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HomeMy Public PortalAbout2017 2nd Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Pension Plan 2nd Quarter 2017 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL 60606 Phone: 312-798-3200 Fax: 312-902-1984 www.pavilioncorp.com 1 Capital Markets Review 1 2 Performance Summary 10 3 Asset Class Diversification 33 4 Manager Evaluation 39 5 Calendar Year Performance 67 6 Appendix 69 Table of Contents Capital Markets Review 1 Capital Markets Review Summary 4.2 3.1 2.5 6.1 7.9 6.3 3.6 2.6 1.4 0.6 2.1 0.2 2.3 -3.0 2.6 1.4 0.5 19.0 17.9 24.6 20.3 21.4 23.7 11.3 -2.2 -0.3 -1.9 12.8 0.5 0.2 -6.5 7.1 5.5 1.6 -10 -5 0 5 10 15 20 25 30 MSCI Global ACWI IMI S&P 500 Russell 2000 MSCI EAFE S&P Dev ex U.S. SC MSCI EMF HFRI Equity Hedged* BBG Barclays Global Agg. BBG Barclays U.S. Agg. WGBI ex-U.S. Hedged BofAML High Yield Cons. 91-Day T-Bills NAREIT Bloomberg Commodity DJ Brookfield Global Infra. HFRI FoF:Cons.* CPI Performance: Past Quarter and Year (%) Past Quarter Past 12 Months * HFRI data are subject to revision. Source: FactSet & BloombergFixed Income (Bonds)Equities (Stocks)AlternativesSustainable Economic Expansion Capital markets continued to benefit from the ongoing synchronized recovery in global growth,with particularly strong improvements in emerging markets.Cyclical risks remain low across developed markets,which we believe should allow existing trends to remain intact. In addition to strengthening economic conditions,Europe benefited from the positive resolution of several challenges,most notably French election results as well as the release of the final Greek loan payment.The reduction in risk allowed for strong performance of European equity markets. While core inflation remains below target in most developed markets,improving growth has allowed central bank policy makers to begin publicly discussing the prospects for normalizing rates,placing some upward pressure on still historically low yields.The prospects for a future convergence in monetary policy also weighed on the dollar,reducing risks of further rapid appreciation. Domestically,the U.S.yield curve flattened as the Federal Open Market Committee (“FOMC”)raised rates again in June (as expected),marginally detracting from intermediate duration performance;however,declines in long-term rates buoyed longer duration instruments.The improving economic conditions also led to spread compression for most sectors,driving outperformance relative to similar duration Treasuries. Global growth helped boost domestic and international equities.After turning positive in the third quarter of 2016,earnings growth has been robust and widespread with expectations continuing to reflect the improving growth landscape.Internationally, earnings and positive currency movements propelled equity prices higher. For the second quarter in a row,commodity prices turned down,dragged by energy and agriculture prices.While prices declined,income-oriented strategies,like infrastructure,generated positive performance,aided by a flattening yield curve and contractual volume based compensation. 2 Capital Markets Review Asset Class Outlook Equities In our view,the main driver of equity market performance over the past twelve months has been the recovery in earnings growth.While the pace of earnings growth is likely to slow in coming quarters,underlying fundamentals remain strong and should support further growth in earnings as well as equity market performance,especially that of emerging markets.Equity markets also should benefit from modestly positive but constrained inflation levels.Additionally,growth assets in general and equities in particular look more attractive once an adjustment is made for the current low level of interest rates.While U.S.fiscal policy enhancements appear less likely than earlier in the year,any progress should provide tailwinds for the U.S.equity market. Fixed Income The FOMC raised rates again during the quarter,and laid out the framework by which they expect to eventually reduce the balance sheet.During the quarter,spurred by improving global growth conditions,central bankers in several developed markets publicly commented on a change in forward guidance.This changing guidance appears to be designed to prepare investors for the eventual normalization of rates in these markets –bringing the markets into synch with U.S.policy.As a result,interest rates rose across developed markets,while the dollar declined.While we anticipate rates rising,it likely will be very gradual,as key inflation measures remain below target.As a result,we believe investors are well served maintaining some high quality duration risk as portfolio protection,including exposure to select securitized sectors such as Non- Agency MBS,CMBS,and off-the-run ABS.While credit markets have experienced further spread tightening,it is difficult to identify a near term catalyst for broad spread widening.Weakness in retail and lower energy prices may,however,put pressure on select industries.Where possible,we recommend investors build in carry advantage through select below investment grade exposures. Real Assets Core inflation remains constrained and below the 2%target in most developed markets. Factors such as globalization,technological innovation,as well as shifting demographics are weighing on inflation,conditions that likely will persist into the foreseeable future. In the U.S.,we do not anticipate inflation levels sustaining an increase much above the Federal Reserve’s 2%target near-term.In the current low yield environment,we maintain our view that global listed infrastructure likely provides a diversifying income stream with a slightly lower volatility profile than commodities.Within commodities and infrastructure,we continue to favor the energy complex.We maintain a cautious view on REITs,due to historical correlations with long duration instruments. Source: Bloomberg Source: Bloomberg & Federal Reserve Source: FactSet as of July 7, 2017 87.38 73.65 61.93 86.98 98.87 105.24 111.31 118.91 118.75 119.33 131.60 146.88 40 60 80 100 120 140 160 180 CY2007CY2008CY2009CY2010CY2011CY2012CY2013CY2014CY2015CY2016CY2017CY2018Actual Estimates S&P 500 Calendar Year Bottom-Up EPS Actuals & Estimates -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%Jan-15Mar-15May-15Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17% Change YOYCore inflation rates remain below target U.S.E.U.U.K.Japan Target 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%Jun-17Aug-17Oct-17Dec-17Feb-18Apr-18Jun-18Aug-18Oct-18Dec-18Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Projected vs. Expected Path of Fed Funds Futures Fed Projections 3 Fixed Income Equities FinancialStressesValuationsCyclicalCurrent Risk Levels Capital Markets Review Key Market Risks Source: Economic Policy Uncertainty Source: Bloomberg, FactSet, Recession Alert, & Pavilion AnalysisLowHigh Cyclical Risks Remain Low with Regional Disturbances Present Ongoing Threat from European Challenges: −The results of French elections provided some welcome relief,but more elections loom, most notably in Italy. −The U.K.faces rising challenges navigating Brexit.While the decline in the British Pound immediately following the Brexit vote provided some near-term stimulus,the downside is now being felt in the form of rising inflation.This rise in inflation may come at an inopportune moment,as the economy may be feeling the drag from declining capital investment as firms evaluate the post Brexit landscape. −While banks in other E.U.countries have addressed re-capitalization issues,Italy has only begun the process,and the underperformance of Italian banks makes recapitalization efforts more difficult,potentially setting the stage for a tightening of European financial conditions. Policy Misstep or Shortfall:The failure to pass healthcare reform has increased uncertainty regarding the administration’s ability to advance other elements of its business- friendly agenda.Geopolitical risks also have become more elevated,with the threat of deploying trade sanctions against China as leverage to resolve the North Korean crisis being one example.Near-term,the single biggest policy risk may be the inability to raise the debt ceiling limit. Removing Accommodation Prematurely:Since the beginning of the recovery,several central banks have made attempts to reduce accommodation,most notably the ECB,only to end up reversing course over a relatively short time period.The challenge for the Fed and other central banks will be normalizing rates while simultaneously reducing balance sheets –uncharted waters to be sure. - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Jul-06Apr-07Jan-08Oct-08Jul-09Apr-10Jan-11Oct-11Jul-12Apr-13Jan-14Oct-14Jul-15Apr-16Jan-17Oct-17Jul-18Apr-19Jan-20Oct-20Jul-21Apr-22Jan-23BillionsPotential Change in Fed Balance Sheet Balance Sheet Projected Reduction 0 50 100 150 200 250 300 350 400 450 500 Jun-87Jun-89Jun-91Jun-93Jun-95Jun-97Jun-99Jun-01Jun-03Jun-05Jun-07Jun-09Jun-11Jun-13Jun-15Jun-17Source: Federal Reserve FRED Data & Pavilion Analysis Economic Policy Uncertainty Remains Elevated in The European Union 4 Capital Markets Review Economy Economy Moves Forward, Despite Political Hindrances U.S.economic activity carried on as if plans for tax cuts,healthcare reform and regulatory reforms under a new president never existed.A succinct lack of Congressional productivity planted seeds for future economic uncertainties,as a continuation of current fiscal and regulatory policies may be a hindrance to expanding GDP growth above its decade-long slump.Growth remained dependent upon businesses to lower costs and improve efficiency. The Federal Reserve increased interest rates 25bps in June,and markets expect its tactics to shift from rate increases to balance sheet reduction by allowing Treasury and mortgage holdings to mature without reinvestment.This process is expected to start very gradually so as to gauge market impact. Consumer enthusiasm for auto purchases waned following several strong quarters of growth. A decline in pent-up demand combined with manufacturers’reluctance to cut prices to reduce inventories are negatively affecting the ability of the auto sector to maintain the more recent rapid pace of growth.Auto loan interest rates have moved up slightly,while the median loan term is approaching six years. Unemployment rates reached levels generally considered full employment,where further labor-intensive economic expansion would demand higher wage growth.A decrease in immigration,coupled with increased industrial and manufacturing demand for labor,resulted in escalating wages,though at a pace much lower than traditional models would forecast. Technological improvements brought intense