INVESTMENT PORTFOLIO REVIEW€¦ · Mid Cap Value 2853752 Wedge Capital MCV SMA WED-MCV $ 1,211,512 $ 46,227 0.99% 1.00% $15,563 $0 Small Cap Growth 2853778 Granite SCG SMA GRT-SCG

INVESTMENT PORTFOLIO REVIEW

PRESENTED TO:

EPISCOPAL DIOCESE OF CT

OCTOBER 23, 2018

G. DIANN PETRINOMANAGING DIRECTOR, INSTITUTIONAL CLIENT EXECUTIVE

609.274.6819

[email protected]

ELIZABETH A. CAHILLMANAGING DIRECTOR, PRIVATE CLIENT ADVISOR

203.422.5206

[email protected]

JOSEPH A. MCCOURT, CFAMANAGING DIRECTOR, SENIOR INSTITUTIONAL PORTFOLIO STRATEGIST

617.434.7944

[email protected]

PATRICK J. STAFFARONISVP, PHILANTHROPIC CLIENT MANAGER

860.244.4878

[email protected]

INTRODUCTIONInvestment Strategy Committee Viewpoint

Economic & Market Quad Chart

PORTFOLIO REVIEWExecutive Summary

Risk Analytics

Attribution Analysis

Investment Performance(Calendar Returns bar chart)

Current Asset Allocation (IPS)

Investment Performance (IPS)

INVESTMENT MANAGER DUE DILIGENCE AND EVALUATION

APPENDIXInvestment Policy Statement

Investment Performance(Product View)

Asset Class and Index Disclosures and Definitions

TABLE OF CONTENTS

2

INTRODUCTION

ECONOMIC OUTLOOK

U.S.

• U.S. growth picked up to about 3.2 percent in the first half of thisyear. For Q3, real gross domestic product (GDP) growth continues totrack well over 3%.

• U.S. consumers have tailwinds from decent wage growth, risinghome prices, still-low interest rates and very positive labor marketdynamics.

• We expect housing and business investmentspending to remain cyclical tailwinds for the overalleconomy, extending the cycle.

• Pro-business policies are helping: Tax cuts, tax reform, repatriation and regulatory relief are boosting confidence and nominal growth.

EMPLOYMENT, INFLATION & INTEREST RATES

• Rising U.S. rates, concerns over slower growth and apotential delay to the end of quantitative easing inEurope should continue to support the dollar in thenear term. On balance, we expect a steady dollar overthe coming year.

• We expect WTI oil prices to remain strong in the $60 to$80 range.

U.S. InflationU.S. Fiscal PolicyEarningsChina and Trade PoliciesCentral Bank MeetingsBrexit negotiationsU.S. Trade PolicyMidterm Elections

WATCH LIST

GLOBAL

•The synchronized global growth upturn that beganin 2016 is transitioning with the U.S. stillaccelerating and the rest of the world slowing.

•Purchasing Managers’ Indexes show the globalexpansion remains solid. Capital spending plans also remain solid.

•Corporate profits are rising around the world.

•We expect real global GDP growth to remain solid in 2019.

PROFITS

Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September 2018. ARWGVC8V

DOLLAR & COMMODITIES

• We expect corporate profits to rise by double-digit percentagesthroughout the year, driven by revenue increases from healthyconsumer and business spending.

• Job growth remains steady and the current trend is sufficient tokeep the unemployment rate declining for the next year.

• Wage growth is moderate and suggests inflation is well anchored orpicking up.

• We expect the Fed to continue to gradually removemonetary accommodation through rate hikes andbalance sheet tapering.

4

Q1 2018A Q2 2018A Q3 2018E 2016A 2017A 2018E 2019E

Real global GDP (% y/y annualized) - - - 3.1 3.8 3.8 3.8

Real U.S. GDP (% q/q annualized) 2.2 4.2 3.4 1.6 2.2 2.9 2.7

CPI inflation (% y/y) 2.3 2.6 2.6 1.3 2.1 2.5 2.1

Core CPI inflation (% y/y) 1.9 2.2 2.3 2.2 1.8 2.2 2.4

Unemployment rate, period average

(%)4.1 3.9 3.8 4.9 4.4 3.9 3.4

Fed funds rate, end period (%) 1.63 1.88 2.13 0.63 1.38 2.38 3.13

10-year Treasury, end period (%) 2.74 2.86 3.15 2.44 2.41 3.25 3.35**

S&P 500, end period 2641 2718 - 2239 2674 3000 -

S&P operating earnings ($/share) 37 40* 40 118 132 159 170

$/€, end period 1.23 1.17 1.12 1.05 1.20 1.14 1.20

¥/$, end period 106 111 114 117 113 112 105

Oil ($/barrel), end period 65 74 62 54 60 63 691

ECONOMIC AND MARKET FORECASTS

Figures represent economic and market data and forecasts provided by BofA Merrill Lynch Global Research.Past performance is no guarantee of future results. There can be no assurance that the forecasts will be achieved. Economic or financial forecasts are inherently limited and should not be relied on as indicators of future investment performance.A=Actual E=Estimate *Estimate for Q2 2018 **Estimate for Q2 2019.1 Forecast represents a period averageSources: BofA Merrill Lynch Global Research; Global Wealth & Investment Management Investment Strategy Committee as of September 7, 2018. ARWGVC8V

5

PORTFOLIO STRATEGY AND ASSET ALLOCATION

TACTICAL SHIFTS EQUITIES

Secular stagnation to fiscalreflation and synchronizedeconomic expansion continues

Equities remain attractive vs.Fixed Income on relative basis

Continue with high quality inFixed Income. Short term yieldshave become more attractive

There is long-term value withEmerging Markets given theirsignificant valuation discounts

MARKET VIEWS

FIXED INCOME

• We are neutral to slightly short duration,balancing expectations for higher rates withperiods of flight-to-quality (for example, tradetensions, Emerging Market sell-off).

• Prefer credit to Treasurys, emphasizingcorporates—particularly banks—although therelative value of credit has moderated. Someallocation to Treasurys for liquidity andrelative safety is advised.

• Compressed yields and risk premiums aroundthe globe present unfavorable risk/rewardconditions for non-U.S. fixed income.

• Prefer actively managed strategies that are higher in credit quality.Within high yield, an allocation to floating rate, secured bank loanstrategies is advised.

• We believe active management can help improve risk-adjustedreturns in a rising-rate environment.

ALTERNATIVE INVESTMENTS*

June 2018:•Lowering our International Developed Markets exposure to neutral as we becomemore cautious given rising political risks and weaker growth. The balance will shift toU.S. equities.March 2018:•Lowering our Small Cap exposure slightly in order to fund an increase in Large Capsgiven the valuation adjustment that has occurred in the U.S. Large Cap stocks.January 2018:•Moderated our view of U.S. municipals to neutral as muni-to-

Treasury ratios are less compelling versus last year.

• We are positive global equities with the expectation of highernominal growth boosting corporate profits, along with graduallyrising inflation and interest rates.

• We continue to favor a barbell strategy of exposure to U.S. equitiesfor higher quality and to Emerging Markets (EMs) for higher beta/risk exposure, especially for long term patient investors. Structurally,we see rising demand from EM consumers.

*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available only to pre-qualified clients. Asset Allocation and diversification do not ensure a profit or protect against loss in a declining market. Neither U.S. Trust, Merrill Lynch nor any of their affiliates or advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September 2018. ARWGVC8V

• We are cautious on Europe given a weak growthbackdrop and higher political risks.

• We like large caps, such as multinationalcompanies; we favor technology and healthcareas sectors; and, financial stocks appear to beattractive.

• We maintain our moderately positive view onlong/short equity, equity market neutral andmerger arbitrage strategies with hedge funds.

• We recommend investors plan a disciplinedmulti-year private equity strategy that buildsportfolio diversity among different managers,styles, geographies and, importantly, vintages.

• We place emphasis on direct real estate

investments that exhibit attractive rent-roll and cash flow characteristics, and have the potential to bridge into the next cycle, providing a long-term hedge against inflation.

• We expect tangible assets over the long term to benefit portfoliosthrough increasing portfolio diversification, protecting against thecorrosive effects of inflation, producing growing streams ofinvestment cash flow and providing favorable social impactopportunities.

6

ASSET CLASS VIEWS

Global Equities

U.S. Large Cap

U.S. Mid Cap

Alternative Investments*

Hedge Funds

Private Equity

Real Estate

Tangible Assets/Commodities

Cash

• Generate attractive cash flows across asset classes

• Active rebalancing during periods of outsized weakness and strength

• Focus on risk-adjusted returns and goal alignment

CORE PORTFOLIO FUNDAMENTALS

When assessing your portfolio in light of our current guidance, consider the tactical positioning around asset allocation in reference to your own individual risk tolerance, time horizon, objectives and liquidity needs. Certain investments may not be appropriate, given your specific circumstances and investment plan. Certain security types, like hedged strategies and private equity investments, are subject to eligibility and suitability criteria. Your financial advisor can help you customize your portfolio in light of your specific circumstances.

*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available only to pre-qualified clients. Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September 2018. ARWGVC8V

Slightly SlightlyNegative Negative Neutral Positive Positive

Emerging Markets

International Developed

U.S. Small Cap

Global Fixed Income

U.S. Investment Grade Taxable

Global High Yield Taxable

International

ALTERNATIVE INVESTMENTS NOTE: Given the differences in liquidity characteristics between AI and traditional investments, the AI portfolio positioning and CIO asset class views have been neutral rated versus our strategic allocations. These types of investments, in our opinion, should not be viewed at the asset class level on a tactical basis, rather the tactical positioning should be expressed at the sub asset level. We will continue to provide strategy level guidance for qualified AI investors and believe allocations to AI can introduce differentiated returns which can complement existing traditional holdings by enhancing returns, reducing risk, and capitalizing on opportunities not available in traditional investments.

7

Equity Market Performance Equity Style Performance

Fixed Income Market Performance Treasury Yield Curve

The performance for above markets are represented by their respective indexes

Past performance is no guarantee of future results. Performance results are extremely short-term and may not provide an adequate basis for evaluating performance potential over varying market conditions or economic cycles.

Please see end of presentation for asset class disclosures and index definitions.

* The FTSE Pension Liability Index provides an investment performance benchmark for asset/liability management of a ‘typical’ pension plan. The Citigroup Fixed Income Indices were recently acquired by FTSE Russell & rebranded as FTSE Indices

Source: FactSet. Data as of 09/30/2018.

Source: Bloomberg. Data as of 09/30/2018.Source: Bloomberg. Data as of 09/30/2018.

Source: Bloomberg. Data as of 09/30/2018.

