Q Market ChartBook

1

Q3 2015 Market ChartBook

Baird Private Wealth Management

Wealth Management | Capital Markets – Investment Banking | Private Equity | Asset Management

Charlotte Chicago

Frankfurt

London

Milwaukee

Shanghai

2

About Baird

A Great Place to Work

Since 2004, Baird has been recognized

annually as one of the FORTUNE 100 Best

Companies to Work For®. We ranked No. 5

for 2015.

Ownership

Founded in 1919 and headquartered in

Milwaukee, WI, Baird is employee-owned and

fully independent.

1_{Greenwich Associates U.S. Equity Investors – Small/Mid-Cap Funds, May 2013. Surveys conducted with 88 U.S. small-cap}

and 10 mid-cap fund managers. Rankings based on top 10 research firms in survey. Greenwich Associates is the leading consulting firm in the institutional and sell-side research market.

Most Trusted Research

In 2014, for the eleventh consecutive year,

small-cap and mid-cap institutional fund

managers ranked Baird as their highest

quality, most trusted source of research.

1

Global Reach

Baird has more than 2,900 employees and

over 100 offices in the United States, Europe

and Asia.

3

Table of Contents

1

|

Economy & Market

Market Highlights

The Markets at a Glance

S&P 500 Index

Economic Growth

Inflation Watch

Jobs Market

Housing Market

Consumer Health

Corporate Profitability

Market Volatility

Commodity Prices

Mutual Fund and ETF Flows

2

|

Domestic Equity

US Equity Snapshot

Asset Class Performance

US Economic Sector Performance

Investment Style Leadership

Historical Market Cap Valuations

Historical Sector Valuation & Growth Ranges

Mutual Fund Over/Under Performance

3

|

International Equity

Global Market Performance

International Equity Snapshot

International Country Performance

Economic Sector Returns

International Style Leadership

Global Stock Market Valuations

Country Valuation Ranges

4

|

Fixed Income

Bond Market Snapshot

Performance by Maturity/Credit Quality

Yield and Volatility Characteristics

U.S. Treasury Bonds

Municipal Bonds

Corporate Bond Yields

Bond Spreads

Mutual Fund Over/Under Performance

4

4

Economy and Market

5

Q3 2015 Market Highlights

Economy and Market

•

Economic Growth: GDP data indicated the

U.S. economy rebounded sharply from a

paltry 0.6% in Q1 to rise 3.9% in Q2. The

rebound stemmed from strong consumer

spending and improving business

investment. The strong number indicates

the U.S. economy is one of the lone bright

spots in a world where growth continues to

lag expectations.

•

Economic Health: Economic data was

mostly positive during the quarter.

Employers added on average 221,000 jobs

during the previous three months through

August, pushing the unemployment rate to a

post-recession low of 5.1%. More

impressive, the demand for housing

continued to firm as starts reached their

highest level in nearly eight years in July.

•

Inflation. Core inflation (excluding food

and energy prices) ticked higher to 1.8%

y/o/y through August, but still remains

below the Fed’s 2% target. When including

the effects of food and energy prices,

headline inflation firmed slightly, rising to

0.2% y/o/y. It’s the stark contrast of a

strong economy and persistent deflationary

trends that further complicates the Fed’s

decision to hike interest rates.

•

Fed Speak. September’s long-awaited Fed

meeting came and went with no action taken

by the Fed to move interest rates off zero.

Fed members cited increased concerns over

the fragility of the global economy and

heighten volatility across financial markets.

Domestic Equity

•

At a Glance: U.S. stocks fell sharply during

the quarter as concerns over a stalling

Chinese economy sparked volatility across

global financial markets. The S&P 500

experienced its sharpest quarterly decline

since 2011, falling 6.4%. With the decline,

the S&P 500 officially entered correction

territory, typically defined as a drop of at

least 10% from the recent peak.

•

Market Cap and Style: While nearly all

segments of the market fell in Q3, Large Cap

and Growth-oriented areas generally lost less

than Smaller Cap and Value-leaning names.

•

Sector: Defensive sectors like Utilities (5.4%)

and Consumer Staples (0.2%) held up the

best as investors sought safe-haven assets.

Among laggards, sectors most exposed to

economic growth suffered the most. Energy

(-17.4%) and Materials (-16.9%) were weak

due to falling commodity prices and the

outlook for weak global demand.

