Quarterly Update - AutoMEP€¦ · In today‟s marketplace, plan sponsors are faced with choosing...

Quarterly Update Q3 2016

As of 10/1/2016

About flexPATH Strategies™

2


In today‟s marketplace, plan sponsors are faced with choosing either a target date fund (TDF) solution that is

not universally customizable across participants because of the single glidepath and investment philosophy or

choosing a custom asset allocation model that is not portable across recordkeepers and does not have daily

valuation reporting capabilities.

While TDFs have simplified the investment selection process for plan participants, the one-size-fits-all

glidepath strategy may not be a good fit for the variety of risk tolerances exhibited by plan participants.

flexPATH Strategies was created as a solution to these complex challenges. flexPATH Strategies is a family of

low-cost TDFs designed with multiple glidepaths, both active and passive management styles and varying

retirement dates. flexPATH Strategies is portable because it consists of low-cost collective investment trusts

(CITs). In addition, there is access to high-quality money managers through an open architecture investment

selection process.

Through flexPATH Strategies, retirement plan advisors can address the diverse needs of all plan participants

by offering three distinct glidepaths, conveniently packaged in one TDF family, while delivering ERISA Section

3(38) fiduciary protection to plan sponsors for both the glidepath construction and fund selection process.

The efficient and personalized participant fund selection process created by flexPATH Strategies is unique in

that it not only factors in participants‟ ability to accept risk but also weighs the amount of risk needed to

accomplish participants‟ retirement goals.


3

Experience and Expertise

The flexPATH Investment Committee is comprised of industry professionals with vast experience in portfolio

analysis and retirement plan consulting best practices. The committee meets quarterly and evaluates the

money managers within the underlying funds.

Chief Investment Officer & Committee Chairman Industry Experience*

Jeffrey Elvander, CFA 22

As the Chief Investment Officer and Committee Chairman of flexPATH Strategies, LLC, Jeff focuses on investment theory, asset allocation, fund manager research and analysis. He is also the creator of the RPAG Scorecard System™, a one-of-a-kind performance monitoring tool that delivers the quantitative and qualitative analytics essential to plan fiduciaries. Jeff‟s highly disciplined approach delivers a consistently measured, calculated and careful analysis of reams of critical data. He is grounded in Modern Portfolio Theory, and has developed a strong foundation in post-modern behavioral finance. Prior to joining the firm in 2003, Jeff‟s career highpoints included positions with Barclays Global Investors and Trust Company of the West, where he was an assistant vice president working on comprehensive asset allocation models in the portfolio analytics group. Jeff is a CFA® charterholder and is a past president and board member of the CFA Society of Orange County, CA. A graduate of the University of California at Santa Barbara, Jeff earned a B.A. in business economics and a Master‟s in business administration from Pepperdine.

Asset Class/Strategy

Committee Member Industry Experience*

Analyst Name

Large Cap Equity Daniel Kallus, CFA 24 Kyle Olson, CFA

Small Cap Equity Geoff Keeling, CFA 20 Kellen Foley, CFA

International Large Cap Equity

David Rinehart, CFA 16 Alex Kahn

International Small Cap Equity

David Rinehart, CFA 16 Matt Giovinazzo

Fixed Income Solomon Stewart, CFA 8 Jonathan Coombs

Alternatives Vince Learned, CFA 15 Kyle Olson, CFA

*Information is as of 10/1/2016


4

Choose Your PATH

There are three unique glidepath strategies within flexPATH Strategies (conservative, moderate and

aggressive), as well as a variety of retirement dates (from flexPATH Retirement through flexPATH 2055). In

order to choose the correct PATH, you simply select a fund dated nearest your “target year”—the year when

you plan to start withdrawing money from your account.

flexPATH Conservative flexPATH Moderate flexPATH Aggressive

Risk is limited because enough has been or is being saved to live on during retirement. The goal is to achieve a more consistent retirement income pattern throughout retirement. Conservative PATH Characteristics

Retirement savings deferral rate greater than 12 percent.

High account balance.

Emphasis on stability in retirement.

Risk can be moderate because current savings will accomplish most retirement goals. Additional risk is necessary to fully achieve all retirement goals, balanced with a more consistent income pattern. Moderate PATH Characteristics

Retirement savings deferral rate between 6-12 percent.

Average account balance.

Balance stability and long-term return in retirement.

Risk is greater because current savings alone will not be enough to reach most retirement goals. The goal is to generate greater expected return through riskier investments in order to supply adequate income at and throughout retirement. Aggressive PATH Characteristics

Retirement savings deferral rate less than 6 percent.

Low account balance

Emphasis on long-term return in retirement.

flexPATH™ Glidepaths

5

Each flexPATH glidepath has a specific mix of equity funds and bond funds. Below is a description of the

equity to bond ratio for each flexPATH fund within a given glidepath (as of Q3 2016).

flexPATH Conservative Glidepath

flexPATH Moderate Glidepath

flexPATH Aggressive Glidepath

For illustrative purposes only. Actual allocations may vary.


6

Reducing Risk up to Retirement Versus Attempting to Reduce Risk Throughout Retirement In its simplest form, this is a debate about how assets should be invested after a participant ceases to earn a paycheck and why a glidepath exists. Human capital is the ability to earn future income. As a participant ages, human capital diminishes and is replaced by greater financial capital (the amount that has been saved). It may be prudent to take on more risk with financial capital earlier in a participant‟s working life because at that point, a participant has relatively little financial capital compared to human capital. That is why a glidepath has higher equity exposure at the beginning. As human capital is replaced by growing financial capital, risk should be reduced to help protect a growing nest egg in light of diminishing years to earn more income. At retirement, human capital is most likely depleted, and financial capital is most likely at its lifetime peak. This makes the day a participant retires the riskiest day of his or her life because with no future income to offset any potential investment losses from that day forward, the impact of those possible losses will never be greater. Therefore, attempting to reduce risk in a glidepath beyond the day of retirement could be detrimental because it might be more difficult to recoup potential losses as equity exposure continues to dwindle with no human capital to increase savings.


7

flexPATH Index Glidepath Allocations (as of 9/30/2016)

Asset Class US Bonds

US Large-

Cap Equities

US Mid/Small

Cap Equities

Intl Equities

Global Real

Estate

US Inflation-

linked Bonds

Commodities

Benchmark

Barclays U.S.

Aggregate Index

S&P 500 Index

DJ US Completion Total Stock

Market Index

MSCI ACWI ex-US

IMI Index

FTSE EPRA/NAR

EIT Developed

Index

Barclays US TIPS

Index

Bloomberg Commodity

Index

Conservative

Retirement 59.7% 15.8% 3.6% 6.3% 0.5% 10.2% 3.8%

2025 47.2% 23.4% 3.5% 13.1% 1.5% 7.6% 3.7%

2035 31.4% 32.6% 2.8% 19.1% 5.7% 4.6% 3.8%

2045 11.3% 44.1% 1.9% 26.6% 10.9% 1.1% 4.0%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

Moderate

Retirement 51.2% 20.9% 3.7% 11.3% 0.5% 8.8% 3.6%

2025 32.5% 31.7% 2.8% 18.5% 5.3% 5.3% 3.8%

2035 14.9% 41.9% 2.1% 25.1% 9.9% 2.2% 4.0%

2045 2.4% 47.6% 1.8% 30.0% 13.7% 0.2% 4.3%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

Aggressive

Retirement 42.6% 25.8% 3.3% 14.7% 2.6% 7.3% 3.7%

2025 20.5% 38.6% 2.3% 23.0% 8.4% 3.3% 3.9%

2035 6.0% 46.2% 1.8% 28.5% 12.4% 0.9% 4.2%

2045 1.0% 48.0% 1.9% 30.6% 14.1% 0.0% 4.3%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

See Disclosures for complete description of the indices shown here. Indices are for benchmarking purposes only. You cannot invest directly in an index. Asset Class allocations and options are current as of the date shown above. There is no assurance that the allocations and options will be maintained.


8

flexPATH Index+ Glidepath Allocations (as of 9/30/2016)

Asset Class

US Bonds

US Large/Mid-

Cap Equities

US Small Cap

Equities

Intl Equities

Global Real Estate

US Inflation-

linked Bonds

Commodities

Benchmark

Barclays U.S.

