WILMINGTON TRUST COLLECTIVE INVESTMENT TRUST MULTI-MANAGER REIT FUND FINANCIAL STATEMENTS DECEMBER 31, 2017 INDEPENDENT AUDITOR'S REPORT

Transcription

1 WILMINGTON TRUST COLLECTIVE INVESTMENT TRUST MULTI-MANAGER REIT FUND FINANCIAL STATEMENTS DECEMBER 31, 2017 WITH INDEPENDENT AUDITOR'S REPORT

2 MULTI-MANAGER REIT FUND CONTENTS Independent Auditor's Report... 1 Statement of Assets and Liabilities... 3 Statement of Operations... 3 Statement of Changes in Net Assets... 4 Financial Highlights... 5 Schedule of Investments... 6 Notes to the Financial Statements... 11

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 (the "Fund") of Wilmington Trust Collective Investment Trust (the "Trust"), which comprise the Statement of Assets and Liabilities, including the Schedule of Investments, as of, and the related Statements of Operations and Changes in Net Assets, and the Financial Highlights for the period from May 1, 2017 (date of inception) to, and the related Notes to the 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 the Fund as of, and the results of its operations, and changes in its net assets and its financial highlights for the period from May 1, 2017 (date of inception) to, 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 period from May 1, 2017 (date of inception) to, following the 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 April 30,

5

6 Statement of Assets and Liabilities Assets Investments in securities, at fair value (cost $10,408,243) $ 10,711,294 Cash and cash equivalents 2,412 Foreign currency, at fair value (cost $15,133) 15,247 Accrued interest, dividends, and tax reclaim receivable (net of tax withholding liability of $2,806) 40,480 Receivable for foreign currency sold 482,802 Receivable for reimbursement 12,569 Receivable for investment securities sold 850,316 Receivable for fund units sold 3,562 Total assets 12,118,682 Liabilities and Net Assets Payable for foreign currency purchased 482,802 Payable for investment securities purchased 2,670 Payable for fund units redeemed 892 Accrued expenses 21,958 Total liabilities 508,322 Net assets $ 11,610,360 Statement of Operations For the period from May 1, 2017 (date of inception) to Investment income Dividends (net of withholding taxes of $5,110) $ 371,676 Interest 246 Total investment income 371,922 Expenses Trustee, investment management and service provider fees 26,648 Professional fees and other operating expenses 9,302 Expense reimbursement from sub-advisor (20,346) Total expenses 15,604 Net investment income 356,318 Realized and unrealized gain (loss) on investments and foreign currency transactions Net realized gain on investments 3,022,439 Net realized loss on foreign currency transactions (39,131) Net change in unrealized appreciation on investments 303,051 Net change in unrealized appreciation on foreign currency transactions 114 Net realized and unrealized gain on investments and foreign currency transactions 3,286,473 Net increase in net assets resulting from operations $ 3,642,791 See Notes to the Financial Statements. 3

7 Increase (decrease) in net assets resulting from operations Net investment income $ 356,318 Net realized gain on investments 3,022,439 Net realized loss on foreign currency transactions (39,131) Net change in unrealized appreciation on investments 303,051 Net change in unrealized appreciation on foreign currency transactions 114 Net increase in net assets resulting from operations 3,642,791 Merger transactions (see Note 1) Class 0IM 15,543,199 Class ,743 Class 60 19,239 Total proceeds from merger transactions 16,032,181 Fund unit transactions Proceeds from units issued Class 0IM 1,041,641 Class 35 28,511 Class R6 ^ 283,417 Total proceeds from units issued 1,353,569 Value of units redeemed Class 0IM (9,217,334) Class 35 (191,859) Class R6 ^ (8,988) Total value of units redeemed (9,418,181) Decrease in net assets resulting from fund unit transactions (8,064,612) Increase in net assets 11,610,360 Net assets, beginning of period - Net assets, end of period $ 11,610,360 ^Class R6 funded on 7/31/2017. Statement of Changes in Net Assets For the period from May 1, 2017 (date of inception) to See Notes to the Financial Statements. 4