International Equity

•

At a Glance: No area of the globe was

immune to the quarter’s selloff. China

concerns weighed on International equities.

Domestic equities held up better than

international with the MSCI EAFE Index falling

10.2%. The MSCI Emerging Markets Index

fell 17.8%.

•

Country/Region: Among developed

markets, Asian markets experienced their

worst quarterly loss since 2011. Among

emerging markets, Latin America was among

the weakest regions. Brazil was the weakest

region after being downgraded to junk status

following their deepening recession.

Fixed Income

•

At a Glance: Volatility surged across all

fixed income segments driven by the

economic weakness abroad and uncertainty

over the timing and eventual extent of Fed

rate hikes. Benchmark 10-Year Treasury

yields trading in a wide range, starting the

quarter at 2.4% before ending at 2.0%. The

Barclays Agg. Bond Index returned 1.2%.

•

Sector: A flights to quality was evident

during the quarter as volatility rose across

global markets. Government securities and

high quality corporates were the standout

sectors as demand for safe-haven assets

increased. Credit-heavy sectors like High

Yield (-4.9%) and Bank Loans (-1.4%) were

noticeably weak. TIPS (-1.2%) finished

lower as the outlook for inflation fell.

•

Maturity and Credit Quality: Longer

maturity bonds finished higher on lower

interest rates while shorter maturity bonds

finished flat. Among credit, investors

preferred quality over yield. With the risk-off

environment, credit spreads among

investment grade bonds moved to the

highest levels since 2012.

•

Yield Curve: The yield curve experienced

significant flattening during the quarter.

Long duration yields dropped in excess of 40

bps while short-term rates were flat to

marginally up.

•

Municipal Bonds: Insulated from the

volatility of international markets and falling

commodity prices, municipal bonds returned

1.7% during the quarter, outpacing their

taxable peers.

6

The Markets at a Glance (as of 9/30/15)

Source: Morningstar Direct; Russell, MSCI, Barclays, Citigroup, and Dow Jones benchmarks. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See important disclosures and definitions included

with this publication.

Robert W. Baird & Co.

Asset Class Last Qtr YTD 1-Year 3-Year 5-Year 10-Year 2014 2013 2012 Benchmark

U.S. Stocks

Large Cap Value (8.4) (9.0) (4.4) 11.6 12.3 5.7 13.5 32.5 17.5

Russell 1000® Value

Large Cap Growth (5.3) (1.5) 3.2 13.6 14.5 8.1 13.0 33.5 15.3

Russell 1000® Growth

Mid Cap (8.0) (5.8) (0.2) 13.9 13.4 7.9 13.2 34.8 17.3

Russell Midcap®

Small Cap (11.9) (7.7) 1.2 11.0 11.7 6.5 4.9 38.8 16.3

Russell 2000®

International Stocks

Developed Markets (10.2) (5.3) (8.7) 5.6 4.0 3.0 (4.9) 22.8 17.3

MSCI EAFE (Net)

Bonds

Short-Term Taxable 0.3 1.0 1.2 0.9 1.0 2.8 0.8 0.6 1.3

Barclays 1-3 Yr Govt/Credit

Intermediate-Term Taxable 0.9 1.8 2.7 1.4 2.4 4.2 3.1 (0.9) 3.9

Barclays Intermed. Govt/Credit

Short-Term Municipal 0.6 0.8 0.8 0.9 1.1 2.5 0.7 1.0 1.2

Barclays 1-3 Yr Municipal

Intermediate-Term Municipal 1.6 2.0 2.8 2.5 3.7 4.7 6.1 (1.0) 4.2

Barclays 7 Yr Municipal

Cash

Cash/Cash Equivalents 0.0 0.0 0.0 0.0 0.1 1.2 0.0 0.1 0.1

Citi 3 Month T-bills

Satellite

High Yield (4.9) (2.5) (3.6) 3.5 5.9 7.1 2.5 7.4 15.6

BofA/ML High Yield Master II

Real Estate 0.5 (4.8) 7.0 7.9 10.7 5.7 27.2 1.8 18.9

DJ US REIT

Commodities (14.5) (15.8) (26.0) (16.0) (8.9) (5.7) (17.0) (9.5) (1.1)

Bloomberg Commodity

Emerging Markets (17.9) (15.5) (19.3) (5.3) (3.6) 4.3 (2.2) (2.6) 18.2

MSCI Emerging Mkts (Net)

7

1800 1850 1900 1950 2000 2050 2100 2150

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15

Adjusted Closing Level

S&P 500 Index

Source: Standard and Poor’s. The S&P 500 Index, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common stocks. Indices are unmanaged and it is not possible to invest directly in an index.