Aggregate Index

Russell 1000 Index

Russell 2000 Index

MSCI ACWI ex-US

IMI Index

FTSE EPRA/NAREIT

Developed Index

Barclays US TIPS

Index

Bloomberg Commodity

Index

Conservative

Retirement 59.7% 15.8% 3.6% 6.3% 0.5% 10.2% 3.8%

2025 47.2% 23.4% 3.5% 13.1% 1.5% 7.6% 3.7%

2035 31.4% 32.6% 2.8% 19.1% 5.7% 4.6% 3.8%

2045 11.3% 44.1% 1.9% 26.6% 10.9% 1.1% 4.0%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

Moderate

Retirement 51.2% 20.9% 3.7% 11.3% 0.5% 8.8% 3.6%

2025 32.5% 31.7% 2.8% 18.5% 5.3% 5.3% 3.8%

2035 14.9% 41.9% 2.1% 25.1% 9.9% 2.2% 4.0%

2045 2.4% 47.6% 1.8% 30.0% 13.7% 0.2% 4.3%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

Aggressive

Retirement 42.6% 25.8% 3.3% 14.7% 2.6% 7.3% 3.7%

2025 20.5% 38.6% 2.3% 23.0% 8.4% 3.3% 3.9%

2035 6.0% 46.2% 1.8% 28.5% 12.4% 0.9% 4.2%

2045 1.0% 48.0% 1.9% 30.6% 14.1% 0.0% 4.3%

2055 1.0% 48.1% 1.8% 30.6% 14.1% 0.0% 4.4%

See Disclosures for complete description of the indices shown here. Indices are for benchmarking purposes only. You cannot invest directly in an index. Asset Class allocations and options are current as of the date shown above. There is no assurance that the allocations and options will be maintained.

flexPATH™ Highlights

9

flexPATH Strategies Quarterly Commentary Q3 2016

The flexPATH Investment Committee held its regular committee meeting to

review and discuss the underlying investment managers within flexPATH to

ensure they were meeting or exceeding the minimum criteria as set forth in

the flexPATH Investment Policy Statement. Utilizing the Scorecard System,

the underlying managers within flexPATH have a strong fiduciary oversight

process in place that is consistent with ERISA 404(a) requirements.

Breaches of investment policy and/or qualitative issues with the people,

process or philosophy drive the broader committee discussion and action(s)

when deemed prudent.

After digesting the Brexit news at the end of the second quarter U.S. equity

markets continued their upward march with the Russell 3000 gaining 4.4%

in the third quarter. Market gains were driven by continued positive

economic data and a Federal Reserve that held rates in check during the

quarter. With prolonged quantitative easing overseas, international equities

performed even better in the quarter with a gain of 6.5% (MSCI EAFE).

Fixed income posted a slight gain in the third quarter with the Barclays

Aggregate Bond Index up 0.5%. Fixed income performance was muted by

rising rates as the market began to anticipate a possible Federal Reserve

rate increase by the end of this year.

With strong equity returns in the third quarter flexPATH‟s more aggressive

glidepaths outperformed the conservative ones as expected. The average

third quarter returns for the flexPATH Index+ Conservative, Moderate and Aggressive suites were 3.26%, 3.73% and

3.97% respectively. The underlying active managers for flexPATH showed good relative results as 12 out of 17 managers

outperformed their benchmarks in the third quarter. One notable standout exhibiting strong absolute and relative

performance was Oakmark International. After a rough second quarter, Oakmark bounced back nicely in the third quarter

with a 13.28% return compared to the MSCI EAFE up 6.43%. On the other hand, BMO Pyrford International was a key

detractor from performance as it trailed its benchmark by over 3.0%.

One area of negative returns came from commodities as the Bloomberg Commodity index declined 3.86% in the quarter.

flexPATH‟s active commodity fund, the Deutsche Enhanced Commodity strategy, held up slightly better with a 3.33% loss.

Core fixed income experienced modest gains despite an increase in yield on 10-year treasuries from 1.49% to 1.61%.

flexPATH‟s active core fixed income funds had good relative results. All four active fixed income strategies outperformed

the Barclays Aggregate index. Neuberger Berman Strategic Income had the strongest quarter of the group, up 3.19%.

The flexPATH Investment Committee reviewed all underlying managers in their quarterly meeting. All of the underlying

flexPATH funds scored a 7 or higher, meeting the minimum criteria set forth in the flexPATH Investment Policy Statement.

¹Performance source: MPI, as of 10/15/2016

Performance quoted represents past performance. Past performance does not guarantee future results

Jeffrey Elvander, CFA

Chief Investment Officer,

flexPATH Strategies

Manager Selection Process

10

Manager Selection Process

Step 1: Initial Screening Utilize RPAG Scorecard System™

Top-tier funds chosen from entire investment universe (25,000+ options)

Consistency in score history

Quantitative due diligence

Step 2: Deep Qualitative Analysis Conduct deep qualitative analysis on funds that pass the initial screen

Evaluate manager teams, processes and philosophy

Looking for consistency and repeatability

Manager calls

Site visits

Step 3: Portfolio Analysis Quantitative and qualitative analysis

Ensure fund strategy fits in the context of the rest of the portfolio

How does it fit into the asset allocation?

How does it complement passive core?

How does it complement active satellites?

flexPATH may use some or all of the techniques described herein.

RPAG Scorecard Methodology™

The Scorecard System™ includes pass/fail criteria on a scale of 0 to 10 (10 being best). Eighty percent of the

fund‟s score is quantitative, incorporating Modern Portfolio Theory statistics and peer group rankings. The

other 20 percent of the score is qualitative. Primary considerations are given to manager tenure, fund

expenses and strength of statistics, however, other significant factors may be considered in the qualitative

review. Active and asset allocation strategies are evaluated over a five-year time period and passive strategies

are evaluated over a three-year time period. The Scorecard System point structure is as follows: Good: 9-10

points | Acceptable: 7-8 points | Watch List: 5-6 points | Poor: 0-4 points.

Underlying Funds

11

flexPATH Index+ Underlying Fund Scores (as of 9/30/2016)

Asset Class Fund RPAG Score¹

US Large Cap Equity

BlackRock Russell 1000 Index Fund 10 JPMorgan Disciplined Equity 7 American Beacon Bridgeway Lg Cp Val 10 T. Rowe Price Instl Large Cap Growth 9

US Small Cap Equity

BlackRock Russell 2000 Index Fund 10 Principal Small Cap Value 10 Hartford Small Cap Growth 10 DFA US Micro Cap 9

International Equity

BlackRock MSCI ACWI ex-U.S. IMI Index 10² BMO Pryford International Stock 9 Artisan International 10 Oakmark International 8 Goldman Sachs Int„l Small Cap 9 Fidelity International Small Cap 10

US Fixed Income

BlackRock US Debt Index 10 DoubleLine Total Return Bond 9

Janus Flexible Bond 10 Prudential Total Return Bond 9 Neuberger Berman Strategic Income 9

Commodities BlackRock Commodity Index Daily 10 DWS Enhanced Commodities 10

REIT BlackRock Developed Real Estate Index 10 Principal Global REIT 10

TIPS BlackRock U.S. TIPS Index 10

Average Score 9.5

¹Retirement Plan Advisory Group (RPAG) Scorecard System Score. Scores shown are from RPAG‟s most recent Market

Review. See Disclosures for a description of RPAG Scores. ² The BlackRock MSCI ACWI ex-U.S IMI Index Fund F score in the Scorecard System when benchmarked against the MSCI ACWI ex-U.S. IMI Index.

Underlying Funds

12

flexPATH Index+ Underlying Fund Scorecard (as of 9/30/2016)

Ticker/ Qual.

ID Risk Style Risk / Up / Info Return SR (2pt. 30-Sep 30-Jun 31-Mar 31-Dec

Level Diversity Return Down Ratio Rank Rank max) 2016 2016 2016 2015

1 0 1 1 1 1 1 1 2 9 9 9 9

62.1/ 3.7/ 126.5/

37.9 5.3 110.5

Ticker/ Qual.

