WILMINGTON TRUST COLLECTIVE INVESTMENT TRUST CREDIT SUISSE FLOATING RATE TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016

Transcription

1 WILMINGTON TRUST COLLECTIVE INVESTMENT TRUST CREDIT SUISSE FLOATING RATE TRUST FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 WITH INDEPENDENT AUDITOR'S REPORT

2 CONTENTS Independent Auditor's Report... 1 Condensed Schedule of Investments... 3 Statement of Assets and Liabilities... 6 Statement of Operations... 6 Statement of Changes in Net Assets... 7 Financial Highlights... 8 Notes to Financial Statements... 9

3 Independent Auditor's Report Wilmington Trust, N.A., Trustee for Wilmington Trust Collective Investment Trust Report on the Financial Statements We have audited the accompanying financial statements of, which comprise the Statement of Assets and Liabilities, including the Condensed Schedule of Investments, as of, and the related Statements of Operations, Changes in Net Assets, and the Financial Highlights for the year then ended, and the related Notes to Financial Statements. These financial statements and Financial Highlights are hereinafter collectively referred to as financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of, and the results of its operations, and changes in its net assets and its financial highlights for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information on investments purchased and sold for the year ended, following the Condensed Schedule of Investments, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Tulsa, Oklahoma July 21,

5 Condensed Schedule of Investments Principal Amount or Fair Shares Cost Value Bank Loan Obligations % Allflex Holdings III, Inc., 4.25%, due 7/20/2020 2,919,658 $ 2,927,124 $ 2,929,702 Alliant Holdings I, Inc., 4.50%, due 8/12/2022 3,220,541 3,221,409 3,234,647 Alvogen Pharma US, Inc., 6.00%, due 4/2/2022 2,737,733 2,726,924 2,641,912 Atlantic Broadband Finance, 3.25%, due 11/30/2019 2,940,352 2,947,074 2,947,703 Avago Technologies Cayman Ltd., 3.70%, due 2/1/2023 2,304,407 2,286,850 2,336,093 Azelis US Holding, Inc., 6.50%, due 12/15/2022 2,227,542 2,188,301 2,244,249 BakerCorp International Holdings, Inc., 4.25%, due 2/7/2020 2,188,692 2,141,468 2,073,786 Belmond Interfin Ltd., 4.00%, due 3/21/2021 2,393,063 2,382,265 2,393,063 BJ's Wholesale Club, Inc., 4.50%-8.50%, due 9/26/2019-3/26/2020 2,876,020 2,876,097 2,902,601 Brand Energy & Infrastructure Services, 4.75%, 11/26/2020 2,234,735 2,235,914 2,227,159 BSN Medical Acquisition Holding, 4.00%, due 8/28/2019 2,489,352 2,491,640 2,483,128 Carestream Health, Inc., 5.00%, due 6/7/2019 2,185,440 2,173,725 2,111,681 Citco Funding LLC, 4.25%, due 6/29/2018 2,394,919 2,392,476 2,397,913 ClubCorp Club Operations, Inc., 4.25%, due 12/15/2022 2,484,008 2,486,074 2,509,891 CPM Holdings, Inc., 6.00%, due 4/11/2022 2,216,250 2,198,664 2,241,183 Dell International LLC, 3.02%, due 9/7/2021 3,000,000 2,917,654 2,995,500 DTZ US Borrower LLC, 4.25%, due 11/4/2021 2,483,614 2,483,614 2,495,412 Eagleview Technology Corp., 5.25%, due 7/22/2022 2,281,125 2,262,226 2,281,125 Electrical Components International, Inc., 5.75%, due 5/30/2021 2,402,078 2,406,030 2,405,080 Epicor Software Company, 4.75%, due 5/8/2022 2,468,750 2,468,750 2,475,811 Headwaters, Inc., 4.00%, due 3/24/2022 2,616,693 2,608,854 2,628,965 HII Holding Corp., 4.25%, due 12/20/2019 1,993,851 1,996,138 2,011,297 Hilton Worldwide Finance LLC, 3.21%-3.50%, due 10/26/ /25/2023 2,767,463 2,768,543 2,796,727 IMS Health, Inc., 3.50% due 3/17/2021 2,984,655 2,981,172 3,001,697 Intrawest Operations Group LLC, 5.50%, due 12/9/2020 2,072,362 2,069,610 2,097,396 Kronos, Inc., 5.00% %, due 11/1/ /1/2024 4,373,377 4,375,655 4,433,060 La Quinta Intermediate Holdings, 4.00%, due 4/14/2021 3,640,406 3,640,068 3,639,278 Lionsgate Entertainment Corp., 3.75%, due 12/8/2023 3,250,000 3,262,500 3,266,250 LTS Buyer LLC, 4.24%, due 4/13/2020 2,936,906 2,916,012 2,950,680 MA FinanceCo LLC, 4.50%, due 11/19/2021 2,203,628 2,172,416 2,229,212 MKS Instruments, Inc., 3.50%, due 5/1/2023 2,410,018 2,387,892 2,434,118 MPG Holdco I, Inc., 3.75%, due 10/20/2021 2,162,168 2,164,323 2,166,666 MTL Publishing LLC, 3.28%, due 8/22/2022 2,175,471 2,181,922 2,186,957 National Financial Partners Corp., 4.50%, due 7/1/2020 2,238,558 2,244,203 2,256,288 Neptune Finco Corp., 3.87%, due 10/11/2024 2,532,895 2,515,607 2,557,692 Nexstar Broadcasting, Inc., 3.75%-4.00%, due 10/1/2020-9/21/2023 3,586,300 3,605,238 3,612,941 NFP Corp., 4.50%, due 12/9/2023 2,462,069 2,449,759 2,480,535 NSAM LP, 4.63%, due 1/29/2023 2,984,962 2,988,549 2,983,709 On Assignment, Inc., 3.50%, due 6/3/2022 2,123,055 2,114,541 2,142,693 Playa Hotels & Resorts B.V., 4.00%, due 8/9/2019 2,443,245 2,439,202 2,445,541 Sedgwick, Inc., 5.25%, due 3/1/2021 2,985,000 2,952,397 3,012,999 TI Group Automotive Systems LLC, 4.50%, due 6/30/2022 2,463,763 2,453,727 2,489,952 Transdigm, Inc., 3.50%, due 5/14/2022 2,177,175 2,171,306 2,194,483 Versum Materials LLC, 3.34%, due 9/29/2023 1,995,000 1,985,294 2,014,950 Wall Street Systems Delaware, Inc., 4.75%, due 8/23/2023 2,255,601 2,258,790 2,255,037 See notes to financial statements. 3