MARKET PERFORMANCEAs of September 30, 2018

8

Donations & Bequests Episcopal Diocese of CT

42-16-100-2852689

Balanced Return

$122,707,453

10/17/2018

Pat Staffaroni

-$

10/19/2017 7/13/2018

Account Investment Manager

Ticker

Symbol

Current Market

Value Current Cash

Current

%

Strategic

Target Low High

Tactical

Target

Suggested

Change Actual Trades

Large Cap Growth 2853026 Loomis LCG SMA LOO-LCG 4,846,484$ 68,165$ 3.95% 4.00% $61,814 $0

Large Cap Growth 2778850 iShares R1000G ETF IWF 13,076,516$ -$ 10.66% 10.50% ($192,234) $0

Large Cap Value 2778850 iShares R1000V ETF IWD 13,091,093$ -$ 10.67% 10.50% ($206,811) $0

Large Cap Value 2853711 MFS LCV SMA MFS-LCV 5,036,889$ 76,532$ 4.10% 4.00% ($128,590) $0

Mid Cap Core 2778850 iShares Russell Mid Cap ETD IWR 3,653,258$ -$ 2.98% 3.00% $27,965 $0

Mid Cap Growth 2853737 Baird MCG SMA BRD-MCG 1,244,278$ 39,578$ 1.01% 1.00% ($17,204) $0

Mid Cap Value 2853752 Wedge Capital MCV SMA WED-MCV 1,211,512$ 46,227$ 0.99% 1.00% $15,563 $0

Small Cap Growth 2853778 Granite SCG SMA GRT-SCG 3,848,622$ 81,014$ 3.14% 3.00% ($167,398) $0

Small Cap Value 2853786 Fuller & Thaler SCV SMA FUL-SCV 4,187,329$ 21,040$ 3.41% 3.50% $107,432 $0

Large Cap Int'l Core 2778850 Vanguard FTSE Dev Mkts ETF VEA 4,772,979$ -$ 3.89% 4.00% $135,319 $0

Large Cap Int'l Growth 2853794 Schroder's Int'l Growth SMA SRD-EIC 3,576,566$ 68,106$ 2.91% 3.00% $104,658 $0

Large Cap Int'l Value 2853828 Cambiar International Value ADR SMA CMB-INT 3,543,808$ 166,622$ 2.89% 3.00% $137,416 $0

Emerging Markets 2778850 Vanguard FTSE Emerging Mkts ETF VWO 5,455,502$ -$ 4.45% 4.75% $373,102 $0

Emerging Markets 2778850 Hartford Schroder Emerging Markets Fund SEMN X 5,564,549$ -$ 4.53% 4.75% $264,055 $0

Total73,109,385$ 567,284$ 59.58% 57.00% 36.00% 76.00% 60.00% 515,087$ -$

Investment Grade 2853836 Neuberger Berman Core FI SMA NBG-TIC 24,325,795$ 244,513$ 19.82% 16.50% 13.00% 35.00% 19.75% ($91,073) $0

Int'l Developed Bond 2778850 PIMCO Foreign Bond Hedged MF PFOR X 4,656,964$ -$ 3.80% 5.00% 0.00% 7.50% 3.75% ($55,434) $0

Global High Yield 2853844 SEIX High Yield Bond SMA SEI-THY 5,005,908$ 88,487$ 4.08% 5.00% 3.00% 8.00% 4.00% ($97,610) $0

Fixed Income Other 2867034 Spectrum Principal Preferred SMA SPE-PFS 5,328,536$ 123,158$ 4.34% 3.50% 0.00% 6.00% 4.50% $193,300 $0

Total39,317,203$ 456,159$ 32.04% 30.00% 16.00% 45.00% 32.00% (50,818)$ -$

Real Estate -$ -$ 0.00% 5.00% 0.00% 10.00% 0.00% $0 $0

Commodities 2778850 Credit Suisse Comm Ret strategy CRSO X 6,489,660$ -$ 5.29% 5.00% 0.00% 7.50% 5.00% ($354,287) $0

Total6,489,660$ -$ 5.29% 10.00% 5.00% (354,287)$ -$

Cash 2778850 Fidelity Institutional Money Market 3,791,206$ -$ 3.09% 3.00% 0.00% 20.00% 3.00% ($109,982) $0

Total3,791,206$ -$ 3.09% 3.00% 0.00% 20.00% 3.00% (109,982)$ -$

TOTAL122,707,453$ 1,023,443$ 100.00% 100.00% 100.00% ($0) $0

RM/CSO:

Client:

Master A/C:

Objective:

Current MV:

Date:

Add/Liquidate

RANGE

Asset Class

5.00% 2.50% 12.00%

27.00% 20.00% 40.00%

FI

5.00% 2.50% 12.00%

10.00% 5.00% 15.00%

EQ

UIT

Y

10.00% 0.00% 10.00%

AL

T

9

PORTFOLIO REVIEW

EXECUTIVE SUMMARYAs of September 30, 2018

Episcopal Diocese of CT

“Courage is knowing what not to fear.”

Plato

It’s said that markets climb a wall of worry. In Q3, many of those worries seemed to be dissipating. The steady, daily rise of 2017 is far in the

past, but over the quarter a healthy pattern of generally higher highs and higher lows brought returns off the flat line experienced over the first

half of 2018. The D&B portfolio was up 2.75% for the quarter, versus 2.42% for the benchmark. What largely drove that return was a sense

of increasing momentum in the U.S. Economy. Last quarter we had been perplexed by the incongruity between equity returns and the growth

reflected in economic statistics. Further complicating the picture was a flat yield curve, leading some to predict that the current market cycle

was coming to an end, and recession looming. While the reason for that curve distortion could be explained, it still created fear that held

asset prices back. Of recent, participants seem to have sorted out some of those fears and found new courage. On September 19, the Dow

closed above its early January high for the first time this year. Interest rates rose as well, the 10-year moving from 2.86% to 3.08% over the

period.

Last quarter we made some minor changes to allocation, which in general proved beneficial to return. The turn to a somewhat more passive

weight in the Large Cap space was mixed, beneficial on the growth side, less so in value where MFS has outperformed the R1000V. We are

still waiting for a turn in Emerging Markets, while the now neutral-weighted International Developed sector had low, but positive returns. Our

active managers in Mid Cap and particularly Small Cap stocks are doing very well, and adding considerable value. The rise in interest rates

made Bonds somewhat unattractive, but spreads on High Yield debt have held up nicely.

Earnings remain robust. Business sentiment is equally sanguine, and at just 2% inflation is still more a threat than a reality. While GDP

growth in Q1 was just +2%, Q2 finalized at +4.2%. These are significant drivers for further upside. Our S&P 500 target for year-end remains

3,000, approximately a 10% upside. Offsetting this, Europe has not proved as strong as we expected in January. The election of populist

governments in Italy and Spain have been a factor, as well as the ineffectiveness of Angela Merkel’s government in Germany. Emerging

markets, last year’s darling, are now in sharply negative territory down 8% for the year so far. Now, if the last few sentences seem familiar,

they should be—they were lifted directly from the Q2 commentary, with only minor changes. Fundamentals, if anything are unchanged or

improving as we move into the end of the year.

Now we come to the Elephant in the room. As we all know, in the first few days of October interest rates rose sharply, and the curve

steepened further. Add in a higher level of vitriol in the China-U.S. “tariff tantrum”, some rotation trading out of growth equities, and higher oil

prices, and you have the making of yet another correction. In just a few trading days, the S&P 500 lost 190 points, the Dow over 1700. Not

every sector reached true correction levels, but it felt like it. Have no fear, since that bottom interest rates have dropped a bit, earnings

reports have been very good, and Brent crude seems to have stabilized at around $80 a barrel. While volatility continues, the S&P has made

up almost half of the drop as of this writing. In our view, the fundamentals remain intact and we are not afraid. You shouldn’t be either—we

can all exhibit courage in abundance in this last quarter of 2018.11


RETURN VS. RISK

RISK STATISTICS

RETURNSTANDARD DEVIATION

BETA ALPHAR-

SQUAREDSHARPE RATIO

TREYNOR RATIO

TRACKING ERROR

INFORMATION RATIO

Total Portfolio 9.92 6.17 .98 .28 .98 1.47 9.27 .91 .08

Policy Benchmark* 9.84 6.25 -- -- -- 1.44 9.00 -- --** ICE BofAML US 3 Month T-Bill Index

Past performance is no guarantee of future results.The risk/potential reward spectrum is intended to provide a general evaluation of the risk and potential return of each asset category. It is not meant to predict future performance or the volatility of any investment option or category. Investors should carefully consider the investment objectives, risks, charges and expenses before investing.

RISK ANALYTICS (TRAILING 36 MONTHS)As of September 30, 2018

* Episcopal CT Benchmark II consists of a blend of the following: 13.5% Russell 1000 Growth, 13.5% Russell 1000 Value, 2.5% Russell Midcap Growth,2.5% Russell Midcap Value, 2.5% Russell 2000 Growth, 2.5% Russell 2000 Value, 4% MSCI EAFE Growth(Net), 4% MSCI EAFE Value(Net), 2% S&P Developed Ex-US Small Cap (US Dollar), 10% MSCI EMF TR Net EmrgMrkts, 16.5% BBG BARC USAggregate Bond Index, 5% ICE BofAML U.S.HYMaster II, 5% BBG BARC Global Aggregate ex-USD,5% MSCI US REIT Index, 5% Bloomberg (DJ UBS) Commodity Index, 3% ICE BofAML US 3 Month T-Bill Index and 3.5% ICE BofAML Core Fixed Rate Preferred Securities Index.

12

ASSET CLASS

ASSETALLOCATIONEFFECT (%)

SECTORALLOCATIONEFFECT (%)

SELECTIONEFFECT (%)

TOTALEFFECT (%)

CASH/CURRENCY 0.06 0.00 -0.01 0.05

EQUITIES 0.19 0.26 -0.37 0.08

U.S. Large Cap Growth 0.05 0.18 -0.48 -0.24

U.S. Large Cap Value 0.05 -0.04 -0.15 -0.14

U.S. Mid Cap Growth 0.00 -0.10 0.03 -0.07

U.S. Mid Cap Value 0.01 0.03 0.00 0.03

U.S. Small Cap Growth 0.01 0.06 0.37 0.44

U.S. Small Cap Value 0.01 -0.05 0.11 0.08

Large Cap International Growth

0.01 0.02 -0.11 -0.07

Large Cap International Value

0.01 0.03 0.02 0.07

Smid Cap International 0.00 0.14 0.00 0.14

Emerging Markets 0.03 -0.02 -0.16 -0.15

FIXED INCOME -0.06 -0.08 -0.04 -0.18

Investment Grade Taxable

-0.06 -0.08 -0.01 -0.15

International Unhedged 0.00 0.05 0.00 0.05

Global High Yield Taxable

-0.01 -0.02 -0.03 -0.06

Fixed Income Other 0.00 -0.03 0.00 -0.03

REAL ESTATE 0.11 0.00 0.00 0.11

TANGIBLE ASSETS -0.03 0.00 -0.05 -0.08

TOTAL 0.26 0.18 -0.46 -0.02

Asset allocation effect (%) Selection effect (%)

Sector allocation effect (%) Total effect (%)


Percentages are rounded by nearest hundredth.

ATTRIBUTION ANALYSIS (TRAILING 12 MONTHS)As of September 30, 2018

13


INVESTMENT PERFORMANCE CALENDAR RETURNSAs of September 30, 2018

Past Performance is no guarantee of future results.All returns are gross of fees unless otherwise noted. For periods longer than one year, the return is annualized. Periods less than one year utilize a cumulative return.Returns may include a partial month.Benchmark performance returns for the Since Inception period are based on the inception date of the sector or the account under which they are displayed.Market value does not include accrued income, but is included in the return calculation.

