investment portfolio review · 2017. 9. 30. · when assessing your portfolio in light of our...

INVESTMENT PORTFOLIO REVIEW

PRESENTED TO:

EPISCOPAL DIOCESE OF CT

JOSEPH A. MCCOURT, CFAMANAGING DIRECTOR, SENIOR INSTITUTIONAL PORTFOLIO STRATEGIST [email protected]

PATRICK J. STAFFARONISVP, PHILANTHROPIC CLIENT [email protected]

OCTOBER 17, 2017

ELIZABETH CAHILLMANAGING DIRECTOR, PRIVATE CLIENT [email protected]

TABLE OF CONTENTS

INTRODUCTIONInvestment Strategy Committee Viewpoint

EXECUTIVE SUMMARY

PORTFOLIO REVIEWCurrent Asset AllocationRisk AnalyticsAttribution AnalysisInvestment Performance(Trailing Returns bar chart)Investment Performance (Product View)Largest Equity PositionsPortfolio Holdings

APPENDIXInvestment Policy StatementRisk Analytics Defintions

2

INTRODUCTION

3

ECONOMIC OUTLOOK

U.S.

• U.S. economic growth is picking up. Second quarter U.S. real Gross Domestic Product (GDP) grew at a 3.0% annual rate and third quarter growth is tracking at a similar pace.

• U.S. consumers have tailwinds from decent wage growth, rising home prices, still-low gasoline prices and very positive labor market dynamics.

• We expect housing and business investment spending to be cyclical tailwinds for the overall economy and extend the cycle.

• Pro-business policies are likely at some level: Tax cuts, tax reform, repatriation and/or regulatoryrelief should boost nominal growth. The mix of realgrowth and inflation is uncertain.

EMPLOYMENT, INFLATION & INTEREST RATES

• In our view, the dollar is close to fair valued on a trade-weighted basis, but interest rate differentials are favorable and we think the dollar will remain broadly stable.

• In June, we lowered our range for WTI to $45-65 per barrel and continue to expect oil prices to remain “even lower for even longer.”

U.S. InflationU.S. Fiscal Policy EarningsU.S. Tax Reform ChinaCentral Bank Meetings Brexit negotiations

WATCH LIST

GLOBAL •The synchronized global growth upturn that began

last year continues.

•Purchasing Managers’ Indexes show the global expansion has become more synchronized as emerging markets pick up after a five-year slowdown. Capital spending plans are rising with global growth.

•Corporate profits are rising around the world as global growth improves.

•We expect 3.5% plus real global GDP growth this year.

PROFITS

Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September 2017. ARYL4MSS.

DOLLAR & COMMODITIES

• Higher nominal growth and possibly a lower corporate tax rate add to the upside risks to profits. S&P 500 earnings per share are tracking in the middle of our forecast for $129 – $138.

• Job growth remains steady and the current trend is sufficient to keep the unemployment rate below 4.5% for the remainder of this year. The participation rate is rising.

• Wage growth is firm and suggests inflation is well anchored.

• We expect the Fed to continue to gradually remove monetary • accommodation through rate hikes and balance sheet

tapering.

4

Q1 2017 Q2 2017 Q3 2017E 2016 2017E 2018E

Real global GDP (% y/y annualized) 3.1 3.5 – 4.0 3.5 – 4.0

Real U.S. GDP (% q/q annualized) 1.2 3.1 1.0 – 2.0 1.5 2.0 – 3.0 2.5 – 3.5

CPI inflation (% y/y)* 1.6 1.9 2.0 1.3 1.8 – 2.2 2.0 – 3.0

Core CPI inflation (% y/y)* 2.2 2.1 2.0 2.2 1.8 – 2.2 2.0 – 3.0

Unemployment rate, period average (%) 4.7 4.4 4.3 4.9 4.3 4.1

Fed funds rate, end period (%)** 0.87 1.12 1.12 0.62 1.12 – 1.62 1.87 – 2.37

10-year Treasury, end period (%) 2.40 2.31 2.31 2.45 2.37 – 2.87 2.87 – 3.37

S&P 500, end period*** 2363 2423 2516 2239 2500 – 2700 2400 – 2800

S&P operating earnings ($/share) 31 33 32 119 129 – 138 138 – 148

$/€, end period 1.07 1.14 1.18 1.05 1.10 – 1.20 1.15 – 1.25

¥/$, end period 111 112 112 117 110 – 120 115 – 125

Oil ($/barrel), end period 51 46 52 54 45 – 65 55 – 70

ECONOMIC AND MARKET FORECASTS

Percent calendar-year average over calendar-year average annualized unless stated. E = Estimate.*Latest 12-month average over previous 12-month average. **Fed funds rate, end period based on market indications.***Our 2017 S&P 500 end period forecast: 2450 is the equilibrium target with 2700 being the highest bull case with pro-growth policies initiated and sentiment driving the earnings number to the upper end of the range. Past performance is no guarantee of future results. Economic or financial forecasts are inherently limited and should not be relied on as indicators of future investment performance.Source: Global Wealth & Investment Management Investment Strategy Committee. Data as of September 29, 2017. ARYL4MSS.

