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HomeMy Public PortalAbout2017 3rd Quarter ReportPerformance Review Metropolitan St. Louis Sewer District Pension Plan 3rd Quarter 2017 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL 60606 Phone: 312-798-3200 Fax: 312-902-1984 www.pavilioncorp.com 1 Capital Markets Review 1 2 Performance Summary 10 3 Asset Class Diversification 34 4 Manager Evaluation 42 5 Calendar Year Performance 70 6 Appendix 72 Table of Contents Capital Markets Review 1 Capital Markets Review Summary 5.3 4.5 5.7 5.4 6.9 7.9 3.5 1.8 0.8 0.7 2.0 0.3 1.1 2.5 2.2 1.2 0.8 18.7 18.6 20.7 19.1 20.2 22.5 11.0 -1.3 0.1 -1.3 9.1 0.6 2.6 -0.3 7.4 4.6 2.2 -5 0 5 10 15 20 25 MSCI Global ACWI IMI S&P 500 Russell 2000 MSCI EAFE S&P Dev ex U.S. SC MSCI EMF HFRI Equity Hedged* BBG Barclays Global Agg. BBG Barclays U.S. Agg. WGBI ex-U.S. Hedged BofAML High Yield Cons. 91-Day T-Bills NAREIT Bloomberg Commodity DJ Brookfield Global Infra. HFRI FoF:Cons.* CPI Performance: Past Quarter and Year (%) Past Quarter Past 12 Months * HFRI data are subject to revision. Source: FactSet & BloombergFixed Income (Bonds)Equities (Stocks)AlternativesAmid Noise,the Trend Persists During the third quarter,geopolitical events and natural disasters dominated the headlines,although financial markets proved resilient,focusing on improving economic data.Risk assets rose.Additionally,cyclical risks remain low across developed markets,which we believe should allow existing trends to remain intact. While natural disasters may shock near-term economic data,political actions in the U.S.and Europe have the potential to alter fundamentals.In the U.S.,tax cuts could produce a near-term benefit but escalating tensions with North Korea could challenge trade with China,a close ally to Pyongyang.In Europe,Brexit negotiations continue to loom,and while Angela Merkel won reelection,her party’s power decreased,a blow to pro-European Union policies. Strengthening corporate profits and economic data continue to bode well for global growth prospects.Consumer sentiment and corporate expectations have been particularly positive,capturing the rebound beginning in the middle of 2016,which has translated into hard data in 2017. Core inflation remains below target in most developed markets,but economic growth and advancing labor markets have encouraged central bank policy makers to publicly discuss the prospects for normalization.In September,the U.S.once again led the global central banks in announcing the reduction in its balance sheet,scheduled to be begin in October.Outside the U.S.,several central banks are contemplating or amending forward guidance.The European Central Bank,in particular,warrants monitoring,as missteps have the potential to repeat 2011’s mistakes. Domestically,the U.S.yield curve declined and flattened further,amid the Federal Open Market Committee (“FOMC”)announcement,which marginally detracted from intermediate duration bond performance.Within credit,improving economic conditions led to spread compression for most sectors,driving outperformance relative to similar duration Treasuries. Emerging market equity performance dominated in the third quarter and year-to-date (+27.8%).Developed equity markets also surged during the quarter and year-to-date periods,as widespread growth permeated economic fundamentals and expectations. After two down quarters,commodity prices turned up,led by industrial metals and energy sub-indices.Income-oriented strategies,like infrastructure,continued to generate positive performance;although,a flattening yield curve likely held back performance. 2 -1% 1% 3% 5% 7% 9% 11% -2100 -1600 -1100 -600 -100 400 900 Dec-00Aug-01Apr-02Dec-02Aug-03Apr-04Dec-04Aug-05Apr-06Dec-06Aug-07Apr-08Dec-08Aug-09Apr-10Dec-10Aug-11Apr-12Dec-12Aug-13Apr-14Dec-14Aug-15Apr-16Dec-16Y-O-Y % Change Real WagesJob Openings Less Hires (000’)Wage Growth Stagnant Jobs (lhs)Wages (rhs) 0.6 0.8 1.0 1.2 1.4 1.6 1.8 5% 10% 15% 20% 25% 30% 35% 40% 45%Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17Implied Basis Point VolatilityImplied Equity VolatilityImplied Volatilities at Post Crisis Lows S&P 500 Index Volatility (lhs)10-YR Rate Volatility (rhs) Capital Markets Review Asset Class Outlook Equities Equity markets continued their strong performance,reflecting the confluence of improving growth,ongoing financial accommodation,and constrained inflation.These factors have contributed to a world in which profit margins and earnings estimates rise, on the further strengthening in underlying fundamentals.These conditions have given rise to extremely steady markets,with the S&P 500 experiencing the lowest realized volatility in over 30 years.Option markets have reflected the current stability as implied volatility or option premiums plumbed to historically low levels.While some suggest these low levels of implied volatility reflect complacency among investors,we view them as the artifact of simple math.Specifically,asset prices move in response to changes in the present value of expected future cash flows.With growth steady and positive,there has been very little volatility in expected future cash flows,and with interest rates and inflation steady,there has been very little volatility in the discounting of future cash flows.The end result is low realized volatility.While these conditions will not last forever,current levels of implied volatility suggest persistence over the coming quarters. Fixed Income The FOMC held interest rates steady over the quarter,choosing instead to begin the process of balance sheet reduction.In addition to announcing the balance sheet reduction,Federal Reserve (“Fed”)officials revealed in their Summary of Economic Projections that they lowered their expectation for the long-run neutral funds rate to 2.8%and do not anticipate core inflation breaching the 2%target until 2020.All of these factors suggest the Fed will continue its patient process of interest rate normalization with one more rate hike this year and possibly as few as three next year.This patient approach to policy refinement also is being pursued by central banks in other developed markets and has allowed fixed income markets to duplicate the low volatility witnessed in equity markets.Fixed income returns are largely being driven by the income streams associated with the various sectors.In addition to accommodative monetary policy, yields on longer maturity bonds continue to receive support from structural and demographic factors that are likely to remain in place for the foreseeable future.While the biggest risk to the current environment is a policy misstep that would give way to a spike in interest rates,the catalyst for such an event is further in the future so we continue to view high quality duration as source of diversification and protection against unanticipated economic events. Real Assets Core inflation continues to remain constrained and below the 2%target in most developed markets,circumstances that are likely to persist for some time.One example holding back inflation is the absence of wage growth despite the increase in labor demand,as reflected by unfilled job openings.In the current low yield environment,we maintain our view that global listed infrastructure likely provides a diversifying income stream with a slightly lower volatility profile than commodities.We maintain a cautious view on REITs,due to historical correlations with long duration instruments. Source: Bloomberg Source: Bloomberg Source: FactSet as of October 6, 2017 87 74 62 87 99 105 111 119 119 120 131 146 160 40 60 80 100 120 140 160 180 CY2007CY2008CY2009CY2010CY2011CY2012CY2013CY2014CY2015CY2016CY2017CY2018CY2019Actual Estimates S&P 500 Calendar Year Bottom-up EPS Actuals & Estimates 3 460 465 470 475 480 485 490 495 10,000 10,100 10,200 10,300 10,400 10,500 10,600 10,700 10,800 10,900 11,000 Jun-9Jun-16Jun-23Jun-30Jul-7Jul-14Jul-21Jul-28Aug-4Aug-11Aug-18Aug-25Sep-1Sep-8Sep-15Sep-22Sep-29Oct-6PricePrice2017 Spanish Exchange Index - IBEX (lhs) MSCI ACWI (rhs) Capital Markets Review Key Market Risks Fixed Income Equities FinancialStressesValuationsCyclicalCurrent Risk Levels Source: Bloomberg Source: Bloomberg, FactSet, Recession Alert, & Pavilion AnalysisLowHigh Cyclical Risks Remain Low While Policy and Geopolitical Risks Persist Normalization of Monetary Policy:Since the financial crisis began 10 years ago,central bankers have deployed multiple policy mechanisms in an effort to enhance financial conditions.With improvements in global growth,policy makers have begun the process of plotting the removal of current levels of accommodation.Given the unique nature of the many policy measures undertaken during the crisis,the playbook for normalization has never been implemented,providing much uncertainty.Central bankers will be challenged by not only the timing but the pace of policy adjustments. Ongoing Threat from European Challenges: −The results of German elections may be felt for some time.Victories by the right will likely force Angela Merkel to form a coalition that will make strengthening the E.U. more difficult.Challenges include providing permanent debt relief for Greece. −The U.K.faces numerous headwinds.Rising inflation may force the hand of the Bank of England,raising interest rates prematurely.This comes at the time of falling real wages,as well as disruptions resulting from the lack of progress in Brexit negotiations. Additionally,there are growing concerns that burgeoning consumer debt may pose a threat to the financial system. −The Catalonian independence movement,and the resulting response from the Spanish government,is one more reminder of the simmering social unrest in Europe.While the impact of these events has largely been limited to Spanish markets,the risk of similar movements or contagion remains. Policy Misstep:The current administration faces many choices in terms of re-negotiating trade policy,the appointment of new Federal Reserve leadership,as well as efforts to revamp tax policy.Unexpected outcomes among any of these decisions presents the possibility for market disruptions. Economic Policy Uncertainty Remains Elevated in the European Union (1,000) (500) - 500 1,000 1,500 2,000 2,500 Sep-93Sep-94Sep-95Sep-96Sep-97Sep-98Sep-99Sep-00Sep-01Sep-02Sep-03Sep-04Sep-05Sep-06Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17Monthly Change in Millions Rapid Growth in U.K. Consumer Credit Raises Concerns Source: Bloomberg 4 32% 33% 34% 35% 36% 37% 38%Sep 1987Sep 1989Sep 1991Sep 1993Sep 1995Sep 1997Sep 1999Sep 2001Sep 2003Sep 2005Sep 2007Sep 2009Sep 2011Sep 2013Sep 2015Sep 201775 80 85 90 95 100 105 9/30/20133/31/20149/30/20143/31/20159/30/20153/31/20169/30/20163/31/20179/30/2017U.S. Dollar Spot Index-3 -2 -1 0 1 2 3 4 5 6 7 19901992199419961998200020022004200620082010201220142016PercentCPICore CPI Capital Markets Review Economy Hurricanes and Future Fed Actions Drive Sentiment Three major hurricanes battered the U.S.mainland and territories,causing property damage in excess of $100 billion.Florida saw damage to its electric grid and housing,Texas saw extensive housing and energy infrastructure damage,mainly due to flooding,while Puerto Rico absorbed two hurricanes that destroyed housing and infrastructure.The storms were a drag on third quarter GDP,as unemployment claims rose and economic activity slowed in these areas,while higher gasoline prices hit nationwide.Insurance companies likely will pass costs on to policyholders across the nation. All eyes on the Fed was a common occurrence during the quarter,as investors attempted to divine the FOMC’s course toward policy normalization.In the end,it is likely that the Fed will begin to slowly liquidate its balance sheet in Q4,with the next interest rate hike likely in December,and the possibility of additional rate hikes in 2018.The U.S.dollar’s slide eased in late September after expectations of a rate hike rose and the balance sheet liquidation was announced. Inflation and employment continued to perplex policymakers,as the accepted theory held that falling unemployment will lead to higher inflation.Currently,inflation remains below 2%and the unemployment rate,at 4.2%,is below the historical average.Employers have more open positions than seen in years,and the non-working labor force is diminishing, suggesting that more workers need to be employed before wage pressures exert further inflationary influence. Source: Federal Reserve Source: Bloomberg U.S. InflationU.S. Dollar Slide Eased at Quarter-End Source: Bureau of Labor Statistics Working Age Civilians Not in Labor Force 5 5.2%4.5%4.8%6.2%5.4% 7.9% 14.7% 2.7% 0.8% 3.0%3.8% 22.9% 17.3% 14.2% 16.0% 21.1%20.0% 27.8% 43.2% 32.2% 22.6%24.1% 12.1% 26.