* Episcopal CT Benchmark II consists of a blend of the following: 13.5% Russell 1000 Growth, 13.5% Russell 1000 Value, 2.5% Russell Midcap Growth,2.5% Russell Midcap Value, 2.5% Russell 2000 Growth, 2.5% Russell 2000 Value, 4% MSCI EAFE Growth(Net), 4% MSCI EAFE Value(Net), 2% S&P Developed Ex-US Small Cap (US Dollar), 10% MSCI EMF TR Net EmrgMrkts, 16.5% BBG BARC US Aggregate Bond Index, 5% ICE BofAML U.S.HYMaster II, 5% BBG BARC Global Aggregate ex-USD, 5% MSCI US REIT Index, 5% Bloomberg (DJ UBS) Commodity Index, 3% ICE BofAML US 3 Month T-Bill Index and 3.5% ICE BofAML Core Fixed Rate Preferred Securities Index.

14

ASSET CATEGORY MARKET VALUE % OF PORTFOLIO TOTAL COSTESTIMATED ANNUAL

INCOME CURRENT YIELD %

EQUITIES $76,388,673 60.5% $64,889,475 $1,401,219 1.83%

U.S. Large Cap $37,446,598 29.6% $30,043,533 $627,536 1.68%

U.S. Mid Cap $6,407,739 5.1% $5,535,647 $100,541 1.57%

U.S. Small Cap $8,481,086 6.7% $6,943,231 $119,731 1.41%

International Developed $12,489,129 9.9% $11,754,540 $355,709 2.85%

Emerging Markets $11,564,121 9.2% $10,612,524 $197,703 1.71%

FIXED INCOME $39,661,308 31.4% $40,630,905 $1,410,463 3.56%

Investment Grade Taxable $29,956,643 23.7% $30,827,481 $1,048,378 3.50%

International Developed Bonds $4,665,652 3.7% $4,699,367 $72,752 1.56%

Global High Yield Taxable $5,039,013 4.0% $5,104,057 $289,332 5.74%

TANGIBLE ASSETS $6,346,025 5.0% $7,833,133 $44,723 0.70%

CASH/CURRENCY $3,957,705 3.1% $3,957,705 $76,347 1.93%

TOTAL PORTFOLIO $126,353,712 100.0% $117,311,217 $2,932,752 2.32%

Allocation percentages of charts do not include negative market values.Due to rounding, percentages presented may not add up precisely to the totals provided.

CURRENT ASSET ALLOCATION (IPS)


As of September 30, 2018

15


ASSET CATEGORY MARKET VALUE ALLOCATION 1 MO % 3 MOS % YTD % 1 YR % 2 YRS % 3 YRS %

SINCEINCEPTION %

(09/02/14)INCEPTION

DATE

TOTAL PORTFOLIO $126,353,252 100.0% -0.13 2.75 2.76 6.65 9.39 9.92 6.03 09/02/14

TOTAL PORTFOLIO - NET OF FEES $126,353,252 100.0% -0.15 2.66 2.49 6.26 8.98 9.50 5.63 09/02/14

Episcopal CT Benchmark II* -0.26 2.42 2.62 6.67 9.00 9.84 5.37 --

60% S&P, 40% BC Agg 0.08 4.59 5.64 9.99 10.44 10.77 7.76 --

EQUITIES $76,388,673 60.5% -0.06 4.68 4.85 10.75 14.77 14.45 8.84 09/03/14

U.S. Large Cap $37,446,598 29.6% 0.35 7.21 8.50 15.36 17.27 17.30 12.38 09/03/14

Russell Top 200 Index 0.78 8.38 11.68 19.26 19.54 18.08 12.51 09/03/14

S&P 500 TR 0.57 7.71 10.55 17.90 18.24 17.29 11.90 09/03/14

U.S. Mid Cap $6,407,739 5.1% -0.41 5.42 8.50 14.79 15.49 13.49 9.39 09/03/14

Russell Mid Cap Index TR -0.64 4.99 7.45 13.97 14.64 14.50 9.46 09/03/14

U.S. Small Cap $8,481,086 6.7% -2.03 8.23 17.66 22.48 20.05 17.11 12.49 09/03/14

Russell 2000 TR -2.41 3.57 11.50 15.22 17.94 17.11 10.83 09/03/14

International Developed $12,489,129 9.9% 0.78 0.76 -2.04 1.96 10.19 8.99 2.42 09/03/14

MSCI EAFE Net TR USD Index 0.87 1.35 -1.44 2.72 10.60 9.22 3.37 09/03/14

Emerging Markets $11,564,121 9.2% -0.61 -1.44 -8.09 -2.19 9.22 11.65 1.74 09/03/14

MSCI EMF TR Net EmrgMrkts -0.53 -1.10 -7.69 -0.83 10.20 12.35 1.45 09/03/14

FIXED INCOME $39,660,849 31.4% -0.57 0.19 -0.52 -0.18 0.73 2.64 2.66 09/03/14

Investment Grade Taxable $29,956,183 23.7% -0.83 -0.14 -1.35 -1.11 -0.14 1.82 2.25 09/03/14

BBG BARC US Aggregate Bond Index -0.64 0.02 -1.61 -1.23 -0.59 1.30 1.58 09/03/14

INVESTMENT PERFORMANCE (IPS)As of September 30, 2018

Past Performance is no guarantee of future results.

All returns are gross of fees unless otherwise noted. For periods longer than one year, the return is annualized. Periods less than one year utilize a cumulative return.Returns may include a partial month.Benchmark performance returns for the Since Inception period are based on the inception date of the sector or the account under which they are displayed.Market value does not include accrued income, but is included in the return calculation.

* Episcopal CT Benchmark II consists of a blend of the following: 13.5% Russell 1000 Growth, 13.5% Russell 1000 Value, 2.5% Russell Midcap Growth,2.5% Russell Midcap Value, 2.5% Russell 2000 Growth, 2.5% Russell 2000 Value, 4% MSCI EAFE Growth(Net), 4% MSCI EAFE Value(Net), 2% S&P Developed Ex-US Small Cap (US Dollar), 10% MSCI EMF TR Net EmrgMrkts, 16.5% BBG BARC US Aggregate Bond Index, 5% ICE BofAML U.S.HY Master II, 5% BBG BARC Global Aggregate ex-USD, 5% MSCI US REIT Index, 5% Bloomberg (DJ UBS) Commodity Index, 3% ICE BofAML US 3 Month T-Bill Index and 3.5% ICE BofAML Core Fixed Rate Preferred Securities Index.

16


ASSET CATEGORY MARKET VALUE ALLOCATION 1 MO % 3 MOS % YTD % 1 YR % 2 YRS % 3 YRS %

SINCEINCEPTION %

(09/02/14)INCEPTION

DATE

International Developed Bonds $4,665,652 3.7% -0.14 0.01 1.93 2.98 2.30 4.38 3.99 09/04/14

FTSE Non-US World Gov Bond Index -1.07 -2.20 -3.10 -1.58 -2.37 2.38 -0.92 09/04/14

Global High Yield Taxable $5,039,013 4.0% 0.57 2.31 2.18 2.48 4.14 5.73 3.91 09/03/14

BBG BARC Global High Yield Index 1.37 1.98 -0.60 0.24 4.65 7.52 3.73 09/03/14

TANGIBLE ASSETS $6,346,025 5.0% 1.72 -2.07 -2.43 1.89 0.89 -0.10 -8.36 09/04/14

Bloomberg (DJ UBS) Commodity Index 1.92 -2.03 -2.03 2.57 1.13 -0.13 -8.41 09/04/14

CASH/CURRENCY $3,957,705 3.1% 0.15 0.48 1.18 1.43 0.98 0.73 0.56 09/02/14

ICE BofAML 0-3 Month T-Bills 0.15 0.48 1.26 1.52 1.06 0.77 0.57 09/02/14

INVESTMENT PERFORMANCE (IPS)As of September 30, 2018



17

INVESTMENT MANAGER DUE DILIGENCE AND EVALUATION

Life’s better when we’re connected®

Chief Investment Office

Investment Manager

Due Diligence

and Evaluation

The manager due diligence process does not cover all managers and strategies available for investment through Merrill Lynch. The Traditional Due Diligence team has specific responsibility for analyzing separately managed accounts (SMAs), mutual funds and exchange-traded funds (ETFs) that are used in certain proprietary Merrill Lynch investment advisory fee-based programs, including Merrill Lynch Consults®, Merrill Lynch Unified Managed Account and certain strategies within the Merrill Lynch Investment Advisory Program. The Traditional Due Diligence team may also selectively cover certain SMAs, mutual funds and ETFs that may be included in various portfolio implementation and other guides made available to your Merrill Lynch Financial Advisor. Alternative investment strategies, including nontraditional mutual funds, are subject to a separate due diligence process. Clients also have the ability to purchase, on a brokerage basis, certain funds and strategies that are not subject to the due diligence process described herein.

Important Information

Merrill Lynch is both a broker-dealer and an investment adviser, and it offers both brokerage and investment advisory services. There are important differences between brokerage and advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. Brokerage services are also regulated under different laws and rules than advisory services. Among its many obligations as a broker-dealer, Merrill Lynch will execute transactions upon your instruction, deal fairly with you, and make recommendations that are suitable in light of your stated risk tolerance, financial needs and investment objectives. As an investment adviser, Merrill Lynch must act solely in your best interest, provide certain specific disclosures and generally act in accordance with the standards of a fiduciary as that term is interpreted under applicable law. Of course, the above is an exceedingly brief summary, and numerous laws and regulations apply to each capacity as well as to the specific products orservices being provided. It is important for you to understand these differences, particularly when deciding which services to select. Your Financial Advisor can provide you with additional information.

Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk.

This material is provided for information and educational purposes only. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument or strategy. Before acting on any recommendation, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of BofA Corp.

Investment products:

MLPF&S is a registered broker-dealer and Member SIPC and a wholly owned subsidiary of BofA Corp.© 2018 Bank of America Corporation. All rights reserved. ARD3QK44

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

20

Goals and Objectives of the Due Diligence Process

The CIO Due Diligence team uses a quantitative and qualitative analysis to evaluate and select investment strategies.*

Our analysis seeks to:

Identify strategies expected to meet their performance objectives over an investment cycle with an appropriate level of risk

ASSESSES RISK ADJUSTED

PERFORMANCE

Identify strategies that offer exposure to unique asset classes or exposures, styles, and risk profiles useful in portfolio construction

EMPHASIZES PLATFORM BREADTH AND DEPTH

Identify weak firms and investment strategiesFOCUSES ON AVOIDING

ADVERSE OUTCOMES

*For investment managers available within certain fee-based programs available at Merrill Lynch.Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk.

21

Due Diligence team breakdown

Our dedicated, experienced due diligence team has 62 members, with an average of over 17

years of industry experience. The team is structured into traditional and alternative investments

with analysts aligned to asset classes listed below.

Anna SniderHead of Due Diligence

Information as of 01-2018

# of analysts

Global Fixed Income 8

Domestic Equity 10

International Equity 7

Impact Investing 1

Traditional

Investment Due Diligence # of analysts

• Hedge Fund and Non-Traditional Mutual Funds 9

• Fund of hedge fund 2

• Private equity and real assets 8

Alternative Investments Business Due Diligence 7 analysts covering all AI asset classes

Alternative Investments

6 team members – covering Due Diligence Strategy, Analytics and Operations for both Traditional and Alternative Investments

Due Diligence Strategy & Support

22

CIO DUE DILIGENCE TEAM MEMBERSAVERAGE INDUSTRYEXPERIENCE (YEARS)

AVERAGE BofAML EXPERIENCE (YEARS)

Traditional Investments(Mutual funds, SMAs, ETFs)

31 19 8

Hedge funds 11 16 7

Private equity funds 8 15 6

Business Due Diligence 7 15 5

Extensive experience and advanced qualifications

PROFESSIONAL DESIGNATIONS/DEGREES

29MBAs

16CFA

Charterholders

2Series 86Series 87

47Series 66

12Series 24

12Former Portfolio

Managers

11Former Sell

Side Analysts

52Series 7

9CAIA

Charterholders

5CPAs

6MAs

5MS in Finance


23


Traditional Due Diligence:

Separately-Managed Accounts (SMAs) & Mutual Funds

The traditional manager due diligence process does not cover all managers and strategies available for investment through Merrill Lynch. The process specifically covers SMAs, mutual funds and ETFs that are used in certain proprietary Merrill Lynch investment advisory fee-based programs.