8 Financial Highlights For the period from May 1, 2017 (date of inception) to Per Unit Operating Performance Class 0IM Class 35 Class 60 Class R6 Net asset value, at inception $ $ $ $ ^ Income from investment operations: Net investment income (1) Net realized and unrealized gain on investments and foreign currency transactions (1) Total income from investment operations Net asset value, end of period $ $ $ $ Total Return 6.33% ^ 5.72% ^ 5.56% ^ 3.14% ^ Supplemental Data Ratio to average net assets: Gross expenses (excluding reimbursement) 0.30% # 0.57% # 0.78% # 0.67% # Net expenses 0.08% # 0.57% # 0.78% # 0.67% # Net investment income 2.06% # 1.69% # 1.69% # 3.14% # Fund Unit Activity Units, beginning of period Issued 19, ,139 Merger transactions (see Note 1) 341,635 10, Redeemed (169,416) (3,584) - (162) Units, end of period 191,363 7, ,977 (1) Based on average units outstanding. ^Not annualized for periods less than one year. Class R6 funded on 7/31/2017. #Annualized. See Notes to the Financial Statements. 5

9 Schedule of Investments Principal Amount or Fair Shares Cost Value Collective Fund - 5.7% BlackRock Developed Real Estate Index Fund F 32,591 $ 644,924 $ 660,211 Common Stocks % Consumer, Cyclical - 1.5% City Developments Ltd. 11, , ,909 Hilton Worldwide Holdings Inc ,523 36,256 Marriott International, Inc. - Class A ,865 33,797 Total Consumer, Cyclical 167, ,962 Consumer, Non-cyclical - 1.8% Brookdale Senior Living, Inc. 21, , ,310 Financial % ADO Properties SA ,214 35,894 Aroundtown SA 10,923 78,464 84,155 BUWOG AG ,012 13,671 Capital & Counties Properties PLC 14,578 54,503 63,046 CapitaLand Ltd. 19,900 54,587 52,564 Castellum AB 1,396 22,233 23,598 CK Asset Holdings Ltd. 34, , ,861 Deutsche Wohnen SE 3, , ,663 Fabege AB 1,311 26,714 27,957 Grainger PLC 32, , ,867 Hongkong Land Holdings Ltd. 6,900 51,121 48,576 Hulic Co Ltd. 2,842 29,233 31,939 Leg Immobilien AG ,353 40,048 Mitsubishi Estate Co., Ltd. 3,541 64,438 61,610 Mitsui Fudosan Co., Ltd. 9, , ,241 Nomura Real Estate Holdings Inc. 1,507 31,290 33,792 Sumitomo Realty & Development Co Ltd. 3,000 91,286 98,615 Sun Hung Kai Properties Ltd. 13, , ,323 Swire Properties Ltd. 9,566 33,768 30,837 Tag Immobilien AG ,412 16,206 Tokyo Tatemono Co Ltd. 2,100 28,503 28,373 Vonovia SE 2, , ,835 Wharf Real Estate Investment Co Ltd. 3,707 21,362 24,659 Wihlborgs Fastigheter AB ,710 19,013 Total Financial 1,835,178 1,911,343 Total Common Stocks 2,252,937 2,294,615 Common Stock Unit - 0.1% Chartwell Retirement Residences 707 9,016 9,175 See Notes to the Financial Statements. 6

