Sample Client December 31, 2013

Transcription

1 Sample Client December 1, 201 Exceeding Your Expectations 00 West Madison Street, Suite 1700 Chicago, IL

2 Sample Client Table of Contents Page Page 1 Page 17 Page 20 Page 21 Page 22 Page 2 Page 24 Page 2 Page 26 Page 27 Page 28 Page 29 Page 0 Page Quarterly Considerations Knowledge College Investment Summary Investment Policy Scorecard Composite Reconciliation Portfolio Engineer Allocation Vs. Target Performance Summary Performance Summary With Peer Group Composite Rank Vs. Peer Group Up-Down Capture Risk Statistics Risk Vs. Return PIMCO Total Return Harbor Capital Appreciation 2

3 Plan Sponsors Quarterly Considerations New Year, New Regs Expect a number of new defined contribution plan regulations in the coming year. A fiduciary definition, annuity related safe harbor provisions, followup rules on fee and investment disclosures, and a requirement that plans illustrate lifetime earnings streams to participants are agenda items for the DOL and SEC in We ll keep you updated. DSA 401(k) Plan Survey Our new 401(k) Plan Survey will provide you an invaluable benchmarking tool for plan design, participant experience, and fees. Our data will help you improve employee retirement readiness through improved plan design. Look forward to our findings next quarter. On the Mend Given improved funding status, many pension plan sponsors had already or will soon take steps to de risk their plans to lower funded status volatility. Companies may be further incented by risk transfer strategies this year given higher discount rates and increasing PBGC premiums. Non-Profit Organizations Keeping You Informed Plan to join us for an Essential Economic Update webcast on January 29 th. We also recommend you read this quarter s Knowledge College which addresses diversification and its long term benefits. Fiscal Challenge Approximately one third of universities expect weaker tuition revenue growth in fiscal year 201, according to a Moody s report. Several factors adversely affecting revenue include lagging growth in family income, uncertain job prospects for recent graduates, and softening demand for higher education at current "sticker" prices. The Wealth Office Annual Check Up Need help arranging your financial affairs for the preceding year? The Wealth Office TM annually prepares a comprehensive financial planning checklist. Please contact us for your copy of this important and useful document. Conversion Recursion More than 10% of IRA holders with 2010 incomes in excess of $1 million took advantage of the temporary opportunity to convert an IRA to a Roth IRA. What s more, this marked the first time Roth IRA conversion amounts were greater than Roth IRA contributions. The Wealth Office TM mentioned this opportunity in prior quarterly communications and will be sure to keep you apprised of similar opportunities in the future. It s What You Keep With the introduction of the.8% net investment income tax and the addition of the 20% capital gains rate, many investors are reviewing the tax efficiency of their investment portfolios. The Wealth Office TM can help you determine if your current investment strategy is as tax efficient as possible and if opportunities exist to enhance your portfolio s after tax performance. 1

4 Market Snapshot Fixed Income Equities Alternatives 0% 40% 8.8% 2.4% 0% 2.% 27.6% 20% 10% 0% -10% -2.0% -8.6% 0.8% 0.8% -0.1% -2.0%.6% 7.4% 0.4% 1.2% -0.7% -.1% -1.% -9.0% 10.% 8.7%.7% 1.9% -2.% 2.% -0.7% -0.2%.9% -1.1% -9.%.7% 9.%.% -20% Barclays U.S. TIPS Source: Bloomberg Barclays Muni Bond Year Barclays Aggregate Barclays U.S. Corp High Yield Barclays Global Agg ex. US (Hedged) Barclays Global Agg ex. US (Unhedged) JPMorgan GBI-EM Global Diversified (Unhedged) S&P 00 Russell 2000 MSCI EAFE MSCI EM NAREIT All Equity S&P Developed World Property Key: DJ UBS Commodity Index HFRI Weighted Composite Alerian MLP Index Left Bars: Recent Quarter Return Right Bars: YTD Return U.S. equity markets were up 2.4% as measured by the S&P 00 during 201, which was the highest calendar year return since the market downturn in The MSCI Emerging Markets index return of -2.% paled in comparison, and the current level of dispersion in returns between the two has not been this great since the Asian Currency Crisis of the late 1990s. Fixed income asset classes with more exposure to lower grade credit and lower duration were favored. The 10-Year U.S. Treasury yield rose from 1.76% at year-end last year to.0% at the close of 201. Real assets produced mixed results as MLPs rallied on strong fundamentals, commodities declined (ex-energy) amid weaker fundamentals and macro concerns, and rising interest rates weighed on REITs. 2 4

5 U.S. Economic Update 6% 4% 2% 0% -2% -4% -6% U.S. Real GDP Growth (Seasonally Adjusted - YoY % Change) Sep-0 Sep-04 Sep-0 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-1 2.0% U.S. Inflation (YoY % Change) 6% % 4% % 2% 1.7% 1% 1.2% 0% -1% -2% Sep-0 Sep-04 Sep-0 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-1 CPI CPI Core Sources: Bloomberg & The Bureau of Labor Statistics Real GDP Growth % YoY Sources: Bloomberg & Bureau of Economic Analysis Unemployment Rate Consumer Confidence 1-Dec % Chg MoM 1-Dec % Chg MoM 6.7% -0.% % Leading Indicators Consumer Spending 0-Nov % Chg MoM 0-Nov % Chg MoM % $11.7T 0.% Housing Starts U.S. Personal Income 0-Nov % Chg MoM 0-Nov % Chg MoM 1.09M 22.7% $14.T 0.2% ISM Manufacturing PMI Retail Sales 1-Dec % Chg MoM 1-Dec % Chg MoM % $42B 0.2% U.S. GDP increased at an annual quarter-over-quarter rate of 4.1% for the prior quarter. YoY inflation remains below the Fed s 2% stated goal and will be a major focal point in its decision-making over the coming months. Unemployment fell to 6.7% in December as more workers left the labor force. The civilian participation rate fell to 62.8%, matching October as the lowest in years.

6 Global Economic Update Eurozone GDP increased at an annual quarter-overquarter rate of 0.1% for the prior quarter as the region continues to struggle with weak economic growth and unemployment hovering near 12%. The ECB cut interest rates by 2 basis points to a record low of 0.2% amid renewed concerns about inflation, which is close to half the ECB s target rate of below, but close to, 2%. Japan s gross debt /GDP ratio has ballooned to over 240%, nearly twice that of Italy which ranks second among major economies. 201 Value Chg from Last Year 201 Value Chg from Last Year U.S %.% Greece 17.7% 18.9% Eurozone 9.7% 2.8% Switzerland 48.2% -1.0% U.K. 92.1%.% Japan 24.%.% Germany 80.4% -1.% China 22.9% -.2% France 9.%.2% Brazil 68.% 0.% Italy 12.%.% Russia 14.1% 1.6% Spain 9.7% 7.8% India 67.2% 0.% Data as of: 12/1/201 Source: IMF Gross Debt / GDP 4 6

