HomeMy Public PortalAbout2014 2nd Quarter ReportPerformance
Review
Metropolitan St. Louis Sewer
District Pension Plan
2nd Quarter 2014
Pavilion Advisory Group Inc.
227 W. Monroe Street, Suite 2020
Chicago, IL 60606
Phone: 312-798-3200
Fax: 312-902-1984
www.pavilioncorp.com
1 Performance Summary 1
2 Asset Class Diversification 18
3 Manager Evaluation 24
4 Calendar Year Performance 64
5 Capital Markets Review 66
6 Appendix 74
Table of Contents
Performance Summary
1
Performance Summary - June 2014
During the second quarter, the Metropolitan St. Louis Sewer District gained 3.7%, outpacing the Policy Benchmark return of 3.5%. On a trailing one-year basis,
the Plan returned 13.9%, underperforming the Policy Benchmark by 30 basis points.
Asset Class Diversification
The Finance Committee approved new asset allocation policy targets and allowable asset class ranges at the February 2014 meeting. Current asset allocation was
within investment policy targets. The Plan was slightly underweight in fixed income and real assets and overweight U.S. equity and cash.
Manager Evaluation
During the second quarter, the following managers notably outperformed their respective benchmarks: Kennedy Mid Cap Value, Brandywine Global
Opportunistic Fixed Income, PIMCO All Asset Fund, and Wellington Diversified Inflation Hedges. Second quarter performance was negatively impacted by the
following managers as they underperformed their respective benchmarks: T. Rowe Price Institutional Large-Cap Growth, Holland Large Cap Growth,
TimesSquare Small Cap Growth Fund, and Penn Capital.
A $1.7 million contribution was made to the UBS Trumbull Property Fund on June 30. Funding came from Vanguard Windsor II which reduced the Fund’s
overweight. UBS’s allocation is now in-line with the policy target.
Consultant News
In June, Pavilion Financial Corporation, the parent of Pavilion Advisory Group, acquired two consulting firms. Plan Sponsor Advisors (PSA), founded in 2002,
provides consulting services predominantly to defined contributions plans. PSA employees are now located in Pavilion Advisory Group’s Chicago office. LP
Capital Advisors (LPCA) was founded in 2004 and is based in Sacramento, California. The firm provides consulting services to institutions investing in various
alternative asset classes with expertise in private equity. The acquisitions of PSA and LPCA are consistent with Pavilion’s strategy of building an employee
owned firm that can invest in and offer a deep expertise in a broad range of advisory services and solutions.
Pension Plan Executive Summary
2
Pension Plan Executive Summary
Capital Markets Review
Markets awaited an economic rebound, following the U.S. first quarter’s 2.9% GDP contraction. Holding growth expectations lower were rising prices across
broad segments of the economy, especially housing and energy. Eurozone inflation moved in the opposite direction, prompting the European Central Bank (ECB)
to move interest rates to -0.1%.
Federal Reserve interest rate policy changes became difficult to downplay as the unemployment rate fell more rapidly than forecast. Already below the previous
Fed target, Janet Yellen worked to calm fears over imminent interest rate changes, explaining that a better understanding of the rapid drop in unemployment is
needed to ascertain whether labor pool changes or economic improvements are responsible.
Q2 GDP is expected to be mixed globally. Japan raised its consumption tax by 3% in April, which was preceded by a Q1 surge in consumer spending. Japan’s Q2
GDP is expected to reflect a drop in consumer activity. China’s growth is expected to remain steady as the government continues to deal with an economy skewed
toward real estate development. Canada’s economy is benefiting from high energy prices, while facing headwinds from rising housing costs. Eurozone GDP will
reflect moderating German growth as the ECB reported lower growth expectations amidst lower exports. Dependency on Russia for natural gas and oil hurt the
outlook for Europe, and left European nations timid on expanded sanctions following Russia’s attempted annexation of Crimea.
Recommendations or Action Items
No recommendations or action items at this meeting. Pavilion is conducting a hedge fund of funds manager search and will bring a recommendation to the
Committee at the third quarter meeting. Pavilion will also bring traditional manager recommendations to the Committee once the Secretary-Treasurer has
conducted the appropriate due diligence on manager search projects.
3
Total Composite Policy Benchmark
0.0
3.0
6.0
9.0
12.0
15.0
18.0
21.0
Return (%)Quarter Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
3.5
5.2
14.2
8.5
11.1
7.1
8.5
3.7
5.3
13.9
8.2
10.8
7.0
8.0
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Total Composite 3.7 5.3 13.9 8.2 10.8 7.0 8.0 21y 6m
Policy Benchmark 3.5 5.2 14.2 8.5 11.1 7.1 N/A
Performance Summary
Total Composite vs. Policy Benchmark
As of June 30, 2014
____________
Performance is reported net of fees.
See appendix for full description of the policy benchmark.
4
-4.0
0.0
4.0
8.0
12.0
16.0
20.0
24.0
28.0
ReturnQuarter
Year
To
Date
1
Year
3
Years
5
Years
7
Years
10
Years
Total Composite 3.7 (38)5.3 (51)13.9 (93)8.2 (91)10.8 (96)5.7 (56)7.0 (52)¢£
5th Percentile 4.5 6.8 19.9 11.7 14.3 6.8 8.2
1st Quartile 3.9 5.9 18.0 10.7 13.4 6.2 7.4
Median 3.6 5.3 16.9 10.0 12.7 5.8 7.0
3rd Quartile 3.2 4.6 15.7 9.0 12.0 5.2 6.5
95th Percentile 2.6 3.6 12.3 7.2 10.8 4.1 5.7
Performance Comparison
All Public Plans <= $500 mil
As of June 30, 2014
_________________________
Performance is reported net of fees.
Parentheses contain percentile rankings.
Calculation based on monthly periodicity.
5
-4.0
0.0
4.0
8.0
12.0
16.0
20.0
24.0
28.0
ReturnQuarter
Year
To
Date
1
Year
3
Years
5
Years
7
Years
10
Years
Total Composite 3.7 (48)5.3 (60)13.9 (91)8.2 (91)10.8 (95)5.7 (50)7.0 (62)¢£
5th Percentile 4.6 7.3 19.8 11.7 14.5 6.9 8.4
1st Quartile 4.0 6.2 18.0 10.7 13.5 6.1 7.7
Median 3.6 5.5 17.0 10.0 12.8 5.7 7.2
3rd Quartile 3.3 4.8 15.6 9.0 12.1 5.1 6.7
95th Percentile 2.6 3.6 11.4 7.4 10.7 4.0 6.0
Performance Comparison
All Public Plans
As of June 30, 2014
_________________________
Performance is reported net of fees.
Parentheses contain percentile rankings.
Calculation based on monthly periodicity.
6
3 Years 5 Years
7.0
9.0
11.0
13.0
14.0
Return (%)7.0 7.4 7.8 8.2 8.6 9.0
Risk (Standard Deviation %)
Policy Benchmark
(7.8 , 11.1)
Total Composite
(7.9 , 10.8)
7.0
9.0
11.0
13.0
14.0
Return (%)7.0 7.4 7.8 8.2 8.6 9.0
Risk (Standard Deviation %)
Policy Benchmark
(7.5 , 8.5)Total Composite
(7.7 , 8.2)
Performance Summary
Risk and Return Summary
As of June 30, 2014
7
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Total Composite 258,364,074 100.0 3.7 5.3 13.9 8.2 10.8 7.0 8.0 21y 6m
Policy Benchmark 3.5 5.2 14.2 8.5 11.1 7.1 N/A
Total Equity Composite 107,781,756 41.7 4.5 5.3 N/A N/A N/A N/A 19.6 0y 10m
MSCI AC World IMI 5.0 6.5 24.0 11.0 15.3 8.3 20.6
Domestic Equity Composite 71,521,951 27.7 4.4 (28)5.5 (47)N/A N/A N/A N/A 21.2 (N/A)0y 10m
Russell 3000 Index 4.9 (14)6.9 (16)25.2 (30)16.5 (10)19.3 (18)8.2 (38)22.1 (N/A)
Broad Equity Peer Group Median 3.9 5.4 23.6 14.1 17.8 7.9 N/A
Large-Cap Equity Composite 55,877,180 21.6 4.7 (41)5.6 (57)24.8 (43)15.1 (47)17.1 (60)7.7 (48)8.8 (N/A)11y 1m
Russell 1000 Index 5.1 (26)7.3 (26)25.4 (38)16.6 (20)19.3 (22)8.2 (35)9.2 (N/A)
Large-Cap Equity Peer Group Median 4.4 6.0 24.1 14.8 17.7 7.6 N/A
Small-Cap Equity Composite 15,644,771 6.1 3.6 (15)4.9 (20)25.2 (31)15.8 (26)21.8 (24)11.1 (6)12.6 (N/A)11y 1m
Russell 2000 Index 2.0 (42)3.2 (40)23.6 (46)14.6 (45)20.2 (49)8.7 (47)10.8 (N/A)
Small-Cap Equity Peer Group Median 1.7 2.7 23.1 14.2 20.1 8.6 N/A
International Equity Composite 36,259,805 14.0 4.6 (46)4.7 (50)N/A N/A N/A N/A 16.6 (N/A)0y 10m
MSCI AC World ex USA Index 5.0 (31)5.6 (34)21.8 (29)5.7 (46)11.1 (57)7.7 (68)18.3 (N/A)
International Equity Peer Group Median 4.5 4.7 19.7 5.6 11.4 8.3 N/A
Developed International Equity Composite 28,611,201 11.1 4.2 (35)4.6 (45)19.7 (70)9.5 (19)11.8 (52)6.8 (61)5.6 (N/A)15y 2m
MSCI EAFE Index 4.1 (39)4.8 (43)23.6 (34)8.1 (35)11.8 (53)6.9 (59)4.4 (N/A)
Developed International Equity Peer Group Median 3.7 4.2 21.5 7.2 11.8 7.2 N/A
Emerging International Equity Composite 7,648,604 3.0 6.1 (68)5.6 (59)10.8 (78)1.2 (35)9.6 (49)N/A 9.6 (46)9y 3m
MSCI Emerging Markets Index 6.6 (54)6.1 (50)14.3 (52)-0.4 (63)9.2 (57)11.9 (39)9.9 (37)
Emerging Markets Equity Peer Group Median 6.7 6.1 14.5 0.2 9.5 11.2 9.2
Fixed Income Composite 88,462,554 34.2 2.5 (14)4.7 (16)5.6 (22)4.8 (19)6.9 (24)5.8 (9)5.4 (12)11y
Barclays Intermediate U.S. Government/Credit 1.2 (78)2.3 (84)2.9 (82)2.8 (78)4.1 (82)4.3 (72)3.9 (74)
Intermediate Duration Fixed Income Peer Group Median 1.5 2.8 4.0 3.7 5.6 4.9 4.4
Performance Summary
Total Pension Fund Asset Allocation and Performance
As of June 30, 2014
_________________________
Performance is reported net of fees.
8
Performance Summary
Total Pension Fund Asset Allocation and Performance
As of June 30, 2014
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Tactical Asset Allocation Composite 25,755,359 10.0 3.7 5.5 14.8 8.3 10.4 7.0 6.8 11y 1m
65% MSCI World (Net) / 35% BC Aggregate 3.9 5.4 16.9 9.1 11.6 6.8 7.6
Alternatives Composite 10,387,844 4.0 4.5 7.6 N/A N/A N/A N/A 9.6 0y 10m
3 Month T-Bills + 3%0.8 1.5 3.1 3.1 3.1 4.7 2.5
Real Estate Composite 12,812,838 5.0 2.2 4.4 9.1 9.3 8.3 6.8 4.7 8y 1m
NCREIF Fund Index-Open End Diversified Core Equity 2.8 5.4 12.3 12.2 9.5 6.7 4.6
Real Assets Composite 11,816,728 4.6 6.2 8.4 16.8 -0.7 N/A N/A 3.9 4y 3m
Wellington DIH Multi-Asset Inflation Index 5.4 7.6 15.3 -0.6 5.8 6.6 3.1
Cash Account 1,346,995 0.5 0.0 0.0 0.1 0.1 -0.3 1.5 1.4 11y 1m
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.1 0.1 0.1 1.6 1.6
_________________________
Performance is reported net of fees.
9
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Domestic Large-Cap Equity Managers
Vanguard Windsor II 15,959,561 6.2 4.6 (46)7.6 (27)22.6 (56)16.5 (27)18.3 (35)8.0 (36)6.8 (N/A)13y 2m
Russell 1000 Value Index 5.1 (29)8.3 (15)23.8 (43)16.9 (18)19.2 (19)8.0 (36)6.7 (N/A)
Large-Cap Value Equity Peer Group Median 4.5 6.6 23.0 15.2 17.6 7.6 N/A
Vanguard Institutional Index Fund 12,295,789 4.8 5.2 (22)7.1 (28)24.6 (46)16.6 (22)18.8 (28)7.8 (46)4.9 (65)14y 9m
S&P 500 5.2 (22)7.1 (28)24.6 (46)16.6 (21)18.8 (28)7.8 (46)4.9 (66)
Large-Cap Equity Peer Group Median 4.4 6.0 24.1 14.8 17.7 7.6 5.7
T. Rowe Price Inst. Large-Cap Core Growth 13,580,075 5.3 4.1 (53)3.0 (76)29.9 (22)18.0 (10)20.1 (19)8.4 (37)27.3 (N/A)1y 4m
Russell 1000 Growth Index 5.1 (22)6.3 (23)26.9 (45)16.3 (24)19.2 (31)8.2 (45)24.8 (N/A)
Large-Cap Growth Equity Peer Group Median 4.2 4.5 26.3 14.6 18.1 8.0 N/A
Holland Large Cap Growth 14,041,755 5.4 4.5 (41)4.0 (62)21.7 (85)14.1 (61)18.1 (51)7.8 (55)19.7 (N/A)1y 4m
Russell 1000 Growth Index 5.1 (22)6.3 (23)26.9 (45)16.3 (24)19.2 (31)8.2 (45)24.8 (N/A)
Large-Cap Growth Equity Peer Group Median 4.2 4.5 26.3 14.6 18.1 8.0 N/A
Domestic Small-Cap Equity Managers
Kennedy Mid Cap Value 8,934,545 3.5 7.6 (5)14.6 (1)31.5 (7)17.1 (16)22.8 (9)N/A 12.5 (1)6y 6m
Russell Midcap Value Index 5.6 (16)11.1 (8)27.8 (19)17.6 (12)23.0 (8)10.7 (19)9.3 (32)
Mid-Cap Value Equity Peer Group Median 3.9 6.3 24.2 14.2 19.7 9.2 8.2
TimesSquare Small Cap Growth Fund 6,710,226 2.6 -1.3 (65)-5.6 (96)17.0 (95)13.8 (39)20.6 (37)11.4 (5)10.7 (N/A)12y 5m
Russell 2000 Growth Index 1.7 (20)2.2 (27)24.7 (31)14.5 (31)20.5 (39)9.0 (42)8.3 (N/A)
Small-Cap Growth Equity Peer Group Median 0.2 0.3 22.8 13.2 20.0 8.6 N/A
Developed International Equity Manager
Morgan Stanley International Equity Fund I 28,611,201 11.1 4.2 (35)4.4 (48)19.5 (72)9.4 (19)11.7 (54)6.9 (60)6.0 (58)9y 3m
MSCI EAFE Index 4.1 (39)4.8 (43)23.6 (34)8.1 (35)11.8 (53)6.9 (59)5.9 (59)
International Equity Peer Group Median 3.7 4.2 21.5 7.2 11.8 7.2 6.3
Emerging Markets Equity Manager
Morgan Stanley Emerging Markets Fund I 7,648,604 3.0 6.1 (68)5.6 (59)10.9 (78)1.2 (34)9.6 (49)11.6 (44)9.6 (46)9y 3m
MSCI Emerging Markets Index 6.6 (54)6.1 (50)14.3 (52)-0.4 (63)9.2 (57)11.9 (39)9.9 (37)
Emerging Markets Equity Peer Group Median 6.7 6.1 14.5 0.2 9.5 11.2 9.2
Performance Summary
Manager Asset Allocation and Performance
As of June 30, 2014
_________________________
Performance is reported net of fees.