Year-to-Date Performance of the S&P 500 Index

Jan

-3.0%

+5.8%

Feb

-1.6%

Mar

Q1: +1.0%

Robert W. Baird & Co.

Apr

+1.0%

+1.3%

May

-2.0%

Jun

2.1%

Jul

-6.0%

Aug

-2.5%

Sep

8

Economic Growth

Source: US Department of Commerce: Bureau of Economic Analysis (GDP Growth)

US GDP Growth (Last 20 Years)

Contribution to U.S GDP Growth (Last 10 Years)

Gross Domestic Product (GDP)

GDP is a basic measure of U.S. economic output. Alternatively, it can be thought of as the final value of all goods and services produced within the U.S. Positive GDP growth signals an expanding economy. GDP is comprised of four major categories: personal consumption, private investment, government spending and net exports.

Robert W. Baird & Co.

-10 -8 -6 -4 -2 0 2 4 6 8 10

Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15

Contribution

to GDP Growth

(%)

Personal Consumption Expenditures Gross Private Domestic Investment Government Consumption Expenditures Net Exports -10 -8 -6 -4 -2 0 2 4 6 8 10 GDP Growth (%)

9

-2 0 2 4 6

Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

Y e ar -O v e r-Y e ar C h an g e i n C P I (% ) Headline CPI Core CPI

Inflation Watch

Source: Bureau of Labor Statistics; Baird Analysis. CPI figures lag one month.

Historic CPI Level (Last 10 Years)

CPI Breakdown

Consumer Price Index (CPI)

A common measure of inflation, Headline

CPI tracks a broad basket of goods and

services relatable to most consumers. Core

CPI excludes Food and Energy due to the

volatile nature of those categories and the distortive effect it can have on the broader inflation measure.

Robert W. Baird & Co.

Components Weight (%) 12-mo Change _(%) Components Weight (%) 12-mo Change _(%)

Headline CPI 100 0.2 Core CPI 78 1.8

Housing 42 2.0 Food 14 1.6

Energy/Transportation 16 (15.0) Energy 8 (15.0)

Food & Beverage 14 1.6

Education 7 0.1

Medical Care 8 2.5

Recreation 6 0.7

Apparel/Clothing 3 (1.5)

Other 3 1.6

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0 1 2 3 4 Wa g e G rr o w th ( % ) 60 63 66 69 Pa rt ic ip a tio n R a te ( % ) 0 3 6 9 12 15 18

Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 Aug-15

U n e m p lo y m ent Ra te (% )

U-3 Unemployment Rate U-6 Underemployment Rate

-1,000 -800 -600 -400 -200 0 200 400 600

Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 Aug-15

Ch a n g e in P a y ro ll ( 0 0 0 s)

Jobs Market

Source: US Department of Labor: Bureau of Labor Statistics. Data will lag one month and is subject to revision. Wage growth is calculated quarterly and will lag one quarter.

Unemployment and Underemployment Rates

Labor Participation Rate

Jobs Gained/Lost

Wage Growth (Last 10 Years)

Unemployment Rate

The U-3 Unemployment Rate is the standard measure of the % of the labor force that is without a job. The U-6 Underemployment Rate includes those in the U-3 measure as well as those employed on a part-time status that would prefer full-time status.

Change in Non-Farm Payroll

This is a key economic indicator that measures changes in the size of the labor force (excluding farm, government and not for-profit workers).

Labor Participation Rate

The % of working age persons that are employed or seeking employment relative to the size of the entire population. Discouraged workers and retirees cause a decline in this rate.

Change in Employment Cost Index

Measures the year-over-year growth of wages and salaries within the private sector, and is based on the Employment Cost Index.

11

3000 4000 5000 6000 7000 8000 9000 10000

Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

U n it s ( 0 0 0 s)

New Housing Starts Existing Home Sales

80 100 120 140 160 180 200 220 240

Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

In d e x Le v e l 100 120 140 160 180 200 220 240

Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

In d e x L e v e l

Housing Market

Source: Standard & Poor’s, US Department of Commerce: Bureau of Economic Analysis.

