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HomeMy Public PortalAbout2016 4th Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Pension Plan 4th Quarter 2016 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL 60606 Phone: 312-798-3200 Fax: 312-902-1984 www.pavilioncorp.com 1 Capital Markets Review 1 2 Performance Summary 10 3 Asset Class Diversification 34 4 Manager Evaluation 40 5 Calendar Year Performance 74 6 Appendix 76 Table of Contents Capital Markets Review 1 Capital Markets Review Summary 1.3 3.8 8.8 -0.7 -3.2 -4.2 1.3 -7.1 8.4 12.0 21.3 1.0 3.4 11.2 5.5 MSCI Global ACWI IMI S&P 500 Russell 2000 MSCI EAFE S&P Dev ex U.S. SC MSCI EMF HFRI Equity Hedged* BBG Barclays Global Agg. Performance: Past Quarter and Year (%) Past Quarter Past 12 Months Equities (Stocks)Global Growth Picks Up Steam §The positive economic momentum of the third quarter carried into the fourth. Improving expectations were supported by resolution of several uncertainties including the U.S.election,OPEC’s oil production,and Italy’s referendum. Shifting global fiscal policies reducing austerity drags or adding stimulus,as emphasized by the incoming U.S.administration added to investor optimism. §With the stabilization of commodity prices and the slowing of U.S.dollar appreciation,inflation has trended back toward more “normal”ranges.Advanced economies are beginning to reinflate while heightened inflation dissipates in emerging markets.Normalizing inflation coupled with accelerating global growth has provided reinforcement for rising interest rates. §Global monetary policy remained accommodative,providing few surprises as the-7.1 -3.0 -2.2 1.9 0.1 -3.3 2.7 2.0 2.0 0.0 2.1 2.6 5.1 17.5 0.3 8.6 11.8 18.3 2.3 2.1 -10 -5 0 5 10 15 20 25 BBG Barclays Global Agg. BBG Barclays Agg. WGBI ex-U.S. Hedged BofAML High Yield Cons. 91-Day T-Bills NAREIT Bloomberg Commodity Alerian MLP HFRI FoF:Cons.* CPI * HFRI data are subject to revision. Source: FactSet & BloombergFixed Income (Bonds)Alternatives§Global monetary policy remained accommodative,providing few surprises as the U.S.Federal Open Market Committee (“FOMC”)raised rates 25 basis points and the European Central Bank (“ECB”)extended its purchase program.Less anticipated,however,were changes to the FOMC’s projections indicating three rate increases in 2017,and the ECB’s reduction of purchases while expanding eligible securities for purchase. §While economic growth is picking up globally,the recent spike in the U.S.dollar eroded much of the performance from international investments for U.S.dollar denominated investors,and somewhat curtailed emerging market optimism. §Domestic equities outpaced international equities during the quarter.Value stocks performed best globally,aided by overweights in financials deemed to benefit from the rising yield curve. §The global increase in interest rates held back fixed income performance with most spread sectors outpacing duration adjusted Treasury equivalents. §Oil prices were buoyed by OPEC’s commitment to cut production and improving global growth.For the year,commodity price performance was strong (+11.8%), as many of 2015’s headwinds disappeared throughout the year. 2 Capital Markets Review Asset Class Outlook 4.0 U.S. Treasury Yields and Forward Expectations 40 60 80 100 120 140 160 180 200 Returning Earnings Growth U.S.EAFE Emerging Markets Source: FactSet NTM EPS Expectations (Jan. 2009 = 100), S&P 500, MSCI EAFE, & MSCI EM Equities §Despite strong fourth quarter performance,equity markets still appear to have room to run.Fundamentals have improved in almost every market,allowing earnings growth to turn positive,which is a reversal of almost five quarters of negative to flat earnings growth.The improvement in earnings combined with the anticipated business friendly policies of the new Trump administration likely will lend further support to U.S. equities,particularly those with more concentrated domestic exposure most likely to benefit from policy changes.Improving growth is not uniform across geographies.The U.S.and emerging markets are showing the strongest improvements.Equities with greater exposure to more rapidly growing geographies should outperform. Fixed Income §The fourth quarter saw a fairly tumultuous rise in yields.The 10-year Treasury rate rose more than 80 basis points,bringing up yields across developed sovereign markets.The rate increases reflected the Federal Reserve’s return to normalizing monetary policy, Source: Bloomberg,Sovereign Inflation Swaps 0.0 1.0 2.0 3.0 1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30YYield (%)Tenor 12/30/2016 5-Year Forwards Source: Bloomberg as of 12/30/16 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 Annual PercentGlobal Inflation Expectations U.S.U.K.E.U.Japan rate increases reflected the Federal Reserve’s return to normalizing monetary policy, with December rate hike of 25 basis points.While yields in some credit sectors rose as well,spread tightening,likely reflecting improving economic fundamentals, significantly dampened the move.A positive result of the move higher in yields is the fact that duration positions now offer more protection in the event of an economic downturn or flight to quality.Since a significant component of the diversification benefit is derived from income,portfolio diversification benefits appear to be particularly pronounced in high quality investment-grade credits including Agency and Non-Agency MBS as well as CMBS.For long-term investors with an ability to sacrifice liquidity for yield pick-up,private credit remains an attractive opportunity.ABS also remains an attractive cash surrogate. Real Assets (Inflation Protection Assets) §Fears of deflation appear to have abated as inflation expectations increased across developed markets,reverting to levels closer to long-term averages.While inflation expectations have risen,we do not anticipate actual levels rising much above the Federal Reserves 2%target near term.As a result,equity positions should provide some protection against near term inflation.In the current low yield environment,global listed infrastructure may provide a diversifying income stream with a slightly lower volatility profile than commodities.Within commodities and infrastructure,we continue to favor the energy complex.While U.S.REITs have outperformed broader equity markets,we maintain a cautious view due to its correlation to long duration instruments. 3 Capital Markets Review Key Market Risks 50 150 250 350 450 550 650 750 Basis PointsBanca Monte dei Paschi CDS The amount, in annual basis points, market participants are willing to pay in order to obtain insurance against Monte dei Paschi defaulting on a bond payment. Fixed Income Equities Financial StressesValuationsCyclicalCurrent Risk Levels LowHighCyclical Risks Remain Low with Regional Disturbances Present §Italian Bank Crisis:It alian banks and policy makers have struggled since the financial crisis to formulate a recapitalization plan for bank balance sheets.While banks throughout Europe had similar challenges,Italy’s governance structure,weak fiscal position and the particular weakness of several high profile Italian banks has made them the poster child of the E.U.banking crisis.The concern is that loss of confidence in one or more Italian banks touches of a new round of E.U.financial sector fears or discussions of an Italian exit from the E.U.,“Quitaly.” §Resurgence in Dollar Appreciation:The global economy only now is recovering from the tightening of global financial conditions caused by the 2014-2015 appreciation of the U.S.dollar.The resumption of rate hikes by the FOMC has reignited fears of a continuation of this phenomenon.We think it unlikely that the pace of appreciation of the past two years will be revisited,but acknowledge that appreciation beyond a 5%year-over-year pace likely will create a drag and stymie or reverse this recovery. §Policy Shortfall:While anticipated policy changes are not the only factor providing a lift to equity markets,they have served as an accelerant.As a result,any material shortfall in actual proposals relative to expectations could trigger a material adjustment downward to the equity markets. -20 -15 -10 -5 0 5 10 15 20 25 Dec-96Dec-97Dec-98Dec-99Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Percentage ChangeY-O-Y Percentage Change in Dollar Valuation U.S. Recession U.S. Dollar Index: Broad Rapid dollar appreciation would likely squeeze global growth, including earnings.Financial StressesSource: Bloomberg Source: Federal Reserve FRED Data Source: Bloomberg, FactSet, Recession Alert, & Pavilion Analysis 4 Capital Markets Review Economy -1 5 -1 0 -5 0 5 10 PercentPeso Yuan Pound Yen Euro Currencies Weaken vs. USD 0 2 4 6 8 10 12 12/0012/0112/0212/0312/0412/0512/0612/0712/0812/0912/1012/1112/1212/1312/1412/1512/16PercentUnemployment Quits Employment Market Shows Strength U.S. Election Jolts Markets and Currencies §The election of Donald Trump as President surprised investors and provided impetus for a rally in the equity markets.The economic outlook changed sharply as the increased likelihood of regulatory repeals and tax reform set the stage for a resurgence in business and consumer optimism. §The FOMC raised interest rates in December,a largely anticipated move.Currency markets moved slightly after the rate increase which were sharply jolted following the election. Uncertainties over trade restrictions and tariffs hurt the peso and yuan,and an improved outlook for the U.S.economy boosted the dollar.Mortgage rates rose ¾%during the quarter,though the home sales forecast did not diminish,given that average rents are high and demographics are expected to boost home demand in the coming years. §The labor market continued to show strength,with the unemployment ending December at 4.7%,and the quit rate up to 2.1%.Wage growth accelerated toward year-end,which was mirrored by the inflation rate,which approached 2%.With potential tax cuts and stronger wage growth,the FOMC will be closely watching for jumps in the inflation rate,which likely would prompt additional interest rate increases in 2017,though the FOMC already expects to implement up to 75 bps of increases,given current data trends.12/0012/0112/0212/0312/0412/0512/0612/0712/0812/0912/1012/1112/1212/1312/1412/1512/162.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 Percent30-Ye ar 15-Ye ar Mortgage Rates Rise Source: Bloomberg Source: Federal Reserve, BOL Source: Federal Reserve 5 1.2%3.8%1.9% -1.3%-0.7% -4.2% -7.4%-5.6% -2.2% -8.0% -4.0% 2.1% 7.9% 12.0% 7.5%4.5% 1.0% 11.2% 3.2% 8.7% 18.5% -1.4% 17.8% 66.3% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% MSCI S&P MSCI MSCI MSCI MSCI China South Taiwan India South Brazil 4Q 2016 Capital Markets Review Equities 4th Quarter and 2016 World and Emerging Market Equity Returns4thQuarter and 2016 S&P 500 Sector Returns -4.8% -4.1% -2.2% -0.1% 1.1% 2.2% 3.8% 4.4% 4.8% 7.1% 7.1% 1.7% -2.9% 4.6% 15.2% 13.2% 5.7% 11.9% 21.8% 16.5% 17.7% 26.4% Real Estate Healthcare Cons Staples Utilities Info Tech Cons Disc S&P 500 Telecom Materials Industrials Energy 4Q 2016 MSCI ACWI S&P 500 MSCI World MSCI ACWI x US MSCI EAFE MSCI EM China South Korea Taiwan India South Africa Brazil Value Drastically Outperformed Growth in 2016 Value,Cyclicals,and Small Caps Propel Equity Markets Higher §The S&P 500 Index returned 3.8%during the fourth quarter,bringing the year-to-date return to 11.9%.Financials was by far the strongest performing sector during the quarter.Bank stocks drove much of this performance,rallying on rising interest rates and the prospects for a continuation of this trend under a Trump administration. §The MSCI ACWI returned a modest 1.2%during the quarter.U.S.equities were largely responsible for the Index’s positive absolute return as stocks outside of the U.S.posted flat to negative returns.During the quarter,Emerging Market equities came under pressure on concerns surrounding the incoming U.S.administration’s views on potential import taxes. China,the largest country by weight in the MSCI Emerging Markets Index traded down on the news.Despite the weak quarter,the MSCI Emerging Markets Index posted an annual return of 11.2%. §Value significantly outperformed Growth during the fourth quarter and in 2016 as a whole. This was a dramatic reversal from 2015 when Growth significantly outperformed Value, though not to the same magnitude as Value outperformed this year.The Russell 1000 Value Index outperformed the Russell 1000 Growth Index by the largest margin in a decade.Moving down the market cap spectrum,the outperformance was even more pronounced. 