6 Condensed Schedule of Investments (continued) Principal Amount or Fair Shares Cost Value Bank Loan Obligations % (continued) William Morris Endeavor Entertainment, 5.25%-8.25%, due 5/6/2021-5/6/2022 3,189,848 $ 3,150,772 $ 3,222,108 Other 119,301, ,225, ,446,737 Total Bank Loan Obligations 237,294, ,285,607 Corporate Bonds % istar, Inc., 4.88% %, due 7/1/2018-7/1/2019 2,725,000 2,700,373 2,734,094 Taseko Mines Ltd., 7.75%, due 4/15/2019 3,500,000 2,602,420 2,940,000 Westlake Chemical Corp., 4.88%, due 5/15/2023 2,004,000 2,085,610 2,079,150 Other 14,787,526 14,463,808 14,923,586 Total Corporate Bonds 21,852,211 22,676,830 Short-Term Investment Fund % State Street Bank & Trust Co. Short-Term Investment Fund 28,202,475 28,202,475 28,202,475 Total Investments % $ 287,348, ,164,912 Liabilities in Excess of Other Assets - (1.66%) (4,695,507) Net Assets - 100% $ 282,469,405 Fair Value Measurements Level 1 Level 2 Level 3 Total Bank Loan Obligations $ - $ 226,061,039 $ 10,224,568 $ 236,285,607 Corporate Bonds - 22,676,830-22,676,830 Short-Term Investment Fund - 28,202,475-28,202,475 $ - $ 276,940,344 $ 10,224,568 $ 287,164,912 The Fund recognizes transfers between the fair value hierarchy levels as of the end of the fiscal year. There were no transfers between any of the fair value hierarchy levels during this year. The following is a reconciliation between the beginning and ending balances of investments in which significant unobservable inputs (Level 3) were used in determining fair value: Total Change in Transfer Balance realized unrealized in and/or as of Beginning gain gain out of December 31, balance Purchases Sales (loss) (loss) Level Bank Loan Obligations $ 14,284,648 $ 2,555,138 $ (8,344,196) $ (8,428) $ 1,737,406 $ - $ 10,224,568 See notes to financial statements. 4

