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Objectivity Experience Pro-Active Advice
Graystone Consulting28 State Street, Suite , Boston,, MA 02109Tel 504-561-6855 Fax 617-557-6966
5051 Westheimer Blvd, Suite 2100, Houston, TX 77056Tel 713-499-3024 Fax 713-499-3090
A BUSINESS OF MORGAN STANLEY SMITH BARNEY, LLC
Norman E. Nabhan, CIMA Managing Director Institutional Consulting Director
James Bee CIMASr. Vice PresidentSr. Investment ManagementConsultant
Dec 18, 2012
AMERICAN SOCIETY OF VARIABLE STAR OBSERVERS
Morgan Stanley A leading global financial services firm providing a wide range of investment banking, securities,
investment management and wealth management services. With over 45,000 employees the firm serves clients worldwide from more than 1,300 offices in 42 countries.
Morgan Stanley GraystoneA global leader in wealth management, provides access to a wide range of products and services to
individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, credit and lending, cash management, annuities and insurance, retirement and
trust services.
Alternative Investment Research 37 Alternative Investment Research analysts who employ rigorous due diligence to identify, evaluate and
select hedge funds, fund of funds, private equity and real estate investment.
Approximately 200 investment strategies are available to our clients.
Global Investment Committee (GIC) 22 member committee
comprised of senior professionals from Morgan Stanley Research, MSSB, Citi Investment Research & Analysis and
outside financial market experts.
Provides strategic and tactical capital markets advice across global asset classes
Consulting Group (CG) CG was established over 30 years ago
and is the managed-account unit of MSSB with over $500 Billion in
consulting assets.
266 Professionals that includes management, operations, technology, sales, marketing, legal and risk support
Investment Advisor Research Investment Advisor Research team has 26 experienced
manager research analysts who evaluate over 1,100 traditional
investment strategies.
Graystone Consulting Houston/Boston
Each client has the intellectual capital of their local Graystone Consultants as well as the entire MSSB organization workingtogether to achieve each client’s investment goals.
**The information presented shows the combined institutional consulting assets of Graystone Consulting, Consulting Group, and Morgan Stanley Global Wealth Manager Group as of December 31, 2010.
Graystone Consulting 43 U.S. Graystone Consulting Office
124 Consultants 195 Operations/Analysts
Consulting to over $151 Billion in assets**
Norm NabhanCIMA
Managing Director
James BeeSr. Vice President
3
ASVSO Service Team
Norman E. Nabhan, CIMA
Managing Director
Institutional Consulting Director
39 Years of Experience
James Bee, CIMA
Senior Vice PresidentSr. Investment
Management Consultant
18 Years of Experience
Scott GuptillResearch Analyst
5 Years of Experience
Elese JacksonGroup Administrator
11 Years of Experience
Jennifer ReardonRelationship Manager
16 Years of Experience
Institutional Consultants
Investment Policy Development
Asset Allocation Analysis
Portfolio Strategy and Rebalancing
Quarterly Performance and Other Client Meetings
Client Education
Analysts
Manager Searches
Performance Reporting
Performance Attribution
Other Customized Client Reports
Client Administration
Client Inquiries & Updates
Reallocations/Fund Movements
Marketing
Follow-up & Client Correspondence
Meeting Arrangements
4
Our Value Proposition» Independent, Objective, Client Centric Advice
» Graystone Consulting-Created to Avoid Conflicts of Interest
» Boutique Consulting Team backed by significant Capital Market and Research Resources
» Significant Industry Experience of the team that would be responsible for the Louisiana Assessor’s Association Fund.
» We believe strongly in an ongoing program of board education. We provide regular educational presentations on: Fiduciary Responsibility, asset allocation, capital markets, trends in Investing, etc.
5
As of 1-14-10. Consulting Group services are offered through Morgan Stanley Smith Barney. The listed clients may participate in various Consulting Group advisory
Allied Services Foundation
American Psychological Foundation
Aurora Foundation, Inc.