How we evaluate investment managers: SMAs and mutual funds

Universe screeningInitial quantitative screen

Eight Factor analysisQuantitative and qualitative evaluation

Investment governance

Broad range of managers

Ongoing monitoring

25

Quantitative screens* allow us to filter and continue to monitor managers

UNIVERSE ANALYSIS

HISTORICAL CRITERIA WE EVALUATE:

Manage tenure assessments

Level of AUM

Rate of product and firm asset growth

Employee ownership

Performance consistency metrics (i.e., batting average)

Active share

Risk-adjusted returns

Volatility (i.e., tracking error)

Downside risk

Spread between up and down market capture

* Certain strategies cannot be run through the quantitative screen for a number of reasons, including lack of a sufficient track record, and are therefore evaluated and monitored through the qualitative process described below. These include certain nontraditional mutual funds, some real asset categories such as commodities, and offshore strategies.

26

Looking Beyond the Numbers – Our 8-Factor Philosophy

ORGANIZATION

OwnershipInfrastructureBreadth of productsClient base

PROGRESS

Ownership changesAdaptabilityGrowthRegulatory Issues

Firm

PROCESS

Clear/understandableData sourcesCommunicationRepeatable

PHILOSOPHY

Manager’s beliefsClear game planRisk/returnValue added

Methodology

PEOPLE

Team stabilityKey decision makersCompensation

PRODUCT

HistoryInvestment vehiclesClient typesPrice

Resources

PORTFOLIO

ConstructionRisk management processConsistent

PERFORMANCE

RepresentativeConsistent with processPerformance vs. risk

Investment Results

EIGHT-FACTOR ANALYSIS

We apply our eight factor analysis to both Quantitatively and Qualitatively covered managers


27

Eight-Factor Analysis (qualitatively covered managers)

EIGHT-FACTOR ANALYSIS

WE ANALYZE THE FOLLOWING:

Organizational structure and growth

Investment professional and strategy resources

Investment philosophy and process

Portfolio construction and investment results

We evaluate a manager’s potential ability to meet future performance objectives.

28

Additional Qualitative Review

WRITTEN EVALUATION

PEER REVIEW GOVERNANCE

For certain strategies, an

Analyst develops an in-

depth, written evaluation

across the Eight Factors

based on discussions with

the investment manager and

quantitative analysis

The evaluation is

discussed within the

Analyst’s asset class

team

The analyst presents their

manager evaluation to an internal

committee for approval of an

initial analysis or a change in an

existing analysis

QUALITATIVE REVIEW

29

We provide consistent ongoing governance & monitoring for all covered strategies

INVESTMENT GOVERNANCE +

ONGOING MONITORING

ONGOING MONITORING

• Due Diligence Committee

In addition, we review multiple factors to monitor performance including

risk/return expectations, asset flows, capacity and liquidity, as well as investment

team and organizational stability.

Quarterly quantitative screenings

Annual investment manager meeting

Annual evaluation to reaffirm each manager’s

ability to meet its stated objectives on a forward

looking basis


30

Analyst coverage on:

• High conviction strategies

• Funds with significant client assets

• Funds in categories of strategicimportance to fulfill CIO guidance

• All Non Traditional Mutual Funds(NTMFs), Separately ManagedAccounts (SMAs), Exchange TradedFunds (ETFs) and offshore funds

Monitor and provide information on:

• Gradually increasing mutual fundcoverage to approximately 1100

• Primarily high AUM strategies thatcomplement CIO Due Diligencecoverage by adding platform depthacross investment categories

Leveraging Morningstar Analysts to Provide Expanded Analytical Coverage

Qualitative coverage model

CIO Due Diligence Morningstar®

Manager evaluation process

Research ratings

Advisor guidance

31

Leveraging Morningstar Analysts to Provide Expanded Analytical Coverage (continued)

Qualitative coverage model

Manager evaluation process

Research ratings

Advisor guidance

8 Factors—People, Product, Portfolio, Performance, Process, Philosophy, Organization and Progress

Color status indicates standing of strategy (advisor-facing)

• CIO Due Diligence Manager Briefs: Duediligence analyst views on SMAs andmutual funds

• Due Diligence Analyst Notes (DDANs)and Manager Flash Reports: Timelyupdates on significant manager events

• Featured Strategies Guide and MasterImplementation Guide: CIO highconviction strategies

• Questions: Access to market specialistsand CIO Due Diligence analysts forcovered strategies

5 Pillars—People, Process, Parent, Performance and Price

Medal ratings represent conviction in fund’s ability to outperform*

• Morningstar Global Funds Report:Analyst views on mutual funds

• Morningstar Analyst Notes: Changes inconviction or analyst views

• Questions: Note that you do not haveaccess to Morningstar analysts and theCIO Due Diligence team can’t answerquestions on Morningstar covered funds

CIO Due Diligence Morningstar®

* CIO will provide oversight over Morningstar but not assign or validate individual Morningstar strategy ratings32


Traditional Due Diligence:Exchange-Traded Funds (ETFs)

The traditional manager due diligence process does not cover all managers and strategies available for investment through Merrill Lynch. The process specifically covers SMAs, mutual funds and ETFs that are used in certain proprietary Merrill Lynch investment advisory fee-based programs.

How we evaluate investment managers: ETFs*

1 Conduct qualitative analysis of the ETF sponsor

2 Evaluate funds using three primary factors:• Tracking

• Liquidity

• Expenses

3 Ongoing monitoring

*The traditional manager due diligence process does not cover all managers and strategies available for investment through Merrill Lynch. The Traditional Due Diligence team has specificresponsibility for analyzing SMAs, mutual funds and ETFs that are used in certain proprietary Merrill Lynch investment advisory fee-based programs.

34

ExpensesLiquidityTracking

Qualitative Evaluation

Monitoring

ETF selection: qualitative evaluation

First, we conduct a qualitative evaluation of the ETF sponsor, including:

• Fund constructionmethodology

• Index methodology

• Index provider

35

How well does the ETF track its underlying index?

Tracking

Is there an active market for the ETF and its underlying components?

Liquidity

What are the costs for owning the ETF?

Expenses

ETF selection: quantitative evaluation



Monitoring

36



Monitoring

ETF selection: ongoing monitoring

Selected ETFs are monitored to evaluate:

• Changes to tracking

• Changes in liquidity

• Qualities relative to peers

If there is a significant change, funds also undergo qualitative monitoring.

Monitoring

37



Investment Due Diligence: Hedge Funds

How we evaluate investment managers: Investment Due Diligence*

Sourcing Due Diligence

Investment

Monitoring

*Many products that pursue Alternative Investment strategies, including hedge funds, are available only to pre-qualified clients. AlternativeInvestments are speculative and subject to a high degree of risk. Although risk management policies and procedures can be effective inreducing or mitigating the effects of certain risks, no risk management policy can completely eliminate the possibility of sudden and severelosses, illiquidity and the occurrence of other material adverse effects. The portfolio due diligence process includes an effort to monitor andmanage risk, but does not imply low risk.

39

Sourcing hedge funds*

PROPRIETARY SOURCES INDUSTRY SOURCES

Relationships with hedge fund

managers

Network of buy-side and

sell-side contacts

Active relationships with other

sophisticated hedge fund investors

Manager database services

Relationships with traditional

money managers

Industry journals and publications

Prime brokerage relationships

*Many products that pursue Alternative Investment strategies, including hedge funds, are available only to pre-qualified clients. Alternative Investments are speculative and subject to a high degree of risk. Although riskmanagement policies and procedures can be effective in reducing or mitigating the effects of certain risks, no riskmanagement policy can completely eliminate the possibility of sudden and severe losses, illiquidity and theoccurrence of other material adverse effects. The portfolio due diligence process includes an effort to monitor andmanage risk, but does not imply low risk.

40

Hedge fund manager investment due diligence process

IDENTIFICATIONDUE DILIGENCE REVIEW / ON-SITE VISIT

ADDITIONAL QUALITATIVE WORK

Pedigree, experience

and talent

Strategy and

portfolio fit

Sound business model and

operations

People

Philosophy

Process

Portfolio

Risk management

Quantitative Review

Follow-up

diligence interviews

Depth, quality

and originality

of research

41

Hedge fund manager monitoring

A rigorous up-front due diligence process, followed by ongoing monitoring.

ONGOING MONITORING

Conduct disciplined monitoring via regular calls,

interviews and on-site visits

Goal is to spot incremental change in the people

and/or investment process

42



Investments Due Diligence: Private Equity and Real Assets

How we evaluate investment managers: Investment Due Diligence*

Sourcing Due Diligence

Investment

Monitoring

*Many products that pursue Alternative Investment strategies, including private equity and real asset funds, are available only to pre-qualified clients. Alternative Investments are speculative and subject to a high degree of risk. Although risk management policies andprocedures can be effective in reducing or mitigating the effects of certain risks, no risk management policy can completely eliminate thepossibility of sudden and severe losses, illiquidity and the occurrence of other material adverse effects. The portfolio due diligence processincludes an effort to monitor and manage risk, but does not imply low risk.

44

The Private Equity & Real Assets Due Diligence Team Capabilities

Consistently reviewing potential new investment opportunities

Cover a range of diverse fund of funds portfolios and single-manager offerings

Coverage of private equity and real assets strategies, globally

Monitoring of existing platform offerings

45

Sourcing private equity and real assets manager talent*

PROPRIETARY SOURCES INDUSTRY SOURCES

Network of fund managers,

institutional investors,

intermediaries and other industry

professionals

Relationships with leading private

equity and real estate firms

developed over years in the industry

Industry database services facilitate

identification of upcoming

investment opportunities

Industry conferences and events

*Many products that pursue Alternative Investment strategies, including private equity and real asset funds, areavailable only to pre-qualified clients. Alternative Investments are speculative and subject to a high degree of risk.Although risk management policies and procedures can be effective in reducing or mitigating the effects of certainrisks, no risk management policy can completely eliminate the possibility of sudden and severe losses, illiquidityand the occurrence of other material adverse effects. The portfolio due diligence process includes an effort tomonitor and manage risk, but does not imply low risk.