10
Performance Summary
Manager Asset Allocation and Performance
As of June 30, 2014
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Fixed Income Managers
Income Research 35,717,342 13.8 1.4 (63)2.5 (63)3.0 (73)3.5 (54)5.1 (57)5.2 (24)5.5 (20)13y
Barclays Intermediate U.S. Government/Credit 1.2 (78)2.3 (84)2.9 (82)2.8 (78)4.1 (82)4.3 (72)4.8 (62)
Intermediate Duration Fixed Income Peer Group Median 1.5 2.8 4.0 3.7 5.6 4.9 4.9
Penn Capital 13,024,834 5.0 1.9 (86)4.3 (91)10.5 (80)7.6 (91)11.6 (86)N/A 7.0 (86)9y
BofA Merrill Lynch US High Yield, Cash Pay Index 2.5 (36)5.6 (38)11.7 (43)9.2 (36)13.8 (29)8.8 (24)8.6 (25)
High Yield Fixed Income Peer Group Median 2.4 5.3 11.6 8.9 13.2 8.4 8.1
Loomis Credit Asset Fund 5,013,089 1.9 2.3 (12)4.6 (15)8.8 (5)7.8 (1)N/A N/A 8.6 (1)4y 4m
50% BC Credit / 25% S&P LSTA / 25% BY High Yield 2.3 (13)4.9 (14)8.0 (7)6.7 (3)9.5 (3)6.6 (11)7.4 (2)
Alternative Credit Focus Funds Peer Group Median 1.4 2.5 4.4 3.8 7.1 4.8 4.7
Brandywine Global Opportunistic Fixed Income 22,539,117 8.7 4.0 (5)8.4 (2)8.3 (29)7.1 (2)10.0 (7)N/A 7.1 (8)9y 6m
Citigroup World Government Bond 2.3 (61)5.0 (46)6.9 (55)1.6 (80)3.6 (86)4.8 (67)3.8 (73)
Global Fixed Income Peer Group Median 2.5 4.9 7.0 3.6 5.6 5.4 4.5
Pictet Emerging Local Currency Debt Fund 12,168,172 4.7 3.6 (84)4.8 (76)1.8 (90)0.1 (67)N/A N/A 3.0 (85)2y 9m
JPM GBI-EM Global Diversified 4.0 (58)6.0 (34)3.9 (30)1.2 (30)7.4 (9)10.0 (N/A)4.6 (37)
Emerging Markets (LC) Fixed Income Peer Group Median 4.1 5.4 3.2 0.6 6.8 N/A 4.1
Tactical Asset Allocation Manager
GMO Asset Allocation Fund 25,755,359 10.0 3.7 (44)5.5 (56)14.8 (34)8.3 (36)10.4 (58)7.6 (16)6.6 (35)7y 11m
65% MSCI World (Net) / 35% BC Aggregate 3.9 (39)5.4 (56)16.9 (20)9.1 (28)11.6 (53)6.8 (40)6.0 (58)
IM Flexible Portfolio (MF) Median 3.5 6.0 9.8 6.7 12.0 6.4 6.2
_________________________
Performance is reported net of fees.
11
Performance Summary
Manager Asset Allocation and Performance
As of June 30, 2014
Allocation
Market
Value
($)%
Performance(%)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years
Since
Inception
Inception
Period
Alternatives Manager
PIMCO All Asset Fund I 10,387,844 4.0 4.5 6.9 11.4 6.7 10.2 7.2 6.6 8y 6m
Barclays U.S. Treasury Inflation Notes: 1-10 Year 2.9 4.0 3.6 2.2 4.5 4.6 4.6
Real Estate Manager
UBS Trumbull Property Fund 12,812,838 5.0 2.2 4.4 9.1 9.3 8.3 6.8 4.7 8y 1m
NCREIF Fund Index-Open End Diversified Core Equity 2.8 5.4 12.3 12.2 9.5 6.7 4.6
Real Asset Manager
Wellington Diversified Inflation Hedges 11,816,728 4.6 6.2 8.4 16.8 -0.7 N/A N/A 3.9 4y 3m
Wellington DIH Multi-Asset Inflation Index 5.4 7.6 15.3 -0.6 5.8 6.6 3.1
Cash Account 1,346,995 0.5 0.0 0.0 0.1 0.1 -0.3 1.5 1.4 11y 1m
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.1 0.1 0.1 1.6 1.6
Total Composite 258,364,074 100.0 3.7 5.3 13.9 8.2 10.8 7.0 8.0 21y 6m
_________________________
Performance is reported net of fees.
12
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
Return (%)12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0
Risk (Standard Deviation %)
Russell 2000 Growth
Russell Midcap Value
Russell 1000 Growth
S&P 500
Russell 1000 Value
Holland Large Cap Growth
Kennedy Mid Cap Value
TimesSquare Small Cap Growth
Vanguard Windsor II Fund
Vanguard Institutional Index Fund
T. Rowe Price Inst. Large-Cap Core Growth
Performance Summary
Risk and Return Summary - Equity Managers
5 Years Ending June 30, 2014
13
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Return (%)0.0 1.5 3.0 4.5 6.0 7.5 9.0 10.5 12.0 13.5
Risk (Standard Deviation %)
50% BC Credit / 25% S&P LSTA / 25% BY High Yield
JPM GBI-EM Global Diversified
Citigroup World Government Bond
BofA Merrill Lynch US High Yield, Cash Pay Index
BC Intermediate U.S. Government/Credit
Penn Capital
Income Research
Brandywine Global
Performance Summary
Risk and Return Summary - Fixed Income Managers
5 Years Ending June 30, 2014
14
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Return (%)-4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0
Risk (Standard Deviation %)
90 Day U.S. Treasury Bill
Barclays U.S. Treasury Inflation Notes: 1-10 Year
NCREIF Fund Index-Open End Diversified Core Equity
Wellington DIH Multi-Asset Inflation Index
65% MSCI World (Net) / 35% BC Aggregate
UBS TPF
PIMCO All Asset GMO
Performance Summary
Risk and Return Summary - Alternative Managers
5 Years Ending June 30, 2014
15
Manager Compliance Checklist
Second Quarter 2014
Mana ge rs
Vangua rd
Windsor
Vangua rd
Inst itutiona l
T. Row e
Price Holland Ke nne dy Ti me sS qua re
Morgan
Stanle y I nt'l
Morga n
Stanley EM
Organi zational /Produ ct Is sues
No ma teria l c hanges to investment team ü ü ü ü ü ü Ye s ü
No ma teria l o rganiza tional changes ü ü ü ü ü ü ü ü
Accounting or regulatory concerns ü ü ü ü ü ü ü ü
Cu rrently in adherence to guidelin es ü ü ü ü ü ü ü ü
Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü
Re lati ve Perfor mance 1
Th re e-year re turn better than benchmark No (-4 0 bps )N/A ü No (-2 20 bps )No (-5 0 bps )No (-7 0 bps )ü ü
Th re e-year ra nkin g better than peer group median ü ü ü No (6 1)ü ü ü ü
Fiv e year return better than benchmark No (-9 0 bps )N/A ü No (-1 10 bps )No (-2 0 bps )ü No (-1 0 bps )ü
1 Manager performance is evaluated net of investment management fees.
Fiv e year rankin g better than peer group median ü ü ü No (5 1)ü ü No (5 4)ü
Perfor mance s tatus Gr een Gr een Gr een Gr een Gr een Gr een Gr een Gr een
Da te perfo rmance status changed
Summary status Re pl ac e Gr een Gr een Gr een Gr een Gr een Gr een Re pl ac e
Da te s umma ry status changed 4Q13 4Q13
16
Manager Compliance Checklist
Second Quarter 2014
Ma nage rs
Income
Re se arch Penn Loomis
Brandyw ine
Global Picte t GMO PIMCO UBS Wellington
Organi zational/Produ ct Is sues
No ma teria l c hanges to investment team ü ü ü Ye s ü ü Ye s ü ü
No ma teria l o rg aniza tional changes ü ü ü ü ü ü ü ü ü
Accounting or re gulatory concerns ü ü ü ü ü ü ü ü ü
Cu rre ntly in adherence to guidelin es ü ü ü ü ü ü ü ü ü
Po rt fo lio characteris tics me et stylis tic expectations ü ü ü ü ü ü ü ü ü
Re lative Performan ce 1
Thre e-year return better than benchmark ü No (-1 60 bps )ü ü No (-1 10 bps )No (-8 0 bps )ü No (-2 90 bps )No (-1 0 bps )
Thre e-year rankin g better than peer group media n No (5 4)No (9 1)ü ü No (6 7)ü N/A N/A N/A
Fiv e year return better than benchmark ü No (-2 00 bps )N/A ü N/A No (-1 20 bps )ü No (-1 20 bps )N/A
1 Manager performance is evaluated net of investment management fees.
Fiv e year return better than benchmark ü No (-2 00 bps )N/A ü N/A No (-1 20 bps )ü No (-1 20 bps )N/A
Fiv e year rankin g better than peer group media n No (5 7)No (8 6)N/A ü N/A No (5 8)N/A N/A N/A
Performance s tatus Gr een Re d Gr een Gr een Red Gr een Gr een Gr een Gr een
Da te perfo rmance s tatus changed
Summary status Gr een Te rminate Te rminate Gr een Te rminate Te rminate Te rminate Gr een Gr een
Da te summa ry status changed 4Q13 4Q13 4Q13 4Q13 4Q13
17
Asset Class Diversification
18
June 30, 2014 : $258,364,074
Target Allocation Actual Allocation Allocation Differences
0.0%6.0%12.0%18.0%24.0%30.0%36.0%42.0%-6.0 %-12.0 %
Cash Account
$1,346,995
Real Asset Composite
$11,816,728
Real Estate Composite
$12,812,838
Alternatives Composite
$10,387,844
Tactical Asset Allocation Composite
$25,755,359
Fixed Income Composite
$88,462,554
Emerging International Equity Composite
$7,648,604
Developed International Equity Composite
$28,611,201
Small-Cap Equity Composite
$15,644,771
Large-Cap Equity Composite
$55,877,180
0.0%
5.0%
5.0%
4.0%
10.0%
35.0%
3.0%
11.0%
6.0%
21.0%
0.5%
4.6%
5.0%
4.0%
10.0%
34.2%
3.0%
11.1%
6.1%
21.6%
0.5%
-0.4 %
0.0%
0.0%
0.0%
-0.8 %
0.0%
0.1%
0.1%
0.6%
Asset Class Diversification
Investment Policy Allocation
As of June 30, 2014
19
Asse t Cl ass/Type Ma na ge r
Total Asse ts
($,mil.)as of
6/30/2014
Perce nt of
Total
Target
Al location
Weighting
Re lative to
Ta rge t
Allowable
Ra nge
Total Asse ts
($,mil.)as of
3/1/2014
La rge -Ca p Equity $55.9 21.6%21.0%+ 0 .6 %15 -25%$54.1
Co re Va nguard Institutional $12.3 4.8%6.0%- 1.2%$9.7
Va lu e Va nguard Windsor $16.0 6.2%5.0%+ 1.2%$17.9
Gr owth T. Rowe Price $13.6 5.3%5.0%+ 0.3%$13.0
Gr owth Ho lla nd $14.0 5.4%5.0%+ 0.4%$13.4
Small-Ca p Equity $15.6 6.1%6.0%+ 0 .1 %2 -8%$15.1
Va lu e Kennedy $8.9 3.5%3.0%+ 0.5%$8.3
Gr owth Time sSquare $6.7 2.6%3.0%- 0.4%$6.8
Inte rna ti ona l Equity $36.3 14.0%14.0%+ 0 .0 %$34.7
Developed Morgan Stanley $28.6 11.1%11.0%+ 0.1%5 -15%$27.5
Eme rgin g Marke ts Morgan Stanley $7.6 3.0%3.0%- 0.0%2 -8%$7.2
Fix ed Income $88.5 34.2%35.0%- 0 .8 %$83.8
Asset Class Diversification
Investment Program Structure
As of June 30, 2014
Fix ed Income $88.5 34.2%35.0%- 0 .8 %$83.8
Do me stic Core In come Res earch $35.7 13.8%14.0%- 0.2%10 -20%$32.7
High Yie ld Penn Capital $13.0 5.0%5.0%+ 0.0%0 -7%$12.8
Op portunistic Credit Lo omis $5.0 1.9%2.0%- 0.1%0 -5%$4.9
Global Brandywin e Glo bal $22.5 8.7%9.0%- 0.3%4 -14%$21.6
Eme rgin g Marke ts Debt Pictet $12.2 4.7%5.0%- 0.3%0 -7%$11.7
Ta cti ca l $25.8 10.0%10.0%- 0 .0 %$24.8
Ba la nced GM O $25.8 10.0%10.0%- 0.0%0 -12%$24.8
Alte rna ti ve s $10.4 4.0%4.0%+ 0 .0 %$11.0
Absolu te Return PIM CO $10.4 4.0%4.0%+ 0.0%0 -7%$11.0
Hedge Funds TBD $0.0 0.0%----0 -20%$0.0
Real Es tate $12.8 5.0%5.0%- 0 .0 %$10.9
Re al Es tate UBS Trumbull $12.8 5.0%5.0%- 0.0%0 -10%$10.9
Real As set $11.8 4.6%5.0%- 0 .4 %$11.1
Re al Asset Wellin gton $11.8 4.6%5.0%- 0.4%0 -10%$11.1
Ca sh $1.3 0.5%0.0%+ 0 .5 %$1.5
Ca sh Account Ca sh Account $1.3 0.5%0.0%+ 0.5%$1.5
Tota l $258.4 100.0%100.0%+ 0 .0 %$246.9
*Totals may not add to exactly 100.0% due to rounding.
