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HomeMy Public PortalAbout2014 4th Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Pension Plan 4th Quarter 2014 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 Performance Summary 1 2 Asset Class Diversification 20 3 Manager Evaluation 26 4 Calendar Year Performance 66 5 Capital Markets Review 68 6 Appendix 76 Table of Contents Performance Summary 1 Performance Summary - December 2014 During the fourth quarter, the Metropolitan St. Louis Sewer District pension plan underperformed its benchmark, reporting a decline of -0.4% while the Policy Benchmark reported a gain of 0.3%. On a trailing one-year basis, the plan reported a gain of 2.9%, lagging the Policy Benchmark by 40 basis points. Asset Class Diversification Current asset allocation was within investment policy targets. The Plan was slightly underweight in fixed income and real assets and overweight equities and real estate. Manager Evaluation 2014 was a difficult year for active managers. 12 of 16 active managers (75%) underperformed their benchmark during the one year period. Fourth quarter performance was most significantly impacted by the following managers as they trailed their respective benchmarks by over 200 basis points: Holland Large Cap Growth, Kennedy Mid Cap Value, GMO Asset Allocation Fund, and Wellington Diversified Inflation Hedges. Capital Markets Review The U.S. economy was aided by a combination of strengthening employment and stronger growth of domestic demand; however, The IMF’s latest quarterly update to its global economic forecasts contained downgrades to its expectations for global growth to 3.5% in 2015. As one of the stronger world economies, the U.S. remained a safe-haven for investors as money flowed out of Europe and Asia and into U.S. securities. World equities performance in 2014 has been dominated by the performance of the US market and the strengthening of the US dollar. The Russell 3000 Index experienced strong gains during the fourth quarter, driven by improved U.S. economic data and the Fed’s declaration that it would remain “patient” before increasing short-term interest rates, given current low inflation expectations. During the quarter, small-cap stocks outperformed their large-cap counterparts, however, large-caps advanced more throughout the year. Non-U.S. equities struggled as the strong U.S. dollar transformed decent local market returns into negative U.S. dollar returns in developed and emerging markets. Disappointing economic data abroad hurt returns, however, significant depreciation of most non-U.S. currencies versus the USD was the main driver of negative performance. Emerging markets were negatively impacted most by depreciating currencies and also were hurt by falling oil and commodity prices. Recommendations or Action Items A resolution to the Board of Trustees was proposed in December 2014 regarding an investment in hedge fund of funds. The resolution formally authorized the District to liquidate assets managed by PIMCO in the All Asset Fund and invest the proceeds in Lighthouse Investment Partners Global Long/Short Ltd as recommended by Pavilion. The Lighthouse Investment Partners subscription documents are still under review and the investment has not yet been made. The pension fund’s allocation to hedge funds is 15%. Pension Plan Executive Summary 2 Total Composite Policy Benchmark 0.0 3.0 6.0 9.0 12.0 15.0 -3.0 -6.0Return (%)Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception 0.3 3.3 3.3 9.1 7.9 6.0 8.2 -0.4 2.9 2.9 8.6 7.6 6.1 7.7 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite -0.4 2.9 2.9 8.6 7.6 6.1 7.7 22y Policy Benchmark 0.3 3.3 3.3 9.1 7.9 6.0 N/A Performance Summary Total Composite vs. Policy Benchmark As of December 31, 2014 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 3 -7.0 -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 -0.4 (100)2.9 (98)2.9 (98)8.6 (97)7.6 (98)4.7 (92)6.1 (72)¢£ 5th Percentile 3.6 9.3 9.3 14.4 11.6 7.0 7.9 1st Quartile 3.0 7.5 7.5 13.1 10.5 6.4 7.1 Median 2.5 6.7 6.7 12.3 9.9 5.8 6.5 3rd Quartile 2.0 5.6 5.6 11.3 9.0 5.3 6.0 95th Percentile 0.5 3.4 3.4 9.3 8.0 4.2 5.3 Performance Comparison All Public Plans <= $500 mil As of December 31, 2014 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 4 -7.0 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite -0.4 (100)2.9 (98)2.9 (98)8.6 (96)7.6 (97)4.7 (88)6.1 (72)¢£ 5th Percentile 3.5 9.5 9.5 14.4 11.6 7.0 7.8 1st Quartile 2.9 7.5 7.5 13.0 10.5 6.2 7.0 Median 2.3 6.7 6.7 12.1 9.8 5.6 6.5 3rd Quartile 1.6 5.6 5.6 11.1 9.0 5.2 6.0 95th Percentile 0.5 3.6 3.6 8.7 7.9 4.1 5.4 Performance Comparison All Public Plans As of December 31, 2014 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 5 3 Years 5 Years 5.0 7.0 9.0 11.0 13.0 14.0 Return (%)5.0 5.7 6.4 7.1 7.8 8.5 9.0 Risk (Standard Deviation %) Policy Benchmark (7.7 , 7.9) Total Composite (7.8 , 7.6) 5.0 7.0 9.0 11.0 13.0 14.0 Return (%)5.0 5.7 6.4 7.1 7.8 8.5 9.0 Risk (Standard Deviation %) Policy Benchmark (5.9 , 9.1) Total Composite (6.2 , 8.6) Performance Summary Risk and Return Summary As of December 31, 2014 6 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 250,685,828 100.0 -0.4 2.9 2.9 8.6 7.6 6.1 7.7 22y Policy Benchmark 0.3 3.3 3.3 9.1 7.9 6.0 N/A Total Equity Composite 105,063,159 41.9 1.1 4.7 4.7 N/A N/A N/A 13.9 1y 4m MSCI AC World IMI 0.7 4.4 4.4 14.9 10.0 6.9 13.3 Domestic Equity Composite 71,405,932 28.5 4.4 (42)10.1 (23)10.1 (23)N/A N/A N/A 19.3 (N/A)1y 4m Russell 3000 Index 5.2 (21)12.6 (8)12.6 (8)20.5 (13)15.6 (11)7.9 (29)20.7 (N/A) Broad Equity Peer Group Median 4.2 8.2 8.2 18.2 13.7 7.3 N/A Large-Cap Equity Composite 56,176,412 22.4 4.0 (55)10.9 (43)10.9 (43)18.6 (55)13.9 (51)7.7 (37)8.9 (N/A)11y 7m Russell 1000 Index 4.9 (33)13.2 (19)13.2 (19)20.6 (26)15.6 (20)8.0 (31)9.3 (N/A) Large-Cap Equity Peer Group Median 4.2 10.3 10.3 19.1 14.0 7.2 N/A Small-Cap Equity Composite 15,229,520 6.1 6.2 (72)7.2 (14)7.2 (14)19.5 (38)16.9 (25)10.3 (3)12.2 (N/A)11y 7m Russell 2000 Index 9.7 (25)4.9 (35)4.9 (35)19.2 (41)15.5 (43)7.8 (47)10.5 (N/A) Small-Cap Equity Peer Group Median 8.1 3.5 3.5 18.5 15.2 7.7 N/A International Equity Composite 33,657,227 13.4 -5.4 (84)-5.5 (65)-5.5 (65)N/A N/A N/A 3.8 (N/A)1y 4m MSCI AC World ex USA Index -3.9 (54)-3.9 (37)-3.9 (37)9.0 (53)4.4 (56)5.1 (65)5.7 (N/A) International Equity Peer Group Median -3.8 -4.7 -4.7 9.1 4.7 5.6 N/A Developed International Equity Composite 26,735,417 10.7 -5.1 (81)-5.8 (57)-5.8 (57)10.7 (45)5.9 (45)4.3 (63)4.8 (N/A)15y 8m MSCI EAFE Index -3.6 (55)-4.9 (46)-4.9 (46)11.1 (39)5.3 (53)4.4 (62)3.7 (N/A) Developed International Equity Peer Group Median -3.4 -5.3 -5.3 10.5 5.5 4.8 N/A Emerging International Equity Composite 6,921,810 2.8 -6.2 (72)-4.5 (69)-4.5 (69)4.4 (57)1.9 (55)N/A 7.9 (50)9y 9m MSCI Emerging Markets Index -4.5 (49)-2.2 (46)-2.2 (46)4.0 (65)1.8 (57)8.4 (37)8.5 (37) Emerging Markets Equity Peer Group Median -4.6 -2.6 -2.6 4.8 2.1 7.9 7.9 Fixed Income Composite 86,639,239 34.6 -0.6 (100)2.4 (83)2.4 (83)3.7 (24)4.7 (38)5.3 (13)5.0 (17)11y 6m Barclays Intermediate U.S. Government/Credit 0.9 (43)3.1 (61)3.1 (61)2.0 (74)3.5 (70)4.1 (73)3.8 (73) Intermediate Duration Fixed Income Peer Group Median 0.8 3.4 3.4 2.8 4.3 4.6 4.4 Performance Summary Total Pension Fund Asset Allocation and Performance As of December 31, 2014 _________________________ Performance is reported net of fees. 7 Performance Summary Total Pension Fund Asset Allocation and Performance As of December 31, 2014 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Tactical Asset Allocation Composite 24,737,029 9.9 -1.2 1.3 1.3 8.0 6.6 5.7 6.2 11y 7m 65% MSCI World (Net) / 35% BC Aggregate 1.3 5.4 5.4 11.0 8.4 5.9 7.2 Alternatives Composite 9,795,969 3.9 -2.9 1.5 1.5 N/A N/A N/A 2.5 1y 4m 3 Month T-Bills + 3%0.7 3.0 3.0 3.1 3.1 4.6 3.0 Real Estate Composite 13,546,840 5.4 2.7 10.4 10.4 9.6 11.3 6.6 5.1 8y 7m NCREIF Fund Index-Open End Diversified Core Equity 0.0 9.0 9.0 11.1 13.1 6.4 4.7 Real Assets Composite 9,553,863 3.8 -12.5 -12.8 -12.8 -4.1 N/A N/A -1.1 4y 9m Wellington DIH Multi-Asset Inflation Index -10.4 -11.4 -11.4 -3.9 -1.4 3.4 -1.3 Cash Account 1,349,729 0.5 0.6 0.6 0.6 0.3 -0.2 1.5 1.4 11y 7m BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 1.5 1.5 _________________________ Performance is reported net of fees. 8 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Domestic Large-Cap Equity Managers Vanguard Windsor II 13,267,354 5.3 3.6 (55)11.3 (36)11.3 (36)19.3 (44)14.1 (43)7.3 (37)6.8 (N/A)13y 8m Russell 1000 Value Index 5.0 (22)13.5 (15)13.5 (15)20.9 (23)15.4 (19)7.3 (37)6.9 (N/A) Large-Cap Value Equity Peer Group Median 3.8 10.2 10.2 18.9 13.8 6.9 N/A Vanguard Institutional Index Fund 16,087,355 6.4 4.9 (32)13.7 (16)13.7 (16)20.4 (30)15.4 (22)7.7 (38)5.1 (64)15y 3m S&P 500 4.9 (32)13.7 (16)13.7 (16)20.4 (30)15.5 (22)7.7 (38)5.1 (64) Large-Cap Equity Peer Group Median 4.2 10.3 10.3 19.1 14.0 7.2 5.8 T. Rowe Price Inst. Large-Cap Core Growth 13,612,960 5.4 4.3 (61)9.3 (61)9.3 (61)22.4 (14)16.7 (15)8.6 (34)23.1 (N/A)1y 10m Russell 1000 Growth Index 4.8 (49)13.1 (24)13.1 (24)20.3 (39)15.8 (26)8.5 (36)21.5 (N/A) Large-Cap Growth Equity Peer Group Median 4.8 10.5 10.5 19.7 14.3 7.9 N/A Holland Large Cap Growth 13,208,743 5.3 1.9 (89)7.2 (82)7.2 (82)16.5 (85)13.7 (66)7.4 (63)15.8 (N/A)1y 10m Russell 1000 Growth Index 4.8 (49)13.1 (24)13.1 (24)20.3 (39)15.8 (26)8.5 (36)21.5 (N/A) Large-Cap Growth Equity Peer Group Median 4.8 10.5 10.5 19.7 14.3 7.9 N/A Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 8,294,340 3.3 3.5 (61)15.8 (4)15.8 (4)20.6 (24)17.2 (12)N/A 11.7 (1)7y Russell Midcap Value Index 6.1 (34)14.7 (6)14.7 (6)22.0 (12)17.4 (10)9.4 (18)9.1 (23) Mid-Cap Value Equity Peer Group Median 4.7 6.2 6.2 18.2 14.5 8.1 7.8 TimesSquare Small Cap Growth Fund 6,935,180 2.8 9.7 (34)-2.5 (81)-2.5 (81)17.7 (53)16.3 (35)11.0 (6)10.5 (N/A)12y 11m Russell 2000 Growth Index 10.1 (24)5.6 (25)5.6 (25)20.1 (32)16.8 (31)8.5 (32)8.3 (N/A) Small-Cap Growth Equity Peer Group Median 8.7 2.7 2.7 18.0 15.5 7.8 N/A Developed International Equity Manager Morgan Stanley International Equity Fund I 26,735,417 10.7 -5.3 (83)-6.1 (61)-6.1 (61)10.6 (48)5.8 (46)4.4 (62)4.5 (63)9y 9m MSCI EAFE Index -3.6 (55)-4.9 (46)-4.9 (46)11.1 (39)5.3 (53)4.4 (62)4.6 (62) International Equity Peer Group Median -3.4 -5.3 -5.3 10.5 5.5 4.8 4.9 Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 6,921,810 2.8 -6.2 (72)-4.5 (69)-4.5 (69)4.4 (57)1.9 (54)7.9 (54)7.9 (49)9y 9m MSCI Emerging Markets Index -4.5 (49)-2.2 (46)-2.2 (46)4.0 (65)1.8 (57)8.4 (37)8.5 (37) Emerging Markets Equity Peer Group Median -4.6 -2.6 -2.6 4.8 2.1 7.9 7.9 Performance Summary Manager Asset Allocation and Performance As of December 31, 2014 _________________________ Performance is reported net of fees. 9 Performance Summary Manager Asset Allocation and Performance As of December 31, 2014 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 36,053,799 14.4 0.8 (44)3.3 (55)3.3 (55)2.7 (56)4.0 (63)4.9 (20)5.3 (26)13y 6m Barclays Intermediate U.S. Government/Credit 0.9 (43)3.1 (61)3.1 (61)2.0 (74)3.5 (70)4.1 (73)4.6 (60) Intermediate Duration Fixed Income Peer Group