Objectivity Experience Pro-Active Advice

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1 A BUSINESS OF MORGAN STANLEY SMITH BARNEY, LLC Norman E. Nabhan, CIMA Managing Director Institutional Consulting Director AMERICAN SOCIETY OF VARIABLE STAR OBSERVERS James Bee CIMA Sr. Vice President Sr. Investment Management Consultant Objectivity Experience Pro-Active Advice Graystone Consulting 28 State Street, Suite, Boston,, MA Tel Fax Dec 18, Westheimer Blvd, Suite 2100, Houston, TX Tel Fax

2 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 Graystone A 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. 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 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. Investment Advisor Research Investment Advisor Research team has 26 experienced manager research analysts who evaluate over 1,100 traditional investment strategies. 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 Graystone Consulting 43 U.S. Graystone Consulting Office 124 Consultants 195 Operations/Analysts Consulting to over $151 Billion in assets** Graystone Consulting Houston/Boston Norm Nabhan CIMA Managing Director James Bee Sr. Vice President Each client has the intellectual capital of their local Graystone Consultants as well as the entire MSSB organization working together 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.

3 ASVSO Service Team Norman E. Nabhan, CIMA Managing Director Institutional Consulting Director 39 Years of Experience James Bee, CIMA Senior Vice President Sr. Investment Management Consultant 18 Years of Experience Institutional Consultants Investment Policy Development Asset Allocation Analysis Portfolio Strategy and Rebalancing Quarterly Performance and Other Client Meetings Client Education Scott Guptill Research Analyst 5 Years of Experience Jennifer Reardon Relationship Manager 16 Years of Experience Analysts Manager Searches Performance Reporting Performance Attribution Other Customized Client Reports 3 Elese Jackson Group Administrator 11 Years of Experience 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. 4

5 Institutional Consulting Representative Client List Foundations & Endowments: 5 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 As of Consulting Group services are offered through Morgan Stanley Smith Barney. The listed clients may participate in various Consulting Group advisory

6 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 MedSynergies United Regional Health Care System Riviana Foods Houston Country Club Indiana University Healthcare -Bloomington Valero Energy 6 Broad Local and National Experience

7 Institutional Investor Solutions

8 Our Strength Our Duty is to assist Trustees in fulfilling their Fiduciary Responsibility. We help you execute and document the process that you need to be prudent fiduciaries. Investment/ Spending Guidelines and Policy Development Ongoing Committee education on current and relevant topics. Chief Investment Officer As your hired expert, our job is to serve as the Chief Investment Officer Cash Flow Analysis, Asset Allocation Development and Asset Liability Modeling. Quarterly Performance Evaluation customized to client needs. Manager Searches documented with both, Quantitative data and detailed written reports on Qualitative issues. 8

9 142 Senior Research Analysts and Strategists Graystone Consulting 403Teams 125 Consultants over 260 Total Field Staff 20 Home Office Management Staff CONSULTING GROUP INVESTMENT ADVISOR RESEARCH 31 Investment Professionals Long only Equity 16 analysts Fixed Income 7 analysts Research Management 3 analysts Graystone Teams Institutional Research Analysts - 45 SINGLE MANAGER HEDGE FUNDS 16 Analysts* PRIVATE EQUITY 10 Analysts* REAL ESTATE 9 Analysts* MANAGED FUTURES 9 Analysts* GLOBAL INVESTMENT STRATEGY COMMITTEE 9 22 Economic/Investment Thought Leaders * Combined Resources of Graystone, Citi, Morgan Stanley, MSSB, Alternative Investment Partners

10 Graystone Consulting Investment Advisor Research»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 Recommendations Advice Advice Recommendations Quantitative & Qualitative Analyses Qualitative Quantitative & Analyses Information Gathering Information Gathering 10

11 Open Architecture For Investment Solutions Focusing On Client Needs 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. 11

12 Standards of Traditional Strategies Review Process Quantitative Analysis Qualitative Assessment KEY EVALUATION ASPECTS Narrows the universe of managers Evaluates managers in specific asset classes Applies measurable criteria: Return / return characteristics Risk-Adjusted Performance PEOPLE AND ORGANIZATION History and stability of firm Background of key professionals Business evaluation Ownership structure Compensation/incentive to key professionals Personnel turnover STRATEGY / PROCESS Sources of returns Risk controls Style analysis Attribution analysis Strategy implementation QUALITY OF RESEARCH Proprietary systems and analytical tools Depth and breadth of research process Technology and business operations Style consistency Portfolio turnover 12

13 13 Research on over rd party managers, mutual funds and ETFs

14 Performance Reporting and Fiduciary Education

15 Institutional Performance Measurement: Total Fund Reports» Detailed, sophisticated performance reports designed for institutional investors and their auditors 15 For Illustrative Purposes Only

16 Institutional Performance Measurement: Manager Reports and Risk Analysis» Performance reports include:»total fund statement»total fund asset allocation»manager attribution analysis»manager style analysis»total fund risk analysis»summary rates of return 16 For Illustrative Purposes Only

17 Our Benefits: Commitment to Fiduciary Education and Communication 17 For Illustrative Purposes Only

18 Hypothetical Portfolio-with Tactical Allocation Strategy

19 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 *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 19

20 Performance Graph Manager Performance July June 2012 (Single Computation) Hypothetical Portfolio S&P % 50% Cumulative Excess Return vs. Market Benchmark 0% Q Q Q Q Q Q Q Q

