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Metropolitan St. Louis Finance Committee Executive Summary 1Q18
Finance Committee Executive Summary Pension Plan, Deferred Compensation Plan, and Defined Contribution Plan 1st Quarter 2018 Pavilion Advisory Group Inc. 227 W. Monroe Street, Suite 2020 Chicago, IL 60606 Phone: 312-798-3200 Fax: 312-902-1984 www.pavilioncorp.com 1 Capital Markets Review 1 2 Pension Plan Executive Summary 10 3 Deferred Compensation Executive Summary 29 4 Defined Contribution Executive Summary 34 5 DC Manager Performance Summary 38 6 Appendix 42 Table Of Contents Capital Markets Review 1 Capital Markets Review Summary As of March 31, 2018 -0.9 -0.8 -0.1 -1.5 -0.9 1.4 0.7 1.4 -1.5 1.5 -0.9 0.3 -6.7 -0.4 -6.2 0.7 0.6 15.0 14.0 11.8 14.8 21.3 24.9 9.8 7.0 1.2 4.0 3.7 1.1 -1.1 3.7 -1.4 3.6 2.4 -10 -5 0 5 10 15 20 25 30 MSCI Global ACWI IMI S&P 500 Russell 2000 MSCI EAFE S&P Dev ex U.S. SC MSCI EMF HFRI Equity Hedged* BBG Barclays Global Agg. BBG Barclays U.S. Agg. WGBI ex-U.S. Hedged BofAML High Yield Cons. 91-Day T-Bills NAREIT Bloomberg Commodity DJ Brookfield Global Infra. HFRI FoF:Cons.* CPI Performance: Past Quarter and Year (%) Past Quarter Past 12 Months Fixed Income (Bonds)Equities (Stocks)AlternativesExpanding uncertainty Increased uncertainty propelled equity market volatility higher late in January and markets remained choppy through quarter end.The jump felt particularly pronounced as the S&P 500 Index experienced 23 trading days with a greater than 1%move in the first quarter compared to 2017’s 8 trading days during the entire year.The equity market’s volatility spike,however, had limited spill over into other asset classes,suggesting issues are not systemic. At the center of the uncertainty was political rhetoric, particularly trade policy.The tariffs proposed initially were unlikely to derail economic growth, but investors reacted to fears of a potential trade war and significant global supply chain disruptions.Technology companies were in the spotlight late in the quarter, as Facebook, Amazon, and Tesla,to name a few,faced challenges that could lead to regulation. Economic growth is intact,supported by the global recovery and fiscal stimulus domestically.Economic success is powering equity earnings with the S&P 500 Index posting double digit earnings growth in 2017,and the trend is expected to continue in the first quarter and 2018 per FactSet.One driver of this growth is healthy consumer balance sheets and sentiment,as debt to income levels remain low. Core inflation is approaching targets in most developed markets,allowing monetary policy makers to gradually reduce accommodation.Central bank guidance did not change materially in the quarter,and January’s spike in rates reflected an alignment of markets and policymakers,rather than a significant change in policy.Consistent with these expectations,the Federal Open Market Committee (“FOMC”) raised rates 25 basis points in March with little market disruption. For the fifth consecutive quarter,the U.S.yield curve flattened, and rising rates in January weighted heavily on quarterly returns within fixed income.Additionally,credit spreads generally widened,reflecting the increased uncertainty in the economic landscape and weighing on performance relative to similar duration Treasuries.Outside the U.S.,local emerging debt benefitted from a weakening U.S.dollar. Emerging markets performance again represented a bright spot for equities.Also maintaining 2017’s trend,the Growth styles outperformed the Value style even with technology stocks performing poorly in March,amid headline shocks.While not immune to the whipsaw market of the first quarter,small capitalization stocks performed better as trade policy was anticipated to have a lesser effect due to lower foreign revenues. The announcement of steel and aluminum tariffs in February hit commodity prices. Tariff escalations drew more sub-groups into the fray,particularly U.S.agriculture and livestock. Income-oriented strategies,like infrastructure,were hurt by a rising, flattening yield curve. *HFRI data are subject to revision. It is not possible to invest directly in an index. Source: FactSet & Bloomberg 2 0 5 10 15 20 25 0 20 40 60 80 100 Apr-98Apr-99Apr-00Apr-01Apr-02Apr-03Apr-04Apr-05Apr-06Apr-07Apr-08Apr-09Apr-10Apr-11Apr-12Apr-13Apr-14Apr-15Apr-16Apr-17HY spreadVIX levelCredit spreads lag volatility spike VIX BofA HY OA Spread 87 74 62 87 99 105 111 119 119 119 133 158 174 40 60 80 100 120 140 160 180 200 CY2007CY2008CY2009CY2010CY2011CY2012CY2013CY2014CY2015CY2016CY2017CY2018CY2019Actual Estimates Capital Markets Review Asset Class Outlook As of March 31, 2018 Source: FactSet as of April 10, 2018 Equities Equity markets experienced their first negative quarter since 2015.Although returns were only slightly negative,there was a dramatic rise in volatility.The increase,while stark,moved volatility closer to long-run average levels from near record low levels during 2017.The shift in volatility reflects the increasing uncertainty surrounding Federal Reserve policy (will they move faster or slower?),the prospects for rising inflation,as well as evolving trade conflicts.Despite these challenges,tailwinds remain.Above trend growth,easy financial conditions,strong earnings growth, record levels of stock buy-backs (over $800 billion estimated)and fiscal stimulus in the form of tax cuts should provide an environment in which equity markets can provide positive though more volatile performance.And while emerging markets continue to enjoy strong growth,environments are a bit more challenging in ex-U.S.developed markets.The U.K.faces weaker growth and increasing Brexit uncertainty while the E.U.deals with the consequences of significant currency appreciation. And,while various valuation metrics may make U.S.equities appear expensive to foreign equities,a large portion of this differential can be explained by differences in earnings growth and sector weights (lower exposure to financials and industrials in the U.S.and higher technology exposure). Adjusting for these differences,valuations appear more symmetric. Fixed Income With the exception of short-term assets such as Treasury Bills,fixed income markets posted negative returns for the quarter,partly reflecting policy makers continued moves to normalizing interest rates. Leading this process has been the Federal Reserve,which nudged rates up another 25 basis points during the quarter,maintaining the commitment to a gradual process.Quarterly projections that Federal Reserve officials provided suggest that as few as two more rate hikes may be necessary this year,with the process ending late in 2019 at a fed funds rate of 3%.Based upon forward markets, market participants anticipate a slightly more gradual pace of rate increases,anticipating a terminal 10-year Treasury rate of about 3%.With 10-year yields currently at about 2.8%,most of the pain from rate increases may be behind us.Credit markets,however,may have room to weaken.Credit spreads typically mimic moves in implied volatility in the equity markets as both reflect the level of uncertainty of future cash-flows.While credit spreads widened during the quarter,the move was significantly less than implied by recent equity market moves.Credit markets may struggle as spreads play catch-up to the increase in equity market volatility Real Assets Core inflation remains subdued;however,it is gradually increasing towards the Federal Reserve’s 2% target.While inflation is likely to rise over the course of the next few quarters,it continues to face headwinds in the form of demographics,technological innovation,as well as globalization.While any material deterioration in trade arrangements would put upward pressure on inflation,those risks remain a considerable distance in the future.Although these conditions have created a difficult environment for real assets,we maintain our view that global listed infrastructure likely provides a diversifying income stream with a slightly lower volatility profile than commodities.We maintain a cautious view on REITs,due to historical correlations with long duration fixed income. S&P 500 Calendar Year Bottom-Up EPS Actuals & Estimates Source: Federal Reserve FRED Data Source: Federal Reserve FRED Data 0.0 0.5 1.0 1.5 2.0 2.5 Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Percent Change YOY (SA)Inflation Core PCE Core CPI FOMC Target 3 50 100 150 200 250 300 350 400 450 2-Oct-1716-Oct-1730-Oct-1713-Nov-1727-Nov-1711-Dec-1725-Dec-178-Jan-1822-Jan-185-Feb-1819-Feb-185-Mar-1819-Mar-182-Apr-18Index ValueEquity volatility the outlier Equities Treasury rates Oil Currencies Capital Markets Review Key Market Risks As of March 31, 2018 Source: Bloomberg, FactSet, Recession Alert, & Pavilion Analysis Cyclical risks appear benign while policy and trade tensions grow Can the Fed thread the needle?Despite below target inflation and subdued wage growth, the Federal Reserve (“Fed”)has been raising rates steadily for over a year.With inflation still low but rising and wage growth subdued,the question is whether the Fed is moving too quickly or too slowly?Will the Fed allow inflation to run a bit above target to spur wage growth or will they treat the target as a ceiling?Signs of rising wage growth contributed to the initial uptick in volatility during the quarter as investors anticipated a more aggressive Fed policy response.While those fears appear to have dissipated,financial conditions have begun to tighten in the last quarter and may cease being a tailwind by year end. Will higher equity volatility infect other asset classes?While equity market volatility spiked during the month,this spike was not reflected in other asset classes.While equity volatility is more of a coincident indicator than a leading indicator,synchronized increases in volatility have been better indicators of evolving stresses.All indications currently suggest that increased volatility is being driven largely by technical factors within equity markets.Careful monitoring of cross-asset volatilities will be important over the coming months. Prospective tariffs and trade conflicts:Recent trade tensions are reminiscent of the 2016 Brexit vote.While markets priced in immediate dire consequences,the impact on fundamentals remains further down the road.Similarly,the impact on near term growth from the trade conflicts appears to be modest.The real threat from an escalation in these conflicts is future inflationary pressures and reduced corporate margins as complex value chains are disrupted.The challenge for