7 Condensed Schedule of Investments (continued) The following table summarizes how the Fund's investments are broken down by country of issuance as a percentage of net assets of the Fund: Percentage Country of Issuer Fair Value of Net Assets United States $ 252,433, % Canada 8,739, % Luxembourg 6,955, % Netherlands 6,397, % Germany 3,817, % Bermuda 2,393, % Cayman Islands 2,336, % Australia 2,313, % Georgia 895, % France 883, % Total $ 287,164, % SUPPLEMENTARY INFORMATION: The following is a breakdown of the total purchases at cost, sales proceeds, and realized gain (loss) for the Fund for the year ended : Purchases Sales Realized at Cost (1) Proceeds (1) Gain (Loss) Bank Loan Obligations $ 202,432,720 $ 280,888,515 $ 1,239,121 Corporate Bonds 6,016,031 17,498,688 (139,847) Short-Term Investment Fund 192,653, ,841,780 - Total $ 401,102,255 $ 480,228,983 $ 1,099,274 (1) Purchases and sales balances may include amortization or accretion of premiums or discounts or paydowns on fixed income securities. See notes to financial statements. 5

8 Assets Wilmington Trust Collective Investment Trust Statement of Assets and Liabilities Investments in securities, at fair value (cost $287,348,989) $ 287,164,912 Receivable for investments sold and paydowns on bank loans 24,388,465 Receivable for bank loans 723,939 Accrued interest receivable 1,167,171 Total assets 313,444,487 Liabilities and Net Assets Payable for investments purchased (See Note 2) 10,519,056 Payable for fund shares redeemed 20,000,000 Payable for bank loans 192,264 Accrued sub-advisory fees 158,175 Accrued trustee fees 77,061 Accrued professional and other fees 28,526 Total liabilities 30,975,082 Net assets $ 282,469,405 Statement of Operations For the year ended Investment income Interest $ 15,900,139 Other income 382,084 Total investment income 16,282,223 Expenses Sub-advisory fees 724,429 Trustee fees 324,092 Professional fees and other operating expenses 198,102 Total expenses 1,246,623 Net investment income 15,035,600 Realized and unrealized gain on investments Net realized gain on investments 1,099,274 Net change in unrealized depreciation on investments 14,168,131 Net realized and unrealized gain on investments 15,267,405 Net increase in net assets resulting from operations $ 30,303,005 See notes to financial statements. 6

9 Statement of Changes in Net Assets For the year ended Increase in net assets from operations Net investment income $ 15,035,600 Net realized gain on investments 1,099,274 Net change in unrealized depreciation on investments 14,168,131 Net increase in net assets resulting from operations 30,303,005 Fund unit transactions Proceeds from units issued Class 0IM - Class 15 5,000,000 Class 45 - Total proceeds from units issued 5,000,000 Value of units redeemed Class 0IM (35,000,000) Class 15 (3,000,000) Class 45 (61,242,176) Total value of units redeemed (99,242,176) Decrease in net assets resulting from fund unit transactions (94,242,176) Net decrease in net assets (63,939,171) Net assets Beginning of year 346,408,576 End of year $ 282,469,405 See notes to financial statements. 7

10 Per Unit Operating Performance Class 0IM Class 15 Class 45 Net asset value, beginning of year $ $ $ Income from investment operations: Net investment income (1) Net realized and unrealized gain on investments (1) Total income from investment operations Net asset value, end of year $ $ $ Total Return 9.97% 9.82% 9.50% Supplemental Data Ratio to average net assets: Expenses 0.16% 0.31% 0.61% Net investment income 4.85% 4.70% 4.43% Fund Unit Activity Units, beginning of year 10,968,273 5,921,211 15,877,452 Issued - 442,835 - Redeemed (3,005,034) (285,442) (5,582,285) Units, end of year 7,963,239 6,078,604 10,295,167 (1) Based on average units outstanding. Financial Highlights For the year ended See notes to financial statements. 8

