($T) Federal Reserve Balance Sheet as of March 29,

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1 MONTHLY MARKET REVIEW March 217 Returns diverged across markets during March. U.S. equities were relatively flat, but some asset classes posted strong gains and others declined modestly. The U.S. dollar (USD) fell relative to most foreign currencies. This provided a tailwind for non-u.s. investments, particularly those within emerging markets (EM). During the month, several domestic economic indicators exhibited positive trends and Federal Reserve representatives publicly indicated that a near-term rate hike was under consideration. As a result, markets increasingly raised expectations that a policy rate hike would occur in March. As expected, the Fed hiked rates by 25 bps at the March meeting, but investors were disappointed that Fed officials did not guide for a faster pace of policy normalization. Furthermore, as the hiking campaign continued to unfold, investor attention shifted toward the timing of Fed plans to alter the size of its balance sheet. The Fed continues to reinvest coupon payments and maturities of the bonds it holds, which has kept the overall size of its balance sheet constant at around $4.5 trillion. However, to move to a more restrictive policy stance, the Fed could look to slow or stop the reinvestment, which could cause financial conditions to tighten. ($T) Federal Reserve Balance Sheet as of March 29, Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 LT Treasury Purchases Traditional Security Holdings Source: Federal Reserve Bank of Cleveland Agency Debt/MBS Purchases Lending to Financial Institutions The U.S. dollar, as measured by the Dollar Spot Index, fell.8%. The USD fell against five of the six major developed market currencies that comprise the Index, with the.7% gain against the Canadian dollar being the sole outlier. In addition to a fall in the Canadian dollar, other developed market currencies that fared badly against the USD included Market Returns MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 1 Yr Market Returns MTD QTD YTD 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 1 Yr S&P Blbg Barc TIPS MSCI EAFE (USD) FTSE EPRA/NAREIT Developed MSCI EM (USD) S&P NA Natural Resources Blbg Barc Aggregate Bloomberg Commodity Blbg Barc Long Treasury Fund Weighted HFRI Blbg Barc Global TSY (Unhedged) Blbg Barc 1-3 Month Treasury