20
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
British American Tobacco PLC 1.3 0.3 1.0 6.9
Reckitt Benckiser Group PLC 1.2 0.1 1.1 7.0
Unilever NV 1.2 0.2 1.1 7.4
Nestle SA, Cham Und Vevey 1.2 0.6 0.6 6.1
Sanofi 1.1 0.3 0.8 5.5
Amazon.com Inc 1.1 0.3 0.8 -3.4
Novartis AG 1.0 0.5 0.5 6.6
Apple Inc 1.0 1.3 -0.4 21.9
Gilead Sciences Inc 0.9 0.3 0.6 17.0
Priceline.Com Inc 0.9 0.1 0.8 0.9
% of Portfolio 10.8 3.9
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)75,957 76,772
Median Mkt. Cap ($M)12,693 1,469
Price/Earnings ratio 19.3 16.9
Price/Book ratio 2.9 2.5
5 Yr. EPS Growth Rate (%)11.9 11.8
Current Yield (%)1.9 2.4
Debt to Equity 0.7 1.3
Number of Stocks 959 8,548
Beta -1.00
Consistency --
Sharpe Ratio --
Information Ratio --
Up Market Capture --
Down Market Capture --
Sector Weights (%)
Total Equity Composite MSCI AC World IMI
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Other
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.0
2.2
1.8
1.8
4.6
16.3
11.1
13.3
15.4
8.8
11.5
13.2
0.0
0.0
3.3
3.4
6.4
12.9
11.7
10.4
21.3
9.6
8.9
12.1
Distribution of Market Capitalization (%)
Total Equity Composite MSCI AC World IMI
0.0
10.0
20.0
30.0
40.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
31.9
29.9
23.6
14.6
0.0
34.0
28.8
25.2
9.8
2.2
Equity Portfolio - Characteristics
Total Equity Composite vs. MSCI AC World IMI
As of June 30, 2014
21
Total Equity
Composite MSCI AC World IMI
Australia 0.6 2.7
Hong Kong 0.4 1.8
Japan 5.2 7.6
New Zealand 0.0 0.1
Singapore 0.0 0.6
Pacific 6.3 12.8
Austria 0.2 0.1
Belgium 0.2 0.5
Finland 0.0 0.3
France 2.9 3.2
Germany 2.2 3.2
Ireland 0.9 0.5
Italy 0.3 1.0
Netherlands 1.6 1.2
Portugal 0.1 0.1
Spain 0.1 1.3
EMU 8.4 11.3
Denmark 0.0 0.6
Norway 0.0 0.4
Sweden 0.7 1.2
Switzerland 4.5 3.3
United Kingdom 8.8 7.8
Europe ex EMU 13.9 13.2
Canada 0.7 4.0
United States 61.3 48.4
Israel 0.0 0.2
Middle East 0.0 0.2
Developed Markets 90.7 89.8
Total Equity
Composite MSCI AC World IMI
Brazil 0.6 1.1
Cayman Islands 0.0 0.0
Chile 0.0 0.2
Colombia 0.2 0.1
Mexico 0.5 0.5
Peru 0.1 0.0
Virgin Islands 0.0 0.0
EM Latin America 1.3 1.9
China 1.5 1.3
India 0.6 0.7
Indonesia 0.1 0.3
Korea 1.2 1.7
Malaysia 0.2 0.4
Philippines 0.3 0.1
Taiwan 0.6 1.4
Thailand 0.2 0.3
EM Asia 4.6 6.2
Czech Republic 0.1 0.0
Egypt 0.0 0.0
Greece 0.0 0.1
Hungary 0.0 0.0
Poland 0.2 0.2
Qatar 0.0 0.0
Russia 0.1 0.5
South Africa 0.4 0.8
Turkey 0.0 0.2
United Arab Emirates 0.0 0.1
EM Europe + Middle East + Africa 0.9 1.9
Emerging Markets 6.8 10.0
Frontier Markets 0.1 0.0
Cash 2.2 0.0
Other 0.3 0.1
Total 100.0 100.0
Equity Portfolio - Country/Region Allocation
Total Equity Composite vs. MSCI AC World IMI
As of June 30, 2014
22
Portfolio Characteristics
Maturity Distribution (%)
Credit Quality Distribution (%)
Risk Characteristics - 3 Years
Sector Distribution (%)
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
AAAAAABBBBBBBelow B64.8
6.7
14.3 14.2
0.0 0.0 0.0
26.4
10.1
19.0 22.3
10.1 11.7
0.4
Portfolio Benchmark
Effective Duration 4.8 3.9
Avg. Maturity 7.5 4.2
Avg. Quality A+AA
Yield To Maturity (%)3.7 1.5
Consistency
Sharpe
Ratio
Information
Ratio
Up
Market
Capture
Down
Market
Capture
Total Fixed Income Composite 61.1 1.0 0.5 157.0
Barclays Intermediate U.S. Government/Credit 0.0 1.3 N/A 100.0
90 Day U.S. Treasury Bill 36.1 N/A -1.3 0.9
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
TreasuriesAgenciesCreditHigh YieldMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.1
6.1
24.7
0.0 0.0 0.0
10.7
2.4 0.0 0.0 0.0 0.0
26.9
0.3
17.9 15.1
3.8 1.8
16.1
4.1 1.2 1.5
6.5 4.8
Total Fixed Income Composite
Barclays Intermediate U.S. Government/Credit
0.0
15.0
30.0
45.0
60.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
41.4
27.1
16.1 15.4
0.0
4.9
18.8 20.5
35.7
8.1
12.0
Fixed Income Portfolio - Characteristics
Total Fixed Income Composite vs. Barclays Intermediate U.S. Government/Credit
As of June 30, 2014
23
Manager Evaluation
24
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Vanguard Windsor II 4.6 7.6 22.6 16.5 18.3 8.0 30.8 16.8 2.8 10.7 27.2 -36.6 2.3 18.4 7.2 18.4
Russell 1000 Value Index 5.1 8.3 23.8 16.9 19.2 8.0 32.5 17.5 0.4 15.5 19.7 -36.8 -0.2 22.2 7.1 16.5
Large-Cap Value Equity Peer Group Median 4.5 6.6 23.0 15.2 17.6 7.6 31.7 15.0 -1.5 13.5 25.4 -37.3 2.9 16.6 6.1 12.5
Vanguard Windsor II Rank 46 27 56 27 35 36 61 28 17 86 41 44 55 35 36 6
16.8
17.6
18.4
19.2
20.0
20.8
Return (%)15.3 15.4 15.5 15.6 15.7 15.8 15.9
Risk (Standard Deviation %)
Russell 1000 Value Index
Vanguard Windsor II
Vanguard Windsor II Russell 1000 Value Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 8.0 16.0-8.0-16.0
Utilities
Telecommunication Services
Other
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-2.2
0.2
0.8
-1.4
0.1
1.6
4.3
-7.4
-2.4
3.1
0.8
2.4
Allocation
(Total: -0.3)
0.0 0.2 0.4-0.2-0.4
-0.1
0.0
0.0
0.0
0.0
0.0
-0.1
0.2
-0.1
-0.1
0.0
-0.1
Stock
(Total: -0.6)
0.0 0.5 1.0-0.5-1.0
0.1
0.0
0.0
0.0
-0.4
-0.3
0.1
-0.1
0.1
0.5
-0.4
0.0
Vanguard Windsor II
0.0 0.4 0.8-0.4-0.8
0.1
0.0
0.0
-0.1
-0.4
-0.3
0.0
0.1
-0.1
0.3
-0.3
-0.1
Manager Evaluation
Vanguard Windsor II vs. Russell 1000 Value Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
25
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Microsoft Corp 2.8 1.2 1.6 2.4
Wells Fargo & Co 2.6 2.5 0.1 6.4
JPMorgan Chase & Co 2.6 2.2 0.4 -4.5
Pfizer Inc 2.5 1.9 0.6 -6.8
Johnson & Johnson 2.4 2.5 -0.1 7.2
Intel Corp 2.4 1.4 1.0 20.7
Medtronic Inc 2.4 0.6 1.7 4.1
American Express Co 2.2 0.0 2.2 5.6
WellPoint Inc 2.2 0.3 1.9 8.5
Philip Morris International Inc 2.2 0.6 1.6 4.1
% of Portfolio 24.3 13.2
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)101,178 110,638
Median Mkt. Cap ($M)22,534 7,193
Price/Earnings ratio 15.8 16.7
Price/Book ratio 2.3 2.0
5 Yr. EPS Growth Rate (%)11.0 7.9
Current Yield (%)2.6 2.3
Debt to Equity 1.1 0.9
Number of Stocks 264 685
Beta (5 Years, Monthly)0.97 1.00
Consistency (5 Years, Monthly)41.67 1.00
Sharpe Ratio (5 Years, Monthly)1.31 1.34
Information Ratio (5 Years, Monthly)-0.36 -
Up Market Capture (5 Years, Monthly)95.59 -
Down Market Capture (5 Years, Monthly)95.51 -
Sector Weights (%)
Vanguard Windsor II Russell 1000 Value Index
0.0 8.0 16.0 24.0 32.0 40.0
Other
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.3
2.9
4.4
2.6
1.6
10.6
9.3
17.5
20.5
12.3
9.9
8.1
0.0
0.0
6.3
2.3
3.4
8.9
10.5
13.1
28.5
13.9
6.9
6.3
Distribution of Market Capitalization (%)
Vanguard Windsor II Russell 1000 Value Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
42.5
30.4
21.3
5.9
0.0
46.9
35.0
13.8
1.5 2.9
Manager Evaluation
Vanguard Windsor II vs. Russell 1000 Value Index
As of June 30, 2014
*Portfolio characteristics as of 12/31/2013.
26
Historical Performance
Three Year Rolling Percentile Ranking Relative Performance
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Vanguard Institutional Index 5.2 7.1 24.6 16.6 18.8 7.8 32.3 16.0 2.1 15.0 26.6 -37.0 5.5 15.8 4.9 10.9
S&P 500 Index 5.2 7.1 24.6 16.6 18.8 7.8 32.4 16.0 2.1 15.1 26.5 -37.0 5.5 15.8 4.9 10.9
Large-Cap Equity Peer Group Median 4.4 6.0 24.1 14.8 17.7 7.6 32.4 14.6 -1.0 14.0 27.8 -37.5 6.2 13.3 5.9 10.2
Vanguard Institutional Index Rank 22 28 46 22 28 46 51 36 22 38 56 45 55 32 62 44
Cumulative Annualized Over/Under Relative Performance
Over/Under Performance
0.0
0.1
0.2
-0.1
-0.2Return (%)9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Vanguard Institutional Index S&P 500 Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Vanguard Institutional Index 18.8 14.9 18.6 0.0 1.0 1.3 0.0 -1.1 8.1 20.0 14y 9m
S&P 500 Index 18.8 14.9 18.7 0.0 1.0 1.3 0.0 N/A 8.1 0.0 14y 9m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.9 -1.3 0.0 20.0 14y 9m
Manager Evaluation
Vanguard Institutional Index vs. S&P 500 Index
As of June 30, 2014
27
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Apple Inc 3.2 3.2 0.0 21.9
Exxon Mobil Corp 2.5 2.5 0.0 3.8
Microsoft Corp 1.8 1.8 0.0 2.4
Johnson & Johnson 1.7 1.7 0.0 7.2
General Electric Co 1.5 1.5 0.0 2.3
Wells Fargo & Co 1.4 1.5 0.0 6.4
Chevron Corp 1.4 1.4 0.0 10.7
JPMorgan Chase & Co 1.3 1.3 0.0 -4.5
Berkshire Hathaway Inc 1.2 1.3 -0.1 1.3
Procter & Gamble Co (The)1.2 1.2 0.0 -1.7
% of Portfolio 17.3 17.4
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)124,062 124,388
Median Mkt. Cap ($M)17,614 17,517
Price/Earnings ratio 18.6 18.6
Price/Book ratio 2.9 2.9
5 Yr. EPS Growth Rate (%)11.9 11.9
Current Yield (%)2.0 2.0
Debt to Equity 0.9 0.9
Number of Stocks 505 501
Beta (5 Years, Monthly)1.00 1.00
Consistency (5 Years, Monthly)31.67 1.00
Sharpe Ratio (5 Years, Monthly)1.37 1.37
Information Ratio (5 Years, Monthly)-0.88 -
Up Market Capture (5 Years, Monthly)99.96 -
Down Market Capture (5 Years, Monthly)100.05 -
Sector Weights (%)
Vanguard Institutional Index S&P 500 Index
0.0 5.0 10.0 15.0 20.0 25.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.2
3.1
2.4
3.5
18.8
10.5
13.3
16.1
10.8
9.5
11.8
0.0
3.2
2.4
3.5
18.8
10.5
13.3
16.1
10.9
9.5
11.8
Distribution of Market Capitalization (%)
Vanguard Institutional Index S&P 500 Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
47.7
35.1
16.7
0.5 0.0
47.6
35.0
16.7
0.5 0.2
Manager Evaluation
Vanguard Institutional Index vs. S&P 500 Index
As of June 30, 2014
28
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
T. Rowe Price LCC Growth 4.1 3.0 29.9 18.0 20.1 8.4 41.4 18.5 1.5 16.4 43.0 -42.6 13.0 9.1 4.0 7.3
Russell 1000 Growth Index 5.1 6.3 26.9 16.3 19.2 8.2 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3
Large-Cap Growth Peer Group Median 4.2 4.5 26.3 14.6 18.1 8.0 34.6 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7
T. Rowe Price LCC Growth Rank 53 76 22 10 19 37 12 16 27 39 14 78 55 33 69 56
17.6
18.4
19.2
20.0
20.8
21.6
Return (%)14.0 14.5 15.0 15.5 16.0 16.5 17.0 17.5
Risk (Standard Deviation %)
Russell 1000 Growth Index
T. Rowe Price LCC Growth
T. Rowe Price LCC Growth Russell 1000 Growth Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 10.0 20.0-10.0-20.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-0.1
-2.0
-0.3
-4.6
2.0
4.2
2.7
-0.5
-9.1
7.4
0.3
Allocation
(Total: -0.4)
0.0 0.2-0.2-0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
-0.2
0.0
Stock
(Total: -0.8)
0.0 0.4 0.8-0.4-0.8
0.0
0.0
-0.1
0.0
0.1
0.2
-0.1
0.0
-0.3
-0.4
0.0
T. Rowe Price LCC Growth
0.0 0.4 0.8-0.4-0.8-1.2
0.0
0.0
-0.1
0.0
0.0
0.2
-0.1
-0.1
-0.4
-0.6
0.0
Manager Evaluation
T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
29
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Amazon.com Inc 4.4 1.2 3.2 -3.4
Priceline.Com Inc 3.3 0.6 2.7 0.9
Gilead Sciences Inc 3.3 1.3 2.0 17.0
Google Inc 2.9 1.6 1.2 4.8
Google Inc 2.8 1.6 1.2 3.3
Danaher Corp 2.6 0.1 2.5 5.1
McKesson Corp 2.6 0.4 2.1 5.6
MasterCard Inc 2.4 0.7 1.7 -1.5
Biogen Idec Inc 2.3 0.7 1.6 3.1
Visa Inc 2.1 1.0 1.0 -2.2
% of Portfolio 28.5 9.3
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)79,150 108,393
Median Mkt. Cap ($M)22,942 8,666
Price/Earnings ratio 27.5 22.0
Price/Book ratio 5.1 4.9
5 Yr. EPS Growth Rate (%)20.0 16.8
Current Yield (%)0.7 1.5
Debt to Equity -0.7 2.1
Number of Stocks 144 672
Beta (5 Years, Monthly)1.12 1.00
Consistency (5 Years, Monthly)55.00 1.00