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% MSCI ACWI S&P 500 MSCI World MSCI ACWI x US MSCI EAFE MSCI EM China South Korea Taiwan India South Africa Brazil 3Q YTD Capital Markets Review Equities Source: FactSet, MSCISource: FactSet, S&P Third Quarter and YTD S&P 500 Sector Returns -1.3% -1.3% 0.8% 0.9% 3.7% 4.2% 4.5% 5.2% 6.0% 6.8% 6.8% 8.6% 6.6% 6.6% 11.9% 7.4% 20.3% 14.1% 14.2% 12.5% 15.8% -4.7% -6.6% 27.4% -10.0%-5.0%0.0%5.0%10.0%15.0%20.0%25.0%30.0% Cons Staples Utilities Cons Disc Real Estate Healthcare Industrials S&P 500 Financials Materials Telecom Energy Info Tech 3Q YTD Third Quarter and YTD World and Emerging Market Equity Returns 3.1% 2.1% 5.1% 5.9%5.5%5.9% 5.3% 6.2% 4.9% 10.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% U.S. Large Cap U.S. Mid Cap U.S. Small Cap Int'l Developed Emerging Mkts Value Growth Source: FactSet, MSCI, Russell Growth Continued to Outperformed Value in U.S. and Emerging Markets Growth in U.S.and Emerging Markets Led the Way in the Third Quarter The S&P 500 Index returned +4.5%during the third quarter,bringing the year-to-date return to +14.2%.Information Technology was the strongest contributor to performance for both the quarter and year-to-date periods.Energy and Telecom were the next best performing sectors during the quarter but remain the only sectors with negative returns year-to-date.Consumer Staples and Utilities were the only sectors to post a loss during the third quarter. Most developed market equity indices provided returns in the +4%to +6%range during the third quarter.Emerging Market equities were slightly higher,returning +7.9%,led by Brazil and China.year-to-date,the key regional indices all provided double digit returns, with the foreign markets benefitting from strong local market returns as well as currency appreciation vs.the U.S.dollar. Growth continued to outperform value in the third quarter within the U.S.and Emerging Markets.Emerging Markets again experienced the most pronounced style differential,as well as the highest absolute return of Growth stocks.International Developed markets, however,saw value edge out growth in the third quarter,a reversal from the first half of the year. 6 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 (Years) 9/30/2016 12/30/2016 9/30/2017 Source: Bloomberg Barclays Capital Markets Review Fixed Income Source: Bloomberg Barclays U.S. Treasury Yield Curve Change Source: US Dept. of The Treasury Duration –Adjusted Excess Returns to Treasuries (bps) FOMC Undeterred by Inflation, Storm Effects Following its September meeting,the Federal Reserve (“Fed”)announced its intention to begin balance sheet normalization in October with maturity roll-offs.The Fed also indicated it plans to raise the federal funds rate one additional time in 2017,striking a slightly more hawkish tone than expected.All fixed income spread sectors posted positive duration-adjusted excess returns for the quarter. For the third consecutive quarter,U.S.Treasuries generated positive absolute returns (+0.4%).The yield on the ten-year U.S.Treasury fell as low as 2.04%in early September before rebounding sharply to finish the quarter at 2.33%.The yield curve flattened as the spread between 2-and 30-year Treasuries fell 8 basis points (bps).TIPS improved, returning +0.9%on rising inflation expectations led by recent wage growth data. Investment grade credit returned +1.3%,outperforming other higher quality sectors.The OAS of the U.S.Credit Index ended the quarter at +96 bps,a level not seen since June 2014.High yield bonds returned +2.0%,while spreads ended the quarter 17 bps tighter at 347 bps.Spread tightening was supported by a rebound in oil prices and the prospect of fiscal stimulus via tax reform.Strong overseas demand for U.S.spread product has remained a technical tailwind for the asset class. Agency MBS generated a +0.4%total return,bringing the YTD return into positive territory.Spreads ended the quarter 10 bps tighter at 22 bps,taking the Fed’s well- telegraphed taper announcement in stride.CMBS and ABS proved resilient with modestly tighter spreads and continued demand for high quality carry in a low yield environment. Best Period Second Best Period Worst Period Second Worst Period Historical Credit Valuations (10-Yr Range) 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Option-Adjusted Spread (bps) 2010 2011 2012 2013 2014 2015 2016 1Q17 2Q17 3Q17 Aggregate 171 -114 226 93 10 -53 138 11 30 41 Agency 77 -25 166 1 10 -133 121 60 20 45 MBS 225 -106 91 98 40 -5 -11 -17 -4 47 ABS 169 52 246 24 53 44 95 22 32 14 CMBS 1501 47 841 97 108 -28 236 8 34 34 Credit 192 -322 693 226 -18 -169 442 47 99 89 High Yield 974 -240 1394 923 -112 -577 1573 214 146 160 EMD (USD)508 -537 1503 -32 -120 3 880 259 72 186 7 Capital Markets Review Alternative Investments Global Alternatives Rise with Risk Assets Hedge Funds:Hedge funds posted moderate gains during a robust quarter for equity markets.Long/short equity strategies were off to a strong start in the beginning weeks of the quarter,with technology,financials,and cable/media names playing prominent roles on the long side of portfolios,while short positions skewed toward consumer retail.Hedge fund alpha was strong across value and growth names,with the average fund outperforming its beta to equity markets.In fixed income,distressed managers registered weaker than expected performance due to prominent exposure to Puerto Rico,as well as select coal and industrials names.On the positive side,oil and gas companies undergoing restructurings rallied significantly in September.Global high yield and non-agency RMBS and CMBS positions benefitted corporate credit and asset-backed managers.Macro managers were hurt by currency positioning –many were positioned with a long bias to the U.S.dollar and a short bias to interest rates.Underlying volatility levels have stayed low for some time,which does not help macro.Event-driven managers benefited from a steady pace of new deals, with most deals closing as expected. Real Assets:In a lower yield environment,real assets (infrastructure,MLPs,and REITs) continue to provide diversifying earning streams that are competitive with traditional equities and fixed income.During the quarter,listed infrastructure was positively impacted by the toll road and port sectors.Toll roads moved higher based on expectations of further industry consolidation in Europe,and the port sector benefited from record import volumes during July and August,as retailers prepare for the holiday season. Private Capital Markets:Fundraising remained strong through the third quarter of 2017,as 267 funds closed with commitments totaling $150 billion.Aggregate private equity capital raised year-to-date 2017 has increased to $338 billion compared to $286 billion raised in same period of 2016.If fundraising momentum continues,2017 may well be within reach of the all-time annual private equity fundraising record of $415 billion set in 2007.In terms of multiples,the median EV/EBITDA multiple jumped from 9.7x in the first quarter to 10.4x in the second quarter,but has stayed at more-or-less 10x earnings for the last 18 months. -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24%Cumulative ReturnHF Longs HF Shorts S&P Long - Shorts Commonly-held hedge fund long positions continued to outperform the S&P 500 through the third quarter, while commonly-held shorts posted modestly negative alpha, particularly in September. 4.5% 5.3% 4.2% 0.9% 1.8%2.0%2.0% 1.3% 3.9% 1.7% 0.6% 0% 5% 10%L/S equity managers generated strong alpha, outpacing their beta to equity markets and nearly matching returns. This was despite global equity prices being boosted by a falling dollar, as many funds are currency hedged. Relative value fixed income and distressed managers outpaced domestic bonds, but distressed modestly underperformed HY. Global stocks/bonds performed well mostly due to FX, while FX-neutral hedge funds and macro funds with a long dollar bias lagged. *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 2017 Q3 Top Hedge Fund Equity Longs vs Shorts (Goldman VIP) Sources: Hedge Fund Research, Factset 7.5% 5.5% 4.5% 3.9%3.8% 2.5%2.3%2.3%2.1% 0.0% 2.0% 4.0% 6.0% 8.0% MLPs ILS Infrastructure U.S. REITs Global REITs DM Equity U.S. 10-year EM Equity U.S. Equity Asset Class Yields Source: Alerian, Elementum, FactSet, Federal Reserve 8 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 4.6 13.7 18.9 17.1 11.0 14.3 14.3 7.6 S&P 500 4.5 14.2 18.6 17.0 10.8 14.2 14.4 7.4 Russell 1000 Index 4.5 14.2 18.5 16.7 10.6 14.3 14.4 7.5 Russell 1000 Growth Index 5.9 20.7 21.9 17.8 12.7 15.3 15.4 9.1 Russell 1000 Value Index 3.1 7.9 15.1 15.7 8.5 13.2 13.2 5.9 Russell Midcap Index 3.5 11.7 15.3 14.8 9.5 14.3 13.8 8.1 Russell Midcap Growth Index 5.3 17.3 17.8 14.5 10.0 14.2 13.8 8.2 Russell Midcap Value Index 2.1 7.4 13.4 15.3 9.2 14.3 13.8 7.8 Russell 2000 Index 5.7 10.9 20.7 18.1 12.2 13.8 13.5 7.8 Russell 2000 Growth Index 6.2 16.8 21.0 16.5 12.2 14.3 14.2 8.5 Russell 2000 Value Index 5.1 5.7 20.5 19.7 12.1 13.3 12.8 7.1 International Equity Indices MSCI EAFE 5.4 20.0 19.1 12.6 5.0 8.4 6.4 1.3 MSCI EAFE Growth Index 4.9 22.4 15.7 12.5 6.5 8.9 7.0 2.1 MSCI EAFE Value Index 5.9 17.6 22.5 12.6 3.5 7.8 5.7 0.5 MSCI EAFE Small Cap 7.5 25.4 21.8 17.0 11.1 12.8 10.0 4.6 MSCI AC World Index 5.2 17.3 18.6 15.3 7.4 10.2 9.2 3.9 MSCI AC World ex US 6.2 21.1 19.6 14.3 4.7 7.0 5.2 1.3 MSCI Emerging Markets Index 7.9 27.8 22.5 19.6 4.9 4.0 2.5 1.3 Fixed Income Indices Blmbg. Barc. U.S. Aggregate 0.8 3.1 0.1 2.6 2.7 2.1 3.0 4.3 Blmbg. Barc. Intermed. U.S. Government/Credit 0.6 2.3 0.2 1.9 2.1 1.6 2.3 3.6 Blmbg. Barc. U.S. Long Government/Credit 1.5 7.7 -0.8 6.7 5.5 3.9 6.2 7.4 Blmbg. Barc. U.S. Corp: High Yield 2.0 7.0 8.9 10.8 5.8 6.4 7.5 7.8 BofA Merrill Lynch 3 Month U.S. T-Bill 0.3 0.6 0.7 0.5 0.3 0.2 0.2 0.5 Blmbg. Barc. U.S. TIPS 0.9 1.7 -0.7 2.9 1.6 0.0 2.6 3.9 Citigroup Non-U.S. World Government Bond 2.6 8.6 -3.1 4.4 0.5 -1.1 0.3 2.7 JPM EMBI Global Diversified (external currency)2.6 9.0 4.6 10.3 6.5 4.9 6.3 7.5 JPM GBI-EM Global Diversified (local currency)3.6 14.3 7.3 12.1 0.3 -0.9 0.7 3.8 Real Asset Indices Bloomberg Commodity Index Total Return 2.5 -2.9 -0.3 -1.4 -10.4 -10.5 -6.8 -6.8 Dow Jones Wilshire REIT 0.6 2.4 0.1 8.7 9.7 9.5 11.4 5.6 Capital Markets Review Index Returns As of September 30, 2017 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 9 Performance Summary 10 Performance Summary - September 2017 During the third quarter, the Metropolitan St. Louis Sewer District pension plan underperformed