Capital Federal Foundation
Chrysalis Foundation
Consumer Health Foundation, Inc.
Cornerstone Foundation of Northeastern Wisconsin, Inc.
Coshocton Communication Foundation
Cupertino Educational Endowment Foundation
Decker Foundation
Dover Foundation Inc.
Edward W. Hazen Foundation
Etscheit Foundation
Five Bridges Foundation
Fullerton Foundation
Genesis Healthcare Systems Foundation
George Mason University Foundation
Heritage Hill Endowment Fund
Hilda E. Bretzlaff Foundation
K.C. Stock Foundation, Inc
.
Lee Hysan Foundation
Leever Foundation
Lithuanian Foundation, Inc.
Lumina Foundation for Education
Marianas Public Land Trust
Mercy Foundation of Des Moines
Michigan Turfgrass Foundation
Northeast Health Designated Fund
Otterbein Homes Endowment
Otterbein Homes Capital Reserve
Ohio Masonic Endowment Fund
Orchard Foundation
Pan American Health & Education Foundation
Princess Grace Foundation-USA
Ruth & Lovett Peters Foundation
Southern Minnesota Initiative Foundation
Steve & Cindy Van Andel Foundation
St Luke’s Episcopal Hosptal
St. Luke’s Health Initiatives-Phoenix
Sunflower Foundation
Wallace Research Foundation
Wyandotte Health Foundation
Institutional Consulting Representative Client ListFoundations & Endowments:
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Who We Consult To
ERISA Plans – 29 Clients Defined Contribution Plans and Defined Benefit Plans (over
$2.2 billion)
12 Defined Benefit Clients
12 Defined Contribution Clients
5 Defined Contribution and Defined Benefit Clients
Endowment and Foundations (over $1 billion)
Total Assets: > $5.0 billion
Representative Clients St. Luke’s Episcopal Health System Baker & Botts, LLP St. Luke’s Health Initiatives – Phoenix, AZ Bracewell & Guiliani, LLP Theater Under The Stars USA Funds
Broad Local and National Experience
MedSynergies United Regional Health Care System Riviana Foods Houston Country Club Indiana University Healthcare -Bloomington Valero Energy
Institutional Investor Solutions
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Our StrengthOur Duty is to assist Trustees in fulfilling their Fiduciary Responsibility. We help you execute anddocument the process that you need to be prudent fiduciaries.
Manager Searches documented with both, Quantitative data and
detailed written reports on Qualitative issues.
Cash Flow Analysis, Asset Allocation Development
and Asset Liability Modeling.
Quarterly Performance Evaluation customized to
client needs.
Ongoing Committee education on current and relevant topics.
Investment/ Spending Guidelines
and Policy Development
“Chief Investment Officer”
As your hired expert, our job is to serve as the
“Chief Investment Officer”
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142 Senior Research Analysts and Strategists
Graystone Consulting403Teams 125 Consultants over 260 Total Field Staff 20 Home Office Management Staff
GLOBAL INVESTMENT STRATEGY COMMITTEE
22 Economic/Investment Thought Leaders* Combined Resources of Graystone, Citi, Morgan Stanley, MSSB, Alternative Investment Partners
CONSULTING GROUPINVESTMENT ADVISOR RESEARCH
31 Investment Professionals Long only Equity – 16 analysts
Fixed Income – 7 analysts
Research Management – 3 analysts
Graystone TeamsInstitutional Research Analysts - 45
SINGLE MANAGER HEDGE FUNDS
16 Analysts*
PRIVATE EQUITY
10 Analysts*
REAL ESTATE
9 Analysts*
MANAGED FUTURES
9 Analysts*
10
Graystone Consulting
»Deliver access to a world-class platform of quality, independent investment firms
»Identify superior traditional and alternative investment money managers through a rigorous quantitative and qualitative research process
»Analyze the risks: investment risk, business risk, management risk and event risk
»Educate clients on investment manager trends, specific product characteristics and portfolio positioning of specific investment products
Information Gathering
Quantitative & Qualitative Analyses
RecommendationsAdvice
Information Gathering
Quantitative & Qualitative Analyses
Recommendations
Advice
Investment Advisor Research
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Services Provided for All-Inclusive Fee:
»We deliver a broad range of traditional, alternative, mutual funds and exchange traded fund options.