Sharpe Ratio (5 Years, Monthly)1.26 1.36
Information Ratio (5 Years, Monthly)0.28 -
Up Market Capture (5 Years, Monthly)108.64 -
Down Market Capture (5 Years, Monthly)113.88 -
Sector Weights (%)
T. Rowe Price Large-Cap Core Growth
Russell 1000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.6
0.0
0.4
3.9
21.4
14.5
17.7
7.5
5.2
2.1
26.7
0.0
0.1
2.3
4.3
27.7
12.3
12.8
5.2
6.4
10.5
18.4
Distribution of Market Capitalization (%)
T. Rowe Price Large-Cap Core Growth
Russell 1000 Growth Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
40.8
32.2
22.9
4.0
0.0
30.8
48.5
20.1
0.0 0.6
Manager Evaluation
T. Rowe Price Large-Cap Core Growth vs. Russell 1000 Growth Index
As of June 30, 2014
30
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Holland Large Cap Growth 4.5 4.0 21.7 14.1 18.1 7.8 30.3 13.1 4.3 15.3 40.0 -33.8 9.4 6.4 -0.1 12.0
Russell 1000 Growth Index 5.1 6.3 26.9 16.3 19.2 8.2 33.5 15.3 2.6 16.7 37.2 -38.4 11.8 9.1 5.3 6.3
Large-Cap Growth Equity Peer Group Median 4.2 4.5 26.3 14.6 18.1 8.0 34.6 14.6 -0.8 15.3 33.4 -38.3 13.8 7.1 6.2 7.7
Holland Large Cap Growth Rank 41 62 85 61 51 55 77 66 14 51 22 22 78 58 93 18
16.0
17.0
18.0
19.0
20.0
21.0
Return (%)13.8 14.1 14.4 14.7 15.0 15.3 15.6 15.9
Risk (Standard Deviation %)
Russell 1000 Growth Index
Holland Large Cap Growth
Holland Large Cap Growth Russell 1000 Growth Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 5.0 10.0-5.0-10.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-0.1
-2.2
-1.7
3.8
-2.4
2.0
-2.0
5.0
-4.1
-0.6
2.2
Allocation
(Total: 0.5)
0.0 0.4 0.8 1.2-0.4-0.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
-0.1
0.0
-0.1
Stock
(Total: -0.7)
0.0 0.8 1.6-0.8-1.6
0.0
0.0
-0.1
0.6
0.0
0.2
-0.3
-0.8
-0.2
-0.3
0.0
Holland Large Cap Growth
0.0 0.4 0.8 1.2-0.4-0.8
0.0
0.0
-0.1
0.6
0.0
0.3
-0.3
-0.2
-0.2
-0.2
-0.1
Manager Evaluation
Holland Large Cap Growth vs. Russell 1000 Growth Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
31
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Qualcomm Inc.4.6 1.3 3.3 1.0
Range Resources Corp.4.0 0.1 3.9 4.8
Visa Inc 3.9 1.0 2.9 -2.2
Priceline.Com Inc 3.5 0.6 2.9 0.9
Adobe Systems Inc 3.5 0.4 3.1 10.1
Apple Inc 3.4 5.5 -2.2 21.9
Citrix Systems Inc.3.3 0.1 3.3 8.9
Amazon.com Inc 3.3 1.2 2.1 -3.4
Cisco Systems Inc 2.9 0.0 2.9 11.8
Gilead Sciences Inc 2.9 1.3 1.6 17.0
% of Portfolio 35.3 11.6
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)87,902 108,393
Median Mkt. Cap ($M)38,913 8,666
Price/Earnings ratio 24.6 22.0
Price/Book ratio 4.6 4.9
5 Yr. EPS Growth Rate (%)14.0 16.8
Current Yield (%)1.1 1.5
Debt to Equity 0.6 2.1
Number of Stocks 50 672
Beta (5 Years, Monthly)0.95 1.00
Consistency (5 Years, Monthly)50.00 1.00
Sharpe Ratio (5 Years, Monthly)1.32 1.36
Information Ratio (5 Years, Monthly)-0.35 -
Up Market Capture (5 Years, Monthly)94.65 -
Down Market Capture (5 Years, Monthly)95.00 -
Sector Weights (%)
Holland Capital Management Russell 1000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.5
0.0
0.0
2.8
31.0
10.8
13.4
3.3
10.3
7.6
18.4
0.0
0.1
2.3
4.3
27.7
12.3
12.8
5.2
6.4
10.5
18.4
Distribution of Market Capitalization (%)
Holland Capital Management Russell 1000 Growth Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
40.8
32.2
22.9
4.0
0.0
36.9
28.3 28.9
3.3 2.5
Manager Evaluation
Holland Capital Management vs. Russell 1000 Growth Index
As of June 30, 2014
32
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Kennedy Mid Cap Value 7.6 14.6 31.5 17.1 22.8 N/A 33.3 13.6 -0.8 27.0 34.8 -27.0 N/A N/A N/A N/A
Russell Midcap Value Index 5.6 11.1 27.8 17.6 23.0 10.7 33.5 18.5 -1.4 24.8 34.2 -38.4 -1.4 20.2 12.6 23.7
Mid-Cap Value Equity Peer Group Median 3.9 6.3 24.2 14.2 19.7 9.2 33.4 15.5 -3.0 20.7 32.9 -38.9 2.7 13.9 8.6 16.7
Kennedy Mid Cap Value Rank 5 1 7 16 9 N/A 51 63 33 9 43 10 N/A N/A N/A N/A
22.4
22.6
22.8
23.0
23.2
23.4
Return (%)17.5 17.6 17.7 17.8 17.9 18.0
Risk (Standard Deviation %)
Russell Midcap Value Index
Kennedy Mid Cap Value
Kennedy Mid Cap Value Russell Midcap Value Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 10.0 20.0-10.0-20.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-2.9
-0.7
0.1
1.4
3.5
-2.7
-9.3
2.0
-0.2
5.3
3.5
Allocation
(Total: -0.1)
0.0 0.3 0.6-0.3-0.6
-0.1
0.0
0.0
0.0
-0.1
0.0
0.2
0.1
0.0
-0.1
-0.2
Stock
(Total: 1.6)
0.0 0.8 1.6-0.8
-0.2
0.0
-0.2
0.0
0.9
0.6
0.3
-0.2
0.3
0.1
0.0
Kennedy Mid Cap Value
0.0 0.5 1.0 1.5-0.5-1.0
-0.2
0.0
-0.2
0.0
0.9
0.5
0.5
-0.1
0.3
0.0
-0.2
Manager Evaluation
Kennedy Mid Cap Value vs. Russell Midcap Value Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
33
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Foot Locker Inc.2.5 0.2 2.3 8.5
Hospira Inc 2.5 0.3 2.2 18.8
Helmerich & Payne Inc.2.5 0.1 2.4 8.6
Ultra Petroleum Corp.2.4 0.1 2.3 10.4
Cadence Design Systems Inc 2.4 0.0 2.4 12.5
Reinsurance Group of America Inc.2.2 0.1 2.1 -0.5
Dana Holding Corp 2.2 0.0 2.2 5.2
Steel Dynamics Inc 2.1 0.1 2.0 1.6
Parker-Hannifin Corp 2.1 0.3 1.8 5.4
Trinity Industries Inc.2.1 0.1 2.1 21.6
% of Portfolio 23.1 1.3
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)8,233 11,224
Median Mkt. Cap ($M)7,257 6,002
Price/Earnings ratio 19.8 19.1
Price/Book ratio 2.2 2.0
5 Yr. EPS Growth Rate (%)8.0 10.9
Current Yield (%)1.6 2.1
Debt to Equity 0.5 0.9
Number of Stocks 53 561
Beta (5 Years, Monthly)1.00 1.00
Consistency (5 Years, Monthly)55.00 1.00
Sharpe Ratio (5 Years, Monthly)1.40 1.44
Information Ratio (5 Years, Monthly)-0.04 -
Up Market Capture (5 Years, Monthly)98.98 -
Down Market Capture (5 Years, Monthly)98.19 -
Sector Weights (%)
Kennedy Capital Management Russell Midcap Value Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
4.7
9.2
0.0
5.3
9.4
16.9
5.8
22.9
10.2
2.9
12.8
0.0
12.2
0.3
7.0
10.7
9.9
8.8
32.0
6.1
3.3
9.7
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
11.4
69.3
19.3
0.00.0
72.8
22.5
4.7
Manager Evaluation
Kennedy Capital Management vs. Russell Midcap Value Index
As of June 30, 2014
34
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
TimesSquare Small Cap Growth -1.3 -5.6 17.0 13.8 20.6 11.4 47.7 13.1 2.6 27.3 35.7 -32.3 10.0 16.5 13.4 11.1
Russell 2000 Growth Index 1.7 2.2 24.7 14.5 20.5 9.0 43.3 14.6 -2.9 29.1 34.5 -38.5 7.0 13.3 4.2 14.3
Small-Cap Growth Equity Peer Group Median 0.2 0.3 22.8 13.2 20.0 8.6 44.7 12.7 -2.7 27.7 34.5 -40.6 9.9 9.9 5.8 11.3
TimesSquare Small Cap Growth Rank 65 96 95 39 37 5 31 47 14 53 46 11 49 14 10 53
20.4
20.5
20.6
20.7
20.8
Return (%)17.7 18.0 18.3 18.6 18.9 19.2 19.5
Risk (Standard Deviation %)
Russell 2000 Growth Index
TimesSquare Small Cap Growth
TimesSquare Small Cap Growth Russell 2000 Growth Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 15.0 30.0-15.0-30.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-0.1
-0.9
-3.4
7.8
9.0
-8.8
-0.2
0.6
-1.0
-5.4
2.4
Allocation
(Total: 0.1)
0.0 0.2 0.4-0.2-0.4-0.6
0.0
0.0
-0.1
0.0
-0.2
0.1
0.0
0.1
0.0
0.1
0.0
Stock
(Total: -2.7)
0.0 2.0-2.0-4.0
0.0
0.0
0.2
-1.6
-0.1
-0.8
0.0
-0.3
-0.5
0.4
0.0
TimesSquare Small Cap Growth
0.0 0.8 1.6-0.8-1.6-2.4
0.0
0.0
0.2
-1.6
-0.3
-0.7
0.0
-0.2
-0.5
0.5
0.0
Manager Evaluation
TimesSquare Small Cap Growth vs. Russell 2000 Growth Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
35
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Solera Holdings Inc 2.4 0.0 2.4 6.3
On Assignment Inc 2.2 0.2 2.0 -7.8
Ultimate Software Group Inc 2.1 0.5 1.7 0.9
WEX Inc 2.0 0.5 1.6 10.4
Albany International Corp.2.0 0.0 2.0 7.3
Heartland Payment Systems Inc 1.9 0.2 1.8 -0.4
PolyOne Corp 1.8 0.5 1.4 15.2
Tyler Technologies Inc.1.8 0.3 1.4 9.0
Corporate Executive Board Company (The)1.7 0.3 1.4 -7.7
Dealertrack Technologies Inc 1.6 0.2 1.4 -7.8
% of Portfolio 19.5 2.6
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)2,163 1,902
Median Mkt. Cap ($M)1,720 856
Price/Earnings ratio 27.3 27.1
Price/Book ratio 3.5 4.1
5 Yr. EPS Growth Rate (%)13.3 17.0
Current Yield (%)0.4 0.6
Debt to Equity 0.6 0.4
Number of Stocks 102 1,163
Beta (5 Years, Monthly)0.85 1.00
Consistency (5 Years, Monthly)51.67 1.00
Sharpe Ratio (5 Years, Monthly)1.24 1.10
Information Ratio (5 Years, Monthly)-0.08 -
Up Market Capture (5 Years, Monthly)88.09 -
Down Market Capture (5 Years, Monthly)76.22 -
Sector Weights (%)
TimesSquare Small Cap Growth Russell 2000 Growth Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
3.5
0.0
0.0
1.8
32.3
23.9
11.5
7.3
4.7
3.6
11.3
0.0
0.2
0.7
5.5
25.7
14.7
21.7
7.4
5.2
3.7
15.2
Distribution of Market Capitalization (%)
TimesSquare Small Cap Growth Russell 2000 Growth Index
0.0
50.0
100.0
150.0
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
0.0
100.0
0.03.9
92.6
3.5
Manager Evaluation
TimesSquare Small Cap Growth vs. Russell 2000 Growth Index
As of June 30, 2014
36
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Morgan Stanley International Equity 4.2 4.4 19.5 9.4 11.7 6.9 20.4 19.6 -7.6 6.1 21.6 -33.1 9.8 22.5 6.5 20.0
MSCI EAFE Index 4.1 4.8 23.6 8.1 11.8 6.9 22.8 17.3 -12.1 7.8 31.8 -43.4 11.2 26.3 13.5 20.2
International Equity Peer Group Median 3.7 4.2 21.5 7.2 11.8 7.2 20.8 18.4 -13.7 11.6 33.5 -44.4 11.9 25.2 15.0 18.5
Morgan Stanley International Equity Rank 35 48 72 19 54 60 54 35 10 88 92 1 66 76 100 38
11.7
11.8
11.9
Return (%)13.6 14.4 15.2 16.0 16.8 17.6 18.4 19.2
Risk (Standard Deviation %)
MSCI EAFE Index
Morgan Stanley International Equity
Morgan Stanley International Equity MSCI EAFE Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 15.0 30.0-15.0-30.0
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-3.8
-2.6
0.4
1.7
-7.5
4.0
-6.2
1.9
14.0
-4.8
2.9
Allocation
(Total: 0.4)
0.0 0.3 0.6-0.3-0.6
-0.1
0.0
0.0
-0.1
0.1
0.0
0.1
0.1
0.3
0.0
-0.1
Stock
(Total: -0.4)
0.0 0.4 0.8-0.4-0.8
0.0
0.0
-0.3
0.0
0.0
-0.2
-0.3
0.1
0.1
0.3
0.0
Morgan Stanley International Equity
0.0 0.3 0.6-0.3-0.6-0.9
-0.1
0.0
-0.3
0.0
0.1
-0.1
-0.2
0.2
0.3
0.3
-0.1
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
37
Total Attribution
0.0 0.1 0.2 0.3 0.4 0.5 0.6-0.1-0.2-0.3-0.4-0.5-0.6
Pacific
Other
North America
Middle East
Europe ex EMU
EMU
EM Europe + Middle East + Africa
EM Asia
Cash
0.1
-0.1
0.0
0.0
0.3
-0.3
0.0
0.1
-0.1
Performance Attribution
Average Active Weight
0.0 10.0 20.0 30.0-10.0-20.0-30.0
Pacific
Other
North America
Middle East
Europe ex EMU
EMU
EM Europe + Middle East + Africa
EM Asia
Cash
-12.8
0.3
1.5
-0.5
11.6
-4.8
-0.2
1.9
2.9
Allocation
(Total: -0.2)
0.0 0.2 0.4-0.2-0.4-0.6
-0.2
0.0
0.0
0.0
0.0
0.1
0.0
0.1
-0.1
Stock
(Total: 0.2)
0.0 0.3 0.6-0.3-0.6-0.9
0.3
-0.1
0.0
0.0
0.3
-0.3
0.0
0.0
0.0
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
1 Quarter Ending June 30, 2014
38
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
British American Tobacco PLC 4.7 0.8 3.9 6.9
Reckitt Benckiser Group PLC 4.6 0.4 4.2 7.0
Unilever NV 4.5 0.5 4.0 7.4
Nestle SA, Cham Und Vevey 4.5 1.8 2.7 6.1
Sanofi 3.9 0.9 3.0 5.5
Novartis AG 3.7 1.5 2.2 6.6
Roche Holding AG 3.0 1.5 1.5 -0.6
Diageo PLC 2.8 0.6 2.2 2.8
Toyota Motor Corp 2.5 1.2 1.3 6.2
SAP AG Systeme Anwendungen 2.5 0.5 2.0 -2.9
% of Portfolio 36.8 9.9
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)82,915 68,236
Median Mkt. Cap ($M)34,323 9,762
Price/Earnings ratio 17.6 16.1
Price/Book ratio 2.5 2.1
5 Yr. EPS Growth Rate (%)7.5 9.7