Median 0.8 3.4 3.4 2.8 4.3 4.6 4.8 Penn Capital 12,558,480 5.0 -1.8 (77)0.2 (88)0.2 (88)6.4 (93)7.6 (88)N/A 6.2 (88)9y 6m BofA Merrill Lynch US High Yield, Cash Pay Index -1.1 (54)2.4 (49)2.4 (49)8.3 (44)8.9 (33)7.5 (25)7.8 (25) High Yield Fixed Income Peer Group Median -0.9 2.4 2.4 8.1 8.6 7.1 7.4 Loomis Credit Asset Fund 5,013,089 2.0 0.4 (14)4.3 (13)4.3 (13)7.6 (2)N/A N/A 7.7 (1)4y 10m 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 0.5 (12)4.8 (13)4.8 (13)5.9 (11)6.8 (1)6.0 (1)6.6 (1) Alternative Credit Focus Funds Peer Group Median -1.0 1.1 1.1 3.6 4.3 4.0 4.0 Brandywine Global Opportunistic Fixed Income 22,143,385 8.8 0.1 (25)6.3 (15)6.3 (15)5.4 (16)7.6 (1)6.5 (9)6.5 (9)10y Citigroup World Government Bond -1.5 (62)-0.5 (79)-0.5 (79)-1.0 (94)1.7 (87)3.1 (75)3.1 (75) Global Fixed Income Peer Group Median -1.2 1.4 1.4 2.6 3.8 4.1 4.1 Pictet Emerging Local Currency Debt Fund 10,870,486 4.3 -5.4 (32)-6.3 (59)-6.3 (59)-1.1 (67)N/A N/A -0.9 (75)3y 3m JPM GBI-EM Global Diversified -5.7 (41)-5.7 (45)-5.7 (45)0.1 (35)2.6 (20)6.7 (N/A)0.2 (41) Emerging Markets (LC) Fixed Income Peer Group Median -6.0 -6.0 -6.0 -0.5 1.8 N/A -0.2 Tactical Asset Allocation Manager GMO Asset Allocation Fund 24,737,029 9.9 -1.2 (75)1.3 (73)1.3 (73)8.0 (62)6.6 (73)6.1 (31)5.7 (45)8y 5m 65% MSCI World (Net) / 35% BC Aggregate 1.3 (33)5.4 (30)5.4 (30)11.0 (27)8.4 (39)5.9 (40)5.6 (50) IM Flexible Portfolio (MF) Median 0.2 3.3 3.3 9.0 7.7 5.6 5.6 _________________________ Performance is reported net of fees. 10 Performance Summary Manager Asset Allocation and Performance As of December 31, 2014 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Alternatives Manager PIMCO All Asset Fund I 9,795,969 3.9 -2.9 0.8 0.8 5.5 6.4 5.6 5.5 9y Barclays U.S. Treasury Inflation Notes: 1-10 Year -1.0 0.9 0.9 0.0 2.8 3.8 4.0 Real Estate Manager UBS Trumbull Property Fund 13,546,840 5.4 2.7 10.4 10.4 9.6 11.3 6.6 5.1 8y 7m NCREIF Fund Index-Open End Diversified Core Equity 0.0 9.0 9.0 11.1 13.1 6.4 4.7 Real Asset Manager Wellington Diversified Inflation Hedges 9,553,863 3.8 -12.5 -12.8 -12.8 -4.1 N/A N/A -1.1 4y 9m Wellington DIH Multi-Asset Inflation Index -10.4 -11.4 -11.4 -3.9 -1.4 3.4 -1.3 Cash Account 1,349,729 0.5 0.6 0.6 0.6 0.3 -0.2 1.5 1.4 11y 7m BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 1.5 1.5 Total Composite 250,685,828 100.0 -0.4 2.9 2.9 8.6 7.6 6.1 7.7 22y _________________________ Performance is reported net of fees. 11 12.0 12.8 13.6 14.4 15.2 16.0 16.8 17.6 18.4 19.2 20.0 Return (%)12.0 12.8 13.6 14.4 15.2 16.0 16.8 17.6 18.4 19.2 20.0 Risk (Standard Deviation %) Russell 2000 Growth Russell Midcap Value Russell 1000 Growth S&P 500 Russell 1000 Value Holland Large Cap Growth Kennedy Mid Cap Value TimesSquare Small Cap Growth Vanguard Windsor II Fund Vanguard Institutional Index Fund T. Rowe Price Inst. Large-Cap Core Growth Performance Summary Risk and Return Summary - Equity Managers 5 Years Ending December 31, 2014 12 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Return (%)0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 12.0 13.5 15.0 Risk (Standard Deviation %) 50% BC Credit / 25% S&P LSTA / 25% BY High Yield JPM GBI-EM Global Diversified Citigroup World Government Bond BofA Merrill Lynch US High Yield, Cash Pay Index BC Intermediate U.S. Government/Credit Penn Capital Income Research Brandywine Global Performance Summary Risk and Return Summary - Fixed Income Managers 5 Years Ending December 31, 2014 13 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Return (%)-4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Risk (Standard Deviation %) 90 Day U.S. Treasury Bill Barclays U.S. Treasury Inflation Notes: 1-10 Year NCREIF Fund Index-Open End Diversified Core Equity Wellington DIH Multi-Asset Inflation Index 65% MSCI World (Net) / 35% BC Aggregate UBS TPF PIMCO All Asset GMO Performance Summary Risk and Return Summary - Alternative Managers 5 Years Ending December 31, 2014 14 Manager Compliance Checklist Fourth Quarter 2014 Mana gers Va nguard Windsor Vanguard Insti tutiona l T. Row e Price Ho lland Ke nne dy TimesS qua re Morga n Stanley Int'l Morga n Stanley EM Organizational /Produ ct Is sues No ma terial c hanges to investme nt team ++++++-+ No ma terial o rganiza tional changes ++++++++ Accounting or regulat ory concerns ++++++++ Cu rrently in adherence to guidelin es ++++++++ Po rt fo lio characteris tics me et s tylis tic expectations ++++++++ Re lati ve Perfor mance 1 Th re e-year re turn better than benchmark -N/A +----+ Th re e-year ra nkin g better t han peer group median +++-+-+- Fiv e year return better t han benchmark -N/A +---++ 1 Manager performance is evaluated net of investment management fees. +++ Fiv e year rankin g better than peer group median +++-+++- Perfor mance status ++++++++ Da te perfo rmance s tatus changed Summary status +++++++Sell Da te s umma ry status changed 4Q13 15 Manager Compliance Checklist Fourth Quarter 2014 Ma nage rs Income Re se arch Penn Loomis Bra ndyw ine Gl oba l Picte t GMO PIMCO UBS Wellington Organi zati onal/Produ ct Is sues No ma teria l c hanges to investme nt team +++-++-++ No ma teria l o rg aniza tional c hanges ++++++-++ Accounting or re gulatory concerns +++++++++ Cu rre ntly in adherence to guidelin es +++++++++ Po rt fo lio characteris tics me et stylis tic expectations +++++++++ Re lative Performance 1 Thre e-year return better than benchmark +-++--+-- Thre e-year rankin g better than peer group media n --++--N/A N/A N/A Fiv e year re turn better than benchmark +-N/A +N/A -+-N/A 1 Manager performance is evaluated net of investment management fees. Fiv e year re turn better than benchmark +-N/A +N/A -+-N/A Fiv e year ra nkin g better than peer group median --N/A +N/A -N/A N/A N/A Perfor mance s tatus +-++--+++ Da te perfo rmance s tatus changed 4Q13 4Q13 3Q14 Summary status +Sell Sell +Sell Sell Sell ++ Da te summa ry status changed 4Q13 4Q13 4Q13 4Q13 4Q13 16 Manager Compliance Issue Explanation Recommended Action Comments Morgan Stanley Emerging Market Equity Performance & Investment Team Changes The manager ranked in the 57th and 54th percentile over the rolling three- and five-year periods of the emerging market equity peer group universe, respectively. The manager has experienced a number of tenured and experienced portfolio manager departures in recent years. Sell There have been a number of important departures in recent years. In 2012, the team lost three portfolio managers. James Cheng announced his retirement from the Asia team. He had held this role since rejoining the firm in 2006 and was the most senior member of the team. The team also lost Homiyar VasaniaIn from the China team and Vincent Eee, who joined in 2009 and had covered Taiwan. In 2011, the team lost Scott Piper, a long-tenured portfolio manager on their LATAM team. Average performance on a peer relative basis and less consistent downside protection, especially over the long-term, are also concerns to us. Manager Compliance Checklist Fourth Quarter 2014 Loomis Sayles Credit Asset Fund Asset Flows & Fixed Income Structure Optimization Asset flows have declined from $1 billion in 2009 to $526 in Q3 of 2014. From a structural perspective we recommend MSD eliminate their allocation to a dedicated credit manager and instead consider a core plus fixed income manager that can allocate across multiple fixed income sectors and regions. Streamline fixed income manager structure and reduction in the number of managers from 5 to 3 will be required. Sell While we have a high degree of confidence in Loomis Sayles credit research process and investment team, assets have declined significantly and fixed income structure optim ization process leaves no place for this strategy on a stand alone basis. 17 Manager Compliance Issue Explanation Recommended Action Comments Penn Performance & Fixed Income Structure Optimization The manager underperformed the BofA Merrill Lynch US High Yield,Cash Pay Index by 190 and 130 basis points over the rolling three-and five-year periods, ranking in the 93rd and 88th percentile of the high yield fixed income peer group universe, respectively. Sell Although the product delivers consistent, predictable performance with a focus on downside protection, from a structural perspective we do not support having a m anager dedicated to high yield for a portfolio of this size. Pictet Performance & Fixed Income Structure The manager underperformed the JPM GBI-EM Global Diversified Index by 120 basis points over the rolling three- Sell The strategy lacks compelling performance. The product is expected to provide excellent downside protection, yet generated meaningful Manager Compliance Checklist Fourth Quarter 2014 Structure Optimization 120 basis points over the rolling three- year period, ranking in the 67th percentile of the emerging markets fixed income peer group universe. protection, yet generated meaningful underperformance during 2013. Pavilion recommends re-allocating to another global bond strategy that provides greater diversification and more consistent performance. Also, from a structural perspective we do not support having a manager dedicated to emerging market local currency debt for a portfolio of this size. 18 Manager Compliance Issue Explanation Recommended Ac tion Comments GMO Performance The manager underperformed the 65% MSCI W orld / 35% BC Aggregate Index by 300 and 180 basis points over the rolling three-and five-year periods, ranking in the 62nd and 73rd percentile of the flexible portfolio peer group universe, respectively. Sell Pavilion does not believe from a structural perspective that allocating to tactical asset allocation strategies will add value to the overall investment program. PIMCO Investment Team Changes Mohamed El-Erian, the Chief Executive Officer and co-Chief Investment Officer of PIMCO, left the firm in mid-March. Mr. El-Erian was a member of PIMCO’s Sell Pavilion is downgrading PIMCO’s manager rating status from “negative watch” to “sell.” W hile PIMCO maintains a very deep investment team with many talented individuals, this change will Manager Compliance Checklist Fourth Quarter 2014 Mr. El-Erian was a member of PIMCO’s 11-person Investment Committee that developed model portfolios and was a prominent contributor to the firm’s annual secular forum meetings, known for his high-level global macroeconomic thinking, especially in regards to central banking and public policy. On September 26, 2014, PIMCO announced the departure of Chief Investment Officer (CIO) Bill Gross, who co-founded PIMCO in 1971 and spent over forty years with the firm. As CIO, Gross was responsible for leading the firm’s portfolio management team and Investment Committee, while serving as lead portfolio manager for many of the firm’s most notable strategies including its flagship Total Return Fund. with many talented individuals, this change will likely spark heightened professional turnover within the firm. Although it is unknown at this point, we believe there is a strong probability some professionals will follow Bill Gross to Janus. Additionally, we are concerned that asset outflows will spike as investors exit PIMCO strategies, which