5

PORTFOLIO STRATEGY AND ASSET ALLOCATION

TACTICAL SHIFTS

May 2017: •Lowered our conviction on U.S. small-caps to a slight overweight •Slightly increased our exposure to International Developed equities March 2017: •Shifted to a slight overweight position in International Developed equities December 2016: •Shifted to an overweight in equities •Within equities we raised U.S. small caps to

overweight •Moved further underweight fixed income

EQUITIES

From secular stagnation to fiscal reflation and synchronized economic expansionEquities remain attractive vs.

Fixed Income on relative basis

Utilize a barbell strategy in Fixed Income to accumulate cash flow

Non-U.S. economies gather momentum

MARKET VIEWS

FIXED INCOME• Neutral to slightly short duration is warranted,

given expectations for higher short-term rates over time and periods of flight to quality givenpolitical and geo-political headwinds

• Prefer credit over Treasuries, be selective ininternational bonds, avoid non-dollar sovereignbonds

• Underweight exposure to high yield. Within high yield, an allocationto leverage loans is advised

• Favorable view on Investment Grade given a gradually improving economic backdrop, modest carry relative to Treasuries and Agencies, and continued technical tailwinds particularly from institutional and foreign investors

ALTERNATIVE INVESTMENTS

• Alternative Investments* help broaden the investment toolkit to diversify traditional stock and bond portfolios

• Currently, we see compelling opportunities within the Real Estate debt space

• We believe the environment for active management, and hence hedge funds, will improve through 2017 and continue to recommend a diversified approach when investing in this heterogeneous asset class. We maintain a moderately positive view on equity long/short strategies

• Within Private Equity, we see opportunities in special situations and private credit

*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available only to pre-qualified clients. Asset Allocation and diversification do not ensure a profit or protect against loss in a declining market. Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September 2017. ARYL4MSS.

• Prefer non-U.S. equities and large capitalization multi-nationals in the U.S.

• A barbell of high quality value focusing on financials, and pro-cyclical exposure, with a focus on healthcare and technology

• Overweight Emerging Markets and International Developed equities, specifically Europe and Japan

• Dividend growth over high dividend yield• Hybrid mix of active and passive managers based

on market opportunity • Factors: low volatility and ultra defensive

positioning is over-extended

6

ASSET CLASS VIEWS

Global Equities

U.S. Large Cap

U.S. Mid & Small Cap

International Developed

Emerging Markets

Global Fixed Income

U.S. Collateralized

Alternatives*

Commodities

Hedged Strategies

Real Estate

Private Equity

Cash

• Generate attractive cash flows across asset classes• Active rebalancing during periods of outsized weakness and strength• Focus on risk-adjusted returns and goal alignment

CORE PORTFOLIO FUNDAMENTALS

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

*Many products that pursue Alternative Investment strategies, specifically Private Equity and Hedge Funds, are available only to pre-qualified clients. Source: Global Wealth & Investment Management Investment Strategy Committee (ISC) as of September. ARYL4MSS.

Slightly SlightlyUnderweight Underweight Neutral Overweight Overweight

U.S. Treasurys/Agencies

U.S. Investment Grade

U.S. Investment Grade Credit

U.S. High Yield

International

7

Equity Market Performance Equity Style Performance

Fixed Income Market Performance Treasury Yield Curve

The performance for above markets are represented by their respective indexes Past performance is no guarantee of future results. Performance results are extremely short-term and may not provide an adequate basis for evaluating performance potential over varying market conditions or economic cycles.Please see end of presentation for asset class disclosures and index definitions.

The Citigroup Pension Liability Index provides an investment performance benchmark for asset/liability management of a ‘typical’ pension plan.* The Barclays Capital Fixed Income Indices were recently acquired by Bloomberg and are now branded Bloomberg Barclays Indices.

Source: FactSet. Data as of 09/30/2017.

Source: Bloomberg. Data as of 09/30/2017.Source: Bloomberg. Data as of 09/30/2017.

Source: Bloomberg. Data as of 09/30/2017.

MARKET PERFORMANCEAs of September 30, 2017

0.0 %

0.5 %

1.0 %

1.5 %

2.0 %

2.5 %

3.0 %

3.5 %

3M 6M 2Y 5Y 10Y 30Y

09/30/17 06/30/17 03/31/17 09/30/16

-5

0

5

10

15

20

25

30

Dow S&P 500 NasdaqComposite

RussellMidcap

Russell 2000 MSCI EAFE MSCIEmergingMarkets

Tota

l Ret

urn

(%)

September Last three months Last 12 months

-6

-4

-2

0

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BarclaysCapital High

Yield

BarclaysCapital

Mortgage-Backed

Securities

BarclaysCapital

Aggregate

BarclaysCapital

Corporate

BarclaysCapital Ten-

yearTreasury

Bellwether

CitigroupPensionLiabilityIndex

BarclaysGlobal

AggregateSovereign

BarclaysGlobal

EmergingMarkets

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l Ret

urn

(%)


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5

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S&P 500 Russell 1000Growth

Russell 1000Value

RussellMidcapGrowth

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Russell 2000Growth

Russell 2000Value

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(%)


8

OUR PHILOSOPHY

We believe that using multiasset class portfolios developed to benefit from multiple sources of return is the best way to have a portfolio support the mission of its organization.

