insidedwp.ladwp.com · 1/27/2016 · Executive Summary The Los Angeles Water & Power Employees Retirement System recently hired BlackRock to complete a US small cap equity transition

The Los Angeles Water & Power

Employees Retirement System

US Small Cap Equity Transition Update

January 27, 2016

FOR USE WITH INSTITUTIONAL INVESTORS ONLY – PROPRIETARY AND

CONFIDENTIAL

The opinions expressed are as of January 2016 and may change as subsequent

conditions vary.

Executive Summary

1. Executive Summary

2. BlackRock Post Trade Reports

3. Harbor Analytics Independent 3rd Party Analysis

2 For use with Institutional Investors Only - Proprietary and Confidential

Executive Summary

Executive Summary

The Los Angeles Water & Power Employees Retirement System recently hired BlackRock to complete a US small cap equity

transition to fund an investment with Emerald’s separate account strategy. Both the Retirement and Health plans transitioned

during this event. The total portfolio value for the Retirement plan was approximately $119 million and the total portfolio value

for the Health plan was approximately $19 million. The transition was completed in the estimated timeframe commencing on

November 12th and completed by November 30th.

Highlights

Executed trades with 17 counterparties across both plans in order to source best execution

Traded 28% on the first trading day, completion after 7 days across both plans

$252 million round trip traded value across both plans

An independent third party review confirmed BlackRock’s stated transition results

Performance results almost exactly at mean estimated costs for both plans:

4

Pension Plan Performance

-98 bps 0 bps -49 bps

Total Cost -50 bps

Health Plan Performance

-98 bps 0 bps -49 bps

Total Cost -48 bps

Post Trade Reports

Transition Management Analytics Focused. Performance Driven.

A post-transition analysis from BlackRock for

4-Dec-15

The Los Angeles Water & Power Employees' Retirement System

Pension Plan - US Equity Restructuring

Summary Timeline of Main Events

Date Event

24-Nov-15 Last day of market tradingFirst day of market trading

13-Nov-15 BlackRock received the initial reconciled list

4-Dec-2015 The Los Angeles Water & Power Employees' Retirement System Reporting Currency: USD

Summary of Transition Page 1 of 8

12-Nov-15 BlackRock received the certified asset list from NT and began managing the legacy accounts

13-Nov-15 Benchmark date

16-Nov-15 BlackRock received the final reconciled list

30-Nov-15 Assets and cash were transferred to target manager Emerald

16-Nov-15

Executive Summary BlackRock was hired by The Los Angeles Water & Power Employees’ Retirement System (“LADWP”) to rebalance plan assets for both the Pension Plan and the Health Plan. While both transition events were considered separate events, the transition rebalance for both plans occurred simultaneously. This post-trade analysis covers the Pension Plan. On November 12, 2015 BlackRock took over portfolio management responsibilities of the transition account held at Northern Trust. Next, target manager Emerald team provided the BlackRock Transitions team with a wishlist for the target strategy. BlackRock began by setting aside approximately $2.92 million worth of securities from the legacy portfolio that overlapped with the target portfolio. These securities were set aside and not traded. The remaining required trading began on November 16 and was completed on November 24. BlackRock rebalanced the portfolio using agency trading via external crossing and open market trades. The potential overall cost of the transition, as measured by implementation shortfall, was estimated to fall between -98 basis points and +0 basis points (1 standard deviation). The actual implementation shortfall was -50 basis points of the legacy asset value, which fell right around the mean estimate of -49 basis points. Performance details and execution results for the transaction can be found on the following pages.

Risk Management Page 2 of 8


BlackRock managed the four dimensions of risk throughout the transition as follows: Exposure Risk What is it: Also known as investment risk, this is risk associated with undesirable market exposure, including factors that can have a negative effect on the value of the portfolio How BlackRock addressed it • Traded in a dollar neutral manner to ensure market exposure throughout the transition period • Coordinated with the target manager in order to maintain market exposure throughout the transition • BlackRock neutralized the sector misweights at the commencement of trading

• We were able to neutralize sector misweights particularly within the Financials and Industrials sectors, bringing the portfolio very close to the sector profile of the target

• Once sector misweights were neutralized, we continued making progress in a dollar neutral manner • Once sector neutrality became a minimal contributor to risk, we shifted gears away from sector neutrality and aimed for higher rates of

completion

Execution Risk What is it: Risk of using inadequate trading venues, especially for illiquid asset classes How BlackRock addressed it: • All transactions executed as agent and as fiduciary • Crossed a portion of the security trades via external crossing venues • Used multiple counterparties and venues to complete the required equity trades • Utilized various underlying brokers and liquidity sources

Process Risk What is it: Risk that costs are incurred due to communication gaps and unchecked assumptions How BlackRock addressed it: • Held conference calls with the client, Northern Trust, and the target manager to discuss timeline and other transition expectations Operational Risk What is it: Risk that operational details-such as account set up and reconciliation are over looked or delayed How BlackRock addressed it: • Monitored account to ensure all market trades settled • Ensured the timely completion of asset transfers

Overlap Overlap

External Cross External Cross

Open Market Trade Open Market Trade

Portfolio Activity Page 3 of 8

Pre-Transition Estimate Actual Results Difference

Trade Value Total (%) Trade Value Total (%) Total (%)

5,903,309 3% 5,847,698 3% 0%

185,830,990 83% 188,468,864 85% 2%

31,746,622 14% 28,162,014 13% -2%

223,480,922 100% 222,478,576 100% 0%


Transition from legacy to target portfolios

Buy Trade $111,358,356

The following schematic details the activity breakdown that took place when moving from the legacy to target portfolios.

The above results are aggregated in a table below and showed versus the projected activity breakdown on pre-transition analysis.

Legacy Value Target Value

Cash $3,699,881

Cash $9,866,023

Sell Trade $105,272,522

Open Market Trade $91,587,094


External Cross $14,476,586

Overlap $2,923,849


Start Date

End Date

Return (%)

Transition Account

Target Portfolio

Total Implementation Shortfall


Absolute Performance Page 4 of 8

-0.50%

3.72%

4.23%

11/13/2015

11/30/2015

Performance Commentary Implementation shortfall, as measured by the return of the transition account versus the return of the target portfolio from November 13 through November 30, was -0.50%. Market Commentary (11/16) U.S. stocks rebounded after their worst week since an August selloff, paced by energy shares amid speculation that any fallout from Friday’s terrorist attacks in Paris would have a limited economic impact. Russell 2000 Index was up 0.8%. Market Commentary (11/17) U.S. stocks were little changed as a drop in energy shares offset higher-than-forecast earnings from retail. Stabilizing inflation (CPI came in at 0.2%, as expected) strengthened sentiment that the Fed will raise interest rates in December. Treasury yields also reached a one-week high after inflation showed an increase in US consumer prices, solidifying expectations for the rate hike in December. Russell 2000 Index ended slightly down (0.25%) compared to Monday's close after a volatile day. Market Commentary (11/18) The S&P 500 rallied the most in almost a month as Federal Reserve meeting minutes revealed policy makers think the economy is strengthening enough to withstand higher interest rates as soon as next month. Russell 2000 Index rose over the course of the day and closed 1.6% up. The Fed stressed that the pace of any increases will be gradual. Banks and Biotech were the strongest sectors on Wednesday, both up over 2%. Yields on treasuries were little changed following the release of Fed minutes.

Sales Buys Total Total (bps) USD BPS

Commission*

Tax

Spread

Market Impact

Opportunity Costs

* Refer to the Broker Trading Report and Revenue Transparency sections for more details.

Implementation Shortfall (IS) Distribution


Pre-Transition Estimate Actual Results DifferenceUSD BPS

(133) (0)

(1,822) (0)

(78,236) (7) (7)

(0)

(576,300) (49) (240,779) (344,477) (585,256)

Transition Costs Page 5 of 8

(25) (5,220) (1)

(206,346) (18) (18)

(0) (117) (0)

(8,956) (1)

579,403 49 1,457,238 (1,461,478) (4,240)

(50)

Total Implementation ShortfallFrom 3,103 From 0 1,216,459 (1,805,955) (589,496) (50)

To (1,155,702) To (98)

(126,977)

(78,073)

(1,939)

(33,791)

(295,117)

(209,832)

(1,939)

(78,369)

(168,140)

(131,759)

-

(44,578)

(3,486) (0)

(289,896) (25)

Transition Costs Costs are broken down into their component parts in the tables and graphs below. Commissions and taxes are a known cost, whereas spread and market impact are estimates and opportunity cost acts as the balancing item. Opportunity cost is broken down further into (as relevant) gain or loss on security trades caused by market movements between the closing prices on the benchmark date and the time of execution.

(49)

(98) 0

(50)

(300) (250) (200) (150) (100) (50) - 50 100 150 200

Implementation Shortfall (basis points)

Forecast T-cost

IS Distribution

Lower IS

Upper IS

Actual IS

Top Positive Contributors to Shortfall Top Negative Contributors to Shortfall Names Names

MASTEC INC. SELL APOGEE ENTERPRISES INC. BUY

TANGOE INC. SELL 8X8 INC. BUY

AMICUS THERAPEUTICS INC BUY EPAM SYSTEMS INC BUY

CELLDEX THERAPEUTICS INC SELL TREX INC CO BUY

OPUS BANK BUY MARINEMAX INC BUY

FLIR SYSTEMS INC SELL ALARM.COM HOLDINGS INC BUY

JACK HENRY & ASSOCIATES INC. SELL INTERFACE INC. BUY

CALLIDUS SOFTWARE INC. SELL BOOT BARN HOLDINGS INC SELL

SIGNATURE BANK SELL TUTOR PERINI CORP. BUY

BENEFITFOCUS INC SELL KFORCE INC. BUY

Total Total

Shortfall by SectorSectors

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Telecommunication Services

Total

Performance Attribution Page 6 of 8

87,131 (88,430)

71,665 (72,619)

69,010 (67,365)

86,735 (80,491)

74,549 (74,816)

118,668 (139,580)

Securities Variance (USD) Securities Variance (USD)

102,561 (104,901)

198,412 (161,698)

932,982

65,671 (66,825)

58,579 (63,186)

(919,914)

Net Transaction (USD) Securities Variance (USD)

(5,901,652) (63,231)

(233,039) 7,955

(563,535) (59,435)

(2,839,306) 320,542

2,131,849 (282,114)

3,030,251 (11,469)

10,252,944 (403,103)

361,149 (20,315)

(152,828) 1,985

6,085,834 (509,188)


Equity Broker Trading ReportEquity Broker Notional Amount # of Shares

BES

CITIGROUP GLOBAL MARKETS INC.

CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

GOLDMAN SACHS & CO.

ITG INC.

J.P. MORGAN SECURITIES LLC

MERRILL LYNCH, PIERCE, FENNER & SMI

MORGAN STANLEY & CO LLC

UBS SECURITIES LLC

Non BES

BARCLAYS CAPITAL INC.

BTIG, LLC

CANTOR FITZGERALD & COMPANY

JONESTRADING INSTITUTIONAL SERVICES

KEEFE BRUYETTE AND WOODS INC

PIPER JAFFRAY & CO.

ROBERT W BAIRD & CO INC

UBS SECURITIES LLC

WEEDEN & COMPANY LP

Total Commissions Paid

Transition Transparency Tool

Do you earn revenue by trading foreign exchange?

Do you earn revenue from internal crossing?

Do you earn revenue by acting in a principal capacity?

Do you receive revenue from an affiliate who acts in a principal capacity?

Do you earn revenue from order-flow payment, or participate in soft-dollar arrangements?

TOTAL HIDDEN REVENUE:

BLACKROCK AGENCY COMMISSIONS

Additionally, BlackRock-managed pooled fund products may be used during the restructuring with prior client consent. Such pooled fund products may also be inherited from a legacy

portfolio or be purchased for a target strategy. In such instances, BlackRock will earn an investment management fee on any such product (which is not included above).

271 646,222 18,033

779

432,859 24,657 247

1,919,094 51,940

99

1,710,289 115,723 1,157

93,896 6,578

1,496

143,691 21,510 323

701,299 99,758

820,369 30,055 180

966,574 767

36,103,536 1,357,981

11,804,875 470,262

51,151

35,259,318 1,190,187

60,480,591 1,833,004

252,679 8,175 82

8,127,734 389,790 3,898

11,158

7,465,184 297,546

1,115,758

13,580

11,902

4,703

18,330

6,423 13,857,077 642,310

Broker Report Page 7 of 8

78,369

BLK U.S. Transitions

0

Commissions

2,975

35,845,591

0

0

73,050

0

0

0


Contact Information Page 8 of 8

Contacts

Monika Lindeman Richard Metzgen

Managing Director, Head of Transition Management - Americas Director

Tel: 1 415 670 2202 Tel: 1 415 670 2271

Email: [email protected] Email: [email protected]

Rajeev Ghia Ece Erdagoz

Director Analyst

Tel: 1 415 670 2634 Tel: 1 415 670 6353



BlackRock Institutional Trust Company, N.A. (“BTC”) offers transition services to both its investment management clients and third party clients. Such transition services usually include brokerage services through its wholly owned subsidiary, BlackRock Execution Services (“BES”), member FINRA. BES receives commissions from the Client for trades that BES executes in the course of transitions services. BES itself purchases clearing or other brokerage services from third parties and/or affiliates with some or all of the commission that BES receives. The information contained herein, together with the performance results presented, is proprietary in nature and has been provided to you on a confidential basis, and may not be reproduced, copied or distributed without the prior consent of BTC. Past or estimated performance is no guarantee of future results. Actual results may differ depending on the size of the account, investment restrictions, transaction costs and expenses, when the account is opened, and other factors. Pre-trade analysis and other estimates contained in this document are merely estimates, and should not be relied on by investors. BTC does not provide investment advice regarding any security, manager or market. The information contained in this document is not intended to provide investment advice. BTC does not guarantee the suitability or potential value of any particular investment. Transition portfolios may be difficult to trade in adverse market conditions, and in the event of such market conditions, securities prices and volume can be expected to be quite volatile and transaction and market impact costs may be higher than anticipated. In addition, BTC’s use of certain strategies may be affected by government or regulatory restrictions. These materials are being provided for informational purposes only, and are not intended to constitute tax, legal or accounting advice. You should consult your own advisers on such matters. Additional information is available on request. Information contained herein is believed to be reliable but BTC does not warrant its accuracy or completeness. Information contained herein represents BTC’s own opinions. These materials are neither an offer to sell, nor a solicitation of any offer to buy, shares in any fund. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Strategy may differ materially from those reflected or contemplated in such forward-looking statements. The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Barclays Global Investors Ltd/NA. Neither MSCI, S&P nor any other party involved in the making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof) and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GCIS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

mailto:[email protected]




Transition Management Analytics Focused. Performance Driven.

A post-transition analysis from BlackRock for

4-Dec-15

The Los Angeles Water & Power Employees' Retirement System

Health Plan - US Equity Restructuring

Summary Timeline of Main Events

Date Event


Summary of Transition Page 1 of 8

16-Nov-15 BlackRock received the final reconciled list

16-Nov-15 First day of market trading

24-Nov-15 Last day of market trading

30-Nov-15 Assets and cash were transferred to target manager Emerald

12-Nov-15 BlackRock received the certified asset list from NT and began managing the legacy accounts

13-Nov-15 BlackRock received the initial reconciled list

13-Nov-15 Benchmark date

Executive Summary BlackRock was hired by The Los Angeles Water & Power Employees’ Retirement System (“LADWP”) to rebalance plan assets for both the Pension Plan and the Health Plan. While both transition events were considered separate events, the transition rebalance for both plans occurred simultaneously. This post-trade analysis covers the Health Plan. On November 12, 2015 BlackRock took over portfolio management responsibilities of the transition account held at Northern Trust. Next, target manager Emerald team provided the BlackRock Transitions team with a wish list for the target strategy. BlackRock began by setting aside approximately $475k worth of securities from the legacy portfolio that overlapped with the target portfolio. These securities were set aside and not traded. The remaining required trading began on November 16 and was completed on November 24. BlackRock rebalanced the portfolio using agency trading via external crossing and open market trades. The potential overall cost of the transition, as measured by implementation shortfall, was estimated to fall between -98 basis points and +0 basis points (1 standard deviation). The actual implementation shortfall was -48 basis points of the legacy asset value, which fell right around the mean estimate of -49 basis points. Performance details and execution results for the transaction can be found on the following pages.


Risk Management Page 2 of 8

BlackRock managed the four dimensions of risk throughout the transition as follows: Exposure Risk What is it: Also known as investment risk, this is risk associated with undesirable market exposure, including factors that can have a negative effect on the value of the portfolio How BlackRock addressed it • Traded in a dollar neutral manner to ensure market exposure throughout the transition period • Coordinated with the target manager in order to maintain market exposure throughout the transition • BlackRock neutralized the sector misweights at the commencement of trading

• We were able to neutralize sector misweights particularly within the Financials and Industrials sectors, bringing the portfolio very close to the sector profile of the target

• Once sector misweights were neutralized, we continued making progress in a dollar neutral manner • Once sector neutrality became a minimal contributor to risk, we shifted gears away from sector neutrality and aimed for higher rates of

completion

Execution Risk What is it: Risk of using inadequate trading venues, especially for illiquid asset classes How BlackRock addressed it: • All transactions executed as agent and as fiduciary • Crossed a portion of the security trades via external crossing venues • Used multiple counterparties and venues to complete the required equity trades • Utilized various underlying brokers and liquidity sources

Process Risk What is it: Risk that costs are incurred due to communication gaps and unchecked assumptions How BlackRock addressed it: • Held conference calls with the client, Northern Trust, and the target manager to discuss timeline and other transition expectations Operational Risk What is it: Risk that operational details-such as account set up and reconciliation are over looked or delayed How BlackRock addressed it: • Monitored account to ensure all market trades settled • Ensured the timely completion of asset transfers

Overlap Overlap

External Cross External Cross

Open Market Trade Open Market Trade

36,228,035 100% 36,083,474 100% 0%


5,146,335 14% 4,567,594 13% -2%

30,124,573 83% 30,567,742 85% 2%

0%957,126 3% 948,138 3%

Pre-Transition Estimate Actual Results Difference

Trade Value Total (%) Trade Value Total (%) Total (%)

Portfolio Activity Page 3 of 8

Transition from legacy to target portfolios

Buy Trade $18,068,003

The following schematic details the activity breakdown that took place when moving from the legacy to target portfolios.

The above results are aggregated in a table below and showed versus the projected activity breakdown on pre-transition analysis.

Legacy Value Target Value

Cash $580,467

Cash $1,594,176

Sell Trade $17,067,333




Overlap $474,069


Start Date

End Date

Return (%)

Transition Account

Target Portfolio

Total Implementation Shortfall

11/13/2015

11/30/2015


Absolute Performance Page 4 of 8

-0.48%

3.75%

4.24%

Performance Commentary Implementation shortfall, as measured by the return of the transition account versus the return of the target portfolio from November 13 through November 30, was -0.48%. Market Commentary (11/16) U.S. stocks rebounded after their worst week since an August selloff, paced by energy shares amid speculation that any fallout from Friday’s terrorist attacks in Paris would have a limited economic impact. Russell 2000 Index was up 0.8%. Market Commentary (11/17) U.S. stocks were little changed as a drop in energy shares offset higher-than-forecast earnings from retail. Stabilizing inflation (CPI came in at 0.2%, as expected) strengthened sentiment that the Fed will raise interest rates in December. Treasury yields also reached a one-week high after inflation showed an increase in US consumer prices, solidifying expectations for the rate hike in December. Russell 2000 Index ended slightly down (0.25%) compared to Monday's close after a volatile day. Market Commentary (11/18) The S&P 500 rallied the most in almost a month as Federal Reserve meeting minutes revealed policy makers think the economy is strengthening enough to withstand higher interest rates as soon as next month. Russell 2000 Index rose over the course of the day and closed 1.6% up. The Fed stressed that the pace of any increases will be gradual. Banks and Biotech were the strongest sectors on Wednesday, both up over 2%. Yields on treasuries were little changed following the release of Fed minutes.

Sales Buys Total Total (bps) USD BPS

Commission*

Tax

Spread

Market Impact

Opportunity Costs

* Refer to the Broker Trading Report and Revenue Transparency sections for more details.

Implementation Shortfall (IS) Distribution

(17,730)

(11,906)

(316)

(5,486)

(45,848)

(32,642)

(316)

(12,724)

(28,117)

(20,737)

-

(7,238)

807 0

(46,994) (25)

(48)

To (187,341) To (98)

(48)

Total Implementation ShortfallFrom 485 From 0 196,919 (288,654) (91,735)

Transition Costs Page 5 of 8

(24) 1,147 0

(33,449) (18) (17)

(0) (21) (0)

1,898 1

93,913 49 232,357 (232,562) (205)


Pre-Transition Estimate Actual Results DifferenceUSD BPS

(34) (0)

(295) (0)

(12,689) (7) (7)

(0)

(93,428) (49) (35,438) (56,092) (91,530)

Transition Costs Costs are broken down into their component parts in the tables and graphs below. Commissions and taxes are a known cost, whereas spread and market impact are estimates and opportunity cost acts as the balancing item. Opportunity cost is broken down further into (as relevant) gain or loss on security trades caused by market movements between the closing prices on the benchmark date and the time of execution.