Current Yield (%)3.0 3.3
Debt to Equity 1.2 1.2
Number of Stocks 70 899
Beta (5 Years, Monthly)0.89 1.00
Consistency (5 Years, Monthly)46.67 1.00
Sharpe Ratio (5 Years, Monthly)0.80 0.74
Information Ratio (5 Years, Monthly)-0.08 -
Up Market Capture (5 Years, Monthly)92.29 -
Down Market Capture (5 Years, Monthly)88.38 -
Sector Weights (%)
Morgan Stanley International Equity MSCI EAFE Index
0.0 6.0 12.0 18.0 24.0 30.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.1
0.0
1.6
8.7
6.7
7.1
14.3
18.2
8.1
24.7
8.7
0.0
3.9
4.9
8.0
4.4
12.7
10.5
25.3
7.3
11.1
11.9
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
33.2
36.7
26.6
3.5
0.0
44.1
30.6
22.4
0.9 2.1
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of June 30, 2014
39
Morgan Stanley
International Equity MSCI EAFE Index
Australia 2.1 7.7
Hong Kong 0.5 2.8
Japan 19.4 20.2
New Zealand 0.0 0.1
Singapore 0.0 1.4
Pacific 22.0 32.4
Austria 0.0 0.3
Belgium 0.0 1.2
Finland 0.0 0.9
France 9.4 9.6
Germany 8.3 9.2
Ireland 1.0 0.3
Italy 1.1 2.5
Netherlands 5.5 3.0
Portugal 0.0 0.2
Spain 0.0 3.6
EMU 25.2 30.8
Denmark 0.0 1.5
Norway 0.0 0.9
Sweden 2.4 3.0
Switzerland 15.6 9.1
United Kingdom 29.9 21.5
Europe ex EMU 47.9 36.0
Canada 1.5 0.0
United States 0.0 0.0
Israel 0.0 0.5
Middle East 0.0 0.5
Developed Markets 96.6 99.7
Morgan Stanley
International Equity MSCI EAFE Index
Brazil 0.0 0.0
Cayman Islands 0.0 0.0
Chile 0.0 0.0
Colombia 0.0 0.0
Mexico 0.0 0.0
Peru 0.0 0.0
Virgin Islands 0.0 0.0
EM Latin America 0.0 0.0
China 1.4 0.0
India 0.0 0.0
Indonesia 0.0 0.0
Korea 0.0 0.0
Malaysia 0.0 0.0
Philippines 0.0 0.0
Taiwan 0.0 0.0
Thailand 0.0 0.0
EM Asia 1.4 0.0
Czech Republic 0.0 0.0
Egypt 0.0 0.0
Greece 0.0 0.0
Hungary 0.0 0.0
Poland 0.0 0.0
Qatar 0.0 0.0
Russia 0.0 0.0
South Africa 0.0 0.0
Turkey 0.0 0.0
United Arab Emirates 0.0 0.0
EM Europe + Middle East + Africa 0.0 0.0
Emerging Markets 1.4 0.0
Frontier Markets 0.0 0.0
Cash 2.1 0.0
Other 0.0 0.3
Total 100.0 100.0
Manager Evaluation
Morgan Stanley International Equity vs. MSCI EAFE Index
As of June 30, 2014
40
Historical Performance
Buy and Hold Attribution
Risk and Return (Jul - 2009 - Jun - 2014)Three Year Rolling Percentile Ranking
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Morgan Stanley Emerging Markets 6.1 5.6 10.9 1.2 9.6 11.6 -0.8 20.2 -18.4 18.5 69.5 -56.4 41.6 38.0 34.5 24.1
MSCI Emerging Markets Index 6.6 6.1 14.3 -0.4 9.2 11.9 -2.6 18.2 -18.4 18.9 78.5 -53.3 39.4 32.2 34.0 25.6
Emerging Markets Equity Peer Group Median 6.7 6.1 14.5 0.2 9.5 11.2 -1.1 19.5 -19.2 19.2 74.0 -54.5 37.4 32.3 32.9 24.9
Morgan Stanley Emerging Markets Rank 68 59 78 34 49 44 47 39 41 55 69 71 25 16 41 60
8.8
9.2
9.6
10.0
10.4
Return (%)17.0 17.5 18.0 18.5 19.0 19.5 20.0 20.5
Risk (Standard Deviation %)
MSCI Emerging Markets Index
Morgan Stanley Emerging Markets
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Average Active Weight
0.0 5.0 10.0-5.0-10.0
Utilities
Telecommunication Services
Other
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
Cash
-3.5
2.3
0.5
-5.7
1.1
1.2
3.1
-1.1
-5.1
1.7
2.8
2.7
Allocation
(Total: -0.4)
0.0 0.3 0.6-0.3-0.6
-0.1
0.0
0.0
0.2
0.0
0.0
0.0
0.0
-0.2
-0.1
-0.1
-0.2
Stock
(Total: -0.6)
0.0 0.4 0.8-0.4-0.8-1.2
0.0
-0.2
0.0
0.2
-0.6
0.1
0.0
-0.2
0.2
-0.2
0.2
0.0
Morgan Stanley Emerging Markets
0.0 0.4 0.8-0.4-0.8-1.2
-0.1
-0.2
0.0
0.4
-0.5
0.1
0.0
-0.2
0.0
-0.3
0.1
-0.2
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of June 30, 2014
Differences between the manager return and the attribution return are due primarily to the effects of fees and portfolio trading.
41
Total Attribution
0.0 0.2 0.4 0.6 0.8-0.2-0.4-0.6-0.8-1.0
Pacific
Other
North America
Frontier Markets
Europe ex EMU
EMU
EM Latin America
EM Europe + Middle East + Africa
EM Asia
Cash
-0.1
0.0
0.0
0.0
-0.3
-0.1
0.4
-0.5
-0.2
-0.2
Performance Attribution
Average Active Weight
0.0 4.0 8.0 12.0-4.0-8.0-12.0
Pacific
Other
North America
Frontier Markets
Europe ex EMU
EMU
EM Latin America
EM Europe + Middle East + Africa
EM Asia
Cash
-2.3
1.9
1.3
1.1
2.1
4.8
-1.3
-5.5
-4.8
2.7
Allocation
(Total: -0.6)
0.0 0.2-0.2-0.4-0.6
0.0
0.0
0.0
0.0
-0.3
-0.1
0.0
0.0
0.0
-0.2
Stock
(Total: -0.4)
0.0 0.4 0.8-0.4-0.8-1.2
-0.1
0.0
0.0
0.0
0.0
0.0
0.4
-0.5
-0.2
0.0
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
1 Quarter Ending June 30, 2014
42
Top Ten Equity Holdings
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Active
Weight
(%)
Quarterly
Return
(%)
Samsung Electronics Co Ltd 2.9 3.5 -0.7 3.6
Tencent Holdings LTD 2.6 1.9 0.7 9.9
Taiwan Semiconductor Manufacturing 2.5 2.5 -0.1 8.8
Bank of China Ltd 2.0 0.9 1.2 8.0
BRF - Brasil Foods S.A.1.9 0.4 1.5 20.4
Naspers Ltd 1.5 1.1 0.4 6.6
Cemex SAB de CV 1.4 0.4 1.1 8.9
Petroleo Brasileiro Sa Petrobras Petr 1.3 0.8 0.5 19.1
SK Hynix Inc 1.3 0.7 0.6 42.0
China Construction Bank Corp 1.3 1.3 -0.1 8.0
% of Portfolio 18.7 13.5
Portfolio Characteristics
Portfolio Benchmark
Wtd. Avg. Mkt. Cap ($M)33,983 40,171
Median Mkt. Cap ($M)8,752 5,560
Price/Earnings ratio 14.2 11.2
Price/Book ratio 2.5 2.1
5 Yr. EPS Growth Rate (%)13.0 14.6
Current Yield (%)2.1 2.5
Debt to Equity 1.0 0.9
Number of Stocks 162 835
Beta (5 Years, Monthly)0.92 1.00
Consistency (5 Years, Monthly)50.00 1.00
Sharpe Ratio (5 Years, Monthly)0.60 0.56
Information Ratio (5 Years, Monthly)0.03 -
Up Market Capture (5 Years, Monthly)93.64 -
Down Market Capture (5 Years, Monthly)89.72 -
Sector Weights (%)
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0.0 8.0 16.0 24.0 32.0 40.0
Cash
Utilities
Telecommunication Services
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
2.3
0.1
8.9
3.6
17.7
8.0
3.8
27.9
6.4
9.6
11.6
0.0
3.6
7.0
8.7
17.3
6.5
1.8
27.0
10.8
8.2
9.1
Distribution of Market Capitalization (%)
Morgan Stanley Emerging Markets MSCI Emerging Markets Index
0.0
15.0
30.0
45.0
60.0
>$75 Bil $20 Bil -
$75 Bil
$5 Bil -
$20 Bil
$0 -
$5 Bil
Cash
19.0
26.7
39.5
14.8
0.0
16.2
22.9
40.4
18.2
2.3
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of June 30, 2014
43
Morgan Stanley
Emerging Markets
MSCI Emerging
Markets Index
Australia 0.0 0.0
Hong Kong 2.8 5.9
Japan 0.5 0.0
New Zealand 0.0 0.0
Singapore 0.4 0.1
Pacific 3.6 6.0
Austria 2.7 0.0
Belgium 0.0 0.0
Finland 0.0 0.0
France 0.0 0.0
Germany 0.0 0.0
Ireland 0.0 0.0
Italy 0.0 0.0
Netherlands 0.6 0.0
Portugal 1.0 0.0
Spain 1.0 0.0
EMU 5.3 0.0
Denmark 0.0 0.0
Norway 0.0 0.0
Sweden 0.0 0.0
Switzerland 1.1 0.0
United Kingdom 0.9 0.0
Europe ex EMU 2.0 0.0
Canada 0.0 0.0
United States 1.5 0.1
Israel 0.0 0.0
Middle East 0.0 0.0
Developed Markets 12.3 6.1
Morgan Stanley
Emerging Markets
MSCI Emerging
Markets Index
Brazil 7.7 10.9
Cayman Islands 0.0 0.0
Chile 0.6 1.5
Colombia 2.4 1.0
Mexico 6.8 5.1
Peru 1.1 0.3
Virgin Islands 0.0 0.0
EM Latin America 18.7 18.8
China 9.5 12.4
India 8.7 6.8
Indonesia 1.2 2.5
Korea 15.5 15.6
Malaysia 2.3 3.9
Philippines 3.7 1.0
Taiwan 8.0 12.1
Thailand 2.5 2.2
EM Asia 51.4 56.5
Czech Republic 0.8 0.2
Egypt 0.0 0.2
Greece 0.0 0.8
Hungary 0.7 0.2
Poland 3.2 1.7
Qatar 0.4 0.4
Russia 1.7 5.4
South Africa 5.3 7.5
Turkey 0.0 1.7
United Arab Emirates 0.0 0.5
EM Europe + Middle East + Africa 12.2 18.6
Emerging Markets 82.4 93.9
Frontier Markets 1.3 0.0
Cash 2.3 0.0
Other 1.7 0.0
Total 100.0 100.0
Manager Evaluation
Morgan Stanley Emerging Markets vs. MSCI Emerging Markets Index
As of June 30, 2014
44
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Income Research 1.4 2.5 3.0 3.5 5.1 5.2 -0.9 5.9 5.6 6.2 14.4 0.8 7.4 4.5 2.8 3.7
Barclays Intermediate U.S. Government/Credit 1.2 2.3 2.9 2.8 4.1 4.3 -0.9 3.9 5.8 5.9 5.2 5.1 7.4 4.1 1.6 3.0
Intermediate Duration Fixed Income Peer Group Median 1.5 2.8 4.0 3.7 5.6 4.9 -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5 2.6
Income Research Rank 63 63 73 54 57 24 61 41 28 49 24 29 9 14 1 19
2.7
3.6
4.5
5.4
6.3
7.2
Return (%)2.2 2.4 2.6 2.8 3.0 3.2
Risk (Standard Deviation %)
Barclays Intermediate U.S. Government/Credit
Income Research
Income Research
Barclays Intermediate U.S. Government/Credit
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Income Research 5.1 3.0 5.0 0.7 1.1 1.7 1.1 0.9 1.0 70.0 17y 5m
Barclays Intermediate U.S. Government/Credit 4.1 2.6 4.0 0.0 1.0 1.6 0.0 N/A 1.0 0.0 17y 5m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 2.5 -1.6 0.0 15.0 17y 5m
Manager Evaluation
Income Research vs. Barclays Intermediate U.S. Government/Credit
As of June 30, 2014
45
Credit Quality Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
AAAAAABBB64.8
6.7
14.3 14.2
52.7
9.5
17.3 20.5
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 3.7 3.9
Avg. Maturity 4.4 4.2
Avg. Quality AA-AA
Yield To Maturity (%)1.8 1.5
Sector Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
25.0
50.0
75.0
100.0
TreasuriesAgenciesCreditMBSABSNon-USEmergingMunicipalsCashOtherCMBS56.1
6.1
24.7
0.0 0.0
10.7
2.4 0.0 0.0 0.0 0.0
26.8
0.8
36.6
7.5 4.4 0.0 0.0 2.4 0.6
9.0 11.9
Maturity Distribution (%)
Income Research
Barclays Intermediate U.S. Government/Credit
0.0
15.0
30.0
45.0
60.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
41.4
27.1
16.1 15.4
0.0
4.7
29.8
33.7
29.7
0.9 1.1
Manager Evaluation
Income Research vs. Barclays Intermediate U.S. Government/Credit
As of June 30, 2014
46
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Penn Capital 1.9 4.3 10.5 7.6 11.6 N/A 5.9 13.3 4.2 15.0 37.5 -21.0 1.8 8.9 N/A N/A
BofA Merrill Lynch US High Yield, Cash Pay Index 2.5 5.6 11.7 9.2 13.8 8.8 7.4 15.4 4.5 15.2 56.3 -26.2 2.2 11.6 2.8 10.8
High Yield Fixed Income Peer Group Median 2.4 5.3 11.6 8.9 13.2 8.4 7.4 15.3 4.0 14.7 47.3 -24.3 2.6 10.7 3.1 10.4
Penn Capital Rank 86 91 80 91 86 N/A 78 80 46 41 79 25 74 84 N/A N/A
8.0
10.0
12.0
14.0
16.0
18.0
Return (%)5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0
Risk (Standard Deviation %)
BofA Merrill Lynch US High Yield, Cash Pay Index
Penn Capital
Penn Capital
BofA Merrill Lynch US High Yield, Cash Pay Index
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Penn Capital 11.6 5.9 11.2 1.1 0.8 1.9 2.2 -1.0 2.1 35.0 9y
BofA Merrill Lynch US High Yield, Cash Pay Index 13.8 7.6 13.3 0.0 1.0 1.8 0.0 N/A 2.8 0.0 9y
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 7.6 -1.8 0.0 15.0 9y
Manager Evaluation
Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index
As of June 30, 2014
47
Credit Quality Distribution (%)
Penn Capital
BofA Merrill Lynch US High Yield, Cash Pay Index
0.0
25.0
50.0
75.0
100.0
AAABBBBBBBelow B0.3 0.0
45.8
38.4
15.5
0.0 0.8
35.5
63.7
0.0
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 4.3 4.3
Avg. Maturity 6.5 6.6
Avg. Quality B B+
Yield To Maturity (%)5.7 5.5
Sector Distribution (%)
Penn Capital
BofA Merrill Lynch US High Yield, Cash Pay Index
0.0
50.0
100.0
150.0
High YieldCashOther100.0
0.0 0.0
97.8
2.1 0.1
Maturity Distribution (%)
Penn Capital
BofA Merrill Lynch US High Yield, Cash Pay Index
0.0
50.0
100.0
150.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.5
8.9
23.5
61.4
3.6 2.12.2 2.6
15.4
77.9
1.9 0.0
Manager Evaluation
Penn Capital vs. BofA Merrill Lynch US High Yield, Cash Pay Index
As of June 30, 2014
48
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Apr-2010 - Jun-2014)