20.9% 26.4% 21.0% -10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0% Energy Financials 17.3% 20.0% 31.7% 5.0% 14.9% 7.1%7.3% 11.3% -3.0% 7.6% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% U.S. Large Cap U.S. Mid Cap U.S. Small Cap Int'l Developed Emerging Mkts Value Growth Source: Factset, MSCI, Russell Source: Factset, MSCI Source: Factset, S&P 6 Source: Bloomberg Barclays Capital Markets Review Fixed Income Best Period Second Best Period Worst Period Second W ors t Period 0 250 500 750 1000 1250 1500 1750 2000 Option-Adjusted Spread (OAS)U.S.Corpor at e High Y ie ld - OAS U.S.HY 10 -Year Median U.S.IG Credit - OA S U.S.IG Credit 10-Year Media n Trailing Ten-Year Credit Spreads Source: Bloomberg Barclays 2010 2011 2012 2013 2014 2015 2016 1Q16 2Q16 3Q16 4Q16 Aggregate 171 -114 226 93 10 -53 138 -4 31 68 39 Agenc y 77 -25 166 1 10 -133 121 23 36 44 17 MBS 225 -106 91 98 40 -5 -11 -38 3 64 -39 ABS 169 52 246 24 53 44 95 16 50 26 3 CMBS 1501 47 841 97 108 -28 236 58 37 91 46 Credit 192 -322 693 226 -18 -169 442 18 97 155 156 High Y ield 974 -240 1394 923 -112 -577 1573 77 411 576 407 EMD (USD)508 -537 1503 -32 -120 3 880 123 266 354 106 Duration –Ad justed Excess Returns to Treasuries (bps) Credit Trumps Rates in Q4 §Yields rose sharply on the election results pushing total returns negative across all bond sectors,sans high yield,for the quarter.Anticipated higher economic growth and inflation associated with President-elect Trump’s promises of fiscal stimulus via tax cuts and infrastructure spending drove yields higher.Additionally,in a well-telegraphed move in December,the FOMC voted unanimously to raise rates by 25 bps,setting the new Fed Funds rate target to 0.50%-0.75%.Despite the negative absolute returns,most fixed income spread sectors outpaced Treasuries on an excess return basis for the quarter and year. §Treasuries returned -3.8%as yi elds moved sharply higher across the curve.The ten-year yield increased over 80 basis points,while one and thirty-year yi elds increased 26 basis points and 74 basis points,respectively.In spite of significant rate movements during the quarter,year-end yields ended just modestly higher than the start of 2016. §Investment grade credit returned -3.0%for the quarter,but outpaced Treasuries by 156 bps on a duration-adjusted basis.Investment grade credit spreads ended the quarter 13 bps tighter at 118 bps as the post-election equity rally,a slowdown in primary issuance and light dealer inventories provided favorable technicals.Corporate high yield held up well (+1.8%)due to continued strong demand and delivered equity-like returns (+17.1%)for the year. §Agency MBS lagged other spread sectors as sharply higher rates reduced prepayment activity leading to significant duration extension.The MBS Index duration drifted two years higher on the quarter,driving the Bloomberg Barclays Aggregate Index duration up from 5.5 years to 5.9 years. 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0 5 10 15 20 25 30Yield to MaturityMaturity (Ye ars) 12/31/2015 9/30/2016 12/30/2016 U.S. Treasury Yield Curve Change Source: US Dept. of The Treasury 7 Capital Markets Review Alternative Investments Volatility Gives Hedge Funds a Boost §Hedge Funds generally rallied alongside risk assets during the quarter as domestic and global -20% -15% -10% -5% 0% 5% 10% 15%Cumulative ReturnHF Longs HF Shorts S&P Long -Shorts Commonly-held hedge fund long positions underperformed short positions in the first half of the year, followed by a Q3 rebound. In Q4, these positions performed in line with general equity markets. Top Hedge Fund Equity Longs vs Shorts (Goldman VIP) 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 0 50 100 150 200 250 300 350 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 5 Yr. Inflation Break EvenBloomberg Commodity IndexCommodities vs. Inflation Bloomberg Commodity Index 5 Yr. Inflation Break Even In the fourth quarter, market indicators of inflation expectations have increased. Commodities could experience upward pressure if inflation expectations remain elevated. Source: Bloomberg §Hedge Funds generally rallied alongside risk assets during the quarter as domestic and global growth indicators improved.Long/short equity funds generally kept pace with global stocks despite their hedged nature.Stock selection,which floundered in the first half of the year due to technical headwinds,was relatively steady in the fourth quarter after a third-quarter rebound. Hedge funds with a long exposures in domestic stocks,value-oriented names,small cap stocks, and winning sectors such as financials generally performed better than those with global, emerging market,and healthcare exposures. §A selloff in rates and volatility following the U.S.election drove a strong outperformance of fixed income hedge funds and relative value strategies,including discretionary macro.Positive sentiment for lower-quality credit and low-to-hedged duration positioning drove outperformance of distressed and RV corporate strategies versus fixed income indices.That said,volatility hurt systematic macro strategies,which posted losses during the quarter. §Commodities were mixed during the quarter:strong gains in energy commodities and base metals were offset by losses in precious metals following a strengthening U.S.dollar. §U.S.REITs ended the fourth quarter in negative territory (-3.3%).REITs experienced poor earnings results in October,with weak earnings growth across various segments of the REIT market.Rising interest rates put additional downward pressure on REIT prices. §Private Capital Markets.Private equity fundraising remains robust,and capital continues to pour into the asset class as LPs seek out returns.Funds focused on software have raised assets and conducted deals in record numbers,given software’s prominence in companies across industries and as sector-focused funds have become more common since their arrival two decades ago.The M&A landscape remains robust,with the continued announcement of large deals through the end of the year.Median EV/EBITDA for buyout deals remained elevated at 8.4x,and competition remains high for the relatively few quality targets in the market.The lower middle market continues to be a target for firms seeking value,but competition could drive up multiples in this segment as well. 3.8% 1.3%1.1% -3.0% -7.1% 1.8%2.7% 4.0% -2.1% 2.2%2.4% -10% -5% 0% 5% 10%Long/short equity managers, which generally have global exposure, underperformed domestic stocks but nearly kept pace with global stocks despite their hedged nature. Fixed income hedge funds outperformed long-only indices, helped by low duration and rate-hedging as well as strong performance of low-quality credits. Multi-strategy and macro funds trounced a global 60/40 portfolio *Asset-weighted is used instead of fund-weighted, as it is available and more indicative of the universe. Sources: Bloomberg, Goldman Sachs Hedge Funds vs Long-Only: Total Returns 2016 Q4 Sources: Hedge Fund Research, Factset 8 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 4.5 13.4 13.4 6.8 8.8 14.7 13.0 7.2 S&P 500 3.8 12.0 12.0 6.5 8.9 14.7 12.8 6.9 Russell 1000 Index 3.8 12.1 12.1 6.3 8.6 14.7 12.9 7.1 Russell 1000 Growth Index 1.0 7.1 7.1 6.4 8.6 14.5 13.0 8.3 Russell 1000 Value Index 6.7 17.3 17.3 6.2 8.6 14.8 12.7 5.7 Russell Midcap Index 3.2 13.8 13.8 5.4 7.9 14.7 13.7 7.9 Russell Midcap Growth Index 0.5 7.3 7.3 3.5 6.2 13.5 12.9 7.8 Russell Midcap Value Index 5.5 20.0 20.0 6.9 9.5 15.7 14.3 7.6 Russell 2000 Index 8.8 21.3 21.3 7.7 6.7 14.5 13.2 7.1 Russell 2000 Growth Index 3.6 11.3 11.3 4.8 5.1 13.7 13.2 7.8 Russell 2000 Value Index 14.1 31.7 31.7 10.4 8.3 15.1 13.1 6.3 International Equity Indices MSCI EAFE -0.7 1.0 1.0 0.1 -1.6 6.5 3.8 0.7 MSCI EAFE Growth Index -5.5 -3.0 -3.0 0.5 -1.2 6.7 4.5 1.6 MSCI EAFE Value Index 4.2 5.0 5.0 -0.5 -2.1 6.3 3.0 -0.2 MSCI EAFE Small Cap -2.9 2.2 2.2 5.8 2.1 10.6 7.8 2.9 MSCI AC World Index 1.2 7.9 7.9 2.6 3.1 9.4 7.3 3.6 MSCI AC World ex US -1.3 4.5 4.5 -0.7 -1.8 5.0 2.9 1.0 MSCI Emerging Markets Index -4.2 11.2 11.2 -2.7 -2.6 1.3 0.5 1.8 Fixed Income Indices Blmbg. Barc. U.S. Aggregate -3.0 2.6 2.6 1.6 3.0 2.2 3.6 4.3 Blmbg. Barc. Intermed. U.S. Government/Credit -2.1 2.1 2.1 1.6 2.1 1.8 3.0 3.8 Blmbg. Barc. U.S. Long Government/Credit -7.8 6.7 6.7 1.6 7.2 4.1 7.4 6.9 Blmbg. Barc. U.S. Corp: High Yield 1.8 17.1 17.1 5.8 4.7 7.4 8.1 7.5 BofA Merrill Lynch 3 Month U.S. T-Bill 0.1 0.3 0.3 0.2 0.1 0.1 0.1 0.8 Blmbg. Barc. U.S. TIPS -2.4 4.7 4.7 1.6 2.3 0.9 3.4 4.4 Citigroup Non-U.S. World Government Bond -10.8 1.8 1.8 -1.9 -2.2 -1.9 0.0 2.5 JPM EMBI Global Diversified (external currency)-4.0 10.2 10.2 5.6 6.2 5.9 7.0 6.9 JPM GBI-EM Global Diversified (local currency)-6.1 9.9 9.9 -3.3 -4.1 -1.3 0.9 3.8 Real Asset Indices Bloomberg Commodity Index Total Return 2.7 11.7 11.7 -8.2 -11.3 -9.0 -6.3 -5.6 Dow Jones Wilshire REIT -2.3 7.2 7.2 5.7 13.8 12.0 13.8 4.8 Capital Markets Review Index Returns As of December 31, 2016 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 9 Performance Summary 10 Performance Summary - December 2016 During the fourth quarter, the Metropolitan St. Louis Sewer District pension plan lagged its benchmark by 80 basis points (bps) returning -0.7%. On a trailing one -year basis, the Portfolio reported a gain of 5.1%, underperforming the Policy Benchmark return of 6.6%. Asset Class Diversification Current asset allocation was within investment policy targets. The Plan was slightly overweight in large-cap, small-cap, and international equity and underweight hedge funds and real estate. Manager Evaluation Fourth quarter performance was the most favorably impacted by the following managers as they outpaced their benchmarks: Kennedy Mid Cap Value, Income Research, Prudential Core Plus, and Brandywine Global Opportunistic. Fourth quarter performance was the most unfavorably impacted by the following managers that underperformed their benchmarks: Vanguard Windsor II, T. Rowe Price Large-Cap Core Growth, Holland Large Cap Growth, TimesSquare Small Cap Growth, Morgan Stanley International Equity, Morgan Stanley Emerging Markets, Lighthouse Global Long/Short, Entrust Capital Diversified, and UBS Trumbull Property. Pension Plan Executive Summary 11 Pension Plan Executive Summary Capital Markets Review The S&P 500 Index returned 3.8% during the fourth quarter, bringing the year-to-date return to 11.9%. Financials was by far the strongest performing sector during the quarter. Bank stocks drove much of this performance, rallying on rising interest rates and the prospects for a continuation of this trend under a Trump administration. Yields rose sharply on the election results pushing total returns negative across all bond sectors, sans high yield, for the quarter. Anticipated higher economic growth and inflation associated with President-elect Trump’s promises of fiscal stimulus via tax cuts and infrastructure spending drove yields higher. Additionally, in a well-telegraphed move in December, the FOMC voted unanimously to raise rates by 25 bps, setting the new Fed Funds rate target to 0.50% - 0.75%. Despite the negative absolute returns, most fixed income spread sectors