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HomeMy WebLinkAboutAgenda Fire Pension 100115THE RESOURCE CENTERS , LLC 4360 Northlake Boulevard, Suite 206 Palm Beach Gardens, FL 33410 Phone (561) 624-3277 Fax (561) 624-3278 WWW .RESOURCE CENTERS .COM PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND Special Meeting of Thursday October 1, 2015 Location: City Hall, Council Chambers Palm Beach Gardens City Hall 10500 North Military Trail Palm Beach Gardens, FL 33410 Time: 9 AM AGENDA 1. Call Meeting to Order 2. Public Comments 3. Investment Manager Interviews: • BlackRock – Tony Marek & Brian Newman • Wells Capital Management – Peter Nolan & Dann Smith • William Blair & Company – Kevin Fetzer & John Simmons 4. Actuary Report: Foster & Foster (Doug Lozen) 5. Other Business: • 2014 State Annual Report Update 6. Next Meeting Previously Scheduled for Wednesday November 4, 2015 at 1PM 7. Adjourn PLEASE NOTE: Should any interested party seek to appeal any decision made by the Board with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings, and for such purpose he may need to insure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. In accordance with the Americans With Disabilities Act of 1990, persons needing a special accommodation to participate in this meeting should contact The Resource Centers, LLC no later than four days prior to the meeting. BlackRock Multi-Asset Income Fund Palm Beach Gardens Fire Pension October 2015 This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of 8/31/15, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that, in certain respects, may not be consistent with the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. USR-7103 NOT FDIC INSURED –MAY LOSE VALUE –NO BANK GUARANTEE FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. Tony Marek, CFA, CPA Director, Senior Strategist Brian Newman Director, Account Manager Table of Contents 1.BlackRock At A Glance 2.Multi-Asset Income Overview 3.Investment Team and Research Process 4.Portfolio Positioning and Results 5.Appendix FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 2 BlackRock at a glance * As of 30 June 2015 Established in 1988 NYSE: BLK $4.72 trillion assets under management More than 12,000 employees More than 1,800 investment professionals ** Offices in over 30 countries 28 primary investment centers * Clients in over 100 countries Over 700 iShares®ETFs Through BlackRock Solutions, the Firm provides risk management and enterprise investment services for over 200 clients Financial Markets Advisory business managed or advised on over $8 trillion in asset and derivative portfolios Transition Management team partners with clients to save costs and reduce risks when changing investment exposures BlackRock facts * $4.72 trillion managed across asset classes Create a better financial future for our clients by building the most respected investment and risk manager in the world BlackRock Mission Statement Assets as of 30 June 2015 1 Includes commodity and currency mandates Active Equity 299 bn Passive Equity 2.21 tn Alternatives1 114 bn Active Fixed Income 719 bn Passive Fixed Income 704 bn Multi-Asset 395 bn Cash Management 272 bn Advisory 13 bn UIM-0101 3 Multi-Asset Income Overview Fixed Income Assets Yielding Over 4%, 1999-2015 0.0% 25.0% 50.0% 75.0% 100.0% U.S. Treasury Euro Core U.S. Agency U.S. Municipal Euro Peripheral U.S. MBS Global Corporate IG U.S. CMBS Emerging Market Global High Yield The Universe for Yield Has Shrunk Less than a quarter of major global fixed income markets yield over 4% today Source: BlackRock Investment Institute, Barclays and Thomson Reuters, 8/31/2015. The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represent s about 70% of the Barclays Multiverse Bond Index. Euro core is based on French and German go vernment debt indexes, Euro peripheral is an average of government debt indexes for Italy, Spain and Ireland. Emerging Markets combine external and local currency debt. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 5 Income Investors Need a Larger Nest Egg Today How much you would have to invest to earn $40,000 of income… $8,510,638 $1,673,640 $814,663 $1,015,228 Core Bonds BLK Multi-Asset Income (MAI) Dividend Stocks 0.4%2.4%4.9%3.9% Savings Account Source: Morningstar and Bloomberg, as of 6/30/15. Past performance and income does not guarantee future results. Cash represented by Bankrate.com US Money Market Account High Yield Rate Index. Core bonds represented by the Barclays US Aggregate Index yield to worst. Global equity represented by the MSCI USA High Dividend Yield Index current yield. Yield on Multi-Asset Income is represented by 30-Day SEC Yield for Instl. Share Class (Subsidized). You cannot directly invest in an index. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 6 Risk in Income Portfolios Then & Now Earning a 5% yield today requires double the risk than 10 years ago Lo w e r R i s k Hi g h e r R i s k 2.54 3.50 3.593.80 5.96 8.77 3% Yield 4% Yield 5% Yield 2004 2014 50% More Risk 70% More Risk 144% More Risk Source: Morningstar, as of 12/31/14. For illustrative purposes only. You cannot invest directly in an index. Risk represented by 10-year annualized standard deviation. The hypothetical 5% Income Portfolio in 2004 consisted of a 77% allocation to Core Bonds and a 23% allocation to High Yield Bonds. In 2014 t hat allocation was 14% Core Bonds and 86% High Yield Bonds. The hypothetical 4% Income Portfolio in 2004 consisted of a 49% allocation to High Yield Bonds and a 51% allocation to Money Market Funds. In 2014 that allocation was 46% Core Bonds and 54% High Yield Bonds. The hypothetical 3% Income Portfolio in 2004 consisted of a 65% allocation to Core Bond s and a 35% allocation to Money Funds. In 2014 that allocation was 77% Core Bonds and 23% High Yield Bonds. Money Funds, Core Bonds and High Yield represented by the Morningstar Taxable Money Market Funds category, Barclays Aggregate Bond Index and Barclays Issuer 2% Capped High Yield Index, respectively. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 7 Unique Investment Philosophy Income at All Costs 1 Risk-first approach to generating income Unconstrained investment universe seeks attractive income opportunities across geographies, sectors, and asset classes A tactical investment process is required to deliver competitive income while managing volatility Traditional Income Strategies BlackRock Multi-Asset Income (MAI) Narrow Investment Universe2 Static Investment Allocations3 As of 8/31/15. Subject to change. Tickers A: BAICX C: BCICX I: BIICX FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 8 -5.26% -8.87% -12.04% -4.87% -12.52% -6.44% -13.25% -5.68% -17.94% -2.35% -12.14% -8.41% -35.00% 5.03% 2.12%2.18%2.42%2.61%3.49%4.11% 7.26% 4.15% 5.56%6.02%6.50%7.09% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% Multi-Asset Income Treasuries US Equity Core Bonds Global Equity Inv. Grade Debt Dividend Equities High Yield US REITs Bank Loans EM Debt Preferred Stock MLPs Source: Morningstar and Bloomberg, as of 8/31/15. *Data is since inception of the Fund’s current strategy (11/28/11). For illustrative purposes only. Data represents past pe rformance and is no guarantee of future results. Multi-Asset Income Fund represented by 30-Day SEC Yield for Instl. Share Class (Subsidized). Index yields are shown for illustrative purposes only and do not predict or depict the yield of any Blackrock fund. See Important Notes for index descriptions. Yields for the various asset class indices have material differences including investment objectives, liquidity, safety, guarantees of insurance, fluctuation of principal or return and tax features. Fixed income yields represented by yield-to-worst, equity yields by 12 month dividend yield while MLPs' yield consists primarily of return of capital which reduces the investors adjusted cost basis , the composition of which varies based on income, expenses, depreciation and tax elections made by the MLP based on each investor’s share of the MLP’s income, expenses, gains and losses. The maximum drawdown is the largest histo rical decline in net asset value from peak to trough. Traditional sources of income Non-traditional sources of income Current Yield Maximum Loss* MAI The Tradeoff of Income Investing A challenging balancing act between earning income and the risk of losing capital FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 9 0% 1% 2% 3% 4% 5% De c - 1 1 Ja n - 1 2 Fe b - 1 2 Ma r - 1 2 Ap r - 1 2 Ma y - 1 2 Ju n - 1 2 Ju l - 1 2 Au g - 1 2 Se p - 1 2 Oc t - 1 2 No v - 1 2 De c - 1 2 Ja n - 1 3 Fe b - 1 3 Ma r - 1 3 Ap r - 1 3 Ma y - 1 3 Ju n - 1 3 Ju l - 1 3 Au g - 1 3 Se p - 1 3 Oc t - 1 3 No v - 1 3 De c - 1 3 Ja n - 1 4 Fe b - 1 4 Ma r - 1 4 Ap r - 1 4 Ma y - 1 4 Ju n - 1 4 Ju l - 1 4 Au g - 1 4 Se p - 1 4 Oc t - 1 4 No v - 1 4 De c - 1 4 Ja n - 1 5 Fe b - 1 5 Ma r - 1 5 Ap r - 1 5 Ma y - 1 5 Ju n - 1 5 Ju l - 1 5 Au g - 1 5 BLK Multi-Asset Income Global Equity Core Bonds 4.87% 13.64% 3.70% 6.40% 0% 2% 4% 6% 8% 10% 12% 14% BLK Multi-Asset Income Global Equity Core Bonds 50/50 Risk Benchmark BlackRock Multi-Asset Income Fund –Historical Yield & Volatility Source: Morningstar and Bloomberg, as of 8/31/15. Portfolio takeover 11/28/11. Average yield represented by the SEC Yield of Instl. Share Class (BIICX). Global equity represented by the MSCI World Index. Core bonds represented by the Barclays US Aggregate Index. The risk benchmark is composed of 50% MSCI World/50% Barclays US Aggregate Index. Investing involves risk. Information is subject to change. Standard Deviation measures the volatility of the fund’s monthly returns. Higher deviation represents higher risk. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an inde x. Fund Average Yield Since Inception = 5.1% Ri s k Since Inception Volatility Comparison Yi e l d FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 10 Multi-Asset Portfolio Strategies (MAPS) Team Investment Team and Tactical Asset Allocation Research Process Multi-Asset Portfolio Strategies (MAPS) Team Michael Fredericks Managing Director, Lead Portfolio Manager Alex Shingler, CFA Managing Director, Co-Portfolio Manager Justin Christofel, CFA, CAIA Director, Co-Portfolio Manager BlackRock Global Investment Platform Multi-Asset Strategies +170 investment professionals responsible for $190B in multi- asset investing Global Investment Teams +1,900 investment professionals with specialties across all asset classes Risk & Quantitative Analysis +500 professionals partner with investment teams to monitor and analyze risk BlackRock Solutions Proprietary Aladdin® platform integrates portfolio management, risk analytics, trading and operations BlackRock Investment Institute Internal forum facilitates idea sharing and debates insights Top-down, macro asset allocation team responsible for portfolio management, risk monitoring, and tactical investment ideas Bottom-up security selection with dedicated risk managers and analysts Over 20 dedicated members managing $45B in assets for individual investors and institutions As of 8/31/15. Subject to change. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 12 Leveraging BlackRock’s Global Investment Resources As of 8/31/15. Subject to change. BlackRock’s income strategies from around the globe Global dividends team London High yield and bank loans team NYC Asian dividends team Hong Kong Covered call team Boston MLPs team Princeton Fundamental FI team NYC Special situation debt team NYC Quantitative FI team San Francisco Preferred stock team NYC US Equity dividend team Princeton Equity Income Fixed Income Alternative Income Sources BlackRock Risk and Quantitative Analysis Group 130+ risk management professionals around the globe, partnering with each investment team Harnessing the Power of BlackRock European equity income team London Emerging market credit Singapore European high yield London Emerging Market equity income team London Mortgage team NYC FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 13 BlackRock Multi-Asset Income Portfolio, Positioning & Results 0% 1% 2% 3% 4% 5% 6% Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Yi e l d BLK Multi-Asset Income Global Equity Core Bonds 0% 2% 4% 6% 8% 10% 12% Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 30 -Da y V o l a t i l i t y Historically less risk than a 50/50 stock/bond portfolio Source: Morningstar and Bloomberg, as of 8/31/15. Portfolio takeover 11/28/11. Investing involves risk. Information is subject to change. Yield on MAI is represented by 30-Day SEC Yield for Instl. Share Class (Subsidized). Global equity represented by the MSCI World Index. Core bonds represented by the Barclays US Aggregate Index. Standard Deviation measures the volatility of the fund’s returns. Higher deviation represents higher risk. Past performance is no guarantee of future results. Index p erformance is shown for illustrative purposes only. It is not possible to invest directly in an index. Average 30-Day Volatility 50/50 Benchmark 5.51% BLK Multi-Asset Income 3.98% 5.03% 2.61% 2.42% Risk-First Approach to Generating Income1 FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 15 Traditional Equity Income US dividend-payers International dividend-payers Min / Max 0% / 80% Typical range 20% –40% Traditional Fixed Income Investment grade debt High yield debt Mortgage backed securities Sovereign debt Min / Max 0% / 100% Typical range 40% –60% Alternative Income Sources MLPs International REITs US REITs US preferred stock Bank loans Emerging market debt Special situation debt Covered call writing Derivative strategies Typical range 10% –40% As of 8/31/15. Subject to change. Unconstrained Investment Universe2 FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 16 -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% No v - 1 1 De c - 1 1 Ja n - 1 2 Fe b - 1 2 Ma r - 1 2 Ap r - 1 2 Ma y - 1 2 Ju n - 1 2 Ju l - 1 2 Au g - 1 2 Se p - 1 2 Oc t - 1 2 No v - 1 2 De c - 1 2 Ja n - 1 3 Fe b - 1 3 Ma r - 1 3 Ap r - 1 3 Ma y - 1 3 Ju n - 1 3 Ju l - 1 3 Au g - 1 3 Se p - 1 3 Oc t - 1 3 No v - 1 3 De c - 1 3 Ja n - 1 4 Fe b - 1 4 Ma r - 1 4 Ap r - 1 4 Ma y - 1 4 Ju n - 1 4 Ju l - 1 4 Au g - 1 4 Se p - 1 4 Oc t - 1 4 No v - 1 4 De c - 1 4 Ja n - 1 5 Fe b - 1 5 Ma r - 1 5 Ap r - 1 5 Ma y - 1 5 Ju n - 1 5 Ju l - 1 5 Au g - 1 5 As of 8/31/15. Not a recommended allocation. Subject to change. Asset class exposure shown as a percent of market value. Hedging strategies shown as a percent of notional value. Largest historical weighting to high yield bonds was 55% in beginning part of 2012 Significant reduction in high yield exposure during elevated market risks in spring 2012 Increased weight to equity covered calls for five straight months during fall 2014 to capitalize on higher market volatility Increased cash to 11% amid unusually low market volatility and less compelling valuations across risk assets during summer 2014 Asset Class Current High Low Global REITS 3%3%0% MLPs 2%7%1% Bank Loans 7%12%0% Preferred Stock 8%11%7% EM Debt 2%6%1% Covered Calls 17%21%0% EM Equity 3%8%1% Int'l Equity 7%16%7% US Equity 6%11%5% High Yield 17%55%12% MBS 14%16%0% Inv. Grade Debt 12%20%0% Cash 2%11%0% Equity Hedges -4%-13%0% Duration Hedges 0%-21%0% Currency Hedges -1%-6%0% A Tactical Investment Process3 FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 17 55% 1% 20% 10% 7% 7% United States Canada Developed Europe United Kingdom Developed Asia Emerging Markets 6%4% 11% 16% 23% 19% 15% 5% AAA AA A BBB BB B CCC or Below Not Rated Current Portfolio Exposures 18 Regional Equity Exposure (% of Equity) Key Rate Duration Top Currency Exposures Credit Quality Breakdown (% of Fixed Income) 3.17% 3.00% 1.05% 0.92% 0.91% 0.58% 0.55% USD/USD GBP/USD EUR/USD CHF/USD JPY/USD HKD/USD SEK/USD TWD/USD 86.99% As of 8/31/15. Subject to change. For illustrative purposes only. See Important Notes for additional information. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 2.03 0.06 0.12 0.23 0.38 0.57 0.31 0.08 0.16 0.07 0.05 0.00 0.50 1.00 1.50 2.00 2.50 US D In t R a t e s Ts y 1 Y Ts y 2 Y Ts y 3 Y Ts y 5 Y Ts y 7 Y Ts y 1 0 Y Ts y 1 5 Y Ts y 2 0 Y Ts y 2 5 Y Ts y 3 0 Y -14% -12% -10% -8% -6% -4% -2% 0% Spring 2012 Fall 2012 Spring 2013 2nd Half 2014 2Q-3Q 2015 Pe r f o r m a n c e D u r i n g S e l l o f f P e r i o d s (% ) BlackRock MAI 50/50 Benchmark Mstar Tactical Allocation MSCI World Tier 1 Tier 2 Tier 3 Tier 4 Equity Fixed-Income Real Assets Cash and FX 19 Leveraging BlackRock’s Aladdin®Risk Management Platform Liquidity Analysis Risk Decomposition Performance During Selloff Periods Historical Beta Source: BlackRock and Morningstar, as of 8/31/15. Subject to change. For illustrative purposes only. Historical Beta represents weekly data since inception. Risk decomposition reflects DLY data (252 days with a 40 day half life). Tier 1 –Highly liquid, even in stress periods (govt bonds, equities, cash, derivatives, FX) Tier 2 –Liquid, deep markets (IG corporates, lower quality govt. bonds, munis) Tier 3 –Illiquid securities (HY, high quality securitized products) Tier 4 –Illiquid securities, may not be tradable in stress periods (non-agency, subordinate CMBS, CLOs, Asian HY) 33% 23% 34% 10% FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 -200 0 200 400 600 800 1000 1200 Ri s k C o n t r i b u t i o n ( b p s ) Rates Equity Spreads FX -1.3 -1.0 -0.8 -0.5 -0.3 0.0 0.3 0.5 0.8 1.0 1.3 Be t a Barclays Aggregate S&P 500 MSCI World -4.0% -2.1% -4.9%-3.6% -5.3% 7.6% -5.4% -2.9% -5.4%-4.0% -6.3% 7.1% -5.8% -3.5% -7.2% -5.5% -9.5% 4.3% -12.5% -6.3%-7.7% -9.3% -12.2% 11.4% BLK Multi Asset Income 50/50 Benchmark MStar Tactical Alloc Avg MSCI World 2.5% 4.4%5.4% -2.7% 1.8%1.2% -0.5% 7.6% -1.0%-0.7%-0.9% -4.3% -1.0%-1.9%-2.6% 2.5% BLK Multi Asset Income Barclays US Aggregate Performance During Periods of Rising Interest Rates (10 Year Treasury Yield Move) Since Inception Annualized Returns* MAI Performance During Equity Selloffs & Rising Rates Source: Morningstar and Bloomberg, as of 8/31/2015. *Data is since inception of the Fund’s current strategy (11/28/11). Benchmark is 50% MSCI World Index and 50% Barclays US Aggregate Index. Fund performance based on BlackRock Multi-Asset Income Instl. Share Class (BIICX). Performance data quoted represents past performance and does not guarantee future results. Performance for drawdown and rising rate periods not annualized. Rising rate periods include 60 day periods with at least a 40 bps increase in 10-year treasury from start date to end date. Q2 2012 Drawdown (European Sovereign Debt Crisis) Q4 2012 Drawdown (U.S. Fiscal Cliff Showdown) 2H 2014 Drawdown (Global Energy Sell-Off) Performance During Periods of Market Stress Q2 2013 Drawdown (U.S. Taper Tantrum) +53 bps (10/23/13 –12/31/13) +56bps (1/31/12 –3/19/12) +107bps (5/1/13 –7/5/13) +47bps (11/16/12 –2/13/13) Since Inception Annualized Returns* +45bps (7/25/12 –9/14/12) +60bps (1/30/15 –3/6/15) +63bps (4/2/15 –6/10/15) FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 20 Q2-Q3 2015 (China Growth Fears) 1.49 1.10 1.09 0.67 0.59 MAI IB CA TA WA 5.03 2.34 2.15 1.99 1.71 MAI CA IB WA TA 7.63 5.00 4.17 4.10 3.11 MAI CA TA WA IB 2.78 4.54 4.99 6.29 7.14 IB CA MAI TA WA 21 BlackRock Multi-Asset Income vs. Morningstar Peer Groups Sharpe Ratio: Highest Risk-Adjusted Returns Yield: Higher Yield Relative to Competitive Universe Return: Higher Return Relative to Competitive Universe Risk: Low to Moderate Risk Level Source: Morningstar, as of 8/31/15. Fund performance and yield based on Multi-Asset Income Instl. Share Class (BIICX). Yields shown are SEC yields. Risk (standard deviation) and return data is annualized based on monthly returns from Fund’s inception 11/28/2011. Past performance does not guarantee future results. Morningstar categorizes BIICX within Tactical Allocation. Key Abbr. BlackRock Multi-Asset Income MAI Tactical Allocation Category TA World Allocation Category WA Conservative Allocation Category CA Intermediate-Term Bond Category IB FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 BlackRock Multi-Asset Income Fund -Performance as of 8/31/15 1. Other classes of shares with differing fees and expenses are available. 2. Performance is cumulative, not annualized.3. The Blended Benchmark represents 50% MSCI World/50% Barclays US Aggregate Index. Overall Morningstar Rating Average annual total returns (%)1 Month2 YTD2 1 year 3-year 5-year Since inception (4/7/08) BLK Multi-Asset Income Fund (Inst)-2.43 -1.08 -2.11 5.73 8.30 5.71 Morningstar Tactical Allocation Category Avg.-4.05 -4.25 -6.62 2.57 4.72 - Blended Benchmark3 -3.38 -0.86 -1.17 6.26 7.20 - Total returns as of 6/30/15 for Institutional shares: 1 Yr, 0.25%; 5 Yrs (Ann.), 9.44%; Since Inception (Ann.), 6.14%; for Investor A shares without/with maximum sales charge: 1 Yr, -0.09%/-5.34%; 5 Yrs (Ann.), 9.15%/7.98%; Since Inception (Ann.), 5.86%/5.07%; for Investor C shares without/with maximum sales charge: 1 Yr, -0.76%/-1.71%; 5 Yrs (Ann.), 8.34%/8.34%; Since Inception (Ann.), 5.07%/5.07%. The fund’s annual total returns prior to 11/28/11 reflect a different investment strategy.Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than th e performance data quoted. Refer to website at www.blackrock.com to obtain performance data current to the most recent month-end. Returns include reinvestment of dividends and capital gains. Institutional share class total annual operating/net expenses as of the most recent prospectus are 0.81%/0.55%. The fund’s net operating expenses exclude acquired fund fees and investment interest expenses, if any, and certain other fund expenses. BlackRock has agreed contractually to waive or reimburse certain fees and expenses until 11/30/15. Contractual waivers terminable upon 90 days notice by the fund’s independent trustees or majority vote of outstanding fund se curities. BLK Multi-Asset Income Fund 30-Day SEC Yield (Inst)Subsidized = 5.03%Unsubsidized = 4.88% 30-Day SEC Yield (subsidized) -The calculation is based on a 30-day period ending on the last day of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. If the fund expenses ha ve waivers, the subsidized yield is based on the net expenses. 