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HomeMy WebLinkAbout3rd Quarter City of Sebastian Police Officers' Retirement System as of September 30, 2018 Quarterly Summary of Relevant Facts Distribution of Assets:Other Important Facts: Equity Total Portfolio$15,167,320 -Large Cap. Value$3,480,884Total Gain/(Loss) - Gross-of-Fees$560,318 -Large Cap. Growth$3,240,361Total Fees($26,570) -SMID Cap. Value$743,288Total Gain/(Loss) - Net-of-Fees$533,748 -SMID Cap. Growth$838,517 -International Value$761,476 Highland - Large Cap ValueHighland - Large Cap Growth -International Growth$1,143,884Total Assets$3,480,884Total Assets$3,240,361 Total Equity$10,208,411Gain or (Loss) - Gross-of-Fees$202,562Gain or (Loss) - Gross-of-Fees$218,566 Fixed$3,548,783Fees($4,065)Fees($3,455) MLPs$648,364Gain or (Loss) - Net-of-Fees$198,497Gain or (Loss) - Net-of-Fees$215,111 Private Real Estate$691,372 Cash$70,390 Boston Partners - SMID ValueFiera Capital - SMID Growth Total Portfolio$15,167,320 Total Assets$743,288Total Assets$838,517 Gain or (Loss) - Gross-of-Fees$4,328Gain or (Loss) - Gross-of-Fees$46,864 Distribution by Percentages:PolicyCurrentRange Fees($1,784)Fees($1,488) Equity BreakdownGain or (Loss) - Net-of-Fees$2,544Gain or (Loss) - Net-of-Fees$45,376 -Large Cap. Value21.25%22.95%15.00 - 25.00% -Large Cap. Growth21.25%21.36%15.00 - 25.00%Highland - Intl Value Renaissance - International Growth -SMID Cap. Value5.00%4.90%2.50 - 7.50%Total Assets$761,476Total Assets$1,143,884 -SMID Cap. Growth5.00%5.53%2.50 - 7.50%Gain or (Loss) - Gross-of-Fees$13,172Gain or (Loss) - Gross-of-Fees$9,289 -International Value5.00%5.02%2.50 - 7.50%Fees($896)Fees($1,632) -International Growth7.50%7.54%5.00 - 10.00%Gain or (Loss) - Net-of-Fees$12,276Gain or (Loss) - Net-of-Fees$7,658 Total Equity65.00%67.31%40.00 - 70.00% Fixed25.00%23.40%20.00 - 35.00%Highland - Fixed Income Center Coast - MLP MLPs5.00%4.27%0.00 - 10.00%Total Assets$3,548,783Total Assets$648,364 Private Real Estate5.00%4.56%0.00 - 10.00%Gain or (Loss) - Gross-of-Fees$2,857Gain or (Loss) - Gross-of-Fees$41,038 Cash0.00%0.46%Fees($4,405)Fees($758) Total Portfolio100.00%100.00%Gain or (Loss) - Net-of-Fees($1,548)Gain or (Loss) - Net-of-Fees$40,280 Receipt & DisbursementIntercontinental - Private Real Estate Total Assets$70,390Total Assets$691,372 Gain or (Loss) - Gross-of-Fees$1,042Gain or (Loss) - Gross-of-Fees$20,600 Fees($6,285)Fees($1,802) Gain or (Loss) - Net-of-Fees($5,243)Gain or (Loss) - Net-of-Fees$18,798 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 1 City of Sebastian Police Officers' Retirement System as of September 30, 2018 Breakdown of Returns DOMESTIC EQUITY Gross-of-FeesNet-of-Fees Highland - Large Cap Value ReturnReturnRussell 1000 ValuePSN Money Managers Quarter6.186.055.705.46 Fiscal Year to Date11.1010.289.4511.01 Since 7/31/201712.1411.439.72NA Highland - Large Cap Growth Russell 1000 GrowthPSN Money Managers Quarter7.647.509.177.79 Fiscal Year to Date22.6722.0626.3021.58 Since 7/31/201722.5121.9825.57NA Boston Partners - SMID Value Russell 2500 ValuePSN Money Managers Quarter0.680.442.672.96 Fiscal Year to Date6.194.9110.249.78 Since 7/31/20177.496.3811.59NA Fiera Capital - SMID Growth Russell 2500 GrowthPSN Money Managers Quarter5.915.727.176.94 Fiscal Year to Date22.7321.8823.1326.45 Since 7/31/201722.3521.6324.12NA INTERNATIONAL EQUITY Highland - Intl Value MSCI EAFE (net) Quarter1.831.711.36 Fiscal Year to Date4.523.822.74 Since 7/31/20174.864.254.51 Renaissance - International Growth MSCI AC Wd x US (net) Quarter0.910.760.71 Fiscal Year to Date(0.80)(1.40)1.76 Since 7/31/20170.37(0.15)3.60 FIXED INCOME Highland - Fixed Income BC Agg Quarter0.08(0.04)0.02 Fiscal Year to Date(1.07)(1.71)(1.22) Since 7/31/2017(0.57)(1.12)(0.69) ALTERNATIVES Center Coast - MLP Alerian MLP Index Quarter6.756.626.57 Fiscal Year to Date0.25(0.23)4.89 Since 7/31/2017(2.37)(2.77)0.34 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 2 City of Sebastian Police Officers' Retirement System as of September 30, 2018 Breakdown of Returns Intercontinental - Private Real Estate NCREIF IndexNCREIF ODCEBC Agg Quarter2.792.521.672.090.02 Fiscal Year to Date12.1811.007.16(1.22)(1.22) Since 9/30/201712.1811.007.168.68(1.22) TOTAL RETURN Time-Weighted Returns (TWR)Policy Index (1)Policy Index (2) Quarter3.843.654.184.18 Fiscal Year to Date8.337.569.619.61 1 Year8.337.569.619.61 3 Year9.959.3010.4310.73 5 Year8.017.388.559.20 Since 1/31/20117.516.928.619.25 15 1/2 Years6.375.707.06 TOTAL RETURN Dollar-Weighted Returns (IRR)Actuary RateCPI +4 Quarter 3.641.861.47 Fiscal Year to Date 7.605.586.44 1 Year 7.607.456.44 3 Year 9.287.456.07 5 Year 7.387.455.54 Since 1/31/2011 6.987.455.75 Policy Index (1) Composition - 21.25% Russell 1000 Value / 21.25% Russell 1000 Growth / 5% Russell 2500 Value / 5% Russell 2500 Growth / 5% MSCI EAFE (net) / 7.5% MSCI AC Wd x US (net) / 25% BC Aggregate / 5% Alerian MLP / 5% NCREIF for periods since 7/31/2017 - 50% S&P 500 / 10% MSCI EAFE (net) / 40% BC Aggregate for periods since 12/31/2015 - 50% S&P 500 / 10% MSCI EAFE (net) / 40% BC Aggregate for periods since 6/30/2011 - 48% S&P 500 / 49% BC Gov/Credit / 3% Citi 3 Month T-Bill for periods prior to 6/30/2011 Policy Index (2) Composition - 21.25% Russell 1000 Value / 21.25% Russell 1000 Growth / 5% Russell 2500 Value / 5% Russell 2500 Growth / 5% MSCI EAFE (net) / 7.5% MSCI AC Wd x US (net) / 25% BC Aggregate / 5% Alerian MLP / 5% NCREIF for periods since 7/31/2017 - 60% S&P 500 / 40% BC Aggregate for periods since 12/31/2015 - 60% S&P 500 / 40% BC Aggregate for periods since 6/30/2011 - 48% S&P 500 / 49% BC Gov/Credit / 3% Citi 3 Month T-Bill for periods prior to 6/30/2011 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 3 City of Sebastian Police Officers' Retirement System as of September 30, 2018 Trailing Returns Manager vs Benchmark: Return through September 2018 (not annualized if less than 1 year) 12 10 Sebastian Police (Gross) 8 Sebastian Police (Net) Sebastian Police Policy Index 6 4 1 quarter1 year3 years5 years10 years15 years 3 quarters Manager vs Benchmark: Return through September 2018 (not annualized if less than 1 year) 1 quarter1 year3 years5 years10 years15 years 3 quarters Sebastian Police (Gross) 3.84%8.33%9.95%8.01%7.17%6.37% Sebastian Police (Net) 3.65%7.56%9.29%7.39%6.53%5.70% Sebastian Police Policy Index 4.18%9.61%10.43%8.55%8.32%7.06% The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 4 City of Sebastian Police Officers' Retirement System as of September 30, 2018 Risk/Return - 5 Year Analysis Manager Risk/Return Manager Performance Single Computation 20-Quarter Moving Windows, Computed Quarterly October 2013 - September 2018 October 2013 - September 2018 10% 150 8% 140 6% Sebastian Police (Gross) 130 Market Benchmark: Sebastian Police (Gross) Sebastian Police Policy Index Sebastian Police Policy Index Cash Equivalent: Citigroup 3-month T-bill 4% 120 2% 110 100 0% 0%1%2%3%4%5% Q3 2013Q4 2014Q4 2015Q4 2016Q3 2018 Standard Deviation Return & Risk Measurements October 2013 - September 2018: Summary Statistics ExcessUpDown BetaAlphaR-Squared ReturnStandardMaximumCaptureCaptureSharpe Returnvs.vs.vs. vs.DeviationDrawdownvs.vs.Ratio MarketMarketMarket MarketMarketMarket Sebastian Police (Gross)8.01%-0.54%4.82%1.02-5.60%97.43%123.31%-0.64%1.5687.15% Sebastian Police Policy Index 8.55%0.00%4.42%1.00-4.22%100.00%100.00%0.00%1.82100.00% The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 5 City of Sebastian Police Officers' Retirement System as of September 30, 2018 Risk/Return - 15 3/4 Year Analysis Manager Risk/Return Manager Performance Single Computation 20-Quarter Moving Windows, Computed Quarterly January 2003 - September 2018 January 2003 - September 2018 8% 300 7% 250 6% 5% Sebastian Police (Gross) Market Benchmark: 200 Sebastian Police (Gross) 4% Sebastian Police Policy Index Sebastian Police Policy Index Cash Equivalent: Citigroup 3-month T-bill 3% 150 2% 1% 100 0% 0%1%2%3%4%5%6%7%8% Q4 2002Q4 2005Q4 2007Q4 2009Q4 2011Q4 2013Q4 2015Q3 2018 Standard Deviation Return & Risk Measurements January 2003 - September 2018: Summary Statistics ExcessUpDown BetaAlphaR-Squared ReturnStandardMaximumCaptureCaptureSharpe Returnvs.vs.vs. vs.DeviationDrawdownvs.vs.Ratio MarketMarketMarket MarketMarketMarket Sebastian Police (Gross)6.37%-0.69%7.32%1.02-22.97%96.75%111.38%-0.77%0.7094.93% Sebastian Police Policy Index 7.06%0.00%7.00%1.00-21.59%100.00%100.00%0.00%0.83100.00% The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 6 City of Sebastian Police Officers' Retirement System as of September 30, 2018 IPS Compliance Check List GUIDELINES In Compliance OBJECTIVES In Compliance Equity PortfolioTotal Portfolio 5 yearsSince Inception Listed on recognized exchangeYesExceed Target Index NoNo Single issue not to exceed 5% at market value forYesExceed Target Rate of Return (7.45%)*NoNo each equity in each separately managed portfolioExceed CPI + 4% *YesYes Total equity portfolio < 70.00% & > 40.00% of total fund *Performance compared to dollar-weighted net Yesreturns at market Highland Capital Large Cap ValueRenaissance International Growth Large Capitalization Value Equity PortfolioInternational Growth Portfolio Market Value < 25.00% & > 15.00% of total fundYes Market Value < 10.00% & > 5.00% of total fundYes Performance (Since 8/31/2017)3 yearsSince Inception Performance (Since 8/31/2017)5 yearsSince Inception Rank in the Top 50% of manager universe N/AYes Return > MSCI World Ex US (Net) N/ANo Return > Russell 1000 Value N/AYes Highland Capital Large Cap GrowthHighland Fixed Income Large Capitalization Growth Equity PortfolioFixed Income Portfolio Market Value < 25.00% & > 15.00% of total fundYes Market Value < 35.00% & > 20.00% of total fundYes Performance (Since 8/31/2017)3 yearsSince Inception Performance (Since 3/31/2014)3 yearsSince Inception Rank in the Top 50% of manager universe N/ANo Return > BC AggN/AYes Return > Russell 1000 Growth N/ANo U.S. Government / Agency or U.S. CorporationsYes Bonds rated "A" or betterYes Boston Partners SMID Cap Value Single corporate issuer not exceed 10% of bond portfolioYes SMID Capitalization Value Equity Portfolio (except U.S. Government/Agency) Market Value < 7.50% & > 2.50% of total fundYes Performance (Since 8/31/2017)3 yearsSince Inception Center Coast MLPs Rank in the Top 50% of manager universe N/ANo Master Limited Partnerships Return > Russell Mid ValueN/ANo Market Value < 10.00% & > 0.00% of total fundYes Performance (Since 8/31/2017)5 yearsSince Inception Fiera Capital SMID Cap Growth Return > Alerian MLPN/ANo SMID Capitalization Growth Equity Portfolio Market Value < 7.50% & > 2.50% of total fundYes Intercontinental Performance (Since 8/31/2017)5 yearsSince Inception Core Private Real Estate Rank in the Top 50% of manager universe N/ANo Market Value < 10.00% & > 0.00% of total fundYes Return > Russell Mid GrowthN/ANo Performance (Inception 10/31/2017)3 yearsSince Inception Return > NCREIF Property IndexN/AYes Highland Capital International Value Return > NCREIF ODCE IndexN/AYes International Value Equity Portfolio Return > BC Agg IndexN/AYes Market Value < 7.50% & > 2.50% of total fundYes Performance (Since 8/31/2017)3 yearsSince Inception Return > MSCI EAFE (Net) N/AYes The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Page 7 Capital Markets OverviewTab 1 Performance ReportsTab 2 Capital Markets Overview: 3Q 2018 Introduction As of 3Q 2018 •The summer of 2018 generally passed quietly in financial markets, with the S&P 500 not registering a single 1% move in the third quarter as the index reached new all-time highs. U.S. and international markets performance continued to diverge, especially in emerging markets. This was driven, in part, by geopolitical tensions and partly by increasingly positive economic data coming out of the US, epitomized by the 4.2% GDP growth in 2Q 2018. CIO and MS & Co.’s Chief US Equity Strategist, Mike Wilson, maintains his price target of 2,750 for the S&P 500 and expects limited upside for equities in the near term, emphasizing recent defensive leadership will likely continue into year end. •US equities generated positive returns in the third quarter, as the S&P 500 rose 7.71% and all 11 sectors finished in the black. Health Care led the way, jumping 14.53% as investors rotated into the traditionally defensive sector. It was followed by Industrials and Communication Services (formerly Telecoms), which increased by 10.0% and 9.94%, respectively. Materials were the greatest laggards, gaining only 0.36%. They were followed closely by Energy, which gained only 0.61%. Other major US indices were positive on the quarter; the Dow Jones rose 9.63% and the NASDAQ returned 7.42%. •International underperformance continued in the third quarter, as divergences in US and world economic data widened. Emerging markets currencies remained under pressure, and the sell-off in China deepened. The MSCI EAFE Index (a benchmark for international developed markets) rose just 1.42% for US-currency investors. In the third quarter, the MSCI Emerging Markets Index dropped 0.95% for US-currency investors as weaknesses in China, Turkey, and Argentina were amplified by the continued strength of the dollar. The MSCI Europe Index rose 0.84% for US-currency investors, while MSCI Japan rose 3.81%. Japanese equity indices such as the Nikkei and TOPIX have now returned to highs not seen since 1991. •The bond market registered basically flat returns during the third quarter. The Bloomberg Barclays US Aggregate Bond Index, a general measure of the bond market, rose 0.02%. •Morgan Stanley & Co. economists expect US real GDP will be 2.9% in 2018, amid an environment of 3.8% global GDP growth. •Commodities were down in the third quarter; the Bloomberg Commodity Index lost 2.53%. Source: FactSet, Bloomberg, Morgan Stanley & Co. Research, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE Capital Markets Overview: 3Q 2018 The US Economy As of 3Q 2018 (with most recent data available) The Bureau of Economic Analysis estimated that real Gross Domestic Product increased at an annual rate of 4.2% in 2Q18, in comparison to a 2.2% increase in 1Q18. Morgan Stanley & Co. economists forecast US Real GDP growth will be 2.9% in 2018 and 2.4% in 2019. The seasonally adjusted unemployment rate for August 2018 was 3.9%. Job gains occurred in construction, professional and business services, health care, and retail. The number of unemployed was 6.2 million in August, up slightly from 6.1 million in May of this year. The number of long- term unemployed (those jobless for 27 weeks or more) was 1.3 million, an increase of around 100,000 from May. These individuals accounted for 21.5% of the unemployed vs. 19.4% at the end of last quarter. According to the most recent data from the Federal Reserve Bank of St. Louis, corporate profits increased 2.4% quarter over quarter and are up 16.1% year over year as of Q2 2018. Inflation increased in the US, according to the Bureau of Labor Statistics. The year-over-year Consumer Price Index was 2.7% in August, up from the 2.2% figure in February. Morgan Stanley & Co. economists forecast a 2.5% annual inflation rate for 2018 and 2.1% for 2019. The Census Bureau reported that the number of new private-sector housing starts in August 2018 was at a seasonally adjusted annual rate of 1,282,000—5.5% below housing starts this time last year. The Census Bureau also reported that seasonally adjusted retail and food services sales increased at 6.6% year over year in August. Consumer confidence increased in 3Q18, with Conference Board Consumer Confidence reading 138.4 in August, the highest level it has been since 2000. In August, the Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI), a manufacturing sector index, arrived at 61.3, up 1.8% from June’s reading of 60.2, and its highest reading since 1987. Generally speaking, a PMI or NMI (ISM Non-Manufacturing Index) over 50 indicates that the sector is expanding, and a PMI below 50 but over 43 indicates that the sector is shrinking but the overall economy is expanding. PMI has registered above 50 for 29 out of the last 32 months, indicating an