(49)

(98) 0

(48)

(300) (250) (200) (150) (100) (50) - 50 100 150 200

Implementation Shortfall (basis points)

Forecast T-cost

IS Distribution

Lower IS

Upper IS

Actual IS

Top Positive Contributors to Shortfall Top Negative Contributors to Shortfall Names Names

MASTEC INC. SELL APOGEE ENTERPRISES INC. BUY

TANGOE INC. SELL 8X8 INC. BUY

AMICUS THERAPEUTICS INC BUY EPAM SYSTEMS INC BUY

CELLDEX THERAPEUTICS INC SELL TREX INC CO BUY

OPUS BANK BUY MARINEMAX INC BUY

FLIR SYSTEMS INC SELL ALARM.COM HOLDINGS INC BUY

JACK HENRY & ASSOCIATES INC. SELL INTERFACE INC. BUY

CALLIDUS SOFTWARE INC. SELL BOOT BARN HOLDINGS INC SELL

SIGNATURE BANK SELL TUTOR PERINI CORP. BUY

BENEFITFOCUS INC SELL KFORCE INC. BUY

Total Total

Shortfall by SectorSectors

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

Industrials

Information Technology

Materials

Telecommunication Services

Total


1,000,670 (78,695)

(699,610) (16,588)

1,526,607 (72,864)

(3,805) (1,731)

(527,143) 9,844

(120,961) 1,247

151,951 (8,277)

(389,000) 77,285

1,459,978 (49,802)

Net Transaction (USD) Securities Variance (USD)

(397,345) (17,809)

150,977

10,500 (10,831)

9,506 (10,241)

(144,142)

Securities Variance (USD) Securities Variance (USD)

16,624 (17,003)

32,413 (26,210)

19,252 (17,651)

14,137 (14,332)

11,492 (11,770)

11,196 (10,927)

14,060 (13,048)

11,798 (12,127)

Performance Attribution Page 6 of 8

Equity Broker Trading ReportEquity Broker Notional Amount # of Shares

BES

CITIGROUP GLOBAL MARKETS INC.

CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

GOLDMAN SACHS & CO.

ITG INC.

J.P. MORGAN SECURITIES LLC

MERRILL LYNCH, PIERCE, FENNER & SMI

MORGAN STANLEY & CO LLC

UBS SECURITIES LLC

Non BES

BARCLAYS CAPITAL INC.

BTIG, LLC

CANTOR FITZGERALD & COMPANY

JONESTRADING INSTITUTIONAL SERVICES

KEEFE BRUYETTE AND WOODS INC

PIPER JAFFRAY & CO.

ROBERT W BAIRD & CO INC

UBS SECURITIES LLC

WEEDEN & COMPANY LP

Total Commissions Paid

Transition Transparency Tool

Do you earn revenue by trading foreign exchange?

Do you earn revenue from internal crossing?

Do you earn revenue by acting in a principal capacity?

Do you receive revenue from an affiliate who acts in a principal capacity?

Do you earn revenue from order-flow payment, or participate in soft-dollar arrangements?

TOTAL HIDDEN REVENUE:

BLACKROCK AGENCY COMMISSIONS

Additionally, BlackRock-managed pooled fund products may be used during the restructuring with prior client consent. Such pooled fund products may also be inherited from a legacy

portfolio or be purchased for a target strategy. In such instances, BlackRock will earn an investment management fee on any such product (which is not included above).

0

0

11,861

0

0

0


Commissions

467

5,858,276

12,724

BLK U.S. Transitions

0

1,838

1,180,820 46,669

183,813

2,262

1,933

761

2,915

1,040 2,240,941 104,003

Broker Report Page 7 of 8

40,954 1,325 13

1,317,124 63,155 632

5,920,840 226,235

1,912,222 76,100

8,290

5,714,514 193,296

9,744,135 291,528

132,957 4,871 29

156,652 124

243

23,314 3,490 52

113,774 16,184

16

277,479 18,775 188

15,231 1,067

126

70,066 3,991 40

311,218 8,423

44 104,819 2,925

Director Analyst

Tel: 1 415 670 2634 Tel: 1 415 670 6353



Tel: 1 415 670 2202 Tel: 1 415 670 2271


Rajeev Ghia Ece Erdagoz

Contacts

Monika Lindeman Richard Metzgen

Managing Director, Head of Transition Management - Americas Director

Contact Information Page 8 of 8

BlackRock Institutional Trust Company, N.A. (“BTC”) offers transition services to both its investment management clients and third party clients. Such transition services usually include brokerage services through its wholly owned subsidiary, BlackRock Execution Services (“BES”), member FINRA. BES receives commissions from the Client for trades that BES executes in the course of transitions services. BES itself purchases clearing or other brokerage services from third parties and/or affiliates with some or all of the commission that BES receives. The information contained herein, together with the performance results presented, is proprietary in nature and has been provided to you on a confidential basis, and may not be reproduced, copied or distributed without the prior consent of BTC. Past or estimated performance is no guarantee of future results. Actual results may differ depending on the size of the account, investment restrictions, transaction costs and expenses, when the account is opened, and other factors. Pre-trade analysis and other estimates contained in this document are merely estimates, and should not be relied on by investors. BTC does not provide investment advice regarding any security, manager or market. The information contained in this document is not intended to provide investment advice. BTC does not guarantee the suitability or potential value of any particular investment. Transition portfolios may be difficult to trade in adverse market conditions, and in the event of such market conditions, securities prices and volume can be expected to be quite volatile and transaction and market impact costs may be higher than anticipated. In addition, BTC’s use of certain strategies may be affected by government or regulatory restrictions. These materials are being provided for informational purposes only, and are not intended to constitute tax, legal or accounting advice. You should consult your own advisers on such matters. Additional information is available on request. Information contained herein is believed to be reliable but BTC does not warrant its accuracy or completeness. Information contained herein represents BTC’s own opinions. These materials are neither an offer to sell, nor a solicitation of any offer to buy, shares in any fund. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Strategy may differ materially from those reflected or contemplated in such forward-looking statements. The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Barclays Global Investors Ltd/NA. Neither MSCI, S&P nor any other party involved in the making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof) and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GCIS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.





Third Party Review

Project Stephon

Transition Management Scorecard Transition Manager: Blackrock

Asset Class: US SMID Cap Equity

Date: December 2015

Harbor Analytics, Confidential Page 2

TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

TRANSITION OVERVIEW 5

TRANSITION DIFFICULTY RANKING 6

PRE TRADE EXPECTATIONS 7

DAILY VALUES 9

TRANSITION PERFORMANCE CHECK 10

TRADING PERIOD VS. SETTLEMENT PERIOD PERFORMANCE 11

RECONCILIATION TO PRE TRADE ANALYTICS 12

PORTFOLIO PERFORMANCE ACROSS ENTIRE PERIOD 13

INTRA-DAY PERFORMANCE – DAY ONE 14

PERFORMANCE ATTRIBUTION 15

INDIVIDUAL SECURITY ANALYSIS – LARGEST POSITIONS 16

MARKET CONDITIONS 17

LUCK FACTOR 18

TIMING & PARTICIPATION RATES 20

SECURITY PERFORMANCE DURING TRADING - LEGACY 21

SECURITY PERFORMANCE DURING TRADING - TARGET 22

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY ONE 24

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY TWO 25

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY THREE 26

SECTOR MANAGEMENT – DAY ONE 27

EXECUTION SIZE 29

VENUE ANALYSIS 30

BLOCK TRADING 31

INFORMATION LEAKAGE 32

COMPLIANCE EVALUATION 33

COST SIMULATION 35

HARBOR ANALYTICS UNIVERSE RANKINGS 36

ABOUT HARBOR ANALYTICS 37

GLOSSARY OF TERMS 38


Executive Summary

Assets in Transition Transition Timing Blackrock was hired by “Stephon” to transition approximately $117 million in US SMID Cap equities; Both portfolios were SMID-cap in nature although the target portfolio had a lower capitalization profile ($1.9b vs $3.4 b) The target was also less liquid than the legacy (16% vs. 12% of average daily volume).

The transition began with on November 16th and trading was completed on November 24th. The reporting in this document uses November 13th as a benchmark (implementation shortfall) and performance was calculated through final settlement date of November 27th.

Expected Cost Actual Cost Harbor Analytics estimated the cost of the transition at 70 basis points ($812k) +/- 40 basis points. Blackrock estimated the cost of the transition at 50 basis points ($586k) +/- 49 basis points. Harbor Analytics model assumes a 10% participation rate for all trading and calculates tracking error using the most recent performance history of the portfolios.

The actual cost of the transition was 50 basis points ($590k) which was 20 basis points or $222k lower than our mean estimate and within our expected range of cost (one standard deviation). The actual costs were virtually equal to Blackrock’s mean expected cost and obviously within their expected range of cost.

Above Expectations Within Expectations Below Expectations 1. The cost of the transition was better than

Harbor’s expectation and equal to the average SMID Cap transition in our universe (pgs. 7, 10, 36).

2. The risk management by Blackrock was good as “Stephon” was systematically exposed to the market across the entire period (pgs. 24-26) and sector risk was prioritized on day one (pg. 27). Blackrock was dealing with extremely difficult market conditions (pg. 17).

3. The larger block transactions had a lower cost than expected and did not reverse performance quickly after Stephon's trade (pgs. 29, 31)

4. Blackrock used unaffiliated dark pools to lower the cost of the event (pgs. 30)

1. The commission charges were slightly higher than our universe average although within reason for a transition of this size and scope (pgs. 7 & 12).

2. Tracking error was within expectations for the trading and settlement periods (pg. 11).

1. None

Compliance Pass Harbor Analytics measured whether the shares and market value traded by the transition manager (verified through time stamped

executions) match the aggregated trades reported to the custodian. To verify this, we calculate the actual average price executed by the transition manager and compare this against the actual price which was sent to the custodian each day.

Pass Harbor Analytics measured whether any individual security transition was outside the confines of the market (i.e. above the high of the day or below the low of the day). To verify this, we compare all of the time stamped executions against the total stock market activity for each security via Bloomberg.

Pass Harbor Analytics measured whether the same security was bought and sold during the transition which often is the result of an error by the transition manager. To verify this, we compare both SEDOL and ISIN to ensure the same security was not traded in error nor did the transition manager buy and sell fungible securities of the same issuer.


PRE TRANSITION OVERVIEW


Transition Overview

What Clients Should Look For Harbor Analytics Evaluation Liquidity The largest driver of transition cost is liquidity. Liquidity is

represented above as the percentage of 20 day average volume of each position.

Liquidity was below average for the transition as the average position was 14% of the average daily volume. There was an illiquid tail on both sides of the transition driven by the large mid and small cap allocations

Capitalization Shift

Performance can deviate significantly across market capitalizations and this can have a significant impact on the cost of a transition.

The weighted average capitalization was similar for both portfolios although the target portfolio was more heavily weighted towards small cap (less mid-cap) and this had a lower average cap.

Sector Risk Sectors can have large deviations in performance on a daily basis. Large shifts can have a significant impact on the cost of a transition.

Sector risk was muted in that the only large risk an increase in financials. Cash was being reduced in the transition therefore Blackrock needed to become a net buyer of approximately $5.5 million.

Portfolio Value Shares % of ADV # of NamesExpected

Cost 5-Day Return Volatility Av g PositionAv g Mkt

Cap (mm) % CashTarget 116,810,205 4,432,807 16.11% 107 -0.40% -4.18% 43.6% 0.93% $1,883 3.7%Legacy 116,810,205 3,291,611 12.06% 96 -0.30% -3.53% 36.2% 1.04% $3,363 8.4%Total/Variance 233,620,411 7,724,418 14.09% -0.70% -0.65% 7.3% -0.11% ($1,481) -4.8%

Portfolio Target Exp Cost Legacy Exp Cost Variance Portfolio Annual TE Daily TELarge Cap 0 0.00% 23,900,485 -0.16% 23,900,485 Target v s. Bench 3.71% 0.23%Mid Cap 38,455,417 -0.27% 40,495,700 -0.30% 2,040,283 Legacy v s. Bench 4.83% 0.31%Small Cap 74,065,411 -0.49% 42,547,998 -0.43% (31,517,413) Target v s. Legacy 5.22% 0.33%

GICS Sector Target % of ADV Legacy % of ADV Net Trading % of ADV Target Exp Cost Legacy Exp CostConsumer Discretionary 17,067,213 16.2% 14,026,688 11.1% (3,040,525) 0-1.0% 1,489,591 -0.22% 3,072,605 -0.18%Consumer Staples 0 0.0% 1,213,759 82.4% 1,213,759 1.0-2.5% 10,877,741 -0.26% 16,651,450 -0.22%Energy 916,206 5.5% 886,643 3.5% (29,563) 2.5-5.0% 13,764,902 -0.23% 17,768,240 -0.28%Financials 23,437,378 21.5% 12,686,174 20.7% (10,751,204) 5.0-7.5% 13,761,023 -0.40% 10,182,200 -0.24%Health Care 20,933,350 13.3% 23,581,496 5.8% 2,648,146 7.5-10% 4,333,653 -0.44% 18,594,385 -0.33%Industrials 14,275,569 21.3% 20,560,258 11.2% 6,284,689 10-15% 23,725,256 -0.38% 9,355,290 -0.39%Information Technology 28,047,762 10.6% 28,467,810 11.5% 420,048 15-20% 14,081,970 -0.45% 12,995,617 -0.42%Materials 935,112 10.0% 828,452 12.7% (106,660) 20-30% 14,849,704 -0.62% 8,513,358 -0.44%Telecommunication Serv ices 3,984,389 22.9% 1,769,054 16.1% (2,215,335) 30-40% 3,486,355 -0.65% 1,587,035 -0.51%Utilities 0 0.0% 0 0.0% 0 40-50% 2,280,456 -0.57% 0 0.00%In-Kinds 2,923,849 0.0% 2,923,849 0.0% 0 50-75% 5,747,768 -0.68% 4,086,395 -0.60%Cash/Hedges 4,289,377 0.0% 9,866,023 0.0% 5,576,646 75-100% 543,319 -0.87% 1,213,759 -0.59%Total 116,810,205 16.1% 116,810,205 12.1% 0 >100% 655,240 -0.71% 0 0.00%

SECTOR CHARACTERISTICS - INCLUDING IN-KIND TRANSFERS LIQUIDITY BREAKDOWN - EX IN-KIND TRANSFERS

TRADE CHARACTERISTICS

REGIONAL/ASSET CLASS BREAKDOWN TRACKING ERROR - INCLUDING IN-KIND TRANSFERS


Transition Difficulty Ranking

Harbor Analytics Transition Difficulty Ranking (“TDR”) normalizes transition costs across all transitions. The ranking is an indication of cost expectation that can be used to compare transitions of different asset sizes and asset classes.

What Clients Should Look For Harbor Analytics Evaluation

Liquidity The average liquidity for all transitions is measured based on the least liquid portfolio (target or legacy). The least liquid side is used as this will drive the timing of the transition.

The liquidity of this event ranks as a 7.65 which makes this transition harder than our average transition event. Liquidity is the largest dictator of cost as impact rises non-linearly as % of ADV increases.

Tracking Error Target versus legacy recent tracking error is measured to determine the recent variation between the two portfolios. This is an effective determinant of opportunity cost.

The tracking error of this event ranks as a 4.65 which makes this transition easier than our average transition event. Tracking error has a large effect on the potential opportunity cost of a transition.

Sector Risk Large sector shifts can have a huge impact on transition costs as sectors can deviate from long term correlations from day to day.

The sector risk of this event ranks as a 2.04 which makes this transition easier than our average transition event. Large sector risk can complicate the risk management of a transition.

Overall TDR Compare rank and avg cost of historical transitions Stephon’s trade was a 6.79/10.0 which is harder than our average event of 4.85. The average cost for similar transition is 40 basis points.

HISTORICAL COMPONENT ACTIVITY

Av g Transition Stephon Rank Av g Transition Stephon Rank Av g Transition Stephon Rank% of ADV 10.5% 16.11% 7.65 Target v s Leg 5.61% 5.22% 4.65 Av g Variance 6.79% 2.76% 2.04

Harbor Analytics TDR Ranking 6.79

HISTORICAL TRANSITION DIFFICULTY RANKING PERFORMANCE% of

Transitions Av g Cost% Better Than

Mean0 - 1 1% 0.08% 60%1 - 2 11% -0.14% 38%2 - 3 22% -0.20% 41%3 - 4 17% -0.28% 27%4 - 5 13% -0.30% 40%5 - 6 12% -0.34% 53%6 - 7 6% -0.40% 61%7 - 8 6% -0.84% 22%8 - 9 8% -0.88% 29%9 - 10 4% -1.01% 31%

TDR Ranking

Liquidity Tracking Error Sector Risk

0%10%20%30%40%50%60%70%80%90%

100%

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Harbor Analytics Transition Difficulty Rank

Historical Provider Performance

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Average Relative Performance

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Historical Cost vs. Tracking Error

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Sect

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Transition Cost

Historical Cost vs. Sector Risk


PRE TRADE EXPECTATIONS The goal of the provider assessment is to determine if the estimate provided was realistic. To best judge the nature of the provider’s estimate we compare their estimate to Harbor Analytics’ independent model. Harbor uses database averages for commissions, half the actual bid ask spread, academically accepted algorithms for calculating market impact and the most recent 50 days of performance to calculate expected opportunity costs.

What Clients Should Look For Harbor Analytics Evaluation Mean Cost Transition managers can be aggressive in their mean

estimate in an attempt to appear cheaper than their competitors

Blackrock’s mean estimate was lower than Harbor’s model which is normal within the industry; We do not estimate any savings associated with any trading methodology. Our model assumes a 10% volume participation rate.

Range of Cost Overly wide range of costs are a tactic of some transition managers to provide a cushion for an overly optimistic mean estimate

Blackrock’s range of cost was narrower than our model. Range of cost is a function of liquidity (duration of transition) and tracking error (deviation in performance between target and legacy during trading).

Commissions While commissions are typically the smallest cost component, clients should pay reasonable commissions for their services

Blackrock’s commissions were higher than the average US equity commission from our Transition Management Universes. Given the size of the transition, the commission costs were reasonable.

PRE TRADE COMPARISON

Mean Cost1 Std Dev Range of

Costs 1 Std Dev Max Cost 1 Std Dev Min Cost2 Std Dev Range of

Costs Trading DaysBlackrock -0.50% 0.490% -0.99% -0.01% -1.48% - 0.48% 4Harbor Analyt ics -0.70% 0.400% -1.10% -0.30% -1.50% - 0.10% 11Variance -0.19% -0.090% -0.10% -0.28% 0.01% - 0.37% 7

COST COMPONENT COMPARISON

Cost Blackrock (bps)Harbor Analyt ics

(bps) Variance (bps) Blackrock ($$ Cost)Harbor Analyt ics

($$ Cost) Variance ($$)Equity Commission -0.070% -0.059% 0.011% (81,767) (68,747) (13,020)Equity Spread and Impact -0.430% -0.635% -0.205% (502,284) (741,790) 239,506Taxes and Fees -0.001% -0.001% 0.000% (1,664) (1,664) 0Total -0.501% -0.695% -0.194% (585,715) (812,202) 226,487BPS is based upon port folio value and not t raded value.

HARBOR ANALYTICS COMMISSION COMPARISONAsset Class Blackrock (bps) Harbor Analyt ics VarianceEquity Commission (bps) -0.036% -0.030% -0.006%Equity Commission (cps) (1.01) (0.85) (0.16)Futures Commission (bps) 0.000% 0.003% NAFutures Commission (Per Contract) $0.00 $2.85 NA

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00%

Prob

ab

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Expected Shortfall

Distribution of Cost ComparisonHarbor AnalyticsBlackrock


TRANSITION PERFORMANCE


DAILY VALUES The following table and charts detail the value of each portfolio that was traded, the value transferred in-kind and also a daily valuation of the target and legacy portfolio for relevant dates of the transition.


Total Turnover Transition’s with a high percentage of in-kind transfers should have much lower cost

3% of the transition was transferred in-kind. This translates into 183% or $214 million in total equity turnover once cash is accounted for. The average transition Harbor analyzes has $551 million in turnover.

First Day Performance

First day performance should somewhat resemble prior period performance

The target outperformed the legacy portfolio by 3 bps on the first trade date. This is within expectations.

TRADING DETAILLegacy % Target %

Starting Value $116,810,205 100% $116,810,205 100%In-Kind Transfer $2,923,849 3% $2,923,849 3%Traded Value $104,020,333 89% $109,596,979 94%Cash $9,866,023 8% $4,289,377 4%

Proceeds $105,272,522 Cost $111,358,356Eqy Implicit Cost 1,252,189 Eqy Implicit Cost (1,761,377)bps 1.19% bps -1.58%

MARKET VALUESDate Legacy Daily Return Target Daily Return Notes11/6 $121,440,474 0.00% $122,260,829 0.00%11/9 $120,666,152 -0.64% $120,879,057 -1.13%11/10 $121,215,986 0.46% $120,936,173 0.05%11/11 $119,951,505 -1.04% $119,700,278 -1.02%11/12 $117,525,865 -2.02% $117,806,390 -1.58%11/13 $116,810,205 -0.61% $116,810,205 -0.85% Benchmark11/16 $117,602,951 0.68% $117,637,314 0.71% First Trade Date11/17 $117,827,290 0.19% $117,901,127 0.22%11/18 $119,628,545 1.53% $119,611,916 1.45%11/19 $118,989,328 -0.53% $118,975,846 -0.53%11/20 $119,925,969 0.79% $120,109,800 0.95%11/23 $121,108,335 0.99% $120,571,329 0.38%

Legacy

In-KindTransfer

TradedValue

Cash

Target

In-KindTransfer

TradedValue

Cash

-2.50%-2.00%-1.50%-1.00%-0.50%0.00%0.50%1.00%1.50%2.00% Daily Returns

Legacy

Target


TRANSITION PERFORMANCE CHECK The first step in evaluating the success of any transition is to measure the performance of the transition account and compare this to the performance of the “Target” portfolio; this concept is commonly referred to as implementation shortfall. Comparison to appropriate industry benchmarks have also been provided for the same time period.

What Clients Should Look For Harbor Analytics Evaluation Implementation Shortfall

The total cost of the transition is calculated by subtracting the target return from the actual return.

Costs were 50 basis points from the 11/13 close. The costs were 19 basis points lower than Harbor Analytics’ mean estimate and flat to Blackrock’s mean estimate.

