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• Dimension of Returns• Diversification• Investor Discipline

Why Pillar Capital?

Dimensions of Returns• The capital markets have rewarded long-term investors

• Dimensions point to differences in expected returns

• Portfolios can be structured to pursue dimensions

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The Capital Markets Have Rewarded Long-Term Investors

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Monthly growth of wealth ($1), 1926–2015

In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results. US Small Cap Index is the CRSP 6–10 Index; US Large Cap Index is the S&P 500 Index; Long-Term Government Bonds Index is 20-year US government bonds; Treasury Bills are One-Month US Treasury bills; Inflation is the Consumer Price Index. CRSP data provided by the Center for Research in Security Prices, The S&P data are provided by Standard & Poor’s Index Services Group. University of Chicago. Bonds, T-bills, and inflation data © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield).

$16,743 US Small Cap Index

$5,386 US Large Cap Index

$135 Long-TermGovernment Bonds Index

$21 Treasury Bills$13 Inflation (CPI)

2015

Dimensions of Expected Returns

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Expected returns are driven by prices investors pay and cash flows they expect to receive

To be considered a dimension of expected return,

a premium must be:

• Sensible

• Persistent across time periods

• Pervasive across markets

• Robust to alternative specifications

• Cost-effective to capture in well-diversified portfolios

Diversification does not eliminate the risk of market loss. 1. Relative price as measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. 2. Profitability is a measure of current profitability, based on information from individual companies’ income statements.

DIMENSIONS POINT TO SYSTEMATIC DIFFERENCES IN EXPECTED RETURNS

EQU

ITIE

S

Company Size Small cap premium—small vs. large companies

Market Equity premium—stocks vs. bonds

Relative Price1

Value premium—value vs. growth companies

Profitability2

Profitability premium—high vs. low profitability companies

Dimensions of Expected Returns

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Historical premiums and returns (annualized): US, Developed ex US, and Emerging Markets

Information provided by Dimensional Fund Advisors LP.US size premium: Dimensional US Small Cap Index minus S&P 500 Index. US relative price premium: Fama/French US Value Index minus Fama/French US Growth Index. US profitability premium: Dimensional US High Profitability Index minus Dimensional US Low Profitability Index. Dev. ex US size premium: Dimensional Intl. Small Cap Index minus MSCI World ex USA Index (gross div.). Dev. ex US relative price premium: Fama/French International Value index minus Fama/French International Growth Index. Dev. ex US profitability premium: Dimensional International High Profitability Index minus Dimensional International Low Profitability Index. Emerging Markets size premium: Dimensional Emerging Markets Small Cap Index minus MSCI Emerging Markets Index (gross div.). Emerging Markets relative price premium: Fama/French Emerging Markets Value Index minus Fama/French Emerging Markets Growth Index. Emerging Markets profitability premium: Dimensional Emerging Markets High Profitability Index minus Dimensional Emerging Markets Low Profitability Index. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. See “Index Descriptions” for descriptions of Dimensional and Fama/French index data. Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. The S&P data is provided by Standard & Poor’s Index Services Group. MSCI data © MSCI 2016, all rights reserved.

ProfitabilityRelative performance of high profitability stocks vs. low profitability stocks (%)

Company SizeRelative performance ofsmall cap stocks vs. large cap stocks (%)

Relative PriceRelative performance of value stocks vs. growth stocks (%)

US StocksDeveloped ex US

Markets Stocks Emerging Markets Stocks

Yearly Observations of Premiums

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Equity, size, relative price, and profitability: US Markets

Information provided by Dimensional Fund Advisors LP.Equity premium: Fama/French Total US Market Index minus one-month US Treasury Bills. Size premium: Dimensional US Small Cap Index minus the S&P 500 Index. Relative price premium: Fama/French US Value Index minus the Fama/French US Growth Index. Profitability premium: Dimensional US High Profitability Index minus the Dimensional US Low Profitability Index. Profitability is measured as operating income before depreciation and amortization minus interest expense, scaled by book. Dimensional indices use CRSP and Compustat data. Fama/French indices provided by Ken French. The S&P data is provided by Standard & Poor's Index Services Group. Index descriptions available upon request. Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.