10 Schedule of Investments (continued) Principal Amount or Fair Shares Cost Value Real Estate Investment Trusts % Consumer, Cyclical - 0.2% Safestore Holdings PLC 2,606 $ 14,684 $ 17,612 Financial % Aeon REIT Investment Corporation 28 28,693 29,454 Alexandria Real Estate Equities, Inc , ,971 Alstria Office REIT-AG 3,829 56,915 59,312 Assura PLC 90,358 75,016 78,106 AvalonBay Communities, Inc , ,626 Axiare Patrimonio SOCIMI, SA ,161 17,098 Boston Properties, Inc ,481 75,937 Brandywine Realty Trust 4,406 76,043 80,146 Brixmore Property Group, Inc. 4,978 94,856 92,890 Camden Property Trust ,825 67,756 Canadian Real Estate Investment Trust 1,434 52,581 52,990 Columbia Property Trust Inc. 4,070 89,022 93,407 CoreSite Realty Corporation ,525 20,160 Crown Castle International Corporation ,910 66,384 CubeSmart 4, , ,081 CyrusOne, Inc ,981 38,933 Daiwa Office Investment Corporation 6 30,650 31,638 DCT Industrial Trust Inc. 1, , ,864 Derwent London PLC 1,074 39,964 45,300 Dexus 8,245 62,704 62,876 Empire State Realty Trust, Inc. 1,769 36,179 36,318 Equinix, Inc , ,369 Equity LifeStyle Properties, Inc ,908 41,750 Equity Residential 1,219 82,474 77,736 Essex Property Trust Inc , ,306 Extra Space Storage Inc. 2, , ,276 Forest City Realty Trust, Inc. 2,413 60,713 58,153 Gecina SA , ,943 GGP Inc. 9, , ,252 Goodman Group 13,586 87,679 89,473 GPT Group 13,348 50,635 53,349 Green REIT PLC 45,874 82,913 85,658 H&R Real Estate Investment Trust 1,264 21,122 21,548 Hammerson PLC 5,686 43,464 42,074 HCP Inc. 3,052 86,708 79,596 Healthcare Trust of America Inc. Class A 2,136 60,957 64,165 Hispania Activos Inmobiliarios SOCIMI SA ,178 18,438 Host Hotels & Resorts, Inc. 7, , ,339 See Notes to the Financial Statements. 7

11 Schedule of Investments (continued) Principal Amount or Fair Shares Cost Value Real Estate Investment Trusts % (continued) Financial % (continued) Hudson Pacific Properties Inc. 1,531 $ 50,040 $ 52,437 Hulic REIT Inc. 9 12,531 13,103 Inmobiliaria Colonial SOCIMI SA 11, , ,238 Invitation Homes Inc. 5, , ,076 Iron Mountain Inc. 1,153 44,750 43,503 Japan Hotel REIT Investment Corporation 28 18,540 18,791 Japan Rental Housing Investments Inc ,444 56,916 Japan Retail Fund Investment Corporation 7 12,764 12,838 Kenedix Office Investment Corporation 7 39,233 39,769 Kilroy Realty Corporation ,045 45,611 Kimco Realty Corporation 2,844 57,193 51,619 Klépierre 2,214 90,993 97,477 Land Securities Group PLC 11, , ,325 Liberty Property Trust ,462 42,795 Link Real Estate Investment Trust 24, , ,922 Mapletree Commercial Trust 62,100 71,520 75,278 Mapletree Logistics Trust 29,000 26,199 28,644 Merlin Properties SOCIMI SA 3,536 46,598 47,980 MGM Growth Properties LLC Class A 4, , ,004 Mirvac Group 34,416 60,645 63,258 Mitsui Fudosan Logistics Park Inc ,072 79,450 Orix JREIT Inc ,085 62,357 Outfront Media Inc. 1,606 39,338 37,259 Paramount Group Inc. 1,898 30,629 30,083 Park Hotels & Resorts Inc. 1,946 53,761 55,947 Prologis, Inc. 4, , ,040 Public Storage ,271 49,324 Pure Industrial Real Estate Trust 12,683 66,324 68,530 Realty Income Corporation ,109 12,316 Regency Centers Corporation 3, , ,552 Retail Properties of America, Inc. 3,644 47,472 48,975 Riocan Real Estate Investment Trust 3,500 69,299 68,047 Scentre Group 21,522 70,808 70,532 Segro PLC 11,023 78,104 87,530 Shaftesbury PLC 1,626 21,392 22,964 Simon Property Group 2, , ,984 SL Green Realty Corporation ,961 69,440 SmartCentres Real Estate Investment Trust 1,192 29,561 29,406 Spirit Realty Capital Inc. 2,064 18,094 17,709 Store Capital Corporation 4, , ,779 Sun Communities Inc ,272 45,277 See Notes to the Financial Statements. 8