markets,and investors,will be differentiating between the real and apparent consequences of any conflict. Fixed Income Equities FinancialStressesValuationsCyclicalCurrent Risk Levels Source:Federal Reserve FRED Data Source: Bloomberg Values indexed to 10/2/2017 Equities: VIX Index; Treasury Rates: Move Index; Oil: OVX Index; and Currencies: FXVIX Index -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 Mar-88Mar-90Mar-92Mar-94Mar-96Mar-98Mar-00Mar-02Mar-04Mar-06Mar-08Mar-10Mar-12Mar-14Mar-16Mar-18Tightening financial conditions U.S. Recession Financial Conditions Easy Tight 4 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q1 1990Q3 1991Q1 1993Q3 1994Q1 1996Q3 1997Q1 1999Q3 2000Q1 2002Q3 2003Q1 2005Q3 2006Q1 2008Q3 2009Q1 2011Q3 2012Q1 2014Q3 2015Q1 2017Percent (Annual Rate)Average Capital Markets Review Economy As of March 31, 2018 Trade tiff adds to volatility Turbulence entered the markets during the first quarter as the reorganization of trade priorities and agreements under the Trump administration came to the forefront.The initial salvo was a tariff on steel and aluminum imports,which was then amended to exclude many countries not named China.The underlying focus of the trade disputes is China’s trade barriers and bias toward its domestic producers in sectors that are susceptible to foreign competition.NAFTA renegotiations also have been ongoing,though in a tamer manner.These policy uncertainties have led to increased volatility,especially across equity markets. The Federal Reserve ushered in Jerome Powell as its new chairman.His manner is expected to be more direct than past leaders,although policy direction is not expected to vary significantly from expectations.The Fed Funds rate was raised by 25bps in March,with two more increases of 25bps forecast through 2018.The economy continued to add jobs at a strong pace and wages grew at the fastest pace since Q1 2011.If policy uncertainties remain escalated,job growth could slow as businesses await stability to implement expansion plans,which can lead to a weakening of economic factors. Canadian and Mexican currencies moved in relation to potential tariff/trade realignments,while others rose as investors moved out of the U.S.dollar and into other perceived to be undervalued. Earnings forecasts have become more muddled,given the recent policy uncertainties,though global growth is expected to remain strong. Source: Bureau of Labor Statistics -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 9/1/201710/1/201711/1/201712/1/20171/1/20182/1/20183/1/2018PercentPeso Yuan Pound Yen Euro Canada Currencies vs USD Productivity Gains 0 20 40 60 80 100 120 140 160 0 10 20 30 40 50 60 70 80 Imports ($ Billions)Exports ($ Billions)Q4 2017 Exports Q4 2017 Imports Top Five U.S. Trading Partners Source: Census Bureau Source: Bloomberg 5 Capital Markets Review Equities As of March 31, 2018 Source: FactSet, S&P Source: FactSet, MSCI Growth and emerging markets continue to outperform The S&P 500 Index returned -0.8%during the first quarter.Information Technology and Consumer Discretionary were the only sectors with positive returns while Telecom and Consumer Staples were the weakest sectors for the quarter,both down more than -7%. Developed market equity indices were down between -0.8%and -1.5%during the first quarter,with the S&P 500 Index down the least at -0.8%.Emerging Market equities were able to produce positive results,returning +1.4%,led by Brazil and Taiwan. The Growth style continued to outperform the Value style during the first quarter, with the exception of Emerging Markets.Within the U.S.,Growth exhibited positive returns while Value was negative.In International Developed markets,Growth was negative but to a lesser extent than Value.Emerging Markets was the only segment to experience positive results within Value,which slightly edged out Growth.U.S. Large Cap Growth did not fare quite as well as U.S.Mid or Small Cap Growth. Within the Value style,size was fairly inconsequential. First Quarter S&P 500 Sector Returns -7.5% -7.1% -5.9% -5.5% -5.0% -3.3% -1.6% -1.2% -1.0% -0.8% 3.1% 3.5% -10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0% Telecom Cons Staples Energy Materials Real Estate Utilities Industrials Healthcare Financials S&P 500 Cons Disc Info Tech -1.0%-0.8%-1.3%-1.2%-1.5% 1.4%1.8% -0.5% 5.7% -7.0% -4.2% 12.4% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% MSCI ACWI S&P 500 MSCI World MSCI ACWI x US MSCI EAFE MSCI EM China South Korea Taiwan India South Africa Brazil First Quarter World and Emerging Market Equity Returns Growth Generally Outperformed Value During the First Quarter -2.8%-2.5%-2.6% -2.0% 1.6%1.4% 2.2%2.3% -1.0% 1.2% -4.0% -2.0% 0.0% 2.0% 4.0% U.S. Large Cap U.S. Mid Cap U.S. Small Cap Int'l Developed Emerging Mkts Value Growth Source: FactSet, MSCI, Russell 6 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0 5 10 15 20 25 30Yield to MaturityMaturity (Years) 3/31/2017 12/31/2017 3/29/2018 Source: Bloomberg Source: Federal Reserve Bank of St. LouisU.S. Treasury Yield Curve Change Source: US Dept. of The Treasury Duration –Adjusted Excess Returns to Treasuries (bps) Curve Flattening Continues Decade-Long Trend The Federal Reserve (“Fed”)raised rates 0.25%at the March FOMC meeting,setting the Federal Funds Rate target at 1.50%to 1.75%.The bellwether 10-year U.S.Treasury nearly reached 3.00%in mid-February as growth and inflation expectations increased,but retraced back to 2.74%by quarter-end amid a flight-to-quality.Yields moved higher across the entire maturity spectrum and the curve continued its flattening trend.Most spread sectors lagged Treasuries and generated negative total returns as rates rose and spreads widened. TIPS (-0.79%)outperformed nominal Treasuries (-1.19%)as breakeven inflation levels increased. Investment-grade corporate spreads widened 16 basis points,underperforming other spread sectors during the quarter.Technical pressure was a headwind due to waning demand amid increased currency hedging costs for foreign investors.High yield (-0.86%)outpaced investment-grade (-2.32%)corporates,benefitting from the higher carry and lower duration sensitivity.Bank loans provided attractive absolute returns (+1.44%),driven by rising LIBOR rates and strong investor demand. Structured products generally outpaced investment-grade credit due to lower spread volatility and insulation from the political trade rhetoric.Agency MBS (-1.19%)spreads widened a modest four basis points as the sector faces demand concerns given the pace of the Fed’s balance sheet wind-down.ABS (-0.39%)provided some stability versus longer duration sectors,yet still trailed Treasuries on a duration-adjusted basis. Local currency emerging market debt (+4.44%)outpaced all fixed income segments during the quarter,driven by strong growth prospects,stable commodity prices,and a weaker U.S. Dollar. -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 Mar-90Mar-92Mar-94Mar-96Mar-98Mar-00Mar-02Mar-04Mar-06Mar-08Mar-10Mar-12Mar-14Mar-16Mar-18PercentDashes represent the end of prior hiking cycles Best Period Second Best Period Worst Period Second Worst Period 2011 2012 2013 2014 2015 2016 2017 1Q18 Aggregate -114 226 93 10 -53 138 121 -31 Agency -25 166 1 10 -133 121 148 6 MBS -106 91 98 40 -5 -11 52 -39 ABS 52 246 24 53 44 95 92 -19 CMBS 47 841 97 108 -28 236 158 -7 Credit -322 693 226 -18 -169 442 335 -68 High Yield -240 1394 923 -112 -577 1573 610 -17 EMD (USD)-537 1503 -32 -120 3 880 627 -26 Fixed Income As of March 31, 2018 Capital Markets Review 2 vs. 10 Year Treasury Curve Slope 7 -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 12/31/2017 1/31/2018 2/28/2018 Longs - S&P 500 (Long Alpha)S&P 500 - Shorts (Short Alpha) Longs - Shorts Capital Markets Review Alternative Investments As of March 31, 2018 Goldman Sachs Hedge Fund VIP Stocks –Longs/Shorts vs. S&P 500 (2018 Q1) Sources: Bloomberg, Goldman Sachs -0.8%-0.9% -2.6% 0.6% -1.5%-0.9% 2.3% 1.1%0.5% -1.1% 0.1% -0.7% -5% 0% 5% Domestic/global stocks sold off, but long/short equity hedge funds gained. Put- write strategies sold off significantly. Relative value fixed income and distressed managers posted modest gains, while duration hurt traditional global/domestic bond performance. A 60/40 portfolio posted losses, while the hedge fund composite gained modestly. Macro strategies declined less than stocks/bonds. *Asset-weighted is used instead of fund-weighted, as it is available and more indicative of the universe.Sources: Hedge Fund Research, FactSet Hedge Funds vs Long-Only: Total Returns 2018 Q1 Global alternatives rise with risk assets Hedge Funds:Hedge funds generated strong alpha during the quarter across nearly all strategies, illustrating the less-correlated nature of the return sources for these strategies.Equity long-short funds generated alpha both from long positions and short positions.Funds with long-biased exposures to growth equities,emerging markets, and the technology and healthcare sectors outperformed those without these exposures. Credit-oriented funds significantly outperformed IG and HY bonds due to a lack of duration,tactical hedging,and process-driven alpha.Structured product hedge funds were some of the strongest performers during the quarter. A robust financing environment and record amount of large announced acquisitions drove gains in merger arbitrage. Other diversified relative value strategies such as volatility arbitrage benefited from broad market dispersion.While volatility is generally good for macro strategies, performance was mixed across sub-strategies.Many discretionary macro managers profited from short interest rate and USD positions while CTAs suffered from the sharp trend reversal in equity markets. Real Assets:Higher-yielding liquid real assets struggled during the first quarter,with listed infrastructure down –5.5%and REITs down -6.7%.For listed infrastructure,the expectation of rising interest rates weighed on some subsectors such as water,which has longer-term fixed contractual agreements.Other listed infrastructure subsectors are expected to perform well in a rising interest rate environment as long as economic growth also improves.These subsectors,like toll roads,airports,and communication,often have explicit revenue escalators that benefit from cyclical upswings. Private Capital Markets: In 2017,921 private equity funds reached a final close ,securing over $453 billion in committed capital,which represents the largest amount of capital ever raised in any single year.2017 was the second consecutive year in which annual fundraising surpassed $400 billion,an event that has only occurred once before (2007/2008).The private equity asset class accounted for 60%of all private capital raised in 2017,representing an increase from 57% in 2016.While H2 2017 distribution numbers are yet to be finalized,$233 billion was distributed to LPs in H1 2017,leaving reason to believe that 2017 will fall short of the $520 billion distributed to LPs in 2016. 