ID Style Risk / Up / Info Return Info (2pt. 30-Sep 30-Jun 31-Mar 31-Dec

Drift Return Down Ratio Rank Ratio max) 2016 2016 2016 2015

Rank

1 1 1 1 1 1 1 1 2 10 10 10 10

-58.4/ 11.3/ 100.2/

83.7 17.6 86.9

1 1 1 0 0 0 1 1 2 7 7 7 10

-10.1/ 11.8/ 100.5/

80.5 15.9 106.4

1 1 1 1 0 1 1 1 2 9 7 7 10

100.0/ 14.4/ 114.5/

53.4 17.6 123.6

1 1 1 1 1 1 1 1 2 10 10 10 10

-46.5/ 14.1/ 100.6/

-74.1 16.6 94

0 1 1 1 1 1 1 1 2 9 9 9 9

-60.3/ 14.8/ 99.7/

-97.3 16.8 93.6

1 1 1 1 1 1 1 1 2 10 10 10 10

82.9/ 15.8/ 98.6/

-85.8 17 93.6

0 1 1 1 1 1 1 1 2 9 9 9 9

40.4/ 10.9/ 75.7/

63.7 7.9 66.2

0 0 1 1 1 1 1 1 2 8 9 9 9

-46.3/ 16.5/ 117.4/

39.9 9.8 107.6

1 1 1 1 1 1 1 1 2 10 10 10 10

91.6/ 13.7/ 98.9/

79.9 10.3 87.2

0 1 1 1 1 1 1 1 2 9 9 9 9

27.5/ 13.4/ 93.8/

-93.4 12.1 79.6

1 1 1 1 1 1 1 1 2 10 10 10 10

51.4/ 11.7/ 93.1/

-81.3 12.9 71.9

International Small-Mid Cap Growth

Fidelity International Small Cap Opp FSCOX18 91.4 0.65 10 10 ISMG ISMG ISMG ISMG

ILCB ILCB ILCB

5 ISMV ISMV ISMV ISMV

ILCG ILCG ILCG

International Small-Mid Cap Value

Goldman Sachs Intl Sm Cp Insghts Instl GICIX17.1 92.3 0.51 5

Oakmark International I OAKIX28.4 89.7 0.44 8 12 ILCB

International Large Cap Growth

Artisan International Institutional APHIX11.6 90 0.43 21 21 ILCG

International/Global Equity

International Large Cap Blend

Pyrford International Equity Composite (BMO) GTM1C.bmo19.1 92.5 0.12 34 33 ILCB ILCB ILCV ILCV

8 SCG SCG SCG SCG

SCB SCB SCB

Small Cap Growth

Hartford Small Cap Growth Y HSLYX10.3 97.5 0.32 13

Small Cap Blend

DFA US Micro Cap I DFSCX8.6 96.7 0.37 21 17 SCB

7 SCV SCV SCV SCV

LCG LCG LCG

Small Cap Value

Principal SmallCap Value II Instl PPVIX10.3 97.1 0.47 15

Large Cap Growth

T. Rowe Price Instl Large Cap Growth TRLGX9.2 88.9 0.2 6 10 LCG

18 LCB LCB LCB LCBJPMorgan Disciplined Equity R6 JDEUX

9.3 97.6 -0.28 18

Large Cap Blend

R2

U.S. Equity

Large Cap Value

American Beacon Bridgeway Lg Cp Val Inst BRLVX10.4 96.2 0.67 3 1

Active

Style Risk/Return Peer Group Score

Style

LCV LCV LCV LCV

Asset Allocation

Style Risk/Return Peer Group Score

R2

Fixed Income

Multisector Bond

Neuberger Berman Strategic Income R6 NRSIX3.7 85.5 0.93 34 30 MSB MSB MSB MSB

Source: Retirement Plan Advisory Group. All data as of 09/30/2016. See Disclosures for a description of RPAG scores.

Underlying Funds

13

flexPATH Index+ Underlying Fund Scorecard (as of 9/30/2016)

Source: Retirement Plan Advisory Group. All data as of 09/30/2016. See Disclosures for a description of RPAG scores.

* The BlackRock MSCI ACWI ex-U.S IMI Index Fund F score in the Scorecard System when benchmarked against the MSCI ACWI ex-

U.S. IMI Index

1 1 1 1 1 1 1 1 2 10 10 10 10

12.5/ 2.6/ 109.4/

38.3 4 80.1

1 1 0 1 1 1 1 1 2 9 9 9 9

-27.4/ 3.6/ 146.2/

59 5.1 115.9

1 1 0 1 1 1 1 1 2 9 9 9 9

-35.4/ 2.3/ 94.4/

-30.9 4.5 23.1

1 1 1 1 1 1 1 1 2 10 9 9 10

63.6/ 9.5/ 67.7/

58.9 -4.8 64.5

1 1 1 1 1 1 1 1 2 10 7 7 8

-5.2/ 13.6/ 93.3/

90 13.8 82.9

Ticker/ Qual.

ID Style Tracking TE Return SR (2pt. 30-Sep 30-Jun 31-Mar 31-Dec

Drift Error Rank Rank Rank max) 2016 2016 2016 2015

1 1 1 1 1 1 1 1 2 10 10 10 10

2.0/

99.8

1 1 1 1 1 1 1 1 2 10 10 10 10

0.9/

-100

1 1 1 1 1 1 1 1 2 10* 10* 10* 8*

-7.6/

33.6

1 1 1 1 1 1 1 1 2 10 10 10 10

-20.4/

33.8

1 1 1 1 1 1 1 1 2 10 10 10 10

-98.9/

99.2

1 1 1 1 1 1 1 1 2 10 10 10 10

99.9/

99.9

1 1 1 1 1 1 1 1 2 10 10 9 10

-6.8/

90.9GRE-P6 6 GRE-P GRE-P GRE-P

CBB-P CBB-P

Global Real Estate

BlackRock Developed Real Estate Index Fund E 643780.brcf5.9 95.1 2.9 33 0

0 48 30 CBB-P CBB-P

Specialty

Commodities Broad Basket

BlackRock Commodity Index Daily Fund F 689516.brcf0.1 100 0.1 2

0 7 3 UGT-P UGT-P

U.S. Government TIPS

BlackRock U.S. Treasury Inflation Protected Sec F USTIPSF.brcf0.6 99.8 0.2 33

CFI-P CFI-P CFI-P CFI-P

UGT-P UGT-P

Core Fixed Income

BlackRock U.S. Debt Index Fund F USDebtF.brcf3.5 99.8 0.1 17 0 9 5

ILCB-P ILCB-P ILCB-P ILCB-P

Fixed Income


BlackRock MSCI ACWI ex-U.S. IMI Index Fund F ACWIIMIF.brcf23.2 98.7 1.63 8 0 6 7

SCB-P SCB-P SCB-P SCB-P


Small Cap Blend

BlackRock Russell 2000 Index Fund F R2000F.brcf0.3 100 0 1 0 30 31

Passive

Style Peer Group Score

Style R2 Expense Rank

22 LCB-P LCB-P LCB-P LCB-P

U.S. Equity

Large Cap Blend

BlackRock Russell 1000 Index Fund F R1000F.brcf0.1 100 0 0 0 21

Global Real Estate

Principal Global Real Estate Sec Instl POSIX9.8 93.1 0.25 5 2 GRE GRE GRE GRE

3 CBB CBB CBB CBB

Specialty


Deutsche Enhanced Commodity Strat Instl SKIRX6.7 89.5 0.79 3

CFI CFI CFI CFI

CFI CFI CFI

DoubleLine Total Return Bond I DBLTX9.7 66.5 0.95 13 15

Fixed Income

Core Fixed Income

Janus Flexible Bond N JDFNX11.9 88.7 1.06 CFI

Prudential Total Return Bond Q PTRQX21.6 78.1 1.17 9 11 CFI

29 8 CFI CFI CFI

Underlying Funds

14

flexPATH Index+ Underlying Fund Returns Analysis (as of 9/30/2016)

Ticker/ Since Inception Share Class

ID 1 Year 3 Year 5 Year 10 Year Incept. Date Inception Gross Net

Neuberger Berman Strategic Income R6 NRSIX 3.19 8.39 7.81 4.25 5.31 6.6 3.1 7/11/2003 3/15/2013 0.8 0.73

StyleBenchmark 1.68 8.24 7.67 3.81 3.91 5.06 - - - - -



American Beacon Bridgeway Lg Cp Val Inst BRLVX 3.9 8.96 15.54 10.79 17.62 7.58 9.31 10/31/2003 10/31/2003 0.75 0.79

Russell 1000 Value Index 3.48 10 16.2 9.7 16.15 5.85 - - - - -

JPMorgan Disciplined Equity R6 JDEUX 4.25 5.09 11.02 9.73 15.88 7.53 9.15 1/3/1997 3/24/2003 0.36 0.35