12 Schedule of Investments (continued) Principal Amount or Fair Shares Cost Value Real Estate Investment Trusts % (continued) Financial % (continued) Sunstone Hotel Investors, Inc. 5,323 $ 85,486 $ 87,989 Suntec Real Estate Investment Trust 16,500 24,779 26,545 Taubman Centers, Inc. 1, , ,867 The Macerich Company 1,186 77,365 77,896 UDR Inc. 2, , ,825 Unibail Rodamco SE , ,380 UNITE Group PLC 8,310 77,972 90,493 United Urban Investment Corporation 21 31,280 30,218 Urban Edge Properties 2,951 74,003 75,221 Ventas, Inc. 1, ,329 98,416 VEREIT Inc. 2,901 24,607 22,599 Vornado Realty Trust 1,189 89,023 92,956 Weingarten Realty Investors 2,120 69,410 69,684 Welltower, Inc. 1,053 71,409 67,150 Westfield Corporation 7,387 44,938 54,831 Total Financial 7,259,828 7,502,827 Total Real Estate Investment Trusts 7,274,512 7,520,439 Money Market Fund - 2.0% State Street Institutional U.S. Government Money Market Fund 226, , ,854 Total Investments % $ 10,408,243 10,711,294 Other Assets and Liabilities, Net - 7.7% 899,066 Net Assets - 100% $ 11,610,360 The following is a summary of the fair value of the investments in the Fund based on the inputs used to value them as of (see Note 3): Fair Value Measurements Level 1 Level 2 Level 3 Total Collective Fund measured at net asset value* $ - $ - $ - $ 660,211 Common Stocks 2,294, ,294,615 Common Stock Unit 9, ,175 Real Estate Investment Trusts 7,520, ,520,439 Money Market Fund 226, ,854 Total $ 10,051,083 $ - $ - $ 10,711,294 *Certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Statement of Assets and Liabilities. See Notes to the Financial Statements. 9

13 Schedule of Investments (continued) During the period ended, the Fund did not hold any Level 3 securities. The Fund recognizes transfers between the fair value hierarchy levels as of the beginning of the fiscal year. There were no transfers between any of the fair value hierarchy levels during the period. Supplementary Information: Total investment purchases, sales proceeds, and realized gain for the period ended, were: Purchases Sales Realized at Cost Proceeds Gain Investments $ 31,844,013 $ 40,379,836 $ 3,022,439 See Notes to the Financial Statements. 10

14 Notes to the Financial Statements Note 1 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 , as clarified and amended. The Trust is exempt from registration under the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended. Wilmington Trust, N.A. ("WTNA" or the "Trustee") is the Trustee of the Trust. The Trustee is responsible for maintaining and administering the Trust and its various funds and also serves as the investment adviser (the "Investment Adviser") to the 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. The purpose of the Trust is to allow collective investments by plan sponsors of retirement plans which qualify for exemption from federal income taxation pursuant to Section 501(a) of the Internal Revenue Code, as amended (the "Code"), by reason of qualifying under Section 401(a) of the Code; tax-exempt governmental plans under Section 414(d) or Section 818(a)(6) of the Code; eligible deferred compensation plans under Section 457(b) of the Code established by a government employer; group trusts or separate accounts consisting solely of assets of the foregoing; and other investors eligible for participation in the Trust. The Trust consists of separate investment funds with differing investment objectives, which are available for investment by participating plans. An eligible plan may join the Trust, subject to the Trustee's acceptance, and become a participating plan by executing participation documents specified by the Trustee. The (the "Fund") is one of the funds of the Trust. The Fund was created on May 1, 2017 when the Total Return REIT Portfolio of the Wilmington Trust Collective Investment Trust for Employee Benefit Plans was merged with and into the REIT Fund of the Trust. Effective June 26, 2017, the name of the Fund changed to. The Fund consists of two active sleeves and a passive index fund sleeve (the "sleeves"), each of which maintain its own separate investment guidelines and restrictions. The passive sleeve invests in the BlackRock Developed Real Estate Index Fund F, a collective investment fund managed by BlackRock Institutional Trust Company, N.A. (the "Underlying Fund Manager"). The investment objective of the Fund is to generate a total return in excess of the FTSE EPRA/NAREIT Developed Index benchmark over a full market cycle, consistent with preservation of capital and a high degree of liquidity. Effective as of July 31, 2017, WTNA has engaged CBRE Clarion Securities LLC as model portfolio provider for one of the active sleeves and Delaware Investment Advisers as sub-advisor to the second active sleeve (the "Sub- Advisors") to provide investment advice and recommendations with respect to investment of the Fund's assets. Prior to July 31, 2017, the Fund was sub-advised by AEW Capital Management, L.P. While the Trustee generally relies on the Sub-Advisors to manage the Fund's assets, the Trustee maintains ultimate fiduciary authority over the management of and investments made in the Fund. The Sub-Advisors are engaged pursuant to a sub-advisory agreement. 11