2.4 2.6 2.8 3 3.2 3.4 3.6 3.8 4 85 90 95 100 105 110 12/31/2017 1/21/2018 2/11/2018 3/4/2018 3/25/2018 U.S. 10 Year Treasury YieldCumulative QuarterlyPerformance %Infrastructure Sector Performance and Rates U.S. 10 Year Treasury Airports Communications Toll Roads Water The yield on the 10-year Treasury began the year at 2.41% and rose to almost 3.00% in mid- February before ending the quarter at 2.74%, which weighed on utilities. Source: Bloomberg Barclays 8 Quarter Year To Date 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Domestic Equity Indices Dow Jones Wilshire 5000 -0.8 -0.8 13.7 16.0 10.5 13.1 12.4 9.6 S&P 500 -0.8 -0.8 14.0 15.6 10.8 13.3 12.7 9.5 Russell 1000 Index -0.7 -0.7 14.0 15.7 10.4 13.2 12.6 9.6 Russell 1000 Growth Index 1.4 1.4 21.3 18.5 12.9 15.5 14.1 11.3 Russell 1000 Value Index -2.8 -2.8 6.9 12.9 7.9 10.8 11.0 7.8 Russell Midcap Index -0.5 -0.5 12.2 14.6 8.0 12.1 11.5 10.2 Russell Midcap Growth Index 2.2 2.2 19.7 16.9 9.2 13.3 11.9 10.6 Russell Midcap Value Index -2.5 -2.5 6.5 13.0 7.2 11.1 11.2 9.8 Russell 2000 Index -0.1 -0.1 11.8 18.8 8.4 11.5 10.4 9.8 Russell 2000 Growth Index 2.3 2.3 18.6 20.8 8.8 12.9 11.3 11.0 Russell 2000 Value Index -2.6 -2.6 5.1 16.6 7.9 10.0 9.4 8.6 International Equity Indices MSCI EAFE -1.5 -1.5 14.8 13.2 5.6 6.5 5.3 2.7 MSCI EAFE Growth Index -1.0 -1.0 17.5 12.4 6.7 7.1 6.1 3.4 MSCI EAFE Value Index -2.0 -2.0 12.2 14.1 4.3 5.8 4.4 2.0 MSCI EAFE Small Cap 0.2 0.2 23.5 17.1 12.3 11.1 8.7 6.5 MSCI AC World Index -1.0 -1.0 14.8 14.9 8.1 9.2 7.9 5.6 MSCI AC World ex US -1.2 -1.2 16.5 14.8 6.2 5.9 4.3 2.7 MSCI Emerging Markets Index 1.4 1.4 24.9 21.0 8.8 5.0 2.5 3.0 Fixed Income Indices Blmbg. Barc. U.S. Aggregate -1.5 -1.5 1.2 0.8 1.2 1.8 2.9 3.6 Blmbg. Barc. Intermed. U.S. Government/Credit -1.0 -1.0 0.4 0.4 0.9 1.2 2.3 2.9 Blmbg. Barc. U.S. Long Government/Credit -3.6 -3.6 5.1 3.0 2.1 4.1 6.9 6.8 Blmbg. Barc. U.S. Corp: High Yield -0.9 -0.9 3.8 9.9 5.2 5.0 6.3 8.3 BofA Merrill Lynch 3 Month U.S. T-Bill 0.4 0.4 1.1 0.7 0.5 0.3 0.3 0.3 Blmbg. Barc. U.S. TIPS -0.8 -0.8 0.9 1.2 1.3 0.0 2.5 2.9 Citigroup Non-U.S. World Government Bond 4.4 4.4 12.9 3.7 5.0 1.4 1.2 1.8 JPM EMBI Global Diversified (external currency)-1.7 -1.7 4.3 6.6 5.8 4.7 6.3 7.0 JPM GBI-EM Global Diversified (local currency)4.4 4.4 13.0 9.2 5.4 -0.7 1.1 3.8 Real Asset Indices Bloomberg Commodity Index Total Return -0.4 -0.4 3.7 6.2 -3.2 -8.3 -8.8 -7.7 Dow Jones Wilshire REIT -7.5 -7.5 -3.6 -0.9 1.0 6.1 8.2 6.2 Capital Markets Review Index Returns As of March 31, 2018 (Percentage Return) _________________________ Returns for periods greater than one year are annualized. 9 Pension Plan Executive Summary 10 Total Market Value Quarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Since Inception Inception Period Total Composite $274,152,009 0.1 0.1 8.6 4.8 5.3 5.7 5.4 7.4 25y 3m Policy Benchmark -0.1 -0.1 8.4 5.1 5.6 5.9 5.4 -- Helped / Hurt Performance Kennedy Mid Cap Value: Stock selection in industrials; overweight allocation and stock selection to IT Positive TimesSquare Small Cap Growth: Overweight allocation and stock selection to IT Positive Morgan Stanley EM: Overweight allocation and stock selection in financials Positive Income Research: Overweight allocation to investment-grade credit Negative Prudential Core Plus: Underweight exposure to investment-grade credit Positive Brandywine Global Opportunistic Income: Unhedged long Mexican peso and South African rand exposure Positive Absolute Performance (%) Quarter 1 Year 0.0 5.0 10.0 15.0 20.0 25.0-5.0-10.0 Total Composite Real Estate Composite Hedge Funds Composite Fixed Income Composite Equity Composite 0.1 1.7 0.3 0.1 -0.4 8.6 6.1 2.9 4.1 15.1 Consultant Comments During the first quarter, the Metropolitan St. Louis Sewer District pension plan outperformed its benchmark by 20 basis points (bps), returning +0.1%. On a trailing one-year basis, the portfolio reported a gain of +8.6%, outpacing the Policy Benchmark by 20 bps. First quarter performance was positively impacted by the Total Composite's overweight allocation to the small-cap equity and fixed income composites. The portfolio's small-cap equity composite outperformed the Russell 2000 Index by 80 bps, while the fixed income composite outpaced the Barclays Intermediate U.S. Government/Credit Index by 110 bps. Relative Performance (%) Quarter 1 Year 0.0 2.0 4.0 6.0 8.0-2.0-4.0-6.0 Total Composite Real Estate Composite Hedge Funds Composite Fixed Income Composite Equity Composite 0.1 0.0 0.0 1.1 0.4 0.2 -1.1 -2.7 3.8 -0.5 Quarterly Performance Summary Executive Summary As of March 31, 2018 Performance for periods longer than one year is annualized. 11 Total Composite Policy Benchmark 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 -2.0 -4.0Return Quarter Year to Date 1 Year 3 Years 5 Years 10 Years Since Inception -0.1 -0.1 8.4 5.1 5.6 5.4 7.8 0.1 0.1 8.6 4.8 5.3 5.4 7.3 Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 0.1 0.1 8.6 4.8 5.3 5.4 7.4 25y 3m Policy Benchmark -0.1 -0.1 8.4 5.1 5.6 5.4 -- Performance Summary Total Composite vs. Policy Benchmark As of March 31, 2018 ____________ Performance is reported net of fees. See appendix for full description of the policy benchmark. 12 -7.0 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 0.1 (20)0.1 (20)8.6 (80)4.8 (93)5.3 (97)5.7 (97)5.4 (96)¢£ 5th Percentile 0.7 0.7 12.6 7.8 9.4 9.0 7.8 1st Quartile 0.0 0.0 11.1 6.9 8.4 8.2 7.2 Median -0.4 -0.4 10.2 6.3 7.9 7.5 6.7 3rd Quartile -0.7 -0.7 9.0 5.8 7.2 7.0 6.3 95th Percentile -1.4 -1.4 5.9 4.2 5.8 6.1 5.4 Performance Comparison All Public Plans <= $500 mil As of March 31, 2018 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 13 -7.0 -4.0 -1.0 2.0 5.0 8.0 11.0 14.0 17.0 20.0 ReturnQuarter Year To Date 1 Year 3 Years 5 Years 7 Years 10 Years Total Composite 0.1 (25)0.1 (25)8.6 (82)4.8 (93)5.3 (96)5.7 (96)5.4 (94)¢£ 5th Percentile 0.7 0.7 12.8 8.0 9.4 9.1 7.8 1st Quartile 0.0 0.0 11.3 7.1 8.5 8.2 7.1 Median -0.3 -0.3 10.3 6.4 7.9 7.5 6.6 3rd Quartile -0.7 -0.7 9.2 5.8 7.2 7.1 6.2 95th Percentile -1.4 -1.4 5.7 4.1 5.4 5.9 5.2 Performance Comparison All Public Plans As of March 31, 2018 _________________________ Performance is reported net of fees. Parentheses contain percentile rankings. Calculation based on monthly periodicity. 14 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.8 (97)14.5 (67)26.5 (59)9.4 (5)13.1 (22)9.1 (43)0.6 (76)¢£ 5th Percentile 60.1 26.4 45.6 9.2 28.3 13.7 6.4 1st Quartile 50.5 22.5 35.1 5.1 11.2 10.3 2.2 Median 44.3 15.9 28.6 4.6 4.9 8.3 1.3 3rd Quartile 39.1 13.4 21.8 4.1 3.6 5.1 0.6 95th Percentile 29.2 8.0 15.8 2.5 0.6 2.7 0.1 Asset Allocation Comparison All Public Plans <= $500 mil As of March 31, 2018 _________________________ Parentheses contain percentile rankings. 15 -30.0 -20.0 -10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Allocation (%)US Equity Intl. Equity US Fixed Income Intl. Fixed Income Alternative Inv.Real Estate Cash Total Composite 26.8 (89)14.5 (70)26.5 (51)9.4 (6)13.1 (43)9.1 (39)0.6 (75)¢£ 5th Percentile 59.6 29.0 46.8 9.6 35.4 14.5 7.9 1st Quartile 49.3 22.6 34.4 5.1 18.7 10.3 2.3 Median 41.6 16.7 26.9 4.5 9.6 8.0 1.3 3rd Quartile 34.0 13.7 20.5 3.6 4.2 5.0 0.6 95th Percentile 20.7 7.7 12.8 0.3 1.4 2.4 0.1 Asset Allocation Comparison All Public Plans As of March 31, 2018 _________________________ Parentheses contain percentile rankings. 16 3 Years 5 Years 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)3.0 3.8 4.6 5.4 6.2 7.0 7.8 Risk (Standard Deviation %) Policy Benchmark (5.1 , 5.1) Total Composite (5.3 , 4.8) 0.0 2.0 4.0 6.0 8.0 10.0 Return (%)4.0 4.7 5.4 6.1 6.8 7.5 8.0 Risk (Standard Deviation %) Policy Benchmark (5.3 , 5.6) Total Composite (5.5 , 5.3) Performance Summary Risk and Return Summary As of March 31, 2018 17 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Total Composite 274,152,009 100.0 0.1 0.1 8.6 4.8 5.3 5.4 7.4 25y 3m Policy Benchmark -0.1 -0.1 8.4 5.1 5.6 5.4 -- Total Equity Composite 113,297,057 41.3 -0.4 -0.4 15.1 8.1 ----10.1 4y 7m MSCI AC World IMI -0.8 -0.8 15.6 8.8 9.9 6.5 10.3 Domestic Equity Composite 73,563,700 26.8 -0.4 -0.4 14.3 9.0 ----12.1 4y 7m Russell 3000 Index -0.6 -0.6 13.8 10.2 13.0 9.6 13.0 Large-Cap Equity Composite 55,377,331 20.2 -0.7 -0.7 13.8 9.2 12.7 8.6 9.0 14y 10m Russell 1000 Index -0.7 -0.7 14.0 10.4 13.2 9.6 9.5 Small-Cap Equity Composite 18,186,369 6.6 0.7 0.7 15.7 8.1 11.9 11.6 11.5 14y 10m Russell 2000 Index -0.1 -0.1 11.8 8.4 11.5 9.8 10.2 International Equity Composite 39,733,356 14.5 -0.5 -0.5 16.6 6.2 ----6.2 4y 7m MSCI AC World ex USA Index -1.2 -1.2 16.5 6.2 5.9 2.7 6.5 Developed International Equity Composite 27,803,435 10.1 -1.5 -1.5 13.7 5.0 5.4 3.4 5.0 18y 11m MSCI EAFE Index -1.5 -1.5 14.8 5.6 6.5 2.7 4.2 Emerging International Equity Composite 11,929,922 4.4 1.9 1.9 23.6 8.4 4.3 2.2 8.1 13y MSCI Emerging Markets Index 1.4 1.4 24.9 8.8 5.0 3.0 8.6 Fixed Income Composite 98,382,288 35.9 0.1 0.1 4.1 2.6 1.7 4.4 4.4 14y 9m Barclays Intermediate U.S. Government/Credit -1.0 -1.0 0.4 0.9 1.2 2.9 3.3 Performance Summary Total Pension Fund Asset Allocation and Performance As of March 31, 2018 _________________________ Performance is reported net of fees. 18 Performance Summary Total Pension Fund Asset Allocation and Performance As of March 31, 2018 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Funds Composite 35,982,445 13.1 0.3 0.3 2.9 0.9 ----1.5 3y 1m HFRI Fund of Funds Composite Index 0.3 0.3 5.6 1.9 3.4 1.6 2.0 60% MSCI ACWI / 40% BC Agg -1.1 -1.1 9.3 5.5 6.3 5.1 5.0 Real Estate Composite.24,871,639 9.1 1.7 1.7 6.1 7.3 8.5 4.2 5.8 11y 10m NCREIF Property Index 1.7 1.7 7.1 8.7 10.0 6.1 7.4 Cash Account 1,618,581 0.6 0.4 0.4 1.2 0.8 0.6 0.4 1.3 14y 10m BofA Merrill Lynch 3 Month U.S. T-Bill 0.4 0.4 1.1 0.5 0.3 0.3 1.3 _________________________ Performance is reported net of fees. 19 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Domestic Large-Cap Equity Managers Blackrock Russell 1000 Index Fund Non-Lending 55,377,331 20.2 -0.7 (47)-0.7 (47)13.9 (48)10.3 (32)13.1 (34)9.6 (40)12.8 (--)1y 1m Russell 1000 Index -0.7 (47)-0.7 (47)14.0 (48)10.4 (31)13.2 (34)9.6 (41)12.9 (--) eV Large Cap All Median -0.8 -0.8 13.3 9.1 12.3 9.1 -- Domestic