Historical Statistics (Apr-2010 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Loomis Credit Asset Fund 2.3 4.6 8.8 7.8 N/A N/A 4.4 14.2 3.3 N/A N/A N/A N/A N/A N/A N/A
50% BC Credit / 25% S&P LSTA / 25% BY High Yield 2.3 4.9 8.0 6.7 9.5 6.6 2.1 11.0 5.8 10.6 34.3 -15.9 3.6 6.8 3.0 6.7
Alternative Credit Focus Funds Peer Group Median 1.4 2.5 4.4 3.8 7.1 4.8 0.8 8.6 1.3 8.1 21.9 -12.7 4.6 5.1 1.4 6.1
Loomis Credit Asset Fund Rank 12 15 5 1 N/A N/A 14 6 22 N/A N/A N/A N/A N/A N/A N/A
5.4
6.3
7.2
8.1
9.0
9.9
Return (%)2.4 2.7 3.0 3.3 3.6 3.9 4.2 4.5 4.8
Risk (Standard Deviation %)
50% BC Credit / 25% S&P LSTA / 25% BY High Yield
Loomis Credit Asset Fund
Loomis Credit Asset Fund
50% BC Credit / 25% S&P LSTA / 25% BY High Yield
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Loomis Credit Asset Fund 8.2 4.2 8.0 -0.6 1.2 1.9 1.9 0.5 1.7 70.6 4y 3m
50% BC Credit / 25% S&P LSTA / 25% BY High Yield 7.2 3.2 7.0 0.0 1.0 2.2 0.0 N/A 1.1 0.0 4y 3m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.2 -2.2 0.0 11.8 4y 3m
Manager Evaluation
Loomis Credit Asset Fund vs. 50% BC Credit / 25% S&P LSTA / 25% BY High Yield
As of June 30, 2014
49
Credit Quality Distribution (%)
Loomis Credit Asset Fund
0.0
15.0
30.0
45.0
AAAAAABBBBBBBelow B1.6 0.4
21.8 20.6
18.5
35.9
1.4
Portfolio Characteristics
Portfolio
Effective Duration 4.0
Avg. Maturity 7.2
Avg. Quality Ba2
Yield To Maturity (%)4.2
Sector Distribution (%)
Loomis Credit Asset Fund
0.0
20.0
40.0
60.0
80.0
TreasuriesCreditHigh YieldABSNon-USCashOtherCMBS0.1
32.5
11.8
0.1 0.4 1.4
53.0
0.6
Maturity Distribution (%)
Loomis Credit Asset Fund
0.0
25.0
50.0
75.0
100.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs2.5 4.3 8.2
58.9
26.1
Manager Evaluation
Loomis Credit Asset Fund
As of June 30, 2014
50
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Brandywine Global Opportunistic Fixed Income 4.0 8.4 8.3 7.1 10.0 N/A -3.5 14.1 8.0 13.9 20.5 -8.5 10.6 8.4 -0.9 N/A
Citigroup World Government Bond 2.3 5.0 6.9 1.6 3.6 4.8 -4.0 1.6 6.4 5.2 2.6 10.9 11.0 6.1 -6.9 10.3
Global Fixed Income Peer Group Median 2.5 4.9 7.0 3.6 5.6 5.4 -1.7 7.5 3.7 6.1 12.0 -2.1 7.7 5.7 0.7 9.5
Brandywine Global Opportunistic Fixed Income Rank 5 2 29 2 7 N/A 69 15 12 10 25 74 18 21 55 N/A
-6.0
0.0
6.0
12.0
18.0
Return (%)5.4 5.6 5.8 6.0 6.2 6.4 6.6
Risk (Standard Deviation %)
Citigroup World Government Bond
Brandywine Global Opportunistic Fixed Income
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Brandywine Global Opportunistic Fixed Income 10.0 6.2 9.7 6.6 0.9 1.6 3.4 1.8 1.6 80.0 9y 6m
Citigroup World Government Bond 3.6 5.7 3.6 0.0 1.0 0.6 0.0 N/A 2.4 0.0 9y 6m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 5.7 -0.6 0.0 45.0 9y 6m
Manager Evaluation
Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond
As of June 30, 2014
51
Credit Quality Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond
0.0
25.0
50.0
75.0
100.0
AAAAAABBBBBBCCCNR17.8
67.3
2.1
12.8
0.0 0.0 0.0 0.0
19.1
24.3 27.8
19.2
7.1
1.1 1.1 0.3
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 6.8 7.0
Avg. Maturity 13.1 8.3
Avg. Quality A AA
Yield To Maturity (%)4.2 1.3
Sector Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond
0.0
25.0
50.0
75.0
100.0
TreasuriesCreditHigh YieldMBSNon-USEmergingMunicipalsCash28.1
0.0 0.0 0.0
71.9
0.0 0.0 0.0
9.3 4.8 0.1 2.9
63.0
16.1
0.8 3.1
Maturity Distribution (%)
Brandywine Global Opportunistic Fixed Income
Citigroup World Government Bond
0.0
15.0
30.0
45.0
< 1 Yr1 < 3 Yrs3 < 5 Yrs5 < 10 Yrs10 < 20 Yrs> 20 Yrs0.0
27.6
19.2
27.6 25.6
0.0
7.2
15.7
5.9
26.8
11.8
32.6
Manager Evaluation
Brandywine Global Opportunistic Fixed Income vs. Citigroup World Government Bond
As of June 30, 2014
52
Historical Performance
Three Year Rolling Percentile Ranking Risk and Return (Jul-2010 - Jun-2014)
Historical Statistics (Jul-2010 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Pictet Emerging Local Currency Debt Fund 3.6 4.8 1.8 0.1 N/A N/A -10.3 15.3 -2.3 N/A N/A N/A N/A N/A N/A N/A
JPM GBI-EM Global Diversified 4.0 6.0 3.9 1.2 7.4 10.0 -9.0 16.8 -1.8 15.7 22.0 -5.2 18.1 15.2 6.3 23.0
Emerging Markets LC Peer Group Median 4.1 5.4 3.2 0.6 6.8 N/A -10.4 16.7 -3.3 14.3 24.1 N/A N/A N/A N/A N/A
Pictet Emerging Local Currency Debt Fund Rank 84 76 90 67 N/A N/A 47 70 38 N/A N/A N/A N/A N/A N/A N/A
0.0
2.0
4.0
6.0
8.0
Return (%)8.8 9.0 9.2 9.4 9.6 9.8 10.0 10.2 10.4
Risk (Standard Deviation %)
JPM GBI-EM Global Diversified
Pictet Emerging Local Currency Debt Fund
Pictet Emerging Local Currency Debt Fund
JPM GBI-EM Global Diversified
0
25
50
75
100Return Percentile Rank9/04 9/05 9/06 9/07 9/08 9/09 9/10 9/11 9/12 9/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Pictet Emerging Local Currency Debt Fund 3.8 9.4 4.1 -1.4 0.9 0.4 1.0 -1.8 5.5 6.3 4y
JPM GBI-EM Global Diversified 5.5 10.0 5.8 0.0 1.0 0.6 0.0 N/A 5.6 0.0 4y
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.0 -0.6 0.0 43.8 4y
Manager Evaluation
Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified
As of June 30, 2014
53
Credit Quality Distribution (%)
Pictet Emerging Local Currency Debt Fund
JPM GBI-EM Global Diversified
0.0
20.0
40.0
60.0
80.0
AAAAAABBBBBBBelow BNot Rated0.0 0.1
30.0
54.9
15.0
0.0 0.0 0.00.2 0.1
27.2
57.5
14.6
0.3 0.3 0.0
Portfolio Characteristics
Portfolio Benchmark
Effective Duration 5.4 4.7
Avg. Maturity 7.9 6.9
Avg. Quality BBB BBB+
Yield To Maturity (%)6.5 6.4
Country/Region Distribution (%)
Pictet Emerging Local Currency Debt Fund
JPM GBI-EM Global Diversified
0.0
15.0
30.0
45.0
60.0
AsiaEastern EuropeLatin AmericaAfricaOthers24.7
36.4
27.2
11.7
0.0
22.5
37.7
27.9
11.8
0.2
Sector Distribution (%)
Pictet Emerging Local Currency Debt Fund
JPM GBI-EM Global Diversified
0.0
50.0
100.0
150.0
-50.0
TreasuriesCashOther100.0
0.0 0.0
100.0
0.9
-0.9
Manager Evaluation
Pictet Emerging Local Currency Debt Fund vs. JPM GBI-EM Global Diversified
As of June 30, 2014
54
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
GMO Asset Allocation Fund 3.7 5.5 14.8 8.3 10.4 7.6 12.5 10.4 1.7 7.4 22.4 -19.4 8.6 12.1 9.5 13.4
65% MSCI World (Net) / 35% BC Aggregate 3.9 5.4 16.9 9.1 11.6 6.8 15.9 11.9 -0.7 10.5 21.6 -26.9 8.4 14.4 7.1 11.1
8.0
10.0
12.0
14.0
Return (%)7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5
Risk (Standard Deviation %)
65% MSCI World (Net) / 35% BC Aggregate
GMO Asset Allocation Fund
Rolling 3 Years Active Return Quarterly Active Return
0.0
8.0
16.0
24.0
-8.0
-16.0Active Return (%)3/97 9/98 3/00 9/01 3/03 9/04 3/06 9/07 3/09 9/10 3/12 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
GMO Asset Allocation Fund 10.4 8.4 10.3 0.8 0.8 1.2 2.5 -0.5 4.5 35.0 17y 8m
65% MSCI World (Net) / 35% BC Aggregate 11.6 10.0 11.6 0.0 1.0 1.2 0.0 N/A 5.5 0.0 17y 8m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 10.0 -1.2 0.0 20.0 17y 8m
Manager Evaluation
GMO Asset Allocation Fund vs. 65% MSCI World (Net) / 35% BC Aggregate
As of June 30, 2014
55
US Quality
14.2%
US Opportunistic
Va lue
3.7%
Debt Opportunities
3.9%
Global Asset
Al location Fixed
In come
0.1%Al pha Only
9.6%
Al ternative Asset
Op portunity
5.2%
Special Situations
0.5%Cash and Cash
Equivalents
3.4%
Manager Evaluation
GMO Asset Allocation Fund
As of June 30, 2014
17.9%
26.8%
10.9%
25.7%
18.7%
10.0%
15.0%
20.0%
25.0%
30.0%
Fund Composition Asset Class Weights
Europe Value
21.7%
Other International
Op portunis ti c Value
1.3%
Japan
3.8%Em erging Markets
8.4%Ris k Premium
2.5%
As set Allocation
Bond
14.0%
Strategic Fixe d
In com e
4.0%
Em erging Country
Debt
3.7%
0.0%
5.0%
56
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
PIMCO All Asset Fund I 4.5 6.9 11.4 6.7 10.2 7.2 0.8 15.4 2.4 13.7 23.0 -15.5 8.7 5.3 6.5 11.8
Barclays U.S. Treasury Inflation Notes: 1-10 Year 2.9 4.0 3.6 2.2 4.5 4.6 -5.6 5.0 8.9 5.2 12.0 -2.4 11.4 1.6 1.9 7.1
-5.0
0.0
5.0
10.0
15.0
20.0
Return (%)1.8 2.7 3.6 4.5 5.4 6.3 7.2 8.1 9.0
Risk (Standard Deviation %)
Barclays U.S. Treasury Inflation Notes: 1-10 Year
PIMCO All Asset Fund I
Rolling 3 Years Active Return Quarterly Active Return
0.0
8.0
16.0
24.0
-8.0
-16.0Active Return (%)12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
PIMCO All Asset Fund I 10.2 7.0 10.0 5.7 1.0 1.4 6.0 0.9 3.4 85.0 11y 11m
Barclays U.S. Treasury Inflation Notes: 1-10 Year 4.5 3.7 4.4 0.0 1.0 1.2 0.0 N/A 2.5 0.0 11y 11m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 3.7 -1.2 0.0 10.0 11y 11m
Manager Evaluation
PIMCO All Asset Fund I vs. Barclays U.S. Treasury Inflation Notes: 1-10 Year
As of June 30, 2014
57
Manager Evaluation
PIMCO All Asset Fund I Sector Allocations
As of June 30, 2014
U.S. Equity
Strat egies
1.1%
Global Equity
Strat egies
23.9%
Short -Te rm
Strat egies
Infl at ion Relat ed
Strat egies
9.7%
Alternat ive
Strat egi es
13.3%
U.S. Core &Long
Maturity Bond
Strat egies
7.9%
Credi t Strat egies
18.6%
EM & Global Bond
Strat egies
24.3%
Strat egies
1.1%
58
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Jul-2009 - Jun-2014)
Historical Statistics (Jul-2009 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
UBS Trumbull Property Fund 2.2 4.4 9.1 9.3 8.3 6.8 9.2 9.0 12.1 15.9 -22.9 -8.3 12.8 15.6 20.1 13.5
NCREIF Fund Index-Open End Diversified Core Equity 2.8 5.4 12.3 12.2 9.5 6.7 13.3 11.0 16.0 16.1 -30.7 -10.4 16.1 16.1 20.2 12.6
6.0
8.0
10.0
12.0
Return (%)3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5
Risk (Standard Deviation %)
NCREIF Fund Index-Open End Diversified Core Equity
UBS Trumbull Property Fund
Rolling 3 Years Active Return Quarterly Active Return
0.0
4.0
8.0
-4.0
-8.0
-12.0Active Return (%)3/78 6/81 9/84 12/87 3/91 6/94 9/97 12/00 3/04 6/07 9/10 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
UBS Trumbull Property Fund 8.3 4.5 8.0 1.5 0.7 1.8 2.2 -0.6 2.6 20.0 36y 6m
NCREIF Fund Index-Open End Diversified Core Equity 9.5 6.2 9.2 0.0 1.0 1.5 0.0 N/A 4.1 0.0 36y 6m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 6.2 -1.5 0.0 10.0 36y 6m
Manager Evaluation
UBS Trumbull Property Fund vs. NCREIF Fund Index-Open End Diversified Core Equity
As of June 30, 2014
59
Property Type
UBS Trumbull Property Fund NCREIF Property Index
0.0
15.0
30.0
45.0
60.0
OfficeApartmentRetailIndustrialHotel30.0
34.0
22.0
9.0
5.0
Portfolio Characteristics
Portfolio Benchmark
# Properties 193 7,141
# Investors 403 N/A
Total Fund Assets 14,700 382,526
Property Location
UBS Trumbull Property Fund NCREIF Property Index
0.0
15.0
30.0
45.0
60.0
EastWestSouthMidwest39.8
31.9
15.0 13.3
Manager Evaluation
UBS Trumbull Property Fund vs. NCREIF Property Index
As of June 30, 2014
60
Type City
Ac quis ition
Da te
%
Occupa nc y Cos t ($000)
Fa ir Market
Value ($000)
Office Ne w York Ju n-06 100%656,365$ 670,000$
Office Bo ston Dec-11 89%626,565$ 648,000$
Re tail Bo ston May-89 96%291,385$ 552,458$
Re tail DFW Dec-02 90%401,427$ 500,000$
Apart me nts Ne w York Ju l-11 98%391,531$ 465,000$
Re tail Ch ic ag o No v-13 96%323,498$ 439,868$
Office Ch ic ag o Dec-11 100%384,475$ 437,382$
Office Ne w York Ju l-11 96%195,287$ 428,153$
Re tail Lo s Angeles Dec-88 98%183,355$ 276,000$
As of June 30,2014
20 La rge st Inve st me nts
Manager Evaluation
UBS Trumbull Property Fund
As of June 30, 2014
Re tail Lo s Angeles Dec-88 98%183,355$ 276,000$