may u ltim ately have a negative impact on performance as assets are liquidated. Pavilion initially downgraded PIMCO to “negative watch” in January following the departure of co- CIO Mohamed El-Erian, and noted we would closely monitor the firm for organizational stability, asset flows, and performance. PIMCO has not made clear improvements in these areas, and the departure of Bill Gross creates a multitude of future unknowns for the firm. 19 Asset Class Diversification 20 December 31, 2014 : $250,685,828 Target Allocation Actual Allocation Allocation Differences 0.0%6.0%12.0%18.0%24.0%30.0%36.0%42.0%-6.0 %-12.0 % Cash Account $1,349,729 Real Asset Composite $9,553,863 Real Estate Composite $13,546,840 Alternatives Composite $9,795,969 Tactical Asset Allocation Composite $24,737,029 Fixed Income Composite $86,639,239 Emerging International Equity Composite $6,921,810 Developed International Equity Composite $26,735,417 Small-Cap Equity Composite $15,229,520 Large-Cap Equity Composite $56,176,412 0.0% 5.0% 5.0% 4.0% 10.0% 35.0% 3.0% 11.0% 6.0% 21.0% 0.5% 3.8% 5.4% 3.9% 9.9% 34.6% 2.8% 10.7% 6.1% 22.4% 0.5% -1.2 % 0.4% -0.1 % -0.1 % -0.4 % -0.2 % -0.3 % 0.1% 1.4% Asset Class Diversification Investment Policy Allocation As of December 31, 2014 21 Asse t Cl ass/Type Ma na ge r Total Asse ts ($,mil.)as of 9/30/2014 Perce nt of Total Target Al location Weighting Re lative to Ta rge t Allowable Ra nge Total Asse ts ($,mil.)as of 7/1/2014 La rge -Ca p Equity $56.2 22.4%21.0%+ 1 .4 %15 -25%$55.9 Co re Va nguard Institutional $16.1 6.4%6.0%+ 0.4%$12.3 Va lu e Va nguard Windsor $13.3 5.3%5.0%+ 0.3%$16.0 Gr owth T. Rowe Price $13.6 5.4%5.0%+ 0.4%$13.6 Gr owth Ho lla nd $13.2 5.3%5.0%+ 0.3%$14.0 Small-Ca p Equity $15.2 6.1%6.0%+ 0 .1 %2 -8%$15.6 Va lu e Kennedy $8.3 3.3%3.0%+ 0.3%$8.9 Gr owth Time sSquare $6.9 2.8%3.0%- 0.2%$6.7 Inte rna ti ona l Equity $33.7 13.4%14.0%- 0 .6 %$36.3 Developed Morgan Stanley $26.7 10.7%11.0%- 0.3%5 -15%$28.6 Eme rgin g Marke ts Morgan Stanley $6.9 2.8%3.0%- 0.2%2 -8%$7.6 Fix ed Income $86.6 34.6%35.0%- 0 .4 %$88.5 Asset Class Diversification Investment Program Structure As of December 31, 2014 Fix ed Income $86.6 34.6%35.0%- 0 .4 %$88.5 Do me stic Core In come Res earch $36.1 14.4%14.0%+ 0.4%10 -20%$35.7 High Yie ld Penn Capital $12.6 5.0%5.0%+ 0.0%0 -7%$13.0 Op portunistic Credit Lo omis $5.0 2.0%2.0%- 0.0%0 -5%$5.0 Global Brandywin e Glo bal $22.1 8.8%9.0%- 0.2%4 -14%$22.5 Eme rgin g Marke ts Debt Pictet $10.9 4.3%5.0%- 0.7%0 -7%$12.2 Ta cti ca l $24.7 9.9%10.0%- 0 .1 %$25.8 Ba la nced GM O $24.7 9.9%10.0%- 0.1%0 -12%$25.8 Alte rna ti ve s $9.8 3.9%4.0%- 0 .1 %$10.4 Absolu te Return PIM CO $9.8 3.9%4.0%- 0.1%0 -7%$10.4 Hedge Funds TBD $0.0 0.0%----0 -20%$0.0 Real Es tate $13.5 5.4%5.0%+ 0 .4 %$12.8 Re al Es tate UBS Trumbull $13.5 5.4%5.0%+ 0.4%0 -10%$12.8 Real As set $9.6 3.8%5.0%- 1 .2 %$11.8 Re al Asset Wellin gton $9.6 3.8%5.0%- 1.2%0 -10%$11.8 Ca sh $1.3 0.5%0.0%+ 0 .5 %$1.3 Ca sh Account Ca sh Account $1.3 0.5%0.0%+ 0.5%$1.3 Tota l $250.7 100.0%100.0%+ 0 .0 %$258.4 *Totals may not add to exactly 100.0% due to rounding. 22 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 1.4 1.6 -0.2 10.0 British American Tobacco PLC 1.2 0.2 1.0 -3.3 Nestle SA, Cham Und Vevey 1.2 0.6 0.7 -0.1 Unilever NV 1.2 0.2 1.0 0.1 Reckitt Benckiser Group PLC 1.2 0.1 1.1 -4.2 Visa Inc 1.1 0.3 0.8 23.1 Sanofi 1.0 0.3 0.7 -19.1 Gilead Sciences Inc 1.0 0.3 0.7 -11.5 Novartis AG 1.0 0.5 0.5 -1.5 Amazon.com Inc 1.0 0.3 0.7 -3.7 % of Portfolio 11.2 4.3 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)81,032 79,061 Median Mkt. Cap ($M)12,509 1,398 Price/Earnings ratio 19.1 17.0 Price/Book ratio 3.1 2.6 5 Yr. EPS Growth Rate (%)15.4 14.6 Current Yield (%)1.9 2.4 Debt to Equity 1.8 1.0 Number of Stocks 943 8,603 Beta -1.00 Consistency -- Sharpe Ratio -- Information Ratio -- Up Market Capture -- Down Market Capture -- Sector Weights (%) Total Equity Composite MSCI AC World IMI 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.0 2.2 1.8 1.7 4.0 17.3 10.7 13.9 16.2 6.0 12.0 14.3 0.0 0.0 3.4 3.4 5.7 13.8 11.4 11.3 21.9 7.4 9.0 12.5 Distribution of Market Capitalization (%) Total Equity Composite MSCI AC World IMI 0.0 10.0 20.0 30.0 40.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 31.2 31.0 22.6 15.1 0.0 33.3 30.6 24.2 9.6 2.2 Equity Portfolio - Characteristics Total Equity Composite vs. MSCI AC World IMI As of December 31, 2014 23 Total Equity Composite MSCI AC World IMI Australia 0.3 2.5 Hong Kong 0.4 1.8 Japan 5.1 7.4 New Zealand 0.0 0.1 Singapore 0.0 0.6 Pacific 5.8 12.4 Austria 0.1 0.1 Belgium 0.2 0.5 Finland 0.0 0.3 France 2.8 2.9 Germany 2.2 2.9 Ireland 0.5 0.6 Italy 0.2 0.8 Netherlands 1.5 1.1 Portugal 0.1 0.1 Spain 0.0 1.1 EMU 7.5 10.2 Denmark 0.0 0.5 Norway 0.0 0.3 Sweden 0.6 1.1 Switzerland 4.2 3.2 United Kingdom 8.3 7.2 Europe ex EMU 13.1 12.2 Canada 0.6 3.6 United States 64.0 51.6 Israel 0.0 0.2 Middle East 0.0 0.2 Developed Markets 91.1 90.3 Total Equity Composite MSCI AC World IMI Brazil 0.5 0.9 Cayman Islands 0.0 0.0 Chile 0.0 0.1 Colombia 0.2 0.1 Mexico 0.4 0.5 Peru 0.1 0.0 Virgin Islands 0.0 0.0 EM Latin America 1.2 1.6 China 1.6 1.5 India 0.7 0.8 Indonesia 0.1 0.3 Korea 0.9 1.5 Malaysia 0.1 0.4 Philippines 0.3 0.1 Taiwan 0.6 1.4 Thailand 0.3 0.3 EM Asia 4.6 6.2 Czech Republic 0.1 0.0 Egypt 0.0 0.0 Greece 0.0 0.1 Hungary 0.0 0.0 Poland 0.2 0.2 Qatar 0.0 0.1 Russia 0.0 0.3 South Africa 0.4 0.8 Turkey 0.0 0.2 United Arab Emirates 0.0 0.1 EM Europe + Middle East + Africa 0.7 1.7 Emerging Markets 6.5 9.5 Frontier Markets 0.1 0.0 Cash 2.2 0.0 Other 0.1 0.1 Total 100.0 100.0 Equity Portfolio - Country/Region Allocation Total Equity Composite vs. MSCI AC World IMI As of December 31, 2014 24 Portfolio Characteristics Maturity Distribution (%) Credit Quality Distribution (%) Risk Characteristics - 3 Years Sector Distribution (%) Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated65.3 6.1 14.7 13.9 0.0 0.0 0.0 0.0 26.5 10.0 19.5 21.6 9.6 10.9 0.4 1.5 Portfolio Benchmark Effective Duration 4.5 3.9 Avg. Maturity 7.2 4.2 Avg. Quality A+AA+ Yield To Maturity (%)3.8 1.7 Consistency Sharpe Ratio Information Ratio Up Market Capture Down Market Capture Total Fixed Income Composite 63.9 0.8 0.5 165.6 Barclays Intermediate U.S. Government/Credit 0.0 1.0 N/A 100.0 90 Day U.S. Treasury Bill 38.9 N/A -1.0 1.0 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.8 0.0 5.7 24.4 0.0 0.0 0.0 10.6 2.5 0.0 0.0 0.0 0.0 24.4 0.0 0.3 19.1 15.3 2.6 3.9 14.6 3.7 1.2 3.0 5.7 6.2 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 41.5 25.9 32.6 0.0 0.0 7.7 19.9 21.4 35.4 4.9 10.7 Fixed Income Portfolio - Characteristics Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2014 25 Manager Evaluation 26 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Windsor II 3.6 11.3 11.3 19.3 14.1 7.3 30.8 16.8 2.8 10.7 27.2 -36.6 2.3 18.4 7.2 18.4 Russell 1000 Value Index 5.0 13.5 13.5 20.9 15.4 7.3 32.5 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 7.1 16.5 Large-Cap Value Equity Peer Group Median 3.8 10.2 10.2 18.9 13.8 6.9 31.7 15.0 -1.5 13.5 25.4 -37.3 2.9 16.6 6.1 12.5 Vanguard Windsor II Rank 55 36 36 44 43 37 61 28 17 86 41 44 55 35 36 6 12.0 14.0 16.0 18.0 Return (%)14.5 14.6 Risk (Standard Deviation %) Russell 1000 Value Index Vanguard Windsor II Vanguard Windsor II Russell 1000 Value Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 8.0 16.0-8.0-16.0 Utilities Telecommunication Services Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.2 0.4 0.3 -1.7 4.0 -1.7 3.8 -7.8 -2.3 2.3 2.7 2.3 Allocation (Total: 0.4) 0.0 0.3 0.6-0.3-0.6 -0.2 0.0 0.0 0.1 0.1 0.0 0.1 -0.2 0.3 0.1 0.2 -0.1 Stock (Total: -1.8) 0.0 0.4 0.8-0.4-0.8-1.2 -0.2 0.0 0.0 0.1 0.0 0.1 -0.5 -0.3 -0.6 -0.6 0.1 0.0 Vanguard Windsor II 0.0 0.3 0.6-0.3-0.6-0.9 -0.4 0.0 0.0 0.3 0.0 0.1 -0.4 -0.4 -0.3 -0.4 0.3 -0.1 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 27 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Microsoft Corp 2.9 1.3 1.6 0.8 JPMorgan Chase & Co 2.7 2.3 0.5 4.6 Medtronic Inc 2.6 0.7 1.9 17.6 Wells Fargo & Co 2.5 2.5 -0.1 6.4 Pfizer Inc 2.5 1.9 0.6 6.3 Intel Corp 2.4 1.6 0.8 4.9 Citigroup Inc 2.2 1.6 0.7 4.4 WellPoint Inc 2.2 0.3 1.9 5.4 Philip Morris International Inc 2.1 0.5 1.6 -1.2 General Dynamics Corp 2.0 0.4 1.6 8.8 % of Portfolio 24.1 13.1 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)107,915 113,441 Median Mkt. Cap ($M)22,070 7,321 Price/Earnings ratio 16.0 16.9 Price/Book ratio 2.4 2.1 5 Yr. EPS Growth Rate (%)14.3 10.6 Current Yield (%)2.5 2.3 Debt to Equity 1.3 1.0 Number of Stocks 268 704 Beta (5 Years, Monthly)0.98 1.00 Consistency (5 Years, Monthly)41.67 1.00 Sharpe Ratio (5 Years, Monthly)1.06 1.14 Information Ratio (5 Years, Monthly)-0.55 - Up Market Capture (5 Years, Monthly)95.20 - Down Market Capture (5 Years, Monthly)98.83 - Sector Weights (%) Vanguard Windsor II Russell 1000 Value Index 0.0 8.0 16.0 24.0 32.0 40.0 Other Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.3 2.1 3.9 2.5 1.6 13.4 9.0 17.0 21.9 8.7 8.8 10.7 0.0 0.0 6.4 2.1 3.0 9.5 10.1 13.7 29.9 11.3 7.4 6.6 Distribution of Market Capitalization (%) Vanguard Windsor II Russell 1000 Value 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 43.6 30.8 19.3 6.3 0.0 45.7 35.9 14.0 2.3 2.1 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2014 *Portfolio characteristics as of 12/31/2013. 28 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Vanguard Institutional Index 4.9 13.7 13.7 20.4 15.4 7.7 32.3 16.0 2.1 15.0 26.6 -37.0 5.5 15.8 4.9 10.9 S&P 500 Index 4.9 13.7 13.7 20.4 15.5 7.7 32.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 4.9 10.9 Large-Cap Equity Peer Group Median 4.2 10.3 10.3 19.1 14.0 7.2 32.4 14.6 -1.0 14.0 27.8 -37.5 6.2 13.3 5.9 10.2 Vanguard Institutional Index Rank 32 16 16 30 22 38 51 36 22 38 56 45 55 32 62 44 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.1 0.2 -0.1 -0.2Return (%)3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Vanguard Institutional Index S&P 500 Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Institutional Index 15.4 14.0 15.5 0.0 1.0 1.1 0.0 -2.7 8.1 10.0 15y 3m S&P 500 Index 15.5 14.0 15.6 0.0 1.0 1.1 0.0 N/A 8.1 0.0 15y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.0 -1.1 0.0 20.0 15y 3m Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2014 29 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.7 3.6 0.1 10.0 Exxon Mobil Corp 2.2 2.2 0.1 -1.0 Microsoft Corp 2.2 2.1 0.1 0.8 Johnson & Johnson 1.7 1.6 0.1 -1.3 Wells Fargo & Co 1.5 1.4 0.0 6.4 General Electric Co 1.4 1.4 0.0 -0.5 Berkshire Hathaway Inc 1.4 1.5 -0.1 8.7 Procter & Gamble Co (The)1.4 1.4 0.0 9.6 JPMorgan Chase & Co 1.3 1.3 0.0 4.6 Chevron Corp 1.2 1.2 0.0 -5.1 % of Portfolio 17.9 17.5 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)133,927 131,374 Median Mkt. Cap ($M)18,965 18,669 Price/Earnings ratio 18.8 18.8 Price/Book ratio 3.0 3.0 5 Yr. EPS Growth Rate (%)15.2 15.1 Current Yield (%)2.0 2.0 Debt to Equity 1.0 1.0 Number of Stocks 480 502 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)26.67 1.00 Sharpe Ratio (5 Years, Monthly)1.18 1.18 Information Ratio (5 Years, Monthly)-1.66 - Up Market Capture (5 Years, Monthly)99.94 - Down Market Capture (5 Years, Monthly)100.05 - Sector Weights (%) Vanguard Institutional Index S&P 500 Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.5 3.3 2.3 3.1 19.5 10.1 13.8 16.6 8.6 10.1 12.1 0.0 3.2 2.3 3.2 19.7 10.4 14.2 16.6 8.4 9.8 12.1 Distribution of Market Capitalization (%) Vanguard Institutional Index S&P 500 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 50.3 34.0 15.1 0.6 0.0 51.7 32.6 14.6 0.6 0.5 Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2014 30 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 T. Rowe Price LCC Growth 4.3 9.3 9.3 22.4 16.7 8.6 41.4 18.5 1.5 16.4 43.0 -42.6 13.0 9.1 4.0 7.3 Russell 1000 Growth Index 4.8 13.1 13.1 20.3 15.8 8.5 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3 Large-Cap Growth Peer Group Median 4.8 10.5 10.5 19.7 14.3 7.9 34.6 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7 T. Rowe Price LCC Growth Rank 61 61 61 14 15 34 12 16 27 39 14 78 55 33 69 56 14.4 15.2 16.0 16.8 17.6 18.4 Return (%)13.5 14.0 14.5 15.0 15.5 16.0 16.5 17.0 Risk (Standard Deviation %) Russell 1000 Growth Index T. Rowe Price LCC Growth T. Rowe Price LCC Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 10.0 20.0-10.0-20.