price competition,limiting the ability of businesses to raise prices. Source: Federal Reserve Source: Bloomberg Source: Bloomberg Unemployment Rates Auto Sales -3 -2 -1 0 1 2 3 4 5 6 7 19901992199419961998200020022004200620082010201220142016PercentCPICore CPI U.S. Inflation 2 4 6 8 10 12 14 16 18 Jan-94Jan-96Jan-98Jan-00Jan-02Jan-04Jan-06Jan-08Jan-10Jan-12Jan-14Jan-16PercentUnemployment Rate Marginally Attached Unemployment Rate 8 10 12 14 16 18 20 22 Jun-90Jun-92Jun-94Jun-96Jun-98Jun-00Jun-02Jun-04Jun-06Jun-08Jun-10Jun-12Jun-14Jun-16Millions (annual rate)5 Capital Markets Review Equities Second Quarter and YTD World and Emerging Market Equity Returns Growth Continued to Outperformed Value in the Second Quarter Growth Continued to Propel Equity Markets Higher The S&P 500 Index returned +3.1%during the second quarter.Healthcare posted the strongest returns for the quarter,followed by Industrials,Financials,and Information Technology.Energy and Telecom were the only sectors to post a loss during the second quarter,continuing a trend from the first quarter. Most developed market equity indices provided similar returns in the +4%to +6%range during the second quarter,the exception being the S&P 500 at +3.1%.Emerging Market equities were slightly higher,returning +6.3%,led by China,South Korea,and Taiwan. Growth has continued to outperform value in the second quarter,as it did during the first quarter.Emerging Markets experienced the most pronounced performance differential by style,as well as the highest absolute return of growth stocks. Second Quarter and YTD S&P 500 Sector Returns Source: Factset, MSCISource: Factset, S&P -7.0% -6.4% 1.6% 2.2% 2.4% 2.8% 3.1% 3.2% 4.1% 4.2% 4.7% 7.1% -10.7% -12.6% 8.0% 8.8% 11.0% 6.4% 9.3% 9.2% 17.2% 6.9% 9.5% 16.1% -15.0%-10.0%-5.0%0.0%5.0%10.0%15.0%20.0% Telecom Energy Cons Staples Utilities Cons Disc Real Estate S&P 500 Materials Info Tech Financials Industrials Healthcare 2Q YTD 1.3%1.4% 0.7% 4.8% 3.2% 4.7% 4.2%4.4% 7.5% 9.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% U.S. Large Cap U.S. Mid Cap U.S. Small Cap Int'l Developed Emerging Mkts Value Growth Source: Factset, MSCI, Russell 4.3%3.1%4.0% 5.8%6.1%6.3% 10.6%10.2% 8.8% 2.9%3.5% -6.7% 11.5% 9.3%10.7% 14.1%13.8% 18.4% 24.9% 28.8% 21.6%20.5% 8.0% 3.0% -10.0% 0.0% 10.0% 20.0% 30.0% MSCI ACWI S&P 500 MSCI World MSCI ACWI x US MSCI EAFE MSCI EM China South Korea Taiwan India South Africa Brazil 2Q YTD 6 Source: Bloomberg Barclays Capital Markets Review Fixed Income Source: Bloomberg Barclays U.S. Treasury Yield Curve Change Source: US Dept. of The Treasury Duration –Adjusted Excess Returns to Treasuries (bps) End of Easing Front and Center The Federal Reserve (“Fed”)raised rates 0.25%in June,setting the Federal Funds Rate target at 1.00%to 1.25%.However,Fed comments hint they are poised to take a pause, as concerns about inflation losing steam have taken hold.The Fed also offered details on the strategy of shrinking its balance sheet and plans to allow a small,but increasing amount of securities to mature each month without reinvestment starting later in 2017. Treasuries returned +1.2%for the quarter.The Treasury curve flattened with yields rising at the short-end while longer-term rates fell.The yield curve spread between 2-and 30- year Treasuries fell 29 basis points (bps)while the spread between 10-and 30-year Treasuries narrowed 8 bps.TIPS declined -0.4%on falling inflation expectations. Investment grade credit returned +2.4%for the quarter and outpaced Treasuries by 99 bps on a duration-adjusted basis.The OAS of the U.S.Credit Index ended the quarter 9 bps tighter at 103 bps,a level not seen since 2014.Industrials outpaced utilities,financials, and non-corporates on a duration-adjusted basis.High yield bonds returned +2.2%,while spreads ended the quarter 28 bps tighter at 364 bps.Energy re-emerged as a pocket of weakness,with oil prices hitting calendar year lows in late June. Agency MBS generated a +0.9%total return,but trailed duration-matched Treasuries by 4 bps for the quarter.Spreads ended the quarter 5 bps wider at 32 bps,prodded by the Fed’s discussion of the end of reinvestment in Agency MBS.CMBS and ABS proved resilient with modestly tighter spreads and continued demand for high quality carry in a low yield environment. Best Period Second Best Period Worst Period Second Worst Period Historical High Yield Credit Valuations 0 250 500 750 1,000 1,250 1,500 1,750 2,000 Option Adjusted Spread (OAS)-0.3% -0.2% -0.1% 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 2Q17 YTD Ending 2Q17 2010 2011 2012 2013 2014 2015 2016 1Q17 2Q17 Aggregate 171 -114 226 93 10 -53 138 11 30 Agency 77 -25 166 1 10 -133 121 60 20 MBS 225 -106 91 98 40 -5 -11 -17 -4 ABS 169 52 246 24 53 44 95 22 32 CMBS 1501 47 841 97 108 -28 236 8 34 Credit 192 -322 693 226 -18 -169 442 47 99 High Yield 974 -240 1394 923 -112 -577 1573 214 146 EMD (USD)508 -537 1503 -32 -120 3 880 259 72 7 Hedge Funds vs Long-Only: Total Returns 2017 Q2 Capital Markets Review Alternative Investments Global Alternatives Rise with Risk Assets Hedge Funds:Hedge fund strategies posted gains alongside risk assets.Global equity markets continued their climb,energy-and commodity-related investments were challenged, and domestic interest rates fell.Long/short equity strategies posted strong results,and like long-only strategies,managers with long exposures to global stocks and growth-oriented names outperformed those with long exposures to domestic value names and stocks within the troubled energy sector.Distressed-oriented and long/short credit funds struggled to keep up with U.S.bonds and high yield markets,particularly those with energy exposure.These credit strategies typically have little exposure to interest rate duration,which was a tailwind to long-only bond strategies.A robust merger and financing environment continues to be a boon to event-driven strategies,and while relative value strategies generally posted positive returns,macro strategies posted losses. Real Assets:Infrastructure rose +9.9%YTD.The top contributors to performance have been the communications and airport sectors,with the only negative sector being MLPs. From a regional perspective,Europe and Asia have done well,as political uncertainty and economic fears have abated.Many infrastructure companies own long-duration physical assets and enjoy relatively stable,contractually-based cash flows that provide investors with an attractive diversifying income stream. Private Capital Markets:Fundraising remained strong through the second quarter of 2017, as 295 funds closed with commitments totaling $175 billion,bringing total private capital fundraising to $356 billion during H1 2017.Given the current trajectory of fundraising activity,and sustained high levels of fund distributions,it is probable that 2017 will be the largest ever fundraising year for private capital.As was the story in recent years,the industry’s strong returns and increasing dry powder continues to create more competition for deals.Exit activity declined for the third consecutive quarter,with 489 private equity exits in Q2 (vs.576 in Q1).As of May 31,2017,the median LBO EV/EBITDA multiple reached 10.8x,up from 10.2x in Q1 of 2017.As a result,equity contributions as a percentage of total capital structure have reached near record highs (5.0x in 2017 vs.3.3x in 2012),as sponsors seek ways to differentiate themselves in the transaction process. -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 30-Dec-16 30-Jan-17 28-Feb-17 31-Mar-17 30-Apr-17 31-May-17 30-Jun-17Cumulative ReturnHF Longs HF Shorts S&P Long - Shorts Commonly-held hedge fund long positions continued to outperform the S&P 500 through the second quarter, while commonly-held shorts kept pace. This has led to continued positive alpha across US-focused long/short equity managers. 3.1% 4.3% 2.4% 1.5% 2.6%2.2% 0.9%0.6% 3.6% 0.4% -1.1% -5% 0% 5% 10%L/S equity managers mostly kept pace with their beta to global equity markets. Global equity markets, however, were boosted by a falling dollar, while hedge fund managers are generally FX-hedged Lower-quality and hedged strategies underperformed domestic bonds. Global stocks/bonds performed well, boosted by expanding equity prices, lower rates, and weaker dollar. FX/rate-neutral hedge funds and long- dollar/short-rate macro funds lagged. *Asset-weighted is used instead of fund-weighted, as it is available and more indicative of the universe. Sources: Bloomberg, Goldman Sachs Top Hedge Fund Equity Longs vs Shorts (Goldman VIP) Sources: Hedge Fund Research, Factset 37.6% 23.8%23.3% 11.0%8.0% 3.8% -3.1%-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% Airports Toll Roads Communications Electrical Transmission and Distribution Water Ports MLPs Listed Infrastructure (Year-to-Date Performance) Sector Index Source:Bloomberg 8 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 2.9 8.7 18.5 10.5 9.3 14.6 15.3 7.3 S&P 500 3.1 9.3 17.9 10.7 9.6 14.6 15.4 7.2 Russell 1000 Index 3.1 9.3 18.0 10.2 9.3 14.7 15.4 7.3 Russell 1000 Growth Index 4.7 14.0 20.4 11.4 11.1 15.3 16.5 8.9 Russell 1000 Value Index 1.3 4.7 15.5 9.0 7.4 13.9 14.3 5.6 Russell Midcap Index 2.7 8.0 16.5 8.2 7.7 14.7 15.3 7.7 Russell Midcap Growth Index 4.2 11.4 17.0 7.0 7.8 14.2 15.2 7.9 Russell Midcap Value Index 1.4 5.2 15.9 9.4 7.5 15.1 15.3 7.2 Russell 2000 Index 2.5 5.0 24.6 7.8 7.4 13.7 14.4 6.9 Russell 2000 Growth Index 4.4 10.0 24.4 5.4 7.6 14.0 15.2 7.8 Russell 2000 Value Index 0.7 0.5 24.9 10.3 7.0 13.4 13.5 5.9 International Equity Indices MSCI EAFE 6.1 13.8 20.3 3.9 1.1 8.7 7.9 1.0 MSCI EAFE Growth Index 7.5 16.7 15.7 4.9 2.8 9.2 8.6 2.1 MSCI EAFE Value Index 4.8 11.1 25.0 2.8 -0.6 8.1 7.1 -0.1 MSCI EAFE Small Cap 8.1 16.7 23.2 8.9 5.6 12.9 11.4 3.4 MSCI AC World Index 4.3 11.5 18.8 6.9 4.8 10.5 10.5 3.7 MSCI AC World ex US 5.8 14.1 20.5 4.0 0.8 7.2 6.7 1.1 MSCI Emerging Markets Index 6.3 18.4 23.7 4.3 1.1 4.0 3.9 1.9 Fixed Income Indices Blmbg. Barc. U.S. Aggregate 1.4 2.3 -0.3 2.8 2.5 2.2 3.2 4.5 Blmbg. Barc. Intermed. U.S. Government/Credit 0.9 1.7 -0.2 2.0 1.9 1.8 2.6 3.9 Blmbg. Barc. U.S. Long Government/Credit 4.4 6.0 -1.1 7.0 5.3 4.3 6.8 7.6 Blmbg. Barc. U.S. Corp: High Yield 2.2 4.9 12.7 7.0 4.5 6.9 8.2 7.7 BofA Merrill Lynch 3 Month U.S. T-Bill 0.2 0.3 0.5 0.3 0.2 0.2 0.2 0.6 Blmbg. Barc. U.S. TIPS -0.4 0.9 -0.6 1.8 0.6 0.3 2.9 4.3 Citigroup Non-U.S. World Government Bond 3.8 5.9 -5.0 4.0 -2.2 -0.8 1.4 3.2 JPM EMBI Global Diversified (external currency)2.2 6.2 6.0 7.9 5.4 5.7 7.1 7.4 JPM GBI-EM Global Diversified (local currency)3.6 10.4 6.4 4.2 -2.8 -0.7 1.9 4.0 Real Asset Indices Bloomberg Commodity Index Total Return -3.0 -5.3 -6.5 -10.0 -14.8 -9.3 -5.7 -6.5 Dow Jones Wilshire REIT 1.8 1.8 -1.7 9.9 8.3 9.3 13.3 5.6 Capital Markets Review