Within Expected Ranges

Transition Providers should be within their/our range of cost 68% of the time. They should also beat their mean 50% of time.

The result was within both Harbor and Blackrock’s expected range of cost (one standard deviation)

Performance vs Benchmarks

How has the portfolios performed versus comparable market benchmarks for the period.

All portfolios performed within expectations over the transition period. The market was very volatile over the transition period

TRANSITION PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE

Portfolio Starting Value Ending Value Gain/(Loss) %

Target Performance $116,810,205 $122,807,696 $5,997,491 5.134%

Legacy Performance $116,810,205 $123,354,823 $6,544,618 5.603%

Stephon Performance $116,810,205 $122,218,200 $5,407,995 4.630%

BENCHMARK PERFORMANCE TRANSITION PERIOD

Index Starting Value Ending Value Gain/(Loss) %

Russell 2000 Index 1146.55 1202.38 55.83 4.869%

Russell 2000 Value Idx 1401.65 1462.82 61.16 4.363%

Russell 2000 Growth Idx 709.89 748.04 38.15 5.374%

Russell 2500 457.19 477.28 20.09 4.395%

Start Date 11/13/2015

End Date 11/27/2015 -0.505%

IMPLEMENTATION SHORTFALL CALCULATION TRANSITION COST

Ending Target Value $122,807,696 Explicit Costs ($80,308) -0.069%

Actual Ending Value $122,218,200 Implicit Costs ($509,188) -0.436%

Implementation Shortfall ($589,496) Total Costs ($589,496) -0.505%

RECONCILIATION TO PRE TRADE ESTIMATES RELATIVE COST

Blackrock Mean Estimate -0.50% Harbor Analytics Mean Estimate -0.70%

Blackrock Range (1 Std Dev ) +/- 0.49% Harbor Analytics Range (1 Std Dev ) +/- 0.40%

Better than Mean No Better than Mean Yes

Within Expected Range Yes Within Expected Range Yes19.06 bps-0.32 bps

Implementation Shortfall

-50.46 BPS

Versus Blackrock Versus Harbor Analytics

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00%

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Transition Cost vs. Historical Transition Cost

Harbor Universe

Stephon


TRADING PERIOD VS. SETTLEMENT PERIOD PERFORMANCE The graphs and tables below detail the performance of the target and legacy portfolio across the trading and settlement periods. The separation of performance from trading and settlement periods is important in determining if the trading of the transition manager overly influenced returns. We also compare the variance between the target and legacy on trade date and for the settlement periods against all past transitions.

What Clients Should Look For Harbor Analytics Evaluation Trading Period Clients should be concerned on how the portfolios

performed together – best case scenario is the legacy outperforming the target portfolio

The target underperformed the legacy by 81.4 basis points which is within the expected tracking error of the trading period (+/- 87 basis points) and within the maximum expected variance (tracking error plus impact) of 151 basis points

Settlement Period

Clients should be concerned if a large deviation in performance occurs with the legacy outperforming the target

The target outperformed the legacy by 34.1 basis points which is within the expected settlement period tracking error (57 basis points) and within the maximum expected variance (tracking error plus impact) of 121 basis points. The target outperformed the legacy (and market) during the settlement period which is positive for Stephon.

TRADING PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE - TRADING PERIOD






End Date 11/24/2015

Russell 2000 Index 3.69% Trading Days 7

Russell 2000 Value Idx 3.59% Legacy v s Target Variance 0.814%

Russell 2000 Growth Idx 3.78% Expected Tracking Error 0.870%

Russell 2500 3.56% Maximum Expected Variance 1.505%

SETTLEMENT PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE - SETTLEMENT PERIOD






End Date 11/27/2015

Russell 2000 Index 1.14% Settlement Period 3




0500

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Trading Period Performance - Target vs. Legacy

Harbor Universe

Stephon

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Target v s Legacy Settlement Period

Settlement Period Performance - Target vs. Legacy

Harbor UniverseStephon


RECONCILIATION TO PRE TRADE ANALYTICS The tables below compare the actual results of the transition against the pre-trade estimate put forth by the transition provider, the expected cost as calculated by Harbor Analytics and also against the average transition cost in our Transition Management Universes.

What Clients Should Look For Harbor Analytics Evaluation How did this transition performance versus comparable data points Stephon’s result was better than Harbor’s mean estimate and nearly identical

to the average SMID cap transition within our universe

RECONCILIATION TO BLACKROCK PRE TRADE

CostBlackrock Pre Trade

Estimate Actual Result VarianceBlackrock Pre Trade

Estimate bps Actual Result bps Variance bpsEquity Commission (81,767) (78,369) 3,398 -0.07% -0.07% 0.00%Equity Implicit Cost (502,284) (509,188) (6,904) -0.43% -0.44% -0.01%Taxes and Fees (1,664) (1,939) (275) 0.00% 0.00% 0.00%Totals (585,715) (589,496) (3,781) -0.50% -0.50% 0.00%

RECONCILIATION TO HARBOR ANALYTICS PRE TRADE

CostHarbor Analytics

Estimate Actual Result VarianceHarbor Analytics

Estimate bps Actual Result bps Variance bpsEquity Commission (68,747) (78,369) (9,622) -0.06% -0.07% -0.01%Equity Implicit Cost (741,790) (509,188) 232,602 -0.64% -0.44% 0.20%Taxes and Fees (1,664) (1,939) (275) 0.00% 0.00% 0.00%Totals (812,202) (589,496) 222,706 -0.70% -0.50% 0.19%

RECONCILIATION TO HARBOR ANALYTICS ASSET CLASS UNIVERSE AVERAGE


Univ erse Av g Actual Result VarianceHarbor Analytics

Univ erse Av g bps Actual Result bps Variance bpsEquity Commission (68,747) (78,369) (9,622) -0.06% -0.07% -0.01%Equity Implicit Cost (513,639) (509,188) 4,451 -0.44% -0.44% 0.00%Taxes and Fees (1,664) (1,939) (275) 0.00% 0.00% 0.00%Totals (584,051) (589,496) (5,445) -0.50% -0.50% 0.00%

BLACKROCK DISTRIBUTION-2 Std Cost Band ($1,730,455)-1 Std Cost Band ($1,158,085)Actual Cost ($589,496)+ 1 Std Cost Band ($13,345)+ 2 Std Cost Band $559,025

($2,000) ($1,500) ($1,000) ($500) $0 $500 $1,000Thousands

-2 Std Cost Band -1 Std Cost Band Actual Cost + 1 Std Cost Band + 2 Std Cost Band


PORTFOLIO PERFORMANCE ACROSS ENTIRE PERIOD The graphs and tables below detail the performance of the target and legacy portfolio across the trading and settlement periods. The separation of performance from trading and settlement periods is important in determining if the trading of the transition manager overly influenced returns. The red marker on the graph indicates the dispersion between the target and the legacy portfolios on the first day of trading. The blue lines in the chart indicate the expected daily tracking bands for the portfolios at 1 and 2 standard deviations.

What Clients Should Look For Harbor Analytics Evaluation Pre Transition Was there a larger than normal deviation between the

portfolios during the trading periods The target portfolio underperformed the legacy portfolio by 68 basis points during the pre-trade measurement period which is within expectations.

Graph Was there a large deviation in performance on the first trading day when most trading occurs

We have highlighted the first day of trading where the tracking was within expectations

Market Conditions

Did the portfolios differ in performance based on market conditions (up or down) during trading period

There was no consistent performance trend between the target and legacy portfolios in up or down markets

PORTFOLIO TRACKING ACROSS ENTIRE PERIOD TOTAL PERIOD PERFORMANCE RECONCILITATIONPortfolio Pre Transition Trading Period Post Transition Total

Target -4.53% 3.76% -1.09% -2.02%

Legacy -3.86% 4.57% -1.41% -0.88%

Actual -3.86% 3.26% -1.09% -1.81%

Actual v s. Target 0.68% -0.50% 0.00% 0.21%

Actual v s. Legacy 0.00% -1.32% 0.32% -0.93%

PERFORMANCE BY MARKET PERFORMANCE DISTRIBUTION OF PERFORMANCE BY DAYTarget Legacy Variance Performance Metric Pre Transition Trading Period Post Transition Total

Up Markets - Pre Trade 0.05% 0.46% -0.41% Within -1 Std Dev 20% 14% 33% 25%

Down Market - Pre Trade -4.58% -4.31% -0.27% Within +1 Std Dev 20% 57% 100% 45%

Up Markets - During Trade 0.57% 0.69% -0.12% Between -1 & -2 Std Dev 40% 29% 0% 25%

Down Market - During Trade -0.04% -0.05% 0.01% Between +1 & +2 Std Dev 20% 0% 0% 10%

Up Markets - Post Trade -0.36% -0.47% 0.11% More Than 2 Std Dev - 0% 0% 0% 0%

Down Markets - Post Trade 0.00% 0.00% 0.00% More Than 2 Std Dev + 0% 0% 0% 0%

Total Up Days 8

Total Down Days 6 Periods Start Date End Date

Pre Transition 11/6/2015 11/13/2015

Trading Period 11/13/2015 11/24/2015

Post Transition 11/24/2015 11/27/2015

Market Condition

0.00%0.20%0.40%0.60%0.80%

Targ

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TE

Tracking Across Period Leg vs Target1 Std Dev +2 Std Dev +


INTRA-DAY PERFORMANCE – DAY ONE The following tables and charts detail the intra-day performance of the target and legacy portfolios during the first day of trading when most of the transition was completed.

What Clients Should Look For Harbor Analytics Evaluation Target vs. Legacy Cumulative

The difference in performance between target and legacy on day one compared to the expected tracking error between the portfolios

The target outperformed the legacy by 3 basis points which is within expectations;

Interval Performance and Completion

The last two columns detail the amount completed during the interval and performance change between the target and legacy portfolios

Trades were mainly executed in the afternoon on the first trade date. There was some impact at the start of trading (circled above) although within tracking error expectations

INTRA-DAY PERFORMANCE - FIRST TRADE DATE

Time Target - Cum Legacy - CumRussell 2000

IndexTarget v s.

Legacy CumWithin 1 Std

DevWithin 2 Std

DevCompletion

Lev elInterv al

PerformanceInterv al

CompletionOpen -0.15% -0.20% 0.00% -0.05% Yes Yes 0.0% -0.05% 0.00%

11/16/15 10:00 AM -0.12% -0.04% -0.06% 0.08% Yes Yes 0.0% 0.13% 0.00%11/16/15 10:30 AM -0.11% -0.12% -0.10% -0.01% Yes Yes 0.0% -0.09% 0.00%11/16/15 11:00 AM -0.51% -0.45% -0.39% 0.06% Yes Yes 0.0% 0.07% 0.00%11/16/15 11:30 AM -0.79% -0.55% -0.51% 0.24% Yes Yes 0.0% 0.18% 0.00%11/16/15 12:00 PM -0.64% -0.38% -0.35% 0.26% Yes Yes 0.0% 0.02% 0.00%11/16/15 12:30 PM -0.40% -0.15% -0.09% 0.25% Yes Yes 0.9% 0.00% 0.86%11/16/15 1:00 PM -0.27% -0.09% -0.03% 0.18% Yes Yes 0.9% -0.07% 0.00%11/16/15 1:30 PM -0.04% -0.05% 0.08% 0.00% Yes Yes 2.7% -0.18% 1.88%11/16/15 2:00 PM 0.18% 0.12% 0.23% -0.06% Yes Yes 4.8% -0.06% 2.10%11/16/15 2:30 PM 0.21% 0.19% 0.32% -0.02% Yes Yes 6.0% 0.04% 1.15%11/16/15 3:00 PM 0.44% 0.41% 0.45% -0.03% Yes Yes 13.2% -0.01% 7.16%11/16/15 3:30 PM 0.62% 0.53% 0.68% -0.09% Yes Yes 23.9% -0.06% 10.71%11/16/15 4:00 PM 0.71% 0.68% 0.83% -0.03% Yes Yes 27.0% 0.06% 3.14%

Legacy v s. Target Performance % of Interv als

% of Trading Completed

<-0.25% 0% 0%(0.25)% - (0.15)% 7% 2%(0.15)% - (0.05)% 29% 13%(0.05)% - 0.00% 21% 8%0.00% - 0.05% 14% 1%0.05% - 0.15% 21% 3%0.15% - 0.25% 7% 0%

>0.25% 0% 0%

0%20%40%60%80%

100%

<-0.25% (0.25)% -(0.15)%

(0.15)% -(0.05)%

(0.05)% -0.00%

0.00% - 0.05%0.05% - 0.15%0.15% - 0.25% >0.25%Com

ple

tion

Lev

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Legacy v s. Target

Completion Level vs. Portfolio Performance Variances

% of Intervals

% of TradingCompleted


PERFORMANCE ATTRIBUTION The tables and charts below detail the cost of the transition by liquidity buckets and also by capitalization. The bubbles in the graphs represent the size of the position.

What Clients Should Look For Harbor Analytics Evaluation Liquidity Buckets Were there liquidity buckets that cost much more than

expected particularly the less liquid names Blackrock’s performance was mixed although they outperformed on most liquidity buckets

Cost by Market Capitalization

Did cost spike for a particularly capitalization band; Mid and Small cap securities tend to be the areas which transition managers underperform

Similar to liquidity, Blackrock was mixed in terms of performance although outperformed on large and mid-cap securities while underperforming on small cap securities

COST BY LIQUIDITY% of ADV Total Trading Actual Cost Expected Cost Variance

0-5.0% 63,624,528 0.29% -0.24% 0.53%5-10% 46,871,262 0.75% -0.34% 1.10%10-20% 60,158,133 -1.15% -0.41% -0.74%20-50% 30,716,908 -1.29% -0.57% -0.72%50-100% 11,591,241 -0.47% -0.65% 0.18%>100% 655,240 2.58% -0.71% 3.29%

COST BY MARKET CAPITALIZATION Market Cap Total Trading Actual Cost Expected Cost Variance

>$50B 0 0.00% 0.00% 0.00%$25B - $50B 0 0.00% 0.00% 0.00%$15B - $25B 0 0.00% 0.00% 0.00%$10B - $15B 0 0.00% 0.00% 0.00%$5B - $10B 23,900,485 1.54% -0.16% 1.70%$2B - $5B 78,951,117 -0.10% -0.28% 0.18%$1B - $2B 69,101,746 -0.28% -0.41% 0.13%<$1 B 41,663,964 -1.57% -0.64% -0.94%

Large Cap 23,900,485 1.54% -0.16% 1.70%Mid Cap 78,951,117 -0.10% -0.28% 0.18%Small Cap 110,765,710 -0.79% -0.50% -0.29%

0%

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Implementation Shortfall by Liquidity

TargetLegacy

0123456789

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Realized Shortfall

Implementation Shortfall by Market Cap

TargetLegacy


INDIVIDUAL SECURITY ANALYSIS – LARGEST POSITIONS The tables below detail the performance of the top buy and sell securities and also the least liquid securities within the transition. Often the largest names in the transition will dictate the overall cost. The provider should pay close attention to these names particularly the securities with the largest percentage of average daily volume.

What Clients Should Look For Harbor Analytics Evaluation Largest Names The largest positions normally drive the cost for the transition

as they are the largest percentage of trading The cost of the largest names in total was +58 basis points versus Harbor’s expectation of 35 basis points.

Least Liquid Names

Were the costs reasonable for less liquid names or were they traded quickly at a high cost

The cost of the least liquid names in total was +52 basis points versus Harbor’s expectation of 55 basis points.

LARGEST TEN LEGACY NAMES LARGEST TEN TARGET NAMESTicker MV (000) ADV Act Cost Exp Costs Variance Ticker MV (000) ADV Act Cost Exp Costs Variance

WSO $4,480 22.9% 1.10% -0.42% 1.52% OZRK $2,840 11.8% -0.86% -0.22% -0.64%AGII $3,246 58.8% 1.69% -0.38% 2.07% EPAM $2,687 11.2% -3.90% -0.28% -3.62%SBNY $3,195 2.4% 2.06% -0.12% 2.18% APOG $2,525 25.6% -6.40% -0.50% -5.90%RJF $3,176 7.5% 1.15% -0.17% 1.32% TREE $2,470 5.2% -0.41% -0.50% 0.09%HAWK $3,022 17.3% 0.38% -0.27% 0.66% IMPV $2,391 12.0% -0.23% -0.50% 0.27%JKHY $2,687 9.4% 2.67% -0.13% 2.80% VG $2,276 26.5% -0.91% -0.70% -0.21%MTZ $2,558 10.8% 7.76% -0.44% 8.19% MSTR $2,234 13.1% -2.38% -0.48% -1.90%LKQ $2,416 6.6% 1.92% -0.21% 2.13% ACHC $2,168 6.2% -0.68% -0.30% -0.38%KAR $2,345 5.3% 0.80% -0.13% 0.94% OPB $2,078 16.2% 4.17% -0.38% 4.55%CLDX $2,240 7.8% 3.89% -0.66% 4.55% WCG $2,047 6.4% -1.19% -0.32% -0.87%Totals $29,365 16.2% 2.18% -0.29% 2.48% Totals $23,716 13.5% -1.40% -0.41% -0.99%

TEN LEAST LIQUID POSITIONS - LEGACY TEN LEAST LIQUID POSITIONS - TARGETTicker MV (000) ADV Act Cost Exp Costs Variance Ticker MV (000) ADV Act Cost Exp Costs Variance

NGVC $1,214 82.4% -3.93% -0.59% -3.33% GSVC $655 106.1% 2.68% -0.71% 3.39%TNGO $840 61.4% 14.13% -1.45% 15.58% LOB $543 92.7% -3.48% -0.87% -2.61%AGII $3,246 58.8% 1.69% -0.38% 2.07% KTWO $1,235 62.7% -1.01% -0.83% -0.18%FOXF $1,370 39.5% 0.51% -0.52% 1.03% CHGG $1,030 61.0% -3.25% -0.93% -2.32%STCK $217 31.1% 1.27% -0.46% 1.73% KFRC $1,643 59.8% -3.84% -0.64% -3.20%RNST $1,157 26.5% 1.39% -0.29% 1.69% PPBI $812 57.2% 0.39% -0.50% 0.89%WSO $4,480 22.9% 1.10% -0.42% 1.52% CNOB $810 53.7% -4.94% -0.40% -4.55%CALD $1,370 21.9% 5.04% -0.59% 5.63% AFCO $218 53.6% -3.88% -0.60% -3.28%QLGC $1,507 21.9% 0.69% -0.45% 1.14% MBUU $353 45.5% -4.53% -0.62% -3.91%DORM $1,479 19.9% 1.22% -0.37% 1.59% ADMS $481 44.3% 0.49% -0.77% 1.26%Totals $16,879 37.3% 1.77% -0.49% 2.26% Totals $7,780 63.9% -2.18% -0.70% -1.48%


MARKET CONDITIONS Market conditions can have a large impact on the performance of the transition. We believe volume and volatility to have the largest impact on transaction costs. We measure these prior to the start of the transition and compare this to the actual market conditions during trading and calculate the impact market conditions had on trading costs. We also measure market dispersion as larger market moves tends to increase transaction costs.

What Clients Should Look For Harbor Analytics Evaluation Volume How did trading period market volumes compare to pre

trade activity Volumes are directly correlated with market impact; The higher the volume the better. Volumes decreased in this transition which tends to increase cost

Range of Market How did the breadth of the market (high to low across each day) compare to pre trade activity

The breadth of the market was equal to the previous two week averages and higher than normal which complicates risk management

VIX How did trading period market volatility compare to pre trade activity

Higher volatility often causes costs to rise; Volatility was still high during the event which increases expected cost

VOLATILITY AND VOLUMEPre Transition During Transition Post Transition Change Effect on Cost

VIX 16.0 18.2 15.1 14% Negativ eDAILY RANGE OF MARKET 1.35% 1.35% 0.72% 0% Positiv eMARKET AVG DAILY VOLUME 262,558,611 230,760,176 99,150,168.0 -12% Negativ eEXPECTED COST IMPACT (bps) -0.117% (Positiv e v alue indicates costs should hav e gone down)

SECTOR DEVIATIONPre-Transition During Transition Post Transition

Sector Av g Daily Mov ement Av g Daily Mov ement Av g Daily Mov ement Change Effect on CostCONSUMER DISCRETIONARY 1.19% 1.86% 0.71% -0.67% Negativ eCONSUMER STAPLES 0.94% 1.87% 0.56% -0.93% Negativ eENERGY 2.12% 1.90% 1.21% 0.22% Positiv eFINANCIALS 1.08% 1.69% 0.48% -0.61% Negativ eHEALTH CARE 1.26% 1.69% 0.59% -0.43% Negativ eINDUSTRIALS 0.96% 1.77% 0.42% -0.81% Negativ eINFORMATION TECHNOLOGY 1.03% 1.82% 0.41% -0.79% Negativ eMATERIALS 1.28% 1.85% 0.79% -0.57% Negativ eTELECOMMUNICATION SERVICES 0.96% 2.03% 0.65% -1.08% Negativ eUTILITIES 1.44% 1.80% 0.83% -0.36% Negativ e

0102030

Market Volatility

0

200

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11/2 11/4 11/6 11/8 11/1011/1211/1411/1611/1811/2011/2211/2411/26

Market Volume


LUCK FACTOR Market conditions often have a large influence on the total cost of the event. In the previous sector, we have estimated the cost associated with volume and volatility which both have large effects on market impact. In this section, we attempt to estimate how overall market performance influenced total cost. We estimate the cost associated with sector movements in addition to the cost associated with capitalization changes.

What Clients Should Look For Harbor Analytics Evaluation Sector Changes How did the market perform in the largest sector imbalances

including both large increases and decreases The performance of sectors had limited effect on the overall cost of the transition; First day sector movement accounted for 17% of total cost.