15 Notes to the Financial Statements (continued) Note 2 Significant Accounting Policies The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Fund is an investment company and follows the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic No Net Asset Value ("NAV") Units of each fee class of the Fund are valued each day on which the New York Stock Exchange ("NYSE") is open for trading in accordance with the valuation procedures established by the Trustee. The NAV per unit is calculated as of the close of trading on the NYSE (generally, 4:00 p.m. U.S. Eastern time). The NAV per unit is computed by dividing the total fair value of the assets of a Fund, less its liabilities, by the total number of units outstanding at the time of such computation. Investment income earned is reinvested in the Fund and included in the determination of unit values. Fund Unit Transactions The Fund sells new units and repurchases outstanding units on a daily basis. Unit purchases and redemptions are transacted at the NAV per fee class of the Fund determined as of the close of business each day. A summary of the Fund unit activity for the Fund is included with its Financial Highlights. The Fund requires the plan sponsor to provide a five-day written notice for withdrawals which will exceed $1 million or 10% of the assets invested in the Fund. Investment Valuation Investments are valued at their current fair value determined as follows: Investments in Collective Funds The Fund may hold investments in units of other funds within the Trust or similar funds for which other unrelated entities are trustee. The Trustee or unrelated trustee estimates the fair value of investments in collective funds that have calculated net asset value per unit in accordance with the specialized accounting guidance for investment companies. Accordingly, as a practical expedient, investments in other such funds are valued at their net asset value as reported by the investee funds. The Fund has the ability to redeem its investments in the collective funds at net asset value without restrictions. Where one fund invests in another fund within the Trust, the Trustee fee allocated to the investment by such investee fund is waived. Money Market Funds Investments in money market funds are valued at the daily closing net asset value of the respective fund. Securities Securities, other than bonds, listed on a securities exchange, market or automated quotation system for which quotations are readily available are valued at the closing price on the primary exchange or market on which they are traded on the day of valuation or, if there is no such reported sale on the valuation date, at the most recent bid quotation on the principal exchange. If a market price is not readily available or if such price is deemed unreliable, it will be valued at fair value in accordance with valuation procedures established by the Trustee. The Trustee's determination of fair value involves consideration of a number of subjective factors, and therefore, no single standard for determining fair value will apply. 12

16 Notes to the Financial Statements (continued) When the valuation methods described above are not reflective of fair value, investments are valued at fair value following procedures and/or guidelines determined by or under the direction of the valuation committee established by the Trustee. In light of the judgment involved in fair value decisions, there can be no assurance that a fair value assigned to a particular investment is accurate. Cash and Cash Equivalents The Fund considers all highly liquid instruments with original maturities of three months or less at the acquisition date to be cash equivalents. 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 NYSE. 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 Statements 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. Investment Transactions and Investment Income The Fund records security transactions on a trade date basis. Dividend income is recorded on the ex-dividend date. Net realized gains and losses on investments are determined by the first-in, first-out method. Interest income and expenses are recorded daily on the accrual basis. Fee Classes and Allocations The Fund offers multiple fee classes. Not all fee classes are available for investment by all plans. Each class is allocated expenses on the basis of expense loads assigned to that class. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each unit class based on the units outstanding for the fee class in proportion to the total outstanding units. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Guarantees and Indemnifications Under the Fund's organizational documents, each trustee, officer, employee and agent of the Trust is indemnified, to the extent permitted by law, against certain liabilities that may arise in the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and the Trustee believes the risk of loss to be remote. 13