Index Returns As of June 30, 2017 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 9 Performance Summary 10 Performance Summary - June 2017 During the second quarter, the Metropolitan St. Louis Sewer District pension plan outperformed its benchmark by 30 basis points (bps) returning 2.8%. On a trailing one-year basis, the Portfolio reported a gain of 8.6%, underperforming the Policy Benchmark return of 9.1%. Asset Class Diversification Current asset allocation was within investment policy targets. The Plan was slightly overweight in large-cap, small-cap, international equity, and fixed income and underweight hedge funds and real estate. Pavilion has conducted an asset allocation study on the pension plan asset allocation policy target. The study includes a variety of portfolios that have a higher expected return with higher expected volatility to consider should the Metropolitan St Louis Metropolitan Sewer District decide to change its risk tolerance. Manager Evaluation Second quarter performance was the most favorably impacted by the following managers as they outpaced their benchmarks: TimesSquare Small Cap Growth, Morgan Stanley International Equity, Morgan Stanley Emerging Markets, Prudential Core Plus Bond Fund, Brandywine Global Opportunistic Fixed, and Entrust Capital Diversified. Second quarter performance was unfavorably impacted by Kennedy Mid Cap Value, Lighthouse Global Long/Short, and UBS Trumbull Property Fund which underperformed their benchmarks. Pension Plan Executive Summary 11 Pension Plan Executive Summary Capital Markets Review The S&P 500 Index returned 3.1% during the second quarter. Growth-oriented sectors led returns with Healthcare being by far the strongest performing sector during the quarter, followed by strong performances by Industrials, Financials, and Information Technology. Energy and Telecommunications were the only two sectors to register a loss during the second quarter, continuing a trend from the first quarter. Short term Treasury yields rose during the quarter, as the FOMC raised the Fed Fund’s rate 25 bps in June. The Fed hinted on pausing increases in interest rates and have instead laid out the framework by which they expect to reduce their balance sheet over time. Treasuries returned 1.2% for the quarter. The U.S. yield curve flattened with yields rising at the short-end while longer-term rates fell. The yield curve spread between two-year and 30-year Treasuries fell 29 bps. Most developed market equity indices provided similar returns in the 4.0% to 6.0% range during the quarter, the exception being the S&P 500 at 3.1%. Emerging Markets were slightly higher, returning 6.3%, led by China, South Korea, and Taiwan. Growth continued to outperform value in the second quarter. Emerging Markets experienced the most pronounced performance differential by style, as well as the highest absolute return of the growth stocks. 12 Total Composite Policy Benchmark 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception 2.5 5.9 9.1 3.1 6.5 4.7 7.8 2.8 6.4 8.6 2.8 6.2 4.8 7.3 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 2.8 6.4 8.6 2.8 6.2 4.8 7.4 24y 6m Policy Benchmark 2.5 5.9 9.1 3.1 6.5 4.7 N/A Performance Summary Total Composite vs. Policy Benchmark As of June 30, 2017 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 13 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 2.8 (64)6.4 (86)8.6 (95)2.8 (98)6.2 (98)7.3 (98)4.8 (92)¢£ 5th Percentile 3.9 9.6 15.3 6.7 10.5 10.9 6.7 1st Quartile 3.2 8.2 13.1 5.9 9.5 10.1 6.1 Median 2.9 7.6 12.0 5.4 9.0 9.5 5.7 3rd Quartile 2.6 6.9 10.8 4.7 8.3 8.9 5.3 95th Percentile 2.0 5.5 8.4 3.7 7.1 7.7 4.6 Performance Comparison All Public Plans <= $500 mil As of June 30, 2017 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 14 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 23.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 2.8 (65)6.4 (86)8.6 (94)2.8 (97)6.2 (97)7.3 (96)4.8 (87)¢£ 5th Percentile 3.9 9.5 15.3 6.7 10.6 10.9 6.7 1st Quartile 3.3 8.3 13.3 5.9 9.6 10.1 6.0 Median 3.0 7.6 12.1 5.4 9.0 9.5 5.6 3rd Quartile 2.6 6.9 11.0 4.7 8.2 8.8 5.2 95th Percentile 2.0 5.1 7.7 3.4 6.9 7.7 4.3 Performance Comparison All Public Plans As of June 30, 2017 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 15 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.8 (97)15.0 (47)26.2 (59)9.3 (4)13.2 (25)8.9 (46)0.6 (72)¢£ 5th Percentile 58.0 25.6 43.8 7.7 24.0 12.8 6.8 1st Quartile 51.3 18.5 34.3 5.0 13.1 10.2 1.7 Median 46.0 14.9 28.5 4.7 5.4 8.6 1.0 3rd Quartile 40.4 11.9 22.3 4.2 4.1 5.3 0.5 95th Percentile 29.0 7.5 14.9 2.7 1.8 3.2 0.1 Asset Allocation Comparison All Public Plans <= $500 mil As of June 30, 2017 _________________________ Parentheses contain percentile rankings. 16 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.8 (88)15.0 (53)26.2 (53)9.3 (5)13.2 (47)8.9 (42)0.6 (73)¢£ 5th Percentile 57.8 27.7 46.9 9.2 32.3 13.1 7.0 1st Quartile 50.1 20.8 33.5 5.0 20.0 10.0 2.0 Median 43.9 15.3 26.9 4.6 12.6 8.0 1.1 3rd Quartile 35.1 12.2 20.8 3.3 5.4 5.1 0.6 95th Percentile 20.3 6.9 13.7 0.3 2.6 2.4 0.1 Asset Allocation Comparison All Public Plans As of June 30, 2017 _________________________ Parentheses contain percentile rankings. 17 3 Years 5 Years 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)3.0 3.8 4.6 5.4 6.2 7.0 7.8 Risk (Standard Deviation %) Policy Benchmark (5.5 , 3.1) Total Composite (5.6 , 2.8) 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)5.0 5.7 6.4 7.1 7.8 8.5 9.0 Risk (Standard Deviation %) Policy Benchmark (5.3 , 6.5) Total Composite (5.4 , 6.2) Performance Summary Risk and Return Summary As of June 30, 2017 18 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 265,771,547 100.0 2.8 6.4 8.6 2.8 6.2 4.8 7.4 24y 6m Policy Benchmark 2.5 5.9 9.1 3.1 6.5 4.7 N/A Total Equity Composite 111,186,165 41.8 4.6 11.2 17.2 5.7 N/A N/A 9.5 3y 10m MSCI AC World IMI 4.4 11.7 19.6 5.4 11.3 4.5 9.4 Domestic Equity Composite 71,215,480 26.8 3.0 7.8 16.8 7.9 N/A N/A 11.6 3y 10m Russell 3000 Index 3.0 8.9 18.5 9.1 14.6 7.3 12.8 Large-Cap Equity Composite 54,496,755 20.5 3.0 8.2 16.1 8.4 13.4 6.9 8.7 14y 1m Russell 1000 Index 3.1 9.3 18.0 9.3 14.7 7.3 9.2 Small-Cap Equity Composite 16,718,726 6.3 2.7 7.0 19.1 6.4 13.7 8.4 11.2 14y 1m Russell 2000 Index 2.5 5.0 24.6 7.4 13.7 6.9 10.1 International Equity Composite 39,970,684 15.0 7.6 17.5 17.7 1.4 N/A N/A 5.2 3y 10m MSCI AC World ex USA Index 5.8 14.1 20.5 0.8 7.2 1.1 5.1 Developed International Equity Composite 28,089,832 10.6 7.6 16.6 16.8 1.1 7.9 2.1 4.9 18y 2m MSCI EAFE Index 6.1 13.8 20.3 1.1 8.7 1.0 3.9 Emerging International Equity Composite 11,880,852 4.5 7.7 19.8 20.1 1.2 4.2 1.2 7.4 12y 3m MSCI Emerging Markets Index 6.3 18.4 23.7 1.1 4.0 1.9 7.7 Fixed Income Composite 94,272,899 35.5 2.3 4.5 2.1 1.4 2.6 4.9 4.5 14y Barclays Intermediate U.S. Government/Credit 0.9 1.7 -0.2 1.9 1.8 3.9 3.5 Performance Summary Total Pension Fund Asset Allocation and Performance As of June 30, 2017 _________________________ Performance is reported net of fees. 19 Performance Summary Total Pension Fund Asset Allocation and Performance As of June 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Funds Composite 35,013,736 13.2 0.1 2.0 4.8 N/A N/A N/A 0.7 2y 4m HFRI Fund of Funds Composite Index 0.7 3.1 6.4 1.5 3.9 0.9 0.7 60% MSCI ACWI / 40% BC Agg 3.1 7.7 10.8 4.0 7.3 4.4 4.1 Real Estate Composite.23,666,023 8.9 0.9 1.9 4.5 8.4 8.6 4.2 5.7 11y 1m NCREIF Property Index 1.7 3.3 7.0 10.2 10.5 6.4 7.4 Cash Account 1,632,724 0.6 0.2 0.4 0.7 0.7 0.4 0.6 1.3 14y 1m BofA Merrill Lynch 3 Month U.S. T-Bill 0.2 0.3 0.5 0.2 0.2 0.6 1.3 _________________________ Performance is reported net of fees. 20 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Domestic Large-Cap Equity Managers Blackrock Russell 1000 Index Fund Non-Lending 54,496,755 20.5 3.0 (55)9.2 (50)18.0 (53)9.3 (30)14.7 (24)7.3 (32)3.1 (56)0y 4m Russell 1000 Index 3.1 (55)9.3 (49)18.0 (53)9.3 (30)14.7 (23)7.3 (32)3.1 (55) IM U.S. Large Cap Equity 3.3 9.2 18.3 8.1 13.6 6.5 3.4 Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 8,390,681 3.2 0.9 (64)5.0 (41)20.4 (26)5.5 (72)13.7 (57)N/A 10.2 (1)9y 6m Russell Midcap Value Index 1.4 (55)5.2 (39)15.9 (66)7.5 (22)15.1 (16)7.2 (28)8.7 (32) IM U.S. Mid Cap Value Equity 1.4 4.3 17.1 6.3 14.0 6.3 8.0 TimesSquare Small Cap Growth Fund 8,328,045 3.1 4.7 (54)8.9 (42)17.6 (87)7.2 (44)13.2 (45)8.9 (21)10.0 (9)15y 5m Russell 2000 Growth Index 4.4 (61)10.0 (40)24.4 (66)7.6 (43)14.0 (39)7.8 (41)8.2 (62) IM U.S. Small Cap Growth Equity 5.1 8.0 25.8 6.5 12.7 7.4 8.4 Developed International Equity Manager Morgan Stanley International Equity Fund I 28,089,832 10.6 7.6 (30)16.7 (45)16.7 (74)1.1 (57)7.9 (48)2.1 (37)4.7 (64)12y 3m MSCI EAFE Index 6.1 (58)13.8 (75)20.3 (45)1.1 (55)8.7 (34)1.0 (57)4.7 (64) IM International Equity 6.4 16.0 19.7 1.4 7.7 1.3 5.5 Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 11,880,852 4.5 7.7 (20)19.9 (34)20.1 (56)1.3 (40)4.3 (43)1.2 (55)7.5 (43)12y 3m MSCI Emerging Markets Index 6.3 (40)18.4 (53)23.7 (29)1.1 (43)4.0 (48)1.9 (39)7.7 (35) IM Emerging Markets Equity 6.0 18.7 21.1 0.7 3.8 1.4 7.1 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of June 30, 2017 _________________________ Performance is reported net of fees. 21 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of June 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 37,111,339 14.0 0.9 (15)1.6 (27)-0.2 (62)1.9 (18)2.0 (22)4.5 (6)4.8 (5)16y Barclays Intermediate U.S. Government/Credit 0.9 (12)1.7 (16)-0.2 (62)1.9 (17)1.8 (30)3.9 (16)4.2 (15) IM U.S. Intermediate Duration Fixed Income 0.7 1.4 0.3 1.4 1.3 3.3 3.7 Prudential Core Plus Bond Fund 32,440,661 12.2 2.2 (11)4.0 (10)2.7 (34)3.7 (9)4.1 (8)6.2 (6)3.9 (9)2y 1m Blmbg. Barc. U.S. Aggregate 1.4 (67)2.3 (83)-0.3 (96)2.5 (49)2.2 (83)4.5 (75)2.1 (67) IM U.S. Broad Market Core+ Fixed Income 1.6 2.9 1.9 2.4 2.9 5.1 2.5 Brandywine Global Opportunistic Fixed Income 24,720,900 9.3 4.4 (1)9.8 (1)4.8 (15)1.2 (33)3.3 (15)6.2 (1)5.7 (1)12y 6m Citigroup World Government Bond Index 2.9 (20)4.5 (44)-4.1 (96)-1.0 (83)-0.2 (89)3.5 (59)2.6 (73) IM Global Fixed Income 2.2 4.3 1.0 0.5 1.6 3.8 3.5 _________________________ Performance is reported net of fees. 22 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of June 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Fund Managers Lighthouse Global Long/Short Fund Limited 18,537,665 7.0 -0.7 2.1 5.4 4.2 7.5 3.7 3.2 2y 4m HFRI Equity Hedge (Total) Index 2.0 5.9 12.2 2.9 6.3 2.7 3.7 Entrust Capital Diversified Fund 16,476,071 6.2 1.0 1.8 4.2 -2.9 2.7 2.2 -3.7 1y 11m HFRI Fund of Funds Composite Index 0.7 3.1 6.4 1.5 3.9 0.9 0.2 Real Estate Manager UBS Trumbull Property Fund 23,666,023 8.9 0.9 1.9 4.5 8.4 8.6 4.2 5.7 11y 1m NCREIF Property Index 1.7 3.3 7.0 10.2 