30-Day SEC Yield (unsubsidized) –This calculation is based on total expenses of the fund. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 22 BlackRock Multi-Asset Income Fund (I) rated against 226 Tactical Allocation Funds, as of 8/31/15, based on risk-adjusted total return. Ratings are determined monthly and subject to change. Overall Morningstar rating for a fund is derived from a weighted average of the performance figures associated with its 3 -, 5- and 10-year (if applicable) Morningstar rating metrics.1 Morningstar has awarded the Fund a Bronze medal. Fewer than 10% of US open-end funds hold medalist ratings. Effective date: 05/26/15. See Important Notes for additional disclosures on Morningstar ratings. Security Selection By Underlying Sleeve Managers As of 8/31/15. For illustrative purposes only. There can be no guarantee the individuals listed above will be employed by BlackRock at any g iven time. Security Selection Expertise of BlackRock Portfolio Management Teams 10,000+ Employees 120+ Investment Teams 7,000+ Portfolios Managed $4.3 Trillion AUM Multi-Asset Income Underlying Equity Sleeves Multi-Asset Income Underlying Fixed Income Sleeves Global Dividend Income –Global Equity Team –London European Equity Income –European Equity Team –London Emerging Market Equity Income –EM Equity Team –London MLPs –Fundamental Equity Team –Princeton Covered Call Writing –Derivative Overlay Team -Boston Global REITs –Global Real Estate -New York, London, Singapore US High Yield Credit –Leveraged Finance Team -New York European High Yield Credit –European Credit Team –London US High Yield Credit –Model-Based FI Team –San Francisco Emerging Market Credit –EM Credit Team –Singapore US IG Credit –Fundamental Fixed Income Team –New York Global IG Credit –European Fixed Income Team -London Preferred Stock –Fundamental Fixed Income–New York Agency Mortgages –Mortgage Team –New York Non-Agency Mortgages –Mortgage Team –New York CMBS –Mortgage Team –New York A key component of the investment process is the utilization of BlackRock’s global investment resources within equities, fixed income and alternatives for individual security selection within each asset class BlackRock Equity and Fixed Income Portfolio Managers manage sleeves of individual securities customized to meet the investment objectives of Multi Asset Income Regular communication between the MAPS team and underlying managers ensures proper management of client assets FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 23 24 Conviction Based Investment Process Risk Composition Intra Asset Class Opportunities Bottom-Up Stock & Bond Selection Leveraging BlackRock’s Aladdin®Risk Management Platform Yield vs. Volatility –Upside vs. Downside –Stress Test Performance –Hedging Strategies –Liquidity Analysis Determine appropriate risk level relative to risk budget (50% MSCI World / 50% Barclays Agg) Allocate risk across equity, spread, and duration Ensure appropriate diversification of macro risk exposures Relative value decisions within equity, spread, and duration Seek best risk-adjusted income opportunities Weigh total return upside vs downside Top-Down Driven Investment Process… …With Bottom-Up Expertise MAI team invests primarily in bespoke underlying portfolios (sleeves) of individual securities Custom sleeves managed by BlackRock asset class experts Collaborative process adjusts portfolios to changing conditions As of 8/31/15. Subject to change. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 25 Most ideas flow from value, economic and sentiment signals Evaluating the Income Landscape Analysis Information Horizon Sample Research Inputs Valuation Assesses underlying fundamental value •Dividend yield •Earnings yield •Risk-free rate •Spreads •Equilibrium exchange rates •Carry Macro Environment Captures changing economic conditions •Leading indicators •Financial conditions •Monetary policy •Fiscal policy Market Sentiment Assesses investor behavior •Risk appetite •Flows •Momentum •Investor biases •Liquidity Idiosyncratic Factors Assesses underlying fundamental value •Geopolitical events •Black swans •Regulatory changes •Natural disasters As of 8/31/15. Subject to change. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 Important Notes The ratings reflect historical risk-adjusted performance, are determined monthly and are subject to change. For each fund with a t least a 3-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars a nd the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its 3 -, 5-and 10-year (if applicable) Morningstar Rating Metrics, as of 8/31/15. BlackRock Multi-Asset Income Fund (Institutional) was rated 4 stars against 226 Tactical Allocation funds in the last three years and was rated 5 stars against 130 funds in the last five years. Morningstar Rating is for the Inst share class only; other classes may have different performance characteristics. Past performance does not guarantee future results. ©2015 Morningstar, Inc. All rights reserved . The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the mutual fund analysts of Morningstar, Inc. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Morningstar's analysts use this five pillar evaluation to identify funds they believe are more likely to o utperform over the long term on a risk-adjusted basis. Analysts consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating ultimately reflects the analyst's overall assessment and is overseen by Morningstar's Analyst Rating Committee. The approach serves not as a formula but as a framework to ensure consistency across Morningstar's global coverage universe. The Analyst Rating scale ranges from Gold to Negative, with Gold being the highest rating and Negative being the lowest rating. A "Bronze"-rated fund has advantages that outweigh the disadvantages across the five pillars, with suff icient level of analyst conviction to warrant a positive rating. Analyst Ratings are evaluated at least every 14 months. "For more detailed information about Mor ningstar's Analyst Rating, including its methodology, please go to http://corporate.morningstar.com/us/documents/MethodologyDocuments/AnalystRatingforFundsMethodology.pdf. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings are based on Morningstar 's current expectations about future events; therefore, in no way does Morningstar represent ratings as a guarantee nor should they be viewed by an investor as su ch.Morningstar Analyst Ratings involve unknown risks and uncertainties which may cause Morningstar's expectations not to occur or to differ significantly from what we expected. Represented indices: Treasury represented by the Barclays US 7-10 Year Treasury Bond Index, including US Treasury securities with a maturity of 7 -10 years. Core bonds represented by the Barclays US Aggregate Index, comprising more than 5,000 investment-grade taxable bonds. Investment grade bonds represented by the Barclays Investment Grade Index, consisting of publicly issued, fixed rate, non-convertible investment grade debt securities. High yield represented by the Barclays HY 2% Issuer Capped Index, comprising issues that have at least $150 million par value outstanding, a maximum credit rating of Ba1 or BB+ (including d efaulted issues) and at least 1 year to maturity. Each issuer is limited to 2% of the index. Bank loans represented by the S&P Leveraged Loan Index, designed to reflect the largest facilities in the leveraged loan market. It mirrors the market -weighted performance of the largest institutional leverag ed loans based upon market weightings, spreads, and interest payments. US equity represented by the S&P 500 Index, covering 500 industrial, utility, transportation and financial companies of the US markets (mostly NYSE issues). Global equity represented by the MSCI World Index, consisting of a market value weighted average of the performance of about 1,350 securities on the stock exchange of selected countries. Dividend Paying Stocks represented by the MSCI USA High Dividend Yield Index, reflecting the performance of the high dividend yield of large-and mid-cap stocks in the US. Preferred stock represented by the S&P US Preferred Stock Ind ex measures the performance of preferred stocks listed in US with a market capitalization over $100 million. EM debt represented by JPM EMBI Global Total Return Index tracking total returns for traded external debt instruments in the emerging markets including US dollar -denominated Brady bonds, loans, and Eurobonds with an outstanding face value of at least $500 million.US REITs represented by the FTSE NAREIT All Equity REITS Total Return Index, measuring the stock performance of companies engaged in the ownership and development of the real estate markets. International REITs represented by the FTSE EPRA/NAREIT Developed Index, measuring the stock performance of companies engaged in the ownership and development of the real estate markets outside the US. MLPs represented by the Alerian MLP Index, a market-cap weighted, float-adjusted index composite of the 50 most prominent energy Master Limited Partnerships (MLPs). Cash represented by Bankrate.com US Money Market Account High Yield Rate Index. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 26 Important Notes Please ask your clients to consider the investment objectives, risks, charges and expenses of the fund carefully before investing. T he prospectus and, if available, the summary prospectus contain this and other information about the fund and are available, along with information on other Black Rock funds, by calling 800-882-0052 or at www.blackrock.com/funds. The prospectus and, if available, the summary prospectus should be read carefully before investing. Important Risks of the Fund: The fund is actively managed and its characteristics will vary. The Fund may invest significantl y in BlackRock equity and/or fixed income mutual funds (“underlying funds”) and affiliated and unaffiliated ETFs. As such, it is subject to the risks associated with t he underlying BlackRock funds in which it invests. Stock and bond values fluctuate in price so the value of your investment can go down depending on market conditions.International investing involves special risks including, but not limited to political risks, currency fluctuations, illiquidity and volatility. These risks may be he ightened for investments in emerging markets. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bon d values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Asset allocation strategies do not assure prof it and do not protect against loss. Non- diversification of investments means that more assets are potentially invested in fewer securities than if investments were d iversified, so risk is increased because each investment has a greater effect on performance. The fund may use derivatives to hedge its investments or to seek to enhance r eturns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher -rated securities. The fund is actively managed and its characteristics will vary. Holdings shown should not be deemed as a recommendation to buy or sell securities. Fund of funds is subject to the risks associated with the underlying BlackRock funds in which it invests. Stock and bond values fluctuate in price so the value of your investment can go down depending on market conditions. International investing involves special risks including, but not limited to currency fluctuations, illiquidity and volatility. These risks may be heightened for investments in emerging markets. Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Asset allocation strategies do not assure profit and do not protect against loss. Non-diversification of investments means that more assets are potentially invested in fewer securities than if investments were diversified, so risk is increased because each investment has a greater effect on performance. The fund may use derivatives to hedge its investments or to seek to enhance returns. Derivatives entail risks relating to liquidity, leverage and credit that may reduce returns and increase volatility. Non- investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. Prepared by BlackRock Investments, LLC, member FINRA. BLACKROCK and Aladdin are registered trademarks of BlackRock, Inc. All other trademarks are the property of their respective owners. ©2015 BlackRock, Inc. All Rights Reserved. USR-7103 FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 27 Appendix $250,000 $275,000 $300,000 $325,000 $350,000 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 No v - 1 1 De c - 1 1 Ja n - 1 2 Fe b - 1 2 Ma r - 1 2 Ap r - 1 2 Ma y - 1 2 Ju n - 1 2 Ju l - 1 2 Au g - 1 2 Se p - 1 2 Oc t - 1 2 No v - 1 2 De c - 1 2 Ja n - 1 3 Fe b - 1 3 Ma r - 1 3 Ap r - 1 3 Ma y - 1 3 Ju n - 1 3 Ju l - 1 3 Au g - 1 3 Se p - 1 3 Oc t - 1 3 No v - 1 3 De c - 1 3 Ja n - 1 4 Fe b - 1 4 Ma r - 1 4 Ap r - 1 4 Ma y - 1 4 Ju n - 1 4 Ju l - 1 4 Au g - 1 4 Se p - 1 4 Oc t - 1 4 No v - 1 4 De c - 1 4 Ja n - 1 5 Fe b - 1 5 Ma r - 1 5 Ap r - 1 5 Ma y - 1 5 Ju n - 1 5 Ju l - 1 5 Au g - 1 5 Multiple Benefits of Income Investing Total Distributions (LHS) Hypothetical performance of $250,000 in Multi-Asset Income (November 2011 through August 2015) Market Value (RHS) Reinvesting Distributions Market Value (RHS) Taking Distributions Reinvesting Distributions Taking Distributions Beginning Value $250,000 $250,000 Ending Value $330,718 $275,977 Distributions Taken -$51,467 Avg. Monthly Income -$1,144 NAV purchases available at $250,000 for Investor A shares Source: Morningstar, as of 8/31/15. Past performance is no guarantee of future results. Illustration based on $250,000 investment in BlackRock Multi-Asset Income Investor A Shares at NAV (BAICX) since inception 11/28/11. (LHS) = Left Hand Side. (RHS) = Right Hand Side. FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 29 Income from $100k: $5,610 Income from $100k: $5,289 Income from $100k: $4,967 Income from $100k: $4,646 Income from $100k: $4,325 Income from $100k: $4,004 Income from $100k: $3,682 Income from $100k: $3,361 Income from $100k: $3,040 Income from $100k: $2,397 Income from $100k: $2,718 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5% An n u a l i z e d R e t u r n Annualized Risk Introducing MAI Into a Retirement Income Portfolio (Fixed Income Portfolio) For investors seeking to diversify their traditional core fixed income allocations, investing a portion of fixed income asset s into Multi-Asset Income has helped deliver a better balance between income, risk & return Source: Bloomberg, as of 6/30/15. Income shown represents income an investor would have received had they been invested over the past 12 months. Past performance and income does not guarantee future results. For standardized performance for the iShares funds, please see slide 28.MAI represented by the BlackRock Multi-Asset Income Fund (Instl. Share BIICX). Core US taxable bonds represented by iShares Core Total U.S. Bond Market ETF (AGG).The asset allocations shown are hypothetical and do not represent actual performance. USR-7103 Investment Results: Adding 20% to MAI Risk Return Income FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 BlackRock Multi- Asset Income Fund Core U.S. Taxable Bonds 30 Income from $100k: $2,213 Income from $100k: $2,892 Income from $100k: $3,232 Income from $100k: $3,572 Income from $100k: $3,912 Income from $100k: $4,251 Income from $100k: $4,591 Income from $100k: $4,931 Income from $100k: $5,270 Income from $100k: $2,553 Income from $100k: $5,610 7.5% 8.0% 8.5% 9.0% 4.9%5.0%5.1%5.2%5.3%5.4%5.5%5.6%5.7% An n u a l i z e d R e t u r n Annualized Risk Introducing MAI Into a Pre-Retirement Portfolio (Balanced Portfolio) For investors seeking to increase yield and/or reduce risk from their traditional balanced portfolio, investing a portion of their assets in Multi-Asset Income has helped deliver a better balance between income, risk & return Source: Bloomberg, as of 6/30/15. Income shown represents income an investor would have received had they been invested over the past 12 months. Past performance and income does not guarantee future results. For standardized performance for the iShares funds, please see slide 28.MAI represents the BlackRock Multi-Asset Income Fund (Instl. Share BIICX). Global stocks represented by iShares MSCI ACWI ETF (ACWI). Core US taxable bonds represented by iShares Core Total U.S. Bond Market ETF (AGG). The asset allocations shown are hypothetical and do not represent actual performance. USR-7103 BlackRock Multi- Asset Income Fund 60/40 Balanced Portfolio Investment Results: Adding 20% to MAI Risk Return Income FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 31 Standardized Returns As of 6/30/15 The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost.Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com. Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. eastern time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI, Inc., nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the company listed above. iShares Core Total U.S. Bond Market ETF (AGG)1-year 5-year 10-year Since inception (9/22/2003) Fund NAV Total Return 1.87%3.22%4.27%4.31% Fund Market Price Returns 1.83%3.11%4.22%4.30% iShares MSCI ACWI ETF (ACWI) 1-year 5-year 10-year Since inception (3/26/2008) Fund NAV Total Return 0.77%11.97%n/a 4.46% Fund Market Price Returns 0.67%12.06%n/a 4.44% FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 32 Work with dedicated derivative overlay team to identify attractive call writing opportunities Rationale High levels of income with attractive upside potential relative to many credit markets within fixed income. Short-term focus takes advantage of best risk/return opportunity while also providing for maximum flexibility to adapt to changing market conditions Covered Call Implementation Write calls on individual securities (50-70 positions) Short-term maturities (1-3 Months) Out-of-the-money (5-8% upside potential) High coupon (10-15% annualized income) Illustrative Example: Structured Notes (Equity Call Overwriting) Source: BlackRock, as of 8/31/15. For illustrative purposes only. Should not be construed as investment advice or recommendation. Performance data quoted represents past performance and does not guarantee future results. Company A Hold long stock Sell call option Identify companies with attractive fundamentals Screen for attractive option pricing Set Upside Cap: 5% growth Collaborate with equity teams to understand expected capital appreciation Set Option Maturity: 5 week term Short-term maturity allows for greater flexibility & upside potential Receive: Coupon: 11.9% p.a. Capital Appreciation: 3.5% Equity-only exposure to Co. A would have generated 0.7% annualized dividend yield + 3.5% capital appreciation FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 33 Equity Covered Call Overwriting Exposures FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 34 Top 10 Countries Sector Exposure 81% 4% 4% 4% 2%1%1%1%1%0% U.S.Germany U.K. France Spain Sweden Switzerland Japan Netherlands Italy 27% 20% 16% 11% 8% 8% 7%2% Consumer Discretionary Industrials Financials Consumer Staples Health Care Information Technology Materials Telecommunication Services Utilities As of 8/31/15. Not a recommended allocation. Subject to change. Source: BlackRock, as of 8/31/15. For illustrative purposes only. Should not be construed as investment advice or recommendation. Performance data quoted represents past performance and does not guarantee future results. Illustrative Example: Preferred Stock Work with dedicated Preferred Stock team to identify attractive security specific opportunities Company B Preferred Stock Specialist manager had high conviction in issue BBB+ rated Higher up capital structure than equity 30 Year Maturity Ability to hedge duration at aggregate portfolio level Receive Fixed Coupon of 6.6% Security dividend yield was 4.3%, bond yield was below 4% FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 35 Rationale Better call protection and fixed to floating structure seeks to lower duration profile High coupon (6% annualized income) Attractive sector diversification with high concentration to financials Preferred Stock Implementation 90% Institutional Preferreds, 10% Retail Preferreds Customized Sleeve managed by underlying BLK Portfolio Management team Prefer exposure to high quality banks, regional banks and diversified insurance companies Source: BlackRock, as of 8/31/15. For illustrative purposes only. Should not be construed as investment advice or recommendation. Challenge to Investors BlackRock Solution Structured credit issues tend to be too large for many investors Size and breadth of BlackRock client base provides scale to buy up meaningful allocations US-focused market US-based mortgage team Seemingly complex market structure Specialist team to manage security selection. Draw on BlackRock’s global insights to draw conclusions on multiple investment factors e.g. prospects for US growth, delinquency levels, interest rate views Attractive but often inaccessible investment opportunities exemplify BlackRock’s edge: Illustrative Example: Structured Credit FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 36 Expertise to manage risk Segregated sleeve managed by dedicated BlackRock team Flexibility to move between various segments/tranches of the structured credit market as opportunities change Investment Case Exposure to mortgage backed securities and other asset backed securities Attractive income relative to interest rate sensitivity Compelling valuations to gain exposure to the US economic recovery Why Choose BlackRock Multi-Asset Income Fund? Risk-First Outcome-Oriented Investment Process Unique investment process aimed at managing the tradeoff between income and risk. Risk budgeting approach provides the necessary framework for the intended investment outcome of a consistent, compelling level of income with less risk than a balanced 50/50 stock/bond portfolio1. Unconstrained Investment Universe A go-anywhere investment solution with the ability to invest up to 80% in stocks and 100% in bonds with no constraints by sector or geography. The Fund typically invests in more than 1,000 individual securities 2 as well as ETFs and derivatives for liquidity and hedging purposes. Best-of-BlackRock Portfolio Construction Investment process combines the top-down asset allocation expertise of the BlackRock Multi-Asset Portfolio Strategies (MAPS) Team with the security selection expertise of the full breadth and depth of BlackRock’s equity and fixed income portfolio management teams 1Balanced 50/50 stock/bond portfolio represented by a 50% MSCI World Index, 50% Barclay’s US Aggregate Index 2 As of 8/31/2015. Tickers A: BAICX C: BCICX I: BIICX 37FOR FINANCIAL PROFESSIONAL USE ONLY. Not to be shown or distributed to the general public. USR-7103 Ci t y o f P a l m B e a c h G a r d e n s F i r e f i g h t e r s ’ P e n s i o n T r us t F u n d Da t e : O c t o b e r 1 , 2 0 1 5 Pr e s e n t e r s : Pe t e r N o l a n - P r o d u c t S p e c i a l i s t , G M O Da n n S m i t h – D i r e c t o r , B u s i n e s s D e v e l o p m e n t , W e l l s C a pi t a l M a n a g e m e n t 2 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C We l l s F a r g o A s s e t M a n a g e m e n t 3 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C Cl i e n t - c e n t r i c r e l a t i o n s h i p s We l l s F a r g o A s s e t M a n a g e m e n t ( W F A M ) Fi r m s n a p s h o t AU M $4 8 8 b i l l i o n In v e s t m e n t t e a m s 36 Gl o b a l i n v e s t m e n t t a l e n t 5 0 0 + Te a m m e m b e r s 1, 6 0 0 + Of f i c e s w o r l d w i d e 18 No t e : A l l f i g u r e s a s o f 0 6 / 3 0 / 1 5 As s e t s u n d e r m a n a g e m e n t By a s s e t c l a s s A U M ( $ B ) A s s e t s ( % ) Eq u i t y 11 8 Fi x e d I n c o m e 1 5 3 Mo n e y M a r k e t / S t a b l e V a l u e 1 8 6 Al t e r n a t i v e s 9 Mu l t i - A s s e t S o l u t i o n s 2 2 4238 31 24 As t h e a s s e t m a n a g e m e n t b u s i n e s s o f W e l l s F a r g o , w e p u t c l i e n t s f i r s t i n e v e r y t h i n g w e d o . Sp e c i a l i z e d , i n d e p e n d e n t i n v e s t m e n t te a m s w i t h p r o v e n p r o c e s s e s Ri g o r o u s i n v e s t m e n t ri s k m a n a g e m e n t o v e r s i g h t Ou r v a l u e s c e n t e r o n : We f o s t e r e n d u r i n g c l i e n t r e l a t i o n s h i p s w i t h : In s t i t u t i o n s Fi n a n c i a l a d v i s o r s In d i v i d u a l c l i e n t s 4 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C WF A M i n v e s t m e n t c a p a b i l i t i e s No t e : A l l f i g u r e s a s o f 0 6 / 3 0 / 2 0 1 5 . 