11 Notes to Financial Statements Note 1 Organization and Investment Objective Organization Wilmington Trust Collective Investment Trust (the "Trust") is intended to constitute an exempt trust under Section 501(a) of the Internal Revenue Code of 1986, as amended, and a group trust within the meaning of Rev. Rul The Trust is exempt from registration under the Investment Company Act of 1940, as amended. Wilmington Trust, N.A. ("WTNA" or the "Trustee") is the Trustee of the Trust and is responsible for maintaining and administering the Trust and its various funds. M&T Bank Corporation is the ultimate parent of the Trustee. State Street Bank and Trust Company provides custody and transfer agency services for the Trust and its funds. Not all funds within the Trust are presented herein. The Trust consists of separate funds with differing investment objectives. (the "Fund") is designed to be used as an investment vehicle by qualified retirement plans and certain plans maintained by governmental employers. Credit Suisse Asset Management, LLC ("the sub-advisor") provides investment advisory services to the Fund. Investment Objective The investment objective of the Fund is to invest on an unlevered basis predominantly in senior secured loans to below investment grade U.S. and non-u.s. obligors, as well as in other debt securities issued by U.S. and non-u.s. obligors including second lien loans, high yield bonds and cash-flow collateralized loan obligations ("CLOs") secured primarily by senior secured loans of U.S. and/or non-u.s. obligors. The Fund offers multiple share classes. Not all share classes are available for investment by all plans. Contributions from participating plans are invested in the Fund according to the plan fiduciary and individual participant elections. Reallocations of existing Fund balances are made at the direction of the plan fiduciary and the participants. Note 2 Significant Accounting Policies The financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("US GAAP") and the Trust agreements which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company and follows the accounting and reporting guidance in Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic No Security Valuation Securities are valued at their current fair value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, such securities are fair valued in good faith by the Trustee in accordance with the Trust valuation procedures. In general, the fair value of securities for which market quotations are readily available and deemed reliable are determined as follows: Debt securities (including restricted securities, if any) for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type, as well as available dealer supplied prices. Certain securities may be valued by a single source or dealer. 9

12 Notes to Financial Statements (continued) Investments in short-term investment funds are valued at the daily closing net asset value ("NAV") of the respective fund, which approximates fair value. There were no changes to the Fund's valuation policies during the year. Bank Loan Obligations The Fund invests in high yield, fixed income securities that consist primarily of senior secured floating rate loans ("Senior Loans") issued by non-investment grade companies. Senior Loans typically are secured by specific collateral of the issuer and hold the most senior position in the issuer's capital structure. The interest rate on Senior Loans is adjusted periodically to a recognized base rate, typically the London Interbank Offered Rate ("LIBOR"). Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars using foreign currency exchange rates determined as of the close of regular trading on the New York Stock Exchange. Purchases and sales of fund securities, commitments under forward foreign currency contracts and income receipts are translated at the prevailing exchange rate as of the date of each transaction. Realized and unrealized gain or loss on the translation of foreign currency denominated investments is included as a component of net realized and unrealized gain or loss on investments in the Statement of Operations. Realized gain or loss on foreign currency transactions may include gains and losses from sales and maturities of foreign currency exchange contracts, gains and losses realized between the trade and settlement dates of foreign security transactions or the difference between the amount of net investment income accrued on foreign securities and the U.S. dollar amount actually received. Unrealized gain or loss on foreign currency transactions include gains and losses due to changes in the value of assets and liabilities, other than fund securities, resulting from changes in exchange rates. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in, or are a reduction of, ordinary income in accordance with U.S. federal income tax regulations. Security Transactions and Related Investment Income and Expense Security transactions are accounted for on the trade date (the date the order to buy or sell is executed). Interest income, adjusted for the accretion of discounts and amortization of premiums, is recorded on the accrual basis from settlement date. Discounts and premiums are accreted and amortized using the Scientific Income method, which approximates the effective interest method. Dividend income is recognized on the ex-dividend date. Costs used in determining realized gains (losses) on the security transactions are calculated on a first-in, first-out basis. The accrual of interest on securities is partially or fully discontinued when, in the opinion of management, there is an indication that the issuer may be unable to meet payments as they become due. If determined to be uncollectible, unpaid accrued interest is also written off. Cash collections on non-accrual securities are generally applied as a reduction to the recorded investment. Cash collections for securities that have been sold will be recorded as a gain on investments. Securities are generally returned to accrual status only after all past due amounts have been received and the issuer has demonstrated sustained performance. Units Issued and Redeemed Unit purchases and redemptions are transacted at the net asset value per unit of the Fund determined as of the close of each business day. The Fund issues new units and repurchases outstanding units on a daily basis at the net asset value per unit. Each participating plan may withdraw, in whole or in part, amounts from its account, upon notice to the Trustee. Investment income earned is retained in the Fund and included in the determination of unit values. 10