Historical Observations of 10-Year Premiums

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Equity, size, relative price, and profitability: US Markets

Information provided by Dimensional Fund Advisors LP.10-year rolling equity premium is computed as the 10-year annualized compound return on the Fama/French Total US Market Index minus the 10-year annualized compound return of the one-month US Treasury Bill. 10-year rolling size premium is computed as the 10-year annualized compound return on the Dimensional US Small Cap Index minus the 10-year annualized compound return on the S&P 500 Index. 10-year rolling relative price premium is computed as the 10-year annualized compound return on the Fama/French US Value Index minus the 10-year annualized compound return on the Fama/French US Growth Index. The 10-year rolling profitability premium is computed as the 10-year annualized compound return on the Dimensional US High Profitability Index minus the 10-year annualized compound return on the Dimensional US Low Profitability Index. Fama/French indices provided by Ken French. The S&P data is provided by Standard & Poor's Index Services Group. Dimensional indices use CRSP and Compustat data. Index descriptions available upon request. Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.

Historical Performance of Premiums over Rolling Periods

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US Markets

Information provided by Dimensional Fund Advisors LP.Indices are not available for direct investment. Past performance is not a guarantee of future results.1. Profitability is a measure of current profitability, based on information from individual companies’ income statements. Based on rolling annualized returns using monthly data. Rolling multiyear periods overlap and are not independent. This statistical dependence must be considered when assessing the reliability of long-horizon return differences. Dimensional Index data compiled by Dimensional. Fama/French data provided by Fama/French. The S&P data is provided by Standard & Poor's Index Services Group. Eugene Fama and Ken French are members of the Board of Directors for and provide consulting services to Dimensional Fund Advisors LP. Index descriptions available upon request.

Small beat large 96% of the time.

MARKET beat T-BILLS

Overlapping Periods: January 1928–December 2015

VALUE beat GROWTH

Overlapping Periods: January 1928–December 2015

SMALL beat LARGEOverlapping Periods: January 1928–December 2015

HIGH PROFITABILITY1 beat LOW PROFITABILITYOverlapping Periods: July 1963–December 2015

Market is Fama/French Total US Market Index. T-Bills is One-Month US Treasury Bills. There are 877 overlapping 15-year periods, 937 overlapping 10-year periods, 997 overlapping 5-year periods, and 1,045 overlapping 1-year periods.

Value is Fama/French US Value Index. Growth is Fama/French US Growth Index. There are 877 overlapping 15-year periods, 937 overlapping 10-year periods, 997 overlapping 5-year periods, and 1,045 overlapping 1-year periods.

Small is Dimensional US Small Cap Index. Large is S&P 500 Index. There are 877 overlapping 15-year periods, 937 overlapping 10-year periods, 997 overlapping 5-year periods, and 1,045 overlapping 1-year periods.

High is Dimensional US High Profitability Index. Low is Dimensional US Low Profitability Index. There are 451 overlapping 15-year periods, 511 overlapping 10-year periods, 571 overlapping 5-year periods, and 619 overlapping 1-year periods.

Portfolios Can Be Structured to Pursue Dimensions

91. Beta: A quantitative measure of the co-movement of a given stock, mutual fund, or portfolio with the overall market. 2. Price-to-Book Ratio: A company's capitalization divided by its book value. It compares the market's valuation of a company to the value of that company as indicated on its financial statements. 3.Profitability: A measure of a company’s current profits. We define this as operating income before depreciation and amortization minus interest expense, scaled by book equity.

Investors can pursue higher expected returns through a low-cost, well-diversified portfolio that targets these dimensions.

Diversification

• Helps you capture what global markets offer

• Smooths out the bumps

• Takes out the guesswork

• Maximizes risk adjusted returns

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Diversification Helps You Capture What Global Markets Offer

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The global equity market is large and represents a world of investment opportunity.

In US dollars. Diversification does not eliminate the risk of market loss. Market cap data is free-float adjusted from Bloomberg securities data. Many nations not displayed. Total may not equal 100% due to rounding. For educational purposes; should not be used as investment advice. China market capitalization excludes A-shares, which are generally only available to mainland China investors.For educational purposes; should not be used as investment advice.

Percent of world market capitalization as of December 31, 2014

• 44 countries• Approximately

12,000 publicly traded stocks

• $46.8 trillion market value

Diversification Smooths Out Some of the Bumps

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Illustrative examples. Diversification does not eliminate the risk of market loss.

A well-diversified portfolio can provide the opportunity for a more stable outcome than a single security.