7 Global Fixed Income 10% % 0% -% -10% -1% -20% -2% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -0.8% -2.7% -2.0% 0.8% 0.8% -0.1% -0.4% -2.0% -1.4% Fixed Income Sector Returns 0.% 0.% 0.2% -10% -8.6% -8.8% U.S. Treasuries U.S. TIPS U.S. Muni Year U.S. Aggregate U.S. MBS U.S. ABS U.S. CMBS U.S. Corporates U.S. High Yield U.S. Long Gov / Credit Sources: Bloomberg, Barclays, & JPMorgan QTR YTD All indices are Barclays indices except where noted 4.0% 1.6% Euro Source: Bloomberg -7.2% -21.4% Japanese Yen Currency Returns vs. U.S. Dollar 2.2% 1.9% British Pound 0.4% -1.4% Mexican Peso QTR 2.8% 1.1% Chinese Yuan YTD -.0% -7.1% Canadian Dollar -0.% 2.% 1.% Swiss Franc -4.% -16.6% Australian Dollar 1.1% -1.%.6% 7.4% -0.1% 1.2% 0.4% Global Agg ex. U.S. Hedged -0.7% -.1% Global Agg ex. U.S. Unhedged -1.% -9.0% JPMorgan GBI- EM Global Diversified Unhedged Fixed income investors had a mixed response to the Fed s reduction of $10 billion in asset purchases to $7 billion per month. The 10-year Treasury yield rose on the news and ended the year at its highest value, which negatively affected Treasuries and TIPS. High yield continued to perform well relative to other bond asset classes, and was the best performing fixed income asset class in 201. The U.S. dollar s movement was mixed against various global currencies, and hedged foreign bonds fared better than unhedged bonds. Emerging market debt continued to struggle, and was down 9.0% for the year. 7

8 U.S. Fixed Income % U.S. Yield Curve 6% 10-Year Breakeven Inflation Rate 4% % 2% % 4% % 2%.0% 2.% 1% 0% Month 6-Month 2-Year -Year 10-Year 0-Year Source: Bloomberg Mar-1 Sep-1 Dec-1 1% 0.8% 0% -1% -2% Dec-0 Dec-04 Dec-0 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-1 Source: Bloomberg 10-Year Breakeven Inflation 10-Year Treasury Yield 10-Year TIPS Yield 14% 12% 10% 8% 6% Credit Spreads Above Treasuries 4% 2.7% 2% 1.2% 0% 0.7% Dec-0 Dec-04 Dec-0 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-1 Agency Spread A Spread BB Spread Sources: Bloomberg & Barclays The U.S. yield curve continued to steepen throughout the fourth quarter and moved higher from the 2-year maturity outward. Investment grade and high yield corporate spreads came in during the quarter with BB-rated bonds tightening by approximately 60 basis points and A-rated bonds tightening by approximately 10 basis points. Market implied inflation of 2.% ticked up by 10 bps during the quarter as the 10-year nominal yield ticked up by approximately 40 basis points and the 10-year TIPS yield ticked up by approximately 0 basis points. 6 8

9 Global Equity Markets Large Mid Small U.S. Equities: Value Core Growth QTR YTD QTR YTD QTR YTD In 201, the markets favored smaller capitalization companies and growth investing. Small cap growth stocks returned 4.% in 201, putting the asset class 7.8% ahead of its previous market peak in October The S&P 00 closed the year with a 1.4x forward P/E ratio, ahead of its 10-year average of 1.9x. All sectors of the S&P 00 made positive returns in Q4 and for the year. Consumer discretionary, heath care, and industrials all posted 40% or more gains in 201. Globally, 201 favored developed countries over emerging markets. Germany, the U.S., France, and Japan led the way. Emerging market returns were also hampered for U.S. investors as the dollar rallied against most developing nations currencies. 40% 0% 20% 10% 0% 10.% 2.6% 7.9% 26.0% 1.% 2.4% 7.4% 20.7% 6.2% 27.7% MSCI Equity Returns by Country / Region 27.% 18.4% 10.%.6% 1.6% 2.%.7%.8% 4.0% 2.% 0.% 1.4% 0.4% 8.2% 0.2% 6.4% 4.2% 0.% -10% -.8% -.% -2.% -4.6% -20% U.S. Europe Germany United Kingdom France Pacific Japan Pacific (ex. Japan) -1.8% -1.2% EM Asia China India Brazil Russia EM Latin America Mexico Canada EM EMEA Sources: Bloomberg & MSCI QTR YTD 7 9

10 Equity Sector Returns (Most Recent Quarter) Domestic Equity Sector Returns 14% 12% 10% 8% 6% 10.2% 8.9% 9.0%.7% 8.0% 6.% 10.2% 10.0% 9.% 8.8% 1.0% 11.7% 10.4% 9.9% 12.4% 7.% 4.% 6.2% 4% 2% 0% Consumer Discretionary Consumer Staples Energy Financial Services Health Care Materials & Processing Producer Durables Technology Utilities Sources: Bloomberg & Russell Domestic Large Cap (Russell 1000) Domestic Small Cap (Russell 2000) 14% 12% International Equity Sector Returns 11.7% 10% 8% 6% 4% 2% 0%.% 2.6%.% 6.7% 6.4% 1.0% 7.4% 4.6%.1% 2.9% 8.0% 7.9%.0% 2.2% 0.0% 1.7% 4.7% -2% -4% Consumer Discretionary -1.6% -2.6% Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Sources: Bloomberg & MSCI International (MSCI EAFE) Emerging Markets (MSCI EM) 8 10

11 Real Assets 0% 2% 20% 1% 10% % 0% -% -10% 2.% -0.7% -0.1% All Equity Index 4.% Domestic REIT Sector Returns 0.6%.6% -2.9% -6.2% 2.2% 1.9% 8.% 27.2% Diversified Office Apartment Retail Lodging & Resorts -7.6% -7.1% Health Care 0.1% -2.0% Mortgage 10% % 0% -% -10% -1% -20% -2% -0% -% -1.1% -9.% DJ UBS Commodity Composite 4.4%.1% DJ UBS Commodity Returns -.4% -16.9% 0.% -1.7% Energy Grains Industrial Metals -1.7% -.6% 0.8%.0% -9.8% -0.8% Livestock Petroleum Precious Metals -7.1% -16.9% Softs Sources: Bloomberg & NAREIT QTR YTD Source: Bloomberg QTR YTD MLP Yield Spreads over 10-Year Treasury 9% 8% 7% 6% % 4% % 2.7% 2% 1% 0% -1% Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-1 MLP Spread FTSE NAREIT All Equity REIT Spread Source: Bloomberg A-Rated Corporate Spread BBB-Rated Corporate Spread Domestic REITs marginally declined. Strong fundamentals continued to support a rally in lodging REITs while apartment REITs lagged on rising supply concerns. European REITs outperformed led by the United Kingdom. Asian REITs suffered from rising rates concerns but Japan was a positive outlier. Commodities were mixed as non-energy sectors generally declined. Gold and silver were key laggards while unleaded gasoline rallied. MLPs capped off a strong year with a volatile quarter. Yields declined by 7 bps during the year. 9 11