17 Notes to the Financial Statements (continued) Income Tax Status The Trust has received a determination from the Internal Revenue Service (the "IRS") that the Trust is exempt from federal income taxation under Section 501(a) of the Code. 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 morelikely-than-not threshold are 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 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. Subsequent Events The Trustee has evaluated the effect of subsequent events on the Fund's financial statements through April 30, 2018, 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. Note 3 Fair Value Measurements Fair value is defined as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Various inputs are used in determining the fair value of the Fund's investments. The Trustee has performed an analysis of the significance and character of these inputs to the fair value determination. These inputs are summarized in the three broad levels listed below: Level 1 Quoted prices in active markets for identical investments. Level 2 Other significant observable inputs (including quoted prices for similar investments, published net asset values, interest rates, credit risk, and others). Level 3 Significant unobservable inputs (including the Trustee's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used as of, in valuing the Fund's assets carried at fair value is included in Note 2. The FASB issued Accounting Standards Update ("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 14

18 Notes to the Financial Statements (continued) 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 adopted ASU and applied the changes to the, financial statements. The aggregate fair value of the investments in the Fund, by input level used as of, is included following the Fund's Schedule of Investments. Note 4 Fees and Expenses Trustee, Estimated Blended Sub-Advisory and Underlying Fund Management, and Service Provider Fees 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 (in basis points). Except as otherwise noted, all asset-based fees are paid from the assets of the Fund. Fee Class Trustee Fee Estimated Blended Sub-Advisory and Underlying Fund Management Fees Service Provider Fee Class 0IM Class Class Class R Trustee Fee The Trustee receives an annual fee for trustee and administrative services provided to the Fund. Trustee fees, except as noted below with respect to Class 0IM, 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. Such Trustee fees for the period from May 1, 2017 (date of inception) to, are included in the Statement of Operations for the Fund. Plans invested in Class 0IM have agreed to pay external fees that are paid either by redemption of Fund units or paid directly by the plan sponsor. Portions of external fees are paid to the Sub-Advisors and Underlying Fund Manager for investment advisory services provided to the respective fund sleeve. External fees are based on the fair value as of the last business day of the previous month end and paid monthly in advance. Sub-Advisory and Underlying Fund Management Fees The Sub-Advisors and Underlying Fund Manager are compensated for their investment advisory services provided to the Fund. Management fees for each class, except as noted below with respect to Class 0IM, 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. Plans in Class 0IM (or their plan sponsors) paid an annual management fee to the Sub-Advisors and Managers of the underlying funds of 44 basis points based on the month-end values of the fund. These fees are not reflected in the Fund's expense ratio. For Class 0IM, the actual net expense ratio including management fees incurred would be 52 basis points. 15

19 Notes to the Financial Statements (continued) Service Provider Fee Service provider fees, if any, are used to compensate other service providers to the Fund, including brokers and financial intermediaries and other parties providing services to retirement plans participating in the Fund. Service provider fees may also be paid to plan service providers, such as third-party administrators and record keepers that provide sub-transfer agency, recordkeeping and other administrative services to participating plans invested in the 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. When assets of the Fund are invested in other investment vehicles, such as other collective funds or Exchange- Traded Funds, those investment vehicles will incur fees and expenses, which will be reflected in the operating results and value of the Fund's investment in such investment vehicle, and are separate and distinct from the fees and expenses of the Fund described above. Note 5 Related Party Transactions The Trustee is a national bank that provides trust and custodial services for tax-advantaged retirement plans as well as trust and investment services to business pension and retirement plans. The Trustee is responsible for managing the Trust's investment and business affairs. Note 6 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 investments. The principal risks associated with investing in the Fund are: 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. Issuer. A stake in any individual security is subject to the risk that the issuer of that security performs poorly, resulting in a decline in the security's value. Issuer-related declines may be caused by poor management decisions, competitive pressures, technological breakthroughs, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. Additionally, certain issuers may be more sensitive to adverse issuer, political, regulatory, market, or economic developments. 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. 16

20 Notes to the Financial Statements (continued) 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. Real Estate/REIT Sector. Concentrating assets in the real estate sector or Real Estate Investment Trusts ("REITs") may disproportionately subject the Fund to the risks of that industry, including loss of value because of changes in real estate values, interest rates, and taxes, as well as changes in zoning, building, environmental, and other laws, among other factors. Investments in REITs may be subject to increased price volatility and liquidity risk, and investors indirectly bear their proportionate share of expenses because of their management fees. 17