Cap Changes Was there a large variation in performance amongst large, mid and small cap securities in addition to net cash change

Similar to sector risk, capitalization shifts had limited effect on the overall cost of the transition. First day capitalization movement actually lowered cost.

Sector Net ImbalanceDay One Sector

Performance CostFirst Hour Sector

Performance CostConsumer Discretionary (3,040,525) 1.23% (37,362) -0.10% 3,064Consumer Staples 1,213,759 1.64% 19,906 0.82% 9,920Energy (29,563) 3.25% (961) 0.75% (221)Financials (10,751,204) 1.25% (134,390) -0.23% 25,086Health Care 2,648,146 1.25% 33,102 0.50% 13,193Industrials 6,284,689 1.20% 75,416 0.44% 27,403Information Technology 420,048 1.42% 5,965 0.49% 2,055Materials (106,660) 1.27% (1,355) 0.76% (808)Telecommunication Serv ices (2,215,335) 2.10% (46,522) 0.62% (13,817)Utilities 0 1.69% 0 0.44% 0Total (5,576,646) (86,201) 65,876

Total Implicit Cost (509,188) Total Implicit Cost (509,188)Day One Sector Performance (86,201) First Hour Sector Performance 65,876Percent of Cost 16.9% Percent of Cost -12.9%

Sector Net ImbalanceDay One Asset Class

Performance CostFirst Hour Asset Class

Performance CostLarge Cap 23,900,485 1.49% 356,117 0.35% 83,644Mid Cap 2,040,283 1.23% 25,095 0.10% 2,002Small Cap (31,517,413) 0.83% (262,225) -0.10% 30,320Cash 5,576,646 (83,092) (19,516)Total (5,576,646) 35,896 96,450

Total Implicit Cost (509,188) Total Implicit Cost (509,188)Day One Asset Class Effect 35,896 First Hour Asset Class Effect 96,450Percent of Cost -7.0% Percent of Cost -18.9%

SECTOR RISK

CAPITALIZATION RISK


EXECUTION QUALITY


TIMING & PARTICIPATION RATES The tables and graphs below detail the execution time of each order plotted against its cost. Harbor has also calculated the performance of each execution versus the time weighted average price for each order. Last we have analyzed the highest cost names for timing aberrations.

What Clients Should Look For Harbor Analytics Evaluation Sector Participation Rate

Was the manager aggressive in reducing the sector biases

Participation rates were appropriate for all sectors. Blackrock quickly closed the financials bias on day one

TWAP Cost How did the manager performance against the average price during trading

Blackrock was 2 basis points away from TWAP which is within expectations and better than the average performance of transition managers in our universe (-3.6 basis points)

Highest Cost Names

How long did the manager take to trade the highest cost names

All of the higher cost names had appropriate participation rates. Our participation threshold is 10%.

EXECUTION TIME VERSUS COST

PortfolioParticipation

Rate % of ADV Ratio Cost v s. TWAPTarget 4.68% 16.11% 0.29 -0.04%Legacy 3.42% 12.06% 0.28 -0.01%Totals 4.06% 14.09% 0.29 -0.02%

Most Overweight Sectors Highest Cost Target Names

Sector Net TradeLegacy

ParticipationTarget

Participation Variance Ticker ADVParticpation

RateTotal Time

(h:mm) CostIndustrials 6,284,689 3.70% 5.95% -2.25% HZO 17.89% 4.95% 20:04 -11.84%Health Care 2,648,146 2.91% 3.59% -0.68% ALRM 25.39% 4.15% 06:00 -9.74%Consumer Staples 1,213,759 6.59% 0.00% 6.59% EGHT 18.01% 4.12% 05:03 -8.17%Information Technology 420,048 3.23% 3.70% -0.48% TILE 12.04% 1.92% 08:51 -7.36%

TDOC 10.37% 4.86% 16:03 -6.88%

Most Underweight Sectors Highest Cost Legacy Names


ParticipationTarget


Rate Total Time CostFinancials (10,751,204) 3.65% 5.21% 1.56% BOOT 15.03% 2.39% 16:03 -13.31%Consumer Discretionary (3,040,525) 3.74% 5.71% 1.97% NGVC 82.42% 6.59% 05:27 -3.93%Telecommunication Serv (2,215,335) 3.18% 6.00% 2.82% HTWR 15.04% 4.41% 10:11 -3.68%Materials (106,660) 6.61% 0.95% -5.66% NK 0.47% 0.23% 15:59 -2.80%Energy (29,563) 1.42% 4.46% 3.04% SGMO 1.25% 1.40% 16:03 -2.54%

PARTICIPATION RATE

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Order Time vs. Actual Cost

Target-15.0%-10.0%-5.0%0.0%5.0%

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SECURITY PERFORMANCE DURING TRADING - LEGACY The table and charts below detail the performance of legacy securities while trading occurred and the performance for the 24 hour period after trading was complete. Relative performance represents the performance of each security versus the market benchmark which best represents the transition. The participation rate details the amount of shares traded by the transition manager as compared to the total volume for that particularly security in the market.

What Clients Should Look For Harbor Analytics Evaluation During Trading Legacy Performance

How did the legacy portfolio perform in total versus the market during the trading period

The legacy portfolio outperformed the market by 31 basis points during trading which is within expectations and positive for Stephon

Post Trading Legacy Performance

How did the legacy portfolio perform in total versus the market after trading was completed

Legacy portfolio continued to outperform by 39 basis points after trading was complete which is slightly higher than expectations but also demonstrates Blackrock was not overly impacting the sells

The ten worst performers Were there any names that severely underperformed the market during the trading period and if so did they bounce back

The largest cost names had significant cost within the transition ($253k) although Blackrock’s participation rates were appropriate.

Ticker Market Value Final Trade TimeRelativ e

PerformanceParticipation

Rate Actual Cost TickerRelativ e

PerformanceBOOT 506,112 11/17 4:03 PM -15.65% 2.39% (67,362) BOOT 14.97%ON 1,247,133 11/19 9:43 AM -8.61% 0.31% (15,075) ON 0.96%NGVC 1,213,759 11/23 3:27 PM -8.05% 6.59% (47,671) NGVC -0.67%ABCO 1,374,009 11/20 3:34 PM -5.55% 2.91% (22,736) ABCO 0.02%HTWR 1,634,230 11/19 3:11 PM -5.16% 4.41% (60,091) HTWR -0.45%TRU 1,443,209 11/24 1:02 PM -5.00% 4.72% (2,620) TRU 0.38%CCOI 1,769,054 11/18 3:39 PM -4.82% 3.18% (33,066) CCOI 1.23%NK 25,652 11/17 3:59 PM -4.65% 0.23% (719) NK 2.87%TSRA 1,250,047 11/20 3:34 PM -4.15% 1.83% (10,825) TSRA 0.43%FOXF 1,369,874 11/24 3:27 PM -3.95% 14.31% 7,007 FOXF 1.11%Total 11,833,079 -6.00% 4.66% (253,159) Total 1.02%

Wgt Av g Legacy 1.65% Wgt Av g Legacy 1.30%Wgt Av g Russell 2000 Index 1.34% Wgt Av g Russell 2000 Index 0.91%

WORST RELATIVE CONTRIBUTORS DURING TRADING - LEGACY REVERSION PERFORMANCE - LEGACY

-1.00%-0.50%0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%

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Trading PeriodPost Trading Period


SECURITY PERFORMANCE DURING TRADING - TARGET The table and charts below detail the performance of target securities while trading occurred and the performance for the 24 hour period after trading was complete. Relative performance represents the performance of each security versus the market benchmark which best represents the transition. The participation rate details the amount of shares traded by the transition manager as compared to the total volume for that particularly security in the market.

What Clients Should Look For Harbor Analytics Evaluation During Trading Target Performance

How did the target portfolio perform in total versus the market during the trading period

The target portfolio outperformed the Russell 2000 Index by 48 basis points on a weighted basis. This was higher than tracking error expectations.

Post Trading Target Performance

How did the target portfolio perform in total versus the market after trading was completed

Tracking error was outside expectations after trading was complete; target underperformed the Russell 2000 Index by 46 basis points post trading

The ten worst performers Were there any names that severely outperformed the market during the trading period and if so did they bounce back

The largest outperformers during the trading period contributed significantly to the cost of the transition although the participation rates by Blackrock were within reason (6.7%) and these securities did not materially reverse their performance after trading was complete (underperformed Russell 2000 Index by 46 basis points)

WORST RELATIVE CONTRIBUTORS DURING TRADING - TARGET

Ticker Market Value Final Trade TimePerf During

TradingParticipation

RateRealized Shortfall Ticker

Relativ e Performance

HZO 679,618 11/20 3:34 PM 16.11% 4.95% (80,479) HZO 0.19%AIMT 420,661 11/20 3:34 PM 14.71% 5.07% (25,817) AIMT 1.12%ALRM 767,869 11/23 4:00 PM 11.20% 4.15% (74,783) ALRM 0.69%NEOS 388,042 11/23 4:00 PM 10.86% 7.40% (19,088) NEOS -3.40%EGHT 1,708,034 11/19 10:03 AM 9.19% 4.12% (139,591) EGHT -0.77%TDOC 266,003 11/17 4:03 PM 8.14% 4.86% (18,303) TDOC -0.89%WD 1,739,842 11/20 10:05 AM 6.42% 8.22% (38,309) WD -0.65%CMN 460,090 11/19 9:39 AM 6.20% 1.48% (22,112) CMN -1.70%TILE 986,940 11/19 1:51 PM 5.98% 1.92% (72,619) TILE -0.95%APOG 2,524,529 11/20 3:34 PM 5.81% 11.70% (161,683) APOG 0.01%Total 9,941,629 8.29% 6.67% (652,784) Total -0.46%

Wgt Av g Target 1.85% Wgt Av g Target 0.40%Wgt Av g Russell 2000 Index 1.37% Wgt Av g Russell 2000 Index 0.86%

REVERSION PERFORMANCE - TARGET

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RISK MANAGEMENT


PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY ONE The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.

What Clients Should Look For Harbor Analytics Evaluation Exposure Variance

The actual equity exposure is compared against the target exposure which represents the cash requested by the target manager less transaction costs

Blackrock began trading around noon EST on the first trading day and increased equity exposure by the $6 million which the target manager requested. This is good risk management.

Exposure Cost The equity exposure variance is compared against the benchmark of the transition to determine the cost of being over/(under) exposed during the trading period

Exposure costs were 0 basis points across the first trading day;

PACE OF TRADING - DAY ONE OF TRADING

Time Buys % Sells %Transition

Completion Net Trading Target NetExposure Variance

Exposure Cost

Exposure Variance

9:35 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 (3,775) 5.3%9:40 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 (7,138) 5.3%9:45 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 1,680 5.3%9:50 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 (5,483) 5.3%9:55 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 8,391 5.3%10:00 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 10,643 5.3%10:30 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 4,063 5.3%11:00 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 14,670 5.3%11:30 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 6,046 5.3%12:00 0 0.0% 0 0.0% 0.0% 0 (6,166,141) 6,166,141 (9,121) 5.3%12:30 1,135,040 1.0% 735,975 0.7% 0.9% (399,065) (6,166,141) 5,767,076 (14,816) 4.9%13:00 1,218,300 1.1% 779,173 0.7% 0.9% (439,127) (6,166,141) 5,727,014 (1,485) 4.9%13:30 3,696,095 3.3% 2,415,292 2.3% 2.8% (1,280,803) (6,166,141) 4,885,338 (6,756) 4.2%14:00 6,354,442 5.7% 4,118,326 3.9% 4.8% (2,236,116) (6,166,141) 3,930,025 (7,000) 3.4%14:30 8,213,983 7.4% 4,849,829 4.6% 6.0% (3,364,154) (6,166,141) 2,801,987 (1,241) 2.4%15:00 19,646,695 17.6% 10,092,726 9.6% 13.7% (9,553,968) (6,166,141) (3,387,827) 4,913 -2.9%15:30 29,215,449 26.2% 22,477,256 21.4% 23.9% (6,738,193) (6,166,141) (572,052) 1,322 -0.5%16:05 32,611,084 29.3% 26,402,853 25.1% 27.2% (6,208,231) (6,166,141) (42,090) 57 0.0%

TOTAL SUB-OPTIMALITY COST (5,029) 0.00%


PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY TWO The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.



Blackrock was very effective in matching buy and sell transactions on day two which limited the exposure variance at all times during the day. This demonstrates good risk management by Blackrock.


Exposure costs were +2 basis points for the second trading day which demonstrates good risk management. The equity exposure ratio was never outside 4% across the entire day.

PACE OF TRADING - DAY TWO OF TRADING



Exposure Cost

Exposure Variance

9:35 32,611,084 29.3% 26,402,853 25.1% 27.2% (6,208,231) (6,166,141) (42,090) 30 0.0%9:40 32,611,084 29.3% 26,402,853 25.1% 27.2% (6,208,231) (6,166,141) (42,090) (106) 0.0%9:45 32,611,084 29.3% 26,402,853 25.1% 27.2% (6,208,231) (6,166,141) (42,090) (21) 0.0%9:50 32,623,105 29.3% 26,405,749 25.1% 27.3% (6,217,356) (6,166,141) (51,215) (25) 0.0%9:55 32,937,080 29.6% 27,016,433 25.7% 27.7% (5,920,647) (6,166,141) 245,494 (251) 0.2%10:00 32,937,080 29.6% 27,155,615 25.8% 27.7% (5,781,465) (6,166,141) 384,677 (574) 0.3%10:30 33,951,510 30.5% 27,506,205 26.1% 28.4% (6,445,305) (6,166,141) (279,163) 229 -0.2%11:00 33,952,077 30.5% 27,568,364 26.2% 28.4% (6,383,713) (6,166,141) (217,572) 571 -0.2%11:30 34,361,081 30.9% 30,671,714 29.1% 30.0% (3,689,367) (6,166,141) 2,476,775 (10,738) 2.1%12:00 34,391,421 30.9% 31,106,913 29.6% 30.2% (3,284,508) (6,166,141) 2,881,633 (220) 2.5%12:30 34,585,585 31.1% 32,478,855 30.9% 31.0% (2,106,730) (6,166,141) 4,059,411 4,628 3.5%13:00 34,585,585 31.1% 32,478,855 30.9% 31.0% (2,106,730) (6,166,141) 4,059,411 8,052 3.5%13:30 34,694,324 31.2% 32,478,855 30.9% 31.0% (2,215,468) (6,166,141) 3,950,673 19,882 3.4%14:00 34,773,086 31.2% 32,478,855 30.9% 31.0% (2,294,231) (6,166,141) 3,871,911 (3,425) 3.3%14:30 35,142,520 31.6% 32,714,777 31.1% 31.3% (2,427,743) (6,166,141) 3,738,398 5,383 3.2%15:00 35,745,944 32.1% 32,730,398 31.1% 31.6% (3,015,546) (6,166,141) 3,150,595 180 2.7%15:30 37,752,510 33.9% 32,730,398 31.1% 32.5% (5,022,112) (6,166,141) 1,144,029 1,153 1.0%16:05 72,172,713 64.8% 64,354,111 61.1% 63.0% (7,818,602) (6,166,141) (1,652,461) (417) -1.4%

TOTAL SUB-OPTIMALITY COST 24,330 0.02%


PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY THREE The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.



Blackrock was very effective in matching buy and sell transactions on day three which limited the exposure variance at all times during the day. This demonstrates good risk management by Blackrock.


Exposure costs were +4 basis points for the third trading day which demonstrates good risk management. The equity exposure ratio was never outside 2% across the entire day.



Exposure Cost

Exposure Variance

9:35 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 6,173 -0.3%9:40 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 0 -0.3%9:45 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 1,437 -0.3%9:50 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 2,324 -0.3%9:55 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 2,511 -0.3%10:00 72,266,608 64.9% 65,776,070 62.5% 63.7% (6,490,539) (6,166,141) (324,397) 0 -0.3%10:30 72,877,465 65.5% 66,229,991 62.9% 64.2% (6,647,474) (6,166,141) (481,333) 1,752 -0.4%11:00 72,877,465 65.5% 66,387,173 63.1% 64.3% (6,490,292) (6,166,141) (324,151) 0 -0.3%11:30 73,050,725 65.6% 67,766,483 64.4% 65.0% (5,284,243) (6,166,141) 881,899 0 0.8%12:00 73,214,292 65.8% 68,354,274 64.9% 65.4% (4,860,019) (6,166,141) 1,306,123 4,637 1.1%12:30 73,516,381 66.0% 68,868,705 65.4% 65.7% (4,647,677) (6,166,141) 1,518,465 (7,671) 1.3%13:00 73,516,381 66.0% 68,868,705 65.4% 65.7% (4,647,677) (6,166,141) 1,518,465 15,729 1.3%13:30 73,516,381 66.0% 68,868,705 65.4% 65.7% (4,647,677) (6,166,141) 1,518,465 26,911 1.3%14:00 74,085,833 66.5% 68,958,954 65.5% 66.0% (5,126,879) (6,166,141) 1,039,263 (11,392) 0.9%14:30 74,407,767 66.8% 69,036,530 65.6% 66.2% (5,371,237) (6,166,141) 794,904 0 0.7%15:00 74,497,857 66.9% 69,133,650 65.7% 66.3% (5,364,207) (6,166,141) 801,934 0 0.7%15:30 75,820,377 68.1% 69,965,273 66.5% 67.3% (5,855,103) (6,166,141) 311,038 5,020 0.3%16:00 82,616,198 74.2% 77,536,966 73.7% 73.9% (5,079,231) (6,166,141) 1,086,910 4,573 0.9%


PACE OF TRADING - DAY THREE OF TRADING


SECTOR MANAGEMENT – DAY ONE Sector management is an important part of the overall risk management process. In this section, we measure the actual sector exposures versus the target exposure of each sector. While all sector variances cannot be immediately eliminated due to liquidity, we look for constant risk management through reduction of sector risks.

What Clients Should Look For Harbor Analytics Evaluation Decline Ratio The ratio of trading to sector decline; This ideally is above

100% at all points during trading Decline ratio was much greater than one on the first day indicating Blackrock was efficient in their trade scheduling

Large Imbalances

Did the transition manager mitigate the largest sector risks The largest starting risk (financials) was reduced by over 80% on day one despite only 27% of the transition being completed

SECTOR MANAGEMENT EVALUATION - ABSOLUTE VALUE OF VARIANCESector Start 10:30 AM 11:00 AM 11:30 AM 12:00 PM 12:30 PM 1:00 PM 2:00 PM 3:00 PM MOC

Consumer Discretionary 3,040,525 2,977,413 2,970,890 2,965,382 2,995,538 2,665,663 2,620,091 1,209,206 1,187,745 130,286Consumer Staples 1,213,759 1,212,088 1,187,034 1,174,785 1,164,206 1,148,542 1,135,142 902,939 661,347 437,159Energy 29,563 18,892 13,868 46,691 64,355 74,474 46,504 35,309 16,889 12,351Financials 10,751,204 10,735,490 10,780,981 10,723,084 10,769,225 10,134,862 10,073,604 7,048,951 4,343,325 2,138,142Health Care 2,648,146 2,465,240 2,731,170 2,697,400 2,547,469 2,271,878 2,318,543 912,991 1,433,321 417,768Industrials 6,284,689 6,392,495 6,434,835 6,415,713 6,374,057 5,985,875 6,009,062 4,213,889 3,032,331 1,965,961Information Technology 420,048 472,302 582,549 568,887 571,939 546,351 574,411 594,520 3,096,143 619,958Materials 106,660 104,635 97,070 95,772 98,992 100,901 99,148 98,760 100,485 107,018Telecommunication Serv ices 2,215,335 2,198,731 2,190,219 2,203,869 2,205,112 2,129,093 2,125,904 1,650,449 1,049,385 448,386Utilities 0 0 0 0 0 0 0 0 0 0Total Variance 26,709,928 26,577,287 26,988,616 26,891,583 26,790,894 25,057,639 25,002,409 16,667,015 14,920,971 6,277,031Total Trading 0% 0% 0% 0% 0% 1% 1% 5% 13% 27%Total Decrease 0% 0% -1% -1% 0% 6% 6% 38% 44% 76%Sector Ratio 0% 0% 0% 0% 716% 740% 783% 336% 281%

0%20%40%60%80%100%

0%5%

10%15%20%25%

Start 10:30AM

11:00AM

11:30AM

12:00PM

12:30PM

1:00PM

2:00PM

3:00PM

MOC

Com

ple

tion

Lev

el

Abso

lute

Risk

Decrease in Sector RiskCompletionSector Risk Decline

-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%

CON D CON S ENER FINAN HEAL INDU IT MAT TELE UTIL

Sector Performance

Market Target Legacy


LIQUIDITY ACCESS


EXECUTION SIZE The table below details the lot size for each trade that was executed during the transition. The table is segmented by half hour increments during the trading day and also the size of the trades executed during this period.

What Clients Should Look For Harbor Analytics Evaluation Large orders, if accessed without disclosing information, can often lower the cost of a transition

There was a large amount of block activity (50.9%) with better than expected cost for these trades

Smaller orders are generally traded through algorithms which if routed poorly can be costly

A smaller percentage of orders (25.2%) were smaller trade sizes (average is 81% in our universe) and the cost of these orders were higher than Harbor’s expectations.