12 Hedge Funds 16% 14% 12% 14.6% 12.% 10% 8.7% 9.% 8% 7.2% 6% 4% 2%.%.7%.0%.8% 2.0% 2.% 0% -2% Fund of Funds Composite Fund Weighted Composite -0.% Equity Hedge Event Driven Macro Relative Value Sources: Bloomberg & Hedge Fund Research QTR Hedge Funds slightly outperformed Fund of Funds for the quarter and year, as the HFRI Fund Weighted Composite Index advanced 9.% during 201 compared to the HFRI Fund of Funds Composite Index gaining 8.7%. Equity hedge and event driven led yearly gains while macro slightly lagged after a strong finish in the fourth quarter. Long-biased technology and healthcare within equity hedge, as well as fundamental event driven strategies benefitting from strategic M&A and shareholder activism, outperformed. Steady inflows during the second half of 201 pushed industry assets to record highs as hedge funds experienced the best calendar year performance since YTD 10 12

13 Financial Markets Performance As of: December 1, 201 Periods greater than one year are annualized Source: Bloomberg All returns are in U.S. dollar terms (unless where noted)* Global Fixed Income Markets QTR YTD 1YR 2YR YR YR 7YR 10YR Citi -Month T-Bill 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 1.0% 1.6% Barclays US TIPS -2.0% -8.6% -8.6% -1.1%.%.6%.% 4.8% Barclays Municipal Bond ( Year) 0.8% 0.8% 0.8% 1.9%.% 4.% 4.6%.9% Barclays US Aggregate -0.1% -2.0% -2.0% 1.0%.% 4.4% 4.9% 4.% Barclays U.S. Corporate High Yield.6% 7.4% 7.4% 11.6% 9.% 18.9% 8.7% 8.6% Barclays Global Aggregate ex-us Hedged 0.4% 1.2% 1.2%.8%.8%.8% 4.2% 4.% Barclays Global Aggregate ex-us Unhedged* -0.7% -.1% -.1% 0.4% 1.7%.% 4.7% 4.4% Barclays U.S. Long Gov / Credit -0.1% -8.8% -8.8% -0.4% 6.7% 6.4% 6.7% 6.4% JPMorgan GBI-EM Global Diversified Unhedged* -1.% -9.0% -9.0%.1% 1.% 8.1% 7.4% 9.% Global Equity Markets QTR YTD 1YR 2YR YR YR 7YR 10YR S&P % 2.4% 2.4% 2.9% 16.2% 17.9% 6.1% 7.4% Dow Jones Industrial Average 10.2% 29.7% 29.7% 19.% 1.7% 16.7% 7.0% 7.4% NASDAQ Composite 11.1% 40.2% 40.2% 28.4% 17.8% 2.0% 9.% 8.8% Russell %.6%.6% 24.7% 16.2% 18.7% 6.% 7.9% Russell %.1%.1% 24.% 16.% 18.6% 6.4% 7.8% Russell 1000 Growth 10.4%.%.% 24.0% 16.4% 20.4% 8.2% 7.8% Russell 1000 Value 10.0% 2.6% 2.6% 24.8% 16.1% 16.7% 4.% 7.6% Russell Mid Cap 8.4% 4.8% 4.8% 2.7% 1.9% 22.% 7.8% 10.2% Russell Mid Cap Growth 8.2%.7%.7% 2.% 1.6% 2.% 8.% 9.7% Russell Mid Cap Value 8.%.6%.6% 2.8% 16.0% 21.1% 6.8% 10.2% Russell % 8.8% 8.8% 27.1% 1.7% 20.1% 7.2% 9.0% Russell 2000 Growth 8.2% 4.% 4.% 28.1% 16.8% 22.% 8.9% 9.4% Russell 2000 Value 9.% 4.% 4.% 26.0% 14.% 17.6%.4% 8.6% MSCI ACWI ex. U.S. 4.8% 1.8% 1.8% 16.6%.6% 1.% 2.6% 8.0% MSCI EAFE.7% 2.% 2.% 20.6% 8.7% 1.0% 2.% 7.4% MSCI EAFE Growth.2% 22.9% 22.9% 20.1% 8.% 1.2%.2% 7.% MSCI EAFE Value 6.% 2.6% 2.6% 21.0% 9.0% 12.6% 1.2% 7.4% MSCI EAFE Small Cap.9% 29.7% 29.7% 2.0% 9.6% 18.9%.7% 9.9% MSCI Emerging Markets 1.9% -2.% -2.% 7.7% -1.7% 1.1% 4.1% 11.% Alternatives QTR YTD 1YR 2YR YR YR 7YR 10YR Consumer Price Index 0.0% 1.2% 1.2% 1.% 2.0% 2.0% 2.0% 2.% FTSE NAREIT Equity REIT -0.7% 2.% 2.% 10.0% 9.4% 16.% 1.7% 8.4% S&P Developed World Property x U.S. 0.1% 8.% 8.% 22.% 8.6% 16.6% 0.% 9.% S&P Developed World Property -0.2%.9%.9% 16.8% 8.8% 16.6% 0.7% 8.7% DJ UBS Commodity Total Return -1.1% -9.% -9.% -.4% -8.1% 1.% -.0% 0.9% HFRI Fund of Funds Composite.% 8.7% 8.7% 6.7% 2.4% 4.8% 1.%.4% HFRI Fund Weighted Composite.7% 9.% 9.% 7.8%.% 7.8%.8%.7% Alerian MLP.% 27.6% 27.6% 1.6% 1.0% 29.4% 14.4% 14.9% 11 1