its benchmark by 30 basis points (bps) returning 2.7%. On a trailing one-year basis, the Portfolio reported a gain of 8.4%, underperforming the Policy Benchmark return of 9.1%. Asset Class Diversification Current asset allocation was within investment policy targets. The Plan was slightly overweight in large-cap, small-cap, international equity, and fixed income and underweight hedge funds and real estate. Manager Evaluation Third quarter performance was the most favorably impacted by the following managers as they outpaced their benchmarks: Kennedy Mid Cap Value, Prudential Core Plus Bond Fund, and Brandywine Global Opportunistic Fixed Income. Third quarter performance was unfavorably impacted by the following managers that underperformed their benchmarks: TimeSquare Small Cap Growth, Morgan Stanley International Equity, Morgan Stanley Emerging Markets, Lighthouse Global Long/Short Fund, Entrust Capital Diversified Fund, and the UBS Trumbell Property Fund. Recommendations or Action Items Alternative asset allocation scenarios were presented at the October Finance Committee meeting and are included in this report. It is recommended that the Metropolitan St. Louis Sewer District move from the Current Policy to Alternative C. Alternative C provides a higher expected return than the Current Policy with an increase in expected risk. Pension Plan Executive Summary 11 Pension Plan Executive Summary Capital Markets Review The S&P 500 Index returned 4.5% during the third quarter. Growth-oriented sectors led returns with Information Technology by far the strongest performing sector during the quarter, followed by strong performances by Energy and Telecommunications. Consumer Staples and Utilities were the only two sectors to register a loss during the third quarter. Most developed market equity indices provided similar returns in the +4% to +6% range during the quarter. Emerging Markets were slightly higher, returning +7.9%, led by Brazil and China. Growth continued to outperform value in the third quarter within U.S. and Emerging Markets. Emerging Markets experienced the most pronounced performance differential by style, as well as the highest absolute return of the growth stocks. International Developed markets, however, saw value lead growth during the quarter. The Fed announced its intention to begin balance sheet normalization in October, and indicated its plans to raise rates in December 2017. In response to hawkish expectations surrounding the Fed, the U.S. dollar’s slide eased in late September. Treasuries returned 0.4% for the quarter, the third consecutive quarter of generating positive absolute returns. The yield on the ten-year U.S. Treasury fell to 2.04% in early September before rebounding sharply to finish the quarter at 2.33%. The yield curve spread between 2- and 30-year Treasuries fell 8 bps. 12 Total Composite Policy Benchmark 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception 3.0 9.1 9.1 4.8 6.2 4.8 7.8 2.7 9.2 8.4 4.3 5.8 4.7 7.3 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 2.7 9.2 8.4 4.3 5.8 4.7 7.4 24y 9m Policy Benchmark 3.0 9.1 9.1 4.8 6.2 4.8 N/A Performance Summary Total Composite vs. Policy Benchmark As of September 30, 2017 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 13 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 2.7 (92)9.2 (88)8.4 (95)4.3 (97)5.8 (98)6.5 (99)4.7 (90)¢£ 5th Percentile 4.2 13.8 15.0 8.3 10.1 10.1 6.7 1st Quartile 3.7 12.1 13.2 7.4 9.2 9.2 6.2 Median 3.4 11.3 12.1 6.9 8.7 8.6 5.7 3rd Quartile 3.1 10.3 11.2 6.3 8.0 8.0 5.4 95th Percentile 1.9 8.2 7.9 5.0 6.7 6.9 4.4 Performance Comparison All Public Plans <= $500 mil As of September 30, 2017 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 14 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 2.7 (93)9.2 (88)8.4 (94)4.3 (96)5.8 (96)6.5 (97)4.7 (88)¢£ 5th Percentile 4.2 13.8 15.0 8.3 10.2 10.1 6.7 1st Quartile 3.8 12.2 13.4 7.4 9.2 9.2 6.1 Median 3.4 11.3 12.2 6.9 8.7 8.6 5.7 3rd Quartile 3.2 10.3 11.1 6.3 7.9 8.0 5.2 95th Percentile 2.0 7.6 7.2 4.7 6.3 6.8 4.3 Performance Comparison All Public Plans As of September 30, 2017 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 15 -40.0 -20.0 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.7 (96)15.0 (61)26.1 (60)9.5 (4)13.1 (27)8.9 (42)0.6 (78)¢£ 5th Percentile 59.3 27.4 42.9 9.5 100.0 13.5 6.3 1st Quartile 49.9 22.1 34.2 5.0 13.6 10.0 2.2 Median 45.0 15.8 28.2 4.7 5.2 8.0 1.4 3rd Quartile 39.8 13.2 22.1 4.2 3.0 5.1 0.7 95th Percentile 28.8 8.3 14.9 3.1 0.5 3.0 0.1 Asset Allocation Comparison All Public Plans <= $500 mil As of September 30, 2017 _________________________ Parentheses contain percentile rankings. 16 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.7 (87)15.0 (65)26.1 (53)9.5 (6)13.1 (42)8.9 (39)0.6 (76)¢£ 5th Percentile 58.4 30.2 44.4 9.7 46.9 13.6 7.1 1st Quartile 48.8 23.5 33.1 5.1 19.5 9.9 2.2 Median 42.7 16.4 26.8 4.5 10.9 7.8 1.3 3rd Quartile 34.4 13.5 20.3 3.8 4.5 5.0 0.6 95th Percentile 19.0 7.9 13.2 0.4 1.3 2.3 0.1 Asset Allocation Comparison All Public Plans As of September 30, 2017 _________________________ Parentheses contain percentile rankings. 17 3 Years 5 Years 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)3.0 3.8 4.6 5.4 6.2 7.0 7.8 Risk (Standard Deviation %) Policy Benchmark (5.1 , 4.8) Total Composite (5.2 , 4.3) 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)4.0 4.7 5.4 6.1 6.8 7.5 8.0 Risk (Standard Deviation %) Policy Benchmark (5.2 , 6.2) Total Composite (5.4 , 5.8) Performance Summary Risk and Return Summary As of September 30, 2017 18 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 268,840,714 100.0 2.7 9.2 8.4 4.3 5.8 4.7 7.4 24y 9m Policy Benchmark 3.0 9.1 9.1 4.8 6.2 4.8 N/A Total Equity Composite 112,216,672 41.7 4.6 16.3 17.0 7.9 N/A N/A 10.1 4y 1m MSCI AC World IMI 5.4 17.7 19.3 8.3 11.0 4.7 10.3 Domestic Equity Composite 71,902,558 26.7 4.7 12.9 16.3 9.6 N/A N/A 12.1 4y 1m Russell 3000 Index 4.6 13.9 18.7 10.7 14.2 7.6 13.2 Large-Cap Equity Composite 54,258,883 20.2 4.4 13.0 15.7 9.6 13.1 6.8 8.9 14y 4m Russell 1000 Index 4.5 14.2 18.5 10.6 14.3 7.5 9.4 Small-Cap Equity Composite 17,643,675 6.6 5.4 12.8 18.3 9.7 13.6 9.2 11.4 14y 4m Russell 2000 Index 5.7 10.9 20.7 12.2 13.8 7.8 10.3 International Equity Composite 40,314,114 15.0 4.5 22.8 18.1 4.5 N/A N/A 6.0 4y 1m MSCI AC World ex USA Index 6.2 21.1 19.6 4.7 7.0 1.3 6.4 Developed International Equity Composite 28,246,700 10.5 3.4 20.6 17.9 4.0 7.4 2.4 5.0 18y 5m MSCI EAFE Index 5.4 20.0 19.1 5.0 8.4 1.3 4.1 Emerging International Equity Composite 12,067,414 4.5 7.0 28.3 18.2 4.7 4.1 0.5 7.9 12y 6m MSCI Emerging Markets Index 7.9 27.8 22.5 4.9 4.0 1.3 8.2 Fixed Income Composite 95,747,793 35.6 1.5 6.0 2.5 2.5 2.1 4.8 4.6 14y 3m Barclays Intermediate U.S. Government/Credit 0.6 2.3 0.2 2.1 1.6 3.6 3.5 Performance Summary Total Pension Fund Asset Allocation and Performance As of September 30, 2017 _________________________ Performance is reported net of fees. 19 Performance Summary Total Pension Fund Asset Allocation and Performance As of September 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Funds Composite 35,288,302 13.1 0.8 2.8 3.3 N/A N/A N/A 1.0 2y 7m HFRI Fund of Funds Composite Index 2.3 5.6 6.5 2.2 3.8 1.1 1.5 60% MSCI ACWI / 40% BC Agg 3.4 11.4 10.9 5.7 7.0 4.4 5.1 Real Estate Composite.23,959,934 8.9 1.2 3.1 4.4 7.8 8.4 4.1 5.7 11y 4m NCREIF Property Index 1.7 5.1 6.9 9.8 10.3 6.2 7.4 Cash Account 1,628,013 0.6 0.3 0.7 0.9 0.7 0.5 0.5 1.3 14y 4m BofA Merrill Lynch 3 Month U.S. T-Bill 0.3 0.6 0.7 0.3 0.2 0.5 1.3 _________________________ Performance is reported net of fees. 20 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Domestic Large-Cap Equity Managers Blackrock Russell 1000 Index Fund Non-Lending 54,258,883 20.2 4.5 (55)14.1 (51)18.5 (50)10.6 (30)14.3 (24)7.6 (28)7.7 (54)0y 7m Russell 1000 Index 4.5 (54)14.2 (51)18.5 (50)10.6 (30)14.3 (23)7.5 (29)7.7 (53) IM U.S. Large Cap Equity 4.6 14.2 18.4 9.4 13.1 6.7 8.0 Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 8,852,157 3.3 5.3 (5)10.5 (13)18.5 (18)8.2 (49)14.0 (28)N/A 10.6 (1)9y 9m Russell Midcap Value Index 2.1 (66)7.4 (48)13.4 (69)9.2 (27)14.3 (17)7.8 (30)8.7 (27) IM U.S. Mid Cap Value Equity 2.9 7.2 14.8 8.1 13.1 7.1 7.7 TimesSquare Small Cap Growth Fund 8,791,519 3.3 5.6 (54)15.0 (41)17.9 (69)11.4 (53)12.8 (47)9.3 (13)10.2 (14)15y 8m Russell 2000 Growth Index 6.2 (42)16.8 (38)21.0 (31)12.2 (40)14.3 (32)8.5 (24)8.5 (36) IM U.S. Small Cap Growth Equity 5.6 14.0 19.8 11.4 12.5 7.7 7.7 Developed International Equity Manager Morgan Stanley International Equity Fund I 28,246,700 10.5 3.4 (90)20.6 (69)17.7 (66)3.9 (73)7.3 (53)2.4 (31)4.9 (69)12y 6m MSCI EAFE Index 5.4 (66)20.0 (76)19.1 (53)5.0 (56)8.4 (36)1.3 (54)5.1 (66) IM International Equity 6.2 23.1 19.3 5.4 7.5 1.4 5.8 Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 12,067,414 4.5 6.9 (63)28.2 (47)18.0 (69)4.8 (47)4.1 (50)0.5 (66)7.9 (47)12y 6m MSCI Emerging Markets Index 7.9 (48)27.8 (49)22.5 (38)4.9 (44)4.0 (54)1.3 (45)8.2 (39) IM Emerging Markets Equity 7.8 27.6 21.1 4.6 4.1 1.0 7.7 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of September 30, 2017 _________________________ Performance is reported net of fees. 21 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of September 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 37,330,856 13.9 0.5 (45)2.1 (31)0.1 (65)2.0 (20)1.6 (26)4.3 (7)4.7 (5)16y 3m Barclays Intermediate U.S. Government/Credit 0.6 (24)2.3 (15)0.2 (61)2.1 (19)1.6 (27)3.6 (22)4.2 (15) IM U.S. Intermediate Duration Fixed Income 0.5 1.8 0.5 1.5 1.1 3.2 3.6 Prudential Core Plus Bond Fund 32,865,682 12.2 1.3 (15)5.3 (9)2.4 (24)4.2 (6)3.7 (8)6.2 (3)4.0 (7)2y 4m Blmbg. Barc. U.S. Aggregate 0.8 (75)3.1 (81)0.1 (92)2.7 (61)2.1 (75)4.3 (78)2.3 (68) IM U.S. Broad Market Core+ Fixed Income 1.0 4.0 1.7 3.0 2.5 4.9 2.8 Brandywine Global Opportunistic Fixed Income 25,551,255 9.5 3.2 (1)13.4 (1)6.4 (5)3.0 (17)2.9 (17)5.9 (1)5.8 (1)12y 9m Citigroup World Government Bond Index 1.8 (31)6.4 (41)-2.7 (94)0.9 (74)-0.4 (89)3.0 (67)2.7 (74) IM Global Fixed Income 1.6 6.1 1.1 1.6 1.4 3.5 3.6 _________________________ Performance is reported net of fees. 22 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of September 30, 2017 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Fund Managers Lighthouse Global Long/Short Fund Limited 18,864,277 7.0 1.8 3.9 4.6 4.5 7.3 4.0 3.6 2y 7m HFRI Equity Hedge (Total) Index 3.5 9.6 11.0 4.6 6.3 2.9 4.7 Entrust Capital Diversified Fund 16,424,025 6.1 -0.3 1.5 1.8 -2.8 2.1 2.2 -3.4 2y 2m HFRI Fund of Funds Composite Index 2.3 5.6 6.5 2.2 3.8 1.1 1.3 Real Estate Manager UBS Trumbull Property Fund 23,959,934 8.9 1.2 3.1 4.4 7.8 8.4 4.1 5.7 11y 4m NCREIF Property Index 1.7 5.1 6.9 9.8 10.3 6.2 7.4 Cash Account 1,628,013 0.6 0.3 0.7 0.9 0.7 0.5 0.5 1.3 14y 4m BofA Merrill Lynch 3 Month U.S. T-Bill 0.3 0.6 0.7 0.3 0.2 0.5 1.3 Total Composite 268,840,714 100.0 2.7 9.2 8.4 4.3 5.8 4.7 7.4 24y 9m _________________________ Performance is reported net of fees. 23 YTD 2016 2015 2014 2013 2012 2011 2010 Total Fund Total Composite 9.2 5.1 -0.7 2.9 10.9 12.1 1.2 11.2 Policy Benchmark 9.1 6.6 -1.4 3.5 12.3 11.6 1.1 11.5 Domestic Equity Blackrock Russell 1000 Index Fund Non-Lending 14.1 (51)12.1 (29)0.9 (46)13.2 (17)33.1 (43)16.4 (35)1.5 (22)16.1 (23) Russell 1000 Index 14.2 (51)12.1 (29)0.9 (46)13.2 (17)33.1 (43)16.4 (35)1.5 (22)16.1 (24) IM U.S. Large Cap Equity Median 14.2 9.1 0.4 10.9 32.5 15.3 -1.4 13.4 Kennedy Mid Cap Value 10.5 (13)22.9 (11)-9.9 (90)15.8 (4)33.3 (75)13.6 (90)-0.8 (30)27.0 (12) Russell Midcap Value Index 7.4 (48)20.0 (34)-4.8 (47)14.7 (9)33.5 (74)18.5 (20)-1.4 (35)24.8 (29) IM U.S. Mid Cap Value Equity 7.2 17.4 -5.6 10.3 35.9 16.4 -3.7 22.0 TimesSquare Small Cap Growth 15.0 (41)8.4 (51)1.0 (21)-2.5 (78)47.7 (21)13.1 (41)2.6 (8)27.3 (50) Russell 2000 Growth Index 16.8 (38)11.3 (46)-1.4 (41)5.6 (16)43.3 (45)14.6 (29)-2.9 (33)29.1 (32) IM U.S. Small Cap Growth Equity 14.0 8.6 -3.3 1.4 42.5 12.0 -4.3 27.2 International Equity Morgan Stanley International Equity Fund I 20.6 (69)-2.0 (79)0.4 (31)-6.1 (68)20.4 (38)19.6 (40)-7.6 (7)6.1 (89) MSCI EAFE Index 20.0 (76)1.0 (57)-0.8 (38)-4.9 (55)22.8 (24)17.3 (64)-12.1 (27)7.8 (80) IM International Equity 23.1 1.8 -2.8 -4.5 17.4 18.6 -14.9 12.9 Morgan Stanley Emerging Markets Fund I 28.2 (47)6.7 (59)-10.3 (27)-4.5 (69)-0.8 (46)20.2 (32)-18.4 (35)18.5 (48) MSCI Emerging Markets Index 27.8 (49)11.2 (30)-14.9 (58)-2.2 (43)-2.6 (58)18.2 (56)-18.4 (36)18.9 (44) IM Emerging Markets Equity 27.6 8.3 -14.1 -2.9 -1.4 18.8 -19.5 18.3 Fixed Income Income Research 2.1 (31)2.3 (34)0.9 (20)3.3 (33)-0.9 (41)5.9 (16)5.6 (40)6.2 (23) Blmbg. Barc. Intermed. U.S. Government/Credit 2.3 (15)2.1 (41)1.1 (16)3.1 (36)-0.9 (40)3.9 (36)5.8 (35)5.9 (31) IM U.S. Intermediate Duration Fixed Income 1.8 1.7 0.4 2.1 -1.3 2.9 5.0 5.1 Performance Summary Manager Performance As of September 30, 2017 24 Performance Summary Manager Performance As of September 30, 2017 YTD 2016 2015 2014 2013 2012 2011 2010 Prudential Core Plus Bond Fund 5.3 (9)5.8 (14)-0.1 (45)7.1 (14)-1.0 (47)10.6 (11)7.6 (19)9.6 (29) Blmbg. Barc. U.S. Aggregate 3.1 (81)2.6 (81)0.5 (14)6.0 (35)-2.0 (76)4.2 (95)7.8 (13)6.5 (84) IM U.S. Broad Market Core+ Fixed Income 4.0 4.1 -0.2 5.3 -1.2 8.2 6.1 8.3 Brandywine Global Opportunistic Fixed Income 13.4 (1)5.2 (22)-8.4 (97)6.3 (11)-3.5 (70)14.1 (5)8.0 (7)13.9 (1) Citigroup World Government Bond Index 6.4 (41)1.6 (78)-3.6 (44)-0.5 (79)-4.0 (78)1.6 (99)6.4 (17)5.2 (63) IM Global Fixed Income 6.1 3.3 -3.8 1.9 -2.5 7.3 4.1 6.0 Hedge Funds Lighthouse Global Long/Short Fund Limited 3.9 0.2 7.4 4.9 20.2 6.1 -2.1 5.2 HFRI Equity Hedge (Total) Index 9.6 5.5 -1.0 1.8 14.3 7.4 -8.4 10.5 Entrust Capital Diversified Fund 1.5 -1.1 -7.3 1.8 13.2 7.4 -4.7 11.1 HFRI Fund of Funds Composite Index 5.6 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 Real Estate UBS Trumbull Property Fund 3.1 6.0 11.7 10.4 9.2 9.0 12.1 15.9 NCREIF Property Index 5.1 8.0 13.3 11.8 11.0 10.5 14.3 13.1 Cash Account 0.7 0.8 0.1 0.6 0.1 0.1 0.1 -1.6 BofA Merrill Lynch 3 Month U.S. T-Bill 0.6 0.3 0.1 0.0 0.1 0.1 0.1 0.1 25 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Return (%)7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 Risk (Standard Deviation %) Russell 1000 Index MSCI Emerging Markets MSCI EAFE Russell 2000 Growth Russell Midcap Value Kennedy Mid Cap Value TimesSquare Small Cap Growth Morgan Stanley Emerging Markets Morgan Stanley International Equity BlackRock Russell 1000 Index Fund Non-Lending Performance Summary Risk and Return Summary - Equity Managers 5 Years Ending September 30, 2017 26 -1.8 -1.2 -0.6 0.0 0.6 1.2 1.8 2.4 3.0 3.6 4.2 4.8 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 September 30, 2017 27 -10.0 -6.0 -2.0 2.0 6.0 10.0 14.0 18.0 22.0 Return (%)0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund HFRI Equity Hedge (Total) Index NCREIF Property Index Lighthouse Global Long/Short Fund Limited UBS TPF Performance Summary Risk and Return Summary - Alternative Managers 5 Years Ending September 30, 2017 28 Manager Compliance Checklist Third Quarter 2017 Ma na ge rs Bl ackRo ck Ru sse ll 1000 Ke nne dy Ti mesS qua re Morga n Stanle y I nt'l Morga n Stanle y EM Incom e Re se arch Or gani zati onal /Produ ct Is sues No ma teria l c hanges to investment team ++++++ No ma teria l o rg an iza tional c hanges ++++++ Accounting or regulatory concerns ++++++ Cu rre ntly in adheren ce to guidelin es ++++++ Po rt fo lio ch aracteris tics me et s tylis tic expectations ++++++ Re lati ve Perfor mance 1 Th ree-year re turn better than benchmark In Line ---In Lin e In Line Th ree-year ra nkin g better than peer group median ++In Line -++ Five year re turn better than benchmark In Line ---+In Line 1 Manager performance is evaluated net of investment management fees. Five year re turn better than benchmark In Line ---+In Line Five year ra nkin g better than peer group media n +++-In Lin e + Perfor ma nc e s tatus +++-++ Da te perfo rmance s tatus changed 3Q17 Summa ry status ++++++ Da te s umma ry status changed 29 Manager Compliance Checklist Third Quarter 2017 Ma na ge rs Prude ntia l Br andyw ine Gl oba l Li ghthouse En trust UBS Or gani zati onal /Produ ct Is sues No ma teria l c hanges to investment team ++-++ No ma teria l o rg an iza tional c hanges +++-+ Accounting or regulatory concerns +++++ Cu rre ntly in adheren ce to guidelin es +++++ Po rt fo lio ch aracteris tics me et s tylis tic expectations +++++ Re lati ve Perfor mance 1 Three-year re turn better than benchmark ++In Line -- Three-year ra nkin g better than peer group median ++N/A N/A N/A Five year re turn better than benchmark +++-- 1 Manager performance is evaluated net of investment management fees. Five year re turn better than benchmark +++-- Five year ra nkin g better than peer group med ia n ++N/A N/A N/A Perfor ma nc e s tatus +++-+ Da te perfo rmance s tatus changed 4Q16 Summary status ++--+ Da te s umma ry status changed 2Q17 3Q17 30 Manager Compliance Issue Explanation Recommended Action Comments EnTrust Organizational Changes/ Performance EnTrust combined their business with that of The Permal Group, a global alternative asset manager that was established in 1973 and acquired by Legg Mason in 2005. The deal closed in mid –2016. Gregg Hymowitz now serves as the Chairman and Chief Executive Officer of EnTrustPermal, as well as continues to be the Chair of the EnTrustPermal Global Investment Committee. Watch After producing solid results relative to the HFRI Fund of Funds Composite Index in calendar years 2009-2013, Entrust has struggled the past three and a half years. The hedge fund industry as a whole has had a difficult time navigating markets, most notably in 2016, due to unprecedented shifts in market sentiment, choppy trading, and low conviction.However, Pavilion believes the acquisition by Permal has shifted the organization’s focus away from the Diversified Fund and we do not have confidence that performance will rebound. The strategy has also experienced outflows as of late, with assets at approximately $2 billion, down from a peak in Manager Compliance Checklist Third Quarter 2017 Entrust trailed the HFRI Fund of Funds Composite Index over the three-and five-year periods by 500 and 170 basis points, respectively. approximately $2 billion, down from a peak in 2014 of over $5 billion. A m ulti-strategy hedge fund manager replacement search has been provided to Management. 31 Manager Compliance Issue Explanation Recommended Action Comments Lighthouse Global Long/Short Investment Team Change On July 24th, Lighthouse notified Pavilion that Barry Timmins, Managing Director and Co-PM of the strategy, was no longer at the firm. Mr. Timmins left to pursue a more entrepreneurial business venture with family members. Mr. Timmins noted that he wanted greater flexibility for personal investment activities and Lighthouse’s personal trading policies were too restrictive. In addition to his departure, turnover has increased among the senior investment team. Watch Lighthouse maintains a deep staff of investment personnel, and historically the investment team exhibited stability. Though, with the departure of Mr. Timmins, and the heightened investment team departures, Pavilion formally placed the Lighthouse Global Long/Short Fund on “Investment Team W atch.” Although recent turnover has been higher than historically observed, the firm has added experienced investment professionals that have direct trading and portfolio management experience. A majority of the key decision makers have long working relationships together, Manager Compliance Checklist Third Quarter 2017 investment team. have long working relationships together, independent of their affiliation at Lighthouse including Co-CIOs Sean McGould and Kelly Perkins. For now, Lighthouse remains one of Pavilion’s highest conviction fund of hedge fund managers, but we are disappointed with the recent level of turnover and will closely monitor investment professional turnover and performance over the next six months to determine if a change to our rating is warranted. 32 Manager Compliance Issue Explanation Recommended Action Comments Morgan Stanley International Equity Performance Morgan Stanley International Equity Fund underperformed the MSCI EAFE index over the trailing 3-and 5-year time periods. The Fund also ranked behind it’s peer group median over the 3-and 5-year time periods, ranking 73rd and 53rd respectively. On a relative basis, the Morgan Stanley International Equity Fund underperformed during the quarter by 200 bps. However, year to date, the Fund outperformed the MSCI Performance Watch During the quarter, Morgan Stanley’s performance trailed the MSCI EAFE benchmark in large part due to the defensive positioning of the Fund, as the overweight to the consumer staples sector negatively im pacted returns. By nature of Morgan Stanley’s high quality, defensive strategy, the manager tends to protect in down m arkets but often lags in steep up markets. Pavilion recommends no changes at this tim e. Manager Compliance Checklist Third Quarter 2017 the Fund outperformed the MSCI EAFE by 60 bps. 33 Asset Class Diversification 34 Asset Allocations Scenarios Model Portfolios Asset Class Current Policy Al ternative A Al ternative B Al ternative C Al ternative D Al ternative E Al ternative F Domestic Large Cap Equity 20.0 20.0 22.0 23.0 25.0 22.0 26.0 Domestic Small Cap Equity 6.0 7.0 8.0 9.0 10.0 8.0 10.0 International Equity 10.0 13.0 12.0 12.0 12.0 14.0 16.0 Emerging Mkts Equity 4.0 5.0 6.0 6.0 6.0 6.0 8.0 Total Equity 40.0 45.0 48.0 50.0 53.0 50.0 60.0 Market Duration Fixed Income 26.0 25.0 25.0 25.0 27.0 27.0 25.0 Global Fixed Income 9.0 5.0 7.0 5.0 8.0 5.5 5.0 Total Fixed Income 35.0 30.0 32.0 30.0 35.0 32.5 30.0 Hedge Fund of Funds 15.0 15.0 8.0 8.0 0.0 7.5 0.0 Real Estate 10.0 10.0 12.0 12.0 12.0 10.0 10.0 Total Alternatives 25.0 25.0 20.0 20.0 12.0 17.5 10.0 Total Portfolio 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1.Assumes a risk –free rate of 1.5% Expected Return 5.9%6.2%6.3%6.4%6.4%6.5%6.7% Standard Deviation 7.1%7.8%8.2%8.5%8.8%8.9%9.9% Return per Unit of Risk (Sharpe)1 0.62 0.60 0.59 0.58 0.56 0.56 0.53 Risk-adjusted Return (Sortino)1 0.79 0.75 0.72 0.70 0.67 0.68 0.62 Probability of exceeding 6.7% Return 36%42%44%46%46%47%50% Probability of exceeding 6.9% Return 33%39%41%43%43%44%47% Maximum 1-Year Loss (95% Probability)-5.7%-6.7%-7.2%-7.6%-8.1%-8.2%-9.5% Recommendation: Move from the Current Policy to Alternative C. Alternative C provides a higher expected return than the Current Policy with an increase in expected risk. 35 Pa vilion Adv isory Group 2017 Capital Market Assumptions: Long-Te rm Correlation Matrix Strategy Return Risk 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Equities1 Global Equity 7.5%16.4%1.00 2 US Equity 7.3%15.4%0.95 1.00 3 US Large Cap Equity 7.2%15.3%0.95 1.00 1.00 4 US Small Cap Equity 8.4%19.7%0.82 0.87 0.84 1.00 5 Intl Equity 7.6%16.6%0.96 0.85 0.84 0.75 1.00 6 Emerging Markets 9.1%21.9%0.88 0.78 0.77 0.74 0.86 1.00 7 Long/Short Equity 5.1%9.1%0.83 0.81 0.79 0.84 0.79 0.82 1.00 8 Private Equity 10.5%25.7%0.99 0.95 0.94 0.81 0.96 0.87 0.82 1.00 Fixed Income9 Global Bonds 2.8%5.4%0.28 0.17 0.17 0.13 0.35 0.29 0.17 0.28 1.00 10 Short Duration 2.8%1.4%(0.10)(0.12)(0.12)(0.17)(0.07)(0.07)(0.03)(0.10)0.57 1.00 11 Treasuries 2.5%4.4%(0.26)(0.26)(0.25)(0.29)(0.24)(0.23)(0.26)(0.26)0.58 0.72 1.00 12 Intermediate Gov't 2.5%3.0%(0.27)(0.28)(0.27)(0.32)(0.25)(0.25)(0.27)(0.27)0.59 0.81 0.96 1.00 13 Long Duration Gov't 2.9%10.1%(0.25)(0.24)(0.24)(0.27)(0.24)(0.22)(0.28)(0.24)0.47 0.49 0.93 0.82 1.00 14 Long G/C 3.9%8.7%(0.01)(0.03)(0.02)(0.07)0.01 0.01 (0.06)(0.01)0.61 0.53 0.86 0.75 0.93 1.00 15 Core Plus 3.1%3.4%(0.01)(0.03)(0.02)(0.09)0.00 0.01 (0.04)(0.01)0.69 0.75 0.91 0.88 0.85 0.92 1.00 Note: Assumptions reflect 10-15 year time horizon, developed January 2017. 