TRADING BY LOT SIZE

# of Shares Total Market Value % of Trading Total Shares # of Trades Av g Trade Size Av g % of OrderImplicit Cost (% of

Trading)> 10,000 110,142,920 50.9% 4,145,799 170 24,387 50% -0.29%5,000 - 10,000 20,346,132 9.4% 613,012 86 7,128 28% -0.24%2,500 - 5,000 13,660,383 6.3% 358,042 101 3,545 16% 1.01%1,000 - 2,500 11,851,651 5.5% 324,659 208 1,561 7% 0.61%500 - 1,000 6,073,909 2.8% 229,336 357 642 2% 0.21%0 - 500 54,526,781 25.2% 2,052,557 23,223 88 0% -0.67%Total 216,601,777 100% 7,723,405 24,145 320 -0.23%

> 10,000 5,000 - 10,000 2,500 - 5,000 1,000 - 2,500 500 - 1,000 0 - 500 Total9:30 - 10:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%10:00 - 10:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%10:30 - 11:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%11:00 - 11:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%11:30 - 12:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%12:00 - 12:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 0.9%12:30 - 1:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%1:00 - 1:30 0.0% 0.0% 0.0% 0.0% 0.0% 1.8% 1.8%1:30 - 2:00 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 2.0%2:00 - 2:30 0.0% 0.0% 0.0% 0.0% 0.0% 1.1% 1.2%2:30 - 3:00 1.0% 0.4% 0.8% 1.1% 0.8% 3.1% 7.1%3:00 - 3:30 1.4% 0.4% 0.6% 1.2% 0.9% 5.6% 10.1%3:30 - 4:00 0.0% 0.0% 0.0% 0.4% 0.3% 2.5% 3.1%

MOC 0.0% 0.0% 0.0% 0.1% 0.0% 0.1% 0.2%Total 2.4% 0.8% 1.5% 2.7% 2.0% 17.0% 26%

TIMING OF BLOCKS - DAY ONE


VENUE ANALYSIS The table below details the liquidity venues accessed by the transition manager and how their routing compares to overall market volumes. We have separated exchange volume (“lit”) from private liquidity pools (“dark”). Effective transition managers will used a wide variety of liquidity venues.

Blackrock Blackrock Routing Total Market Blackrock Cost BpsLit Markets 57.6% 61.7% (314,882) -0.723%Dark Markets 42.4% 38.3% 109,872 0.342%Total 100.0% 100.0% (205,010) -0.271%

Exchange Market ShareBlackrock Routing Variance Blackrock Cost

NYSE 12.8% 2.4% -10.4% -1.79%NYSE ARCA 10.6% 2.9% -7.8% -0.42%NYSE MKT 0.2% 0.0% -0.1% -3.98%NASDAQ 15.2% 8.3% -6.9% -0.55%NASDAQ BX 2.2% 0.4% -1.8% -1.24%NASDAQ PSX 1.0% 0.0% -0.9% -1.54% Venue Market Share Blackrock Routing Variance Blackrock CostBATS 4.2% 3.1% -1.2% -0.22% CROSSFINDER 12.5% 0.0% 12.5% -0.68%BATS Y 4.2% 1.0% -3.2% -0.50% UBS ATS 13.2% 1.7% 11.4% 0.31%EDGX 8.4% 1.5% -6.9% -1.14% SUPERX 8.6% 0.0% 8.6% 0.18%EDGA 2.6% 0.5% -2.2% -1.86% IEX 9.7% 3.3% 6.4% 0.49%CSE 0.2% 0.0% -0.2% 0.00% INSTINCT X 6.3% 0.0% 6.3% 0.00%Total 61.7% 20.1% -0.72% 50.3% 5.0% 45.2%

VenueDark Market

ShareBlackrock Routing Variance Blackrock Cost

UBS ATS 5.0% 0.7% -4.3% 0.31%CROSSFINDER 4.8% 0.0% -4.8% 0.00%IEX 3.7% 1.4% -2.3% 0.49%SUPERX 3.3% 0.0% -3.3% 0.00%MS POOL (ATS-4) 2.7% 1.1% -1.7% -0.23%INSTINCT X 2.4% 0.0% -2.4% 0.00%JPM-X 1.8% 1.0% -0.7% 0.32%LEVEL ATS 1.7% 0.0% -1.7% 0.00%BARCLAYS ATS ("LX") 1.6% 0.0% -1.6% 0.00%INSTINET (CBX) 1.4% 0.1% -1.3% 0.26%Total 28.4% 4.3% 0.34%

ROUTING ANALYSIS

LIT EXCHANGE VOLUME

10 LARGEST DARK POOLS

DARK POOL ROUTING VARIANCES

BLACKROCK DARK POOL ALLOCATION

57.6%

42.4%

61.7%

38.3%

Lit Markets

Dark Markets

0% 10% 20% 30% 40% 50% 60% 70%

Total Market Blackrock Routing

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

10.00%

BIDS DBSX CAES IEXG MSPL JPMX UBSA PULX SGMA KNMX

Blackrock Dark Pool Allocation


BLOCK TRADING The table below detail the largest child order executions for the transition. The tables detail the largest blocks and also the price of the security fifteen minutes post execution. We measure the trade fifteen minutes after the trade to ensure Mario received an appropriate price.

What Clients Should Look For Harbor Analytics Evaluation Was the print size for the transition manager significantly different from the market print sizes and if so why?

Print sizes were higher than market averages by 72% demonstrating Blackrock was able to locate large blocks

Did the largest blocks move materially in the 15 minutes after the block was priced which would suggest information was leaked to solicit the block?

There was no reversion in price for the largest trades after the fact demonstrating effective liquidity access by Blackrock

PortfolioMarket Value (ex In Kinds) Total Shares # of Names

Av g Share Position

Av g Print Size in Market

Av g Print Size by Blackrock Variance Total Prints

Target 109,596,979 4,432,807 107 41,428 189 439 250 14,042Legacy 104,020,333 3,291,611 96 34,288 180 326 146 10,103Total 213,617,312 7,724,418 203 38,051 185 320 396 24,145

Ticker Market Value Shares Ex Price Benchmark Shortfall TimePrice 15 Minutes After Execution

Variance 15 Minutes Post Trade

TNGO 701,299 99,758 7.030 6.020 100,756 11/18/15 11:01 AM 7.020 998FOLD 864,225 91,306 9.465 10.480 92,662 11/17/15 4:03 PM 9.440 (2,297)BCEI 727,040 90,227 8.058 7.770 25,976 11/17/15 3:55 PM 8.010 4,321

CHGG 546,105 76,909 7.101 6.750 (26,969) 11/19/15 11:04 AM 7.130 2,256MTZ 1,325,022 72,259 18.337 16.810 110,349 11/19/15 9:51 AM 18.180 11,354

SYRG 790,202 67,845 11.647 11.190 (31,017) 11/17/15 3:43 PM 11.575 (4,896)ON 696,250 64,679 10.765 10.720 2,891 11/17/15 4:03 PM 10.740 1,597

TWOU 1,321,950 62,351 21.202 21.690 (30,443) 11/17/15 4:03 PM 21.230 (1,762)AEO 890,914 61,201 14.557 14.690 8,128 11/17/15 4:03 PM 14.500 (3,500)CLDX 903,410 60,228 15.000 14.230 46,365 11/17/15 11:02 AM 14.975 1,495Total 8,766,417 746,763 298,697 9,567

TOTAL TRADING

LARGEST BLOCKS


INFORMATION LEAKAGE In this section we measure the close to open gap on the first trading day to see if any information was leaked to the market. It is important to note that the transition manager is not the only party who has access to the securities in transition.

What Clients Should Look For Harbor Analytics Evaluation Was the close to open gap within reason

Compare the actual close to open gap to the expectations from prior days

The close to open gap was 4.8 basis points which is within expectations for these two portfolios (+/- 8 basis points) and demonstrates good control of information by Blackrock

REALIZED CLOSE TO OPEN GAP (TARGET VS LEGACY) HISTORICAL CLOSE TO OPEN GAPPortfolio Close Open Change

Target $116,810,205 $116,629,520 -0.155% Av erage Daily Gap 0.07% Max Gap 0.14%Legacy $116,810,205 $116,573,639 -0.203% Exp Range of Daily Gap 0.08% Min Gap -0.14%

Shortfall Gap -0.048% -$55,881

LARGEST MOVES - LEGACY PORTFOLIO LARGEST MOVES - TARGET PORTFOLIOTicker Market Value Gap Total Gap Portfolio Effect Ticker Market Value Gap Total Gap Portfolio Effect

BCEI $745,811 0.64% $4,799 0.00% FIVE $1,072,441 -2.24% $23,971 -0.02%ITCI $805,615 0.53% $4,300 0.00% OZRK $2,840,087 -0.59% $16,828 -0.01%CALD $1,369,815 0.31% $4,208 0.00% WD $1,739,842 -0.95% $16,443 -0.01%TMH $564,761 0.73% $4,101 0.00% MGNX $1,109,032 -1.47% $16,335 -0.01%SMTC $128,271 2.75% $3,522 0.00% PFPT $1,893,712 -0.65% $12,248 -0.01%

HAWK $3,022,296 -0.83% ($25,112) -0.02% TREE $2,470,403 1.23% ($30,326) 0.03%KITE $1,692,152 -1.39% ($23,511) -0.02% AIMT $420,661 4.87% ($20,485) 0.02%MYGN $1,950,536 -0.89% ($17,387) -0.01% GTT $1,218,575 1.12% ($13,705) 0.01%CLDX $2,239,959 -0.77% ($17,315) -0.01% SQBG $744,188 0.92% ($6,869) 0.01%KAR $2,344,736 -0.61% ($14,345) -0.01% WCG $2,046,871 0.27% ($5,519) 0.00%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%

0.20%

11/2 11/3 11/4 11/5 11/6 11/9 11/10 11/11 11/12 11/13 11/16

Historical Close to Open Gap

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Mar

ket V

alu

e o

f Tr

ade

Close to Open Gap

Actual Transition Close to Open Gap

Buys Sells

-0.15%-0.10%-0.05%0.00%0.05%0.10%0.15%0.20%

11/2 11/3 11/4 11/5 11/6 11/9 11/10 11/11 11/12 11/13 11/16


0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0005,000,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Ma

rket

Va

lue

of T

rad

e

Close to Open Gap


Buys

Sells


COMPLIANCE EVALUATION In the tables below we have provided the test results from basic compliance checks performed on the transition portfolios. We test whether the time stamped executions, which are the books and records of the transition manager, match the aggregated executions reported to the custodian which are the books and records of the client. We measure whether any trades were executed at prices worse than the highs and lows of the market on any given day. We also measure the percentage of trades that occurred within each quartile of prices each day. Lastly, we measure whether the transition manager bought and sold the same security which is often caused by transition manager errors.

What Clients Should Look For Harbor Analytics Evaluation Time Stamp vs Custodian Prices

The brokers orders should tie to the custodian prices unless a riskless principal markup was contractually agreed to

No issues

Trades in Error Did the transition manager trade any securities in error (bought and sold same name

No issues

Price Distributions Were the prices received within the confines of the market Within expectations

CUSTODIAN RECORDS v s. TRANSITION MANAGER TIME STAMPED DATA

Portfolio Time Stamp Shares Custodian Shares VarianceTime Stamp Market

ValueCustodian Market

Value VarianceTarget 4,432,807 4,432,807 0 111,358,356 111,358,356 0Legacy 3,291,611 3,291,611 0 105,272,522 105,272,522 0Total 7,724,418 7,724,418 0 216,630,878 216,630,878

EQUITY COMPLIANCE CHECK EQUITY TRADE DISTRIBUTION WITHIN HIGH/LOW OF DAY

Portfolio Target LegacyRange (0-25 being worst) Target Legacy Variance

% of Trades at High 0.08% 0.03% 0-25 15.6% 9.0% 6.6%% of Trades at Low 0.01% 0.03% 25-50 38.5% 39.6% -1.1%% of Trades abov e High 0.00% 0.00% 50-75 34.8% 30.2% 4.6%% of Trades below Low 0.00% 0.00% 75-100 10.2% 20.8% -10.6%

TRADES IN ERRORTicker Side Shares Ex Price Proceeds LossNone


PERFORMANCE COMPARISON


COST SIMULATION Harbor simulated this exact transition over the previous ten trading days. The goal of the simulation is to accurately estimate what opportunity costs would have been based on the performance of the buy and sell portfolios. To be overly fair to the transition provider, we assume that the historical prices observed in the market would not have been attainable without impacting the security. Therefore we have taken the prior observed prices and subtracted the expected costs associated with the transition. We have provided what the maximum, minimum, average and median costs would have been using Harbor Analytics expectation of costs. In the graph below, we have detailed the relative performance of the transition versus the simulated results using Harbor Analytics estimates for commissions, spread, taxes and impact.

What Clients Should Look For Harbor Analytics Evaluation Average Simulated Cost

Compare the actual cost of the transition to the average and median simulated cost

Harbor’s cost simulation was 61 basis points which was 11 basis points higher than the actual cost

Range of Outcomes

The best and worst case scenario details how good or bad the transition could have been

The range of costs (best case versus worst case) was 624 basis points which is extremely high for a transition and demonstrates the volatile markets Blackrock was dealing with

Cost versus VWAP

Assuming VWAP was achieved for each name, what would the cost have been

First day VWAP would have yielded a cost of 6 basis points which was 44 basis points lower than the actual cost; First day VWAP is a difficult comparison due to the liquidity issues that existed in the transition

2-Nov -15 3-Nov -15 4-Nov -15 5-Nov -15 6-Nov -15 9-Nov -15 10-Nov -15 11-Nov -15 12-Nov -15 13-Nov -15 Av erageOpp Costs ($425,301) $183,587 $534,965 $390,999 ($21,904) $422,895 $390,794 ($176,475) ($566,284) $253,729 $98,701

bps -0.36% 0.16% 0.46% 0.33% -0.02% 0.36% 0.33% -0.15% -0.48% 0.22% 0.08%

Max Cost Min Cost Av g Cost Median Harbor Assumptions -1.18% -0.24% -0.61% -0.51%

Scenario Cost Calculation CalculationBest Case Scenario 3.77%Worst Case Scenario -2.47%VWAP -0.06% All trades at VWAP Day 1

Sell @ High; Buy @ Low

IMPLEMENTATION SHORTFALL SIMULATION

SIMULATION RESULTS

TRADE DATE SIMULATIONS

Opportunity Cost Simulation

Sell @ Low; Buy @ High -0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

Max Cost Min Cost Avg Cost MedianCost

VWAP

Actual Cost vs. Simulated Results


HARBOR ANALYTICS UNIVERSE RANKINGS Harbor Analytics has compared this event against our universe of events. Harbor’s universe has more than $200 billion in transition activity across all publically traded asset classes. There are twelve active transition managers in our universe.

What Clients Should Look For Harbor Analytics Evaluation Performance vs. Averages

How did this transition perform against the historical universe of results

Stephon underperforms most the average transition within our universe although this is to be expected given the SMID cap nature of the event

Asset Class Ranking

Where did this transition range versus all other trades; 50 is average and the higher than range the better

Stephon’s performance is equal to the average US SMID Cap equity cap transitions within our universe

Description Blackrock Ev ent Harbor Univ erse VarianceActual Cost -0.505% -0.370% 0.135%Performance v s. Prov ider Mean 0.00% -0.08% 0.08%Performance v s. Harbor Mean 0.19% 0.01% 0.18%Performance v s. Simulation 0.11% -0.05% -0.16%US SMID Cost Composite -0.505% -0.500% -0.005%Weighted In-Kind Transfer 3% 18% -15%One-Way Cost of Trading -0.26% -0.31% 0.05%% better than Prov ider Mean No 30%SMID Perf v s. Prov ider Mean 0.00% -0.23% 0.23%SMID Perf v s. Harbor Mean 0.19% -0.09% 0.28%

Description Blackrock Ev ent Univ erse Rank Better than Av gTotal Cost -0.50% 57 NoExplicit Cost (cps) 1.01 60 NoImplicit Cost (bps) -0.44% 55 NoPerformance v s. Mean 0.00% 34 YesPerformance v s. Harbor Mean 0.19% 12 Yes

Description Blackrock Ev ent Univ erse Rank Better than Av gTotal Cost -0.50% 59 NoExplicit Cost (cps) 1.01 62 NoImplicit Cost (bps) -0.44% 57 NoPerformance v s. Mean 0.00% 36 YesPerformance v s. Harbor Mean 0.19% 14 Yes

TRANSITION RANK - TOTAL UNIVERSE

HARBOR ANALYTICS UNIVERSE COMPARISON

TRANSITION RANK - ASSET CLASS UNIVERSE

-0.600%-0.500%-0.400%-0.300%-0.200%-0.100%0.000%0.100%0.200%0.300%

Actual Cost Performance vs. ProviderMean

Performance vs. HarborMean

Provider Relative Performance

Blackrock EventHarbor Universe

0

50

100

Total Cost Exp Cost (cps) Imp Cost (bps) Perf vs. Mean Perf vs. HarborMean

Total Universe Rank

0

50

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Total Cost Exp Cost (cps) Imp Cost (bps) Perf vs. Mean Perf vs. HarborMean

Asset Class Rank


ABOUT HARBOR ANALYTICS Harbor Analytics was founded to assist Asset Owners in measuring and managing transaction costs across all asset classes. We assist Asset Owners across the globe in evaluating equity, fixed income and foreign exchange transaction costs. We consistently add value to our clients by reducing costs, improving the on-going trading processes of their providers and providing clarity to investment staff and boards on the actual cost of execution.

Our Philosophy

In a perfect world, all transactions would be executed instantaneously with zero explicit and implicit costs. This is clearly impossible, but that is the benchmark we use for measurement. All costs, regardless of asset class, are measured against this frictionless cost ideology. Once an investment decision has been made, we measure all implementation costs from this time. Each order has a decision point benchmark that will be used to calculate cost. Deviation from this benchmark will be calculated as cost, and then Harbor Analytics will segment this amount into explicit and implicit costs. We also provide attribution of these costs and rank all providers in our Peer Universe.

What We Do

Measuring and managing the costs associated with any investment activity is imperative to long-term success. Whether it is active equity managers looking to add alpha, transition managers seeking to seamlessly reallocate assets, or 401K plans looking to provide the best platform for its beneficiaries, excessive trading cost can derail the success of these programs. At Harbor Analytics, we assist our clients by measuring the performance loss associated with trading, providing meaningful suggestions on how these costs can be minimized in the future, and assessing whether our client's current providers can meet the targets that have been set. We do this across all asset classes.

Legal Disclaimer

The content of this document is based on derived information from multiple sources including market data providers and client transaction data. We make no representation that the data provided is accurate, complete or up to date and accept no responsibility from any errors in this document. The communication is background information and should not be considered a solicitation for any investment strategy. Harbor Analytics receives compensation from transition managers in our role in benchmarking their performance.


GLOSSARY OF TERMS

Term Description Term Description Actual Portfolio The assets the client held during the entire period. This

portfolio begins with the legacy portfolio and ends with the target portfolio. The actual performance during the transition period factors in all costs in the transition.

Opportunity Costs A measure of value lost or gained by not being in the target portfolio instantaneously. Opportunity cost is essentially the market movement that is not captured that cannot be explained by explicit costs, bid ask spread or market impact.

ADV Average daily volume. Range of Costs One standard deviation range of costs around the mean. Clients should be within this range two thirds of the time. Range of costs is drive by tracking error between the target and legacy portfolio.

Best Case IS Assumes all “buys” are purchased at the low price of the trading period and all “sells” are sold at the high price of the trading period.

Range of Market The difference between the high and low prices of the market on any given date.

Bounce-back The performance of the target vs. legacy portfolio after trading has completed. We use this as a measure of how much impact the transition manager was having on the portfolios.

Settlement Period Performance

The target, legacy and actual client performance during the three days of trade settlements.

Close to Open Gap

A comparison of the closing price of a security to the opening price the next business day.

Standard Deviation A measure of dispersion from the average result.

Daily Tracking Error A calculation of the expected daily performance of each portfolio using the last 250 days of trading.

Start Date The closing values on trade date minus one. Essentially the value of all transition assets prior to trading occurring.

End Date The final settlement date of the transition. At this time the new managers take over portfolio responsibility.

Target Portfolio The assets (equity, fixed, futures and/or cash) being purchased in the transition. The performance of all assets being acquired in the transition had they been acquired on the close prior to any transition activity.

Expected Time to Trade

The time expected to trade the order assuming the trade is completed at 10% of the volume.

Time to Trade The amount of time the order took to complete measuring from market open

External Liquidity Sources

All securities not traded with internal liquidity sources. Tracking Error A measure of how closely two portfolios follow each other.


The difference between the performance of the target portfolio and the actual transition performance portfolio during the transition period

Trading Period Performance

The target, legacy and actual client performance during the day(s) when trading is being executed.

Internal Liquidity Sources

Using data sourced from the provider, we provide trading statistics on the securities executed with internal liquidity sources.

VIX A measure of the implied volatility of any particular index. VIX is often referred to as the ‘fear index’.

Legacy Portfolio The assets (equity, fixed, futures and/or cash) being sold in the transition. The performance of the legacy assets represents client performance had no transition taken place.

VWAP Volume Weighted Average Price.

Mean Costs The expected cost of the transition assuming no opportunity costs are incurred. Clients should expect to outperform the mean cost estimate 50% of the time.

Weighted Average Liquidity

The percentage of volume each security encompasses times the weight of each security with respect to trading.

MWBE D/V Minority, Woman-Owned, or Disabled Veteran Business Enterprises

Project Stephon – Health Plan

Transition Management Scorecard Transition Manager: Blackrock

Asset Class: US SMID Cap Equity

Date: December 2015


TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

TRANSITION OVERVIEW 5

TRANSITION DIFFICULTY RANKING 6

PRE TRADE EXPECTATIONS 7

DAILY VALUES 9

TRANSITION PERFORMANCE CHECK 10

TRADING PERIOD VS. SETTLEMENT PERIOD PERFORMANCE 11

RECONCILIATION TO PRE TRADE ANALYTICS 12

PORTFOLIO PERFORMANCE ACROSS ENTIRE PERIOD 13

INTRA-DAY PERFORMANCE – DAY ONE 14

PERFORMANCE ATTRIBUTION 15

INDIVIDUAL SECURITY ANALYSIS – LARGEST POSITIONS 16

MARKET CONDITIONS 17

LUCK FACTOR 18

TIMING & PARTICIPATION RATES 20

SECURITY PERFORMANCE DURING TRADING - LEGACY 21

SECURITY PERFORMANCE DURING TRADING - TARGET 22

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY ONE 24

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY TWO 25

PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY THREE 26

SECTOR MANAGEMENT – DAY ONE 27

EXECUTION SIZE 29

VENUE ANALYSIS 30

BLOCK TRADING ERROR! BOOKMARK NOT DEFINED.