14 YTD REITs 1.6% Emerging 4.% REITs.0% Emerging 9.8% Why Diversify? Aggregate Bond.2% Emerging 79.0% MLP.9% MLP 1.9% Emerging 18.6% Small Growth 4.% Emerging 26.0% Commodities 21.4% Emerging 2.6% Emerging Debt 18.1% Foreign Bond 4.4% MLP 76.4% Small Growth 29.1% TIPS 1.6% REITs 18.1% Small Blend 8.8% Emerging Debt 2.0% International 14.0% International 26.9% Commodities 16.2% Cash 1.8% High Yield 8.2% REITs 27.9% REITs 8.% Small Value 18.1% Small Value 4.% Small Value 22.2% REITs 12.2% MLP 26.1% MLP 12.7% TIPS 2.4% Large Growth 7.2% Small Blend 26.9% Aggregate Bond 7.8% International 17.9% Large Growth.% International 20.7% Large Value 7.1% Small Value 2.% Large Growth 11.8% Emerging Debt.2% Small Growth 4.% Small Value 24.% High Yield.0% Large Value 17.% Large Value 2.% Small Blend 18.% MLP 6.% Large Value 22.2% International 11.6% Balanced 24.8% International 2.% Emerging 19.2% Foreign Bond 4.4% Emerging Debt 16.8% Large Blend 2.4% MLP 16.7% Emerging Debt 6.% Small Blend 18.4% TIPS 11.6% High Yield 26.2% REITs 28.0% Commodities 16.8% Large Growth 2.6% Small Blend 16.% MLP 27.6% Large Value 16.% Balanced.8% Large Blend 1.8% Foreign Bond 11.0% Small Value 28.9% Small Blend 27.2% Large Growth 16.7% Large Blend 2.1% Large Blend 16.0% International 2.% Small Growth 14.% Large Growth.% Balanced 1.4% Small Growth 7.0% Small Blend.8% Large Blend 26.% Emerging Debt 1.7% Balanced 1.1% High Yield 1.8% Balanced 20.2% Balanced 12.% Large Blend 4.9% Emerging Debt 1.2% Aggregate Bond 7.0% Commodities.6% Emerging Debt 22.0% Large Value 1.% Large Value 0.4% Large Growth 1.% High Yield 7.4% Foreign Bond 12.% Small Value 4.7% Small Growth 1.% Large Blend.% Large Value 6.8% Balanced 21.4% High Yield 1.1% Ca sh 0.1% Small Growth 14.6% REITs 2.% High Yield 11.1% Small Blend 4.6% High Yield 11.9% Balanced 4.7% MLP 6.9% Small Value 20.6% Large Blend 1.1% Emerging Debt 1.8% Balanced 12.9% Ca sh 0.1% Large Blend 10.9% Small Growth 4.2% Large Growth 9.1% Cash 4.7% Large Blend 7.0% Large Value 19.7% Balanced 1.9% Small Growth 2.9% TIPS 7.0% Aggregate Bond 2.0% Commodities 9.1% Cash.0% Foreign Bond 8.2% High Yield 1.9% REITs 7.7% Commodities 18.9% International 8.2% Small Blend 4.2% MLP 4.8% Emerging 2.% TIPS 8.% TIPS 2.8% Cash 4.8% Large Value 0.2% Large Growth 8.4% TIPS 11.4% Aggregate Bond 6.% Small Value.% Aggregate Bond 4.2% Foreign Bond.1% Large Growth 6.% High Yield 2.7% Aggregate Bond 4.% Small Blend 1.6% Small Growth 8.% Foreign Bond 7.% TIPS 6.% International 11.7% Foreign Bond 4.1% TIPS 8.6% Aggregate Bond 4.% Aggregate Bond 2.4% Commodities 2.1% Small Value 9.8% International 4.1% Aggregate Bond.9% Foreign Bond 4.9% Commodities 1.% Ca sh 0.1% Emerging Debt 9.0% Cash 1.2% Foreign Bond 8.7% TIPS 0.% REITs 1.7% Emerging.2% Ca sh 0.2% Ca sh 0.1% Emerging 18.2% Commodities 1.1% Commodities 9.% 12 14

15 Fourth Quarter 201 Knowledge College Has A Market High Ever Felt So Bad? 201 brought good and bad news for investors. Unfortunately, the good AND bad news were one and the same: diversification worked extremely well. The divergence in performance between asset classes was significant, meaning the pistons in the diversification engine did what they were supposed to do. However, U.S. equities dominated all other asset classes, including developed and emerging foreign equities, real assets, and global fixed income. The exhibit to the right shows three broadly diversified sample portfolios compared to the S&P 00 Index in 201. $1.40 $1. $1.0 $1.2 $1.20 $1.1 $1.10 $1.0 Broadly Diversified Portfolios vs. the S&P 00 $1.00 Dec-12 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 60% Fixed Income / 40% Equity & Real Assets 40% Fixed Income / 60% Equity & Real Assets 20% Fixed Income / 80% Equity & Real Assets 100% Large Cap U.S. Equity The fully invested Large Cap U.S. Equity portfolio is invested solely in the S&P 00. The allocations for the three sample diversified portfolios are shown on the following page. All portfolios were not rebalanced during the year. (+2.4%) (+1.%) (+8.8%) (+4.9%) The S&P 00 Index s total return of 2.4% in 201 was its best calendar year return since 1997 and its fourth best in the past 8 years. Only 1980, 199, and 1997 saw higher returns (placing 201 in the top decile of S&P 00 historical performance since 1976). The S&P 00 s performance was even more extraordinary when compared to virtually all other asset classes. The exhibit on the next page shows the S&P 00 s 201 outperformance relative to other asset classes and compares this year s results to previous calendar years. The results not only show strong absolute performance for domestic equities, but also a dominating year when compared to virtually all other asset classes. 1 1

16 Observations and Comments: Fourth Quarter 201 Knowledge College *Different total years reflect different starting points of respective indices. S&P 00 Excess Return Number of of Greater Excess Return*: S&P 00 Comparison of Greater Comparison Return Index Excess Return S&P 00 to Barclays Aggregate 2.4% -2.0% 4.4% 0 of 8 years None S&P 00 to Barclays U.S. Corporate High Yield 7.4% 24.9% 2 of 0 years 1989 & 1998 S&P 00 to MSCI Emerging Markets -2.% 4.7% of 26 years 199, 1997, & 1998 S&P 00 to FTSE NAREIT All Equity REITs 2.9% 29.% 1 of years 1998 S&P 00 to DJ-UBS Commodity -9.% 41.9% 1 of 2 years 1998 S&P 00 to HFRI Fund of Funds Index 8.7% 2.7% 2 of 24 years 199 & 1998 The S&P 00 s 201 outperformance relative to Core Fixed Income, High Yield, Emerging Markets, Real Estate, Commodities, and Hedge Funds was extremely high in terms of historical norms. The S&P 00 s 201 excess return compared to the Barclays Aggregate Bond Index was its highest level since the Aggregate index was created in was the last similar year of significant excess return for the S&P 00 versus many asset classes, including Emerging Markets, Commodities, Real Estate, High Yield Bonds, and Hedge Funds. The last time the S&P 00 dominated so significantly, we were in the midst of the technology stock boom of the late 1990 s, which led then-fed Chairman Alan Greenspan to utter his now famous irrational exuberance statement. In the late 1990 s, we successfully navigated our clients away from the very natural temptation to want to abandon diversification principles (in favor of an overly U.S. and equity-centric portfolio). Over the subsequent decade, the S&P 00 Index was cut in half twice (down 1% between and down 4% between ), and our typical client weathered the storm well because they remained diversified. As Mark Twain once said, History does not repeat itself, but it does rhyme. The tune that s playing now sounds very familiar. 60% Fixed Income / 40% Equity & Real Assets: 7% TIPS, 22% Core Fixed Income, 17% Foreign Developed Bonds, 9% High Yield Bonds, % Emerging Markets Bonds, 7% Large Cap U.S. Equity, 2% Small Cap U.S. Equity, % International Developed Equity, % Emerging Markets Equity, 6% Real Estate, 8% MLPs, and 9% Commodities. 40% Fixed Income / 60% Equity & Real Assets: 6% TIPS, 9% Core Fixed Income, 11% Foreign Developed Bonds, 10% High Yield Bonds, 4% Emerging Markets Bonds, 12% Large Cap U.S. Equity, 4% Small Cap U.S. Equity, 11% International Developed Equity, 6% Emerging Markets Equity, 8% Real Estate, 8% MLPs, and 11% Commodities. 20% Fixed Income / 80% Equity & Real Assets: % TIPS, % Core Fixed Income, % Foreign Developed Bonds, 7% High Yield Bonds, 2% Emerging Markets Bonds, 17% Large Cap U.S. Equity, 6% Small Cap U.S. Equity, 18% International Developed Equity, 11% Emerging Markets Equity, 10% Real Estate, 8% MLPs, and 10% Commodities. 2 16