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.1 -2.0 -0.6 -6.2 1.2 7.6 2.3 -1.9 -8.2 6.6 1.4 Allocation (Total: 1.0) 0.0 0.4 0.8-0.4-0.8 0.0 0.2 0.0 0.0 0.0 0.3 0.1 0.4 -0.2 0.2 -0.1 Stock (Total: -1.2) 0.0 0.9 1.8-0.9-1.8-2.7 0.0 0.0 0.2 0.0 0.4 -0.6 -0.1 -0.2 0.2 -1.2 0.0 T. Rowe Price LCC Growth 0.0 0.6 1.2-0.6-1.2-1.8 0.0 0.2 0.2 0.0 0.5 -0.3 0.0 0.3 0.0 -1.0 -0.1 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 31 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Amazon.com Inc 4.0 1.1 2.9 -3.7 Gilead Sciences Inc 3.5 1.4 2.1 -11.5 Priceline.Com Inc 3.0 0.6 2.5 -1.6 McKesson Corp 2.8 0.5 2.4 6.8 Biogen Idec Inc 2.6 0.8 1.9 2.6 Danaher Corp 2.6 0.1 2.5 12.9 MasterCard Inc 2.6 0.8 1.8 16.7 Google Inc (Class C)2.5 1.4 1.1 -8.8 Visa Inc 2.5 1.2 1.3 23.1 Facebook Inc 2.4 1.4 1.0 -1.3 % of Portfolio 28.6 9.2 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)83,030 119,250 Median Mkt. Cap ($M)26,792 8,642 Price/Earnings ratio 27.4 21.6 Price/Book ratio 5.3 5.1 5 Yr. EPS Growth Rate (%)24.8 20.1 Current Yield (%)0.6 1.5 Debt to Equity 1.7 1.2 Number of Stocks 133 682 Beta (5 Years, Monthly)1.12 1.00 Consistency (5 Years, Monthly)55.00 1.00 Sharpe Ratio (5 Years, Monthly)1.08 1.16 Information Ratio (5 Years, Monthly)0.28 - Up Market Capture (5 Years, Monthly)108.75 - Down Market Capture (5 Years, Monthly)111.57 - Sector Weights (%) T. Rowe Price Large-Cap Core Growth Russell 1000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 1.3 0.0 0.0 3.7 21.5 14.2 22.0 7.7 2.9 2.4 24.2 0.0 0.1 2.1 4.0 28.3 12.2 14.2 5.4 4.5 10.5 18.7 Distribution of Market Capitalization (%) T. Rowe Price Large-Cap Core Growth Russell 1000 Growth 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 44.5 30.7 21.1 3.6 0.0 35.1 45.8 17.8 0.0 1.3 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2014 32 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Holland Large Cap Growth 1.9 7.2 7.2 16.5 13.7 7.4 30.3 13.1 4.3 15.3 40.0 -33.8 9.4 6.4 -0.1 12.0 Russell 1000 Growth Index 4.8 13.1 13.1 20.3 15.8 8.5 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3 Large-Cap Growth Equity Peer Group Median 4.8 10.5 10.5 19.7 14.3 7.9 34.6 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7 Holland Large Cap Growth Rank 89 82 82 85 66 63 77 66 14 51 22 22 78 58 93 18 10.0 12.0 14.0 16.0 18.0 20.0 Return (%)12.8 13.2 13.6 14.0 14.4 14.8 15.2 15.6 Risk (Standard Deviation %) Russell 1000 Growth Index Holland Large Cap Growth Holland Large Cap Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 3.0 6.0-3.0-6.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.1 -2.4 -1.1 2.6 -1.4 -0.7 -1.5 3.0 -1.5 0.3 2.9 Allocation (Total: -0.7) 0.0 0.6 1.2-0.6-1.2 0.0 0.2 0.0 0.0 -0.1 0.0 0.0 -0.7 0.0 0.0 -0.1 Stock (Total: -2.1) 0.0 0.7 1.4-0.7-1.4 0.0 0.0 -0.1 -0.4 -0.4 -0.5 -0.1 -0.7 0.5 -0.3 0.0 Holland Large Cap Growth 0.0 0.8 1.6-0.8-1.6-2.4 0.0 0.2 -0.1 -0.4 -0.5 -0.6 -0.1 -1.4 0.5 -0.3 -0.1 Manager Evaluation Holland Large Cap Growth vs. Russell 1000 Growth Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 33 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Visa Inc 4.7 1.2 3.5 23.1 Qualcomm Inc.4.2 1.2 3.0 0.0 Apple Inc 4.2 6.2 -2.1 10.0 Priceline.Com Inc 3.6 0.6 3.1 -1.6 Google Inc (Class C)3.6 1.4 2.2 -8.8 Adobe Systems Inc 3.4 0.3 3.0 5.1 Citrix Systems Inc.3.3 0.1 3.2 -10.6 Gilead Sciences Inc 3.2 1.4 1.8 -11.5 Cisco Systems Inc 3.1 0.0 3.1 10.5 Medtronic Inc 3.0 0.0 3.0 17.6 % of Portfolio 36.2 12.4 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)101,382 119,250 Median Mkt. Cap ($M)37,750 8,642 Price/Earnings ratio 23.3 21.6 Price/Book ratio 4.8 5.1 5 Yr. EPS Growth Rate (%)22.6 20.1 Current Yield (%)1.1 1.5 Debt to Equity 0.6 1.2 Number of Stocks 48 682 Beta (5 Years, Monthly)0.95 1.00 Consistency (5 Years, Monthly)45.00 1.00 Sharpe Ratio (5 Years, Monthly)1.05 1.16 Information Ratio (5 Years, Monthly)-0.65 - Up Market Capture (5 Years, Monthly)92.63 - Down Market Capture (5 Years, Monthly)99.00 - Sector Weights (%) Holland Capital Management Russell 1000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.5 0.0 0.0 2.9 31.9 9.7 13.6 3.8 4.8 11.6 19.1 0.0 0.1 2.1 4.0 28.3 12.2 14.2 5.4 4.5 10.5 18.7 Distribution of Market Capitalization (%) Holland Capital Management Russell 1000 Growth 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 44.5 30.7 21.1 3.6 0.0 41.8 28.8 24.3 2.5 2.5 Manager Evaluation Holland Capital Management vs. Russell 1000 Growth Index As of December 31, 2014 34 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Kennedy Mid Cap Value 3.5 15.8 15.8 20.6 17.2 N/A 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A N/A N/A N/A Russell Midcap Value Index 6.1 14.7 14.7 22.0 17.4 9.4 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 20.2 12.6 23.7 Mid-Cap Value Equity Peer Group Median 4.7 6.2 6.2 18.2 14.5 8.1 33.4 15.5 -3.0 20.7 32.9 -38.9 2.7 13.9 8.6 16.7 Kennedy Mid Cap Value Rank 61 4 4 24 12 N/A 51 63 33 9 43 10 N/A N/A N/A N/A 16.5 16.8 17.1 17.4 17.7 18.0 Return (%)15.3 15.6 15.9 16.2 16.5 16.8 17.1 17.4 Risk (Standard Deviation %) Russell Midcap Value Index Kennedy Mid Cap Value Kennedy Mid Cap Value Russell Midcap Value Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 10.0 20.0-10.0-20.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.2 -0.3 -3.3 2.0 6.0 -3.2 -8.4 2.6 -1.4 5.8 3.5 Allocation (Total: -1.3) 0.0 0.8 1.6-0.8-1.6 -0.2 0.0 0.2 0.0 -0.2 -0.1 -0.2 -0.8 0.0 0.3 -0.2 Stock (Total: -1.8) 0.0 0.8-0.8-1.6-2.4 0.0 0.0 0.1 0.0 -0.2 0.0 0.0 -1.3 0.1 -0.5 0.0 Kennedy Mid Cap Value 0.0 0.9 1.8-0.9-1.8-2.7-3.6 -0.2 0.0 0.3 0.0 -0.4 -0.1 -0.3 -2.1 0.1 -0.1 -0.2 Manager Evaluation Kennedy Mid Cap Value vs. Russell Midcap Value Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 35 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Hospira Inc 2.9 0.3 2.6 17.7 Cadence Design Systems Inc 2.5 0.0 2.5 10.2 Covance Inc 2.5 0.0 2.4 31.9 Whirlpool Corp 2.4 0.4 1.9 33.6 Reinsurance Group of America Inc.2.4 0.1 2.2 9.8 UGI Corp 2.3 0.2 2.1 12.1 Foot Locker Inc.2.2 0.2 2.0 1.4 Lincoln National Corp 2.2 0.5 1.7 8.0 Carlisle Companies Inc 2.2 0.2 2.0 12.6 Brixmor Property Group Inc 2.2 0.0 2.1 12.6 % of Portfolio 23.5 2.1 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)8,907 12,031 Median Mkt. Cap ($M)6,970 5,813 Price/Earnings ratio 17.7 19.6 Price/Book ratio 2.4 2.1 5 Yr. EPS Growth Rate (%)16.1 12.5 Current Yield (%)1.6 2.1 Debt to Equity 8.2 1.2 Number of Stocks 55 578 Beta (5 Years, Monthly)1.03 1.00 Consistency (5 Years, Monthly)55.00 1.00 Sharpe Ratio (5 Years, Monthly)1.12 1.19 Information Ratio (5 Years, Monthly)-0.04 - Up Market Capture (5 Years, Monthly)100.31 - Down Market Capture (5 Years, Monthly)101.60 - Sector Weights (%) Kennedy Capital Management Russell Midcap Value Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.4 9.3 0.0 2.6 11.8 16.0 6.8 24.8 5.4 4.1 15.6 0.0 12.5 0.3 6.7 10.9 9.1 9.6 33.2 3.8 3.4 10.5 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 16.1 63.2 20.7 0.02.0 69.9 24.7 3.4 Manager Evaluation Kennedy Capital Management vs. Russell Midcap Value Index As of December 31, 2014 36 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 TimesSquare Small Cap Growth 9.7 -2.5 -2.5 17.7 16.3 11.0 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 16.5 13.4 11.1 Russell 2000 Growth Index 10.1 5.6 5.6 20.1 16.8 8.5 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 13.3 4.2 14.3 Small-Cap Growth Equity Peer Group Median 8.7 2.7 2.7 18.0 15.5 7.8 44.7 12.7 -2.7 27.7 34.5 -40.6 9.9 9.9 5.8 11.3 TimesSquare Small Cap Growth Rank 34 81 81 53 35 6 31 47 14 53 46 11 49 14 10 53 15.5 16.0 16.5 17.0 17.5 Return (%)17.7 18.0 18.3 18.6 18.9 19.2 19.5 Risk (Standard Deviation %) Russell 2000 Growth Index TimesSquare Small Cap Growth TimesSquare Small Cap Growth Russell 2000 Growth Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 15.0 30.0-15.0-30.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.2 0.2 -3.7 6.6 9.9 -9.1 -0.4 -0.9 0.0 -3.3 1.0 Allocation (Total: -0.1) 0.0 0.6 1.2-0.6-1.2 0.0 0.0 0.4 0.1 -0.1 -0.7 0.0 0.4 0.0 -0.1 -0.1 Stock (Total: 0.7) 0.0 0.9 1.8-0.9-1.8 0.0 -0.1 0.1 -0.8 0.7 -0.5 0.6 0.5 0.3 -0.1 0.0 TimesSquare Small Cap Growth 0.0 0.8 1.6 2.4-0.8-1.6-2.4 0.0 -0.1 0.5 -0.7 0.7 -1.2 0.6 0.8 0.3 -0.2 -0.1 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 37 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Albany International Corp.2.1 0.0 2.0 12.1 On Assignment Inc 2.0 0.2 1.8 23.6 Ultimate Software Group Inc 2.0 0.5 1.5 3.7 Solera Holdings Inc 1.9 0.0 1.9 -8.9 CoStar Group Inc 1.8 0.0 1.8 18.1 Henry (Jack) & Associates Inc.1.7 0.0 1.7 12.0 j2 Global Inc 1.7 0.3 1.4 26.3 PolyOne Corp 1.7 0.4 1.3 6.8 Corporate Executive Board Company (The)1.7 0.3 1.4 21.2 Monro Muffler Brake Inc 1.6 0.2 1.4 19.4 % of Portfolio 18.1 1.9 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)2,165 2,083 Median Mkt. Cap ($M)1,726 822 Price/Earnings ratio 26.9 25.8 Price/Book ratio 3.6 4.1 5 Yr. EPS Growth Rate (%)15.2 16.9 Current Yield (%)0.5 0.6 Debt to Equity 2.8 1.1 Number of Stocks 101 1,205 Beta (5 Years, Monthly)0.86 1.00 Consistency (5 Years, Monthly)51.67 1.00 Sharpe Ratio (5 Years, Monthly)1.01 0.94 Information Ratio (5 Years, Monthly)-0.18 - Up Market Capture (5 Years, Monthly)86.99 - Down Market Capture (5 Years, Monthly)79.10 - Sector Weights (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 4.5 0.0 1.0 1.7 30.3 24.8 11.6 6.0 3.3 3.3 13.7 0.0 0.2 0.8 4.6 25.7 14.5 24.0 7.8 2.9 3.8 15.7 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 1.3 98.7 0.04.1 91.4 4.5 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2014 38 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Morgan Stanley International Equity -5.3 -6.1 -6.1 10.6 5.8 4.4 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 22.5 6.5 20.0 MSCI EAFE Index -3.6 -4.9 -4.9 11.1 5.3 4.4 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3 13.5 20.2 International Equity Peer Group Median -3.4 -5.3 -5.3 10.5 5.5 4.8 20.8 18.4 -13.7 11.6 33.5 -44.4 11.9 25.2 15.0 18.5 Morgan Stanley International Equity Rank 83 61 61 48 46 62 54 35 10 88 92 1 66 76 100 38 4.5 5.0 5.5 6.0 6.5 Return (%)14.0 14.5 15.0 15.5 16.0 16.5 17.0 17.5 Risk (Standard Deviation %) MSCI EAFE Index Morgan Stanley International Equity Morgan Stanley International Equity MSCI EAFE Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 15.0 30.0-15.