46

IDENTIFICATION QUALITATIVE REVIEW QUANTITATIVE REVIEW

Proactively identify potential

funds coming to market

Screen for managers with strong

historical track records and/or

differentiated capabilities

Holistic approach to platform

construction considers strategy

and portfolio fit

Meet with investment

professionals and other key

individuals

Assess skill level and capabilities

of the investment team

Look for alignment of interests

between investors and manager

Scrutinize manager’s deal

sourcing and investment process

Detailed review of fund terms

Understand historic

value creation

Attribution analysis of historic

value creation, when applicable

Assess past performance relative

to peers or key benchmarks

New manager private equity and real assets due diligence process

47

Private equity and real assets investment manager monitoring

ONGOING MONITORING

Assess execution of investment strategy

Review performance of the fund and portfolio

Maintain open lines of communication with investment

manager

48


Alternative Investments Business Due Diligence

AI Business Due Diligence Capabilities

The dedicated team has seven senior analysts, all based in New York, with an

average of 15 years of financial services experience. Analysts have complementary

backgrounds in public accounting, compliance, operations, and fund

administration.

The AI Business Due Diligence team covers hedge funds, fund of hedge funds,

private equity & real assets, and options overlay registered investment advisers.


50

How we evaluate investment managers: Business Due Diligence

An in-depth and independent review

A process-driven evaluation of an alternative asset manager’s entire business and operational platform

The ability to make independent decisions in the diligence process

A double coverage model which includes a separate due diligence process for the business/operational platform and investments

51

How we evaluate investment managers: Business Due Diligence*

Document Review

On-Site Visit at

Onboarding

Administrator & Background

Checks

Ongoing Monitoring

* Many products that pursue Alternative Investment strategies, including hedge, private equity, and real asset funds, are available only topre-qualified clients. Alternative Investments are speculative and subject to a high degree of risk. Although risk management policies andprocedures can be effective in reducing or mitigating the effects of certain risks, no risk management policy can completely eliminate thepossibility of sudden and severe losses, illiquidity and the occurrence of other material adverse effects.

52

Comprehensive review of fund governing and disclosure documents

ARTICLES OF ASSOCIATION AND OFFERINGMEMORANDUMS

KEY DISCLOSURE DOCUMENTS

LEGAL DUE DILIGENCE REVIEW

Examine legal structure and

governance framework

Evaluate investment terms

Identify and assess potential

conflicts of interest

Review due diligence

questionnaires, regulatory

filings, audited financial

statements, marketing

materials, etc., to cross-check

disclosures and representations

Legal review of fund governing

documents by counsel

53

On-site evaluation of key businessand operational risks

CULTURE AND GOVERNANCE

OPERATIONS AND CONTROL ENVIRONMENT FUND TERMS

Organizational structure

Staffing, retention and

compensation

Governance and conflicts

Leadership and

management style

Discipline, integrity and

ethical commitment

Transparency and attitude

towards investors

Regulatory registrations

Legal and compliance

environment

Segregation of duties

Trade operations

Valuation

Custody and counterparty

risk

Cash controls and

reconciliations

Technology and business

continuity

Fees and expenses

Liquidity profile vs.

redemption terms

Side letters

54

ADMINISTRATOR BACKGROUND CHECKS

Independently contact the

administrator to verify the

administration relationship and

the scope of services provided, and

significant details concerning

valuation and NAV calculation

procedures.

Conduct formal background checks

on key investment and non-

investment personnel

Independent review of administratorand background checks

55

Ongoing monitoring

THOROUGH INITIAL DUE DILIGENCE, FOLLOWED BY ACTIVE MONITORING

Periodic calls or meetings with the manager as required

Mandatory annual on-site visit for hedge fund managers

Annual reconfirmation of the administrator’s roles and responsibilities

Review of updated fund governing hedge fund documents

Review of the fund’s annual audited financial statements

56

Life’s better when we’re connected®57

APPENDIX

IPS AS OF DATE 2017-10-19

REPORT TITLE Episcopal Pooled Fund of CT

PORTFOLIO PURPOSE AND BACKGROUND

This is the Donations and Bequests Fund of the Episcopal Diocese of Connecticut. Approximately half of the account is the endowment of the Diocese, the remainder the interest of the 120 Episcopal churches of the state, held as a pooled fund.

INVESTMENT OBJECTIVE Customized Objective

CUSTOMIZED OBJECTIVE INFORMATION

Objective established by the Trustees of the D&B Fund, with the consultation of the Investment Manager.

TIME HORIZON 10+ years

ASSET ALLOCATION ASSET CLASS STRATEGIC POLICY RANGE

CASH 3.0% 0.00% - 20.00%

EQUITY 57.0% 36.00% - 76.00%

U.S. Large Cap 27.0% 20.00% - 40.00%

U.S. Mid Cap 5.0% 2.50% - 12.00%

U.S. Small Cap 5.0% 2.50% - 12.00%

International - Developed 10.0% 5.00% - 15.00%

Emerging Markets 10.0% 0.00% - 10.00%

FIXED INCOME 30.0% 16.00% - 45.00%

Investment Grade 16.5% 13.00% - 35.00%

International Developed Bonds 5.0% 0.00% - 7.50%

High Yield 5.0% 3.00% - 8.00%

Fixed Income - Other 3.5% 0.00% - 6.00%

REAL ESTATE 5.0% 0.00% - 10.00%

TANGIBLE ASSETS 5.0% 0.00% - 7.50%

The asset allocation ranges are current as of the creation of this summary. This information may differ from the asset allocation ranges outlined in the investment policy statement signed by you.


IPS CLIENT SUMMARY

59

DISTRIBUTION NEEDS-OTHER NEED

Other Distributions take place monthly, based on the demand of participants.

LIQUIDITY NEEDS The portfolio has no specific requirements to maintain liquidity for short-term cash flow needs.

INVESTOR TAX SENSITIVITY This portfolio is constructed without a need to consider taxability of ordinary income and capital gains from investments. Unrelated business tax income may be a consideration.

CUSTOM RESTRICTIONS Trustees of the Donations and Bequests Committee of the Diocese have requested that preferred stocks be included as a potential asset class within the fixed income allocation. The strategic target for such assets shall be 3-4%, with a policy range of 0-6%. This is reflected in the "fixed income other" category of the asset allocation portion of this document.

PERFORMANCE REVIEW FREQUENCY

periodically

PORTFOLIO BENCHMARK ASSET CLASS CURRENT WEIGHTING

CURRENT BENCHMARK NAME

CASH 3.0% ICE BofAML 0-3 Month T-Bills

U.S. Large Cap 27.0% S&P 500 TR

U.S. Mid Cap 5.0% Russell Mid Cap Index TR

U.S. Small Cap 5.0% Russell 2000 TR

International - Developed 10.0% MSCI World ex US Net

Emerging Markets 10.0% MSCI EMF TR Net EmrgMrkts

Investment Grade Taxable 16.5% BBG BARC US Aggregate Bond Index

International Developed Bonds 5.0% ICE BOFAML Global Broad Market ex USD

Global High Yield Taxable 5.0% BBG BARC Global High Yield Index

Fixed Income - Other 3.5%

REAL ESTATE 5.0% 50% NCREIF TBI, 50% NCREIF PROPERTY

TANGIBLE ASSETS 5.0% Bloomberg (DJ UBS) Commodity Index

The asset allocation ranges are current as of the creation of this summary. This information may differ from the asset allocation ranges outlined in the investment policy statement signed by you.


IPS CLIENT SUMMARY

OWNER & SIGNATORY OWNER(S) AND SIGNATORY(S) ROLE

for the Donations & Bequests Committee, Episcopal Diocese of CT.

Owner & Signatory

60


ASSET CATEGORY MARKET VALUE ALLOCATION1 MO

%3 MOS

%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

TOTAL PORTFOLIO $126,353,252 100.0% -0.13 2.75 2.76 6.65 9.39 9.92 6.03 09/02/14

TOTAL PORTFOLIO - NET OF FEES $126,353,252 100.0% -0.15 2.66 2.49 6.26 8.98 9.50 5.63 09/02/14

Episcopal CT Benchmark II* -- -- -0.26 2.42 2.62 6.67 9.00 9.84 5.37 --

60% S&P, 40% BC Agg -- -- 0.08 4.59 5.64 9.99 10.44 10.77 7.76 --

EQUITIES $76,388,673 60.5%

U.S. Large Cap Growth $18,796,268 14.9%

iShares Russell 1000 Growth ETF $13,696,448 10.8% 0.58 9.08 16.84 26.16 23.89 20.34 14.95 09/04/14

Russell 1000 Growth Index -- -- 0.56 9.17 17.08 26.28 24.08 20.54 15.25 --

Loomis Large Cap Growth $5,099,820 4.0% -0.15 6.69 10.85 18.05 19.27 20.64 15.07 09/03/14

Russell 1000 Growth Index -- -- 0.56 9.17 17.08 26.28 24.08 20.54 15.15 --

U.S. Large Cap Value $18,650,330 14.8%

iShares Russell 1000 Value ETF $13,475,280 10.7% 0.24 5.51 3.59 9.21 -- -- 9.75 05/05/17

Russell 1000 Value Index -- -- 0.20 5.70 3.91 9.44 -- -- 10.08 --

MFS Investment Large Cap Value $5,175,049 4.1% 0.47 6.90 2.39 7.91 13.59 14.44 10.12 09/03/14

Russell 1000 Value Index -- -- 0.20 5.70 3.91 9.44 12.24 13.54 8.06 --

U.S. MidCap Core $3,830,085 3.0%

iShares Russell Mid Cap ETF $3,830,085 3.0% -0.63 5.10 7.49 13.98 -- -- 13.95 05/03/17

Russell Mid Cap Index TR -- -- -0.64 4.99 7.45 13.97 -- -- 13.85 --



INVESTMENT PERFORMANCE (PRODUCT VIEW)As of September 30, 2018

* Episcopal CT Benchmark II consists of a blend of the following: 13.5% Russell 1000 Growth, 13.5% Russell 1000 Value, 2.5% Russell Midcap Growth,2.5% Russell Midcap Value, 2.5% Russell 2000 Growth, 2.5% Russell 2000 Value, 4% MSCI EAFE Growth(Net), 4% MSCI EAFE Value(Net), 2% S&P Developed Ex-US Small Cap (US Dollar), 10% MSCI EMF TR Net EmrgMrkts, 16.5% BBG BARC US Aggregate Bond Index, 5% ICE BofAML U.S.HYMaster II, 5% BBG BARC Global Aggregate ex-USD, 5% MSCI US REIT Index, 5% Bloomberg (DJ UBS) Commodity Index, 3% ICE BofAML US 3 Month T-Bill Index and 3.5% ICE BofAML Core Fixed Rate Preferred Securities Index.