2 MONTHLY MARKET REVIEW March 217 the New Zealand dollar ( 3.4%), the Norwegian krone ( 2.7%), and the Australian dollar (.8%). A common theme impacting these developed market currencies was weakness in commodities, including falling prices in oil markets, industrial metals, and across the livestock category. The drivers of commodity weakness include a fragile macro economy, trade concerns, and rising geopolitical risks. While these factors help explain USD strength against a subset of developed market currencies, the broad weakness of the greenback against other currencies may be due to a few other factors. The Fed policy rate hike in the middle of the month is one potential factor. At the beginning of the year, markets did not expect a March rate hike. As it became increasingly evident the Fed would move earlier than expected, some investors felt the Fed may guide toward more rate hikes this year. However, Federal Open Market Committee projections continued to call for a total of three hikes in 217, unchanged from projections made in December. This may have disappointed investors and removed optimism about the dollar. Another factor could be the failure of the GOP to repeal and replace the Affordable Care Act, which created uncertainty about the Trump administration s goals for fiscal stimulus both infrastructure spending and tax cuts particularly since the failure to pass health care legislation largely stemmed from disagreements within the Republican ranks. The market s repricing of the potential benefits of the Trump agenda can be seen in the fluctuations of the Mexican peso. For 216 and into January 217, the peso was one of the worst performing currencies. However, the peso followed its 3.8% gain in February with a 6.2% rally in March. Although Mexico has taken steps to support its currency such as unexpected central bank rate hikes and the launch of a large FX hedge program fading fears of a border wall and a U.S. withdrawal of NAFTA were other factors that may have supported the peso. According to the U.S. Commodity Futures Trading Commission, hedge funds built up the largest bullish position in the peso since May 216. As sentiment on the Mexican peso became bullish, other EM currencies rallied against the USD, including the Russian ruble (+3.7%), Polish zloty (+2.5%), Indian rupee (+2.8%), Thai baht (+1.6%), and South Korean won (+1.1%). However, there was divergence among emerging markets currency performance. The Egyptian pound fell 12.5%, retracing a large part of the 19.9% gain in February. The South African rand fell 2.5% due to political turmoil that included the dismissal of the finance minister and a reshuffling of President Jacob Zuma s cabinet. Latin American currencies such as the Brazilian real ( 2.%), Chilean peso ( 1.9%), and Uruguay peso ( 1.5%) sold off amid rising geopolitical concerns in the region. While the S&P 5 posted its largest quarterly gain since 215, growing uncertainty over the Trump administration s ability to enact his pro-growth agenda hurt certain portions of the market in March, and the S&P 5 was up only.1% in the month. Financials ( 2.9%) and industrials (.8%), which have generated strong returns since the November election, were among the sectors negatively impacting the S&P 5 during the month. International equity markets broadly outperformed U.S. equities. The MSCI EM Index was up 2.5% in USD and 1.9% in local currencies during March, ending the quarter with a strong showing (+11.4% USD, +7.8% local). Emerging markets shrugged off the Fed s rate hike, as the move was widely expected. Mexico was the top performing market in the Index, gaining nearly 1% in USD terms and boosting YTD returns to 16%. Markets in Asia exhibited notable strength and were the largest drivers of the gains in the MSCI EM Index. Notable contributors included India (+6.%) and South Korea (+5.3%). South Korea s performance is noteworthy as the equity market showed resilience despite the impeachment and arrest of President Park Geun-hye in March. The MSCI EAFE Index grew 2.8% during the month (+2.4% local), closing the first quarter up 7.2% (4.7% local). In March, Spain (+11.1%), Italy (+9.3%), and Portugal (+7.3%) were the top performers in the Index. The 56.2 final estimate of the Eurozone Manufacturing Purchasing Managers Index for March was the highest reading in six years and was 2

3 MONTHLY MARKET REVIEW March % 1% 5% % consistent with the growth in annual industrial production. Also, euro area unemployment fell to its lowest rate in nearly eight years. While improving economic data points to a cautious recovery, the European Central Bank is expected to maintain its accommodative stance until the economic recovery is more firmly established and inflation is closer to the 2.% target. Equity Market Returns (YTD as of March 31, 217) Russell 3 MSCI EAFE MSCI EM -5% Dec-16 Jan-17 Jan-17 Feb-17 Feb-17 Mar-17 Mar-17 Global REITs declined 1.4% in March, as measured by the FTSE EPRA/ NAREIT Developed Index, masking dispersion amongst regions. North American REITs ( 2.7%) led the decline as the Federal Reserve raised policy interest rates and signaled multiple additional hikes in 217. While domestic REITs reported solid fourth quarter earnings and underlying fundamentals appeared to remain in good standing, concerns about emerging pockets of weakness in fundamentals in select markets and sectors weighed heavily on REIT valuations. Notably, within the retail sector, concerns about the impact of e-commerce on certain brick and mortar retailers caused shopping center ( 6.4%) and mall-focused REITs ( 6.2%) to stumble. Recently, several major retailers, including Sears, J.C. Penney, and Macy s, announced more store closings, potentially negatively impacting revenues for the sector. Elsewhere, Asian real estate securities ended the month essentially flat (.4%), while European REITs advanced 1.%. European REITs (ex- U.K.), which were up 1.3%, appeared to be buoyed by solid economic data and slightly lower bond yields across developed Europe. Within the U.K., REITs were also essentially flat (+.4%) as Prime Minister Theresa May gave official notice that triggered the beginning of the country s departure process from the European Union (EU). Post-Brexit, financial firms a key component of the London and broader U.K. economy may lose the passporting rights that currently allow them to sell products and operate freely across the single EU market. Immediately after the referendum vote in June 216, U.K. REITs fell by 2% (local terms), but have recovered more than half of those losses. This is largely the result of fairly resilient underlying asset values that have been supported by solid leasing activity and a weaker pound, which has attracted foreign buyers. Some market observers believe the impact of Brexit on the London and U.K. commercial real estate markets may end up being less severe than originally thought. Financial corporations appear reluctant to relocate significant amounts of their London-based employees and many firms have existing European branches where they can add staff if necessary. Additionally, in recent years other sectors like technology, media, and telecom have accounted for a growing portion of space demand in the London economy. Indices referenced are unmanaged and cannot be invested in directly. Index returns do not reflect any investment management fees or transaction expenses. Past performance is not an indication of future results. This report is intended for informational purposes only; it does not constitute an offer, nor does it invite anyone to make an offer to buy or sell securities. Information herein has been obtained from third-party sources that are believed to be reliable; however, the accuracy of the data is not guaranteed and may not have been independently verified. The content of this report is current as of the date indicated and is subject to change without notice. It does not take into account the specific investment objectives, financial situations, or needs of individual or institutional investors. All commentary contained within is the opinion of Prime Buchholz and intended solely for our clients. Unless otherwise noted, FactSet was the source for data used in this report. 217 Prime, Buchholz & Associates, Inc. MK1711_4617 3