13 Notes to Financial Statements (continued) Unit Classes Expenses are allocated to unit classes on the basis of expense loads assigned to each class. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains and losses on investments are allocated to each unit class based on the units outstanding for the unit class in proportion to the total outstanding units. Withdrawals Payable Withdrawals, whether expressed as dollars or units, are recognized as liabilities when each of the dollar and units amounts requested in the withdrawal notice become fixed, which generally occurs on the last day of a fiscal period. As a result, withdrawals paid after the end of the year, but based upon year-end net asset values, would be reflected as withdrawals payable at year-end. Withdrawal notices received for which the dollar and units amounts are not fixed remain in capital until the net asset value used to determine the withdrawal and units amounts are determined. Note 3 Fair Value Measurements In accordance with ASC 820, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund's investments are categorized based on the priority of the inputs to the valuation technique into a threelevel fair value hierarchy. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Financial assets and liabilities are recorded based on the three levels of the fair value hierarchy as follows: Level 1 Unadjusted quoted prices in active markets at the measurement date for identical securities. Level 2 Other prices in markets that are not active or based on quoted prices for similar assets or liabilities, or for which all significant inputs are observable, directly or indirectly. Level 3 Significant unobservable inputs (including the Trustee's own assumptions in determining the value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The fair value of the Fund's assets and liabilities which qualify as financial instruments under ASC 825, Financial Instruments, approximates the carrying amounts due to the short collection period presented in the Statement of Assets and Liabilities. Securities valued as Level 2 securities are priced using an industry recognized third-party pricing vendor. The Fund may utilize third party vendor evaluations, which may be derived from one or more of the following standard inputs: benchmark yields, reported trades, broker dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids/offers, reference data (corporate actions or material event notices), industry and economic events, comparable bonds, equity and credit default swap curves, and monthly payment information. These securities are valued daily by the vendor and are updated each day a NAV is struck for the Fund. Securities valued as Level 3 securities are valued daily via a single broker quote or the use of a valuation matrix. The security prices are updated each day a NAV is struck for the Fund. 11

14 Notes to Financial Statements (continued) The aggregate fair value of the investments in the Fund by input level used as of, is included following the Condensed Schedule of Investments. The Financial Accounting Standards Board ( FASB ) issued ASU , Fair Value Measurement (Topic 820) - Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). ASU removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share as a practical expedient. ASU also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share as a practical expedient. Investments that calculate NAV per share (or its equivalent), but for which the practical expedient is not applied will continue to be included in the fair value hierarchy along with the related required disclosures. The Fund elected to early adopt ASU Note 4 Income Tax Status It is intended that the Trust be exempt from taxation under Section 501(a) of the Code and qualify as a "group trust" under Revenue Ruling and other applicable Internal Revenue Service rules and regulations. No provision for income taxes is required. ASC , Accounting for Uncertainty in Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense. The Trustee has evaluated uncertain tax positions in the United States and all major foreign jurisdictions for all open tax years for the Fund since the Fund's inception and has determined that the Fund's tax positions are deemed to be "more-likely-than-not" as of. In the event that the Fund incurs any tax liabilities in the future, the tax liabilities and the corresponding tax expense will be recorded on the Statement of Assets and Liabilities and Statement of Operations, respectively. The Trust's federal fiduciary tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service. The Fund did not accrue any interest or penalties related to uncertain tax liabilities as of. The Trustee is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. Note 5 Expenses All asset-based fees are based upon the net assets as determined at the end of each preceding business day as set forth in the table below. Except as otherwise noted, all asset-based fees are paid from the assets of the Fund. Fees by class are presented as a percentage of net assets: Class Trustee Fees^ Sub-Advisory Fees 0IM 0.10% of first $500M of Fund assets 0.08% on next $500M of Fund assets 0.06% on Fund assets in excess of $1B 0.00% 0.00% 0.00% 12