»Asset Allocation is tailored for Client’s specific goals.
»Research on over 1100 asset managers.
»Research flexibility allows us to identify niche investment opportunities.
Open Architecture For Investment Solutions Focusing On Client Needs
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KEY EVALUATION ASPECTS
Narrows the universe of managers
Evaluates managers in specific asset classes
Applies measurable criteria:
Return / return characteristics
Risk-Adjusted Performance
Style consistency
Portfolio turnover
STRATEGY / PROCESS
Sources of returns
Risk controls
Style analysis
Attribution analysis
Strategy implementation
PEOPLE AND ORGANIZATION
History and stability of firm
Background of key professionals
Business evaluation
Ownership structure
Compensation/incentive to key professionals
Personnel turnover
QUALITY OF RESEARCH
Proprietary systems and analytical tools
Depth and breadth of research process
Technology and business operations
Standards of Traditional Strategies Review Process
Quantitative Analysis Qualitative Assessment
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Research on over 1100 3rd party
managers, mutual funds and
ETFs
Performance Reportingand Fiduciary Education
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Institutional Performance Measurement: Total Fund Reports
For Illustrative Purposes Only
» Detailed, sophisticated performance reports designed for institutional investors and their auditors
16
Institutional Performance Measurement: Manager Reports and Risk Analysis
For Illustrative Purposes Only
» Performance reports include:
»Total fund statement
»Total fund asset allocation
»Manager attribution analysis
»Manager style analysis
»Total fund risk analysis
»Summary rates of return
17
Our Benefits: Commitment to Fiduciary Education and Communication
For Illustrative Purposes Only
Hypothetical Portfolio-with Tactical Allocation Strategy
Hypothetical Portfolio
»14% Santa Barbara Dividend Growth»11% Blackrock Equity Dividend»5% Orleans Capital Energy Opportunities»5% Center Coast Capital MLPs*»7.5% Cambiar International Value**»12.5% Lazard Emerging Markets»15% PIMCO Total Return»10% Emerging Markets Debt» 5% Spectrum Preferred Securities» 5% Alkeon Growth Strategy Hedge Fund»10% Skybridge Series G Fund of Funds
19
*Center Coast Capital incepted 2007, Alerian MLP Index is used for periods prior to inception in the following analysis
**Cambiar International Value SMA incepted in 2006, Cambiar International Value Mutual Fund used in the following analysis
20
Performance GraphManager PerformanceJuly 2004 - June 2012 (Single Computation)
60
80
100
120
140
160
180
200
220
240
Hypothetical PortfolioS&P 500
0%
50%
100%
Q2 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q2 2012
Cumulative Excess Returnvs. Market Benchmark
21
Annual Return Manager vs Benchmark: ReturnJuly 2004 - June 2012 (not annualized if less than 1 year)
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
S&P 500
1 year 3 years 5 years 7 years
5.71 16.23 3.89% 7.75%
6.33 16.64 2.56% 7.47%
-24.59 11.39 0.13% 8.09%
10.68 28.19 10.57% 13.49%
-10.90 10.89 -3.80% 3.74%
-8.34 14.06 1.02% 11.75%
7.84 8.36 8.94% 7.01%
4.28 16.47 11.29% 10.30%
6.50 17.90 4.77% 4.47%
0.58 10.75 9.40% 14.14%
1.26 12.75 5.63% 7.14%
0.89 14.75 5.79% 9.31%
5.45 16.40 0.22% 4.09%
22
Risk Return Statistics Custom TableJuly 2004 - June 2012: Summary Statistics
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
S&P 500
Return CumulativeReturn
StandardDeviation
SharpeRatio
Excess Returnvs.