9

Donations & Bequests Episcopal Diocese of CTBalanced Return$120,826,16710/11/2017Pat Staffaroni

-$

Investment ManagerTicker Symbol

Current Market Value

Current Cash

Current %

Strategic Target

Tactical Target

Suggested Change

Large Cap Grow th Loomis LCG SMA LOO-LCG 8,560,541$ 130,322$ 7.09% 7.00% ($102,710)Large Cap Grow th iShares R1000G ETF IWF 8,532,959$ -$ 7.06% 7.00% ($75,128)Large Cap Value iShares R1000V ETF IWD 8,463,735$ -$ 7.00% 7.00% ($5,903)Large Cap Value MFS LCV SMA MFS-LCV 8,472,367$ 187,291$ 7.01% 7.00% ($14,535)Mid Cap Core iShares Russell Mid Cap ETD IWR 2,414,434$ -$ 2.00% 2.00% $2,089Mid Cap Grow th Baird MCG SMA BRD-MCG 1,808,313$ 331,067$ 1.50% 1.50% $4,079Mid Cap Value Wedge Capital MCV SMA WED-MCV 1,822,448$ 66,512$ 1.51% 1.50% ($10,055)Small Cap Grow th Granite SCG SMA GRT-SCG 3,608,642$ 216,390$ 2.99% 3.00% $16,143Small Cap Value Fuller & Thaler SCV SMA FUL-SCV 4,234,214$ 101,829$ 3.50% 3.50% ($5,298)Large Cap Int'l Core Vanguard FTSE Dev Mkts ETF VEA 4,570,521$ -$ 3.78% 3.75% ($39,540)Large Cap Int'l Grow th Schroder's Int'l Grow th SMA SRD-EIC 4,402,314$ 30,656$ 3.64% 3.63% ($22,366)Large Cap Int'l Value Cambiar International Value ADR SMA CMB-INT 4,406,199$ 81,078$ 3.65% 3.63% ($26,250)Emerging Markets Vanguard FTSE Emerging Mkts ETF VWO 5,787,949$ -$ 4.79% 4.75% ($48,706)Emerging Markets Hartford Schroder Emerging Markets Fund SEMN X 5,823,015$ -$ 4.82% 4.75% ($83,772)

Total 72,907,651$ 1,145,145$ 60.34% 57.00% 60.00% (411,951)$

Investment Grade Neuberger Berman Core FI SMA NBG-TIC 23,773,708$ 3,833,810$ 19.68% 16.50% 19.75% $89,460Int'l Developed Bond PIMCO Foreign Bond Hedged MF PFOR X 4,515,724$ -$ 3.74% 5.00% 3.75% $15,258Global High Yield SEIX High Yield Bond SMA SEI-THY 4,819,300$ 382,522$ 3.99% 5.00% 4.00% $13,747Fixed Income Other Spectrum Principal Preferred SMA SPE-PFS 5,406,864$ 309,301$ 4.47% 3.50% 4.50% $30,314

Total 38,515,595$ 4,525,632$ 31.88% 30.00% 32.00% 148,778$ Real Estate -$ -$ 0.00% 5.00% 0.00% $0Commodities Credit Suisse Comm Ret strategy CRSO X 6,075,381$ -$ 5.03% 5.00% 5.00% ($34,073)

Total 6,075,381$ -$ 5.03% 10.00% 5.00% (34,073)$ Cash Fidelity Institutional Money Market 3,327,540$ 2,752$ 2.75% 3.00% 3.00% $297,245

Total 3,327,540$ 2,752$ 2.75% 3.00% 3.00% 297,245$

TOTAL 120,826,167$ 5,673,529$ 100.00% 100.00% 100.00% $0

Market Values as of 10/11/2017

RM/CSO:

Client:Objective:Current MV:Date:

Add/Liquidate

Asset Class

5.00%

27.00%

FI

5.00%

10.00%

EQUI

TY

10.00%

ALT

10

EXECUTIVE SUMMARY

11

Executive Summary As of September 30, 2017“Trust in God and keep your powder dry”

Attributed to Oliver Cromwell

For several quarters, we have been keepers of the Goldilocks Global Economy concept, not too hot, not too cold, just right. This was one of the topics of the Executive Summary in the Q2 book. Over time, it seems that much of the rest of the world has come around to our position—while voices of dissent are sometimes heard, most pundits now believe in a low inflation, moderate growth world environment for at least the next year or longer. I am one of those believers, and think you should be as well—all signs support this. Economically sensitive sectors have done well, defensives ones poorly. Changes in corporate tax policy are likely to lead to increasing profits, as well as valuations. Recovery and growth are underway worldwide. Emerging markets, powered by trade have outperformed those in the U.S. year-to-date.