4 MONTHLY MARKET REVIEW March 217 Key Valuation Metrics Summary Current Period 1 Year Ago 15-Year Avg Equities Trailing P/E (x) S&P MSCI EAFE MSCI EM Credit OAS (bps) Blbg Barc Aggregate Blbg Barc High Yield Blbg Barc IG Corporate Deflation Hedging Nominal Yields 1-Year U.S. Treasury Year U.S. Treasury Inflation Hedging 1-Year U.S. TIPS S&P Energy Equity Trailing P/E (x) MSCI U.S. REIT Index Dividend Yield Non-U.S. Bonds Blbg Barc Global Treasury ex-u.s. Yield Blbg Barc EM Local Currency Govt. Yield * * Emerging markets local debt data from July 31, 28 to present Historical Trailing PE 15-Yr Avg Current S&P MSCI EAFE MSCI EM S&P 5 MSCI EAFE MSCI EM Market Yields Historical U.S. Inflation Avg Current YOY Core CPI YOY CPI S&P 5 Yield 1-Year Treasury Yield YOY Core CPI YOY CPI 4

5 MACRO ENVIRONMENT MONTHLY MARKET REVIEW March 217 Historical Central Bank Policy Rates Market Inflation Forecast BOJ BOE ECB Fed U.S. Breakeven 1-year Index U.S. Breakeven 1-year Index Avg. 6 Year-Over-Year U.S. Corporate Profits 2 Quarterly U.S. GDP Growth As of December 31, 216 As of December 31,

6 GLOBAL EQUITY MONTHLY MARKET REVIEW March 217 Equity Market Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year S&P Russell Russell Russell NASDAQ Composite MSCI ACWI (USD) MSCI ACWI (Local) MSCI ACWI ex-u.s. (USD) MSCI ACWI ex-u.s. (Local) MSCI EAFE (USD) MSCI EAFE (Local) MSCI EM (USD) MSCI EM (Local) MSCI Frontier Markets London - FTSE 1* GBP Japan - Nikkei 225* JPY Hong Kong - Hang Seng* HKD China - Shanghai Composite* CNY *Returns in local currency Equity Volatility MSCI ACWI Returns by Sector MSCI ACWI Sectors MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year Consumer Disc Consumer Staples Energy Financials Health Care Industrials IT Materials Telecom Utilities MSCI ACWI Returns by Region MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year MSCI ACWI Developed Markets MSCI EAFE MSCI U.K MSCI Europe ex-u.k MSCI Japan MSCI Asia ex-japan Emerging Markets MSCI EM MSCI EMEA MSCI Russia MSCI EM Asia MSCI China MSCI India MSCI EM LatAm MSCI Brazil VIX V2X (Europe) Index VIX Index Avg V2X (Europe) Index Avg 6