outpaced Treasuries on an excess return basis for the quarter and year. Treasuries returned -3.8% as yields moved sharply higher across the curve. The ten-year yield increased over 80 basis points, while one and thirty-year yields increased 26 basis points and 74 basis points, respectively. In spite of significant rate movements during the quarter, year-end yields ended just modestly higher than the start of 2016. The MSCI ACWI returned a modest 1.2% during the quarter. U.S. equities were largely responsible for the Index’s positive absolute return as stocks outside of the U.S. posted flat to negative returns. During the quarter, Emerging Market equities came under pressure on concerns surrounding the incoming U.S. administration’s views on potential import taxes. China, the largest country by weight in the MSCI Emerging Markets Index traded down on the news. Despite the weak quarter, the MSCI Emerging Markets Index posted an annual return of 11.2%. Value significantly outperformed Growth during the fourth quarter and in 2016 as a whole. This was a dramatic reversal from 2015 when Growth significantly outperformed Value, though not to the same magnitude as Value outperformed this year. The Russell 1000 Value Index outperformed the Russel 1000 Growth Index by the largest margin in a decade. Moving down the market cap spectrum, the outperformance was even more pronounced. Recommendations or Action Items In November, the Finance Committee agreed to liquidate all four of its large-cap managers, which include T. Rowe Price Large-Cap Core Growth, Vanguard S&P 500, Vanguard Windsor II and Holland, and use these funds to purchase shares in a BlackRock Russell 1000 Passive U.S. Equity CIT. Additionally, Wellington Diversified Inflation Hedges was terminated and proceeds were moved to the UBS Trumbull Property Fund. 12 Total Composite Policy Benchmark 0.0 2.0 4.0 6.0 8.0 10.0 12.0 -2.0 -4.0Return Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception 0.1 6.6 6.6 2.8 6.4 4.7 7.7 -0.7 5.1 5.1 2.4 6.0 4.8 7.2 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite -0.7 5.1 5.1 2.4 6.0 4.8 7.2 24y Policy Benchmark 0.1 6.6 6.6 2.8 6.4 4.7 N/A Performance Summary Total Composite vs. Policy Benchmark As of December 31, 2016 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 13 -7.0 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite -0.7 (97)5.1 (92)5.1 (92)2.4 (99)6.0 (98)6.0 (99)4.8 (86)¢£ 5th Percentile 2.4 9.5 9.5 5.9 10.2 9.3 6.5 1st Quartile 1.3 8.2 8.2 5.1 9.2 8.5 5.8 Median 0.7 7.0 7.0 4.6 8.6 8.1 5.5 3rd Quartile 0.3 6.2 6.2 4.1 7.9 7.5 5.1 95th Percentile -0.5 4.6 4.6 2.9 6.8 6.7 4.2 Performance Comparison All Public Plans <= $500 mil As of December 31, 2016 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 14 -7.0 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite -0.7 (96)5.1 (92)5.1 (92)2.4 (98)6.0 (97)6.0 (98)4.8 (81)¢£ 5th Percentile 2.2 9.6 9.6 6.1 10.2 9.4 6.4 1st Quartile 1.3 8.3 8.3 5.2 9.2 8.5 5.8 Median 0.7 7.3 7.3 4.6 8.5 8.0 5.4 3rd Quartile 0.2 6.4 6.4 4.1 7.8 7.4 5.0 95th Percentile -0.6 4.5 4.5 2.9 6.4 6.6 4.1 Performance Comparison All Public Plans As of December 31, 2016 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 15 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 27.3 (97)14.3 (38)25.8 (66)8.8 (8)13.7 (17)9.2 (43)0.9 (69)¢£ 5th Percentile 58.3 23.5 43.8 9.9 22.1 13.4 7.3 1st Quartile 51.1 17.1 34.9 5.2 11.9 10.5 2.4 Median 46.3 13.7 29.7 4.9 5.9 8.6 1.4 3rd Quartile 40.9 10.8 23.3 4.4 4.5 5.6 0.8 95th Percentile 28.6 7.1 14.8 2.6 1.1 4.3 0.1 Asset Allocation Comparison All Public Plans <= $500 mil As of December 31, 2016 _________________________ Parentheses contain percentile rankings. 16 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 27.3 (88)14.3 (46)25.8 (57)8.8 (8)13.7 (43)9.2 (39)0.9 (69)¢£ 5th Percentile 57.7 25.8 45.7 10.0 35.0 14.7 7.4 1st Quartile 50.2 19.4 33.9 5.2 20.6 10.4 2.4 Median 43.8 14.1 27.3 4.7 12.4 8.2 1.4 3rd Quartile 34.9 11.1 21.4 3.0 5.8 5.3 0.8 95th Percentile 20.7 7.1 13.6 0.1 2.5 2.9 0.2 Asset Allocation Comparison All Public Plans As of December 31, 2016 _________________________ Parentheses contain percentile rankings. 17 Potential Asset Allocations August 2016 Asset Allocation Study Asse t Cl ass Curre nt Policy Portfolio A (m ore conserva ti ve ) Portfolio B (no he dge funds) Portfolio C (more aggre ssi ve ) Portfo lio D (m ost a ggre ssi ve ) Do me stic Eq uity 26.0 23.0 31.0 29.5 32.5 31.0 26.0 In ternational Equity 10.0 9.0 12.0 11.0 12.5 12.0 10.0 Eme rg in g Mkts Eq uity 4.0 3.0 4.5 4.5 5.0 4.5 4.0 Total Equity 40.0 35.0 47.5 45.0 50.0 47.5 40.0 Marke t Duration Fixed Income 26.0 31.0 30.0 22.0 17.5 30.0 26.0 Gl obal Fixe d Income 9.0 9.0 12.5 8.0 7.5 12.5 9.0 Total Fi xe d In come 35.0 40.0 42.5 30.0 25.0 42.5 35.0 Multi-Stra tegy HFOF 7.5 7.5 0.0 7.5 7.5 0.0 7.5 Lo ng/Short Equity HFOF 7.5 7.5 0.0 7.5 7.5 0.0 7.5 Re al Es tate 5.0 10.0 10.0 10.0 10.0 0.0 10.0 Re al Assets 5.0 0.0 0.0 0.0 0.0 0.0 0.0 Model Portfolios Portfolio E (no he dge fu nds and re al esta te ) Portfolio F (Curre nt Policy ex real asse ts) 1.Assumes a risk –free rate of 1.5% Note: Portfolio F represents the investment policy allocations currently in place. Re al Assets 5.0 0.0 0.0 0.0 0.0 0.0 0.0 REITS 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Priv ate Equity 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Al te rnati ve s 25.0 25.0 10.0 25.0 25.0 10.0 25.0 Total Portfol io 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Expected Return 6.4%6.3%6.4%6.8%7.1%6.4%6.6% Standard Deviation 9.4%8.1%9.7%10.2%11.5%11.2%9.1% Re turn per Un it of Ris k (Sh arpe)1 0.52 0.59 0.51 0.52 0.49 0.44 0.56 Maximu m 1 -Year Lo ss (95%Pro babilit y)-7.8%-5.9%-7.9%-8.0%-10.1%-9.8%-7.1% 18 Peer Asset Allocations August 2016 Asset Allocation Study Asse t Cl ass Gre enwich: Al l Public Gre enwich : <$500M MOLAGERS 1 MOSERS 2 MPERS 3 SLC ERS 4 PSRSMO5 Do me stic Eq uity 26.0 In ternational Eq uity 10.0 Emerging Mkts Eq uity 4.0 Total Equi ty 40.0 50.0 59.0 49.0 9.0 30.0 49.0 42.0 Co re Fixed Income 26.0 Gl obal Fixed Income 9.0 Total Fi xe d In come 35.0 27.0 27.0 22.0 45.0 25.0 24.0 30.0 He dge Fu nd of Fu nds 15.0 4.0 4.0 4.0 15.0 15.0 10.0 6.0 Re al Es tate 10.0 9.0 7.0 8.0 0.0 10.0 12.0 7.0 Re comme nde d Policy Comparison to Pe er DB P lans 1.Missouri Local Government Employees Retirement System ($6 billion). 2.Missouri State Employees Retirement System ($8 billion). 3.MODOT & Patrol Employees Retirement System ($2 billion). 4.St. Louis County Employees Retirement System ($730 million). 5.Public School Retirement System of Missouri ($38 billion). 6.Assumes a risk-free rate of 1.5%. Note: Portfolios shown above are approximations of peer plans’ asset allocation based on publicly available information at the time the asset allocation study was produced and therefore may be different than the allocations currently in place. Re al Es tate 10.0 9.0 7.0 8.0 0.0 10.0 12.0 7.0 Re al Assets 0.0 2.0 0.0 10.0 9.0 5.0 5.0 4.0 Priv ate Equity 0.0 8.0 3.0 7.0 22.0 15.0 0.0 11.0 Total Al te rnatives 25.0 23.0 14.0 29.0 46.0 45.0 27.0 28.0 Total Portfol io 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Expected Return 6.6%7.3%7.2%7.2%6.3%7.4%7.0%7.2% Standard Deviation 9.1%13.2%13.3%12.9%10.3%12.1%11.6%12.1% Re turn per Un it of Ris k (Sh arpe)6 0.56 0.44 0.43 0.44 0.47 0.49 0.47 0.47 Maximum 1-Year Lo ss (95%Pro babilit y)7.1%-11.9%-12.2%-11.7%-8.5%-10.0%-10.0%-10.2% 19 3 Years 5 Years 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)3.0 3.8 4.6 5.4 6.2 7.0 7.8 Risk (Standard Deviation %) Policy Benchmark (5.7 , 2.8) Total Composite (5.9 , 2.4) 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)5.0 5.7 6.4 7.1 7.8 8.5 9.0 Risk (Standard Deviation %) Policy Benchmark (6.0 , 6.4) Total Composite (6.2 , 6.0) Performance Summary Risk and Return Summary As of December 31, 2016 20 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 251,155,138 100.0 -0.7 5.1 5.1 2.4 6.0 4.8 7.2 24y Policy Benchmark 0.1 6.6 6.6 2.8 6.4 4.7 N/A Total Equity Composite 104,539,805 41.6 0.6 6.3 6.3 3.8 N/A N/A 7.5 3y 4m MSCI AC World IMI 1.4 9.0 9.0 3.8 10.2 4.4 7.3 Domestic Equity Composite 68,643,278 27.3 3.0 9.6 9.6 7.1 N/A N/A 10.9 3y 4m Russell 3000 Index 4.2 12.7 12.7 8.4 14.7 7.1 11.9 Large-Cap Equity Composite 51,889,813 20.7 2.4 7.9 7.9 7.5 13.3 6.9 8.4 13y 7m Russell 1000 Index 3.8 12.1 12.1 8.6 14.7 7.1 8.9 Small-Cap Equity Composite 16,753,465 6.7 5.0 15.6 15.6 5.7 13.4 8.6 11.1 13y 7m Russell 2000 Index 8.8 21.3 21.3 6.7 14.5 7.1 10.1 International Equity Composite 35,896,527 14.3 -3.9 0.3 0.3 -2.4 N/A N/A 1.0 3y 4m MSCI AC World ex USA Index -1.3 4.5 4.5 -1.8 5.0 1.0 1.8 Developed International Equity Composite 26,020,030 10.4 -2.3 -1.8 -1.8 -2.6 5.9 1.5 4.1 17y 8m MSCI EAFE Index -0.7 1.0 1.0 -1.6 6.5 0.7 3.2 Emerging International Equity Composite 9,876,496 3.9 -7.9 6.9 6.9 -3.0 1.7 1.0 6.1 11y 9m MSCI Emerging Markets Index -4.2 11.2 11.2 -2.6 1.3 1.8 6.5 Fixed Income Composite 86,742,616 34.5 -3.3 4.2 4.2 1.5 2.6 4.6 4.4 13y 6m Barclays Intermediate U.S. Government/Credit -2.1 2.1 2.1 2.1 1.8 3.8 3.5 Performance Summary Total Pension Fund Asset Allocation and Performance As of December 31, 2016 _________________________ Performance is reported net of fees. 21 Performance Summary Total Pension Fund Asset Allocation and Performance As of December 31, 2016 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Funds Composite 34,334,876 13.7 0.5 -0.4 -0.4 N/A N/A N/A -0.1 1y 10m HFRI Fund of Funds Composite Index 0.9 0.5 0.5 1.2 3.4 1.3 -0.8 60% MSCI ACWI / 40% BC Agg -0.5 5.9 5.9 3.3 6.6 4.2 1.1 Real Estate Composite.23,229,927 9.2 1.2 6.0 6.0 9.3 9.2 4.9 8.0 39y NCREIF Property Index 1.7 8.0 8.0 11.0 10.9 6.9 9.3 Cash Account 2,307,915 0.9 0.2 0.8 0.8 0.5 0.3 0.8 1.3 13y 7m BofA Merrill Lynch 3 Month U.S. T-Bill 0.1 0.3 0.3 0.1 0.1 0.8 1.3 _________________________ Performance is reported net of fees. 22 Allocation Market Value ($)% 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 12,835,945 5.1 5.7 (81)13.5 (59)13.5 (59)6.9 (44)13.3 (58)5.8 (32)6.5 (30)15y 8m Russell 1000 Value Index 6.7 (57)17.3 (22)17.3 (22)8.6 (7)14.8 (14)5.7 (35)6.8 (25) IM U.S. Large Cap Value Equity 6.8 14.0 14.0 6.8 13.5 5.1 6.0 Vanguard Institutional Index Fund 16,867,477 6.7 3.8 (43)11.9 (31)11.9 (31)8.8 (7)14.6 (17)6.9 (30)5.3 (42)17y 3m S&P 500 3.8 (43)12.0 (31)12.0 (31)8.9 (7)14.7 (17)6.9 (31)5.3 (42) IM U.S. Large Cap Equity 3.2 9.2 9.2 6.8 13.3 6.2 5.0 T. Rowe Price Inst. Large-Cap Core Growth 12,247,106 4.9 -0.3 (34)1.1 (61)1.1 (61)7.2 (26)15.6 (5)8.5 (13)13.9 (7)3y 10m Russell 1000 Growth Index 1.0 (16)7.1 (8)7.1 (8)8.6 (8)14.5 (21)8.3 (15)13.4 (14) IM U.S. Large Cap Growth Equity -1.2 2.0 2.0 6.1 12.9 7.2 11.6 Holland Large Cap Growth 9,939,285 4.0 -0.8 (42)2.2 (49)2.2 (49)5.4 (64)11.6 (81)7.7 (32)9.8 (82)3y 10m Russell 1000 Growth Index 1.0 (16)7.1 (8)7.1 (8)8.6 (8)14.5 (21)8.3 (15)13.4 (14) IM U.S. Large Cap Growth Equity -1.2 2.0 2.0 6.1 12.9 7.2 11.6 Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 8,622,421 3.4 7.2 (42)22.9 (12)22.9 (12)8.7 (21)14.2 (50)N/A 10.2 (3)9y Russell Midcap Value Index 5.5 (75)20.0 (38)20.0 (38)9.5 (14)15.7 (17)7.6 (21)8.6 (27) IM U.S. Mid Cap Value Equity 6.2 18.1 18.1 7.3 14.1 6.6 7.3 TimesSquare Small Cap Growth Fund 8,131,044 3.2 2.6 (68)8.4 (77)8.4 (77)2.2 (67)12.3 (66)8.9 (15)9.7 (8)14y 11m Russell 2000 Growth Index 3.6 (60)11.3 (69)11.3 (69)5.1 (47)13.7 (47)7.8 (33)7.8 (52) IM U.S. Small Cap Growth Equity 4.8 14.0 14.0 4.6 13.4 7.4 7.9 Developed International Equity Manager Morgan Stanley International Equity Fund I 26,020,030 10.4 -2.4 (35)-2.0 (79)-2.0 (79)-2.6 (60)5.9 (45)1.5 (40)3.6 (67)11y 9m MSCI EAFE Index -0.7 (19)1.0 (57)1.0 (57)-1.6 (41)6.5 (32)0.7 (55)3.8 (62) IM International Equity -3.8 1.8 1.8 -2.1 5.5 1.0 4.4 Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 9,876,496 3.9 -7.9 (81)6.7 (59)6.7 (59)-2.9 (50)1.7 (45)1.0 (56)6.1 (42)11y 9m MSCI Emerging Markets Index -4.2 (34)11.2 (31)11.2 (31)-2.6 (42)1.3 (56)1.8 (39)6.5 (33) IM Emerging Markets Equity -5.2 8.3 8.3 -3.0 1.5 1.1 6.0 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of December 31, 2016 _________________________ Performance is reported net of fees. 23 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of December 31, 2016 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 35,632,939 14.2 -2.0 (75)2.3 (35)2.3 (35)2.2 (20)2.3 (21)4.5 (6)4.8 (6)15y 6m Barclays Intermediate U.S. Government/Credit -2.1 (77)2.1 (42)2.1 (42)2.1 (22)1.8 (34)3.8 (19)4.2 (17) IM U.S. Intermediate Duration Fixed Income -1.2 1.8 1.8 1.6 1.4 3.3 3.7 Prudential Core Plus Bond Fund 29,118,894 11.6 -2.8 (89)5.8 (16)5.8 (16)4.2 (9)4.4 (7)5.9 (5)2.6 (8)1y 7m Blmbg. Barc. U.S. Aggregate -3.0 (96)2.6 (82)2.6 (82)3.0 (45)2.2 (89)4.3 (74)1.4 (52) IM U.S. Broad Market Core+ Fixed Income -2.4 4.2 4.2 2.9 3.1 4.9 1.4 Brandywine Global Opportunistic Fixed Income 21,990,783 8.8 -6.2 (62)5.2 (22)5.2 (22)0.8 (42)2.4 (28)5.4 (5)5.1 (8)12y Citigroup World Government Bond Index -8.5 (98)1.6 (79)1.6 (79)-0.8 (83)-1.0 (90)3.0 (68)2.4 (75) IM Global Fixed Income -3.9 3.4 3.4 0.4 1.4 3.8 3.2 _________________________ Performance is reported net of fees. 24 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of December 31, 2016 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Fund Managers Lighthouse Global Long/Short Fund Limited 18,155,711 7.2 0.7 0.2 0.2 4.1 7.5 4.8 2.9 1y 10m HFRI Equity Hedge (Total) Index 1.2 5.4 5.4 2.1 5.5 2.9 1.5 Entrust Capital Diversified Fund 16,179,165 6.4 0.3 -1.1 -1.1 -2.3 2.5 2.8 -6.2 1y 5m HFRI Fund of Funds Composite Index 0.9 0.5 0.5 1.2 3.4 1.3 -1.8 Real Estate Manager UBS Trumbull Property Fund 23,229,927 9.2 1.2 6.0 6.0 9.3 9.2 4.9 5.8 10y 7m NCREIF Property Index 1.7 8.0 8.0 11.0 10.9 6.9 7.5 Cash Account 2,307,915 0.9 0.2 0.8 0.8 0.5 0.3 0.8 1.3 13y 7m BofA Merrill Lynch 3 Month U.S. T-Bill 0.1 0.3 0.3 0.1 0.1 0.8 1.3 Total Composite 251,155,138 100.0 -0.7 5.1 5.1 2.4 6.0 4.8 7.2 24y _________________________ Performance is reported net of fees. 25 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Return (%)9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 Risk (Standard Deviation %) Vanguard Institutional Index Fund MSCI Emerging Markets MSCI EAFE Russell 2000 Growth Russell Midcap Value Russell 1000 Growth S&P 500 Russell 1000 Value Holland Large Cap Growth Kennedy Mid Cap Value TimesSquare Small Cap Growth Morgan Stanley Emerging Markets Morgan Stanley International Equity Vanguard Windsor II Fund T. Rowe Price Inst. Large-Cap Core Growth Performance Summary Risk and Return Summary - Equity Managers 5 Years Ending December 31, 2016 26 -2.4 -1.6 -0.8 0.0 0.8 1.6 2.4 3.2 4.0 4.8 5.6 Return (%)0.0 0.7 1.4 2.1 2.8 3.5 4.2 4.9 5.6 6.3 7.0 7.7 8.4 9.0 Risk (Standard Deviation %) Citigroup World Government Bond Index BC Intermediate U.S. Government/Credit Blmbg. Barc. U.S. Aggregate Prudential Core Plus Bond Fund Income Research Brandywine Global Performance Summary Risk and Return Summary - Fixed Income Managers 5 Years Ending December 31, 2016 27 -10.0 -6.0 -2.0 2.0 6.0 10.0 14.0 18.0 22.0 Return (%)0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund HFRI Equity Hedge (Total) Index NCREIF Property Index Lighthouse Global Long/Short Fund Limited UBS TPF Performance Summary Risk and Return Summary - Alternative Managers 5 Years Ending December 31, 2016 28 Manager Compliance Checklist Fourth Quarter 2016 Mana ge rs Va ngua rd Windsor Vangua rd Insti tu ti onal T.Ro we Price Holland Ke nne dy TimesS qua re Morga n Stanley Int'l Morgan Stanley EM Organizational /Produ ct Is sues No ma terial c hanges to inves tment team ++++++++ No ma terial o rg aniza tional changes ++++--++ Accounting or re gulatory 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 than peer group median +++-+--+ Fiv e year return better than benchmark -N/A +----+ Fiv e year rankin g better than peer group media n -++-+-++ Note: Assets invested in Vanguard Windsor II, Vanguard Institutional Index, T. Rowe Price Large Cap Growth, and Holland Large Cap Growth will be transitioned to a passive Blackrock Russell 1000 U.S. equity commingled fund in February. 1 Manager performance is evaluated net of investment management fees. Fiv e year rankin g better than peer group media n -++-+-++ Perfor mance s tatus +++-+-++ Da te perfo rmance s tatus changed 3Q 16 3Q 16 Summary status Eliminate Eliminate Eliminate Eliminate ++++ Da te s umma ry status changed 4Q16 4Q 16 4Q16 4Q 16 29 Manager Compliance Checklist Fourth Quarter 2016 Ma na ge rs Income Re se arch Prude ntial Brandyw ine Globa l Lighthouse En trust UBS Or gani zati onal /Produ ct Is sues No ma teria l c hanges to investment team ++++++ No ma teria l o rg 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 s tylis tic expectations ++++++ Re lati ve Perfor man ce 1 Th re e-year re turn better than benchmark ++++-- Th re e-year ra nkin g better than peer group median +++N/A N/A N/A Five year re turn better than benchmark ++++-- 1 Manager performance is evaluated net of investment management fees. Five year re turn better than benchmark ++++-- Five year ra nkin g better than peer group media n +++N/A N/A N/A Perfor ma nc e s tatus ++++-+ Da te perfo rman ce s tatus changed 4Q 16 Summa ry status ++++++ Da te s umma ry status changed 30 Manager Compliance Issue Explanation Recommended Action Comments Holland Performance Holland Large Cap Growth has underperformed its benchmark and peers over the 3-and 5-year periods for 11 consecutive quarters. Hold Holland’s high quality growth strategy has been out of favor for the past few years. Assets will be transitioned to a passive large cap strategy at the end of February. Manager Compliance Checklist Fourth Quarter 2016 31 Manager Compliance Issue Explanation Recommended Action Comments Kennedy Organizational Changes Kennedy’s CEO and Chairman of the Board, Randall Kirkland, has retired. Kimberly Wood replaced Randall in August 2016 and now serves as the President, CEO and Chairwoman of the Board. Hold The announcement does not impact Pavilion’s opinion or rating on Kennedy, but it will be important to monitor Kimberly Woods and the impact she has on the firm. TimesSquare Organizational Changes/ Effective August 1, 2016,Mark Aaron no longer serves as COO and Hold TimesSquare is a well-resourced organization with the support of AMG behind it,especially in regard Manager Compliance Checklist Fourth Quarter 2016 Changes/ Performance CCO and Head of Operations Fred Kramer will serve as interim COO while they search for a replacement. Michael Andrews was appointed interim CCO. TimesSquare trailed the Russell 2000 Growth Index over the three- and five-year periods by 290 and 140 basis points, respectively, ranking in the third quartile of the small growth peer universe over both periods. to the compliance function. AMG provides full legal and compliance support to TimesSquare, with the CCO acting more as a liaison. Mark Aaron’s departure does not alter Pavilion’s favorable view of the organization. TimesSquare’s underperformance during the three-and five-year periods is concentrated in 2014 and 2016 when the manager underperformed the Index by 810 bps and 290 bps, respectively. In 2014, the manager’s lack of exposure to high flying biotech and REITs hindered performance, while stock selection was a headwind in 2016. Pavilion continues to possess a high degree of conviction in the fund’s approach and recommends retaining the strategy. 32 Manager Compliance Issue Explanation Recommended Action Comments EnTrust Organizational Changes/ Performance EnTrust combined their business with that of The Permal Group, a global alternative asset manager that was established in 1973 and acquired by Legg Mason in 2005. The deal closed in mid –2016. Gregg Hymowitz now serves as the Chairman and Chief Executive Officer of EnTrustPermal, as well as continue to be the Chair of the EnTrustPermal Global Investment Committee. Hold Pavilion will be reviewing the effects of the combination and advise you if we see any organizational risk that may impair the investment process. After producing solid results relative to the HFRI Fund of Funds Composite Index in calendar years 2009-2013, Entrust has struggled the past three years. The strategy has also experienced outflows as of late, with assets at approximately $3 billion, down from a peak in 2014 of over $5 billion. We will be watching the performance of this fund closely during 2017. Manager Compliance Checklist Fourth Quarter 2016 Entrust trailed the HFRI Fund of Funds Composite Index over the three-and five-year periods by 350 and 90 basis points, respectively. closely during 2017. 33 Asset Class Diversification 34 December 31, 2016 : $251,159,480 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 $2,307,915 Real Estate Composite $23,229,927 Hedge Funds Composite $34,339,218 Fixed Income Composite $86,742,616 Emerging International Equity Composite $9,876,496 Developed International Equity Composite $26,020,030 Small-Cap Equity Composite $16,753,465 Large-Cap Equity Composite $51,889,813 0.0% 10.0% 15.0% 35.0% 4.0% 10.0% 6.0% 20.0% 0.9% 9.2% 13.7% 34.5% 3.9% 10.4% 6.7% 20.7% 0.9% -0.8 % -1.3 % -0.5 % -0.1 % 0.4% 0.7% 0.7% Asset Class Diversification Investment Policy Allocation As of December 31, 2016 35 Asset Class Diversification Investment Program Structure As of December 31, 2016 Asset Class/Type Manage r Total Assets ($, mil.) as of 12/31/2016 Perce nt of Total Targe t Allocation Weighting Re lative to Targe t Allowable Range To tal Assets ($, mil.) as of 9/30/2016 Large -Cap Equity $51.9 20.7%20.0%+0.7%15 -25%$50.6 Co re Va nguard In stit utional $16.9 6.7%6.0%+0.7%$15.2 Va lu e Va nguard Windsor $12.8 5.1%5.0%+0.1%$12.6 Gr owth T. Rowe Pric e $12.2 4.9%5.0%-0.1%$12.8 Gr owth Ho lla nd $9.9 4.0%4.0%-0.0%$10.0 Small-Cap Equity $16.8 6.7%6.0%+0.7%2 -8%$15.8 Va lu e Ke nnedy $8.6 3.4%3.0%+0.4%$7.9 Gr owth Time sSquare $8.1 3.2%3.0%+0.2%$7.9 Inte rn ati onal Equity $35.9 14.3%14.0%+0.3%$35.8 De veloped Morgan Stanley $26.0 10.4%10.0%+0.4%5 -15%$25.4 Eme rg in g Marke ts Morgan Stanley $9.9 3.9%4.0%-0.1%2 -8%$10.4 *Totals may not add to exactly 100.0% due to rounding. Eme rg in g Marke ts Morgan Stanley $9.9 3.9%4.0%-0.1%2 -8%$10.4 Fixed Income $86.7 34.5%35.0%-0.5%$89.4 Do me stic Core In come Res earch $35.6 14.2%14.0%+0.2%10 -20%$36.0 Gl obal Brandywin e Glo bal $22.0 8.8%9.0%-0.2%4 -14%$23.4 Do me stic Core Plu s Pru dential $29.1 11.6%12.0%-0.4%10 -20%$30.0 He dge Funds $34.3 13.7%15.0%-1.3%0 -20% $34.2 He dge Funds Lighthouse Glo bal $18.2 7.2%7.5%-0.3%$18.0 He dge Funds En trust $16.2 6.4%7.5%-1.1%$16.2 Re al Estate $23.2 9.2%10.0%-0.8%$15.8 Re al Es tate UBS T ru mb ull $23.2 9.2%10.0%-0.8%0 -12%$15.8 Cash $2.3 0.9%0.0%+0.9%$1.6 Ca sh Account Ca sh Account $2.3 0.9%0.0%+0.9%$1.6 Total $251.2 100.0%100.0%+0.0%$243.2 36 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)94,382 86,227 Median Mkt. Cap ($M)12,797 1,451 Price/Earnings ratio 20.8 18.7 Price/Book ratio 3.1 2.6 5 Yr. EPS Growth Rate (%)10.9 7.9 Current Yield (%)1.7 2.5 Debt to Equity 2.6 1.3 Number of Stocks 919 8,628 Beta (3 Years, Monthly)0.96 1.00 Consistency (3 Years, Monthly)50.00 1.00 Sharpe Ratio (3 Years, Monthly)0.39 0.38 Information Ratio (3 Years, Monthly)0.00 - Up Market Capture (3 Years, Monthly)99.36 - Down Market Capture (3 Years, Monthly)99.20 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Microsoft Corp 1.6 1.1 0.5 8.6 Amazon.com Inc 1.6 0.7 0.9 -10.4 Google Inc (Class C)1.2 0.5 0.7 -0.7 British American Tobacco PLC 1.2 0.2 1.0 -10.8 Apple Inc 1.1 1.4 -0.3 3.0 UNILEVER NV 1.1 0.0 1.1 N/A Reckitt Benckiser Group PLC 1.1 0.1 1.0 -10.7 Nestle SA, Cham Und Vevey 1.1 0.5 0.6 -9.0 L'Oreal S.A., Paris 1.0 0.1 0.9 -3.2 Glaxosmithkline PLC 1.0 0.2 0.8 -10.0 % of Portfolio 12.0 4.8 Distribution of Market Capitalization (%) Equity Composite MSCI AC World IMI 0.0 15.0 30.0 45.