Housing Market Trend

Housing Affordability

Average Selling Price of New and Existing Homes

Housing Market Activity

Housing Affordability Index

A value of 100 means that a family with a median income can qualify for a median-priced home. A higher value means housing is generally more affordable.

Home Starts/Sales

These are indicators of housing market activity that track new home construction as well as the sales of existing homes.

S&P/Case Shiller Home Price Index

This is a well-known housing market index that measures home prices among the 20 largest metropolitan areas.

Robert W. Baird & Co.

$125,000 $175,000 $225,000 $275,000 $325,000

Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15

Median Price (Existing) Median Price (New Homes)

12

$37,989 $32,000 $34,000 $36,000 $38,000 $40,000

4.6

0 2 4 6 8 10 12 Pe rs o n a l S a v in g s R a te ( % )

3.5

-4 -2 0 2 4 6 8 C o n su m er S p en di n g G ro w th ( % ) 50 55 60 65 70 75 80 85 90 95 100 In d e x L e v e l

Consumer Health

Source: Thomas Reuters/University of Michigan, US Department of Commerce: Bureau of Economic Analysis.

Consumer Sentiment

Consumer Spending Growth

Personal Savings Rate

Personal Income per Capita

Univ. of Michigan Consumer Sentiment

A monthly survey of consumers’ feelings toward personal financial health and direction of the economy.

Personal Consumption Expenditures

Measures the rate of change of consumer expenditures. Core Spending excluded food and energy spending.

Personal Savings Rate

An average estimate of how much a consumer is saving as a percentage of total disposable income.

Personal Income per Capita

This measures the average gross annual wage/salary of working US citizens.

13

Corporate Profitability

Source: BEA, Bloomberg, Standard & Poors, Baird analysis. Past performance is not a guarantee of future results.

S&P 500 Earnings per Share (EPS)

Corporate Profits (% of GDP)

S&P 500 EPS: Current: $110

Average: $64

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Corporate Profits

This chart illustrates after-tax corporate profits as a percentage of U.S. GDP. The larger the percentage, the more important corporate profits are to overall economic growth.

3% 6% 9% 12%

Jun-95 Jun-97 Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15

C o rpora te P rof it s /G D P $0 $20 $40 $60 $80 $100 $120 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Se p-00 Se p-01 Se p-02 Se p-03 Se p-04 Se p-05 Se p-06 Se p-07 Se p-08 Se p-09 Se p-10 Se p-11 Se p-12 Se p-13 Se p-14 Se p-15

Earnings

 

Per

 

Sh

 

(right

 

axis)

Revenues

 

Per

 

Sh

 

(left

 

axis)

Earnings/Revenue Per Share

One way to evaluate a company’s profitability is to measure its earnings on a per share basis. The same can be done at a broader market level. The S&P 500 EPS illustrates how profitable companies are, on average.

14

0% 20% 40% 60% 80% Q 2 20 05 Q 3 20 05 Q 4 20 05 Q 1 20 06 Q 2 20 06 Q 3 20 06 Q 4 20 06 Q 1 20 07 Q 2 20 07 Q 3 20 07 Q 4 20 07 Q 1 20 08 Q 2 20 08 Q 3 20 08 Q 4 20 08 Q 1 20 09 Q 2 20 09 Q 3 20 09 Q 4 20 09 Q 1 20 10 Q 2 20 10 Q 3 20 10 Q 4 20 10 Q 1 20 11 Q 2 20 11 Q 3 20 11 Q 4 20 11 Q 1 20 12 Q 2 20 12 Q 3 20 12 Q 4 20 12 Q 1 20 13 Q 2 20 13 Q 3 20 13 Q 4 20 13 Q 1 20 14 Q 2 20 14 Q 3 20 14 Q 4 20 14 Q 1 20 15 Q 2 20 15 Q 3 20 15

Pe

rc

en

t o

f T

ra

din

g D

ay

s

% of days up/down 2% or more

% of days up/down 1-2%

Market Volatility (as of 9/30/15)

Source: Standard & Poor’s; CBOE; Baird Analysis.

Historic VIX Level (Last 10 Years)

Quarterly S&P 500 Trading Volatility (Last 10 Years)

VIX (CBOE Volatility Index)

The VIX measures the implied volatility of S&P 500 future options. Simply put, it measures the expected volatility of the S&P 500 Index over the next 30 days. The higher the index, the higher the expected volatility. It is also commonly referred to as the “fear index.”