10.5 6.4 7.4 Cash Account 1,632,724 0.6 0.2 0.4 0.7 0.7 0.4 0.6 1.3 14y 1m BofA Merrill Lynch 3 Month U.S. T-Bill 0.2 0.3 0.5 0.2 0.2 0.6 1.3 Total Composite 265,771,547 100.0 2.8 6.4 8.6 2.8 6.2 4.8 7.4 24y 6m _________________________ Performance is reported net of fees. 23 YTD 2016 2015 2014 2013 2012 2011 2010 Total Fund Total Composite 6.4 5.1 -0.7 2.9 10.9 12.1 1.2 11.2 Policy Benchmark 5.9 6.6 -1.4 3.5 12.3 11.6 1.1 11.5 Domestic Equity Blackrock Russell 1000 Index Fund Non-Lending 9.2 (50)12.1 (30)0.9 (46)13.2 (17)33.1 (44)16.4 (34)1.5 (23)16.1 (23) Russell 1000 Index 9.3 (49)12.1 (30)0.9 (46)13.2 (17)33.1 (44)16.4 (34)1.5 (23)16.1 (23) IM U.S. Large Cap Equity Median 9.2 9.2 0.3 10.9 32.5 15.3 -1.4 13.4 Kennedy Mid Cap Value 5.0 (41)22.9 (12)-9.9 (88)15.8 (5)33.3 (76)13.6 (87)-0.8 (25)27.0 (13) Russell Midcap Value Index 5.2 (39)20.0 (40)-4.8 (50)14.7 (11)33.5 (75)18.5 (23)-1.4 (31)24.8 (33) IM U.S. Mid Cap Value Equity 4.3 18.5 -4.9 10.3 36.1 16.0 -3.9 22.1 TimesSquare Small Cap Growth 8.9 (42)8.4 (59)1.0 (19)-2.5 (79)47.7 (23)13.1 (37)2.6 (10)27.3 (46) Russell 2000 Growth Index 10.0 (40)11.3 (51)-1.4 (43)5.6 (16)43.3 (46)14.6 (24)-2.9 (31)29.1 (29) IM U.S. Small Cap Growth Equity 8.0 11.3 -3.3 1.4 42.6 11.8 -4.7 26.9 International Equity Morgan Stanley International Equity Fund I 16.7 (45)-2.0 (79)0.4 (31)-6.1 (68)20.4 (38)19.6 (40)-7.6 (7)6.1 (89) MSCI EAFE Index 13.8 (75)1.0 (57)-0.8 (38)-4.9 (55)22.8 (24)17.3 (64)-12.1 (27)7.8 (80) IM International Equity 16.0 1.8 -2.8 -4.5 17.4 18.6 -14.9 12.9 Morgan Stanley Emerging Markets Fund I 19.9 (34)6.7 (59)-10.3 (26)-4.5 (69)-0.8 (46)20.2 (32)-18.4 (35)18.5 (48) MSCI Emerging Markets Index 18.4 (53)11.2 (30)-14.9 (57)-2.2 (43)-2.6 (58)18.2 (56)-18.4 (36)18.9 (44) IM Emerging Markets Equity 18.7 8.3 -14.1 -3.0 -1.5 18.8 -19.5 18.3 Fixed Income Income Research 1.6 (27)2.3 (33)0.9 (20)3.3 (32)-0.9 (41)5.9 (16)5.6 (41)6.2 (22) Blmbg. Barc. Intermed. U.S. Government/Credit 1.7 (16)2.1 (41)1.1 (16)3.1 (36)-0.9 (39)3.9 (35)5.8 (36)5.9 (31) IM U.S. Intermediate Duration Fixed Income 1.4 1.7 0.4 2.1 -1.3 2.9 5.0 5.1 Performance Summary Manager Performance As of June 30, 2017 24 Performance Summary Manager Performance As of June 30, 2017 YTD 2016 2015 2014 2013 2012 2011 2010 Prudential Core Plus Bond Fund 4.0 (10)5.8 (14)-0.1 (45)7.1 (14)-1.0 (47)10.6 (11)7.6 (19)9.6 (29) Blmbg. Barc. U.S. Aggregate 2.3 (83)2.6 (81)0.5 (14)6.0 (35)-2.0 (76)4.2 (95)7.8 (13)6.5 (84) IM U.S. Broad Market Core+ Fixed Income 2.9 4.1 -0.2 5.3 -1.2 8.2 6.1 8.3 Brandywine Global Opportunistic Fixed Income 9.8 (1)5.2 (22)-8.4 (97)6.3 (11)-3.5 (70)14.1 (5)8.0 (7)13.9 (1) Citigroup World Government Bond Index 4.5 (44)1.6 (78)-3.6 (44)-0.5 (79)-4.0 (78)1.6 (99)6.4 (17)5.2 (63) IM Global Fixed Income 4.3 3.3 -3.8 1.9 -2.5 7.3 4.1 6.0 Hedge Funds Lighthouse Global Long/Short Fund Limited 2.1 0.2 7.4 4.9 20.2 6.1 -2.1 5.2 HFRI Equity Hedge (Total) Index 5.9 5.5 -1.0 1.8 14.3 7.4 -8.4 10.5 Entrust Capital Diversified Fund 1.8 -1.1 -7.3 1.8 13.2 7.4 -4.7 11.1 HFRI Fund of Funds Composite Index 3.1 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 Real Estate UBS Trumbull Property Fund 1.9 6.0 11.7 10.4 9.2 9.0 12.1 15.9 NCREIF Property Index 3.3 8.0 13.3 11.8 11.0 10.5 14.3 13.1 Cash Account 0.4 0.8 0.1 0.6 0.1 0.1 0.1 -1.6 BofA Merrill Lynch 3 Month U.S. T-Bill 0.3 0.3 0.1 0.0 0.1 0.1 0.1 0.1 25 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Return (%)7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 Risk (Standard Deviation %) Russell 1000 Index MSCI Emerging Markets MSCI EAFE Russell 2000 Growth Russell Midcap Value Kennedy Mid Cap Value TimesSquare Small Cap Growth Morgan Stanley Emerging Markets Morgan Stanley International Equity BlackRock Russell 1000 Index Fund Non-Lending Performance Summary Risk and Return Summary - Equity Managers 5 Years Ending June 30, 2017 26 -1.2 -0.6 0.0 0.6 1.2 1.8 2.4 3.0 3.6 4.2 4.8 5.4 Return (%)0.0 0.7 1.4 2.1 2.8 3.5 4.2 4.9 5.6 6.3 7.0 7.7 8.4 9.0 Risk (Standard Deviation %) Citigroup World Government Bond Index BC Intermediate U.S. Government/Credit Blmbg. Barc. U.S. Aggregate Prudential Core Plus Bond Fund Income Research Brandywine Global Performance Summary Risk and Return Summary - Fixed Income Managers 5 Years Ending June 30, 2017 27 -10.0 -6.0 -2.0 2.0 6.0 10.0 14.0 18.0 22.0 Return (%)0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund HFRI Equity Hedge (Total) Index NCREIF Property Index Lighthouse Global Long/Short Fund Limited UBS TPF Performance Summary Risk and Return Summary - Alternative Managers 5 Years Ending June 30, 2017 28 Manager Compliance Checklist Second Quarter 2017 Ma na ge rs Bl ackRo ck Ru sse ll 1000 Ke nne dy Ti mesS qua re Morga n Stanle y I nt'l Morga n Stanle y EM Incom e Re se arch Or gani zati onal /Produ ct Is sues No ma teria l c hanges to investment team ++++++ No ma teria l o rg an iza tional c hanges ++++++ Accounting or regulatory concerns ++++++ Cu rre ntly in adheren ce to guidelin es ++++++ Po rt fo lio ch aracteris tics me et s tylis tic expectations ++++++ Re lati ve Perfor mance 1 Th ree-year re turn better than benchmark In Line --In Line +In Line Th ree-year ra nkin g better than peer group median +-+-++ Five year re turn better than benchmark In Line ---++ 1 Manager performance is evaluated net of investment management fees. Five year re turn better than benchmark In Line ---++ Five year ra nkin g better than peer group media n +-++++ Perfor ma nc e s tatus ++++++ Da te perfo rmance s tatus changed Summa ry status ++++++ Da te s umma ry status changed 29 Manager Compliance Checklist Second Quarter 2017 Ma na ge rs Prude ntia l Br andyw ine Gl oba l Li ghthouse En trust UBS Or gani zati onal /Produ ct Is sues No ma teria l c hanges to investment team ++-++ No ma teria l o rg an iza tional c hanges +++-+ Accounting or regulatory concerns +++++ Cu rre ntly in adheren ce to guidelin es +++++ Po rt fo lio ch aracteris tics me et s tylis tic expectations +++++ Re lati ve Perfor mance 1 Three-year re turn better than benchmark +++-- Three-year ra nkin g better than peer group median ++N/A N/A N/A Five year re turn better than benchmark +++-- 1 Manager performance is evaluated net of investment management fees. Five year re turn better than benchmark +++-- Five year ra nkin g better than peer group med ia n ++N/A N/A N/A Perfor ma nc e s tatus +++-+ Da te perfo rmance s tatus changed 4Q 16 Summary status ++-++ Da te s umma ry status changed 2Q17 30 Manager Compliance Issue Explanation Recommended Action Comments EnTrust Organizational Changes/ Performance EnTrust combined their business with that of The Permal Group, a global alternative asset manager that was established in 1973 and acquired by Legg Mason in 2005. The deal closed in mid –2016. Gregg Hymowitz now serves as the Chairman and Chief Executive Officer of EnTrustPermal, as well as continue to be the Chair of the EnTrustPermal Global Investment Committee. Hold Pavilion will be reviewing the effects of the combination and advise you if we see any organizational risk that may impair the investment process. After producing solid results relative to the HFRI Fund of Funds Composite Index in calendar years 2009-2013, Entrust has struggled the past three years. The strategy has also experienced outflows as of late, with assets at approximately $3 billion, down from a peak in 2014 of over $5 billion. We will be watching the performance of this fund closely during 2017. Manager Compliance Checklist Second Quarter 2017 Entrust trailed the HFRI Fund of Funds Composite Index over the three-and five-year periods by 440 and 120 basis points, respectively. closely during 2017. 31 Manager Compliance Issue Explanation Recommended Action Comments Lighthouse Global Long/Short Investment Team Change On July 24th, Lighthouse notified Pavilion that Barry Timmins, Managing Director and Co-PM of the strategy, was no longer at the firm. Mr. Timmins left to pursue a more entrepreneurial business venture with family members. Mr. Timmins noted that he wanted greater flexibility for personal investment activities and Lighthouse’s personal trading policies were too restrictive. In addition to his departure, turnover has increased among the senior investment team. Watch Lighthouse maintains a deep staff of investment personnel, and historically the investment team exhibited stability. Though, with the departure of Mr. Timmins, and the heightened investment team departures, Pavilion formally placed the Lighthouse Global Long/Short Fund on “Investment Team W atch.” Although recent turnover has been higher than historically observed, the firm has added experienced investment professionals that have direct trading and portfolio management experience. A majority of the key decision makers have long working relationships together, Manager Compliance Checklist Second Quarter 2017 investment team. have long working relationships together, independent of their affiliation at Lighthouse including Co-CIOs Sean McGould and Kelly Perkins. For now, Lighthouse remains one of Pavilion’s highest conviction fund of hedge fund managers, but we are disappointed with the recent level of turnover and will closely monitor investment professional turnover and performance over the next six months to determine if a change to our rating is warranted. 