INFORMATION LEAKAGE 31

COMPLIANCE EVALUATION 32

COST SIMULATION 34

HARBOR ANALYTICS UNIVERSE RANKINGS 35

ABOUT HARBOR ANALYTICS 36

GLOSSARY OF TERMS 37


Executive Summary

Assets in Transition Transition Timing Blackrock was hired by “Stephon” to transition approximately $19 million in US SMID Cap equities; Both portfolios were SMID-cap in nature although the target portfolio had a lower capitalization profile ($1.9b vs $3.4 b) The target was also less liquid than the legacy (16% vs. 12% of average daily volume once pension assets are included).

The transition began with on November 16th and trading was completed on November 24th. The reporting in this document uses November 13th as a benchmark (implementation shortfall) and performance was calculated through final settlement date of November 27th.

Expected Cost Actual Cost Harbor Analytics estimated the cost of the transition at 70 basis points ($132k) +/- 40 basis points. Blackrock estimated the cost of the transition at 51 basis points ($96k) +/- 49 basis points. Harbor Analytics model assumes a 10% participation rate for all trading and calculates tracking error using the most recent performance history of the portfolios.

The actual cost of the transition was 48 basis points ($92k) which was 21 basis points or $40k lower than our mean estimate and within our expected range of cost (one standard deviation). The actual costs were 2 basis points lower Blackrock’s mean expected cost and within their expected range of cost.

Above Expectations Within Expectations Below Expectations 1. The cost of the transition was better than

Harbor’s expectation and equal to the average SMID Cap transition in our universe (pgs. 7, 10, 36).

2. The risk management by Blackrock was good as “Stephon” was systematically exposed to the market across the entire period (pgs. 24-26) and sector risk was prioritized on day one (pg. 27). Blackrock was dealing with extremely difficult market conditions (pg. 17).

3. Blackrock used unaffiliated dark pools to lower the cost of the event (pgs. 30)

1. The commission charges were slightly higher than our universe average although within reason for a transition of this size and scope (pgs. 7 & 12).

2. Tracking error was within expectations for the trading and settlement periods (pg. 11).

1. None

Compliance Pass Harbor Analytics measured whether the shares and market value traded by the transition manager (verified through time stamped

executions) match the aggregated trades reported to the custodian. To verify this, we calculate the actual average price executed by the transition manager and compare this against the actual price which was sent to the custodian each day.

Pass Harbor Analytics measured whether any individual security transition was outside the confines of the market (i.e. above the high of the day or below the low of the day). To verify this, we compare all of the time stamped executions against the total stock market activity for each security via Bloomberg.

Pass Harbor Analytics measured whether the same security was bought and sold during the transition which often is the result of an error by the transition manager. To verify this, we compare both SEDOL and ISIN to ensure the same security was not traded in error nor did the transition manager buy and sell fungible securities of the same issuer.


PRE TRANSITION OVERVIEW


Transition Overview

What Clients Should Look For Harbor Analytics Evaluation Liquidity The largest driver of transition cost is liquidity. Liquidity is

represented above as the percentage of 20 day average volume of each position.

Liquidity was below average for the transition as the average position was 14% (including pension) of the average daily volume. There was an illiquid tail on both sides of the transition driven by the large mid and small cap allocations

Capitalization Shift

Performance can deviate significantly across market capitalizations and this can have a significant impact on the cost of a transition.

The weighted average capitalization was similar for both portfolios although the target portfolio was more heavily weighted towards small cap (less mid-cap) and this had a lower average cap.

Sector Risk Sectors can have large deviations in performance on a daily basis. Large shifts can have a significant impact on the cost of a transition.

Sector risk was muted in that the only large risk an increase in financials. Cash was being reduced in the transition therefore Blackrock needed to become a net buyer of approximately $1 million.

Portfolio Value Shares % of ADV # of NamesExpected

Cost 5-Day Return Volatility Av g PositionAv g Mkt

Cap (mm) % CashTarget 18,932,857 719,745 2.63% 107 -0.44% -4.19% 43.6% 0.93% $1,881 3.6%Legacy 18,932,857 534,395 1.95% 96 -0.32% -3.54% 36.3% 1.04% $3,357 8.4%Total/Variance 37,865,714 1,254,140 2.29% -0.70% -0.65% 7.3% -0.11% ($1,476) -4.9%

Portfolio Target Exp Cost Legacy Exp Cost Variance Portfolio Annual TE Daily TELarge Cap 0 0.00% 3,859,654 -0.17% 3,859,654 Target v s. Bench 3.71% 0.23%Mid Cap 6,233,142 -0.29% 6,562,171 -0.33% 329,029 Legacy v s. Bench 4.82% 0.30%Small Cap 12,027,514 -0.54% 6,916,856 -0.47% (5,110,658) Target v s. Legacy 5.22% 0.33%

GICS Sector Target % of ADV Legacy % of ADV Net Trading % of ADV Target Exp Cost Legacy Exp CostConsumer Discretionary 2,766,472 2.6% 2,275,906 1.8% (490,567) 0-1.0% 5,161,157 -0.30% 6,701,090 -0.26%Consumer Staples 0 0.0% 197,116 13.4% 197,116 1.0-2.5% 6,172,111 -0.43% 5,914,516 -0.38%Energy 148,500 0.9% 143,781 0.6% (4,719) 2.5-5.0% 4,370,199 -0.60% 3,166,867 -0.44%Financials 3,821,415 3.6% 2,055,781 3.4% (1,765,634) 5.0-7.5% 934,762 -0.67% 222,011 -0.57%Health Care 3,392,779 2.2% 3,825,795 0.9% 433,016 7.5-10% 600,221 -0.75% 663,012 -0.65%Industrials 2,313,905 3.4% 3,327,648 1.8% 1,013,742 10-15% 353,859 -0.70% 197,116 -0.65%Information Technology 4,546,118 1.7% 4,617,726 1.9% 71,608 15-20% 194,278 -0.85% 0 0.00%Materials 151,577 1.6% 133,865 2.1% (17,712) 20-30% 0 0.00% 0 0.00%Telecommunication Serv ices 645,819 3.7% 286,994 2.6% (358,825) 30-40% 0 0.00% 0 0.00%Utilities 0 0.0% 0 0.0% 0 40-50% 0 0.00% 0 0.00%In-Kinds 474,069 0.0% 474,069 0.0% 0 50-75% 0 0.00% 0 0.00%Cash/Hedges 672,201 0.0% 1,594,176 0.0% 921,975 75-100% 0 0.00% 0 0.00%Total 18,932,857 2.6% 18,932,857 2.0% (0) >100% 0 0.00% 0 0.00%

SECTOR CHARACTERISTICS - INCLUDING IN-KIND TRANSFERS LIQUIDITY BREAKDOWN - EX IN-KIND TRANSFERS

TRADE CHARACTERISTICS

REGIONAL/ASSET CLASS BREAKDOWN TRACKING ERROR - INCLUDING IN-KIND TRANSFERS


Transition Difficulty Ranking

Harbor Analytics Transition Difficulty Ranking (“TDR”) normalizes transition costs across all transitions. The ranking is an indication of cost expectation that can be used to compare transitions of different asset sizes and asset classes.


Liquidity The average liquidity for all transitions is measured based on the least liquid portfolio (target or legacy). The least liquid side is used as this will drive the timing of the transition.

The liquidity of this event ranks as a 7.65 which makes this transition harder than our average transition event. Liquidity is the largest dictator of cost as impact rises non-linearly as % of ADV increases.

Tracking Error Target versus legacy recent tracking error is measured to determine the recent variation between the two portfolios. This is an effective determinant of opportunity cost.

The tracking error of this event ranks as a 4.65 which makes this transition easier than our average transition event. Tracking error has a large effect on the potential opportunity cost of a transition.

Sector Risk Large sector shifts can have a huge impact on transition costs as sectors can deviate from long term correlations from day to day.

The sector risk of this event ranks as a 2.04 which makes this transition easier than our average transition event. Large sector risk can complicate the risk management of a transition.

Overall TDR Compare rank and avg cost of historical transitions Stephon’s trade was a 6.79/10.0 which is harder than our average event of 4.85. The average cost for similar transition is 40 basis points.

HISTORICAL COMPONENT ACTIVITY

Av g Transition Stephon Rank Av g Transition Stephon Rank Av g Transition Stephon Rank% of ADV 10.5% 16.11% 7.65 Target v s Leg 5.61% 5.22% 4.65 Av g Variance 6.79% 2.76% 2.04

Harbor Analytics TDR Ranking 6.79

HISTORICAL TRANSITION DIFFICULTY RANKING PERFORMANCE% of

Transitions Av g Cost% Better Than

Mean0 - 1 1% 0.08% 60%1 - 2 11% -0.14% 38%2 - 3 22% -0.20% 41%3 - 4 17% -0.28% 27%4 - 5 13% -0.30% 40%5 - 6 12% -0.34% 53%6 - 7 6% -0.40% 61%7 - 8 6% -0.84% 22%8 - 9 8% -0.88% 29%9 - 10 4% -1.01% 31%

TDR Ranking

Liquidity Tracking Error Sector Risk

0%10%20%30%40%50%60%70%80%90%

100%

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Bett

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Historical Provider Performance

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-3.0% -2.0% -1.0% 0.0% 1.0% 2.0%

Wgt

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Transition Cost

Historical Cost vs. Liquidity

0%10%20%30%40%

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Sect

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Transition Cost

Historical Cost vs. Sector Risk


PRE TRADE EXPECTATIONS The goal of the provider assessment is to determine if the estimate provided was realistic. To best judge the nature of the provider’s estimate we compare their estimate to Harbor Analytics’ independent model. Harbor uses database averages for commissions, half the actual bid ask spread, academically accepted algorithms for calculating market impact and the most recent 50 days of performance to calculate expected opportunity costs.

What Clients Should Look For Harbor Analytics Evaluation Mean Cost Transition managers can be aggressive in their mean

estimate in an attempt to appear cheaper than their competitors

Blackrock’s mean estimate was lower than Harbor’s model which is normal within the industry; We do not estimate any savings associated with any trading methodology. Our model assumes a 10% volume participation rate.

Range of Cost Overly wide range of costs are a tactic of some transition managers to provide a cushion for an overly optimistic mean estimate

Blackrock’s range of cost was narrower than our model. Range of cost is a function of liquidity (duration of transition) and tracking error (deviation in performance between target and legacy during trading).

Commissions While commissions are typically the smallest cost component, clients should pay reasonable commissions for their services

Blackrock’s commissions were higher than the average US equity commission from our Transition Management Universes. Given the size of the transition, the commission costs were reasonable.

PRE TRADE COMPARISON

Mean Cost1 Std Dev Range of

Costs 1 Std Dev Max Cost 1 Std Dev Min Cost2 Std Dev Range of

Costs Trading DaysBlackrock -0.51% 0.490% -1.00% -0.02% -1.49% - 0.47% 4Harbor Analyt ics -0.70% 0.400% -1.10% -0.30% -1.50% - 0.10% 11Variance -0.19% -0.090% -0.10% -0.28% 0.01% - 0.37% 7

COST COMPONENT COMPARISON

Cost Blackrock (bps)Harbor Analyt ics

(bps) Variance (bps) Blackrock ($$ Cost)Harbor Analyt ics

($$ Cost) Variance ($$)Equity Commission -0.070% -0.059% 0.011% (13,253) (11,162) (2,091)Equity Spread and Impact -0.430% -0.635% -0.205% (81,411) (120,224) 38,812Taxes and Fees -0.009% -0.001% 0.007% (1,664) (270) (1,394)Total -0.509% -0.695% -0.187% (96,328) (131,655) 35,327BPS is based upon port folio value and not t raded value.

HARBOR ANALYTICS COMMISSION COMPARISONAsset Class Blackrock (bps) Harbor Analyt ics VarianceEquity Commission (bps) -0.036% -0.030% -0.006%Equity Commission (cps) (1.01) (0.85) (0.16)Futures Commission (bps) 0.000% 0.003% NAFutures Commission (Per Contract) $0.00 $2.85 NA

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00%

Prob

ab

ility

Expected Shortfall

Distribution of Cost ComparisonHarbor AnalyticsBlackrock


TRANSITION PERFORMANCE


DAILY VALUES The following table and charts detail the value of each portfolio that was traded, the value transferred in-kind and also a daily valuation of the target and legacy portfolio for relevant dates of the transition.


Total Turnover Transition’s with a high percentage of in-kind transfers should have much lower cost

15% of the transition was transferred in-kind. This translates into 183% or $35 million in total equity turnover once cash is accounted for. The average transition Harbor analyzes has $551 million in turnover.

First Day Performance

First day performance should somewhat resemble prior period performance

The target outperformed the legacy portfolio by 3 bps on the first trade date. This is within expectations.

TRADING DETAILLegacy % Target %

Starting Value $18,932,857 100% $18,932,857 100%In-Kind Transfer $2,923,849 15% $2,923,849 15%Traded Value $16,864,612 89% $17,786,587 94%Cash $1,594,176 8% $672,201 4%

Proceeds $17,067,333 Cost $18,068,003Eqy Implicit Cost 202,721 Eqy Implicit Cost (281,416)bps 1.19% bps -1.56%

MARKET VALUESDate Legacy Daily Return Target Daily Return Notes11/6 $19,685,361 0.00% $19,817,317 0.00%11/9 $19,558,977 -0.64% $19,592,786 -1.13%11/10 $19,648,240 0.46% $19,601,894 0.05%11/11 $19,442,959 -1.04% $19,401,665 -1.02%11/12 $19,049,300 -2.02% $19,094,292 -1.58%11/13 $18,932,857 -0.61% $18,932,857 -0.85% Benchmark11/16 $19,061,055 0.68% $19,066,954 0.71% First Trade Date11/17 $19,097,277 0.19% $19,109,938 0.23%11/18 $19,389,641 1.53% $19,387,691 1.45%11/19 $19,286,566 -0.53% $19,284,761 -0.53%11/20 $19,438,256 0.79% $19,468,813 0.95%11/23 $19,629,541 0.98% $19,544,083 0.39%

Legacy

In-KindTransfer

TradedValue

Cash

Target

In-KindTransfer

TradedValue

Cash

-2.50%-2.00%-1.50%-1.00%-0.50%0.00%0.50%1.00%1.50%2.00% Daily Returns

Legacy

Target


TRANSITION PERFORMANCE CHECK The first step in evaluating the success of any transition is to measure the performance of the transition account and compare this to the performance of the “Target” portfolio; this concept is commonly referred to as implementation shortfall. Comparison to appropriate industry benchmarks have also been provided for the same time period.

What Clients Should Look For Harbor Analytics Evaluation Implementation Shortfall

The total cost of the transition is calculated by subtracting the target return from the actual return.

Costs were 48 basis points from the 11/13 close. The costs were 21 basis points lower than Harbor Analytics’ mean estimate and 2 basis points lower than Blackrock’s mean estimate.

Within Expected Ranges

Transition Providers should be within their/our range of cost 68% of the time. They should also beat their mean 50% of time.

The result was within both Harbor and Blackrock’s expected range of cost (one standard deviation)

Performance vs Benchmarks

How has the portfolios performed versus comparable market benchmarks for the period.

All portfolios performed within expectations over the transition period. The market was very volatile over the transition period

TRANSITION PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE


Target Performance $18,932,857 $19,906,529 $973,672 5.143%


Stephon Performance $18,932,857 $19,814,794 $881,937 4.658%

BENCHMARK PERFORMANCE TRANSITION PERIOD

Index Starting Value Ending Value Gain/(Loss) %

Russell 2000 Index 1146.55 1202.38 55.83 4.869%

Russell 2000 Value Idx 1401.65 1462.82 61.16 4.363%

Russell 2000 Growth Idx 709.89 748.04 38.15 5.374%

Russell 2500 457.19 477.28 20.09 4.395%


End Date 11/27/2015 -0.485%

IMPLEMENTATION SHORTFALL CALCULATION TRANSITION COST

Ending Target Value $19,906,529 Explicit Costs ($13,040) -0.069%

Actual Ending Value $19,814,794 Implicit Costs ($78,695) -0.416%

Implementation Shortfall ($91,735) Total Costs ($91,735) -0.485%

RECONCILIATION TO PRE TRADE ESTIMATES RELATIVE COST

Blackrock Mean Estimate -0.51% Harbor Analytics Mean Estimate -0.70%

Blackrock Range (1 Std Dev ) +/- 0.49% Harbor Analytics Range (1 Std Dev ) +/- 0.40%

Better than Mean Yes Better than Mean Yes

Within Expected Range Yes Within Expected Range Yes21.08 bps2.42 bps


-48.45 BPS

Versus Blackrock Versus Harbor Analytics

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00%

Size

of T

rans

ition M

illion

s


Transition Cost vs. Historical Transition Cost

Harbor Universe

Stephon


TRADING PERIOD VS. SETTLEMENT PERIOD PERFORMANCE The graphs and tables below detail the performance of the target and legacy portfolio across the trading and settlement periods. The separation of performance from trading and settlement periods is important in determining if the trading of the transition manager overly influenced returns. We also compare the variance between the target and legacy on trade date and for the settlement periods against all past transitions.

What Clients Should Look For Harbor Analytics Evaluation Trading Period Clients should be concerned on how the portfolios

performed together – best case scenario is the legacy outperforming the target portfolio

The target underperformed the legacy by 80.9 basis points which is within the expected tracking error of the trading period (+/- 87 basis points) and within the maximum expected variance (tracking error plus impact) of 151 basis points

Settlement Period

Clients should be concerned if a large deviation in performance occurs with the legacy outperforming the target

The target outperformed the legacy by 34.0 basis points which is within the expected settlement period tracking error (57 basis points) and within the maximum expected variance (tracking error plus impact) of 121 basis points. The target outperformed the legacy (and market) during the settlement period which is positive for Stephon.

TRADING PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE - TRADING PERIOD



Legacy Performance $18,932,857 $19,799,687 $866,830 4.58%



End Date 11/24/2015

Russell 2000 Index 3.69% Trading Days 7




SETTLEMENT PERIOD PERFORMANCE PERFORMANCE VS HARBOR UNIVERSE - SETTLEMENT PERIOD



Legacy Performance $19,799,687 $19,994,506 $194,818 0.98%



End Date 11/27/2015

Russell 2000 Index 1.14% Settlement Period 3




0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

Size

of T

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ition

Milli

ons

Target v s Legacy Trading Period

Trading Period Performance - Target vs. Legacy

Harbor Universe

Stephon

0

1,000

2,000

3,000

4,000

5,000

-8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

Size

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Target v s Legacy Settlement Period

Settlement Period Performance - Target vs. Legacy

Harbor UniverseStephon


RECONCILIATION TO PRE TRADE ANALYTICS The tables below compare the actual results of the transition against the pre-trade estimate put forth by the transition provider, the expected cost as calculated by Harbor Analytics and also against the average transition cost in our Transition Management Universes.

What Clients Should Look For Harbor Analytics Evaluation How did this transition performance versus comparable data points Stephon’s result was better than Harbor’s mean estimate and better than the

average SMID cap transition within our universe

RECONCILIATION TO BLACKROCK PRE TRADE

CostBlackrock Pre Trade

Estimate Actual Result VarianceBlackrock Pre Trade

Estimate bps Actual Result bps Variance bpsEquity Commission (13,253) (12,724) 529 -0.07% -0.07% 0.00%Equity Implicit Cost (81,411) (78,695) 2,716 -0.43% -0.42% 0.01%Taxes and Fees (1,664) (316) 1,348 -0.01% 0.00% 0.01%Totals (96,328) (91,735) 4,594 -0.51% -0.48% 0.02%

RECONCILIATION TO HARBOR ANALYTICS PRE TRADE


Estimate Actual Result VarianceHarbor Analytics

Estimate bps Actual Result bps Variance bpsEquity Commission (11,162) (12,724) (1,562) -0.06% -0.07% -0.01%Equity Implicit Cost (120,224) (78,695) 41,529 -0.64% -0.42% 0.22%Taxes and Fees (270) (316) (46) 0.00% 0.00% 0.00%Totals (131,655) (91,735) 39,921 -0.70% -0.48% 0.21%

RECONCILIATION TO HARBOR ANALYTICS ASSET CLASS UNIVERSE AVERAGE


Univ erse Av g Actual Result VarianceHarbor Analytics

Univ erse Av g bps Actual Result bps Variance bpsEquity Commission (11,162) (12,724) (1,562) -0.06% -0.07% -0.01%Equity Implicit Cost (83,233) (78,695) 4,538 -0.44% -0.42% 0.02%Taxes and Fees (270) (316) (46) 0.00% 0.00% 0.00%Totals (94,664) (91,735) 2,930 -0.50% -0.48% 0.02%

BLACKROCK DISTRIBUTION-2 Std Cost Band ($281,870)-1 Std Cost Band ($189,099)Actual Cost ($91,735)+ 1 Std Cost Band ($3,557)+ 2 Std Cost Band $89,214

($350) ($300) ($250) ($200) ($150) ($100) ($50) $0 $50 $100 $150Thousands

-2 Std Cost Band -1 Std Cost Band Actual Cost + 1 Std Cost Band + 2 Std Cost Band


PORTFOLIO PERFORMANCE ACROSS ENTIRE PERIOD The graphs and tables below detail the performance of the target and legacy portfolio across the trading and settlement periods. The separation of performance from trading and settlement periods is important in determining if the trading of the transition manager overly influenced returns. The red marker on the graph indicates the dispersion between the target and the legacy portfolios on the first day of trading. The blue lines in the chart indicate the expected daily tracking bands for the portfolios at 1 and 2 standard deviations.

