified Inflation Hedges. Fourth quarter performance was adversely affected by the following managers as they failed to keep pace with their respective benchmarks: Vanguard Windsor II, Holland Large Cap Growth, GMO Asset Allocation, and Pyramis Market Neutral. On January 17, 2014, Morgan Stanley announced the retirement of Peter Wright, co-lead portfolio manager of the International Equity Strategy, effective December 17, 2014. William Lock will be the sole lead portfolio manager from December 2014. While this is a key departure for the team, Pavilion believes that this retirement notice a year in advance will give the International Equity Strategy team adequate time to transition all of Mr. Wright's responsibilities. Pavilion will continue to monitor this manager for further developments. Capital Markets Review On December 18th, the Fed announced the tapering of asset purchases by $10 billion per month beginning in January, citing an improving economy as a main reason for this decision. Interest rates are expected to remain at very low levels for an extended period of time, as the Fed seeks to lessen the reliance on targets for rising rates. Market speculation leading up to the Fed's plans resulted in considerable interest rate volatility during the quarter as the 10-year U.S. Treasury yield fell to 2.5% in October before surpassing 3.0% in late December. The yield curve flattened during the quarter as intermediate rates rose more than long rates. During the fourth quarter, global equity markets again experienced strong gains, due to central bank policy changes and encouraging economic data. Within the domestic equity market, lage-cap growth companies outpaced their value counterparts, while value stocks outpaced growth stock among small- and mid-cap indices. Among non-U.S. indices, developed market value companies outpaced their growth counterparts, while emerging market growth stocks outperformed value stocks. While corporate earnings increased somewhat during the quarter, equity market gains were primarily a result of multiples expansion and higher interest rates, which has increased the valuations of equities, particularly U.S. equities. Recommendations or Action Items Pavilion will be presenting an asset allocation study and investment structure review at the February 2014 Finance Committee Meeting. Pension Plan Executive Summary 2 Total Composite Policy Benchmark 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 17.6 Return (%)Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception 4.0 12.5 12.5 8.3 11.1 6.8 8.4 3.9 10.9 10.9 8.0 11.0 6.7 7.9 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 3.9 10.9 10.9 8.0 11.0 6.7 8.0 21y Policy Benchmark 4.0 12.5 12.5 8.3 11.1 6.8 N/A Performance Summary Total Composite vs. Policy Benchmark As of December 31, 2013 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 3 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 3.9 (98)10.9 (96)10.9 (96)8.0 (90)11.0 (92)5.8 (44)6.7 (46)¢£ 5th Percentile 7.5 22.1 22.1 11.7 14.6 6.8 8.1 1st Quartile 6.4 18.9 18.9 10.7 13.1 6.4 7.4 Median 5.7 17.5 17.5 9.7 12.4 5.7 6.6 3rd Quartile 5.0 15.6 15.6 8.6 11.9 5.2 6.2 95th Percentile 4.1 11.0 11.0 7.0 10.7 4.1 5.2 Performance Comparison All Public Plans <= $500 mil As of December 31, 2013 _________________________ Performance is reported net of fees. Plan sponsor peer group data is preliminary. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 4 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 3.9 (90)10.9 (91)10.9 (91)8.0 (89)11.0 (88)5.8 (36)6.7 (61)¢£ 5th Percentile 7.3 21.9 21.9 11.7 14.3 6.8 8.2 1st Quartile 6.2 18.5 18.5 10.5 13.0 6.2 7.5 Median 5.5 16.7 16.7 9.6 12.4 5.6 7.0 3rd Quartile 4.8 14.4 14.4 8.6 11.8 5.1 6.4 95th Percentile 2.9 7.1 7.1 6.9 9.9 4.1 5.3 Performance Comparison All Public Plans As of December 31, 2013 _________________________ Performance is reported net of fees. Plan sponsor peer group data is preliminary. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 5 3 Years 5 Years 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 Return (%)6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 Risk (Standard Deviation %) Policy Benchmark (9.3 , 11.1) Total Composite (8.7 , 11.0) 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 Return (%)6.0 7.0 8.0 9.0 10.0 11.0 Risk (Standard Deviation %) Policy Benchmark (7.4 , 8.3) Total Composite (7.6 , 8.0) Performance Summary Risk and Return Summary As of December 31, 2013 6 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 246,429,988 100.0 3.9 10.9 10.9 8.0 11.0 6.7 8.0 21y Policy Benchmark 4.0 12.5 12.5 8.3 11.1 6.8 N/A Total Equity Composite 99,021,752 40.2 8.3 N/A N/A N/A N/A N/A 13.7 0y 4m MSCI AC World Index 7.3 22.8 22.8 9.7 14.9 7.2 12.9 Domestic Equity Composite 66,233,176 26.9 10.2 (26)N/A N/A N/A N/A N/A 14.9 (N/A)0y 4m Russell 3000 Index 10.1 (28)33.6 (40)33.6 (40)16.2 (16)18.7 (37)7.9 (45)14.2 (N/A) Broad Equity Peer Group Median 9.4 32.5 32.5 14.5 18.0 7.7 N/A Large-Cap Equity Composite 52,689,603 21.4 10.6 (35)32.0 (54)32.0 (54)15.5 (38)16.8 (60)7.5 (45)8.7 (N/A)10y 7m S&P 500 10.5 (37)32.4 (50)32.4 (50)16.2 (28)17.9 (42)7.4 (48)8.5 (N/A) Large-Cap Equity Peer Group Median 9.9 32.4 32.4 14.8 17.4 7.3 N/A Small-Cap Equity Composite 13,543,573 5.5 8.5 (65)40.3 (45)40.3 (45)17.0 (32)22.4 (33)11.1 (9)12.7 (N/A)10y 7m Russell 2000 Index 8.7 (59)38.8 (51)38.8 (51)15.7 (51)20.1 (61)9.1 (48)11.0 (N/A) Small-Cap Equity Peer Group Median 9.0 39.0 39.0 15.7 20.8 9.0 N/A International Equity Composite 32,788,576 13.3 4.7 (65)N/A N/A N/A N/A N/A 11.3 (N/A)0y 4m MSCI AC World ex USA Index 4.8 (64)15.3 (54)15.3 (54)5.1 (52)12.8 (62)7.6 (68)12.0 (N/A) International Equity Peer Group Median 5.2 15.6 15.6 5.2 13.3 8.2 N/A Developed International Equity Composite 25,542,840 10.4 5.6 (61)20.4 (54)20.4 (54)10.0 (17)11.4 (77)7.0 (55)5.5 (N/A)14y 8m MSCI EAFE Index 5.7 (58)22.8 (32)22.8 (32)8.2 (39)12.4 (59)6.9 (60)4.3 (N/A) Developed International Equity Peer Group Median 6.0 20.8 20.8 7.4 12.9 7.3 N/A Emerging International Equity Composite 7,245,736 2.9 1.7 (62)-0.9 (48)-0.9 (48)-0.9 (39)14.3 (56)N/A 9.4 (45)8y 9m MSCI Emerging Markets Index 1.8 (60)-2.6 (64)-2.6 (64)-2.1 (57)14.8 (47)11.2 (38)9.7 (39) Emerging Markets Equity Peer Group Median 2.5 -1.1 -1.1 -1.6 14.5 10.4 8.9 Fixed Income Composite 78,301,664 31.8 0.4 (35)-1.7 (82)-1.7 (82)4.2 (18)7.9 (11)5.4 (6)5.2 (9)10y 6m Barclays Intermediate U.S. Government/Credit 0.0 (65)-0.9 (55)-0.9 (55)2.9 (56)4.0 (67)4.1 (49)3.9 (51) Intermediate Duration Fixed Income Peer Group Median 0.2 -0.6 -0.6 3.1 5.8 4.1 3.9 Performance Summary Total Fund Asset Allocation and Performance As of December 31, 2013 _________________________ Performance is reported net of fees. 7 Performance Summary Total Fund Asset Allocation and Performance As of December 31, 2013 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Tactical Asset Allocation Composite 24,417,418 9.9 4.2 12.5 12.5 8.1 10.7 6.7 6.6 10y 7m 65% MSCI World (Net) / 35% BC Aggregate 5.1 15.9 15.9 8.8 11.6 6.4 7.4 Alternatives Composite 21,839,752 8.9 0.3 N/A N/A N/A N/A N/A 1.9 0y 4m 3 Month T-Bills + 3%0.8 3.1 3.1 3.1 3.1 4.7 1.0 Real Estate Composite 10,640,927 4.3 2.0 9.2 9.2 10.1 3.6 6.9 4.4 7y 7m NCREIF Property Index 2.5 11.0 11.0 11.9 5.7 8.6 6.3 Real Assets Composite 10,853,467 4.4 2.7 -3.9 -3.9 -2.6 N/A N/A 2.3 3y 9m Wellington DIH Multi-Asset Inflation Index 1.6 -2.1 -2.1 -2.3 6.4 6.2 1.6 Cash Account 1,355,008 0.5 0.1 0.1 0.1 0.1 -0.2 1.5 1.5 10y 7m BofA Merrill Lynch 3 Month US T-Bill 0.0 0.1 0.1 0.1 0.1 1.7 1.6 _________________________ Performance is reported net of fees. 8 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Domestic Large-Cap Equity Managers Vanguard Windsor II 18,135,703 7.4 9.5 (52)30.8 (61)30.8 (61)16.2 (27)17.2 (42)8.0 (29)6.4 (N/A)12y 8m Russell 1000 Value Index 10.0 (44)32.5 (44)32.5 (44)16.1 (29)16.7 (51)7.6 (40)6.4 (N/A) Large-Cap Value Equity Peer Group Median 9.6 31.7 31.7 14.7 16.7 7.3 N/A Vanguard Institutional Index Fund 7,705,753 3.1 10.5 (37)32.3 (51)32.3 (51)16.2 (29)18.0 (41)7.4 (47)4.6 (66)14y 3m S&P 500 10.5 (37)32.4 (50)32.4 (50)16.2 (28)17.9 (42)7.4 (48)4.5 (67) Large-Cap Equity Peer Group Median 9.9 32.4 32.4 14.8 17.4 7.3 5.4 T. Rowe Price Inst. Large-Cap Core Growth 13,401,922 5.4 12.8 (10)41.4 (12)41.4 (12)19.4 (10)23.1 (15)8.4 (35)34.0 (N/A)0y 10m Russell 1000 Growth Index 10.4 (53)33.5 (58)33.5 (58)16.5 (34)20.4 (35)7.8 (47)26.4 (N/A) Large-Cap Growth Equity Peer Group Median 10.6 34.6 34.6 15.3 19.3 7.7 N/A Holland Large Cap Growth 13,446,225 5.5 9.9 (66)30.3 (77)30.3 (77)15.4 (48)19.9 (41)7.9 (45)22.2 (N/A)0y 10m Russell 1000 Growth Index 10.4 (53)33.5 (58)33.5 (58)16.5 (34)20.4 (35)7.8 (47)26.4 (N/A) Large-Cap Growth Equity Peer Group Median 10.6 34.6 34.6 15.3 19.3 7.7 N/A Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 6,876,406 2.8 8.0 (61)33.3 (51)33.3 (51)14.5 (46)20.8 (34)N/A 11.1 (8)6y Russell Midcap Value Index 8.6 (49)33.5 (50)33.5 (50)16.0 (28)21.2 (30)10.3 (28)8.2 (42) Mid-Cap Value Equity Peer Group Median 8.5 33.4 33.4 14.2 19.6 9.1 7.8 TimesSquare Small Cap Growth Fund 6,667,167 2.7 9.1 (40)47.7 (31)47.7 (31)19.7 (12)24.2 (24)12.5 (1)11.7 (N/A)11y 11m Russell 2000 Growth Index 8.2 (64)43.3 (60)43.3 (60)16.8 (49)22.6 (47)9.4 (28)8.5 (N/A) Small-Cap Growth Equity Peer Group Median 8.8 44.7 44.7 16.7 22.4 8.9 N/A Developed International Equity Manager Morgan Stanley International Equity Fund I 25,542,840 10.4 5.6 (61)20.4 (54)20.4 (54)10.0 (17)11.4 (77)7.0 (56)5.8 (61)8y 9m MSCI EAFE (net)5.7 (58)22.8 (32)22.8 (32)8.2 (39)12.4 (59)6.9 (60)5.7 (63) International Equity Peer Group Median 6.0 20.8 20.8 7.4 12.9 7.3 6.2 Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 7,245,736 2.9 1.8 (60)-0.8 (47)-0.8 (47)-0.9 (39)14.3 (56)10.8 (44)9.5 (44)8y 9m MSCI EM (net)1.8 (60)-2.6 (64)-2.6 (64)-2.1 (57)14.8 (47)11.2 (38)9.7 (39) Emerging Markets Equity Peer Group Median 2.5 -1.1 -1.1 -1.6 14.5 10.4 8.9 Performance Summary Manager Asset Allocation and Performance As of December 31, 2013 _________________________ Performance is reported net of fees. 9 Performance Summary Manager Asset Allocation and Performance As of December 31, 2013 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 30,527,362 12.4 0.0 (64)-0.9 (61)-0.9 (61)3.5 (38)6.1 (40)5.0 (13)5.5 (8)12y 6m Barclays Intermediate U.S. Government/Credit 0.0 (65)-0.9 (55)-0.9 (55)2.9 (56)4.0 (67)4.1 (49)4.8 (31) Intermediate Duration Fixed Income Peer Group Median 0.2 -0.6 -0.6 3.1 5.8 4.1 4.4 Penn Capital 12,441,710 5.0 3.5 (37)5.9 (78)5.9 (78)7.7 (81)14.6 (82)N/A 6.9 (87)8y 6m BofA Merrill Lynch US High Yield, Cash Pay Index 3.5 (42)7.4 (50)7.4 (50)9.0 (39)18.5 (23)8.4 (29)8.5 (30) High Yield Fixed Income Peer Group Median 3.4 7.4 7.4 8.7 16.9 8.0 8.1 Loomis Credit Asset Fund 4,782,723 1.9 2.3 (12)4.4 (13)4.4 (13)7.2 (1)N/A N/A 8.6 (1)3y 10m 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 1.8 (35)2.1 (32)2.1 (32)6.3 (2)12.3 (1)6.2 (5)7.1 (5) Alternative Credit Focus Funds Peer Group Median 1.3 0.4 0.4 3.7 8.5 4.3 4.4 Brandywine Global Opportunistic Fixed Income 18,943,631 7.7 -0.3 (72)-3.5 (69)-3.5 (69)5.9 (13)10.3 (13)N/A 6.6 (19)9y Citigroup World Government Bond -1.1 (86)-4.0 (72)-4.0 (72)1.2 (79)2.3 (84)4.2 (65)3.5 (82) Global Fixed Income Peer Group Median 0.5 -1.7 -1.7 3.1 6.0 5.0 4.8 Pictet Emerging Local Currency Debt Fund 11,606,238 4.7 -1.5 (50)-10.3 (47)-10.3 (47)0.3 (63)N/A N/A 1.6 (75)2y 3m JPM GBI-EM Global Diversified -1.5 (50)-9.0 (24)-9.0 (24)1.5 (26)8.1 (56)9.5 (N/A)3.0 (41) Emerging Markets (LC) Fixed Income Peer Group Median -1.6 -10.4 -10.4 0.6 8.4 N/A 2.6 Tactical Asset Allocation Manager GMO Asset Allocation Fund 24,417,418 9.9 4.3 (34)12.5 (32)12.5 (32)8.1 (31)10.7 (63)7.3 (13)6.3 (25)7y 5m 65% MSCI World (Net) / 35% BC Aggregate 5.1 (27)15.9 (27)15.9 (27)8.8 (25)11.6 (53)6.4 (39)5.6 (50) IM Flexible Portfolio (MF) Median 2.1 4.6 4.6 6.0 12.2 6.1 5.6 _________________________ Performance is reported net of fees. 10 Performance Summary Manager Asset Allocation and Performance As of December 31, 2013 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Alternatives Managers Pyramis Market Neutral 10,093,529 4.1 -2.4 -1.6 -1.6 0.4 0.1 N/A 3.2 8y 5m 3 Month T-Bills + 3%0.8 3.1 3.1 3.1 3.1 4.7 4.7 PIMCO All Asset Fund I 11,746,223 4.8 1.3 0.8 0.8 6.0 10.8 6.7 6.1 8y Barclays U.S. Treasury Inflation Notes: 1-10 Year -1.3 -5.6 -5.6 2.6 5.0 4.4 4.4 Real Estate Manager UBS Trumbull Property Fund 10,640,927 4.3 2.0 9.2 9.2 10.1 3.6 6.9 4.4 7y 7m NCREIF Property Index 2.5 11.0 11.0 11.9 5.7 8.6 6.3 Real Asset Manager Wellington Diversified Inflation Hedges 10,853,467 4.4 2.7 -3.9 -3.9 -2.6 N/A N/A 2.3 3y 9m Wellington DIH Multi-Asset Inflation Index 1.6 -2.1 -2.1 -2.3 6.4 6.2 1.6 Cash Account 1,355,008 0.5 0.1 0.1 0.1 0.1 -0.2 1.5 1.5 10y 7m BofA Merrill Lynch 3 Month US T-Bill 0.0 0.1 0.1 0.1 0.1 1.7 1.6 Total Composite 246,429,988 100.0 3.9 10.9 10.9 8.0 11.0 6.7 8.0 21y _________________________ Performance is reported net of fees. 11 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 23.0 24.0 25.0 26.0 Return (%)14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 23.0 23.6 Risk (Standard Deviation %) MSCI Emerging Markets (net) MSCI EAFE (net) Russell 2000 Growth Russell Midcap Value Russell 1000 Growth S&P 500 Russell 1000 Value Holland Large Cap Growth Kennedy Mid Cap Value TimesSquare Small Cap Growth Morgan Stanley Emerging Markets Morgan Stanley International Equity Vanguard Windsor II Fund Vanguard Institutional Index Fund T. Rowe Price Inst. Large-Cap Core Growth Performance Summary Risk and Return Summary - Equity Managers 5 Years Ending December 31, 2013 12 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 20.9 Return (%)1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 Risk (Standard Deviation %) 50% BC Credit / 25% S&P LSTA / 25% BY High Yield JPM GBI-EM Global Diversified Citigroup World Government Bond BofA Merrill Lynch US High Yield, Cash Pay Index BC Intermediate U.S. Government/Credit Penn Capital Income Research Brandywine Global Performance Summary Risk and Return Summary - Fixed Income Managers 5 Years Ending December 31, 2013 13 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 Return (%)-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 16.7 Risk (Standard Deviation %) Barclays U.S. Treasury Inflation Notes: 1-10 Year NCREIF Property Index Wellington DIH Multi-Asset Inflation Index 3 Month T-Bills + 3% 65% MSCI World (Net) / 35% BC Aggregate UBS TPF Pyramis PIMCO All Asset GMO Performance Summary Risk and Return Summary - Alternative Managers 5 Years Ending December 31, 2013 14 Manager Compliance Checklist Fourth Quarter 2013 Mana ge rs Vangua rd Windsor Vangua rd Inst itutional T. Row e Price Holland Ke nne dy Ti me sS qua re Morgan Stanle y I nt'l Morga n Stanley EM Organi zati onal /Produ ct Is sues No ma teria l c hanges to investment team ü ü ü ü ü ü Ye s ü No ma teria l o rg aniza tional changes ü ü ü ü ü ü ü ü Accounting or regulatory concerns ü ü ü ü ü ü ü ü Cu rrently in adherence to guidelin es ü ü ü ü ü ü ü ü Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü Re lati ve Perfor mance 1 Th re e-year re turn better than benchmark ü N/A ü No (-1 10 bps )No (-1 50 bps )ü ü ü Th re e-year ra nkin g better than peer group median ü N/A ü ü ü ü ü ü Fiv e year return better than benchmark ü N/A ü No (-5 0 bps )No (-4 0 bps )ü No (-1 00 bps )No (-5 0 bps ) 1 Manager performance is evaluated net of investment management fees. Fiv e year rankin g better than peer group median ü N/A ü ü ü ü No (7 7)No (5 6) Perfor manc e s tatus Gr een Gr een Gr een Gr een Gr een Gr een Gr een Gr een Da te perfo rmance s tatus changed Summary status Re pl ac e Gr een Gr een Gr een Gr een Gr een Gr een Te rminate Da te s umma ry status changed 4Q13 4Q13 15 Manager Compliance Checklist Fourth Quarter 2013 Mana ge rs Income Re se arch Penn Loomis Bra ndywine Global Picte t GMO Pyra mis PIMCO UBS Wellington Organizational /Produ ct Is sues No ma terial c hanges to investment team ü ü ü Ye s ü ü ü Ye s ü ü No ma terial o rganiza tional changes ü ü ü ü ü ü ü ü ü ü Accounting or regulatory concerns ü ü ü ü ü ü ü ü ü ü Cu rrently in adherence to guidelin es ü ü ü ü ü ü ü ü ü ü Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü ü ü Relati ve Perfor mance 1 Three-year return better than benchmark ü No (-1 30 bps )ü ü No (-120 bps )No (-7 0 bps )No (-270 bps )ü No (-1 80 bps )No (-3 0 bps ) Three-year rankin g better than peer group median ü No (8 1)ü ü No (63)ü N/A N/A N/A N/A Fiv e year return better than benchmark ü No (-3 90 bps )N/A ü N/A No (-9 0 bps )No (-300 bps )ü No (-2 10 bps )N/A Fiv e year rankin g better than peer group median ü No (8 2)N/A ü N/A No (6 3)N/A N/A N/A N/AFive year rankin g better than peer group median ü No (8 2)N/A ü N/A No (6 3)N/A N/A N/A N/A Performance s tatus Gr een Gr een Gr een Gr een Red Gr een Red Gr een Gr een Gr een Date performance status changed Summar y s tatus Gr een Te rminate Te rminate Gr een Te rminate Te rminate Repl ace Te rminate Gr een Gr een Date s umma ry status changed 4Q13 4Q13 4Q13 4Q13 4Q13 4Q13 1 Manager performance is evaluated net of investment management fees. 16 Asset Class Diversification 17 December 31, 2013 : $246,429,988 Target Allocation Actual Allocation Allocation Differences 0.0%3.0%6.0%9.0%12.0%15.0%18.0%21.0%24.0%27.0%30.0%33.0%36.0%38.1%-3.0 %-6.0 % Cash Account $1,355,008 Real Asset Composite $10,853,467 Real Estate Composite $10,640,927 Alternatives Composite $21,839,752 Tactical Asset Allocation Composite $24,417,418 Fixed Income Composite $78,301,664 Emerging International Equity Composite $7,245,736 Developed International Equity Composite $25,542,840 Small-Cap Equity Composite $13,543,573 Large-Cap Equity Composite $52,689,603 0.0% 5.0% 5.0% 9.0% 10.0% 33.0% 3.0% 10.0% 5.0% 20.0% 0.5% 4.4% 4.3% 8.9% 9.9% 31.8% 2.9% 10.4% 5.5% 21.4% 0.5% -0.6 % -0.7 % -0.1 % -0.1 % -1.2 % -0.1 % 0.4% 0.5% 1.4% Asset Class Diversification Investment Policy Allocation As of December 31, 2013 18 Asse t Cl ass/Type Manager Total Asse ts ($,mil.)as of 12/31/2013 Perce nt of Total Targe t Allocation Weighting Re lati ve to Ta rge t Al lowable Ra nge Total Asse ts ($,mil.)as of 10/1/2013 Large -Ca p Equity $52.7 21.4%20.0%+ 1 .4%16 -24%$47.9 Co re Va nguard Ins titutional $7.7 3.1%5.0%- 1.9%$7.2 Va lu e Va nguard Windsor $18.1 7.4%5.0%+ 2.4%$16.0 Gr owth T. Rowe Price $13.4 5.4%5.0%+ 0.4%$12.6 Gr owth Ho lla nd $13.4 5.5%5.0%+ 0.5%$12.2 Small-Ca p Equity $13.5 5.5%5.0%+ 0 .5%3 -7%$12.5 Va lu e Kennedy $6.9 2.8%2.5%+ 0.3%$6.4 Gr owth Time sSquare $6.7 2.7%2.5%+ 0.2%$6.1 Inte rna ti ona l Equity $32.8 13.3%13.0%+ 0 .3%$31.2 Developed Morgan Stanley $25.5 10.4%10.0%+ 0.4%8 -12%$24.5 Eme rgin g Marke ts Morgan Stanley $7.2 2.9%3.0%- 0.1%2 -5%$6.6 Fix ed Income $78.3 31.8%33.0%- 1 .2%$74.7 Asset Class Diversification Investment Program Structure As of December 31, 2013 Fix ed Income $78.3 31.8%33.0%- 1 .2%$74.7 Do me stic Core In come Res earch $30.5 12.4%13.0%- 0.6%10 -20%$29.6 High Yie ld Penn Capit al $12.4 5.0%5.0%+ 0.0%3 -7%$12.0 Op portunistic Cr edit Lo omis $4.8 1.9%2.0%- 0.1%0 -5%$4.7 Global Br andywin e Glo bal $18.9 7.7%8.0%- 0.3%6 -10%$17.9 Eme rgin g Marke ts De bt Pictet $11.6 4.7%5.0%- 0.3%3 -7%$10.5 Tacti ca l $24.4 9.9%10.0%- 0 .1%$24.0 Ba la nced GM O $24.4 9.9%10.0%- 0.1%8 -12%$24.0 Alte rna ti ve s $21.8 8.9%9.0%- 0 .1%$22.2 Marke t Neutral Py ramis $10.1 4.1%5.0%- 0.9%3 -7%$10.3 Absolu te Return PIMCO $11.7 4.8%4.0%+ 0.8%3 -7%$11.9 Real Es tate $10.6 4.3%5.0%- 0 .7%$10.4 Re al Es tate UBS Tru mb ull $10.6 4.3%5.0%- 0.7%3 -7%$10.4 Real As set $10.9 4.4%5.0%- 0 .6%$10.1 Re al Asset Wellin gton $10.9 4.4%5.0%- 0.6%3 -7%$10.1 Ca sh $1.4 0.5%0.0%+ 0 .5%$1.3 Ca sh Account Ca sh Account $1.4 0.5%0.0%+ 0.5%$1.3 Tota l $246.4 100.0%100.0%+ 0 .0%$234.3 *Totals may not add to exactly 100.0% due to rounding. 19 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)73,850 84,976 Median Mkt. Cap ($M)12,101 8,486 Price/Earnings ratio 19.5 16.5 Price/Book ratio 2.9 2.5 5 Yr. EPS Growth Rate (%)8.3 5.6 Current Yield (%)1.9 2.4 Debt to Equity 6.2 3.3 Number of Stocks 953 2,441 Beta -1.00 Consistency -- Sharpe Ratio -- Information Ratio -- Up Market Capture -- Down Market Capture -- Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Google Inc 1.5 0.9 0.6 27.9 Amazon.com Inc 1.4 0.4 1.0 27.6 Nestle SA, Cham Und Vevey 1.2 0.7 0.5 5.0 Unilever NV 1.2 0.2 1.0 4.6 British American Tobacco PLC 1.2 0.3 0.9 1.1 Reckitt Benckiser Group PLC 1.1 0.1 1.0 8.5 Sanofi 1.1 0.4 0.8 4.7 Apple Inc 1.0 1.4 -0.4 18.4 Visa Inc 1.0 0.3 0.7 16.8 Novartis AG 0.9 0.5 0.4 4.2 % of Portfolio 11.5 5.2 Sector Weights (%) Total Equity Composite MSCI AC World Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.2 2.0 1.4 2.1 4.7 17.0 11.0 13.2 15.7 8.5 11.5 12.8 0.0 0.0 3.1 4.2 5.9 12.5 11.0 10.3 21.5 9.8 9.8 11.9 Distribution of Market Capitalization (%) Total Equity Composite MSCI AC World Index 0.0 10.0 20.0 30.0 40.0 49.5 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 42.9 35.1 21.6 0.4 0.0 39.9 29.1 25.2 3.7 2.0 Equity Portfolio - Characteristics Total Equity Composite vs. MSCI AC World Index As of December 31, 2013 20 Total Equity Composite MSCI AC World Index Australia 0.4 2.8 Hong Kong 0.4 1.8 Japan 4.7 7.8 New Zealand 0.0 0.0 Singapore 0.0 0.6 Pacific 5.6 13.0 Austria 0.1 0.1 Belgium 0.2 0.4 Finland 0.0 0.3 France 2.4 3.5 Germany 2.3 3.5 Greece 0.0 0.1 Ireland 0.9 0.5 Italy 0.4 0.8 Luxembourg 0.3 0.1 Netherlands 1.6 1.3 Portugal 0.1 0.1 Spain 0.1 1.2 EMU 8.3 11.9 Denmark 0.0 0.4 Norway 0.0 0.3 Sweden 0.3 1.2 Switzerland 4.5 3.6 United Kingdom 9.3 8.2 Europe ex EMU 14.1 13.8 Canada 0.5 3.7 United States 62.4 47.6 Israel 0.0 0.2 Middle East 0.0 0.2 Developed Markets 91.0 90.1 Total Equity Composite MSCI AC World Index Brazil 0.5 1.1 Cayman Islands 0.0 0.0 Chile 0.0 0.2 Colombia 0.1 0.1 Mexico 0.5 0.6 Peru 0.1 0.0 Virgin Islands 0.0 0.0 EM Latin America 1.2 2.0 China 1.5 1.4 India 0.5 0.7 Indonesia 0.1 0.2 Korea 1.3 1.7 Malaysia 0.2 0.4 Philippines 0.3 0.1 Taiwan 0.5 1.2 Thailand 0.4 0.2 EM Asia 4.7 6.0 Czech Republic 0.1 0.0 Egypt 0.0 0.0 Hungary 0.1 0.0 Morocco 0.0 0.0 Poland 0.2 0.2 Russia 0.2 0.6 South Africa 0.3 0.8 Turkey 0.1 0.2 EM Europe + Middle East + Africa 1.0 1.9 Emerging Markets 6.9 9.9 Frontier Markets 0.0 0.0 Cash 2.0 0.0 Other 0.1 0.0 Total 100.0 100.0 Equity Portfolio - Country/Region Allocation Total Equity Composite vs. MSCI AC World Index As of December 31, 2013 21 Portfolio Characteristics Maturity Distribution (%) Credit Quality Distribution (%) Risk Characteristics - 3 Years Sector Distribution (%) Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 20.0 40.0 60.0 80.0 87.5 AAAAAABBBBBBBelow BNot Rated65.5 6.6 14.1 13.8 0.0 0.0 0.0 0.0 26.6 9.7 16.2 21.7 10.7 12.1 0.6 2.3 Portfolio Benchmark Effective Duration 4.4 3.8 Avg. Maturity 6.9 4.1 Avg. Quality A-AA+ Yield To Maturity (%)3.9 1.6 Consist ency Sharpe Ratio Informa tion Ratio Up Market Capture Down Market Capture Total Fixed Income Composite 55.6 0.9 0.4 152.8 163.7 Barclays Intermediate U.S. Government/Credit 0.0 1.3 N/A 100.0 100.0 90 Day U.S. Treasury Bill 38.9 N/A -1.3 0.9 -1.7 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 12.0 24.0 36.0 48.0 60.0 72.0 81.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.7 6.8 23.9 0.0 0.0 0.0 10.3 2.3 0.0 0.0 0.0 0.0 11.1 0.4 17.7 17.1 4.0 2.5 16.7 14.9 1.4 4.6 5.0 4.7 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 10.0 20.0 30.0 40.0 50.0 56.7 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 41.5 27.5 31.0 0.0 0.0 8.9 18.4 20.6 39.2 4.2 8.7 Fixed Income Portfolio - Characteristics Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2013 22 Manager Evaluation 23 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Vanguard Windsor II 9.5 30.8 30.8 16.2 17.2 8.0 16.8 2.8 10.7 27.2 -36.6 2.3 18.4 7.2 18.4 30.2 Russell 1000 Value Index 10.0 32.5 32.5 16.1 16.7 7.6 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 7.1 16.5 30.0 Large-Cap Value Equity Peer Group Median 9.6 31.7 31.7 14.7 16.7 7.3 15.0 -1.5 13.5 25.4 -37.3 2.9 16.6 6.1 12.5 28.4 Vanguard Windsor II Rank 52 61 61 27 42 29 28 17 86 41 44 55 35 36 6 34 16.2 16.5 16.8 17.1 17.4 17.7 Return (%)18.0 18.2 18.4 18.6 18.8 19.0 19.2 19.4 19.6 Risk (Standard Deviation %) Russell 1000 Value Index Vanguard Windsor II Vanguard Windsor II Russell 1000 Value Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 6.0 9.6-6.0-12.