7 Yield GLOBAL BONDS MONTHLY MARKET REVIEW March 217 Bond Market Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year Curr. Blbg Barc 1-3 Month Treasury USD Blbg Barc 1-3 Year Treasury USD Blbg Barc Long Treasury USD Blbg Barc Intermediate Treasury USD Blbg Barc Emerging Markets USD Blbg Barc EM Local Crncy (Unhedged) Blbg Barc EM Local Crncy (Hedged) Blbg Barc Global TSY (Unhedged) USD Blbg Barc Global TSY (Hedged) USD Blbg Barc Glob TSY x-u.s. (Unhedged) USD Blbg Barc Global TSY x-u.s. (Hedged) USD Blbg Barc Municipal Bond USD Blbg Barc Aggregate USD Blbg Barc Eurozone Government EUR - Austria EUR - Belgium EUR - Finland EUR - France EUR - Germany EUR - Ireland EUR - Italy EUR - Netherlands EUR - Portugal EUR - Spain EUR Blbg Barc Sterling Gilt GBP Blbg Barc Japan Treasury JPY Blbg Barc G4 Treasury USD Blbg Barc Majors USD Currency Rates (per U.S. Dollar) (% change) MTD QTD YTD 1 Year 2 Year 3 Year 5 Year Current Spot Rate U.S. Dollar Spot (DXY)* Canadian Dollar Japanese Yen British Pound Euro Swiss Franc Australian Dollar Brazilian Real Chinese Yuan/Renminbi GBP/Euro Yen/Euro *Index measures value of USD relative to basket of foreign currencies U.S. Treasury Yield Curves Year 12/31/216 2/28/217 3/31/217 TIPS 12/31/16 TIPS 2/28/217 TIPS 3/31/217 Foreign Holdings of U.S. Treasury Securities ($B) 4% 7, 35% 6, 3% 5, 25% 4, 2% 3, 15% 1% 2, 5% 1, As of January 31, 217 % % Held by Foreign Investors Total Foreign Holdings of U.S. Treasury Secs. 7

8 Total Deal Count Total Deal Volume ($B) FLEXIBLE CAPITAL MONTHLY MARKET REVIEW March Short Interest Ratio - Total U.S. Markets 4,5 Deal Count & Volume ($B) $8 6. 4, $ ,5 3, 2,5 2, 1,5 $6 $5 $4 $3. 1, $2 5 $1 Credit Market Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year Blbg Barc U.S. Corporate S&P Leveraged Loan Blbg Barc High Yield Blbg Barc MBS Blbg Barc CMBS Blbg Barc ABS HFRI Index Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year Fund Weighted FI-Convertible Arb Distressed Restructuring Equity Hedge (L/S) Eq. Market Neutral Event Driven Macro/CTA Merger Arbitrage Relative Value Arb $ Deal Count Average Deal Count Volume (USD) Average Volume ($B) Option-Adjusted Spreads IG Corp. HY Corp. IG Corp. Avg HY Corp. Avg 8

9 REAL ASSETS MONTHLY MARKET REVIEW March 217 Real Asset Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year FTSE EPRA/NAREIT Dev d EPRA/NAREIT U.S EPRA/NAREIT Europe EPRA/NAREIT Asia S&P NA Nat. Resources S&P GSCI Alerian MLP Index Bloomberg Commodity Blbg Barc TIPS Current MTD QTD YTD 1 Year 2 Year* 3 Year* 5 Year* Price Gold $/oz $1,247.3 WTI Crude Oil $/bbl $5.6 Brent Crude Oil $/bbl $53.53 *Annualized Price Change Bloomberg Commodity Returns MTD QTD YTD 1 Year 2 Year 3 Year 5 Year 7 Year 1 Year Bloomberg Commodity Agriculture Energy Industrial Metals Precious Metals Livestock , 1,8 1,6 1,4 1,2 1, Historic Gold Price ($/oz.) $16 $14 $12 $1 $8 $6 $4 $2 $ MSCI U.S. REIT Index Div. Yield MSCI U.S. REIT Index 1-Year Treasury Yield MSCI U.S. REIT Index Yield Avg 1-Year Treasury Yield Avg WTI Crude Oil Spot Price ($/bbl) Inflation Adjusted Price Nominal Spot Price 9