What Clients Should Look For Harbor Analytics Evaluation Pre Transition Was there a larger than normal deviation between the

portfolios during the trading periods The target portfolio underperformed the legacy portfolio by 67 basis points during the pre-trade measurement period which is within expectations.

Graph Was there a large deviation in performance on the first trading day when most trading occurs

We have highlighted the first day of trading where the tracking was within expectations

Market Conditions

Did the portfolios differ in performance based on market conditions (up or down) during trading period

There was no consistent performance trend between the target and legacy portfolios in up or down markets

PORTFOLIO TRACKING ACROSS ENTIRE PERIOD TOTAL PERIOD PERFORMANCE RECONCILITATIONPortfolio Pre Transition Trading Period Post Transition Total

Target -4.54% 3.77% 1.32% 0.37%

Legacy -3.87% 4.58% 0.98% 1.52%

Actual -3.87% 3.28% 1.32% 0.61%

Actual v s. Target 0.67% -0.48% 0.00% 0.23%

Actual v s. Legacy 0.00% -1.29% 0.34% -0.92%

PERFORMANCE BY MARKET PERFORMANCE DISTRIBUTION OF PERFORMANCE BY DAYTarget Legacy Variance Performance Metric Pre Transition Trading Period Post Transition Total

Up Markets - Pre Trade 0.05% 0.46% -0.41% Within -1 Std Dev 20% 14% 33% 25%

Down Market - Pre Trade -4.58% -4.32% -0.26% Within +1 Std Dev 20% 57% 100% 45%

Up Markets - During Trade 0.58% 0.69% -0.12% Between -1 & -2 Std Dev 40% 29% 0% 25%

Down Market - During Trade -0.04% -0.05% 0.01% Between +1 & +2 Std Dev 20% 0% 0% 10%

Up Markets - Post Trade 0.44% 0.33% 0.11% More Than 2 Std Dev - 0% 0% 0% 0%

Down Markets - Post Trade 0.00% 0.00% 0.00% More Than 2 Std Dev + 0% 0% 0% 0%

Total Up Days 8

Total Down Days 6 Periods Start Date End Date

Pre Transition 11/6/2015 11/13/2015

Trading Period 11/13/2015 11/24/2015

Post Transition 11/24/2015 11/27/2015

Market Condition

0.00%0.20%0.40%0.60%0.80%

Targ

et Le

gacy

TE

Tracking Across Period Leg vs Target1 Std Dev +2 Std Dev +


INTRA-DAY PERFORMANCE – DAY ONE The following tables and charts detail the intra-day performance of the target and legacy portfolios during the first day of trading when most of the transition was completed.

What Clients Should Look For Harbor Analytics Evaluation Target vs. Legacy Cumulative

The difference in performance between target and legacy on day one compared to the expected tracking error between the portfolios

The target outperformed the legacy by 3 basis points which is within expectations;

Interval Performance and Completion

The last two columns detail the amount completed during the interval and performance change between the target and legacy portfolios

Trades were mainly executed in the afternoon on the first trade date. There was some impact at the start of trading (circled above) although within tracking error expectations

INTRA-DAY PERFORMANCE - FIRST TRADE DATE

Time Target - Cum Legacy - CumRussell 2000

IndexTarget v s.

Legacy CumWithin 1 Std

DevWithin 2 Std

DevCompletion

Lev elInterv al

PerformanceInterv al

CompletionOpen -0.15% -0.20% 0.00% -0.05% Yes Yes 0.0% -0.05% 0.00%

11/16/15 10:00 AM -0.12% -0.04% -0.06% 0.08% Yes Yes 0.0% 0.13% 0.00%11/16/15 10:30 AM -0.11% -0.12% -0.10% -0.01% Yes Yes 0.0% -0.09% 0.00%11/16/15 11:00 AM -0.51% -0.45% -0.39% 0.06% Yes Yes 0.0% 0.07% 0.00%11/16/15 11:30 AM -0.79% -0.55% -0.51% 0.23% Yes Yes 0.0% 0.17% 0.00%11/16/15 12:00 PM -0.64% -0.38% -0.35% 0.25% Yes Yes 0.0% 0.02% 0.00%11/16/15 12:30 PM -0.40% -0.15% -0.09% 0.25% Yes Yes 0.0% 0.00% 0.00%11/16/15 1:00 PM -0.27% -0.09% -0.03% 0.18% Yes Yes 0.0% -0.07% 0.00%11/16/15 1:30 PM -0.04% -0.05% 0.08% -0.01% Yes Yes 1.9% -0.18% 1.91%11/16/15 2:00 PM 0.19% 0.12% 0.23% -0.06% Yes Yes 4.0% -0.06% 2.13%11/16/15 2:30 PM 0.21% 0.18% 0.32% -0.03% Yes Yes 5.2% 0.04% 1.18%11/16/15 3:00 PM 0.44% 0.41% 0.45% -0.03% Yes Yes 12.4% -0.01% 7.20%11/16/15 3:30 PM 0.62% 0.53% 0.68% -0.09% Yes Yes 23.2% -0.06% 10.78%11/16/15 4:00 PM 0.71% 0.68% 0.83% -0.03% Yes Yes 26.3% 0.06% 3.15%

Legacy v s. Target Performance % of Interv als

% of Trading Completed

<-0.25% 0% 0%(0.25)% - (0.15)% 7% 2%(0.15)% - (0.05)% 29% 13%(0.05)% - 0.00% 21% 7%0.00% - 0.05% 14% 1%0.05% - 0.15% 21% 3%0.15% - 0.25% 7% 0%

>0.25% 0% 0%

0%20%40%60%80%

100%

<-0.25% (0.25)% -(0.15)%

(0.15)% -(0.05)%

(0.05)% -0.00%

0.00% - 0.05%0.05% - 0.15%0.15% - 0.25% >0.25%Com

ple

tion

Lev

el

Legacy v s. Target

Completion Level vs. Portfolio Performance Variances

% of Intervals

% of TradingCompleted


PERFORMANCE ATTRIBUTION The tables and charts below detail the cost of the transition by liquidity buckets and also by capitalization. The bubbles in the graphs represent the size of the position.

What Clients Should Look For Harbor Analytics Evaluation Liquidity Buckets Were there liquidity buckets that cost much more than

expected particularly the less liquid names Blackrock’s performance was mixed although they outperformed on most liquidity buckets

Cost by Market Capitalization

Did cost spike for a particularly capitalization band; Mid and Small cap securities tend to be the areas which transition managers underperform

Blackrock outperformed on all capitalizations except for securities less than $1 billion


INDIVIDUAL SECURITY ANALYSIS – LARGEST POSITIONS The tables below detail the performance of the top buy and sell securities and also the least liquid securities within the transition. Often the largest names in the transition will dictate the overall cost. The provider should pay close attention to these names particularly the securities with the largest percentage of average daily volume.

What Clients Should Look For Harbor Analytics Evaluation Largest Names The largest positions normally drive the cost for the transition

as they are the largest percentage of trading The cost of the largest names in total was +91 basis points versus Harbor’s expectation of 38 basis points.

Least Liquid Names

Were the costs reasonable for less liquid names or were they traded quickly at a high cost

The cost of the least liquid names in total was +67 basis points versus Harbor’s expectation of 60 basis points.

LARGEST TEN LEGACY NAMES LARGEST TEN TARGET NAMESTicker MV (000) ADV Act Cost Exp Costs Variance Ticker MV (000) ADV Act Cost Exp Costs Variance

WSO $714 3.6% 1.10% -0.46% 1.57% OZRK $460 1.9% -0.40% -0.24% -0.16%AGII $527 9.5% 1.69% -0.41% 2.11% EPAM $435 1.8% -0.61% -0.31% -0.31%RJF $519 1.2% 1.15% -0.19% 1.34% APOG $409 4.2% -2.30% -0.55% -1.75%SBNY $511 0.4% 2.06% -0.13% 2.19% TREE $400 0.8% -0.19% -0.55% 0.36%HAWK $490 2.8% 0.38% -0.30% 0.68% IMPV $388 2.0% -0.03% -0.55% 0.52%JKHY $431 1.5% 2.67% -0.14% 2.81% VG $369 4.3% -0.72% -0.75% 0.03%MTZ $418 1.8% 7.75% -0.47% 8.23% MSTR $362 2.1% -2.39% -0.53% -1.85%LKQ $387 1.1% 1.92% -0.22% 2.15% ACHC $351 1.0% 0.00% -0.33% 0.33%KAR $375 0.8% 0.80% -0.14% 0.95% OPB $337 2.6% 0.52% -0.41% 0.93%CLDX $363 1.3% 3.89% -0.72% 4.61% WCG $332 1.0% -0.30% -0.35% 0.05%Totals $4,735 2.6% 2.19% -0.32% 2.51% Totals $3,844 2.2% -0.66% -0.45% -0.21%

TEN LEAST LIQUID POSITIONS - LEGACY TEN LEAST LIQUID POSITIONS - TARGETTicker MV (000) ADV Act Cost Exp Costs Variance Ticker MV (000) ADV Act Cost Exp Costs Variance

NGVC $197 13.4% -3.93% -0.65% -3.29% GSVC $106 17.2% 0.42% -0.77% 1.19%TNGO $136 10.0% 14.13% -1.58% 15.71% LOB $88 15.0% -3.49% -0.94% -2.54%AGII $527 9.5% 1.69% -0.41% 2.11% CNOB $154 10.2% -4.81% -0.45% -4.36%FOXF $222 6.4% 0.51% -0.57% 1.08% KTWO $200 10.2% -0.38% -0.90% 0.52%RNST $188 4.3% 1.39% -0.32% 1.71% CHGG $167 9.9% -0.83% -1.01% 0.18%STCK $35 4.3% 1.29% -0.47% 1.76% KFRC $266 9.7% -2.70% -0.70% -2.00%WSO $714 3.6% 1.10% -0.46% 1.57% PPBI $132 9.3% 0.12% -0.55% 0.67%CALD $222 3.5% 5.04% -0.65% 5.68% AFCO $35 8.7% -2.32% -0.64% -1.67%QLGC $241 3.5% 0.70% -0.48% 1.18% MBUU $57 7.4% -3.05% -0.68% -2.37%DORM $246 3.3% 1.22% -0.41% 1.63% ADMS $78 7.2% 0.11% -0.84% 0.95%Totals $2,728 6.0% 1.77% -0.53% 2.31% Totals $1,284 10.5% -1.69% -0.75% -0.93%


MARKET CONDITIONS Market conditions can have a large impact on the performance of the transition. We believe volume and volatility to have the largest impact on transaction costs. We measure these prior to the start of the transition and compare this to the actual market conditions during trading and calculate the impact market conditions had on trading costs. We also measure market dispersion as larger market moves tends to increase transaction costs.

What Clients Should Look For Harbor Analytics Evaluation Volume How did trading period market volumes compare to pre

trade activity Volumes are directly correlated with market impact; The higher the volume the better. Volumes decreased in this transition which tends to increase cost

Range of Market How did the breadth of the market (high to low across each day) compare to pre trade activity

The breadth of the market was equal to the previous two week averages and higher than normal which complicates risk management

VIX How did trading period market volatility compare to pre trade activity

Higher volatility often causes costs to rise; Volatility was still high during the event which increases expected cost

VOLATILITY AND VOLUMEPre Transition During Transition Post Transition Change Effect on Cost

VIX 16.0 18.2 15.1 14% Negativ eDAILY RANGE OF MARKET 1.35% 1.35% 0.72% 0% Positiv eMARKET AVG DAILY VOLUME 262,558,611 230,760,176 99,150,168.0 -12% Negativ eEXPECTED COST IMPACT (bps) -0.117% (Positiv e v alue indicates costs should hav e gone down)

SECTOR DEVIATIONPre-Transition During Transition Post Transition

Sector Av g Daily Mov ement Av g Daily Mov ement Av g Daily Mov ement Change Effect on CostCONSUMER DISCRETIONARY 1.19% 1.86% 0.71% -0.67% Negativ eCONSUMER STAPLES 0.94% 1.87% 0.56% -0.93% Negativ eENERGY 2.12% 1.90% 1.21% 0.22% Positiv eFINANCIALS 1.08% 1.69% 0.48% -0.61% Negativ eHEALTH CARE 1.26% 1.69% 0.59% -0.43% Negativ eINDUSTRIALS 0.96% 1.77% 0.42% -0.81% Negativ eINFORMATION TECHNOLOGY 1.03% 1.82% 0.41% -0.79% Negativ eMATERIALS 1.28% 1.85% 0.79% -0.57% Negativ eTELECOMMUNICATION SERVICES 0.96% 2.03% 0.65% -1.08% Negativ eUTILITIES 1.44% 1.80% 0.83% -0.36% Negativ e

0102030

Market Volatility

0

200

400

11/2 11/4 11/6 11/8 11/1011/1211/1411/1611/1811/2011/2211/2411/26

Market Volume


LUCK FACTOR Market conditions often have a large influence on the total cost of the event. In the previous sector, we have estimated the cost associated with volume and volatility which both have large effects on market impact. In this section, we attempt to estimate how overall market performance influenced total cost. We estimate the cost associated with sector movements in addition to the cost associated with capitalization changes.

What Clients Should Look For Harbor Analytics Evaluation Sector Changes How did the market perform in the largest sector imbalances

including both large increases and decreases The performance of sectors had limited effect on the overall cost of the transition; First day sector movement accounted for 18% of total cost.

Cap Changes Was there a large variation in performance amongst large, mid and small cap securities in addition to net cash change

Similar to sector risk, capitalization shifts had limited effect on the overall cost of the transition. First day capitalization movement actually lowered cost.

Sector Net ImbalanceDay One Sector

Performance CostFirst Hour Sector

Performance CostConsumer Discretionary (490,567) 1.23% (6,028) -0.10% 494Consumer Staples 197,116 1.64% 3,233 0.82% 1,611Energy (4,719) 3.25% (153) 0.75% (35)Financials (1,765,634) 1.25% (22,070) -0.23% 4,120Health Care 433,016 1.25% 5,413 0.50% 2,157Industrials 1,013,742 1.20% 12,165 0.44% 4,420Information Technology 71,608 1.42% 1,017 0.49% 350Materials (17,712) 1.27% (225) 0.76% (134)Telecommunication Serv ices (358,825) 2.10% (7,535) 0.62% (2,238)Utilities 0 1.69% 0 0.44% 0Total (921,975) (14,185) 10,746

Total Implicit Cost (78,695) Total Implicit Cost (78,695)Day One Sector Performance (14,185) First Hour Sector Performance 10,746Percent of Cost 18.0% Percent of Cost -13.7%

Sector Net ImbalanceDay One Asset Class

Performance CostFirst Hour Asset Class

Performance CostLarge Cap 3,859,654 1.49% 57,509 0.35% 13,508Mid Cap 329,029 1.23% 4,047 0.10% 323Small Cap (5,110,658) 0.83% (42,521) -0.10% 4,917Cash 921,975 (13,737) (3,227)Total (921,975) 5,298 15,520

Total Implicit Cost (78,695) Total Implicit Cost (78,695)Day One Asset Class Effect 5,298 First Hour Asset Class Effect 15,520Percent of Cost -6.7% Percent of Cost -19.7%

SECTOR RISK

CAPITALIZATION RISK


EXECUTION QUALITY


TIMING & PARTICIPATION RATES The tables and graphs below detail the execution time of each order plotted against its cost. Harbor has also calculated the performance of each execution versus the time weighted average price for each order. Last we have analyzed the highest cost names for timing aberrations.

What Clients Should Look For Harbor Analytics Evaluation Sector Participation Rate

Was the manager aggressive in reducing the sector biases

Participation rates were appropriate for all sectors. Blackrock quickly closed the financials bias on day one

TWAP Cost How did the manager performance against the average price during trading

Blackrock was 2 basis points away from TWAP which is within expectations and better than the average performance of transition managers in our universe (-3.6 basis points)

Highest Cost Names

How long did the manager take to trade the highest cost names

All of the higher cost names had appropriate participation rates. Our participation threshold is 10%.

EXECUTION TIME VERSUS COST

PortfolioParticipation

Rate % of ADV Ratio Cost v s. TWAPTarget 0.34% 2.63% 0.13 -0.04%Legacy 0.55% 1.95% 0.28 -0.01%Totals 0.44% 2.29% 0.20 -0.02%

Most Overweight Sectors Highest Cost Target Names


ParticipationTarget


RateTotal Time

(h:mm) CostIndustrials 1,013,742 0.59% 0.32% 0.28% ALRM 4.12% 0.57% 00:13 -8.25%Health Care 433,016 0.47% 0.16% 0.31% HZO 2.90% 0.52% 05:26 -7.74%Consumer Staples 197,116 1.07% 0.00% 1.07% CNOB 10.16% 1.45% 00:21 -4.81%Information Technology 71,608 0.52% 0.24% 0.28% CMN 1.25% 0.24% 04:39 -4.80%

EGHT 2.92% 0.44% 00:49 -4.22%

Most Underweight Sectors Highest Cost Legacy Names


ParticipationTarget


Rate Total Time CostFinancials (1,765,634) 0.59% 0.49% -0.10% BOOT 2.44% 0.39% 16:03 -13.31%Consumer Discretionary (490,567) 0.61% 0.45% -0.16% NGVC 13.39% 1.07% 23:55 -3.93%Telecommunication Serv (358,825) 0.52% 0.73% 0.21% HTWR 2.44% 0.72% 10:11 -3.68%Materials (17,712) 1.07% 0.05% -1.02% NK 0.08% 0.04% 15:59 -2.80%Energy (4,719) 0.23% 0.05% -0.18% SGMO 0.20% 0.23% 16:03 -2.54%

PARTICIPATION RATE

-10.0%-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

0:00 12:00 24:00 36:00 48:00 60:00

Cos

t of N

am

e

Time To Trade Order


Target-15.0%-10.0%-5.0%0.0%5.0%

10.0%15.0%20.0%

0:00 24:00 48:00 72:00

Cost

of N

ame

Time To Trade Order


Legacy

0%

100%

Open Noon Close


SECURITY PERFORMANCE DURING TRADING - LEGACY The table and charts below detail the performance of legacy securities while trading occurred and the performance for the 24 hour period after trading was complete. Relative performance represents the performance of each security versus the market benchmark which best represents the transition. The participation rate details the amount of shares traded by the transition manager as compared to the total volume for that particularly security in the market.

What Clients Should Look For Harbor Analytics Evaluation During Trading Legacy Performance

How did the legacy portfolio perform in total versus the market during the trading period

The legacy portfolio outperformed the market by 23 basis points during trading which is within expectations and positive for Stephon

Post Trading Legacy Performance

How did the legacy portfolio perform in total versus the market after trading was completed

Legacy portfolio continued to outperform by 47 basis points after trading was complete which is higher than expectations but also demonstrates Blackrock was not overly impacting the sells

The ten worst performers Were there any names that severely underperformed the market during the trading period and if so did they bounce back

The largest cost names had significant cost within the transition ($43k) although Blackrock’s participation rates were appropriate.

Ticker Market Value Final Trade TimeRelativ e

PerformanceParticipation

Rate Actual Cost TickerRelativ e

PerformanceBOOT 82,096 11/17 4:03 PM -15.65% 0.39% (10,930) BOOT 14.97%ON 202,340 11/19 9:43 AM -8.61% 0.05% (2,447) ON 0.96%NGVC 197,116 11/24 12:25 AM -7.82% 1.07% (7,755) NGVC -0.91%ABCO 219,404 11/21 12:58 AM -5.34% 0.47% (3,661) ABCO -0.20%HTWR 265,145 11/19 3:11 PM -5.16% 0.72% (9,752) HTWR -0.45%TRU 234,153 11/25 12:38 AM -5.00% 0.77% (426) TRU 0.38%CCOI 286,994 11/18 3:39 PM -4.82% 0.52% (5,370) CCOI 1.23%NK 4,171 11/17 3:59 PM -4.65% 0.04% (117) NK 2.87%WBC 38,135 11/19 3:59 PM -3.78% 0.02% (532) WBC -0.05%TSRA 203,294 11/21 12:58 AM -3.74% 0.30% (1,761) TSRA 0.02%Total 1,732,846 -6.11% 0.54% (42,752) Total 0.89%

Wgt Av g Legacy 1.57% Wgt Av g Legacy 1.38%Wgt Av g Russell 2000 Index 1.34% Wgt Av g Russell 2000 Index 0.91%

WORST RELATIVE CONTRIBUTORS DURING TRADING - LEGACY REVERSION PERFORMANCE - LEGACY

-1.00%-0.50%0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%

-20.0% -10.0% 0.0% 10.0% 20.0%

Ma

rket

Per

form

anc

e


Legacy Securities



SECURITY PERFORMANCE DURING TRADING - TARGET The table and charts below detail the performance of target securities while trading occurred and the performance for the 24 hour period after trading was complete. Relative performance represents the performance of each security versus the market benchmark which best represents the transition. The participation rate details the amount of shares traded by the transition manager as compared to the total volume for that particularly security in the market.

What Clients Should Look For Harbor Analytics Evaluation During Trading Target Performance

How did the target portfolio perform in total versus the market during the trading period

The target portfolio outperformed the Russell 2000 Index by 42 basis points on a weighted basis. This was higher than tracking error expectations.