S&P 500 Trading Volatility

Rather than focus on implied volatility, this measures actual trading volatility. Trading days where the S&P 500 Index closes up/down more than 1% or 2% are reported on a quarterly basis.

Robert W. Baird & Co.

0 20 40 60 80

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

15

-15.8 -20.9 -27.3 -4.4 -23.0 -20.3 -17.6 _-18.5 -6.8 -6.2 _-8.0 -13.7 -10.7 -14.6 -11.1 -15.9 -30 -25 -20 -15 -10 -5 0 5

Commodity Markets (as of 9/30/15)

Year-to-Date Returns of Various Commodity Types

Oil Prices (Last 10 Years)

Source: U.S. Dept of Energy; London PM Gold Fix Index; Baird Analysis. “Broad Market” is represented by the Bloomberg Commodity Index, specific commodity types are reported segments of that index. See important disclosures and definitions included with this publication.

Robert W. Baird & Co.

Gold Prices (Last 10 Years)

$ 4 5 $20 $40 $60 $80 $100 $120 $140 $160 W T I Cr u d e O il P ric e s ($ /b b l) $ 1 ,1 35 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 Lo n d o n P M G o ld ( $ /o z)

16

Mutual Fund and ETF Flows (as of 8/31/15)

Source: Morningstar Direct; Baird Analysis. Asset classes with less than $25 billion invested were excluded from the analysis.

Annual Fund Flows

The examination of annual

mutual fund and ETF flows shows

the investment pattern of the

average investor by broad asset

class. For example, in 2008

investors exited stocks when the

markets fell. In 2009, large

amounts of capital went to fixed

income, but little flowed back to

stocks.

Gainers/Losers

These tables depict individual

asset classes that have exhibited

the greatest positive or negative

percentage change in assets.

Annual Mutual Fund and ETF Flows ($millions)

Biggest % Gainers/Losers by Asset Class

Robert W. Baird & Co.

Year-to-Date 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Money Market (44,267) 17,490 37,782 20,812 (65,566) (439,558) (296,092) 603,895 344,362 234,997 125,924 Municipal Bond 8,644 32,149 (56,962) 54,411 (8,698) 15,606 77,568 13,231 14,408 18,267 7,757 Taxable Bond 47,731 104,474 25,538 318,557 200,513 244,566 331,931 58,171 108,272 51,839 41,246 Allocation 2,704 47,659 62,986 41,025 20,401 27,612 12,877 (20,814) 47,810 29,409 49,133 U.S. Stock (73,495) 106,194 162,110 (42,548) (49,740) (23,360) (32,598) (4,252) 35,785 51,048 73,701 International Stock 187,623 149,549 202,855 60,742 17,982 92,835 62,519 (45,204) 173,444 161,461 135,736 Alternative 14,787 21,057 49,390 15,645 22,688 23,503 29,890 21,258 11,509 10,916 3,901 Commodities 1,060 (3,120) (32,633) 11,993 8,243 24,925 36,377 12,341 6,505 8,748 9,083

Calendar Year Net Flows ($M)

Top 10 In-Flows Trailing 1-Year Top 10 Out-Flows Trailing 1-Year

(as a % of assets) Growth Rate (as a % of assets) Growth Rate

Managed Futures

40.3%

Market Neutral

-20.7%

Multialternative

28.6%

Long-Term Bond

-19.3%

Europe Stock

23.0%

Bank Loan

-19.0%

Foreign Small/Mid Blend

14.7%

Long/Short Equity

-12.7%

Foreign Large Blend

13.8%

Emerging Markets Bond

-12.2%

Health

13.5%

Utilities

-9.4%

Foreign Small/Mid Value

8.8%

Convertibles

-6.3%

Muni California Intermediate

7.6%

Muni Single State Short

-6.1%

World Bond

7.0%

Mid-Cap Growth

-5.8%

17

17

Domestic Equity

18

Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative

benchmark” column. See important disclosures and definitions included with this publication.

U.S. Stock Market Snapshot (as of 9/30/15)

Robert W. Baird & Co.