1 W e l l s C a p i t a l M a n a g e m e n t ’ s A U M i n c l u d e s $ 5 B f r o m th e E C M A s s e t M a n a g e m e n t t e a m . 2 W e l l s F a r g o o w n s a m a j o r i t y s t a k e i n T h e R o c k C r e ek G r o u p . T o t a l a s s e t s s h o w n i n c l u d e d i s c r e t i o n a r y an d n o n - d i s c r e t i o n a r y a s s e t s . 3 W e l l s F a r g o o w n s a m a j o r i t y s t a k e i n G o l d e n C a p i t al M a n a g e m e n t . T o t a l a s s e t s s h o w n i n c l u d e d i s c r e t i o na r y a n d n o n - d i s c r e t i o n a r y a s s e t s . MA N A G E R (A U M ) U. S . Eq u i t y Gl o b a l Eq u i t y Em e r g i n g Ma r k e t s E q u i t y U. S . F i x e d In c o m e Eu r o p e a n Fi x e d I n c o m e Gl o b a l F i x e d In c o m e A l t e r n a t i v e s Specialty/ Multi-Asset We l l s C a p i t a l M a n a g e m e n t 1 Tr a d i t i o n a l S t r a t e g i e s ( $ 3 4 9 B ) Th e R o c k C r e e k G r o u p 2 He d g e F u n d o f F u n d s ( $ 1 1 B ) Go l d e n C a p i t a l M a n a g e m e n t 3 Qu a n t i t a t i v e S t r a t e g i e s ( $ 8 B ) Ne l s o n C a p i t a l M a n a g e m e n t ES G E q u i t y S t r a t e g i e s ( $ 2 B ) Ga l l i a r d C a p i t a l M a n a g e m e n t St a b l e V a l u e & F i x e d I n c o m e ( $ 8 4 B ) Pe r e g r i n e C a p i t a l M a n a g e m e n t U. S . E q u i t i e s ( $ 3 B ) In v e s t m e n t c a p a b i l i t i e s s p a n a l l a s s e t c l a s s e s , p r o vi d i n g a w e a l t h o f i n v e s t m e n t e x p e r t i s e t o o u r c l i e nts. We p r o v i d e c l i e n t s w i t h g l o b a l a c c e s s t o o u r i n v e s t me n t c a p a b i l i t i e s i n a v a r i e t y o f v e h i c l e s , f r o m s e pa r a t e a c c o u n t s t o d i f f e r e n t f u n d s s u c h a s We l l s F a r g o A d v a n t a g e F u n d s ( U . S . m u t u a l f u n d c o m p a ny ) a n d t h e W e l l s F a r g o W o r l d w i d e F u n d ( L u x e m b o u r g do m i c i l e d U C I T S I C A V ) . 5 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C We l l s C a p i t a l M a n a g e m e n t 6 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C We l l s C a p i t a l M a n a g e m e n t As o f J u n e 3 0 , 2 0 1 5 . T o t a l f i r m a s s e t s u n d e r m a n a g e me n t a r e $ 3 4 8 B . T h e c h a r t s a b o v e e x c l u d e $ 1 1 9 B i n M on e y M a r k e t M u t u a l F u n d s a n d o t h e r W e l l s F a r g o A f f i li a t e d M o n e y M a r k e t A c c o u n t s . A s s e t s u n d e r ma n a g e m e n t , e x c l u d i n g M o n e y M a r k e t M u t u a l F u n d s a n d o t h e r W e l l s F a r g o A f f i l i a t e d M o n e y M a r k e t a c c o u n t s t o t a l $ 2 2 9 B . 1 I n c l u d e s a c c o u n t s w i t h d u r a t i o n s o v e r 1 - 5 y e a r b e nc h m a r k s . 2 I n c l u d e s a c c o u n t s w i t h d u r a t i o n s u p t o 1 - 5 y e a r b en c h m a r k s , e x c l u d i n g M o n e y M a r k e t F u n d s . As s e t s u n d e r m a n a g e m e n t O u r c l i e n t s U. S . E q u i t y 26 % Gl o b a l / e x - U . S . E q u i t y 8 % U. S . F i x e d I n c o m e 1 31 % Gl o b a l / e x - U . S . F i x e d I n c o m e 5 % Sh o r t D u r a t i o n 2 27 % Mu l t i - A s s e t S o l u t i o n s 3 % Co r p o r a t e 27% En d o w m e n t / F o u n d a t i o n / N o n - P r o f i t 6 % Pu b l i c / G o v e r n m e n t / U n i o n 1 3 % So v e r e i g n W e a l t h F u n d / C e n t r a l B a n k 2 % We l l s F a r g o S u b - A d v i s o r y 4 0 % Ex t e r n a l S u b - A d v i s o r y 1 1 % Ot h e r 1% We l l s C a p p r o f i l e Es t a b l i s h e d i n 1 9 9 6 AU M i n e x c e s s o f $ 3 4 8 B 26 a u t o n o m o u s i n v e s t m e n t t e a m s Ov e r 1 , 0 0 0 c l i e n t s i n m o r e t h a n 3 0 c o u n t r i e s w o r l d w id e Mo r e t h a n 3 9 3 i n v e s t m e n t p r o f e s s i o n a l s w i t h a n a v e r ag e f i r m te n u r e o f 1 0 y e a r s 7 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W IT H T H E R E T A I L P U B L I C We l l s C a p r e p r e s e n t a t i v e c l i e n t l i s t As o f S e p t e m b e r 2 2 , 2 0 1 5 . T h i s l i s t h e r e i n i s r e p r e se n t a t i v e o f W e l l s C a p i t a l M a n a g e m e n t ’ s i n s t i t u t i o n al c l i e n t s a n d w a s s e l e c t e d r e g a r d l e s s o f i n v e s t m e n t s t r a t e g y . O n l y c l i e n t s g i v i n g u s p e r m i s s i o n t o d o so are in c l u d e d o n t h i s l i s t . T h e s e l e c t i o n w a s b a s e d r a n d om l y i n o r d e r t o r e p r e s e n t t h e d i v e r s i t y o f t h e c l i en t t y p e , a n d n e i t h e r p e r f o r m a n c e d a t a n o r a c c o u n t si z e w a s u s e d a s a m e a n s o f s e l e c t i n g t h e i r i n c l u s i on. The use of th e i r n a m e s d o e s n o t c o n s t i t u t e a n i n d i c a t i o n o f a p pr o v a l o r d i s a p p r o v a l o f o u r p r o d u c t s o r s e r v i c e s . Co r p o r a t e a c c o u n t s Af f i l i a t e d M a r k e t i n g , I n c . Bo e h r i n g e r I n g e l h e i m C o r p o r a t i o n Ca n o p y A s s u r a n c e , L t d . Co x E n t e r p r i s e s , I n c . , M a s t e r T r u s t De e r e & C o m p a n y Do m i n i o n R e s o u r c e s , I n c . He w l e t t - P a c k a r d C o m p a n y M e r c k & C o . , I n c . M a s t e r R e t i r e m e n t T r u s t Pu b l i c S e r v i c e C o m p a n y o f N e w M e x i c o Qu a d / G r a p h i c s , I n c . Th e I n t e r p u b l i c G r o u p o f C o m p a n i e s , I n c . Un i t e d T e c h n o l o g i e s C o r p o r a t i o n US G C o r p o r a t i o n W e l l s F a r g o P e n s i o n YW C A Ho s p i t a l / h e a l t h c a r e a c c o u n t s Fr o e d t e r t a n d C o m m u n i t y H e a l t h K a i s e r F o u n d a t i o n H o s p i t a l s M a i n L i n e H e a l t h No r t h C a r o l i n a B a p t i s t H o s p i t a l Si l b l e y M e m o r i a l H o s p i t a l Va l l e y C h i l d r e n ’ s H o s p i t a l En d o w m e n t / f o u n d a t i o n / n o n - p r o f i t Bu c k n e l l U n i v e r s i t y Ch u r c h o f G o d B e n e f i t s B o a r d , I n c . Co l u m b i a U n i v e r s i t y Ha m i l t o n C o l l e g e Ma r q u e t t e U n i v e r s i t y Mi c h i g a n S t a t e U n i v e r s i t y Pe p p e r d i n e U n i v e r s i t y Sa n F r a n c i s c o M u s e u m o f M o d e r n A r t St . L u k e ’ s M e d i c a l C e n t e r St e t s o n U n i v e r s i t y Th e D o m e s t i c & F o r e i g n M i s s i o n a r y o f t h e P r o t e s t a n t Ep i s c o p a l C h u r c h U S Th e S a l v a t i o n A r m y - U S A S o u t h e r n T e r r i t o r y Ut a h S t a t e U n i v e r s i t y We l l s F a r g o F o u n d a t i o n Ta f t - H a r t l e y a c c o u n t s Am a l g a m a t e d T r a n s i t U n i o n , L o c a l 8 5 Ba n q u e t P e n s i o n T r u s t F u n d Ce m e n t M a s o n s a n d P l a s t e r e r s J o i n t P e n s i o n T r u s t Co n s t r u c t i o n I n d u s t r y & L a b o r e r s IB E W L o c a l 6 9 7 P e n s i o n F u n d Mi c h i a n a A r e a E l e c t r i c a l W o r k e r s P e n s i o n P l a n Na t i o n a l E l e c t r i c a l B e n e f i t F u n d Pl u m b e r s a n d P i p e f i t t e r s N a t i o n a l P e n s i o n F u n d Sh e e t M e t a l W o r k e r s ' N a t i o n a l P e n s i o n F u n d Te a m s t e r s L o c a l 8 3 0 P e n s i o n F u n d Te a m s t e r P e n s i o n T r u s t F u n d o f P h i l a d e l p h i a & V i c i n ity Pu b l i c a c c o u n t s As s o c i a t i o n C o u n t y C o m m i s s i o n e r s o f G e o r g i a Bo s t o n ( M A ) R e t i r e m e n t B o a r d Ca l l e g u a s M u n i c i p a l W a t e r D i s t r i c t Ch i c a g o P o l i c e m e n ’ s A n n u i t y a n d B e n e f i t F u n d Ci t y o f O a k l a n d P a r k P o l i c e O f f i c e r s a n d F i r e f i g h t e rs Pe n s i o n F u n d Ci t y o f D e l r a y B e a c h P o l i c e O f f i c e r s a n d F i r e f i g h t e rs Re t i r e m e n t S y s t e m Fo r t M y e r s R e t i r e m e n t S y s t e m Fo r t W a l t o n B e a c h G e n e r a l E m p l o y e e s P e n s i o n Je f f e r s o n C o u n t y G e n e r a l R e t i r e m e n t S y s t e m L o s A n g e l e s C o u n t y ( C A ) E m p l o y e e s R e t i r e m e n t As s o c i a t i o n L o s A n g e l e s ( C A ) D e p a r t m e n t o f W a t e r & P o w e r Re t i r e m e n t Mi s s o u r i L o c a l G o v e r n m e n t E m p l o y e e s R e t i r e m e n t Sy s t e m Mu n i c i p a l E m p l o y e e s ' R e t i r e m e n t S y s t e m o f M i c h i g a n No r t h D a k o t a S t a t e I n v e s t m e n t B o a r d Or l a n d o U t i l i t i e s C o m m i s s i o n Pe n s a c o l a P o l i c e P e n s i o n P l a n So u t h e a s t e r n P e n n s y l v a n i a T r a n s p o r t a t i o n A u t h o r i t y St a t e B o a r d o f A d m i n i s t r a t i o n o f F l o r i d a St a t e L a n d D e p a r t m e n t o f N o r t h D a k o t a St a t e o f D e l a w a r e Te n n e s s e e V a l l e y A u t h o r i t y Th e P o l i c e R e t i r e m e n t S y s t e m o f S t . L o u i s We l l s F a r g o A d v a n t a g e A b s o l u t e R e t u r n F u n d FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 8 Ab o u t G M O 9 No t e : T h e a s s e t b r e a k o u t a b o v e m a y n o t i n c l u d e a l l u n d e r l y i n g a s s e t s a n d t h u s m a y n o t a d d u p t o t h e t ot a l A U M f i g u r e s h o w n . * N a t u r a l R e s o u r c e s i n c l u d e : 1 ) G M O R e n e w a b l e R e s o ur c e s a s s e t s ; a n d 2 ) a s s e t s o f G M O ' s R e s o u r c e s S t r a tegy. ** R e l e v a n t A s s e t A l l o c a t i o n a n d A b s o l u t e R e t u r n a s se t s a r e a l s o a c c o u n t e d f o r w i t h i n E q u i t i e s a n d F i x ed I n c o m e s t r a t e g i e s . As s e t s m a n a g e d b y G M O R e n e w a b l e R e s o u r c e s , a j o i n t ve n t u r e , i s n o t p a r t o f t h e G I P S c o m p l i a n t f i r m , G M O. FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C In v e s t m e n t A p p r o a c h • G M O b l e n d s p r o v e n t r a d i t i o n a l j u d g m e n t s w i t h i n n o v a t i ve qu a n t i t a t i v e m e t h o d s , t o f i n d v a l u e a c r o s s a w i d e r a n g e of as s e t c l a s s e s • L o n g - t e r m , v a l u e o r i e n t e d p e r s p e c t i v e Fi r m H i s t o r y Fo u n d e d i n 1 9 7 7 b y J e r e m y G r a n t h a m , R i c h a r d M a y o a n d Eyk Va n O t t e r l o o a s a p r i v a t e p a r t n e r s h i p f o c u s e d o n i n v e s t m ent ma n a g e m e n t AU M Fi r m a s s e t s u n d e r m a n a g e m e n t o f $ 1 2 0 b i l l i o n a s o f Ma y 3 1 , 2 0 1 5 • E q u i t i e s : $ 6 3 b i l l i o n • F i x e d i n c o m e : $ 1 7 b i l l i o n • N a t u r a l r e s o u r c e s : $ 2 b i l l i o n * • A s s e t A l l o c a t i o n : $ 7 9 b i l l i o n * * • A b s o l u t e r e t u r n : $ 1 3 b i l l i o n * * Gl o b a l p r e s e n c e Of f i c e s i n B o s t o n ( M A ) , S a n F r a n c i s c o ( C A ) , L o n d o n , Si n g a p o r e , A m s t e r d a m , a n d S y d n e y Br o a d r a n g e o f in v e s t m e n t p r o d u c t s Eq u i t y a n d f i x e d i n c o m e s t r a t e g i e s a c r o s s d e v e l o p e d a n d em e r g i n g m a r k e t s GM O i n v e s t m e n t a n d p r o d u c t t e a m 10 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C Po r t f o l i o M a n a g e m e n t T e a m St r a t e g i s t s Be n I n k e r , C F A Co - H e a d , A s s e t A l l o c a t i o n T e a m Po r t f o l i o M a n a g e r BA , Y a l e U n i v e r s i t y Sa m W i l d e r m a n , C F A Co - H e a d , A s s e t A l l o c a t i o n T e a m Po r t f o l i o M a n a g e r BA , Y a l e U n i v e r s i t y Ma t t K a d n a r , C F A BA , B o s t o n C o l l e g e JD , S t . L o u i s U n i v e r s i t y Ri c k F r i e d m a n BS , U n i v e r s i t y o f P e n n s y l v a n i a MB A , H a r v a r d B u s i n e s s S c h o o l Je r e m y G r a n t h a m Ch i e f I n v e s t m e n t S t r a t e g i s t BA , U n i v e r s i t y o f S h e f f i e l d ( U . K . ) MB A , H a r v a r d B u s i n e s s S c h o o l Pe t e r C h i a p p i n e l l i , C F A , C A I A BA , C a r l e t o n C o l l e g e MB A , W h a r t o n Ca t h e r i n e L e G r a w , C F A BS , B A , U n i v e r s i t y o f P e n n s y l v a n i a Ta r i q A l i J a m e s M o n t i e r Vl a d B a r b a l a t P h i l i p P i l k i n g t o n B. J . B r a n n a n A m a r R e g a n t i Ma l c o l m B r o w n R a m T h i r u k k o n d a An n a C h e t o u k h i n a J o h n T h o r n d i k e Ch r i s H u d s o n Re s e a r c h / P M Ma t t L e h m a n n BS , N o t t i n g h a m T r e n t U n i v e r s i t y MS , U n i v e r s i t y o f S u s s e x Wa i t f o r t h e f a t p i t c h Th e r i s k t h a t m a t t e r s i s l o s i n g m o n e y Me a n r e v e r s i o n Ma r k e t s a r e g r o s s l y i n e f f i c i e n t GM O c o r e b e l i e f s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 11 Ca s t a w i d e n e t GM O 7 - y e a r a s s e t c l a s s r e t u r n f o r e c a s t s * 12 As o f J u n e 3 0 , 2 0 1 5 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C So u r c e : G M O *T h e c h a r t r e p r e s e n t s r e a l r e t u r n f o r e c a s t s f o r s e v er a l a s s e t c l a s s e s a n d n o t f o r a n y G M O f u n d o r s t r a te g y . T h e s e f o r e c a s t s a r e f o r w a r d - l o o k i n g s t a t e m e n t s based up o n t h e r e a s o n a b l e b e l i e f s o f G M O a n d a r e n o t a g u ar a n t e e o f f u t u r e p e r f o r m a n c e . F o r w a r d - l o o k i n g s t a te m e n t s s p e a k o n l y a s o f t h e d a t e t h e y a r e m a d e , a n d GMO as s u m e s n o d u t y t o a n d d o e s n o t u n d e r t a k e t o u p d a t e f o r w a r d - l o o k i n g s t a t e m e n t s . F o r w a r d - l o o k i n g s t a t e me n t s a r e s u b j e c t t o n u m e r o u s a s s u m p t i o n s , r i s k s , a nd un c e r t a i n t i e s , w h i c h c h a n g e o v e r t i m e . A c t u a l r e s u lt s m a y d i f f e r m a t e r i a l l y f r o m t h o s e a n t i c i p a t e d i n f o r w a r d - l o o k i n g s t a t e m e n t s . U . S . i n f l a t i o n i s a s s umed to mean re v e r t t o l o n g - t e r m i n f l a t i o n o f 2 . 2 % o v e r 1 5 y e a r s . -1 . 9 % -2 . 4 % 0. 7 % 0. 0 % -0 . 8 % 3. 1 % -0 . 6 % -2 . 8 % 2. 2 % 0.2% -0.5% -6 % -4 % -2 % 0% 2% 4% 6% 8% U. S . La r g e U. S . Sm a l l U. S . H i g h Qu a l i t y In t l La r g e In t l Sm a l l Em e r g i n g U . S . Bo n d s In t l Bo n d s He d g e d Em e r g i n g De b t U. S . I n f l a t i o n Li n k e d B o n d s U.S. Cash A n n u a l r e a l r e t u r n o v e r 7 y e a r s 6.5% long-term historical U.S. equity return ST O C K S BO N D S GM O 7 - y e a r g l o b a l e q u i t y f o r e c a s t s * Va l u e a n d g r o w t h w i t h i n l a r g e a n d s m a l l s t o c k s , a n d R E I T s 13 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C As o f 6 - 3 0 - 1 5 So u r c e : G M O *T h e c h a r t r e p r e s e n t s r e a l r e t u r n f o r e c a s t s f o r s e v er a l a s s e t c l a s s e s a n d n o t f o r a n y G M O f u n d o r s t r a te g y . T h e s e f o r e c a s t s a r e f o r w a r d - l o o k i n g s t a t e m e n t s based up o n t h e r e a s o n a b l e b e l i e f s o f G M O a n d a r e n o t a g u ar a n t e e o f f u t u r e p e r f o r m a n c e . F o r w a r d - l o o k i n g s t a te m e n t s s p e a k o n l y a s o f t h e d a t e t h e y a r e m a d e , a n d GMO as s u m e s n o d u t y t o a n d d o e s n o t u n d e r t a k e t o u p d a t e f o r w a r d - l o o k i n g s t a t e m e n t s . F o r w a r d - l o o k i n g s t a t e me n t s a r e s u b j e c t t o n u m e r o u s a s s u m p t i o n s , r i s k s , a nd un c e r t a i n t i e s , w h i c h c h a n g e o v e r t i m e . A c t u a l r e s u lt s m a y d i f f e r m a t e r i a l l y f r o m t h o s e a n t i c i p a t e d i n f o r w a r d - l o o k i n g s t a t e m e n t s . U . S . i n f l a t i o n i s a s s umed to mean re v e r t t o l o n g - t e r m i n f l a t i o n o f 2 . 2 % o v e r 1 5 y e a r s . -1 . 9 % -1 . 9 % -1 . 9 % 0. 7 % -4 . 3 % -2 . 4 % -0 . 4 % 0. 0 % -1 . 5 % 1. 5 % -2 . 0 % -0 . 8 % -2 . 3 % 0. 7 % 3.1% 7.1% -6 % -4 % -2 % 0% 2% 4% 6% 8% U. S . La r g e U. S . La r g e Gr o w t h U. S . La r g e Va l u e U. S . Hi g h Qu a l i t y U. S . Lo w Qu a l i t y U. S . Sm a l l RE I T s I n t l I n t l Gr o w t h In t l Va l u e Ja p a n I n t l Sm a l l In t l Sm a l l Gr o w t h In t l Sm a l l Va l u e EMG EMG Value A n n u a l R e a l R e t u r n O v e r 7 Y e a r s U. S . L A R G E U. S . S M A L L IN T ' L L A R G E IN T ' L S M A L L EMERGING Ge t t h e b i g p i c t u r e r i g h t Source: GMO Th e r e a l i z e d p e r f o r m a n c e o f o u r f o r e c a s t s s i n c e J u n e 1 9 9 4 14 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C -2 . 8 -3 . 5 -1 . 9 2. 2 2. 4 2. 5 3. 1 6. 7 8. 1 10 . 7 12.6 15.2 -1 0 -5 0510 15 20 - 1 0 t o - 8 - 8 t o - 6 - 6 t o - 4 - 4 t o - 2 - 2 t o 0 0 t o 2 2 t o 4 4 t o 6 6 t o 8 8 t o 1 0 10 to 12 12 to 14 M e d i a n r e a l r e t u r n o v e r n e x t 7 y e a r s ( % ) Re a l R e t u r n F o r e c a s t ( % ) Wh e n G M O f o r e c a s t e d a s s e t c l a s s re t u r n s b e t w e e n - 1 0 % a n d - 8 % , t h e me d i a n r e a l i z e d r e t u r n o f a l l t h e f o r e c a s t s wa s - 2 . 8 % Wh e n G M O f o r e c a s t e d a s s e t c l a s s r e t u r n s * be t w e e n 1 2 % a n d 1 4 % , t h e m e d i a n re a l i z e d r e t u r n o f a l l t h e f o r e c a s t s w a s 15 . 2 % As o f 1 2 - 3 1 - 1 4 An a l y s i s u s e s G M O f o r e c a s t s f o r 2 1 a s s e t c l a s s e s * f ro m J u n e 1 9 9 4 u n t i l D e c e m b e r 2 0 0 7 ( S t a r t d a t e i s S e pt e m b e r 1 9 9 9 f o r R E I T S , J u n e 1 9 9 8 f o r T I P S , a n d Ju l y 2 0 0 4 f o r U . S . Q u a l i t y a n d U . S . J u n k ) . T h e m e d i an r e a l i z e d p e r f o r m a n c e o f t h e f o r e c a s t s i s f r o m J u ne 2 0 0 4 u n t i l D e c e m b e r 2 0 1 4 . 1 0 - y e a r f o r e c a s t s a r e co n v e r t e d i n t o 7 - y e a r f o r e c a s t s b y a s s u m i n g 3 y e a r s o f e q u i l i b r i u m r e t u r n s . G M O c h a n g e d f o r e c a s t s f r o m 1 0 - y e a r f o r e c a s t s t o 7 - y e a r f o r e c a s t o n D e c e m b e r 31 , 2 0 0 1 . R e t u r n s a n d f o r e c a s t s a r e a n n u a l i z e d . *S & P 5 0 0 ; R u s s e l l 1 0 0 0 G r o w t h ; R u s s e l l 1 0 0 0 V a l u e ; Ru s s e l l 2 5 0 0 ; R u s s e l l 2 5 0 0 G r o w t h ; R u s s e l l 2 5 0 0 V a l ue ; M S C I E A F E ; M S C I E A F E G r o w t h ; M S C I EA F E V a l u e ; M S C I E A F E S m a l l C a p ; M S C I E A F E S m a l l C a p G r o w t h ; M S C I E A F E S m a l l C a p V a l u e ; S & P / I F C I C o m p o si t e ; M S C I U . S . R E I T ; B a r c l a y s U S Ag g r e g a t e B o n d ; J P M N o n U S G o v e r n m e n t B o n d I n d e x ; J PM E M B I G l o b a l ; B a r c l a y s U . S . T r e a s u r y : U S T I P S ; U . S. H i g h Q u a l i t y S t o c k s ; U . S . L o w Q u a l i t y St o c k s ; U . S . C a s h ( T B i l l s ) If y o u s e e k u n c o n v e n t i o n a l r e t u r n s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 15 1. 