10 INDEX DESCRIPTIONS MONTHLY MARKET REVIEW March 217 Mergers and Acquisitions (M&A) is a general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. Deal count and volume each quantify the mergers and acquisitions activity occurring within a given time period. Deal count represents the actual number of deals that were completed each month, while volume represents the total dollar value of the deals that were completed during the month. The premium is the difference between the actual cost for acquiring a target firm versus the estimate made of its value before the acquisition. Short Interest Ratio is an indicator that is derived by dividing the short interest by the average daily volume for a stock. This indicator is used by both fundamental and technical traders to identify the prevailing sentiment the market has for a specific stock. U.S. Corporate Profits is a statistic reported quarterly by the Bureau of Economic Analysis (BEA) that summarizes the net income of corporations in the National Income and Product Accounts (NIPA). Corporate profits are an economic indicator that calculates net income using several different measures: profits from current production; book profits, and after-tax profits. Bloomberg Barclays Aggregate Index comprises government securities, mortgagebacked securities, asset-backed securities, and corporate securities to simulate the universe of bonds in the market. The maturities of the bonds in the Index are over one year. Bloomberg Barclays Global Treasury ex-u.s. Index includes government bonds issued by investment-grade countries outside the United States, in local currencies, that have a remaining maturity of one year or more and are rated investment grade. Bloomberg Barclays U.S. TIPS Index is a rules-based, market value-weighted Index that tracks inflation protected securities issued by the U.S. Treasury. Chicago Board Options Exchange Volatility Index (VIX) measures traders' expectations of volatility in the stock market by tracking bid/ask quotes on the Standard & Poor's 5 Stock Index. Bloomberg Commodity Index is composed of futures contracts on physical commodities. It is composed of commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc, which trade on the London Metal Exchange (LME). FTSE EPRA/NAREIT Developed Index is designed to represent general trends in eligible real estate equities worldwide. Relevant real estate activities are defined as the ownership, disposure, and development of income-producing real estate. The Index series includes a range of regional and country indices. HFRI Fund Weighted Composite Index is designed to represent the performance of domestic and offshore hedge funds across all strategies with the exception of fund of funds. Comprised of over 2 hedge funds, it is a fund weighted index in that all funds, regardless of assets under management or other factors, are given an equal weighting. HFRI Equity Hedge Index is designed to represent the overall composition of the equity hedge (also known as long/short equity) universe. The Index is constructed with equally weighted composites of constituents as reported by the hedge fund managers listed within the Hedge Fund Research (HFR) database. HFRI Event Driven Index is an equally weighted index that represents constituents investing in opportunities created by significant transactional events as reported by the hedge fund managers listed within the HFR database. HFRI Macro Index tracks investment managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets. MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The Index consists of a mix of developed and emerging market country indices. MSCI China Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of Chinese companies listed on the Hong Kong exchange, which are frequently referred to as H shares. MSCI EAFE Net Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. Russell 3 Index measures the performance of the largest 3, U.S. companies, representing approximately 98% of the investable U.S. equity market. Russell 3 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3 companies with higher price-to-book ratios and higher forecasted growth values. Russell 3 Value Index measures the performance of the broad value segment of U.S. equity value universe. It includes those Russell 3 companies with lower price-to-book ratios and lower forecasted growth values. Russell Midcap Index measures the performance of the midcap segment of the U.S. equity universe. The Index is a subset of the Russell 1 Index. It includes approximately 8 of the smallest securities based on a combination of their market cap and current Index membership. S&P 5 Index is a gauge of the U.S. equities market and includes 5 leading companies in leading industries of the U.S. economy. U.S. Dollar Index indicates the general international value of the U.S. dollar (USD) by averaging the exchange rates between the USD and six major world currencies. 1