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.2 0.2 1.2 -1.5 -1.0 1.5 4.4 -8.0 -2.0 3.1 0.9 3.6 Allocation (Total: -0.1) 0.0 0.3-0.3-0.6 0.2 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.1 0.0 -0.4 Stock (Total: -0.4) 0.0 0.4 0.8-0.4-0.7 -0.2 0.0 0.0 0.0 0.0 -0.2 -0.1 0.5 0.0 -0.4 0.0 0.0 Vanguard Windsor II 0.0 0.3 0.6 0.9-0.3-0.6 0.0 0.0 0.0 0.0 0.0 -0.1 -0.1 0.5 0.0 -0.4 0.0 -0.4 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 24 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)95,419 114,371 Median Mkt. Cap ($M)21,044 6,562 Price/Earnings ratio 15.7 16.6 Price/Book ratio 2.2 2.0 5 Yr. EPS Growth Rate (%)3.6 1.8 Current Yield (%)2.5 2.2 Debt to Equity 1.2 1.2 Number of Stocks 291 662 Beta (5 Years, Monthly)0.94 1.00 Consistency (5 Years, Monthly)45.00 1.00 Sharpe Ratio (5 Years, Monthly)1.06 0.98 Information Ratio (5 Years, Monthly)0.10 - Up Market Capture (5 Years, Monthly)95.94 - Down Market Capture (5 Years, Monthly)90.01 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) JPMorgan Chase & Co 2.7 2.4 0.4 14.0 Pfizer Inc 2.6 2.2 0.4 7.5 Microsoft Corp 2.6 0.0 2.6 13.3 Raytheon Co.2.6 0.3 2.2 18.4 American Express Co 2.5 0.0 2.5 20.5 WellPoint Inc 2.5 0.3 2.2 11.0 Wells Fargo & Co 2.4 2.4 0.0 10.7 Philip Morris International Inc 2.3 0.0 2.3 1.7 Medtronic Inc 2.2 0.6 1.5 8.9 Johnson & Johnson 2.2 2.4 -0.3 6.4 % of Portfolio 24.6 10.6 Sector Weights (%) Vanguard Windsor II Russell 1000 Value Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 34.5 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.8 2.5 3.6 2.7 1.5 8.9 11.6 17.3 21.8 12.6 9.3 7.4 0.0 0.0 5.7 2.5 2.9 8.9 10.5 12.9 29.0 15.0 5.9 6.6 Distribution of Market Capitalization (%) Vanguard Windsor II Russell 1000 Value Index 0.0 10.0 20.0 30.0 40.0 50.0 57.5 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 47.4 31.6 20.8 0.3 0.0 49.9 35.3 12.2 0.1 2.5 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2013 25 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Vanguard Institutional Index 10.5 32.3 32.3 16.2 18.0 7.4 16.0 2.1 15.0 26.6 -37.0 5.5 15.8 4.9 10.9 28.7 S&P 500 Index 10.5 32.4 32.4 16.2 17.9 7.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 4.9 10.9 28.7 Large-Cap Equity Peer Group Median 9.9 32.4 32.4 14.8 17.4 7.3 14.6 -1.0 14.0 27.8 -37.5 6.2 13.3 5.9 10.2 27.1 Vanguard Institutional Index Rank 37 51 51 29 41 47 36 22 38 56 45 55 32 62 44 38 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.00 0.03 0.06 0.09 0.10 -0.03 -0.05Return (%)3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Vanguard Institutional Index S&P 500 Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Institutional Index 18.0 17.2 18.2 0.0 1.0 1.1 0.0 0.2 9.5 30.0 14y 3m S&P 500 Index 17.9 17.1 18.2 0.0 1.0 1.1 0.0 N/A 9.5 0.0 14y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 17.1 -1.1 0.0 25.0 14y 3m Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2013 26 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)118,706 118,708 Median Mkt. Cap ($M)16,455 16,430 Price/Earnings ratio 18.9 18.9 Price/Book ratio 2.9 2.9 5 Yr. EPS Growth Rate (%)6.5 6.4 Current Yield (%)2.0 2.0 Debt to Equity 5.7 5.7 Number of Stocks 502 500 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)40.00 1.00 Sharpe Ratio (5 Years, Monthly)1.13 1.13 Information Ratio (5 Years, Monthly)0.26 - Up Market Capture (5 Years, Monthly)100.02 - Down Market Capture (5 Years, Monthly)99.98 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.1 3.1 0.0 18.4 Exxon Mobil Corp 2.7 2.7 0.0 18.4 Google Inc 1.9 1.9 0.0 27.9 Microsoft Corp 1.7 1.7 0.0 13.3 General Electric Co 1.7 1.7 0.0 18.3 Johnson & Johnson 1.6 1.6 0.0 6.4 Chevron Corp 1.5 1.5 0.0 3.7 Procter & Gamble Co (The)1.3 1.3 0.0 8.5 JPMorgan Chase & Co 1.3 1.3 0.0 14.0 Wells Fargo & Co 1.3 1.3 0.0 10.7 % of Portfolio 18.1 18.1 Sector Weights (%) Vanguard Institutional Index S&P 500 Index 0.0 3.0 6.0 9.0 12.0 15.0 18.0 21.0 23.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.9 2.3 3.5 18.6 10.9 13.0 16.2 10.3 9.8 12.5 2.9 2.3 3.5 18.6 10.9 13.0 16.2 10.3 9.8 12.5 Distribution of Market Capitalization (%) Vanguard Institutional Index S&P 500 Index 0.0 10.0 20.0 30.0 40.0 50.0 60.0 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil 54.4 34.3 11.3 54.4 34.3 11.3 Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2013 27 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 T. Rowe Price LCC Growth 12.8 41.4 41.4 19.4 23.1 8.4 18.5 1.5 16.4 43.0 -42.6 13.0 9.1 4.0 7.3 N/A Russell 1000 Growth Index 10.4 33.5 33.5 16.5 20.4 7.8 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3 29.7 Large-Cap Growth Peer Group Median 10.6 34.6 34.6 15.3 19.3 7.7 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7 25.8 T. Rowe Price LCC Growth Rank 10 12 12 10 15 35 16 27 39 14 78 55 33 69 56 N/A 18.0 20.0 22.0 24.0 26.0 Return (%)16.0 16.2 16.4 16.6 16.8 17.0 17.2 17.4 17.6 17.8 17.9 Risk (Standard Deviation %) Russell 1000 Growth Index T. Rowe Price LCC Growth T. Rowe Price LCC Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 7.0 12.5-7.0-14.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.2 -1.9 0.0 -3.1 1.4 1.9 4.1 -0.3 -8.9 6.2 0.8 Allocation (Total: 0.3) 0.0 0.2 0.4-0.2 0.0 0.1 0.0 -0.1 0.0 0.0 0.0 0.0 0.3 0.0 -0.1 Stock (Total: 2.1) 0.0 0.5 1.0 1.3-0.5 0.0 0.0 -0.2 0.8 0.0 0.5 0.4 0.0 0.0 0.6 0.0 T. Rowe Price LCC Growth 0.0 0.3 0.6 0.9 1.1-0.3-0.5 0.0 0.1 -0.2 0.8 0.1 0.5 0.4 0.0 0.2 0.6 -0.1 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 28 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)81,872 97,884 Median Mkt. Cap ($M)24,492 8,042 Price/Earnings ratio 30.2 22.2 Price/Book ratio 5.3 4.8 5 Yr. EPS Growth Rate (%)14.8 12.4 Current Yield (%)0.7 1.6 Debt to Equity 36.4 9.1 Number of Stocks 142 625 Beta (5 Years, Monthly)1.06 1.00 Consistency (5 Years, Monthly)56.67 1.00 Sharpe Ratio (5 Years, Monthly)1.36 1.31 Information Ratio (5 Years, Monthly)0.76 - Up Market Capture (5 Years, Monthly)108.56 - Down Market Capture (5 Years, Monthly)102.59 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Google Inc 5.9 3.1 2.7 27.9 Amazon.com Inc 5.3 1.5 3.8 27.6 MasterCard Inc 3.4 1.0 2.4 24.3 Priceline.Com Inc 3.3 0.6 2.7 15.0 Gilead Sciences Inc 3.2 1.2 2.1 19.5 Danaher Corp 2.8 0.1 2.7 11.4 Precision Castparts Corp.2.2 0.4 1.8 18.5 McKesson Corp 2.2 0.4 1.8 26.0 Visa Inc 2.2 1.2 1.0 16.8 Biogen Idec Inc 2.1 0.7 1.4 16.1 % of Portfolio 32.5 10.2 Sector Weights (%) T. Rowe Price Large-Cap Core Growth Russell 1000 Growth Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.6 0.0 0.3 4.3 24.4 13.4 14.3 9.1 3.9 2.5 27.2 0.0 0.2 2.0 4.5 27.1 12.4 12.2 5.4 4.4 11.9 19.9 Distribution of Market Capitalization (%) T. Rowe Price Large-Cap Core Growth Russell 1000 Growth Index 0.0 10.0 20.0 30.0 40.0 50.0 57.5 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 49.2 29.5 21.1 0.1 0.0 47.7 40.0 11.6 0.0 0.6 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2013 29 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Holland Large Cap Growth 9.9 30.3 30.3 15.4 19.9 7.9 13.1 4.3 15.3 40.0 -33.8 9.4 6.4 -0.1 12.0 27.9 Russell 1000 Growth Index 10.4 33.5 33.5 16.5 20.4 7.8 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3 29.7 Large-Cap Growth Equity Peer Group Median 10.6 34.6 34.6 15.3 19.3 7.7 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7 25.8 Holland Large Cap Growth Rank 66 77 77 48 41 45 66 14 51 22 22 78 58 93 18 36 19.5 19.8 20.1 20.4 20.7 20.9 Return (%)15.4 15.6 15.8 16.0 16.2 16.4 16.6 16.8 Risk (Standard Deviation %) Russell 1000 Growth Index Holland Large Cap Growth Holland Large Cap Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 5.0 10.0-5.0-8.1 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.2 -2.0 -1.6 6.2 -3.4 2.5 -2.0 3.6 -4.2 -2.3 3.5 Allocation (Total: -0.4) 0.0 0.3-0.3-0.6 0.0 0.1 0.0 0.1 -0.1 0.0 0.0 -0.3 0.1 0.0 -0.4 Stock (Total: 0.3) 0.0 1.0 1.9-1.0-1.9 0.0 0.0 -0.1 -1.1 -0.4 -0.2 0.2 0.5 0.3 1.1 0.0 Holland Large Cap Growth 0.0 1.0 1.8-1.0-1.7 0.0 0.1 -0.1 -1.0 -0.5 -0.2 0.2 0.2 0.4 1.1 -0.4 Manager Evaluation Holland Large Cap Growth vs. Russell 1000 Growth Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 30 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)82,350 97,884 Median Mkt. Cap ($M)33,671 8,042 Price/Earnings ratio 26.0 22.2 Price/Book ratio 4.8 4.8 5 Yr. EPS Growth Rate (%)10.4 12.4 Current Yield (%)1.0 1.6 Debt to Equity 0.7 9.1 Number of Stocks 48 625 Beta (5 Years, Monthly)0.95 1.00 Consistency (5 Years, Monthly)51.67 1.00 Sharpe Ratio (5 Years, Monthly)1.31 1.31 Information Ratio (5 Years, Monthly)-0.14 - Up Market Capture (5 Years, Monthly)95.19 - Down Market Capture (5 Years, Monthly)91.31 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Qualcomm Inc.4.6 1.3 3.2 10.8 Visa Inc 4.4 1.2 3.2 16.8 Amazon.com Inc 4.2 1.5 2.7 27.6 Range Resources Corp.4.1 0.1 3.9 11.2 Citrix Systems Inc.3.5 0.1 3.4 -10.4 Google Inc 3.5 3.1 0.3 27.9 Priceline.Com Inc 3.1 0.6 2.5 15.0 Apple Inc 3.1 4.1 -1.1 18.4 Adobe Systems Inc 3.0 0.1 2.9 15.3 Cisco Systems Inc 2.7 0.0 2.7 -3.6 % of Portfolio 36.0 12.3 Sector Weights (%) Holland Capital Management Russell 1000 Growth Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.2 0.0 0.0 2.8 32.3 8.6 14.3 3.5 9.4 8.1 18.8 0.0 0.2 2.0 4.5 27.1 12.4 12.2 5.4 4.4 11.9 19.9 Distribution of Market Capitalization (%) Holland Capital Management Russell 1000 Growth Index 0.0 10.0 20.0 30.0 40.0 50.0 57.5 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 49.2 29.5 21.1 0.1 0.0 42.5 26.1 28.1 1.1 2.2 Manager Evaluation Holland Capital Management vs. Russell 1000 Growth Index As of December 31, 2013 31 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Kennedy Mid Cap Value 8.0 33.3 33.3 14.5 20.8 N/A 13.6 -0.8 27.0 34.8 -27.0 N/A N/A N/A N/A N/A Russell Midcap Value Index 8.6 33.5 33.5 16.0 21.2 10.3 18.5 -1.4 24.8 34.2 -38.4 -1.4 20.2 12.6 23.7 38.1 Mid-Cap Value Equity Peer Group Median 8.5 33.4 33.4 14.2 19.6 9.1 15.5 -3.0 20.7 32.9 -38.9 2.7 13.9 8.6 16.7 35.2 Kennedy Mid Cap Value Rank 61 51 51 46 34 N/A 63 33 9 43 10 N/A N/A N/A N/A N/A 20.4 20.7 21.0 21.3 21.6 Return (%)18.0 18.5 19.0 19.5 20.0 20.5 21.0 21.5 22.0 Risk (Standard Deviation %) Russell Midcap Value Index Kennedy Mid Cap Value Kennedy Mid Cap Value Russell Midcap Value Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 7.0 12.6-7.0-14.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -4.8 -0.6 -0.7 0.8 6.2 -0.4 -9.1 4.0 -1.0 2.0 3.5 Allocation (Total: 0.3) 0.0 0.3 0.5-0.3-0.5 0.3 0.0 0.0 0.0 0.3 0.0 0.1 -0.1 0.0 0.1 -0.3 Stock (Total: -1.3) 0.0 0.7-0.7-1.4 0.0 0.0 0.3 -1.0 -0.5 0.0 0.4 -0.4 0.2 -0.4 0.0 Kennedy Mid Cap Value 0.0 0.5 1.0-0.5-1.0-1.5 0.3 0.0 0.3 -1.0 -0.2 0.0 0.5 -0.5 0.2 -0.3 -0.3 Manager Evaluation Kennedy Mid Cap Value vs. Russell Midcap Value Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 32 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)8,031 10,627 Median Mkt. Cap ($M)6,054 5,247 Price/Earnings ratio 18.2 18.1 Price/Book ratio 2.0 1.9 5 Yr. EPS Growth Rate (%)7.4 4.7 Current Yield (%)1.6 2.0 Debt to Equity 0.6 1.8 Number of Stocks 55 534 Beta (5 Years, Monthly)0.88 1.00 Consistency (5 Years, Monthly)50.00 1.00 Sharpe Ratio (5 Years, Monthly)1.19 1.12 Information Ratio (5 Years, Monthly)-0.12 - Up Market Capture (5 Years, Monthly)93.25 - Down Market Capture (5 Years, Monthly)88.44 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Protective Life Corp 2.5 0.2 2.4 19.6 Southwest Airlines Co.2.5 0.5 2.0 29.7 Parker-Hannifin Corp 2.4 0.7 1.7 18.8 Georgia Gulf Corp.2.3 0.0 2.3 26.0 Foot Locker Inc.2.3 0.2 2.1 22.8 Hospira Inc 2.3 0.3 2.0 5.3 Harman International Industries Inc.2.2 0.2 2.0 24.0 Steel Dynamics Inc 2.2 0.2 2.1 17.5 AGCO Corp 2.2 0.2 2.0 -1.9 Zimmer Holdings Inc 2.2 0.5 1.6 13.7 % of Portfolio 23.1 2.9 Sector Weights (%) Kennedy Capital Management Russell Midcap Value Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.2 7.1 0.0 5.8 12.8 16.8 8.2 22.4 8.7 2.0 14.0 0.0 11.5 0.7 5.4 10.6 11.8 8.7 32.3 7.2 2.8 9.1 Distribution of Market Capitalization (%) Kennedy Capital Management Russell Midcap Value Index 0.0 20.0 40.0 60.0 80.0 100.0 $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 28.6 70.5 0.9 0.0 13.3 84.5 0.0 2.2 Manager Evaluation Kennedy Capital Management vs. Russell Midcap Value Index As of December 31, 2013 33 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 TimesSquare Small Cap Growth 9.1 47.7 47.7 19.7 24.2 12.5 13.1 2.6 27.3 35.7 -32.3 10.0 16.5 13.4 11.1 37.5 Russell 2000 Growth Index 8.2 43.3 43.3 16.8 22.6 9.4 14.6 -2.9 29.1 34.5 -38.5 7.0 13.3 4.2 14.3 48.5 Small-Cap Growth Equity Peer Group Median 8.8 44.7 44.7 16.7 22.4 8.9 12.7 -2.7 27.7 34.5 -40.6 9.9 9.9 5.8 11.3 43.3 TimesSquare Small Cap Growth Rank 40 31 31 12 24 1 47 14 53 46 11 49 14 10 53 73 21.0 