The expectations above and their fulfillment have been the fundamental drivers of performance in the D&B Fund. Year-to-date 2017, the portfolio is up 12.64%, versus 9.97% for the benchmark, and 9.69% for the simple 60/40 target. The numbers are similar for 1-and-2 years, as well as Q3 of 2017. Since the inception of the account, the return of the portfolio has been 5.83%, versus 4.39%—32.8% higher than the benchmark. In that same period, the standard deviation of return (or risk) has been 7.07% versus 6.43% for the benchmark, just 10.0% higher. An excellent risk/value tradeoff. Bottom line—good markets, good choices, good performance, low risk. The best of all possible worlds. Now we just need to stay on track.

Regardless of your personal opinion about Mr. Cromwell, his quote above has something to say to us. Recall that earlier this year, we moved to combine most active managers in the portfolio with a passive counterpart, commonly an ETF. This was done to keep options clearly open should the active/passive dynamic change (it has not as yet). At the time I described it as an “insurance policy”, best purchased before the need was obvious. Although we haven’t yet needed that policy (our active managers continue to do spectacularly), I am more comfortable with that insurance in place, as you should be as well. While the policy has had an opportunity cost, when needed you will be glad it was in effect.

In a world in which no week goes by without a series of new highs for markets, I believe that keeping your powder dry has become still more important. To that end, we have recently become more aggressive in our rebalancing standards. In addition, while maintaining over-and-underweights that conform to our macroeconomic expectations we have somewhat reduced the magnitude of those variances. For example, large cap stocks have gone from 30% of portfolio to 28%, and small cap stocks from 8% to 6.5%. This is still overweight to Strategic Target, but less so. As importantly, we will be trading more often and for smaller amounts—reallocating on a near-continuous basis, rather than allowing appreciation to remain for any length of time. Money taken out of risk is money kept.

We still see no signs that the expansion we have enjoyed is drawing to a close, but each month that passes puts us another month closer to its inevitable end. In the most recent period, we have put yet another insurance policy in place to support the value of the D&B Fund. We dotrust in God (and the Bank) that the expansion underway will persist, but intend to keep our powder dry as well given the long-term perspective of the D&D Fund. We hope you agree—we assume if he were here Mr. Cromwell would..

12

PORTFOLIO REVIEW

13

ASSET CATEGORY MARKET VALUE % OF PORTFOLIO TOTAL COSTESTIMATED ANNUAL

INCOME CURRENT YIELD %EQUITIES $75,890,237 63.2% $64,851,237 $1,349,098 1.78%

FIXED INCOME $31,590,744 26.3% $31,391,949 $1,106,992 3.50%

TANGIBLE ASSETS $5,914,331 4.9% $7,343,941 $0 0.00%

CASH/CURRENCY $6,631,090 5.5% $6,631,090 $51,411 0.78%

TOTAL PORTFOLIO $120,026,401 100.0% $110,218,217 $2,507,500 2.09%

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

CURRENT ASSET ALLOCATION

Episcopal Diocese of CTAs of September 30, 2017

14

Episcopal Diocese of CTRETURN VS. RISK

RISK STATISTICS

RETURN STANDARD DEVIATION BETA ALPHA R-

SQUAREDSHARPE RATIO

TREYNOR RATIO

TRACKING ERROR

INFORMATION RATIO

Total Portfolio 5.83 7.07 1.08 1.08 .97 0.78 5.11 1.42 1.00Policy Benchmark* 4.39 6.43 -- -- -- 0.63 4.08 -- --

*Episcopal CT Benchmark*

**90 Day TBill

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

RISK ANALYTICS (SINCE INCEPTION)As of September 30, 2017

15

ASSET CLASS

ASSETALLOCATIONEFFECT (%)

SECTORALLOCATIONEFFECT (%)

SELECTIONEFFECT (%)

TOTALEFFECT (%)

EQUITIES 0.98 0.08 0.04 1.10U.S. Large Cap Growth 0.24 0.06 -0.10 0.20U.S. Large Cap Value 0.25 -0.13 0.30 0.42U.S. Mid Cap Growth 0.04 0.03 0.07 0.13U.S. Mid Cap Value 0.05 0.10 0.12 0.27U.S. Small Cap Growth 0.06 0.01 -0.08 -0.02U.S. Small Cap Value 0.07 0.02 -0.18 -0.09Large Cap International Growth 0.06 0.04 0.13 0.23

Large Cap International Value 0.06 -0.06 -0.14 -0.14

Smid Cap International 0.00 -0.05 0.00 -0.05Emerging Markets 0.15 0.06 -0.07 0.14

FIXED INCOME 0.83 0.19 0.06 1.08Investment Grade Taxable 0.64 0.01 0.12 0.77

International Developed Bonds 0.06 0.02 0.08 0.16

Global High Yield Taxable 0.13 0.16 -0.14 0.15

REAL ESTATE 0.05 0.00 0.12 0.17TANGIBLE ASSETS 0.06 0.00 0.00 0.06TOTAL 1.93 0.27 0.22 2.41

Asset allocation effect (%) Selection allocation effect (%)

Sector effect (%) Total effect (%)

Episcopal Diocese of CT

Percentages are rounded by nearest hundredth.