17 Sample Client Investment Summary As of December 1, 201 Market Value ($) Allocation % Current Quarter YTD 1 Year Performance(%) Composite Sample Client 20,22, Sample Target Asset Allocation Fund & Cat Avg Exp Ratio TIPS TIPS Fund 6,717, Barclays U.S. Treasury: U.S. TIPS IM U.S. TIPS (MF) Median TIPS Fund Rank Broad Domestic Fixed Intermediate Bond Fund 11,64, Barclays Aggregate IM U.S. Broad Market Core Fixed Income (MF) Median Intermediate Bond Fund Rank High Yield Fixed High Yield Fund 21,862, Barclays US Corp: High Yield IM U.S. High Yield Bonds (MF) Median High Yield Fund Rank International Fixed Hedged Foreign Bond Fund Hedged 10,6, Barclays Global Aggregate Ex USD (Hedged) IM International Fixed Income (MF) Median Foreign Bond Fund Hedged Rank International Fixed Un-Hedged Foreign Bond Fund Un-Hedged 10,460, N/A Barclays Global Aggregate Ex USD IM International Fixed Income (MF) Median Foreign Bond Fund Un-Hedged Rank N/A

18 Market Value ($) Allocation % Sample Client Investment Summary As of December 1, 201 Current Quarter YTD 1 Year Performance(%) Emerging Markets Debt Emerging Markets Debt Fund 6,28, N/A JPM GBI-EM Global Diversified IM Emerging Markets Debt (MF) Median Emerging Markets Debt Fund Rank N/A Large Cap S&P 00 Index Fund 27,4, S&P IM U.S. Large Cap Core Equity (MF) Median S&P 00 Index Fund Rank Small Cap Small Core Fund 8,174, Vanguard Spliced Small Cap Index IM U.S. Small Cap Core Equity (MF) Median Small Core Fund Rank International Equity International Fund 27,92, MSCI AC World ex USA IM International Large Cap Core Equity (MF) Median International Fund Rank Emerging Markets Emerging Markets Fund 17,74, MSCI Emerging Markets Index IM Emerging Markets Equity (MF) Median Emerging Markets Fund Rank Private Real Estate Private Real Estate Fund 7,924, NCREIF / 0 FTSE NAREIT Real Estate Global Global Real Estate Fund 9,18, S&P Developed Property Fund & Cat Avg Exp Ratio 18

19 Market Value ($) Allocation % Sample Client Investment Summary As of December 1, 201 Current Quarter YTD 1 Year Performance(%) Commodities Commodity Fund 22,778, Dow Jones-UBS Commodity Index MLP MLP Fund 1 10,786, N/A Alerian MLP Index MLP Fund 2 9,92, N/A Alerian MLP Index Hedge Funds Hedge Fund 28,680, HFRI Fund of Funds Composite Index Private Equity Private Equity 1 4,67, Private Equity 2,7,62 1. Cash/Equivalents Cash,862, Fund & Cat Avg Exp Ratio 19

20 Sample Client Manager Evaluation Summary As of December 1, 201 vs Benchmark vs Benchmark vs Peer Group vs Peer Group Alpha Alpha Consistency Expense Ratio Firm/Strategy Evaluation Status TIPS Fund Intermediate Bond Fund High Yield Fund Foreign Bond Fund Hedged Foreign Bond Fund Un-Hedged Emerging Markets Debt Fund S&P 00 Index Fund Small Core Fund International Fund Emerging Markets Fund Pass Pass Discuss Discuss Discuss Discuss Pass Pass Discuss Discuss Global Real Estate Fund N/A N/A N/A N/A Commodity Fund N/A N/A N/A N/A MLP Fund N/A N/A N/A N/A Hedge Fund N/A N/A N/A N/A Legend For Overall Criteria vs Benchmark Outperform Benchmark Underperform Benchmark vs Peer Group 1-0 Percentile Percentile Alpha Positive Alpha Negative Alpha Consistency 0% or greater Lower than 0% Expense Ratio Lower than category average Higher than category average Firm/Strategy Evaluation Subjective* Subjective* Status Discuss: Trailed 4 or more categories or recognized within Firm/Strategy Evaluation category * Recognition within Firm/Strategy Evaluation category the result of a FLASH memo issued by DiMeo Schneider Investment Committee based on qualitative factors. 20

21 Sample Client ACCOUNT RECONCILIATION Composite Reconciliation December 1, 201 Current Quarter YTD 1 Year Since Inception Sample Client 01/01/1986 Beginning Market Value 244,07,8 26,871,499 26,871,499 27,26, ,49,266,220,00 Net Contributions -1,818,620-6,872,077-6,872,077-26,61,01-44,762,24-164,041,4 Gain/Loss 7,6,6 20,2,166 20,2,166 9,626,71 120,19,647 9,074,117 Ending Market Value 20,22,88 20,22,88 20,22,88 20,22,88 20,22,88 20,22,88 Inception Date TRAILING PERFORMANCE SUMMARY Current Quarter YTD 1 Year 10 Since Inception Sample Client /01/1986 Sample Target Asset Allocation /01/1986 Sample Broad Policy Index /01/1986 Inception Date CALENDAR YEAR PERFORMANCE SUMMARY Sample Client Sample Target Asset Allocation Sample Broad Policy Index BENCHMARK COMPOSITION Allocation Mandate Weight (%) Mar-201 Barclays U.S. Treasury: U.S. TIPS.16 Barclays Aggregate.26 Barclays US Corp: High Yield 9.47 Barclays Global Aggregate Ex USD (Hedged) 4.74 Barclays Global Aggregate Ex USD 4.74 JPM GBI-EM Global Diversified.16 S&P Russell 2000 Index.16 MSCI AC World ex USA 10. MSCI Emerging Markets Index 7.7 FTSE NAREIT Equity REIT Index.16 S&P Developed Property 4.21 Dow Jones-UBS Commodity Index 10. Alerian MLP Index 8.40 HFRI Fund of Funds Composite Index