Office Washin gton DC May-06 80%238,555$ 260,000$
Apart me nts Ne w York Dec-07 99%225,037$ 240,000$
Office Se attle Oc t-84 80%223,602$ 240,000$
Office De nver Ju n-06 91%157,869$ 232,609$
Office De nver Apr-82 91%139,603$ 209,450$
Office Sa n Fra ncis co Dec-85 86%161,530$ 209,075$
Office Lo s Angeles May-84 97%180,421$ 204,000$
Re tail Worces ter Se p-04 98%156,000$ 189,200$
Apart me nts Washin gton DC Mar-13 93%69,211$ 186,958$
Apart me nts Washin gton DC Apr-02 98%79,905$ 186,468$
Ho tel Ne w York Ju n-10 N/A 154,266$ 155,800$
All o ther in vestme nts ----9,236,679$ 10,005,255$
Total Properties 14,476,566$ 16,735,676$
61
Historical Performance
Comparative Performance and Rolling Return Risk and Return (Apr-2010 - Jun-2014)
Historical Statistics (Apr-2010 - Jun-2014)
Quarter
Year
To
Date
1
Year
3
Years
5
Years
10
Years 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Wellington Diversified Inflation Hedges 6.2 8.4 16.8 -0.7 N/A N/A -3.9 5.2 -8.6 N/A N/A N/A N/A N/A N/A N/A
Wellington DIH Multi-Asset Inflation Index 5.4 7.6 15.3 -0.6 5.8 6.6 -2.1 2.3 -7.0 12.7 30.0 -32.7 25.8 14.1 19.7 16.0
1.6
2.4
3.2
4.0
4.8
5.6
Return (%)12.6 13.2 13.8 14.4 15.0 15.6 16.2 16.8
Risk (Standard Deviation %)
Wellington DIH Multi-Asset Inflation Index
Wellington Diversified Inflation Hedges
Rolling 3 Years Active Return Quarterly Active Return
0.0
2.0
4.0
-2.0
-4.0Active Return (%)6/10 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14
Return
Standard
Deviation
Excess
Return Alpha Beta
Sharpe
Ratio
Tracking
Error
Information
Ratio
Downside
Risk Consistency
Inception
Date
Wellington Diversified Inflation Hedges 3.9 15.6 5.0 0.6 1.1 0.3 2.4 0.4 10.4 58.8 4y 3m
Wellington DIH Multi-Asset Inflation Index 3.1 14.0 4.0 0.0 1.0 0.3 0.0 N/A 9.4 0.0 4y 3m
90 Day U.S. Treasury Bill 0.1 0.0 0.0 0.1 0.0 N/A 14.0 -0.3 0.0 41.2 4y 3m
Manager Evaluation
Wellington Diversified Inflation Hedges vs. Wellington DIH Multi-Asset Inflation Index
As of June 30, 2014
62
Manager Evaluation
We llington Diversified Inflation Hedges Sector Allocation
As of June 30, 20141
En ergy
28.7%
TIPS
8.1%
Emerging
Markets
In flati on -Linked
Bon ds
5.7%
Cash
6.7%
3.1%
0.2%
3.6%
0.0%
5.0%
10.0%
15.0%
20.0%
Fund Composition Fund Weights Relative to Benchmark
Energy
30.0%
TIPS
12.2%
Emerging
Ma rkets
In flati on-Linked
Bonds
3.1%
Cash
2.6%
Me ta ls &
Mining
3.0%
Agricultu re
5.1%
En du ri ng
Assets
11 .7%
Preciou s
Meta ls
8.7%
Commodities
22.4%
Global Inflation-Sensitive Equities
Commodities
Fixed Income & Cash
-7.0%
-2 0.0%
-1 5.0%
-1 0.0%
-5 .0 %
0.0%
Equi ties Fi xed In come Commodities Cash
1Allocations as of May 31, 2014. June 30, 2014 portfolio sector positioning was not available at the time of report production.
Meta ls &
Mini ng
7.6%
Agriculture
4.6%Enduri ng
Assets
5.0%
Precious
Me ta ls
2.3%
Infla ti on
Op portuni ti es
5.1%
Commoditi es
27.5%
63
Calendar Year Performance
64
Year
To
Date 2013 2012 2011 2010 2009 2008 2007 2006 2005
Total Composite 5.3 10.9 12.1 1.2 11.2 20.2 -20.2 10.7 11.8 5.6
Policy Benchmark 5.2 12.5 11.6 1.1 11.5 19.5 -20.6 8.3 13.0 5.7
Total Equity Composite 5.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A
MSCI AC World Index 6.2 22.8 16.1 -7.3 12.7 34.6 -42.2 11.7 21.0 10.8
Domestic Equity Composite 5.5 (47)N/A N/A N/A N/A N/A N/A N/A N/A N/A
Russell 3000 Index 6.9 (16)33.6 (40)16.4 (26)1.0 (16)16.9 (39)28.3 (59)-37.3 (38)5.1 (62)15.7 (31)6.1 (63)
Broad Equity Peer Group Median 5.4 32.5 14.6 -2.1 16.2 29.6 -38.4 6.5 13.6 7.0
International Equity Composite 4.7 (50)N/A N/A N/A N/A N/A N/A N/A N/A N/A
MSCI AC World ex USA Index 5.6 (34)15.3 (54)16.8 (72)-13.7 (32)11.2 (74)41.4 (64)-45.5 (36)16.7 (66)26.7 (55)16.6 (86)
International Equity Peer Group Median 4.7 15.6 18.5 -15.2 13.6 44.1 -47.0 18.3 27.0 19.7
Fixed Income Composite 4.7 (16)-1.7 (82)10.9 (1)3.8 (72)8.7 (10)18.9 (8)-3.4 (70)6.4 (26)5.6 (8)2.8 (1)
Barclays Intermediate U.S. Government/Credit 2.3 (84)-0.9 (55)3.9 (70)5.8 (22)5.9 (54)5.2 (100)5.1 (13)7.4 (9)4.1 (42)1.6 (46)
Intermediate Duration Fixed Income Peer Group Median 2.8 -0.6 5.1 4.6 6.1 9.8 -1.8 5.5 4.0 1.5
Tactical Asset Allocation Composite 5.5 12.5 10.4 1.7 7.4 22.4 -19.4 8.6 12.3 5.0
60% World / 40% Agg 5.3 14.5 11.3 0.0 10.2 20.4 -24.7 8.3 13.6 6.7
Alternatives Composite 7.6 N/A N/A N/A N/A N/A N/A N/A N/A N/A
3 Month T-Bills + 3%1.5 3.1 3.1 3.1 3.1 3.2 5.1 8.2 8.0 6.2
Calendar Year Performance
Composite Performance
As of June 30, 2014
_________________________
See appendix for a description of the benchmarks and universe. Performance is reported net of fees.
65
Capital Markets Review
66
Capital Markets Rev iew
Economy
-3
-2
-1
0
1
2
3
4
5
6
Jun-04Dec-04Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Jun-09Dec-09Jun-10Dec-10Jun-11Dec-11Jun-12Dec-12Jun-13Dec-13Jun-14Can Inf Can ex Fo od/Energ y U.S. CPI U.S. Core -4
-2
0
2
4
6
8
10
U.S.Canad a Japan China Euro zo nePercentQ1 13 Q2 13 Q3 13 Q4 13 Q1 14
World Growth Uneven, While Investors Prepare For Federal Reserve
Inflation Rising GDP Growth Rates
Source: Trading Economics
2
3
4
5
6
7
8
9
10
11
12
Jun-1950Jun-1954Jun-1958Jun-1962Jun-1966Jun-1970Jun-1974Jun-1978Jun-1982Jun-1986Jun-1990Jun-1994Jun-1998Jun-2002Jun-2006Jun-2010Jun-2014PercentWorld Growth Uneven, While Investors Prepare For Federal Reserve
Policy Changes
•Markets awaited an economic rebound, following the U.S. first quarter’s 2.9% GDP
contraction. Holding growth expectations lower were rising prices across broad
segments of the economy, especially housing and energy. Eurozone prices
moved in the opposite direction, prompting the European Central Bank (ECB) to
move interest rates to -0.1%.
•Federal Reserve interest rate policy became difficult to predict as the
unemployment rate fell more rapidly than forecast.Already below the previous
Fed target,Janet Yellen worked to calm fears over imminent interest rate
increases,explaining that a better understanding of the rapid drop in
unemployment is needed to ascertain whether labor pool changes or economic
improvements are responsible.
•Q2 GDP is expected to be mixed globally.Japan raised its consumption tax by 3%
in April,which was preceded by a Q1 surge in consumer spending.Japan’s Q2
GDP is expected to reflect a drop in consumer activity.China’s growth is expected
to remain steady as the government continues to deal with an economy skewed
toward real estate development.Canada’s economy is benefiting from high energy
prices,while facing headwinds from rising housing costs.Eurozone GDP will
reflect moderating German growth as the ECB reported lower growth expectations
amidst lower exports.Dependency on Russia for natural gas and oil hurt the
outlook for Europe,and left European nations timid on expanded sanctions
following Russia’s annexation of Crimea.
Unemployment Rate
Source: Federal Reserve; Bloomberg
Source: Bureau of Labor Statistics
67
5.3%
1.0%
3.9%
4.4%
10.2%
5.4%
6.9%
8.3%
8.0%
18.0%
14.0%
2.4%
3.2%
3.4%
3.9%
4.3%
4.7%
4.9%
5.1%
5.7%
7.8%
12.2%
0.0%5.0%10.0%15.0%20.0%
Fi nancials
Cons. Disc.
In dust rials
Telecom
Health Care
Cons.Sta pl es
Russell 30 00
Mate rials
Info Tech
Utilities
Energy
2Q14 YTD
2nd Quarter and YTD 2014 Sector Returns
Capital Markets Rev iew
Equities
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
ACWI ex
USA
Ca na da Pacific USA
S&P 500
MS CI
EAFE
Euro pe EMU EM
Asia
EM Latin
America
MS CI
EM
EM
EMEA
5.0%
9.9%
5.8%
5.2%
4.1%
3.3%
2.1%
7.2%6.8%6.7%
4.4%
2nd Quarter 2014 World Equity Returns (USD)
Developed Markets Emerging Markets
Historic Volatility Levels
0.0%5.0%10.0%15.0%20.0%
0
5
10
15
20
25
30
35
40
45
50
Ju n-09 De c-09 Ju n-10 Dec-10 Ju n-11 Dec-11 Ju n-12 Dec-12 Ju n-13 De c-13 Ju n-14
VIX Volatili ty Index 10 Year Average
Source: CBOE
The Streak Continues;Equity Markets Advance in Second Quarter
•Domestic equity markets continued to advance for a sixth consecutive quarter,
the longest streak since 1998.Large-cap stocks outperformed small-cap stocks
while growth and value stocks performed almost identically.All ten sectors rose,
with energy and utilities notably advancing due to a combination of heightened
tensions in the Middle East,which reduced oil supply,and investors seeking
dividend-paying securities amid the low interest rate environment.
•Equity market volatility,as measured by the VIX Index,continued to trend lower
and closed the quarter at its lowest level since December 2006 despite
uncertain global economic prospects and increased geopolitical turmoil
throughout the quarter.Historically,when volatility is low,equities trend higher
as they did during the second quarter.Accommodation by central banks around
the world has significantly contributed to the extremely low volatility levels.
•Non-U.S.equities experienced solid gains with emerging markets outperforming
developed markets for the first time since the third quarter of 2012.Emerging
markets were aided by signs of economic stabilization in China,increased
stimulus measures in Europe,and an improving U.S.economy.Asian and
American markets fared better than European markets,however,all regions
advanced.
68
0
250
500
750
1000
1250
1500
1750
2000
Jun-04Jun-05Jun-06Jun-07Jun-08Jun-09Jun-10Jun-11Jun-12Jun-13Jun-14Option-Adjusted Spread (OAS)Date
Barclays US Credit
US Credit 10-Year Average
Barclays US HY
HY 10-Year Average
Source: Barclays
Duration-adjusted Excess Returns to Treasuries (bps) Trailing 10-Year Credit Spreads
Capital Markets Rev iew
Fixed Income
Best Period Second Bes t Period Wors t Period Second W ors t Period
2007 2008 2009 2010 2011 2012 2013 1Q14 2Q14
Aggre ga te -206 -710 746 171 -114 226 93 16 52
Agency -56 -110 288 77 -25 166 1 30 50
MBS -177 -232 495 225 -106 91 98 -24 90
ABS -634 -2223 2496 169 52 246 24 19 30
CM BS -435 -3274 2960 1501 47 841 97 65 55
Cre dit -464 -1786 1990 192 -322 693 226 75 81
Hi gh Yield -777 -3832 5955 974 -240 1394 923 199 137
Em erging -457 -2842 3797 508 -537 1503 -32 127 282
Date
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0 5 10 15 20 25 30Yield to MaturityMatu rity (Y ears)
12/31/2013 3/31/2014 6/30/2014
Source: Barclays
U.S. Treasury Yield Curve
Source: US Dept of The Treasury
More of the Same in Q2 as Yields Decline and Spreads Tighten
•All major fixed income sectors produced positive total returns as yields declined
and spreads tightened.High beta sectors such as high yield corporates and
emerging markets debt produced particularly strong results as investors
continued to seek yield and embraced easy-money policy.
•The yield curve flattened during the quarter.Sluggish economic growth,
escalating geopolitical risks,and accommodative central bank policy drove
intermediate and long rates lower,while the Federal Reserve’s commitment to
low short term rates anchored the front end of the curve.The spreads between
five-and 30-year Treasuries reached the tightest level since the first quarter of
2009.
•Credit spreads continued to tighten during the quarter amid healthy corporate
fundamentals,accommodative monetary policy,and an ongoing thirst for yield
among investors.Investment grade and high yield credit spreads reached
seven-year lows and currently trade well-below their respective ten-year
averages.