ATTRIBUTION ANALYSIS (TRAILING 12 MONTHS)As of September 30, 2017

16


INVESTMENT PERFORMANCE TRAILING RETURNSAs of September 30, 2017

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

17


ASSET CATEGORY MARKET VALUE ALLOCATION3 MOS

%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

TOTAL PORTFOLIO $120,026,453 100.0% 3.96 12.64 12.20 11.60 6.93 5.83 09/02/14

TOTAL PORTFOLIO - NET OF FEES $120,026,453 100.0% 3.87 12.32 11.77 11.16 6.50 5.42 09/02/14

Episcopal CT Benchmark* -- -- 3.29 9.97 9.79 10.11 5.58 4.39 --

60% S&P, 40% BC Agg -- -- 3.02 9.69 10.90 11.16 7.65 7.05 --

EQUITIES $76,629,368 63.8%

U.S. Large Cap Growth $17,296,009 14.4%

iShares Russell 1000 Growth ETF $8,471,189 7.1% 5.75 20.34 21.66 17.53 12.44 11.52 09/04/14

Russell 1000 Growth -- -- 5.90 20.71 21.93 17.76 12.68 11.87 --

Loomis Large Cap Growth $8,824,819 7.4% 6.49 26.06 20.50 21.96 15.13 14.11 09/03/14

Russell 1000 Growth -- -- 5.90 20.71 21.93 17.76 12.68 11.75 --

U.S. Large Cap Value $19,192,644 16.0%

iShares Russell 1000 Value ETF $9,611,161 8.0% 2.99 -- -- -- -- 4.47 05/05/17

Russell 1000 Value -- -- 3.11 -- -- -- -- 4.89 --

MFS Investment Large Cap Value $9,581,483 8.0% 3.05 13.70 19.58 17.86 11.75 10.84 09/03/14

Russell 1000 Value -- -- 3.11 7.91 15.11 15.64 8.52 7.61 --

U.S. MidCap Core $2,357,914 2.0%

iShares Russell Mid Cap ETF $2,357,914 2.0% 3.48 -- -- -- -- 5.57 05/03/17

Russell Mid Cap Index TR -- -- 3.47 -- -- -- -- 5.45 --

Past Performance is no guarantee of future results.

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

INVESTMENT PERFORMANCE (PRODUCT VIEW)As of September 30, 2017

18



%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

U.S. Mid Cap Growth $1,517,533 1.3%

Baird Mid Cap Growth $1,517,533 1.3% 3.73 20.02 20.76 14.03 9.33 8.06 09/03/14

Russell Mid Cap Growth -- -- 5.28 17.27 17.81 14.47 9.95 8.53 --

U.S. MidCap Value $2,071,468 1.7%

Wedge Capital Mid Cap Value $2,071,468 1.7% 2.97 13.31 18.72 14.88 10.69 9.29 09/03/14

Russell Mid Cap Value -- -- 2.14 7.42 13.35 15.28 9.18 7.60 --

U.S. Small Cap Growth $4,421,470 3.7%

Granite Small Cap Growth $4,421,470 3.7% 6.76 19.16 18.19 10.83 9.08 7.14 09/03/14

Russell 2000 Growth -- -- 6.22 16.80 20.97 16.45 12.16 9.70 --

U.S. Small Cap Value $5,665,927 4.7%

Fuller & Thaler Small Cap Value $5,665,927 4.7% 4.47 7.57 16.69 17.99 13.09 11.51 09/03/14

Russell 2000 Value -- -- 5.11 5.67 20.53 19.66 12.10 9.11 --

International Developed $13,536,201 11.3%

Vanguard FTSE DevelopedMarkets ETF $4,566,385 3.8% 5.49 21.13 19.29 13.50 5.85 4.10 09/04/14

MSCI EAFE Net TR USD Index -- -- 5.40 19.95 19.09 12.62 5.02 3.33 --

Schroders Int'l Growth ADR $4,525,332 3.8% 7.56 24.53 20.43 13.97 6.69 5.39 09/03/14

MSCI EAFE Growth Net -- -- 4.94 22.44 15.67 12.52 6.47 5.05 --




19



%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATECambiar International Value $4,444,484 3.7% 6.91 16.68 17.59 10.55 0.37 -1.79 09/03/14

MSCI EAFE Value (Net) -- -- 5.86 17.62 22.53 12.62 3.49 2.04 --

Emerging Markets $10,570,203 8.8%

Emerging Markets Funds (SEMNX + VWO) $10,570,203 8.8% 8.71 28.04 21.96 19.28 6.09 3.06 09/03/14