22 Sample Client Portfolio Engineer 8.0% 7.8% 7.6% Target Allocation 12/1/201 Expected Return 7.4% 7.2% 7.0% 9/0/201 Past Allocations 6.8% 6.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 12.2% 12.4% 12.6% 12.8% Expected Risk (Standard Deviation) Constraint Radius 0.48% Broad Allocation Fixed Income Equity Real Assets Hedge Funds Assumptions Fixed Income Equity Real Assets Hedge Funds Cash TIPS US Bond For. Dev. Bond HY Bond EM Bond US Equity (LC) Target 1% % 26% 11% 0% % 0% % 9% 9% % 12% 0% % 11% 7% 7% 8% 11% 11% 0% 7.29% 12.0% N.A. N.A. 12/1/201 0% 4% 2% 12% 2% % 0% % 9% 9% % 11% 0% % 12% 7% 7% 8% 9% 12% 0% 7.2% 12.01% 0.06% No 9/0/201 0% % 2% 12% 1% % 0% % 9% 9% % 11% 0% % 11% 7% 7% 8% 10% 12% 0% 7.29% 11.98% 0.07% 6/0/201 0% 2% 26% 12% 1% % 0% % 9% 9% % 12% 0% % 11% 7% 7% 9% 9% 12% 0% 7.27% 11.82% 0.24% /1/201 2% 6% 21% 11% 1% 6% 0% 7% 7% 8% % 14% 0% 6% 11% % 7% 6% 9% 11% 0% 7.12% 11.79% 0.1% 12/1/2012 % 6% 20% 11% 1% 6% 0% 7% 7% 8% % 14% 0% % 11% 6% 6% % 9% 11% 0% 6.97% 11.64% 0.2% 9/0/2012 1% 6% 22% 11% 1% 6% 0% 6% 7% 8% % 14% 0% % 12% % 6% % 10% 11% 0% 7.07% 11.82% 0.2% 6/0/2012 2% 6% 21% 11% 1% 6% 0% 7% 7% 8% % 1% 0% % 11% % 7% 6% 9% 11% 0% 7.0% 11.67% 0.47% /1/2012 % 6% 20% 11% 1% 7% 0% 8% % 11% 0% 1% 0% 4% 11% 6% 6% 6% 9% 11% 0% 7.01% 11.61% 0.2% 12/1/2011 4% % 20% 1% 2% 8% 0% 9% % 11% 0% 14% 0% 4% 11% % 6% 6% 9% 1% 0% 6.90% 11.17% 0.97% 9/0/2011 % 2% 20% 1% 1% 8% 0% 9% 6% 11% 0% 1% 0% 4% 11% % 6% % 9% 1% 0% 6.82% 11.0% 1.1% 6/0/2011 2% 6% 21% 12% 1% 7% 0% 8% % 10% 0% 1% 0% 4% 12% 6% 6% % 9% 12% 0% 7.04% 11.6% 0.49% /1/2011 2% 42% 2% 11% 1% 9% 0% 6% % % 0% 14% 0% % 14% 10% % 6% 14% 11% 0% 7.8% 12.41% 0.6% US Equity (SC) Int'l Developed Equity EM Equity Real Estate MLPs Commod. Fut. HFoF Multi-Strat Return Risk (σ) Distance From Target Rebalance Required The current and target allocations exclude the private equity allocation because it cannot be rebalanced. The target allocation changed effective March

23 Sample Client Allocation Vs. Target December 1, 201 December 1, 201 September 0, 201 December 1, 201 Market Value ($) Allocation (%) Target (%) TIPS 6,717, Broad Domestic Fixed 11,64, High Yield Fixed 21,862, International Fixed Hedged 10,6, International Fixed Un-Hedged 10,460, Emerging Markets Debt 6,28, Large Cap 27,4, Small Cap 8,174,10..0 International Equity 27,92, Emerging Markets 17,74, Real Estate Domestic 7,924, Real Estate Global 9,18, Commodities 22,778, MLP 20,78, Hedge Funds 28,680, Private Equity 8,9, Cash/Equivalents,862, Total Fund 20,22, September 0, 201 Market Value ($) Allocation (%) Target (%) TIPS 6,871, Broad Domestic Fixed 11,619, High Yield Fixed 21,26, International Fixed Hedged 10,06, International Fixed Un-Hedged 10,07, Emerging Markets Debt 6,66, Large Cap 26,292, Small Cap 7,11, International Equity 26,806, Emerging Markets 17,400, Real Estate Domestic 7,77, Real Estate Global 9,188, Commodities 2,10, MLP 19,78, Hedge Funds 27,692, Private Equity 8,18, Cash/Equivalents,407, Total Fund 244,07,

24 Sample Client Performance Summary December 1, 201 Current Quarter YTD 1 Year 10 Since Inception Sample Client /01/1986 Sample Target Asset Allocation /01/1986 Sample Broad Policy Index /01/1986 Inception Date 24

25 Sample Client Performance Summary With Peer Group December 1, 201 Current Quarter YTD 1 Year 10 Since Inception Sample Client /01/1986 Endowments Less Than $00 Million Median N/A Sample Target Asset Allocation /01/1986 Sample Broad Policy Index /01/1986 Inception Date 2

26 Sample Client Composite Rank Vs. Peer Group Endowments Less Than $00 Million Current Quarter YTD 1 Year Sample Client.1 (91) 8.6 (88) 8.6 (88).7 (92) 11.9 (67) 11.7 (7) -2.7 (7) 1.9 (6) Sample Target Asset Allocation.0 (92) 8.2 (89) 8.2 (89).8 (91) 11.9 (67) 11. (81) -1.7 (2) 14.6 (1) Sample Broad Policy Index.2 (44) 1.9 (46) 1.9 (46) 9.7 (27) 1.8 (20) 12.9 (4) 0.9 (1) 1.9 (27) th Percentile st Quartile Median rd Quartile th Percentile Population Parentheses contain percentile rankings. Calculation based on quarterly periodicity. 26

27 Up Market Capture Sample Client Up-Down Capture As of December 1, YTD ( Quarters Up ) 1 Year ( Quarters Up ) ( 8 Quarters Up ) Time Periods ( 14 Quarters Up ) 10 ( 26 Quarters Up ) Sample Client Sample Target Asset Allocation Down Market Capture YTD ( 1 Quarter Down ) 1 Year ( 1 Quarter Down ) ( 4 Quarters Down ) Time Periods ( 6 Quarters Down ) 10 ( 14 Quarters Down ) Sample Client Sample Target Asset Allocation 27

28 1 Year Sample Client Risk Statistics As of December 1, 201 Return Standard Deviation Downside Risk vs. Sample Target Asset Allocation Alpha Beta Consistency Information Ratio M-Squared R-Squared Tracking Error Treynor Ratio vs. Sample Broad Policy Index Alpha Beta Consistency Information Ratio M-Squared R-Squared Tracking Error Treynor Ratio vs. Citigroup Month T-Bill Sharpe Ratio Calculation based on quarterly periodicity. 28