Market
TrackingErrorvs.
Market
InformationRatiovs.
Market
Alphavs.
Market
Betavs.
Market
R-Squaredvs.
Market
8.69% 94.80% 15.01% 0.45 4.32% 6.02% 0.72 4.91% 0.80 89.46%
8.62% 93.82% 16.02% 0.42 4.25% 5.17% 0.82 4.64% 0.87 91.77%
12.96% 165.08% 35.56% 0.31 8.59% 26.49% 0.32 11.50% 1.40 48.40%
15.91% 225.72% 18.08% 0.77 11.54% 15.26% 0.76 13.46% 0.65 40.54%
4.36% 40.65% 23.96% 0.10 -0.01% 11.89% -0.00 0.29% 1.19 77.34%
14.64% 198.24% 26.77% 0.48 10.27% 14.13% 0.73 10.06% 1.32 76.71%
6.99% 71.67% 4.13% 1.23 2.62% 18.21% 0.14 7.08% -0.00 0.00%
11.37% 136.75% 10.79% 0.88 7.00% 11.48% 0.61 8.97% 0.48 61.06%
5.17% 49.66% 19.78% 0.16 0.80% 14.87% 0.05 2.33% 0.77 47.71%
12.29% 152.76% 16.57% 0.63 7.92% 16.02% 0.49 10.36% 0.53 31.95%
6.62% 66.95% 9.00% 0.52 2.25% 12.15% 0.18 4.63% 0.39 60.14%
10.21% 117.73% 13.32% 0.62 5.84% 7.48% 0.78 6.82% 0.69 85.14%
4.37% 40.80% 17.72% 0.14 0.00% 0.00% 0.00 0.00% 1.00 100.00%
23
Calendar Year Returns
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
S&P 500
YTD 2011 2010 2009 2008 2007 2006 2005
6.78% 5.87% 16.56% 18.51% -24.23% 13.11% 19.63% 7.88%
7.24% 6.70% 14.12% 23.19% -31.97% 15.78% 20.24% 13.62%
-10.27% -7.14% 27.76% 69.13% -53.39% 54.70% 4.70% 62.11%
-1.48% 19.28% 34.91% 76.58% -36.69% 12.65% 26.06% 6.32%
4.74% -8.08% 12.83% 42.88% -49.73% 19.68% 29.04% 5.55%
7.67% -15.89% 24.29% 67.93% -49.51% 31.43% 38.64% 36.19%
4.39% 6.19% 7.97% 12.92% 4.68% 8.80% 4.58% 2.61%
8.72% 1.94% 21.27% 44.78% -12.60% 4.23% 8.21% 7.64%
10.14% 2.89% 17.50% 46.70% -30.26% -7.58% 6.88% 3.25%
8.14% 0.22% 7.42% 30.62% -18.97% 56.65% 16.96% 10.39%
8.34% -0.63% 17.21% 21.79% -19.62% 14.03% 8.69% 5.67%
5.88% 0.70% 17.76% 34.28% -26.21% 17.83% 16.73% 13.83%
9.49% 2.11% 15.06% 26.46% -37.00% 5.49% 15.79% 4.91%
Calendar Year ReturnAs of June 2012
24
Standard DeviationManager vs Benchmark: Standard DeviationJuly 2004 - June 2012 (not annualized if less than 1 year)
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
S&P 500
1 year 3 years 5 years 7 years
23.78 17.70 18.45% 15.85%
21.06 16.68 19.48% 17.01%
38.90 34.07 41.62% 37.49%
18.89 14.16 21.10% 18.91%
30.03 22.93 28.57% 25.05%
32.36 24.79 30.84% 28.23%
1.22 3.47 4.23% 4.23%
15.84 11.80 13.26% 11.25%
11.17 11.76 25.03% 21.11%
20.10 13.10 17.45% 16.37%
11.42 8.50 11.00% 9.54%
18.14 14.09 16.22% 14.12%
25.37 19.02 21.75% 18.66%
25
3 Year Risk Return Profile Risk / ReturnSeptember 2009 - June 2012 (Single Computation)
Ret
urn
0%
5%
10%
15%
20%
25%
30%
Standard Deviation
0% 5% 10% 15% 20% 25% 30%
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
Market Benchmark:S&P 500Cash Equivalent:Citigroup 3-month T-bill
Capital Market Line
26
5 Year Risk Return Profile Risk / ReturnSeptember 2007 - June 2012 (Single Computation)
Ret
urn
-5%
0%
5%
10%
15%
Standard Deviation
0% 5% 10% 15% 20% 25% 30% 35%
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
Market Benchmark:S&P 500Cash Equivalent:Citigroup 3-month T-bill
Capital Market Line
27
7 Year Risk Return Profile Risk / ReturnJuly 2005 - June 2012 (Single Computation)
Ret
urn
0%
2%
4%
6%
8%
10%
12%
14%
16%
Standard Deviation
0% 5% 10% 15% 20% 25% 30% 35% 40%
Santa Barbara Dividend Growth