MSCI EMF TR Net EmrgMrkts -- -- 7.89 27.77 22.44 19.57 4.89 2.21 --

FIXED INCOME $32,545,333 27.1%

Investment Grade Taxable $25,523,638 21.3%

Neuberger Berman Core FI Taxable $20,279,035 16.9% 0.80 2.93 -0.32 2.05 2.35 2.20 09/03/14

BBG BARC US Aggregate Bond Index -- -- 0.85 3.13 0.06 2.59 2.70 2.51 --

Preferred Stock $5,244,604 4.4%

Spectrum Principal Preferred $5,244,604 4.4% 0.88 10.70 4.69 7.49 7.49 7.59 09/12/14

BofA Merrill Lynch Core Fixed Rate Preferred Index

-- -- 1.09 10.84 4.93 7.73 7.68 7.76 --

International Developed Bonds $2,330,724 1.9%

PIMCO Foreign Bond Fund $2,330,724 1.9% 1.36 2.49 1.62 5.08 4.40 4.32 09/04/14

JPMorgan GBI Global ex US -- -- 0.26 -0.25 -2.90 2.18 2.87 2.91 --




20



%YTD

%1 YR

%2 YRS

%3 YRS

%

SINCEINCEPTION

%INCEPTION

DATE

Global High Yield Taxable $4,690,971 3.9%

Seix High Yield Bond $4,690,971 3.9% 1.72 5.26 5.85 7.40 4.91 4.38 09/03/14

ML High Yield Master -- -- 2.04 7.06 9.04 10.90 5.85 4.99 --

TANGIBLE ASSETS $5,914,331 4.9%

Credit Suisse Commodity Fund $5,914,331 4.9% 2.48 -2.67 -0.11 -1.07 -10.30 -11.47 09/04/14

Bloomberg (DJ UBS) Commodity Index -- -- 2.52 -2.88 -0.30 -1.45 -10.43 -11.72 --

CASH/CURRENCY $4,937,421 4.1%

BofA Cash $4,937,421 4.1% 0.21 0.47 0.53 0.38 0.28 0.28 09/02/14

Merrill Lynch 90 Day T-Bill -- -- 0.26 0.57 0.65 0.46 0.32 0.31 --




* The Benchmark consists of a blend of the following: 10% Russell 1000 Growth, 10% Russell 1000 Value, 4% Russell Midcap Growth,4% Russell Midcap Value, 2.5% Russell 2000 Growth, 2.5% Russell 2000 Value, 4.4% MSCI EAFE Growth(Net), 4.4% MSCI EAFE Value(Net), 2.2% S&P Developed x US Small Cap, 7% MSCI Emerging Markets, 31% BBG BARC US Aggregate Bond, 3.2% BofAML U.S.HY Master, 0.8% JP Morgan ELMI+, 3% BBG BARC Global Agg x US, 5% MSCI US REIT, and 6% Bloomberg Commodity Index.

21

COMPANY NAME% OF EQUITY

(Common Stocks Only) % OF PORTFOLIO QUANTITY MARKET VALUEALIBABA GROUP HLDG LTD ADS 1.88 0.61 4,270 $737,472

SCHLUMBERGER LTD COM 1.71 0.56 9,607 $670,184

FACEBOOK INC CL A COM 1.53 0.50 3,518 $601,121

AMAZON COM INC COM 1.45 0.47 591 $568,158

VISA INC CL A COM 1.20 0.39 4,473 $470,739

J P MORGAN CHASE & CO COM 1.15 0.38 4,717 $450,521

PHILIP MORRIS INTL INC COM 1.04 0.34 3,665 $406,852

CISCO SYS INC COM 1.01 0.33 11,784 $396,296

ORACLE CORP COM 0.94 0.31 7,579 $366,445

CITIGROUP INC NEW COM 0.87 0.28 4,679 $340,350

Source: FactSet®Past Performance is no guarantee of future results.Returns are a reflection of time and not whether the position was actually held in the portfolio for that period.Reflects top 10 Common Stock holdings.

LARGEST EQUITY POSITIONS

Episcopal Diocese of CTAs of September 30, 2017

22

QUANTITY TICKER SECURITY DESCRIPTION

MOODY'S / S&P

RATINGUNIT

COST $TOTAL

COST $ PRICE $MARKETVALUE $

ACCRUED INCOME $

ESTIMATED ANNUAL

INCOME $CURRENT

YIELD %% OF ASSET

CLASS% OF

PORTFOLIOEQUITIES

U.S. Large Cap67,737 IWF ISHARES RUSSELL 1000 GROWTH

ETF 93.76 6,350,901 125.06 8,471,189 0 104,488 1.23 11.1 7.1

81,100 IWD ISHARES RUSSELL 1000 VALUE ETF 114.79 9,309,485 118.51 9,611,161 0 221,567 2.31 12.5 8.00 LOOMIS LARGE CAP GROWTH 6,524,158 0.00 8,824,819 6,225 108,202 1.23 11.5 7.40 MFS INVESTMENT LARGE CAP