Small-Cap Equity Managers Kennedy Mid Cap Value 8,939,423 3.3 -2.1 (51)-2.1 (51)11.0 (18)7.3 (53)11.7 (37)11.2 (15)10.5 (--)10y 3m Russell Midcap Value Index -2.5 (63)-2.5 (63)6.5 (69)7.2 (55)11.1 (50)9.8 (49)8.6 (--) eV Mid Cap Value Median -2.1 -2.1 7.9 7.5 11.1 9.7 -- TimesSquare Small Cap Growth Fund 9,246,947 3.4 3.6 (39)3.6 (39)20.7 (45)8.7 (60)11.7 (70)11.9 (33)10.5 (--)16y 2m Russell 2000 Growth Index 2.3 (59)2.3 (59)18.6 (55)8.8 (59)12.9 (53)11.0 (55)8.6 (--) eV Small Cap Growth Median 2.9 2.9 20.2 9.3 13.1 11.2 -- Developed International Equity Manager Morgan Stanley International Equity Fund I 27,803,435 10.1 -1.5 (70)-1.5 (70)13.7 (79)4.9 (82)5.3 (91)3.4 (58)4.9 (--)13y MSCI EAFE Index -1.5 (71)-1.5 (71)14.8 (70)5.6 (71)6.5 (67)2.7 (82)5.1 (--) Custom Non US Diversified All Median -0.8 -0.8 16.5 6.6 7.3 3.7 -- Emerging Markets Equity Manager Morgan Stanley Emerging Markets Fund I 11,929,922 4.4 1.9 (40)1.9 (40)23.5 (48)8.4 (55)4.3 (70)2.2 (85)8.2 (--)13y MSCI Emerging Markets Index 1.4 (49)1.4 (49)24.9 (36)8.8 (50)5.0 (55)3.0 (67)8.6 (--) eV International Emerging Equity Median 1.3 1.3 22.8 8.8 5.2 3.6 -- Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of March 31, 2018 _________________________ Performance is reported net of fees. 20 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of March 31, 2018 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Fixed Income Managers Income Research 38,927,653 14.2 -1.1 (71)-1.1 (71)0.2 (86)0.8 (67)1.2 (63)3.6 (34)4.5 (--)16y 9m Barclays Intermediate U.S. Government/Credit -1.0 (42)-1.0 (42)0.4 (69)0.9 (59)1.2 (56)2.9 (75)4.0 (--) eV US Intermediate Fixed Income Median -1.0 -1.0 0.5 1.0 1.3 3.3 -- Prudential Core Plus Bond Fund 33,802,293 12.3 -1.3 (59)-1.3 (59)3.4 (7)2.8 (10)3.2 (9)5.8 (15)3.2 (--)2y 10m Blmbg. Barc. U.S. Aggregate -1.5 (79)-1.5 (79)1.2 (90)1.2 (88)1.8 (89)3.6 (100)1.5 (--) eV Core Plus Fixed Income Median -1.3 -1.3 2.0 1.9 2.4 4.7 -- Brandywine Global Opportunistic Fixed Income 25,652,341 9.4 3.8 (4)3.8 (4)11.4 (14)4.3 (26)3.0 (43)5.8 (24)5.9 (--)13y 3m Citigroup World Government Bond Index 2.5 (12)2.5 (12)8.5 (25)3.5 (45)1.2 (80)2.0 (91)2.9 (--) eV Global Fixed Income Median 0.4 0.4 5.0 3.2 2.6 4.1 -- _________________________ Performance is reported net of fees. 21 Performance Summary Total Pension Fund Manager Asset Allocation and Performance As of March 31, 2018 Allocation Market Value ($)% Performance(%) Quarter Year To Date 1 Year 3 Years 5 Years 10 Years Since Inception Inception Period Hedge Fund Managers Lighthouse Global Long/Short Fund Limited 19,663,835 7.2 1.6 1.6 5.3 4.0 6.7 5.1 4.4 3y 1m HFRI Equity Hedge (Total) Index 0.4 0.4 9.5 5.2 5.7 3.9 5.2 Entrust Capital Diversified Fund 16,318,610 6.0 -1.3 -1.3 0.1 -3.2 0.7 2.3 -3.0 2y 8m HFRI Fund of Funds Composite Index 0.3 0.3 5.6 1.9 3.4 1.6 2.0 Real Estate Manager UBS Trumbull Property Fund 24,871,639 9.1 1.7 1.7 6.1 7.3 8.5 4.2 5.8 11y 10m NCREIF Property Index 1.7 1.7 7.1 8.7 10.0 6.1 7.4 Cash Account 1,618,581 0.6 0.4 0.4 1.2 0.8 0.6 0.4 1.3 14y 10m BofA Merrill Lynch 3 Month U.S. T-Bill 0.4 0.4 1.1 0.5 0.3 0.3 1.3 Total Composite 274,152,009 100.0 0.1 0.1 8.6 4.8 5.3 5.4 7.4 25y 3m _________________________ Performance is reported net of fees. 22 YTD 2017 2016 2015 2014 2013 2012 2011 Total Fund Total Composite 0.1 12.3 5.1 -0.7 2.9 10.9 12.1 1.2 Policy Benchmark -0.1 12.2 6.6 -1.4 3.5 12.3 11.6 1.1 Domestic Equity Blackrock Russell 1000 Index Fund Non-Lending -0.7 (47)21.6 (48)12.1 (34)0.9 (43)13.2 (29)33.1 (51)16.4 (33)1.5 (36) Russell 1000 Index -0.7 (47)21.7 (47)12.1 (34)0.9 (43)13.2 (29)33.1 (50)16.4 (33)1.5 (36) eV Large Cap All Median -0.8 21.3 9.5 0.0 11.5 33.1 15.0 0.0 Kennedy Mid Cap Value -2.1 (51)18.0 (15)22.9 (14)-9.9 (96)15.8 (5)33.3 (72)13.6 (77)-0.8 (44) Russell Midcap Value Index -2.5 (63)13.3 (63)20.0 (37)-4.8 (59)14.7 (12)33.5 (69)18.5 (28)-1.4 (50) eV Mid Cap Value Median -2.1 14.5 17.3 -3.8 10.1 35.3 16.0 -1.5 TimesSquare Small Cap Growth 3.6 (39)21.1 (61)8.4 (65)1.0 (31)-2.5 (82)47.7 (35)13.1 (60)2.6 (17) Russell 2000 Growth Index 2.3 (59)22.2 (57)11.3 (44)-1.4 (48)5.6 (29)43.3 (64)14.6 (46)-2.9 (55) eV Small Cap Growth Median 2.9 23.5 10.3 -1.6 3.0 44.8 14.1 -2.3 International Equity Morgan Stanley International Equity Fund I -1.5 (70)25.2 (67)-2.0 (81)0.4 (41)-6.1 (76)20.4 (59)19.6 (37)-7.6 (14) MSCI EAFE Index -1.5 (71)25.0 (68)1.0 (53)-0.8 (53)-4.9 (59)22.8 (39)17.3 (67)-12.1 (47) Custom Non US Diversified All Median -0.8 26.8 1.1 -0.6 -4.3 21.6 18.5 -12.5 Morgan Stanley Emerging Markets Fund I 1.9 (40)35.0 (57)6.7 (65)-10.3 (32)-4.5 (79)-0.8 (61)20.2 (43)-18.4 (49) MSCI Emerging Markets Index 1.4 (49)37.3 (43)11.2 (34)-14.9 (68)-2.2 (63)-2.6 (74)18.2 (62)-18.4 (49) eV International Emerging Equity Median 1.3 35.9 8.7 -12.9 -1.1 0.0 19.6 -18.6 Fixed Income Income Research -1.1 (71)2.0 (80)2.3 (42)0.9 (60)3.3 (51)-0.9 (58)5.9 (24)5.6 (58) Blmbg. Barc. Intermed. U.S. Government/Credit -1.0 (42)2.1 (66)2.1 (50)1.1 (42)3.1 (62)-0.9 (55)3.9 (75)5.8 (46) eV US Intermediate Fixed Income Median -1.0 2.3 2.1 1.0 3.3 -0.8 4.7 5.7 Prudential Core Plus Bond Fund -1.3 (59)6.6 (6)5.8 (23)-0.1 (49)7.1 (12)-1.0 (72)10.6 (26)7.6 (29) Blmbg. Barc. U.S. Aggregate -1.5 (79)3.5 (92)2.6 (94)0.5 (25)6.0 (37)-2.0 (93)4.2 (100)7.8 (19) eV Core Plus Fixed Income Median -1.3 4.7 4.5 -0.2 5.7 -0.5 8.8 6.8 Performance Summary Manager Performance As of March 31, 2018 _________________________ Performance is reported net of fees. 23 Performance Summary Manager Performance As of March 31, 2018 YTD 2017 2016 2015 2014 2013 2012 2011 Brandywine Global Opportunistic Fixed Income 3.8 (4)12.8 (12)5.2 (42)-8.4 (88)6.3 (15)-3.5 (81)14.1 (24)8.0 (12) Citigroup World Government Bond Index 2.5 (12)7.5 (56)1.6 (79)-3.6 (60)-0.5 (74)-4.0 (86)1.6 (100)6.4 (23) eV Global Fixed Income Median 0.4 7.8 4.5 -2.9 1.9 0.4 9.9 4.1 Hedge Funds Lighthouse Global Long/Short Fund Limited 1.6 6.6 0.2 7.4 4.9 20.2 6.1 -2.1 HFRI Equity Hedge (Total) Index 0.4 13.3 5.5 -1.0 1.8 14.3 7.4 -8.4 Entrust Capital Diversified Fund -1.3 2.1 -1.1 -7.3 1.8 13.2 7.4 -4.7 HFRI Fund of Funds Composite Index 0.3 7.8 0.5 -0.3 3.4 9.0 4.8 -5.7 Real Estate UBS Trumbull Property Fund 1.7 5.3 6.0 11.7 10.4 9.2 9.0 12.1 NCREIF Property Index 1.7 7.0 8.0 13.3 11.8 11.0 10.5 14.3 Cash Account 0.4 1.1 0.8 0.1 0.6 0.1 0.1 0.1 BofA Merrill Lynch 3 Month U.S. T-Bill 0.4 0.9 0.3 0.1 0.0 0.1 0.1 0.1 _________________________ Performance is reported net of fees. 24 Fund Name Qualitative Compliance Performance Compliance 3 Year Return Short-Term 3 Year Rank 3 Year Sharpe 5 Year Return Longer-Term 5 Year Rank 5 Year Sharpe Kennedy Mid Cap Value ✔✔✔✖✖✔✖✖ TimesSquare Small Cap Growth ✔✔✖✖✔✖✖✖ Morgan Stanley International Equity Fund I ✔✖✖✖✖✖✖✖ Morgan Stanley Emerging Markets Fund I ✔✔✖✖✔✖✖✖ Income Research ✔✔✖✖✖✖✖✖ Prudential Core Plus Bond Fund ✔✔✔✔✔✔✔✔ Brandywine Global Opportunistic Fixed Income ✔✔✔✔✔✔✔✔ Lighthouse Global Long/Short Fund Limited ✖✔✖--✖✔--✔ Entrust Capital Diversified Fund ✖✖✖--✖✖--✖ Legend 3 Year Return ✔Goals met or no material change ✖Goals not met or material changes Portfolio Score Factor Comments Kennedy Mid Cap Value Qualitative Compliance In March, Kennedy announced that Kimberly Wood, President and CEO, resigned from the firm. Ms. Wood had been with the firm for about 18 months, having joined the firm in August 2016. As a result of this resignation, Kennedy’s Board of Directors selected Donald Cobin as the new President, CEO and Chairman of the Board of Directors. Currently, Mr. Cobin serves as Portfolio Manager on the firm’s Small Cap Core and SMID Cap Core strategies. Mr. Cobin has stated that he does not intend to relinquish his portfolio management responsibilities. TimesSquare Small Cap Growth Qualitative Compliance TimesSquare parted ways with U.S. Healthcare Services Analyst Sameer Sabharwal in February. Senior Healthcare Analyst David Ferreiro and Associate Healthcare Analyst Will Glindmeyer remain at the firm. In April, the firm announced one of the three Technology analysts, Jim Russo, resigned from the firm. Morgan Stanley International Equity Fund I Performance Compliance Morgan Stanley's high quality philosophy has faced some headwinds over the last few years, particularly during the lower quality rally in the back half of 2016, and the steep up market of 2013. The fund rebounded nicely in 2017, managing to keep pace with the surging index. At this time, Pavilion recommends no changes, though we would like to see better consistency from Morgan Stanley. Morgan Stanley Emerging Markets Fund I Qualitative Compliance May Yu was added to the listed portfolio manager team for the emerging markets strategy. Gaite Ali, who had been a portfolio manager for five years on the Fund, is no longer a named portfolio manager. Lighthouse Global Long/Short Fund Limited Qualitative Compliance In March 2018, Lighthouse and Mesirow Financial announced the signing of a definitive agreement for Lighthouse to acquire the assets of Mesirow Advanced Strategies, and the acquisition is expected to be finalized in the next couple months. Pavilion’s initial takeaway from early conversations with the managers is that the combination makes sense given the current industry environment. That said, uncertainties remain with the integration process, and we have placed the broader Lighthouse organization on “Watch” as a result. A more detailed memo is available upon request. Entrust Capital Diversified Fund Qualitative Compliance Senior Managing Director, Robert Kaplan, elected to retire in the first quarter. Mr. Kaplan was member of the six-person Global Investment Committee for EnTrust. Redemptions from the Diversified Fund were $367 million in the first quarter, bringing total fund AUM to $1.6 billion. While $310 million of the redemptions were attributed to clients transitioning to strategic partnerships, the fund's assets have declined over the past years from a peak of $5 billion in 2014. This has been due to challenged performance and organizational changes. EnTrust combined their business with that of The Permal Group, a global alternative asset manager. The deal closed in mid – 2016. Pavilion believes the acquisition by Permal has shifted the organization’s focus away from the Diversified Fund and we do not have confidence that performance will rebound. Entrust Capital Diversified Fund Performance Compliance EnTrust has underperformed its benchmark over the trailing 1-, 3-, and 5-year periods. Since late 2016, a 3% allocation to the portfolio's Tail Risk Hedge has been the most significant detractor. Also, activist equity