61



%3 MOS

%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

U.S. MidCap Growth $1,322,343 1.0%

Baird Mid Cap Growth $1,322,343 1.0% 0.32 8.81 16.49 23.23 21.98 17.02 11.59 09/03/14

Russell MidCap Growth Index -- -- -0.43 7.57 13.37 21.09 19.43 16.63 11.49 --

U.S. MidCap Value $1,255,312 1.0%

Wedge Capital Mid Cap Value $1,255,312 1.0% -0.52 2.98 2.58 8.28 13.38 12.64 9.04 09/03/14

Russell MidCap Value Index -- -- -0.79 3.29 3.12 8.79 11.05 13.08 7.89 --

U.S. Small Cap Growth $4,069,155 3.2%

Granite Small Cap Growth $4,069,155 3.2% -2.25 14.54 31.06 34.65 26.15 18.26 13.31 09/03/14

Russell 2000 Growth Index -- -- -2.34 5.52 15.75 21.05 21.01 17.97 12.38 --

U.S. Small Cap Value $4,411,931 3.5%

Fuller & Thaler Small Cap Value $4,411,931 3.5% -1.83 2.95 6.99 12.61 14.63 16.17 11.78 09/03/14

Russell 2000 Value Index -- -- -2.48 1.60 7.13 9.31 14.79 16.11 9.16 --

International Developed $12,489,129 9.9%

Vanguard FTSE Developed Markets ETF $5,012,786 4.0% 0.72 1.23 -1.64 2.62 10.64 9.75 3.74 09/04/14

MSCI EAFE Net TR USD Index -- -- 0.87 1.35 -1.44 2.72 10.60 9.22 3.18 --

Schroders Int'l Growth ADR $3,764,553 3.0% 0.64 1.16 -1.05 2.83 11.28 10.13 4.75 09/03/14

MSCI EAFE Growth Net -- -- -0.25 1.52 0.57 5.83 10.64 10.24 5.24 --

Cambiar International Value $3,711,790 2.9% 1.00 -0.29 -3.62 0.23 8.57 7.00 -1.30 09/03/14

MSCI EAFE Value (Net) -- -- 2.07 1.17 -3.50 -0.38 10.48 8.11 1.44 --




62



%3 MOS

%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

Emerging Markets $11,564,121 9.2%

Emerging Markets Funds (SEMNX + VWO) $11,564,121 9.2% -0.61 -1.44 -8.09 -2.19 9.22 11.65 1.74 09/03/14

MSCI EMF TR Net EmrgMrkts -- -- -0.53 -1.10 -7.69 -0.83 10.20 12.35 1.45 --

FIXED INCOME $39,660,849 31.4%

Investment Grade Taxable $29,956,183 23.7%

Neuberger Berman Core FI Taxable $24,493,631 19.4% -0.63 -0.04 -1.55 -1.32 -0.82 0.92 1.33 09/03/14

BBG BARC US Aggregate Bond Index -- -- -0.64 0.02 -1.61 -1.23 -0.59 1.30 1.58 --

Preferred Stock $5,462,552 4.3%

Spectrum Principal Preferred $5,462,552 4.3% -1.73 -0.58 -0.22 0.16 2.40 4.99 5.71 09/12/14

ICE BofAML Core Fixed Rate Preferred Securities In

-- -- -1.53 -0.77 0.04 0.47 2.68 5.26 5.92 --

International Developed Bonds $4,665,652 3.7%

PIMCO Foreign Bond Fund $4,665,652 3.7% -0.14 0.01 1.93 2.98 2.30 4.38 3.99 09/04/14

JP Morgan GBI Global ex US -- -- -0.40 -1.18 -0.58 0.14 -1.39 1.50 2.22 --

Global High Yield Taxable $5,039,013 4.0%

Seix High Yield Bond $5,039,013 4.0% 0.57 2.31 2.17 2.47 4.15 5.73 3.91 09/03/14

Merrill Lynch High Yield Master Index -- -- 0.58 2.44 2.49 2.88 5.91 8.16 4.47 --

TANGIBLE ASSETS $6,346,025 5.0%

Credit Suisse Commodity Fund $6,346,025 5.0% 1.72 -2.07 -2.43 1.89 0.89 -0.10 -8.36 09/04/14

Bloomberg (DJ UBS) Commodity Index -- -- 1.92 -2.03 -2.03 2.57 1.13 -0.13 -8.41 --

CASH/CURRENCY $3,957,705 3.1%

Cash $3,957,705 3.1% 0.15 0.48 1.18 1.43 0.98 0.73 0.56 09/02/14

ICE BofAML US 3 Month T-Bill Index -- -- 0.15 0.49 1.30 1.59 1.12 0.84 0.62 --




63

DISCLOSURE

This document is provided for informational purposes only and is not issued in connection with any proposed offering of securities. This Furthermore, it is not used with regard to any specific investment objectives, financial situation or particular needs of any specific recipient and does not contain investment recommendations.

IMPORTANT: The material presented is designed to provide general information about ideas and strategies. It is for discussion purposes since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Economic or financial forecasts are inherently limited and should not be relied on as an indicator of future investment performance.

Alternative investments are sold to qualified investors only by a Confidential Offering Memorandum or Prospectus. Alternative investments may provide limited liquidity and include, among other things, the risks inherent in investing in securities and derivatives, using leverage and engaging in short sales. An investment in an alternative investment fund is speculative, involves substantial risks and should not constitute a complete investment program. An alternative investment fund may be highly leveraged. The volatility of the price of its interests may involve complex tax structures and there may be delays in distributing important tax information. These funds may not be subject to the same regulatory requirements as registered mutual funds, and their fees and expenses may be high. Interests in alternative investments are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other governmental agency. An investment in alternative investments is not suitable or desirable for all investors. Investors may lose all or a portion of the capital invested.

Nonfinancial assets, such as closely held businesses, real estate, oil, gas and mineral properties, and timber, farm and ranch land, are complex in nature and involve risks including total loss of value. Special risk considerations include natural events (for example, earthquakes or fires), complex tax considerations and lack of liquidity. Nonfinancial assets are not suitable for all investors.

Always consult with your independent attorney, tax advisor, insurance agent or other professional advisors for final recommendations and before changing or implementing any financial, tax, or estate planning strategy. Client eligibility may apply.

Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Diversification does not ensure a profit or protect against loss in declining markets.


Institutional Investments & Philanthropic Solutions (II&PS) is part of U.S. Trust, Bank of America Corporation (U.S. Trust). U.S. Trust operates through Bank of America, N.A. and other subsidiaries of Bank of America Corporation (BofA Corp.). Trust and fiduciary services and other banking products are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.

Bank of America, N.A., Member FDIC.

Bank of America, N.A. makes available investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp.

This document may not be reproduced or distributed without prior written consent of U.S. Trust.

© 2017 Bank of America Corporation. All rights reserved. –|–ARR5L938 | 02/2017


64

RISK ANALYTICS STATISTICS DEFINITIONS

GLOSSARY

Standard Deviation – A gauge of volatility which measures the spread of the difference of returns from their average. The more a portfolio’s returns vary from its average, the higher the standard deviation. It is important to note that higher than average returns affect the standard deviation just as lower than average returns. Thus, it is not a measure of downside risk. Since it measures total variation of return, standard deviation is a measure of total risk.

Beta – A relative measure of the risk level of a manager. Beta measures the systematic risk, or the return that is attributable to market movements. This measure is relative to the benchmark defined (i.e. Standard and Poor’s 500, Russell 2000 Growth). A beta equal to one indicates a risk level equivalent to the benchmark defined. Higher betas are associated with higher risk levels, while lower betas are associated with lower risk levels.

Alpha – A measure of the difference between a portfolio’s actual return and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the portfolio has performed better than its beta would predict.

R-Squared – It is used to show how much a manager’s variability can be accounted for by the market. For example, if a portfolio’s R-squared is 0.79, then 79% of the manager’svariability is due to market conditions. As R-squared approaches 100, the portfolio is more closely correlated with the market.

Sharpe Ratio – A ratio that measures risk-adjusted performance. The Sharpe Ratio is calculated by subtracting the risk-free rate – such as that of the 90-Day Treasury Bill –from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns.

Treynor Ratio – A risk-adjusted measure of return based on systematic risk. The ratio measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. It is similar to the Sharpe Ratio, with the difference being that the Treynor Ratio uses beta as the measurement of volatility.

Tracking Error – A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark.

Information Ratio – A ratio of portfolio returns above the returns of a benchmark (usually an index) to the volatility of those returns. The information ratio (IR) measures a portfolio manager’s ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor.

AR8F3XJX

65

DISCLOSURES AND DEFINITIONSIMPORTANT INFORMATIONThe information and views contained in this presentation are as of date specified and are subject to change. These views are not necessarily representative of the opinions and views of other portfolio managers or of the firm as a whole.

Past performance is no guarantee of future results. The investment services of U.S. Trust / Bank of America are not guaranteed and are not insured by the FDIC and could result in the loss of value to your account. The actual return and value of an account will fluctuate and at any point in time could be worth more or less than the amount invested. Your account is tailored towards your individual needs based on your investment objectives, restrictions and strategies, including tax strategies.

Clients’ performance and risk tolerance preferences may require deviation from this guidance when implementing investment solutions. Accounts subject to laws that may be more restrictive as to permissible investments require portfolio manager review.

For daily benchmarks, benchmark performance for the Since Inception period is based on the inception date for the corresponding sector or account. Monthly benchmark returns will be as of the first day of the month when the corresponding account or sector inception date is mid-month.

Indices shown are to make general risk and return comparisons. They are shown for informational purposes only and cannot be invested in directly.

Securities in your account differ from securities comprising an index thus the risk, performance and investment style of your account will vary, sometimes significantly from that of the index.

Statistics have been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness.

Hypothetical illustrations do not reflect the performance of any specific investment. Actual rates of return cannot be predicted and will fluctuate. Your results may be more or less. The illustrations assume no withdrawals or distribution, and reinvesting of all dividends and capital gains.

Performance results are gross of fees and therefore do not reflect the deduction of investment advisory fees, however, such results would have been reduced by advisory fees as described in standard fee schedules.

Performance for new asset classes to an account may be for a partial period while many benchmarks for the asset class may reflect the entire reporting period.

All sector and asset allocation recommendations must be considered in context of an individual investor’s goals, time horizon and risk tolerance. Not all recommendations will be suitable for all investors.

Important Notes Concerning Alternative Investments and Hedge Funds:Market prices for Hedge Funds, Private Equity Funds and Real Estate Funds normally lag 30 days or more from the previous closing period and therefore returns are for the same period. Benchmarks may not reflect the same time period.

Loss information for the Bank of America Hedge Fund should not be used for tax reporting purposes. Please refer to Schedule K-1 reporting to complete tax returns for the appropriate tax year.

Oil, Gas and Mineral InterestsTo holders of Oil, Gas and Mineral properties: Market Value for Oil, Gas and Mineral properties represent an estimate only, calculated from the most recent 12 months net income from producing properties and includes nominal value applied to non-producing properties.

GLOSSARYAccrued Interest: Accrued interest is the interest that has been earned, but not paid. Bonds typically payaccrued interest every six months.

Average Coupon: Average coupon is the weighted average gross interest rate of a pool of securities.

Average Quality: Average Quality is the average credit quality of the bond portfolio.

Beta: Beta is a measure of systematic risk or the sensitivity of a manager to movements in the benchmark. Abeta of 1 implies that you can expect the movement of a manager’s return series to match that of thebenchmark.

Cash/Currency: Cash/Currency include cash and may include other highly liquid investments that maturewithin one year, such as commercial paper, treasury bills, money market funds and CDs.

Change in Value: Change in value is the change in value of the portfolio during the statement period. It isthe ending value of the account less the beginning value of the account taking into consideration additionsand withdrawals.

Current Price: Current price is the value of the share, unit or contract as priced at the close of the market onthe last day of the statement period or the last available price.

Current Yield: Current yield reflects the percentage return that results from estimated annual income orcapital gains or losses realized upon the disposition of a security. It is calculated by dividing estimatedannual income by total market value.

Estimated Annual Income: Estimated annual income is the income that is expected to be received from anasset over the next 12 months, based on the current level of income produced by the asset. It may includeinterest and dividends, but not capital gains or losses realized upon the disposition of the security. Forholder of Fiduciary Shares, estimated annual income includes the Rebate.