32 Asset Class Diversification 33 June 30, 2017 : $265,771,547 Target Allocation Actual Allocation Allocation Differences 0.0%8.0%16.0%24.0%32.0%40.0%48.0%-8.0 % Cash Account $1,632,724 Real Estate Composite $23,666,023 Hedge Funds Composite $35,013,736 Fixed Income Composite $94,272,899 Emerging International Equity Composite $11,880,852 Developed International Equity Composite $28,089,832 Small-Cap Equity Composite $16,718,726 Large-Cap Equity Composite $54,496,755 0.0% 10.0% 15.0% 35.0% 4.0% 10.0% 6.0% 20.0% 0.6% 8.9% 13.2% 35.5% 4.5% 10.6% 6.3% 20.5% 0.6% -1.1 % -1.8 % 0.5% 0.5% 0.6% 0.3% 0.5% Asset Class Diversification Investment Policy Allocation As of June 30, 2017 34 Asset Class Diversification Investment Program Structure As of March 31, 2017 Asse t Class/Type Manager Total Asse ts ($, mil.) as of 6/30/2017 Pe rce nt of Total Targ et Allocati on Weighting Re lati ve to Targe t Al lowabl e Range To tal Assets ($, mil.) as of 3/31/2017 Large-Cap Equi ty $54.5 20.5%20.0%+0.5%15 -25%$53.3 Co re Va nguard Instit utio nal $0.0 0.0%0.0%+0.0%$0.0 Va lu e Va nguard Winds or $0.0 0.0%0.0%+0.0%$0.0 Gr owth T. Rowe Pric e $0.0 0.0%0.0%+0.0%$0.0 Gr owth Ho lla nd $0.0 0.0%0.0%+0.0%$0.0 Co re Bla ckRo ck $54.5 20.5%20.0%+0.5%$53.3 Small-Cap Equity $16.7 6.3%6.0%+0.3%2 -8%$16.0 Va lu e Ke nnedy $8.4 3.2%3.0%+0.2%$8.3 Gr owth Time sSquare $8.3 3.1%3.0%+0.1%$7.7 Inte rnati onal Equi ty $40.0 15.0%14.0%+1.0%$37.8 De veloped Morgan Stanley $28.1 10.6%10.0%+0.6%5 -15%$26.8 *Totals may not add to exactly 100.0% due to rounding. De veloped Morgan Stanley $28.1 10.6%10.0%+0.6%5 -15%$26.8 Eme rg in g Marke ts Morgan Stanley $11.9 4.5%4.0%+0.5%2 -8%$11.0 Fixed Income $94.3 35.5%35.0%+0.5%$88.7 Do me stic Co re In come Res earch $37.1 14.0%14.0%-0.0%10 -20%$35.9 Gl obal Bra ndywin e Glo bal $24.7 9.3%9.0%+0.3%4 -14%$23.2 Do me stic Co re Plus Pru dential $32.4 12.2%12.0%+0.2%10 -20%$29.6 He dge Funds $35.0 13.2%15.0%-1.8%0 -20% $35.0 He dge Funds Lig hthous e Glo bal $18.5 7.0%7.5%-0.5%$18.7 He dge Funds En trus t $16.5 6.2%7.5%-1.3%$16.3 Re al Es tate $23.7 8.9%10.0%-1.1%$23.2 Re al Es tate UBS T ru mb ull $23.7 8.9%10.0%-1.1%0 -12%$23.2 Cash $1.6 0.6%0.0%+0.6%$1.7 Ca sh Acco unt Ca sh Account $1.6 0.6%0.0%+0.6%$1.7 To tal $265.8 100.0%100.0%-0.0%$255.7 35 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)105,054 96,659 Median Mkt. Cap ($M)8,706 1,607 Price/Earnings ratio 21.4 18.8 Price/Book ratio 3.2 2.7 5 Yr. EPS Growth Rate (%)10.0 9.3 Current Yield (%)1.9 2.4 Debt to Equity 1.3 1.3 Number of Stocks 1,263 8,668 Beta (3 Years, Monthly)0.95 1.00 Consistency (3 Years, Monthly)50.00 1.00 Sharpe Ratio (3 Years, Monthly)0.58 0.53 Information Ratio (3 Years, Monthly)0.14 - Up Market Capture (3 Years, Monthly)100.47 - Down Market Capture (3 Years, Monthly)98.48 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 1.6 1.6 0.0 0.7 Reckitt Benckiser Group PLC 1.3 0.1 1.2 12.4 Tencent Holdings LTD 1.2 0.4 0.8 25.0 British American Tobacco PLC 1.2 0.3 0.9 2.3 Unilever NV 1.2 0.2 1.0 11.5 Microsoft Corp 1.1 1.1 0.0 5.2 L'Oreal S.A., Paris 1.1 0.1 1.0 9.9 NOVARTIS AG 1.0 0.0 1.0 N/A Glaxosmithkline PLC 1.0 0.2 0.8 1.0 Pernod-Ricard 0.9 0.1 0.8 12.8 % of Portfolio 11.6 4.1 Distribution of Market Capitalization (%) Equity Composite MSCI AC World IMI 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 34.2 29.4 22.3 14.1 0.0 37.4 26.1 24.0 11.7 0.7 Sector Weights (%) Equity Composite MSCI AC World IMI 0.0 5.0 10.0 15.0 20.0 25.0 Other Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.1 0.7 2.3 2.1 3.4 4.1 18.2 12.2 12.6 15.1 4.7 13.3 11.1 0.0 0.0 3.1 2.9 4.2 5.6 16.5 11.7 11.2 17.9 5.7 8.8 12.4 Equity Portfolio - Characteristics Total Equity Composite vs. MSCI AC World IMI As of June 30, 2017 36 Total Equity Composite MSCI AC World IMI Australia 0.0 2.3 Hong Kong 2.2 2.3 Japan 4.1 8.1 New Zealand 0.0 0.1 Singapore 0.2 0.7 Pacific 6.5 13.6 Austria 0.1 0.1 Belgium 0.0 0.4 Finland 0.0 0.4 France 3.9 3.0 Germany 2.1 3.0 Ireland 1.2 1.1 Italy 0.0 0.8 Netherlands 2.2 1.2 Portugal 0.2 0.1 Spain 0.0 1.1 EMU 9.7 11.2 Denmark 0.0 0.6 Norway 0.0 0.3 Sweden 0.3 1.1 Switzerland 3.2 2.9 United Kingdom 7.9 6.5 Europe ex EMU 11.4 11.4 Canada 0.8 3.2 United States 61.4 50.3 Israel 0.0 0.3 Middle East 0.0 0.3 Developed Markets 89.8 90.0 Total Equity Composite MSCI AC World IMI Brazil 0.7 0.7 Cayman Islands 0.0 0.0 Chile 0.1 0.1 Colombia 0.0 0.0 Mexico 0.6 0.4 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 1.4 1.3 China 1.3 1.7 India 0.9 1.1 Indonesia 0.6 0.3 Korea 1.6 1.8 Malaysia 0.4 0.3 Philippines 0.3 0.1 Taiwan 0.9 1.5 Thailand 0.2 0.3 EM Asia 6.2 7.0 Czech Republic 0.1 0.0 Egypt 0.1 0.0 Greece 0.0 0.1 Hungary 0.1 0.0 Poland 0.4 0.1 Qatar 0.0 0.1 Russia 0.2 0.3 South Africa 0.4 0.7 Turkey 0.0 0.1 United Arab Emirates 0.0 0.1 EM Europe + Middle East + Africa 1.3 1.6 Emerging Markets 8.9 9.9 Frontier Markets 0.4 0.0 Cash 0.7 0.0 Other 0.3 0.1 Total 100.0 100.0 Equity Portfolio - Country/Region Allocation Total Equity Composite vs. MSCI AC World IMI As of June 30, 2017 37 Portfolio Characteristics Maturity Distribution (%) Credit Quality Distribution (%) Risk Characteristics - 3 Years Sector Distribution (%) Portfolio Benchmark Effective Duration 5.3 4.1 Avg. Maturity 7.6 4.4 Avg. Quality A AA Yield To Maturity (%)3.1 2.1 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated64.1 5.7 13.4 16.9 0.0 0.0 0.0 0.0 43.1 8.6 18.0 22.2 4.7 2.3 0.5 0.6 Consistency Sharpe Ratio Information Ratio Up Market Capture Down Market Capture Total Fixed Income Composite 52.8 0.3 -0.2 128.9 182.0 Barclays Intermediate U.S. Government/Credit 0.0 0.8 N/A 100.0 100.0 90 Day U.S. Treasury Bill 41.7 N/A -0.8 3.9 -2.5 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 36.2 29.2 34.6 0.0 0.0 7.8 18.6 23.9 32.5 5.8 11.3 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS57.3 3.2 26.4 0.0 0.0 0.0 11.2 2.0 0.0 0.0 0.0 0.0 22.2 2.2 30.4 3.1 1.5 10.5 14.2 5.0 1.6 1.5 0.9 6.9 Fixed Income Portfolio - Characteristics Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit As of June 30, 2017 38 Manager Evaluation 39 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics - Monthly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 BlackRock Russell 1000 Index Fund Non-Lending 3.0 9.2 18.0 9.3 14.7 7.3 12.1 0.9 13.2 33.1 16.4 1.5 16.1 28.5 -37.6 5.8 Russell 1000 Index 3.1 9.3 18.0 9.3 14.7 7.3 12.1 0.9 13.2 33.1 16.4 1.5 16.1 28.4 -37.6 5.8 IM U.S. Large Cap Equity 3.3 9.2 18.3 8.1 13.6 6.5 9.2 0.3 10.9 32.5 15.3 -1.4 13.4 28.2 -37.9 7.0 BlackRock Russell 1000 Index Fund Non-Lending Rank 55 50 53 30 24 32 30 46 17 44 34 23 23 49 47 57 BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.1 -0.1 -0.2Return (%)9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date BlackRock Russell 1000 Index Fund Non-Lending 14.7 9.6 14.1 0.0 1.0 1.5 0.0 -0.6 4.9 41.7 14y 3m Russell 1000 Index 14.7 9.6 14.1 0.0 1.0 1.5 0.0 N/A 4.9 0.0 14y 3m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.1 0.0 N/A 9.6 -1.5 0.0 26.7 14y 3m Manager Evaluation BlackRock Russell 1000 Index Fund Non-Lending vs. Russell 1000 Index As of June 30, 2017 40 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)149,730 149,730 Median Mkt. Cap ($M)9,061 9,061 Price/Earnings ratio 21.6 21.6 Price/Book ratio 3.3 3.3 5 Yr. EPS Growth Rate (%)11.4 11.4 Current Yield (%)2.0 2.0 Debt to Equity 1.5 1.5 Number of Stocks 990 990 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)41.67 1.00 Sharpe Ratio (5 Years, Monthly)1.47 1.47 Information Ratio (5 Years, Monthly)-0.63 - Up Market Capture (5 Years, Monthly)99.94 - Down Market Capture (5 Years, Monthly)99.97 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.2 3.2 0.0 0.7 Microsoft Corp 2.2 2.2 0.0 5.2 Amazon.com Inc 1.7 1.7 0.0 9.2 Exxon Mobil Corp 1.5 1.5 0.0 -0.6 Johnson & Johnson 1.5 1.5 0.0 6.9 Facebook Inc 1.5 1.5 0.0 6.3 Berkshire Hathaway Inc 1.4 1.4 0.0 1.6 JPMorgan Chase & Co 1.4 1.4 0.0 4.6 Alphabet Inc 1.2 1.2 0.0 9.7 Google Inc (Class C)1.2 1.2 0.0 9.5 % of Portfolio 16.8 16.8 Distribution of Market Capitalization (%) BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil 49.9 28.0 18.8 3.3 49.9 28.0 18.8 3.3 Sector Weights (%) BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.1 2.1 3.8 3.3 21.8 10.5 13.9 14.7 5.8 8.4 12.6 3.1 2.1 3.8 3.3 21.8 10.5 13.9 14.7 5.8 8.4 12.6 Manager Evaluation BlackRock Russell 1000 Index Fund Non-Lending vs. Russell 1000 Index As of June 30, 2017 41 Historical Performance Buy and Hold Attribution Risk and Return (Jul - 2012 - Jun - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Kennedy Mid Cap Value 0.9 5.0 20.4 5.5 13.7 N/A 22.9 -9.9 15.8 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A Russell Midcap Value Index 1.4 5.2 15.9 7.5 15.1 7.2 20.0 -4.8 14.7 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 IM U.S. Mid Cap Value Equity 1.4 4.3 17.1 6.3 14.0 6.3 18.5 -4.9 10.3 36.1 16.0 -3.9 22.1 36.9 -38.1 0.8 Kennedy Mid Cap Value Rank 64 41 26 72 57 N/A 12 88 5 76 87 25 13 57 1 N/A Kennedy Mid Cap Value Russell Midcap Value Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 10.0 12.0 14.0 16.0 18.0 Return (%)7.6 8.0 8.4 8.8 9.2 9.6 10.0 10.4 10.8 11.2 Risk (Standard Deviation %) Russell Midcap Value Index Kennedy Mid Cap Value Average Active Weight 0.0 3.0 6.0 9.0-3.0-6.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -1.5 -1.2 -1.9 -0.3 2.8 -0.9 -0.1 -2.2 -0.4 -0.8 2.4 4.1 Allocation (Total: 0.1) 0.0 0.1 0.2-0.1-0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.0 Stock (Total: -0.4) 0.0 0.4 0.8-0.4-0.8 0.0 0.0 0.4 -0.1 -0.3 -0.1 -0.1 -0.4 0.2 0.0 0.1 0.0 Kennedy Mid Cap Value 0.0 0.4 0.8-0.4-0.8 0.0 0.0 0.4 -0.1 -0.2 -0.2 -0.1 -0.4 0.3 0.0 0.1 0.0 Manager Evaluation Kennedy Mid Cap Value vs. Russell Midcap Value Index As of June 30, 2017 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 42 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)10,736 13,456 Median Mkt. Cap ($M)8,731 6,999 Price/Earnings ratio 19.4 19.4 Price/Book ratio 2.3 2.1 5 Yr. EPS Growth Rate (%)15.3 9.2 Current Yield (%)1.8 2.2 Debt to Equity 0.9 0.7 Number of Stocks 57 590 Beta (5 Years, Monthly)1.10 1.00 Consistency (5 Years, Monthly)51.67 1.00 Sharpe Ratio (5 Years, Monthly)1.16 1.42 Information Ratio (5 Years, Monthly)-0.37 - Up Market Capture (5 Years, Monthly)99.96 - Down Market Capture (5 Years, Monthly)113.88 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Reinsurance Group of America Inc.3.0 0.2 2.8 1.4 East West Bancorp Inc.2.6 0.2 2.4 13.9 Centene Corp 2.5 0.3 2.2 12.1 Old Dominion Freight Line Inc 2.5 0.1 2.4 11.4 Huntington Bancshares Inc 2.3 0.4 1.9 1.6 Lincoln National Corp 2.2 0.4 1.8 3.7 Brunswick Corp 2.2 0.0 2.2 2.8 Westlake Chemical Corp 2.2 0.0 2.2 0.5 Torchmark Corp 2.2 0.2 2.0 -0.5 Western Digital Corp 2.1 0.6 1.5 7.9 % of Portfolio 23.8 2.4 Distribution of Market Capitalization (%) Kennedy Capital Management Russell Midcap Value Index 0.0 25.0 50.0 75.0 100.0 $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 22.4 63.3 14.2 0.0 11.4 75.1 9.8 3.6 Sector Weights (%) Kennedy Capital Management Russell Midcap Value Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.6 9.9 0.0 12.7 5.6 10.9 12.5 4.3 17.3 8.1 2.4 12.8 0.0 10.6 0.9 14.7 5.1 6.3 11.3 7.1 19.7 7.9 4.3 12.1 Manager Evaluation Kennedy Capital Management vs. Russell Midcap Value Index As of June 30, 2017 43 Historical Performance Buy and Hold Attribution Risk and Return (Jul - 2012 - Jun - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 TimesSquare Small Cap Growth 4.7 8.9 17.6 7.2 13.2 8.9 8.4 1.0 -2.5 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 Russell 2000 Growth Index 4.4 10.0 24.4 7.6 14.0 7.8 11.3 -1.4 5.6 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 IM U.S. Small Cap Growth Equity 5.1 8.0 25.8 6.5 12.7 7.4 11.3 -3.3 1.4 42.6 11.8 -4.7 26.9 33.4 -42.8 7.4 TimesSquare Small Cap Growth Rank 54 42 87 44 45 21 59 19 79 23 37 10 46 43 1 34 TimesSquare Small Cap Growth Russell 2000 Growth Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 11.9 12.6 13.3 14.0 14.7 15.4 Return (%)12.2 12.3 12.4 Risk (Standard Deviation %) Russell 2000 Growth Index TimesSquare Small Cap Growth Average Active Weight 0.0 15.0 30.0-15.0-30.