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.9 -3.3 0.0 2.3 -5.5 3.4 -7.2 0.7 13.5 -2.5 2.4 Allocation (Total: 0.0) 0.0 0.3 0.6-0.3-0.6 0.0 -0.1 0.0 0.1 0.0 -0.1 0.0 -0.1 0.3 -0.2 0.1 Stock (Total: -1.1) 0.0 0.6 1.2-0.6-1.2 0.0 -0.2 -0.1 0.1 -0.4 -0.5 0.3 -0.6 -0.2 0.4 0.0 Morgan Stanley International Equity 0.0 0.4 0.8-0.4-0.8-1.2 0.0 -0.3 -0.1 0.2 -0.4 -0.6 0.3 -0.7 0.1 0.3 0.1 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 39 Total Attribution 0.0 0.2 0.4 0.6-0.2-0.4-0.6-0.8-1.0-1.2-1.4 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash -0.9 0.0 -0.3 0.0 0.1 -0.2 -0.1 0.1 Performance Attribution Average Active Weight 0.0 10.0 20.0 30.0-10.0-20.0 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash -11.5 -0.3 1.4 -0.6 11.8 -4.4 1.3 2.4 Allocation (Total: -0.5) 0.0 0.2 0.4-0.2-0.4-0.6 -0.2 0.0 -0.3 0.0 -0.1 0.0 -0.1 0.1 Stock (Total: -0.7) 0.0 0.4 0.8-0.4-0.8-1.2 -0.7 0.0 0.0 0.0 0.2 -0.2 0.0 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index 1 Quarter Ending December 31, 2014 40 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) British American Tobacco PLC 4.8 0.8 4.0 -3.3 Nestle SA, Cham Und Vevey 4.7 1.9 2.8 -0.1 Unilever NV 4.6 0.5 4.0 0.1 Reckitt Benckiser Group PLC 4.6 0.4 4.1 -4.2 Sanofi 3.8 0.9 2.9 -19.1 Novartis AG 3.8 1.7 2.0 -1.5 Roche Holding AG 3.1 1.5 1.5 -8.3 Diageo PLC 2.9 0.6 2.3 -0.4 Toyota Motor Corp 2.7 1.4 1.4 7.0 SAP AG Systeme Anwendungen 2.5 0.5 2.0 -2.2 % of Portfolio 37.4 10.3 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)77,033 60,779 Median Mkt. Cap ($M)29,681 8,971 Price/Earnings ratio 17.8 15.9 Price/Book ratio 2.6 2.2 5 Yr. EPS Growth Rate (%)5.6 11.7 Current Yield (%)2.9 3.2 Debt to Equity 1.2 1.0 Number of Stocks 71 910 Beta (5 Years, Monthly)0.90 1.00 Consistency (5 Years, Monthly)45.00 1.00 Sharpe Ratio (5 Years, Monthly)0.44 0.39 Information Ratio (5 Years, Monthly)0.06 - Up Market Capture (5 Years, Monthly)92.49 - Down Market Capture (5 Years, Monthly)88.89 - Sector Weights (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 6.0 12.0 18.0 24.0 30.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.5 0.0 1.5 7.5 7.4 6.5 14.1 19.2 5.9 25.0 10.2 0.0 3.9 5.0 7.6 4.8 12.6 11.0 25.9 5.7 11.1 12.4 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 26.9 40.9 27.2 5.0 0.0 33.9 37.6 24.4 1.6 2.5 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2014 41 Morgan Stanley International Equity MSCI EAFE Index Australia 1.2 7.5 Hong Kong 0.6 3.1 Japan 19.6 21.2 New Zealand 0.0 0.2 Singapore 0.0 1.6 Pacific 21.5 33.6 Austria 0.0 0.2 Belgium 0.0 1.3 Finland 0.0 0.9 France 9.6 9.2 Germany 8.4 9.1 Ireland 1.0 0.3 Italy 0.8 2.2 Netherlands 5.6 3.0 Portugal 0.0 0.1 Spain 0.0 3.5 EMU 25.4 29.8 Denmark 0.0 1.5 Norway 0.0 0.7 Sweden 2.4 3.1 Switzerland 16.1 9.3 United Kingdom 29.8 21.1 Europe ex EMU 48.3 35.7 Canada 1.1 0.0 United States 0.0 0.0 Israel 0.0 0.6 Middle East 0.0 0.6 Developed Markets 96.2 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 1.3 0.0 India 0.0 0.0 Indonesia 0.0 0.0 Korea 0.0 0.0 Malaysia 0.0 0.0 Philippines 0.0 0.0 Taiwan 0.0 0.0 Thailand 0.0 0.0 EM Asia 1.3 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 1.3 0.0 Frontier Markets 0.0 0.0 Cash 2.5 0.0 Other 0.0 0.3 Total 100.0 100.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2014 42 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2010 - Dec - 2014)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Morgan Stanley Emerging Markets -6.2 -4.5 -4.5 4.4 1.9 7.9 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 38.0 34.5 24.1 MSCI Emerging Markets Index -4.5 -2.2 -2.2 4.0 1.8 8.4 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 32.2 34.0 25.6 Emerging Markets Equity Peer Group Median -4.6 -2.6 -2.6 4.8 2.1 7.9 -1.1 19.5 -19.2 19.2 74.0 -54.5 37.4 32.3 32.9 24.9 Morgan Stanley Emerging Markets Rank 72 69 69 57 54 54 47 39 41 55 69 71 25 16 41 60 1.4 1.6 1.8 2.0 2.2 Return (%)15.2 15.6 16.0 16.4 16.8 17.2 17.6 18.0 18.4 Risk (Standard Deviation %) MSCI Emerging Markets Index Morgan Stanley Emerging Markets Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Average Active Weight 0.0 4.0 8.0-4.0-8.0 Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.3 0.8 -4.3 -1.6 1.4 0.8 2.9 -2.3 1.2 2.5 1.9 Allocation (Total: 1.0) 0.0 0.4 0.8-0.4-0.8 0.1 0.0 0.3 -0.1 0.0 0.0 0.2 0.5 0.0 0.0 0.1 Stock (Total: -2.1) 0.0 0.5-0.5-1.0-1.5 0.1 0.0 0.0 -0.3 -0.4 -0.1 -0.8 -0.4 0.1 -0.2 0.0 Morgan Stanley Emerging Markets 0.0 0.4 0.8-0.4-0.8-1.2 0.1 -0.1 0.3 -0.4 -0.4 0.0 -0.6 0.0 0.1 -0.2 0.1 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2014 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 43 Total Attribution 0.0 0.2 0.4 0.6 0.8 1.0 1.2-0.2-0.4-0.6-0.8-1.0-1.2 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash 0.0 0.0 -0.1 -0.1 0.0 -0.2 -0.6 0.6 -0.6 0.1 Performance Attribution Average Active Weight 0.0 4.0 8.0-4.0-8.0-12.0 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -2.7 1.6 1.3 1.3 1.9 3.5 2.2 -6.9 -4.3 1.9 Allocation (Total: -0.4) 0.0 0.3 0.6 0.9-0.3-0.6 -0.1 0.0 0.0 -0.1 0.0 -0.2 -0.2 0.3 -0.2 0.1 Stock (Total: -0.6) 0.0 0.3 0.6-0.3-0.6-0.9 0.1 0.0 -0.1 0.0 0.0 0.0 -0.4 0.2 -0.5 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index 1 Quarter Ending December 31, 2014 44 Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Bank of China Ltd 3.0 1.2 1.8 25.8 Taiwan Semiconductor Manufacturing 2.6 2.9 -0.3 13.0 Tencent Holdings LTD 2.6 2.0 0.6 -2.5 BRF - Brasil Foods S.A.2.4 0.4 2.0 0.7 Samsung Electronics Co Ltd 2.2 3.5 -1.4 9.6 Naspers Ltd 1.7 1.4 0.4 19.0 Fomento Economico Mex 1.7 0.5 1.3 -4.4 China Mobile Ltd 1.7 1.9 -0.2 1.0 China Construction Bank Corp 1.5 1.6 0.0 17.3 Cemex SAB de CV 1.4 0.3 1.1 -21.9 % of Portfolio 20.9 15.5 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)33,948 41,144 Median Mkt. Cap ($M)8,290 5,233 Price/Earnings ratio 13.7 11.8 Price/Book ratio 2.4 2.1 5 Yr. EPS Growth Rate (%)18.3 15.8 Current Yield (%)2.1 2.8 Debt to Equity 1.0 0.9 Number of Stocks 153 834 Beta (5 Years, Monthly)0.90 1.00 Consistency (5 Years, Monthly)50.00 1.00 Sharpe Ratio (5 Years, Monthly)0.19 0.18 Information Ratio (5 Years, Monthly)-0.02 - Up Market Capture (5 Years, Monthly)90.91 - Down Market Capture (5 Years, Monthly)89.91 - Sector Weights (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.4 0.4 8.0 3.8 16.5 6.9 2.9 31.7 6.0 9.7 11.8 0.0 3.5 7.5 7.4 18.0 6.7 2.2 29.3 8.1 8.2 9.2 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 16.5 27.2 40.1 16.2 0.0 14.1 23.5 40.6 19.5 2.4 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2014 45 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Australia 0.0 0.0 Hong Kong 3.2 6.7 Japan 0.3 0.0 New Zealand 0.0 0.0 Singapore 0.4 0.1 Pacific 3.9 6.8 Austria 2.1 0.0 Belgium 0.0 0.0 Finland 0.0 0.0 France 0.0 0.0 Germany 0.0 0.0 Ireland 0.0 0.0 Italy 0.0 0.0 Netherlands 0.4 0.0 Portugal 0.8 0.0 Spain 0.0 0.0 EMU 3.3 0.0 Denmark 0.0 0.0 Norway 0.0 0.0 Sweden 0.0 0.0 Switzerland 1.0 0.0 United Kingdom 0.8 0.0 Europe ex EMU 1.8 0.0 Canada 0.0 0.0 United States 1.6 0.1 Israel 0.0 0.0 Middle East 0.0 0.0 Developed Markets 10.7 6.9 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Brazil 7.5 8.9 Cayman Islands 0.0 0.0 Chile 0.5 1.4 Colombia 2.4 0.8 Mexico 6.6 4.9 Peru 1.3 0.3 Virgin Islands 0.0 0.0 EM Latin America 18.3 16.4 China 11.6 15.0 India 10.6 7.1 Indonesia 1.6 2.8 Korea 13.2 14.7 Malaysia 1.2 3.6 Philippines 4.1 1.3 Taiwan 9.4 12.6 Thailand 3.9 2.4 EM Asia 55.6 59.5 Czech Republic 1.0 0.2 Egypt 0.0 0.2 Greece 0.0 0.5 Hungary 0.0 0.2 Poland 2.4 1.6 Qatar 0.5 0.9 Russia 0.6 3.3 South Africa 5.7 7.9 Turkey 0.0 1.8 United Arab Emirates 0.0 0.6 EM Europe + Middle East + Africa 10.2 17.2 Emerging Markets 84.2 93.1 Frontier Markets 1.2 0.0 Cash 2.4 0.0 Other 1.6 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2014 46 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Income Research 0.8 3.3 3.3 2.7 4.0 4.9 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 4.5 2.8 3.7 Barclays Intermediate U.S. Government/Credit 0.9 3.1 3.1 2.0 3.5 4.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 4.1 1.6 3.0 Intermediate Duration Fixed Income Peer Group Median 0.8 3.4 3.4 2.8 4.3 4.6 -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5 2.6 Income Research Rank 44 55 55 56 63 20 61 41 28 49 24 29 9 14 1 19 2.8 3.2 3.6 4.0 4.4 4.8 Return (%)2.1 2.2 2.3 2.4 Risk (Standard Deviation %) Barclays Intermediate U.S. Government/Credit Income Research Income Research Barclays Intermediate U.S. Government/Credit 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Income Research 4.0 2.3 3.9 0.7 0.9 1.7 0.7 0.6 1.0 60.0 17y 11m Barclays Intermediate U.S. Government/Credit 3.5 2.4 3.4 0.0 1.0 1.5 0.0 N/A 1.0 0.0 17y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.4 -1.5 0.0 20.0 17y 11m Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2014 47 Credit Quality Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated65.3 6.1 14.7 13.9 0.0 0.0 0.0 0.0 50.1 9.6 18.2 21.4 0.0 0.0 0.0 0.7 Portfolio Characteristics Portfolio Benchmark Effective Duration 3.8 3.9 Avg. Maturity 4.5 4.2 Avg. Quality AA-AA+ Yield To Maturity (%)2.1 1.7 Sector Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.8 0.0 5.7 24.4 0.0 0.0 0.0 10.6 2.5 0.0 0.0 0.0 0.0 21.7 0.0 0.8 38.5 0.0 3.9 8.7 0.0 0.0 2.4 0.7 8.9 14.4 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 Yrs> 20 Yrs0.0 41.5 25.9 32.6 0.0 0.0 8.7 25.3 33.2 30.5 1.2 1.1 Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2014 48 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Penn Capital -1.8 0.2 0.2 6.4 7.6 N/A 5.9 13.3 4.2 15.0 37.5 -21.0 1.8 8.9 N/A N/A BofA Merrill Lynch US High Yield, Cash Pay Index -1.1 2.4 2.4 8.3 8.9 7.5 7.4 15.4 4.5 15.2 56.3 -26.2 2.2 11.6 2.8 10.8 High Yield Fixed Income Peer Group Median -0.9 2.4 2.4 8.1 8.6 7.1 7.4 15.3 4.0 14.7 47.3 -24.3 2.6 10.7 3.1 10.4 Penn Capital Rank 77 88 88 93 88 N/A 78 80 46 41 79 25 74 84 N/A N/A 4.0 6.0 8.0 10.0 12.0 Return (%)5.0 5.2 5.4 5.6 5.8 6.0 6.2 6.4 Risk (Standard Deviation %) BofA Merrill Lynch US High Yield, Cash Pay Index Penn Capital Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Penn Capital 7.6 5.4 7.5 -0.1 0.9 1.4 1.4 -0.9 2.5 35.0 9y 6m BofA Merrill Lynch US High Yield, Cash Pay Index 8.9 6.0 8.7 0.0 1.0 1.4 0.0 N/A 3.0 0.0 9y 6m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.0 -1.4 0.0 25.0 9y 6m Manager Evaluation Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index As of December 31, 2014 49 Credit Quality Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow BNot Rated0.0 0.0 0.0 0.0 47.2 39.5 13.4 0.00.0 0.0 0.0 0.7 32.8 63.2 0.0 3.3 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.6 4.5 Avg. Maturity 6.8 6.6 Avg. Quality B B Yield To Maturity (%)6.5 6.6 Sector Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 50.0 100.0 150.0 High YieldCashOther100.0 0.0 0.0 96.2 3.6 0.2 Maturity Distribution (%) Penn Capital BofA Merrill Lynch US High Yield, Cash Pay Index 0.0 50.0 100.0 150.