Representative Last Qtr YTD 1-Year 3-Year 5-Year 10-Year Std. Dev. Max. Loss P/E EPS Gr. Div. Yld. Benchm ark

Bellw ethers

S&P 500 (6.4) (5.3) (0.6) 12.4 13.3 6.8 11.5 (16.3) 17.6 10.0 2.3 S&P 500

DJIA (7.0) (7.0) (2.1) 9.3 11.4 7.2 10.9 (13.8) 15.5 9.2 2.8 Dow Jones Industrial Avg.

Market Cap

Mega (5.5) (4.6) (1.6) 10.1 12.7 6.2 11.2 (13.2) Russell Top 50

Large (6.3) (5.0) (0.8) 12.1 13.4 6.6 11.4 (15.4) 0.0 0.0 0.0 Russell Top 200

Mid (8.0) (5.8) (0.2) 13.9 13.4 7.9 13.1 (20.9) 0.0 0.0 0.0 Russell Midcap

Sm all (11.9) (7.7) 1.2 11.0 11.7 6.5 16.0 (25.1) 0.0 0.0 0.0 Russell 2000

Micro (13.8) (8.6) 1.7 11.3 12.3 4.9 16.8 (26.5) Russell Micro Cap

Style

Value (8.6) (9.1) (4.2) 11.4 12.1 5.7 12.3 (19.3) 0.0 0.0 0.0 Russell 3000 Value

Core (7.2) (5.4) (0.5) 12.5 13.3 6.9 11.9 (17.7) 0.0 0.0 0.0 Russell 3000

Grow th (5.9) (1.9) 3.2 13.5 14.4 8.1 12.0 (16.2) 0.0 0.0 0.0 Russell 3000 Growth

S&P 500 Sectors

Consum er Staples (2.6) 4.1 13.2 18.6 19.3 10.4 13.0 (13.4) 20.1 13.1 1.6 S&P 500/Cons. Staples Consum er Discretionary (0.2) (1.0) 7.1 12.5 14.2 10.3 10.1 (6.5) 20.0 8.3 2.7 S&P 500/Cons. Disc. Energy (17.4) (21.3) (29.7) (4.1) 3.9 3.2 18.5 (35.7) 21.1 8.0 3.9 S&P 500/Energy Financials (6.7) (7.1) (0.3) 15.4 11.6 (0.4) 16.3 (29.2) 13.6 9.5 2.3 S&P 500/Financials Health Care (10.7) (2.1) 5.2 20.2 19.0 9.9 11.3 (13.1) 21.7 9.1 1.6 S&P 500/Health Care Industrials (6.9) (9.8) (3.6) 13.1 12.3 7.0 13.8 (23.7) 16.1 9.4 2.6 S&P 500/Industrials Inform ation Technology (3.7) (3.0) 2.1 12.2 14.2 8.6 13.5 (11.6) 17.9 12.1 2.0 S&P 500/Info. Tech. Materials (16.9) (16.5) (18.0) 4.8 6.7 6.4 17.6 (26.8) 16.1 9.7 2.7 S&P 500/Materials Telecom m (6.8) (3.9) (7.9) 1.2 8.3 6.7 12.6 (10.6) 13.0 7.7 5.2 S&P 500/Telecomm Utilities 5.4 (5.9) 6.6 10.1 11.0 6.7 12.0 (12.7) 16.4 4.9 3.9 S&P 500/Utilities

19

-6.4 -8.0 -11.9 -8.4 -5.3 -8.0 -8.0 -10.7 -13.1

‐

5.3

‐

5.8

‐

7.7

‐

9.0

‐

1.5

‐

7.7

‐

4.1

‐

10.1

‐

5.5

-14 -12 -10 -8 -6 -4 -2 0 2

Large Cap

Mid Cap

Small Cap

Large

Value

Growth

Large

Value

Mid

Growth

Mid

Small

Value

Growth

Small

Re

tu

rn

(%

)

Last Quarter

Year-to-Date

Domestic Asset Class Performance (as of 9/30/15)

Performance by Market Cap and Style

Source: Morningstar Direct. Asset classes are represented by the following benchmarks: S&P 500 (Large Cap), Russell Midcap® (Mid Cap), Russell 2000® (Small Cap), Russell 1000 Value® (Large Value), Russell 1000 Growth® (Large Growth), Russell Midcap Value® (Mid Value), Russell Midcap Growth® (Mid Growth), Russell 2000 Value® (Small Value), and Russell 2000 Growth® (Small Growth). See important disclosures and definitions included with this publication.