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.4 1.3 -1.4 -2.7 3.4 8.5 -12.4 -2.4 2.1 -1.3 0.1 5.1 Allocation (Total: -1.2) 0.0 0.5 1.0-0.5-1.0-1.5 0.0 0.3 0.0 0.1 0.0 -0.3 -0.7 0.1 -0.6 0.1 0.0 -0.2 Stock (Total: 1.6) 0.0 0.8 1.6-0.8-1.6 -0.1 -0.5 -0.2 0.4 0.6 1.0 -0.3 0.2 0.4 0.0 0.2 0.0 TimesSquare Small Cap Growth 0.0 0.6 1.2 1.8-0.6-1.2-1.8 -0.1 -0.2 -0.3 0.4 0.6 0.7 -0.9 0.3 -0.2 0.0 0.2 -0.2 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of June 30, 2017 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 44 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)2,420 2,206 Median Mkt. Cap ($M)2,062 894 Price/Earnings ratio 31.4 26.4 Price/Book ratio 3.7 4.1 5 Yr. EPS Growth Rate (%)11.0 14.1 Current Yield (%)0.8 0.7 Debt to Equity 1.1 1.4 Number of Stocks 103 1,171 Beta (5 Years, Monthly)0.84 1.00 Consistency (5 Years, Monthly)48.33 1.00 Sharpe Ratio (5 Years, Monthly)1.03 0.97 Information Ratio (5 Years, Monthly)-0.21 - Up Market Capture (5 Years, Monthly)86.14 - Down Market Capture (5 Years, Monthly)78.85 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) On Assignment Inc 2.3 0.3 2.0 11.6 Bright Horizons Family Solutions Inc 2.3 0.0 2.3 6.5 WEX Inc 2.1 0.0 2.1 0.7 WageWorks Inc 2.1 0.3 1.8 -7.1 j2 Global Inc 1.9 0.4 1.5 1.9 Envestnet Inc 1.8 0.2 1.6 22.6 MKS Instruments Inc 1.8 0.4 1.4 -1.9 Albany International Corp.1.8 0.1 1.7 16.4 2U Inc 1.6 0.2 1.4 18.3 ExlService Holdings Inc 1.6 0.2 1.4 17.4 % of Portfolio 19.3 2.1 Distribution of Market Capitalization (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 50.0 100.0 150.0 $5 Bil - $20 Bil $0 - $5 Bil Cash 0.5 99.5 0.02.4 95.8 1.8 Sector Weights (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Other Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 1.5 1.8 0.4 2.2 3.5 2.4 27.8 25.4 12.4 4.6 2.8 1.4 13.8 0.0 0.0 0.7 1.0 3.5 4.7 24.4 17.4 24.3 6.0 1.2 2.6 14.2 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of June 30, 2017 45 Historical Performance Buy and Hold Attribution Risk and Return (Jul - 2012 - Jun - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Morgan Stanley International Equity 7.6 16.7 16.7 1.1 7.9 2.1 -2.0 0.4 -6.1 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 MSCI EAFE Index 6.1 13.8 20.3 1.1 8.7 1.0 1.0 -0.8 -4.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 IM International Equity 6.4 16.0 19.7 1.4 7.7 1.3 1.8 -2.8 -4.5 17.4 18.6 -14.9 12.9 36.4 -46.0 13.2 Morgan Stanley International Equity Rank 30 45 74 57 48 37 79 31 68 38 40 7 89 92 3 70 Morgan Stanley International Equity MSCI EAFE Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 6.4 7.2 8.0 8.8 9.6 10.4 Return (%)9.0 9.3 9.6 9.9 10.2 10.5 10.8 11.1 Risk (Standard Deviation %) MSCI EAFE Index Morgan Stanley International Equity Average Active Weight 0.0 20.0 40.0-20.0-40.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.4 -1.8 -3.0 1.7 3.2 0.4 3.9 -11.5 -2.4 16.6 -6.0 2.2 Allocation (Total: 0.4) 0.0 0.3 0.6-0.3-0.6 0.0 0.0 0.0 -0.1 0.1 0.0 0.0 -0.1 0.2 0.3 0.1 -0.1 Stock (Total: 1.0) 0.0 2.0 4.0-2.0 0.0 -0.1 0.0 -0.7 0.2 -0.3 0.2 0.2 0.0 1.7 -0.2 0.0 Morgan Stanley International Equity 0.0 1.0 2.0 3.0-1.0-2.0 0.0 -0.1 0.0 -0.7 0.3 -0.3 0.3 0.1 0.1 1.9 -0.2 -0.1 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of June 30, 2017 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 46 Total Attribution 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2.1 2.4-0.3-0.6-0.9-1.2-1.5-1.8 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash 1.4 0.0 -0.7 0.0 0.3 0.6 0.1 -0.1 Performance Attribution Average Active Weight 0.0 8.0 16.0-8.0-16.0-24.0 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash -12.3 -0.3 3.2 -0.7 -0.8 6.7 1.9 2.2 Allocation (Total: 0.1) 0.0 0.2 0.4 0.6-0.2-0.4-0.6 0.3 0.0 -0.2 0.0 0.0 0.2 0.1 -0.1 Stock (Total: 1.3) 0.0 0.6 1.2 1.8-0.6-1.2 1.1 0.0 -0.5 0.0 0.3 0.4 0.0 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index 1 Quarter Ending June 30, 2017 47 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)95,968 58,507 Median Mkt. Cap ($M)36,734 10,401 Price/Earnings ratio 21.5 17.3 Price/Book ratio 3.3 2.2 5 Yr. EPS Growth Rate (%)4.2 5.1 Current Yield (%)2.0 3.2 Debt to Equity 1.3 1.2 Number of Stocks 62 927 Beta (5 Years, Monthly)0.90 1.00 Consistency (5 Years, Monthly)40.00 1.00 Sharpe Ratio (5 Years, Monthly)0.73 0.76 Information Ratio (5 Years, Monthly)-0.23 - Up Market Capture (5 Years, Monthly)94.72 - Down Market Capture (5 Years, Monthly)97.67 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Reckitt Benckiser Group PLC 5.0 0.5 4.5 12.4 Unilever NV 4.9 0.7 4.2 11.5 British American Tobacco PLC 4.8 0.9 3.9 2.3 L'Oreal S.A., Paris 4.2 0.4 3.8 9.9 NOVARTIS AG 4.1 0.0 4.1 N/A Glaxosmithkline PLC 4.0 0.8 3.2 1.0 Pernod-Ricard 3.6 0.2 3.4 12.8 SAP AG Systeme Anwendungen 3.1 0.7 2.4 7.4 Bayer AG 3.1 0.8 2.3 14.4 Roche Holding AG 3.0 1.3 1.7 -0.2 % of Portfolio 39.8 6.3 Distribution of Market Capitalization (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 26.6 41.6 28.4 3.5 0.0 43.3 35.4 18.4 2.8 0.1 Sector Weights (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.1 0.0 2.4 0.6 5.4 8.9 13.6 16.9 13.5 2.3 31.4 4.9 0.0 3.4 4.3 3.6 7.5 6.1 14.5 10.8 21.5 4.7 11.5 12.1 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of June 30, 2017 48 Morgan Stanley International Equity MSCI EAFE Index Australia 0.0 7.1 Hong Kong 4.3 3.2 Japan 16.2 23.5 New Zealand 0.0 0.2 Singapore 0.0 1.3 Pacific 20.5 35.2 Austria 0.0 0.2 Belgium 0.0 1.1 Finland 0.0 1.0 France 14.9 9.9 Germany 7.8 9.4 Ireland 1.3 0.5 Italy 0.0 2.1 Netherlands 7.9 3.8 Portugal 0.6 0.1 Spain 0.0 3.5 EMU 32.6 31.8 Denmark 0.0 1.8 Norway 0.0 0.6 Sweden 1.2 2.9 Switzerland 11.1 8.6 United Kingdom 29.2 17.9 Europe ex EMU 41.5 31.8 Canada 2.7 0.0 United States 0.0 0.2 Israel 0.0 0.7 Middle East 0.0 0.7 Developed Markets 97.3 99.7 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 0.7 0.0 India 0.0 0.0 Indonesia 0.0 0.0 Korea 1.9 0.0 Malaysia 0.0 0.0 Philippines 0.0 0.0 Taiwan 0.0 0.0 Thailand 0.0 0.0 EM Asia 2.6 0.0 Czech Republic 0.0 0.0 Egypt 0.0 0.0 Greece 0.0 0.0 Hungary 0.0 0.0 Poland 0.0 0.0 Qatar 0.0 0.0 Russia 0.0 0.0 South Africa 0.0 0.0 Turkey 0.0 0.0 United Arab Emirates 0.0 0.0 EM Europe + Middle East + Africa 0.0 0.0 Emerging Markets 2.6 0.0 Frontier Markets 0.0 0.0 Cash 0.1 0.0 Other 0.0 0.3 Total 100.0 100.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of June 30, 2017 49 Historical Performance Buy and Hold Attribution Risk and Return (Jul - 2012 - Jun - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Morgan Stanley Emerging Markets 7.7 19.9 20.1 1.3 4.3 1.2 6.7 -10.3 -4.5 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 MSCI Emerging Markets Index 6.3 18.4 23.7 1.1 4.0 1.9 11.2 -14.9 -2.2 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 IM Emerging Markets Equity 6.0 18.7 21.1 0.7 3.8 1.4 8.3 -14.1 -3.0 -1.5 18.8 -19.5 18.3 72.7 -54.6 36.7 Morgan Stanley Emerging Markets Rank 20 34 56 40 43 55 59 26 69 46 32 35 48 62 69 22 Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 3.3 3.6 3.9 4.2 4.5 4.8 Return (%)11.7 12.0 12.3 12.6 12.9 13.2 13.5 13.8 Risk (Standard Deviation %) MSCI Emerging Markets Index Morgan Stanley Emerging Markets Average Active Weight 0.0 5.0 10.0-5.0-10.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.8 -0.8 -0.5 -1.5 -2.8 0.6 -0.8 3.0 -2.5 1.4 5.6 1.0 Allocation (Total: 0.3) 0.0 0.3 0.6-0.3-0.6 0.2 0.0 0.0 0.1 -0.3 0.0 0.0 -0.1 0.3 0.0 0.1 -0.1 Stock (Total: 1.5) 0.0 0.6 1.2-0.6-1.2 0.0 0.2 -0.1 0.2 0.2 0.2 0.2 0.8 -0.3 0.1 0.0 0.0 Morgan Stanley Emerging Markets 0.0 0.4 0.8 1.2-0.4-0.8 0.2 0.3 -0.1 0.3 0.0 0.2 0.2 0.7 0.0 0.1 0.1 -0.1 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of June 30, 2017 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 50 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 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash 0.3 0.2 0.1 0.2 0.0 0.1 0.3 0.9 -0.2 -0.1 Performance Attribution Average Active Weight 0.0 6.0 12.0-6.0-12.0-18.0 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -0.6 2.9 0.8 3.8 0.7 2.9 2.8 -2.8 -11.5 1.0 Allocation (Total: 0.1) 0.0 0.2 0.4-0.2-0.4-0.6 0.0 0.2 0.1 0.2 0.0 0.1 -0.2 0.1 -0.2 -0.1 Stock (Total: 1.7) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0.3 0.0 0.1 0.0 0.0 0.0 0.5 0.8 0.0 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index 1 Quarter Ending June 30, 2017 51 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)60,168 68,310 Median Mkt. Cap ($M)11,030 5,575 Price/Earnings ratio 18.0 14.1 Price/Book ratio 2.9 2.4 5 Yr. EPS Growth Rate (%)13.2 10.6 Current Yield (%)1.9 2.3 Debt to Equity 0.8 0.9 Number of Stocks 119 845 Beta (5 Years, Monthly)0.86 1.00 Consistency (5 Years, Monthly)48.33 1.00 Sharpe Ratio (5 Years, Monthly)0.38 0.33 Information Ratio (5 Years, Monthly)0.03 - Up Market Capture (5 Years, Monthly)88.21 - Down Market Capture (5 Years, Monthly)84.20 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Tencent Holdings LTD 5.5 4.4 1.1 25.0 Taiwan Semiconductor Manufacturing 3.0 3.6 -0.6 13.9 Samsung Electronics Co Ltd 2.8 4.4 -1.6 12.7 Alibaba Group Holding Ltd 2.5 3.4 -0.9 30.7 Bank of China Ltd 2.0 0.8 1.2 -1.2 Grupo Financiero Banorte 1.9 0.3 1.6 15.6 Itau Unibanco Holding SA 1.5 0.8 0.7 -6.9 MercadoLibre Inc 1.5 0.0 1.5 18.7 Samsonite International SA 1.4 0.0 1.4 16.6 China Construction Bank Corp 1.4 1.4 0.0 1.4 % of Portfolio 23.5 19.1 Distribution of Market Capitalization (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 21.5 28.0 36.9 13.6 0.0 19.1 24.0 40.3 14.1 2.6 Sector Weights (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 6.0 12.0 18.0 24.0 30.0 36.