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