69
$2,000,000
$2,500,000
$3,000,000
Assets ($MM)Net Asset Flow Estimated Assets
Capital Markets Review
Hedge Funds
HFRI Index Performance –Second Quarter and YTD 2014
Growth of As sets in Hedge Funds
Rolling 3-Year Correlation of Hedge Fund Strategies
to the MSCI All-Country World Index
3.9%
6.2%
2.2%
3.2%
1.9%
0.9%
4.4%
1.5%
3.3%
5.4%
3.5%
2.0%
5.0%
1.6%
2.0%
1.2%
1.2%
2.3%
0.3%
2.2%
2.5%
1.2%
0%1%2%3%4%5%6%7%
BC Aggregate Bond Index
MSCI All-Country World Index
Fu nd of Funds
Hedge Fund Com posite
Merger Arbitrage
Gl obal Macro
Event Driven
Equity Market Neutral
Equity Hedge
Distressed Securities
Convertible Arbitrage
Q2
YT D
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Sep-96Apr-97Nov-97Jun-98Jan-99Aug-99Mar-00Oct-00May-01Dec-01Jul-02Feb-03Sep-03Apr-04Nov-04Jun-05Jan-06Aug-06Mar-07Oct-07May-08Dec-08Jul-09Feb-10Sep-10Apr-11Nov-11Jun-12Jan-13Aug-13Mar-14Distressed Relative Value Event-Driven L/S Equity Multi-Strat HF OF Macro
-$500,000
$0
$500,000
$1,000,000
$1,500,000
199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013Q12014Q2014Assets ($MM)59%54%53%
46%45%
30%
19%
7%2%4%
0%
10%
20%
30%
40%
50%
60%
70%Returns that Are Uncorrelated to Equity MarketsProduce Absolute Returns in All MarketsProduce Robust Risk-Adjusted ReturnsDampen Portfolio VolatilityDiversify Total PortfolioMitigate Risks in Other Areas of Total PortfolioDiversify Alternative Asset PortfolioHigh ReturnsReturns that Are Correlated to Equity MarketsOtherProportion of RespondentsObjectives of Institutional Investors for
Their Hedge Fund Portfolios
Source: HFR Inc.
Source: Preqin
Distressed Relative Value Event-Driven L/S Equity Multi-Strat HF OF Macro
Hedge Fund Assets Break New Record
•Distressed hedge funds were the top performers for the second quarter in a
row,returning 5.4%year-to-date.Global macro managers produced a positive
return for the quarter but performance continued to lag behind other hedge fund
strategies.All hedge fund strategies trailed global equities during the second
quarter and through the first half of 2014.
•The hedge-fund industry now oversees a record $2.8 trillion in assets,
according to industry tracker HFR Inc.That marked the eighth consecutive
quarterly record for industrywide assets under management.
•According to an April 2014 study by Preqin,the top objective of institutional
investors’hedge fund allocations is to obtain returns uncorrelated to the equity
markets.However,the rolling three-year correlation of most hedge fund
strategies with the MSCI All-Country World Index is above 0.8,indicating the
limited diversification benefits of hedge funds during the past several years.
Global macro has the lowest correlation to equities with a rolling three-year
correlation of 0.3.
70
Capital Markets Review
Real Assets
Real Estate Returns as of March 31, 2014
Source: Ibbotson
DJ-UBS Commodity Index Components
Total Return Ending June 30, 2014
Global Equity REIT Issuance
Se gment 3 M onths YT D 1 Ye ar 3 Years 5 Year s
30.6%Energy 4.4%8.7%16.7%-3.9%-5.1%
15.3%Petroleum 5.8%6.3%14.2%4.1%4.7%
15.0%In dus trial Metals 8.5%3.6%8.3%-10.9%2.2%
15.1%Precious Me tals 3.8%9.4%7.5%-7.7%7.5%
24.6%Grains -13.2%0.7%-9.6%-2.1%2.7%
5.7%Livestoc k 3.6%20.5%21.6%4.5%3.3%
9.0%Softs -6.9%13.0%6.0%-14.5%4.9%
100.0%Total Market 0.1%7.1%8.2%-5.2%2.0%
Al locationNCREIF3 M on.YT D 1 Yr.3 Yrs.5 Y rs.10 Yrs.
NCREIF 2.7%11.0%11.2%11.7%7.9%8.7%
Apartm ents 2.2%10.4%10.0%11.9%9.1%8.3%
In dus trials 2.8%12.3%12.6%12.3%7.3%8.2%
Offic e 2.2%9.9%10.2%10.7%6.6%8.2%
Retail 4.3%12.9%13.5%13.0%9.4%10.2%
Ho tel 0.8%7.7%7.3%8.2%4.5%6.8%
Eas t 2.1%9.3%9.2%10.2%7.6%8.6%
Mi dwes t 2.6%10.6%10.7%10.8%7.2%7.3%
South 3.4%12.5%12.9%12.3%8.2%8.6%
West 3.1%11.8%12.2%13.1%8.2%9.3%
Source: Preqin Real Estate Online
Global Equity REIT Issuance
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
Of feri ngs IPO Of ferings IPO Of ferings IPO Of ferings IPO
Americ as
Asia-Pacific
Euro pe$24,974M
$5,731M
$28,879M
$6,686M
$32,943M
$25,696M
$10,454M
$5,614M
2011 2012 2013 2014
Source: CBRE Clarion as of May 31, 2014
Private and Public Real Estate Post Strong Gains while Commodities
Experience Flat Results
•Private real estate returns continued to outpace historical average results during
the first quarter.Capitalization rate compression continued to be a significant
driver of performance.From a sector perspective,retail finally landed back on top
with a 4.3%quarterly return (highest since 4Q10)driven by regional and super
regional malls,which both returned over 5%and comprise approximately half of
the retail sector by value.
•Domestic and international REITs delivered returns of 7.0%and 8.8%,
respectively,during the second quarter,compared to 5.2%for the S&P 500.As
fixed income yields continue to compress,investors have been attracted by
REITs’yield of 3.8%(130 basis points above the 10-Year U.S.Treasury).
•After advancing 7.0%during the first quarter,commodity prices were mixed during
the second quarter resulting in a gain of just 0.1%for the DJ UBS Commodity
Index.Supply imbalances drove grain prices down after the U.S.Department of
Agriculture released its forecast for a record corn crop this fall.Industrial metals
and energy prices were both up during the quarter.Continued Middle East
conflict as well as harsh weather that continued into April help buoy energy prices.
Copper prices have escalated due to an Indonesian ban on the export of both
nickel (+19.2%)and copper (+6.4%)ore,which was announced in January.
71
0
20
40
60
80
100
120
140
160
0
50
100
150
200
250
300
350
400
450
Agg. Value ($,Millions)# of DealsBuy out-Bac ked Ex its #Buy out-Bac ked Ex its $Va lue
Buyout-Backed Exit Ac tivityInvestment Horizon Pooled IRR as of 12/31/13
Fund Type 3 Months 1 Year 3 Years 5 Years 10 Years 20 Years
Early Stage Venture 7.5%15.8%4.2%2.4%2.6%27.4%
Balanced Venture 4.6%14.2%4.2%4.5%6.0%10.0%
Later Stage Venture 8.1%22.4%6.5%9.2%8.2%13.2%
All Venture 6.0%15.6%4.6%4.5%5.1%15.1%
Small Buyouts 3.8%15.0%4.9%5.2%10.0%11.7%
Medium Buyouts 8.3%18.3%8.4%8.2%9.1%11.1%
Large Buyouts 7.0%19.7%9.6%10.1%11.5%10.3%
Mega Buyouts 7.8%24.4%13.7%15.7%9.8%9.9%
All Buyouts 7.6%22.4%11.1%11.9%10.4%10.5%
Mezzanine 3.4%14.0%6.4%5.9%6.6%7.4%
Distressed/Turnaround 6.8%15.8%10.0%14.3%10.0%10.3%
All Private Equity 7.1%20.7%9.7%10.6%9.4%11.2%
S&P 500 10.5%32.4%15.8%17.9%8.1%8.8%
Capital Markets Rev iew
Pr ivate Equity
Buy out-Bac ked Ex its #Buy out-Bac ked Ex its $Va lue
$0
$20
$40
$60
$80
$100
$120
$140
$160
$,BillionsVC Buy out Real As sets Sec ondary Funds Di stressed/SS
2Q14 Among Most Active Ever for Buyout Fund Exit Activity
•Private equity performance data in the ThomsonOne database has yet to be
updated for the first quarter of 2014.During 4Q13,private equity funds
produced strong absolute returns but failed to keep pace with the extraordinary
returns from public equity markets.Middle-market buyout and late stage
venture capital funds were the strongest performers for the quarter while small
buyout and mezzanine were the worst performing fund segments.
•During 2Q14,private equity funds experienced their best fundraising quarter
since before the financial crisis,raising $112 billion,an increase of 30%from
the prior quarter and 16%more than the same period last year.Buyout funds
led the way,raising more than $54 billion,up more than 50%from the prior
quarter.Venture capital funds raised $14 billion in 2Q14,matching the amount
raised in the prior quarter but still well above the quarterly average seen since
the financial crisis.
•Buyout funds continued to take advantage of strength in public equity markets
to exit investments during the second quarter.According to Preqin,buyout
funds completed 394 exits with an aggregate exit value of $137 billion globally
during 2Q14.Those quarterly totals represent the second highest number of
exits and largest aggregate value of exits on record.
Source: Thomson Reuters ThomsonOne database, July 2014.
Note: Data is continuously updated and is therefore subject to change.
S&P 500 10.5%32.4%15.8%17.9%8.1%8.8%
Source: Thomson Reuters ThomsonOne database, July 2014.
Source: Preqin
Global Fundraising
72
Quarter
Year
To
Date
1
Year
2
Years
3
Years
5
Years
7
Years
10
Years
Domestic Equity Indices
Dow Jones Wilshire 5000 4.8 6.9 25.1 23.4 16.5 19.5 6.7 8.5
S&P 500 5.2 7.1 24.6 22.6 16.6 18.8 6.2 7.8
Russell 1000 Index 5.1 7.3 25.4 23.3 16.6 19.3 6.5 8.2
Russell 1000 Growth Index 5.1 6.3 26.9 21.9 16.3 19.2 8.0 8.2
Russell 1000 Value Index 5.1 8.3 23.8 24.6 16.9 19.2 4.8 8.0
Russell Midcap Index 5.0 8.7 26.9 26.1 16.1 22.1 7.7 10.4
Russell Midcap Growth Index 4.4 6.5 26.0 24.4 14.5 21.2 7.9 9.8
Russell Midcap Value Index 5.6 11.1 27.8 27.7 17.6 23.0 7.1 10.7
Russell 2000 Index 2.0 3.2 23.6 23.9 14.6 20.2 6.7 8.7
Russell 2000 Growth Index 1.7 2.2 24.7 24.2 14.5 20.5 7.9 9.0
Russell 2000 Value Index 2.4 4.2 22.5 23.6 14.6 19.9 5.5 8.2
International Equity Indices
MSCI EAFE 4.1 4.8 23.6 21.1 8.1 11.8 1.0 6.9
MSCI EAFE Growth Index 3.5 3.6 20.3 19.5 7.7 12.2 1.7 7.1
MSCI EAFE Value Index 4.7 6.0 26.9 22.6 8.5 11.2 0.1 6.7
MSCI EAFE Small Cap 2.1 5.5 29.1 24.9 9.8 15.2 2.5 8.8
MSCI AC World Index 5.0 6.2 22.9 19.7 10.3 14.3 3.2 7.5
MSCI AC World ex US 5.0 5.6 21.8 17.6 5.7 11.1 1.3 7.7
MSCI Emerging Markets Index 6.7 6.3 14.7 8.8 -0.1 9.6 2.6 12.3
Fixed Income Indices
Barclays U.S. Aggregate 2.0 3.9 4.4 1.8 3.7 4.9 5.3 4.9
Barcap Intermediate U.S. Government/Credit 1.2 2.3 2.9 1.6 2.8 4.1 4.7 4.3
Barclays U.S. Long Government/Credit 4.9 11.8 10.8 2.8 9.6 9.6 8.6 7.6
Barclays US Corp: High Yield 2.4 5.5 11.7 10.6 9.5 14.0 9.1 9.1
BofA Merrill Lynch 3 Month U.S. T-Bill 0.0 0.0 0.1 0.1 0.1 0.1 0.7 1.6
Barclays U.S. Treasury: U.S. TIPS 3.8 5.8 4.4 -0.3 3.6 5.6 5.9 5.3
Citigroup Non-U.S. World Government Bond 2.6 5.9 8.9 1.3 1.0 3.6 5.6 4.9
JPM EMBI Global Diversified (external currency)4.8 8.7 11.6 6.2 7.4 10.3 8.3 9.3
JPM GBI-EM Global Diversified (local currency)4.0 6.0 3.9 2.6 1.2 7.4 7.0 10.0
Real Asset Indices
Dow Jones - UBS Commodity 0.1 7.1 8.2 -0.2 -5.2 2.0 -2.7 0.9
Dow Jones Wilshire REIT 7.2 18.1 13.5 10.9 11.7 24.0 4.5 9.6
Capital Markets Review
Index Returns
As of June 30, 2014
(Percentage Return)
_________________________
Returns for periods greater than one year are annualized.
73
Appendix
74
2013 Acti on
Sep tember •The M et rop olit an St.Louis Sew er D istrict hired Pav ilion Advisory Group as their investment consultant .
2014 Acti on
February •Pavilio n p resent ed an as set allocat ion and investment and manager structure review to the F inance Commit tee.Pavilion recommended t he
ad op tion of new as set allocat ion t ar ge ts and allowable ranges that would p ermit the eliminat ion of t he tact ical as set allocat ion and market neut ral
st rategi es , t he addit ion of hedge fund strat egies through hedge fund of funds, and t he reduction of the number of manage rs and exposure to high
yield and non-US d ebt in the fixed income p ortfolio. T he following as set allocat ion s tructure was p rop osed:
40% Equity
35% Fixe d Income
25% Alternat ives
Appendix
History of Investment Decisions
Given Pyramis ' p oor p erformance and rapidly declining a ssets in t he strategy , Pav ilion furt her recommended t he manager be terminat ed
immediat ely . T he Commit tee ap proved t hese recommendat io ns.
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 April 1, 2014, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI
Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High Yield
Blend Index,14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High Yield
Cash Pay Index, 4% CPI+5%, 5% We llington DIH Benchmark, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE.
Prior to April 1, 2014, the Policy Benchmark is comprised of 20% Russell 1000 Index, 5% Russell 2000 Index, 10% MSCI EAFE Index,3%
MSCI Emerging Markets Index, 10% 65% MSCI Wo rld/35% BC Aggregate Blend Index, 2% 50% BC Credit/25% S&P LSTA /25% BC High
Yi eld Blend Index, 13% BC Intermediate Gov/Credit Index, , 8% Citigroup World Government Bond Index, 5% BofA Merrill Lyn ch US High
Yi eld, Cash Pay Index, 5% 3 Month T-Bills + 3%, 4% CPI + 5%, 5% We llington DIH Multi-Asset Inflation Index, 5% JPM GBI-EM Global
Diversified Index, and 5% NCREIF Fund Index-OEDCE.
Note: Wellington DIH Multi-Asset Inflation Index consists of 50% MSCI ACW Commodity Producers Index, 25% DJ AIG Commodity To tal
Return Index and 25% BC US Treasury Inflation Notes: 1-10 Year.
76