3 8. 6 8. 1 7. 0 8.8 0246810 12 HF R X E q u a l W e i g h t S & P 5 0 0 A C W I 6 0 / 4 0 A b s o l u t e R e t u r n Fund A n n u a l i z e d r e t u r n ( % ) Pe r f o r m a n c e s i n c e 7 - 3 1 - 0 3 * (A d m i n i s t r a t o r C l a s s , t h r o u g h 6 - 3 0 - 1 5 ) 60 / 4 0 = 6 0 % M S C I A C W I I n d e x p l u s 4 0 % B a r c l a y s A g g r e ga t e U . S . B o n d I n d e x , r e b a l a n c e d m o n t h l y Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . In v e s t m e n t r e t u r n a n d p r i n c i p a l v a l u e o f a n i n v e s t m ent will fluctuate so t h a t a n i n v e s t o r ’ s s h a r e s , w h e n r e d e e m e d , m a y b e w o r t h m o r e o r l e s s t h a n t h e i r o r i g i n a l c o s t . C u r r e nt p e r f o r m a n c e m a y b e l o w e r o r h i g h e r t h a n t h e pe r f o r m a n c e d a t a q u o t e d a n d a s s u m e s t h e r e i n v e s t m e n t o f d i v i d e n d s a n d c a p i t a l g a i n s . C u r r e n t m o n t h - e n d p e r f o r m a n c e i s a v a i l a b l e a t t h e f u n d ’ s w e b s i t e , we l l s f a r g o a d v a n t a g e f u n d s . c o m . Ad m i n i s t r a t o r C l a s s s h a r e s a r e s o l d w i t h o u t a f r o n t -e n d s a l e s c h a r g e o r c o n t i n g e n t d e f e r r e d s a l e s c h a r ge . *A d m i n i s t r a t o r C l a s s s h a r e s i n c e p t e d o n 3 - 1 - 1 2 . H i s to r i c a l p e r f o r m a n c e s h o w n f o r t h e A d m i n i s t r a t o r c l a ss s h a r e s p r i o r t o t h e i r i n c e p t i o n i s b a s e d o n t h e pe r f o r m a n c e o f t h e C l a s s I I I s h a r e s o f t h e B e n c h m a r k- F r e e A l l o c a t i o n F u n d ( G B M F X ) , t h e G M O f u n d i n w h i ch t h e f u n d i n v e s t s s u b s t a n t i a l l y a l l o f i t s i n v e s t able as s e t s . R e t u r n s f o r t h e C l a s s I I I s h a r e s h a v e b e e n ad j u s t e d d o w n w a r d t o r e f l e c t t h e h i g h e r e x p e n s e s a p pl i c a b l e t o A d m i n i s t r a t o r C l a s s s h a r e s a t t h e i r i n c eption. Th e B e n c h m a r k - F r e e A l l o c a t i o n F u n d i n c e p t e d o n 7 - 2 3 -0 3 . Th e a d v i s o r h a s c o m m i t t e d t o c e r t a i n f e e w a i v e r s a n d/ o r e x p e n s e r e i m b u r s e m e n t s . W i t h o u t t h e s e r e d u c t i o ns , t h e f u n d ’ s r e t u r n s w o u l d h a v e b e e n l o w e r . T h e s e re d u c t i o n s m a y b e d i s c o n t i n u e d . Es p e c i a l l y i n a d o w n y e a r FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 16 -4 2 . 2 -3 7 . 0 -2 5 . 6 -2 1 . 9 -12.0 -4 5 -4 0 -3 5 -3 0 -2 5 -2 0 -1 5 -1 0 -5 0 AC W I S & P 5 0 0 6 0 / 4 0 H F R X E q u a l We i g h t Absolute Return Fund 2 0 0 8 r e t u r n ( % ) 20 0 8 p e r f o r m a n c e (A d m i n i s t r a t o r c l a s s ) Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . Ti m e t o r e c o v e r y fr o m 1 2 / 0 8 : 51 mo n t h s 24 mo n t h s 9 months 38 mo n t h s St i l l un d e r w a t e r * *A s o f 6 - 3 0 - 2 0 1 5 , t h e H F R X E q u a l W e i g h t e d I n d e x n e ed e d t o r e t u r n + 5 . 7 % t o g e t b a c k t o e v e n . Po t e n t i a l t o m a k e m o r e m o n e y w i t h l e s s v o l a t i l i t y 17 $0 . 8 0 $1 . 0 0 $1 . 2 0 $1 . 4 0 $1 . 6 0 $1 . 8 0 $2 . 0 0 $2 . 2 0 $2 . 4 0 $2 . 6 0 $2 . 8 0 J u l - 0 3 J u l - 0 4 J u l - 0 5 J u l - 0 6 J u l - 0 7 J u l - 0 8 J u l - 0 9 J u l - 1 0 J u l -1 1 J u l - 1 2 J u l - 1 3 J u l - 1 4 G r o w t h o f $ 1 We l l s F a r g o A d v a n t a g e Ab s o l u t e R e t u r n F u n d Volatility 7.0% S& P 5 0 0 I n d e x 13.9% Al l d a t a s h o w n i s n e t o f f e e s a s o f 6 - 3 0 - 1 5 Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C HFRX Eq.-Wtd 1.3% GSCI -1.9% JPM EMBIG 8.5% S&P 500 8.6% Barcap Agg 4.6% T-Bill 1.4% ML HY II 8.4% MSCI ACWI xUS 8.2% Entire period** GS C I 25 . 6 % HF R X E q . - W t d 1. 3 % JP M E M B I G 10 . 7 % S& P 5 0 0 4. 9 % Ba r c a p A g g 2. 4 % T- B i l l 3. 0 % ML H Y I I 2. 7 % MS C I A C W I xU S 16 . 6 % WF A A R 15 . 4 % GS C I -1 5 . 1 % HF R X E q . - W t d 8. 8 % JP M E M B I G 9. 9 % S& P 5 0 0 15 . 8 % Ba r c a p A g g 4. 3 % T- B i l l 4. 8 % ML H Y I I 11 . 8 % MS C I A C W I xU S 26 . 7 % WF A A R 11 . 9 % GS C I 32 . 7 % HF R X E q . - W t d 4. 0 % JP M E M B I G 5. 5 % S& P 5 0 0 5. 5 % Ba r c a p A g g 7. 0 % T- B i l l 4. 7 % ML H Y I I 2. 2 % MS C I A C W I xU S 16 . 7 % WF A A R 10 . 3 % GS C I -4 6 . 5 % HF R X E q . - W t d -2 1 . 9 % JP M E M B I G -1 0 . 9 % S& P 5 0 0 -3 7 . 0 % Ba r c a p A g g 5. 2 % T- B i l l 1. 8 % ML H Y I I -2 6 . 4 % MS C I A C W I xU S -4 5 . 5 % WF A A R -1 2 . 0 % GS C I 13 . 5 % HF R X E q . - W t d 11 . 4 % JP M E M B I G 28 . 2 % S& P 5 0 0 26 . 5 % Ba r c a p A g g 5. 9 % T- B i l l 0. 2 % ML H Y I I 57 . 5 % MS C I A C W I xU S 41 . 4 % WF A A R 19 . 6 % GS C I 9. 0 % HF R X E q . - W t d 5. 3 % JP M E M B I G 12 . 0 % S& P 5 0 0 15 . 1 % Ba r c a p A g g 6. 5 % T- B i l l 0. 1 % ML H Y I I 15 . 2 % MS C I A C W I xU S 11 . 2 % WF A A R 3. 9 % GS C I -1 . 2 % HF R X E q - W t d -6 . 2 % JP M E M B I G 8. 5 % S& P 5 0 0 2. 1 % Ba r c a p A g g 7. 8 % T- B i l l 0. 1 % ML H Y I I 4. 4 % MS C I A C W I xU S -1 3 . 7 % WF A A R 2. 9 % GS C I 0. 1 % HF R X E q - W t d 2. 5 % JP M E M B I G 18 . 5 % S& P 5 0 0 16 . 0 % Ba r c a p A g g 4. 2 % T- B i l l 0. 1 % ML H Y I I 15 . 6 % MS C I A C W I xU S 16 . 8 % WF A A R 8. 6 % HF R X E q . - W t d 2. 7 % GS C I 17 . 3 % JP M E M B I G 11 . 6 % S& P 5 0 0 10 . 9 % Ba r c a p A g g 4. 3 % T- B i l l 1. 2 % ML H Y I I 10 . 9 % MS C I A C W I xU S 20 . 9 % WF A A R 17 . 1 % GS C I -1 . 2 % HF R X Eq - W t d 6. 3 % JP M E M B I G -6 . 6 % S& P 5 0 0 32 . 4 % Ba r c a p A g g -2 . 0 % T- B i l l 0. 1 % ML H Y I I 7. 4 % MS C I A C W I xU S 15 . 3 % WF A A R 9. 9 % 20 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 WFA AR 8.8% Ab s o l u t e R e t u r n F u n d : C o m p a r i s o n HFRX Eq-Wtd -0.5% GSCI -33.1% MSCI ACWI xUS -3.9% T-Bill 0.0% ML HY II 2.5% Barcap Agg 6.0% JPM EMBIG 5.5% S&P 500 13.7% WFA AR 0.6% 2014 So u r c e : G M O *8 - 0 1 - 0 3 t o 1 2 - 3 1 - 0 3 ** 8 - 0 1 - 0 3 t o 6 - 3 0 - 1 5 Pe r f o r m a n c e d a t a q u o t e d r e p r e s e n t s p a s t p e r f o r m a n c e a n d i s n o t p r e d i c t i v e o f f u t u r e p e r f o r m a n c e . IN V E S T M E N T P R O F E S S I O N A L U S E O N L Y – N O T F O R U S E W I T H TH E R E T A I L P U B L I C 18 HF R X E q . - W t d 4. 4 % GS C I 11 . 2 % JP M E M B I G 11 . 0 % S& P 5 0 0 13 . 1 % Ba r c a p A g g 3. 7 % T- B i l l 0. 4 0 % ML H Y I I 10 . 2 % MS C I A C W I xU S 23 . 9 % WF A A R 19 . 6 % 20 0 3 * Yo u m u s t b e u n c o n v e n t i o n a l a n d d y n a m i c FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 19 *C o m b i n a t i o n o f t h e G M O A l p h a O n l y F u n d a n d o t h e r p ri v a t e v e h i c l e s . EM D e b t 1 0 % Ju l y 2 0 0 3 : Un c o n v e n t i o n a l Na k e d U S L a r g e C a p Na k e d C o r p o r a t e a n d No m i n a l T r e a s u r i e s Au g u s t 2 0 0 8 : De f e n s i v e Pu r e Q u a l i t y p l a y i n e q u i t y 75 % i n a b s o l u t e r e t u r n an d b o n d s In c r e a s e d E q u i t y W e i g h t De d i c a t e d J a p a n E q u i t y Ex p o s u r e Ap r i l 2 0 0 9 : Re - i n v e s t i n g w h e n t e r r i f i e d Qu a l i t y 2 5 % EM D e b t 2 % St r a t e g i c F i x e d In c o m e 3 0 % Ab s o l u t e Re t u r n * & C a s h 43 % EM D e b t 2 % Em e r g i n g E q u i t y 8 % De v e l o p e d F i x e d In c o m e 1 6 % Ja p a n e s e E q u i t i e s 3 % In t ' l S m a l l C a p 6 % Ab s o l u t e Re t u r n * & C a s h 30 % Qu a l i t y 3 5 % Em e r g i n g E q u i t y 14 % RE I T s 8 % In t ' l S m a l l C a p 31 % In t ' l V a l u e 7 % TI P s 3 0 % St r a t e g y t h a t a d j u s t s t o c h a n g i n g m a r k e t s 20 So u r c e : G M O a s o f 6 - 3 0 - 1 5 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 0% 10 % 20 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 10 0 % 20 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 Em e r g i n g m a r k e t s e q u i t y De v e l o p e d i n t e r n a t i o n a l eq u i t y U. S . E q u i t y De v e l o p e d r a t e s Em e r g i n g d e b t As s e t - b a c k e d s e c u r i t i e s Al t e r n a t i v e s t r a t e g i e s Ca s h / C a s h p l u s We l l s F a r g o A d v a n t a g e A b s o l u t e R e t u r n F u n d cu r r e n t a l l o c a t i o n 21 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 21 As o f 6 - 3 0 - 1 5 *I n y e a r s o f d u r a t i o n . ** I n p e r c e n t o f V e g a n o t i o n a l . No t e : W e i g h t i n g s a r e s u b j e c t t o c h a n g e w i t h o u t n o t ic e . Al p h a O n l y 7 . 2 % C r o s s - S e c t i o n a l R a t e s a n d F X 2 0 . 8 % Eu r o p e a n V a l u e 1 0 . 1 % C a s h 9 . 1 % Me r g e r A r b i t r a g e 5 . 5 % Em e r g i n g M a r k e t s 1 7 . 2 % U . S . Q u a l i t y 6 . 2 % Ot h e r U . S . 3 . 4 % Em e r g i n g C o u n t r y D e b t 4 . 6 % As s e t - B a c k e d S e c u r i t i e s 3 . 9 % Ja p a n 2 . 3 % Sy s t e m a t i c G l o b a l M a c r o 5 . 0 % Sp e c i a l O p p o r t u n i t y 3 . 0 % C r e d i t O p p o r t u n i t i e s 1 . 6 % 0.3 -0 . 4 -0 . 4 A u s t r a l i a U K E u r o -1% -5% 1% 1% CH F E U R Ra t e s FX Al p h a O n l y Fi x e d I n c o m e Al l o c a t i o n s Eq u i t i e s : 3 9 % Fi x e d i n c o m e : 3 1 % Al t e r n a t i v e st r a t e g i e s : 1 4 % Ca s h / C a s h p l u s : 1 6 % -0 . 5 % -0 . 8 % 0.7% 0.7% -3 . 8 % 4.2% -6 % - 4 % - 2 % 0 % 2 % 4 % 6 % U. S . M i d U. S . S m a l l Em e r g i n g V a l u e EA F E V a l u e S& P e x F i n Qu a l i t y In t e r e s t - R a t e Du r a t i o n * Cu r r e n c i e s Vo l a t i l i t y * * Gl o b a l I n t e r e s t R a t e E x p o s u r e s * Cu r r e n c y a n d V o l a t i l i t y E x p o s u r e 19 . 5 17 . 1 15 . 4 11 . 9 10 . 3 -1 2 . 0 19 . 6 3. 9 2. 9 8. 6 9. 9 0.6 0.8 0. 6 3. 4 3. 5 2. 6 4. 1 0. 2 2. 9 1. 3 3. 0 1. 9 1. 6 0.7 0.4 -1 5 . 0 -1 0 . 0 -5 . 0 0. 0 5. 0 10 . 0 15 . 0 20 . 0 25 . 0 20 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 Ab s o l u t e R e t u r n F u n d CP I We l l s F a r g o A d v a n t a g e A b s o l u t e R e t u r n F u n d An n u a l p e r f o r m a n c e , A d m i n i s t r a t o r c l a s s 1. I n c e p t i o n d a t e : 7 - 2 3 - 0 3 2. S o u r c e : G M O , S e a s o n a l l y a d j u s t e d C P I i n i t i a l r e l e as e 3. D a t a a s o f 6 - 3 0 - 1 5 Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . 22 1 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 2 3 Po s i t i o n i n g a b s o l u t e r e t u r n i n c l i e n t p o r t f o l i o s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 23 10 0 % a b s o l u t e re t u r n p o r t f o l i o Co r e / s a t e l l i t e po r t f o l i o AR F Al t e r n a t i v e sl e e v e p o r t f o l i o Cl i e n t P o r t f o l i o Al t e r n a t i v e As s e t A l l o c a t i o n Al t e r n a t i v e In c o m e - g e n e r a t i n g po r t f o l i o Vo l a t i l i t y - m a n a g e d po r t f o l i o Ta c t i c a l al l o c a t i o n fu n d Ab s o l u t e Re t u r n F u n d Ta c t i c a l al l o c a t i o n fu n d Hi s t o r i c a l h y p o t h e t i c a l r e s u l t s w i t h ab s o l u t e r e t u r n FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 24 Hi s t o r i c a l r e s u l t s h a v e s h o w n t h a t c l i e n t s a c h i e v e a b e t t e r r i s k / r e w a r d t r a d e o f f w i t h h i g h e r A R F a l l o c ations. So u r c i n g t h e a l l o c a t i o n f r o m s t o c k s h a s a c h i e v e d b e tt e r r e s u l t s t h a n s o u r c i n g f r o m b o n d s . Th e f u n d h a s g e n e r a t e d s u p e r i o r r e s u l t s b y l a r g e l y in v e s t i n g i n t h e s a m e a s s e t s t h a t c o m p r i s e t h e tr a d i t i o n a l 6 0 / 4 0 p o r t f o l i o . GM O c a n a v o i d t h e e x p e n s i v e a s s e t c l a s s e s w i t h o u t h av i n g t o w o r r y a b o u t t h i n g s l i k e t r a c k i n g e r r o r . We a l t h c o m p o u n d s a t a b s o l u t e r e t u r n s , n o t r e t u r n s r el a t i v e t o s o m e b e n c h m a r k . So u r c e : Z e p h y r , W e l l s F a r g o F u n d s M a n a g e m e n t L L C Pa s t p e r f o r m a n c e i s n o g u a r a n t e e o f f u t u r e r e s u l t s . Th e h i s t o r i c a l p e r f o r m a n c e — s i n c e 7 - 3 1 - 0 3 , t h e f i r s t fu l l m o n t h o f r e t u r n s f o r t h e A b s o l u t e R e t u r n F u n d — o f a variety of po t e n t i a l a l l o c a t i o n s . R e t / V o l i s t h e r e t u r n p e r u n it o f r i s k ( s i m i l a r t o S h a r p e R a t i o ) . Co l o r c o d e s = t o p t h r e e v a l u e s i n g r e e n , m i d d l e t h r ee v a l u e s i n y e l l o w , a n d w o r s t t h r e e v a l u e s i n r e d . In d e x e s u s e d = M S C I W o r l d I n d e x f o r s t o c k s a n d B a r c la y s U . S . A g g r e g a t e B o n d I n d e x f o r b o n d s . 8- 1 - 0 3 – 6- 3 0 - 1 5 No A R F al l o c a t i o n 10 % a l l o c a t i o n 2 0 % a l l o c a t i o n H i g h e r a l l o c a t i o n s Tr a d 60 / 4 0 Al l f r o m bo n d s Al l f r o m st o c k s Ha l f & ha l f Al l f r o m bo n d s Al l f r o m st o c k s Ha l f & ha l f 50 % A R F , 50 % T r a d 100% ARF St o c k s 60 % 6 0 % 5 0 % 5 5 % 6 0 % 4 0 % 5 0 % 3 0 % 0 % Bo n d s 40 % 3 0 % 4 0 % 3 5 % 2 0 % 4 0 % 3 0 % 2 0 % 0 % AR F Ad m i n 0% 1 0 % 1 0 % 1 0 % 2 0 % 2 0 % 2 0 % 5 0 % 1 0 0 % 10 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % 1 0 0 % Re t u r n 6. 9 0 7 . 2 8 6 . 9 7 7 . 1 3 7 . 6 6 7 . 0 3 7 . 3 5 7 . 8 6 8 . 7 6 Vo l a t i l i t y 9. 2 7 9 . 8 0 8 . 3 7 9 . 0 8 1 0 . 3 5 7 . 4 9 8 . 9 0 7 . 8 1 7 . 0 4 Re t / V o l 0. 7 4 0 . 7 4 0 . 8 3 0 . 7 9 0 . 7 4 0 . 9 4 0 . 8 3 1 . 0 1 1 . 2 4 Ad d e n d u m 25 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C Ab s o l u t e R e t u r n F u n d s t a t i s t i c s v e r s u s S & P 5 0 0 26 So u r c e : Z e p h y r Pa s t p e r f o r m a n c e i s n o g u a r a n t e e o f f u t u r e r e s u l t s . FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C Th e p r o b l e m w i t h b e n c h m a r k s 1. Be n c h m a r k s i g n o r e v a l u a t i o n . 2. Be n c h m a r k s a s s u m e v o l a t i l i t y = r i s k . 3. Be n c h m a r k s a s s u m e t r a c k i n g e r r o r = r i s k . 4. Be n c h m a r k s c a n s h a c k l e p o r t f o l i o s t o a l o w r e t u r n . FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 27 Be n c h m a r k s i g n o r e v a l u a t i o n FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 28 0% 2% 4% 6% 8% 10 % 12 % 5 t o 1 3 1 3 t o 1 5 1 5 t o 2 0 2 0 t o 4 8 St a r t i n g S h i l l e r P / E Today 26.8x S& P 5 0 0 I n d e x S u b s e q u e n t 1 0 - y e a r a n n u a l i z e d r e a l r e t u r n As o f 6 - 3 0 - 1 5 So u r c e : G M O , S h i l l e r Th e a n n u a l i z e d t e n y e a r f o r w a r d r e a l r e t u r n s s h o w n ab o v e a r e c a l c u l a t e d u s i n g r e a l p r i c e , r e a l d i v i d e n ds f o r t h e S & P c o m p o s i t e i n d e x a n d c y c l i c a l l y a d j u s t ed PE from th e s t a n d a r d S h i l l e r d a t a s o u r c e ( h t t p : / / w w w . e c o n . y a le . e d u / ~ s h i l l e r / d a t a / i e _ d a t a . x l s ) . Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . Be n c h m a r k s i g n o r e v a l u a t i o n FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 29 -2 % -1 % 0% 1% 2% 3% 4% 5% 6% 7% 8% Be l o w 3 3 % t o 5 % 5 % t o 8 % A b o v e 8 % St a r t i n g y i e l d s 29 U. S . T r e a s u r i e s S u b s e q u e n t 1 0 - y e a r a n n u a l i z e d r e a l r e t u r n As o f 6 - 3 0 - 1 5 So u r c e : G l o b a l F i n a n c i a l , S h i l l e r Gl o b a l F i n a n c i a l D a t a f o r h i s t o r i c a l : 1 0 - Y e a r U . S . Tr e a s u r y r e t u r n i n d e x , U . S . C P I , S h i l l e r s o u r c e ( h t t p: / / w w w . e c o n . y a l e . e d u / ~ s h i l l e r / d a t a / i e _ d a t a . x l s ) : 1 0-Year yields. Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . To d a y 2. 3 5 % Sp i n n i n g y o u r w h e e l s : A h y p o t h e t i c a l 6 0 / 4 0 * p o r t f o l i o o v e r t i m e 30 Ov e r v a l u e d m a r k e t s c a n d o o m a s t a t i c p o r t f o l i o t o p oo r r e t u r n s f o r e x t e n d e d p e r i o d s As o f 3 - 3 1 - 1 5 Pa s t p e r f o r m a n c e i s n o g u a r a n t e e o f f u t u r e r e s u l t s . 60 % U . S . E q u i t i e s ( S & P 5 0 0 ) , 4 0 % U . S . B o n d s ( U . S . T re a s u r i e s ) r e b a l a n c e d m o n t h l y . Th e a b o v e i l l u s t r a t e s a h y p o t h e t i c a l s t r a t e g y t h a t GM O d o e s n o t m a n a g e . H y p o t h e t i c a l r e t u r n s a r e n o t p re d i c t i v e o f f u t u r e a l l o c a t i o n s . T h e r e s u l t s r e f l e c t returns an in v e s t o r w o u l d h a v e o b t a i n e d h a d t h e y i n v e s t e d i n t hi s h y p o t h e t i c a l s t r a t e g y d u r i n g t h e t i m e p e r i o d s s ho w n a n d d o n o t r e p r e s e n t a c t u a l r e t u r n s . H y p o t h e t i cal returns ar e c a l c u l a t e d b y t h e r e t r o a c t i v e a p p l i c a t i o n o f a mo d e l c o n s t r u c t e d o n t h e b a s i s o f h i s t o r i c a l d a t a a nd b a s e d o n a s s u m p t i o n s i n t e g r a l t o t h e m o d e l . I n t h e above, GMO is u s i n g a 6 0 % U . S . e q u i t y a n d 4 0 % f i x e d i n c o m e ( U . S. T r e a s u r i e s ) a l l o c a t i o n t o a r r i v e a t t h e r e t u r n s . T o r e p r e s e n t t h e 6 0 % U . S . e q u i t y a l l o c a t i o n , G M O u s ed the Co w l e s / S t a n d a r d & P o o r ’ s C o m p o s i t e i n d e x o f s t o c k s fr o m 1 9 0 0 t o 1 9 2 6 . F r o m 1 9 2 6 t o 1 9 5 7 , a 9 0 - s t o c k C o m po s i t e w a s u s e d , a n d i n 1 9 5 7 , S & P i n t r o d u c e d t h e S & P 50 0 s t o c k a v e r a g e . C h a n g e s i n t h e s e a s s u m p t i o n s m a y ha v e a m a t e r i a l i m p a c t o n t h e h y p o t h e t i c a l r e t u r n s pr e s e n t e d . C e r t a i n a s s u m p t i o n s h a v e b e e n m a d e f o r mo d e l i n g p u r p o s e s a n d a r e u n l i k e l y t o b e r e a l i z e d . No r e p r e s e n t a t i o n s a n d w a r r a n t i e s a r e m a d e a s t o t h e r e a s o n a b l e n e s s o f t h e a s s u m p t i o n s . So u r c e s : G l o b a l F i n a n c i a l D a t a ( e a r l y h i s t o r y ) , F a c ts e t ( S & P 5 0 0 r e t u r n s a n d C P I ) , J . P . M o r g a n ( J . P . M o r ga n G B I U n i t e d S t a t e s T r a d e d ) . Ro b e r t S h i l l e r ’ s w e b s i t e : h t t p : / / w w w . e c o n . y a l e . e d u / ~s h i l l e r / d a t a . h t m . 19 0 0 – 1 9 2 0 -0 . 2 % 19 x 5x 3. 2 % 5. 1 % 19 2 9 – 1 9 4 9 1. 4 % 31 x 10 x 3. 4 % 2. 3 % 19 6 5 – 1 9 8 5 0. 9 % 23 x 10 x 4. 2 % 11 . 5 % 20 0 0 – P r e s e n t 3.1% 43 x 27x 5. 8 % 2.0% P e r f o r m a n c e i n R e a l T e r m s o f a 6 0 / 4 0 P o r t f o l i o * Re a l R e t u r n : Sh i l l e r P / E : Bo n d Y i e l d s : -5 0 % 0% 50 % 10 0 % 15 0 % 20 0 % 25 0 % '0 0 ' 0 4 ' 0 8 ' 1 2 ' 1 6 ' 2 0 ' 2 4 ' 2 8 ' 3 2 ' 3 6 ' 4 0 ' 4 4 ' 4 8 ' 5 2 ' 5 6 ' 6 0 ' 6 4 '6 8 ' 7 2 ' 7 6 ' 8 0 ' 8 4 ' 8 8 ' 9 2 ' 9 6 ' 0 0 ' 0 4 ' 0 8 ' 1 2 FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C Ri s k ≠ V o l a t i l i t y FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 31 0% 5% 10 % 15 % 20 % 25 % 30 % 35 % 20 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 A n n u a l v o l a t i l i t y o f S & P 5 0 0 I n d e x Sp r i n g 2 0 0 7 : V o l a t i l i t y hi t s a m u l t i - y e a r l o w ri g h t be f o r e th e c r a s h Sp r i n g 2 0 0 9 : V o l a t i l i t y h i t s a m u l t i - y e a r h i g h ri g h t be f o r e a m a s s i v e r a l l y Ja n - So u r c e : S t a n d a r d & P o o r ’ s , G M O A s o f 9 - 3 0 - 1 1 Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . Tw o s o u r c e s o f r e t u r n Th e c h a r t a b o v e r e p r e s e n t s a l l o f t h e u n d e r l y i n g s t ra t e g i e s t h a t m a y b e u t i l i z e d b y t h e W e l l s F a r g o A d va n t a g e A b s o l u t e R e t u r n F u n d . A c t u a l a l l o c a t i o n s m ay vary. 32 Ta c t i c a l a l l o c a t i o n a c r o s s G M O s t r a t e g i e s Qu a l i t y U. S . E q u i t y A l l o c a t i o n In t e r n a t i o n a l E q u i t y In t e r n a t i o n a l L a r g e / M i d C a p Eq u i t y Re s o u r c e s Em e r g i n g C o u n t r i e s Em e r g i n g D o m e s t i c Op p o r t u n i t i e s Em e r g i n g M a r k e t s As s e t A l l o c a t i o n B o n d Co r e P l u s B o n d Cu r r e n c y H e d g e d I n t e r n a t i o n a l Bo n d De b t O p p o r t u n i t i e s De v e l o p e d R a t e s Em e r g i n g C o u n t r y D e b t Gl o b a l B o n d In f l a t i o n I n d e x e d P l u s B o n d In t e r n a t i o n a l B o n d W o r l d O p p o r t u n i t y O v e r l a y Me r g e r A r b i t r a g e Ri s k P r e m i u m Sp e c i a l O p p o r t u n i t i e s Sy s t e m a t i c G l o b a l M a c r o Op p o r t u n i t y U. S . E q u i t y St r a t e g i e s In t e r n a t i o n a l De v e l o p e d E q u i t i e s St r a t e g i e s Em e r g i n g M a r k e t s Eq u i t i e s S t r a t e g i e s Gl o b a l F i x e d I n c o m e St r a t e g i e s Al t e r n a t i v e In v e s t m e n t s St r a t e g i e s Se c u r i t y s e l e c t i o n w i t h i n s t r a t e g i e s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C Alpha Only U.S. Treasury Cash/Cash Plus Strategies Fr a m e w o r k Ze r o t o n e g a t i v e e q u i t y b e t a Bo n d - l i k e v o l a t i l i t y Lo w c o r r e l a t i o n t o s t o c k s o r bo n d s Re t u r n t a r g e t o f T - b i l l s p l u s 1. 