Income Assets: Income assets consist of the earnings, such as interest, dividends and royalties and rentfrom assets in the portfolio or assets purchase or held as a re-investment of accumulated income, whichhave not been added to principal.

Modified Duration: Modified duration is a formula that expresses the measurable change in the value of asecurity in response to a change in interest rates.

Net Margin: Net margin is the ratio of net profits to revenues for a company or business segment - typicallyexpressed as a percentage – that shows how much of each dollar earned by the company is translated intoprofits

N/A: Not Applicable/ Not Available

Other Assets: The summarization of other assets, includes assets that do not fall into the Cash & CashEquivalents, Fixed Income or Equity categories, such as real estate and mineral holdings, warrants andoptions.

% of Total Assets: Percent of total assets is the total market value of an individual asset divided by the totalmarket value of the portfolio.

Price/Book: Price/Book is a ratio used to compare a stock's market value to its book value. It is calculatedby dividing the current closing price of the stock by the latest quarter's book value per share.

Price/Earnings: Price/Earnings is a valuation ratio of a company's current share price compared to its per-share earnings.

Price/Sales: Price/Sales is a valuation ratio that compares a company’s stock price to its revenues.

Principal Assets: Principal assets are assets that are the property of a trust or estate, but are not Incomeassets.

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DISCLOSURES AND DEFINITIONSReturn on Equity: Return on Equity is the amount of net income returned as a percentage of shareholderequity. It measures profitability by revealing how much profit is generated with the money a shareholderhas invested.

Tax Cost: Tax cost is the cost basis of an asset as carried on the books of the account. In the Detail ofRealized Capital Gain/Loss schedule, tax cost information may include adjustments to the cost basis of theCommon Trust Funds, as applicable.

Transaction Date: Transaction date is the date on which a transaction (such as a purchase or a sale) isinitiated. When trade date reporting is used, transactions are reported only if the transaction date fallswithin the current statement period.

Weighted Average Market Capitalization: Weighted average market capitalization is the mean of themarket capitalizations of the common stocks held in the portfolio.

Weighted Average Maturity of Bonds: Weighted average maturity of bonds is the average amount of timeremaining until the maturity date for the entire bond portfolio. The average amount is computed byweighting each maturity date by the market value of the security.

Yield to Maturity at Market: Yield to maturity at market reflects the return that will be achieved if thesecurity was purchased on the last day of the statement period. If yield to maturity at market is less/greaterthan yield to maturity at cost, the market value of the security has increased/decreased during the timesince the security was purchased. When finding the after-tax yield to maturity of a bond, it is customary touse the approximate relationship: after-tax yield = (1- tax rate) x (before tax-yield.)_________________________________________________________________________________

ASSET CLASS DISCLOSURESAlternative Investments: Alternative investments are intended for qualified and suitable investors only.Alternative Investments such as derivatives, hedge funds, private equity funds and funds of funds canresult in higher return potential but also higher risk loss potential. Changes in economic conditions or othercircumstances may adversely affect your investments. Before investing in alternative investments, youshould consider your overall financial situation, how much money you have to invest, your need forliquidity and your tolerance for risk.

Asset Allocation: Asset Allocation cannot eliminate the risk of fluctuating process and uncertain returns.

Asset Class: All asset classes are not suitable for all investors. Each investor should select the asset classesfor investment based on his or her goals, time horizon and risk tolerance.

Commodities: There are special risks associated with an investment in commodities including market pricefluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact ofadverse political or financial factors.

Convertibles: Most convertible securities are not investment grade and are therefore more speculative innature than securities with higher ratings.

Diversification: Diversification does not ensure a profit or protect against loss in declining markets.

Emerging Markets: Investing in emerging markets may involve greater risks than investing in moredeveloped countries. In addition, concentration of investments in a single region may result in greatervolatility.

Equities: Equity securities are subject to stock market fluctuations that occur in response to economic andbusiness developments.

Fixed Income: Investing in fixed income securities may involve certain risks, including the credit quality ofindividual issuers, possible prepayments, market or economic developments and yields and share pricefluctuations due to changes in interest rates. When interest rates go up, bond prices typically drop, andvice versa.

Hedge Funds: An investment in a hedge fund involves a substantially more complicated set of risk factorsthan traditional investments in stocks or bonds, including the risks of using derivatives, leverage, and shortsales which can magnify potential losses or gains. Restrictions exist on the ability to redeem units in ahedge fund. Hedge funds are speculative and involve a high degree if risk.

High-Yield (Junk Bonds): Investments in high-yield bonds (sometimes referred to as “junk bonds”) offer thepotential for high current income and attractive total return, but involve certain risks.

International: International investing involves special risks, including foreign taxation, currency risks, risksassociated with possible difference in financial standards and other risks associated with future politicaland economic developments.

Real Estate/REITs: Investments in real estate securities can be subject to fluctuations in the value of theunderlying properties, the effect of economic conditions on real estate values, changes in interest rates,and risks related to renting properties, such as rental defaults. As the REIT market has evolved, REIT’sperformance and risk characteristics are more closely correlated with the Equity asset category. InSeptember 2016 the Global Industry Classification Standard (GICS) removed Real Estate from the Financialsector and created a separate Real Estate sector within the Equities asset category. Effective in 2017 U.S.Trust moved REITs from Real Estate to Equities.

Small/Mid Cap: Stock of small- and mid-cap companies pose special risks, including possible illiquidity andgreater price volatility than stocks of larger, more established companies.

Specialty/Non-Financial Assets: Non-financial assets, such as closely-held businesses, real estate, oil, gasand mineral properties, timber, farm and ranch land are complex in nature and involve risks including totalloss of value. Special risk considerations include natural events (for example, earthquakes or fires),complex tax considerations, and lack of liquidity. Non-financial assets are not suitable for all investors.Always consult with your independent attorney, tax advisor, investment manager and insurance agent forfinal recommendations and before changing or implementing any financial, tax or estate planning strategy.

Tax-exempt: Tax-exempt investing offers current tax-exempt income, but it also involves special risks.Single-state municipal bonds pose additional risks due to limited geographical diversification. Interestincome from certain tax-exempt bonds may be subject to certain state and local taxes and, if applicable,the alternative minimum tax. Any capital gains distributed are taxable to the investor._______________________________________________________________________________

INDEX DEFINITIONSBloomberg Barclays (BBG BARC) High Yield Municipal Bond Index is an unmanaged index made up ofmunicipal bonds that are non-investment grade, unrated, or rated below Ba1.

Bloomberg Barclays (BBG BARC) Municipal Index is a rules-based, market-value-weighted indexengineered for the long-term tax-exempt bond market.

Bloomberg Barclays (BBG BARC) US Aggregate Bond Index represents securities that are U.S. domestic,taxable, and dollar denominated. The index covers the US investment grade fixed rate bond market, withindex components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated andreported on a regular basis.

Bloomberg Barclays (BBG BARC) Global High Yield Index provides a broad-based measure of the globalhigh yield fixed income markets. The Index represents the union of the US High Yield, Pan-European HighYield, U.S. Emerging Markets High Yield, CMBS High Yield, and Pan-European Emerging Markets High YieldIndices. The Index is a component of the Bloomberg Barclays Multiverse Index, along with the BloombergBarclays Global Aggregate Bond Index. The Global High Yield Index was created on January 1, 1999, withindex history backfilled to January 1, 1990.

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DISCLOSURES AND DEFINITIONS

FTSE Emerging Net Total Return Index are part of the FTSE Global Equity Index Series . The series includeslarge and mid cap securities from advanced and secondary emerging markets, classified in accordancewith FTSE's transparent Country Classification Review Process. The FTSE Emerging Index providesinvestors with a comprehensive means of measuring the performance of the most liquid companies inthe emerging markets. The Total Return index measures performance including dividends while the NetReturn index tracks performance net of taxes.

FTSE NAREIT All REITs Index is a market capitalization-weighted index that and includes all tax-qualifiedreal estate investment trusts (REITs) that are listed on the New York Stock Exchange, the American StockExchange or the NASDAQ National Market List. The FTSE NAREIT All REITs Index is not free float adjusted,and constituents are not required to meet minimum size and liquidity criteria.

FTSE non-USD World Government Bond Index (WGBI) measures the performance of bonds issued bygovernments outside the US It is calculated on a market-weighted basis and includes all fixed-rate bondswith a remaining maturity of one year or longer and with amounts outstanding of at least the equivalentof US $25 million. The Index excludes floating or variable rate bonds, securities aimed principally at non-institutional investors and private placement-type securities. To join the WGBI, a market must satisfymarket size, credit and barriers-to-entry requirements.

FTSE US Broad Investment Grade (BIG) tracks the performance of US Dollar-denominated bonds issuedin the US investment-grade bond market. Introduced in 1985, the index includes US Treasury,government sponsored, collateralized, and corporate debt providing a reliable representation of the USinvestment-grade bond market. Sub-indices are available in any combination of asset class, maturity andrating.

HFRI Fund Weighted Composite is a global, equity weighted index of over 2,000 single-manager fundsthat report to HFR Database. Constituent funds report monthly net of all fees performance in US Dollarand have a minimum of $50 million under management or a 12-month track record of activeperformance. It does not include Funds of Hedge Funds.

HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedgefund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertiblearbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, mergerarbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution ofassets in the hedge fund industry.

ICE BofAML US T-Bill 3 Month Index tracks the performance of US dollar denominated US Treasury Bills publicly issued in the US domestic market. Qualifying securities have with a remaining term to final maturity of less than 3 months.

ICE BofAML Global Broad Market Ex USD Total Return (Hedged USD) tracks the performance of investment grade debt publicly issued in the major domestic and eurobond markets, including sovereign, quasi-government, corporate, securitized and collateralized securities, excluding all securities denominated in US dollars.

ICE BofAML US High Yield, Cash Pay Index tracks US dollar denominated non-investment grade corporate debt, currently in a coupon paying period, that is publicly issued in the US domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the balancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. Qualifying securities must have risk exposure to countries that are members of the FX-G10, Western Europe or territories of the US and Western Europe.

Bloomberg Barclays (BBG BARC) U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets(sovereign rating of Baa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) areexcluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included.Original issue zeroes, step-up coupon structures, 144-As and pay-in-kind bonds (PIKs, as of October 1,2009) are also included.

Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for commoditiesas an asset class. The Index is composed of futures contracts on 19 physical commodities. The Indexchanged its name from DJ UBS Commodity Index to Bloomberg Commodity Index in July 2014.

Credit Suisse Hedge Fund Index is compiled by Credit Suisse Hedge Index LLC and CME Group IndexServices LLC. It is an asset-weighted hedge fund index and includes only funds, as opposed to separateaccounts. The index uses the Credit Suisse Hedge Fund Database (formerly known as the “CreditSuisse/Tremont Hedge Fund Database”), which tracks approximately 8,000 funds and consists only offunds with a minimum of US$50 million under management, a 12-month track record, and auditedfinancial statements. The index is calculated and rebalanced on a monthly basis, and reflectsperformance net of all hedge fund component performance fees and expenses.

Credit Suisse Liquid Alternative Beta Index uses only liquid securities, the Credit Suisse Liquid AlternativeBeta Index seeks to replicate the return of the overall hedge fund industry, as represented by the CreditSuisse Hedge Fund Index. The Credit Suisse Liquid Alternative Beta Index reflects the combined returns ofthe individual LAB strategy indices – Long/Short, Event Driven, Global Strategies, Merger Arbitrage andManaged Futures – weighted according to their respective strategy weights in the Credit Suisse HedgeFund Index.