Russell 1000 Index 4.03 7.92 14.93 10.78 16.41 7.4 - - - - -

T. Rowe Price Instl Large Cap Growth TRLGX 8.03 1.07 9.98 10.85 17.61 9.5 8.76 10/31/2001 10/31/2001 0.56 0.56

Russell 1000 Growth Index 4.58 6 13.76 11.83 16.6 8.85 - - - - -

Principal SmallCap Value II Instl PPVIX 7.56 11.73 14.04 7.8 16.58 6.4 8.02 6/1/2004 6/1/2004 1.03 1.01

Russell 2000 Value Index 8.87 15.49 18.81 6.77 15.45 5.78 - - - - -

DFA US Micro Cap I DFSCX 7.46 10.57 14.65 6.87 16.83 7.23 11.8 12/23/1981 12/23/1981 0.52 0.52

Russell 2000 Index 9.05 11.46 15.47 6.71 15.82 7.07 - - - - -

Hartford Small Cap Growth Y HSLYX 7.64 6.69 11.25 7.32 16.96 8.63 8.7 2/19/2002 2/19/2002 0.78 0.78

Russell 2000 Growth Index 9.22 7.48 12.12 6.58 16.15 8.29 - - - - -

Oakmark International I OAKIX 13.28 1.4 6.66 -1.19 9.78 4.46 9.49 9/30/1992 9/30/1992 0.95 0.95

BMO Pyrford International Stock R6 BISGX 3.08 7.01 10.66 2.02 - - -1.17 12/29/2011 5/27/2014 0.89 0.85

MSCI EAFE ND USD 6.43 1.73 6.52 0.48 7.39 1.82 - - - - -

Artisan International Growth Trust artingr.fnd 4.01 -1.4 6.09 0.58 10.19 - 13.19 1/5/2009 - - 0.9

MSCI EAFE Large Growth ND USD 4.56 2.38 8.94 1.99 8.47 3.18 - - - - -

Goldman Sachs Intl Sm Cp Insghts Instl GICIX 9.2 5.65 12.27 5.59 12.05 - 4.29 9/28/2007 9/28/2007 0.99 0.9

MSCI EAFE Smid Value ND USD 9.68 4.66 8.71 3.5 9.95 3.31 - - - - -

Fidelity International Small Cap Opp FSCOX 7.38 4.29 9.02 6.14 12.87 3.49 6.06 8/2/2005 8/2/2005 1.23 1.23

MSCI EAFE Smid Growth ND USD 6.71 3.63 11.83 4.6 10.23 3.63 - - - - -

Janus Flexible Bond N JDFNX 0.91 5.51 4.69 3.87 4.03 5.91 3.34 7/7/1987 5/31/2012 0.44 0.44

Prudential Total Return Bond Q PTRQX 1.41 8.08 7.27 5.33 5.14 6.37 5.64 1/10/1995 12/27/2010 0.43 0.43

DoubleLine Total Return Bond I DBLTX 0.83 4.07 3.58 4.26 4.54 - 7.35 4/6/2010 4/6/2010 0.47 0.47

BC Aggregate Bond 0.46 5.8 5.19 4.03 3.08 4.79 - - - - -

Deutsche Enhanced Commodity Strat Instl SKIRX -3.33 8.52 1.95 -5.76 -4.81 -1.9 -0.55 2/14/2005 2/14/2005 1.16 0.99

DJUBS US Commodity Index TR -3.86 8.87 -2.58 -12.34 -9.37 - - - - - -

Principal Global Real Estate Sec Instl POSIX 1.33 7.23 11.68 8.15 13.81 - 3.68 10/1/2007 10/1/2007 0.9 0.9

MSCI World REIT ND USD -1.01 10.55 17.52 10.75 12.89 - - - - - -

Fixed Income

Asset Allocation QTR YTDAnnualized Returns Expense

U.S. Equity

Large Cap Value

Large Cap Blend

Multisector Bond

Active QTR YTDAnnualized Returns

Expense

Ratio

Small Cap Growth



Small Cap Blend

Large Cap Growth

Small Cap Value

Fixed Income

Core Fixed Income




Specialty


Global Real Estate

Underlying Funds

15

flexPATH Index+ Underlying Funds Returns Analysis (as of 9/30/2016)

Disclosure

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. The performance data does not reflect any short-term redemption fees, which if reflected, would reduce the performance quoted. The maximum short-term redemption fee is 2.00 percent. Performance data is subject to change without prior notice. Some funds, accounts, or share classes may not be available for investment. Performance history prior to inception (if applicable) reflects another share class or account reflecting the manager's historical performance record. Fund Inception Date - the date on which a fund commenced operations. Share Class Inception Date - the date on which a fund's share class was introduced. Contact flexPATH Strategies with any questions about this report or for the most current month-end performance at 800.974.0188.



BlackRock Russell 1000 Index Fund F R1000F.brcf 4.04 7.98 15.02 10.83 16.44 7.44 - 11/16/2001 - - 0.06

Russell 1000 Index 4.03 7.92 14.93 10.78 16.41 7.4 - - - - -

BlackRock Russell 2000 Index Fund F R2000F.brcf 9.08 11.72 15.83 6.98 16.1 7.27 - 12/31/1997 - - 0.09

Russell 2000 Index 9.05 11.46 15.47 6.71 15.82 7.07 - - - - -

BlackRock MSCI ACWI ex-U.S. IMI Index Fund F ACWIIMIF.brcf 7.11 7.06 10.21 0.91 6.85 - - 2/28/2011 - - 0.19

MSCI EAFE ND USD 6.43 1.73 6.52 0.48 7.39 1.82 - - - - -

BlackRock U.S. Debt Index Fund F USDebtF.brcf 0.48 5.88 5.26 4.15 3.18 4.85 - 6/6/1996 - - 0.06


BlackRock U.S. Treasury Inflation Protected Sec F USTIPSF.brcf 1.02 7.36 6.78 2.49 1.99 4.53 - 7/30/2002 - - 0.05

BC TIPS 0.97 7.27 6.58 2.4 1.93 4.48 - - - - -

BlackRock Commodity Index Daily Fund F 689516.brcf -3.89 8.76 -2.82 -12.43 -9.45 - - 1/31/2011 - - 0.4


BlackRock Developed Real Estate Index Fund E 643780.brcf 1.11 11.15 15.81 8.52 13.2 - - 3/31/2008 - - 0.2


QTR YTDAnnualized Returns Expense


Global Real Estate


Specialty



Fixed Income

Core Fixed Income

U.S. Equity

Large Cap Blend

Small Cap Blend

Passive

Underlying Funds

16

flexPATH Index Underlying Fund Scores (as of 9/30/2016)

Asset Class Fund RPAG Score¹

US Large Cap Equity BlackRock Index Equity 10

US Small Cap Equity BlackRock Extended Equity Market 10²

International Equity BlackRock MSCI ACWI ex-U.S. IMI Index 10³

US Fixed Income BlackRock US Debt Index 10

Commodities BlackRock Commodity Index Daily 10

REIT BlackRock Developed Real Estate Index 10

TIPS BlackRock U.S. TIPS Index 10

Average Score 10

¹Retirement Plan Advisory Group (RPAG) Scorecard System Score. Scores shown are from RPAG‟s most recent Market

Review. See Disclosures for a description of RPAG Scores. ² The BlackRock Extended Equity Market Fund F score in the Scorecard System when benchmarked against the Dow Jones U.S. Completion Total Stock Market Index ³ The BlackRock MSCI ACWI ex-U.S IMI Index Fund F score in the Scorecard System when benchmarked against the MSCI ACWI ex-U.S. IMI Index

Underlying Funds

17

flexPATH Index Underlying Fund Scorecard (as of 9/30/2016)

Source: Retirement Plan Advisory Group. All data as of 9/30/2016. See Disclosures for a description of RPAG Scores.

* The BlackRock Extended Equity Market Fund F score in the NFP Retirement Scorecard System when benchmarked agaisnt the Dow

Jones U.S. Completion Total Stock Market Index

** The BlackRock MSCI ACWI ex-U.S IMI Index Fund F score in the NFP Retirement Scorecard System when benchmarked against

the MSCI ACWI ex-U.S. IMI Index

Ticker/ Qual.