22.0 23.0 24.0 25.0 26.0 Return (%)18.5 19.0 19.5 20.0 20.5 21.0 21.5 22.0 22.4 Risk (Standard Deviation %) Russell 2000 Growth Index TimesSquare Small Cap Growth TimesSquare Small Cap Growth Russell 2000 Growth Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 10.0 18.1-10.0-16.3 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.1 -0.9 -3.8 10.3 9.7 -9.1 -0.1 1.8 -0.7 -9.2 2.2 Allocation (Total: -0.2) 0.0 0.2 0.4-0.2-0.3 0.0 0.0 -0.1 -0.1 0.2 0.0 0.0 0.0 0.0 0.0 -0.2 Stock (Total: 0.9) 0.0 0.7 1.3-0.7-1.3 0.0 0.0 0.1 0.1 0.0 0.2 0.8 -0.7 0.1 0.4 0.0 TimesSquare Small Cap Growth 0.0 0.5 1.0 1.3-0.5-1.0-1.3 0.0 0.0 0.0 0.0 0.2 0.2 0.8 -0.8 0.1 0.3 -0.2 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 34 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)2,353 2,012 Median Mkt. Cap ($M)1,839 877 Price/Earnings ratio 31.4 26.1 Price/Book ratio 3.6 4.1 5 Yr. EPS Growth Rate (%)12.6 13.1 Current Yield (%)0.4 0.6 Debt to Equity 0.7 1.3 Number of Stocks 103 1,174 Beta (5 Years, Monthly)0.83 1.00 Consistency (5 Years, Monthly)53.33 1.00 Sharpe Ratio (5 Years, Monthly)1.35 1.10 Information Ratio (5 Years, Monthly)0.16 - Up Market Capture (5 Years, Monthly)89.22 - Down Market Capture (5 Years, Monthly)72.55 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Solera Holdings Inc 2.4 0.0 2.4 34.2 Ultimate Software Group Inc 2.2 0.5 1.7 3.9 On Assignment Inc 2.2 0.2 2.0 5.8 CoStar Group Inc 2.0 0.6 1.4 9.9 Dealertrack Technologies Inc 1.8 0.2 1.6 12.2 Air Methods Corp 1.8 0.3 1.5 36.9 Heartland Payment Systems Inc 1.7 0.2 1.5 25.7 WEX Inc 1.7 0.5 1.3 12.9 Henry (Jack) & Associates Inc.1.7 0.0 1.7 15.0 Corporate Executive Board Company (The)1.6 0.3 1.3 7.0 % of Portfolio 19.2 2.7 Sector Weights (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 6.0 12.0 18.0 24.0 30.0 36.0 41.4 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.0 0.0 0.0 1.5 35.6 23.4 12.6 6.6 4.0 4.7 8.7 0.0 0.1 0.9 5.1 24.6 15.4 21.3 7.3 3.8 4.8 16.7 Distribution of Market Capitalization (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 10.0 20.0 30.0 40.0 50.0 60.0 69.0 $2 Bil - $15 Bil $0 - $2 Bil Cash 43.8 56.2 0.0 49.9 47.2 3.0 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2013 35 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Morgan Stanley International Equity 5.6 20.4 20.4 10.0 11.4 7.0 19.6 -7.6 6.1 21.6 -33.1 9.8 22.5 6.5 20.0 32.7 MSCI EAFE Index 5.7 22.8 22.8 8.2 12.4 6.9 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3 13.5 20.2 38.6 International Equity Peer Group Median 6.0 20.8 20.8 7.4 12.9 7.3 18.4 -13.7 11.6 33.5 -44.4 11.9 25.2 15.0 18.5 36.1 Morgan Stanley International Equity Rank 61 54 54 17 77 56 35 10 88 92 1 66 76 100 38 66 11.0 12.0 13.0 13.6 Return (%)17.0 18.0 19.0 20.0 21.0 22.0 23.0 Risk (Standard Deviation %) MSCI EAFE Index Morgan Stanley International Equity Morgan Stanley International Equity MSCI EAFE Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 10.0 20.0-10.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -1.9 -2.4 -0.7 2.9 -7.4 3.3 -5.2 1.1 13.1 -5.2 2.5 Allocation (Total: -0.3) 0.0 0.2-0.2-0.4 0.1 -0.1 0.0 0.1 0.0 0.1 0.0 0.0 -0.3 0.0 -0.1 Stock (Total: 0.1) 0.0 0.3 0.5-0.3-0.5 -0.1 -0.1 0.3 0.1 0.1 0.0 0.2 -0.3 0.2 -0.1 0.0 Morgan Stanley International Equity 0.0 0.2 0.4 0.5-0.2-0.4-0.5 0.0 -0.2 0.3 0.2 0.1 0.0 0.2 -0.3 -0.1 -0.1 -0.1 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 36 Total Attribution 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3-0.1-0.2-0.3-0.4-0.5-0.6-0.7-0.8-0.9-1.0 Pacific North America Middle East Europe ex EMU EMU EM Asia Cash 0.7 0.0 0.0 -0.2 -0.5 0.0 -0.1 Performance Attribution Average Active Weight 0.0 10.0 20.0 24.5-10.0-20.0 Pacific North America Middle East Europe ex EMU EMU EM Asia Cash -12.1 0.3 -0.4 14.5 -5.9 1.1 2.5 Allocation (Total: 0.2) 0.0 0.2 0.4 0.6 0.8-0.2-0.4 0.5 0.0 0.0 0.1 -0.2 0.0 -0.1 Stock (Total: -0.4) 0.0 0.2 0.4-0.2-0.4-0.5 0.2 0.0 0.0 -0.3 -0.3 0.0 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index 1 Quarter Ending December 31, 2013 37 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)80,684 66,178 Median Mkt. Cap ($M)29,767 9,155 Price/Earnings ratio 17.2 15.6 Price/Book ratio 2.3 2.1 5 Yr. EPS Growth Rate (%)6.2 2.4 Current Yield (%)2.9 3.0 Debt to Equity 1.1 1.3 Number of Stocks 69 914 Beta (5 Years, Monthly)0.85 1.00 Consistency (5 Years, Monthly)46.67 1.00 Sharpe Ratio (5 Years, Monthly)0.72 0.70 Information Ratio (5 Years, Monthly)-0.32 - Up Market Capture (5 Years, Monthly)87.80 - Down Market Capture (5 Years, Monthly)86.51 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Nestle SA, Cham Und Vevey 4.7 1.8 2.9 5.0 Unilever NV 4.6 0.5 4.1 4.6 British American Tobacco PLC 4.5 0.8 3.7 1.1 Reckitt Benckiser Group PLC 4.3 0.4 3.9 8.5 Sanofi 4.1 1.0 3.1 4.7 Novartis AG 3.5 1.4 2.1 4.2 Roche Holding AG 3.0 1.5 1.5 3.9 SAP AG Systeme Anwendungen 2.9 0.6 2.3 16.0 Diageo PLC 2.9 0.6 2.3 4.1 Prudential PLC 2.5 0.4 2.0 19.1 % of Portfolio 36.9 8.9 Sector Weights (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.6 0.0 3.1 9.1 6.7 6.5 13.1 19.4 8.6 24.0 6.9 0.0 3.5 5.7 7.6 4.5 12.9 10.0 25.6 7.2 10.9 12.0 Distribution of Market Capitalization (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 10.0 20.0 30.0 40.0 50.0 58.7 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 40.1 36.6 23.2 0.1 0.0 50.5 31.0 15.7 0.2 2.6 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2013 38 Morgan Stanley International Equity MSCI EAFE Index Australia 1.5 7.4 Hong Kong 0.5 2.8 Japan 18.1 20.9 New Zealand 0.0 0.1 Singapore 0.0 1.5 Pacific 20.2 32.7 Austria 0.0 0.3 Belgium 0.0 1.2 Finland 0.0 0.9 France 7.7 9.4 Germany 8.6 9.4 Greece 0.0 0.1 Ireland 1.3 0.3 Italy 1.4 2.2 Luxembourg 0.7 0.3 Netherlands 5.6 3.1 Portugal 0.0 0.2 Spain 0.0 3.3 EMU 25.3 30.7 Denmark 0.0 1.2 Norway 0.0 0.8 Sweden 1.3 3.2 Switzerland 15.7 8.9 United Kingdom 32.1 22.0 Europe ex EMU 49.1 36.1 Canada 1.2 0.0 United States 0.0 0.0 Israel 0.0 0.4 Middle East 0.0 0.4 Developed Markets 95.8 100.0 Morgan Stanley International Equity MSCI EAFE Index Brazil 0.0 0.0 Cayman Islands 0.0 0.0 Chile 0.0 0.0 Colombia 0.0 0.0 Mexico 0.0 0.0 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 0.0 0.0 China 1.6 0.0 India 0.0 0.0 Indonesia 0.0 0.0 Korea 0.0 0.0 Malaysia 0.0 0.0 Philippines 0.0 0.0 Taiwan 0.0 0.0 Thailand 0.0 0.0 EM Asia 1.6 0.0 Czech Republic 0.0 0.0 Egypt 0.0 0.0 Hungary 0.0 0.0 Morocco 0.0 0.0 Poland 0.0 0.0 Russia 0.0 0.0 South Africa 0.0 0.0 Turkey 0.0 0.0 EM Europe + Middle East + Africa 0.0 0.0 Emerging Markets 1.6 0.0 Frontier Markets 0.0 0.0 Cash 2.6 0.0 Other 0.0 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2013 39 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2009 - Dec - 2013)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Morgan Stanley Emerging Markets 1.8 -0.8 -0.8 -0.9 14.3 10.8 20.2 -18.4 18.5 69.5 -56.4 41.6 38.0 34.5 24.1 54.9 MSCI Emerging Markets Index 1.8 -2.6 -2.6 -2.1 14.8 11.2 18.2 -18.4 18.9 78.5 -53.3 39.4 32.2 34.0 25.6 55.8 Emerging Markets Equity Peer Group Median 2.5 -1.1 -1.1 -1.6 14.5 10.4 19.5 -19.2 19.2 74.0 -54.5 37.4 32.3 32.9 24.9 56.3 Morgan Stanley Emerging Markets Rank 60 47 47 39 56 44 39 41 55 69 71 25 16 41 60 56 14.1 14.4 14.7 15.0 15.3 Return (%)22.6 22.8 23.0 23.2 23.4 23.6 23.8 24.0 24.2 Risk (Standard Deviation %) MSCI Emerging Markets Index Morgan Stanley Emerging Markets Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Average Active Weight 0.0 5.0 9.8-5.0-8.8 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.2 -1.3 0.5 -5.0 1.3 1.9 2.9 -3.5 -4.8 5.4 3.3 2.5 Allocation (Total: 0.1) 0.0 0.2 0.4-0.2-0.3 -0.1 0.0 -0.1 0.0 0.1 0.0 0.1 0.0 0.2 -0.2 0.0 0.0 Stock (Total: 0.0) 0.0 0.2 0.4-0.2-0.4 0.0 -0.2 0.0 0.0 0.0 0.2 0.1 -0.2 0.1 -0.2 0.2 0.0 Morgan Stanley Emerging Markets 0.0 0.3 0.6-0.3-0.6 -0.1 -0.2 -0.1 0.0 0.1 0.2 0.2 -0.2 0.3 -0.3 0.2 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2013 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 40 Total Attribution 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4-0.2-0.4-0.6-0.8-1.0-1.2-1.4-1.5 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash 0.0 0.1 0.2 0.0 0.0 0.2 -0.1 0.7 -0.9 0.0 Performance Attribution Average Active Weight 0.0 3.0 6.0 8.3-3.0-6.0-7.7 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -2.0 0.7 1.7 0.4 2.4 4.5 -2.2 -4.4 -3.5 2.5 Allocation (Total: 0.4) 0.0 0.1 0.2 0.3-0.1-0.2 0.0 0.1 0.1 0.0 0.0 0.2 0.1 0.1 -0.1 0.0 Stock (Total: -0.3) 0.0 0.4 0.8 1.2-0.4-0.8-1.2 0.0 0.0 0.1 0.0 0.0 0.0 -0.2 0.6 -0.8 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index 1 Quarter Ending December 31, 2013 41 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)45,708 39,156 Median Mkt. Cap ($M)8,347 4,726 Price/Earnings ratio 14.4 11.1 Price/Book ratio 2.6 2.1 5 Yr. EPS Growth Rate (%)12.1 11.8 Current Yield (%)1.9 2.5 Debt to Equity 0.8 0.9 Number of Stocks 160 821 Beta (5 Years, Monthly)0.94 1.00 Consistency (5 Years, Monthly)46.67 1.00 Sharpe Ratio (5 Years, Monthly)0.73 0.72 Information Ratio (5 Years, Monthly)-0.15 - Up Market Capture (5 Years, Monthly)94.20 - Down Market Capture (5 Years, Monthly)92.64 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Samsung Electronics Co Ltd 4.2 3.8 0.3 2.6 Tencent Holdings LTD 2.3 1.7 0.5 21.6 Taiwan Semiconductor Manufacturing 2.0 2.3 -0.3 3.9 Bank of China Ltd 2.0 0.9 1.0 0.9 Hyundai Motor Co Ltd 1.9 0.9 1.0 -3.6 BRF - Brasil Foods S.A.1.7 0.4 1.4 -14.0 Cemex SAB de CV 1.5 0.4 1.1 5.8 Bank Zachodni Wbk S.A., Wroclaw 1.4 0.1 1.3 15.3 Naspers Ltd 1.4 1.1 0.3 13.3 Grupo Financiero Banorte 1.3 0.5 0.9 13.1 % of Portfolio 19.5 12.0 Sector Weights (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 4.0 8.0 12.0 16.0 20.0 24.0 28.0 31.1 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.5 2.2 0.0 7.5 4.1 17.1 8.8 4.7 23.8 6.2 12.6 12.4 0.0 0.0 3.3 7.4 9.7 16.0 6.5 1.7 26.7 11.3 8.6 8.8 Distribution of Market Capitalization (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 10.0 20.0 30.0 40.0 50.0 57.5 >$59 Bil $15 Bil - $59 Bil $2 Bil - $15 Bil $0 - $2 Bil Cash 20.1 33.7 42.5 3.6 0.0 17.3 28.7 47.3 4.6 2.2 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2013 42 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Australia 0.0 0.0 Hong Kong 3.3 6.6 Japan 0.5 0.0 New Zealand 0.0 0.0 Singapore 0.4 0.0 Pacific 4.2 6.7 Austria 1.8 0.0 Belgium 0.0 0.0 Finland 0.0 0.0 France 0.0 0.0 Germany 0.0 0.0 Greece 0.0 0.0 Ireland 0.0 0.0 Italy 0.0 0.0 Luxembourg 1.2 0.0 Netherlands 0.9 0.0 Portugal 1.1 0.0 Spain 0.8 0.0 EMU 5.7 0.0 Denmark 0.0 0.0 Norway 0.0 0.0 Sweden 0.0 0.0 Switzerland 0.9 0.0 United Kingdom 1.5 0.0 Europe ex EMU 2.5 0.0 Canada 0.0 0.0 United States 1.7 0.1 Israel 0.0 0.0 Middle East 0.0 0.0 Developed Markets 14.1 6.8 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Brazil 6.9 10.7 Cayman Islands 0.0 0.0 Chile 0.7 1.6 Colombia 1.1 1.0 Mexico 7.2 5.4 Peru 1.1 0.3 Virgin Islands 0.0 0.0 EM Latin America 17.0 19.0 China 9.5 13.2 India 6.5 6.3 Indonesia 1.6 2.2 Korea 16.2 16.2 Malaysia 2.9 3.8 Philippines 3.6 0.9 Taiwan 7.0 11.7 Thailand 4.9 2.2 EM Asia 52.1 56.5 Czech Republic 0.8 0.2 Egypt 0.0 0.2 Hungary 1.0 0.3 Morocco 0.0 0.2 Poland 3.2 1.7 Russia 2.3 6.1 South Africa 4.4 7.4 Turkey 1.7 1.5 EM Europe + Middle East + Africa 13.4 17.7 Emerging Markets 82.5 93.2 Frontier Markets 0.5 0.0 Cash 2.2 0.0 Other 0.8 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2013 43 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Income Research 0.0 -0.9 -0.9 3.5 6.1 5.0 5.9 5.6 6.2 14.4 0.8 7.4 4.5 2.8 3.7 5.6 Barclays Intermediate U.S. Government/Credit 0.0 -0.9 -0.9 2.9 4.0 4.1 3.9 5.8 5.9 5.2 5.1 7.4 4.1 1.6 3.0 4.3 Intermediate Duration Fixed Income Peer Group Median 0.2 -0.6 -0.6 3.1 5.8 4.1 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5 2.6 3.3 Income Research Rank 64 61 61 38 40 13 41 28 49 24 29 9 14 1 19 15 2.0 3.0 4.0 5.0 6.0 7.0 8.0 8.6 Return (%)2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.1 Risk (Standard Deviation %) Barclays Intermediate U.S. Government/Credit Income Research Income Research Barclays Intermediate U.S. Government/Credit 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Income Research 6.1 3.6 6.0 1.7 1.1 1.7 2.2 1.0 1.0 70.0 16y 11m Barclays Intermediate U.S. Government/Credit 4.0 2.6 3.8 0.0 1.0 1.5 0.0 N/A 1.0 0.0 16y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.6 -1.5 0.0 20.0 16y 11m Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2013 44 Credit Quality Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 20.0 40.0 60.0 80.0 87.5 AAAAAABBB65.5 6.6 14.1 13.8 52.9 8.9 18.5 19.7 Portfolio Characteristics Portfolio Benchmark Effective Duration 3.8 3.8 Avg. Maturity 4.5 4.1 Avg. Quality AA-AA+ Yield To Maturity (%)2.1 1.6 Sector Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 20.0 40.0 60.0 80.