expansion in manufacturing since March 2016. Overall, PMI has been above 43 for 110 consecutive months, indicating overall economic recovery and expansion since June 2009. The ISM’s Non-Manufacturing Index (NMI) for August was 58.5—0.1 points lower than in May 2018. The index has now been above 50 for 103 consecutive months, indicating non-manufacturing expansion since February 2010. Source: FactSet, Bloomberg, Morgan Stanley & Co. Research, Federal Reserve Bank of St. Louis, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE Capital Markets Overview: 3Q 2018 US Equity Markets As of 3Q 2018 The Dow Jones Industrial Average gained 9.63% in the second quarter, while the NASDAQ Composite Index was up 7.42%. The S&P 500 Index rose 7.71% over the same period. Every sector was up on a total return basis in 3Q18. Health Care led the way, jumping 14.53% as investors rotated into the traditionally defensive sector. It was followed by Industrials and Communication Services (formerly Telecoms), which increased by 10.0% and 9.94%, respectively. Materials were the greatest laggards, gaining only 0.36%. They were followed closely by Energy, which gained only 0.61%. The Russell 1000, a large-cap index, increased 7.42% for the quarter, with large-cap growth (+9.17% ) outperforming large-cap value (+5.70%). The Russell Midcap gained 5.00% on the quarter, with mid-cap growth (+7.57%) outperforming mid-cap value (+3.30%). The Russell 2000, a small-cap index, appreciated 3.58% for the quarter, with small-cap growth (+5.50%) outperforming small-cap value (+1.60%). Key US Stock Market Index Returns (%) for the Period Ending 9/28/2018 5-Years 7-Years INDEX IN USDQuarter12 Months (Annualized) (Annualized S&P 5007.71%18.35%13.80%16.61% Dow Jones9.63%20.89%14.37%16.19% Russell 20003.58%15.41%11.06%16.22% Russell Midcap5.00%14.41%11.58%15.70% Russell 10007.42%18.19%13.53%16.59% Source: FactSet, Bloomberg, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE S&P 500 Sectors YTD 2018 Total Return As of September 28, 2018 Staples -3.3% Materials -2.7% Financials 0.1% Communication Services 0.8% Real Estate 1.7% Utilities 2.7% Industrials 4.8% Energy 7.5% Health Care 16.6% Discretionary 20.6% Technology 20.6% -10%0%10%20%30% Source: Bloomberg Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE Capital Markets Overview: 3Q 2018 Global Equity Markets As of 3Q 2018 International underperformance continued in the third quarter, as divergences in US and world economic data widened. Emerging markets currencies remained under pressure, and the sell-off in China deepened. The MSCI EAFE Index (a benchmark for international developed markets) rose just 1.42% for US-currency investors. In the third quarter, the MSCI Emerging Markets Index dropped 0.95% for US-currency investors as weaknesses in China, Turkey, and Argentina were amplified by the continued strength of the dollar. The MSCI Europe Index rose 0.84% for US-currency investors, while MSCI Japan rose 3.81%. Japanese equity indices such as the Nikkei and TOPIX have now returned to highs not seen since 1991. The S&P 500 Index gained 7.71% for the quarter. Emerging economy equity market indices were down further in the third quarter. The MSCI BRIC (Brazil, Russia, India and China) Index fell 4.02% in US dollar terms, while the MSCI EM Asia Index was down 2.74%. Key Global Stock Market Index Returns (%) for the Period Ending 9/28/2018 5-Years 7-Years INDEX IN USDQuarter12 Months (Annualized) (Annualized) MSCI EAFE1.42%3.80%4.70%8.56% MSCI EAFE Growth1.57%6.80%5.84%9.36% MSCI EAFE Value1.26%0.79%3.49%7.69% MSCI Europe0.84%1.10%4.17%8.64% MSCI Japan3.81%10.57%6.69%8.98% S&P 5007.71%18.35%13.80%16.61% MSCI Emerging Markets-0.95%0.43%3.73%5.22% Source: FactSet, Bloomberg, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE Capital Markets Overview: 3Q 2018 The US Bond Market As of 3Q 2018 The bond market registered basically flat returns during the third quarter. The Bloomberg Barclays US Aggregate Bond Index, a general measure of the bond market, rose 0.02%. Interest rates increased during the third quarter, as the yield on the 10-year US Treasury note increased to a quarter-end 3.06% from 2.86% at the end of June. During the final week of the quarter, the yield approached 3.10%, challenging the cycle-high of 3.11% before fading slightly. Riskier parts of the bond market such as US high yield debt fared better in the third quarter. The Bloomberg Barclays Capital High Yield Index, a measure of lower-rated corporate bonds, gained 2.40%. Mortgage-backed had slight losses in the third quarter. The Bloomberg Barclays Capital Mortgage-Backed Securities Index fell 0.12%. Municipal bonds were also down slightly; the Bloomberg Barclays Capital Muni Index saw losses of 0.15%. Key US Bond Market Index Returns (%) for the Period Ending 9/28/2018 5-Years 7-Years INDEX IN USDQuarter12 Months (Annualized) (Annualized) Bloomberg Barclays Capital US Aggregate0.02%-1.22%2.16%2.07% Bloomberg Barclays Capital High Yield2.40%3.12%5.50%7.44% Bloomberg Barclays Capital Government/Credit0.03%-1.41%2.17%2.11% Bloomberg Barclays Capital Government -0.59%-1.66%1.34%1.14% Bloomberg Barclays Capital Intermediate Govt/Credit0.20%-1.06%1.51%1.64% Bloomberg Barclays Capital Long Govt/Credit-0.47%-2.46%5.14%4.21% Bloomberg Barclays Capital Mortgage Backed Securities-0.12%-0.95%2.02%1.80% Bloomberg Barclays Capital Muni-0.15%0.34%3.54%3.35% Source: FactSet, Bloomberg, Morgan Stanley & Co. Research, Morgan Stanley Wealth Management GIC Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Please refer to important information, disclosures and qualifications at the end of this material. This slide sourced from Market Performance section. WEALTH MANAGEMENT INVESTMENT RESOURCES | CHARTBOOK | MARKET PERFORMANCE Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC, a registered broker-dealer in the United States. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be suitable for all clients. Any product discussed herein may be purchased only after a client has carefully reviewed the offering memorandum and executed the subscription documents. 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GIMA may also determine that an investment product no longer meets the criteria under either process and will no longer be recommended in investment advisory programs (in which case the investment product is given a “Not Approved” status). GIMA has a ‘Watch” policy and may describe a Focus List or Approved List investment product as being on “Watch” if GIMA identifies specific areas that (a) merit further evaluation by GIMA and (b) may, but are not certain to, result in the investment product becoming “Not Approved.” The Watch period depends on the length of time needed for GIMA to conduct its evaluation and for the investment manager or fund to address any concerns. Certain investment products on either the Focus List or Approved List may also be recommended for the Tactical Opportunities List based in part on tactical opportunities existing at a given time. The investment products on the Tactical Opportunities List change over time. For more information on the Focus List, Approved List, Tactical Opportunities List and Watch processes, please see the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management. Your Financial Advisor or Private Wealth Advisor can also provide upon request a copy of a publication entitled “Manager Selection Process.” The Global Investment Committee is a group of seasoned investment professionals who meet regularly to discuss the global economy and markets. The committee determines the investment outlook that guides our advice to clients. They continually monitor developing economic and market conditions, review tactical outlooks and recommend model portfolio weightings, as well as produce a suite of strategy, analysis, commentary, portfolio positioning suggestions and other reports and broadcasts. The GIC Asset Allocation Models are not available to be directly implemented as part of an investment advisory service and should not be regarded as a recommendation of any Morgan Stanley investment advisory service. The GIC Asset Allocation Models do not represent actual trading or any type of account or any type of investment strategies and none of the fees or other expenses (e.g. commissions, mark-ups, mark-downs, advisory fees, fund expenses) associated with actual trading or accounts are reflected in the GIC Asset Allocation Models which, when compounded over a period of years, would decrease returns. Adverse Active Alpha (AAA) is a patented screening and scoring process designed to help identify high-quality equity and fixed income managers with characteristics that may lead to future outperformance relative to index and peers. While highly ranked managers performed well as a group in our Adverse Active Alpha model back tests, not all of the managers will outperform. Please note that this data may be derived from back-testing, which has the benefit of hindsight. In addition, highly ranked managers can have differing risk profiles that might not be suitable for all investors. Our view is that Adverse Active Alpha is a good starting point and should be used in conjunction with other information. Morgan Stanley Wealth Management’s qualitative and quantitative investment manager due diligence process are equally important factors for investors when considering managers for use through an investment advisory program. Factors including, but not limited to, manager turnover and changes to investment process can partially or fully negate a positive Adverse Active Alpha ranking. Additionally, highly ranked managers can have differing risk profiles that might not be suitable for all investors. For more information on AAA, please see the Adverse Active Alpha Ranking Model and Selecting Managers with Adverse Active Alpha whitepapers. The whitepaper are available from your Financial Advisor or Private Wealth Advisor. ADVERSE ACTIVE ALPHA is a registered service mark of Morgan Stanley and/or its affiliates. U.S. Pat. No. 8,756,098 applies to the Adverse Active Alpha system and/or methodology. The Global Investment Manager Analysis (GIMA) Services Only Apply to Certain Investment Advisory Programs GIMA evaluates certain investment products for the purposes of some – but not all – of Morgan Stanley Smith Barney LLC’s investment advisory programs (as described in more detail in the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management). If you do not invest through one of these investment advisory programs, Morgan Stanley Wealth Management is not obligated to provide you notice of any GIMA Status changes even though it may give notice to clients in other programs. Strategy May Be Available as a Separately Managed Account or Mutual Fund Strategies are sometimes available in Morgan Stanley Wealth Management investment advisory programs both in the form of a separately managed account (“SMA”) and a mutual fund. These may have different expenses and investment minimums. Your Financial Advisor or Private Wealth Advisor can provide more information on whether any particular strategy is available in more than one form in a particular investment advisory program. In most Morgan Stanley Wealth Management investment advisory accounts, fees are deducted quarterly and have a compounding effect on performance. For example, on an advisory account with a 3% annual fee, if the gross annual performance is 6.00%, the compounding effect of the fees will result in a net performance of approximately 3.93% after one year, 1 after three years, and 21.23% after five years. Conflicts of Interest: GIMA’s goal is to provide professional, objective evaluations in support of the Morgan Stanley Wealth Management investment advisory programs. We have policies and procedures to help us meet this goal. However, our business is subject to various conflicts of interest. For example, ideas and suggestions for which investment products should be evaluated by GIMA come from a variety of sources, including our Morgan Stanley Wealth Management Financial Advisors and their direct or indirect managers, and other business persons within Morgan Stanley Wealth Management or its affiliates. Such persons may have an ongoing business relationship with certain investment managers or mutual fund companies whereby they, Morgan Stanley Wealth Management or its affiliates receive compensation from, or otherwise related to, those investment managers or mutual funds. For example, a Financial Advisor may suggest that GIMA evaluates an investment manager or fund in which a portion of his or her clients’ assets are already invested. While such a recommendation is permissible, GIMA is responsible for the opinions expressed by GIMA. See the conflicts of interest section in the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management for a discussion of other types of conflicts that may be relevant to GIMA’s evaluation of managers and funds. In addition, Morgan Stanley Wealth Management, MS & Co., managers and their affiliates provide a variety of services (including research, brokerage, asset management, trading, lending and investment banking services) for each other and for various clients, including issuers of securities that may be recommended for purchase or sale by clients or are otherwise held in client accounts, and managers in various advisory programs. Morgan Stanley Wealth Management, managers, MS & Co., and their affiliates receive compensation and fees in connection with these services. Morgan Stanley Wealth Management believes that the nature and range of clients to which such services are rendered is such that it would be inadvisable to exclude categorically all of these companies from an account. Consider Your Own Investment Needs: The model portfolios and strategies discussed in the material are formulated based on general client characteristics including risk tolerance. This material is not intended to be a client-specific suitability analysis or recommendation, or offer to participate in any investment. Therefore, clients should not use this profile as the sole basis for investment decisions. They should consider all relevant information, including their existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Such a suitability determination may lead to asset allocation results that are materially different from the asset allocation shown in this profile. Talk to your Financial Advisor about what would be a suitable asset allocation for you, whether CGCM is a suitable program for you. No obligation to notify – Morgan Stanley Wealth Management has no obligation to notify you when the model portfolios, strategies, or any other information, in this material changes. Please consider the investment objectives, risks, fees, and charges and expenses of mutual funds, ETFs, closed end funds, unit investment trusts, and variable insurance products carefully before investing. The prospectus contains this and other information about each fund. To obtain a prospectus, contact your Financial Advisor or Private Wealth Advisor or visit the Morgan Stanley website at www.morganstanley.com. Please read it carefully before investing. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. The type of mutual funds and ETFs discussed in this presentation utilizes nontraditional or complex investment strategies and/or derivatives. Examples of these types of funds include those that utilize one or more of the below noted investment strategies or categories or which seek exposure to the following markets: (1) commodities (e.g., agricultural, energy and metals), currency, precious metals; (2) managed futures; (3) leveraged, inverse or inverse leveraged; (4) bear market, hedging, long-short equity, market neutral; (5) real estate; (6) volatility (seeking exposure to the CBOE VIX Index). Investors should keep in mind that while mutual funds and ETFs may, at times, utilize nontraditional investment options and strategies, they should not be equated with unregistered privately offered alternative investments. Because of regulatory limitations, mutual funds and ETFs that seek alternative-like investment exposure must utilize a more limited investment universe. As a result, investment returns and portfolio characteristics of alternative mutual funds and ETFs may vary from traditional hedge funds pursuing similar investment objectives. Moreover, traditional hedge funds have limited liquidity with long “lock-up” periods allowing them to pursue investment strategies without having to factor in the need to meet client redemptions and ETFs trade on an exchange. On the other hand, mutual funds typically must meet daily client redemptions. This differing liquidity profile can have a material impact on the investment returns generated by a mutual or ETF pursuing an alternative investing strategy compared with a traditional hedge fund pursuing the same strategy. Nontraditional investment options and strategies are often employed by a portfolio manager to further a fund’s investment objective and to help offset market risks. However, these features may be complex, making it more difficult to understand the fund’s essential characteristics and risks, and how it will perform in different market environments and over various periods of time. They may also expose the fund to increased volatility and unanticipated risks particularly when used in complex combinations and/or accompanied by the use of borrowing or “leverage.” KEY ASSET CLASS CONSIDERATIONS AND OTHER RISKS Investing in the markets entails the risk of market volatility. The value of all types of investments, including stocks, mutual funds, exchange-traded funds (“ETFs”), closed-end funds, and unit investment trusts, may increase or decrease over varying time periods. To the extent the investments depicted herein represent international securities, you should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial and accounting standards. These risks may be magnified in emerging markets and frontier markets. Small- and mid-capitalization companies may lack the financial resources, product diversification and competitive strengths of larger companies. In addition, the securities of small- and mid-capitalization companies may not trade as readily as, and be subject to higher volatility than, those of larger, more established companies. The value of fixed income securities will fluctuate and, upon a sale, may be worth more or less than their original cost or maturity value. Bonds are subject to interest rate risk, call risk, reinvestment risk, liquidity risk, and credit risk of the issuer. High yield bonds are subject to additional risks such as increased risk of default and greater volatility because of the lower credit quality of the issues. In the case of municipal bonds, income is generally exempt from federal income taxes. Some income may be subject to state and local taxes and to the federal alternative minimum tax. Capital gains, if any, are subject to tax. Treasury Inflation Protection Securities’ (TIPS) coupon payments and underlying principal are automatically increased to compensate for inflation by tracking the consumer price index (CPI). While the real rate of return is guaranteed, TIPS tend to offer a low return. Because the return of TIPS is linked to inflation, TIPS may significantly underperform versus conventional U.S. Treasuries in times of low inflation. There is no guarantee that investors will receive par if TIPS are sold prior to maturity. The returns on a portfolio consisting primarily of environmental, social, and governance-aware investments (“ESG”) may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. The companies identified and investment examples are for illustrative purposes only and should not be deemed a recommendation to purchase, hold or sell any securities or investment products. They are intended to demonstrate the approaches taken by managers who focus on ESG criteria in their investment strategy. There can be no guarantee that a client's account will be managed as described herein. Options and margin trading involve substantial risk and are not suitable for all investors. Besides the general investment risk of holding securities that may decline in value and the possible loss of principal invested, closed-end funds may have additional risks related to declining market prices relative to net asset values (NAVs), active manager underperformance and potential leverage. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. NAV is total assets less total liabilities divided by the number of shares outstanding. At the time an investor purchases shares of a closed-end fund, shares may have a market price that is above or below NAV. Portfolios that invest a large percentage of assets in only one industry sector (or in only a few sectors) are more vulnerable to price fluctuation than those that diversify among a broad range of sectors. Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing. Certain of these risks may include but are not limited to: Loss of all or a substantial portion of the investment due to leveraging, short-selling, or other speculative practices; Lack of liquidity in that there may be no secondary market for a fund; Volatility of returns; Restrictions on transferring interests in a fund; Potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; Absence of information regarding valuations and pricing; Complex tax structures and delays in tax reporting; Less regulation and higher fees than mutual funds; and Risks associated with the operations, personnel, and processes of the manager. As a diversified global financial services firm, Morgan Stanley Wealth Management engages in a broad spectrum of activities including financial advisory services, investment management activities, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication, and other activities. In the ordinary course of its business, Morgan Stanley Wealth Management therefore engages in activities where Morgan Stanley Wealth Management’s interests may conflict with the interests of its clients, including the private investment funds it manages. Morgan Stanley Wealth Management can give no assurance that conflicts of interest will be resolved in favor of its clients or any such fund. All expressions of opinion are subject to change without notice and are not intended to be a forecast of future events or results. Further, opinions regarding Alternative Investments expressed herein may differ from the opinions expressed by Morgan Stanley Wealth Management and/or other businesses/affiliates of Morgan Stanley Wealth Management. This is not a "research report" as defined by NASD Conduct Rule 2711 and was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC or Morgan Stanley & Co. LLC or its affiliates. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements. Clients should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. While the HFRI indices are frequently used, they have limitations (some of which are typical of other widely used indices). These limitations include survivorship bias (the returns of the indices may not be representative of all the hedge funds in the universe because of the tendency of lower performing funds to leave the index); heterogeneity (not all hedge funds are alike or comparable to one another, and the index may not accurately reflect the performance of a described style); and limited data (many hedge funds do not report to indices, and the index may omit funds, the inclusion of which might significantly affect the performance shown. The HFRI indices are based on information self-reported by hedge fund managers that decide on their own, at any time, whether or not they want to provide, or continue to provide, information to HFR Asset Management, L.L.C. Results for funds that go out of business are included in the index until the date that they cease operations. Therefore, these indices may not be complete or accurate representations of the hedge fund universe, and may be biased in several ways. Composite index results are shown for illustrative purposes and do not represent the performance of a specific investment. Individual funds have specific tax risks related to their investment programs that will vary from fund to fund. Clients should consult their own tax and legal advisors as Morgan Stanley Wealth Management does not provide tax or legal advice. Interests in alternative investment products are offered pursuant to the terms of the applicable offering memorandum, are distributed by Morgan Stanley Smith Barney LLC and certain of its affiliates, and (1) are not FDIC-insured, (2) are not deposits or other obligations of Morgan Stanley or any of its affiliates, (3) are not guaranteed by Morgan Stanley and its affiliates, and (4) involve investment risks, including possible loss of principal. Morgan Stanley Smith Barney LLC is a registered broker-dealer, not a bank. This material is not to be reproduced or distributed to any other persons (other than professional advisors of the investors or prospective investors, as applicable, receiving this material) and is intended solely for the use of the persons to whom it has been delivered. This material is not for distribution to the general public. Past performance is no guarantee of future results. Actual results may vary. SIPC insurance does not apply to precious metals, other commodities, or traditional alternative investments. Interests in alternative investment products are offered pursuant to the terms of the applicable offering memorandum, are distributed by Morgan Stanley Smith Barney LLC and certain of its affiliates, and (1) are not FDIC-insured, (2) are not deposits or other obligations of Morgan Stanley or any of its affiliates, (3) are not guaranteed by Morgan Stanley and its affiliates, and (4) involve investment risks, including possible loss of principal. Morgan Stanley Smith Barney LLC is a registered broker-dealer, not a bank. In Consulting Group’s advisory programs, alternative investments are limited to US-registered mutual funds, separate account strategies and exchange-traded funds (ETFs) that seek to pursue alternative investment strategies or returns utilizing publicly traded securities. Investment products in this category may employ various investment strategies and techniques for both hedging and more speculative purposes such as short-selling, leverage, derivatives and options, which can increase volatility and the risk of investment loss. Alternative investments are not suitable for all investors. As a diversified global financial services firm, Morgan Stanley Wealth Management engages in a broad spectrum of activities including financial advisory services, investment management activities, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication, and other activities. In the ordinary course of its business, Morgan Stanley Wealth Management therefore engages in activities where Morgan Stanley Wealth Management’s interests may conflict with the interests of its clients, including the private investment funds it manages. Morgan Stanley Wealth Management can give no assurance that conflicts of interest will be resolved in favor of its clients or any such fund. Alternative investments involve complex tax structures, tax inefficient investing, and delays in distributing important tax information. Individual funds have specific risks related to their investment programs that will vary from fund to fund. Clients should consult their own tax and legal advisors as Morgan Stanley Wealth Management does not provide tax or legal advice. While the HFRI indices are frequently used, they have limitations (some of which are typical of other widely used indices). These limitations include survivorship bias (the returns of the indices may not be representative of all the hedge funds in the universe because of the tendency of lower performing funds to leave the index); heterogeneity (not all hedge funds are alike or comparable to one another, and the index may not accurately reflect the performance of a described style); and limited data (many hedge funds do not report to indices, and the index may omit funds, the inclusion of which might significantly affect the performance shown. The HFRI indices are based on information self-reported by hedge fund managers that decide on their own, at any time, whether or not they want to provide, or continue to provide, information to HFR Asset Management, L.L.C. Results for funds that go out of business are included in the index until the date that they cease operations. Therefore, these indices may not be complete or accurate representations of the hedge fund universe, and may be biased in several ways. It should be noted that the majority of hedge fund indexes are comprised of hedge fund manager returns. This is in contrast to traditional indexes, which are comprised of individual securities in the various market segments they represent and offer complete transparency as to membership and construction methodology. As such, some believe that hedge fund index returns have certain biases that are not present in traditional indexes. Some of these biases inflate index performance, while others may skew performance negatively. However, many studies indicate that overall hedge fund index performance has been biased to the upside. Some studies suggest performance has been inflated by up to 260 basis points or more annually depending on the types of biases included and the time period studied. Although there are numerous potential biases that could affect hedge fund returns, we identify some of the more common ones throughout this paper. Self-selection bias results when certain manager returns are not included in the index returns and may result in performance being skewed up or down. Because hedge funds are private placements, hedge fund managers are able to decide which fund returns they want to report and are able to opt out of reporting to the various databases. Certain hedge fund managers may choose only to report returns for funds with strong returns and opt out of reporting returns for weak performers. Other hedge funds that close may decide to stop reporting in order to retain secrecy, which may cause a downward bias in returns. Survivorship bias results when certain constituents are removed from an index. This often results from the closure of funds due to poor performance, “blow ups,” or other such events. As such, this bias typically results in performance being skewed higher. As noted, hedge fund index performance biases can result in positive or negative skew. However, it would appear that the skew is more often positive. While it is difficult to quantify the effects precisely, investors should be aware that idiosyncratic factors may be giving hedge fund index returns an artificial “lift” or upwards bias. Hedge Funds of Funds and many funds of funds are private investment vehicles restricted to certain qualified private and institutional investors. They are often speculative and include a high degree of risk. Investors can lose all or a substantial amount of their investment. They may be highly illiquid, can engage in leverage and other speculative practices that may increase volatility and the risk of loss, and may be subject to large investment minimums and initial lockups. They involve complex tax structures, tax-inefficient investing and delays in distributing important tax information. Categorically, hedge funds and funds of funds have higher fees and expenses than traditional investments, and such fees and expenses can lower the returns achieved by investors. Funds of funds have an additional layer of fees over and above hedge fund fees that will offset returns. An investment in an exchange-traded fund involves risks similar to those of investing in a broadly based portfolio of equity securities traded on an exchange in the relevant securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock and bond prices. An investment in a target date portfolio is subject to the risks attendant to the underlying funds in which it invests, in these portfolios the funds are the Consulting Group Capital Market funds. A target date portfolio is geared to investors who will retire and/or require income at an approximate year. The portfolio is managed to meet the investor’s goals by the pre-established year or “target date.” A target date portfolio will transition its invested assets from a more aggressive portfolio to a more conservative portfolio as the target date draws closer. An investment in the target date portfolio is not guaranteed at any time, including, before or after the target date is reached. Managed futures investments are speculative, involve a high degree of risk, use significant leverage, are generally illiquid, have substantial charges, subject investors to conflicts of interest, and are suitable only for the risk capital portion of an investor’s portfolio. Managed futures investments do not replace equities or bonds but rather may act as a complement in a well diversified portfolio. Managed Futures are complex and not appropriate for all investors. Rebalancing does not protect against a loss in declining financial markets. There may be a potential tax implication with a rebalancing strategy. Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets. Past performance is no guarantee of future results. Actual results may vary. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account. Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustration purposes only and do not show the performance of any specific investment. Reference to an index does not imply that the portfolio will achieve return, volatility or other results similar to the index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility, or tracking error target, all of which are subject to change over time. This material is not a financial plan and does not create an investment advisory relationship between you and your Morgan Stanley Financial Advisor. We are not your fiduciary either under the Employee Retirement Income Security Act of 1974 (ERISA) or the Internal Revenue Code of 1986, and any information in this report is not intended to form the primary basis for any investment decision by you, or an investment advice or recommendation for either ERISA or Internal Revenue Code purposes. Morgan Stanley Private Wealth Management will only prepare a financial plan at your specific request using Private Wealth Management approved financial planning signature. We may act in the capacity of a broker or that of an advisor. As your broker, we are not your fiduciary and our interests may not always be identical to yours. Please consult with your Private Wealth Advisor to discuss our obligations to disclose to you any conflicts we may from time to time have and our duty to act in your best interest. We may be paid both by you and by others who compensate us based on what you buy. Our compensation, including that of your Private Wealth Advisor, may vary by product and over time. Investment and services offered through Morgan Stanley Private Wealth Management, a division of Morgan Stanley Smith Barney LLC, Member SIPC. Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, Member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services. For index, indicator and survey definitions referenced in this report please visit the following: http://www.morganstanleyfa.com/public/projectfiles/id.pdf GLOBAL INVESTMENT COMMITTEE (GIC) ASSET ALLOCATION MODELS: The Asset Allocation Models are created by Morgan Stanley Wealth Management’s GIC. HYPOTHETICAL MODEL PERFORMANCE (GROSS): Hypothetical model performance results do not reflect the investment or performance of an actual portfolio following a GIC Strategy, but simply reflect actual historical performance of selected indices on a real-time basis over the specified period of time representing the GIC’s strategic and tactical allocations as of the date of this report. The past performance shown here is simulated performance based on benchmark indices, not investment results from an actual portfolio or actual trading. There can be large differences between hypothetical and actual performance results achieved by a particular asset allocation or trading strategy. Hypothetical performance results do not represent actual trading and are generally designed with the benefit of hindsight. Actual performance results of accounts vary due to, for example, market factors (such as liquidity) and client-specific factors (such as investment vehicle selection, timing of contributions and withdrawals, restrictions and rebalancing schedules). Clients would not necessarily have obtained the performance results shown here if they had invested in accordance with any GIC Asset Allocation Model for the periods indicated. Despite the limitations of hypothetical performance, these hypothetical performance results allow clients and Financial Advisors to obtain a sense of the risk/return trade-off of different asset allocation constructs. The hypothetical performance results in this report are calculated using the returns of benchmark indices for the asset classes, and not the returns of securities, fund or other investment products. Models may contain allocations to Hedge Funds, Private Equity and Private Real Estate. The benchmark indices for these asset classes are not issued on a daily basis. When calculating model performance on a day for which no benchmark index data is issued, we have assumed straight line growth between the index levels issued before and after that date. FEES REDUCE THE PERFORMANCE OF ACTUAL ACCOUNTS: None of the fees or other expenses (e.g. commissions, mark-ups, mark-downs, fees) associated with actual trading or accounts are reflected in the GIC Asset Allocation Models. The GIC Asset Allocation Models and any model performance included in this presentation are intended as educational materials. Were a client to use these models in connection with investing, any investment decisions made would be subject to transaction and other costs which, when compounded over a period of years, would decrease returns. Information regarding Morgan Stanley’s standard advisory fees is available in the Form ADV Part 2, which is available at www.morganstanley.com/adv. The following hypothetical illustrates the compound effect fees have on investment returns: For example, if a portfolio’s annual rate of return is 15% for 5 years and the account pays 50 basis points in fees per annum, the gross cumulative five-year return would be 101.1% and the five-year return net of fees would be 96.8%. Fees and/or expenses would apply to clients who invest in investments in an account based on these asset allocations, and would reduce clients’ returns. The impact of fees and/or expenses can be material. Variable annuities are long-term investments designed for retirement purposes and may be subject to market fluctuations, investment risk, and possible loss of principal. All guarantees, including optional benefits, are based on the financial strength and claims-paying ability of the issuing insurance company and do not apply to the underlying investment options. Optional riders may not be able to be purchased in combination and are available at an additional cost. Some optional riders must be elected at time of purchase. Optional riders may be subject to specific limitations, restrictions, holding periods, costs, and expenses as specified by the insurance company in the annuity contract. If you are investing in a variable annuity through a tax-advantaged retirement plan such as an IRA, you will get no additional tax advantage from the variable annuity. Under these circumstances, you should only consider buying a variable annuity because of its other features, such as lifetime income payments and death benefits protection. Taxable distributions (and certain deemed distributions) are subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal income tax penalty. Early withdrawals will reduce the death benefit and cash surrender value. Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment. Ultrashort-term fixed income asset class is comprised of fixed income securities with high quality, very short maturities. They are therefore subject to the risks associated with debt securities such as credit and interest rate risk. Master Limited Partnerships (MLPs) are limited partnerships or limited liability companies that are taxed as partnerships and whose interests (limited partnership units or limited liability company units) are traded on securities exchanges like shares of common stock. Currently, most MLPs operate in the energy, natural resources or real estate sectors. Investments in MLP interests are subject to the risks generally applicable to companies in the energy and natural resources sectors, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. Individual MLPs are publicly traded partnerships that have unique risks related to their structure. These include, but are not limited to, their reliance on the capital markets to fund growth, adverse ruling on the current tax treatment of distributions (typically mostly tax deferred), and commodity volume risk. The potential tax benefits from investing in MLPs depend on their being treated as partnerships for federal income tax purposes and, if the MLP is deemed to be a corporation, then its income would be subject to federal taxation at the entity level, reducing the amount of cash available for distribution to the fund which could result in a reduction of the fund’s value. MLPs carry interest rate risk and may underperform in a rising interest rate environment. MLP funds accrue deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investments; this deferred tax liability is reflected in the daily NAV, and, as a result, the MLP fund’s after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked. Investing in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii) governmental programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention. Physical precious metals are non-regulated products. Precious metals are speculative investments, which may experience short-term and long term price volatility. The value of precious metals investments may fluctuate and may appreciate or decline, depending on market conditions. Unlike bonds and stocks, precious metals do not make interest or dividend payments. Therefore, precious metals may not be suitable for investors who require current income. Precious metals are commodities that should be safely stored, which may impose additional costs on the investor. REITs investing risks are similar to those associated with direct investments in real estate: property value fluctuations, lack of liquidity, limited diversification and sensitivity to economic factors such as interest rate changes and market recessions. Risks of private real estate include: illiquidity; a long-term investment horizon with a limited or nonexistent secondary market; lack of transparency; volatility (risk of loss); and leverage. Principal is returned on a monthly basis over the life of a mortgage-backed security. Principal prepayment can significantly affect the monthly income stream and the maturity of any type of MBS, including standard MBS, CMOs and Lottery Bonds. Asset-backed securities generally decrease in value as a result of interest rate increases, but may benefit less than other fixed-income securities from declining interest rates, principally because of prepayments. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision. Credit ratings are subject to change. Duration, the most commonly used measure of bond risk, quantifies the effect of changes in interest rates on the price of a bond or bond portfolio. The longer the duration, the more sensitive the bond or portfolio would be to changes in interest rates. The majority of $25 and $1000 par preferred securities are “callable” meaning that the issuer may retire the securities at specific prices and dates prior to maturity. Interest/dividend payments on certain preferred issues may be deferred by the issuer for periods of up to 5 to 10 years, depending on the particular issue. The investor would still have income tax liability even though payments would not have been received. Price quoted is per $25 or $1,000 share, unless otherwise specified. Current yield is calculated by multiplying the coupon by par value divided by the market price. The initial interest rate on a floating-rate security may be lower than that of a fixed-rate security of the same maturity because investors expect to receive additional income due to future increases in the floating security’s underlying reference rate. The reference rate could be an index or an interest rate. However, there can be no assurance that the reference rate will increase. Some floating-rate securities may be subject to call risk. The market value of convertible bonds and the underlying common stock(s) will fluctuate and after purchase may be worth more or less than original cost. If sold prior to maturity, investors may receive more or less than their original purchase price or maturity value, depending on market conditions. Callable bonds may be redeemed by the issuer prior to maturity. Additional call features may exist that could affect yield. Some $25 or $1000 par preferred securities are QDI (Qualified Dividend Income) eligible. Information on QDI eligibility is obtained from third party sources. The dividend income on QDI eligible preferreds qualifies for a reduced tax rate. Many traditional ‘dividend paying’ perpetual preferred securities (traditional preferreds with no maturity date) are QDI eligible. In order to qualify for the preferential tax treatment all qualifying preferred securities must be held by investors for a minimum period – 91 days during a 180 day window period, beginning 90 days before the ex-dividend date. Companies paying dividends can reduce or cut payouts at any time. Nondiversification: For a portfolio that holds a concentrated or limited number of securities, a decline in the value of these investments would cause the portfolio’s overall value to decline to a greater degree than a less concentrated portfolio. The indices selected by Morgan Stanley Wealth Management to measure performance are representative of broad asset classes. Morgan Stanley Wealth Management retains the right to change representative indices at any time. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. Growth investing does not guarantee a profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations. Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies which would result in stock prices that do not rise as initially expected. Any type of continuous or periodic investment plan does not assure a profit and does not protect against loss in declining markets. Since such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities, the investor should consider his financial ability to continue his purchases through periods of low price levels. This material is disseminated in the United States of America by Morgan Stanley Smith Barney LLC. Morgan Stanley Wealth Management is not acting as a municipal advisor to any municipal entity or obligated person within the meaning of Section 15B of the Securities Exchange Act (the “Municipal Advisor Rule”) and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of the Municipal Advisor Rule. This material, or any portion thereof, may not be reprinted, sold or redistributed without the written consent of Morgan Stanley Smith Barney LLC. ©2018 Morgan Stanley Smith Barney LLC. Member SIPC. City of Sebastian Police Officers' Retirement Plan Asset Allocation & Time Weighted Performance as of September 30, 2018 AllocationPerformance(%) Market CurrentFiscal1357SinceInception Value% QuarterYTDYearYearsYearsYearsInceptionDate ($) Total Fund15,167,320100.003.848.338.339.958.019.557.5102/01/2011 Policy Index 14.189.619.6110.438.5510.258.61 Domestic Equity Highland - Large Cap Value3,480,88422.956.1811.1011.10N/AN/AN/A12.1408/01/2017 Russell 1000 VL5.709.459.45N/AN/AN/A9.72 Highland - Large Cap Growth3,240,36121.367.6422.6722.67N/AN/AN/A22.5108/01/2017 Russell 1000 Gr9.1726.3026.30N/AN/AN/A25.57 Boston Partners - SMID Value743,2884.900.686.196.19N/AN/AN/A7.4908/01/2017 Russell 2500 VL2.6710.2410.24N/AN/AN/A11.59 Fiera Capital - SMID Growth838,5175.535.9122.7322.73N/AN/AN/A22.3508/01/2017 Russell 2500 GR7.1723.1323.13N/AN/AN/A24.12 International Equity Highland - Intl Value761,4765.021.834.524.52N/AN/AN/A4.8608/01/2017 MSCI EAFE Net1.362.742.74N/AN/AN/A4.51 Renaissance - International Growth1,143,8847.540.91-0.80-0.80N/AN/AN/A0.3708/01/2017 MSCI AC World ex US Net0.711.761.76N/AN/AN/A3.60 Fixed Income Highland - Fixed Income3,548,78323.400.08-1.07-1.07N/AN/AN/A-0.5708/01/2017 Barclays Aggregate0.02-1.22-1.22N/AN/AN/A-0.69 Alternative Investments Center Coast - MLP648,3644.276.750.250.25N/AN/AN/A-2.3708/01/2017 Alerian MLP Index6.574.894.89N/AN/AN/A0.34 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Asset Allocation & Time Weighted Performance as of September 30, 2018 AllocationPerformance(%) Market CurrentFiscal1357SinceInception Value% QuarterYTDYearYearsYearsYearsInceptionDate ($) Intercontinental - Private Real Estate691,3724.562.7912.1812.18N/AN/AN/A12.1810/01/2017 NCREIF Property Idx1.677.167.16N/AN/AN/A7.16 Cash Receipt & Disbursement70,3900.460.411.791.79N/AN/AN/A1.6108/01/2017 90-Day T-Bills0.501.571.57N/AN/AN/A1.51 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Asset Allocation & Net Dollar Weighted Performance (IRR) as of September 30, 2018 CurrentFiscal1357SinceInception % QuarterYTDYearYearsYearsYearsInceptionDate Total Fund100.003.647.607.609.287.388.846.9801/31/2011 Domestic Equity Highland - Large Cap Value22.956.0511.3311.33N/AN/AN/A12.5607/31/2017 Highland - Large Cap Growth21.367.4120.7820.78N/AN/AN/A20.8607/31/2017 Boston Partners - SMID Value4.900.354.824.82N/AN/AN/A6.3007/31/2017 Fiera Capital - SMID Growth5.535.7221.8921.89N/AN/AN/A21.6307/31/2017 International Equity Highland - Intl Value5.021.673.793.79N/AN/AN/A4.2307/31/2017 Renaissance - International Growth7.540.72-1.36-1.36N/AN/AN/A-0.1407/31/2017 Fixed Income Highland - Fixed Income23.40-0.04-1.67-1.67N/AN/AN/A-1.0407/31/2017 Alternative Investments Center Coast - MLP4.286.62-0.24-0.24N/AN/AN/A-2.7807/31/2017 Intercontinental - Private Real Estate4.562.5211.2911.29N/AN/AN/A11.2910/15/2017 Cash Receipt & Disbursement0.46-2.11-1.20-1.20N/AN/AN/A-0.9807/31/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Total Fund - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 16.0 14.0 12.0 12.0 8.0 10.0 4.0 8.0 0.0 6.0 Current Fiscal 1357Since YTDYearsYearsYears QuarterYearInception 4.0 Manager Annualized Performance 2.0 CurrentFiscal1357Inception QuarterYTDYearYearsYearsYears02/01/2011 Total Fund3.848.338.339.958.019.557.51 0.0 Policy Index 14.189.619.6110.438.5510.258.61 Differences-0.34-1.28-1.28-0.48-0.54-0.70-1.10 -2.0 Historic Asset Growth CurrentFiscal1357Inception -4.0 QuarterYTDYearYearsYearsYears02/01/2011 -4.0-2.00.02.04.06.08.010.0 Total Fund Risk (Standard Deviation %) Beginning Market Value14,57114,00314,00311,29210,0737,5277,730 Total Fund Policy Index 190-Day T-Bills Net Contributions651021023706491,0911,559 Fees/Expenses-27-103-103-240-364-459-481 Income893483489681,4481,8842,018 Gain/Loss4708188182,7773,3615,1254,342 Ending Market Value15,16715,16715,16715,16715,16715,16715,167 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Total Fund7.516.821.02-10.7196.98111.21-1.141.050.9302/01/2011 Policy Index 18.616.451.00-8.54100.00100.000.001.261.0002/01/2011 90-Day T-Bills0.340.150.000.002.01-1.310.34N/A0.0002/01/2011 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Total Fund - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $20.0 $16.3 $16.0 $15.2 $12.0 $8.8 $8.0 $4.0 1/117/111/127/121/137/131/147/141/157/151/167/161/177/171/189/18 Total Fund Policy Index 1Net Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesIncomeAs of TransfersInvestment 07/01/201809/30/2018 Total Fund14,570.62-5,338.19-5,273.44-26.57-88.89558.5215,167.32 Distribution of Returns 40 30 24 20 20 11 10 9 10 6 4 3 22 1 0 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Value - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 20.0 18.0 15.0 15.0 10.0 12.0 5.0 9.0 0.0 Current Fiscal 1Since YTD QuarterYearInception 6.0 Manager Annualized Performance 3.0 CurrentFiscal1Inception QuarterYTDYear08/01/2017 Highland - Large Cap Value6.1811.1011.1012.14 0.0 Russell 1000 VL5.709.459.459.68 Differences0.481.651.652.46 Historic Asset Growth -3.0 -4.0-2.00.02.04.06.08.010.012.0 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Highland - Large Cap Value Highland - Large Cap ValueRussell 1000 VL Beginning Market Value3,2834,4674,4674,342 90-Day T-Bills Net Contributions--1,377-1,377-1,377 Fees/Expenses-4-26-26-26 Income218686103 Gain/Loss182331331439 Ending Market Value3,4813,4813,4813,481 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Highland - Large Cap Value12.147.620.95-6.36109.4789.672.711.350.9708/01/2017 Russell 1000 VL9.687.881.00-6.45100.00100.000.001.031.0008/01/2017 90-Day T-Bills1.500.110.000.007.46-4.231.49N/A0.0008/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland Large Cap Value - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $5.6 $4.8 $4.0 $3.5 $3.4 $3.2 $2.9 $2.4 $1.6 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Highland - Large Cap ValueRussell 1000 VLNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Highland - Large Cap Value3,282,719.48-195,682.67-196,014.89-4,065.26-202,562.093,480,884.09 Distribution of Returns 6 4 4 3 22 2 111 00000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Value - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate UtilitiesUtilities 0.06.012.018.024.030.036.0-30.0-15.00.015.030.045.0 Highland - Large Cap ValueHighland - Large Cap Value Russell 1000 VLRussell 1000 VL Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Utilities -0.8-0.6-0.4-0.20.00.20.40.60.81.0 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Value - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services3.566.726.776.21-0.020.04-0.020.00 Consumer Discretionary3.505.54-12.290.320.11-0.700.26-0.33 Consumer Staples6.917.27-1.234.710.00-0.430.02-0.41 Energy13.2111.121.531.48-0.090.010.00-0.08 Financials23.9323.294.164.19-0.01-0.010.00-0.02 Health Care15.2513.8517.5015.600.140.260.030.43 Industrials8.917.877.508.320.03-0.06-0.01-0.05 Information Technology12.029.6011.518.210.060.320.080.46 Materials4.034.100.65-0.090.000.030.000.03 Real Estate3.074.915.190.720.090.22-0.080.23 Utilities5.625.722.962.440.000.030.000.03 Total100.00100.006.005.690.33-0.300.280.30 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Value - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)162,838,622.34126,935,326.98 (%)(%)(%)(%) Median Mkt. Cap ($000)52,331,612.649,935,306.04 JPMorgan Chase & Co4.612.771.848.88 Price/Earnings ratio15.5716.45 Cisco Systems Inc3.211.681.5313.94 Price/Book ratio2.232.24 Exxon Mobil Corp3.062.640.423.83 5 Yr. EPS Growth Rate (%)6.787.25 Bank of America Corp2.862.010.855.01 BetaN/A1.00 Pfizer Inc2.791.880.9122.51 Number of Stocks78727 Merck & Co Inc.2.531.291.2417.67 Debt to Equity1.550.74 Wells Fargo & Co2.531.670.86-4.50 Citigroup Inc2.431.331.107.87 Intel Corp2.351.600.75-4.29 Chevron Corp2.331.710.62-2.36 % of Portfolio28.7018.5810.12 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) HCA Healthcare Inc0.940.080.8635.95US Foods Holding Corp0.750.050.70-18.51 Corning Inc1.290.211.0829.01General Electric Co0.860.710.15-16.26 Premier Inc1.180.011.1725.84Ford Motor Co0.450.260.19-15.25 Perspecta Inc0.050.000.0525.42Micron Technology Inc.0.390.080.31-13.75 Cigna Corp0.870.220.6522.54General Motors Co0.880.320.56-13.60 Pfizer Inc2.791.880.9122.51PulteGroup Inc0.920.030.89-13.55 Apple Inc1.310.001.3122.38Campbell Soup Co0.770.010.76-9.64 Abbott Laboratories1.180.920.2620.28Schlumberger Ltd1.480.620.86-8.38 Norfolk Southern Corp1.460.371.0920.20Synchrony Financial0.980.110.87-6.24 Lockheed Martin Corp1.120.051.0717.83LyondellBasell Industries NV1.460.131.33-5.84 % of Portfolio12.193.748.45% of Portfolio8.942.326.62 City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Growth - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 40.0 36.0 30.0 30.0 20.0 24.0 10.0 18.0 0.0 12.0 Current Fiscal 1Since YTD QuarterYearInception 6.0 Manager Annualized Performance CurrentFiscal1Inception 0.0 QuarterYTDYear08/01/2017 Highland - Large Cap Growth7.6422.6722.6722.51 -6.0 Russell 1000 Gr9.1726.3026.3025.45 Differences-1.53-3.63-3.63-2.94 Historic Asset Growth -12.0 -4.0-2.00.02.04.06.08.010.012.014.0 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Highland - Large Cap Growth Highland - Large Cap GrowthRussell 1000 Gr Beginning Market Value2,7881,5731,5731,523 90-Day T-Bills Net Contributions2371,1821,1821,182 Fees/Expenses-3-14-14-14 Income9333337 Gain/Loss209466466513 Ending Market Value3,2403,2403,2403,240 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Highland - Large Cap Growth22.519.140.98-5.9393.31112.23-1.912.120.9908/01/2017 Russell 1000 Gr25.459.291.00-5.29100.00100.000.002.351.0008/01/2017 90-Day T-Bills1.500.110.000.004.60-4.441.48N/A0.0008/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland Large Cap Growth - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $5.0 $4.0 $3.3 $3.2 $3.0 $2.7 $2.0 $1.0 $0.0 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Highland - Large Cap GrowthRussell 1000 GrNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Highland - Large Cap Growth2,788,387.60-3,772,380.22-3,535,517.44-3,454.85-218,565.573,240,361.10 Distribution of Returns 6 4 4 3 2 2 11111 0000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Growth - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate 0.08.016.024.032.040.048.0-16.0-8.00.08.016.024.0 Highland - Large Cap GrowthHighland - Large Cap Growth Russell 1000 GrRussell 1000 Gr Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate -1.4-1.2-1.0-0.8-0.6-0.4-0.20.00.20.40.6 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Growth - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services14.9113.190.64-1.07-0.180.230.030.08 Consumer Discretionary16.1115.1610.3510.270.010.010.000.02 Consumer Staples6.115.726.436.11-0.010.020.000.01 Energy0.911.01-5.41-4.950.010.000.000.01 Financials3.324.445.653.250.070.11-0.030.15 Health Care12.6013.3713.3312.72-0.030.080.000.05 Industrials11.2311.8710.8910.66-0.010.030.000.02 Information Technology29.8831.2711.3213.80-0.06-0.780.03-0.81 Materials2.951.80-1.11-0.10-0.11-0.02-0.01-0.14 Real Estate1.992.160.820.190.020.010.000.03 Total100.00100.008.569.14-0.29-0.310.02-0.58 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Large Cap Growth - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)326,775,461.66313,613,099.48 (%)(%)(%)(%) Median Mkt. Cap ($000)41,423,424.0012,897,250.56 Apple Inc8.587.880.7022.38 Price/Earnings ratio27.6929.31 Amazon.com Inc6.135.880.2517.84 Price/Book ratio6.707.54 Microsoft Corp6.085.930.1516.43 5 Yr. EPS Growth Rate (%)19.6216.26 Alphabet Inc2.932.620.316.98 BetaN/A1.00 Facebook Inc2.922.820.10-15.37 Number of Stocks105542 Unitedhealth Group Inc2.691.840.858.80 Debt to Equity1.430.77 Alphabet Inc2.622.600.026.90 Visa Inc2.161.940.2213.49 Home Depot Inc. (The)1.961.720.246.72 Netflix Inc1.791.130.66-4.42 % of Portfolio37.8634.363.50 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) WellCare Health Plans Inc0.540.110.4330.15Tesla Inc0.570.260.31-22.80 Hubbell Inc0.780.040.7427.09MKS Instruments Inc0.440.030.41-16.07 Premier Inc0.460.010.4525.84athenahealth Inc0.780.040.74-16.05 Advance Auto Parts Inc.0.670.030.6424.09Facebook Inc2.922.820.10-15.37 Zebra Technologies Corp.0.720.070.6523.44E*TRADE Financial Corporation0.520.020.50-14.34 Southwest Airlines Co.0.630.170.4623.06Thor Industries Inc.0.480.030.45-14.06 Express Scripts Holding Co0.570.030.5423.05PulteGroup Inc0.730.010.72-13.55 Cigna Corp0.880.140.7422.54LogMeIn Inc0.470.020.45-13.39 Apple Inc8.587.880.7022.38Lam Research Corp0.520.170.35-11.61 Splunk Inc0.560.130.4322.00Halliburton Co0.330.260.07-9.64 % of Portfolio14.398.615.78% of Portfolio7.763.664.10 City of Sebastian Police Officers' Retirement Plan Boston Partners - SMID Value - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 20.0 18.0 15.0 15.0 10.0 12.0 5.0 9.0 0.0 Current Fiscal 1Since YTD QuarterYearInception 6.0 Manager Annualized Performance 3.0 CurrentFiscal1Inception QuarterYTDYear08/01/2017 Boston Partners - SMID Value0.686.196.197.49 0.0 Russell 2500 VL2.6710.2410.2411.54 Differences-1.99-4.05-4.05-4.05 Historic Asset Growth -3.0 -4.0-2.00.02.04.06.08.010.012.0 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Boston Partners - SMID Value Boston Partners - SMID ValueRussell 2500 VL Beginning Market Value712689689672 90-Day T-Bills Net Contributions29222222 Fees/Expenses-2-9-9-9 Income3131314 Gain/Loss1292944 Ending Market Value743743743743 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Boston Partners - SMID Value7.498.360.94-4.1682.96108.51-2.970.730.8808/01/2017 Russell 2500 VL11.548.391.00-4.91100.00100.000.001.171.0008/01/2017 90-Day T-Bills1.500.110.000.006.40-4.441.49N/A0.0008/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Boston SMID Value - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $0.9 $0.8 $0.8 $0.7 $0.7 $0.7 $0.6 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Boston Partners - SMID ValueRussell 2500 VLNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Boston Partners - SMID Value712,242.02-140,196.03-111,693.25-1,783.93-4,327.50743,288.37 Distribution of Returns 6 4 3 2222 2 111 0000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Boston Partners - SMID Value - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate UtilitiesUtilities 0.08.016.024.032.040.048.0-20.0-10.00.010.020.0 Boston Partners - SMID ValueBoston Partners - SMID Value Russell 2500 VLRussell 2500 VL Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Utilities -1.4-1.2-1.0-0.8-0.6-0.4-0.20.00.20.40.60.8 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Boston Partners - SMID Value - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services1.342.956.764.97-0.040.05-0.03-0.01 Consumer Discretionary5.088.60-3.611.330.05-0.420.17-0.20 Consumer Staples1.893.47-10.65-4.000.11-0.230.11-0.02 Energy11.437.35-0.441.29-0.06-0.13-0.07-0.25 Financials31.6022.89-1.110.91-0.15-0.46-0.18-0.79 Health Care5.724.9711.2010.400.060.040.010.10 Industrials14.6713.346.337.160.06-0.11-0.01-0.06 Information Technology16.108.640.715.010.18-0.37-0.32-0.52 Materials9.776.15-2.771.65-0.04-0.27-0.16-0.47 Real Estate1.6515.49-7.92-0.200.40-1.201.070.27 Utilities0.766.166.144.16-0.080.12-0.11-0.07 Total100.00100.000.632.660.48-2.980.48-2.02 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Boston Partners - SMID Value - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)4,767,788.064,973,410.98 (%)(%)(%)(%) Median Mkt. Cap ($000)3,725,068.051,184,046.45 SLM Corp1.690.181.51-2.62 Price/Earnings ratio13.7616.60 Walker & Dunlop Inc1.520.051.47-4.54 Price/Book ratio1.931.89 Two Harbors Investment Corp1.500.141.36-2.56 5 Yr. EPS Growth Rate (%)12.959.66 World Fuel Services Corp1.480.071.4135.91 BetaN/A1.00 Graphic Packaging Holding Co1.430.131.30-2.94 Number of Stocks1621,749 Air Lease Corp1.400.151.259.56 Debt to Equity1.840.73 Navient Corp1.370.131.244.68 EnerSys1.360.051.3116.98 Diamondback Energy Inc1.300.001.302.86 Arrow Electronics Inc1.300.241.06-2.07 % of Portfolio14.351.1413.21 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) World Fuel Services Corp1.480.071.4135.91TTEC Holdings Inc0.660.000.66-25.04 ProAssurance Corp0.590.090.5033.32Fresh Del Monte Produce Inc.0.510.040.47-23.63 LifePoint Health Inc0.780.080.7031.97Extraction Oil & Gas Inc0.390.050.34-23.14 Cambrex Corp0.340.050.2930.78EQT Corp0.500.000.50-19.80 Arconic Inc0.410.000.4129.76FCB Financial Holdings Inc0.380.010.37-19.39 Radian Group Inc.0.520.170.3527.45ACCO Brands Corp0.690.040.65-18.01 Essent Group Ltd1.140.081.0623.54Granite Construction Inc.0.620.020.60-17.66 FTI Consulting Inc.0.840.100.7421.02Gulfport Energy Corp0.270.070.20-17.18 Huron Consulting Group Inc0.670.040.6320.78ON Semiconductor Corp0.610.000.61-17.11 Assured Guaranty Ltd1.220.171.0518.65Forum Energy Technologies Inc0.370.030.34-16.19 % of Portfolio7.990.857.14% of