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 31.6 30.4 22.7 15.2 0.0 35.5 28.7 22.5 12.1 1.2 Sector Weights (%) Equity Composite MSCI AC World IMI 0.0 5.0 10.0 15.0 20.0 25.0 Other Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.1 1.2 1.6 2.1 2.4 4.4 18.7 12.0 13.5 13.7 4.5 13.1 12.8 0.0 0.0 3.1 3.2 4.2 5.7 15.3 11.6 10.7 18.1 6.9 8.9 12.4 Equity Portfolio - Characteristics Total Equity Composite vs. MSCI AC World IMI As of December 31, 2016 37 Total Equity Composite MSCI AC World IMI Australia 0.0 2.4 Hong Kong 0.3 1.0 Japan 5.3 8.2 New Zealand 0.0 0.1 Singapore 0.0 0.4 Pacific 5.6 12.2 Austria 0.2 0.1 Belgium 0.0 0.4 Finland 0.0 0.3 France 3.6 3.0 Germany 2.0 2.9 Ireland 0.7 0.2 Italy 0.1 0.8 Netherlands 2.4 1.0 Portugal 0.1 0.1 Spain 0.0 1.0 EMU 9.0 9.8 Denmark 0.0 0.5 Norway 0.0 0.3 Sweden 0.3 1.0 Switzerland 3.4 2.7 United Kingdom 7.2 6.0 Europe ex EMU 11.0 10.5 Canada 0.8 3.3 United States 62.7 53.6 Israel 0.3 0.3 Middle East 0.3 0.3 Developed Markets 89.3 89.6 Total Equity Composite MSCI AC World IMI Brazil 0.6 0.8 Cayman Islands 0.0 0.0 Chile 0.1 0.1 Colombia 0.1 0.0 Mexico 0.6 0.4 Peru 0.2 0.0 Virgin Islands 0.0 0.0 EM Latin America 1.6 1.3 China 2.6 2.6 India 0.9 0.9 Indonesia 0.4 0.3 Korea 0.8 1.5 Malaysia 0.0 0.3 Philippines 0.4 0.1 Taiwan 1.0 1.3 Thailand 0.2 0.3 EM Asia 6.3 7.4 Czech Republic 0.1 0.0 Egypt 0.0 0.0 Greece 0.0 0.0 Hungary 0.0 0.0 Poland 0.3 0.1 Qatar 0.0 0.1 Russia 0.1 0.4 South Africa 0.5 0.7 Turkey 0.1 0.1 United Arab Emirates 0.0 0.1 EM Europe + Middle East + Africa 1.1 1.7 Emerging Markets 8.9 10.4 Frontier Markets 0.3 0.0 Cash 1.2 0.0 Other 0.3 0.0 Total 100.0 100.0 Equity Portfolio - Country/Region Allocation Total Equity Composite vs. MSCI AC World IMI As of December 31, 2016 38 Portfolio Characteristics Maturity Distribution (%) Credit Quality Distribution (%) Risk Characteristics - 3 Years Sector Distribution (%) Portfolio Benchmark Effective Duration 5.3 4.1 Avg. Maturity 7.5 4.4 Avg. Quality A AA Yield To Maturity (%)3.5 2.1 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow BNot Rated63.3 6.3 13.5 16.9 0.0 0.0 0.0 0.0 38.7 10.5 17.9 23.4 5.2 2.9 0.5 1.1 Consistency Sharpe Ratio Information Ratio Up Market Capture Down Market Capture Total Fixed Income Composite 50.0 0.4 -0.2 116.9 163.0 Barclays Intermediate U.S. Government/Credit 0.0 0.9 N/A 100.0 100.0 90 Day U.S. Treasury Bill 44.4 N/A -0.9 2.1 -1.1 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 36.6 29.0 34.4 0.0 0.0 12.3 15.6 24.6 30.5 5.8 11.1 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.2 3.9 26.9 0.0 0.0 0.0 11.0 2.0 0.0 0.0 0.0 0.0 17.3 0.2 30.9 4.1 1.7 9.9 10.8 6.3 1.7 2.3 6.6 8.1 Fixed Income Portfolio - Characteristics Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2016 39 Manager Evaluation 40 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Vanguard Windsor II 5.7 13.5 13.5 6.9 13.3 5.8 -3.1 11.3 30.8 16.8 2.8 10.7 27.2 -36.6 2.3 18.4 Russell 1000 Value Index 6.7 17.3 17.3 8.6 14.8 5.7 -3.8 13.5 32.5 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 IM U.S. Large Cap Value Equity 6.8 14.0 14.0 6.8 13.5 5.1 -3.8 10.8 32.5 15.5 -2.5 12.7 24.0 -36.9 1.7 18.0 Vanguard Windsor II Rank 81 59 59 44 58 32 35 37 77 32 11 81 28 47 44 47 Vanguard Windsor II Russell 1000 Value Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 10.0 12.0 14.0 16.0 18.0 Return (%)8.7 8.8 8.9 9.0 9.1 9.2 9.3 9.4 9.5 Risk (Standard Deviation %) Russell 1000 Value Index Vanguard Windsor II Average Active Weight 0.0 6.0 12.0-6.0-12.0 Utilities Telecommunication Services Real Estate Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary -3.6 -1.0 -4.8 0.3 -0.7 5.1 2.0 6.8 -3.6 -4.1 -1.5 4.9 Allocation (Total: -0.9) 0.0 0.7 1.4-0.7-1.4 0.2 0.0 0.5 0.0 0.0 -0.3 0.0 -0.8 -0.5 0.0 0.1 -0.1 Stock (Total: 0.6) 0.0 0.8 1.6-0.8-1.6 0.0 -0.1 0.1 0.0 -0.1 0.0 -0.2 0.3 0.9 0.2 -0.2 -0.4 Vanguard Windsor II 0.0 0.5 1.0 1.5-0.5-1.0-1.5 0.3 -0.1 0.6 0.0 -0.1 -0.3 -0.1 -0.5 0.3 0.2 0.0 -0.6 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 41 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)121,430 120,671 Median Mkt. Cap ($M)20,869 8,372 Price/Earnings ratio 17.9 18.4 Price/Book ratio 2.4 2.1 5 Yr. EPS Growth Rate (%)8.7 6.3 Current Yield (%)2.4 2.5 Debt to Equity 1.6 0.8 Number of Stocks 278 696 Beta (5 Years, Monthly)0.99 1.00 Consistency (5 Years, Monthly)41.67 1.00 Sharpe Ratio (5 Years, Monthly)1.24 1.36 Information Ratio (5 Years, Monthly)-0.67 - Up Market Capture (5 Years, Monthly)96.04 - Down Market Capture (5 Years, Monthly)104.23 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Bank of America Corp 3.6 2.1 1.5 41.7 Microsoft Corp 3.4 0.0 3.4 8.6 JPMorgan Chase & Co 2.9 2.9 0.0 30.5 PNC Financial Services Group Inc.2.5 0.5 2.0 30.6 Pfizer Inc 2.5 1.6 0.9 -3.1 Citigroup Inc 2.3 1.6 0.7 26.2 Wells Fargo & Co 2.3 2.3 0.0 25.5 United Technologies Corp 2.2 0.8 1.4 8.6 Philip Morris International Inc 2.0 1.1 0.9 -4.8 Sanofi 2.0 0.0 2.0 5.9 % of Portfolio 25.7 12.9 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 - $5 Bil Cash 45.0 30.8 19.9 4.3 0.0 48.9 37.9 9.8 1.4 2.0 Sector Weights (%) Vanguard Windsor II Russell 1000 Value Index 0.0 6.0 12.0 18.0 24.0 30.0 36.0 Other Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.6 2.0 1.0 2.8 0.2 1.9 13.0 10.0 18.5 24.4 10.8 7.6 7.2 0.0 0.0 6.0 3.9 4.6 2.8 9.4 10.0 10.2 26.8 13.6 8.0 4.5 Manager Evaluation Vanguard Windsor II vs. Russell 1000 Value Index As of December 31, 2016 42 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics - Monthly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Vanguard Institutional Index 3.8 11.9 11.9 8.8 14.6 6.9 1.4 13.7 32.3 16.0 2.1 15.0 26.6 -37.0 5.5 15.8 S&P 500 Index 3.8 12.0 12.0 8.9 14.7 6.9 1.4 13.7 32.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 IM U.S. Large Cap Equity 3.2 9.2 9.2 6.8 13.3 6.2 0.3 10.9 32.5 15.3 -1.4 13.4 28.2 -37.9 7.0 13.0 Vanguard Institutional Index Rank 43 31 31 7 17 30 43 14 53 41 19 34 58 39 60 29 Vanguard Institutional Index S&P 500 Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.1 0.2 -0.1 -0.2Return (%)3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Vanguard Institutional Index 14.6 10.3 14.2 0.0 1.0 1.4 0.0 -1.9 5.6 28.3 17y 3m S&P 500 Index 14.7 10.3 14.2 0.0 1.0 1.4 0.0 N/A 5.6 0.0 17y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.3 -1.4 0.0 31.7 17y 3m Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2016 43 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)148,437 148,474 Median Mkt. Cap ($M)19,131 18,956 Price/Earnings ratio 20.5 20.5 Price/Book ratio 3.1 3.1 5 Yr. EPS Growth Rate (%)10.0 9.7 Current Yield (%)2.1 2.1 Debt to Equity 1.0 1.0 Number of Stocks 506 505 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)28.33 1.00 Sharpe Ratio (5 Years, Monthly)1.38 1.38 Information Ratio (5 Years, Monthly)-1.87 - Up Market Capture (5 Years, Monthly)99.93 - Down Market Capture (5 Years, Monthly)100.09 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.2 3.2 0.0 3.0 Microsoft Corp 2.5 2.5 0.0 8.6 Exxon Mobil Corp 1.9 1.9 0.0 4.3 JPMorgan Chase & Co 1.6 1.6 0.0 30.5 Johnson & Johnson 1.6 1.6 0.0 -1.8 Berkshire Hathaway Inc 1.5 1.6 -0.1 12.8 Amazon.com Inc 1.5 1.5 0.0 -10.4 General Electric Co 1.5 1.5 0.0 7.5 AT&T Inc 1.4 1.4 0.0 6.0 Facebook Inc 1.4 1.4 0.0 -10.3 % of Portfolio 18.1 18.2 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 51.9 33.6 14.2 0.2 0.0 51.9 33.6 14.2 0.2 0.0 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 Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.0 3.2 2.7 2.9 2.8 20.8 10.3 13.6 14.8 7.6 9.4 12.0 0.0 3.2 2.7 2.9 2.8 20.8 10.3 13.6 14.8 7.6 9.4 12.0 Manager Evaluation Vanguard Institutional Index vs. S&P 500 Index As of December 31, 2016 44 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 T. Rowe Price LCC Growth -0.3 1.1 1.1 7.2 15.6 8.5 11.3 9.3 41.4 18.5 1.5 16.4 43.0 -42.6 13.0 9.1 Russell 1000 Growth Index 1.0 7.1 7.1 8.6 14.5 8.3 5.7 13.1 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 IM U.S. Large Cap Growth Equity -1.2 2.0 2.0 6.1 12.9 7.2 5.6 10.5 33.9 14.9 -1.8 15.1 35.1 -39.9 13.8 6.6 T. Rowe Price LCC Growth Rank 34 61 61 26 5 13 5 66 6 18 19 36 20 72 56 23 T. Rowe Price LCC Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 13.0 14.0 15.0 16.0 17.0 Return (%)7.2 8.1 9.0 9.9 10.8 11.7 12.6 13.5 14.4 Risk (Standard Deviation %) Russell 1000 Growth Index T. Rowe Price LCC Growth Average Active Weight 0.0 6.0 12.0-6.0-12.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.1 -1.2 -0.9 -2.8 1.6 -2.7 3.3 4.6 -0.6 -6.4 5.0 Allocation (Total: 0.1) 0.0 0.3 0.6-0.3-0.6 0.0 0.0 0.1 0.0 0.0 -0.2 -0.1 0.3 0.0 0.1 0.1 Stock (Total: -1.0) 0.0 2.0-2.0-4.0 0.0 0.0 0.0 0.0 -1.7 0.5 0.4 0.7 0.0 -0.1 -0.9 T. Rowe Price LCC Growth 0.0 1.0 2.0 3.0-1.0-2.0-3.0 0.0 0.0 0.0 -0.1 -1.7 0.4 0.2 1.0 0.0 0.0 -0.8 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 45 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)151,059 148,016 Median Mkt. Cap ($M)32,384 8,951 Price/Earnings ratio 26.7 23.2 Price/Book ratio 4.4 5.4 5 Yr. EPS Growth Rate (%)14.1 13.4 Current Yield (%)0.9 1.6 Debt to Equity 1.0 1.1 Number of Stocks 144 606 Beta (5 Years, Monthly)1.10 1.00 Consistency (5 Years, Monthly)60.00 1.00 Sharpe Ratio (5 Years, Monthly)1.21 1.31 Information Ratio (5 Years, Monthly)0.28 - Up Market Capture (5 Years, Monthly)108.13 - Down Market Capture (5 Years, Monthly)108.10 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Amazon.com Inc 8.3 2.8 5.5 -10.4 Facebook Inc 4.6 2.5 2.1 -10.3 Google Inc (Class C)4.4 2.2 2.2 -0.7 Priceline Group Inc (The)4.3 0.7 3.6 -0.4 Microsoft Corp 3.6 4.5 -0.9 8.6 Visa Inc 2.9 1.4 1.5 -5.5 Mastercard Inc 2.7 0.9 1.8 1.6 Alphabet Inc 2.6 2.2 0.4 -1.4 Danaher Corp 2.4 0.1 2.3 -0.5 Unitedhealth Group Inc 2.2 1.4 0.8 14.8 % of Portfolio 38.0 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 48.3 29.9 19.0 2.8 47.6 43.5 8.9 0.0 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 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.3 0.0 2.0 0.4 33.4 8.4 18.2 9.4 0.0 2.9 25.0 0.0 1.3 2.7 3.6 31.4 11.1 16.1 2.9 0.6 9.5 20.8 Manager Evaluation T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index As of December 31, 2016 46 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Holland Large Cap Growth -0.8 2.2 2.2 5.4 11.6 7.7 7.1 7.2 30.3 13.1 4.3 15.3 40.0 -33.8 9.4 6.4 Russell 1000 Growth Index 1.0 7.1 7.1 8.6 14.5 8.3 5.7 13.1 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 IM U.S. Large Cap Growth Equity -1.2 2.0 2.0 6.1 12.9 7.2 5.6 10.5 33.9 14.9 -1.8 15.1 35.1 -39.9 13.8 6.6 Holland Large Cap Growth Rank 42 49 49 64 81 32 33 90 81 73 5 49 31 5 81 53 Holland Large Cap Growth Russell 1000 Growth Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 6.0 9.0 12.0 15.0 18.0 Return (%)8.8 9.0 9.2 9.4 9.6 9.8 10.0 Risk (Standard Deviation %) Russell 1000 Growth Index Holland Large Cap Growth Average Active Weight 0.0 4.0 8.0-4.0-8.