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.6 0.0 3.3 2.1 4.6 22.4 7.3 2.6 26.3 4.0 9.1 15.8 0.0 2.6 5.4 2.7 7.1 26.6 5.7 2.4 23.6 6.5 6.7 10.6 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of June 30, 2017 52 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Australia 0.0 0.0 Hong Kong 10.1 11.2 Japan 0.0 0.0 New Zealand 0.0 0.0 Singapore 0.0 0.0 Pacific 10.1 11.2 Austria 1.0 0.0 Belgium 0.0 0.0 Finland 0.0 0.0 France 0.0 0.0 Germany 0.7 0.0 Ireland 0.0 0.0 Italy 0.0 0.0 Netherlands 0.7 0.0 Portugal 0.7 0.0 Spain 0.0 0.0 EMU 3.1 0.0 Denmark 0.0 0.0 Norway 0.0 0.0 Sweden 0.0 0.0 Switzerland 0.5 0.0 United Kingdom 0.0 0.0 Europe ex EMU 0.5 0.0 Canada 0.0 0.0 United States 1.1 0.3 Israel 0.0 0.0 Middle East 0.0 0.0 Developed Markets 14.9 11.5 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Brazil 6.9 6.6 Cayman Islands 0.0 0.0 Chile 0.6 1.1 Colombia 0.0 0.4 Mexico 6.0 3.7 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 13.4 12.0 China 9.8 16.7 India 8.8 8.8 Indonesia 5.3 2.5 Korea 10.6 15.6 Malaysia 3.7 2.4 Philippines 2.8 1.2 Taiwan 8.1 12.5 Thailand 2.1 2.2 EM Asia 51.0 61.8 Czech Republic 1.1 0.2 Egypt 0.6 0.1 Greece 0.0 0.4 Hungary 1.2 0.3 Poland 3.7 1.3 Qatar 0.0 0.7 Russia 1.7 3.2 South Africa 3.6 6.6 Turkey 0.0 1.2 United Arab Emirates 0.0 0.7 EM Europe + Middle East + Africa 11.9 14.6 Emerging Markets 76.3 88.3 Frontier Markets 3.7 0.1 Cash 2.6 0.0 Other 2.5 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of June 30, 2017 53 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Monthly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Income Research 0.9 1.6 -0.2 1.9 2.0 4.5 2.3 0.9 3.3 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 Barclays Intermediate U.S. Government/Credit 0.9 1.7 -0.2 1.9 1.8 3.9 2.1 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 IM U.S. Intermediate Duration Fixed Income 0.7 1.4 0.3 1.4 1.3 3.3 1.7 0.4 2.1 -1.3 2.9 5.0 5.1 7.1 1.9 5.7 Income Research Rank 15 27 62 18 22 6 33 20 32 41 16 41 22 19 54 8 Income Research Barclays Intermediate U.S. Government/Credit 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 1.4 1.6 1.8 2.0 2.2 Return (%)2.1 2.2 2.3 2.4 Risk (Standard Deviation %) Barclays Intermediate U.S. Government/Credit Income Research Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Income Research 2.0 2.1 1.8 0.2 1.0 0.9 0.4 0.5 1.3 51.7 20y 5m Barclays Intermediate U.S. Government/Credit 1.8 2.1 1.6 0.0 1.0 0.8 0.0 N/A 1.3 0.0 20y 5m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.1 0.0 N/A 2.1 -0.8 0.0 40.0 20y 5m Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of June 30, 2017 54 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.0 4.1 Avg. Maturity 4.6 4.4 Avg. Quality AA-AA Yield To Maturity (%)2.2 2.1 Credit Quality Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBBNot Rated64.1 5.7 13.4 16.9 0.0 54.7 4.3 14.2 26.5 0.3 Maturity Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs0.0 36.2 29.2 34.6 0.0 8.9 21.9 36.8 28.6 3.9 Sector Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashCMBS57.3 3.2 26.4 0.0 0.0 11.2 2.0 0.0 0.0 0.0 33.7 5.1 42.3 0.4 8.7 0.0 0.0 2.6 0.3 7.0 Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of June 30, 2017 55 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Monthly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Prudential Core Plus Bond Fund 2.2 4.0 2.7 3.7 4.1 6.2 5.8 -0.1 7.1 -1.0 10.6 7.6 9.6 18.7 -2.1 4.6 Blmbg. Barc. U.S. Aggregate 1.4 2.3 -0.3 2.5 2.2 4.5 2.6 0.5 6.0 -2.0 4.2 7.8 6.5 5.9 5.2 7.0 IM U.S. Broad Market Core+ Fixed Income 1.6 2.9 1.9 2.4 2.9 5.1 4.1 -0.2 5.3 -1.2 8.2 6.1 8.3 14.3 -3.0 5.5 Prudential Core Plus Bond Fund Rank 11 10 34 9 8 6 14 45 14 47 11 19 29 25 46 77 Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 -2.0 0.0 2.0 4.0 6.0 8.0 Return (%)2.4 2.7 3.0 3.3 3.6 3.9 4.2 4.5 Risk (Standard Deviation %) Blmbg. Barc. U.S. Aggregate Prudential Core Plus Bond Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Prudential Core Plus Bond Fund 4.1 3.6 4.0 1.4 1.2 1.1 1.4 1.4 2.3 63.3 18y 1m Blmbg. Barc. U.S. Aggregate 2.2 2.8 2.1 0.0 1.0 0.7 0.0 N/A 1.8 0.0 18y 1m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.1 0.0 N/A 2.8 -0.7 0.0 38.3 18y 1m Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of June 30, 2017 56 Portfolio Characteristics Portfolio Benchmark Effective Duration 6.1 6.0 Avg. Maturity 7.7 8.3 Avg. Quality A AA+ Yield To Maturity (%)3.4 2.6 Credit Quality Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated71.6 4.2 10.6 13.6 0.0 0.0 0.0 0.0 46.1 4.5 11.9 22.2 6.6 6.2 1.0 1.5 Maturity Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 20.0 40.0 60.0 80.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 20.5 19.7 44.2 3.6 12.0 5.2 13.8 22.0 43.9 4.5 10.6 Sector Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 15.0 30.0 45.0 60.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS37.0 2.6 21.1 0.0 28.1 0.5 7.1 1.8 0.0 0.0 0.0 1.8 15.0 0.6 27.1 9.1 2.3 20.5 3.8 4.6 1.1 1.8 2.1 12.1 Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of June 30, 2017 57 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Monthly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Brandywine Global Opportunistic Fixed Income 4.4 9.8 4.8 1.2 3.3 6.2 5.2 -8.4 6.3 -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 Citigroup World Government Bond Index 2.9 4.5 -4.1 -1.0 -0.2 3.5 1.6 -3.6 -0.5 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 IM Global Fixed Income 2.2 4.3 1.0 0.5 1.6 3.8 3.3 -3.8 1.9 -2.5 7.3 4.1 6.0 11.8 -2.3 7.7 Brandywine Global Opportunistic Fixed Income Rank 1 1 15 33 15 1 22 97 11 70 5 7 1 22 75 2 Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0 25 50 75 100Return Percentile Rank9/07 9/08 9/09 9/10 9/11 9/12 9/13 9/14 9/15 9/16 6/17 -6.0 -3.0 0.0 3.0 6.0 9.0 Return (%)6.4 6.6 6.8 7.0 7.2 7.4 7.6 7.8 Risk (Standard Deviation %) Citigroup World Government Bond Index Brandywine Global Opportunistic Fixed Income Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Brandywine Global Opportunistic Fixed Income 3.3 7.1 3.4 3.6 1.0 0.5 4.8 0.8 4.8 56.7 12y 6m Citigroup World Government Bond Index -0.2 5.3 -0.2 0.0 1.0 0.0 0.0 N/A 4.0 0.0 12y 6m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.1 0.0 N/A 5.3 0.0 0.0 50.0 12y 6m Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of June 30, 2017 58 Portfolio Characteristics Portfolio Benchmark Effective Duration 6.1 7.9 Avg. Maturity 12.0 9.0 Avg. Quality A AA- Yield To Maturity (%)4.0 1.2 Credit Quality Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow B12.5 52.0 22.8 12.7 0.0 0.0 0.0 21.7 20.3 31.7 15.7 9.3 0.7 0.6 Maturity Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 15.0 30.0 45.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 24.3 19.7 25.9 30.1 0.0 9.8 19.9 7.2 23.5 10.3 29.3 Sector Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 25.0 50.0 75.0 100.0 TreasuriesCreditHigh YieldMBSNon-USEmergingMunicipalsCashOther34.6 0.0 0.0 0.0 65.4 0.0 0.0 0.0 0.0 14.3 16.8 0.1 2.1 49.2 13.2 0.8 3.0 0.5 Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of June 30, 2017 59 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Quarterly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Lighthouse Global Long/Short Fund Limited -0.7 2.1 5.4 4.2 7.5 3.7 0.2 7.4 4.9 20.2 6.1 -2.1 5.2 10.1 -14.1 13.9 HFRI Equity Hedge (Total) Index 2.0 5.9 12.2 2.9 6.3 2.7 5.5 -1.0 1.8 14.3 7.4 -8.4 10.5 24.6 -26.7 10.5 Rolling 3 Years Active Return Quarterly Active Return 0.0 8.0 16.0 -8.0 -16.0Active Return (%)3/04 6/05 9/06 12/07 3/09 6/10 9/11 12/12 3/14 6/15 6/17 4.0 5.0 6.0 7.0 8.0 9.0 Return (%)4.4 4.6 4.8 5.0 5.2 5.4 5.6 Risk (Standard Deviation %) HFRI Equity Hedge (Total) Index Lighthouse Global Long/Short Fund Limited Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Lighthouse Global Long/Short Fund Limited 7.5 4.7 7.2 3.6 0.6 1.5 4.0 0.3 2.2 50.0 13y 6m HFRI Equity Hedge (Total) Index 6.3 5.2 6.1 0.0 1.0 1.2 0.0 N/A 3.0 0.0 13y 6m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.1 0.0 N/A 5.1 -1.2 0.0 25.0 13y 6m Manager Evaluation Lighthouse Global Long/Short Fund Limited vs. HFRI Equity Hedge (Total) Index As of June 30, 2017 60 Portfolio Characteristics Portfolio Manager Count 33 Net Exposure %25.7 Leverage 151.9 # Managers Funded 1 # Managers Redeemed 1 Region Allocation (Net Geographic Exposure) Asia 11.2% Europe 16.3% Latin America 9.5% United States 63.0% Strategy Allocation Value 13.4% Trading 16.4% Event Driven 12.0% Sector Specialist 58.2% Manager Evaluation Lighthouse Global Long/Short Fund Limited As of June 30, 2017 61 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Quarterly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Entrust Capital Diversified Fund 1.0 1.8 4.2 -2.9 2.7 2.2 -1.1 -7.3 1.8 13.2 7.4 -4.7 11.1 35.2 -26.0 9.9 HFRI Fund of Funds Composite Index 0.7 3.1 6.4 1.5 3.9 0.9 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 Rolling 3 Years Active Return Quarterly Active Return 0.0 6.0 12.0 18.0 -6.0 -12.0Active Return (%)12/03 3/05 6/06 9/07 12/08 3/10 6/11 9/12 12/13 3/15 6/17 0.0 2.0 4.0 6.0 Return (%)2.8 3.2 3.6 4.0 4.4 4.8 5.2 5.6 6.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Entrust Capital Diversified Fund 2.7 4.9 2.6 -1.6 1.1 0.5 2.9 -0.4 3.3 35.0 13y 9m HFRI Fund of Funds Composite Index 3.9 3.5 3.7 0.0 1.0 1.1 0.0 N/A 2.1 0.0 13y 9m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.2 0.0 N/A 3.5 -1.1 0.0 10.0 13y 9m Manager Evaluation Entrust Capital Diversified Fund vs. HFRI Fund of Funds Composite Index As of June 30, 2017 62 Portfolio Characteristics Portfolio Manager Count 26 Net Exposure %68.9 Leverage 147.0 # Managers Funded 0 # Managers Redeemed 0 Region Allocation (Net Geographic Exposure) Non-US 22.7% US 77.3% Strategy Allocation Trading 3.0% Opportunistic 15.6% Long/Short 8.7% Activist 19.2% Credit 28.5% Event Driven 25.1% Manager Evaluation Entrust Capital Diversified Fund As of June 30, 2017 63 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jul-2012 - Jun-2017) Historical Statistics - Quarterly Periodicity (Jul-2012 - Jun-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 UBS Trumbull Property Fund 0.9 1.9 4.5 8.4 8.6 4.2 6.0 11.7 10.4 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 NCREIF Property Index 1.7 3.3 7.0 10.2 10.5 6.4 8.0 13.3 11.8 11.0 10.5 14.3 13.1 -16.8 -6.5 15.8 Rolling 3 Years Active Return Quarterly Active Return 0.0 5.0 10.0 -5.0 -10.0Active Return (%)3/78 9/81 3/85 9/88 3/92 9/95 3/99 9/02 3/06 9/09 3/13 6/17 6.0 8.0 10.0 12.0 14.0 Return (%)0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 Risk (Standard Deviation %) NCREIF Property Index UBS Trumbull Property Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date UBS Trumbull Property Fund 8.6 1.4 8.2 -2.7 1.1 5.7 0.7 -2.4 0.0 15.0 39y 6m NCREIF Property Index 10.5 1.1 10.0 0.0 1.0 8.7 0.0 N/A 0.0 0.0 39y 6m 90 Day U.S. Treasury Bill 0.1 0.1 0.0 0.8 -0.1 N/A 1.1 -8.7 0.0 0.0 39y 6m Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of June 30, 2017 64 Portfolio Characteristics Portfolio Benchmark # Properties 222 7,161 # Investors 461 N/A Total Fund Assets 19,600 539,165 Property Type UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 OfficeApartmentRetailIndustrialHotel36.8 24.3 23.8 14.2 0.9 31.0 31.0 22.0 13.0 3.0 Property Location UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 EastWestSouthMidwest33.2 38.4 19.8 8.6 34.0 38.0 15.0 13.0 Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of June 30, 2017 65 Type City Ac quis ition Da te % Oc cupa nc y Cos t ($000) Fa ir Market Value ($000) Offic e Bo ston Dec-11 79%676,158$ 776,940$ Re tail Ca mb rid ge May-89 95%303,346$ 619,336$ Offic e Ne w York Ju n-06 87%669,407$ 615,000$ Re tail Da lla s Dec-02 92%422,297$ 601,000$ Offic e Ne w York Ju l-11 94%231,606$ 524,577$ Apart me nts Ne w York Ju l-11 98%391,572$ 523,000$ Offic e Ch ic ag o Dec-11 96%411,708$ 520,229$ Re tail Ch ic ag o No v-13 93%232,837$ 482,094$ Offic e Ne w York Se p-14 93%292,965$ 473,670$ As of June 2017 20 La rge st Inve st ments Manager Evaluation UBS Trumbull