Post Trading Target Performance

How did the target portfolio perform in total versus the market after trading was completed

Tracking error was outside expectations after trading was complete; target underperformed the Russell 2000 Index by 51 basis points post trading

The ten worst performers Were there any names that severely outperformed the market during the trading period and if so did they bounce back

The largest outperformers during the trading period contributed significantly to the cost of the transition although the participation rates by Blackrock were within reason (0.6%) and these securities did not materially reverse their performance after trading was complete (underperformed Russell 2000 Index by 17 basis points)

WORST RELATIVE CONTRIBUTORS DURING TRADING - TARGET

Ticker Market Value Final Trade TimePerf During

TradingParticipation

RateRealized Shortfall Ticker

Relativ e Performance

HZO 110,157 11/21 12:56 AM 15.44% 0.52% (8,525) HZO 0.76%AIMT 68,185 11/21 12:53 AM 14.20% 0.26% (1,337) AIMT 1.56%ALRM 124,459 11/24 12:43 AM 10.59% 0.57% (10,265) ALRM 1.24%EGHT 276,851 11/18 3:19 PM 9.35% 0.44% (11,676) EGHT -0.92%NEOS 62,886 11/24 12:58 AM 8.19% 0.87% (2,245) NEOS -1.06%TDOC 43,106 11/17 4:03 PM 8.14% 0.20% (744) TDOC -0.89%WD 282,005 11/20 10:59 AM 6.42% 0.81% (3,777) WD -0.65%CMN 74,543 11/19 9:39 AM 6.20% 0.24% (3,582) CMN -1.70%MBUU 57,266 11/21 12:57 AM 5.85% 0.94% (1,745) MBUU -0.63%APOG 409,197 11/21 12:51 AM 5.53% 0.68% (9,425) APOG 0.27%Total 1,508,655 8.16% 0.60% (53,320) Total -0.17%

Wgt Av g Target 1.73% Wgt Av g Target 0.35%Wgt Av g Russell 2000 Index 1.31% Wgt Av g Russell 2000 Index 0.86%

REVERSION PERFORMANCE - TARGET

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

-20.0% -10.0% 0.0% 10.0% 20.0%

Ma

rket

Per

form

anc

e


Target Securities



RISK MANAGEMENT


PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY ONE The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.



Blackrock began trading around noon EST on the first trading day and increased equity exposure by the $1 million which the target manager requested. This is good risk management.


Exposure costs were 1 basis point across the first trading day;

PACE OF TRADING - DAY ONE OF TRADING



Exposure Cost

Exposure Variance

9:35 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 (621) 5.4%9:40 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 (1,173) 5.4%9:45 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 276 5.4%9:50 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 (901) 5.4%9:55 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 1,380 5.4%10:00 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 1,750 5.4%10:30 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 668 5.4%11:00 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 2,412 5.4%11:30 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 994 5.4%12:00 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 (1,499) 5.4%12:30 0 0.0% 0 0.0% 0.0% 0 (1,013,710) 1,013,710 (2,604) 5.4%13:00 13,551 0.1% 7,050 0.0% 0.1% (6,501) (1,013,710) 1,007,208 (261) 5.3%13:30 423,990 2.3% 275,144 1.6% 2.0% (148,846) (1,013,710) 864,864 (1,196) 4.6%14:00 866,941 4.8% 554,221 3.2% 4.0% (312,720) (1,013,710) 700,989 (1,248) 3.7%14:30 1,177,235 6.5% 673,150 3.9% 5.3% (504,085) (1,013,710) 509,625 (226) 2.7%15:00 3,046,091 16.8% 1,524,728 8.9% 13.0% (1,521,363) (1,013,710) (507,653) 736 -2.7%15:30 4,619,791 25.5% 3,535,277 20.7% 23.2% (1,084,514) (1,013,710) (70,804) 164 -0.4%16:05 5,171,525 28.6% 4,175,286 24.4% 26.6% (996,240) (1,013,710) 17,470 (23) 0.1%

TOTAL SUB-OPTIMALITY COST (1,375) -0.01%


PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY TWO The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.



Blackrock was very effective in matching buy and sell transactions on day two which limited the exposure variance at all times during the day. This demonstrates good risk management by Blackrock.


Exposure costs were +1 basis point for the second trading day which demonstrates good risk management. The equity exposure ratio was never outside 2% across the entire day.

PACE OF TRADING - DAY TWO OF TRADING



Exposure Cost

Exposure Variance

9:35 5,363,456 29.7% 4,296,009 25.1% 27.5% (1,067,448) (1,013,710) (53,738) 38 -0.3%9:40 5,363,456 29.7% 4,296,009 25.1% 27.5% (1,067,448) (1,013,710) (53,738) (135) -0.3%9:45 5,363,456 29.7% 4,296,009 25.1% 27.5% (1,067,448) (1,013,710) (53,738) (27) -0.3%9:50 5,365,413 29.7% 4,296,480 25.2% 27.5% (1,068,933) (1,013,710) (55,224) (27) -0.3%9:55 5,416,332 30.0% 4,395,745 25.7% 27.9% (1,020,587) (1,013,710) (6,877) 7 0.0%10:00 5,416,332 30.0% 4,418,345 25.9% 28.0% (997,988) (1,013,710) 15,722 (23) 0.1%10:30 5,571,716 30.8% 4,475,446 26.2% 28.6% (1,096,270) (1,013,710) (82,561) 68 -0.4%11:00 5,580,762 30.9% 4,475,446 26.2% 28.6% (1,105,316) (1,013,710) (91,606) 240 -0.5%11:30 5,582,914 30.9% 4,793,807 28.1% 29.5% (789,107) (1,013,710) 224,603 (974) 1.2%12:00 5,647,304 31.2% 4,988,767 29.2% 30.2% (658,537) (1,013,710) 355,173 (27) 1.9%12:30 5,647,304 31.2% 4,988,767 29.2% 30.2% (658,537) (1,013,710) 355,173 405 1.9%13:00 5,647,304 31.2% 4,988,767 29.2% 30.2% (658,537) (1,013,710) 355,173 705 1.9%13:30 5,665,044 31.3% 4,988,767 29.2% 30.3% (676,277) (1,013,710) 337,433 1,698 1.8%14:00 5,677,912 31.4% 4,988,767 29.2% 30.3% (689,145) (1,013,710) 324,564 (287) 1.7%14:30 5,737,791 31.7% 5,027,049 29.4% 30.6% (710,741) (1,013,710) 302,969 436 1.6%15:00 5,835,625 32.3% 5,029,608 29.4% 30.9% (806,017) (1,013,710) 207,693 12 1.1%15:30 6,161,054 34.1% 5,029,608 29.4% 31.8% (1,131,447) (1,013,710) (117,737) (119) -0.6%16:15 11,755,615 65.0% 10,391,384 60.8% 63.0% (1,364,231) (1,013,710) (350,522) (87) -1.9%



PACE OF TRADING AND EXPOSURE MANAGEMENT – DAY THREE The pace of trading is measured in this section in addition to the success of the provider in managing the desired market exposure of the transition.



Blackrock was very effective in matching buy and sell transactions on day three which limited the exposure variance at all times during the day. This demonstrates good risk management by Blackrock.


Exposure costs were +1 basis point for the third trading day which demonstrates good risk management. The equity exposure ratio was never outside 1% across the entire day.



Exposure Cost

Exposure Variance

9:35 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 1,833 -0.5%9:40 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 0 -0.5%9:45 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 427 -0.5%9:50 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 690 -0.5%9:55 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 746 -0.5%10:00 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 0 -0.5%10:30 11,792,120 65.2% 10,682,067 62.5% 63.9% (1,110,053) (1,013,710) (96,344) 351 -0.5%11:00 11,891,127 65.8% 10,682,067 62.5% 64.2% (1,209,060) (1,013,710) (195,350) 0 -1.0%11:30 11,892,729 65.8% 10,829,289 63.4% 64.6% (1,063,440) (1,013,710) (49,731) 0 -0.3%12:00 11,919,223 65.9% 10,930,571 64.0% 65.0% (988,652) (1,013,710) 25,058 89 0.1%12:30 11,919,223 65.9% 10,930,571 64.0% 65.0% (988,652) (1,013,710) 25,058 (127) 0.1%13:00 11,919,223 65.9% 10,930,571 64.0% 65.0% (988,652) (1,013,710) 25,058 260 0.1%13:30 11,919,223 65.9% 10,930,571 64.0% 65.0% (988,652) (1,013,710) 25,058 444 0.1%14:00 12,011,505 66.4% 10,945,199 64.1% 65.3% (1,066,305) (1,013,710) (52,596) 577 -0.3%14:30 12,063,708 66.7% 10,957,525 64.1% 65.5% (1,106,183) (1,013,710) (92,473) 0 -0.5%15:00 12,078,310 66.8% 10,973,287 64.2% 65.6% (1,105,023) (1,013,710) (91,313) 0 -0.5%15:30 12,293,821 68.0% 11,108,906 65.0% 66.6% (1,184,915) (1,013,710) (171,205) (2,763) -0.9%16:00 13,393,591 74.1% 12,332,874 72.2% 73.2% (1,060,718) (1,013,710) (47,008) (198) -0.2%


PACE OF TRADING - DAY THREE OF TRADING


SECTOR MANAGEMENT – DAY ONE Sector management is an important part of the overall risk management process. In this section, we measure the actual sector exposures versus the target exposure of each sector. While all sector variances cannot be immediately eliminated due to liquidity, we look for constant risk management through reduction of sector risks.

What Clients Should Look For Harbor Analytics Evaluation Decline Ratio The ratio of trading to sector decline; This ideally is above

100% at all points during trading Decline ratio was much greater than one on the first day indicating Blackrock was efficient in their trade scheduling

Large Imbalances

Did the transition manager mitigate the largest sector risks The largest starting risk (financials) was reduced by over 75% on day one despite only 27% of the transition being completed

SECTOR MANAGEMENT EVALUATION - ABSOLUTE VALUE OF VARIANCESector Start 10:30 AM 11:00 AM 11:30 AM 12:00 PM 12:30 PM 1:00 PM 2:00 PM 3:00 PM MOC

Consumer Discretionary 490,567 480,284 479,278 478,380 483,294 494,049 486,714 257,338 132,065 83,654Consumer Staples 197,116 196,844 192,775 190,786 189,068 191,057 188,861 151,018 111,744 75,296Energy 4,719 2,985 2,173 7,497 10,361 12,001 7,464 5,647 2,632 1,891Financials 1,765,634 1,763,037 1,770,500 1,761,129 1,768,595 1,769,620 1,759,712 1,267,670 827,882 456,598Health Care 433,016 403,343 446,463 440,964 416,656 428,507 436,219 207,465 292,168 126,743Industrials 1,013,742 1,031,065 1,037,911 1,034,659 1,027,784 1,022,854 1,027,011 731,752 539,815 366,817Information Technology 71,608 80,013 97,874 95,501 95,990 91,856 96,405 99,690 243,714 522,714Materials 17,712 17,388 16,162 15,942 16,467 16,778 16,496 16,436 16,685 17,831Telecommunication Serv ices 358,825 356,135 354,755 356,969 357,171 360,620 360,135 265,318 147,069 30,212Utilities 0 0 0 0 0 0 0 0 0 0Total Variance 4,352,939 4,331,094 4,397,892 4,381,828 4,365,388 4,387,343 4,379,018 3,002,334 2,313,773 1,681,755Total Trading 0% 0% 0% 0% 0% 0% 0% 4% 12% 27%Total Decrease 0% 1% -1% -1% 0% -1% -1% 31% 47% 61%Sector Ratio 0% 0% 0% 0% 0% 0% 776% 377% 231%

0%20%40%60%80%100%

0%5%

10%15%20%25%

Start 10:30AM

11:00AM

11:30AM

12:00PM

12:30PM

1:00PM

2:00PM

3:00PM

MOC

Com

ple

tion

Lev

el

Abso

lute

Risk

Decrease in Sector RiskCompletionSector Risk Decline

-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%

CON D CON S ENER FINAN HEAL INDU IT MAT TELE UTIL

Sector Performance

Market Target Legacy


LIQUIDITY ACCESS


EXECUTION SIZE The table below details the lot size for each trade that was executed during the transition. The table is segmented by half hour increments during the trading day and also the size of the trades executed during this period.

What Clients Should Look For Harbor Analytics Evaluation Large orders, if accessed without disclosing information, can often lower the cost of a transition

The size of the positions in this event did not require block liquidity access

Smaller orders are generally traded through algorithms which if routed poorly can be costly

A smaller percentage of orders (50.7%) were smaller trade sizes (average is 81% in our universe) and the cost of these orders were higher than Harbor’s expectations.

TRADING BY LOT SIZE

# of Shares Total Market Value % of Trading Total Shares # of Trades Av g Trade Size Av g % of OrderImplicit Cost (% of

Trading)> 10,000 775,607 3.2% 63,235 5 12,647 71% 4.40%5,000 - 10,000 1,723,325 7.0% 78,948 11 7,177 54% 2.60%2,500 - 5,000 3,712,486 15.1% 88,055 26 3,387 51% 0.36%1,000 - 2,500 3,478,531 14.2% 97,178 58 1,675 34% 1.02%500 - 1,000 2,405,649 9.8% 65,696 94 699 26% 0.88%0 - 500 12,455,730 50.7% 446,190 21,922 20 1% -0.44%Total 24,551,328 100% 839,302 22,116 38 0.39%

> 10,000 5,000 - 10,000 2,500 - 5,000 1,000 - 2,500 500 - 1,000 0 - 500 Total9:30 - 10:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%10:00 - 10:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%10:30 - 11:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%11:00 - 11:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%11:30 - 12:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%12:00 - 12:30 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%12:30 - 1:00 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%1:00 - 1:30 0.0% 0.0% 0.0% 0.0% 0.0% 2.7% 2.7%1:30 - 2:00 0.0% 0.0% 0.0% 0.0% 0.0% 2.9% 2.9%2:00 - 2:30 0.0% 0.0% 0.0% 0.0% 0.0% 1.7% 1.7%2:30 - 3:00 0.0% 0.0% 0.0% 0.8% 0.7% 7.6% 9.2%3:00 - 3:30 0.0% 0.0% 0.1% 0.8% 1.0% 11.1% 13.1%3:30 - 4:00 0.0% 0.0% 0.0% 0.0% 0.1% 4.4% 4.5%

MOC 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.2%Total 0.0% 0.0% 0.1% 1.6% 1.8% 30.7% 34%

TIMING OF BLOCKS - DAY ONE


VENUE ANALYSIS The table below details the liquidity venues accessed by the transition manager and how their routing compares to overall market volumes. We have separated exchange volume (“lit”) from private liquidity pools (“dark”). Effective transition managers will used a wide variety of liquidity venues.

Blackrock Blackrock Routing Total Market Blackrock Cost BpsLit Markets 58.0% 61.7% (54,838) -0.765%Dark Markets 42.0% 38.3% 17,873 0.344%Total 100.0% 100.0% (36,965) -0.299%

Exchange Market ShareBlackrock Routing Variance Blackrock Cost

NYSE 12.8% 2.4% -10.4% -1.81%NYSE ARCA 10.6% 2.8% -7.8% -0.42%NYSE MKT 0.2% 0.0% -0.1% -3.98%NASDAQ 15.2% 8.2% -7.0% -0.62%NASDAQ BX 2.2% 0.4% -1.8% -1.10%NASDAQ PSX 1.0% 0.0% -0.9% -1.55% Venue Market Share Blackrock Routing Variance Blackrock CostBATS 4.2% 3.3% -0.9% -0.26% CROSSFINDER 12.5% 0.0% 12.5% -0.72%BATS Y 4.2% 1.2% -3.0% -0.78% UBS ATS 13.2% 1.7% 11.4% 0.31%EDGX 8.4% 1.5% -6.9% -1.14% SUPERX 8.6% 0.0% 8.6% 0.20%EDGA 2.6% 0.5% -2.1% -1.88% IEX 9.7% 3.3% 6.4% 0.54%CSE 0.2% 0.0% -0.2% 0.00% INSTINCT X 6.3% 0.0% 6.3% 0.00%Total 61.7% 20.4% -0.76% 50.3% 5.0% 45.2%

VenueDark Market

ShareBlackrock Routing Variance Blackrock Cost

UBS ATS 5.0% 0.7% -4.3% 0.31%CROSSFINDER 4.8% 0.0% -4.8% 0.00%IEX 3.7% 1.4% -2.3% 0.54%SUPERX 3.3% 0.0% -3.3% 0.00%MS POOL (ATS-4) 2.7% 1.1% -1.7% -0.23%INSTINCT X 2.4% 0.0% -2.4% 0.00%JPM-X 1.8% 1.0% -0.7% 0.32%LEVEL ATS 1.7% 0.0% -1.7% 0.00%BARCLAYS ATS ("LX") 1.6% 0.0% -1.6% 0.00%INSTINET (CBX) 1.4% 0.1% -1.3% 0.26%Total 28.4% 4.3% 0.34%

ROUTING ANALYSIS

LIT EXCHANGE VOLUME

10 LARGEST DARK POOLS

DARK POOL ROUTING VARIANCES

BLACKROCK DARK POOL ALLOCATION

58.0%

42.0%

61.7%

38.3%

Lit Markets

Dark Markets

0% 10% 20% 30% 40% 50% 60% 70%

Total Market Blackrock Routing

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

BIDS DBSX CAES IEXG MSPL JPMX UBSA PULX SGMA KNMX

Blackrock Dark Pool Allocation


INFORMATION LEAKAGE In this section we measure the close to open gap on the first trading day to see if any information was leaked to the market. It is important to note that the transition manager is not the only party who has access to the securities in transition.

What Clients Should Look For Harbor Analytics Evaluation Was the close to open gap within reason

Compare the actual close to open gap to the expectations from prior days

The close to open gap was 4.8 basis points which is within expectations for these two portfolios (+/- 8 basis points) and demonstrates good control of information by Blackrock

REALIZED CLOSE TO OPEN GAP (TARGET VS LEGACY) HISTORICAL CLOSE TO OPEN GAPPortfolio Close Open Change

Target $18,932,857 $18,903,620 -0.154% Av erage Daily Gap 0.07% Max Gap 0.14%Legacy $18,932,857 $18,894,505 -0.203% Exp Range of Daily Gap 0.08% Min Gap -0.14%

Shortfall Gap -0.048% -$9,115

LARGEST MOVES - LEGACY PORTFOLIO LARGEST MOVES - TARGET PORTFOLIOTicker Market Value Gap Total Gap Portfolio Effect Ticker Market Value Gap Total Gap Portfolio Effect

BCEI $120,994 0.64% $779 0.00% FIVE $173,840 -2.24% $3,886 -0.02%ITCI $130,689 0.53% $698 0.00% OZRK $460,364 -0.59% $2,728 -0.01%CALD $222,251 0.31% $683 0.00% WD $282,005 -0.95% $2,665 -0.01%TMH $91,629 0.73% $665 0.00% MGNX $179,749 -1.47% $2,648 -0.01%SMTC $20,796 2.75% $571 0.00% PFPT $306,954 -0.65% $1,985 -0.01%

HAWK $490,320 -0.83% ($4,074) -0.02% TREE $400,376 1.23% ($4,915) 0.03%KITE $274,570 -1.39% ($3,815) -0.02% AIMT $68,185 4.87% ($3,320) 0.02%MYGN $316,400 -0.89% ($2,820) -0.01% GTT $197,506 1.12% ($2,221) 0.01%CLDX $363,420 -0.77% ($2,809) -0.01% SQBG $120,627 0.92% ($1,113) 0.01%KAR $375,386 -0.61% ($2,297) -0.01% WCG $331,734 0.27% ($894) 0.00%

-0.15%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%

0.20%

11/2 11/3 11/4 11/5 11/6 11/9 11/10 11/11 11/12 11/13 11/16


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Mar

ket V

alu

e o

f Tr

ade

Close to Open Gap


Buys Sells

-0.15%-0.10%-0.05%0.00%0.05%0.10%0.15%0.20%

11/2 11/3 11/4 11/5 11/6 11/9 11/10 11/11 11/12 11/13 11/16


0100,000200,000300,000400,000500,000600,000700,000800,000

-3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Ma

rket

Va

lue

of T

rad

e

Close to Open Gap


Buys

Sells


COMPLIANCE EVALUATION In the tables below we have provided the test results from basic compliance checks performed on the transition portfolios. We test whether the time stamped executions, which are the books and records of the transition manager, match the aggregated executions reported to the custodian which are the books and records of the client. We measure whether any trades were executed at prices worse than the highs and lows of the market on any given day. We also measure the percentage of trades that occurred within each quartile of prices each day. Lastly, we measure whether the transition manager bought and sold the same security which is often caused by transition manager errors.

What Clients Should Look For Harbor Analytics Evaluation Time Stamp vs Custodian Prices

The brokers orders should tie to the custodian prices unless a riskless principal markup was contractually agreed to

No issues

Trades in Error Did the transition manager trade any securities in error (bought and sold same name

No issues

Price Distributions Were the prices received within the confines of the market Within expectations

CUSTODIAN RECORDS v s. TRANSITION MANAGER TIME STAMPED DATA

Portfolio Time Stamp Shares Custodian Shares VarianceTime Stamp Market

ValueCustodian Market

Value VarianceTarget 719,745 719,745 0 18,068,003 18,068,003 0Legacy 534,395 534,395 0 17,067,333 17,067,333 0Total 1,254,140 1,254,140 0 35,135,336 35,135,336

EQUITY COMPLIANCE CHECK EQUITY TRADE DISTRIBUTION WITHIN HIGH/LOW OF DAY

Portfolio Target LegacyRange (0-25 being worst) Target Legacy Variance

% of Trades at High 0.07% 0.03% 0-25 15.3% 8.9% 6.5%% of Trades at Low 0.01% 0.04% 25-50 37.8% 38.7% -0.9%% of Trades abov e High 0.00% 0.00% 50-75 33.2% 29.6% 3.6%% of Trades below Low 0.00% 0.00% 75-100 10.1% 19.5% -9.4%

TRADES IN ERRORTicker Side Shares Ex Price Proceeds LossNone


PERFORMANCE COMPARISON

insidedwp.ladwp.com · 1/27/2016 · Executive Summary The Los Angeles Water & Power Employees Retirement System recently hired BlackRock to complete a US small cap equity transition

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