ID Style Tracking TE Return SR (2pt. 30-Sep 30-Jun 31-Mar 31-Dec

Drift Error Rank Rank Rank max) 2016 2016 2016 2015

1 1 1 1 1 1 1 1 2 10 9 10 10

4.8/

99.1

1 1 1 1 1 1 1 1 2 10* 8 8 7

20.2/

-50

1 1 1 1 1 1 1 1 2 10** 10* 10* 8*

-7.6/

33.6

1 1 1 1 1 1 1 1 2 10 10 10 10

-20.4/

33.8

1 1 1 1 1 1 1 1 2 10 10 10 10

-98.9/

99.2

1 1 1 1 1 1 1 1 2 10 10 10 10

99.9/

99.9

1 1 1 1 1 1 1 1 2 10 10 9 10

-6.8/

90.9

Passive

Style Peer Group Score

Style R2 Expense Rank

1 LCB-P LCB-P LCB-P LCB-P

U.S. Equity

Large Cap Blend

BlackRock Equity Index Fund F IndEqF.brcf4.1 99.6 0.7 29 0 2

SCB-P SCB-P SCB-P SCB-P


Small Cap Blend

BlackRock Extended Equity Market Fund F 537992.brcf8.9 99.99 0.15 37 0 25 24

ILCB-P ILCB-P ILCB-P ILCB-P

Fixed Income


BlackRock MSCI ACWI ex-U.S. IMI Index Fund F ACWIIMIF.brcf23.2 98.7 1.63 8 0 6 7

CFI-P CFI-P CFI-P CFI-P


Core Fixed Income

BlackRock U.S. Debt Index Fund F USDebtF.brcf3.5 99.8 0.1 17 0 9 5

UGT-P UGT-P

Specialty


BlackRock Commodity Index Daily Fund F 689516.brcf0.1 100 0.1 2

0 7 3 UGT-P UGT-PBlackRock U.S. Treasury Inflation Protected Sec F USTIPSF.brcf

0.6 99.8 0.2 33

GRE-P6 6 GRE-P GRE-P GRE-P

CBB-P CBB-P

Global Real Estate

BlackRock Developed Real Estate Index Fund E 643780.brcf5.9 95.1 2.9 33 0

0 48 30 CBB-P CBB-P

Underlying Funds

18

flexPATH Index Underlying Funds Returns Analysis (as of 9/30/2016)

Disclosure

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. The performance data does not reflect any short-term redemption fees, which if reflected, would reduce the performance quoted. The maximum short-term redemption fee is 2.00 percent. Performance data is subject to change without prior notice. Some funds, accounts, or share classes may not be available for investment. Performance history prior to inception (if applicable) reflects another share class or account reflecting the manager's historical performance record. Fund Inception Date - the date on which a fund commenced operations. Share Class Inception Date - the date on which a fund's share class was introduced. Contact flexPATH Strategies with any questions about this report or for the most current month-end performance at 800.974.0188.



BlackRock Equity Index Fund F IndEqF.brcf 3.86 7.87 15.47 11.21 16.42 7.32 - 3/5/1997 - - 0.05

Russell 1000 Index 4.03 7.92 14.93 10.78 16.41 7.4 - - - - -

BlackRock Extended Equity Market Fund F 537992.brcf 7.16 9.94 13.43 7.57 16.32 - - 6/2/1997 - - 0.01

Russell 2000 Index 9.05 11.46 15.47 6.71 15.82 7.07 - - - - -

BlackRock MSCI ACWI ex-U.S. IMI Index Fund F ACWIIMIF.brcf 7.11 7.06 10.21 0.91 6.85 - - 2/28/2011 - - 0.19

MSCI EAFE ND USD 6.43 1.73 6.52 0.48 7.39 1.82 - - - - -

BlackRock U.S. Debt Index Fund F USDebtF.brcf 0.48 5.88 5.26 4.15 3.18 4.85 - 6/6/1996 - - 0.06


BlackRock U.S. Treasury Inflation Protected Sec F USTIPSF.brcf 1.02 7.36 6.78 2.49 1.99 4.53 - 7/30/2002 - - 0.05

BC TIPS 0.97 7.27 6.58 2.4 1.93 4.48 - - - - -

BlackRock Commodity Index Daily Fund F 689516.brcf -3.89 8.76 -2.82 -12.43 -9.45 - - 1/31/2011 - - 0.04




BlackRock Developed Real Estate Index Fund E 643780.brcf 1.11 11.15 15.81 8.52 13.2 - - 3/31/2008 - - 0.02


Fixed Income

Core Fixed Income

Large Cap Blend

Small Cap Blend

Passive QTR YTDAnnualized Returns Expense Ratio

U.S. Equity

Specialty

Global Real Estate


Passive QTR YTDAnnualized Returns Expense Ratio


Specialty



Underlying Funds

19

Underlying Fund Commentaries – Q3 2016

Equity Funds

Large Cap Value

American Beacon Bridgeway

For the quarter, the American Beacon Bridgeway Large-Cap Value Fund returned 3.94% versus the Russell 1000 Value Index‟s total return of 3.48%. The overall allocation effect of smaller market capitalization had a positive effect on quarterly performance, as did the overall allocation effect of the composite‟s deeper value stocks across multiple value metrics. Looking at model categories, the absolute return for the Value Metrics and Company Financial Health categories outperformed the Russell 1000 Value Index while the Price Momentum category lagged the Index. Within sectors, the effects from both allocation and stock selection were positive. Note that sector allocation is simply an outcome of statistical analysis of company-level fundamentals and not any macroeconomic view or sector overlay. Specific stock selection in the Energy and Consumer Discretionary sectors and an underweighting to the Real Estate sector contributed most positively to performance. Stock selection in the Real Estate and Consumer Staples sectors and an overweighting to the Utilities sector detracted the most from performance.

Large Cap Blend

JPMorgan Disciplined Equity

For the quarter, the JPMorgan Disciplined Equity delivered a return of 4.3% compared to a return of 4.03% for the

benchmark Russell 1000 Index. The fund continues to score acceptably for the third quarter. The team‟s process (with

more than 30 years‟ history of implementation of this strategy) focused on buying stocks in the top two quintiles of the

universe (Russell 1000) based on discounted cash flow valuation metrics weighed on the fund‟s relative performance as

the market continued to witness a performance lag from the cyclical-leaning names (vetted for quality/investability) that

typically represent a large portion of the portfolio. The Fund outperformed its benchmark during the period both on a stock

selection and sector allocation basis. Large detractors year-to-date remain from the Pharma/Medical Technology sector,

notably Allergan (0.81% portfolio weighting) and Gilead Sciences(0.92% portfolio weighting). Though no changes

occurred from a personnel standpoint, there was a slight change in their portfolio construction. Sector allocation and stock

selection limitations were tightened even further, which is seen by our Investment Committee as a positive, allowing more

performance to be derived from stock selection.

Large Cap Growth

T. Rowe Price Institutional Large Cap Growth

In the third quarter, T. Rowe Price Institutional Large Cap Growth fund‟s return outperformed the Russell 1000 Growth

Index by a wide margin, 8.03% versus 4.58%. Portfolio relative performance benefited from many of the same portfolio

exposure that hampered the fund earlier in the year, namely holdings within Information Technology and Health Care.

Despite having a strong quarter, the fund is still under the benchmark in 2016 by nearly 5%. Based on the Scorecard

Methodology, the fund‟s score increased from a 7 to a 9 this quarter due to improvements in the risk/return and

information ratio metrics. As mentioned last quarter, the fund will also undergo a manager change at the end of this year.

Rob Sharps, who managed the fund since 2002, will depart from the strategy at the end of December. He will stay at T.

Rowe Price, taking on a higher role within the firm as part of the Management Committee as well as become the co-head

of Global Equity strategies. His replacement is Taymour Tamaddon, who has been with T. Rowe Price for over 12 years

and was the manager of the T. Rowe Price Health Sciences Equity Strategy. Sharps and Tamaddon are jointly managing

the fund until the end of the year when Sharps will officially be taken off of the fund‟s management.

Underlying Funds

20

Small Cap Value

Principal Small Cap Value II

SmallCap Value II underperformed the Russell 2000 Value index for the quarter, however outperformance over the index remains a wide margin for the 3- and 5-year time periods, ranking in the top quartile of peers. For the quarter, Vaughan Nelson was the main contributor to portfolio underperformance as they trailed the index by approximately 2.85% resulting from negative stock selection in the Health Care and Financials sectors. DFA also trailed the index by approximately 0.40%. L.A. Capital provided positive performance to the portfolio as they outperformed the index by approximately 0.25%. The overall portfolio beta profile was lower relative to the index which hurt performance as more aggressive strategies were rewarded during the quarter. For the year, all sub-advisors underperformed the index. However, the investment option still ranked in the top half of its peer group. Much like the quarter, Vaughan Nelson was the main contributor to underperformance as they trailed the benchmark by approximately 7.0%. Year-to-date, overall portfolio stock selection was negative, driven by poor selection in the Materials and Consumer Discretionary sectors. Overall portfolio sector allocation was also negative, mainly attributable to an approximate 7% underweight to the Real Estate sector. At the end of the quarter, the approximate weight to each manager was DFA 32%, Vaughan Nelson 42%, L.A. Capital 11%, and Principal Management Corporation 15%.