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 10.1 22.3 61.0 4.3 2.33.6 2.6 17.4 73.2 0.9 2.4 Manager Evaluation Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index As of December 31, 2014 50 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Apr-2010 - Dec-2014) Historical Statistics (Apr-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Loomis Credit Asset Fund 0.4 4.3 4.3 7.6 N/A N/A 4.4 14.2 3.3 N/A N/A N/A N/A N/A N/A N/A 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 0.5 4.8 4.8 5.9 6.8 6.0 2.1 11.0 5.8 10.6 34.3 -15.9 3.6 6.8 3.0 6.7 Alternative Credit Focus Funds Peer Group Median -1.0 1.1 1.1 3.6 4.3 4.0 0.7 8.5 1.3 8.0 21.4 -12.7 4.6 5.1 1.4 6.1 Loomis Credit Asset Fund Rank 14 13 13 2 N/A N/A 15 6 22 N/A N/A N/A N/A N/A N/A N/A 5.6 6.4 7.2 8.0 8.8 Return (%)2.4 2.7 3.0 3.3 3.6 3.9 4.2 4.5 4.8 5.1 Risk (Standard Deviation %) 50% BC Credit / 25% S&P LSTA / 25% BY High Yield Loomis Credit Asset Fund Loomis Credit Asset Fund 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Loomis Credit Asset Fund 7.3 4.2 7.1 -0.5 1.2 1.7 1.8 0.5 1.7 63.2 4y 9m 50% BC Credit / 25% S&P LSTA / 25% BY High Yield 6.4 3.2 6.2 0.0 1.0 1.9 0.0 N/A 1.1 0.0 4y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.2 -1.9 0.0 15.8 4y 9m Manager Evaluation Loomis Credit Asset Fund vs. 50% BC Credit / 25% S&P LSTA / 25% BY High Yield As of December 31, 2014 51 Credit Quality Distribution (%) Loomis Credit Asset Fund 0.0 8.0 16.0 24.0 32.0 AAAAAABBBBBBBelow BNot Rated11.1 2.6 14.2 23.0 23.8 22.0 3.3 0.0 Portfolio Characteristics Portfolio Effective Duration 4.3 Avg. Maturity 9.8 Avg. Quality BBB- Yield To Maturity (%)4.6 Sector Distribution (%) Loomis Credit Asset Fund 0.0 15.0 30.0 45.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS2.3 0.0 0.0 21.5 22.8 4.1 4.1 0.0 0.0 0.0 10.8 30.7 3.7 Maturity Distribution (%) Loomis Credit Asset Fund 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs13.7 13.9 21.1 44.0 7.3 0.0 Manager Evaluation Loomis Credit Asset Fund As of December 31, 2014 52 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Brandywine Global Opportunistic Fixed Income 0.1 6.3 6.3 5.4 7.6 6.5 -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 8.4 -0.9 N/A Citigroup World Government Bond -1.5 -0.5 -0.5 -1.0 1.7 3.1 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 6.1 -6.9 10.3 Global Fixed Income Peer Group Median -1.2 1.4 1.4 2.6 3.8 4.1 -1.7 7.5 3.7 6.1 12.0 -2.1 7.7 5.7 0.7 9.5 Brandywine Global Opportunistic Fixed Income Rank 25 15 15 16 1 9 69 15 12 10 25 74 18 21 55 N/A -10.0 -5.0 0.0 5.0 10.0 15.0 Return (%)5.4 5.5 5.6 5.7 5.8 Risk (Standard Deviation %) Citigroup World Government Bond Brandywine Global Opportunistic Fixed Income Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Brandywine Global Opportunistic Fixed Income 7.6 5.7 7.4 6.1 0.9 1.3 3.3 1.7 1.8 80.0 10y Citigroup World Government Bond 1.7 5.5 1.7 0.0 1.0 0.3 0.0 N/A 2.9 0.0 10y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 5.5 -0.3 0.0 50.0 10y Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond As of December 31, 2014 53 Credit Quality Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated17.9 67.4 2.3 12.4 0.0 0.0 0.0 0.0 19.7 22.7 30.0 17.8 6.9 2.0 1.0 0.0 Portfolio Characteristics Portfolio Benchmark Effective Duration 5.5 7.4 Avg. Maturity 11.1 8.4 Avg. Quality A AA Yield To Maturity (%)3.4 1.1 Sector Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 25.0 50.0 75.0 100.0 TreasuriesTIPSAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS30.9 0.0 0.0 0.0 0.0 0.0 0.0 69.1 0.0 0.0 0.0 0.0 0.0 13.3 0.0 0.0 7.8 0.1 3.1 0.0 57.1 14.6 0.7 2.7 0.7 0.0 Maturity Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond 0.0 15.0 30.0 45.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 24.9 18.8 25.5 30.8 0.0 6.1 24.1 7.2 28.9 7.1 26.6 Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond As of December 31, 2014 54 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jul-2010 - Dec-2014) Historical Statistics (Jul-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Pictet Emerging Local Currency Debt Fund -5.4 -6.3 -6.3 -1.1 N/A N/A -10.3 15.3 -2.3 N/A N/A N/A N/A N/A N/A N/A JPM GBI-EM Global Diversified -5.7 -5.7 -5.7 0.1 2.6 6.7 -9.0 16.8 -1.8 15.7 22.0 -5.2 18.1 15.2 6.3 23.0 Emerging Markets LC Peer Group Median -6.0 -6.0 -6.0 -0.5 1.8 N/A -10.4 16.7 -3.3 14.3 24.1 N/A N/A N/A N/A N/A Pictet Emerging Local Currency Debt Fund Rank 32 59 59 67 N/A N/A 49 70 38 N/A N/A N/A N/A N/A N/A N/A -2.0 0.0 2.0 4.0 Return (%)9.2 9.4 9.6 9.8 10.0 10.2 10.4 10.6 10.8 11.0 Risk (Standard Deviation %) JPM GBI-EM Global Diversified Pictet Emerging Local Currency Debt Fund Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0 25 50 75 100Return Percentile Rank3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Pictet Emerging Local Currency Debt Fund 0.8 9.7 1.2 -1.3 0.9 0.1 1.0 -1.5 6.3 16.7 4y 6m JPM GBI-EM Global Diversified 2.2 10.4 2.6 0.0 1.0 0.3 0.0 N/A 6.5 0.0 4y 6m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.4 -0.3 0.0 50.0 4y 6m Manager Evaluation Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified As of December 31, 2014 55 Credit Quality Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow BNot Rated0.0 0.1 31.7 52.5 15.8 0.0 0.0 0.00.0 0.1 27.3 53.2 13.7 0.0 0.0 5.7 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.8 4.9 Avg. Maturity 7.6 7.2 Avg. Quality BBB BBB+ Yield To Maturity (%)6.5 6.4 Country/Region Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 15.0 30.0 45.0 AsiaEastern EuropeLatin AmericaAfricaOthers26.6 32.0 29.6 11.8 0.0 26.3 29.1 27.6 11.3 5.7 Sector Distribution (%) Pictet Emerging Local Currency Debt Fund JPM GBI-EM Global Diversified 0.0 50.0 100.0 150.0 -50.0 TreasuriesCreditCash100.0 0.0 0.0 94.3 -0.9 6.6 Manager Evaluation Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified As of December 31, 2014 56 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 GMO Asset Allocation Fund -1.2 1.3 1.3 8.0 6.6 6.1 12.5 10.4 1.7 7.4 22.4 -19.4 8.6 12.1 9.5 13.4 65% MSCI World (Net) / 35% BC Aggregate 1.3 5.4 5.4 11.0 8.4 5.9 15.9 11.9 -0.7 10.5 21.6 -26.9 8.4 14.4 7.1 11.1 4.0 6.0 8.0 10.0 12.0 Return (%)7.2 7.5 7.8 8.1 8.4 8.7 9.0 9.3 9.6 9.9 Risk (Standard Deviation %) 65% MSCI World (Net) / 35% BC Aggregate GMO Asset Allocation Fund Rolling 3 Years Active Return Quarterly Active Return 0.0 8.0 16.0 24.0 -8.0 -16.0Active Return (%)3/97 9/98 3/00 9/01 3/03 9/04 3/06 9/07 3/09 9/10 3/12 9/13 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date GMO Asset Allocation Fund 6.6 8.0 6.7 -0.6 0.8 0.8 2.3 -0.8 4.7 30.0 18y 2m 65% MSCI World (Net) / 35% BC Aggregate 8.4 9.2 8.5 0.0 1.0 0.9 0.0 N/A 5.6 0.0 18y 2m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 9.2 -0.9 0.0 25.0 18y 2m Manager Evaluation GMO Asset Allocation Fund vs. 65% MSCI World (Net) / 35% BC Aggregate As of December 31, 2014 57 Manager Evaluation GMO Asset Allocation Fund As of December 31, 2014 Fund Composition Asset Class Weights US Qu ality 14.5% US Opportunistic Va lue 2.4% As set Backed Securities 4.4% Em erging Country Debt 3.6% Al pha Only 6.9% Cas h and Cas h Equivalents 5.6% 16.9% 25.4% 30.2% 12.5%15.0% 20.0% 25.0% 30.0% 35.0% Europe Value 18.7% Other International Op portunisti c Value 1.5%Ja pan 5.2%Em erging Markets 9.4%Systematic Global Ma cro 3.0% Ris k Prem ium 2.5% Developed Rates 22.2% 9.4% 5.5% 12.5% 0.0% 5.0% 10.0% 15.0% 58 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 PIMCO All Asset Fund I -2.9 0.8 0.8 5.5 6.4 5.6 0.8 15.4 2.4 13.7 23.0 -15.5 8.7 5.3 6.5 11.8 Barclays U.S. Treasury Inflation Notes: 1-10 Year -1.0 0.9 0.9 0.0 2.8 3.8 -5.6 5.0 8.9 5.2 12.0 -2.4 11.4 1.6 1.9 7.1 -4.0 0.0 4.0 8.0 12.0 Return (%)1.6 2.4 3.2 4.0 4.8 5.6 6.4 7.2 8.0 8.8 Risk (Standard Deviation %) Barclays U.S. Treasury Inflation Notes: 1-10 Year PIMCO All Asset Fund I Rolling 3 Years Active Return Quarterly Active Return 0.0 8.0 16.0 24.0 -8.0 -16.0Active Return (%)12/02 3/04 6/05 9/06 12/07 3/09 6/10 9/11 12/12 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date PIMCO All Asset Fund I 6.4 6.9 6.4 3.7 1.0 0.9 5.7 0.6 3.9 75.0 12y 5m Barclays U.S. Treasury Inflation Notes: 1-10 Year 2.8 3.9 2.8 0.0 1.0 0.7 0.0 N/A 2.7 0.0 12y 5m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.9 -0.7 0.0 20.0 12y 5m Manager Evaluation PIMCO All Asset Fund I vs. Barclays U.S. Treasury Inflation Notes: 1-10 Year As of December 31, 2014 59 Manager Evaluation PIMCO All Asset Fund I Sector Allocations As of December 31, 2014 U.S. Equity Strat egies 4.0% Global Equity Strat egies 19.8% Infl at ion Relat ed Strat egies 12.6% Alternat ive Strat egies 16.3% U.S. Core &Long Maturi ty Bond Strat egies 12.3% Credi t Strat egies 14.1% EM & Global Bond Strat egies 19.3% Short -Te rm Strat egies 1.5% 12.6% 60 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2010 - Dec-2014) Historical Statistics (Jan-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 UBS Trumbull Property Fund 2.7 10.4 10.4 9.6 11.3 6.6 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 15.6 20.1 13.5 NCREIF Fund Index-Open End Diversified Core Equity 0.0 9.0 9.0 11.1 13.1 6.4 13.3 11.0 16.0 16.1 -30.7 -10.4 16.1 16.1 20.2 12.6 8.0 10.0 12.0 14.0 16.0 Return (%)1.6 1.8 2.0 2.2 2.4 2.6 2.8 Risk (Standard Deviation %) NCREIF Fund Index-Open End Diversified Core Equity UBS Trumbull Property Fund Rolling 3 Years Active Return Quarterly Active Return 0.0 4.0 8.0 -4.0 -8.0 -12.0Active Return (%)3/78 6/81 9/84 12/87 3/91 6/94 9/97 12/00 3/04 6/07 9/10 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date UBS Trumbull Property Fund 11.3 1.9 10.8 4.5 0.5 5.7 1.9 -0.9 0.0 15.0 37y NCREIF Fund Index-Open End Diversified Core Equity 13.1 2.5 12.4 0.0 1.0 5.0 0.0 N/A 0.0 0.0 37y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.0 0.0 N/A 2.5 -5.0 0.0 5.0 37y Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Fund Index-Open End Diversified Core Equity As of December 31, 2014 61 Property Type UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 OfficeApartmentRetailIndustrialOtherHotel36.6 24.7 23.3 13.7 0.0 1.7 31.0 33.0 22.0 9.0 0.0 5.0 Portfolio Characteristics Portfolio Benchmark # Properties 198 7,170 # Investors 411 N/A Total Fund Assets 15,400 395,434 Property Location UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 EastWestSouthMidwest34.3 35.4 20.8 9.5 40.4 23.0 14.3 22.3 Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of December 31, 2014 *Portfolio information is represented as of 9/30/2014. Data as of 12/31/2014 was not yet available at the time of report production. 