5 % t o 2 % Tw o p r i m a r y a l p h a s o u r c e s : – Se c u r i t y s e l e c t i o n – AA f o r e c a s t s Se c u r i t y S e l e c t i o n & P o r t a b l e A l p h a : A S t y l i z e d E x a m p l e Lo n g Q u a l i t y Sh o r t S& P 5 0 0 Lo n g A c t i v e : In t e r n a t i o n a l C o r e Sh o r t U n d e r l y i n g Be t a : E A F E GM O A l p h a O n l y f u n d FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 33 Ro l e w i t h i n a p o r t f o l i o Al t e r n a t i v e t o c a s h o r b o n d s “D r y p o w d e r ” As s e t A l l o c a t i o n F o r e c a s t s & S p r e a d T r a d e s : A S t y l i z e d E x a m p l e + = + = Ex c e s s R e t u r n (A l p h a ) EA F E - E A F E Excess Return (Alpha) Qu a l i t y 7- Y e a r Fo r e c a s t S& P 5 0 0 : 7- Y e a r Fo r e c a s t Spread Alpha Sp r e a d be t w e e n fo r e c a s t s 34 As o f 6 - 3 0 - 1 5 *E f f e c t i v e y i e l d r e p r e s e n t s t o t a l p a y o u t i n c l u d i n g ca s h d i v i d e n d s a n d s h a r e b u y b a c k s . C u r r e n t c a s h d i vi d e n d y i e l d f o r t h e S & P 5 0 0 i s 2 . 1 % . Pa s t p e r f o r m a n c e i s n o g u a r a n t e e o f f u t u r e r e s u l t s . Th e c h a r t r e p r e s e n t s r e a l r e t u r n i l l u s t r a t i o n s f o r se v e r a l a s s e t c l a s s e s a n d a n e s t i m a t e o f v a l u e e x p e cted to b e a d d e d f r o m a c t i v e m a n a g e m e n t . T h e s e i l l u s t r a t io n s a r e f o r w a r d - l o o k i n g s t a t e m e n t s b a s e d u p o n t h e re a s o n a b l e b e l i e f s o f G M O . Co m p o n e n t s o f a n n u a l r e t u r n o f S & P 5 0 0 : 7- y e a r r e g r e s s i o n FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 34 Va l u a t i o n Gr o w t h a n d I n c o m e P/ E M a r g i n C a p i t a l G r o w t h E f f e c t i v e Y i e l d * No r m a l 16 . 0 5. 7 % No r m a l 2. 9 % 2. 9 % Cu r r e n t 20 . 7 7. 2 % Va l u a t i o n Ad j u s t m e n t 0. 6 % -1 . 1 % -3 . 7 % -3 . 4 % 3. 4 % 1. 8 % -1.9% -6 % -4 % -2 % 0% 2% 4% Lo s s f r o m P / E Co n t r a c t i o n Lo s s f r o m Ma r g i n De c r e a s e G a i n f r o m Ca p i t a l G r o w t h Ef f e c t i v e Yi e l d Total Return + + + = St a n d a r d i z e d p e r f o r m a n c e FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 35 Av e r a g e a n n u a l t o t a l r e t u r n s ( % ) a s o f 6 - 3 0 - 1 5 1 y e a r 3 y e a r 5 y e a r 1 0 y e a r Since inception 7-23-03 We l l s F a r g o A d v a n t a g e Ab s o l u t e R e t u r n F u n d – I n s t 1 -2 . 4 1 5 . 5 8 6 . 5 1 6 . 4 6 8 . 7 9 We l l s F a r g o A d v a n t a g e Ab s o l u t e R e t u r n F u n d – A d m i n 1 -2 . 7 4 5 . 3 1 6 . 3 5 6 . 3 8 8 . 7 2 Fi g u r e s q u o t e d r e p r e s e n t p a s t p e r f o r m a n c e , w h i c h i s n o g u a r a n t e e o f f u t u r e r e s u l t s . In v e s t m e n t r e t u r n a n d p r i n c i p a l v a l u e o f a n i n v e s t m ent wi l l f l u c t u a t e s o t h a t a n i n v e s t o r ’ s s h a r e s , w h e n r ed e e m e d , m a y b e w o r t h m o r e o r l e s s t h a n t h e i r o r i g i na l c o s t . C u r r e n t p e r f o r m a n c e m a y b e l o w e r or h i g h e r t h a n t h e p e r f o r m a n c e d a t a q u o t e d a n d a s s u me s t h e r e i n v e s t m e n t o f d i v i d e n d s a n d c a p i t a l g a i n s . C u r r e n t m o n t h - e n d p e r f o r m a n c e i s av a i l a b l e a t t h e f u n d s ’ w e b s i t e , w e l l s f a r g o a d v a n t a g ef u n d s . c o m . Ad m i n i s t r a t o r a n d I n s t i t u t i o n a l C l a s s s h a r e s a r e s o ld w i t h o u t a f r o n t - e n d s a l e s c h a r g e o r c o n t i n g e n t d ef e r r e d s a l e s c h a r g e . T h e a d v i s o r h a s co m m i t t e d t o c e r t a i n f e e w a i v e r s a n d / o r e x p e n s e r e i mb u r s e m e n t s . W i t h o u t t h e s e r e d u c t i o n s , t h e f u n d s ’ r et u r n s w o u l d h a v e b e e n l o w e r . T h e s e re d u c t i o n s m a y b e d i s c o n t i n u e d . 1. P e r f o r m a n c e f o r t h e f u n d s h o w n r e f l e c t s a p r e d e c e s so r f u n d ’ s p e r f o r m a n c e a n d m a y b e a d j u s t e d t o r e f l e ct t h e f u n d ’ s e x p e n s e s a s a p p l i c a b l e . Pr e d e c e s s o r f u n d i n f o r m a t i o n c a n b e f o u n d i n t h e f u nd ’ s p r o s p e c t u s . Ab s o l u t e r e t u r n f u n d s a r e n o t i n t e n d e d t o o u t p e r f o r m s t o c k s a n d b o n d s i n s t r o n g m a r k e t s , a n d t h e r e i s no gu a r a n t e e o f p o s i t i v e r e t u r n s o r t h a t t h e f u n d ’ s o b je c t i v e s w i l l b e a c h i e v e d . S t o c k v a l u e s f l u c t u a t e i n response to th e a c t i v i t i e s o f i n d i v i d u a l c o m p a n i e s a n d g e n e r a l ma r k e t a n d e c o n o m i c c o n d i t i o n s . B o n d v a l u e s f l u c t u a te in re s p o n s e t o t h e f i n a n c i a l c o n d i t i o n o f i n d i v i d u a l i ss u e r s , g e n e r a l m a r k e t a n d e c o n o m i c c o n d i t i o n s , a n d changes in i n t e r e s t r a t e s . C h a n g e s i n m a r k e t c o n d i t i o n s a n d g o v e r n m e n t p o l i c i e s m a y l e a d t o p e r i o d s o f h e i g h t e ned vo l a t i l i t y i n t h e b o n d m a r k e t a n d r e d u c e d l i q u i d i t y f o r c e r t a i n b o n d s h e l d b y t h e f u n d . I n g e n e r a l , w h en interest ra t e s r i s e , b o n d v a l u e s f a l l a n d i n v e s t o r s m a y l o s e p r i n c i p a l v a l u e . I n t e r e s t - r a t e c h a n g e s a n d t h e i r i mpact on the fu n d a n d i t s s h a r e p r i c e c a n b e s u d d e n a n d u n p r e d i c ta b l e . A l t e r n a t i v e i n v e s t m e n t s , s u c h a s c o m m o d i t i e s and me r g e r a r b i t r a g e s t r a t e g i e s , a r e s p e c u l a t i v e a n d e n ta i l a h i g h d e g r e e o f r i s k . F o r e i g n i n v e s t m e n t s a r e especially vo l a t i l e a n d c a n r i s e o r f a l l d r a m a t i c a l l y d u e t o d if f e r e n c e s i n t h e p o l i t i c a l a n d e c o n o m i c c o n d i t i o n s of the host co u n t r y . T h e f u n d w i l l i n d i r e c t l y b e e x p o s e d t o a l l o f t h e r i s k s o f a n i n v e s t m e n t i n t h e u n d e r l y i n g f u nds and will in d i r e c t l y b e a r e x p e n s e s o f t h e u n d e r l y i n g f u n d s . T he u s e o f d e r i v a t i v e s m a y r e d u c e r e t u r n s a n d / o r i n c rease vo l a t i l i t y . C e r t a i n i n v e s t m e n t s t r a t e g i e s t e n d t o i nc r e a s e t h e t o t a l r i s k o f a n i n v e s t m e n t ( r e l a t i v e t o the broader ma r k e t ) . T h i s f u n d i s e x p o s e d t o s m a l l e r - c o m p a n y s e cu r i t i e s r i s k . C o n s u l t t h e f u n d ’ s p r o s p e c t u s f o r a d ditional in f o r m a t i o n o n t h e s e a n d o t h e r r i s k s . Ca r e f u l l y c o n s i d e r a f u n d ’ s i n v e s t m e n t o b j e c t i v e s , ri s k s , c h a r g e s , a n d e x p e n s e s b e f o r e i n v e s t i n g . F o r a current pr o s p e c t u s a n d , i f a v a i l a b l e , a s u m m a r y p r o s p e c t u s , c o n t a i n i n g t h i s a n d o t h e r i n f o r m a t i o n , v i s i t we l l s f a r g o a d v a n t a g e f u n d s . c o m . R e a d i t c a r e f u l l y b e f or e i n v e s t i n g . We l l s F a r g o A s s e t M a n a g e m e n t ( W F A M ) i s a t r a d e n a m e u s e d b y t h e a s s e t m a n a g e m e n t b u s i n e s s e s o f W e l l s F ar g o & C o m p a n y . W F A M i n c l u d e s A f f i l i a t e d M a n a g e r s ( G alliard Capital Ma n a g e m e n t , I n c . ; G o l d e n C a p i t a l M a n a g e m e n t , L L C ; N el s o n C a p i t a l M a n a g e m e n t ; P e r e g r i n e C a p i t a l M a n a g e m en t ; a n d T h e R o c k C r e e k G r o u p ) ; W e l l s C a p i t a l M a n a g e ment, Inc. (Metropolitan We s t C a p i t a l M a n a g e m e n t , L L C ; F i r s t I n t e r n a t i o n a l A dv i s o r s , L L C ; a n d E C M A s s e t M a n a g e m e n t L t d . ) ; W e l l s F a r g o F u n d s D i s t r i b u t o r , L L C ; W e l l s F a r g o A s s e t M a nagement Luxembourg S.A.; an d W e l l s F a r g o F u n d s M a n a g e m e n t , L L C . We l l s F a r g o F u n d s M a n a g e m e n t , L L C , a w h o l l y o w n e d s ub s i d i a r y o f W e l l s F a r g o & C o m p a n y , p r o v i d e s i n v e s t me n t a d v i s o r y a n d a d m i n i s t r a t i v e s e r v i c e s f o r Wells Fargo Ad v a n t a g e F u n d s . Ot h e r a f f i l i a t e s o f W e l l s F a r g o & C o m p a n y p r o v i d e s ub a d v i s o r y a n d o t h e r s e r v i c e s f o r t h e f u n d s . T h e f u nd s a r e d i s t r i b u t e d b y We l l s F a r g o F u n d s D i s t r i b u t o r , L L C , Me m b e r F I N R A , a n a f f i l i a t e o f W e l l s F a r g o & C o m p a n y . 2 3 7 2 3 2 0 9 - 1 5 Di s c l o s u r e s t a t e m e n t s FO R I N V E S T M E N T P R O F E S S I O N A L U S E O N L Y - N O T F O R U S E W IT H T H E R E T A I L P U B L I C 36 NO T F D I C I N S U R E D – N O B A N K G U A R A N T E E – M A Y L O S E V A L U E September 24, 2015 Audrey Ross Plan Administrator, City of Palm Beach Gardens Firefighters’ Pension Trust Fund City of Palm Beach Gardens City Hall Council Chambers 10500 North Military Trail Palm Beach Gardens, Florida 33410 RE: William Blair – Macro Allocation Strategy Presentation Dear Ms. Ross: Thank you for inviting us to present our Macro Allocation Strategy to the City of Palm Beach Gardens Firefighters’ Pension Trust Fund on Thursday, October 1, 2015 at 10:15 a.m. EST. Joining me for the presentation will be John Simmons, CFA. John is a senior member of our Dynamic Allocation Strategies Team, serving as an Investment Strategist. We thought it would be helpful to summarize what we believe to be a few of our distinguishing characteristics as they relate to our Macro Allocation strategy for the City of Palm Beach Gardens Firefighters’ Pension Trust Fund: • 80 years of stability and continuity for our clients – William McCormick Blair founded our firm in Chicago in 1935 with a belief that, “When our clients succeed, the firm’s success will follow.” Such values are intact today and the firm remains 100% employee-owned by the active partners. • Experienced investment team – The DAS team has worked together for more than 15 years, and Brian Singer, co-Portfolio manager and founder of the strategy, has managed multi-asset portfolios for sophisticated institutional clients for over 20 years. • Consistent philosophy and process – The team’s time tested philosophy is grounded in the belief that asset prices gravitate towards their long term fundamental value. Allocating to undervalued assets and currencies results in superior risk-adjusted returns. The strategy has outperformed CPI+ 6% by 368 bps (as of 06/30/15) annualized since its 11/30/11 inception. • Market behavioral analysis – Market behavioral analysis is a critical aspect of the investment process and helps the team navigate the short to intermediate time horizon. The team spends considerable time and research to understand market behavioral factors in determining why prices differ from fundamental value. This analysis considers macro themes, the understanding of conventional wisdom and geopolitical game theaters. • Active currency management – We believe that active currency management is an inefficient and underutilized tool in portfolio management. Our longer-term, fundamental value approach to currency management is a key differentiator of William Blair’s strategy, and it has proven to add significant value over time. Additionally, exposure to active currency management can add significant diversification benefits to multi-asset class portfolios, as currencies tend to have very little correlation with other asset classes over the long-term. • Considerable experience with public funds – We have been entrusted to manage approximately $15 billion in assets on behalf of public fund clients such as the City of Baltimore Fire & Police Employees Retirement System, City of Orlando and Florida State Board of Administration. Additionally, in May 2015, William Blair was recognized with the National Conference on Public Employee Retirement Systems (NCPERS) Award of Excellence. The award symbolizes NCPERS’ acknowledgement of our dedicated support of defined benefit plans across the country. Thank you again for your consideration. Should you have any questions or need additional information, please feel free to contact me at 312-364-8863 or kfetzer@williamblair.com. Kindest regards, Kevin Fetzer, CFA CC: Daniel Johnson, Senior Consultant, The Bogdahn Group Jo h n C . S i m m o n s , C F A js i m m o n s @ w i l l i a m b l a i r . c o m +1 3 1 2 3 6 4 8 2 7 9 Ke v i n F e t z e r , C F A kf e t z e r @ w i l l i a m b l a i r . c o m +1 3 1 2 3 6 4 8 8 6 3 40807 Cu s t o m C o v e r – 2 L i n e T i t l e Ma c r o A l l o c a t i o n S t r a t e g y Ci t y o f P a l m B e a c h G a r d e n s Fi r e f i g h t e r s ' P e n s i o n T r u s t F u n d Oc t o b e r 0 1 , 2 0 1 5 FO R U S E W I T H I N S T I T U T I O N A L I N V E S T O R S O N L Y . A s u s e d i n t h i s d o c u m e n t , “ W i l l i a m B l a i r ” r e f e r s t o W i l l i a m B la i r I n v e s t m e n t M a n a g e m e n t , L L C a n d t h e I n v e s t m e n t M anagement di v i s i o n o f W i l l i a m B l a i r & C o m p a n y , L . L . C . u n l e s s ot h e r w i s e n o t e d . F o r m o r e i n f o r m a t i o n a b o u t W i l l i a m B l a i r , p l e a s e s e e h t t p : / / w w w . w i l l i a m b l a i r . c o m / A b o u t -W i l l i a m - B l a i r . a s p x 00001480 1 Fi r m O v e r v i e w In d e p e n d e n c e • A c o l l e g i a l , e n t r e p r e n e u r i a l c u l t u r e • Br o a d - b a s e d o w n e r s h i p • 10 0 % a c t i v e e m p l o y e e o w n e d Pe r f o r m a n c e • De d i c a t i o n t o a r e s e a r c h - f o c u s e d i n v e s t m e n t pr o c e s s d e s i g n e d f o r c o n s i s t e n t lo n g - t e r m r e t u r n s Re l a t i o n s h i p s • Co m m i t m e n t t o c l i e n t s u c c e s s e n c o m p a s s e s pe r f o r m a n c e , p r o c e s s d e v e l o p m e n t , co m m u n i c a t i o n , a n d r e s p o n s i v e n e s s Co m m i t t e d t o Cl i e n t S u c c e s s Si n c e 1 9 3 5 238847 000015A2 2 As s e t s U n d e r M a n a g e m e n t 234277 $6 8 . 3 b i l l i o n i n a s s e t s u n d e r m a n a g e m e n t As o f J u n e 3 0 , 2 0 1 5 Ma c r o A l l o c a t i o n B r i a n S i n g e r A l l C a p G r o w t h $ 3 . 6 b i l l i o n J o h n J o s t ra n d I n t e r n a t i o n a l G r o w t h $ 1 6 . 5 b i l l i o n S t e p h a n i e Braming Gl o b a l O p p o r t u n i t y T h o m a s C l a r k e D a v i d F o r d i n g ( c l o s e d 6 / 1 2 ) S i m o n F e n n e l l D y n a m i c D i v e r s i f i e d A l l o c a t i o n La r g e C a p G r o w t h $ 1 . 0 b i l l i o n J a m e s G o l a n Jeffrey Urbina D a v i d R i c c i I n t e r n a t i o n a l L e a d e r s $ 4 . 0 b i l l i o n K en McAtamney Mi d C a p G r o w t h $ 5 . 6 b i l l i o n R o b e r t L a n p h i e r Simon Fennell Mu l t i S t r a t e g y J o h n A b u n a s s a r D a v i d R i c c i I n t e r n a t i o n a l D e v . P l u s $ 1 . 3 b i l l i o n David Merjan He d g e d E q u i t y P e t e r C a r l S m a l l - M i d C a p G r o w t h $ 5 . 1 b i l l i o n K a r l B r e w e r Jack Murphy No n - D i r e c t i o n a l M a t t D e m a r a y R o b e r t L a n p h i e r A D R G r o w t h $ 3 0 5 m i l l i o n D a v i d M e rjan Gl o b a l C o m m o d i t y S p e c i a l i s t D . T r o w b r i d g e E l l i m a n M a t t L i t f i n I n t l . S m a l l C a p G r o w t h $ 2 . 9 b i l l i o n Jeffrey Urbina D i r e c t i o n a l M u l t i a l t e r n a t i v e B r i a n Z i v S m a l l C a p G r o w t h $ 8 7 9 m i l l i o n M i k e B a l k in ( c l o s e d 3 / 1 1 ) S t e p h a n i e B r a m i n g J a s o n M o e d e K a r l B r e w e r Andrew Flynn K a t i e A u s t i n La r g e C a p V a l u e $ 4 m i l l i o n D a v i d H o n e E m e r g i n g M a r ke t s G r o w t h $ 5 . 4 b i l l i o n J e f f r e y U r b i n a (c l o s e d 6 / 1 1 ) T o d d M c C l o n e Mi d C a p V a l u e $ 3 m i l l i o n C h a d K i l m e r Casey Preyss M a r k L e s l i e E m e r g i n g M a r k e t s L e a d e r s $ 3 . 9 b i l l i o n Todd McClone D a v i d M i t c h e l l Jeffrey Urbina Sm a l l - M i d C a p V a l u e $ 1 3 2 m i l l i o n C h a d K i l m e r E m e r g i ng M a r k e t s S m a l l C a p $ 1 . 4 b i l l i o n T o d d M c C l o n e M a r k L e s l i e (c l o s e d 1 0 / 1 3 ) Jeffrey Urbina D a v i d M i t c h e l l G l o b a l L e a d e r s $ 2 . 7 b i l l i o n K e n M c Atamney Sm a l l C a p V a l u e $ 1 . 6 b i l l i o n C h a d K i l m e r David Fording M a r k L e s l i e Gl o b a l S m a l l C a p $ 6 0 m i l l i o n Andrew Flynn D a v i d M i t c h e l l Matthew Litfin Fi x e d I n c o m e $ 2 . 7 b i l l i o n C h r i s t o p h e r V i n c e n t Ch i n a A S h a r e s $ 3 1 8 m i l l i o n Jeffrey Urbina C o r e T o d d K u r i s u Casey Preyss I n t e r m e d i a t e K a t h y L y n c h L o w D u r a t i o n P a u l S u l a r z Cu s t o m P o r t f o l i o s $ 5 . 8 b i l l i o n US S t r a t e g i e s : $ 2 6 . 7 b i l l i o n N o n - U S S t r a t e g i e s : $ 3 8 . 9 billion He d g e F u n d S t r a t e g i e s : $ 6 3 6 m i l l i o n Dy n a m i c A l l o c a t i o n S t r a t e g i e s : $ 2 . 0 b i l l i o n 00000A2E 3 Re p r e s e n t a t i v e C l i e n t L i s t Wi l l i a m B l a i r & C o m p a n y s e l e c t e d c l i e n t s f o r i n c l u s i on i n t h i s l i s t t o i n d i c a t e t h e s c o p e o f c l i e n t s s e rv e d u s i n g t h e f o l l o w i n g c r i t e r i a : c a t e g o r y , g e o g r a p hic location, size, investment style and na m e r e c o g n i t i o n . I n c l u s i o n o n t h i s l i s t i s n o t t o b e c o n s t r u e d a s a p p r o v a l o r d i s a p p r o v a l o f W i l l i a m B l ai r o r i t s a d v i s o r y s e r v i c e s . 36662 Co r p o r a t e Pu b l i c P l a n s a n d T a f t - H a r t l e y • Ai r P r o d u c t s & C h e m i c a l , I n c . • AT & T • Ba n k o f A m e r i c a • Bo e i n g C o m p a n y • Co n s o l i d a t e d C o m m u n i c a t i o n s • De l u x e C o r p o r a t i o n • Do w C h e m i c a l C o m p a n y • PG A T O U R , I n c . • Ar i z o n a S t a t e R e t i r e m e n t S y s t e m • Ci t y o f L a n s i n g E R S & P F R S • Ci t y o f O r l a n d o P e n s i o n P l a n s • Ci t y & C o u n t y o f S a n F r a n c i s c o E R S • Co n s t r u c t i o n L a b o r e r s P e n s i o n T r u s t o f G r e a t e r S t . Louis • Co n t r a C o s t a C o u n t y E m p l o y e e s ’ R e t i r e m e n t A s s o c i a t i on • Co u n t y E m p l o y e e s ’ A n n u i t y a n d B e n e f i t F u n d o f C o o k County • El P a s o F i r e m e n a n d P o l i c e m e n ’ s P e n s i o n F u n d • Em p l o y e s ’ R e t i r e m e n t S y s t e m o f t h e C i t y o f M i l w a u k e e • Fi r e m e n ’ s A n n u i t y & B e n e f i t F u n d o f C h i c a g o • Fl o r i d a S t a t e B o a r d o f A d m i n i s t r a t i o n • Il l i n o i s S t a t e B o a r d o f I n v e s t m e n t • Il l i n o i s M u n i c i p a l R e t i r e m e n t F u n d • Io w a J u d i c i a r y • La b o r e r s ’ A n n u i t y a n d B e n e f i t F u n d o f C h i c a g o • Mu n i c i p a l E m p l o y e e s ’ A n n u i t y & B e n e f i t F u n d o f C h i c ago • Mu n i c i p a l P o l i c e E m p l o y e e s ’ R e t i r e m e n t S y s t e m o f L o uisiana • Or a n g e C o u n t y E R S • Or e g o n S t a t e T r e a s u r y • Pe n s i o n s k a s s e S B B ( S w i s s F e d e r a l R a i l w a y ) • Po l i c e m e n ’ s A n n u i t y a n d B e n e f i t F u n d o f C h i c a g o • Sa c r a m e n t o C o u n t y E R S • St a t e o f C o n n e c t i c u t R e t i r e m e n t P l a n s a n d T r u s t F u n ds • Tu l a r e C o u n t y E m p l o y e e s ’ R e t i r e m e n t A s s o c i a t i o n • Wa s h i n g t o n S t a t e I n v e s t m e n t B o a r d • Wi s c o n s i n L a b o r e r s • Wo r k p l a c e S a f e t y a n d I n s u r a n c e B o a r d o f O n t a r i o En d o w m e n t / F o u n d a t i o n • Am e r i c a n L e g a c y F o u n d a t i o n • Th e C a r l e F o u n d a t i o n • Th e C o l l e g e o f W i l l i a m a n d M a r y F o u n d a t i o n • De n i s o n U n i v e r s i t y • In d i a n a U n i v e r s i t y F o u n d a t i o n • La n d m a r k s F i n a n c i a l C o r p o r a t i o n • Mc G i l l U n i v e r s i t y • To l e d o M u s e u m o f A r t • Un i v e r s i t y o f C a l i f o r n i a , I r v i n e F o u n d a t i o n • W. K . K e l l o g g F o u n d a t i o n He a l t h c a r e & N o t - F o r - P r o f i t • Ad v o c a t e H e a l t h c a r e • Al b e r t E i n s t e i n M e d i c a l C e n t e r • Ba n n e r H e a l t h • Ca t h o l i c H e a l t h I n i t i a t i v e s • Ch i l d r e n ’ s H o s p i t a l o f N e w O r l e a n s • Cl e r i c s o f S t . V i a t o r • Ha d l e y S c h o o l f o r t h e B l i n d • Ka i s e r P e r m a n e n t e • No r t h S h o r e U n i v e r s i t y H e a l t h S y s t e m • Oh i o H e a l t h • Ru s h U n i v e r s i t y M e d i c a l C e n t e r • SK L I n v e s t m e n t G r o u p , L L C Su b A d v i s o r y • Ch a r l e s S c h w a b • Fi d e l i t y • Go l d m a n S a c h s • Lo m b a r d O d i e r D a r i e r H e n t s c h • No r t h e r n T r u s t • No r t h w e s t e r n M u t u a l • Th e P r i n c i p a l F i n a n c i a l G r o u p • Pr u d e n t i a l • Ru s s e l l I n v e s t m e n t G r o u p • SE B G r o u p • SE I • UB S • Va n g u a r d 00001363 4 Te a m w o r k b y E x p e r t s As o f J u l y 2 0 1 5 . 