Small Cap Blend

DFA US Micro Cap I

During the quarter ending September 30, 2016, the U.S. Micro Cap Portfolio had a return of 7.5%, underperforming the

Russell 2000 Index by 1.6%. The portfolio‟s exclusion of stocks with the lowest profitability and highest relative price

detracted from relative performance, as those securities outperformed, particularly in the Health Care and Information

Technology sectors. Conversely, the portfolio‟s security screening practices generally exclude real estate investment

trusts (REITs), which had a positive impact on relative performance as REITs underperformed the overall index for the

quarter.

Small Cap Growth

Hartford Small Cap Growth

The Hartford Small Cap Growth fund finished the third quarter of 2016 up 7.64% versus the Russell 2000 Growth Index of 9.22%. Year-to-date, through September 30, the fund delivered 6.69% returns versus the Russell 2000 Growth Index 7.48%.The modest underperformance for the quarter was driven mostly by stock selection, given the similar economic sector exposures between the fund and its benchmark. Selection challenges were fairly broad based, with seven of 11 sectors generating negative relative performance. Those headwinds were most apparent within the information technology and consumer staples sectors. The fund benefited from positive security selection within financials.

International Large Cap Value

Pyrford International Stock (BMO)

BMO Pyrford International Stock finished the third quarter up 3.08%. Pyrford retains a cautious outlook in Japan and continental Europe. Considering that 2016 has been volatile for international stocks, the fund is up 7.01% year-to-date, outpacing 88% of peers. Financials were one of the stronger performers during the quarter and Pyrford remains significantly underweight in that sector, especially avoiding European banks. The strategy will at times go outside of the benchmark MSCI EAFE if a strong investment case can be made. There was a recent review of India and Mexico and while there are compelling investment opportunities in those countries, the team felt valuations were on the high side. Stock picking was the largest detractor (1.84%) during the quarter with country selection the next largest detractor

Underlying Funds

21

(0.87%). The fund experienced no changes to its process, philosophy or team during the quarter.


Oakmark International I

The Oakmark International fund rebounded during the third quarter of 2016, gaining an impressive 13.28%. This put the

fund in the first percentile of all international large blend managers in the Morningstar peer group. Despite a compelling

third quarter, the fund lags the benchmark and peers year-to-date through the third quarter, up only 1.40%. Financials

and Consumer Discretionary were the biggest contributing sectors to performance in the third quarter. Materials company

(5.14% portfolio weighting), a top holding, was one of the stronger performers, adding to overall performance. The fund

continues to be overweight Financials. There is no direct exposure to Deutsche Bank, there is however significant

exposure to other European bank stocks. Harris (the underlying manager) believes that European banks are coming

under pressure from earnings and not from capital or liquidity constraints experienced in 2008 and 2011. There were no

changes to the fund‟s process, philosophy or team during the quarter.


Artisan International Institutional

Artisan International Growth gained 4.01% for the third quarter, underperforming 87% of International Growth managers. Detractors for the quarter were underweight to Financials (especially European banks), Technology and Consumer Discretionary. The portfolio remains largely overweight Consumer Defensive stocks as the team believes there are fewer growth opportunities at reasonable valuations. The portfolio managers have also been adding to their Emerging Market exposure, increasing the position from 3% to 7%. Contributing factors for the quarter were underweight positioning to Energy and Utility companies. The fund experienced no changes to its process, philosophy or team during the quarter.


Goldman Sachs International Small Cap Insights

Goldman Sachs International Insights fund rose 9.20% for the third quarter of 2016. From a regional standpoint, stock

picking in Japan and Europe ex U.K. were key contributors to performance. Sector wise, Health Care, Industrials and

Basic Materials were outperformers. In particular, the Insights team process led them to a few Japanese polymer

(chemical) companies that were strong performers during the quarter. The Consumer Discretionary sector and the U.K.

as a region were detractors for the quarter. The portfolio remains underweight banks and overweight asset managers

within the Financial sector. The fund continues to closely track the benchmark from a country and sector weighting

perspective, so performance remains largely driven by stock picking. The focus of the fund‟s process is on stock price

momentum, attractive valuations and profitability as well as efficient trade execution. There were no major personnel

changes or changes to the fund‟s process or philosophy during the third quarter.


Fidelity International Small Cap Opportunities

Fidelity International Small Cap Opportunity returned 7.38% for the third quarter of 2016 and 4.29% year-to-date through September 30th. These returns compare favorably to peers, above median for the quarter and year-to-date, but falling behind the ACWI and EAFE SMID Growth indices. Detractors to performance included an underweight to Financials and overall stock selection. There was an increase in the Industrial sector as infrastructure plays look compelling to the team.

Underlying Funds

22

Cash fell even further during the quarter, dropping to 2.5%. There were no changes to the fund‟s process, philosophy or team during the quarter.

Fixed Income Funds

Multisector Bond

Neuberger Berman Strategic Income I

The third quarter of 2016 saw strong performance from Neuberger Berman Strategic Income that outperformed the Barclays Aggregate Bond Index by 2.73% and the Multi-sector Bond category peer group average by 0.49%. Top contributors include off benchmark exposure to high yield and non-agency mortgages. Investment grade security selection was a close second from an additive standpoint. Duration has been a top detractor for the fund year to date, however this positioning resulted in a slightly positive relative impact in the third quarter. Top detractors included underweights in non-corporates (sovereigns) as well as underweights in MBS. The team has recently reduced exposure to high yield in favor of bringing down tracking error across the board. Their belief is there will be more attractive opportunities to invest in the space following the U.S. presidential election. Core Fixed Income

Prudential Total Return Bond

Prudential Total Return Bond exhibited continued strong performance for the year with the third quarter returning 0.95%

above the Barclays Aggregate Bond Index and 0.42% above the Intermediate Term Bond category peer group average.

Sector allocation was additive to performance, particularly from high yield, IG corporates and bank loans. An underweight

to Agency MBS was the largest performance detractor year-to-date and during the quarter, as these investments have

posted positive excess returns versus Treasuries on a duration-weighted basis. Additionally, an underweight to energy,

due to a high quality bias, was a security selection detractor for both the quarter and year-to-date. The strategy maintains

a slightly longer duration than the benchmark and the portfolio management team continues to favor spread sectors with a

particular emphasis on high-quality structured products.

Janus Flexible Bond I Performance for Janus Flexible Bond was 0.45% over the Barclays Aggregate Bond Index and just slightly behind the Intermediate Term Bond category peer group average. The team continued their defensive positioning by looking for credit opportunities that are backed by well-fortified balance sheets. As such, they increased their credit allocation slightly during the quarter to take advantage of attractive spread opportunities in corporates and bank loans. Security selection, particularly in the technology and financial sectors, was the top contributor for the quarter and contributed 1.47% of outperformance versus the benchmark. A sector underweight in long-duration wire lines (Verizon, AT&T) was the top detractor with restaurants a somewhat distant second. Following the departure of co-PM Gibson Smith at the end of the first quarter, the team continues to tweak the analyst, trading and risk management coverage. Shortly after quarter-end, Janus announced the merger between Janus and the U.K. based Henderson Group, with a target effective date of the second quarter in 2017. During the interim, both firms will run as separate entities while awaiting regulatory approval. From an investment leadership standpoint, the global CIO of the entire combined firm will be Enrique Chang, the current Janus CIO. Graham Kitchen, the current CIO of Henderson, will be the global head of equities and report to Chang. Kumar Palghat, currently on the Janus fixed income macro team, will be the global head of fixed income for the combined firm and will also report to Chang. Janus doesn‟t anticipate any change to process, team coverage, or management of the portfolios.

Underlying Funds

23

DoubleLine Total Return I DoubleLine Total Return rallied in the third quarter to outperform the Barclays Aggregate Bond Index by 0.37%, however it

underperformed the average peer by 0.15%. Performance was positively impacted by carry despite slightly declining

prices in many areas of the market due to rates rising. Structurally, the fund will almost always maintain a lower exposure

to interest rates relative to the index. Many of the securities in the portfolio pay significantly higher coupon payments

versus the index, which contributes positively to returns. Mortgages, specifically non-agency MBS, contributed positively

to performance. The lack of corporates in the portfolio contributed negatively to relative performance, however the team is

comfortable with the portfolio allocation strategy in place and doesn‟t anticipate making any significant changes. The

team‟s recent increased exposure to structured credit (ABS, CLO and CMBS) paid off moderately with additive

contributions across the board.