62 Type City Ac quis ition Da te % Occupa nc y Cos t ($000) Fa ir Market Value ($000) Office Ne w York Ju n-06 100%664,900$ 664,900$ Office Bo ston Dec-11 89%657,691$ 657,691$ Re tail Ca mb rid ge May-89 96%559,300$ 561,377$ Re tail Da lla s Dec-02 90%505,000$ 505,000$ Apart me nts Ne w York Ju l-11 95%463,000$ 463,000$ Office Ne w York Ju l-11 97%275,213$ 457,308$ Re tail Ch ic ag o No v-13 95%249,108$ 444,227$ Office Ne w York Se p-14 92%273,599$ 443,349$ Office Ch ic ag o Dec-11 100%435,000$ 435,768$ As of De ce mber 31,2014 20 La rge st Inve st me nts Manager Evaluation UBS Trumbull Property Fund As of December 31, 2014 Office Ch ic ag o Dec-11 100%435,000$ 435,768$ Re tail Eme ry ville Aug-14 99%305,442$ 305,442$ Re tail Montebello Dec-88 97%281,000$ 281,000$ Office Washin gton May-06 80%262,000$ 262,000$ Office De nver Ju n-06 94%250,000$ 250,000$ Office Se attle Oc t-84 80%250,000$ 250,000$ Apart me nts Br ookly n Dec-07 95%240,000$ 240,000$ Office Sa n Fra ncis co Dec-85 89%214,000$ 216,504$ Office De nver Apr-82 91%213,000$ 213,000$ Office Pa sadena May-84 97%209,000$ 209,000$ Re tail Millb ury Se p-04 97%190,800$ 190,800$ Apart me nts Arlin gton Mar-13 94%66,628$ 188,953$ All o ther in vestme nts ----10,688,765$ 10,692,363$ Total Properties 17,253,446$ 17,931,682$ *Portfolio information is represented as of 9/30/2014.Data as of 12/31/2014 was not yet available at the time of report production. 63 Historical Performance Comparative Performance and Rolling Return Risk and Return (Apr-2010 - Dec-2014) Historical Statistics (Apr-2010 - Dec-2014) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Wellington Diversified Inflation Hedges -12.5 -12.8 -12.8 -4.1 N/A N/A -3.9 5.2 -8.6 N/A N/A N/A N/A N/A N/A N/A Wellington DIH Multi-Asset Inflation Index -10.4 -11.4 -11.4 -3.9 -1.4 3.4 -2.1 2.3 -7.0 12.7 30.0 -32.7 25.8 14.1 19.7 16.0 -1.8 -1.6 -1.4 -1.2 -1.0 -0.8 Return (%)13.2 13.8 14.4 15.0 15.6 16.2 16.8 17.4 18.0 Risk (Standard Deviation %) Wellington DIH Multi-Asset Inflation Index Wellington Diversified Inflation Hedges Rolling 3 Years Active Return Quarterly Active Return 0.0 2.0 4.0 -2.0 -4.0Active Return (%)6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14 12/14 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Wellington Diversified Inflation Hedges -1.1 16.5 0.2 0.5 1.1 0.0 2.5 0.2 12.0 57.9 4y 9m Wellington DIH Multi-Asset Inflation Index -1.3 14.6 -0.3 0.0 1.0 0.0 0.0 N/A 10.8 0.0 4y 9m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.6 0.0 0.0 47.4 4y 9m Manager Evaluation Wellington Diversified Inflation Hedges vs. Wellington DIH Multi-Asset Inflation Index As of December 31, 2014 64 Manager Evaluation We llington Diversified Inflation Hedges Sector Allocation As of December 31, 2014 Fund Composition Fund Weights Relative to Benchmark Energy 29.0%TIPS 5.5% Emerging Markets Inflati on-Link ed Bonds 5.4% Cash 0.5% 8.3% 5.4% 0.5% 0.0% 5.0% 10.0% 15.0% 20.0% Global Inflation-Sensitive Equities Commodities Fixed Income & Cash Meta ls & Mini ng 8.1% Agriculture 4.4%Enduri ng Assets 7.5% Precious Meta ls 2.1% Inflati on Opportuni ti es 7.1% Commoditi es 30.4% -14.1% -20.0% -15.0% -10.0% -5.0% Equities Fixed Income Commodities Cash 65 Calendar Year Performance 66 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Total Composite 2.9 10.9 12.1 1.2 11.2 20.2 -20.2 10.7 11.8 5.6 Policy Benchmark 3.3 12.5 11.6 1.1 11.5 19.5 -20.6 8.3 13.0 5.7 Total Equity Composite 4.7 N/A N/A N/A N/A N/A N/A N/A N/A N/A MSCI AC World Index 4.2 22.8 16.1 -7.3 12.7 34.6 -42.2 11.7 21.0 10.8 Domestic Equity Composite 10.1 (23)N/A N/A N/A N/A N/A N/A N/A N/A N/A Russell 3000 Index 12.6 (8)33.6 (40)16.4 (26)1.0 (16)16.9 (39)28.3 (59)-37.3 (38)5.1 (62)15.7 (31)6.1 (63) Broad Equity Peer Group Median 8.2 32.5 14.6 -2.1 16.2 29.6 -38.4 6.5 13.6 7.0 International Equity Composite -5.5 (65)N/A N/A N/A N/A N/A N/A N/A N/A N/A MSCI AC World ex USA Index -3.9 (37)15.3 (54)16.8 (72)-13.7 (32)11.2 (74)41.4 (64)-45.5 (36)16.7 (66)26.7 (55)16.6 (86) International Equity Peer Group Median -4.7 15.6 18.5 -15.2 13.6 44.1 -47.0 18.3 27.0 19.7 Fixed Income Composite 2.4 (83)-1.7 (82)10.9 (1)3.8 (72)8.7 (10)18.9 (8)-3.4 (70)6.4 (26)5.6 (8)2.8 (1) Barclays Intermediate U.S. Government/Credit 3.1 (61)-0.9 (55)3.9 (70)5.8 (22)5.9 (54)5.2 (100)5.1 (13)7.4 (9)4.1 (42)1.6 (46) Intermediate Duration Fixed Income Peer Group Median 3.4 -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5 Tactical Asset Allocation Composite 1.3 12.5 10.4 1.7 7.4 22.4 -19.4 8.6 12.3 5.0 60% World / 40% Agg 5.4 14.5 11.3 0.0 10.2 20.4 -24.7 8.3 13.6 6.7 Alternatives Composite 1.5 N/A N/A N/A N/A N/A N/A N/A N/A N/A 3 Month T-Bills + 3%3.0 3.1 3.1 3.1 3.1 3.2 5.1 8.2 8.0 6.2 Calendar Year Performance Composite Performance As of December 31, 2014 _________________________ See appendix for a description of the benchmarks and universe. Performance is reported net of fees. 67 Capital Markets Review 68 Capital Markets Rev iew Economy -3 -2 -1 0 1 2 3 4 5 Mar-2007Sep-2007Mar-2008Sep-2008Mar-2009Sep-2009Mar-2010Sep-2010Mar-2011Sep-2011Mar-2012Sep-2012Mar-2013Sep-2013Mar-2014Sep-2014Percent-3 -2 -1 0 1 2 3 4 5 6 7 1990199219941996199820002002200420062008201020122014PercentCPICore CPI Real Wage Growth Relatively Flat Consumer Price Index Falls Sources: Bureau of Labor Statistics; Federal Reserve Sources: Federal Reserve Crude Oil’s Fall Continues to Shift Economic Policies •U.S.inflation fell for a second consecutive quarter,leaving full-year 2014 inflation at 0.7%.The fall in oil prices,combined with weakening foreign currencies,led to the low reading.Wages fell in December,inflation contracted further and consumers’purchasing power growth remained anemic.The rapid fall in energy prices contributed to a short-term fall in overall prices,and likely will keep real wage growth below 1%.The Federal Reserve prefers that real wages grow more significantly before it considers raising interest rates. •China’s economy expanded at a 7.3%rate during the quarter,and 7.4%for 2014. While slower than its long-term average,the Chinese government expressed the need for rapid growth to continue the country’s transformation from an agricultural to an industrial nation.Russia’s central bank raised its key interest rate from 10.5%to 17%,as it looked to stem capital outflows from the country amidst international opposition to the Ukraine invasion.Ongoing Saudi Arabian support for lower crude oil prices added uncertainty to the economic outlook for many economies. •The U.S.economy was aided by lower oil imports,though weaker foreign economies began to take a toll on exports.As one of the stronger world economies,the U.S.remained a safe-haven for investors as money flowed out of Europe and Asia and into U.S.securities.Lower mortgage rates led to a surge in mortgage activity,while homebuilders saw a small uptick in demand. -8 -7 -6 -5 -4 -3 -2 -1 0 1 Oct-2014Nov-2014Nov-2014Nov-2014Nov-2014Dec-2014Dec-2014Dec-2014Dec-2014PercentEuro Yen Franc Pound CA D *Relat iv e t o the U.S. d ollar World Currencies Weaken Source: Bloomberg 69 -35.0 -30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 -3.9 13.7 1.5 -2.7 -4.9 -6.2 -8.4 4.9 -2.2 -15.2 -12.3 -30.0 4th Quarter and YTD 2014 Sector Returns Capital Markets Rev iew Equities 2014 World Equity Returns (USD) Developed Markets Emerging Markets -10.0% 2.5% 5.7% 12.6% 17.8% 8.0% 14.4% 15.9% 25.1% 9.2% 26.9% -13.1% -3.9% -0.8% 5.2% 5.4% 7.0% 7.8% 8.4% 8.6% 8.9% 13.0% -20.0%-10.0%0.0%10.0%20.0%30.0% Energy Telecom Materials Russell 30 00 Info Tech Indust rials Fi nancials Cons.Stapl es Health Care Cons. Di sc. Utilities 4Q 14 YTD Historic Volatility Levels U.S.Equity a Cut Above;Ap preciating USD Impact Felt Globally •The Russell 3000 Index experienced strong gains during the fourth quarter, driven by improved economic data and the Fed’s declaration that it would remain “patient”before increasing short-term interest rates,given current low inflation expectations.During the quarter,small-cap stocks outperformed their large-cap counterparts,however,large-caps advanced more throughout the year.The utility and consumer sectors were standout performers during the quarter,while energy companies declined in value due to falling oil prices. •Non-U.S.equities struggled as both developed and emerging markets declined in USD terms during the quarter.Disappointing economic data abroad hurt returns,however,significant depreciation of most non-U.S.currencies versus the USD was the main driver of negative performance.Emerging markets were negatively impacted most by depreciating currencies and also were hurt by falling oil and commodity prices. •Equity market volatility,as measured by the VIX Index,started to tick higher in the fourth quarter after a period of historically low levels.The first signs of heightened volatility occurred in October as the Fed completed its quantitative easing program.Plunging oil prices and uncertain global economic prospects further increased volatility throughout the quarter. 0 5 10 15 20 25 30 35 40 VIX Volatility Ind ex 10 Y ear Averag e Source: CBOE 70 0 250 500 750 1000 1250 1500 1750 2000 Option-Adjusted Spread (OAS)Date Barclays U.S. Credit U.S. Credit 10-Year Average Barclays U.S. HY HY 10-Year Average Source: Barclays Source: Barclays Duration-adjusted Excess Returns to Treasuries (bps) Trailing Ten-Year Credit Spreads Capital Markets Rev iew Fixed Income Best Period Second Best Period Wors t Period Second W orst Period 2008 2009 2010 2011 2012 2013 2014 4Q14 Aggre ga te -710 746 171 -114 226 93 10 -30 Agency -110 288 77 -25 166 1 10 -59 MBS -232 495 225 -106 91 98 40 -1 ABS -2223 2496 169 52 246 24 53 8 CMBS -3274 2960 1501 47 841 97 108 23 Cre dit -1786 1990 192 -322 693 226 -18 -105 Hi gh Yie ld -3832 5955 974 -240 1394 923 -112 -232 Em erging -2842 3797 508 -537 1503 -32 -120 -401 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 0 5 10 15 20 25 30Yield to MaturityMaturity (Years) 12/31/2013 9/30/2014 12/31/2014 US Treasury Yield Curve Source: U.S. Dept of The Treasury Rates Defy Experts in 2014 •Despite Wall Street forecasts calling for higher interest rates in 2014,the 10- year U.S.Treasury yield fell from 3.04%to 2.17%during the year.The yield curve continued to flatten during the fourth quarter,driven by weak global growth,safe-haven demand and low domestic inflation expectations.Short- term rates rose slightly as investors prepared for a Fed Funds rate hike in 2015.While long rates rallied,U.S.yields remained attractive to investors given the significant yield advantage versus other major developed markets such as Germany,Spain,Japan,and the United Kingdom. •Corporate credit spreads widened during the quarter.Record new issuance, coupled with shrinking dealer balance sheets and reduced trading in the secondary markets,contributed to increased volatility.Higher quality and longer duration credits performed best,while the high yield segment suffered due to a large proportion of energy-related companies. •CMBS and ABS generated positive duration-adjusted excess returns to Treasuries during the quarter.Commercial property prices generally improved, resulting in strong collateral performance,while ABS benefitted from supportive consumer credit quality.Despite the end of the Fed’s QE MBS purchases,a significant issuance slowdown buoyed Agency MBS prices. 