and merger arbitrage managers have been notable detractors. Performance Summary Compliance Checklist As of March 31, 2018 Performance compliance represents Pavilion’s view on manager performance relative to Pavilion’s expectations for performance, based primarily on manager investment philosophy and process. The three and five year return, rank and Sharpe ratio goals are as follows: the annualized return exceeds the benchmark’s return, the manager’s peer group rank is better than the 50th percentile, and the manager’s Sharpe ratio exceeds the benchmark’s.25 March 31, 2018 : $274,152,009 Target Allocation Actual Allocation Allocation Differences 0.0%8.0%16.0%24.0%32.0%40.0%48.0%-8.0 % Cash Account $1,618,581 Real Estate Composite $24,871,639 Hedge Funds Composite $35,982,445 Fixed Income Composite $98,382,288 Emerging International Equity Composite $11,929,922 Developed International Equity Composite $27,803,435 Small-Cap Equity Composite $18,186,369 Large-Cap Equity Composite $55,377,331 0.0% 10.0% 15.0% 35.0% 4.0% 10.0% 6.0% 20.0% 0.6% 9.1% 13.1% 35.9% 4.4% 10.1% 6.6% 20.2% 0.6% -0.9 % -1.9 % 0.9% 0.4% 0.1% 0.6% 0.2% Asset Class Diversification Investment Policy Allocation As of March 31, 2018 26 *Totals may not add to exactly 100.0% due to rounding. Asset Class Diversification Investment Pr ogram Structure Asse t C lass/Type Manage r To tal Asse ts ($, mi l.) as of 3/31/2018 Pe rce nt of Total Targe t Al locati on Weighti ng Re lati ve to Targe t Al lowabl e Range Total Asse ts ($, mi l.) as o f 12/31/2017 Large -Cap Equi ty $55.4 20.2%20.0%+0.2%15 - 2 5%$57.5 Co re Bla ckRo ck $55.4 20.2%20.0%+0.2%$57.5 Smal l-Cap Eq uity $18.2 6.6%6.0%+0.6%2 - 8 %$18.7 Va lu e Ke nnedy $8.9 3.3%3.0%+0.3%$9.5 Gr owth Time sSquare $9.2 3.4%3.0%+0.4%$9.3 Inte rn ational Equity $39.7 14.5%14.0%+0.5%$40.8 De veloped Morgan St anley $27.8 10.1%10.0%+0.1%5 - 1 5%$28.7 Eme rg in g Marke ts Morgan St anley $11.9 4.4%4.0%+0.4%2 - 8 %$12.1 Fixe d Income $98.4 35.9%35.0%+0.9%$99.0 Do me stic Core In come Re search $38.9 14.2%14.0%+0.2%10 - 2 0%$39.3 Gl obal Bra ndywin e Gl obal $25.7 9.4%9.0%+0.4%4 - 1 4%$25.5 Do me stic Core Plus Pru dential $33.8 12.3%12.0%+0.3%10 - 2 0%$34.3 He dge Funds $36.0 13.1%15.0%-1.9%0 - 2 0% $35.9 He dge Fu nds Li ghthous e Gl obal $19.7 7.2%7.5%-0.3%$19.3 He dge Fu nds En trust $16.3 6.0%7.5%-1.5%$16.5 Re al Es tate $24.9 9.1%10.0%-0.9%$24.5 Re al Estate UBS Tru mb ull $24.9 9.1%10.0%-0.9%0 - 1 2%$24.5 Cash $1.6 0.6%0.0%+0.6%$1.7 Ca sh A ccount Ca sh A ccount $1.6 0.6%0.0%+0.6%$1.7 Total $274.2 100.0%100.0%+0.0%$278.1 27 Current Manager Fe e Schedule Investment performance calculated net of fees. * Incentive fees may be paid to underlying hedge fund managers.During 2016, the average incentive fee for managers in the Entrust Fund was 16.5% of profits.Some managers were subject to a hurdle rate.The average incentive fee for managers in the Lighthouse fee was 19.3% of profits.Some managers were subject to a hurdle rate. Fe e (%) Do mest ic Equi ty Black Rock $55,377,331 20.2 0.04 0.05 US Pas sive Large Cap (CIT )$ 19,382 Kennedy $8,939,423 3.3 0.90 0.75 US M id Cap Valu e $ 80,455 Times Sq uare $9,246,947 3.4 1.03 1.00 US Small Cap Grow th $ 95,244 Inte rna ti ona l Equity Morgan Stanley Int ernat ional $27,803,435 10.1 0.91 0.90 All EA FE Equit y $ 253,011 Morgan Stanley Emerging Markets $11,929,922 4.4 1.04 1.10 Emergi ng M kt s Equit y $ 124,071 Fi xed Income Income Res ear ch $38,927,653 14.2 0.30 0.30 US Core F ixed Income $ 116,783 Prudent ial $33,802,293 12.3 0.30 0.34 US Core Plus F ixed Income $ 101,407 Brandy wine $25,652,341 9.4 0.45 0.42 Global Agg Fixe d Income $ 115,436 He dge Funds* Light hous e $19,663,835 7.2 1.58 N/A N/A $ 310,689 Ent rust $16,318,610 6.0 2.64 N/A N/A $ 430,811 Re al Est ate UBS Trumbull $24,871,639 9.1 1.00 N/A N/A $ 248,716 Ca sh Money M arket $1,618,581 0.6 0.16 0.19 US Cas h M anagement $ 2,590 Pavilion-Consulting Fee $ 122,039 US Bank Cus tody and Benefit Pay ment Fee $ 78,146 Tota l $274,152,009 100.0 %0.77%$ 2,098,779 Tota l Assets ($ millions )% of Tota l Proje cted Annua l Fe e eVestment Al lia nc e Universe Media n eVestment Allia nc e Un iverse 28 Deferred Compensation Executive Summary 29 40 45 50 55 60 65 Market Value ($, mil)•During the quarter,all of the Vanguard Target Date Retirement Funds modestly outperformed their respective S&P Target Date Indices.Vanguard’s underweight to REITs,slight overweight to small cap stocks,and higher strategic allocation to international bonds versus the S&P Target Date Index benefited results. •Domestic equity fund Vanguard U.S.Growth and international equity fund Vanguard International Growth were the top relative performers over the trailing one-year period,outpacing their respective benchmarks by 470 and 1,470 basis points,respectively. Executive Summary Metropolitan St. Louis Sewer District Deferred Compensation Plan As of March 31, 2018 Total Asset Growth Plan Update Asset Allocation Breakdown by Asset Class Key Plan Design Features Investment Highlights and Recommendations Managers for Discussion* •All managers in the investment menu are compliant as of 3/31/2018. $63.24 Million •Pavilion recommends no changes to the investment lineup at this time. 30 March 2018 December 2017 Change $%$%$% Target Date Vanguard Target Retirement Income Inv 951,825 1.5 824,242 1.3 127,584 15.5 Vanguard Target Retirement 2015 Inv 966,278 1.5 975,588 1.5 -9,310 -1.0 Vanguard Target Retirement 2020 Inv 2,604,549 4.1 2,812,842 4.4 -208,294 -7.4 Vanguard Target Retirement 2025 Inv 4,572,455 7.2 4,506,811 7.1 65,643 1.5 Vanguard Target Retirement 2030 Inv 1,879,431 3.0 1,855,802 2.9 23,629 1.3 Vanguard Target Retirement 2035 Inv 1,887,618 3.0 1,856,963 2.9 30,655 1.7 Vanguard Target Retirement 2040 Inv 1,135,024 1.8 1,101,522 1.7 33,502 3.0 Vanguard Target Retirement 2045 Inv 1,246,564 2.0 1,190,114 1.9 56,450 4.7 Vanguard Target Retirement 2050 Inv 806,792 1.3 767,662 1.2 39,130 5.1 Vanguard Target Retirement 2055 Inv 256,881 0.4 245,553 0.4 11,328 4.6 Vanguard Target Retirement 2060 Inv 100,277 0.2 82,303 0.1 17,974 21.8 Vanguard Target Retirement 2065 Inv 549 0.0 81 0.0 468 577.8 Total Target Date 16,408,242 25.9 16,219,482 25.5 188,759 1.2 Domestic Equity Vanguard 500 Index Inv 8,847,936 14.0 8,995,067 14.2 -147,131 -1.6 Vanguard Windsor II Inv 8,843,336 14.0 9,382,333 14.8 -538,997 -5.7 Vanguard U.S. Growth Inv 5,837,764 9.2 5,399,403 8.5 438,361 8.1 Vanguard Mid-Cap Index Inv 3,464,698 5.5 3,461,785 5.4 2,912 0.1 Vanguard Small-Cap Index Inv 2,813,705 4.4 2,814,235 4.4 -530 0.0 Total Domestic Equity 29,807,439 47.1 30,052,824 47.3 -245,385 -0.8 International Equity Vanguard International Growth Inv 3,223,651 5.1 3,341,152 5.3 -117,501 -3.5 Total International Equity 3,223,651 5.1 3,341,152 5.3 -117,501 -3.5 Fixed Income Vanguard Total Bond Market Index Inv 2,773,287 4.4 2,742,294 4.3 30,992 1.1 Vanguard Retirement Savings Trust 2,807,806 4.4 2,941,454 4.6 -133,649 -4.5 Vanguard Balanced Index Inv 5,405,768 8.5 5,485,682 8.6 -79,914 -1.5 Total Fixed Income 10,986,860 17.4 11,169,431 17.6 -182,570 -1.6 Capital Preservation Vanguard Prime Money Market Inv 1,429,988 2.3 1,384,365 2.2 45,622 3.3 Total Capital Preservation 1,429,988 2.3 1,384,365 2.2 45,622 3.3 Plan Summary Asset Allocation - Metropolitan St. Louis Sewer District Deferred Compensation Plan As of March 31, 2018 Percentage change includes all cash flows and market movements. 31 Plan Summary Asset Allocation - Metropolitan St. Louis Sewer District Deferred Compensation Plan As of March 31, 2018 March 2018 December 2017 Change $%$%$% Loan Funds Loan Fund 1,386,309 2.2 1,378,189 2.2 8,120 0.6 Total Loan Fund 1,386,309 2.2 1,378,189 2.2 8,120 0.6 Total Plan Deferred Compensation Plan Total Composite 63,242,488 100.0 63,545,442 100.0 -302,954 -0.5 Percentage change includes all cash flows and market movements. 32 Plan Summary Fee Comparison Summary As of March 31, 2018 Inv estment Option Expe nse Ratio Morningstar Cate gory Av erage Fe e Level Comparison Group Median eVestment Al liance Univ erse Median Cate gory Fe e Le vel Comparison Group e Ve st me nt Alliance Univ erse Va nguard 500 In dex 0.14 0.98 0.89 0.15 La rg e Ble nd La rg e Ca p No Load US Pa ssive La rge Ca p Eq uity Va nguard US Gro wth 0.43 1.10 0.89 0.78 La rg e Gr owth La rg e Ca p No Load US Large Ca p Gr owth Va nguard Windsor 0.34 1.02 0.89 0.75 La rg e Va lu e La rg e Ca p No Load US Large Ca p Va lu e Va nguard Mid-Ca p In dex 0.17 1.06 1.03 0.18 Mid Ble nd Mid Ca p No Load US Pa ssive Mid Ca p Eq uity Va nguard Small-Ca p In dex 0.17 1.17 1.18 0.19 Small Ble nd Small Ca p No Load US Pa ssive Small Cap Eq uity Va nguard In ternational Gro wt h 0.45 1.17 1.01 1.00 Fo re ig n La rg e Gr owth Fo reig n La rg e Ca p No Load ACWI e x-US Gro wt h Eq uity Va nguard Total Bond Marke t In dex 0.15 0.79 0.64 0.46 In terme diate-Term Bond Interme diate-Term Bo nd No Load US Core Fixe d In come Va nguard Re tire me nt Savin g Trust 0.53 N/A N/A 0.79 N/A N/A US St able Va lu e Fixe d In come Va nguard Ba lanced Index 0.19 0.84 0.90 0.76 Moderate Allo cation Moderate Allo cation No Load US Balanced Va nguard Targ et Re tire me nt In come 0.13 0.43 0.50 0.37 Re tire me nt In come Re tireme nt In come No Load Lifecycle/Target Da te In come Va nguard Targ et Re tire me nt 2015 0.13 0.36 0.64 0.40 Target Date 2011-2015 Target Re tire me nt 2011-2015 No Load Lifecycle/Target Da te 2015 Va nguard Targ et Re tire me nt 2020 0.13 0.41 0.64 0.40 Target Date 2016-2020 Target Re tire me nt 2016-2020 No Load Lifecycle/Target Da te 2020 Va nguard Targ et Re tire me nt 2025 0.14 0.39 0.66 0.43 Target Date 2021-2025 Target Re tire me nt 2021-2025 No Load Lifecycle/Target Da te 2025 Va nguard Targ et Re tire me nt 2030 0.14 0.41 0.68 0.42 Target Date 2026-2030 Target Re tire me nt 2026-2030 No Load Lifecycle/Target Da te 2030 Va nguard Targ et Re tire me nt 2035 0.14 0.40 0.72 0.43 Target Date 2031-2035 Target Re tire me nt 3031-2035 No Load Lifecycle/Target Da te 2035 Va nguard Targ et Re tire me nt 2040 0.15 0.42 0.72 0.44 Target Date 2036-2040 Target Re tire me nt 2036-2040 No Load Lifecycle/Target Da te 2040 Va nguard Targ et Re tire me nt 2045 0.15 0.42 0.74 0.45 Target Date 2041-2045 Target Re tire me nt 2041-2045 No Load Lifecycle/Target Da te 2045 Va nguard Targ et Re tire me nt 2050 0.15 0.41 0.72 0.45 Target Date 2046-2050 Target Re tire me nt 2046-2050 No Load Lifecycle/Target Da te 2050 Va nguard Targ et Re tire me nt 2055 0.15 0.41 0.75 0.45 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2055 Va nguard Targ et Re tire me nt 2060 