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.7 6.8 23.9 0.0 0.0 10.3 2.3 0.0 0.0 0.0 0.0 23.1 0.9 39.3 8.4 5.8 0.0 0.0 3.1 0.5 7.6 11.4 Maturity Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 10.0 20.0 30.0 40.0 50.0 56.7 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 41.5 27.5 31.0 0.0 0.0 6.9 27.6 29.5 33.6 1.7 0.7 Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2013 45 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Penn Capital 3.5 5.9 5.9 7.7 14.6 N/A 13.3 4.2 15.0 37.5 -21.0 1.8 8.9 N/A N/A N/A BofA Merrill Lynch US High Yield, Cash Pay Index 3.5 7.4 7.4 9.0 18.5 8.4 15.4 4.5 15.2 56.3 -26.2 2.2 11.6 2.8 10.8 27.2 High Yield Fixed Income Peer Group Median 3.4 7.4 7.4 8.7 16.9 8.0 15.3 4.0 14.7 47.3 -24.3 2.6 10.7 3.1 10.4 24.1 Penn Capital Rank 37 78 78 81 82 N/A 80 46 41 79 25 74 84 N/A N/A N/A 12.0 14.0 16.0 18.0 20.0 22.0 22.8 Return (%)6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 Risk (Standard Deviation %) BofA Merrill Lynch US High Yield, Cash Pay Index Penn Capital Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Penn Capital 14.6 7.2 14.0 3.3 0.6 1.9 5.0 -0.8 2.1 40.0 8y 6m BofA Merrill Lynch US High Yield, Cash Pay Index 18.5 11.3 17.8 0.0 1.0 1.6 0.0 N/A 2.8 0.0 8y 6m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 11.3 -1.6 0.0 15.0 8y 6m Manager Evaluation Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index As of December 31, 2013 46 Credit Quality Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 20.0 40.0 60.0 80.0 87.5 BBBBBBBelow B0.0 45.3 38.5 16.2 1.3 33.0 65.7 0.0 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.1 4.4 Avg. Maturity 6.0 6.7 Avg. Quality B B+ Yield To Maturity (%)6.0 5.9 Sector Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 30.0 60.0 90.0 120.0 135.0 High YieldCash100.0 0.0 96.8 3.2 Maturity Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 20.0 40.0 60.0 80.0 100.0 1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs8.4 22.4 63.4 3.9 2.03.0 17.7 79.3 0.0 0.1 Manager Evaluation Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index As of December 31, 2013 47 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2010 - Dec-2013) Historical Statistics (Apr-2010 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Loomis Credit Asset Fund 2.3 4.4 4.4 7.2 N/A N/A 14.2 3.3 N/A N/A N/A N/A N/A N/A N/A N/A 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 1.8 2.1 2.1 6.3 12.3 6.2 11.0 5.8 10.6 34.3 -15.9 3.6 6.8 3.0 6.7 13.4 Alternative Credit Focus Funds Peer Group Median 1.3 0.4 0.4 3.7 8.5 4.3 8.9 0.7 7.8 20.7 -12.8 4.6 5.5 1.4 6.1 15.8 Loomis Credit Asset Fund Rank 12 13 13 1 N/A N/A 6 22 N/A N/A N/A N/A N/A N/A N/A N/A 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.4 Return (%)2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6 4.8 5.0 5.1 Risk (Standard Deviation %) 50% BC Credit / 25% S&P LSTA / 25% BY High Yield Loomis Credit Asset Fund Loomis Credit Asset Fund 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Loomis Credit Asset Fund 8.1 4.5 7.8 -0.4 1.2 1.7 2.0 0.6 1.8 73.3 3y 9m 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 6.9 3.3 6.7 0.0 1.0 2.0 0.0 N/A 1.2 0.0 3y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.3 -2.0 0.0 13.3 3y 9m Manager Evaluation Loomis Credit Asset Fund vs. 50% BC Credit / 25% S&P LSTA / 25% BY High Yield As of December 31, 2013 48 Credit Quality Distribution (%) Loomis Credit Asset Fund 0.0 5.0 10.0 15.0 20.0 25.0 30.0 33.8 AAAAAABBBBBBBelow BNot Rated3.1 3.4 15.6 21.4 25.6 27.0 3.8 0.1 Portfolio Characteristics Portfolio Effective Duration 3.6 Avg. Maturity 6.5 Avg. Quality BB Yield To Maturity (%)4.7 Sector Distribution (%) Loomis Credit Asset Fund 0.0 10.0 20.0 30.0 40.0 45.9 TreasuriesCreditHigh YieldMBSABSCashOtherCMBS0.2 22.6 27.8 4.7 4.5 2.2 34.0 4.0 Maturity Distribution (%) Loomis Credit Asset Fund 0.0 10.0 20.0 30.0 40.0 50.0 60.0 67.5 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs5.8 11.4 26.7 48.7 1.3 6.2 Manager Evaluation Loomis Credit Asset Fund As of December 31, 2013 49 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Brandywine Global Opportunistic Fixed Income -0.3 -3.5 -3.5 5.9 10.3 N/A 14.1 8.0 13.9 20.5 -8.5 10.6 8.4 -0.9 N/A N/A Citigroup World Government Bond -1.1 -4.0 -4.0 1.2 2.3 4.2 1.6 6.4 5.2 2.6 10.9 11.0 6.1 -6.9 10.3 14.9 Global Fixed Income Peer Group Median 0.5 -1.7 -1.7 3.1 6.0 5.0 7.5 3.7 6.1 12.0 -2.1 7.7 5.7 0.7 9.5 13.4 Brandywine Global Opportunistic Fixed Income Rank 72 69 69 13 13 N/A 15 12 10 25 74 18 21 55 N/A N/A -6.0 -3.0 0.0 3.0 6.0 9.0 12.0 15.0 18.0 Return (%)5.5 6.0 6.5 7.0 7.5 8.0 8.5 8.9 Risk (Standard Deviation %) Citigroup World Government Bond Brandywine Global Opportunistic Fixed Income Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Brandywine Global Opportunistic Fixed Income 10.3 8.1 10.1 7.9 1.0 1.3 4.8 1.6 2.0 80.0 9y Citigroup World Government Bond 2.3 6.3 2.4 0.0 1.0 0.4 0.0 N/A 3.2 0.0 9y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.3 -0.4 0.0 50.0 9y Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond As of December 31, 2013 50 Credit Quality Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 20.0 40.0 60.0 80.0 87.5 AAAAAABBBBBBBelow B17.9 67.7 2.2 12.3 0.0 0.0 0.0 23.9 25.0 23.2 18.6 7.5 0.1 1.7 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.9 6.7 Avg. Maturity 11.8 8.2 Avg. Quality A+AA Yield To Maturity (%)4.2 1.6 Sector Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 30.0 60.0 90.0 -25.0 TreasuriesCreditHigh YieldMBSNon-USEmergingMunicipalsCashOther29.1 0.0 0.0 0.0 70.9 0.0 0.0 0.0 0.0 8.6 4.1 0.1 1.7 68.9 9.0 0.8 7.1 -0.1 Maturity Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 10.0 20.0 30.0 40.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 28.5 19.9 28.0 23.7 0.0 12.2 20.4 6.9 24.9 5.5 30.1 Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond As of December 31, 2013 51 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jul-2010 - Dec-2013) Historical Statistics (Jul-2010 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Pictet Emerging Local Currency Debt Fund -1.5 -10.3 -10.3 0.3 N/A N/A 15.3 -2.3 N/A N/A N/A N/A N/A N/A N/A N/A JPM GBI-EM Global Diversified -1.5 -9.0 -9.0 1.5 8.1 9.5 16.8 -1.8 15.7 22.0 -5.2 18.1 15.2 6.3 23.0 16.9 Emerging Markets LC Peer Group Median -1.6 -10.4 -10.4 0.6 8.4 N/A 16.6 -3.3 14.3 24.1 N/A N/A N/A N/A N/A N/A Pictet Emerging Local Currency Debt Fund Rank 50 47 47 63 N/A N/A 68 40 N/A N/A N/A N/A N/A N/A N/A N/A 2.0 3.0 4.0 5.0 6.0 6.4 Return (%)9.8 10.0 10.2 10.4 10.6 10.8 10.9 Risk (Standard Deviation %) JPM GBI-EM Global Diversified Pictet Emerging Local Currency Debt Fund Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0 25 50 75 100Return Percentile Rank3/04 3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Pictet Emerging Local Currency Debt Fund 2.9 9.9 3.3 -1.3 0.9 0.3 1.0 -1.7 5.9 7.1 3y 6m JPM GBI-EM Global Diversified 4.6 10.6 4.9 0.0 1.0 0.5 0.0 N/A 6.0 0.0 3y 6m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.6 -0.5 0.0 50.0 3y 6m Manager Evaluation Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified As of December 31, 2013 52 Credit Quality Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 20.0 40.0 60.0 77.5 AAAAAABBBBBNot Rated0.0 0.2 20.0 61.1 18.3 0.40.2 0.1 16.3 54.1 13.7 15.6 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.4 4.6 Avg. Maturity 6.4 6.8 Avg. Quality BBB BBB Yield To Maturity (%)5.5 6.8 Country/Region Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 11.0 22.0 33.0 44.0 54.0 AsiaEastern EuropeLatin AmericaAfricaOthers25.5 37.2 25.3 12.0 0.0 24.7 38.5 22.2 14.5 0.2 Sector Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 30.0 60.0 90.0 120.0 135.0 Local CurrencyCashOther100.0 0.0 0.0 86.2 13.7 0.2 Manager Evaluation Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified As of December 31, 2013 53 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 GMO Asset Allocation Fund 4.3 12.5 12.5 8.1 10.7 7.3 10.4 1.7 7.4 22.4 -19.4 8.6 12.1 9.5 13.4 28.5 65% MSCI World (Net) / 35% BC Aggregate 5.1 15.9 15.9 8.8 11.6 6.4 11.9 -0.7 10.5 21.6 -26.9 8.4 14.4 7.1 11.1 22.4 10.0 10.4 10.8 11.2 11.6 12.0 12.4 12.6 Return (%)9.0 9.5 10.0 10.5 11.0 11.5 12.0 12.5 13.0 Risk (Standard Deviation %) 65% MSCI World (Net) / 35% BC Aggregate GMO Asset Allocation Fund Rolling 3 Years Active Return Quarterly Active Return 0.0 4.0 8.0 12.0 16.0 -4.0 -8.0 -12.0Active Return (%)3/97 9/98 3/00 9/01 3/03 9/04 3/06 9/07 3/09 9/10 3/12 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date GMO Asset Allocation Fund 10.7 9.8 10.6 1.3 0.8 1.1 3.0 -0.4 5.0 35.0 17y 2m 65% MSCI World (Net) / 35% BC Aggregate 11.6 12.1 11.7 0.0 1.0 1.0 0.0 N/A 6.5 0.0 17y 2m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 12.1 -1.0 0.0 25.0 17y 2m Manager Evaluation GMO Asset Allocation Fund vs. 65% MSCI World (Net) / 35% BC Aggregate As of December 31, 2013 54 U.S. Flex ib le Equities 22.8% Asset Allocation Bond Debt Op portunities 2.9% Cas h &Cas h Equivalents 1.9% Alpha Only 9.4% Alternat ive Asset Op portunity 5.3% Spec ial Situations 0.5% Manager Evaluation GMO Asset Allocation Fund As of December 31, 20131 3.0%1.6% 17.1% 0.0% 5.0% 10.0% 15.0% 20.0% Fund Composition Fund Weights Relative to Benchmark Internat io nal Intrins ic Value 21.9% Currency Hed ged In ternat io nal Equity 5.3%Risk Premium 2.4% Emerg ing Mark et s 8.7% Domestic Bond 0.7% Strateg ic Fixed Income 4.7% Emerg ing Co untry Debt 3.5% Bond 9.9% -8.5% -13.3% -20.0% -15.0% -10.0% -5.0% U.S. Equities Int'l.Equities Em ergin g Equities Fixed Income Ot her 1Allocations as of November 30, 2013. December 31, 2013 portfolio sector positioning was not available at the time of report production. 55 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Pyramis Market Neutral -2.4 -1.6 -1.6 0.4 0.1 N/A 1.9 0.9 -4.4 4.1 -9.3 25.4 7.2 N/A N/A N/A 3 Month T-Bills + 3%0.8 3.1 3.1 3.1 3.1 4.7 3.1 3.1 3.1 3.2 5.1 8.2 8.0 6.2 4.4 4.2 -2.0 0.0 2.0 4.0 6.0 Return (%)-2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 Risk (Standard Deviation %) 3 Month T-Bills + 3% Pyramis Market Neutral Rolling 3 Years Active Return Quarterly Active Return 0.0 5.0 10.0 14.9 -5.0 -10.0 -15.0 -19.2Active Return (%)12/05 9/06 6/07 3/08 12/08 9/09 6/10 3/11 12/11 9/12 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Pyramis Market Neutral 0.1 4.8 0.2 -17.1 6.0 0.0 4.8 -0.6 3.0 40.0 8y 5m 3 Month T-Bills + 3%3.1 0.0 3.0 0.0 1.0 234.4 0.0 N/A 0.0 0.0 8y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 -2.6 0.9 N/A 0.0 -234.4 0.0 0.0 8y 5m Manager Evaluation Pyramis Market Neutral vs. 3 Month T-Bills + 3% As of December 31, 2013 56 Manager Evaluation Pyramis Market Neutral Fund As of December 31, 2013 Inve st ment Type Ex posure 23.3%21.5% 15.6%15.2%11.2% 2.9%2.1%1.8%1.1% 0.0% -23.0%-21.2% -17.6%-15.4% -8.6% -4.7%-2.2%-1.1%0.0% 0.0% Long ShortLongShort 6.1% 2.5% 1.1%0.7%0.4%0.3%0.0% -0.1%-0.2% -1.8%-2.0%-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Sector Attribution 57 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 PIMCO All Asset Fund I 1.3 0.8 0.8 6.0 10.8 6.7 15.4 2.4 13.7 23.0 -15.5 8.7 5.3 6.5 11.8 16.0 Barclays U.S. Treasury Inflation Notes: 1-10 Year -1.3 -5.6 -5.6 2.6 5.0 4.4 5.0 8.9 5.2 12.0 -2.4 11.4 1.6 1.9 7.1 7.1 0.0 3.0 6.0 9.0 12.0 15.0 17.4 Return (%)2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 10.8 Risk (Standard Deviation %) Barclays U.S. Treasury Inflation Notes: 1-10 Year PIMCO All Asset Fund I Rolling 3 Years Active Return Quarterly Active Return 0.0 4.0 8.0 12.0 16.0 -4.0 -8.0 -12.0Active Return (%)12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date PIMCO All Asset Fund I 10.8 8.6 10.6 9.0 0.4 1.2 8.8 0.7 3.6 80.0 11y 5m Barclays U.S. Treasury Inflation Notes: 1-10 Year 5.0 4.2 4.8 0.0 1.0 1.2 0.0 N/A 2.5 0.0 11y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 4.2 -1.2 0.0 10.0 11y 5m Manager Evaluation PIMCO All Asset Fund I vs. Barclays U.S. Treasury Inflation Notes: 1-10 Year As of December 31, 2013 58 Manager Evaluation PIMCO All Asset Fund I Sector Allocations As of December 31, 2013 U.S. Equi ty Strat eg ies 1.2% Glo bal Eq uity Strat eg ies 23.2% Short -Te rm Strat eg ies 0.6% In flat io n Relat ed Strat eg ies 8.3% Alternat iv e Strat eg ies 13.5% U.S. Core &Lo ng Maturity Bond Strat eg ies 4.8% Cred it Strat eg ies 23.9% EM & Glo bal Bo nd Strat eg ies 24.5% 0.6% 59 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2009 - Dec-2013) Historical Statistics (Jan-2009 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 UBS Trumbull Property Fund 2.0 9.2 9.2 10.1 3.6 6.9 9.0 12.1 15.9 -22.9 -8.3 12.8 15.6 20.1 13.5 8.5 NCREIF Property Index 2.5 11.0 11.0 11.9 5.7 8.6 10.5 14.3 13.1 -16.8 -6.5 15.8 16.6 20.1 14.5 9.