VALUE8,066,593 0.00 9,581,483 15,285 206,746 2.16 12.5 8.0

Total U.S. Large Cap 30,251,136 36,488,652 21,510 641,003 1.76 47.6 30.4U.S. Mid Cap

11,960 IWR ISHARES RUSSELL MID-CAP ETF 188.31 2,252,128 197.15 2,357,914 0 39,281 1.67 3.1 2.00 BAIRD MID CAP GROWTH 1,211,226 0.00 1,517,533 498 9,900 0.65 2.0 1.30 WEDGE CAPITAL MID CAP VALUE 1,838,405 0.00 2,071,468 3,556 37,352 1.80 2.7 1.7

Total U.S. Mid Cap 5,301,759 5,946,915 4,054 86,533 1.46 7.8 5.0U.S. Small Cap

0 FULLER & THALER SMALL CAP VALUE

4,994,345 0.00 5,665,927 13,269 129,083 2.28 7.4 4.7

0 GRANITE SCG 3,844,279 0.00 4,421,470 330 26,111 0.59 5.8 3.7Total U.S. Small Cap 8,838,625 10,087,397 13,599 155,194 1.54 13.2 8.4International Developed105,192 VEA VANGUARD FTSE DEVELOPED

MARKETS ETF40.48 4,258,679 43.41 4,566,385 0 116,868 2.56 6.0 3.8

0 CAMBIAR INTERNATIONAL VALUE 4,050,107 0.00 4,444,480 8,719 98,276 2.21 5.8 3.70 SCHRODERS INTL GROWTH ADR 3,855,815 0.00 4,525,332 7,235 90,199 1.99 5.9 3.8

Total International Developed 12,164,601 13,536,196 15,954 305,343 2.26 17.7 11.3Emerging Markets340,326 SEMN X HARTFORD MUT FDS II INC

SCHRODERS EMERGING MKTS11.74 3,997,064 15.69 5,339,712 0 38,275 0.72 7.0 4.4

120,048 VWO VANGUARD FTSE EMERGING MKTS ETF

41.99 5,040,558 43.57 5,230,491 0 121,969 2.33 6.8 4.4

Total Emerging Markets 9,037,621 10,570,203 0 160,244 1.52 13.8 8.8TOTAL EQUITIES 65,593,742 76,629,363 55,117 1,348,317 1.76 100 63.8

Due to rounding, percentages presented may not add up precisely to the totals provided.Portfolio characteristics and holdings are subject to change periodically and may not be representative of current characteristics and holdings.


PORTFOLIO HOLDINGSAs of September 30, 2017

23

QUANTITY TICKER SECURITY DESCRIPTION

MOODY'S / S&P

RATINGUNIT

COST $TOTAL

COST $ PRICE $MARKETVALUE $

ACCRUED INCOME $

ESTIMATED ANNUAL

INCOME $CURRENT

YIELD %% OF ASSET

CLASS% OF

PORTFOLIOFIXED INCOME

Investment Grade Taxable0 NEUBERGER BERMAN CORE FI

TAXABLE20,284,459 0.00 20,279,035 105,906 565,044 2.79 62.3 16.9

0 SPECTRUM PRINCIPAL PREFERRED 5,035,214 0.00 5,244,604 14,687 275,838 5.26 16.1 4.4Total Investment Grade Taxable 25,319,673 25,523,638 120,593 840,882 3.29 78.4 21.3International Developed Bonds219,259 PFOR X PIMCO FOREIGN BD US$HD INSTL 11.00 2,412,448 10.63 2,330,724 2,387 26,181 1.12 7.2 1.9

Total International Developed Bonds 2,412,448 2,330,724 2,387 26,181 1.12 7.2 1.9Global High Yield Taxable

0 SEIX HIGH YIELD BOND MGMT 4,610,991 0.00 4,690,924 70,598 253,828 5.41 14.4 3.9Total Global High Yield Taxable 4,610,991 4,690,924 70,598 253,828 5.41 14.4 3.9

TOTAL FIXED INCOME 32,343,112 32,545,285 193,578 1,120,891 3.44 100 27.1TANGIBLE ASSETS

Commodities1,197,233 CRSO X CREDIT SUISSE COMMODITY-

RETURN STRATEGY FUND CL I6.13 7,343,941 4.94 5,914,331 0 0 0.00 100.0 4.9

Total Commodities 7,343,941 5,914,331 0 0 0.00 100 4.9TOTAL TANGIBLE ASSETS 7,343,941 5,914,331 0 0 0.00 100 4.9CASH/CURRENCY

Cash Equivalents980,391 BANK OF AMERICA TEMPORARY 1.00 980,391 1.00 980,391 54 9,010 0.92 19.9 0.8

3,957,031 FEDERATED US TREASURY CASH 1.00 3,957,031 1.00 3,957,031 2,708 29,282 0.74 80.1 3.3Total Cash Equivalents 4,937,421 4,937,421 2,761 38,292 0.78 100 4.1

TOTAL CASH/CURRENCY 4,937,421 4,937,421 2,761 38,292 0.78 100 4.1TOTAL PORTFOLIO 110,218,21

7120,026,401 251,456 2,507,500 2.09 100

Due to rounding, percentages presented may not add up precisely to the totals provided.Portfolio characteristics and holdings are subject to change periodically and may not be representative of current characteristics and holdings.