16 Investment Grade Corporates 3.8%5.3%0.28 0.23 0.23 0.17 0.29 0.29 0.23 0.28 0.67 0.57 0.62 0.55 0.61 0.85 0.86 1.00 17 High Yield 5.0%9.0%0.68 0.64 0.64 0.63 0.66 0.68 0.61 0.68 0.30 0.01 (0.16)(0.21)(0.13)0.17 0.18 0.54 1.00 18 Emerging Markets Debt 4.9%8.9%0.68 0.59 0.59 0.50 0.69 0.67 0.54 0.68 0.61 0.29 0.22 0.18 0.21 0.47 0.50 0.70 0.73 1.00 Multi-Strat.19 Distressed 8.8%10.5%0.65 0.61 0.60 0.64 0.64 0.65 0.75 0.65 0.12 (0.08)(0.31)(0.33)(0.33)(0.09)(0.07)0.24 0.68 0.49 1.00 20 Long/Short Fixed Income 5.0%8.5%0.20 0.18 0.17 0.21 0.20 0.21 0.24 0.19 (0.00)(0.02)(0.17)(0.17)(0.16)(0.00)0.04 0.21 0.39 0.21 0.46 1.00 21 Diversified Hedge Funds (FOF)4.9%3.9%0.64 0.59 0.59 0.55 0.62 0.63 0.79 0.64 0.07 (0.01)(0.25)(0.27)(0.25)(0.04)(0.02)0.25 0.57 0.47 0.83 0.40 1.00 22 Multi-Strategy -Direct 5.5%6.9%0.82 0.80 0.78 0.82 0.78 0.83 0.97 0.82 0.17 (0.04)(0.25)(0.26)(0.25)(0.03)(0.02)0.26 0.64 0.56 0.80 0.29 0.84 1.00 Real Assets23 Commodities 5.4%16.2%0.42 0.33 0.33 0.33 0.44 0.48 0.47 0.42 0.36 0.09 (0.08)(0.06)(0.14)0.00 0.05 0.20 0.36 0.42 0.43 0.16 0.46 0.48 1.00 24 Inflation Linked Notes 2.7%5.5%0.08 0.02 0.03 (0.01)0.10 0.14 0.06 0.08 0.64 0.53 0.65 0.62 0.60 0.69 0.74 0.68 0.27 0.53 0.11 0.04 0.13 0.09 0.28 1.00 25 Natural Resources / Infrastructure 6.3%16.3%0.43 0.41 0.41 0.38 0.41 0.42 0.42 0.41 0.18 0.08 (0.16)(0.15)(0.21)(0.02)0.05 0.27 0.57 0.35 0.51 0.25 0.41 0.44 0.38 0.14 1.00 26 Real Estate (Private)6.4%10.3%0.08 0.06 0.06 0.05 0.10 0.04 0.09 0.08 0.02 (0.05)(0.04)(0.07)(0.01)0.04 (0.01)0.06 0.04 0.05 0.23 0.12 0.18 0.07 0.10 (0.01)0.07 1.00 27 REITs 7.2%20.1%0.58 0.59 0.58 0.63 0.56 0.51 0.44 0.58 0.32 0.01 (0.05)(0.08)(0.02)0.17 0.16 0.35 0.61 0.50 0.43 0.22 0.32 0.44 0.25 0.23 0.33 0.13 1.00 28 Cash 2.4%0.6%(0.03)(0.01)(0.01)(0.04)(0.04)(0.00)0.13 (0.03)0.01 0.45 0.12 0.19 0.00 (0.03)0.09 (0.03)(0.11)(0.04)0.03 (0.08)0.17 0.10 0.07 0.02 0.04 0.06 (0.03)1.00 36 September 30, 2017 : $268,840,714 Target Allocation Actual Allocation Allocation Differences 0.0%8.0%16.0%24.0%32.0%40.0%48.0%-8.0 % Cash Account $1,628,013 Real Estate Composite $23,959,934 Hedge Funds Composite $35,288,302 Fixed Income Composite $95,747,793 Emerging International Equity Composite $12,067,414 Developed International Equity Composite $28,246,700 Small-Cap Equity Composite $17,643,675 Large-Cap Equity Composite $54,258,883 0.0% 10.0% 15.0% 35.0% 4.0% 10.0% 6.0% 20.0% 0.6% 8.9% 13.1% 35.6% 4.5% 10.5% 6.6% 20.2% 0.6% -1.1 % -1.9 % 0.6% 0.5% 0.5% 0.6% 0.2% Asset Class Diversification Investment Policy Allocation As of September 30, 2017 37 Asset Class Diversification Investment Program Structure As of September 30, 2017 Asse t C lass/Type Manage r To tal Asse ts ($, mil.) as of 9/30/2017 Pe rce nt of Total Targe t Al locati on Weighti ng Re lati ve to Targe t Al lowabl e Range Total Asse ts ($, mil.) as of 6/30/2017 Large -Cap Equi ty $54.3 20.2%20.0%+0.2%15 -25%$54.5 Co re Bla ckRo ck $54.3 20.2%20.0%+0.2%$54.5 Smal l-Cap Equi ty $17.6 6.6%6.0%+0.6%2 -8%$16.7 Va lu e Ke nnedy $8.9 3.3%3.0%+0.3%$8.4 Gr owth Time sSquare $8.8 3.3%3.0%+0.3%$8.3 Inte rn ational Equity $40.3 15.0%14.0%+1.0%$40.0 De veloped Morgan Stanley $28.2 10.5%10.0%+0.5%5 -15%$28.1 Eme rg in g Marke ts Morgan Stanley $12.1 4.5%4.0%+0.5%2 -8%$11.9 Fixe d Income $95.7 35.6%35.0%+0.6%$94.3 *Totals may not add to exactly 100.0% due to rounding. Fixe d Income 35.6% Do me stic Co re In come Res earch $37.3 13.9%14.0%-0.1%10 -20%$37.1 Gl obal Bra ndywin e Glo bal $25.6 9.5%9.0%+0.5%4 -14%$24.7 Do me stic Co re Plus Pru dential $32.9 12.2%12.0%+0.2%10 -20%$32.4 He dge Funds $35.3 13.1%15.0%-1.9%0 -20% $35.0 He dge Fu nds Li ghthous e Glo bal $18.9 7.0%7.5%-0.5%$18.5 He dge Fu nds En trust $16.4 6.1%7.5%-1.4%$16.5 Re al Es tate $24.0 8.9%10.0%-1.1%$23.7 Re al Es tate UBS Tru mb ull $24.0 8.9%10.0%-1.1%0 -12%$23.7 Cash $1.6 0.6%0.0%+0.6%$1.6 Ca sh Account Ca sh Account $1.6 0.6%0.0%+0.6%$1.6 Total $268.8 100.0%100.0%+0.0%$265.8 38 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)107,332 102,588 Median Mkt. Cap ($M)9,182 1,694 Price/Earnings ratio 21.6 19.1 Price/Book ratio 3.1 2.7 5 Yr. EPS Growth Rate (%)10.3 9.3 Current Yield (%)1.9 2.4 Debt to Equity 1.3 1.3 Number of Stocks 1,258 8,603 Beta (3 Years, Monthly)0.95 1.00 Consistency (3 Years, Monthly)44.44 1.00 Sharpe Ratio (3 Years, Monthly)0.79 0.80 Information Ratio (3 Years, Monthly)-0.22 - Up Market Capture (3 Years, Monthly)97.66 - Down Market Capture (3 Years, Monthly)99.55 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 1.6 1.6 0.0 7.4 Tencent Holdings LTD 1.4 0.5 0.9 20.3 Unilever NV 1.3 0.2 1.1 8.1 Reckitt Benckiser Group PLC 1.2 0.1 1.1 -8.8 Microsoft Corp 1.1 1.1 0.0 8.6 Glaxosmithkline PLC 1.1 0.2 0.9 -3.2 L'Oreal S.A., Paris 1.1 0.1 1.0 2.2 NOVARTIS AG 1.0 0.0 1.0 N/A Pernod-Ricard 1.0 0.1 0.9 4.3 Bayer AG 0.8 0.2 0.6 5.6 % of Portfolio 11.6 4.1 7.5 Distribution of Market Capitalization (%) Equity Composite MSCI AC World IMI 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 35.0 29.5 21.9 13.6 0.0 36.5 26.6 24.8 10.5 1.5 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 1.5 2.3 2.1 3.3 4.2 19.1 11.9 12.9 15.5 4.7 11.4 11.0 0.0 0.0 3.1 2.9 4.1 5.8 17.1 11.8 11.0 18.0 6.0 8.3 12.2 Equity Portfolio - Characteristics Total Equity Composite vs. MSCI AC World IMI As of September 30, 2017 39 Total Equity Composite MSCI AC World IMI Australia 0.0 2.3 Hong Kong 2.3 2.4 Japan 4.6 8.1 New Zealand 0.0 0.1 Singapore 0.2 0.7 Pacific 7.1 13.5 Austria 0.1 0.1 Belgium 0.0 0.4 Finland 0.0 0.4 France 4.1 3.1 Germany 2.2 3.1 Ireland 1.1 1.0 Italy 0.0 0.8 Netherlands 2.3 1.3 Portugal 0.3 0.1 Spain 0.0 1.1 EMU 10.1 11.5 Denmark 0.0 0.6 Norway 0.0 0.3 Sweden 0.3 1.1 Switzerland 2.7 2.8 United Kingdom 6.6 6.6 Europe ex EMU 9.6 11.5 Canada 0.8 3.3 United States 61.4 49.9 Israel 0.0 0.2 Middle East 0.0 0.2 Developed Markets 89.0 89.9 Total Equity Composite MSCI AC World IMI Brazil 0.9 0.8 Cayman Islands 0.0 0.0 Chile 0.1 0.1 Colombia 0.0 0.0 Mexico 0.5 0.4 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 1.5 1.4 China 1.3 1.8 India 1.0 1.0 Indonesia 0.5 0.3 Korea 1.6 1.7 Malaysia 0.4 0.3 Philippines 0.3 0.1 Taiwan 0.8 1.4 Thailand 0.0 0.3 EM Asia 5.9 6.9 Czech Republic 0.1 0.0 Egypt 0.1 0.0 Greece 0.0 0.0 Hungary 0.1 0.0 Poland 0.5 0.1 Qatar 0.0 0.1 Russia 0.3 0.4 South Africa 0.4 0.7 Turkey 0.0 0.1 United Arab Emirates 0.0 0.1 EM Europe + Middle East + Africa 1.5 1.6 Emerging Markets 8.9 10.0 Frontier Markets 0.4 0.0 Cash 1.5 0.0 Other 0.3 0.1 Total 100.0 100.0 Equity Portfolio - Country/Region Allocation Total Equity Composite vs. MSCI AC World IMI As of September 30, 2017 40 Portfolio Characteristics Maturity Distribution (%) Credit Quality Distribution (%) Risk Characteristics - 3 Years Sector Distribution (%) Portfolio Benchmark Effective Duration 4.9 4.0 Avg. Maturity 7.1 4.4 Avg. Quality A AA Yield To Maturity (%)3.0 2.1 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated63.8 5.5 13.5 17.2 0.0 0.0 0.0 0.0 44.4 7.8 18.3 21.5 4.9 2.2 0.5 0.4 Consistency Sharpe Ratio Information Ratio Up Market Capture Down Market Capture Total Fixed Income Composite 58.3 0.6 0.2 132.8 151.1 Barclays Intermediate U.S. Government/Credit 0.0 0.9 N/A 100.0 100.0 90 Day U.S. Treasury Bill 38.9 N/A -0.9 5.3 -4.0 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 36.3 29.0 34.7 0.0 0.0 6.8 22.3 21.7 33.9 5.5 9.8 Total Fixed Income Composite Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS57.4 3.1 26.6 0.0 0.0 0.0 11.0 2.0 0.0 0.0 0.0 0.0 23.2 2.1 29.5 2.9 1.6 10.6 13.9 5.5 1.5 1.0 0.7 7.4 Fixed Income Portfolio - Characteristics Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit As of September 30, 2017 41 Manager Evaluation 42 Historical Performance Three Year Rolling Percentile Ranking Relative Performance Historical Statistics - Monthly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 BlackRock Russell 1000 Index Fund Non-Lending 4.5 14.1 18.5 10.6 14.3 7.6 12.1 0.9 13.2 33.1 16.4 1.5 16.1 28.5 -37.6 5.8 Russell 1000 Index 4.5 14.2 18.5 10.6 14.3 7.5 12.1 0.9 13.2 33.1 16.4 1.5 16.1 28.4 -37.6 5.8 IM U.S. Large Cap Equity 4.6 14.2 18.4 9.4 13.1 6.7 9.1 0.4 10.9 32.5 15.3 -1.4 13.4 28.2 -37.9 7.1 BlackRock Russell 1000 Index Fund Non-Lending Rank 55 51 50 30 24 28 29 46 17 43 35 22 23 49 47 57 BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 Cumulative Annualized Over/Under Relative Performance Over/Under Performance 0.0 0.1 -0.1 -0.2Return (%)12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date BlackRock Russell 1000 Index Fund Non-Lending 14.3 9.6 13.7 0.0 1.0 1.4 0.0 -0.7 4.9 41.7 14y 6m Russell 1000 Index 14.3 9.6 13.7 0.0 1.0 1.4 0.0 N/A 4.9 0.0 14y 6m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 9.6 -1.4 0.0 26.7 14y 6m Manager Evaluation BlackRock Russell 1000 Index Fund Non-Lending vs. Russell 1000 Index As of September 30, 2017 43 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)158,729 158,729 Median Mkt. Cap ($M)9,547 9,547 Price/Earnings ratio 22.4 22.4 Price/Book ratio 3.2 3.2 5 Yr. EPS Growth Rate (%)10.2 10.2 Current Yield (%)1.9 1.9 Debt to Equity 1.2 1.2 Number of Stocks 981 981 Beta (5 Years, Monthly)1.00 1.00 Consistency (5 Years, Monthly)41.67 1.00 Sharpe Ratio (5 Years, Monthly)1.43 1.43 Information Ratio (5 Years, Monthly)-0.68 - Up Market Capture (5 Years, Monthly)99.93 - Down Market Capture (5 Years, Monthly)99.97 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Apple Inc 3.3 3.3 0.0 7.4 Microsoft Corp 2.3 2.3 0.0 8.6 Facebook Inc 1.7 1.7 0.0 13.2 Amazon.com Inc 1.6 1.6 0.0 -0.7 Berkshire Hathaway Inc 1.5 1.5 0.0 8.2 Johnson & Johnson 1.5 1.5 0.0 -1.1 Exxon Mobil Corp 1.4 1.4 0.0 2.5 JPMorgan Chase & Co 1.4 1.4 0.0 5.1 Google Inc (Class C)1.2 1.2 0.0 5.5 Alphabet Inc 1.2 1.2 0.0 4.7 % of Portfolio 17.1 17.1 0.0 Distribution of Market Capitalization (%) BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil 50.7 28.2 18.2 2.9 50.7 28.2 18.2 2.9 Sector Weights (%) BlackRock Russell 1000 Index Fund Non-Lending Russell 1000 Index 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.1 2.1 3.7 3.3 22.8 10.5 13.8 14.8 5.9 7.7 12.2 3.1 2.1 3.7 3.3 22.8 10.5 13.8 14.8 5.9 7.7 12.2 Manager Evaluation BlackRock Russell 1000 Index Fund Non-Lending vs. Russell 1000 Index As of September 30, 2017 44 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2012 - Sep - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Kennedy Mid Cap Value 5.3 10.5 18.5 8.2 14.0 N/A 22.9 -9.9 15.8 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A Russell Midcap Value Index 2.1 7.4 13.4 9.2 14.3 7.8 20.0 -4.8 14.7 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 IM U.S. Mid Cap Value Equity 2.9 7.2 14.8 8.1 13.1 7.1 17.4 -5.6 10.3 35.9 16.4 -3.7 22.0 36.4 -38.0 1.0 Kennedy Mid Cap Value Rank 5 13 18 49 28 N/A 11 90 4 75 90 30 12 53 1 N/A Kennedy Mid Cap Value Russell Midcap Value Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 13.2 13.6 14.0 14.4 14.8 Return (%)7.6 8.0 8.4 8.8 9.2 9.6 10.0 10.4 10.8 11.2 Risk (Standard Deviation %) Russell Midcap Value Index Kennedy Mid Cap Value Average Active Weight 0.0 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 -0.7 -0.9 -2.1 0.6 4.6 1.1 -2.8 -2.4 0.2 -1.9 0.8 3.6 Allocation (Total: 0.5) 0.0 0.2 0.4-0.2-0.4 0.0 0.1 0.0 0.0 0.1 0.0 0.2 0.0 0.0 0.1 0.0 -0.1 Stock (Total: 3.0) 0.0 0.6 1.2 1.8-0.6-1.2 0.0 0.0 0.2 0.2 0.6 0.9 0.4 0.6 0.3 0.1 -0.2 0.0 Kennedy Mid Cap Value 0.0 0.5 1.0 1.5-0.5-1.0 0.0 0.1 0.2 0.2 0.7 0.9 0.7 0.5 0.3 0.2 -0.2 -0.1 Manager Evaluation Kennedy Mid Cap Value vs. Russell Midcap Value Index As of September 30, 2017 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)10,870 13,555 Median Mkt. Cap ($M)8,999 7,048 Price/Earnings ratio 20.6 19.8 Price/Book ratio 2.4 2.1 5 Yr. EPS Growth Rate (%)14.0 9.0 Current Yield (%)1.7 2.2 Debt to Equity 0.8 1.1 Number of Stocks 60 587 Beta (5 Years, Monthly)1.10 1.00 Consistency (5 Years, Monthly)55.00 1.00 Sharpe Ratio (5 Years, Monthly)1.17 1.34 Information Ratio (5 Years, Monthly)-0.05 - Up Market Capture (5 Years, Monthly)102.60 - Down Market Capture (5 Years, Monthly)109.12 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Old Dominion Freight Line Inc 2.7 0.1 2.6 15.7 Westlake Chemical Corp 2.6 0.0 2.6 25.8 East West Bancorp Inc.2.5 0.2 2.3 2.4 Teledyne Technologies Inc.2.4 0.1 2.3 24.7 Reinsurance Group of America Inc.2.4 0.2 2.2 9.1 ON Semiconductor Corp 2.2 0.0 2.2 31.6 Huntington Bancshares Inc 2.2 0.4 1.8 3.9 Lincoln National Corp 2.2 0.4 1.8 9.2 Torchmark Corp 2.2 0.2 2.0 4.7 Xcel Energy Inc.2.1 0.6 1.5 3.9 % of Portfolio 23.5 2.2 21.3 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 23.3 63.4 13.3 0.0 10.0 80.8 6.2 3.1 Sector Weights (%) Kennedy Capital Management Russell Midcap Value Index 0.0 5.0 10.0 15.0 20.0 25.