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Return (%)5.7 6.0 6.3 6.6 6.9 7.2 7.5 7.8 8.1 8.4 8.6 Risk (Standard Deviation %) NCREIF Property Index UBS Trumbull Property Fund Rolling 3 Years Active Return Quarterly Active Return 0.0 3.0 6.0 8.4 -3.0 -6.0 -8.2Active Return (%)3/78 3/81 3/84 3/87 3/90 3/93 3/96 3/99 3/02 3/05 3/08 3/11 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date UBS Trumbull Property Fund 3.6 7.9 3.7 -3.1 1.2 0.5 2.1 -0.9 6.1 25.0 36y NCREIF Property Index 5.7 6.4 5.7 0.0 1.0 0.9 0.0 N/A 4.4 0.0 36y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.4 -0.9 0.0 20.0 36y Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of December 31, 2013 60 Property Type UBS Trumbull Property Fund NCREIF Property Index 0.0 10.0 20.0 30.0 40.0 48.6 OfficeApartmentRetailIndustrialHotel35.9 24.9 23.4 13.6 2.2 Portfolio Characteristics Portfolio Benchmark # Properties 186 7,029 # Investors 399 N/A Leverage %13.0 N/A Property Location UBS Trumbull Property Fund NCREIF Property Index 0.0 10.0 20.0 30.0 40.0 50.0 55.4 EastWestSouthMidwest34.7 35.1 21.1 9.0 Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of December 31, 2013 61 Type City Ac quis ition Da te % Occupa nc y Cos t ($000) Fa ir Market Value ($000) Offi ce Ne w York Ju n-06 100%655,470$ 673,000$ Offi ce Bo ston Dec-11 88%625,321$ 632,000$ Ret ail Ca mb rid ge May-89 97%291,079$ 518,619$ Ret ail Da lla s Dec-02 93%396,700$ 493,000$ Apart ment s Ne w York Ju l-11 94%391,531$ 445,000$ Ret ail Ch ic ag o No v-13 97%318,972$ 414,053$ Offi ce Ne w York Ju l-11 96%185,937$ 413,292$ Offi ce Ch ic ag o Dec-11 100%383,877$ 406,684$ Offi ce Washin gton May-06 80%238,339$ 259,000$ As of De ce mber 31,2013 20 La rge st Investm ents Manager Evaluation UBS Trumbull Property Fund As of December 31, 2013 Offi ce Washin gton May-06 80%238,339$ 259,000$ Ret ail Montebello Dec-88 0%183,298$ 252,000$ Apart ment s Bro okly n Dec-07 97%225,037$ 241,000$ Offi ce Se attle Oc t-84 73%219,872$ 225,000$ Offi ce De nver Ju n-06 89%155,901$ 220,609$ Offi ce De nver Apr-82 91%139,102$ 205,000$ Apart ment s Arlin gton Mar-13 86%68,061$ 191,562$ Offi ce Sa n Fra ncis co Dec-85 87%160,111$ 191,361$ Offi ce Pa sadena May-84 97%179,085$ 189,000$ Apart ment s Washin gton Apr-02 91%79,524$ 186,882$ Ret ail Millb ury Se p-04 99%156,000$ 185,300$ Ret ail St amfo rd Se p-98 94%147,415$ 153,995$ All other inves tment s ------8,547,662$ 9,167,860$ To tal Properties 13,748,294$ 15,664,217$ 62 Historical Performance Comparative Performance and Rolling Return Risk and Return (Apr-2010 - Dec-2013) Historical Statistics (Apr-2010 - Dec-2013) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Wellington Diversified Inflation Hedges 2.7 -3.9 -3.9 -2.6 N/A N/A 5.2 -8.6 N/A N/A N/A N/A N/A N/A N/A N/A Wellington DIH Multi-Asset Inflation Index 1.6 -2.1 -2.1 -2.3 6.4 6.2 2.3 -7.0 12.7 30.0 -32.7 25.8 14.1 19.7 16.0 26.0 0.9 1.2 1.5 1.8 2.1 2.4 2.7 3.0 Return (%)14.0 14.5 15.0 15.5 16.0 16.5 17.0 17.3 Risk (Standard Deviation %) Wellington DIH Multi-Asset Inflation Index Wellington Diversified Inflation Hedges Rolling 3 Years Active Return Quarterly Active Return 0.0 1.0 2.0 3.0 -1.0 -2.0 -3.0 -3.9Active Return (%)6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Wellington Diversified Inflation Hedges 2.3 16.4 3.5 0.7 1.1 0.2 2.5 0.4 11.1 60.0 3y 9m Wellington DIH Multi-Asset Inflation Index 1.6 14.7 2.5 0.0 1.0 0.2 0.0 N/A 10.1 0.0 3y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.7 -0.2 0.0 46.7 3y 9m Manager Evaluation Wellington Diversified Inflation Hedges vs. Wellington DIH Multi-Asset Inflation Index As of December 31, 2013 63 Manager Evaluation We llington Diversified Inflation Hedges Sector Allocation As of December 31, 20131 En ergy 28.7% TIPS 8.1% Emerging Markets In flati on -Linked Bon ds 5.7% Cash 6.7% 13% 1% 0% 5% 10% 15% 20% Fund Composition Fund Weights Relative to Benchmark En ergy 35.8% TIP S 6.1% Emerging Markets In flati on -Linked Bon ds 7.7% Cash 0.6% Me ta ls & Mining 3.0% Agricultu re 5.1% En du ri ng Assets 11 .7% Preciou s Meta ls 8.7% Commodities 22.4% Global Inflation-Sensitive Equities Commodities Fixed Income & Cash -11% -2% -20% -15% -10% -5% 0% Equities Fixed Income Commodities Ca sh 1Allocations as of November 30, 2013. December 31, 2013 portfolio sector positioning was not available at the time of report production. Metals & Mi ning 6.6% Agricultu re 6.2% En du ri ng Assets 10.1% Preciou s Metals 4.1% Commodities 22.8% 64 Calendar Year Performance 65 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Total Composite 10.9 12.1 1.2 11.2 20.2 -20.2 10.7 11.8 5.6 9.1 Policy Benchmark 12.5 11.6 1.1 11.5 19.5 -20.6 8.3 13.0 5.7 10.7 Total Equity Composite N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A MSCI AC World Index 22.8 16.1 -7.3 12.7 34.6 -42.2 11.7 21.0 10.8 15.2 Domestic Equity Composite N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Russell 3000 Index 33.6 (40)16.4 (26)1.0 (16)16.9 (39)28.3 (59)-37.3 (38)5.1 (62)15.7 (31)6.1 (63)11.9 (50) Broad Equity Peer Group Median 32.5 14.6 -2.1 16.2 29.6 -38.4 6.5 13.6 7.0 11.9 International Equity Composite N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A MSCI AC World ex USA Index 15.3 (54)16.8 (72)-13.7 (32)11.2 (74)41.4 (64)-45.5 (36)16.7 (66)26.7 (55)16.6 (86)20.9 (42) International Equity Peer Group Median 15.6 18.5 -15.2 13.6 44.1 -47.0 18.3 27.0 19.7 20.2 Fixed Income Composite -1.7 (82)10.9 (1)3.8 (72)8.7 (10)18.9 (8)-3.4 (70)6.4 (26)5.6 (8)2.8 (1)3.7 (19) Barclays Intermediate U.S. Government/Credit -0.9 (55)3.9 (70)5.8 (22)5.9 (54)5.2 (100)5.1 (13)7.4 (9)4.1 (42)1.6 (46)3.0 (34) Intermediate Duration Fixed Income Peer Group Median -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5 2.6 Tactical Asset Allocation Composite 12.5 10.4 1.7 7.4 22.4 -19.4 8.6 12.3 5.0 11.1 60% World / 40% Agg 14.5 11.3 0.0 10.2 20.4 -24.7 8.3 13.6 6.7 10.6 Alternatives Composite N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 3 Month T-Bills + 3%3.1 3.1 3.1 3.1 3.2 5.1 8.2 8.0 6.2 4.4 Calendar Year Performance Composite Performance As of December 31, 2013 _________________________ See appendix for a description of the benchmarks and universe. Performance is reported net of fees. 66 Capital Markets Review 67 Reasonable Growth Allows Fed to Begin Taper •Third quarter U.S.GDP grew at a 4.1%rate,only the second quarter since 2006 to top 4%.Large inventory changes led the ascent,while rising exports bode well for manufacturing,tech,and energy development.Fourth quarter growth is expected to be around 3%.Consumer spending over the holiday season was reasonably strong, though brick and mortar stores lost further ground to online stores.Less foot traffic reflected the growing preference to shop on smartphones and computers.The late surge in consumer orders overwhelmed shippers FedEx and UPS,forcing some deliveries to be made after Christmas.Online shopping led more stores to match prices,which tended to hurt profits at stores with lower volume or higher overhead. •Janet Yellen was chosen to succeed Ben Bernanke as chairperson of the Federal Reserve.In a move that eases the transition,the Fed chose to scale back its bond purchases by $10 billion per mo nth.The Fed cited an improving economy as a main reason to start withdrawing financial support.Interest rates are expected to remain at very low levels for an extended time,as the Fed sought to lessen the reliance on targets for raising rates.While the unemployment rate fell to 6.7%in December, close to the Fed’s initial 6.5%target,and inflation was well below 2%,Bernanke believed that it was premature to disrupt the economy through higher interest rates. Bernanke likely believes that the falling labor participation rate is restricting growth, Capital Markets Rev iew Economy -10 -8 -6 -4 -2 0 2 4 6 8 10 1980q31983q21986q11988q41991q31994q21997q11999q42002q32005q22008q12010q42013q3Ann. Rate of Return (%)GDP Growth 40-Year Averag e=2.8% 8.0 10.0 12.0 14.0 16.0 PercentInflat ion and Unempl oyme nt Unemployment *Dashed lines represent Federal Reserve targets Source: Bureau of Economic Analysis Bernanke likely believes that the falling labor participation rate is restricting growth, and its continued descent will coincide with interest rates remaining low. •Enrollment problems plagued the rollout of Obamacare,prompting multiple website shutdowns and deadline extensions.The government hired new companies to oversee technological reworks and begin wo rk on the systems to connect providers,insurers and patients.Insurance cost appreciation had slowed in the past decade,reflecting higher deductibles and increased patient scrutiny of costs. •The federal government partially shutdown in the first half of October over budget disagreements.A temporary spending bill passed to end the deadlock,while a spending bill passed in December provided longer-term certainties.The new budget trimmed sequester cuts,raised taxes and fees,and slowed the growth of some federal pensions.Detroit and Illinois pension reforms led the charge to balance revenues with contributions and future expenditures.Court challenges to these changes will determine the future of municipal pension reforms across the country. •The Volcker Rule,which regulates banks’investment activities,passed in December. The rule extensively regulates banks’proprietary trading and limits their hedging activities to reducing risk on bank-owned assets.The rule aims to reduce risk in the financial system by limiting banks’exposure to negative market conditions and lower the likelihood of financial bailouts. 62 63 64 65 66 67 144 146 148 150 152 154 156 158 PercentMillionsLabor Force Size (Employed + Unemployed) Participation Rat e (%) -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 1/19801/19821/19841/19861/19881/19901/19921/19941/19961/19981/20001/20021/20041/20061/20081/20101/2012PercentUnemployment Inf latio n Source: Bureau of Labor Statistics 68 4th Quarter 2013 Sector Returns Risk Meter: S&P 500 Index minus Barclays U.S. Treasury Index Calendar Year Return, 1994-2013 Capital Markets Rev iew Equities Equities Escalate to End 2013;S&P 500 Rises to Record Levels •Equity markets soared in the fourth quarter,capping off strong gains during the first three quarters of the year for both the U.S.and developed market countries.Domestically,positive economic data,reduced political uncertainties,and the Federal Reserve’s announcement that it would begin tapering asset purchases helped propel the S&P 500 to record levels.The Index returned 10.5%during the quarter,outpacing foreign indices and boosting the year’s return to 32.4%,the best since 1997.During the quarter,foreign equity markets also experienced positive returns with developed markets significantly outperforming their emerging counterparts as the MSCI EAFE and MSCI Emerging Market indices returned 5.7%and 1.8%,respectively. •In the fourth quarter,style performance was mixed across the capitalization spectrum.Within domestic indices,large-cap growth companies outpaced their value counterparts,while value stocks outpaced growth stocks among small-and mid-cap indices.Among non-U.S.indices, developed market value companies outpaced growth companies,while emerging market growth stocks outperformed value stocks.From a capitalization perspective,large-cap indices outperformed small-caps for the quarter,however,small-cap indices performed better for the year.Within the Russell 3000,all 10 sectors experienced positive returns with economically sensitive and domestic-oriented sectors leading the way,while defensive,dividend-focused sectors lagged due to rising bond yields and an improving economic outlook. 