21 Annual Return Manager vs Benchmark: Return July June 2012 (not annualized if less than 1 year) 1 year 3 years 5 years 7 years 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 % 7.75% % 7.47% % 8.09% % 13.49% % 3.74% % 11.75% % 7.01% % 10.30% % 4.47% % 14.14% % 7.14% % 9.31% % 4.09% 21

22 Risk Return Statistics Custom Table July June 2012: Summary Statistics Return Cumulative Return Standard Deviation Sharpe Ratio Excess Return vs. Market Tracking Error vs. Market Information Ratio vs. Market Alpha vs. Market Beta vs. Market R-Squared vs. Market 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 % 94.80% 15.01% % 6.02% % % 8.62% 93.82% 16.02% % 5.17% % % 12.96% % 35.56% % 26.49% % % 15.91% % 18.08% % 15.26% % % 4.36% 40.65% 23.96% % 11.89% % % 14.64% % 26.77% % 14.13% % % 6.99% 71.67% 4.13% % 18.21% % % 11.37% % 10.79% % 11.48% % % 5.17% 49.66% 19.78% % 14.87% % % 12.29% % 16.57% % 16.02% % % 6.62% 66.95% 9.00% % 12.15% % % 10.21% % 13.32% % 7.48% % % 4.37% 40.80% 17.72% % 0.00% % % 22

23 Calendar Year Returns Calendar Year Return As of June 2012 YTD 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 % 5.87% 16.56% 18.51% % 13.11% 19.63% 7.88% 7.24% 6.70% 14.12% 23.19% % 15.78% 20.24% 13.62% % -7.14% 27.76% 69.13% % 54.70% 4.70% 62.11% -1.48% 19.28% 34.91% 76.58% % 12.65% 26.06% 6.32% 4.74% -8.08% 12.83% 42.88% % 19.68% 29.04% 5.55% 7.67% % 24.29% 67.93% % 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% % 4.23% 8.21% 7.64% 10.14% 2.89% 17.50% 46.70% % -7.58% 6.88% 3.25% 8.14% 0.22% 7.42% 30.62% % 56.65% 16.96% 10.39% 8.34% -0.63% 17.21% 21.79% % 14.03% 8.69% 5.67% 5.88% 0.70% 17.76% 34.28% % 17.83% 16.73% 13.83% 9.49% 2.11% 15.06% 26.46% % 5.49% 15.79% 4.91% 23

24 Standard Deviation Manager vs Benchmark: Standard Deviation July June 2012 (not annualized if less than 1 year) 1 year 3 years 5 years 7 years 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 % 15.85% % 17.01% % 37.49% % 18.91% % 25.05% % 28.23% % 4.23% % 11.25% % 21.11% % 16.37% % 9.54% % 14.12% % 18.66% 24

25 3 Year Risk Return Profile Risk / Return September June 2012 (Single Computation) 30% 25% Santa Barbara Dividend Growth BlackRock: Equity Dividend Orleans Capital Energy Opportunities 20% Center Coast plus Alerian backfill Cambiar International Equity Return 15% Lazard Emerging Markets PIMCO Total Return TCW Emerging Markets Income 10% 5% 0% 0% 5% 10% 15% 20% 25% 30% Standard Deviation Spectrum Preferred Securities Alkeon Growth Strategy Skybridge Multi-Adviser Series G Hypothetical Portfolio Market Benchmark: S&P 500 Cash Equivalent: Citigroup 3-month T-bill Capital Market Line 25

26 5 Year Risk Return Profile Risk / Return September June 2012 (Single Computation) 15% Santa Barbara Dividend Growth 10% BlackRock: Equity Dividend Orleans Capital Energy Opportunities Center Coast plus Alerian backfill Cambiar International Equity Return 5% Lazard Emerging Markets PIMCO Total Return TCW Emerging Markets Income 0% -5% 0% 5% 10% 15% 20% 25% 30% 35% Spectrum Preferred Securities Alkeon Growth Strategy Skybridge Multi-Adviser Series G Hypothetical Portfolio Market Benchmark: S&P 500 Cash Equivalent: Citigroup 3-month T-bill Capital Market Line 26 Standard Deviation

27 7 Year Risk Return Profile Risk / Return July June 2012 (Single Computation) 16% 14% Santa Barbara Dividend Growth BlackRock: Equity Dividend 12% Orleans Capital Energy Opportunities Center Coast plus Alerian backfill 10% Cambiar International Equity Return 8% Lazard Emerging Markets PIMCO Total Return TCW Emerging Markets Income 6% Spectrum Preferred Securities Alkeon Growth Strategy 4% Skybridge Multi-Adviser Series G 2% 0% 0% 5% 10% 15% 20% 25% 30% 35% 40% Hypothetical Portfolio Market Benchmark: S&P 500 Cash Equivalent: Citigroup 3-month T-bill Capital Market Line 27 Standard Deviation

28 Fees and Services

29 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 Review 2. Asset Allocation Analysis 3. Manager Review and Searches 4. Quarterly Performance Evaluation 5. Custody (Optional) 6. All transaction costs for trades executed on trading desk at zero cents per share 7. Trustee Education and training 8. 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 basis points and higher for NASDAQ, while Global stock trading costs were basis points. Custody costs can range from 5 to 10 basis points plus transaction settlement fees. These costs would be eliminated. 29

30 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. 30

31 The Advantages of Working with Graystone Consulting Boston/Houston Team 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 Graystone Consulting 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 The Power of an Industry Leader 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 31