Diversification Helps Take the Guesswork out of Investing

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Annual returns (%): 2001–2015

In US dollars. Diversification does not eliminate the risk of market loss. Past performance is not a guarantee of future results. Indices are not available for direct investment. Their performance does not reflect expenses associated with the management of an actual portfolio. Source: S&P data provided by Standard & Poor's Index Services Group. Russell data copyright © Russell Investment Group 1995-2016, all rights reserved. Dow Jones data provided by Dow Jones Indexes. Dimensional Index data compiled by Dimensional. MSCI data © 2016, all rights reserved. The BofA Merrill Lynch Indices are used with permission; copyright 2016 Merrill Lynch, Pierce, Fenner & Smith Incorporated; all rights reserved. Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly owned subsidiary of Bank of America Corporation. Barclays Capital data is provided by Barclays Bank PLC. Citigroup bond indices © 2016 by Citigroup.

You never know which markets will outperform from year to year.

By holding a globally diversified portfolio, investors are positioned to capture returns wherever they occur.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201512.3 7.6 62.6 33.2 34.5 36.0 39.8 8.8 79.0 28.1 9.4 18.6 38.8 32.0 5.8

8.4 5.1 56.3 29.9 25.5 32.6 8.2 6.6 51.4 26.9 3.4 17.9 32.4 13.7 4.5

7.3 3.6 47.3 26.0 13.8 19.8 6.3 4.7 28.5 24.9 2.3 17.1 26.0 4.9 1.4

6.4 3.4 36.2 18.3 4.9 18.4 5.9 -33.8 27.2 19.2 2.1 16.3 1.2 1.9 1.0

2.5 -6.0 28.7 10.9 4.6 15.8 5.5 -37.0 26.5 15.1 0.6 16.0 0.6 1.2 0.9

-2.4 -7.1 2.0 2.7 3.1 4.3 3.6 -39.2 2.3 3.7 -4.2 2.1 0.3 0.2 0.2

-10.2 -20.5 1.9 1.3 2.4 4.1 -1.6 -47.8 0.8 2.0 -15.5 0.9 -0.1 -1.8 -4.4

-11.9 -22.1 1.5 0.8 1.3 3.8 -17.6 -53.2 0.2 0.8 -18.2 0.2 -2.3 -5.0 -14.6

S&P 500 IndexRussell 2000 IndexDow Jones US Select REIT IndexDimensional International Small Cap indexMSCI Emerging Markets Index (gross div.)BofA Merrill Lynch One-Year US Treasury Notes IndexBarclays Treasury Bond Index 1-5 YearsCitigroup World Government Bond Index 1-5 Years (hedged to USD)

Higher Return

Low er Return

Investor Discipline

• Humans are not wired for disciplined investing

• Many investors follow their emotions

• Markets have rewarded discipline

• Focus on what you can control

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Humans Are Not Wired for Disciplined Investing

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When people follow their natural instincts, they tend to apply faulty reasoning to investing.

Many Investors Follow Their Emotions

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Markets Have Rewarded Discipline

17In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results. MSCI data © MSCI 2014, all rights reserved.

Growth of a dollar—MSCI World Index, 1970–2013

$43

US home prices hit bottom

Fiscal cliff worries

Euro zone debt crisis

S&P 500 down 46%

Subprime mortgage crisis

Hurricanes Katrina and Rita

Iraq war begins

Dotcom stock crash

9/11 terrorist attack

Y2K Scare

Russian financial

crisisAsian

currency crisis

Income tax rates rate

Iraq invades Kuwait

Savings and loan crisis

Dow drops 23% on Black Monday

US inflation at 13.5%

BusinessWeek: “The Death of Equities”

Gold hits record high

S&P 500 down 43%

Oil prices quadruple

Arab oil embargo

1970 1980 1990 2000 2010 2013

1

A disciplined investor looks beyond the concerns of today to the long-term growth potential of markets.

$43

US home prices hit bottom

Fiscal cliff worries

Eurozone debt crisis

S&P 500 down 46%

Subprime mortgage crisis

Hurricanes Katrina and Rita

Iraq war begins

Dotcom stock crash

9/11 terrorist attacks

Y2K Scare

Russian financial

crisisAsian

currency crisis

Income tax rates rise

Iraq invades Kuwait

Savings and loan crisis

Dow drops 23% on Black Monday

US inflation at 13.5%

BusinessWeek: “The Death of Equities”

Gold hits record high

S&P 500 down 43%

Oil prices quadruple

Arab oil embargo

1970 1980 1990 2000 2010 2013

Focus on What You Can Control

18Diversification neither ensures a profit nor guarantees against loss in a declining market.

Creating an investment plan to fit

your needs and risk tolerance

Structuring a portfolio around dimensions of returns

Diversifying broadly

Reducing expenses and turnover

Minimizing taxes