Market Cap

Style

20

-17.4 -16.9 -10.7 -6.9 -6.8 -6.7 -6.4 -3.7 -2.6 -0.2 5.4 -25 -20 -15 -10 -5 0 5 10 Energy Materials Health Care Industrials Telecomm Financials S&P 500 Info. Tech. Cons. Disc. Cons. Staples Utilities Return (%)

U.S. Economic Sector Performance (as of 9/30/15)

S&P 500 Index: Performance by Sector (Latest Quarter)

Source: Morningstar Direct; Standard & Poor’s; Baird Analysis. P/E ratios are based on trailing 12 month earnings (TTM) and the consensus forecast over the next 12 months (NTM). EPS Growth is a measure of forecasted earnings growth over the next 5 years. Past performance is not a guarantee of future results. Direct investments in sectors is not possible.

S&P 500 Index: Industry Metrics

S&P 500 Index: Performance by Sector (Year to Date)

Robert W. Baird & Co.

-21.3 -16.5 -9.8 -7.1 -5.9 -5.3 -3.9 -3.0 -2.1 -1.0 4.1 -25 -20 -15 -10 -5 0 5 10 Energy Materials Industrials Financials Utilities S&P 500 Telecomm Info. Tech. Health Care Cons. Staples Cons. Disc. Return (%) P/E Ratio

(TTM) P/E Ratio (NTM) Yield (%)Dividend EPS Growth (%)

S&P 500 Index 18.4 17.6 2.3 10.0 Consumer Discretionary 19.4 20.1 1.6 13.1 Consumer Staples 22.1 20.0 2.7 8.3 Energy 15.6 21.1 3.9 8.0 Financials 15.0 13.6 2.3 9.5 Health Care 22.4 21.7 1.6 9.1 Industrials 18.5 16.1 2.6 9.4 Info. Tech. 18.1 17.9 2.0 12.1 Materials 18.3 16.1 2.7 9.7 Telecomm 24.8 13.0 5.2 7.7 Utilities 16.3 16.4 3.9 4.9

21

-40 -30 -20 -10 0 10 20 30 1 2 -M o P e rf or m an ce D if fe re n ti a l ( % ) -50 -40 -30 -20 -10 0 10 20 1 2 -M o P e rf or m an ce D if fe re n ti a l ( % ) -20 -15 -10 -5 0 5 10 15 20 1 2 -M o P e rf or m an ce D if fe re n ti a l ( % ) -20 -15 -10 -5 0 5 10 15 1 2 -M o P e rf or m an ce D if fe re n ti a l ( % )

Investment Style Leadership

Source: Morningstar Direct. Styles represented by S&P 500 (Large Cap), Russell 2000 (Small Cap), Russell 1000 Value (Value), Russell 1000 Growth (Growth), S&P 500 High Quality (High Quality), S&P 500 Low Quality (Low Quality), Russell 1000 Defensive (Defensive), Russell 1000 Dynamic (Cyclical). See important disclosures and definitions included with this publication.

Defensive vs. Cyclical (Rolling 12 month periods)

Large Cap vs. Small Cap (Rolling 12 month periods)

Value vs. Growth (Rolling 12 month periods)

Large Cap Outperforms

_{Value Outperforms}

Small Cap Outperforms

Growth Outperforms

High Quality vs. Low Quality (Rolling 12 month periods)

High Quality Outperforms

_{Defensive Outperforms}

Low Quality Outperforms

Cyclical Outperforms

22

Historical Market Cap Valuations

Source: Morningstar Direct, Standard & Poor’s, Russell. P/E (Price/Earnings) is calculated based on the weighted-average price relative to earnings over the trailing 12 months. Mid Cap is measured by the Russell Midcap Index; Small Cap is measured by the Russell 2000 Index. See important disclosures and definitions included with this publication.

S&P 500 Valuation History

Mid Cap Valuation History

Small Cap Valuation History

Robert W. Baird & Co.

18.4 16.1 6 8 10 12 14 16 18 20 22

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

P/ E R a ti o ( T T M )

S&P 500 P/E 10-Year Average P/E Average +1 Std. Dev. Average -1 Std. Dev.