1. J o i n e d W i l l i a m B l a i r a n d C o m p a n y i n M a r c h 2 0 1 4 . Ye a r s w i t h t h e t e a m i n c l u d e s 2 0 0 2 – 2 0 0 9 w h i l e a t U B S . 15 y e a r s i n v e s t m e n t t e a m c o n t i n u i t y 232809 Dy n a m i c A l l o c a t i o n S t r a t e g i e s T e a m Br i a n S i n g e r , C F A Pa r t n e r He a d o f D y n a m i c A l l o c a t i o n S t r a t e g i e s T e a m St r a t e g y a n d P o r t f o l i o D e s i g n Br i a n S i n g e r , C F A Pa r t n e r MB A , U n i v e r s i t y o f C h i c a g o BA , N o r t h w e s t e r n U n i v e r s i t y 33 y e a r s i n i n d u s t r y 25 y e a r s w i t h t e a m To m C l a r k e Pa r t n e r BS c , U n i v e r s i t y o f M a n c h e s t e r ( U K ) 24 y e a r s i n i n d u s t r y 15 y e a r s w i t h t e a m Re s e a r c h A n a l y s i s I m p l e m e n t a t i o n Aa r o n B a l s a m , C F A MB A , U n i v e r s i t y o f C h i c a g o BS , N o r t h P a r k U n i v e r s i t y 16 y e a r s i n i n d u s t r y 11 y e a r s w i t h t e a m Gu y B l o o m f i e l d BS , N o r t h e r n I l l i n o i s U n i v e r s i t y 15 y e a r s i n i n d u s t r y 15 y e a r s w i t h t e a m Ky l e C o n c a n n o n , C F A BS , B o s t o n C o l l e g e 8 y e a r s i n i n d u s t r y Jo i n e d t e a m i n 2 0 1 5 Ross Hambrick BBA, University of Cincinnati 2 years in industry Joined team in 2014 Pa t r i c k H u r l e s s MB A , K e l l o g g - N o r t h w e s t e r n U n i v e r s i t y BS , U n i v e r s i t y o f I l l i n o i s a t C h i c a g o 22 y e a r s i n i n d u s t r y 8 y e a r s w i t h t e a m 1 Sa m M a r s h a l l BS , U n i v e r s i t y o f S u r r e y 13 y e a r s i n i n d u s t r y 7 y e a r s w i t h t e a m Lo t t a M o b e r g , P h . D . Ph . D . , G e o r g e M a s o n U n i v e r s i t y BA , L u n d U n i v e r s i t y , L u n d , S w e d e n Jo i n e d t e a m i n 2 0 1 5 Edouard Senechal, CFA, FRM MBA, University of Chicago BA , D a u p h i n e U n i v e r s i t y , P a r i s , F r a n c e 15 years in industry 10 years with team Jo h n C . S i m m o n s , C F A MB A , S a i n t X a v i e r U n i v e r s i t y BA , S a i n t X a v i e r U n i v e r s i t y 18 y e a r s i n i n d u s t r y 3 y e a r s w i t h t e a m Re n a t o S t a u b , P h . D . Ph . D . & M A , U n i v e r s i t y o f S t . G a l l e n , Sw i t z e r l a n d MS , S w i s s F e d e r a l I n s t i t u t e o f Te c h n o l o g y , Z u r i c h , S w i t z e r l a n d 19 y e a r s i n i n d u s t r y 19 y e a r s w i t h t e a m 00000FBC 5 Mu l t i - A s s e t A p p r o a c h e s 235888 I n v e s t m e n t S t y l e Ac t i v e Pa s s i v e Al l o c a t i o n S t y l e Ri s k B a s e d Dy n a m i c R i s k Ca p i t a l Al l o c a t i o n Gl o b a l T a c t i c a l As s e t Al l o c a t i o n Ri s k P a r i t y o r “R i s k B a l a n c e d ” “C l a s s i c ” S t a t i c Ba l a n c e d As s e t B a s e d Fo r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d a s i n ve s t m e n t a d v i c e . 000010C4 6 Ma c r o A l l o c a t i o n S t r a t e g y C h a r a c t e r i s t i c s 241865 1. M u t u a l F u n d N S h a r e C l a s s m i n i m u m : $ 2 , 5 0 0 Mu t u a l F u n d I S h a r e C l a s s m i n i m u m : $ 5 0 0 , 0 0 0 Mu t u a l F u n d J S h a r e C l a s s m i n i m u m : $ 5 , 0 0 0 , 0 0 0 2. L L C a n d C I T m i n i m u m : $ 2 5 , 0 0 0 , 0 0 0 3. S e p a r a t e A c c o u n t m i n i m u m : $ 2 5 0 , 0 0 0 , 0 0 0 Pl e a s e c a r e f u l l y c o n s i d e r t h e F u n d ’ s i n v e s t m e n t o b j ec t i v e s , r i s k s , c h a r g e s , a n d e x p e n s e s b e f o r e i n v e s t in g . T h i s a n d o t h e r i n f o r m a t i o n i s c o n t a i n e d i n t h e Fund’s prospectus, which you ma y o b t a i n b y c a l l i n g 1 - 8 0 0 - 7 4 2 - 7 2 7 2 . R e a d i t c a r e f ul l y b e f o r e y o u i n v e s t o r s e n d m o n e y . Wi l l i a m B l a i r & C o m p a n y , L . L . C . , d i s t r i b u t o r Ma c r o A l l o c a t i o n Re t u r n O b j e c t i v e CP I + 6 % Av e r a g e E x p e c t e d V o l a t i l i t y 10 % Ex p e c t e d V o l a t i l i t y R a n g e 5% - 1 5 % Ri s k B u d g e t ( M a x i m u m ) 20 % In v e s t a b l e U n i v e r s e Ab i l i t y t o g o L o n g / S h o r t i n m o r e t h a n 1 2 5 e q u i t y a n d bond ma r k e t s a n d c u r r e n c i e s Co m p a r a t i v e I n d e x B o f A M e r r i l l L y n c h 3 - M o n t h T r e a s u r y B i l l Av a i l a b l e V e h i c l e s Mu t u a l F u n d 1 Co l l e c t i v e I n v e s t m e n t T r u s t 2 LL C 3 ( c ) ( 7 ) F u n d 2 Se p a r a t e A c c o u n t 3 Li q u i d i t y T e r m s Da i l y 00001CED 7 In v e s t m e n t P h i l o s o p h y 232811 To p - d o w n ( m a c r o ) c a p a b i l i t i e s a d d e d t o a p o r t f o l i o ca n i m p r o v e e f f i c i e n c y th r o u g h r e t u r n e n h a n c e m e n t a n d r i s k m i t i g a t i o n • Ma r k e t s a n d C u r r e n c i e s a r e m a c r o - i n e f f i c i e n t • Lo n g e r - t e r m , f u n d a m e n t a l v a l u a t i o n o p p o r t u n i t i e s ar e w e l l - c o m p e n s a t e d • Th e p r e s e n t v a l u e o f f u t u r e c a s h f l o w s ( a s s e t s ) a n d re l a t i v e p u r c h a s i n g p o w e r ( c u r r e n c i e s ) d e t e r m i n e s fu n d a m e n t a l v a l u e • Va l u e / P r i c e d i s c r e p a n c i e s r e v e a l i n v e s t m e n t op p o r t u n i t i e s • Dy n a m i c r i s k - c a p i t a l a l l o c a t i o n i s s u p e r i o r t o tr a d i t i o n a l a s s e t a l l o c a t i o n Co r e B e l i e f s 000010A9 8 Br e a d t h o f I n v e s t a b l e U n i v e r s e Ac t i v e m a n a g e m e n t a c r o s s a s s e t a l l o c a t i o n , c u r r e n c i es , g e o g r a p h i e s , i n d u s t r i e s , s e c t o r s , du r a t i o n , c r e d i t , s t y l e , s i z e , t h e m e s , a n d v o l a t i l i ty 232813 Gl o b a l E q u i t y De v e l o p e d E q u i t y Au s t r a l i a G e r m a n y N e t h e r l a n d s S w i t z e r l a n d Ca n a d a H o n g K o n g S i n g a p o r e U K EM U I t a l y S p a i n U . S . Fr a n c e J a p a n S w e d e n Em e r g i n g E q u i t y Br a z i l I n d o n e s i a M e x i c o T a i w a n Ch i n a K o r e a R u s s i a T u r k e y In d i a M a l a y s i a S o u t h A f r i c a V i e t n a m Se c t o r s S i z e & S t y l e Co n s . D i s c . I T U . S . L a r g e C a p Co n s . S t a p l e s M a t e r i a l s U . S . M i d C a p En e r g y T e l e c o m U . S . S m a l l C a p Fi n a n c i a l s U t i l i t i e s U . S . G r o w t h He a l t h C a r e U . S . V a l u e In d u s t r i a l s Gl o b a l F i x e d I n c o m e No m i n a l B o n d s Au s t r a l i a N e t h e r l a n d s Ca n a d a N e w Z e a l a n d Fr a n c e P o r t u g a l Ge r m a n y S p a i n Gr e e c e S w e d e n Ir e l a n d S w i t z e r l a n d It a l y U K Ja p a n U . S . Re a l B o n d s U. S . Cr e d i t M a r k e t EM $ - D e n o m i n a t e d D e b t EM - L o c a l C u r r e n c y U. S . H i g h Y i e l d U. S . I n v e s t m e n t G r a d e Currency Argentina Malaysia Australia Mexico Brazil New Zealand Canada Norway China Philippines Colombia Poland Czech Russia Denmark Singapore EMU South Africa Hong Kong Sweden Hungary Switzerland India Taiwan Indonesia Thailand Israel Turkey Japan UK Korea U.S. Fundamental Opportunities Volatility Fo r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d a s i n ve s t m e n t a d v i c e . 0000180B 9 In v e s t m e n t P r o c e s s O v e r v i e w 232814 Wh e r e do p r i c e s d i f f e r f r o m fu n d a m e n t a l v a l u e ? Wh y do p r i c e s d i f f e r f r o m fu n d a m e n t a l v a l u e ? Ho w be s t t o c a p t u r e va l u e / p r i c e d i s c r e p a n c i e s ? De s i g n P o r t f o l i o an d I n t e g r a t e R i s k Ex p o s u r e s As s e s s Op p o r t u n i t i e s Id e n t i f y V a l u e t o Pr i c e D i s c r e p a n c i e s 000010AC 10 Pr o c e s s i n A c t i o n Ja p a n e s e E q u i t y Re t u r n s s t a t e d a b o v e a r e g r o s s o f f e e s . P a s t r e t u r n s ar e n o g u a r a n t e e o f f u t u r e p e r f o r m a n c e . F o r i n f o r m a t i on a l p u r p o s e s o n l y . T h i s i n f o r m a t i o n d o e s n o t c o n s t i tute, and should not be co n s t r u e d a s , i n v e s t m e n t a d v i c e o r r e c o m m e n d a t i o n s . Pl e a s e r e f e r t o t h e M a c r o A l l o c a t i o n C o m p o s i t e p e r f or m a n c e a n d d i s c l o s u r e p a g e s f o r a d d i t i o n a l i n f o r m a t i on. Wh e r e do p r i c e s d i f f e r f r o m fu n d a m e n t a l v a l u e ? Id e n t i f y V a l u e t o Pr i c e D i s c r e p a n c i e s Wh y do p r i c e s d i f f e r f r o m fu n d a m e n t a l v a l u e ? As s e s s Op p o r t u n i t i e s Ho w be s t t o c a p t u r e va l u e / p r i c e di s c r e p a n c i e s ? De s i g n P o r t f o l i o an d I n t e g r a t e R i s k Ex p o s u r e s • Ja p a n e s e s t o c k s 7 % l o n g • Ja p a n e s e s t o c k s 2 % l o n g • Sh i n z o A b e e l e c t e d Pr i m e M i n i s t e r o f J a p a n • Th r e e A r r o w s – F i s c a l s t i m u l u s – M o n e t a r y e a s i n g – S t r u c t u r a l r e f o r m s • Haruhiko Kuroda elected Governor of B a n k o f J a p a n • Lo o s e m o n e t a r y p o l i c y p r i c e d i n t o eq u i t y • In c r e a s e d e x p o s u r e t o Ja p a n e s e s t o c k s f r o m 5 % t o 9 % • Reduced exposure to Ja p a n e s e s t o c k s t o 2 % Ex p o s u r e t o J a p a n e s e s t o c k s a d d e d 2 . 9 3 % t o r e t u r n i n 2 0 1 3 June 2013 Ma r k e t M o v e s De c e m b e r 20 1 2 00005E4D 11 Wi l l i a m B l a i r M a c r o A l l o c a t i o n S t r a t e g y Po r t f o l i o c o n s t r u c t i o n g u i d e l i n e s 1. M S C I A C W o r l d I n d e x Da t a i s f o r i l l u s t r a t i v e p u r p o s e s o n l y a n d i s n o t i n t en d e d a s i n v e s t m e n t a d v i c e . A l l o c a t i o n s s u b j e c t t o c ha n g e w i t h o u t n o t i c e . 235677 -2 0 % -1 5 % -1 5 % -5 0 % -5 0 % -2 5 % -2 5 % -4 0 % -5 0 % -5 0 % -3 0 % 80% 50% 25 % 130% 75% 35% 30 % 100% 50% 50% 30 % Lo w e r E x p e c t a t i o n s U p p e r E x p e c t a t i o n s Gl o b a l E q u i t y U. S . E q u i t y Ot h e r E q u i t y M a r k e t s (i n d i v i d u a l l y ) Gl o b a l F i x e d I n c o m e U. S . F i x e d I n c o m e (a g g r e g a t e ) MB S , I G , H Y , T I P S (i n d i v i d u a l l y ) Ot h e r F i x e d I n c o m e Ma r k e t s ( i n d i v i d u a l l y ) Ca s h U. S . D o l l a r EU R , J P Y , A U D Ot h e r C u r r e n c i e s (i n d i v i d u a l l y ) To t a l R e t u r n , b e n c h m a r k - a g n o s t i c or i e n t a t i o n : • CP I + 6 % l o n g - t e r m t o t a l re t u r n o b j e c t i v e Ex p e c t e d r i s k c h a r a c t e r i s t i c s o v e r a ma r k e t c y c l e : • Av e r a g e V o l a t i l i t y : 1 0 % • Av e r a g e B e t a : 0 . 3 5 1 000010B7 12 Ma c r o A l l o c a t i o n S t r a t e g y P e r f o r m a n c e Pe r i o d s e n d i n g A u g u s t 3 1 , 2 0 1 5 1 Re f l e c t s p a r t i a l y e a r b e g i n n i n g 1 1 / 3 0 / 1 1 . In v e s t m e n t p e r f o r m a n c e a s s u m e s r e i n v e s t m e n t o f d i v i d e n d s a nd c a p i t a l g a i n s a n d i s g r o s s o f i n v e s t m e n t m a n a g e m e n t f e e s a nd n e t o f t r a n s a c t i o n c o s t s . P e r f o r m a n c e r e s u l t s w i l l b e r e d u ced by t h e f e e s i n c u r r e d i n t h e m a n a g e m e n t o f t h e a c c o u n t . F o r e x a m pl e , o n a n a c c o u n t w i t h a 1 % f e e , a n d g r o s s p e r f o r m a n c e o f 2 0 % o v er o n e y e a r , t h e a n n u a l t o t a l r e t u r n o n a n e t o f f e e b a s i s wi l l r e s u l t i n p e r f o r m a n c e o f 1 8 . 8 5 % . A $ 1 , 0 0 0 , 0 0 0 i n i t i a l i n ve s t m e n t w o u l d g r o w t o a p p r o x i m a t e l y $ 1 , 4 4 0 , 0 0 0 g r o s s o f f e e s, v e r s u s $ 1 , 4 1 2 , 5 3 2 n e t o f f e e s , o v e r a t w o y e a r p e r i o d , a s s u m ing an a n n u a l r e t u r n o f 2 0 % . I n v e s t m e n t m a n a g e m e n t f e e s a r e d e s c ri b e d i n W i l l i a m B l a i r ' s F o r m A D V P a r t 2 A . P a s t p e r f o r m a n c e i s n o t i n d i c a t i v e o f f u t u r e r e t u r n s . R e t u r n s f o r p e r i o d s g r e a t er th a n o n e y e a r a r e a n n u a l i z e d . T h e s t a t e d b e n c h m a r k f o r t h i s c o mp o s i t e i s t h e B a n k o f A m e r i c a M e r r i l l L y n c h 3 - M o n t h U . S . T r e as u r y B i l l I n d e x , w h i c h i s a n u n m a n a g e d m a r k e t i n d e x o f U . S . Tr e a s u r y s e c u r i t i e s m a t u r i n g i n 9 0 d a y s t h a t a s s u m e s r e i n v e st m e n t o f a l l i n c o m e . T h e U . S . C P I I n d e x + 6 % i s i n c l u d e d a s s u p p l em e n t a l r e f e r e n c e s . T h e C o n s u m e r P r i c e I n d e x e s ( C P I ) p r o g r a m pr o d u c e s m o n t h l y d a t a o n c h a n g e s i n t h e p r i c e s p a i d b y u r b a n c o n su m e r s f o r a r e p r e s e n t a t i v e b a s k e t o f g o o d s a n d s e r v i c e s . C o m po s i t e c o n s i s t s o f c o n s i d e r a b l y f e w e r s e c u r i t i e s t h a n i n d i c es.241296 C a l e n d a r Y e a r P e r f o r m a n c e ( % ) 2 0 1 4 2 0 1 3 2 0 1 2 2011 1 Ma c r o A l l o c a t i o n C o m p o s i t e 4. 1 8 1 4 . 6 9 1 5 . 5 8 0 . 0 9 B o f A M e r r i l l L y n c h 3 - M o n t h U . S . T r e a s u r y B i l l 0. 0 3 0 . 0 7 0 . 1 1 0 . 0 0 U. S . C P I + 6 % 6. 6 6 7 . 4 9 7 . 7 4 0 . 5 0 Si n c e In c e p t i o n S t a n d a r d S h a r p e Pe r f o r m a n c e ( % ) YT D 1 Y e a r 2 Y e a r 3 Y e a r ( 1 1 / 3 0 / 1 1 ) D e v i a t i o n R a t i o Ma c r o A l l o c a t i o n C o m p o s i t e -1 . 9 6 - 2 . 1 9 5 . 2 7 7 . 6 1 8 . 4 4 8 . 2 1 1 . 0 2 B o f A M e r r i l l L y n c h 3 - M o n t h U . S . T r e a s u r y B i l l 0. 0 2 0 . 0 3 0 . 0 4 0 . 0 6 0 . 0 6 U. S . C P I + 6 % 4. 7 1 6 . 2 2 6 . 9 4 7 . 1 0 7 . 2 4 An n u a l i z e d A n n u a l i z e d S i n c e Inception (11/30/11) Au g u s t 2 0 1 5 p e r f o r m a n c e i s p r e l i m i n a r y . 0000163F 13 Pe r f o r m a n c e A t t r i b u t i o n S i n c e I n c e p t i o n ( U S D ) As o f A u g u s t 3 1 , 2 0 1 5 241555 In c e p t i o n d a t e : 1 1 / 3 0 / 2 0 1 1 . P a s t p e r f o r m a n c e i s n ot i n d i c a t i v e o f f u t u r e r e s u l t s . F o r i l l u s t r a t i v e p u r p o s es o n l y a n d n o t i n t e n d e d a s i n v e s t m e n t a d v i c e . E q u i t y R a t e s C r e d i t C u r r e n c y R e s i d u a l / Ot h e r T o t a l Re g i o n % % % % % No r t h A m e r i c a 0. 4 3 % - 0 . 1 2 % 0 . 9 9 % 0 . 0 8 % 1.38% D e v e l o p e d E u r o p e 4. 1 2 % - 1 . 5 0 % 0 . 0 0 % 2 . 4 3 % 5.05% D e v e l o p e d A s i a ( e x J a p a n ) -0 . 0 4 % 0 . 0 0 % 0 . 0 0 % 1 . 4 6 % 1.42% Ja p a n 1. 2 1 % - 0 . 1 7 % 0 . 0 0 % 0 . 7 5 % 1.80% Em e r g i n g M a r k e t s -0 . 3 5 % 0 . 0 0 % - 0 . 0 1 % - 0 . 7 9 % -1.15% Mu l t i - R e g i o n -0 . 3 6 % 0 . 0 0 % 0 . 0 0 % 0 . 0 0 % -0.36% Re s i d u a l / O t h e r 0.30% To t a l 5. 0 1 % - 1 . 7 9 % 0 . 9 8 % 3 . 9 4 % 0 . 3 0 % 8 . 4 4 % Ma c r o A l l o c a t i o n 00001801 14 Wi l l i a m B l a i r M a c r o A l l o c a t i o n S t r a t e g y Po r t f o l i o e x p o s u r e s 235678 As o f A u g u s t 3 1 , 2 0 1 5 . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d a s i n v e s t m e n t a d v i c e . A l l o c a t i o n s a r e s u b j e c t t o c h a n g e w i t h o u t n o t i c e . U n e n c u m b e r e d c a s h is residual cash and eq u i v a l e n t s . C o l l a t e r a l c a s h i s c a s h a n d c a s h - l i k e i ns t r u m e n t s ( e . g . , U . S . T r e a s u r i e s ) t h a t a r e h e l d t o s ec u r e a d e r i v a t i v e e x p o s u r e . S y n t h e t i c c a s h i s a c c o u n t ing offset associated with the use of de r i v a t i v e c o n t r a c t s , w h i c h p r o v i d e e c o n o m i c e x p o s u r e w i t h o u t a n i n i t i a l o u t l a y o f c a s h . Ac t i v e C u r r e n c y USD Based US D -5.7% CA D 0.0% Am e r i c a s ( e x - U S D , C A D ) 12.4% EU R -9.0% CH F -8.0% GB P -3.0% Ot h e r E u r o p e ( e x - G B P , E U R , C H F ) 1.5% AU D ( & N Z D ) -14.0% JP Y 6.0% CN Y 4.6% As i a ( e x - J P Y , C N Y ) * * 9.8% Ot h e r 5.5% TOTAL 0.0% Gl o b a l E q u i t y 28 . 6 % U. S . -1 . 8 % Ca n a d a 0. 1 % Eu r o p e e x - U . K . 16 . 6 % Un i t e d K i n g d o m 3. 6 % As i a D e v e l o p e d 3. 2 % Em e r g i n g M a r k e t s 6. 8 % Gl o b a l F i x e d I n c o m e ( 1 0 - Y e a r E q u i v a l e n t s ) - 5 . 2 % U. S . T r e a s u r y a n d C r e d i t * 16 . 9 % No n - U . S . -2 2 . 9 % • Ge r m a n y -1 . 8 % • Fr a n c e -4 . 7 % • Ja p a n -5 . 1 % • Sw i t z e r l a n d -5 . 0 % Em e r g i n g M a r k e t s D e b t 0. 8 % Ca s h 76 . 6 % Un e n c u m b e r e d 41 . 1 % Co l l a t e r a l 6. 1 % Sy n t h e t i c 29 . 5 % TO T A L 1 0 0 % ** L a r g e s t E x p o s u r e s In d i a R u p e e 7.5% Ma l a y s i a R i n g g i t 4.1% In d o n e s i a R u p i a h 3.8% * U . S . C r e d i t D e t a i l U. S . C o r p o r a t e S p r e a d 8. 0 % U. S . H i g h Y i e l d S p r e a d 1. 3 % U. S . M B S S p r e a d 0. 0 % 000017FE 15 SE C T I O N I V Ap p e n d i x 232831 0000130F 16 Ma c r o A l l o c a t i o n S t r a t e g y F e e S c h e d u l e s 1 Th e F u n d ’ s A d v i s e r h a s c o n t r a c t u a l l y a g r e e d t o w a i v e f e e s a n d /o r r e i m b u r s e e x p e n s e s t o li m i t f u n d o p e r a t i n g e x p e n s e s u n t i l 4 / 3 0 / 1 6 . A f t e r t h a t d a t e , th e r e i s n o a s s u r a n c e t h a t th e F u n d ’ s e x p e n s e s w i l l b e l i m i t e d . T h e C a p p e d E x p e n s e d o e s n ot r e f l e c t a c q u i r e d f u n d fe e s a n d e x p e n s e s o f 0 . 1 4 % o r d i v i d e n d e x p e n s e s o n s h o r t s a l e s o f 0 . 1 2 % . T h e F u n d ’ s n e t ex p e n s e s p a i d m a y b e d i f f e r e n t . P l e a s e r e f e r t o t h e F u n d ’ s P r o sp e c t u s f o r m o r e in f o r m a t i o n o n t h e F u n d ’ s e x p e n s e s . Pl e a s e c a r e f u l l y c o n s i d e r t h e F u n d s ' i n v e s t m e n t o b j e c t i v e s, r i s k s , c h a r g e s , a n d ex p e n s e s b e f o r e i n v e s t i n g . T h i s a n d o t h e r i n f o r m a t i o n i s c o nt a i n e d i n t h e F u n d s ' pr o s p e c t u s , w h i c h y o u m a y o b t a i n b y c a l l i n g 1 - 8 0 0 - 7 4 2 - 7 2 7 2 . R e a d i t c a r e f u l l y be f o r e y o u i n v e s t o r s e n d m o n e y . Wi l l i a m B l a i r & C o m p a n y , L . L . C . , d i s t r i b u t o r Mu t u a l F u n d Mu t u a l F u n d ( J C l a s s ) M i n i m u m : $ 5 M i l l i o n Co l l e c t i v e I n v e s t m e n t T r u s t ( C I T ) Ac c o u n t S i z e An n u a l I n v e s t m e n t Management Fee Fi r s t $ 2 5 M i l l i o n 0 . 8 0 % Ne x t $ 2 5 M i l l i o n 0 . 6 0 % Ne x t $ 5 0 M i l l i o n 0 . 5 0 % Ne x t $ 5 0 M i l l i o n 0 . 4 5 % Ne x t $ 5 0 M i l l i o n 0 . 4 0 % Ov e r $ 2 0 0 M i l l i o n 0 . 3 5 % Mi n i m u m A c c o u n t S i z e : $ 2 5 m i l l i o n In v e s t o r s i n t h e C o l l e c t i v e I n v e s t m e n t T r u s t a r e a l s o r e s p o n sible for customary expenses as s o c i a t e d w i t h p o o l e d i n v e s t m e n t v e h i c l e s ( i n c l u d i n g c u s t o dy, trustee, fund accounting, au d i t , e t c . ) , w h i c h a r e p a i d t o u n a f f i l i a t e d t h i r d p a r t y s e r v i ce providers. These expenses ar e c o n t r a c t u a l l y c a p p e d a t 2 0 b p s b u t m a y b e l o w e r b a s e d o n t h e asset level of the CIT. Th e C I T d o e s n o t p a r t i c i p a t e i n s e c u r i t i e s l e n d i n g . T h e r e i s no revenue sharing for th e C I T . 241993 Ma c r o A l l o c a t i o n F u n d ( J C l a s s ) Ex p e n s e R a t i o G r o s s : 1 . 1 9 % ; C a p p e d : 0 . 9 5 % 1 00015D70 17 241554 Ro l l i n g 1 2 - M o n t h P e r i o d s Re a l i z e d B e t a o f M a c r o A l l o c a t i o n v s . M S C I A C W o r l d I n d e x Au g u s t 2 0 1 5 p e r f o r m a n c e i s p r e l i m i n a r y . So u r c e : W i l l i a m B l a i r . C o m p o s i t e I n c e p t i o n 1 1 / 3 0 / 1 1 . I n v e st m e n t p e r f o r m a n c e a s s u m e s r e i n v e s t m e n t o f d i v i d e n d s a n d c ap i t a l g a i n s a n d i s g r o s s o f i n v e s t m e n t m a n a g e m e n t f e e s a n d n et of tr a n s a c t i o n c o s t s . P e r f o r m a n c e r e s u l t s w i l l b e r e d u c e d b y t h e f e e s i n c u r r e d i n t h e m a n a g e m e n t o f t h e a c c o u n t . F o r e x a m p l e , o n a n a c c o u n t w i t h a 1 % f e e , a n d g r o s s p e r f o r m a n c e o f 2 0 % o v e r on e y e a r , t h e a n n u a l t o t a l r e t u r n o n a n e t o f f e e b a s i s w i l l r e s u l t i n p e r f o r m a n c e o f 1 8 . 8 5 % . A $ 1 , 0 0 0 , 0 0 0 i n i t i a l i n v e s t m e n t wo u l d g r o w t o a p p r o x i m a t e l y $ 1 , 4 4 0 , 0 0 0 g r o s s o f f e e s , v e r s u s $1 , 4 1 2 , 5 3 2 n e t o f f e e s , o v e r a t w o y e a r p e r i o d , a s s u m i n g a n a n n ua l r e t u r n o f 2 0 % . I n v e s t m e n t m a n a g e m e n t f e e s a r e d e s c r i b e d i n Wi l l i a m B l a i r ’ s F o r m A D V P a r t 2 A . P a s t p e r f o r m a n c e i s n o t in d i c a t i v e o f f u t u r e r e t u r n s . B e t a i s a q u a n t i t a t i v e m e a s u r e of t h e v o l a t i l i t y o f t h e p o r t f o l i o r e l a t i v e t o t h e o v e r a l l m a rk e t , r e p r e s e n t e d b y a c o m p a r a b l e b e n c h m a r k . A b e t a a b o v e 1 i s more vo l a t i l e t h a n t h e o v e r a l l m a r k e t , w h i l e a b e t a b e l o w 1 i s l e s s vo l a t i l e , a n d c o u l d b e e x p e c t e d t o r i s e a n d f a l l m o r e s l o w l y t ha n t h e m a r k e t . T h e M S C I A C W o r l d I n d e x i s a f r e e f l o a t - a d j u s t e d ma r k e t c a p i t a l i z a t i o n i n d e x t h a t i s d e s i g n e d t o m e a s u r e e q u it y m a r k e t p e r f o r m a n c e i n t h e g l o b a l d e v e l o p e d a n d e m e r g i n g ma r k e t s A d i r e c t i n v e s t m e n t i n a n u n m a n a g e d i n d e x i s n o t po s s i b l e . 