71 Capital Markets Review Hedge Funds HFRI Index Performance –Fourth Quarter and 2014 Calendar Year Performance by Hedge Fund Strategy Source: HFR 6.0% 4.2% 3.4% 3.3% 1.7% 6.2% 1.4% 3.5% 2.1% -1.0% 2.0% 1.8% 0.4% 0.9% 0.5% 0.0% 2.9% -1.1% 1.6% 0.2% -3.5% -0.2% -6%-4%-2%0%2%4%6%8% BC Aggr egate Bond Index MSCI All-Country World Index Fund of Funds Hedge Fu nd Compo si te Merger Arbitrage Gl obal Macro Event Driven Equi ty Market Neutral Equi ty He dge Dist ressed Securities Convertibl e Arbitrag e Q4 2014 2008 2009 2010 2011 2012 2013 2014 Mac ro Di stres sed Dis tres sed Multi-Strategy Relative Value Long/Short Macro 4.8%28.1%12.1%4.2%10.0%14.6%6.2% Relative Value Relative Value Event Drive n Relat ive Value Distressed Distres sed Relative Value -18.0%25.8%11.9%0.1%10.3%13.6%4.2% Fund of Funds Event Driven Relative Value Dis tressed Multi-Strategy Event Driven Multi-Strat egy -21.4%25.0%11.4%-1.8%9.2%12.5%3.8% Event Driven Long/Short Long/Short Event Driven Event Driven Multi-Strat egy Fund of Funds -21.8%24.6%10.5%-3.3%8.5%11.2%3.4% Multi-Strat egy Multi-Strat egy Multi-Strategy Macro Long/Short Fund of Funds Long/Short -23.6%24.6%9.3%-4.2%7.4%9.0%2.1% Distres sed Fund of Funds Macro Fund of Funds Fund of Funds Relative Value Event Driven -25.2%11.5%8.1%-5.7%5.3%7.2%1.4% Long/Short Macro Fund of Funds Long/Short Macro Mac ro Di stres sed -26.7%4.3%5.7%-8.4%-0.2%-0.3%-1.0% Source: HFR Inc. Global Macro Shines in Fourth Quarter •Overall hedge fund performance was muted during the fourth quarter,with the HFRI Hedge Fund Composite Index returning 0.5%.For the year,the Index returned 3.3%,underperforming global equities and fixed income. •After three years of underperformance,global macro advanced 2.9%for the quarter and 6.2%for the year,making it the top-performing hedge fund strategy for the year.In November,Commodity Trading Advisors (CTA)experienced their best monthly return since 2002,fueled by strong trending behavior in oil and energy commodities.Additionally,managers with long U.S.dollar exposure benefited from the dollar’s continued appreciation relative to other major currencies.Global macro managers in aggregate outpaced both global equities and fixed income in 2014.In contrast,distressed (-3.5%)and event driven (-1.1%)strategies declined during the quarter.Distressed managers were negatively impacted by underperformance of lower quality bonds,long energy positions amid falling oil prices.Event driven managers,which place directional and arbitrage trades on mergers,acquisitions and other corporate shake-ups,were hurt by the unraveling of a number of large deals. •The hedge-fund industry saw inflows of $3.6 billion during the fourth quarter according to Hedge Fund Research.According to eVestment’s 2015 Hedge Fund Outlook Report,the hedge fund industry is positioned for estimated growth of $90 to $110 billion,with distressed managers likely to see the most asset growth. Hedge Fund Assets and Flows -$500,000 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 Assets ($MM)Net Asset Flow Estimated Assets 72 -12.1% -17.0% -9.4% -5.5% -1.9% -2 0% -1 8% -1 6% -1 4% -1 2% -1 0% -8 % -6 % -4 % -2 % 0% 4Q 14 1 Yea r 3 Y ea rs 5 Y ea rs 10 Ye ar s Capital Markets Review Real Assets Real Estate Returns as of September 30, 2014 Source: Bloomberg Commodity Index Returns for Periods Ended December 31, 2014 Source: NCREIF NCREIF 3 M on.YT D 1 Yr.3 Yrs.5 Yrs.10 Yrs. NCREIF 2.6%8.5%11.3%11.1%11.0%8.5% Ap artm ents 2.5%7.3%10.0%10.9%12.1%8.3% In dus trials 2.9%9.2%12.4%11.7%10.6%8.3% Offic e 2.8%8.2%10.7%10.1%10.0%8.2% Retail 2.3%10.2%13.1%12.8%12.0%9.7% Ho tel 2.9%6.5%8.9%8.2%7.8%6.9% Eas t 2.2%6.7%9.2%9.4%10.3%8.3% Mi dw es t 2.6%8.2%10.4%10.6%9.8%7.2% South 2.8%9.7%12.8%12.2%11.3%8.7% West 3.0%9.7%12.7%12.2%11.8%9.2% No Stopping the Decline in Cap Rates REITs Dominate, Commodities Hit the Skids •The global search for yield continued to provide a tailwind for publicly traded real estate during the fourth quarter as U.S.and global REITs advanced 12.4%and 6.9%, respectively.U.S.REITs experienced a stellar year with an annual return of 27.2%, which was well ahead of all other broad market asset classes.In general,low levels of new supply,strengthening tenant demand,and an earnings season that handily exceeded expectations contributed to REITs’strong performance during the quarter. •Private real estate returned 2.6%during the third quarter,slightly down from the second quarter.Through the first three quarters of the year,the Index produced an 8.5%return driven by capitalization rate compression in conjunction with net operating income growth.The South and West regions experienced higher than average returns as these areas benefited from the energy and technology markets. Given the collapse of oil prices,growth rates could start to decline for these markets. •Heavy exposure (23%)to the energy sector led the Bloomberg Commodity Index to post abysmal fourth quarter and full year returns.The energy sector lost 36.6%and 39.3%for the quarter and year,respectively,due to an accommodative production stance from the Middle East.Metals also witnessed an upswing in volatility.Both the industrial (-6.2%)and precious metals (-3.9%)sectors lost ground due to the persistence of a strong U.S.dollar and slower demand.Agriculture and grains were the only sectors to experience positive performance during the quarter supported by cuts to corn production and yield estimates.Source: CBRE Global Investors, Real Capital Analytics 73 0 50 100 150 200 250 300 350 400 450 0 200 400 600 800 1000 1200 1400 1600 1800 Agg. Exit Value ($,Billions)# of Exits# o f Ex its Ag gregate Ex it Val ue Global Buyout-Backed Exit ActivityInvestment Horizon Pooled IRR as of 06/30/14 Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years Early Stage VC 3.3%31.6%14.3%15.4%9.5%48.1% Late/Expansion Stage VC -1.3%24.7%12.0%17.7%12.1%11.0% Multi-Stage VC 4.2%28.0%13.0%13.2%10.5%12.6% All Venture Capital 3.2%29.7%13.6%14.8%10.1%27.6% Small Buyouts 3.2%17.5%10.6%16.5%19.8%14.7% Medium Buyouts 3.8%16.6%10.1%13.9%17.2%15.9% Large Buyouts 5.1%22.5%11.8%16.9%15.4%16.2% Mega Buyouts 5.4%24.8%13.8%18.5%12.7%N/A All Buyouts 5.0%22.7%12.6%17.3%14.4%13.6% Mezzanine/Sub Debt 2.7%12.3%11.8%11.7%10.7%10.1% Distressed 3.3%16.8%11.9%16.9%11.7%11.9% All Private Equity 4.8%22.7%12.4%16.4%13.4%14.9% S&P 500 5.2%24.8%16.3%18.6%8.9%9.0% Capital Markets Rev iew Pr ivate Equity # o f Ex its Ag gregate Ex it Val ue $0 $100 $200 $300 $400 $500 $600 $,BillionsVC Buy out Real As sets Sec ondary Funds Di stressed/SS 2014 Sees Another Record High for Private Equity Exit Activity •Private equity market performance data through September 30,2014 was not yet available at the time of report production.During 2Q14,venture capital and small-and mid-cap buyouts lagged the S&P 500.However,large-and mega- cap buyout funds performed in line with their public equity market counterparts, which is not surprising given that valuations for larger buyout funds are more closely linked to public market comparables. •After a big uptick in 2013,the positive momentum for private equity fundraising continued in 2014 amid robust private equity distribution activity and favorable public equity market returns.In total,private equity funds raised just over $400 billion in 2014,a 7%increase from the prior year and the highest total on record outside the peak buyout boom years of 2007-2008. •During 2014,private equity funds continued to exit investments at a record pace,taking advantage of the favorable public market environment to unload investments made during the buyout boom.Buyout-backed exit activity reached record levels for a second straight year.According to Preqin,buyout funds completed 1,604 exits with an aggregate exit value of $428 billion globally in 2014,an increase of nearly 30%in aggregate exit value from the prior year. Source: ThomsonOne/Cambridge Associates database, January 2015. Note: Data is continuously updated and is therefore subject to change. S&P 500 5.2%24.8%16.3%18.6%8.9%9.0% Source: Thomson Reuters, ThomsonOne database, January 2015. Source: Preqin, January 2015. Global Fundraising 74 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 5.3 12.7 12.7 22.5 20.3 15.5 7.5 8.0 S&P 500 4.9 13.7 13.7 22.7 20.4 15.5 7.3 7.7 Russell 1000 Index 4.9 13.2 13.2 22.8 20.6 15.6 7.5 8.0 Russell 1000 Growth Index 4.8 13.1 13.1 22.8 20.3 15.8 8.4 8.5 Russell 1000 Value Index 5.0 13.5 13.5 22.6 20.9 15.4 6.4 7.3 Russell Midcap Index 5.9 13.2 13.2 23.5 21.4 17.2 8.9 9.6 Russell Midcap Growth Index 5.8 11.9 11.9 23.2 20.7 16.9 8.6 9.4 Russell Midcap Value Index 6.1 14.7 14.7 23.8 22.0 17.4 9.1 9.4 Russell 2000 Index 9.7 4.9 4.9 20.7 19.2 15.5 8.2 7.8 Russell 2000 Growth Index 10.1 5.6 5.6 23.0 20.1 16.8 8.7 8.5 Russell 2000 Value Index 9.4 4.2 4.2 18.4 18.3 14.3 7.6 6.9 International Equity Indices MSCI EAFE -3.6 -4.9 -4.9 8.1 11.1 5.3 -0.5 4.4 MSCI EAFE Growth Index -2.3 -4.4 -4.4 8.2 11.0 6.2 0.0 4.9 MSCI EAFE Value Index -4.9 -5.4 -5.4 7.9 11.0 4.4 -1.0 3.9 MSCI EAFE Small Cap -2.3 -4.9 -4.9 10.9 13.8 8.6 2.4 6.0 MSCI AC World Index 0.4 4.2 4.2 13.1 14.1 9.2 2.7 6.1 MSCI AC World ex US -3.9 -3.9 -3.9 5.3 9.0 4.4 -0.6 5.1 MSCI Emerging Markets Index -4.5 -2.2 -2.2 -2.4 4.0 1.8 -1.3 8.4 Fixed Income Indices Barclays U.S. Aggregate 1.8 6.0 6.0 1.9 2.7 4.4 4.8 4.7 Barcap Intermediate U.S. Government/Credit 0.9 3.1 3.1 1.1 2.0 3.5 4.0 4.1 Barclays U.S. Long Government/Credit 5.6 19.3 19.3 4.3 5.8 9.8 8.5 7.4 Barclays US Corp: High Yield -1.0 2.5 2.5 4.9 8.4 9.0 8.8 7.7 BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.0 0.1 0.1 0.1 0.4 1.5 Barclays U.S. Treasury: U.S. TIPS 0.0 3.6 3.6 -2.7 0.4 4.1 4.2 4.4 Citigroup Non-U.S. World Government Bond -2.9 -2.7 -2.7 -3.6 -1.9 0.8 2.6 2.6 JPM EMBI Global Diversified (external currency)-0.6 7.4 7.4 0.9 6.1 7.6 7.4 7.8 JPM GBI-EM Global Diversified (local currency)-5.7 -5.7 -5.7 -7.4 0.1 2.6 4.0 6.7 Real Asset Indices Dow Jones - UBS Commodity -12.1 -17.0 -17.0 -13.3 -9.4 -5.5 -7.6 -1.9 Dow Jones Wilshire REIT 15.1 31.8 31.8 15.9 16.4 17.3 8.2 8.3 Capital Markets Review Index Returns As of December 31, 2014 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 75 Appendix 76 2013 Acti on Sep tember •The M et rop olit an St . Louis Sewer District hired Pavilion Advisory Group as their investment consultant . 2014 Acti on February •Pavilion p resent ed an asset allocat ion and investment and manager structure 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 t o high y ield and non- US debt in the fixed income p ortfolio. T he following as set 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 reco mmended t he manager be t erminat ed immediat ely . T he Commit tee ap proved t hese r ecommendations. Sep tember •Pavilion downgraded PIM CO’s manager rating stat us from “negat ive wat ch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat ive wat ch” in January following the dep ar ture of co-CIO M ohamed El-Er ian, and noted we would closely monitor t he firm for organiz at io nal s tabilit y,as set flow s,and p erformance. November & 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/Sh ort Fund which was support ed by Metrop olit an St Louis Sew er St aff. T he F und will rep lace P IM CO All A sset Fund which was recommended for t erminat io n. PIM CO All A sset Fund managed ap proximat ely $9.8 million at December 31, 2014. Light house d ocument at io n and p lan document at ion are current ly under review. 77 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 April 1, 2014, 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. 78