Portfolio5.000.264.74 City of Sebastian Police Officers' Retirement Plan Fiera Capital SMID Growth - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 40.0 36.0 30.0 30.0 20.0 24.0 10.0 18.0 0.0 12.0 Current Fiscal 1Since YTD QuarterYearInception 6.0 Manager Annualized Performance CurrentFiscal1Inception 0.0 QuarterYTDYear08/01/2017 Fiera Capital - SMID Growth5.9122.7322.7322.35 -6.0 Russell 2500 GR7.1723.1323.1324.01 Differences-1.26-0.40-0.40-1.66 Historic Asset Growth -12.0 -4.0-2.00.02.04.06.08.010.012.014.0 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Fiera Capital - SMID Growth Fiera Capital - SMID GrowthRussell 2500 GR Beginning Market Value793690690669 90-Day T-Bills Net Contributions--2-2-2 Fees/Expenses-1-5-5-5 Income1445 Gain/Loss46152152172 Ending Market Value839839839839 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Fiera Capital - SMID Growth22.358.660.86-2.2194.2197.581.652.220.8908/01/2017 Russell 2500 GR24.019.491.00-3.28100.00100.000.002.181.0008/01/2017 90-Day T-Bills1.500.110.000.004.24-7.651.48N/A0.0008/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Fiera Capital SMID Growth - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $1.0 $0.9 $0.8 $0.8 $0.7 $0.6 $0.4 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Fiera Capital - SMID GrowthRussell 2500 GRNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Fiera Capital - SMID Growth793,493.23-152,592.80-152,945.02-1,487.80-46,863.71838,516.92 Distribution of Returns 6 4 4 33 22 2 0000000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Fiera Capital - SMID Growth - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate UtilitiesUtilities 0.08.016.024.032.040.048.0-16.0-8.00.08.016.024.0 Fiera Capital - SMID GrowthFiera Capital - SMID Growth Russell 2500 GRRussell 2500 GR Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Utilities -0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.10.00.10.20.30.40.5 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Fiera Capital - SMID Growth - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services4.943.336.897.050.00-0.010.00-0.01 Consumer Discretionary20.6515.871.672.96-0.20-0.20-0.06-0.46 Consumer Staples0.001.990.004.550.050.000.000.05 Energy3.071.914.14-5.84-0.150.190.120.16 Financials7.497.36-1.421.01-0.01-0.180.00-0.19 Health Care15.7022.048.5010.18-0.19-0.370.11-0.46 Industrials14.9917.116.496.440.010.010.000.02 Information Technology29.2322.5910.1313.050.39-0.66-0.19-0.46 Materials3.925.11-5.86-0.620.09-0.270.06-0.11 Real Estate0.002.500.003.230.100.000.000.10 Utilities0.000.210.004.470.010.000.000.01 Total100.00100.005.757.110.10-1.490.02-1.36 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Fiera Capital - SMID Growth - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)8,948,668.185,677,105.70 (%)(%)(%)(%) Median Mkt. Cap ($000)7,015,691.881,330,655.04 Fortinet Inc3.050.552.5047.80 Price/Earnings ratio23.3126.35 Veeva Systems Inc2.950.562.3941.65 Price/Book ratio4.925.17 Broadridge Fin. Solutions2.840.002.8415.05 5 Yr. EPS Growth Rate (%)22.6721.03 Live Nation Entertainment Inc2.520.322.2012.15 BetaN/A1.00 Total System Services Inc.2.400.002.4016.98 Number of Stocks721,501 United Rentals Inc.2.320.002.3210.82 Debt to Equity0.6059.99 Splunk Inc2.320.002.3222.00 Icon PLC2.260.002.2616.01 MercadoLibre Inc2.220.002.2213.90 Dolby Laboratories Inc2.190.002.1913.70 % of Portfolio25.071.4323.64 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) Fortinet Inc3.050.552.5047.80Huazhu Group Ltd1.350.001.35-23.08 Veeva Systems Inc2.950.562.3941.65Eagle Materials Inc1.000.150.85-18.80 Veoneer Inc1.140.001.1437.50Nutanix Inc2.150.201.95-17.16 GrubHub Inc1.060.540.5232.13Supernus Pharmaceuticals Inc1.540.111.43-15.87 Cambrex Corp0.830.040.7930.78Entegris Inc1.600.181.42-14.43 WellCare Health Plans Inc0.820.640.1830.15Autoliv Inc0.800.000.80-14.07 Momenta Pharmaceuticals Inc1.070.090.9828.61PulteGroup Inc2.100.092.01-13.55 Ultimate Software Group Inc (The)2.020.421.6025.21Power Integrations Inc0.850.080.77-13.29 Middleby Corp (The)1.310.181.1323.88Advanced Energy Industries Inc.0.790.090.70-11.09 Ionis Pharmaceuticals Inc0.480.280.2023.78Legg Mason Inc1.360.001.36-10.08 % of Portfolio14.733.3011.43% of Portfolio13.540.9012.64 City of Sebastian Police Officers' Retirement Plan Highland - International Value - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 8.0 6.4 6.0 5.6 4.0 4.8 2.0 4.0 0.0 Current Fiscal 1Since 3.2 YTD QuarterYearInception Manager Annualized Performance 2.4 CurrentFiscal1Inception QuarterYTDYear08/01/2017 1.6 Highland - Intl Value1.834.524.524.86 MSCI EAFE Net1.362.742.744.49 Differences0.471.781.780.37 0.8 Historic Asset Growth CurrentFiscal1Inception 0.0 QuarterYTDYear08/01/2017 -4.0-2.00.02.04.06.08.010.012.014.0 Highland - Intl Value Risk (Standard Deviation %) Beginning Market Value723709709701 Highland - Intl Value MSCI EAFE Net90-Day T-Bills Net Contributions26262626 Fees/Expenses-1-5-5-5 Income4161618 Gain/Loss9161622 Ending Market Value761761761761 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Highland - Intl Value4.868.911.00-6.79100.2396.320.410.410.8708/01/2017 MSCI EAFE Net4.498.341.00-7.40100.00100.000.000.391.0008/01/2017 90-Day T-Bills1.500.110.000.005.44-6.761.51N/A0.0608/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - International Value - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $0.9 $0.8 $0.8 $0.8 $0.7 $0.7 $0.6 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Highland - Intl Value MSCI EAFE NetNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Highland - Intl Value723,427.94-49,982.35-24,209.57-896.14-13,171.69761,476.27 Distribution of Returns 6 4 3 2222 2 111 0000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Intl Value - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate UtilitiesUtilities 0.08.016.024.032.040.0-16.0-8.00.08.016.024.0 Highland - Intl Value MSCI EAFE NetHighland - Intl Value MSCI EAFE Net Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Utilities -2.4-1.8-1.2-0.60.00.61.21.82.43.03.64.24.8 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Intl Value - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services8.255.40-1.843.380.05-0.28-0.15-0.38 Consumer Discretionary25.1311.2211.81-0.25-0.251.351.682.78 Consumer Staples12.1511.32-6.260.03-0.01-0.71-0.05-0.78 Energy9.646.073.413.720.08-0.02-0.010.05 Financials11.2219.81-1.451.080.04-0.500.22-0.25 Health Care10.3410.654.985.73-0.01-0.080.00-0.09 Industrials7.6814.31-3.662.66-0.07-0.900.42-0.56 Information Technology10.236.19-4.010.45-0.04-0.28-0.18-0.50 Materials4.378.17-4.070.550.04-0.380.18-0.16 Real Estate0.003.530.00-2.910.160.000.000.16 Utilities0.983.32-7.14-0.740.05-0.210.15-0.01 Total100.00100.001.801.530.02-2.012.250.26 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Intl Value - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)95,176,735.1361,248,915.24 (%)(%)(%)(%) Median Mkt. Cap ($000)47,219,227.2311,018,051.19 Sony Corp9.820.549.2818.32 Price/Earnings ratio14.4114.43 Philips Electronics NV7.000.306.707.66 Price/Book ratio2.462.19 Royal Caribbean Cruises Ltd6.390.006.3926.09 5 Yr. EPS Growth Rate (%)16.1610.83 SAP AG5.950.845.116.35 BetaN/A1.00 Siemens AG5.470.684.79-3.05 Number of Stocks40924 Anheuser-Busch InBev SA/NV5.080.464.62-13.09 Debt to Equity1.151.12 BP PLC4.721.063.662.39 Honda Motor Co Ltd4.270.343.932.77 Intercontinental Hotels Group PLC4.000.083.920.77 STMicroelectronics NV3.750.093.66-16.81 % of Portfolio56.454.3952.06 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) Royal Caribbean Cruises Ltd6.390.006.3926.09Bright Scholar Education Holdings Limited0.500.000.50-25.50 Petrobras1.580.001.5820.59STMicroelectronics NV3.750.093.66-16.81 Sony Corp9.820.549.2818.32Barrick Gold Corp0.970.000.97-15.37 Aegon NV0.750.080.6711.56Copa Holdings SA0.840.000.84-14.68 Philips Electronics NV7.000.306.707.66Anheuser-Busch InBev SA/NV5.080.464.62-13.09 Arcelormittal SA1.660.141.527.23Invesco Ltd1.200.001.20-12.79 BT Group PLC3.240.173.077.02Vodafone Group PLC1.100.400.70-10.74 Deutsche Bank AG0.600.160.446.97ING Groep NV2.480.352.13-7.63 SAP AG5.950.845.116.35National Grid plc0.900.240.66-7.14 Toronto-Dominion Bank (The)0.980.000.986.01CRH PLC1.500.191.31-6.80 % of Portfolio37.972.2335.74% of Portfolio18.321.7316.59 City of Sebastian Police Officers' Retirement Plan Renaissance - International Growth - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 6.0 4.8 4.0 3.0 3.2 0.0 2.4 -3.0 1.6 Current Fiscal 1Since YTD QuarterYearInception 0.8 Manager Annualized Performance CurrentFiscal1Inception 0.0 QuarterYTDYear08/01/2017 Renaissance - International Growth0.91-0.80-0.800.37 -0.8 MSCI AC World ex US Net0.711.761.763.58 Differences0.20-2.56-2.56-3.21 Historic Asset Growth -1.6 -4.0-2.00.02.04.06.08.010.012.0 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Renaissance - International Growth Renaissance - International GrowthMSCI AC World ex US Net Beginning Market Value1,0061,0291,0291,016 90-Day T-Bills Net Contributions131130130130 Fees/Expenses-2-6-6-6 Income9272728 Gain/Loss1-34-34-23 Ending Market Value1,1441,1441,1441,144 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Renaissance - International Growth0.378.640.94-10.3476.9797.71-2.90-0.090.9108/01/2017 MSCI AC World ex US Net3.588.761.00-8.84100.00100.000.000.281.0008/01/2017 90-Day T-Bills1.500.110.000.005.93-5.541.51N/A0.0908/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Renaissance - International Growth - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $1.3 $1.2 $1.2 $1.1 $1.1 $1.1 $1.0 $0.9 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Renaissance - International GrowthMSCI AC World ex US NetNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Renaissance - International Growth1,005,528.55-462,265.84-331,568.06-1,631.70-9,289.371,143,884.00 Distribution of Returns 8 6 5 4 222 2 111 00000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Renaissance - International Growth - Quarterly Performance Attributes as of September 30, 2018 AllocationPerformance Communication ServicesCommunication Services Consumer DiscretionaryConsumer Discretionary Consumer StaplesConsumer Staples EnergyEnergy FinancialsFinancials Health CareHealth Care IndustrialsIndustrials Information TechnologyInformation Technology MaterialsMaterials Real EstateReal Estate UtilitiesUtilities 0.06.012.018.024.030.0-16.0-8.00.08.016.024.0 Renaissance - International GrowthRenaissance - International Growth MSCI AC World ex US NetMSCI AC World ex US Net Total Attribution Communication Services Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Utilities -1.5-1.2-0.9-0.6-0.30.00.30.60.91.21.5 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Renaissance - International Growth - Quarterly Performance Attributes as of September 30, 2018 Performance - Quarter Ending Allocation - 07/01/2018Attribution September 30, 2018 PortfolioBenchmarkPortfolioBenchmarkSectorStockInteractionTotal Communication Services8.317.69-2.79-2.92-0.020.010.00-0.01 Consumer Discretionary17.6810.80-5.38-2.95-0.26-0.26-0.17-0.69 Consumer Staples3.979.66-4.50-0.370.07-0.400.23-0.09 Energy3.257.4213.784.59-0.160.68-0.380.14 Financials15.2821.917.361.82-0.061.22-0.370.78 Health Care6.888.128.604.46-0.040.34-0.050.24 Industrials18.7911.641.632.910.15-0.15-0.09-0.09 Information Technology12.718.361.011.430.02-0.03-0.02-0.03 Materials13.148.19-2.740.37-0.02-0.25-0.15-0.43 Real Estate0.003.210.00-3.500.140.000.000.14 Utilities0.003.000.00-0.930.050.000.000.05 Total100.00100.000.880.87-0.141.14-1.000.01 All the values for Allocation, Performance and Attribution are expresssed in Percentage(%) terms The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Renaissance - International Growth - Portfolio Characteristics as of September 30, 2018 Portfolio CharacteristicsTop Ten Equity Holdings PortfolioBenchmarkPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturn Wtd. Avg. Mkt. Cap ($000)36,507,998.8864,560,338.57 (%)(%)(%)(%) Median Mkt. Cap ($000)21,516,550.938,008,619.92 Oil Co LUKOIL PJSC3.020.162.8613.78 Price/Earnings ratio12.4814.09 Eni SpA2.760.232.534.06 Price/Book ratio2.062.20 Arkema2.490.042.454.68 5 Yr. EPS Growth Rate (%)17.2011.33 Teck Resources Ltd2.450.062.39-5.15 BetaN/A1.00 CRH PLC2.410.132.28-6.80 Number of Stocks542,166 Sony Corp2.390.372.0218.32 Debt to Equity0.671.06 Stora Enso OYJ, Helsinki2.380.052.33-2.21 Scor SE2.360.042.3225.06 Taiwan Semiconductor2.261.011.2520.79 Seven & I Holdings Co Ltd2.250.162.092.14 % of Portfolio24.772.2522.52 Ten Best PerformersTen Worst Performers PortfolioBenchmarkActiveQuarterlyPortfolioBenchmarkActiveQuarterly WeightWeightWeightReturnWeightWeightWeightReturn (%)(%)(%)(%)(%)(%)(%)(%) Scor SE2.360.042.3225.06Stars Group Inc1.800.001.80-31.41 Taiwan Semiconductor2.261.011.2520.79YY Inc2.000.021.98-25.43 Check Point Software2.070.072.0020.46NXP Semiconductors NV1.900.141.76-21.54 SK Telecom Co Ltd2.200.022.1819.55Valeo SA1.960.051.91-20.54 Sony Corp2.390.372.0218.32Ryanair Holdings PLC1.940.011.93-15.92 Icon PLC2.030.002.0316.01WH Group Ltd1.910.031.88-12.84 Banco Santander Mexico SA2.040.012.0316.00Smc Corp1.830.091.74-12.73 Safran SA2.230.222.0115.40Infineon Technologies1.820.121.70-10.82 Astellas Pharma Inc2.110.161.9514.43Magna International Inc.2.020.081.94-9.10 Oil Co LUKOIL PJSC3.020.162.8613.78Persimmon PLC1.950.051.90-7.78 % of Portfolio22.712.0620.65% of Portfolio19.130.5918.54 City of Sebastian Police Officers' Retirement Plan Highland - Fixed Income - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 0.6 2.5 2.0 0.0 1.5 -0.6 1.0 -1.2 0.5 -1.8 Current Fiscal 1Since 0.0 YTD QuarterYearInception Manager Annualized Performance -0.5 CurrentFiscal1Inception -1.0 QuarterYTDYear08/01/2017 Highland - Fixed Income0.08-1.07-1.07-0.57 Barclays Aggregate0.02-1.22-1.22-0.69 -1.5 Differences0.060.150.150.12 Historic Asset Growth -2.0 -0.8-0.40.00.40.81.21.62.02.42.83.2 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear08/01/2017 Highland - Fixed Income Highland - Fixed Income Barclays Aggregate Beginning Market Value3,5513,8853,8853,980 90-Day T-Bills Net Contributions--275-275-387 Fees/Expenses-4-23-23-23 Income28119119144 Gain/Loss-26-157-157-166 Ending Market Value3,5493,5493,5493,549 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Highland - Fixed Income-0.572.271.01-2.20104.28100.170.13-0.900.9908/01/2017 Barclays Aggregate-0.692.221.00-2.28100.00100.000.00-0.971.0008/01/2017 90-Day T-Bills1.500.110.000.0025.84-20.091.50N/A0.0108/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Highland - Fixed Income - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $24.0 $16.0 $8.0 $3.5 $0.6 $0.0 ($1.4) ($8.0) 1/117/111/127/121/137/131/147/141/157/151/167/161/177/171/189/18 Barclays Aggregate Highland - Fixed Income Net Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Highland - Fixed Income3,550,598.46-239,344.74-239,611.98-4,405.06-2,857.203,548,783.36 Distribution of Returns 32 23 24 19 16 16 10 8 8 5 33 22 1 0 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Center Coast - MLP - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 12.0 3.2 8.0 2.4 4.0 1.6 0.0 0.8 -4.0 -8.0 0.0 Current Fiscal 1Since YTD QuarterYearInception -0.8 Manager Annualized Performance -1.6 CurrentFiscal1Inception QuarterYTDYear08/01/2017 Center Coast - MLP6.750.250.25-2.37 -2.4 Alerian MLP Index6.574.894.890.34 Differences0.18-4.64-4.64-2.71 -3.2 Historic Asset Growth CurrentFiscal1Inception -4.0 QuarterYTDYear08/01/2017 -8.0-4.00.04.08.012.016.020.024.028.0 Center Coast - MLP Risk (Standard Deviation %) Beginning Market Value608651651672 Center Coast - MLPAlerian MLP Index90-Day T-Bills Net Contributions--1-1-1 Fees/Expenses-1-3-3-3 Income12474758 Gain/Loss29-45-45-77 Ending Market Value648648648648 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Center Coast - MLP-2.3718.070.98-17.7294.48104.58-2.64-0.120.9608/01/2017 Alerian MLP Index0.3418.121.00-15.96100.00100.000.000.031.0008/01/2017 90-Day T-Bills1.500.110.000.002.80-2.731.49N/A0.0908/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Center Coast - MLP - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $0.8 $0.7 $0.7 $0.7 $0.6 $0.6 $0.5 7/178/179/1710/1711/1712/171/182/183/184/185/186/187/188/189/18 Center Coast - MLPAlerian MLP IndexNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Center Coast - MLP608,456.32-81,847.92-82,220.14-758.49-41,038.32648,363.93 Distribution of Returns 6 4 3 22 2 1111111 00 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Intercontinental - Private Real Estate - Executive Summary as of September 30, 2018 Manager Performance ChartManager Risk & Return 20.0 18.0 15.0 15.0 10.0 12.0 5.0 9.0 0.0 Current Fiscal 1Since YTD QuarterYearInception 6.0 Manager Annualized Performance 3.0 CurrentFiscal1Inception QuarterYTDYear10/01/2017 Intercontinental - Private Real Estate2.7912.1812.1812.18 0.0 NCREIF Property Idx1.677.167.167.16 Differences1.125.025.025.02 Historic Asset Growth -3.0 -1.4-0.70.00.71.42.12.83.54.24.95.66.3 CurrentFiscal1Inception Risk (Standard Deviation %) QuarterYTDYear10/01/2017 Intercontinental - Private Real Estate Intercontinental - Private Real EstateNCREIF Property Idx Beginning Market Value682112112112 90-Day T-Bills Net Contributions-7523523523 Fees/Expenses-2-6-6-6 Income---- Gain/Loss19626262 Ending Market Value691691691691 Modern Portfolio Statistics UpDown StandardMaximumSharpeInception ReturnBetaMarketMarketAlphaR-Squared DeviationDrawdownRatioDate CaptureCapture Intercontinental - Private Real Estate12.184.450.930.00166.79N/A5.262.270.3610/01/2017 NCREIF Property Idx7.162.851.000.00100.00N/A0.001.911.0010/01/2017 90-Day T-Bills1.570.100.010.0022.36N/A1.53N/A0.0310/01/2017 The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. City of Sebastian Police Officers' Retirement Plan Intercontinental - Private Real Estate - Change in Assets & Distribution of Returns as of September 30, 2018 Historic Change in Assets $1.2 $0.9 $0.7 $0.7 $0.6 $0.6 $0.3 $0.0 ($0.3) 10/1711/1712/171/182/183/184/185/186/187/188/189/18 Intercontinental - Private Real EstateNCREIF Property IdxNet Cash Flow Quarterly Change in Assets Market ValueMarket Value NetReturn On As ofContributionsDistributionsFeesExpensesAs of TransfersInvestment 07/01/201809/30/2018 Intercontinental - Private Real Estate681,630.00---7,254.00-1,802.00-18,798.00691,372.00 Distribution of Returns 12 9 8 6 3 3 0000000000 0 < -5-5 To -4-4 To -3-3 To -2-2 To -1-1 To 00 To 11 To 22 To 33 To 44 To 5> 5 Returns (%) The prices, quotes, or statistics contained herein have been obtained from sources believed to be reliable, however, its accuracy cannot be guaranteed. Past performance is not a guarantee of future results. Performance Appendix 13510SinceInception Portfolio NameQTDYTDYearYearsYearsYearsInceptionDate Boston Partners - SMID Value0.334.91------5.5807/01/2017 0.44 Center Coast - MLP1.59-0.23-------2.9907/01/2017 6.62 Fiera Capital - SMID Growth12.0221.88------19.2107/01/2017 5.72 Highland - Fixed Income-2.19-1.715.735.27--5.4101/01/2011 -0.04 Highland - Intl Value-0.623.82------5.8307/01/2017 1.71 Highland - Large Cap Growth13.5522.06------20.6607/01/2017 7.50 Highland - Large Cap Value4.3610.28------10.8507/01/2017 6.05 Intercontinental - Private Real Estate8.2711.00------11.0010/01/2017 2.52 Receipt & Disbursement-2.89-2.07-------1.5607/01/2017 -3.29 Renaissance - International Growth-4.03-1.40------0.1407/01/2017 0.76 Glossary of Terms Excess over Benchmark: The percentage gain or loss of an investment relative to the investment's Active Contribution Return: The gain or loss percentage of an investment relative to the performance of benchmark. the investment benchmark. Excess Return: Arithmetic difference between the manager’s return and the risk-free return over a Active Exposure: The percentage difference in weight of the portfolio compared to its policy benchmark. specified time period. Active Return: Arithmetic difference between the manager’s return and the benchmark’s return over a Growth: A diversified investment strategy which includes investment selections that have capital specified time period. appreciation as the primary goal, with little or no dividend payouts. These strategies can include reinvestment in expansion, acquisitions, and/or research and development opportunities. Actual Correlation: A measure of the correlation (linear dependence) between two variables X and Y, with a value between +1 and -1 inclusive. This is also referred to as coefficient of correlation. Growth of Dollar: The aggregate amount an investment has gained or lost over a certain time period, also referred to as Cumulative Return, stated in terms of the amount to which an initial dollar investment would Alpha: A measure of a portfolio's time weighted return in excess of the market’s return, both adjusted for have grown over the given time period. risk. A positive alpha indicates that the portfolio outperformed the market on a risk-adjusted basis, and a negative alpha indicates the portfolio did worse than the market. Investment Decision Process (IDP): A model for structuring the investment process and implementing the correct attribution methodologies. The IDP includes every decision made concerning the division of the Best Quarter: The highest quarterly return for a certain time period. assets under management over the various asset categories. To analyze each decision‘s contribution to the Beta: A measure of the sensitivity of a portfolio’s time weighted return (net of fees) against that of thetotal return, a modeling approach must measure the marginal value of every individual decision. In this market. A beta greater than 1.00 indicates volatility greater than the market. respect, the hierarchy of the decisions becomes very important. We therefore use the IDP model, which serves as a proper foundation for registering the decisions and relating them to each other. Consistency: The percentage of quarters that a product achieved a rate of return higher than that of its benchmark. The higher the consistency figure, the more value a manager has contributed to the product’s Information Ratio: Measured by dividing the active rate of return by the tracking error. The higher the performance. Information Ratio, the more value-added contribution by the manager. Core: Refers to an investment strategy mandate that is blend of growth and value styles without a Jensen’s Alpha: The Jensen's alpha measure is a risk-adjusted performance measure that represents the average return on a portfolio or investment above or below that predicted by the capital asset pricing model pronounced tilt toward either style. (CAPM) given the portfolio's or investment's beta and the average market return. This metric is also commonly referred to as alpha.. Cumulative Selection Return (Cumulative Return): Cumulative investment performance over a specified period of time. Kurtosis: A statistical measure that is used to describe the distribution, or skewness, of observed data around the mean, sometimes referred to as the volatility of volatility. Distribution Rate: The most recent distribution paid, annualized, and then divided by the current market price. Distribution rate may consist of investment income, short-term capital gains, long-term capital gains, Maximum Drawdown: The drawdown is defined as the percent retrenchment from a fund's peak to the fund's trough value. It is in effect from the time the fund's retrenchment begins until a new fund high is and/or return of capital. reached. The maximum drawdown encompasses both the period from the fund's peak to the fund's valley (length), and the time from the fund's valley to a new fund high (recovery). It measures the largest Down Market Capture: The ratio of average portfolio returns over the benchmark during periods of percentage drawdown that has occurred in any fund's data record. negative benchmark return. Lower values indicate better product performance. Modern Portfolio Theory (MPT):An investment analysis theory on how risk-averse investors can Downside Risk: A measure similar to standard deviation, but focuses only on the negative movements of construct portfolios to optimize or maximize expected return based on a given level of market risk, the return series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The emphasizing that risk is an inherent part of higher reward. higher the value, the more risk the product has. Mutual Fund (MF):An investment program funded by shareholders that trade in diversified holdings and is professionally managed. Downside Semi Deviation:A statistical calculation that measures the volatility of returns below a minimum acceptable return. This return measure isolates the negative portion of volatility: the larger the Peer Group: A combination of funds that share the same investment style combined as a group for number, the greater the volatility. comparison purposes. Drawdown:A drawdown is the peak-to-trough decline during a specific period of an investment, fund or Peer/ Plan Sponsor Universe: A combination of asset pools of total plan investments by specific sponsor commodity. and plan types for comparison purposes. Performance Ineligible Assets: Performance returns are not calculated for certain assets because accurate valuations and transaction data for these assets are not processed or maintained by us. Common examples of these include life insurance, some annuities and some assets held externally. Upside Semi Deviation: A statistical calculation that measures the volatility of returns above an acceptable Performance Statistics: A generic term for various measures of investment performance measurementreturn. This return measure isolates the positive portion of volatility: the larger the number, the greater the terms.volatility. Portfolio Characteristics: A generic term for various measures of investment portfolio characteristics.Value: A diversified investment strategy that includes investment selections which tend to trade at a lower price relative to its dividends, earnings, and sales. Common attributes are stocks that include high dividend, Preferred Return:A term used in the private equity (PE) world, and also referred to as a “Hurdle Rate.” Itlow price-to-book ratio, and/or low price-to-earnings ratio. refers to the threshold return that the limited partners of a private equity fund must receive, prior to the PE firm receiving its carried interest or "carry."Worst Quarter: The lowest rolling quarterly return for a certain time period. Ratio of Cumulative Wealth: A defined ratio of the Cumulative Return of the portfolio divided by the Cumulative Return of the benchmark for a certain time period. Information Disclosures Regression Based Analysis:A statistical process for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the The performance data shown reflects past performance, which does not guarantee future results. relationship between a dependent variable and one or more independent variables Investment return and principal will fluctuate so that an investor’s shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the Residual Correlation: Within returns-based style analysis, residual correlation refers to the portion of a performance data shown. For up to date month-end performance information, please contact your strategy’s return pattern that cannot be explained by its correlation to the asset-class benchmarks to which it is being compared. Financial Advisor or visit the funds’ company website. Return: A rate of investment performance for the specified period. Investors should carefully consider the fund’s investment objectives, risks, charges and expenses before investing. The prospectus and, if available the summary prospectus, contains this and other information Rolling Percentile Ranking:A measure of an investment portfolio’s ranking versus a peer group for a that should be read carefully before investing. Investors should review the information in the prospectus specific rolling time period (i.e. Last 3 Years, Last 5 years, etc.). carefully. To obtain a prospectus, please contact your Financial Advisor or visit the funds’ company website. R-Squared: The percentage of a portfolio's performance explained by the behavior of the appropriate benchmark. High R-Squared means a higher correlation of the portfolio's performance to the appropriate benchmark. Past performance is no guarantee of future results. SA/CF (Separate Account/Comingled Fund): Represents an acronym for Separate Account and Investing involves market risk, including possible loss of principal.Growth investing does not guarantee a Commingled Fund investment vehicles. profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with Sector Benchmark: A market index that serves as a proxy for a sector within an asset class. more modest growth expectations.Value investing involves the risk that the market may not recognize that securities are undervalued and they may not appreciate as anticipated.Small and mid-capitalization Sharpe Ratio:Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is the absolute rate of return per unit of risk. The higher the value, companies may lack the financial resources, product diversification and competitive strengths of larger the better the product’s historical risk-adjusted performance results in. companies. The securities of small capitalization companies may not trade as readily as, and be subject to higher volatility than those of larger, more established companies.Bond funds and bond holdings have the Standard Deviation: A statistical measure of the range of a portfolio's performance; the variability of a same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the return around its average return over a specified time period. funds. The return of principal in bond funds, and in funds with significant bond holdings, is not guaranteed. International securities’ prices may carry additional risks, including foreign economic, political, monetary Total Fund Benchmark:The policy benchmark for a complete asset pool that could consist of multiple investment mandates. and/or legal factors, changing currency exchange rates, foreign taxes and differences in financial and accounting standards. International investing may not be for everyone. These risks may be magnified in Total Fund Composite: The aggregate of multiple portfolios within an asset pool or household. emerging markets.Alternative investments, including private equity funds, real estate funds, hedge funds, managed futures funds, and funds of hedge funds, private equity, and managed futures funds, are Tracking Error: A measure of standard deviation for a portfolio's investment performance, relative to the speculative and entail significant risks that can include losses due to leveraging or\\other speculative performance of an appropriate market benchmark. investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, Treynor Ratio: A ratio that divides the excess return (above the risk free rate) by the portfolio’s beta to arrive at a unified measure of risk adjusted return. It is generally used to rank portfolios, funds and complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds and benchmarks. A higher ratio is indicative of higher returns per unit of market risk. This measurement can risks associated with the operations, personnel and processes of the advisor.Master Limited Partnerships help determine if the portfolio is reaching its goal of increasing returns while managing market risk. (MLPs) are limited partnerships or limited liability companies that are taxed as partnerships and whose interests (limited partnership units or limited liability company units) are traded on securities exchanges like Up Market Capture: The ratio of average portfolio returns over the benchmark during periods of positive shares of common stock. Currently, most MLPs operate in the energy, natural resources or real estate benchmark return. Higher values indicate better product performance. sectors. Investments in MLP interests are subject to the risks generally applicable to companies in theactual investment can be ranked versus its peer across various quantitative metrics. energy and natural resources sectors, including commodity pricing risk, supply and demand risk, depletion All Peer Group data are provided