Alternatives


Deutsche Enhanced Commodity

The Deutsche Enhanced Commodity Strategy Fund returned -3.33%, versus the benchmark return of the Bloomberg

Commodity Index of -3.86%.

Positive contributors to return included the fund‟s enhanced beta momentum strategy and fixed income collateral. The

fund‟s overall exposure to commodities was reduced from 97% to 75% throughout the quarter as the market was

declining, thus providing some excess return versus benchmark.

A negative contributor to return was the fund‟s relative value alpha strategy, which was a detractor as the fund was

positioned with an overweight to crude and heating oil and an underweight to gold.

After a strong second quarter, the overall commodities complex gave up some of its earlier gains with a retractment in the

agriculture and energy sectors.

Global Real Estate

Principal Global Real Estate Securities

The Principal Global Real Estate fund returned 1.33%, versus the benchmark return of the FTSE NAREIT All REITS TR Index of -0.95%.

A key contributor to return was an overweight in Mirvac Group(1.65% portfolio weighting). Underlying earnings and fundamentals in the Australian housing market had been underappreciated, and investors rewarded the stock after its recent earnings release and upgraded guidance. Other contributors included an underweight to Canadian stocks, strong security selection in Australian residential, and exposure to the ongoing office recovery.

A key detractor to performance was an overweight in CubeSmart (1.40% portfolio weighting). Concerns over accelerating growth deceleration, driven by limited occupancy potential, peaking rental pricing power, back-to-normal expense run rates, and an uncertain impact from increasing new supply, had investors deeply worried about the group‟s large valuation premium.

The market may be returning to a focus on fundamentals, as opposed to its recent heavy focus on yield and low volatility. Such a change would be more consistent with the fund‟s philosophy and process, which is predicated on identifying companies that have attractive fundamentals trading at reasonable prices.

Underlying Funds

24

Passive Funds

Large Cap Blend

BlackRock Russell 1000 Index Fund

The tracking difference over the quarter to the Russell 1000 Index benchmark was 0.04%, well in line with our

expectations for the strategy.

BlackRock Equity Index

The tracking difference over the quarter to the S&P 500 Index benchmark was 0.01%, well in line with our expectations for

the strategy.

Small Cap Blend

BlackRock Russell 2000 Index Fund

The tracking difference over the quarter to the Russell 2000 Index benchmark was a positive 0.03%, well in line with our

expectations for the strategy.

BlackRock Extended Market

The tracking difference over the quarter to the Dow Jones U.S. completion Total Stock Market Index benchmark was a

negative 0.01%, well in line with our expectations for the strategy. The fund achieved a lower score in the RPAG

Scorecard System due to a different benchmark mandate; the fund tracks the Dow Jones U.S. completion Total Stock

Market Index while the Scorecard uses the Russell 2000 Index. The Dow Jones U.S. Completion Total Stock Market

Index includes more mid-cap companies than the Russell 2000, explaining the lower reported score.


BlackRock MSCI ACWI ex-U.S. IMI Index Fund

The tracking difference over the quarter to the MSCI ACWI ex-U.S. IMI Index benchmark was a positive 0.02%, well in

line with our expectations for the strategy. The fund achieved a lower score in the Scorecard System due to a different

benchmark mandate; the fund tracks the MSCI ACWI ex-U.S. IMI Index while the Scorecard uses the MSCI EAFE Index.

The MSCI ACWI ex-U.S. IMI Index includes more countries, including in the emerging markets, than the MSCI EAFE,

explaining the lower score. The tracking difference of the fund to the MSCI ACWI ex-U.S. IMI Index over the last three

years (the Scorecard‟s measured time period) was still in line with expectations at a positive 0.17%. Because of this and

its adjusted score of 10 against the MSCI ACWI ex-U.S. IMI Index, the fund was not placed on the Watch List.

Core Fixed Income

BlackRock U.S. Debt Index Fund

The tracking difference over the quarter to the Barclays U.S. Aggregate Bond Index benchmark was a positive 0.02%, well in line with our expectations for the strategy.

Underlying Funds

25


BlackRock U.S. TIPS Index Fund

The tracking difference over the quarter to the Barclays U.S. Treasury Inflation Protected Securities Index benchmark was a positive 0.06%, well in line with our expectations for the strategy.


Commodity Index Daily Fund

The tracking difference over the quarter to the Bloomberg Commodity Index benchmark was a negative 0.03%, well in line

with our expectations for the strategy.

Global Real Estate

Developed Real Estate Index Fund

The tracking difference over the quarter to the FTSE EPRA/NARIET Index benchmark was a negative 0.14%, well in line

with our expectations for the strategy.

*Performance source: MPI, as of 10/15/2016

Index Management

26

Our Index Management Process is Anything but Passive

flexPATH Strategies has selected BlackRock as the manager of the passive/index funds within the underlying

portfolios. We selected BlackRock based on their deep expertise in passively managed funds, size, scale and

low fees.

BlackRock is the largest index manager worldwide in indexed assets.

BlackRock manages 31 percent of all indexed assets worldwide.¹

The top five managers manage 85 percent of global indexed equity assets totaling $6.2 trillion.

BlackRock manages 32 percent of the overall indexed equity total: 24 percent of domestic equity

and 45 percent of international equity indexed assets.

BlackRock’s Approach to Index Management

Source: BlackRock. All data as of 06/30/15. Past Performance does not guarantee future results.

1. Pension & Investment Online Research Center

Size and Scale Matter

•Global leader in indexing with $2.8 trillion in index AUM.

•Invented the industry‟s first index fund in 1971.

Seeking Enhanced Performance

•Securities Lending program has shown positive monthly lending performance since the inception of the program.

•Potential for reduced transaction costs through netting of client flows.

Dedicated Team and Research

•Dedicated team of over 140 indexing professionals.

•Full resources of BlackRock from analytics to research to risk to compliance and operations.

Fees and Share Classes

27

Expenses are based off of funds and asset allocation ending 9/30/2016.

Expenses are based off of funds and asset allocation ending 9/30/2016.

Investment options and fees are current as of the date shown here and are subject to change. There is no assurance that the options and fees noted above will be maintained.

flexPATH I Shares Fund Fees

flexPATH Index I* Conservative Moderate Aggressive

Retirement 0.25% 0.24% 0.24%

2025 0.25% 0.24% 0.24%

2035 0.25% 0.24% 0.24%

2045 0.25% 0.24% 0.24%

2055 0.25% 0.24% 0.24%

flexPATH Index+ I Conservative Moderate Aggressive

Retirement 0.41% 0.42% 0.43%

2025 0.43% 0.44% 0.46%

2035 0.45% 0.46% 0.47%

2045 0.47% 0.48% 0.48%

2055 0.48% 0.48% 0.48%

flexPATH R Shares Fund Fees

flexPATH Index R Conservative Moderate Aggressive

Retirement 0.20% 0.19% 0.19%

2025 0.20% 0.19% 0.19%

2035 0.20% 0.19% 0.19%

2045 0.20% 0.19% 0.19%

2055 0.20% 0.19% 0.19%

flexPATH Index+ R Conservative Moderate Aggressive

Retirement 0.41% 0.42% 0.43%

2025 0.43% 0.44% 0.46%

2035 0.45% 0.46% 0.47%

2045 0.47% 0.48% 0.48%

2055 0.48% 0.48% 0.48%

Expenses shown are for the I1

share class with 0 bps of

shareholder servicing.

Additional share class options:

I2: 25 bps shareholder servicing

I3: 50 bps shareholder servicing

*flexPATH Index I shares contain 5

bps excess shareholder servicing

fees that will be credited back to

the plan or passed through, upon

agreement with the plan sponsor,

to pay flexPATH strategies 3(38)

asset allocation services fees,

which are contracted and billed

separately.

Expenses shown are for the R1

share class with 0 bps of revenue

sharing.

Additional share class options:

R2: 25 bps shareholder

servicing

R3: 50 bps shareholder

servicing

Provider Availability

28

Recordkeeping Platforms Availability

flexPATH has partnered with industry-leading recordkeeping platforms to make the flexPATH family of target date funds available for your clients.