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 3.1 9.5 0.0 12.0 7.4 10.2 12.6 5.6 16.8 8.4 2.3 12.0 0.0 10.7 0.8 14.5 5.3 6.5 11.7 6.6 20.1 8.1 3.8 11.8 Manager Evaluation Kennedy Capital Management vs. Russell Midcap Value Index As of September 30, 2017 46 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2012 - Sep - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 TimesSquare Small Cap Growth 5.6 15.0 17.9 11.4 12.8 9.3 8.4 1.0 -2.5 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 Russell 2000 Growth Index 6.2 16.8 21.0 12.2 14.3 8.5 11.3 -1.4 5.6 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 IM U.S. Small Cap Growth Equity 5.6 14.0 19.8 11.4 12.5 7.7 8.6 -3.3 1.4 42.5 12.0 -4.3 27.2 33.5 -42.8 7.8 TimesSquare Small Cap Growth Rank 54 41 69 53 47 13 51 21 78 21 41 8 50 43 2 36 TimesSquare Small Cap Growth Russell 2000 Growth Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 10.0 12.0 14.0 16.0 18.0 Return (%)12.1 12.2 12.3 12.4 Risk (Standard Deviation %) Russell 2000 Growth Index TimesSquare Small Cap Growth Average Active Weight 0.0 15.0 30.0-15.0-30.0 Utilities Telecommunication Services Real Estate Other Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -0.4 1.1 -0.1 1.5 -2.3 3.4 8.0 -11.9 -1.3 1.6 -1.2 -0.4 1.8 Allocation (Total: 0.3) 0.0 0.2 0.4-0.2-0.4 0.0 0.1 0.0 0.1 0.0 0.0 0.2 -0.1 0.0 0.0 0.1 0.0 -0.1 Stock (Total: -0.1) 0.0 0.9 1.8-0.9-1.8-2.7 0.0 0.2 0.1 0.0 0.0 0.3 -0.4 -1.2 -0.2 0.2 0.3 0.5 0.0 TimesSquare Small Cap Growth 0.0 0.7 1.4-0.7-1.4-2.1 0.0 0.3 0.1 0.1 0.0 0.3 -0.2 -1.2 -0.2 0.2 0.3 0.6 -0.1 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of September 30, 2017 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)2,577 2,454 Median Mkt. Cap ($M)2,116 979 Price/Earnings ratio 32.2 26.5 Price/Book ratio 3.9 4.3 5 Yr. EPS Growth Rate (%)16.1 16.2 Current Yield (%)0.7 0.7 Debt to Equity 1.0 1.8 Number of Stocks 104 1,172 Beta (5 Years, Monthly)0.85 1.00 Consistency (5 Years, Monthly)48.33 1.00 Sharpe Ratio (5 Years, Monthly)0.99 0.98 Information Ratio (5 Years, Monthly)-0.37 - Up Market Capture (5 Years, Monthly)86.32 - Down Market Capture (5 Years, Monthly)83.33 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) MKS Instruments Inc 2.5 0.5 2.0 40.6 Bright Horizons Family Solutions Inc 2.4 0.0 2.4 11.7 WEX Inc 2.4 0.0 2.4 7.6 On Assignment Inc 2.3 0.3 2.0 -0.9 WageWorks Inc 2.1 0.2 1.9 -9.7 Albany International Corp.1.8 0.1 1.7 7.8 Beacon Roofing Supply Inc 1.7 0.2 1.5 4.6 Monro Inc 1.6 0.2 1.4 34.8 j2 Global Inc 1.6 0.3 1.3 -12.7 Paycom Software Inc 1.6 0.4 1.2 9.6 % of Portfolio 20.0 2.2 17.8 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 3.6 96.4 0.0 7.9 87.7 4.4 Sector Weights (%) TimesSquare Small Cap Growth Russell 2000 Growth Index 0.0 8.0 16.0 24.0 32.0 40.0 Other Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 1.6 4.4 0.3 2.1 3.4 1.8 27.7 23.7 13.5 4.7 1.7 1.4 13.6 0.0 0.0 0.7 1.1 3.4 4.6 24.1 17.9 24.8 6.0 1.2 2.5 13.6 Manager Evaluation TimesSquare Small Cap Growth vs. Russell 2000 Growth Index As of September 30, 2017 48 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2012 - Sep - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Morgan Stanley International Equity 3.4 20.6 17.7 3.9 7.3 2.4 -2.0 0.4 -6.1 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 MSCI EAFE Index 5.4 20.0 19.1 5.0 8.4 1.3 1.0 -0.8 -4.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 IM International Equity 6.2 23.1 19.3 5.4 7.5 1.4 1.8 -2.8 -4.5 17.4 18.6 -14.9 12.9 36.3 -46.0 13.2 Morgan Stanley International Equity Rank 90 69 66 73 53 31 79 31 68 38 40 7 89 92 3 70 Morgan Stanley International Equity MSCI EAFE Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 6.0 7.0 8.0 9.0 10.0 Return (%)9.0 9.3 9.6 9.9 10.2 10.5 10.8 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 -3.4 -1.8 -3.1 -2.1 2.9 -0.9 6.1 -8.0 -2.4 19.9 -7.2 0.1 Allocation (Total: -1.4) 0.0 0.6-0.6-1.2-1.8 0.0 0.1 0.1 -0.1 0.1 0.0 -0.3 0.0 -0.2 -0.9 -0.2 0.0 Stock (Total: -0.5) 0.0 0.5 1.0-0.5-1.0 0.0 0.1 -0.1 -0.4 0.6 -0.1 0.1 -0.3 -0.1 -0.3 0.0 0.0 Morgan Stanley International Equity 0.0 0.7 1.4-0.7-1.4-2.1 0.0 0.1 0.0 -0.5 0.7 -0.1 -0.2 -0.3 -0.3 -1.2 -0.2 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of September 30, 2017 Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading. 49 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 1.2 0.0 0.0 0.1 -2.5 -0.7 0.0 0.0 Performance Attribution Average Active Weight 0.0 10.0 20.0-10.0-20.0-30.0 Pacific Other North America Middle East Europe ex EMU EMU EM Asia Cash -14.6 -0.4 2.4 -0.7 9.7 0.8 2.6 0.1 Allocation (Total: 0.2) 0.0 0.2 0.4-0.2-0.4 0.2 0.0 -0.1 0.1 0.0 0.0 0.0 0.0 Stock (Total: -2.1) 0.0 2.0 4.0-2.0-4.0 1.0 0.0 0.1 0.0 -2.5 -0.7 0.0 0.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index 1 Quarter Ending September 30, 2017 50 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)86,374 61,875 Median Mkt. Cap ($M)35,391 11,202 Price/Earnings ratio 20.1 17.1 Price/Book ratio 3.1 2.2 5 Yr. EPS Growth Rate (%)7.7 6.5 Current Yield (%)2.1 3.2 Debt to Equity 2.0 1.6 Number of Stocks 62 926 Beta (5 Years, Monthly)0.89 1.00 Consistency (5 Years, Monthly)40.00 1.00 Sharpe Ratio (5 Years, Monthly)0.68 0.74 Information Ratio (5 Years, Monthly)-0.28 - Up Market Capture (5 Years, Monthly)92.94 - Down Market Capture (5 Years, Monthly)96.58 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Unilever NV 5.2 0.7 4.5 8.1 Reckitt Benckiser Group PLC 4.6 0.4 4.2 -8.8 Glaxosmithkline PLC 4.3 0.7 3.6 -3.2 L'Oreal S.A., Paris 4.3 0.4 3.9 2.2 NOVARTIS AG 3.9 0.0 3.9 N/A Pernod-Ricard 3.8 0.2 3.6 4.3 Bayer AG 3.4 0.8 2.6 5.6 SAP AG Systeme Anwendungen 3.3 0.7 2.6 5.1 Shiseido Co Ltd 3.1 0.1 3.0 12.5 Roche Holding AG 3.0 1.2 1.8 0.2 % of Portfolio 38.9 5.2 33.7 Distribution of Market Capitalization (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 27.2 42.6 27.1 3.1 0.0 38.6 38.4 18.5 2.0 2.6 Sector Weights (%) Morgan Stanley International Equity MSCI EAFE Index 0.0 6.0 12.0 18.0 24.0 30.0 36.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.6 0.0 2.5 0.5 5.7 10.0 13.3 17.5 14.1 2.5 26.0 5.3 0.0 3.3 4.1 3.5 7.9 6.3 14.4 10.6 21.5 5.1 11.2 12.2 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of September 30, 2017 51 Morgan Stanley International Equity MSCI EAFE Index Australia 0.0 6.8 Hong Kong 4.6 3.1 Japan 18.2 23.0 New Zealand 0.0 0.2 Singapore 0.0 1.3 Pacific 22.8 34.4 Austria 0.0 0.3 Belgium 0.0 1.2 Finland 0.0 1.0 France 15.7 10.1 Germany 8.5 9.7 Ireland 1.4 0.5 Italy 0.0 2.2 Netherlands 8.2 4.0 Portugal 0.7 0.2 Spain 0.0 3.5 EMU 34.6 32.6 Denmark 0.0 1.9 Norway 0.0 0.7 Sweden 1.3 2.9 Switzerland 9.5 8.3 United Kingdom 23.7 18.1 Europe ex EMU 34.5 31.9 Canada 2.8 0.0 United States 0.0 0.2 Israel 0.0 0.5 Middle East 0.0 0.5 Developed Markets 94.7 99.6 Morgan Stanley International Equity MSCI EAFE Index Brazil 0.0 0.0 Cayman Islands 0.0 0.0 Chile 0.0 0.0 Colombia 0.0 0.0 Mexico 0.0 0.0 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 0.0 0.0 China 0.7 0.0 India 0.0 0.0 Indonesia 0.0 0.0 Korea 2.1 0.0 Malaysia 0.0 0.0 Philippines 0.0 0.0 Taiwan 0.0 0.0 Thailand 0.0 0.0 EM Asia 2.8 0.0 Czech Republic 0.0 0.0 Egypt 0.0 0.0 Greece 0.0 0.0 Hungary 0.0 0.0 Poland 0.0 0.0 Qatar 0.0 0.0 Russia 0.0 0.0 South Africa 0.0 0.0 Turkey 0.0 0.0 United Arab Emirates 0.0 0.0 EM Europe + Middle East + Africa 0.0 0.0 Emerging Markets 2.8 0.0 Frontier Markets 0.0 0.0 Cash 2.6 0.0 Other 0.0 0.4 Total 100.0 100.0 Manager Evaluation Morgan Stanley International Equity vs. MSCI EAFE Index As of September 30, 2017 52 Historical Performance Buy and Hold Attribution Risk and Return (Oct - 2012 - Sep - 2017)Three Year Rolling Percentile Ranking Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Morgan Stanley Emerging Markets 6.9 28.2 18.0 4.8 4.1 0.5 6.7 -10.3 -4.5 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 MSCI Emerging Markets Index 7.9 27.8 22.5 4.9 4.0 1.3 11.2 -14.9 -2.2 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 IM Emerging Markets Equity 7.8 27.6 21.1 4.6 4.1 1.0 8.3 -14.1 -2.9 -1.4 18.8 -19.5 18.3 72.7 -54.6 36.7 Morgan Stanley Emerging Markets Rank 63 47 69 47 50 66 59 27 69 46 32 35 48 62 69 22 Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 3.8 4.0 4.2 4.4 Return (%)11.4 11.7 12.0 12.3 12.6 12.9 13.2 13.5 13.8 Risk (Standard Deviation %) MSCI Emerging Markets Index Morgan Stanley Emerging Markets Average Active Weight 0.0 5.0 10.0-5.0-10.0 Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary Cash -2.6 -2.1 -0.6 -2.5 -4.2 1.6 0.2 2.7 -2.5 2.3 5.2 2.6 Allocation (Total: -0.8) 0.0 0.2 0.4-0.2-0.4-0.6 0.0 0.1 -0.1 -0.1 -0.1 -0.1 0.0 0.0 -0.1 -0.1 -0.2 -0.2 Stock (Total: 0.3) 0.0 0.6 1.2-0.6-1.2 0.0 -0.1 -0.2 -0.5 -0.2 -0.2 0.0 0.4 0.1 0.4 0.6 0.0 Morgan Stanley Emerging Markets 0.0 0.4 0.8 1.2-0.4-0.8-1.2 0.0 0.0 -0.3 -0.5 -0.3 -0.3 0.0 0.4 0.0 0.3 0.4 -0.2 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of September 30, 2017 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 0.2 0.4 0.6-0.2-0.4-0.6-0.8 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -0.4 0.0 0.0 -0.2 0.0 0.2 0.1 0.3 -0.3 -0.2 Performance Attribution Average Active Weight 0.0 6.0 12.0-6.0-12.0-18.0 Pacific Other North America Frontier Markets Europe ex EMU EMU EM Latin America EM Europe + Middle East + Africa EM Asia Cash -1.1 2.5 0.8 3.5 0.5 3.1 1.4 -2.8 -10.6 2.6 Allocation (Total: -0.5) 0.0 0.4 0.8-0.4-0.8-1.2-1.6 -0.1 0.0 0.1 -0.9 0.0 0.2 0.1 0.0 0.3 -0.2 Stock (Total: 0.0) 0.0 0.5 1.0 1.5-0.5-1.0-1.5 -0.3 0.0 0.0 0.7 0.0 0.0 0.0 0.3 -0.6 0.