29 YEARS Sample Client Risk Vs. Return December 1, 201 YEARS 7 YEARS 10 YEARS 29

30 PIMCO Total Return Instl December 1, 201 FUND INFO Product Name : Fund Family : Ticker : Peer Group : Benchmark : PIMCO:Tot Rtn;Inst (PTTRX) PIMCO PTTRX IM U.S. Broad Market Core Fixed Income (MF) Barclays Aggregate Fund Inception : 0/11/1987 Portfolio Manager : William H. Gross Total Assets : $14,660 Million Total Assets Date : 11/0/201 Gross Expense : 0.46% Net Expense : 0.46% Turnover : 80% FUND OBJECTIVE PIMCO uses strategies intended to capitalize on the firm s top-down analysis and their bottom-up fundamental research. PIMCO s top down analysis combines their outlook on the global economy and interest rates with a shorter term scenario analysis on factors such as interest rate volatility, yield curve movements and credit trends. Once the larger themes are established, PIMCO s portfolio management team focuses on selecting high-quality fixed income securities through the use of proprietary fundamental and quantitative research. In addition to traditional strategies such as sector rotation and yield curve management, PIMCO uses derivatives to implement portfolio strategy. The fund may use futures contracts to replicate physical bonds or to create a short position in a given sector or along the yield curve. The fund is managed in a go anywhere style which allows PIMCO to invest in securities not found in the index including, but not limited to, international developed country bonds, convertible bonds, high yield bonds and emerging market debt. QUARTERLY COMMENTS - FUND The fund performed in line with the benchmark during the fourth quarter with some underperformance coming from the fund s underweight to the U.S. corporate credit sector, which outperformed. However, the fund s concentration in shorter term, less duration-sensitive securities, and holdings in mortgages and municipal bonds offset the fund s underperformance in the U.S. corporate credit sector. Duration was added during the quarter by purchasing futures contracts to be approximately in line with the benchmark s duration at year end. The portfolio remains underweight to the investment-grade credit sector, but the fund s tactical positions in Build America Bonds are viewed as substitutes to credit that are trading at more attractive yield spreads above treasuries than are traditional investment-grade credits. The team continues to find mortgage exposure through non-agency MBS, which the team views as more attractive on a relative value basis than agency MBS, which the team views as overall fairly valued. During the quarter, the team added significantly to the portfolio s futures positions that mature in late 201 and early 2016 in order to benefit from the Fed delaying fed funds rate hikes longer than the market expects. Positioning remains overweight to the 0- year portion of the nominal yield curve and overweight to year TIPS while limiting corporate exposure, especially in financials which are less attractive on a relative basis due to continued strong performance. A. Novara, Research Analyst, DiMeo Schneider & Associates, L.L.C. 4Q1 HISTORICAL PERFORMANCE Current Quarter YTD 1 Year PIMCO Total Return Instl Barclays Aggregate IM U.S. Broad Market Core Fixed Income (MF) Median PIMCO Total Return Instl Rank

31 PIMCO Total Return Instl December 1, 201 PEER GROUP ANALYSIS YEAR ROLLING PEER GROUP PERCENTILE RANKING Current Quarter 1 Year PIMCO Total Return Instl 0.0 (6) -1.9 (49) 4.1 (27) 6.9 (1) Barclays Aggregate -0.1 (71) -2.0 (4). (61) 4.4 (84) th Percentile st Quartile Median rd Quartile th Percentile RISK AND RETURN (01/01/09-12/1/1) RELATIVE PERFORMANCE TO INDEX 1

32 PIMCO Total Return Instl December 1, 201 RISK CHARACTERISTICS 1 Year 10 Return Standard Deviation Barclays Aggregate Return Standard Deviation PORTFOLIO CHARACTERISTICS Portfolio Benchmark Effective Duration.2.6 Avg. Maturity Yield To Worst vs. Barclays Aggregate Tracking Error Alpha Beta R-Squared Consistency vs. 90 Day U.S. Treasury Bill Sharpe Ratio CREDIT QUALITY DISTRIBUTION (%) SECTOR EXPOSURE (%) 2

33 Harbor Capital Appreciation Instl December 1, 201 FUND INFO Product Name : Harbor:Cap Apprec;Inst (HACAX) Fund Family : Harbor Capital Advisors Inc Ticker : HACAX Peer Group : IM U.S. Large Cap Growth Equity (MF) Benchmark : Russell 1000 Growth Index Fund Inception : 12/29/1987 Portfolio Manager : Team Managed Total Assets : $19,970 Million Total Assets Date : 11/0/201 Gross Expense : 0.68% Net Expense : 0.66% Turnover : 41% FUND OBJECTIVE Jennison Associates is the fund's sub advisor. The fund purchases stocks with a high level of unit growth, improving sales momentum, a high or improving return on equity and return on assets and a strong balance sheet. They also look for companies with a defensible franchise and a strong market position. Companies that possess distinctive attributes such as unique marketing competence, strong research and development, and/or excellent management capability, including financial discipline are also attractive. They will sell a stock if growth expectations are not achieved or if fundamentals deteriorate. Sector weightings are a by-product of stock selection with risk controls in place that limit any one sector to 40%. QUARTERLY COMMENTS - FUND (+) Favorable stock selection in health care (+0.9%) and in consumer discretionary (+0.6%) had the two biggest positive impacts throughout the fourth quarter. (+) Stock selection in industrials enhanced performance (+0.2%) for the quarterly period as well. (-) Unfavorable stock selection in energy had the most damaging impact on performance (-0.1%) throughout the fourth quarter. (+) Over the past year, stock selection in information technology (+2.4%) and sector selection in health care (+0.6%) had the two largest positive impacts on performance. (+) For the past years, effective stock selection in information technology was the largest contributor to performance (+1.4%). (+) Over years, beneficial stock selection in information technology gave the biggest boost to performance (+2.%). As of 9/0/201, the three main sector and or country overweights (versus the Russell 1000 Growth Index) were in health care (+7%), consumer discretionary (+4%), and information technology (+%). The three principal underweights were in The United States (-10%), consumer staples (- %), and industrials (-4%). The position in cash was 1%. HISTORICAL PERFORMANCE Current Quarter YTD 1 Year Harbor Capital Appreciation Instl Russell 1000 Growth Index IM U.S. Large Cap Growth Equity (MF) Median Harbor Capital Appreciation Instl Rank

34 Harbor Capital Appreciation Instl December 1, 201 PEER GROUP ANALYSIS YEAR ROLLING PEER GROUP PERCENTILE RANKING Current Quarter 1 Year Harbor Capital Appreciation Instl 11.9 (16) 7.7 (16) 17.0 (16) 20. (19) Russell 1000 Growth Index 10.4 (60). (1) 16. (2) 20.4 (20) th Percentile st Quartile Median rd Quartile th Percentile RISK AND RETURN (01/01/09-12/1/1) RELATIVE PERFORMANCE TO INDEX 4

35 Harbor Capital Appreciation Instl December 1, 201 RISK CHARACTERISTICS 1 Year 10 Return Standard Deviation Russell 1000 Growth Index Return Standard Deviation PORTFOLIO CHARACTERISTICS Portfolio Benchmark Total Securities Price/Earnings (P/E) Price/Book (P/B) Dividend Yield vs. Russell 1000 Growth Index Tracking Error Alpha Beta R-Squared Consistency vs. 90 Day U.S. Treasury Bill Sharpe Ratio SECTOR EXPOSURE (%) TOP 10 HOLDINGS As of 09/0/201 Apple Inc ORD 4.1 % Google Inc ORD 4.1 % MasterCard Inc ORD 4.0 % Amazon.com Inc ORD.6 % Priceline Com Inc ORD 2.9 % Facebook Inc ORD 2.4 % Monsanto Co ORD 2. % Biogen Idec Inc ORD 2. % LinkedIn Corp ORD 2.2 % Boeing Co ORD 2.1 %