Property Fund As of June 30, 2017 Offic e Ne w York Se p-14 93%292,965$ 473,670$ Offic e Po rt la nd Aug-15 97%377,635$ 449,242$ Re tail Montebello Dec-88 99%195,188$ 330,000$ Re tail Eme ry ville Aug-14 94%309,465$ 324,000$ Offic e Se at tle Oc t-84 99%245,953$ 320,000$ Offic e Sa n Fra ncis co Dec-85 95%171,487$ 302,795$ Offic e De nver Ju n-06 86%192,116$ 273,000$ Offic e Pa sadena May-84 81%194,177$ 243,000$ Offic e Washin gton Ju n-15 92%246,949$ 235,000$ Offic e De nver Apr-82 89%164,972$ 229,132$ Offic e Pleas anton Dec-03 100%205,804$ 212,799$ Re tail Millb ury Se p-04 99%156,000$ 208,300$ All o ther in vestme nts --12,013,187$ 14,359,156$ To tal Pr operties 18,104,829$ 22,622,271$ 66 Calendar Year Performance 67 Year To Date 2016 2015 2014 2013 2012 2011 2010 2009 2008 Total Composite 6.4 5.1 -0.7 2.9 10.9 12.1 1.2 11.2 20.2 -20.2 Policy Benchmark 5.9 6.6 -1.4 3.5 12.3 11.6 1.1 11.5 19.5 -20.6 Total Equity Composite 11.2 6.3 0.5 4.7 N/A N/A N/A N/A N/A N/A MSCI AC World Index 11.5 7.9 -2.4 4.2 22.8 16.1 -7.3 12.7 34.6 -42.2 Domestic Equity Composite 7.8 9.6 1.9 10.1 N/A N/A N/A N/A N/A N/A Russell 3000 Index 8.9 12.7 0.5 12.6 33.6 16.4 1.0 16.9 28.3 -37.3 International Equity Composite 17.5 0.3 -2.0 -5.5 N/A N/A N/A N/A N/A N/A MSCI AC World ex USA Index 14.1 4.5 -5.7 -3.9 15.3 16.8 -13.7 11.2 41.4 -45.5 Fixed Income Composite 4.5 4.2 -2.1 2.4 -1.7 10.9 3.8 8.7 18.9 -3.4 Barclays Intermediate U.S. Government/Credit 1.7 2.1 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 Hedge Funds Composite 2.0 -0.4 N/A N/A N/A N/A N/A N/A N/A N/A HFRI Fund of Funds Composite Index 3.1 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 Calendar Year Performance Composite Performance As of June 30, 2017 _________________________ See appendix for a description of the benchmarks and universe. Performance is reported net of fees. 68 Appendix 69 Current Manager Fee Schedule Fe e (%) Do mest ic Eq ui ty Black Rock $54,496,755 20.5 0.04 0.06 US Passive Large Cap (CIT )$ 19,074 Kennedy $8,390,681 3.2 0.90 0.75 US Mid Cap Va lu e $ 75,516 Times Sq uare $8,328,045 3.1 1.05 1.02 US Small Cap Growth $ 87,444 Inte rna ti ona l Equity Morgan St anley Int ernat ional $28,089,832 10.6 0.95 0.92 All EA FE Equit y $ 266,853 Morgan St anley Emerging M ar ket s $11,880,852 4.5 1.03 1.10 Emergi ng Mkts Equit y $ 122,373 Fi xed Income Income Res ear ch $37,111,339 14.0 0.30 0.30 US Core Fixe d Income $ 111,334 Prudent ial $32,440,661 12.2 0.30 0.35 US Core Plus Fixe d Income $ 97,322 Brandy wine $24,720,900 9.3 0.45 0.45 Global A gg F ixed Income $ 111,244 He dge Funds* Tota l Assets ($ millions )% o f Tota l Proje cted An nua l Fe e eVestment Al lia nc e Universe Media n eVestment Allia nc e Universe Investment performance calculated net of fees. * Incentive fees may be paid to underlying hedge fund managers.During 2016, the average incentive fee for managers in the Entrust Fund was 16.5% of profits.Some managers were subject to a hurdle rate.The average incentive fee for managers in the Lighthouse fee was 19.3% of profits.Some managers were subject to a hurdle rate. Light hous e $18,537,665 7.0 1.58 N/A N/A $ 292,895 Ent rust $16,476,071 6.2 2.64 N/A N/A $ 434,968 Re al Esta te UBS T rumbull $23,666,023 8.9 1.00 N/A N/A $ 236,660 Ca sh Money Market $1,632,724 0.6 0.16 0.20 US Cas h M anagement $ 2,612 Pavilion-Consulting Fee $ 118,836 US Bank Cus tody and Benefit Payment Fee $ 78,146 Tota l $265,771,547 100.0 %0.77%$ 2,055,279 70 2013 Acti on Sep tember •The M et rop olit an St . Louis Sewer District hired Pavilion Advisory Group as their invest ment consult ant. 2014 Acti on February •Pavilion p resent ed an asset allocat ion and investment and manager struct ure review to the F inance Commit tee.Pavilion recommended t he adop tion of new asset allocat ion targe ts and allowable ranges that would p ermit the eliminat ion of t he tact ical as set allocat ion and market neut ral s trat egies , the ad dit ion of hedge fund strat egies through hedge f und of funds, and the reduction of t he number of managers and exposure to high yield and non- US debt in the fixed income p ortfolio. T he following asset allocat ion s tructure was p rop os ed: 40% Equit y 35% Fixed Income 25% Alt ernatives Appendix History of Investment Decisions Given Pyramis ' p oor p er formance and rapidly declining as sets in the s trat egy,Pavilion furt her recommended the manager be t erminat ed immediat ely . T he Commit tee ap proved t hese recommendations. Sep tember •Pavilion downgraded PIM CO’s manager rating stat us from “negat iv e w at ch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat iv e w at ch” in January following the dep art ure of co-CIO Mohamed El-Erian, and not ed we would closely monit or t he firm for organiz at ional s tabilit y,asset flow s,and p erformance. Novemb er & December •Pavilion conducted an equit y long/s hort hedge fund of funds search and p resent ed the rep ort to the F inance Commit tee.Pavilion recommended Light house C ap it al P artners Global Long/Short Fund which was support ed by Metrop olit an St Louis Sew er St aff. T he F und rep laced PIMCO All Asset Fund on M arch 1, 2015. 71 2015 Acti on May •Pavilion recommended liquidat ing the t he Pict et Local Currency Emerging Market Debt Fund, Loomis Sayles Credit Fund and the Penn Capital High Yi eld Fund and inves ting the p roceeds int o the Prudent ial T otal Ret urn Fund. T he recommendation is support ed by the Office of t he Secr et ary Treas urer and t he Investment Commit tee.The F inance Commit tee ap proved t he recommendat io n t o go t o t he Board of T rus tees . Pavilion p rovided t he Finance Commit tee w it h a revised St at ement of Investment Policy , Object iv es an d Op erat ing Guidelines . T he p olicy was reviewed with and sup port ed by the O ffice of t he Secr et ary Treas urer. T he Finance Commit tee requested addit ional t ime t o review the document . June •Pavilion recommended liquidat ing the G MO Asset Allocat ion Fund and investing the p roceeds in t he Light house G lobal Long/Short Eq uit y Fund and t he Entrust Diversified Hedge F und of F unds. T he recommendat ion was support ed by the O ffice of t he Secret ary Treas urer and t he Inves tment Commit tee.The F inance Commit tee ap proved t he recommendation t o go t o t he Board of T rustees . T he Finance Commit tee review ed and ap proved t he revised Statement of Investment Policy , O bject ives and Op erat ing G uidelines provided at the M ay meet in g.The r ev is ed Inves tment Policy document was approved by the Board of T rustees . Appendix History of Investment Decisions 2016 Acti on Novemb er •Pavilion conducted a sear ch to replace t he pens ion p lan's large -cap managers with an index s trat egy.The Finance Commit tee agreed to liq uidat e all four of its large -cap managers, which include T . Rowe P rice Large -Cap Core Growth, Van gu ard S&P 500, Vanguard Windsor II and Holland, and use thes e funds t o p urchase s hares in a Blackrock Russell 1000 P assive U.S.Equit y CIT . December •Wellingt on Divers ified Inflat ion Hedges was terminat ed and p roceeds were moved t o t he UBS T rumbull Prop erty Fund. 2017 Acti on February •In February , all four large -cap managers T.Rowe P rice Large-Cap Growt h, Vangu ard S&P 500, Vangu ard Windsor II and Holland were liquidated and p roceeds used to p urchase shar es in the BlackRock Rus sell 1000 Pas sive U .S. Equity CIT . 72 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. Benchmark Comparison 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. Universe Comparison 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 performing 1% of managers. Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad Appendix Benchmark and Universe Descriptions 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. Policy Benchmark As of January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 10% NCREIF Property Index. From August 1, 2015 to January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 5% We llington DIH Multi-Asset Inflation Index and 5% NCREIF Property Index. From March 1, 2015 to August 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% 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,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield Cash Pay Index, 4% HFRI Equity Hedge (Total) Index, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE. 73 Policy Benchmark(Cont.) From April 1, 2014 to March 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% 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,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield Cash Pay Index, 4% CPI+5%, 5% We llington DIH Benchmark, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index- OEDCE. Prior to April 1, 2014, the Policy Benchmark is comprised of 20% Russell 1000 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 Yi eld Blend Index, 13% BC Intermediate Gov/Credit Index, , 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yi eld, Cash Pay Index, 5% 3 Month T-Bills + 3%, 4% CPI + 5%, 5% We llington DIH Multi-Asset Inflation Index, 5% JPM GBI-EM Global Diversified Index, and 5% NCREIF Fund Index-OEDCE. Note: Wellington DIH Multi-Asset Inflation Index consists of 50% MSCI ACW Commodity Producers Index, 25% DJ AIG Commodity To tal Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year Appendix Benchmark and Universe Descriptions Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year 74 This report contains confidential and proprietary information and is intended for the exclusive use of the parties to whom it was provided. Facts and information provided in this report are believed to be accurate at the time of preparation. However, certain information in this document has been provided to Pavilion Advisory Group Inc. (Pavilion) by third parties and subject to change at any time and based on market conditions. Although we believe this information is reliable, we have not independently verified the information. Returns are net of investment fees unless otherwise denoted. Returns for periods greater than one year are annualized. Mutual fund returns assume reinvestment of all distributions at net asset value (NAV) and deduction of fund expenses. Past performance does not guarantee future results. This document may include certain forward-looking statements that are based on current estimates and forecasts. Actual results could differ materially. Investing in securities products involves risk, including possible loss of principal as the value of investments fluctuates. This report is not to be reproduced, redistributed or retransmitted in any form without prior expressed written consent from Pavilion. ©2017 Pavilion Advisory Group Inc. All rights reserved. www.pavilioncorp.com Disclosures 75