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.1 -0.2 -2.8 -2.3 1.1 1.7 -3.2 0.7 -0.6 0.8 0.9 3.9 Allocation (Total: 0.4) 0.0 0.2 0.4-0.2-0.4 0.0 0.0 0.2 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 Stock (Total: -2.0) 0.0 0.8-0.8-1.6 0.0 -0.1 0.0 -0.1 -0.5 0.3 -0.6 0.3 0.0 -0.4 -0.9 0.0 Holland Large Cap Growth 0.0 0.5 1.0-0.5-1.0-1.5 0.0 -0.1 0.2 -0.1 -0.5 0.4 -0.4 0.3 0.0 -0.4 -0.9 0.0 Manager Evaluation Holland Large Cap Growth vs. Russell 1000 Growth Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 47 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)137,316 148,016 Median Mkt. Cap ($M)51,190 8,951 Price/Earnings ratio 23.4 23.2 Price/Book ratio 5.0 5.4 5 Yr. EPS Growth Rate (%)15.4 13.4 Current Yield (%)1.2 1.6 Debt to Equity 0.8 1.1 Number of Stocks 52 606 Beta (5 Years, Monthly)1.03 1.00 Consistency (5 Years, Monthly)43.33 1.00 Sharpe Ratio (5 Years, Monthly)1.01 1.31 Information Ratio (5 Years, Monthly)-0.88 - Up Market Capture (5 Years, Monthly)93.10 - Down Market Capture (5 Years, Monthly)110.42 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Google Inc (Class C)4.6 2.2 2.4 -0.7 Apple Inc 4.6 5.5 -0.9 3.0 Visa Inc 4.5 1.4 3.1 -5.5 Amazon.com Inc 4.4 2.8 1.6 -10.4 Microsoft Corp 3.7 4.5 -0.8 8.6 Adobe Systems Inc 3.5 0.5 3.0 -5.2 Priceline Group Inc (The)3.4 0.7 2.7 -0.4 Honeywell International Inc 2.9 0.8 2.1 0.5 Southwest Airlines Co.2.8 0.3 2.5 28.4 United Parcel Service Inc 2.8 0.8 2.0 5.6 % of Portfolio 37.2 19.5 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 48.3 29.9 19.0 2.8 0.0 45.4 33.1 19.2 0.0 2.4 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 Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.4 0.0 0.0 0.0 1.3 33.6 12.1 14.6 4.0 0.0 10.1 22.1 0.0 0.0 1.3 2.7 3.6 31.4 11.1 16.1 2.9 0.6 9.5 20.8 Manager Evaluation Holland Capital Management vs. Russell 1000 Growth Index As of December 31, 2016 48 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Kennedy Mid Cap Value 7.2 22.9 22.9 8.7 14.2 N/A -9.9 15.8 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A N/A Russell Midcap Value Index 5.5 20.0 20.0 9.5 15.7 7.6 -4.8 14.7 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 20.2 IM U.S. Mid Cap Value Equity 6.2 18.1 18.1 7.3 14.1 6.6 -5.8 10.8 36.0 16.2 -4.2 22.1 36.1 -38.1 0.8 14.7 Kennedy Mid Cap Value Rank 42 12 12 21 50 N/A 88 5 73 86 20 10 53 1 N/A N/A Kennedy Mid Cap Value Russell Midcap Value Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 12.0 14.0 16.0 18.0 Return (%)9.0 9.6 10.2 10.8 11.4 12.0 12.6 13.2 Risk (Standard Deviation %) Russell Midcap Value Index Kennedy Mid Cap Value Average Active Weight 0.0 4.0 8.0-4.0-8.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -1.8 -1.4 -1.5 -1.9 5.1 -0.8 -0.1 -3.0 0.9 -1.3 2.3 3.6 Allocation (Total: -0.3) 0.0 0.4-0.4-0.8 0.1 0.0 0.1 0.0 0.1 0.0 0.0 -0.4 0.0 0.1 -0.1 -0.2 Stock (Total: 3.0) 0.0 1.0 2.0 3.0-1.0-2.0 0.4 0.0 0.0 0.0 0.5 0.1 -0.4 1.5 -0.1 0.0 1.1 0.0 Kennedy Mid Cap Value 0.0 0.6 1.2 1.8-0.6-1.2 0.5 0.0 0.1 0.0 0.5 0.1 -0.4 1.1 -0.1 0.1 1.0 -0.2 Manager Evaluation Kennedy Mid Cap Value vs. Russell Midcap Value Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 49 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)9,551 13,299 Median Mkt. Cap ($M)8,069 6,365 Price/Earnings ratio 21.9 19.3 Price/Book ratio 2.3 2.0 5 Yr. EPS Growth Rate (%)12.4 8.8 Current Yield (%)1.8 2.2 Debt to Equity 1.7 0.9 Number of Stocks 57 568 Beta (5 Years, Monthly)1.12 1.00 Consistency (5 Years, Monthly)53.33 1.00 Sharpe Ratio (5 Years, Monthly)1.11 1.39 Information Ratio (5 Years, Monthly)-0.35 - Up Market Capture (5 Years, Monthly)101.36 - Down Market Capture (5 Years, Monthly)116.39 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Reinsurance Group of America Inc.3.1 0.2 2.9 17.0 ON Semiconductor Corp 2.5 0.1 2.4 3.6 East West Bancorp Inc.2.4 0.2 2.2 39.2 Helmerich & Payne Inc.2.4 0.2 2.2 16.3 Huntington Bancshares Inc 2.4 0.4 2.0 34.9 Old Dominion Freight Line Inc 2.4 0.1 2.3 25.0 Harman International Industries Inc.2.3 0.1 2.2 32.2 PacWest Bancorp 2.3 0.2 2.1 28.2 Reliance Steel & Aluminum Co 2.3 0.2 2.1 11.0 Lincoln National Corp 2.2 0.4 1.8 41.8 % of Portfolio 24.3 2.1 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 23.2 62.9 13.9 0.0 6.6 76.6 12.6 4.2 Sector Weights (%) Kennedy Capital Management Russell Midcap Value Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 4.2 9.5 0.0 12.8 4.2 11.2 12.2 3.7 18.2 10.4 2.7 10.9 0.0 10.9 1.4 13.9 6.0 8.8 12.6 4.2 19.9 10.6 3.2 8.5 Manager Evaluation Kennedy Capital Management vs. Russell Midcap Value Index As of December 31, 2016 50 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 TimesSquare Small Cap Growth 2.6 8.4 8.4 2.2 12.3 8.9 1.0 -2.5 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 16.5 Russell 2000 Growth Index 3.6 11.3 11.3 5.1 13.7 7.8 -1.4 5.6 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 13.3 IM U.S. Small Cap Growth Equity 4.8 14.0 14.0 4.6 13.4 7.4 -3.4 1.6 42.4 12.0 -4.6 27.0 33.1 -42.7 7.4 9.4 TimesSquare Small Cap Growth Rank 68 77 77 67 66 15 26 81 24 38 7 47 41 1 34 13 TimesSquare Small Cap Growth Russell 2000 Growth Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 10.0 12.0 14.0 16.0 Return (%)12.4 12.6 12.8 13.0 13.2 13.4 13.6 13.8 Risk (Standard Deviation %) Russell 2000 Growth Index TimesSquare Small Cap Growth Average Active Weight 0.0 10.0 20.0-10.0-20.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.8 0.1 -2.5 -2.4 2.4 8.0 -7.8 -1.2 1.5 -2.5 0.2 5.0 Allocation (Total: 1.0) 0.0 0.6 1.2 1.8-0.6-1.2 0.0 0.0 0.0 -0.1 -0.1 0.6 0.8 -0.2 0.1 0.0 0.0 -0.2 Stock (Total: -1.7) 0.0 0.9 1.8-0.9-1.8 0.0 0.0 -0.1 0.0 0.7 -0.5 -0.3 -0.2 -0.3 0.0 -0.9 0.0 TimesSquare Small Cap Growth 0.0 0.6 1.2 1.8-0.6-1.2-1.8 0.0 0.0 -0.1 -0.1 0.7 0.2 0.5 -0.4 -0.3 0.0 -0.9 -0.2 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 51 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)2,210 2,169 Median Mkt. Cap ($M)1,858 879 Price/Earnings ratio 31.8 26.4 Price/Book ratio 3.6 3.8 5 Yr. EPS Growth Rate (%)12.5 13.5 Current Yield (%)0.8 0.8 Debt to Equity 0.7 0.8 Number of Stocks 91 1,177 Beta (5 Years, Monthly)0.84 1.00 Consistency (5 Years, Monthly)45.00 1.00 Sharpe Ratio (5 Years, Monthly)0.92 0.91 Information Ratio (5 Years, Monthly)-0.36 - Up Market Capture (5 Years, Monthly)84.82 - Down Market Capture (5 Years, Monthly)81.28 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) On Assignment Inc 2.4 0.3 2.1 21.7 Bright Horizons Family Solutions Inc 2.2 0.3 1.9 4.7 j2 Global Inc 2.2 0.4 1.8 23.4 MKS Instruments Inc 2.0 0.0 2.0 19.8 Monro Muffler Brake Inc 2.0 0.2 1.8 -6.2 Albany International Corp.1.9 0.0 1.9 9.6 WEX Inc 1.9 0.0 1.9 3.2 Kennedy-Wilson Holdings Inc 1.7 0.1 1.6 -8.5 PRA Health Sciences Inc 1.6 0.1 1.5 -2.5 WageWorks Inc 1.6 0.3 1.3 19.0 % of Portfolio 19.5 1.7 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 2.1 97.9 0.03.6 91.4 5.0 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 Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 5.0 0.6 2.0 4.3 2.4 27.8 25.2 12.4 1.5 3.4 1.4 14.0 0.0 0.8 0.8 5.5 5.2 24.4 16.8 20.9 5.6 1.4 3.1 15.4 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of December 31, 2016 52 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Morgan Stanley International Equity -2.4 -2.0 -2.0 -2.6 5.9 1.5 0.4 -6.1 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 22.5 MSCI EAFE Index -0.7 1.0 1.0 -1.6 6.5 0.7 -0.8 -4.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3 IM International Equity -3.8 1.8 1.8 -2.1 5.5 1.0 -2.8 -4.5 17.3 18.6 -14.9 12.9 36.4 -46.0 13.2 26.2 Morgan Stanley International Equity Rank 35 79 79 60 45 40 31 68 38 40 7 89 92 3 70 78 Morgan Stanley International Equity MSCI EAFE Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 4.8 5.4 6.0 6.6 7.2 7.8 Return (%)10.0 10.4 10.8 11.2 11.6 12.0 12.4 Risk (Standard Deviation %) MSCI EAFE Index Morgan Stanley International Equity Average Active Weight 0.0 20.0 40.0-20.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -3.7 -2.4 -2.9 0.2 1.1 -3.0 3.7 -4.2 -2.5 18.5 -7.0 2.1 Allocation (Total: -2.2) 0.0 1.0-1.0-2.0-3.0 0.2 0.1 0.2 0.0 0.0 0.0 -0.3 -0.4 -0.3 -1.7 -0.2 0.0 Stock (Total: 1.3) 0.0 0.8 1.6-0.8-1.6 0.0 0.0 0.2 -0.2 0.2 0.0 0.7 -0.4 -0.1 1.0 0.1 0.0 Morgan Stanley International Equity 0.0 0.5 1.0-0.5-1.0-1.5 0.2 0.1 0.4 -0.2 0.2 0.0 0.4 -0.8 -0.4 -0.7 -0.1 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 53 Total Attribution 0.0 0.5 1.0 1.5 2.0 2.5 3.0-0.5-1.0-1.5-2.0-2.5-3.0-3.5-4.0 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash 1.4 0.0 0.0 0.1 -2.2 -0.8 0.0 0.0 Performance Attribution Average Active Weight 0.0 15.0 30.0-15.0-30.0-45.0 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash -18.7 0.0 2.5 -0.7 14.8 -0.8 0.9 2.1 Allocation (Total: -0.4) 0.0 0.2-0.2-0.4-0.6 0.1 0.0 -0.2 0.1 -0.2 0.0 0.0 0.0 Stock (Total: -1.3) 0.0 2.0 4.0-2.0-4.0 1.3 0.0 0.2 0.0 -2.0 -0.7 0.0 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index 1 Quarter Ending December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 54 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)80,554 53,714 Median Mkt. Cap ($M)28,834 8,882 Price/Earnings ratio 18.5 18.1 Price/Book ratio 3.1 2.2 5 Yr. EPS Growth Rate (%)7.6 4.0 Current Yield (%)1.7 3.2 Debt to Equity 8.2 2.2 Number of Stocks 58 930 Beta (5 Years, Monthly)0.89 1.00 Consistency (5 Years, Monthly)40.00 1.00 Sharpe Ratio (5 Years, Monthly)0.52 0.53 Information Ratio (5 Years, Monthly)-0.21 - Up Market Capture (5 Years, Monthly)91.17 - Down Market Capture (5 Years, Monthly)91.96 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) British American Tobacco PLC 4.7 0.9 3.8 -10.8 UNILEVER NV 4.5 0.0 4.5 N/A Reckitt Benckiser Group PLC 4.3 0.4 3.9 -10.7 Nestle SA, Cham Und Vevey 4.2 1.8 2.4 -9.0 Glaxosmithkline PLC 4.0 0.8 3.2 -10.0 L'Oreal S.A., Paris 3.9 0.4 3.5 -3.2 NOVARTIS AG 3.8 0.0 3.8 N/A JAPAN TOBACCO INC 3.2 0.0 3.2 N/A Pernod-Ricard 3.1 0.2 2.9 -7.4 Roche Holding AG 3.1 1.3 1.8 -7.9 % of Portfolio 38.8 5.8 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 23.6 42.0 29.5 4.9 39.3 32.7 23.8 4.1 Sector Weights (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 8.0 16.0 24.0 32.0 40.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.0 2.6 0.7 9.1 6.9 12.6 16.5 11.0 2.6 32.3 5.7 3.4 4.5 3.7 7.9 5.5 14.0 10.7 21.2 5.5 11.2 12.5 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 55 Morgan Stanley International Equity MSCI EAFE Index Australia 0.0 7.4 Hong Kong 0.6 3.1 Japan 20.8 24.1 New Zealand 0.0 0.2 Singapore 0.0 1.2 Pacific 21.4 36.0 Austria 0.0 0.2 Belgium 0.0 1.2 Finland 0.0 1.0 France 13.0 10.2 Germany 7.7 9.3 Ireland 2.6 0.5 Italy 0.5 2.1 Netherlands 7.5 3.2 Portugal 0.0 0.2 Spain 0.0 3.1 EMU 31.3 30.9 Denmark 0.0 1.6 Norway 0.0 0.7 Sweden 1.2 2.8 Switzerland 13.4 8.7 United Kingdom 26.8 18.4 Europe ex EMU 41.5 32.2 Canada 2.6 0.0 United States 1.9 0.2 Israel 0.0 0.7 Middle East 0.0 0.7 Developed Markets 98.6 100.0 Morgan Stanley International Equity MSCI EAFE Index Brazil 0.0 0.0 Cayman Islands 0.0 0.0 Chile 0.0 0.0 Colombia 0.0 0.0 Mexico 0.0 0.0 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 0.0 0.0 China 1.4 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 1.4 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 1.4 0.0 Frontier Markets 0.0 0.0 Cash 0.0 0.0 Other 0.0 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 56 Historical Performance Buy and Hold Attribution Risk and Return (Jan - 2012 - Dec - 2016)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Morgan Stanley Emerging Markets -7.9 6.7 6.7 -2.9 1.7 1.0 -10.3 -4.5 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 38.0 MSCI Emerging Markets Index -4.2 11.2 11.2 -2.6 1.3 1.8 -14.9 -2.2 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 32.2 IM Emerging Markets Equity -5.2 8.3 8.3 -3.0 1.5 1.1 -14.2 -2.9 -1.4 18.8 -19.5 18.3 72.8 -54.6 36.8 32.3 Morgan Stanley Emerging Markets Rank 81 59 59 50 45 56 25 69 46 32 35 48 62 69 21 12 Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 0.4 0.8 1.2 1.6 2.0 2.4 Return (%)11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 Risk (Standard Deviation %) MSCI Emerging Markets Index Morgan Stanley Emerging Markets Average Active Weight 0.0 5.0 10.0-5.0-10.0 Utilities Telecommunication Services Real Estate Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.1 -0.3 -1.4 0.4 -0.2 -1.9 3.3 -0.6 -1.1 -4.8 2.0 4.0 2.7 Allocation (Total: -0.7) 0.0 0.4-0.4-0.8-1.2 0.0 0.0 0.1 0.0 0.0 0.0 -0.1 0.0 0.0 -0.6 -0.1 -0.2 0.1 Stock (Total: -2.9) 0.0 0.6-0.6-1.2-1.8 -0.1 -0.1 -0.1 0.0 -0.4 -0.7 -0.2 -0.1 -1.0 -0.1 -0.2 0.1 0.0 Morgan Stanley Emerging Markets 0.0 0.5 1.0-0.5-1.0-1.5-2.0 0.0 -0.1 0.0 0.0 -0.5 -0.7 -0.2 0.0 -1.0 -0.7 -0.3 -0.2 0.1 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2016 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 57 Total Attribution 0.0 0.4 0.8 1.2-0.4-0.8-1.2-1.6-2.0-2.4-2.8-3.2 