PORTFOLIO HOLDINGSAs of September30, 2017

24

APPENDIX

25

DISCLOSURE

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

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

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

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

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

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

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

Investment products:

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

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

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

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

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

Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value

26

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

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

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

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

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

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

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

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

AR8F3XJX

27

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

N/A: Not Applicable/ Not Available

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

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

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

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

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

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

28

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

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

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

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

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

Yield to Maturity at Market: Yield to maturity at market reflects the return that will be achieved if thesecurity was purchased on the last day of the statement period. If yield to maturity at market is less/greaterthan yield to maturity at cost, the market value of the security has increased/decreased during the timesince the security was purchased. When finding the after-tax yield to maturity of a bond, it is customary touse the approximate relationship: after-tax yield = (1- tax rate) x (before tax-yield.)_________________________________________________________________________________ASSET CLASS DISCLOSURESAlternative Investments: Alternative investments are intended for qualified and suitable investors only.Alternative Investments such as derivatives, hedge funds, private equity funds and funds of funds canresult in higher return potential but also higher risk loss potential. Changes in economic conditions or othercircumstances may adversely affect your investments. Before investing in alternative investments, youshould consider your overall financial situation, how much money you have to invest, your need forliquidity and your tolerance for risk.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tax-exempt: Tax-exempt investing offers current tax-exempt income, but it also involves special risks.Single-state municipal bonds pose additional risks due to limited geographical diversification. Interestincome from certain tax-exempt bonds may be subject to certain state and local taxes and, if applicable,the alternative minimum tax. Any capital gains distributed are taxable to the investor._______________________________________________________________________________INDEX DEFINITIONSBBG BARC High Yield Municipal Bond Index is an unmanaged index made up of municipal bonds that arenon-investment grade, unrated, or rated below Ba1.

BBG BARC Municipal Index is a rules-based, market-value-weighted index engineered for the long-termtax-exempt bond market.

BBG BARC U.S. Aggregate Bond Index represents securities that are U.S. domestic, taxable, and dollardenominated. The index covers the U.S. investment grade fixed rate bond market, with index componentsfor government and corporate securities, mortgage pass-through securities, and asset-backed securities.These major sectors are subdivided into more specific indices that are calculated and reported on a regularbasis.

BBG BARC Global High Yield Index provides a broad-based measure of the global high yield fixed incomemarkets. The Index represents the union of the U.S. High Yield, Pan-European High Yield, U.S. EmergingMarkets High Yield, CMBS High Yield, and Pan-European Emerging Markets High Yield Indices. The Index is acomponent of the Bloomberg Barclays Multiverse Index, along with the Bloomberg Barclays GlobalAggregate Bond Index. The Global High Yield Index was created on January 1, 1999, with index historybackfilled to January 1, 1990.

29

DISCLOSURES AND DEFINITIONSCiti US Broad Investment Grade (BIG) tracks the performance of US Dollar-denominated bonds issued inthe US investment-grade bond market. Introduced in 1985, the index includes US Treasury, governmentsponsored, collateralized, and corporate debt providing a reliable representation of the US investment-grade bond market. Sub-indices are available in any combination of asset class, maturity and rating.

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

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

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

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

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

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

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

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

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

BBG BARC U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt.Eurobonds and debt issues from countries designated as emerging markets (sovereign rating ofBaa1/BBB+/BBB+ and below using the middle of Moody’s, S&P, and Fitch) are excluded, but Canadianand global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes,step-up coupon structures, 144-As and pay-in-kind bonds (PIKs, as of October 1, 2009) are also included.

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

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

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

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

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

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

Citi 3-Month T-bill Index measures the monthly return equivalents of yield averages that are not markedto market. The 3-Month Treasury Bill Indexes consist of the last three three-month Treasury bill issues.

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

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

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

IA SBBI US 30 Day TBill TR USD & BAML U.S. Treasury Bills 3 months Index is the U.S. Treasury Bill index,data from The Wall Street Journal are used for 1977-Present; the CRSP U.S. Government Bond File is thesource from 1926 to 1976. Each month a one-bill portfolio containing the shortest-term bill having notless than one month to maturity is constructed. (The bill's original term to maturity is not relevant.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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IMPORTANT INFORMATION

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

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

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

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Investment products:

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

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

Credit and collateral subject to approval. Terms and conditions apply. Programs, rates, terms and conditions subject to change without notice. Equal Housing Lender.

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