0.43 -0 . 2 0 0. 2 0. 4 0. 6 0. 8 1 1. 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 D e c - 1 4 J a n - 1 5 F e b - 1 5 M a r - 1 5 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Ma c r o A l l o c a t i o n C o m p o s i t e 00001812 18 Ma c r o A l l o c a t i o n S t r a t e g y – M a r k e t E x p o s u r e s 240962 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . G l o b a l E q u i t y i n c l u d e s U . S . L a rg e C a p ( G r o w t h a n d V a l u e ) , M i d C a p , S m a l l C a p , a n d Mi c r o C a p , a s w e l l a s C a n a d a , E u r o p e e x - U . K . , U . K . , Developed Asia, and Emerging Ma r k e t s . G l o b a l F i x e d I n c o m e i n c l u d e s U . S . T r e a s u r y a n d C r e d i t , G e r m a n y , F r a n c e , S p a i n , J a p a n , S w i t z e r la n d , a n d E m e r g i n g M a r k e t s D e b t . C a s h i n c o r p o r a t e s cash equivalents. Not intended as i n v e s t m e n t a d v i c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t to c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d a s i n v e s t m e n t a d v i c e . -6 0 % -4 0 % -2 0 % 0% 20 % 40 % 60 % 80 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Gl o b a l E q u i t y Gl o b a l F i x e d I n c o m e Un e n c u m b e r e d C a s h 0000180C 19 Ma c r o A l l o c a t i o n S t r a t e g y – E q u i t y E x p o s u r e s 240963 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . N o t i n t e n d e d a s i n v e s t m e n t a d vi c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t t o c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d as investment advice. -1 5 % -1 0 % -5 % 0% 5% 10 % 15 % 20 % 25 % 30 % 35 % 40 % 45 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Eu r o p e e x - U K Em e r g i n g M a r k e t s UK As i a D e v e l o p e d U. S . Canada 0000180D 20 Ma c r o A l l o c a t i o n S t r a t e g y – U . S . E q u i t y E x p o s u r e s 240964 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . N o t i n t e n d e d a s i n v e s t m e n t a d vi c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t t o c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d as investment advice. -1 5 % -1 0 % -5 % 0% 5% 10 % 15 % 20 % 25 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 U. S . L a r g e C a p V a l u e U. S . M i d C a p U. S . S m a l l & M i c r o C a p U. S . L a r g e C a p G r o w t h 0000180E 21 Ma c r o A l l o c a t i o n S t r a t e g y – F i x e d I n c o m e E x p o s u r e s 240965 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . N o t i n t e n d e d a s i n v e s t m e n t a d vi c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t t o c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d as investment advice. -2 5 % -2 0 % -1 5 % -1 0 % -5 % 0% 5% 10 % 15 % 20 % 25 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 U. S . C o r p o r a t e B o n d s ( S p r e a d ) U. S . ( 1 0 - Y e a r ) U. S . H i g h Y i e l d ( S p r e a d ) Em e r g i n g M a r k e t s D e b t U. S . M B S ( S p r e a d ) Ge r m a n y Fr a n c e Ja p a n Sw i t z e r l a n d 0000180F 22 Ma c r o A l l o c a t i o n S t r a t e g y – C u r r e n c y E x p o s u r e s ( M a j o r) 240966 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . N o t i n t e n d e d a s i n v e s t m e n t a d vi c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t t o c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d as investment advice. -3 0 % -2 0 % -1 0 % 0% 10 % 20 % 30 % 40 % 50 % 60 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 As i a ( E x c l u d i n g J P Y a n d C N Y ) Gr e a t B r i t i s h P o u n d S t e r l i n g ( G B P ) Ch i n e s e Y u a n ( C N Y ) Eu r o ( E U R ) U. S . D o l l a r ( U S D ) Sw i s s F r a n c ( C H F ) Ja p a n e s e Y e n ( J P Y ) Au s t r a l i a n D o l l a r ( A U D ) & N e w Z e a l a n d D o l l a r ( N Z D ) 00001810 23 Ma c r o A l l o c a t i o n S t r a t e g y – C u r r e n c y E x p o s u r e s 240967 As o f A u g u s t 3 1 , 2 0 1 5 . So u r c e : W i l l i a m B l a i r . N o t i n t e n d e d a s i n v e s t m e n t a d vi c e . S t r a t e g y e x p o s u r e s a r e s u b j e c t t o c h a n g e a t a n y t i m e . F o r i l l u s t r a t i v e p u r p o s e s o n l y a n d n o t i n t e n d e d as investment advice. -3 0 % -2 0 % -1 0 % 0% 10 % 20 % 30 % 40 % 50 % 60 % N o v - 1 1 D e c - 1 1 J a n - 1 2 F e b - 1 2 M a r - 1 2 A p r - 1 2 M a y - 1 2 J u n - 1 2 J u l - 1 2 A u g - 1 2 S e p - 1 2 O c t - 1 2 N o v - 1 2 D e c - 1 2 J a n - 1 3 F e b - 1 3 M a r - 1 3 A p r - 1 3 M a y - 1 3 J u n - 1 3 J u l - 1 3 A u g - 1 3 S e p - 1 3 O c t - 1 3 N o v - 1 3 D e c - 1 3 J a n - 1 4 F e b - 1 4 M a r - 1 4 A p r - 1 4 M a y - 1 4 J u n - 1 4 J u l - 1 4 A u g - 1 4 S e p - 1 4 O c t - 1 4 N o v - 1 4 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 As i a ( E x c l u d i n g J P Y a n d C N Y ) Ja p a n e s e Y e n ( J P Y ) Ch i n e s e Y u a n ( C N Y ) Gr e a t B r i t i s h P o u n d S t e r l i n g ( G B P ) Ot h e r A m e r i c a s Ot h e r E u r o p e U. S . D o l l a r ( U S D ) Eu r o ( E U R ) Ca n a d i a n D o l l a r ( C A D ) Sw i s s F r a n c ( C H F ) Ot h e r Au s t r a l i a n D o l l a r ( A U D ) & N e w Z e a l a n d D o l l a r ( N Z D ) 00001811 24 Bi o g r a p h i e s 233199 Br i a n D . S i n g e r , C F A , P a r t n e r , H e a d o f D y n a m i c A l l o ca t i o n S t r a t e g i e s T e a m Br i a n S i n g e r i s t h e h e a d o f t h e D y n a m i c A l l o c a t i o n S t r a t e g i e s t e a m a n d a l s o s e r v e s a s a p o r t f o l i o m a n a g e r . B e f o r e j o i n i n g Wi l l i a m B l a i r i n 2 0 1 1 , h e w a s t h e h e a d o f i n v e s t m e n t s t r a t e g i es at S i n g e r P a r t n e r s , L L C . P r e v i o u s l y , B r i a n w a s t h e h e a d o f g l ob a l i n v e s t m e n t s o l u t i o n s a n d t h e A m e r i c a s c h i e f i n v e s t m e n t o f f i c e r f o r U B S G l o b a l A s s e t M a n a g e m e n t , w h e r e h e w a s a me m b e r o f t h e U B S G r o u p m a n a g i n g b o a r d a n d g l o b a l a s s e t m a n a g em e n t e x e c u t i v e c o m m i t t e e . B r i a n f o r m e r l y s e r v e d a s a b o a r d me m b e r a n d c h a i r o f t h e C F A I n s t i t u t e b o a r d o f go v e r n o r s . H e i s a m e m b e r o f t h e C F A S o c i e t y o f C h i c a g o a n d a m e mb e r o f t h e C F A I n s t i t u t e R e s e a r c h F o u n d a t i o n B o a r d o f R e g e n ts . H e s e r v e s o n t h e e n d o w m e n t i n v e s t m e n t c o m m i t t e e fo r E x e t e r C o l l e g e a t O x f o r d U n i v e r s i t y a n d i s t h e c h a i r m a n o f t h e “ F r e e t o C h o o s e N e t w o r k , ” w h i c h i s i n s p i r e d b y t h e i d e a s of e c o n o m i s t M i l t o n F r i e d m a n . B r i a n a l s o s e r v e s a s a m e m b e r of t h e R e h a b i l i t a t i o n I n s t i t u t e o f C h i c a g o F o u n d a t i o n ’ s b o ar d . B r i a n h a s w r i t t e n e x t e n s i v e l y o n g l o b a l p o r t f o l i o , c u r r e n c y , a n d p e r f o r m a n c e i s s u e s a n d c o - w r o t e t h e s e m i n a l De t e r m i n a n t s o f P o r t f o l i o P e r f o r m a n c e I I : A n U p d a t e w i t h G a r y B r i n s o n a n d G i l b e r t B e e b o w e r . I n 2 0 0 9 B r i a n w a s t h e l e a d a u th o r o f I n v e s t m e n t L e a d e r s h i p a n d P o r t f o l i o M a n a g e m e n t , Wi l e y P u b l i s h i n g . E d u c a t i o n : B . A . , e c o n o m i c s , N o r t h we s t e r n U n i v e r s i t y ; M . B . A . , U n i v e r s i t y o f C h i c a g o ’ s B o o t h S c h o o l o f B u s i n e s s . Th o m a s C l a r k e , P a r t n e r T h o m a s C l a r k e i s a p o r t f o l i o m a n a g e r o n t h e D y n a m i c A l l o c a t i on S t r a t e g i e s t e a m . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 1 , h e wa s a m e m b e r o f S i n g e r P a r t n e r s ’ i n v e s t m e n t t e a m w i t h a sp e c i a l f o c u s o n c u r r e n c y s t r a t e g y . U n t i l 2 0 0 9 , T o m w a s a m a n ag i n g d i r e c t o r a n d h e a d o f c u r r e n c y a n a l y s i s a n d s t r a t e g y f o r t h e g l o b a l i n v e s t m e n t s o l u t i o n s t e a m o f U B S G l o b a l A s s e t Ma n a g e m e n t . T h e r e , h e s e t c u r r e n c y s t r a t e g i e s f o r m u l t i - a s s e t , g l o b a l a n d i n t e r n a t i o n a l e q u i t y , a n d f i x e d - i n c o m e p o r tf o l i o s , a n d d e v e l o p e d a n d m a n a g e d o f t h e c u r r e n c y - a n a l y s i s pr o c e s s . T o m w a s a l s o a m e m b e r o f t h e g l o b a l a s s e t a l l o c a t i o n an d c u r r e n c y c o m m i t t e e a n d t h e U . K . I n v e s t m e n t C o m m i t t e e . B ef o r e j o i n i n g U B S i n 2 0 0 0 , T o m w a s h e a d o f c u r r e n c y f o r Ro t h s c h i l d A s s e t M a n a g e m e n t , w h e r e h e s p e n t 1 0 y e a r s a s p a r t o f t h e f i x e d - i n c o m e a n d c u r r e n c y g r o u p . E du c a t i o n : B . S c . , U n i v e r s i t y o f M a n c h e s t e r . Aa r o n B a l s a m , C F A Aa r o n B a l s a m i s a s e n i o r a n a l y s t o n t h e D y n a m i c A l l oc a t i o n S t r a t e g i e s t e a m . A a r o n i s r e s p o n s i b l e f o r c on t r i b u t i n g t o a l l a s p e c t s o f m a c r o i n v e s t m e n t r e s e arch, including valuation work, co n v e n t i o n a l w i s d o m , m a c r o t h e m a t i c a n d g e o p o l i t i c a l a n a l ys i s , a n d s t r a t e g y s e t t i n g . B e f o r e j o i n i n g W i l l i a m B l a i r i n 20 1 1 , h e w a s a m e m b e r o f t h e g l o b a l i n v e s t m e n t s o l u t i o n s t e a m at UB S G l o b a l A s s e t M a n a g e m e n t . M o s t r e c e n t l y a t U B S , A a r o n w a s a p o r t f o l i o m a n a g e r r e s p o n s i b l e f o r b o t h r e l a t i v e a n d t o t a l r e t u r n m u l t i - a s s e t s t r a t e g i e s . B e f o r e t h a t , h e w a s a n a s s e t - al l o c a t i o n a n a l y s t r e s p o n s i b l e f o r s t r a t e g y a n a l y s i s , c o n st r u c t i o n , i m p l e m e n t a t i o n , a n d c o m m u n i c a t i o n . H e i s a m e m b er o f t h e C F A I n s t i t u t e a n d t h e C F A S o c i e t y o f C h i c a g o . E d u c a t ion: B. S . , f i n a n c e a n d e c o n o m i c s , N o r t h P a r k U n i v e r s i t y ; M . B . A . , U n i v e r s i t y o f C h i c a g o ’ s B o o t h S c h o o l o f B u si n e s s . Gu y B l o o m f i e l d Gu y B l o o m f i e l d i s a n a n a l y s t o n t h e D y n a m i c A l l o c a t i o n S t r a t eg i e s t e a m . G u y i s r e s p o n s i b l e f o r t r a d e o p e r a t i o n s a n d t e c h no l o g y . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 1 , h e w a s r e s p o n s ible fo r o p e r a t i o n s a t S i n g e r P a r t n e r s . G u y i s t h e f o r m e r d i r e c t o r o f t h e i n v e s t m e n t a n a l y t i c s g r o u p f o r U B S G l o b a l A s s e t M a n a ge m e n t , w h e r e h e l e d t e a m s r e s p o n s i b l e f o r r i s k , a s s e t r e b a l a n c i n g , a n d s t r a t e g y - s e t t i n g t e c h n o l o g i e s . B e f o r e w or k i n g a t U B S , G u y m a n a g e d t h e I T i n f r a s t r u c t u r e f o r a g l o b a l co n s u l t i n g f i r m a n d c o n s u l t e d i n t h e f i n a n c e a n d i n s u r a n c e in d u s t r i e s . E d u c a t i o n : B . S . , o p e r a t i o n s m a n a g e m e n t an d i n f o r m a t i o n s y s t e m s , N o r t h e r n I l l i n o i s U n i v e r s i ty . Ky l e C o n c a n n o n , C F A Ky l e i s a n i n v e s t m e n t s t r a t e g i s t o n t h e D y n a m i c A l l o c a t i o n S tr a t e g i e s t e a m . I n t h i s c a p a c i t y , h e c o n t r i b u t e s t o t h e i n v e st m e n t p r o c e s s a n d i s r e s p o n s i b l e f o r c o m m u n i c a t i n g t h e t e a m’s ph i l o s o p h y a n d p r o c e s s , p o r t f o l i o p o s i t i o n i n g , a n d d r i v e r s o f p e r f o r m a n c e t o i n t e r n a l a n d e x t e r n a l s t a k e h o l d e r s . B e f or e j o i n i n g W i l l i a m B l a i r i n 2 0 1 5 , K y l e s p e n t e i g h t y e a r s a t U BS Gl o b a l A s s e t M a n a g e m e n t , m o s t r e c e n t l y a s p a r t o f i t s g l o b a l in v e s t m e n t s o l u t i o n s t e a m , w h e r e h e w a s r e s p o n s i b l e f o r i n t er a c t i n g w i t h c l i e n t s a n d p r o s p e c t s r e g a r d i n g t h e f i r m ’ s mu l t i - a s s e t c a p a b i l i t i e s . K y l e i s a m e m b e r o f t h e C FA I n s t i t u t e a n d t h e C F A S o c i e t y o f C h i c a g o . E d u c a t io n : B . A . , f i n a n c e , B o s t o n C o l l e g e . 000011DB 25 Bi o g r a p h i e s 233200 Lo t t a M o b e r g , P h . D . Lo t t a M o b e r g i s a n a n a l y s t o n t h e D y n a m i c A l l o c a t i o n S t r a t e g ie s t e a m . L o t t a h a s p r e v i o u s l y w o r k e d f o r t h e S w e d i s h f o r e i g n m i n i s t r y i n R u s s i a a n d t h e S w e d i s h D e f e n s e F o r c e s i n Ko s o v o , a n d h a s b e e n a c o n s u l t a n t f o r t h e W o r l d B a n k . S h e h a s p ub l i s h e d i n s e v e r a l e c o n o m i c s j o u r n a l s , i n c l u d i n g t h e J o u r na l o f I n s t i t u t i o n a l E c o n o m i c s a n d t h e R e v i e w o f A u s t r i a n Ec o n o m i c s , a n d h a s t a u g h t c l a s s e s i n e c o n o m i c s a t G e o r g e M a s on U n i v e r s i t y . L o t t a h a s r e s e a r c h e d a r e a s s u c h a s s p e c i a l e c on o m i c z o n e s , t a x p o l i c y , a n d m u n i c i p a l b a n k r u p t c y . Ed u c a t i o n : P h . D . , e c o n o m i c s , G e o r g e M a s o n U n i v e r s i t y; B . A . , e c o n o m i c s , L u n d U n i v e r s i t y , S w e d e n . Ro s s H a m b r i c k Ro s s H a m b r i c k i s a n a n a l y s t o n t h e D y n a m i c A l l o c a t i o n S t r a t e gi e s t e a m . R o s s s u p p o r t s t h e t e a m i n a l l a s p e c t s o f m a c r o i n v e st m e n t r e s e a r c h , a s s e t a n d c u r r e n c y v a l u a t i o n , t r a d e su p p o r t , a n d c a s h a n d c o l l a t e r a l m a n a g e m e n t . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 4 , R o s s w o r k e d a t J o h n s o n I n v e s t m e n t C o un s e l , w h e r e h e c o m p l e t e d r o t a t i o n s i n p o r t f o l i o m a n a g e m e n t an d i n v e s t m e n t r e s e a r c h . H e h a s p a s s e d a l l t h r e e l e v e l s o f t h e C F A p r o g r a m a n d m a y b e a w a r d e d t h e c h a r t e r u p o n c o m p l e t i o n o f t h e r e q u i r e d w o r k e x p e r i e n c e . E d u c a t i o n : B . B . A . , f i n a n c e an d b u s i n e s s e c o n o m i c s , s u m m a c u m l a u d e , U n i v e r s i t y o f C i n c i n n a t i . Pa t r i c k H u r l e s s Pa t r i c k H u r l e s s d i r e c t s t h e r e s e a r c h - a n d - d e v e l o p m e n t p r o je c t s o f t h e D y n a m i c A l l o c a t i o n S t r a t e g i e s t e a m . H e h a s m o r e th a n 1 0 y e a r s o f e x p e r i e n c e w o r k i n g w i t h i n m u l t i - a s s e t a n d mu l t i - c u r r e n c y i n v e s t m e n t t e a m s o v e r s e e i n g t h e f r a m e w o r k s t h a t s u p p o r t t h e i n v e s t m e n t p r o c e s s a n d p o r t f o l i o i m p l e m e nt a t i o n . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 4 , P a t r i c k w a s a ma n a g i n g d i r e c t o r f o r t h e g l o b a l i n v e s t m e n t s o l u t i o n s t e a m at U B S G l o b a l A s s e t M a n a g e m e n t . H i s r o l e s p a n n e d o r g a n i z i n g an d s u p p o r t i n g t h e m u l t i - a s s e t a n d m u l t i - c u r r e n c y in v e s t m e n t a n d i n s t i t u t i o n a l a d v i s o r y f u n c t i o n s t o c h a i r i ng t h e g l o b a l i n v e s t m e n t s o l u t i o n s s e n i o r m a n a g e m e n t c o m m i tt e e . B e f o r e t h a t , h e w a s a m e m b e r o f t h e U . S . i n s t i t u t i o n a l c lient r e l a t i o n s h i p m a n a g e m e n t t e a m . E d u c a t i o n : B . S . , e c o n om i c s , U n i v e r s i t y o f I l l i n o i s a t C h i c a g o ; M . B . A . , N or t h w e s t e r n U n i v e r s i t y ’ s K e l l o g g G r a d u a t e S c h o o l o f Management. Sa m M a r s h a l l Sa m M a r s h a l l i s a n a n a l y s t o n t h e D y n a m i c A l l o c a t i o n S t r a t e g ie s t e a m . H e i s r e s p o n s i b l e f o r p o r t f o l i o c o o r d i n a t i o n a n d i mp l e m e n t a t i o n , i n c l u d i n g m a n a g i n g c a s h f l o w s a n d u p d a t i n g , im p l e m e n t i n g , a n d m o n i t o r i n g s t r a t e g y c h a n g e s f o r m u l t i - a s s e t c a p a b i l i t i e s . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 1 , h e wa s a d i r e c t o r a t U B S G l o b a l A s s e t M a n a g e m e n t , w h e r e h e w a s p a rt of t h e g l o b a l i n v e s t m e n t s o l u t i o n s g r o u p . B e f o r e j o i n i n g t h at g r o u p i n 2 0 0 5 , h e w a s a p e r f o r m a n c e a n a l y s t f o r t h r e e y e a r s . E d u c a t i o n : B . S c . f r o m U n i v e r s i t y o f S u r r e y . D e s i g n a t i o n s : In v e s t m e n t M a n a g e m e n t C e r t i f i c a t e ( I M C ) . Ed o u a r d S e n e c h a l , C F A , F R M Ed o u a r d S e n e c h a l i s a s e n i o r r e s e a r c h a n a l y s t o n t h e D y n a m i c Al l o c a t i o n S t r a t e g i e s t e a m . W i t h i n t h i s r o l e , E d o u a r d f o c u se s o n v a l u a t i o n r e s e a r c h a n d r i s k m a n a g e m e n t . B e f o r e j o i n i ng Wi l l i a m B l a i r i n 2 0 1 1 , h e w a s r e s p o n s i b l e f o r q u a n t i t a t i v e i nv e s t m e n t r e s e a r c h a n d r i s k m a n a g e m e n t a t S i n g e r P a r t n e r s , LL C . E d o u a r d i s t h e f o r m e r e x e c u t i v e d i r e c t o r a n d s e n i o r r i s k ma n a g e r o f U B S G l o b a l A s s e t M a n a g e m e n t A m e r i c a s . A t U B S , E d o ua r d a l s o m a n a g e d a q u a n t i t a t i v e r e s e a r c h g r o u p f o c u s e d o n e xt e r n a l m a n a g e r r e s e a r c h a n d w a s i n c h a r g e o f im p l e m e n t i n g p o r t a b l e a l p h a s o l u t i o n s . B e f o r e U B S , h e s e r v ed a s a s e n i o r c o n s u l t a n t f o r A p p l i e d R e s e a r c h a t B a r r a . H e h a s a u t h o r e d a n u m b e r o f p u b l i c a t i o n s , i n c l u d i n g , m o s t r e c e n t ly, “T h e E m p i r i c a l L a w o f A c t i v e M a n a g e m e n t : P e r s p e c t i v e s o n t h e D e c l i n i n g S k i l l o f U . S . F u n d M a n a g e r s , ” p u b l i s h e d i n 2 0 1 0 i n t h e J o u r n a l o f P o r t f o l i o M a n a g e m e n t . E d o u a r d i s a l s o t h e cu r r e n t c h a i r o f t h e C F A I n s t i t u t e S t a n d a r d o f P r a c ti c e C o u n c i l . E d u c a t i o n : B . A . , e c o n o m i c s , D a u p h i n e Un i v e r s i t y ; M . B . A . , U n i v e r s i t y o f C h i c a g o ’ s B o o t h S chool of Business. 000011DC 26 Bi o g r a p h i e s 233201 Jo h n C . S i m m o n s , C F A Jo h n S i m m o n s i s a s e n i o r i n v e s t m e n t s t r a t e g i s t f o r t h e D y n a m ic A l l o c a t i o n S t r a t e g i e s t e a m . H e j o i n e d W i l l i a m B l a i r i n h i s c u r r e n t r o l e i n 2 0 1 2 . P r e v i o u s l y , J o h n w a s a s e n i o r v i c e pr e s i d e n t w i t h C a l l a n A s s o c i a t e s . B e f o r e t h a t , h e w a s a s e n i or c o n s u l t a n t , p o r t f o l i o m a n a g e r , a n d p r e s i d e n t f o r N u v e e n In v e s t m e n t S o l u t i o n s a n d t h e N u v e e n H y d e P a r k G r o u p , w h e r e , as po r t f o l i o m a n a g e r f o r N u v e e n M o d e r a t e A l l o c a t i o n F u n d , h e w on t h e 2 0 1 1 L i p p e r F u n d A w a r d f o r t h e B e s t F u n d o v e r T h r e e Y e a r s i n t h e M i x e d - A s s e t T a r g e t A l l o c a t i o n M o d e r a t e F u n d s ca t e g o r y . B e f o r e t h a t , J o h n w a s a s e n i o r c o n s u l t a n t a n d p r i n ci p a l w i t h R i c h a r d s & T i e r n e y . H e i s a m e m b e r a n d i m m e d i a t e p a st d i r e c t o r o f t h e C F A S o c i e t y o f C h i c a g o a n d a m e m b e r o f th e C F A I n s t i t u t e , t h e E c o n o m i c C l u b o f C h i c a g o , t h e E x e c u t i v e s ’ C l u b o f C h i c a g o , t h e C h i c a g o C o u n c i l on G l o b a l A f f a i r s , a n d t h e a d v i s o r y b o a r d o f t h e C e nter for Study of Financial Markets an d D e r i v a t i v e s a t S a i n t X a v i e r U n i v e r s i t y . I n a d d i t i o n , J o hn i s a c t i v e i n a n u m b e r o f c i v i c a n d c h a r i t a b l e e n d e a v o r s , i n cl u d i n g c u r r e n t o r p a s t m e m b e r s h i p s o n t h e S c h o o l D i s t r i c t 1 61 Bo a r d o f E d u c a t i o n , t h e b o a r d o f t r u s t e e s o f S a i n t X a v i e r U n i v e r s i t y , t h e c o m m u n i t y b o a r d o f t h e C a n c e r S u p p o r t C e n t e r , a nd t h e g o v e r n i n g c o u n c i l o f S a i n t F r a n c i s d e S a l e s H i g h S c h o o l. Ed u c a t i o n : B . A . , c u m l a u d e , S a i n t X a v i e r U n i v e r s i t y ; M . B . A . , S a i n t X a v i e r U n i v e r s i t y . Re n a t o S t a u b , P h . D . Re n a t o S t a u b i s a s e n i o r a n a l y s t o n t h e D y n a m i c A l l o c a t i o n S t r a t e g i e s t e a m . B e f o r e j o i n i n g W i l l i a m B l a i r i n 2 0 1 1 , h e w a s r es p o n s i b l e f o r q u a n t i t a t i v e i n v e s t m e n t r e s e a r c h a n d r i s k ma n a g e m e n t a t S i n g e r P a r t n e r s , L L C , a n d w a s a s e n i o r i n v e s t m en t a n d r i s k a n a l y s t a t U B S G l o b a l A s s e t M a n a g e m e n t i n C h i c a g o a n d Z u r i c h , w h e r e h e w a s r e s p o n s i b l e f o r v a l u a t i o n an a l y s i s , r i s k a n a l y s i s , a n d r i s k m o d e l i n g , a n d p o r t f o l i o d es i g n o f l i q u i d a n d a l t e r n a t i v e a s s e t s f o r a s s e t a l l o c a t i o n . H e s t a r t e d h i s c a r e e r i n i n v e s t m e n t m a n a g e m e n t i n 1 9 9 6 a s a qu a n t i t a t i v e a n a l y s t , i n v o l v e d i n t h e d e v e l o p m e n t o f v a r i o us a l t e r n a t i v e i n v e s t m e n t s . R e n a t o h a s p u b l i s h e d a r t i c l e s in a v a r i e t y o f p r o f e s s i o n a l j o u r n a l s . E d u c a t i o n : M . S . , S w i ss Federal In s t i t u t e o f T e c h n o l o g y ; M . A . a n d P h . D . , U n i v e r s i t y o f S t . G a l l e n S c h o o l o f M a n a g e m e n t , E c o n o m i c s , L a w , S o c i a l S c i e n c e s , a n d I n t e r n a t i o n a l A f f a i r s ( H S G ) . 