3.2% 6.8% 7.8% 8.6% 9.5% 9.8% 10.1% 10.4% 10.5% 12.2% 13.1% 0.0%3.0%6.0%9.0%12.0%15.0% Utilities Te lecom Energy Cons. Staples Financials Health Care Ru ssell 3000 Materials Cons.Disc. Info Tech In dustrials 20 40 Difference (%)Risk On sectors lagged due to rising bond yields and an improving economic outlook. •The MSCI EAFE Index advanced 5.7%during the fourth quarter.The European region (+7.9%)led returns across developed markets with European Economic and Monetary Union members (+9.6%)performing especially well.An unexpected rate cut by the ECB in November,reduced emphasis on austerity measures,and data confirming that the European region’s longest recession ever ended during the third quarter helped boost equity markets. Peripheral countries Spain (+11.4%),Ireland (+11.3%),and Italy (+10.7%)performed particularly well due to increasingly positive investor sentiment generated from progress on structural reforms.The Pacific region (+1.6%),however,lagged the Index as Australia (-0.9%) and New Zealand (-4.1%)were the only two developed markets to experience negative returns. •Emerging market equities rose 1.8%in the final quarter of the year.An October rally generated by the Fed’s decision to not begin tapering its asset purchases in September drove quarterly performance;however,markets retreated during November and December as economic data out of the U.S.strengthened,leading to the Fed’s eventual decision to begin tapering its asset purchases come January.Additionally,disappointing economic data throughout the developing world took its toll on equity markets.Performance among EM countries was mixed,with Asian EM countries (+3.7%),most notably India (+10.3%),experiencing the strongest gains. •Despite earnings increasing somewhat for the year,strong equity market gains came primarily as a result of multiples expansion,which,in combination with higher interest rates has increased the valuations of equities,particularly U.S.equities.U.S.equities are now trading above historical averages relative to their own history and non-U.S.indices. -40% -30% -20% -10% 0% 10% 20% 30%Relative PerformanceDeveloped vs. Emerging Markets: 3 Year Relative Performance Rolling 3 Year Annualized Relative Returns Developed Markets Outperformed Emerging Markets Outperformed -60 -40 -20 0 Difference (%)Risk Off Source: Fidelity Investments Source: Pyramis Global Advisors 69 Fed Begins to Drain the Punch Bowl •After much debate and anticipation,the Federal Reserve announced on December 18,that it would start tapering its $85 billion in monthly asset purchases by $10 billion each month beginning in January 2014.Market speculation regarding the Fed’s plans resulted in considerable interest rate volatility during the quarter as the 10-year U.S.Treasury yield fell to 2.5%in October before surpassing 3.0%in late December.The yield curve flattened during the quarter as intermediate rates rose more than long rates.For the year,ten-and- thirty year yields increased 126 and 101 basis points (bps),respectively,while short rates remained anchored.Rising rates,coupled with low yields,contributed to negative absolute returns for the Barclays Aggregate Index (-2.0%)in 2013,resulting in the lowest annual return since 1994 (-2.9%),and the second-lowest annual return since index inception in 1976.Spread sectors outperformed Treasuries during the year,with lower quality and lower duration assets generally posting the best results.High yield credit (+7.4%),bank loans (+5.5%),and CMBS (+0.2%)were the only fixed income sectors to generate positive absolute returns during the year. •Investment grade credit spreads narrowed 25 bps for the quarter and the duration-adjusted excess return to Treasuries was 208 bps.Likewise,high yield credit generated 422 bps of excess return as spreads tightened from 461 bps to 382 bps during the quarter.Lower-rated issues outperformed handily in 2013,driven by higher yi elds and lower duration.The Source: Barclays U.S. Treasury Yield Curve Change by Maturity Duration-adjusted Excess Returns to Treasuries (bps) Capital Markets Rev iew Fixed Income Best Period Second Best Period Worst Period Second W orst Period 2007 2008 2009 2010 2011 2012 2013 4Q13 Aggre ga te -206 -710 746 171 -114 226 93 78 Agency -56 -110 288 77 -25 166 1 44 MBS -177 -232 495 225 -106 91 98 57 ABS -634 -2223 2496 169 52 246 24 46 CM BS -435 -3274 2960 1501 47 841 97 85 Credit -464 -1786 1990 192 -322 693 226 208 Hi gh Yie ld -777 -3832 5955 974 -240 1394 923 422 Em erging -457 -2842 3797 508 -537 1503 -32 226 0.7% 0.9% 1.1% 1.3%Change in Yield4Q YTD 201 3 -100,000 -80,000 -60,000 -40,000 -20,000 0 20,000 40,000 60,000 80,000 $ MillionsBank Loan No ntraditi onal Bond Sh ort-Term Bond Hig h Yield Bo nd In termed iate-Term Bond issues outperformed handily in 2013,driven by higher yi elds and lower duration.The credit sector benefited from healthy corporate fundamentals,low default rates,positive technicals,and accommodative global central bank policies.Supply was plentiful throughout the ye ar as companies were eager to issue debt at low rates,which was easily absorbed by a yield-hungry investor base.Both investment grade and high yield credit spreads are trading well inside historical averages.Bank loans led all fixed income categories with $67 billion in inflows during 2013 and investors were rewarded with a total return of +5.5%. •Despite the Fed’s taper announcement in December,Agency MBS spreads tightened 8 basis points during the quarter and generated 57 basis points of excess returns over Treasuries.Low coupon mortgages,which are most affected by Fed purchases,lagged higher coupon mortgages during the quarter.Rising rates dampened mortgage origination and refinancing trends during the year.CMBS spreads tightened 15 bps during the quarter and the sector ended the year with positive absolute returns (+0.2%),benefiting from rebounding real estate valuations and improved lending.According to Prudential, seasoned,top-of-the capital structure non-agency RMBS averaged 6%to 8%returns in 2013 driven by positive carry,strong demand,and limited outstanding supply. •Non-U.S.developed government bonds returned +0.5%in local currency terms and -1.2% in US dollar terms during the quarter.Recovering Eurozone countries such as Ireland and Italy fared best,outperforming safe havens such as the UK and Germany.Capping off a volatile year,local currency and USD-denominated emerging market government debt returned -1.5%and +1.5%for the quarter,respectively,while emerging market corporate bonds returned +1.9%. Source: Morningstar Cumulative Fixed Income Asset Flows (Mutual Funds + ETFs) Source: US Dept of The Treasury -0 .1% 0.1% 0.3% 0.5%Change in YieldMa turity (Ye ars) 70 Directional Strategies Prevail in 2013 •Most hedge fund strategies delivered another positive quarter of performance,bringing the annual HFR Hedge Fund Composite Index return to 9.3%.As expected in a stellar year for equities,higher beta strategies performed best.Strategies that are less dependent on market direction faced a challenging environment,as short positions typically detracted value.As compared to the BC Aggregate Bond Index,hedge funds shined. •For the second consecutive quarter,long/short equity was the best performing hedge fund strategy,with the HFR Equity Hedge Index returning 5.0%.The HFR Equity Hedge Index displayed a beta of 0.3 to the S&P 500 during the quarter,suggesting that approximately 3.2% of the Index’s return was due to the equity market’s run-up and 1.8%was attributable to managers’alpha generation.Many of the best performing long/short equity managers were those solely focused on fundamental stock picking rather than quantitative strategies. •Activist hedge funds were particularly strong performers in 2013.Managers commonly cited two drivers of favorable returns.Against a backdrop of an improving economy,corporate management teams have been paying back shareholders through stock buybacks,higher dividends or mergers and acquisitions.In addition,there have been more corporate events that serve as catalysts to drive value creation and profitable investment opportunities. •Many short positions widely-held by hedge fund managers continued to climb in price through Returns as of December 31, 2013 Source: Hedge Fund Research, Inc. Capital Markets Review Hedge Funds St yle Fo urth Qu ar te r 2013 2012 Co nv er tible A rbitrage 1.3%7.8%8.6% Distressed Sec ur ities 3.9%13.6%10.1% Eq uity He dge 5.0%14.6%7.4% Eq uity Ma rket Neutr al 3.2%7.1%3.0% Shor t Bias ed -2.8%-16.4%-17.2% Global Ma cro 2.0%-0.3%-0.1% Me rger Arbitrage 1.5%4.8%2.8% He dge Fund Compos ite 3.7%9.3%6.4% Fu nd of Fu nds 3.5%8.7%4.8% S&P 500 10.5%32.4%16.0% BC Aggr egate Bond Index -0.1%-2.0%4.2% •Many short positions widely-held by hedge fund managers continued to climb in price through the end of the year,offsetting the strong performance of popular long positions and dampening overall hedge fund returns.Goldman Sachs reported that more than half of the 50 most commonly held short positions were outperforming the S&P 500 Index as of September 30, 2013,and a few returned more than 100%. •After experiencing two consecutive quarters of negative returns,global macro managers advanced 2.0%during the fourth quarter,although the strategy still finished the ye ar in the red. Diversified macro strategies struggled the most during the year while trend following strategies with meaningful equity market exposure were more successful. •Research by Goldman Sachs indicates that hedge fund managers are turning over their portfolios less frequently.Turnover of all hedge fund positions fell to a record low of 28% compared with the long-term average of 35%.In addition,hedge funds are operating 51%net long in aggregate,which is slightly below levels earlier in the year,despite the continued market rally.This indicates managers are being mindful of exposure levels and maintaining hedges. •A recent Preqin survey indicates investors were satisfied with their hedge funds’returns in 2013.Preqin interviewed 148 institutional investors with more than $60 billion invested in hedge funds.21%of those surveyed said their hedge fund returns had exceeded expectations and 63%said their hedge fund returns had met expectations.Only 16%felt return expectations had not been met,a sizable decrease from 2012 when 41%of those surveyed said they were disappointed. 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 10% 20% 30% 40% 50% 60% 70%Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13S&P 500 LevelHedge Fund Net Long ExposureHedge Fund Exposure vs.S&P 500 Index Level Hedge Fund Net Long Exposure S&P 500 Level Source: Goldman Sachs 71 Returns as of September 30, 2013 Private Real Estate Returns Hold For Now; Dismal Ye ar For Commodities •Despite upward pressure on interest rates,which is likely to continue into 2014 as the Fed tapers its monthly bond purchases,private real estate delivered steady income (+1.2%)and appreciation (+1.4%)during the quarter.The NCREIF Property Index (“NPI”)returned 2.6%resulting in a year-to-date return ended September 30,2013 of 8.2%.Industrial properties outperformed other property types for the second consecutive quarter due to net operating income (NOI)growth and cap rate compression.Overall real estate fundamentals have continued to strengthen.The NPI occupancy rate increased to 90.7%,a level last touched in the third quarter of 2008. •According to Real Capital Analytics,transaction volume accelerated during the quarter.Over the trailing four quarters ended September 30,2013,transaction volume totaled $351 billion,a 37%increase from the same period one year prior. •Domestic and international REITs returned -0.1%and -0.3%,respectively,in the fourth quarter,and finished the year in positive territory with returns of 2.3%and 6.1%,which significantly lagged the broader equity markets and broke a four-year winning streak for REITs versus the S&P 500.Principal concerns among investors Capital Markets Review Real Assets NCREIF 3 Mon.YT D 1 Yr.3 Yrs.5 Yrs.10 Yrs. NCREIF 2.6%8.2%11.0%12.7%3.4%8.7% Ap artments 2.5%7.7%10.8%13.7%4.3%8.4% In dus trials 3.1%9.1%11.7%12.7%2.7%8.1% Offi ce 2.4%7.4%9.7%11.6%1.9%8.1% Retail 2.7%9.9%13.2%13.5%5.6%10.5% Hotel 2.1%5.3%7.7%9.6%-0.3%6.7% Eas t 2.1%6.9%9.2%11.9%2.7%8.8% Mi dwes t 2.7%8.4%10.9%11.4%3.5%7.1% South 3.0%9.4%12.6%12.7%4.2%8.5% West 2.8%8.9%11.8%13.9%3.5%9.2% $1 ,400 $1 ,600 $1 ,800 $2 ,000 50 60 70 80 