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -0.1 -0.1 -0.1 0.2 0.0 0.1 -0.6 -1.2 -2.1 0.1 Performance Attribution Average Active Weight 0.0 6.0 12.0-6.0-12.0-18.0-24.0 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash 1.6 2.6 1.9 1.4 0.7 3.9 2.6 -5.1 -12.5 2.7 Allocation (Total: 0.1) 0.0 0.3 0.6-0.3-0.6-0.9 -0.1 -0.1 -0.1 0.2 0.0 0.1 0.1 -0.3 0.2 0.1 Stock (Total: -4.0) -3.5 -2.8 -2.1 -1.4 -0.7 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 -0.7 -0.9 -2.3 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index 1 Quarter Ending December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 58 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)39,699 48,996 Median Mkt. Cap ($M)6,125 4,713 Price/Earnings ratio 16.3 13.5 Price/Book ratio 2.7 2.3 5 Yr. EPS Growth Rate (%)11.0 8.7 Current Yield (%)2.2 2.6 Debt to Equity 0.9 0.9 Number of Stocks 146 832 Beta (5 Years, Monthly)0.85 1.00 Consistency (5 Years, Monthly)50.00 1.00 Sharpe Ratio (5 Years, Monthly)0.19 0.15 Information Ratio (5 Years, Monthly)0.04 - Up Market Capture (5 Years, Monthly)85.20 - Down Market Capture (5 Years, Monthly)82.48 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Tencent Holdings LTD 4.8 3.5 1.3 -10.9 Taiwan Semiconductor Manufacturing 3.1 3.5 -0.4 -3.8 China Mobile Ltd 2.2 1.7 0.5 -12.4 China Construction Bank Corp 2.2 1.6 0.6 3.8 Naspers Ltd 2.0 1.6 0.4 -14.7 Credicorp Ltd 1.8 0.3 1.5 3.7 Banco Bradesco Sa Brad 1.5 0.6 0.9 -2.2 Alibaba Group Holding Ltd 1.5 2.5 -1.0 -17.0 Samsonite International SA 1.5 0.0 1.5 -11.0 Fomento Economico Mex 1.5 0.4 1.1 -16.6 % of Portfolio 22.1 15.7 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 17.6 26.6 37.7 18.2 14.6 17.6 38.7 29.1 Sector Weights (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 6.0 12.0 18.0 24.0 30.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 0.7 5.4 1.5 7.6 19.2 9.8 1.2 25.7 1.9 10.3 16.7 2.9 5.9 2.6 7.4 23.2 5.8 2.5 24.4 7.9 7.2 10.3 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 59 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Australia 0.0 0.0 Hong Kong 1.2 0.4 Japan 0.6 0.0 New Zealand 0.0 0.0 Singapore 0.0 0.0 Pacific 1.8 0.4 Austria 1.7 0.0 Belgium 0.0 0.0 Finland 0.0 0.0 France 0.0 0.0 Germany 0.5 0.0 Ireland 0.0 0.0 Italy 0.0 0.0 Netherlands 1.2 0.0 Portugal 0.9 0.0 Spain 0.0 0.0 EMU 4.3 0.0 Denmark 0.0 0.0 Norway 0.0 0.0 Sweden 0.0 0.0 Switzerland 0.7 0.0 United Kingdom 0.9 0.0 Europe ex EMU 1.7 0.0 Canada 0.0 0.0 United States 1.6 0.0 Israel 0.0 0.0 Middle East 0.0 0.0 Developed Markets 9.4 0.4 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Brazil 6.5 7.7 Cayman Islands 0.0 0.0 Chile 0.7 1.2 Colombia 0.8 0.5 Mexico 6.0 3.5 Peru 2.4 0.4 Virgin Islands 0.0 0.0 EM Latin America 16.4 13.3 China 18.3 26.2 India 10.0 8.3 Indonesia 4.8 2.6 Korea 8.6 14.5 Malaysia 0.0 2.5 Philippines 3.9 1.2 Taiwan 10.0 12.1 Thailand 1.7 2.3 EM Asia 57.2 69.8 Czech Republic 1.0 0.2 Egypt 0.4 0.1 Greece 0.0 0.4 Hungary 0.0 0.3 Poland 2.9 1.1 Qatar 0.0 0.9 Russia 0.6 4.5 South Africa 5.6 7.1 Turkey 1.0 1.0 United Arab Emirates 0.0 0.9 EM Europe + Middle East + Africa 11.4 16.6 Emerging Markets 85.0 99.6 Frontier Markets 2.8 0.0 Cash 0.0 0.0 Other 2.8 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of December 31, 2016 _______________________________ Holdings as of September 30, 2016 as more recent data was unavailable at time of report production. 60 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Monthly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Income Research -2.0 2.3 2.3 2.2 2.3 4.5 0.9 3.3 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 4.5 Barclays Intermediate U.S. Government/Credit -2.1 2.1 2.1 2.1 1.8 3.8 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 4.1 IM U.S. Intermediate Duration Fixed Income -1.2 1.8 1.8 1.6 1.4 3.3 0.4 2.2 -1.3 2.9 5.0 5.1 7.3 1.9 5.7 3.7 Income Research Rank 75 35 35 20 21 6 20 33 41 17 40 23 20 53 8 10 Income Research Barclays Intermediate U.S. Government/Credit 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 1.6 2.0 2.4 2.8 3.2 Return (%)2.0 2.1 2.2 2.3 2.4 Risk (Standard Deviation %) Barclays Intermediate U.S. Government/Credit Income Research Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Income Research 2.3 2.2 2.2 0.5 1.0 1.0 0.4 1.0 1.3 56.7 19y 11m Barclays Intermediate U.S. Government/Credit 1.8 2.2 1.8 0.0 1.0 0.8 0.0 N/A 1.3 0.0 19y 11m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.1 -0.8 0.0 41.7 19y 11m Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2016 61 Portfolio Characteristics Portfolio Benchmark Effective Duration 3.9 4.1 Avg. Maturity 4.6 4.4 Avg. Quality AA-AA Yield To Maturity (%)2.3 2.1 Credit Quality Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 20.0 40.0 60.0 80.0 AAAAAABBB63.3 6.3 13.5 16.9 55.1 4.2 15.9 24.8 Maturity Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs0.0 36.6 29.0 34.4 0.0 15.1 15.9 36.8 28.7 3.5 Sector Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.2 3.9 26.9 0.0 0.0 11.0 2.0 0.0 0.0 0.0 0.0 32.0 0.0 40.8 0.4 7.1 0.0 0.0 2.9 1.3 5.4 10.1 Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of December 31, 2016 62 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Monthly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Prudential Core Plus Bond Fund -2.8 5.8 5.8 4.2 4.4 5.9 -0.1 7.1 -1.0 10.6 7.6 9.6 18.7 -2.1 4.6 5.1 Blmbg. Barc. U.S. Aggregate -3.0 2.6 2.6 3.0 2.2 4.3 0.5 6.0 -2.0 4.2 7.8 6.5 5.9 5.2 7.0 4.3 IM U.S. Broad Market Core+ Fixed Income -2.4 4.2 4.2 2.9 3.1 4.9 -0.3 5.4 -1.1 8.2 6.0 8.3 14.5 -2.4 5.4 4.1 Prudential Core Plus Bond Fund Rank 89 16 16 9 7 5 42 12 49 11 20 30 27 48 77 18 Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 -2.0 0.0 2.0 4.0 6.0 8.0 Return (%)2.4 2.7 3.0 3.3 3.6 3.9 4.2 4.5 Risk (Standard Deviation %) Blmbg. Barc. U.S. Aggregate Prudential Core Plus Bond Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Prudential Core Plus Bond Fund 4.4 3.7 4.3 1.7 1.2 1.1 1.6 1.3 2.3 61.7 17y 7m Blmbg. Barc. U.S. Aggregate 2.2 2.9 2.2 0.0 1.0 0.8 0.0 N/A 1.8 0.0 17y 7m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.9 -0.8 0.0 38.3 17y 7m Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of December 31, 2016 63 Portfolio Characteristics Portfolio Benchmark Effective Duration 6.3 5.9 Avg. Maturity 7.3 8.2 Avg. Quality A-AA+ Yield To Maturity (%)4.2 2.6 Credit Quality Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated70.8 4.8 10.9 13.5 0.0 0.0 0.0 0.0 37.8 4.7 13.2 23.5 8.6 8.1 0.9 3.2 Maturity Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 15.0 30.0 45.0 60.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 20.8 20.0 43.9 3.5 11.810.4 13.6 23.4 38.3 3.9 10.5 Sector Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 15.0 30.0 45.0 60.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS36.2 3.2 21.6 0.0 28.1 0.5 7.0 1.8 0.0 0.0 0.0 1.6 6.3 0.7 29.4 12.1 3.0 20.8 1.7 5.1 0.9 5.4 2.8 11.9 Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of December 31, 2016 64 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Monthly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Brandywine Global Opportunistic Fixed Income -6.2 5.2 5.2 0.8 2.4 5.4 -8.4 6.3 -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 8.4 Citigroup World Government Bond Index -8.5 1.6 1.6 -0.8 -1.0 3.0 -3.6 -0.5 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 6.1 IM Global Fixed Income -3.9 3.4 3.4 0.4 1.4 3.8 -3.7 2.0 -2.5 7.4 4.0 6.1 12.0 -2.5 7.5 5.7 Brandywine Global Opportunistic Fixed Income Rank 62 22 22 42 28 5 97 11 71 5 8 1 23 73 2 1 Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0 25 50 75 100Return Percentile Rank3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 12/16 -6.0 -3.0 0.0 3.0 6.0 9.0 Return (%)6.2 6.4 6.6 6.8 7.0 7.2 Risk (Standard Deviation %) Citigroup World Government Bond Index Brandywine Global Opportunistic Fixed Income Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Brandywine Global Opportunistic Fixed Income 2.4 7.5 2.6 3.6 1.0 0.3 5.1 0.7 5.0 56.7 12y Citigroup World Government Bond Index -1.0 5.3 -0.9 0.0 1.0 -0.2 0.0 N/A 4.1 0.0 12y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 5.3 0.2 0.0 53.3 12y Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of December 31, 2016 65 Portfolio Characteristics Portfolio Benchmark Effective Duration 6.5 7.8 Avg. Maturity 12.4 8.9 Avg. Quality A AA- Yield To Maturity (%)4.4 1.1 Credit Quality Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow B12.5 51.6 23.7 12.2 0.0 0.0 0.0 13.2 28.3 27.4 21.0 8.9 0.6 0.6 Maturity Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 15.0 30.0 45.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 24.3 20.0 26.4 14.7 14.7 10.3 17.7 6.5 23.3 12.2 30.0 Sector Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditHigh YieldMBSNon-USEmergingMunicipalsCashOther34.6 0.0 0.0 0.0 0.0 65.4 0.0 0.0 0.0 0.0 8.1 0.0 16.9 0.1 2.2 40.2 18.1 0.8 0.0 13.6 Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of December 31, 2016 66 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Quarterly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Lighthouse Global Long/Short Fund Limited 0.7 0.2 0.2 4.1 7.5 4.8 7.4 4.9 20.2 6.1 -2.1 5.2 10.1 -14.1 13.9 11.3 HFRI Equity Hedge (Total) Index 1.2 5.4 5.4 2.1 5.5 2.9 -1.0 1.8 14.3 7.4 -8.4 10.5 24.6 -26.7 10.5 11.7 Rolling 3 Years Active Return Quarterly Active Return 0.0 8.0 16.0 -8.0 -16.0Active Return (%)3/04 6/05 9/06 12/07 3/09 6/10 9/11 12/12 3/14 6/15 12/16 2.0 4.0 6.0 8.0 10.0 12.0 Return (%)4.5 4.8 5.1 5.4 5.7 6.0 6.3 6.6 6.9 7.2 Risk (Standard Deviation %) HFRI Equity Hedge (Total) Index Lighthouse Global Long/Short Fund Limited Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Lighthouse Global Long/Short Fund Limited 7.5 5.1 7.4 4.0 0.6 1.4 4.0 0.5 2.4 55.0 13y HFRI Equity Hedge (Total) Index 5.5 6.2 5.5 0.0 1.0 0.9 0.0 N/A 3.6 0.0 13y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.2 -0.9 0.0 30.0 13y Manager Evaluation Lighthouse Global Long/Short Fund Limited vs. HFRI Equity Hedge (Total) Index As of December 31, 2016 67 Portfolio Characteristics Portfolio Manager Count 30 Net Exposure %19.3 Leverage 122.6 # Managers Funded 5 # Managers Redeemed 0 Region Allocation (Net Geographic Exposure) Asia 13.1% Europe 19.2% Latin America 7.6% United States 60.1% Strategy Allocation Value 9.4% Trading 21.5% Event Driven 17.4% Sector Specialist 51.7% Manager Evaluation Lighthouse Global Long/Short Fund Limited As of December 31, 2016 68 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Quarterly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Entrust Capital Diversified Fund 0.3 -1.1 -1.1 -2.3 2.5 2.8 -7.3 1.8 13.2 7.4 -4.7 11.1 35.2 -26.0 9.9 12.8 HFRI Fund of Funds Composite Index 0.9 0.5 0.5 1.2 3.4 1.3 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 10.4 Rolling 3 Years Active Return Quarterly Active Return 0.0 6.0 12.0 18.0 -6.0 -12.0Active Return (%)12/03 3/05 6/06 9/07 12/08 3/10 6/11 9/12 12/13 3/15 12/16 0.8 1.6 2.4 3.2 4.0 4.8 Return (%)2.8 3.2 3.6 4.0 4.4 4.8 5.2 5.6 6.