15 Notes to Financial Statements (continued) Class Trustee Fees^ Sub-Advisory Fees % of first $500M of Fund assets 0.08% on next $500M of Fund assets 0.06% on Fund assets in excess of $1B 40* 0.10% of first $500M of Fund assets 0.08% on next $500M of Fund assets 0.06% on Fund assets in excess of $1B % of first $500M of Fund assets 0.08% on next $500M of Fund assets 0.06% on Fund assets in excess of $1B 0.15% 0.17% 0.19% 0.40% 0.42% 0.44% 0.45% 0.47% 0.49% Not all fee classes are available for participation to all plans. Restrictions on investment apply. ^ Subject to a $25,000 minimum trustee fee per quarter. * Fee class not currently funded, but open to new investors. Trustee Fees The Trustee receives an annual fee for trustee and administrative services provided to the Fund. These fees are based upon the average daily value of the Fund and are accrued daily, paid quarterly in arrears and charged against the assets invested in the Fund. Sub-Advisory Fees The sub-advisor is compensated for investment advisory services provided to the Fund. Fund Operating Expenses In addition to the fees described above, the Fund bears expenses related to its operation, including, but not limited to, audit, custody, tax and legal services. Expenses incurred in connection with the investment and reinvestment of Fund assets, including, without limitation, transfer agency fees, brokerage commission and other expenses, are also charged against the Fund. The sub-advisor will reimburse the Fund if the Fund's year-to-date expenses (including Trustee fees, but excluding sub-advisory fees) have exceeded the product of 1/365 of 20 basis points multiplied by the net asset value of the Fund at the end of each calendar day and adding all calendar days through the most recently ended calendar quarter. At the end of the calendar quarter, and to the extent necessary, the Fund may repay all or a portion of such reimbursements to the sub-advisor if the year-to-date expenses of the Fund fall within the year-to-date expense limits at that point in the Fund's fiscal year. These arrangements may be discontinued by the sub-advisor at any time. The Fund was not reimbursed by the sub-advisor for the year ended. Note 6 Related Party Transactions The Trustee is a non-depository bank that provides trust and custodial services for tax-advantaged retirement plans as well as trust and investment services to smaller business pension and retirement plans. The Trustee is responsible for managing the Trust's investment and business affairs. 13

16 Notes to Financial Statements (continued) Note 7 Capital Purchases and Withdrawals The net asset value of the Fund is determined at the end of each business day. The Fund sells new units and processes redemptions of outstanding units on a daily basis at the net asset value per unit. Each participating plan may withdraw, in whole or in part, amounts from its capital account, upon notice to the Trustee. Advance written notice of five business days is required from any participating plan where that withdrawal will exceed $1,000,000 or 10% of the assets invested in the Fund. Note 8 Indemnification The Trust's organizational documents provide limited indemnification for the Trustee, and its directors, officers, employees, and agents against liabilities arising in connection with the performance of their duties to the Trust. The Trust's maximum exposure under this arrangement is unknown as this would be dependent on future claims that may be made against the Trust. The risk of material loss from such claims is considered remote. Note 9 Risks Associated with Investing in the Fund In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the fair value of the Fund. Bank Loans. Investments in bank loans, also known as senior loans or floating-rate loans are rated belowinvestment grade and may be subject to a greater risk of default than are investment-grade loans, reducing the potential for income and potentially leading to impairment of the collateral provided by the borrower. Bank loans pay interest at rates that are periodically reset based on changes in interest rates and may be subject to increased prepayment and liquidity risks. Conflict of Interest. A conflict of interest may arise if the sub-advisor makes an investment in certain underlying funds based on the fact that those funds are also managed by the sub-advisor or an affiliate or because certain underlying funds may pay higher fees to the sub-advisor than others. In addition, a subadvisor's participation in the primary or secondary market for loans may be deemed a conflict of interest and limit the ability of the investment to acquire those assets. Credit and Counterparty. The issuer or guarantor of a fixed-income security, counterparty to an OTC derivatives contract, or other borrower may not be able to make timely principal, interest, or settlement payments on an obligation. In this event, the issuer of a fixed-income security may have its credit rating downgraded or defaulted, which may reduce the potential for income and value of the Fund. Emerging Markets. Investments in emerging- and frontier-markets securities may be subject to greater market, credit, currency, liquidity, legal, political, and other risks compared with assets invested in developed foreign countries. Foreign Securities. Investments in foreign securities may be subject to increased volatility as the value of these securities can change more rapidly and extremely than can the value of U.S. securities. Foreign 14