36 Index Definitions & Disclosures Please note: Due to rounding methodologies of various data providers, certain returns in this report might differ slightly when compared to other sources. Index Definitions: -Barclays Treasury U.S. T-Bills-1- Months includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than months and more than 1 month, are rated investment grade, and have $20 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and non convertible. -Barclays Capital US Treasury Inflation Protected Securities Index measures bonds with fixed rate coupon payments that adjust for inflation as measured by the Consumer Price Index. All bonds must be publicly traded, investment grade and have a minimum maturity of one year and a minimum amount outstanding of $20 million of face value. It currently is comprised of only US Treasury issued securities. -Barclays Muni Year index contains USD-denominated municipal bonds with maturities between 4 and 6 years that are classified as revenue bonds, general obligation bonds, pre-refunded bonds, or insured bonds. -Barclays U.S. Aggregate and Global Aggregate ex. USD Indices are unmanaged market value-weighted performance benchmarks for investment-grade fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year. -The Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds with a maturities of greater than one year. Securities are classified as high yield if the middle rating of Moody s, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. -JP Morgan Government Bond Index-Emerging Market (GBI-EM) Index is a comprehensive emerging market debt index that tracks local currency bonds issued by emerging market governments; The Index is comprised of 14 countries whose weights are capped at 10% to avoid bias to more debt-laden countries. -The S&P 00 is based on the average performance of the 00 industrial stocks monitored by Standard & Poor s. -The Dow Jones Industrial Index is based on the average performance of the 0 blue-chip stocks monitored. -The NASDAQ measures all domestic and non-u.s. based common stocks listed on The NASDAQ Stock Market. -Russell 000 is a market-cap-weighted index which consists of roughly,000 of the largest companies in the U.S. As such, it represents nearly 98% of the investable U.S. equity market. -Russell 1000 is a market-cap-weighted index which consists of roughly 1,000 of the largest companies in the U.S. -Russell 1000 Growth measures the performance of those Russell 1000 companies with higher P/B ratios and higher forecasted growth values. -Russell 1000 Value measures the performance of those Russell 1000 companies with lower P/B ratios and lower forecasted growth values. -Russell Mid Cap measures the performance of the 800 smallest companies in the Russell 1000 Index. -Russell Mid Cap Growth measures the performance of those Russell Mid Cap companies with higher P/B ratios and higher forecasted growth values. -Russell Mid Cap Value measures the performance of those Russell Mid Cap companies with lower P/B ratios and lower forecasted growth values. -Russell 2000 is a market-cap-weighted index which consists of the 2,000 smallest U.S. companies in the Russell 000 universe. -Russell 2000 Growth measures the performance of the Russell 2000 companies with higher P/B ratios and higher forecasted growth values. -Russell 2000 Value measures the performance of those Russell 2000 companies with lower P/B ratios and lower forecasted growth values. -MSCI ACWI (All Country World Index) ex. U.S. Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The index consists of the 48 developed and emerging markets outside the U.S. This index represents approximately 60% of global market capitalization measured in U.S. dollars. -MSCI EAFE is a market-cap weighted index representing 22 of the developed markets outside North America. These 22 countries include 16 European countries and 6 Pacific countries. -MSCI EAFE Value and MSCI EAFE Growth are free float-adjusted market cap indexes designed to measure the equity market performance of developed markets, excluding US & Canada. Five growth and three value variables are used to assign stocks to a specific style index. These include, book value to price, 12-months forward earnings to price, dividend yield, long-term forward earnings per share (EPS) growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend, and long-term historical sales per share growth trend. -MSCI EAFE Small Cap Index represents the small cap size segment of the MSCI EAFE Index. The small cap universe consists of the securities of those companies whose securities are not included in the large cap or mid cap segments of a particular market, which together comprise approximately 8% of each market s free float-adjusted market cap. The small cap segment covers the 8-99% range of each market s free float-adjusted market cap. -MSCI Emerging Markets is a market-cap weighted index representing the major emerging countries in the world. -Consumer Price Index is the United States Headline Consumer Price Index. -NAREIT Equity REITs measures equity REITs. The index contains health care REITs, but no mortgage and hybrid REITs. -S&P Developed World Property x U.S. measures the investable universe of publicly traded property companies in developed countries outside of the U.S. -S&P Developed World Property measures the investable universe of publicly traded property companies in developed countries. -Dow Jones UBS Commodity Index is composed of futures contracts on 19 physical commodities. No related group of commodities (e.g., energy, precious metals, livestock, grains, etc.) may constitute more than % of the index. Livestock = live cattle and lean hogs. Softs = sugar, cotton and coffee. Industrial Metals = aluminum, copper, zinc and nickel. Precious Metals = gold and silver. Grains = wheat, corn, soybeans. Energy = natural gas, crude oil, unleaded gas and heating oil. Petroleum = crude oil, unleaded gas and heating oil. -HFRI Fund Weighted Composite Index - Fund of Funds invest with multiple managers through funds or managed accounts. The strategy designs a diversified portfolio of managers with the objective of significantly lowering the risk (volatility) of investing with an individual manager. The Fund of Funds manager has discretion in choosing which strategies to invest in for the portfolio. A manager may allocate funds to numerous managers within a single strategy, or with numerous managers in multiple strategies. The minimum investment in a Fund of Funds may be lower than an investment in an individual hedge fund or managed account. The investor has the advantage of diversification among managers and styles with significantly less capital than investing with separate managers. PLEASE NOTE: The HFRI Fund of Funds Index is not included in the HFRI Fund Weighted Composite Index. -The Alerian MLP Index is a composite of the 0 most prominent energy master limited partnerships and will be calculated by Standard & Poor s using a float-adjusted, market capitalization-weighted methodology. -Cambridge Associates LLC calculates end-to-end returns for both a U.S. private equity index and a U.S. venture capital index. For the private equity index, data is compiled from 986 U.S. private equity funds formed since 1986, and for the U.S. venture capital index, 1,68 venture capital funds formed since 1981 are used. Returns include fully liquidated partnerships, and are net of fees, expenses, and carried interest. Historical returns are updated at year end to adjust for changes in the index sample. Data is subject to a one or two quarter lag, and may include the most recent preliminary data release when prudent to minimize the lag in data. Additional: -Equity sector returns are calculated by Russell and MSCI for domestic and international markets, respectively. MSCI sector definitions correspond to the MSCI GICS classification (Global Industry Classification System); Russell uses its own sector and industry classifications. -MSCI country returns are calculated by MSCI, and are free float-adjusted market capitalization indices that are designed to measure equity market performance in each specific country. -Currency returns are calculated using Bloomberg s historical spot rate indices and are calculated using the U.S. dollar as the base currency. -The Index of Leading Economic Indicators, calculated by The Conference Board, is used as a barometer of economic activity over a range of three to six months. The index is used to determine the direction and stability of the economy. The composite index of leading indicators, which is derived from 10 leading indicators, helps to signal turning points in the economy and forecast economic cycles. The leading indicators are the following: average weekly hours, average weekly initial claims, manufacturers new orders, both consumer and non defense capital goods, vendor performance, building permits, stock prices, money supply (M2), the interest rate spread and the index of consumer expectations. 6