0.15 0.43 0.77 0.46 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2060 Va nguard Targ et Re tirment 2065 0.15 0.43 0.64 0.46 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2060 Va nguard Prime Money Marke t 0.16 0.42 N/A 0.19 Money Marke t Taxable N/A US Cas h Management Pavilio n Co nsulting Fee ($10,612 p er y ear) 33 Defined Contribution Executive Summary 34 0 2 4 6 8 10 Market Value ($, mil)•During the quarter,all of the Vanguard Target Date Retirement Funds modestly outperformed their respective S&P Target Date Indices.Vanguard’s underweight to REITs,slight overweight to small cap stocks,and higher strategic allocation to international bonds versus the S&P Target Date Index benefited results. •Domestic equity fund Vanguard U.S.Growth and international equity fund Vanguard International Growth were the top relative performers over the trailing one-year period,outpacing their respective benchmarks by 470 and 1,470 basis points,respectively. Executive Summary Metropolitan St. Louis Sewer District Defined Contribution Plan As of March 31, 2018 Total Asset Growth Plan Update Asset Allocation Breakdown by Asset Class Key Plan Design Features Investment Highlights and Recommendations Managers for Discussion* •All managers in the investment menu are compliant as of 3/31/2018. $7.79 Million •Pavilion recommends no changes to the investment lineup at this time. Domestic Equity 13.5% International Equity 2.3%Fixed Income 5.1% Target Date Funds 78.0% Capital Preservation 1.1% 35 March 2018 December 2017 Change $%$%$% Target Date Vanguard Target Retirement Income Inv 26,660 0.3 23,967 0.3 2,693 11.2 Vanguard Target Retirement 2015 Inv 4,667 0.1 4,397 0.1 270 6.1 Vanguard Target Retirement 2020 Inv 111,103 1.4 105,897 1.4 5,206 4.9 Vanguard Target Retirement 2025 Inv 521,770 6.7 510,553 6.9 11,217 2.2 Vanguard Target Retirement 2030 Inv 422,339 5.4 404,474 5.4 17,866 4.4 Vanguard Target Retirement 2035 Inv 864,100 11.1 844,806 11.3 19,295 2.3 Vanguard Target Retirement 2040 Inv 932,785 12.0 890,425 12.0 42,360 4.8 Vanguard Target Retirement 2045 Inv 1,604,473 20.6 1,568,783 21.1 35,690 2.3 Vanguard Target Retirement 2050 Inv 900,979 11.6 892,179 12.0 8,801 1.0 Vanguard Target Retirement 2055 Inv 538,748 6.9 499,884 6.7 38,863 7.8 Vanguard Target Retirement 2060 Inv 145,908 1.9 127,501 1.7 18,407 14.4 Vanguard Target Retirement 2065 Inv 1,921 0.0 122 0.0 1,799 1,479.6 Total Target Date 6,075,452 78.0 5,872,988 78.9 202,464 3.4 Domestic Equity Vanguard 500 Index Inv 395,893 5.1 386,587 5.2 9,306 2.4 Vanguard Windsor II Inv 118,884 1.5 116,699 1.6 2,185 1.9 Vanguard U.S. Growth Inv 171,293 2.2 157,854 2.1 13,439 8.5 Vanguard Mid-Cap Index Inv 220,345 2.8 215,936 2.9 4,408 2.0 Vanguard Small-Cap Index Inv 147,283 1.9 145,743 2.0 1,540 1.1 Total Domestic Equity 1,053,699 13.5 1,022,821 13.7 30,878 3.0 International Equity Vanguard International Growth Inv 177,702 2.3 169,172 2.3 8,530 5.0 Total International Equity 177,702 2.3 169,172 2.3 8,530 5.0 Fixed Income Vanguard Total Bond Market Index Inv 173,401 2.2 131,345 1.8 42,056 32.0 Vanguard Retirement Savings Trust 74,244 1.0 70,413 0.9 3,831 5.4 Vanguard Balanced Index Inv 148,586 1.9 143,183 1.9 5,403 3.8 Total Fixed Income 396,231 5.1 344,941 4.6 51,290 14.9 Capital Preservation Vanguard Prime Money Market Inv 85,984 1.1 34,204 0.5 51,780 151.4 Total Capital Preservation 85,984 1.1 34,204 0.5 51,780 151.4 Total Plan Defined Contribution Plan Total Composite 7,789,068 100.0 7,444,125 100.0 344,942 4.6 Plan Summary Asset Allocation - Metropolitan St. Louis Sewer District Defined Contribution Plan As of March 31, 2018 Percentage change includes all cash flows and market movements. 36 Plan Summary Fee Comparison Summary As of March 31, 2018 Inv estment Option Expe nse Ratio Morningstar Cate gory Av erage Fe e Level Comparison Group Median eVestment Al liance Univ erse Median Cate gory Fe e Le vel Comparison Group e Ve st me nt Alliance Univ erse Va nguard 500 In dex 0.14 0.98 0.89 0.15 La rg e Ble nd La rg e Ca p No Load US Pa ssive La rge Ca p Eq uity Va nguard US Gro wth 0.43 1.10 0.89 0.78 La rg e Gr owth La rg e Ca p No Load US Large Ca p Gr owth Va nguard Windsor 0.34 1.02 0.89 0.75 La rg e Va lu e La rg e Ca p No Load US Large Ca p Va lu e Va nguard Mid-Ca p In dex 0.17 1.06 1.03 0.18 Mid Ble nd Mid Ca p No Load US Pa ssive Mid Ca p Eq uity Va nguard Small-Ca p In dex 0.17 1.17 1.18 0.19 Small Ble nd Small Ca p No Load US Pa ssive Small Cap Eq uity Va nguard In ternational Gro wt h 0.45 1.17 1.01 1.00 Fo re ig n La rg e Gr owth Fo reig n La rg e Ca p No Load ACWI e x-US Gro wt h Eq uity Va nguard Total Bond Marke t In dex 0.15 0.79 0.64 0.46 In terme diate-Term Bond Interme diate-Term Bo nd No Load US Core Fixe d In come Va nguard Re tire me nt Savin g Trust 0.53 N/A N/A 0.79 N/A N/A US St able Va lu e Fixe d In come Va nguard Ba lanced Index 0.19 0.84 0.90 0.76 Moderate Allo cation Moderate Allo cation No Load US Balanced Va nguard Targ et Re tire me nt In come 0.13 0.43 0.50 0.37 Re tire me nt In come Re tireme nt In come No Load Lifecycle/Target Da te In come Va nguard Targ et Re tire me nt 2015 0.13 0.36 0.64 0.40 Target Date 2011-2015 Target Re tire me nt 2011-2015 No Load Lifecycle/Target Da te 2015 Va nguard Targ et Re tire me nt 2020 0.13 0.41 0.64 0.40 Target Date 2016-2020 Target Re tire me nt 2016-2020 No Load Lifecycle/Target Da te 2020 Va nguard Targ et Re tire me nt 2025 0.14 0.39 0.66 0.43 Target Date 2021-2025 Target Re tire me nt 2021-2025 No Load Lifecycle/Target Da te 2025 Va nguard Targ et Re tire me nt 2030 0.14 0.41 0.68 0.42 Target Date 2026-2030 Target Re tire me nt 2026-2030 No Load Lifecycle/Target Da te 2030 Va nguard Targ et Re tire me nt 2035 0.14 0.40 0.72 0.43 Target Date 2031-2035 Target Re tire me nt 3031-2035 No Load Lifecycle/Target Da te 2035 Va nguard Targ et Re tire me nt 2040 0.15 0.42 0.72 0.44 Target Date 2036-2040 Target Re tire me nt 2036-2040 No Load Lifecycle/Target Da te 2040 Va nguard Targ et Re tire me nt 2045 0.15 0.42 0.74 0.45 Target Date 2041-2045 Target Re tire me nt 2041-2045 No Load Lifecycle/Target Da te 2045 Va nguard Targ et Re tire me nt 2050 0.15 0.41 0.72 0.45 Target Date 2046-2050 Target Re tire me nt 2046-2050 No Load Lifecycle/Target Da te 2050 Va nguard Targ et Re tire me nt 2055 0.15 0.41 0.75 0.45 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2055 Va nguard Targ et Re tire me nt 2060 0.15 0.43 0.77 0.46 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2060 Va nguard Targ et Re tirment 2065 0.15 0.43 0.64 0.46 Target Da te 2051+Target Re tire me nt 2051+ No Load Lifecycle/Target Da te 2060 Va nguard Prime Money Marke t 0.16 0.42 N/A 0.19 Money Marke t Taxable N/A US Cas h Management Pavilio n Co nsulting Fee ($10,612 p er y ear) 37 DC Manager Performance Summary 38 Performance (%) Quarter YTD 1 Year 3 Years 5 Years 7 Years 10 Years Target Date Vanguard Target Retirement Income Inv -0.5 (8)-0.5 (8)5.4 (54)3.7 (52)4.3 (47)5.1 (41)4.9 (41) Vanguard Target Income Composite Index (Net)-0.5 (12)-0.5 (12)5.6 (51)3.9 (50)4.5 (44)5.2 (37)5.0 (36) S&P Target Date Retirement Income Index -0.8 (48)-0.8 (48)5.4 (54)3.5 (58)4.1 (50)4.7 (49)4.3 (75) TD Income Universe Median -0.9 -0.9 5.6 3.8 4.0 4.7 4.8 Vanguard Target Retirement 2015 Inv -0.5 (18)-0.5 (18)7.3 (33)4.7 (26)6.2 (21)6.4 (18)5.7 (15) Vanguard Target 2015 Composite Index (Net)-0.6 (24)-0.6 (24)7.4 (24)4.9 (21)6.4 (15)6.6 (13)5.8 (13) S&P Target Date 2015 Index -0.9 (69)-0.9 (69)6.9 (37)4.8 (24)5.9 (26)6.0 (34)5.4 (46) TD 2015 Universe Median -0.8 -0.8 6.6 4.3 5.3 5.6 5.3 Vanguard Target Retirement 2020 Inv -0.6 (27)-0.6 (27)9.0 (12)5.6 (15)7.3 (8)7.2 (18)6.2 (15) Vanguard Target 2020 Composite Index (Net)-0.6 (31)-0.6 (31)9.1 (11)5.8 (11)7.5 (6)7.5 (6)6.4 (9) S&P Target Date 2020 Index -0.9 (67)-0.9 (67)7.8 (60)5.3 (29)6.6 (36)6.6 (41)5.8 (44) TD 2020 Universe Median -0.8 -0.8 8.0 5.0 6.3 6.5 5.7 Vanguard Target Retirement 2025 Inv -0.6 (35)-0.6 (35)10.2 (19)6.3 (17)8.0 (12)7.8 (18)6.5 (19) Vanguard Target 2025 Composite Index (Net)-0.7 (40)-0.7 (40)10.3 (17)6.5 (13)8.2 (7)8.0 (12)6.6 (16) S&P Target Date 2025 Index -0.9 (73)-0.9 (73)9.0 (58)6.0 (38)7.3 (45)7.2 (50)6.1 (43) TD 2025 Universe Median -0.8 -0.8 9.6 5.8 7.1 7.2 6.0 Vanguard Target Retirement 2030 Inv -0.6 (31)-0.6 (31)11.2 (36)6.8 (27)8.6 (18)8.2 (23)6.7 (24) Vanguard Target 2030 Composite Index (Net)-0.7 (37)-0.7 (37)11.3 (27)7.0 (19)8.8 (13)8.5 (13)6.9 (17) S&P Target Date 2030 Index -0.9 (73)-0.9 (73)10.2 (60)6.6 (39)8.0 (48)7.7 (49)6.4 (44) TD 2030 Universe Median -0.8 -0.8 10.8 6.3 8.0 7.6 6.2 Vanguard Target Retirement 2035 Inv -0.6 (37)-0.6 (37)12.2 (40)7.3 (30)9.2 (23)8.7 (26)7.0 (38) Vanguard Target 2035 Composite Index (Net)-0.7 (42)-0.7 (42)12.3 (33)7.5 (22)9.4 (17)8.9 (11)7.2 (23) S&P Target Date 2035 Index -0.9 (83)-0.9 (83)11.3 (65)7.2 (40)8.6 (49)8.1 (53)6.6 (50) TD 2035 Universe Median -0.7 -0.7 12.1 7.0 8.5 8.3 6.6 Vanguard Target Retirement 2040 Inv -0.5 (34)-0.5 (34)13.2 (27)7.9 (24)9.7 (18)9.1 (21)7.3 (24) Vanguard Target 2040 Composite Index (Net)-0.7 (51)-0.7 (51)13.4 (24)8.1 (19)10.0 (8)9.4 (10)7.5 (15) S&P Target Date 2040 Index -0.9 (80)-0.9 (80)12.1 (67)7.6 (39)9.1 (47)8.5 (47)6.8 (46) TD 2040 Universe Median -0.7 -0.7 12.7 7.3 9.0 8.4 6.7 Performance Summary Annualized Performance (Net) As of March 31, 2018 _____________________________ Returns are expressed as percentages and net of fees. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. Rankings in the top quartile of peers are shown as green, while rankings in the bottom quartile of peers are shown as red. 39 Performance Summary Annualized Performance (Net) As of March 31, 2018 Performance (%) Quarter YTD 1 Year 3 Years 5 Years 7 Years 10 Years Vanguard Target Retirement 2045 Inv -0.6 (43)-0.6 (43)13.7 (37)8.1 (19)9.9 (20)9.2 (19)7.4 (21) Vanguard Target 2045 Composite Index (Net)-0.7 (51)-0.7 (51)13.8 (31)8.3 (17)10.1 (9)9.5 (14)7.6 (14) S&P Target Date 2045 Index -0.9 (84)-0.9 (84)12.5 (77)7.9 (42)9.4 (47)8.7 (51)6.9 (63) TD 2045 Universe Median -0.7 -0.7 13.1 7.8 9.3 8.7 7.1 Vanguard Target Retirement 2050 Inv -0.6 (40)-0.6 (40)13.7 (40)8.1 (22)9.9 (24)9.2 (26)7.4 (24) Vanguard Target 2050 Composite Index (Net)-0.7 (49)-0.7 (49)13.8 (36)8.3 (18)10.1 (15)9.5 (14)7.6 (12) S&P Target Date 2050 Index -0.9 (81)-0.9 (81)12.8 (71)8.1 (22)9.7 (37)8.9 (42)7.1 (50) TD 2050 Universe Median -0.7 -0.7 13.5 7.8 9.4 8.7 7.0 Vanguard Target Retirement 2055 Inv -0.6 (43)-0.6 (43)13.7 (45)8.1 (33)9.8 (34)9.2 (46)-- Vanguard Target 2055 Composite Index (Net)-0.7 (54)-0.7 (54)13.8 (37)8.3 (20)10.1 (23)9.5 (23)-- S&P Target Date 2055 Index -0.9 (76)-0.9 (76)13.0 (65)8.2 (24)9.9 (33)9.1 (47)7.2 (--) TD 2055 Universe Median -0.7 -0.7 13.6 7.9 9.6 9.0 -- Vanguard Target Retirement 2060 Inv -0.6 (44)-0.6 (44)13.7 (44)8.1 (47)9.8 (--)---- Vanguard Target 2060 Composite Index (Net)-0.7 (60)-0.7 (60)13.8 (42)8.3 (43)10.1 (--)---- S&P Target Date 2060+ Index -0.9 (85)-0.9 (85)13.2 (61)8.3 (43)9.9 (--)9.2 (--)-- TD 2060 Universe Median -0.7 -0.7 13.6 8.0 ------ Vanguard Target Retirement 2065 Inv -0.6 (47)-0.6 (47)---------- Vanguard Target 2065 Composite Index (Net)-0.7 (63)-0.7 (63)---------- S&P Target Date 2060+ Index -0.9 (85)-0.9 (85)13.2 (57)8.3 (45)9.9 (--)9.2 (--)-- TD 2065 Universe Median -0.7 -0.7 13.2 8.0 ------ Domestic Equity Vanguard 500 Index Inv -0.8 (51)-0.8 (51)13.8 (49)10.6 (19)13.1 (28)12.5 (27)9.4 (42) S&P 500 -0.8 (49)-0.8 (49)14.0 (48)10.8 (17)13.3 (25)12.7 (21)9.5 (39) eV Large Cap Core Median -0.8 -0.8 13.8 9.2 12.3 11.9 9.1 Vanguard U.S. Growth Inv 4.3 (25)4.3 (25)26.0 (21)12.3 (32)15.6 (30)14.1 (24)11.0 (32) Russell 1000 Growth Index 1.4 (69)1.4 (69)21.3 (54)12.9 (25)15.5 (31)14.1 (24)11.3 (26) eV Large Cap Growth Median 2.7 2.7 21.7 11.2 14.6 12.8 10.4 _____________________________ Returns are expressed as percentages and net of fees. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. Rankings in the top quartile of peers are shown as green, while rankings in the bottom quartile of peers are shown as red. 40 Performance Summary Annualized Performance (Net) As of March 31, 2018 Performance (%) Quarter YTD 1 Year 3 Years 5 Years 7 Years 10 Years Vanguard Windsor II Inv -2.9 (72)-2.9 (72)8.2 (70)7.6 (58)10.4 (67)10.7 (54)8.1 (54) Russell 1000 Value Index -2.8 (67)-2.8 (67)6.9 (80)7.9 (52)10.8 (57)11.0 (45)7.8 (64) eV Large Cap Value Median -2.4 -2.4 9.8 7.9 11.2 10.8 8.2 Vanguard Mid-Cap Index Inv 0.0 (46)0.0 (46)12.2 (52)7.7 (52)12.1 (38)11.1 (43)10.0 (52) Vanguard Mid-Cap Index Fund Blended Benchmark 0.0 (45)0.0 (45)12.4 (51)7.9 (50)12.3 (35)11.4 (37)10.2 (48) eV Mid Cap All Median -0.4 -0.4 12.4 7.9 11.7 10.8 10.1 Vanguard Small-Cap Index Inv -0.2 (47)-0.2 (47)11.7 (47)7.9 (56)11.5 (48)10.8 (45)10.6 (42) Vanguard Small-Cap Index Fund Blended Benchmark -0.2 (47)-0.2 (47)11.8 (46)8.0 (55)11.7 (46)10.9 (43)10.7 (41) eV Small Cap All Median -0.5 -0.5 11.1 8.4 11.4 10.5 10.2 International Equity Vanguard International Growth Inv 3.4 (9)3.4 (9)31.2 (11)12.3 (5)11.0 (10)8.2 (16)5.9 (22) MSCI AC World ex USA (Net)-1.2 (89)-1.2 (89)16.5 (89)6.2 (83)5.9 (94)4.3 (100)2.7 (90) Custom Non US Diversified Growth Median 0.4 0.4 21.6 8.0 8.2 6.9 4.8 Fixed Income Vanguard Total Bond Market Index Inv -1.5 (63)-1.5 (63)1.0 (75)1.0 (85)1.6 (80)2.7 (87)3.5 (87) Vanguard Total Bond Market Index Fund Benchmark -1.5 (59)-1.5 (59)1.2 (62)1.2 (72)1.8 (62)2.9 (70)3.7 (78) eV Core Fixed Income Median -1.4 -1.4 1.3 1.4 1.9 3.2 4.1 Vanguard Retirement Savings Trust 0.5 0.5 1.8 1.8 1.8 2.0 2.4 Ryan 3 Yr GIC Master 0.4 0.4 1.7 1.4 1.3 1.4 2.2 Vanguard Balanced Index Inv -0.9 (56)-0.9 (56)8.6 (47)6.5 (36)8.4 (36)8.6 (30)7.4 (23) Vanguard Balanced Index Fund Benchmark -0.9 (51)-0.9 (51)8.7 (42)6.7 (30)8.6 (30)8.7 (24)7.6 (19) eV US Balanced Median -0.9 -0.9 8.2 6.1 7.8 8.0 6.9 Capital Preservation Vanguard Prime Money Market Inv 0.4 (15)0.4 (15)1.2 (32)0.6 (51)0.4 (50)0.3 (51)0.4 (54) BofA Merrill Lynch 3 Month U.S. T-Bill 0.4 (32)0.4 (32)1.1 (43)0.5 (65)0.3 (60)0.3 (58)0.3 (64) eV US Cash Management Median 0.3 0.3 1.0 0.6 0.4 0.3 0.5 Total Composite 0.0 0.0 ---------- _____________________________ Returns are expressed as percentages and net of fees. Returns for periods greater than one year are annualized. Peer group percentile ranks are shown in parenthesis. Rankings in the top quartile of peers are shown as green, while rankings in the bottom quartile of peers are shown as red. 41 Appendix 42 2013 Acti on Sep tember ●The Metrop olit an St. Louis Sewer District hired Pavilion Advisory Group as t heir invest ment consult ant. 2014 Acti on February ●Pavilion p resent ed an asset allocat ion and investment and manager s truct ure review t o t he Finance Commit tee. Pavilion recommended t he adop tion of new asset allocat ion targe ts and allowable ranges t hat would p ermit t he eliminat ion of t he t act ical as set allocat ion and market neut ral s trat egies , the ad dit ion of hedge fund strat egies t hrough hedge fund of funds, and the reduction of t he number of managers and exposure t o high y ield and non- US debt in t he fixed income p ortfolio. T he following as set allocat ion s tructure was prop os ed: 40% Equit y 35% Fixed Income 25% Alt ernatives Given Pyramis ' poor p er formance and rap idly declining assets in t he strat egy, Pavilion furt her recommended t he manager be t erminat ed immediat ely . T he Commit tee ap proved t hese recommendations. Sep tember ●Pavilion downgraded PIM CO’s manager rat ing status from “nega tive watch” t o “sell.” Pavilion init ially downgraded PIM CO to “negat iv e watch” in January following the depart ure of co-CIO M ohamed El-Erian, and not ed we would closely monit or t he firm for organiz at ional st abilit y, asset flow s, and p erformance. Novemb er & December ●Pavilion conducted an equit y long/s hort hedge fund of funds search and p resent ed t he report t o t he Finance Commit tee. Pavilion recommended Light house Capital P artners Global Long/Short Fund which was sup port ed by M et rop olit an St Louis Sew er Staff. T he F und rep laced PIM CO A ll Asset Fund on M arch 1, 2015. Appendix History of Investment Decisions 43 2015 Acti on May ●Pavilion recommended liquidat ing t he t he Pict et Local Currency Emerging M arket Debt Fund, Loomis Say les Credit Fund and the Penn Capital High Yield Fund and inves ting t he p roceeds int o the Prudent ial Total Ret urn Fund. T he recommendat ion is s up port ed by the Office of t he Secr et ary Treas urer and t he Investment Commit tee. T he Finance Commit tee ap proved t he recommendat io n t o go t o t he Board of T rus tees . Pavilion p rovided t he Finance Commit tee with a revised Statement of Investment Policy , Object iv es and Op erat ing Guidelines . T he p olicy w as reviewed with and sup port ed by t he Office of t he Secret ary T reas urer. T he Finance Commit tee requested addit ional t ime to review t he document . June ●Pavilion recommended liquidat ing t he GMO Asset Allocat ion Fund and investing t he p roceeds in t he Light house Global Long/Short Equit y Fund and t he Entrust Diversified Hedge Fund of F unds. T he recommendat ion was sup port ed by t he Office of t he Secret ary Treas urer and t he Inves tment Commit tee. T he Finance Commit tee ap proved t he recommendation t o go t o t he Board of T rustees . T he Finance Commit tee review ed and ap proved t he revised Statement of Inves tment Policy , O bject ives and Op erat ing Guidelines p rovided at t he M ay meet in g. T he revised Inves tment Policy document was approved by t he Board of T rustees . 2016 Acti on Novemb er ●Pavilion conducted a search t o replace the pens ion p lan's lar ge -cap managers with an index strat egy. The Finance Commit tee agreed t o liq uidat e all four of its large -cap managers, which include T . Rowe Price Large -Cap Core Growth, Van gu ard S&P 500, Vanguard Windsor II and Holland, and use t hese funds t o p urchase shares in a Blackrock Russell 1000 Passive U.S. Equit y CIT . December ●Wellingt on Divers ified Inflat ion Hedges was terminat ed and p roceeds were moved t o t he UBS T rumbull Prop erty Fund. 2017 Acti on February ●In February , all four large -cap managers T. Rowe P rice Large-Cap Growt h, Vangu ard S&P 500, Vangu ard Windsor II and Holland were liquidated and p roceeds used to p urchase shares in t he BlackRock Russell 1000 Pas sive U .S. Equity CIT . Appendix History of Investment Decisions 44 2018 Acti on Ap ril ● The Board ap proved t he liquidat ion of t he hedge fund of funds investments, Light house and EnT rust, and p olicy asset allocat ion t arge ts of 53% equit y, 35% fixe d income and 12% real estate. Appendix History of Investment Decisions 45 All To tal 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 performance 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 universes will vary throughout market cycle depending on the manager's investment style or philosophy. Over longer time periods (7 to 10 years or more), a manager ranking in the top quartile (top 25%) of these broad universes would be perceived as performing well. Policy Benchmark As of January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 10% NCREIF Property Index. From August 1, 2015 to January 1, 2017, The Policy Benchmark consists of 20% Russell 1000 Index, 6% Russell 2000 Index, 10% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 12% BC Aggregate Index, 14% BC Intermediate Gov/Credit Index, 9% Citigroup World Government Bond Index, 15% HFRI Fund of Funds Composite Index, 5% Wellington DIH Multi-Asset Inflation Index and 5% NCREIF Property Index. From March 1, 2015 to August 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI World/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 Yi eld Cash Pay Index, 4% HFRI Equity Hedge (Total) Index, 5% JPMorgan GBI-EM Diversified and 5% NCREIF Fund Index-OEDCE. Appendix Benchmark and Universe Descriptions 46 Policy Benchmark(Cont.) From April 1, 2014 to March 1, 2015, The Policy Benchmark consists of 21% Russell 1000 Index, 6% Russell 2000 Index, 11% MSCI EAFE Index, 3% MSCI Emerging Markets Index, 10% 65% MSCI World/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 Yi eld Cash Pay Index, 4% CPI+5%, 5% Wellington 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 World/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 A CW Commodity Producers Index, 25% DJ AIG Commodity Total Return Index and 25% BC US Treasury Inflation Notes: 1-10 Ye ar Appendix Benchmark and Universe Descriptions 47 Important Information –Peer Universe Change Over the past year, Pavilion Advisory Group Inc. conducted a study to determine the most appropriate investment manager peer universes to use for the preparation of performance and manager search reports for clients. We analyzed a variety of options focusing on the following qualities: Robustness of Market Segment Universes –The universe provider must offer an ample number of universe categories to select from, and universes must be large enough to constitute a proper sample size. Institutional Quality Mandates –Ensure that universes are a proper representation of our clients’ opportunity set. Alignment –Universes should be accessible for timely manager evaluation, screening and performance evaluation. Net of Investment Manager Fee Universe Availability –Peer ranks should reflect the impact of management fees. Solution: eVestment Net of Fee Universes Robust third-party database, widely used by investment industry for manager research and well-populated by managers High membership counts versus other net-only universe options such as Investment Metrics or Lipper Institutionally focused universes consist of separate account composites, institutional pooled fund vehicles and mutual funds –universes do not include listings for multiple share classes Relative to mutual fund-only universes, eVestment peer groups may lead to less favorable rankings for client managers due to lower average fees of the underlying universe constituents We believe eVestment is the right solution for our clients at this time, however, it is not perfect. As with any peer group universe, there are some strategies that will not fit exactly into any one category. In these cases, Pavilion has closely examined portfolio characteristics, and selected the group we believe represents the right fit. In the preparation of performance and manager search reports for clients, Pavilion relies on the use of third parties. While we believe our sources to be reliable, we cannot be liable for third-party errors or omissions. 