000011DD 27 Bi o g r a p h y 227788 Ke v i n F e t z e r , C F A Ke v i n F e t z e r i s r e s p o n s i b l e f o r c o n s u l t a n t r e l a t i o n s a n d i n st i t u t i o n a l b u s i n e s s d e v e l o p m e n t i n t h e M i d w e s t a n d S o u t h e as t r e g i o n s o f t h e U n i t e d S t a t e s a t W i l l i a m B l a i r . H e j o i n e d Wi l l i a m B l a i r ’ s b u s i n e s s d e v e l o p m e n t t e a m i n 2 0 1 0 t o a s s i s t cl i e n t s a n d t h e i r i n v e s t m e n t c o n s u l t a n t s a s t h e y s e e k t o f u l fi l l i n v e s t m e n t o b j e c t i v e s . B e f o r e j o i n i n g t h e f i r m , K e v i n worked fo r U B S G l o b a l A s s e t M a n a g e m e n t a s a c l i e n t r e l a t i o n s h i p m a n ag e r a n d c o n s u l t a n t r e l a t i o n s a s s o c i a t e . H e b e g a n h i s c a r e e r a s a c o m m e r c i a l c r e d i t a n a l y s t f o r R e g i o n s F i n a n c i a l . K e v i n se r v e s a s a n a d v i s o r y g r o u p m e m b e r f o r t h e C F A S o c i e t y o f C h i c ag o a n d i s a n a c t i v e v o l u n t e e r f o r I m e r m a n ’ s A n g e l s ( a c a n c e r su p p o r t n e t w o r k ) . K e v i n i s a m e m b e r o f t h e C F A I n s t i t u t e an d C F A S o c i e t y o f C h i c a g o . E d u c a t i o n : B . S . i n f i n a n c e , F l o r id a S t a t e U n i v e r s i t y ; M . B . A . w i t h a c o n c e n t r a t i o n i n i n v e s t me n t m a n a g e m e n t , D e P a u l U n i v e r s i t y ’ s K e l l s t a d t G r a d u a t e S chool of Bu s i n e s s . 000011F1 28 No t e s 232837 Th i s m a t e r i a l i s p r o v i d e d b y W i l l i a m B l a i r ’ s D y n a m i c A l l o c a t i o n S t r a t e g i e s t e a m f o r g e n e r a l i n f o r m a t i o n p u r p o s e s o n l y a n d i s n o t i n t e n d e d a s in v e s t m e n t a d v i c e . A n y d i s c u s s i o n o f p a r t i c u l a r t o pi c s i s n o t m e a n t t o b e c o m p r e h e n s i v e a n d m a y b e s u bj e c t t o c h a n g e . A n y i n v e s t m e n t o r s t r a t e g y me n t i o n e d h e r e i n m a y n o t b e s u i t a b l e f o r e v e r y i n v e st o r . F a c t u a l i n f o r m a t i o n h a s b e e n t a k e n f r o m s o u r ce s w e b e l i e v e t o b e r e l i a b l e , b u t i t s a c c u r a c y , co m p l e t e n e s s o r i n t e r p r e t a t i o n c a n n o t b e g u a r a n t e e d . I n f o r m a t i o n a n d o p i n i o n s e x p r e s s e d a r e t h o s e o f t he a u t h o r a n d m a y n o t r e f l e c t t h e o p i n i o n s o f ot h e r i n v e s t m e n t t e a m s w i t h i n W i l l i a m B l a i r . I n f o r m at i o n i s c u r r e n t a s o f t h e d a t e a p p e a r i n g i n t h i s m at e r i a l o n l y a n d s u b j e c t t o c h a n g e w i t h o u t n o t i c e . Ex p e c t e d r e t u r n i n f o r m a t i o n c o n t a i n e d h e r e i n i s i n t en d e d t o i l l u s t r a t e p o t e n t i a l e x p e c t a t i o n s f o r v a r i ou s c a p i t a l m a r k e t s a n d s h o u l d n o t b e co n s i d e r e d a n y r e p r e s e n t a t i o n o f p a s t o r e x p e c t e d f ut u r e r e t u r n o r r i s k f o r a n y W i l l i a m B l a i r i n v e s t m e nt s t r a t e g y o r p r o d u c t . Expected re t u r n s a r e p r o v i d e d a r e f o r i n f o r m a t i o n a l p u r p o s e s o n l y a n d n o t i n t e n d e d t o b e r e f l e c t i v e o f r e s u l t s a p e r s o n s h o u l d e x p e c t t o a c h i e v e . A c t u a l r e s u l t s wi l l v a r y a n d m a y b e h i g h e r o r l o w e r t h a n t h e v a l u e s i n d i c a t e d . D i f f e r e n c e s b e t w e e n e x p e c t e d a n d a c t u al r e s u l t s m a y b e e x a g g e r a t e d i n v o l a t i l e ma r k e t e n v i r o n m e n t s . T h e r e i s n o g u a r a n t e e t h a t e x pe c t e d r e t u r n o r r i s k e x p e c t a t i o n s i n d i c a t e d w i l l e qu a l a c t u a l r e t u r n o r r i s k f o r a n y c a p i t a l m a r k e t or i n v e s t m e n t s t r a t e g y . Th e e x p e c t e d r e t u r n o f a n a s s e t r e f l e c t s t h e a v e r a g e p r o b a b i l i t y d i s t r i b u t i o n o f p o s s i b l e r e t u r n s a n d is b a s e d o n t h e c o n v e r g e n c e o f v a l u e t o p r i c e ( o v e r an 8 - y e a r p e r i o d f o r e q u i t i e s a n d 5 - y e a r p e r i o d f o r b o n d s ) p l u s i n c o m e a c c r u i n g t o a n i n v e s t o r . T h e e qu i l i b r i u m r e t u r n r e f l e c t s t h e c a s h r a t e ( i . e . , r e a l ri s k - f r e e r a t e + i n f l a t i o n p r e m i u m ) p l u s a p r o p r i e t ar y r i s k p r e m i u m b a s e d o n t h e D A S t e a m ’ s l o n g - t e r m ri s k m o d e l . V a l u e r e f l e c t s t h e p r e s e n t v a l u e o f fu t u r e e x p e c t e d c a s h f l o w s . D i s c o u n t r a t e s a n d e q u i li b r i u m r i s k e s t i m a t e s a r e b a s e d o n t h e D A S t e a m ’ s pr o p r i e t a r y l o n g - t e r m r i s k m o d e l . P r i c e r e f l e c t s cu r r e n t i n d e x o r y i e l d v a l u e a n d i s b a s e d o n h i s t o r ic a l d a i l y p r i c e s o f l e a d i n g i n d i c e s . P e r i o d s g r e a t er t h a n o n e y e a r a r e s h o w n a n n u a l i z e d . V o l a t i l i t y i s me a s u r e d b y t h e s t a n d a r d d e v i a t i o n o f r e t u r n s . Co m p a r a t i v e i n d i c e s a r e i n t e n d e d f o r i l l u s t r a t i v e p ur p o s e s o n l y a n d d o n o t r e f l e c t t h e p e r f o r m a n c e o f an y p r o d u c t o r s t r a t e g y m a n a g e d b y W i l l i a m Bl a i r . T h e f o l l o w i n g l e a d i n g i n d i c e s a r e u s e d a s p r ox i e s f o r v a r i o u s a s s e t c l a s s e s : 1 ) U . S . E q u i t y – S & P 5 0 0 I n d e x ; 2 ) N o n - U . S . E q u i t y – M S C I E A F E I n d e x ; 3) E m e r g i n g M a r k e t E q u i t y – M S C I E m e r g i n g M a r k e t s I n de x ; 4 ) U . S . B o n d – B a r c l a y s C a p i t a l U . S . A g g r e g a t e Bo n d I n d e x ; 5 ) N o n - U . S . G o v e r n m e n t B o n d – S & P / C i t i g r o u p I n t e r n a t i o n a l T r e a s u r y B o n d I n d e x E x -U . S . ; 6 ) U . S . I n v e s t m e n t G r a d e B o n d – B a n k o f A m e r i ca / M e r r i l l L y n c h U . S . C o r p o r a t e M a s t e r In d e x ; 7 ) U . S . H i g h Y i e l d – B a n k o f A m e r i c a / M e r r i l l Ly n c h U . S . H i g h Y i e l d C a s h P a y I n d e x ; 8 ) E m e r g i n g M ar k e t D e b t – J P M o r g a n E m e r g i n g M a r k e t s Bo n d I n d e x G l o b a l ; a n d 9 ) C a s h – T h o m p s o n R e u t e r s d a il y e x c h a n g e r a t e s . I n d i c e s a r e u n m a n a g e d , d o n o t i nc u r m a n a g e m e n t f e e s , c o s t s o r e x p e n s e s an d c a n n o t b e i n v e s t e d i n d i r e c t l y . P a s t o r e x p e c t ed p e r f o r m a n c e d o e s n o t g u a r a n t e e f u t u r e r e s u l t s . 000010CA 29 No t e s ( C o n t i n u e d ) 232838 Wi l l i a m B l a i r ’ s D y n a m i c A l l o c a t i o n S t r a t e g i e s e m p l o y s o p h i s t i c a t e d i n v e s t m e n t s t r a t e g i e s t h a t m a y n o t be s u i t a b l e f o r a l l i n v e s t o r s , a n d a n in v e s t o r c o u l d l o s e a l l , o r a s u b s t a n t i a l a m o u n t o f t h e i r i n v e s t m e n t . T h e s e s t r a t e g i e s : • A r e s p e c u l a t i v e a n d i n v o l v e a s u b s t a n t i a l d e g r e e o f r i s k ; • M a y u s e l e v e r a g e t o a c h i e v e p o t e n t i a l l y h i g h e r r e t ur n s t h r o u g h p r o p o r t i o n a l l y h i g h e r e x - a n t e r i s k e x p os u r e s t h r o u g h , b u t n o t l i m i t e d t o , t h e d i r e c t us e o f s w a p s , o p t i o n s , f o r e i g n e x c h a n g e c o n t r a c t s , ex c h a n g e t r a d e d f u n d s , f u t u r e s c o n t r a c t s , a n d / o r b y b o r r o w i n g m o n e y t o p u r c h a s e i n v e s t m e n t s ; • A r e s u b j e c t t o o t h e r i n v e s t m e n t r i s k s i n c l u d i n g t h os e a s s o c i a t e d w i t h h i g h y i e l d s e c u r i t i e s , e m e r g i n g m a r k e t s , n o n - U . S . s e c u r i t i e s , c u r r e n c y m a r k e t s an d f i x e d i n c o m e s e c u r i t i e s ; • E x p e c t t o i n c u r , b u t n o t t a r g e t , e q u i t y - l i k e r i s k , o v e r p e r i o d s o f f i v e y e a r s o r l o n g e r b u t m a y e x p e r ie n c e r i s k a n d r e t u r n s s i g n i f i c a n t l y d i f f e r e n t t h a n ex p e c t a t i o n s ; a n d • M a y p r o d u c e h i g h l y v o l a t i l e i n v e s t m e n t r e t u r n s . Al t e r n a t i v e i n v e s t m e n t s , i n c l u d i n g o p t i o n s , f u t u r e s a n d h e d g e f u n d s , a r e s p e c u l a t i v e a n d t y p i c a l l y i n v ol v e a h i g h d e g r e e o f r i s k . These in v e s t m e n t s a r e i n t e n d e d f o r e x p e r i e n c e d a n d s o p h i s ti c a t e d i n v e s t o r s w h o a r e w i l l i n g t o b e a r t h e l o s s of t h e i r e n t i r e i n v e s t m e n t a n d m a y n o t b e su i t a b l e f o r a l l i n v e s t o r s . P e r f o r m a n c e o f t h e s e p r od u c t s m a y b e v o l a t i l e , a n d w h i l e t h e y m a y p r o v i d e th e p o t e n t i a l f o r p o s i t i v e r e t u r n s i n b o t h r i s i n g an d d e c l i n i n g m a r k e t s , t h e p o t e n t i a l f o r l o s s i s e q ua l . S o m e a l t e r n a t i v e i n v e s t m e n t s c a n b e h i g h l y i l l iq u i d , m a y n o t b e r e q u i r e d t o p r o v i d e p e r i o d i c pr i c i n g o r v a l u a t i o n t o i n v e s t o r s , a n d m a y i n v o l v e co m p l e x t a x s t r u c t u r e s a n d d e l a y s i n d i s t r i b u t i o n o f i m p o r t a n t t a x i n f o r m a t i o n . C e r t a i n a l t e r n a t i v e s ar e n o t s u b j e c t t o t h e s a m e r e g u l a t o r y r e q u i r e m e n t s , c h a r g e h i g h e r f e e s a n d m a y h a v e l i m i t e d o p p o r t u n i ty f o r e a r l y r e d e m p t i o n o r t r a n s f e r e n c e o f in t e r e s t s . A l t e r n a t i v e i n v e s t m e n t s t r a t e g i e s a r e n o t i n t e n d e d a s a c o m p l e t e i n v e s t m e n t p r o g r a m . E a c h i nv e s t o r s h o u l d c o n s u l t t h e i r o w n a d v i s o r s re g a r d i n g t h e l e g a l , t a x , a n d f i n a n c i a l s u i t a b i l i t y o f a l t e r n a t i v e i n v e s t m e n t s . 000010CB 30 Co m p o s i t e D i s c l o s u r e Ma c r o A l l o c a t i o n 233314 Di s c l o s u r e s : Wi l l i a m B l a i r I n v e s t m e n t M a n a g e m e n t c l a i m s c o m p l i a n ce w i t h t h e G l o b a l I n v e s t m e n t P e r f o r m a n c e S t a n d a r d s ( GI P S ® ) a n d h a s p r e p a r e d a n d p r e s e n t e d t h i s r e p o r t i n co m p l i a n c e w i t h t h e G I P S s t a n d a r d s . W i l l i a m B l a i r In v e s t m e n t M a n a g e m e n t h a s b e e n i n d e p e n d e n t l y v e r i f i e d f o r t h e p e r i o d s J a n u a r y 1 , 1 9 9 3 t h r o u g h D e c e m b e r 3 1 , 2 0 1 4 . V e r i f i c a t i o n a s s e s s e s w h e t h e r ( 1 ) t h e f i r m h a s c o m plied with all the composite construction re q u i r e m e n t s o f t h e G I P S s t a n d a r d s o n a f i r m - w i d e b a si s a n d ( 2 ) t h e f i r m ’ s p o l i c i e s a n d p r o c e d u r e s a r e d es i g n e d t o c a l c u l a t e a n d p r e s e n t p e r f o r m a n c e i n c o m p li a n c e w i t h t h e G I P S s t a n d a r d s . T h e M a c r o A l l o c a t i o n Co m p o s i t e h a s b e e n e x a m i n e d f o r t h e p e r i o d s p r e s e n t e d t h r o u g h D e c e m b e r 3 1 , 2 0 1 4 . T h e v e r i f i c a t i o n a n d p e r f o rm a n c e e x a m i n a t i o n r e p o r t s a r e a v a i l a b l e u p o n r e q u e s t. For purposes of compliance with GIPS, the Fi r m i s d e f i n e d a s a l l a c c o u n t s m a n a g e d b y W i l l i a m Bl a i r I n v e s t m e n t M a n a g e m e n t . W i l l i a m B l a i r I n v e s t m e nt M a n a g e m e n t i n c l u d e s W i l l i a m B l a i r I n v e s t m e n t M a n ag e m e n t , L L C a n d s o m e a c c o u n t s m a n a g e d b y W i l l i a m Bl a i r & C o m p a n y , L . L . C . W i l l i a m B l a i r I n v e s t m e n t M a na g e m e n t , L L C a n d W i l l i a m B l a i r & C o m p a n y , L . L . C . a re i n v e s t m e n t a d v i s e r s r e g i s t e r e d w i t h t h e U n i t e d S t a te s S e c u r i t i e s a n d E x c h a n g e C o m m i s s i o n ( “ S E C ” ) . Re g i s t r a t i o n w i t h t h e S E C d o e s n o t i m p l y a c e r t a i n l e ve l o f s k i l l o r t r a i n i n g . Th e M a c r o A l l o c a t i o n i n v e s t m e n t o b j e c t i v e i s t o m a x i mi z e l o n g - t e r m r i s k a d j u s t e d t o t a l r e t u r n b y e m p l o y in g a d y n a m i c g l o b a l m a c r o a s s e t a l l o c a t i o n s t r a t e g y w h i c h a t t e m p t s t o e x p l o i t p e r i o d i c m a r k e t i n e f f i c i e ncies by t a k i n g l o n g a n d s h o r t p o s i t i o n s i n v a r i o u s a s s e t cl a s s e s i n o r d e r t o p r o f i t f r o m r e l a t i v e m o v e m e n t s ac r o s s a n d w i t h i n s u c h a s s e t c l a s s e s . T h e s t r a t e g y m a y i n v e s t i n o r s e e k e x p o s u r e t o a w i d e r a n g e o f a s s e t classes in c l u d i n g , w i t h o u t l i m i t a t i o n , e q u i t y a n d f i x e d i n c o me m a r k e t s , c u r r e n c i e s , c o m m o d i t i e s , a n d r e a l e s t a t e. L e v e r a g e m a y b e u s e d t o a c h i e v e p o t e n t i a l l y h i g h e r re t u r n s t h r o u g h p r o p o r t i o n a l l y h i g h e r e x - a n t e r i s k ex p o s u r e s t h r o u g h , b u t n o t l i m i t e d t o , t h e f r e q u e n t a n d d i r e c t u s e o f s w a p s , o p t i o n s , f o r e i g n e x c h a n g e c o n tr a c t s , e x c h a n g e t r a d e d f u n d s , a n d f u t u r e s c o n t r a c t s . T h e s t r a t e g y h a s n o g e o g r a p h i c o r o t h e r l i m i t s o n t h e al l o c a t i o n o f i t s a s s e t s a m o n g a s s e t c l a s s e s . T h e s t ra t e g y m a y a l s o s e e k e x p o s u r e t o v o l a t i l i t y o r v a r i an c e s o f b r o a d - b a s e d m a r k e t i n d i c e s a n d t o e c o n o m i c v a r i a b l e s s u c h a s i n f l a t i o n r a t e s . T h e t a r g e t e d l o n g -term (7+ ye a r s ) v o l a t i l i t y o f t h e s t r a t e g y r e t u r n s i s 1 0 % . Th e p r i m a r y b e n c h m a r k f o r t h e s t r a t e g y i s t h e B a n k o f A me r i c a M e r r i l l L y n c h 3 - M o n t h T r e a s u r y B i l l I n d e x . T h e se c o n d a r y b e n c h m a r k f o r t h e s t r a t e g y i s a b l e n d o f 4 0 % Barclays Aggregate Bond Index, 30% MSCI All Co u n t r y W o r l d I n d e x ( n e t ) , a n d 3 0 % B a n k o f A m e r i c a Me r r i l l L y n c h 3 - M o n t h T r e a s u r y B i l l I n d e x . T h e b l e n d e d b e n c h m a r k i s r e b a l a n c e d d a i l y . T h e p r i m a r y b e n c h m a r k for Macro Allocation changed from the Macro Al l o c a t i o n B l e n d e d b e n c h m a r k t o t h e B a n k o f A m e r i c a M er r i l l L y n c h 3 - M o n t h T r e a s u r y B i l l I n d e x o n J a n u a r y 2 9, 2 0 1 5 t o b e c o n s i s t e n t w i t h t h e t o t a l r e t u r n n a t u r e o f t h e s t r a t e g y . V a l u a t i o n s a n d r e t u r n s a r e de n o m i n a t e d i n U . S . D o l l a r s . A c c r u a l a c c o u n t i n g i s us e d f o r d i v i d e n d s . T h e d i v i d e n d a c c r u a l s i n c l u d e d i n p o r t f o l i o v a l u a t i o n s a r e n e t o f a p p l i c a b l e w i t h h o l d i ng t a x e s . P e n d i n g w i t h h o l d i n g t a x r e c l a i m s a r e n o t a c crued fo r i n t h e p o r t f o l i o v a l u a t i o n s . P o r t f o l i o s m u s t h a v e a n i n i t i a l m a r k e t v a l u e g r e a t e r t h a n o r e q u a l t o $ 1 m i l l i o n t o b e i n c l u d e d i n t h e c o m p o s i t e . N e w a c c o u n t s a r e a d d e d t o t h e c o m p o s i t e a t t h e b e g i n n i n g o f t h e m onth fo l l o w i n g t h e f i r s t f u l l c a l e n d a r m o n t h u n d e r m a n a g e m en t . P o r t f o l i o s t h a t c h a n g e i n v e s t m e n t s t r a t e g i e s a r e t r a n s f e r r e d b e t w e e n c o m p o s i t e s i n t h e f i r s t f u l l m o nt h l y r e p o r t i n g p e r i o d t h e p o r t f o l i o i s m a n a g e d u n d e r th e n e w s t y l e . P o r t f o l i o s w i l l b e e x c l u d e d f r o m t h e i r c o m p o s i t e t h e f i r s t m o n t h i m m e d i a t e l y f o l l o w i n g t h e i r l a s t c o m p l e t e m o n t h o f a u t h o r i z e d m a n a g e m e n t b y t h e F ir m . Co m p o s i t e d i s p e r s i o n m e a s u r e s r e p r e s e n t t h e c o n s i s t e nc y o f a f i r m ' s c o m p o s i t e p e r f o r m a n c e w i t h r e s p e c t t o t h e i n d i v i d u a l p o r t f o l i o r e t u r n s w i t h i n a c o m p o s i t e . T h e d i s p e r s i o n o f a n n u a l r e t u r n s i s m e a s u r e d b y t h e as s e t - w e i g h t e d s t a n d a r d d e v i a t i o n o f t h e g r o s s r e t u r n s i n t h e c o m p o s i t e . D i s p e r s i o n i n c l u d e s o n l y t h o s e p o rt f o l i o s t h a t h a v e b e e n i n c l u d e d i n t h e c o m p o s i t e f o r th e e n t i r e y e a r . T h i s e l i m i n a t e s a n y i n a c c u r a c i e s c r e ated by a n n u a l i z i n g p a r t i a l y e a r r e t u r n s . T h e t h r e e - y e a r a nn u a l i z e d s t a n d a r d d e v i a t i o n m e a s u r e s t h e v a r i a b i l i t y o f t h e c o m p o s i t e a n d t h e b e n c h m a r k r e t u r n s o v e r t h e p re c e d i n g 3 6 - m o n t h p e r i o d . T h i s s t a t i s t i c i s n o t pr e s e n t e d u n t i l t h e r e a r e 3 6 m o n t h s o f p e r f o r m a n c e a v ai l a b l e . P e r f o r m a n c e r e s u l t s a r e s t a t e d g r o s s a n d n et o f i n v e s t m e n t a d v i s o r y f e e s . T h e m a n a g e m e n t f e e s ch e d u l e i s a s f o l l o w s : Fi r s t $ 2 5 0 , 0 0 0 , 0 0 0 : 0 . 7 0 % Ne x t $ 2 5 0 , 0 0 0 , 0 0 0 : 0 . 6 0 % Ne x t $ 2 5 0 , 0 0 0 , 0 0 0 : 0 . 5 0 % Ne x t $ 2 5 0 , 0 0 0 , 0 0 0 : 0 . 4 0 % Ov e r $ 1 , 0 0 0 , 0 0 0 , 0 0 0 : 0 . 3 0 % Th e m a x i m u m f e e i s 0 . 7 0 % . Th e M a c r o A l l o c a t i o n C o m p o s i t e w a s c r e a t e d i n D e c e m b er , 2 0 1 1 . A c o m p l e t e l i s t a n d d e s c r i p t i o n o f f i r m c om p o s i t e s i s a v a i l a b l e u p o n r e q u e s t . A d d i t i o n a l i n f o rm a t i o n r e g a r d i n g p o l i c i e s f o r v a l u i n g p o r t f o l i o s , ca l c u l a t i n g p e r f o r m a n c e a n d p r e p a r i n g c o m p l i a n t p r e se n t a t i o n s i s a l s o a v a i l a b l e u p o n r e q u e s t . P a s t p e r fo r m a n c e i s n o t i n d i c a t i v e o f f u t u r e r e s u l t s . *P a r t i a l p e r i o d r e p r e s e n t s d a t a f r o m 1 2 / 1 / 2 0 1 1 . Ca l e n d a r Ye a r To t a l G r o s s A s s e t - We i g h t e d R e t u r n To t a l N e t A s s e t - We i g h t e d R e t u r n Bo f A M e r r i l l Ly n c h 3 M T - B i l l Ma c r o A l l o c a t i o n Bl e n d e d C o m p o s i t e 3 - Y r St a n d a r d D e v i a t i o n Be n c h m a r k 3 - Y r S t a n d a r d D e v i a t i o n Nu m b e r o f Po r t f o l i o s D i s p e r s i o n C o m p o s i t e A s s e t s E n d o f P e r i o d (mm) Percent Non-Fee Paying Percent of Total Firm Asets * 20 1 1 0. 0 9 % 0 . 0 2 % 0 . 1 0 % 0 . 4 0 % # N / A 0 . 0 3 5 / F e w e r N / A $ 5 . 9 3 0 . 0 0 % 0 . 0 1% 20 1 2 15 . 5 8 % 1 4 . 6 5 % 0 . 1 0 % 6 . 5 6 % # N / A 0 . 0 3 5 / F e w e r N / A $ 4 9 . 9 6 0 . 0 0 % 0.09% 20 1 3 14 . 6 9 % 1 3 . 7 8 % 0 . 0 7 % 5 . 6 2 % # N / A 0 . 0 3 5 / F e w e r N / A $ 3 8 4 . 0 1 0 . 0 0 % 0.62% 20 1 4 4. 1 8 % 3 . 3 7 % 0 . 0 3 % 3 . 7 2 % 8 . 1 6 0 . 0 2 5 / F e w e r N / A $ 1 , 0 2 1 . 5 1 0 . 0 0 % 1.62% 000009CA 31