Dow Jones Emerging Markets Total Stock Market Total Return Index includes equity securities withreadily available prices that trade in emerging markets. The index is a subset of the Dow Jones GlobalTotal Stock Market Index.

Dow Jones Global Select Real Estate Securities Index (RESI) represents equity real estate investmenttrusts (REITs) and real estate operating companies (REOCs) traded globally.

Dow Jones U.S. Select REIT Index intends to measure the performance of publicly traded REITs and REIT-like securities. The index is a subset of the Dow Jones U.S. Select Real Estate Securities Index (RESI), whichrepresents equity real estate investment trusts (REITs) and real estate operating companies (REOCs)traded in the U.S. The indices are designed to serve as proxies for direct real estate investment, in part byexcluding companies whose performance may be driven by factors other than the value of real estate.

FTSE 3-Month T-bill Index measures the monthly return equivalents of yield averages that are notmarked to market. The 3-Month Treasury Bill Indexes consist of the last three three-month Treasury billissues.

FTSE Developed Ex North America Total Return Index is part of a range of indices designed to helpinvestors benchmark their international investments. The index comprises Large and Mid cap stocksproviding coverage of Developed markets, excluding the US and Canada. The index is derived from theFTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

FTSE Developed Ex US Index is part of a range of indexes designed to help US investors benchmark theirinternational investments. The index comprises Large (85%) and Mid (15%) Cap stocks providing coverageof Developed markets (24 countries) excluding the US. The index is derived from the FTSE Global EquityIndex Series (GEIS), which covers 98% of the world’s Investable market capitalization.

FTSE Emerging Markets Index are part of the FTSE Global Equity Index Series . The series includes largeand mid cap securities from advanced and secondary emerging markets, classified in accordance withFTSE's transparent Country Classification Review Process. The FTSE Emerging Index provides investorswith a comprehensive means of measuring the performance of the most liquid companies in theemerging markets. The Total Return index measures performance including dividends while the NetReturn index tracks performance net of taxes.

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DISCLOSURES AND DEFINITIONSICE BofAML US High Yield, Master II Index tracks US dollar denominated non-investment grade corporatedebt that is publicly issued in the US domestic market. Qualifying securities must have a belowinvestment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to finalmaturity at the time of issuance, at least one year remaining term to final maturity as of the balancingdate, a fixed coupon schedule and a minimum amount outstanding of $100 million. Qualifying securitiesmust have risk exposure to countries that are members of the FX-G10, Western Europe or territories ofthe US and Western Europe.

ICE BofAML US Corporate & Government Index tracks the performance of US dollar denominatedinvestment grade debt publicly issued in the US domestic market, including US Treasury, US agency,foreign government, supranational and corporate securities. Qualifying securities must have aninvestment grade rating (based on an average of Moody’s, S&P and Fitch). In addition, qualifyingsecurities must have at least one year remaining term to final maturity, at least 18 months to finalmaturity at point of issuance, a fixed coupon schedule and a minimum amount outstanding of $1 billionfor US Treasuries and $250 million for all other securities.

ICE BofAML US Tax Municipal Securities Index tracks the performance of US dollar denominated debtpublicly issued by US states, territories and their political subdivisions in the US domestic market.Qualifying securities must be subject to US federal taxes and must have at least at least 18 months tomaturity at point of issuance, at least one year remaining term to final maturity to enter the index andone month remaining term to final maturity to remain in the index, a fixed coupon schedule (includingzero coupon bonds) and an investment grade rating (based on an average of Moody’s, S&P and Fitch).

MSCI Daily Net World Ex USA USD Total Return Index captures large and mid cap representation across22 of 23 Developed Markets countries – excluding the United States. The index covers approximately85% of the free float-adjusted market capitalization in each country.

MSCI Emerging Markets (MSCI EM) Total Return Net USD Index is a free float-adjusted marketcapitalization index that is designed to measure equity market performance in the global emergingmarkets. The MSCI Emerging Markets Index consists of emerging markets in Europe, Latin America, andthe Pacific Basin.

MSCI Europe, Australasia, Far East (MSCI EAFE) Total Return Net USD Index is a capitalization-weightedindex that tracks the total return of common stocks in developed-market countries within Europe,Australasia and the Far East. MSCI aims to include in its international indexes 85% of the free float-adjusted market capitalization in each industry group, within each country.

MSCI US REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs.The index is based on MSCI USA Investable Market Index (IMI) its parent index which captures large, midand small caps securities. It represents about 99% of the US REIT universe and securities are classified inthe REIT sector according to the Global Industry Classification Standard (GICS®). It however excludesMortgage REIT and selected Specialized REITs.

Merrill Lynch Small Cap Research Private Equity/ Micro Cap Index is a customized proprietary marketcapitalization weighted index provided by Bank of America Merrill Lynch Global Research with securitymarket capitalization ranging from $101 Million to $779 Million.

Russell 1000 Total Return Index consists of the largest 1000 companies in the Russell 3000 Index. Thisindex represents the universe of large capitalization stocks with a base value of 130.00 as of December31, 1986.

Russell 2000 Total Return Index measures the performance of the small-cap segment of the U.S. equityuniverse. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 8% ofthe total market capitalization of that index. It includes approximately 2,000 of the smallest securitiesbased on a combination of their market cap and current index membership. The Russell 2000 isconstructed to provide a comprehensive and unbiased small-cap barometer and is completelyreconstituted annually to ensure larger stocks do not distort the performance and characteristics of thetrue small-cap opportunity set.

Russell Emerging Markets Total Return Index measures the performance of the investable securities inemerging countries globally.

Russell Top 200 Total Return Index measures the performance of the largest cap segment of the U.S.equity universe. The Russell Top 200 Index is a subset of the Russell 3000 Index. It includes approximately200 of the largest securities based on a combination of their market cap and current index membershipand represents approximately 65% of the U.S. market. The Russell Top 200 Index is constructed toprovide a comprehensive and unbiased barometer for this very large cap segment and is completelyreconstituted annually to ensure new and growing equities are reflected.

Russell Midcap Total Return Index measures the performance of the mid-cap segment of the U.S. equityuniverse. The Russell Midcap Index is a subset of the Russell 1000® Index. It includes approximately 800securities based on a combination of their market cap and current index membership. The RussellMidcap Index represents approximately 27% of the total market capitalization of the Russell 1000companies. The Russell Midcap Index is constructed to provide a comprehensive and unbiasedbarometer for the mid-cap segment. The Index is completely reconstituted annually to ensure largerstocks do not distort the performance and characteristics of the true mid-cap opportunity set.

Standard and Poor’s 500 Total Return Index measures the performance of the large capitalization sectorof the U.S. equity market and is considered one of the best representations of the domestic stock market.Utilizing a market-cap weighting structure, this index invests in 500 of the largest U.S. firms listed on theNYSE (including NYSE Arca and NYSE MKT) or the NASDAQ. Constituents are selected by S&P Dow JonesIndices and must have a 50% public float to be considered for inclusion in the benchmark

Standard and Poor’s Citi BMI EM Index captures all companies domiciled in the emerging markets withinthe S&P Global BMI with a float-adjusted market capitalization of at least USD 100 million and a minimumannual trading liquidity of USD 50 million.

Standard and Poor’s MidCap 400 Total Return seeks to track the performance of mid-cap U.S. equities. The index consists of 400 U.S. stocks that are listed on the NYSE or the NASDAQ. Constituents are selected by S&P Dow Jones Indices and must have an unadjusted market capitalization between $1.4 billion and $5.9 billion to be considered for addition to the benchmark. The index is weighted by market capitalization.

Standard and Poor’s GSCI is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The returns are calculated on a fully collateralized basis with full reinvestment. The combination of these attributes provides investors with a representative and realistic picture of realizable returns attainable in the commodities markets. Individual components qualify for inclusion in the S&P GSCI on the basis of liquidity and are weighted by their respective world production quantities. The principles behind the construction of the index are public and designed to allow easy and cost-efficient investment implementation.

Standard and Poor’s Small Cap 600 Total Return Index seeks to track the performance of small-capsegment of the U.S equity market. to track the performance of small-cap segment of the U.S equitymarket. The index consists of 600 US stocks that are listed on the NYSE or the NASDAQ. Constituents areselected by S&P Dow Jones Indices and must have an unadjusted market capitalization between $400million and $1.8 billion to be considered for addition to the benchmark. The index is weighted by marketcapitalization.

50/50 NCREIF Property / NCREIF Transaction Based Index (i) Produced quarterly, the NCREIF PropertyIndex (NPI) shows real estate performance returns using data submitted by its Data ContributingMembers. The NPI is used as an industry benchmark to compare an investor’s own returns against theindustry average. (ii) The NCREIF Transaction-Based Index (TBI) is an index based on properties that werein the NCREIF Property Index and were sold that quarter. The index does not replace the NPI. It is acomplementary index to the appraisal-based NPI. A transaction-based index is often considered to bemore comparable to stock and bond indexes that are transaction-based.

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IMPORTANT INFORMATION

This presentation is designed to introduce you to the products and services available through U.S. Trust, Bank of America Private Wealth Management, is provided for informational purposes only, and is not issued in connection with any proposed offering of securities. This presentation is not used with regard to any specific investment objectives, financial situation or particular needs of any specific recipient and does not contain investment recommendations. Bank of America and its affiliates do not accept any liability for any direct, indirect or consequential damages or losses arising from any use of this presentation or its contents. The information in this presentation was obtained from sources believed to be accurate, but we do not guarantee that it is accurate or complete. The opinions expressed herein are made as of the date of this material and are subject to change without notice. There is no guarantee the views and opinions expressed in this presentation will come to pass. Other affiliates may have opinions that are different from and/or inconsistent with the opinions expressed herein. All charts are based on historical data for the time periods indicated and are intended for illustrative purposes only. Past performance is no guarantee of future results.

IMPORTANT: The material presented is designed to provide general information about ideas and strategies. It is for discussion purposes since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy.

Neither U.S. Trust nor any of its affiliates or advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisor before making any financial decisions.

Investing involves risk. There is always the potential of losing money when you invest in securities.


U.S. Trust, Bank of America Private Wealth Management and U.S. Trust, Bank of America Corporation (“U.S. Trust”) operate through Bank of America N.A., and other subsidiaries of Bank of America Corporation (“BofACorp.”). Trust and fiduciary services and other banking products are provided by wholly owned banking affiliates of BofACorp., including Bank of America, N.A. Brokerage services may be performed by wholly owned brokerage affiliates of BofACorp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”). Institutional Investments & Philanthropic Solutions (“II&PS”) is part of U.S. Trust. Bank of America, N.A. and U.S. Trust Company of Delaware (collectively the “Bank”) do not serve in a fiduciary capacity with respect to all products or services. Fiduciary standards or fiduciary duties do not apply, for example, when the Bank is offering or providing credit solutions, banking, custody or brokerage products/services or referrals to other affiliates of the Bank.

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U.S. Trust Company of Delaware is an indirect wholly owned subsidiary of BofACorp.

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INVESTMENT PORTFOLIO REVIEW€¦ · Mid Cap Value 2853752 Wedge Capital MCV SMA WED-MCV $ 1,211,512 $ 46,227 0.99% 1.00% $15,563 $0 Small Cap Growth 2853778 Granite SCG SMA GRT-SCG