90 $ US/Troy OZ.Gold Holdings (Millions of Troy Ounces)SPDR Gold Holdings vs. Gold Price winning streak for REITs versus the S&P 500.Principal concerns among investors are the impact of rising rates on property values and the ability of REIT companies to continue accessing the equity and debt markets. •Soaring U.S.equity markets,rising interest rates,a strengthening US dollar,and little sign of inflation combined to produce a slump in commodities prices.Gold’s precipitous fall from grace continued with a 9.5%decline during the fourth quarter bringing the calendar year decline to 28.7%.Silver prices took a hit as well,sliding 11.0%and 36.6%during the quarter and year,respectively.Of the six sectors in the Index,only energy and industrial metals experienced positive returns.Energy sector gains were driven by natural gas,which rallied during the quarter producing a return of 11.0%as a brutal cold snap covered much of the nation. •A dramatic shift in gold demand negatively impacted its price during 2013.At the end of 2013,GLD’s (the largest gold bullion ETF)bullion holdings declined to less than 25.7 million ounces or a loss of 36%from its peak.Additionally,India’s demand for gold deteriorated dramatically due to a government imposed import restriction enacted to support the Rupee and ease trade imbalances.India has amassed the largest private gold holdings in the world so any sustained restrictions on bullion holdings will likely weigh on gold prices. Source: Ibbotson DJ-UBS Commodity Index Components Total Return Ending December 31, 2013 Segment 3 Months 1 Year 3 Years 5 Years 38.9%Energy 4.4%5.2%-7.1%-7.5% 16.8%Petroleum 0.9%5.1%2.4%6.3% 16.7%Indus trial Metals 0.3%-13.6%-13.0%6.6% 11.3%Precious Metals -9.8%-30.8%-8.4%7.2% 19.6%Grains -5.4%-16.9%-5.6%1.5% 5.7%Live stock -1.7%-3.5%-3.1%-3.3% 7.8%Soft s -7.1%-16.9%-17.8%5.1% 100.0%To tal Market -1.1%-9.5%-8.1%1.5% Al loca ti on $4 00 $6 00 $8 00 $1 ,000 $1 ,200 0 10 20 30 40 50 $ US/Troy OZ.Gold Holdings (Millions of Troy Ounces)To tal Known ETF Gold Ho ldings (Left) SPDR Gold Trust Gold Ho ldings (Left) Gold Price (Right) Source: Van Eck and Bloomberg 72 $400 $500 $600 •Private equity performance data in the ThomsonOne database has yet to be updated for the third quarter of 2013.During the second quarter,private equity funds outperformed their public market counterparts,with a pooled IRR of 3.4%versus 2.9%for the S&P 500.For the trailing one-year period,buyout funds modestly trailed the S&P 500 while venture capital funds lagged by a significant margin.Mega buyout funds were the best performers over the trailing one-year period,with a pooled IRR of 22.7%compared to 20.6%for the S&P 500.The valuations for mega buyout funds tend to be more closely aligned with public market comparables than their smaller counterparts.Balanced stage venture capital funds were the worst performers for the one- year period,with a pooled IRR of 2.1%. •Private equity funds raised approximately $360 billion in 2013,up from $305 billion and $315 billion in 2011 and 2012,respectively.The amount raised in 2013 was the highest annual amount on record outside of the buyout boom years of 2006 to 2008.That amount also represents nearly twice the capital raised in 2009 during the depths of the financial crisis.The marked improvement in 2013 was driven by a 39%year-over-year increase in buyout fundraising.The fundraising environment was much bleaker for venture capital funds,which raised $27 billion in 2013,the lowest total since the years following the dot com bubble.Venture funds saw fundraising declines of 35%and 27%in 2012 and 2013,respectively. •Mega buyout funds –those raising at least $5 billion-have experienced renewed interest over the Source: Thomson Reuters ThomsonOne database, January 2014. Note: Data is continuously updated and is therefore subject to change. Buyout Appetite Grew, Ve nture Interest Waned in 2013 Global Fundraising Investment Horizon Pooled IRR as of 6/30/13 Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years Early Stage Venture 2.0%5.7%4.3%-1.0%1.8%23.3% Balanced Venture 2.0%2.1%5.4%0.8%5.9%10.1% Later Stage Venture 5.4%9.7%9.7%4.7%8.2%13.7% All Venture 2.7%5.0%5.7%0.8%4.6%14.3% Small Buyouts 4.0%14.8%7.7%1.4%11.0%12.9% Med Buyouts 4.9%15.4%10.2%4.2%10.3%12.4% Large Buyouts 4.2%14.5%11.6%3.9%12.9%10.3% Mega Buyouts 3.8%22.7%14.4%6.0%8.8%9.0% All Buyouts 4.1%18.8%12.4%4.7%10.9%10.7% Mezzanine 1.9%10.5%7.4%3.1%6.7%7.6% Distressed/Turnaround 2.8%14.7%11.3%8.4%10.3%10.2% All Private Equity 3.4%15.7%11.0%4.3%9.5%11.2% S&P 500 2.9%20.6%18.5%7.8%7.7%8.0% Capital Markets Rev iew Pr ivate Equity 0 50 100 150 200 250 300 350 0 200 400 600 800 1000 1200 1400 1600 Agg. Value ($,Billions)# of DealsBuy out -Bac ked Exits #Buyout-Backed Exit s $Value $0 $100 $200 $300 $400 $,BillionsVC Buyout Real Assets Secondary Funds Distressed/SS Fund of Funds Total Raised •Mega buyout funds –those raising at least $5 billion-have experienced renewed interest over the last couple of years.Those funds raised $50 billion in 2012 and $76 billion in 2013,representing 38%and 41%,respectively,of total buyout fundraising.The last time mega buyout funds represented more than 40%of capital raised was during the buyout boom.Investor interest in the largest end of the buyout market plummeted following the financial crisis and mega buyout funds represented just 10%and 16%of buyout fundraising in 2010 and 2011,respectively. •By dollar volume,annual private equity-backed buyout deal activity has remained relatively steady since 2011.According to Preqin,$274 billion in private equity-backed buyout deals were announced in 2013 compared to $265 billion and $264 billion in 2011 and 2012,respectively. However,fewer deals were completed in 2013,increasing the average deal size to $97 million per deal from around $83 million in both 2011 and 2012 . •Extraordinary performance in public equity markets and widely accessible debt markets drove another excellent year for buyout-backed exits.According to Preqin,there were 1,348 buyout- backed exits in 2013 with an aggregate exit value of $303 billion,up from 1,299 exits worth $285 billion in 2012.The uptick was due to a significant increase in buyout-backed IPO activity. •Venture-backed exit activity was a mixed bag in 2013 as it was the strongest year for venture- backed IPOs since 2007 but the slowest year for venture-backed M&As since 2009.According to Thomson Reuters and the National Venture Capital Association,82 venture-backed IPOs raised an aggregate $11.2 billion in 2013,compared to the prior year when 48 IPOs raised $5.5 billion excluding the $16 billion Facebook IP O.There were 377 venture-backed M&A exits in 2013, down from 488 in 2012 and the lowest total since 2009 when 360 venture-backed M&A exits were completed. Source: Thomson Reuters ThomsonOne database, January 2014. Source: Preqin Buyout-Backed Exit Ac tivity 73 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 10.1 34.0 34.0 24.7 16.1 19.0 6.8 8.2 S&P 500 10.5 32.4 32.4 23.9 16.2 17.9 6.1 7.4 Russell 1000 Index 10.2 33.1 33.1 24.5 16.3 18.6 6.4 7.8 Russell 1000 Growth Index 10.4 33.5 33.5 24.0 16.5 20.4 8.2 7.8 Russell 1000 Value Index 10.0 32.5 32.5 24.8 16.1 16.7 4.5 7.6 Russell Midcap Index 8.4 34.8 34.8 25.7 15.9 22.4 7.8 10.2 Russell Midcap Growth Index 8.2 35.7 35.7 25.4 15.6 23.4 8.5 9.8 Russell Midcap Value Index 8.6 33.5 33.5 25.8 16.0 21.2 6.8 10.3 Russell 2000 Index 8.7 38.8 38.8 27.1 15.7 20.1 7.2 9.1 Russell 2000 Growth Index 8.2 43.3 43.3 28.1 16.8 22.6 8.9 9.4 Russell 2000 Value Index 9.3 34.5 34.5 26.0 14.5 17.6 5.4 8.6 International Equity Indices MSCI EAFE 5.7 22.8 22.8 20.0 8.2 12.4 1.8 6.9 MSCI EAFE Growth Index 5.2 22.5 22.5 19.7 8.0 12.8 2.9 7.0 MSCI EAFE Value Index 6.3 23.0 23.0 20.3 8.3 12.0 0.6 6.8 MSCI EAFE Small Cap 5.9 29.3 29.3 24.6 9.3 18.5 3.3 9.5 MSCI AC World Index 7.3 22.8 22.8 19.4 9.7 14.9 3.7 7.2 MSCI AC World ex US 4.8 15.3 15.3 16.1 5.1 12.8 2.2 7.6 MSCI Emerging Markets Index 1.9 -2.3 -2.3 7.7 -1.7 15.2 4.1 11.5 Fixed Income Indices Barclays Aggregate -0.1 -2.0 -2.0 1.0 3.3 4.4 4.9 4.5 Barcap Intermediate U.S. Government/Credit 0.0 -0.9 -0.9 1.5 2.9 4.0 4.6 4.1 Barclays U.S. Long Government/Credit -0.1 -8.8 -8.8 -0.4 6.7 6.4 6.7 6.4 Barclays US Corp: High Yield 3.6 7.4 7.4 11.6 9.3 18.9 8.7 8.6 BofA Merrill Lynch 3 Month US T-Bill 0.0 0.1 0.1 0.1 0.1 0.1 1.1 1.7 Barclays U.S. Treasury: U.S. TIPS -2.0 -8.6 -8.6 -1.1 3.5 5.6 5.3 4.9 Citigroup Non-U.S. World Government Bond -1.2 -4.6 -4.6 -1.6 0.6 2.3 4.6 4.1 JPM EMBI Global Diversified (external currency)1.5 -5.2 -5.2 5.5 6.1 11.7 7.2 8.2 JPM GBI-EM Global Diversified (local currency)-1.5 -9.0 -9.0 3.1 1.5 8.1 7.4 9.5 Real Asset Indices Dow Jones - UBS Commodity -1.1 -9.5 -9.5 -5.4 -8.1 1.5 -3.0 0.9 Dow Jones Wilshire REIT -0.8 1.9 1.9 9.4 9.4 16.7 1.2 8.4 Capital Markets Review Index Returns As of December 31, 2013 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 74 Appendix 75 All Total Composite, asset class composite and manager returns in this report are shown net of fees as of September 1, 2013. To tal Composite returns prior to September 1, 2013 were provided by New England Pension Consultants. Separate account manager returns prior to September 1, 2013 were provided by the investment managers and are displayed net of Benchmark Comparison One relative comparison for a fund is with a market index or blend of indices. We call this a benchmark comparison. The bench predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success. Appendix Benchmark and Universe Descriptions predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success. Universe Comparison A p erformance measurement universe is created by arraying the results of a large number of professional investment managers f Results are grouped in percentiles. The first percentile represents the top performing 1% of the managers; the 99th percentil performing 1% of managers. Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within the will vary throughout market cycle depending on the manager's investment style or philosophy. Over longer time periods (7 to 1 manager ranking in the top quartile (top 25%) of these broad universes would be perceived as performing well. Policy Benchmark As of September 1, 2013, the Policy Benchmark is comprised of 20% S&P 500 Index, 5% Russell 2000 Index, 10% MSCI EAFE Index, Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield Blen Index, 13% BC Aggregate, 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield, Cash Pay Index, 5% 3 T-Bills + 3%, 4% CPI + 5%, 5% Wellington DIH Multi-Asset Inflation Index, 5% JPM GBIT-Bills + 3%, 4% CPI + 5%, 5% Wellington DIH Multi-Asset Inflation Index, 5% JPM GBI Index-OEDCE. All Total Composite, asset class composite and manager returns in this report are shown net of fees as of September 1, 2013. To tal Composite returns prior to September 1, 2013 were provided by New England Pension Consultants. Separate account manager returns prior to September 1, 2013 were provided by the investment managers and are displayed net of fees. One relative comparison for a fund is with a market index or blend of indices. We call this a benchmark comparison. The benchmark should be predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success.predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success. A p erformance measurement universe is created by arraying the results of a large number of professional investment managers from the best to worst. Results are grouped in percentiles. The first percentile represents the top performing 1% of the managers; the 99th percentile represents the bottom Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad universes will vary throughout market cycle depending on the manager's investment style or philosophy. Over longer time periods (7 to 10 years or more), a manager ranking in the top quartile (top 25%) of these broad universes would be perceived as performing well. As of September 1, 2013, the Policy Benchmark is comprised of 20% S&P 500 Index, 5% Russell 2000 Index, 10% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield Blend Index, 13% BC Aggregate, 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield, Cash Pay Index, 5% 3 Month Asset Inflation Index, 5% JPM GBI-EM Global Diversified Index, and 5% NCREIF Fund Asset Inflation Index, 5% JPM GBI-EM Global Diversified Index, and 5% NCREIF Fund 76