by Investment Metrics, LLC. risk and exploration risk; and MLP interests in the real estate sector are subject to special risks, including interest rate and property value fluctuations, as well as risks related to general and economic conditions. The URL below provides all the definitions and methodology about the various Peer Groups Because of their narrow focus, MLPs maintain exposure to price volatility of commodities and/or underlying assets and tend to be more volatile than investments that diversify across many sectors and https://www.invmetrics.com/style-peer-groups companies. MLPs are also subject to additional risks including: investors having limited control and rights to vote on matters affecting the MLP, limited access to capital, cash flow risk, lack of liquidity, dilution Peer Group Ranking Methodology risk, conflict of interests, and limited call rights related to acquisitions. A percentile rank denotes the value of a product in which a certain percent of observations fall within a peer Mortgage backed securities also involve prepayment risk, in that faster or slower prepayments than group. The range of percentile rankings is between 1 and 100, where 1 represents a high statistical value and expected on underlying mortgage loans can dramatically alter the yield-to-maturity of a mortgage-backed 100 represents a low statistical value. security and prepayment risk includes the possibility that a fund may invest the proceeds at generally lower interest rates. The 30th percentile, for example, is the value in which 30% of the highest observations may be found, the 65th percentile is the value in which 65% of the highest observations may be found, and so on. Tax managed funds may not meet their objective of being tax-efficient. Percentile rankings are calculated based on a normalized distribution ranging from 1 to 100 for all products Real estate investments are subject to special risks, including interest rate and property value fluctuations, in each peer group, where a ranking of 1 denotes a high statistical value and a ranking of 100 denotes a low as well as risks related to general and economic conditions.High yield fixed income securities, also known statistical value. It is important to note that the same ranking methodology applies to all statistics, implying as “junk bonds”, are considered speculative, involve greater risk of default and tend to be more volatile than that a ranking of 1 will always mean highest value across all statistics. investment grade fixed income securities. For example, consider a risk/return assessment using standard deviation as a measure of risk. A percentile Credit quality is a measure of a bond issuer’s creditworthiness, or ability to repay interest and principal to ranking equal to 1 for return denotes highest return, whereas a percentile ranking of 1 for standard deviation bondholders in a timely manner. The credit ratings shown are based on security rating as provided by denotes highest risk among peers. Standard & Poor’s, Moody’s and/or Fitch, as applicable. Credit ratings are issued by the rating agencies for the underlying securities in the fund and not the fund itself, and the credit quality of the securities in the In addition, values may be used to demonstrate quartile rankings. For example, the third quartile is also fund does not represent the stability or safety of the fund. Credit ratings shown range from AAA, being the known as the 75th percentile, and the median is the 50th percentile. highest, to D, being the lowest based on S&P and Fitch’s classification (the equivalent of Aaa and C, respectively, by Moody(s). Ratings of BBB or higher by S&P and Fitch (Baa or higher by Moody’s) are Alternatives considered to be investment grade-quality securities. If two or more of the agencies have assigned different ratings to a security, the highest rating is applied. Securities that are not rated by all three agencies are Graystone Consulting is a business of Morgan Stanley Smith Barney LLC. (“Morgan Stanley”) This listed as “NR”. material is not to be reproduced or distributed to any other persons (other than professional advisors of the investors) and is intended solely for the use of the persons to whom it has been delivered. This material is “Alpha tilt strategies comprise a core holding of stocks that mimic a benchmark type index such as the not for distribution to the general public. S&P 500 to which additional securities are added to help tilt the fund toward potentially outperforming the market in an effort to enhance overall investment returns Tilt strategies are subject to significant timing The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to risk and could potentially expose investors to extended periods of underperformance.” purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be suitable for all clients. Any product discussed herein may be purchased only after a Custom Account Index:The Custom Account Index is an investment benchmark based on your historical client has carefully reviewed the offering memorandum and executed the subscription documents. Morgan target allocations and/or manager selection that you may use to evaluate the performance of your account. Stanley has not considered the actual or desired investment objectives, goals, strategies, guidelines, or factual circumstances of any investor in any fund(s). Before making any investment, each investor should The Custom Account index does take into consideration certain changes that may have occurred in your carefully consider the risks associated with the investment, as discussed in the applicable offering portfolio since the inception of your account, i.e., asset class and/or manager changes. However, in some memorandum, and make a determination based upon their own particular circumstances, that the investment circumstances, it may not be an appropriate benchmark for use with your specific account composition. For is consistent with their investment objectives and risk tolerance. detailed report of the historical composition of this blend please contact your Financial Advisor. This information is being provided as a service of your Graystone Institutional Consultant and does not Peer Groups supersede or replace your Morgan Stanley customer statement. The information is as of the date(s) noted and subject to daily market fluctuation. Your interests in Alternative Investments, which may have been Peer Groups are a collection of similar investment strategies that essentially group investment products thatpurchased through us, are generally not held here, and are generally not covered by SIPC. The information provided to you: 1) is included as a service to you, and certain transactions may not be reported; 2) is share the same investment approach. Peer Groups are used for comparison purposes to compare and derived from you or another external source for which we are not responsible, and may have been modified illustrate a clients investment portfolio versus its peer across various quantitative metrics like performance to take into consideration capital calls or distributions to the extent applicable; 3) may not reflect actual and risk. Peer Group comparison is conceptually another form of benchmark comparison whereby the shares, share prices or values; 4) may include invested or distributed amounts in addition to a fair value estimate; and 5) should not be relied upon for tax reporting purposes. Notwithstanding the foregoing, 1) toadvisory clients, an annual advisory fee of up to 2.5%), which would result in a substantial reduction in the the extent this report displays Alternative Investment positions within a Morgan Stanley Individualreturns if such fees were incorporated. Retirement Account (“IRA”), such positions are held by Morgan Stanley Smith Barney LLC as the custodian of your Morgan Stanley IRA; and 2) if your Alternative Investment positon(s) is held by us and isFor most investment advisory clients, the program account will be charged an asset-based wrap fee every registered pursuant to the Securities Act of 1933, as amended, your Alternative Investment position(s) isquarter (“the Fee”). In general, the Fee covers investment advisory services and reporting. In addition to the covered by SIPC.Fee, clients will pay the fees and expenses of any funds in which their account is invested. Fund fees and expenses are charged directly to the pool of assets the fund invests in and impact the valuations. Clients Alternatives may be either traditional alternative investment vehicles or non-traditional alternative strategymust understand that these fees and expenses are an additional cost and will not be included in the Fee vehicles. Traditional alternative investment vehicles may include, but are not limited to, Hedge Funds,amount in the account statements. Fund of Funds (both registered and unregistered), Exchange Funds, Private Equity Funds, Private Credit Funds, Real Estate Funds, and Managed Futures Funds. Non-traditional alternative strategy vehicles mayAs fees are deducted quarterly, the compounding effect will be to increase the impact of the fees by an include, but are not limited to, Open or Closed End Mutual Funds, Exchange-Traded and Closed-Endamount directly related to the gross account performance. For example, for an account with an initial value Funds, Unit Investment Trusts, exchange listed Real Estate Investment Trusts (REITs), and Master Limitedof $100,000 and a 2.5% annual fee, if the gross performance is 5% per year over a three year period, the Partnerships (MLPs). These non-traditional alternative strategy vehicles also seek alternative-like exposurecompounding effect of the fees will result in a net annual compound rate of return of approximately 2.40% but have significant differences from traditional alternative investment vehicles. Non-traditional alternativeper year over a three year period, and the total value of the client’s portfolio at the end of the three year strategy vehicles may behave like, have characteristics of, or employ various investment strategies andperiod would be approximately $115,762.50 without the fees and $107,372.63 with the fees. Please see the techniques for both hedging and more speculative purposes such as short-selling, leverage, derivatives, andapplicable Morgan Stanley Smith Barney LLC Form ADV Part 2A for more information including a options, which can increase volatility and the risk of investment loss. Characteristics such as correlation todescription of the fee schedule. It is available at traditional markets, investment strategy, and market sector exposure can play a role in the classification of a <http://www.morganstanley.com/ADV> or from your Financial traditional security being classified as alternative.Advisor/Private Wealth Advisor. Traditional alternative investment vehicles are illiquid and usually are not valued daily. The estimatedAlternative investments involve complex tax structures, tax inefficient investing, and delays in distributing valuation provided will be as of the most recent date available and will be included in summaries of yourimportant tax information. Individual funds have specific risks related to their investment programs that will assets. Such valuation may not be the most recent provided by the fund in which you are invested. Novary from fund to fund. Clients should consult their own tax and legal advisors as Morgan Stanley does not representation is made that the valuation is a market value or that the interest could be liquidated at thisprovide tax or legal advice. Interests in alternative investment products are offered pursuant to the terms of value. We are not required to take any action with respect to your investment unless valid instructions arethe applicable offering memorandum, are distributed by Morgan Stanley Smith Barney LLC and certain of received from you in a timely manner. Some positions reflected herein may not represent interests in theits affiliates, and (1) are not FDIC-insured, (2) are not deposits or other obligations of Morgan Stanley or fund, but rather redemption proceeds withheld by the issuer pending final valuations which are not subjectany of its affiliates, (3) are not guaranteed by Morgan Stanley and its affiliates, and (4) involve investment to the investment performance of the fund and may or may not accrue interest for the length of therisks, including possible loss of principal. Morgan Stanley Smith Barney LLC is a registered broker-dealer, withholding. Morgan Stanley does not engage in an independent valuation of your alternative investmentnot a bank. assets. Morgan Stanley provides periodic information to you including the market value of an alternative investment vehicle based on information received from the management entity of the alternative investment SIPC insurance does not apply to precious metals, other commodities, or traditional alternative investments. vehicle or another service provider. © 2018 Morgan Stanley Smith Barney LLC. Member SIPC. Traditional alternative investment vehicles often are speculative and include a high degree of risk. . Investors should carefully review and consider potential risks before investing. Certain of these risks may Money Market Funds include but are not limited to:• Loss of all or a substantial portion of the investment due to leveraging, short- selling, or other speculative practices;• Lack of liquidity in that there may be no secondary market for a fund;• Volatility of returns;• Restrictions on transferring interests in a fund;• Potential lack of diversification You could lose money in Money Market Funds. Although MMFs classified as government funds (i.e., and resulting higher risk due to concentration of trading authority when a single advisor is utilized;•MMFs that invest 99.5% of total assets in cash and/or securities backed by the U.S government) and retail Absence of information regarding valuations and pricing;• Complex tax structures and delays in tax funds (i.e., MMFs open to natural person investors only) seek to preserve value at $1.00 per share, they reporting;• Less regulation and higher fees than mutual funds; and• Risks associated with the operations,cannot guarantee they will do so. The price of other MMFs will fluctuate and when you sell shares they may personnel, and processes of the manager. As a diversified global financial services firm, Morgan Stanleybe worth more or less than originally paid. MMFs may impose a fee upon sale or temporarily suspend sales Wealth Management engages in a broad spectrum of activities including financial advisory services, if liquidity falls below required minimums. During suspensions, shares would not be available for investment management activities, sponsoring and managing private investment funds, engaging in broker-purchases, withdrawals, check writing or ATM debits. A MMF investment is not insured or guaranteed by dealer transactions and principal securities, commodities and foreign exchange transactions, research the Federal Deposit Insurance Corporation or other government agency. publication, and other activities. In the ordinary course of its business, Morgan Stanley Wealth Management therefore engages in activities where Morgan Stanley Wealth Management’s interests may conflict with the interests of its clients, including the private investment funds it manages. Morgan Stanley Wealth Management can give no assurance that conflicts of interest will be resolved in favor of its clients or any such fund. Indices are unmanaged and investors cannot directly invest in them. Composite index results are shown for illustrative purposes and do not represent the performance of a specific investment. Past performance is no guarantee of future results. Actual results may vary. Diversification does not assure a profit or protect against loss in a declining market. Any performance or related information presented has not been adjusted to reflect the impact of the additional fees paid to a placement agent by an investor (for Morgan Stanley placement clients, a one-time upfront Placement Fee of up to 3%, and for Morgan Stanley investment