48 ��C u s t o m N o n U S D i v e r s i f i e d A l l : T h e C u s t o m N o n U S D i v e r s i f i e d A l l u n i v e r s e i s a c u s t o m u n i v e r s e t h a t i n c l u d e s t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d E q u i t y u n i v e r s e e x c l u d i n g a l l s t r a t e g i e s i n c l u d e d i n t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d E q u i t y u n i v e r s e i s m a d e u p o f a l l N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s i n c l u s i v e o f a l l s t y l e , c a p i t a l i z a t i o n , a n d s t r a t e g y a p p r o a c h e s . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e c o n s i s t s o f a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s m a l l c a p i t a l i z a t i o n s t o c k s r e g a r d l e s s o f t h e s t y l e ( g r o w t h , v a l u e o r c o r e ) f o c u s . ��C u s t o m N o n U S D i v e r s i f i e d C o r e : T h e C u s t o m N o n U S D i v e r s i f i e d C o r e u n i v e r s e i s a c u s t o m u n i v e r s e t h a t i n c l u d e s t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d C o r e E q u i t y u n i v e r s e e x c l u d i n g a l l s t r a t e g i e s i n c l u d e d i n t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d C o r e E q u i t y u n i v e r s e i s m a d e u p o f a l l a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n a m i x t u r e o f g r o w t h a n d v a l u e s t o c k s . T h i s u n i v e r s e i s i n c l u s i v e o f N o n - U S D i v e r s i f i e d E q u i t y s t r a t e g i e s r e g a r d l e s s o f m a r k e t c a p i t a l i z a t i o n . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e c o n s i s t s o f a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s m a l l c a p i t a l i z a t i o n s t o c k s r e g a r d l e s s o f t h e s t y l e ( g r o w t h , v a l u e o r c o r e ) f o c u s . ��C u s t o m N o n U S D i v e r s i f i e d G r o w t h : T h e C u s t o m N o n U S D i v e r s i f i e d G r o w t h u n i v e r s e i s a c u s t o m u n i v e r s e t h a t i n c l u d e s t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d G r o w t h E q u i t y u n i v e r s e e x c l u d i n g a l l s t r a t e g i e s i n c l u d e d i n t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d G r o w t h E q u i t y u n i v e r s e i s m a d e u p o f a l l a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s t o c k s t h a t a r e e x p e c t e d t o h a v e a n a b o v e - a v e r a g e c a p i t a l a p p r e c i a t i o n r a t e r e l a t i v e t o t h e m a r k e t . T h i s u n i v e r s e i s i n c l u s i v e o f N o n - U S D i v e r s i f i e d E q u i t y s t r a t e g i e s r e g a r d l e s s o f m a r k e t c a p i t a l i z a t i o n . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e c o n s i s t s o f a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s m a l l c a p i t a l i z a t i o n s t o c k s r e g a r d l e s s o f t h e s t y l e ( g r o w t h , v a l u e o r c o r e ) f o c u s . ��C u s t o m N o n U S D i v e r s i f i e d V a l u e : T h e C u s t o m N o n U S D i v e r s i f i e d V a l u e u n i v e r s e i s a c u s t o m u n i v e r s e t h a t i n c l u d e s t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d V a l u e E q u i t y u n i v e r s e e x c l u d i n g a l l s t r a t e g i e s i n c l u d e d i n t h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d V a l u e E q u i t y u n i v e r s e i s m a d e u p o f a l l a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s t o c k s t h a t m a y b e t r a d i n g a t l o w e r p r i c e s l o w e r t h a n t h e i r f u n d a m e n t a l o r i n t r i n s i c v a l u e . T h i s u n i v e r s e i s i n c l u s i v e o f N o n - U S D i v e r s i f i e d E q u i t y s t r a t e g i e s r e g a r d l e s s o f m a r k e t c a p i t a l i z a t i o n . T h e e V e s t m e n t A l l i a n c e N o n - U S D i v e r s i f i e d S m a l l C a p E q u i t y u n i v e r s e c o n s i s t s o f a c t i v e l y - m a n a g e d N o n - U S D i v e r s i f i e d ( E A F E a n d A C W I e x - U S ) E q u i t y p r o d u c t s t h a t p r i m a r i l y i n v e s t i n s m a l l c a p i t a l i z a t i o n s t o c k s r e g a r d l e s s o f t h e s t y l e ( g r o w t h , v a l u e o r c o r e ) f o c u s . C u s t o m P e e r G r o u p U n i v e r s e D e s c r i p t i o n A s o f M a r c h 3 1 , 2 0 1 8 4 9 This report contains confidential and proprietary information and is intended for the exclusive use of the parties to whom it is provided. Facts and information provided in this report are believed to be accurate at the time of preparation. However, certain information in this report has been provided to Pavilion Advisory Group Inc. (“Pavilion”) by third parties. Although we believe the third-party sources used to prepare this information are reliable, Pavilion shall not be liable for any errors or as to the accuracy of the information and takes no responsibility to update this information. This performance report is not a custodial statement or statement of record. You should receive custodial statements or other statement(s) of record directly from your custodian or applicable managers. Performance returns for period longer than one year are annualized. Returns are shown net of investment manager fees assessed by third party managers or funds, as applicable, unless otherwise denoted and generally include the effect of all cash flows (e.g., earnings, distributions). In addition, accounts may incur other transactions costs such as brokerage commissions, custodial costs and other expenses which are not denoted in this report and may not be reflected in the performance returns. Mutual fund returns assume reinvestment of all distributions at net asset value (NAV) and deduction of fund expenses. Report totals may not sum due to rounding. It is important to note that performance results do not reflect the deduction of any investment advisory fees you pay to Pavilion, therefore, performance results would be reduced by these investment advisory fees. Note, however, certain client reports may reflect the deduction of Pavilion’s investment advisory fee. Information about Pavilion’s investment advisory fees is available in the firm’s Form ADV Part 2A, available upon request. Generally, the client inception period represents the first full month of performance of the account. Any returns shown prior to the client inception period are obtained directly from the manager or based upon the performance of the investment product. Performance data prior to the consulting relationship with Pavilion may be sourced from prior consultant(s), if applicable. When administrator valuations for the last month of the reported period are not available prior to report production, Pavilion may derive market values and performance based on manager provided estimates for that investment product. Alternatively, Pavilion may use carry forward market values from the prior month. Performance and market values are updated if/when the statement is received from the manager/administrator and may be different than the values in the initial report. Performance and market value estimates are denoted with [CE] (current estimate). Private equity holding results typically lag by 45 to 180 days after the report period end due to statement availability, therefore may not be included in the report. Disclosures 50 In the course of Pavilion’s performance reconciliation process, Pavilion may uncover significant pricing differences between you r investment managers and the values of the custodian on a security by security basis and may adjust the custodian valuation, if the manager's price is closer to a third party pricing source (FactSet, Bloomberg, Bondedge). If a third party price is unavailable, Pavilion uses the more conservative price. For other identified valuation errors, Pavilion alerts the custodian about any issues and will report as representative a market value for the portfolio as possible. You should carefully review your custodial statements or other statement(s) of record from the manager and report any discrepancies to your qualified custodian or applicable manager. This disclosure is intended to capture and explain Pavilion’s process for performance reporting. Due to specific client requests, accommodations or other circumstances, the actual process may vary from this description. Past performance is no indication of future results. This document may include certain forward-looking statement or opinions that are based on current estimates and forecasts. Actual results could differ materially. Investing in securities products involves risk, including possible loss of principal. You should carefully review and consider the applicable prospectus or other offering documents prior to making any investment. Pavilion Advisory Group Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. This report is not to be reproduced, redistributed or retransmitted in any form without prior expressed written consent from Pavilion. ©2018 Pavilion Advisory Group Inc. All rights reserved. www.pavilioncorp.com Disclosures 51