17 Notes to Financial Statements (continued) securities are subject to increased issuer risk because foreign issuers may not experience the same degree of regulation as U.S. issuers do and are held to different reporting, accounting, and auditing standards. In addition, foreign securities are subject to increased costs because there are generally higher commission rates on transactions, transfer taxes, higher custodial costs, and the potential for foreign tax charges on dividend and interest payments. Many foreign markets are relatively small, and securities issued in lessdeveloped countries face the risks of nationalization, expropriation or confiscatory taxation, and adverse changes in investment or exchange control regulations, including suspension of the ability to transfer currency from a country. Economic, political, social, or diplomatic developments can also negatively impact performance. High Portfolio Turnover. Active trading may create high portfolio turnover, or a turnover of 100% or more, resulting in increased transaction costs. These higher costs may have an adverse impact on performance and generate short-term capital gains, creating potential tax liability even if an investor does not sell any shares during the year. High-Yield Securities. Investments in below-investment-grade debt securities and unrated securities of similar credit quality, commonly known as "junk bonds" or "high-yield securities," may be subject to increased interest, credit, and liquidity risks. Industry and Sector Investing. Concentrating assets in a particular industry, sector of the economy, or markets may increase volatility because the investment will be more susceptible to the impact of market, economic, regulatory, and other factors affecting that industry or sector compared with a more broadly diversified asset allocation. Interest Rate. Most securities are subject to the risk that adverse changes in interest rates will reduce their market value. Leverage. Leverage transactions may increase volatility and result in a significant loss of value if a transaction fails. Because leverage usually involves investment exposure that exceeds the initial investment, the resulting gain or loss from a relatively small change in an underlying indicator will be disproportionately magnified. Management. Performance is subject to the risk that the sub-advisor's asset allocation and investment strategies do not perform as expected, which may cause the Fund to underperform its benchmark, other investments with similar objectives, or the market in general. The investment is subject to the risk of loss of income and capital invested, and the sub-advisor does not guarantee its value, performance, or any particular rate of return. Market/Market Volatility. The market value of the Fund's securities may fall rapidly or unpredictably because of changing economic, political, or market conditions, which may reduce the value of the Fund. Regulation/Government Intervention. The business of the issuer of an underlying security may be adversely impacted by new regulation or government intervention, impacting the price of the security. Direct government ownership of distressed assets in times of economic instability may subject the Fund's holdings to increased price volatility and liquidity risk. 15

18 Notes to Financial Statements (continued) Restricted/Illiquid Securities. Restricted and illiquid securities may fall in price because of an inability to sell the securities when desired. Investing in restricted securities may subject the Fund to higher costs and liquidity risk. Short Sale. Selling securities short may be subject to the risk that a sub-advisor does not correctly predict the movement of the security, resulting in a loss if a security must be purchased on the market above its initial borrowing price to return to the lender, in addition to interest paid to the lender for borrowing the security. Note 10 Concentration of Ownership As of, the Fund had three unaffiliated investors holding 33%, 25% and 16% of the total outstanding units of the Fund. Note 11 Subsequent Events The Trustee has evaluated the effects of subsequent events on the Fund's financial statements through July 21, 2017, which is the date the financial statements were available to be issued, and has determined that there are no material subsequent events that would require disclosure or adjustment in the Fund's financial statements through this date. 16