BlackRock: Equity Dividend
Orleans Capital Energy Opportunities
Center Coast plus Alerian backfill
Cambiar International Equity
Lazard Emerging Markets
PIMCO Total Return
TCW Emerging Markets Income
Spectrum Preferred Securities
Alkeon Growth Strategy
Skybridge Multi-Adviser Series G
Hypothetical Portfolio
Market Benchmark:S&P 500Cash Equivalent:Citigroup 3-month T-bill
Capital Market Line
Fees and Services
Consulting Fees» We would propose an all-inclusive annual asset based fee of:
» Investment Consulting on:
.54% on the first $5 Million
.32% on the next $5 Million
.16% on the next $15 Million
The fee includes:1. Investment Policy Development and Review2. Asset Allocation Analysis3. Manager Review and Searches4. Quarterly Performance Evaluation5. Custody (Optional)6. All transaction costs for trades executed on trading desk at zero cents per share7. Trustee Education and training8. Travel
We consider this fee to be competitive for the following reasons:
» The fee is all-inclusive of our services, custody and all execution costs. When compared to other fee bids that require paying additionally for custody and transaction costs, our fees should be highly competitive. According to the Elkins McSherry annual transaction cost survey, trading costs for New York Stock Exchange stocks in 2010 were 19.69 basis points and higher for NASDAQ, while Global stock trading costs were 41.38 basis points. Custody costs can range from 5 to 10 basis points plus transaction settlement fees. These costs would be eliminated.
29
Asset Management Fees» In addition, due to our size and scope in the industry and our investment in trading and back office support, if we act
as custodian of your assets, we can hire over 350 asset management firms, at lower management fees than many other consultants. Fees for equity managers are generally:
» Equity Managers .47%» Fixed Income Managers .20% to .32%
» NOTE: Should The American Society of Variable Star Observers add alternative asset managers, the fees for those types of managers may be higher and vary greatly from manager to manager due to their respective strategy and structure. All fees for these types of investments would be fully disclosed on a case by case basis.
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Resources of one of the leading providers of investment advice:
Your global financial advocate Breadth of investment strategy, technical and research
professionals Range of financial services including markets and banking,
wealth management, lending, trust, capital markets and others
Robust benefits of an investment leader:
Unbiased investment research; relentless in pursuit of results
Objective in all recommendations Full disclosure of fees Highest standards of ethical behaviour
Customized local advice; world class services:
Comprehensive approach to fiduciary investment advice Decisions tailored to your unique needs Detailed performance reporting and ongoing monitoring Full-service team delivering personalized services Fully committed to Louisiana
The Power of an Industry Leader
Graystone Consulting
Boston/Houston Team
The Advantages of Working with Graystone Consulting