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Entrust Capital Diversified Fund 2.5 5.2 2.6 -1.2 1.1 0.5 2.8 -0.3 3.4 35.0 13y 3m HFRI Fund of Funds Composite Index 3.4 3.9 3.4 0.0 1.0 0.9 0.0 N/A 2.4 0.0 13y 3m 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.9 -0.9 0.0 15.0 13y 3m Manager Evaluation Entrust Capital Diversified Fund vs. HFRI Fund of Funds Composite Index As of December 31, 2016 69 Portfolio Characteristics Portfolio Manager Count 28 Net Exposure %44.4 Leverage 138.4 # Managers Funded 0 # Managers Redeemed 0 Region Allocation (Net Geographic Exposure) Asia -0.5 % Europe 17.8% Latin America -2.6 % US/Canada 85.3% Strategy Allocation Trading 3.0% Special Situations 10.3% Opportunistic 14.8% Long/Short 8.4% Activist 19.6% Credit 17.4% Event Driven 26.5% Manager Evaluation Entrust Capital Diversified Fund As of December 31, 2016 70 Historical Performance Comparative Performance and Rolling Return Risk and Return (Jan-2012 - Dec-2016) Historical Statistics - Quarterly Periodicity (Jan-2012 - Dec-2016) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 UBS Trumbull Property Fund 1.2 6.0 6.0 9.3 9.2 4.9 11.7 10.4 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 15.6 NCREIF Property Index 1.7 8.0 8.0 11.0 10.9 6.9 13.3 11.8 11.0 10.5 14.3 13.1 -16.8 -6.5 15.8 16.6 Rolling 3 Years Active Return Quarterly Active Return 0.0 5.0 10.0 -5.0 -10.0Active Return (%)3/78 6/81 9/84 12/87 3/91 6/94 9/97 12/00 3/04 6/07 9/10 12/13 12/16 6.0 8.0 10.0 12.0 14.0 Return (%)0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 Risk (Standard Deviation %) NCREIF Property Index UBS Trumbull Property Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date UBS Trumbull Property Fund 9.2 1.2 8.9 -1.6 1.0 7.4 0.8 -2.0 0.0 20.0 39y NCREIF Property Index 10.9 0.9 10.4 0.0 1.0 11.3 0.0 N/A 0.0 0.0 39y 90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.5 0.0 N/A 0.9 -11.3 0.0 0.0 39y Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of December 31, 2016 71 Portfolio Characteristics Portfolio Benchmark # Properties 219 7,362 # Investors 447 N/A Total Fund Assets 19,700 525,274 Property Type UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 OfficeApartmentRetailIndustrialHotel36.8 24.3 23.6 14.4 1.0 30.0 31.0 23.0 12.0 4.0 Property Location UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 EastWestSouthMidwest33.8 37.8 19.6 8.9 34.0 38.0 15.0 13.0 Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of December 31, 2016 72 Type City Ac quis ition Da te % Occupa nc y Cos t ($000) Fa ir Market Value ($000) Offic e Bo ston Dec-11 76%662,542$ 759,000$ Offic e Ne w York Ju n-06 82%665,687$ 631,000$ Re tail Ca mb rid ge May-89 96%294,802$ 600,820$ Re tail Da lla s Dec-02 94%420,355$ 588,782$ Apartme nts Ne w York Ju l-11 97%391,572$ 524,000$ Offic e Ne w York Ju l-11 93%214,214$ 512,537$ Offic e Ch ic ag o Dec-11 93%409,683$ 505,009$ Re tail Ch ic ag o No v-13 96%230,879$ 481,459$ Offic e Ne w York Se p-14 93%283,241$ 468,031$ As of S epte mber 30,2016* 20 La rge st Inve st me nts Manager Evaluation UBS Trumbull Property Fund As of December 31, 2016 Offic e Ne w York Se p-14 93%283,241$ 468,031$ Offic e Po rt la nd Aug-15 97%375,191$ 411,602$ Re tail Eme ry ville Aug-14 95%308,232$ 319,000$ Re tail Montebello Dec-88 97%190,068$ 317,000$ Offic e Se attle Oc t-84 98%242,705$ 314,000$ Offic e Sa n Fra ncis co Dec-85 94%170,203$ 293,744$ Offic e De nver Ju n-06 91%186,158$ 289,000$ Offic e Pa sadena May-84 88%190,225$ 243,000$ Offic e Washin gton Ju n-15 96%246,786$ 239,000$ Offic e De nver Apr-82 96%156,037$ 210,000$ Re tail Millb ury Se p-04 99%156,000$ 208,800$ Offic e Pleas anton Dec-03 100%202,474$ 201,000$ All o ther in vestme nts ----11,986,731$ 14,532,301$ To tal Properties 17,983,786$ 22,649,084$ *Data not yet available for most recent quarter. 73 Calendar Year Performance 74 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Total Composite 5.1 -0.7 2.9 10.9 12.1 1.2 11.2 20.2 -20.2 10.7 Policy Benchmark 6.6 -1.4 3.5 12.3 11.6 1.1 11.5 19.5 -20.6 8.3 Total Equity Composite 6.3 0.5 4.7 N/A N/A N/A N/A N/A N/A N/A MSCI AC World Index 7.9 -2.4 4.2 22.8 16.1 -7.3 12.7 34.6 -42.2 11.7 Domestic Equity Composite 9.6 1.9 10.1 N/A N/A N/A N/A N/A N/A N/A Russell 3000 Index 12.7 0.5 12.6 33.6 16.4 1.0 16.9 28.3 -37.3 5.1 International Equity Composite 0.3 -2.0 -5.5 N/A N/A N/A N/A N/A N/A N/A MSCI AC World ex USA Index 4.5 -5.7 -3.9 15.3 16.8 -13.7 11.2 41.4 -45.5 16.7 Fixed Income Composite 4.2 -2.1 2.4 -1.7 10.9 3.8 8.7 18.9 -3.4 6.4 Barclays Intermediate U.S. Government/Credit 2.1 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 Hedge Funds Composite -0.4 N/A N/A N/A N/A N/A N/A N/A N/A N/A HFRI Fund of Funds Composite Index 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 Calendar Year Performance Composite Performance As of December 31, 2016 _________________________ See appendix for a description of the benchmarks and universe. Performance is reported net of fees. 75 Appendix 76 Current Manager Fee Schedule Fe e (%) Domest ic Eq uity Van gu ard Windsor II $12,835,945 5.1 0.25 0.77 US Large Cap Valu e $ 32,090 Van gu ard Inst it ut io nal Index $16,867,477 6.7 0.04 0.16 US Passive Large Cap Equit y $ 6,747 T.Rowe Price $12,247,106 4.9 0.57 0.80 US Large Cap Growth $ 69,809 Holland $9,939,285 4.0 0.80 0.70 US Large Cap Growth $ 79,514 Kennedy $8,622,421 3.4 0.90 0.75 US Mid Cap Valu e $ 77,602 Times Sq uare $8,131,044 3.2 1.04 1.02 US Small Cap Growth $ 84,563 Inte rna ti ona l Equity Morgan Stanley Int ernational $26,020,030 10.4 0.95 0.95 All EA FE Equit y $ 247,190 Morgan Stanley Emergi ng Markets $9,876,496 3.9 1.05 1.17 Emerging Mkts Eq uit y $ 103,703 Fixed Income Income Res earch $35,632,939 14.2 0.30 0.30 US Core Fixed Income $ 106,899 Prudent ial $29,118,894 11.6 0.30 0.35 US Core Plus Fixe d Income $ 87,357 Brandy wine $21,990,783 8.8 0.45 0.40 Global A gg F ixed Income $ 98,959 He dge Funds* Total Assets ($millions )% o f Tota l Proje cted Annua l Fe e eVestment Allia nc e Un ive rse Media n eVestment Allianc e Universe * Incentive fees may be paid to underlying hedge fund managers of 15-20% of the profits above a certain threshold on a manager by manager basis He dge Funds* Light hous e $18,155,711 7.2 1.85 N/A N/A $ 335,881 Ent rust $16,179,165 6.4 2.78 N/A N/A $ 449,781 Re al Esta te UBS Trumbull $23,229,927 9.2 1.00 N/A N/A $ 232,299 Ca sh Money Market $2,307,915 0.9 0.20 0.20 US Cash M anagemen t $ 4,616 Pavilion-Consult ing Fee $ 118,836 US Bank Cust ody and Benefit Payment Fee $ 78,146 Total $251,155,138 100.0 %0.88%$ 2,213,990 77 2013 Acti on Sep tember •The M et rop olit an St . Louis Sewer District hired Pavilion Advisory Group as their invest ment consult ant. 2014 Acti on February •Pavilion p resent ed an asset allocat ion and investment and manager struct ure review to the F inance Commit tee.Pavilion recommended t he adop tion of new asset allocat ion targe ts and allowable ranges that would p ermit the eliminat ion of t he tact ical as set allocat ion and market neut ral s trat egies , the ad dit ion of hedge fund strat egies through hedge f und of funds, and the reduction of t he number of managers and exposure to high yield and non- US debt in the fixed income p ortfolio. T he following asset allocat ion s tructure was p rop os ed: 40% Equit y 35% Fixed Income 25% Alt ernatives Appendix History of Investment Decisions Given Pyramis ' p oor p er formance and rapidly declining as sets in the s trat egy,Pavilion furt her recommended the manager be t erminat ed immediat ely . T he Commit tee ap proved these recommendations. Sep tember •Pavilion downgraded PIM CO’s manager rating stat us from “negat iv e w at ch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat iv e w at ch” in January following the dep art ure of co-CIO Mohamed El-Erian, and noted we would closely monit or t he firm for organiz at ional s tabilit y,asset 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/Short Fund which was support ed by Metrop olit an St Louis Sew er St aff. T he F und rep laced PIMCO All Asset Fund on M arch 1, 2015. 78 2015 Acti on May •Pavilion recommended liquidat ing the t he Pict et Local Currency Emerging Market Debt Fund, Loomis Sayles Credit Fund and the Penn Capital High Yi eld Fund and inves ting the p roceeds int o the Prudent ial T otal Ret urn Fund. T he recommendation is support ed by the Office of t he Secr et ary Treas urer and t he Investment Commit tee.The F inance Commit tee ap proved t he recommendat io n t o go t o t he Board of T rus tees . Pavilion p rovided t he Finance Commit tee w it h a revised St at ement of Investment Policy , Object iv es an d Op erat ing Guidelines . T he p olicy was reviewed with and sup port ed by the O ffice of t he Secr et ary Treas urer. T he Finance Commit tee requested addit ional t ime t o review the document . June •Pavilion recommended liquidat ing the G MO Asset Allocat ion Fund and investing the p roceeds in t he Light house G lobal Long/Short Eq uit y Fund and t he Entrust Diversified Hedge F und of F unds. T he recommendat ion was support ed by the O ffice of t he Secret ary Treas urer and t he Investment Commit tee.The F inance Commit tee ap proved t he recommendation t o go t o t he Board of T rustees . T he Finance Commit tee review ed and ap proved t he revised Statement of Investment Policy , O bject ives and Op erat ing G uidelines provided at the M ay meet in g.The r ev is ed Investment Policy document was approved by the Board of T rustees . Appendix History of Investment Decisions 2016 Acti on Novemb er •Pavilion conducted a sear ch to replace t he pens ion p lan's large -cap managers with an index s trat egy.The Finance Commit tee agreed to liq uidat e all four of its large -cap managers, which include T . Rowe P rice Large -Cap Core Growth, Van gu ard S&P 500, Vanguard Windsor II and Holland, and use thes e funds t o p urchase s hares in a Blackrock Russell 1000 P assive U.S.Equit y CIT . December •Wellingt on Divers ified Inflat ion Hedges was terminat ed and p roceeds were moved t o t he UBS T rumbull Prop erty Fund. 79 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 August 1, 2015, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 5% We llington DIH Multi-Asset Inflation Index and 5% NCREIF Property Index. From March 1, 2015 to August 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield Cash Pay Index, 4% HFRI Equity Hedge (Total) Index, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE. 80 Policy Benchmark(Cont.) From April 1, 2014 to March 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield Cash Pay Index, 4% CPI+5%, 5% We llington DIH Benchmark, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index- OEDCE. Prior to April 1, 2014, the Policy Benchmark is comprised of 20% Russell 1000 Index, 5% Russell 2000 Index, 10% MSCI EAFE Index,3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yi eld Blend Index, 13% BC Intermediate Gov/Credit Index, , 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yi eld, Cash Pay Index, 5% 3 Month T-Bills + 3%, 4% CPI + 5%, 5% We llington DIH Multi-Asset Inflation Index, 5% JPM GBI-EM Global Diversified Index, and 5% NCREIF Fund Index-OEDCE. Note: Wellington DIH Multi-Asset Inflation Index consists of 50% MSCI ACW Commodity Producers Index, 25% DJ AIG Commodity To tal Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year Appendix Benchmark and Universe Descriptions Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year 81 This report contains confidential and proprietary information and is intended for the exclusive use of the parties to whom it was provided. Facts and information provided in this report are believed to be accurate at the time of preparation. However, certain information in this document has been provided to Pavilion Advisory Group Inc. (Pavilion) by third parties and subject to change at any time and based on market conditions. Although we believe this information is reliable, we have not independently verified the information. Returns are net of investment fees unless otherwise denoted. Returns for periods greater than one year are annualized. Mutual fund returns assume reinvestment of all distributions at net asset value (NAV) and deduction of fund expenses. Past performance does not guarantee future results. This document may include certain forward-looking statements that are based on current estimates and forecasts. Actual results could differ materially. Investing in securities products involves risk, including possible loss of principal as the value of investments fluctuates. This report is not to be reproduced, redistributed or retransmitted in any form without prior expressed written consent from Pavilion. ©2017 Pavilion Advisory Group Inc. All rights reserved. www.pavilioncorp.com Disclosures 82