As of 9/30/2016

Recordkeeper Name NAV/Mutual Fund Group Annuity

ABG ✓ ✓

ADP Access OFA only ($3M+)

American Funds No

Ascensus ✓ (includes Vanguard product)

Aspire ✓

BMO ✓

BPAS ✓

Charles Schwab ✓

DFA ✓

Empower Custom Key only ($3M+) No (Premier Key)

Fidelity Advisor ✓

Fidelity Direct ✓

John Hancock ✓ (Enterprise and TRS/legacy NYL) No

Lincoln ✓

MassMutual ✓

Available (SIA platform): I2/R2 Index+; (No legacy

Hartford/Aviator)

Mercer ✓

Milliman ✓

Mutual of Omaha No

Nationwide No

Northwest Plan Services ✓

OneAmerica ✓ Available on Institutional product, I2/R2 Index+

Pai ✓ (Moderate glidepath must be default)

Paychex ✓

Pensys ✓

Principal Financial ✓ (Advantage) ✓ (PCRP)

Prudential ✓ ✓

Securian ✓ Coming Soon

T.Rowe Price

OMNI (Enterprise & Tailored) only, not

available as QDIA on TRAC (Essential &

Focused)

The Newport Group ( Daily Access) ✓

The Standard ✓ NoTIAA-CREF ✓ (401k only)

Transamerica ✓ (Advisor series/$1M+) N0 (Director/Partner series)

Trautmann ✓

Vanguard ✓

Voya Plans over $5M Plans over $5M

Wells Fargo ✓

Trading platform availability

Please note: collective investment trusts are not available to 403(b) and non-governmental 457 (NQDC) plans

ADP, Ascensus, Fidelity-FIIOC, Fidelity-NFS, Great West, MassMutual, Matrix, Mid-Atlantic, OneAmerica/AUL, Principal,

Prudential, Schwab, TD Ameritrade, T. Rowe, Vanguard, Voya

Disclosures

flexPATH Strategies I 120 Vantis, Suite 400, Aliso Viejo, CA 92656 I 800.959.0071 I flexpathstrategies.com

Investment Advisory Services offered through flexPATH Strategies, LLC.

©2015 flexPATH Strategies, LLC. All Rights Reserved. The flexPATH Strategies name and logo are registered trademarks of flexPATH Strategies, LLC or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. FLEX-2015-1 ACR#171768 02/16

Index Definitions: US Aggregate Index. The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Provided the necessary inclusion rules are met, US Aggregateeligible securities also contribute to the multi-currency Global Aggregate Index and the US Universal Index, which includes high yield and emerging markets debt. The US Aggregate Index was created in 1986 with history backfilled to January 1, 1976. S&P 500. The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 7.8 trillion benchmarked to the index, with index assets comprising approximately USD 2.2 trillion of this total. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Dow Jones US Completion Total Stock Market Index. To represent all U.S. equity issues with readily available prices, excluding components of the S&P 500. To be included in the index, a security must be the primary equity issue of a U.S. company. Excluded are bulletin-board issues, because in general they do not have consistently readily available prices. — The index is weighted by float-adjusted market capitalization. — The Dow Jones U.S. Completion Total Stock Market Index was first calculated on January 30, 1987. MSCI ACWI Ex USA IMI. The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,056 constituents, the index covers approximately 99% of the global equity opportunity set outside the US. FTSE EPRA/NAREIT Developed Index. The FTSE EPRA/NAREIT Developed Index is designed to track the performance of listed real estate companies and REITS worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs). US Tips. The Barclays US Government Inflation-Linked Bond Index measures the performance of the US Treasury Inflation Protected Securities ("TIPS") market. The index includes TIPS with one or more years remaining maturity with total outstanding issue size of $500m or more. History for the TIPS index goes back to the inception of the market (1997) and returns are available in local currency and in most major currencies hedged or un-hedged. Sub indices are available by maturity. The TIPS index is the largest component of World Government inflation-linked index and is widely to benchmark the asset class. Bloomberg Commodities Index. The index is made up of 22 exchange-traded futures on physical commodities. » The index currently represents 20 commodities, which are weighted to account for economic significance and market liquidity. » Weighting restrictions on individual commodities and commodity groups promote diversification. Russell 1000 Index. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Russell 2000 Index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. Investing involves risk, including possible loss of principal. The funds are not FDIC insured and there is no bank guarantee. The principal value of the funds is not guaranteed at any time including at and after the target date. Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal. Investment in the funds is subject to the risks of the underlying funds.

flexPATH Strategies are Collective Investment Trusts available only to qualified plans and governmental 457(b) plans. They are not mutual funds and are not registered with the Securities and Exchange Commission. Wilmington Trust Retirement and Institutional Services Company serves as Trustee and is responsible for maintaining and administering the funds.


The data and information presented are for informational purposes only. The data and information contained herein should be treated in a confidential manner and may not be transmitted, reproduced or used in whole or in part for any other purpose, nor may it be disclosed without the prior written consent of flexPATH Strategies, LLC. By accepting this material, the Recipient agrees not to distribute or provide this information to any other person.

This material is qualified in its entirety by the flexPATH Target Date Funds (“the Funds”) offering memoranda and any supplements thereto, which may be obtained from flexPATH by calling 800.974.0188. Please refer to the offering documentation and Fund documents for further important information regarding the Funds, including the risks and costs associated with making investments in the Funds.

No representation regarding the suitability of these instruments and strategies for a particular investor or plan participant is made. Separately managed account and bank collective fund guidelines and strategies may differ and may involve different asset classes and different degrees and types of risks. Eligible plans should consider whether an investment in one or more of the Funds satisfies the diversification requirements and prudence requirements

Disclosures

flexPATH Strategies I 120 Vantis, Suite 400, Aliso Viejo, CA 92656 I 800.959.0071 I flexpathstrategies.com


©2015 flexPATH Strategies, LLC. All Rights Reserved. The flexPATH Strategies name and logo are registered trademarks of flexPATH Strategies, LLC or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. FLEX-2015-1 ACR#171768 02/16

of ERISA and/or other applicable law and regulations thereunder applied to the plans‟ own circumstances and should inform themselves as to any other applicable legal requirements, and taxation and exchange control regulations in the countries of their sponsors‟ or participants‟ citizenship, residence or domicile which might be relevant.

Predictions, opinions, and other information contained in this material are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Any forward-looking statements speak only as of the date they are made, and flexPATH Strategies assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those projected in these materials due to factors including, without limitation, economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, and competitive conditions.

flexPATH Strategies is not and will not become a fiduciary or investment advisor with respect to any person or plan by reason of providing this material. This material is intended solely for use by retirement plan sponsors, their consultants, and advisors to provide them background information. This material is not intended for use by the general public or for use by any retirement plan participants, nor is it an offer or solicitation to the general public or any retirement plan participants to buy or sell any investment products.

NO SECURITIES REGISTRATION: THE UNITS OFFERED BY THE FUNDS (“UNITS”) HAVE NOT BEEN REGISTERED WITH, AND THE MERITS OF THE OFFERING OF UNITS HAVE NOT BEEN PASSED UPON BY, THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE REGULATORY AGENCY IN RELIANCE ON EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS.

Market indexes are included in this report only as context reflecting general market results during the period. flexPATH Strategies may provide research on funds that are not represented by such market indexes. Accordingly, no representations are made that the performance or volatility of any fund where flexPATH Strategies provides research will track or reflect any particular index. Market index performance calculations are gross of management and performance incentive fees.

Scorecard System evaluates funds based proprietary research. Scorecard System results may vary with each use and over time. The use of the Scorecard System does not guarantee results. It is an investment analysis tool intended to aid in the investment decision making process. Any decision to invest in a fund should be made in consultation with qualified tax, legal or investment professional advice.

The performance data used in this material represents past performance. Past performance does not guarantee future results.

A mutual fund's investment return and principal value will fluctuate. Upon redemption, shares may be worth more or less than their original cost.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Neither NFP nor its subsidiaries or affiliates offer tax or legal advice.

Mutual funds are sold by prospectus only. Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of a mutual fund. The fund prospectus provides this and other important information. Please contact your representative or the Company to obtain a prospectus. Please read the prospectus carefully before investing or sending money.

Quarterly Update - AutoMEP€¦ · In today‟s marketplace, plan sponsors are faced with choosing...

Documents

Transcript of Quarterly Update - AutoMEP€¦ · In today‟s marketplace, plan sponsors are faced with choosing...