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index 1 Quarter Ending September 30, 2017 54 Portfolio Characteristics Portfolio Benchmark Wtd. Avg. Mkt. Cap ($M)72,364 81,292 Median Mkt. Cap ($M)12,037 5,881 Price/Earnings ratio 18.1 14.4 Price/Book ratio 2.9 2.5 5 Yr. EPS Growth Rate (%)12.3 10.7 Current Yield (%)2.0 2.5 Debt to Equity 0.9 0.9 Number of Stocks 121 839 Beta (5 Years, Monthly)0.86 1.00 Consistency (5 Years, Monthly)48.33 1.00 Sharpe Ratio (5 Years, Monthly)0.37 0.33 Information Ratio (5 Years, Monthly)-0.02 - Up Market Capture (5 Years, Monthly)88.06 - Down Market Capture (5 Years, Monthly)84.95 - Top Ten Equity Holdings Portfolio Weight (%) Benchmark Weight (%) Active Weight (%) Quarterly Return (%) Tencent Holdings LTD 6.2 4.9 1.3 20.3 Taiwan Semiconductor Manufacturing 3.2 3.5 -0.3 4.0 Alibaba Group Holding Ltd 2.9 3.9 -1.0 22.6 Samsung Electronics Co Ltd 2.8 4.4 -1.6 8.0 Grupo Financiero Banorte 2.0 0.3 1.7 8.4 Bank of China Ltd 1.9 0.8 1.1 5.7 Itau Unibanco Holding SA 1.7 0.9 0.8 24.8 Banco Bradesco Sa Brad 1.6 0.7 0.9 31.4 MercadoLibre Inc 1.4 0.0 1.4 3.3 China Construction Bank Corp 1.3 1.4 -0.1 7.0 % of Portfolio 25.0 20.8 4.2 Distribution of Market Capitalization (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 15.0 30.0 45.0 60.0 >$75 Bil $20 Bil - $75 Bil $5 Bil - $20 Bil $0 - $5 Bil Cash 24.0 26.7 36.6 12.7 0.0 21.7 23.8 40.7 11.4 2.4 Sector Weights (%) Morgan Stanley Emerging Markets MSCI Emerging Markets Index 0.0 8.0 16.0 24.0 32.0 40.0 Cash Utilities Telecommunication Services Real Estate Materials Information Technology Industrials Health Care Financials Energy Consumer Staples Consumer Discretionary 2.4 0.6 2.5 1.4 4.0 23.8 6.1 2.4 29.2 3.8 7.4 16.4 0.0 2.6 5.1 2.9 7.2 27.6 5.4 2.3 23.4 6.8 6.5 10.3 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of September 30, 2017 55 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Australia 0.0 0.0 Hong Kong 10.6 12.2 Japan 0.0 0.0 New Zealand 0.0 0.0 Singapore 0.0 0.0 Pacific 10.6 12.2 Austria 1.0 0.0 Belgium 0.0 0.0 Finland 0.0 0.0 France 0.0 0.0 Germany 0.8 0.0 Ireland 0.0 0.0 Italy 0.0 0.0 Netherlands 1.0 0.0 Portugal 0.7 0.0 Spain 0.0 0.0 EMU 3.6 0.0 Denmark 0.0 0.0 Norway 0.0 0.0 Sweden 0.0 0.0 Switzerland 0.5 0.0 United Kingdom 0.0 0.0 Europe ex EMU 0.5 0.0 Canada 0.0 0.0 United States 1.3 0.3 Israel 0.0 0.0 Middle East 0.0 0.0 Developed Markets 16.0 12.5 Morgan Stanley Emerging Markets MSCI Emerging Markets Index Brazil 8.0 7.6 Cayman Islands 0.0 0.0 Chile 1.2 1.3 Colombia 0.0 0.4 Mexico 4.9 3.5 Peru 0.0 0.0 Virgin Islands 0.0 0.0 EM Latin America 14.2 12.8 China 10.1 17.4 India 9.2 8.4 Indonesia 4.8 2.3 Korea 9.5 15.0 Malaysia 3.9 2.3 Philippines 2.7 1.1 Taiwan 7.5 11.5 Thailand 0.0 2.2 EM Asia 47.8 60.2 Czech Republic 1.1 0.2 Egypt 0.6 0.1 Greece 0.0 0.3 Hungary 1.3 0.3 Poland 4.3 1.3 Qatar 0.0 0.6 Russia 3.2 3.4 South Africa 3.3 6.4 Turkey 0.0 1.1 United Arab Emirates 0.0 0.7 EM Europe + Middle East + Africa 13.7 14.5 Emerging Markets 75.7 87.4 Frontier Markets 3.4 0.1 Cash 2.4 0.0 Other 2.5 0.0 Total 100.0 100.0 Manager Evaluation Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index As of September 30, 2017 56 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Monthly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Income Research 0.5 2.1 0.1 2.0 1.6 4.3 2.3 0.9 3.3 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 Barclays Intermediate U.S. Government/Credit 0.6 2.3 0.2 2.1 1.6 3.6 2.1 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 IM U.S. Intermediate Duration Fixed Income 0.5 1.8 0.5 1.5 1.1 3.2 1.7 0.4 2.1 -1.3 2.9 5.0 5.1 7.1 1.9 5.7 Income Research Rank 45 31 65 20 26 7 34 20 33 41 16 40 23 20 54 8 Income Research Barclays Intermediate U.S. Government/Credit 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 1.5 1.6 1.7 Return (%)2.0 2.1 2.2 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 1.6 2.0 1.5 0.1 1.0 0.7 0.3 0.1 1.3 48.3 20y 8m Barclays Intermediate U.S. Government/Credit 1.6 2.1 1.4 0.0 1.0 0.7 0.0 N/A 1.3 0.0 20y 8m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 2.1 -0.7 0.0 41.7 20y 8m Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of September 30, 2017 57 Portfolio Characteristics Portfolio Benchmark Effective Duration 3.9 4.0 Avg. Maturity 4.5 4.4 Avg. Quality AA-AA Yield To Maturity (%)2.2 2.1 Credit Quality Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 AAAAAABBB63.8 5.5 13.5 17.2 57.6 4.1 14.0 24.2 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 36.3 29.0 34.7 0.0 6.0 26.6 36.5 28.2 2.8 Sector Distribution (%) Income Research Barclays Intermediate U.S. Government/Credit 0.0 25.0 50.0 75.0 100.0 TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashCMBS57.4 3.1 26.6 0.0 0.0 11.0 2.0 0.0 0.0 0.0 37.7 4.6 39.9 0.6 8.3 0.0 0.0 2.5 0.3 6.1 Manager Evaluation Income Research vs. Barclays Intermediate U.S. Government/Credit As of September 30, 2017 58 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Monthly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Prudential Core Plus Bond Fund 1.3 5.3 2.4 4.2 3.7 6.2 5.8 -0.1 7.1 -1.0 10.6 7.6 9.6 18.7 -2.1 4.6 Blmbg. Barc. U.S. Aggregate 0.8 3.1 0.1 2.7 2.1 4.3 2.6 0.5 6.0 -2.0 4.2 7.8 6.5 5.9 5.2 7.0 IM U.S. Broad Market Core+ Fixed Income 1.0 4.0 1.7 3.0 2.5 4.9 4.1 -0.2 5.3 -1.2 8.2 6.1 8.3 14.3 -3.0 5.5 Prudential Core Plus Bond Fund Rank 15 9 24 6 8 3 14 45 14 47 11 19 29 25 46 77 Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 0.0 2.0 4.0 6.0 Return (%)2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 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 3.7 3.6 3.5 1.2 1.2 1.0 1.3 1.2 2.3 63.3 18y 4m Blmbg. Barc. U.S. Aggregate 2.1 2.8 1.9 0.0 1.0 0.7 0.0 N/A 1.8 0.0 18y 4m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 2.8 -0.7 0.0 40.0 18y 4m Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of September 30, 2017 59 Portfolio Characteristics Portfolio Benchmark Effective Duration 6.2 6.0 Avg. Maturity 8.0 8.2 Avg. Quality A AA+ Yield To Maturity (%)3.4 2.6 Credit Quality Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 25.0 50.0 75.0 100.0 AAAAAABBBBBBBelow BNot Rated71.3 4.1 10.7 13.9 0.0 0.0 0.0 0.0 46.4 4.3 11.7 22.7 7.1 5.8 0.9 1.2 Maturity Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 20.0 40.0 60.0 80.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 20.5 19.4 44.4 3.6 12.1 3.3 14.5 15.9 50.5 5.0 10.8 Sector Distribution (%) Prudential Core Plus Bond Fund Blmbg. Barc. U.S. Aggregate 0.0 15.0 30.0 45.0 60.0 TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS37.0 2.5 21.4 0.0 28.1 0.5 6.9 1.8 0.0 0.0 0.0 1.8 12.2 0.7 27.5 8.5 2.0 21.6 5.1 4.7 1.1 0.2 1.9 14.6 Manager Evaluation Prudential Core Plus Bond Fund vs. Blmbg. Barc. U.S. Aggregate As of September 30, 2017 60 Historical Performance Three Year Rolling Percentile Ranking Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Monthly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Brandywine Global Opportunistic Fixed Income 3.2 13.4 6.4 3.0 2.9 5.9 5.2 -8.4 6.3 -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 Citigroup World Government Bond Index 1.8 6.4 -2.7 0.9 -0.4 3.0 1.6 -3.6 -0.5 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 IM Global Fixed Income 1.6 6.1 1.1 1.6 1.4 3.5 3.3 -3.8 1.9 -2.5 7.3 4.1 6.0 11.8 -2.3 7.7 Brandywine Global Opportunistic Fixed Income Rank 1 1 5 17 17 1 22 97 11 70 5 7 1 22 75 2 Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0 25 50 75 100Return Percentile Rank12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 9/17 -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 7.4 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 2.9 7.1 2.9 3.4 1.0 0.4 4.7 0.7 4.8 56.7 12y 9m Citigroup World Government Bond Index -0.4 5.3 -0.5 0.0 1.0 -0.1 0.0 N/A 4.1 0.0 12y 9m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 5.3 0.1 0.0 51.7 12y 9m Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of September 30, 2017 61 Portfolio Characteristics Portfolio Benchmark Effective Duration 4.7 7.9 Avg. Maturity 10.0 9.0 Avg. Quality A AA- Yield To Maturity (%)3.8 1.2 Credit Quality Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 20.0 40.0 60.0 80.0 AAAAAABBBBBBBelow BNot Rated12.5 52.0 22.8 12.7 0.0 0.0 0.0 0.0 22.4 17.6 33.0 16.1 9.3 0.9 0.6 0.1 Maturity Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 15.0 30.0 45.0 < 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0 24.3 19.7 25.9 30.1 0.0 12.5 26.1 7.4 21.0 10.0 23.0 Sector Distribution (%) Brandywine Global Opportunistic Fixed Income Citigroup World Government Bond Index 0.0 25.0 50.0 75.0 100.0 TreasuriesCreditHigh YieldMBSNon-USEmergingMunicipalsCashOther34.6 0.0 0.0 0.0 65.4 0.0 0.0 0.0 0.0 16.4 17.1 0.1 2.5 45.5 14.5 0.8 3.2 0.1 Manager Evaluation Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond Index As of September 30, 2017 62 Historical Performance Comparative Performance and Rolling Return Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Quarterly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Lighthouse Global Long/Short Fund Limited 1.8 3.9 4.6 4.5 7.3 4.0 0.2 7.4 4.9 20.2 6.1 -2.1 5.2 10.1 -14.1 13.9 HFRI Equity Hedge (Total) Index 3.5 9.6 11.0 4.6 6.3 2.9 5.5 -1.0 1.8 14.3 7.4 -8.4 10.5 24.6 -26.7 10.5 Rolling 3 Years Active Return Quarterly Active Return 0.0 8.0 16.0 -8.0 -16.0Active Return (%)3/04 6/05 9/06 12/07 3/09 6/10 9/11 12/12 3/14 6/15 9/16 9/17 4.5 5.4 6.3 7.2 8.1 9.0 Return (%)4.4 4.6 4.8 5.0 5.2 5.4 5.6 Risk (Standard Deviation %) HFRI Equity Hedge (Total) Index Lighthouse Global Long/Short Fund Limited Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Lighthouse Global Long/Short Fund Limited 7.3 4.7 7.0 3.5 0.6 1.5 4.1 0.2 2.2 50.0 13y 9m HFRI Equity Hedge (Total) Index 6.3 5.2 6.1 0.0 1.0 1.2 0.0 N/A 3.0 0.0 13y 9m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 5.1 -1.2 0.0 25.0 13y 9m Manager Evaluation Lighthouse Global Long/Short Fund Limited vs. HFRI Equity Hedge (Total) Index As of September 30, 2017 63 Portfolio Characteristics Portfolio Manager Count 33 Net Exposure %28.5 Leverage 154.4 # Managers Funded 0 # Managers Redeemed 0 Region Allocation (Net Geographic Exposure) Asia 12.0% Europe 17.4% Latin America 8.2% United States 62.4% Strategy Allocation International Equity 29.0% Quantitative 10.2% Relative Value 2.8% U.S. Equity 58.0% Manager Evaluation Lighthouse Global Long/Short Fund Limited As of September 30, 2017 64 Historical Performance Comparative Performance and Rolling Return Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Quarterly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 Entrust Capital Diversified Fund -0.3 1.5 1.8 -2.8 2.1 2.2 -1.1 -7.3 1.8 13.2 7.4 -4.7 11.1 35.2 -26.0 9.9 HFRI Fund of Funds Composite Index 2.3 5.6 6.5 2.2 3.8 1.1 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 10.3 Rolling 3 Years Active Return Quarterly Active Return 0.0 6.0 12.0 18.0 -6.0 -12.0Active Return (%)12/03 3/05 6/06 9/07 12/08 3/10 6/11 9/12 12/13 3/15 6/16 9/17 0.0 2.0 4.0 6.0 Return (%)2.8 3.2 3.6 4.0 4.4 4.8 5.2 5.6 6.0 Risk (Standard Deviation %) HFRI Fund of Funds Composite Index Entrust Capital Diversified Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date Entrust Capital Diversified Fund 2.1 4.9 2.0 -1.9 1.1 0.4 3.0 -0.5 3.3 35.0 14y HFRI Fund of Funds Composite Index 3.8 3.5 3.7 0.0 1.0 1.0 0.0 N/A 2.1 0.0 14y 90 Day U.S. Treasury Bill 0.2 0.1 0.0 0.2 0.0 N/A 3.5 -1.0 0.0 10.0 14y Manager Evaluation Entrust Capital Diversified Fund vs. HFRI Fund of Funds Composite Index As of September 30, 2017 65 Portfolio Characteristics Portfolio Manager Count 25 Net Exposure %56.6 Leverage 153.4 # Managers Funded 0 # Managers Redeemed 0 Region Allocation (Net Geographic Exposure) Non-US 22.8% US 77.2% Strategy Allocation Trading 3.2% Opportunistic 18.4% Long/Short 8.3% Activist 16.7% Credit 28.1% Event Driven 25.2% Manager Evaluation Entrust Capital Diversified Fund As of September 30, 2017 66 Historical Performance Comparative Performance and Rolling Return Risk and Return (Oct-2012 - Sep-2017) Historical Statistics - Quarterly Periodicity (Oct-2012 - Sep-2017) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 UBS Trumbull Property Fund 1.2 3.1 4.4 7.8 8.4 4.1 6.0 11.7 10.4 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 NCREIF Property Index 1.7 5.1 6.9 9.8 10.3 6.2 8.0 13.3 11.8 11.0 10.5 14.3 13.1 -16.8 -6.5 15.8 Rolling 3 Years Active Return Quarterly Active Return 0.0 5.0 10.0 -5.0 -10.0Active Return (%)3/78 9/81 3/85 9/88 3/92 9/95 3/99 9/02 3/06 9/09 3/13 9/17 6.0 8.0 10.0 12.0 14.0 Return (%)0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6 Risk (Standard Deviation %) NCREIF Property Index UBS Trumbull Property Fund Return Standard Deviation Excess Return Alpha Beta Sharpe Ratio Tracking Error Information Ratio Downside Risk Consistency Inception Date UBS Trumbull Property Fund 8.4 1.4 8.0 -2.8 1.1 5.2 0.7 -2.5 0.0 15.0 39y 9m NCREIF Property Index 10.3 1.1 9.8 0.0 1.0 8.0 0.0 N/A 0.0 0.0 39y 9m 90 Day U.S. Treasury Bill 0.2 0.1 0.0 1.1 -0.1 N/A 1.2 -8.0 0.0 0.0 39y 9m Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of September 30, 2017 67 Portfolio Characteristics Portfolio Benchmark # Properties 216 7,165 # Investors 436 N/A Total Fund Assets 23,200 543,515 Property Type UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 OfficeApartmentRetailIndustrialHotel36.8 24.1 23.7 14.6 0.8 31.0 31.0 22.0 13.0 3.0 Property Location UBS Trumbull Property Fund NCREIF Property Index 0.0 15.0 30.0 45.0 60.0 EastWestSouthMidwest33.2 38.5 19.8 8.5 34.0 38.0 15.0 13.0 Manager Evaluation UBS Trumbull Property Fund vs. NCREIF Property Index As of September 30, 2017 68 Type City Ac quis ition Da te % Oc cupa nc y Cos t ($000) Fa ir Market Value ($000) Offic e Bo ston Dec-11 84%681,280$ 784,000$ Re tail Ca mb rid ge May-89 95%315,052$ 629,359$ Re tial Da lla s Dec-02 93%423,063$ 607,000$ Offic e Ne w York Ju n-06 75%670,906$ 605,000$ Offic e Ne w York Ju l-11 95%237,242$ 529,662$ Apart me nts Ne w York Ju l-11 96%391,572$ 523,000$ Offic e Ch ic ag o Dec-11 96%415,420$ 522,757$ Offic e Ne w York Se p-14 93%295,650$ 478,690$ Re tail Ch ic ag o No v-13 93%234,034$ 474,651$ As of Septe mber 2017 20 La rge st Inve st ments Manager Evaluation UBS Trumbull Property Fund As of September 30, 2017 Re tail Ch ic ag o No v-13 93%234,034$ 474,651$ Offic e Po rt la nd Aug-15 96%377,657$ 453,721$ Re tail Montebello Dec-88 98%195,464$ 332,000$ Re tail Se at tle Oc t-84 100%246,501$ 327,000$ Offic e Eme ry ville Aug-14 93%309,965$ 326,000$ Offic e Sa n Fra ncis co Dec-85 96%172,662$ 305,261$ Offic e De nver Ju n-06 80%192,553$ 274,000$ Offic e Pa sadena May-84 80%195,777$ 243,000$ Offic e Washin gton Ju n-15 91%247,608$ 236,132$ Offic e De nver Apr-82 89%172,623$ 231,764$ Offic e Oa kla nd Dec-15 98%176,066$ 216,667$ Re tail Millb ury Se p-04 99%156,000$ 207,400$ All o ther in vestme nts --11,751,706$ 14,174,265$ To tal Pr operties 17,858,800$ 22,481,328$ 69 Calendar Year Performance 70 Year To Date 2016 2015 2014 2013 2012 2011 2010 2009 2008 Total Composite 9.2 5.1 -0.7 2.9 10.9 12.1 1.2 11.2 20.2 -20.2 Policy Benchmark 9.1 6.6 -1.4 3.5 12.3 11.6 1.1 11.5 19.5 -20.6 Total Equity Composite 16.3 6.3 0.5 4.7 N/A N/A N/A N/A N/A N/A MSCI AC World Index 17.3 7.9 -2.4 4.2 22.8 16.1 -7.3 12.7 34.6 -42.2 Domestic Equity Composite 12.9 9.6 1.9 10.1 N/A N/A N/A N/A N/A N/A Russell 3000 Index 13.9 12.7 0.5 12.6 33.6 16.4 1.0 16.9 28.3 -37.3 International Equity Composite 22.8 0.3 -2.0 -5.5 N/A N/A N/A N/A N/A N/A MSCI AC World ex USA Index 21.1 4.5 -5.7 -3.9 15.3 16.8 -13.7 11.2 41.4 -45.5 Fixed Income Composite 6.0 4.2 -2.1 2.4 -1.7 10.9 3.8 8.7 18.9 -3.4 Barclays Intermediate U.S. Government/Credit 2.3 2.1 1.1 3.1 -0.9 3.9 5.8 5.9 5.2 5.1 Hedge Funds Composite 2.8 -0.4 N/A N/A N/A N/A N/A N/A N/A N/A HFRI Fund of Funds Composite Index 5.6 0.5 -0.3 3.4 9.0 4.8 -5.7 5.7 11.5 -21.4 Calendar Year Performance Composite Performance As of September 30, 2017 _________________________ See appendix for a description of the benchmarks and universe. Performance is reported net of fees. 71 Appendix 72 Current Manager Fee Schedule Fe e (%) Do mest ic Eq ui ty Black Rock $54,258,883 20.2 0.04 0.06 US Passive Large Cap (CIT )$ 18,991 Kennedy $8,852,157 3.3 0.90 0.75 US Mid Cap Va lu e $ 79,669 Times Sq uare $8,791,519 3.3 1.05 1.02 US Small Cap Growth $ 92,311 Inte rna ti ona l Equity Morgan St anley Int ernat ional $28,246,700 10.5 0.91 0.91 All EA FE Equit y $ 257,045 Morgan St anley Emerging M ar ket s $12,067,414 4.5 1.03 1.10 Emergi ng Mkts Equit y $ 124,294 Fi xed Income Income Res ear ch $37,330,856 13.9 0.30 0.30 US Core Fixe d Income $ 111,993 Prudent ial $32,865,682 12.2 0.30 0.35 US Core Plus Fixe d Income $ 98,597 Brandy wine $25,551,255 9.5 0.45 0.42 Global A gg F ixed Income $ 114,981 He dge Funds* Tota l Assets ($ millions )% o f Tota l Proje cted An nua l Fe e eVestment Al lia nc e Universe Media n eVestment Allia nc e Universe Investment performance calculated net of fees. * Incentive fees may be paid to underlying hedge fund managers.During 2016, the average incentive fee for managers in the Entrust Fund was 16.5% of profits.Some managers were subject to a hurdle rate.The average incentive fee for managers in the Lighthouse fee was 19.3% of profits.Some managers were subject to a hurdle rate. Light hous e $18,864,277 7.0 1.58 N/A N/A $ 298,056 Ent rust $16,424,025 6.1 2.64 N/A N/A $ 433,594 Re al Esta te UBS T rumbull $23,959,934 8.9 1.00 N/A N/A $ 239,599 Ca sh Money Market $1,628,013 0.6 0.16 0.20 US Cas h M anagement $ 2,605 Pavilion-Consulting Fee $ 118,836 US Bank Cus tody and Benefit Payment Fee $ 78,146 Tota l $268,840,714 100.0 %0.77%$ 2,068,717 73 2013 Acti on Sep tember •The M et rop olit an St . Louis Sewer District hired Pavilion Advisory Group as their invest ment consult ant. 2014 Acti on February •Pavilion p resent ed an asset allocat ion and investment and manager struct ure review to the F inance Commit tee.Pavilion recommended t he adop tion of new asset allocat ion targe ts and allowable ranges that would p ermit the eliminat ion of t he tact ical as set allocat ion and market neut ral s trat egies , the ad dit ion of hedge fund strat egies through hedge f und of funds, and the reduction of t he number of managers and exposure to high yield and non- US debt in the fixed income p ortfolio. T he following asset allocat ion s tructure was p rop os ed: 40% Equit y 35% Fixed Income 25% Alt ernatives Appendix History of Investment Decisions Given Pyramis ' p oor p er formance and rapidly declining as sets in the s trat egy,Pavilion furt her recommended the manager be t erminat ed immediat ely . T he Commit tee ap proved t hese recommendations. Sep tember •Pavilion downgraded PIM CO’s manager rating stat us from “negat iv e w at ch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat iv e w at ch” in January following the dep art ure of co-CIO Mohamed El-Erian, and not ed we would closely monit or t he firm for organiz at ional s tabilit y,asset flow s,and p erformance. Novemb er & December •Pavilion conducted an equit y long/s hort hedge fund of funds search and p resent ed the rep ort to the F inance Commit tee.Pavilion recommended Light house C ap it al P artners Global Long/Short Fund which was support ed by Metrop olit an St Louis Sew er St aff. T he F und rep laced PIMCO All Asset Fund on M arch 1, 2015. 74 2015 Acti on May •Pavilion recommended liquidat ing the t he Pict et Local Currency Emerging Market Debt Fund, Loomis Sayles Credit Fund and the Penn Capital High Yi eld Fund and inves ting the p roceeds int o the Prudent ial T otal Ret urn Fund. T he recommendation is support ed by the Office of t he Secr et ary Treas urer and t he Investment Commit tee.The F inance Commit tee ap proved t he recommendat io n t o go t o t he Board of T rus tees . Pavilion p rovided t he Finance Commit tee w it h a revised St at ement of Investment Policy , Object iv es an d Op erat ing Guidelines . T he p olicy was reviewed with and sup port ed by the O ffice of t he Secr et ary Treas urer. T he Finance Commit tee requested addit ional t ime t o review the document . June •Pavilion recommended liquidat ing the G MO Asset Allocat ion Fund and investing the p roceeds in t he Light house G lobal Long/Short Eq uit y Fund and t he Entrust Diversified Hedge F und of F unds. T he recommendat ion was support ed by the O ffice of t he Secret ary Treas urer and t he Inves tment Commit tee.The F inance Commit tee ap proved t he recommendation t o go t o t he Board of T rustees . T he Finance Commit tee review ed and ap proved t he revised Statement of Investment Policy , O bject ives and Op erat ing G uidelines provided at the M ay meet in g.The r ev is ed Inves tment Policy document was approved by the Board of T rustees . Appendix History of Investment Decisions 2016 Acti on Novemb er •Pavilion conducted a sear ch to replace t he pens ion p lan's large -cap managers with an index s trat egy.The Finance Commit tee agreed to liq uidat e all four of its large -cap managers, which include T . Rowe P rice Large -Cap Core Growth, Van gu ard S&P 500, Vanguard Windsor II and Holland, and use thes e funds t o p urchase s hares in a Blackrock Russell 1000 P assive U.S.Equit y CIT . December •Wellingt on Divers ified Inflat ion Hedges was terminat ed and p roceeds were moved t o t he UBS T rumbull Prop erty Fund. 2017 Acti on February •In February , all four large -cap managers T.Rowe P rice Large-Cap Growt h, Vangu ard S&P 500, Vangu ard Windsor II and Holland were liquidated and p roceeds used to p urchase shar es in the BlackRock Rus sell 1000 Pas sive U .S. Equity CIT . 75 All Total Composite, asset class composite and manager returns in this report are shown net of fees as of September 1, 2013. To tal Composite returns prior to September 1, 2013 were provided by New England Pension Consultants. Separate account manager returns prior to September 1, 2013 were provided by the investment managers and are displayed net of fees. Benchmark Comparison One relative comparison for a fund is with a market index or blend of indices. We call this a benchmark comparison. The benchmark should be predefined as an objective. This passive investment alternative is one measure for evaluating relative performance success. Universe Comparison A p erformance measurement universe is created by arraying the results of a large number of professional investment managers from the best to worst. Results are grouped in percentiles. The first percentile represents the top performing 1% of the managers; the 99th percentile represents the bottom performing 1% of managers. Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad Appendix Benchmark and Universe Descriptions Performance measurement universes are differentiated by time period and asset classes. Investment manager rankings within these broad universes will vary throughout market cycle depending on the manager's investment style or philosophy. Over longer time periods (7 to 10 years or more), a manager ranking in the top quartile (top 25%) of these broad universes would be perceived as performing well. Policy Benchmark As of January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 10% NCREIF Property Index. From August 1, 2015 to January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 5% We llington DIH Multi-Asset Inflation Index and 5% NCREIF Property Index. From March 1, 2015 to August 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield Cash Pay Index, 4% HFRI Equity Hedge (Total) Index, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE. 76 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 77 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 78