18.9 17.6 5 10 15 20 25 P/ E R a ti o ( T T M )

Small Cap 10-Year Average P/E

Average +1 Std. Dev. Average -1 Std. Dev. 17.6 5 10 15 20 25 P/ E R a ti o ( T T M )

Mid Cap 10-Year Average P/E

23

Historical Sector Valuation and Growth Ranges

Source: Morningstar Direct; Standard & Poor’s; Baird Analysis. P/E ratios are based on trailing 12 month earnings. EPS Growth is a measure of forecasted earnings growth over the next 5 years. See important disclosures and definitions included with this publication.

S&P 500 Sectors: 10-Year P/E Valuation Range

S&P 500 Sectors: 10-Year Earnings Growth Range

10-Year Low 10-Year High

Current

Average

LEGEND

Robert W. Baird & Co.

19.6

20.1

_19.2

13.4

20.7

15.4

17.3

_14.9

12.4

16.8

0 5 10 15 20 25 30 35

Cons. Disc. Cons. Staples Energy Financials Health Care Industrials Info Tech Materials Telecomm Utilities

P/ E R a ti o

13.0

8.0

5.5

10.3

9.1

10.2

12.2

9.3

7.6

4.9

0 2 4 6 8 10 12 14 16 18

Cons. Disc. Cons. Staples Energy Financials Health Care Industrials Info Tech Materials Telecomm Utilities

LT E a rn in g s G ro w th

24

Mutual Fund Over/Under Performance (Equity Funds)

Percent of Funds Outperforming Market Benchmarks (Trailing 1 Year)

Percent of Funds Outperforming Market Benchmarks (Trailing 5 Years)

Mutual Fund Style Universe: Style-specific universe of mutual funds as categorized by Morningstar. Number of funds in each category as of March 2015: 338 for Large Growth, 259 for Large Value, 177 for Mid Growth, 91 for Mid Value, 182 for Small Growth, 82 for Small Value, and 124 for International. Source: Morningstar Direct; S&P 500 and Russell benchmarks; Baird Analysis. See important disclosures and definitions included with this publication.

Mutual Fund Performance

Active investment managers often have a primary objective of outperforming a relevant market benchmark based on the fund’s investment style. In certain periods, active managers can find it easier or more difficult to outperform.

This chart examines four main assets classes, detailing what percentage of mutual fund managers over- or under-performed in a given period. This provides useful context when assessing mutual funds that you may own.

Robert W. Baird & Co.

34%

47%

45%

39%

35%

46%

57%

0% 25% 50% 75% 100%

Large Growth Large Value

Mid Growth

Mid Value Small Growth Small Value

Int'l

P e rc en t o f T o ta l

% Underperform

% Outperform

20%

26%

20%

18%

33%

55%

41%

0% 25% 50% 75% 100%

Large Growth Large Value

Mid Growth

Mid Value Small Growth Small Value

Int'l

P e rc en t o f T o ta l

% Underperform

% Outperform

25

25

International Equity

26

Global Market Performance (as of 9/30/15)

Source: Standards & Poor’s (S&P 500); MSCI benchmarks (country returns). All performance is measured in USD. See important disclosures and definitions included with this publication.

Year-to-Date Performance of Selected Stock Markets

S&P 500 -5.3% Canada -19.6% Mexico -13.3% UK -8.2% France -1.0% Spain -13.2% Germany -8.3% Brazil -39.3% Japan 0.5% Hong Kong -6.2% China -11.2% India -5.3% Australia -18.0% South Africa -16.3% Europe -4.8% Russia 9.4%

27

International Equity Snapshot (as of 9/30/15)

Source: Morningstar Direct; MSCI benchmarks. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See important disclosures and definitions included with this publication.

Robert W. Baird & Co.

Asset Class/Region Last Qtr YTD 1-Year 3-Year 5-Year 10-Year 2014 2013 2012 Benchmark

Broad Developed Markets

Developed Markets (USD) (10.2) (5.3) (8.7) 5.6 4.0 3.0 (4.9) 22.8 17.3

MSCI EAFE (Net) USD

Developed Markets (Local Currency) (9.0) (0.9) 0.8 12.7 7.7 3.3 5.9 26.9 17.3

MSCI EAFE (Net) Local

Currency Effect (USD - Local Returns)

(1.3)

(4.3)

(9.5)

(7.1)

(3.7)

(0.3)

(10.8)

(4.1)

0.0

Broad Emerging Markets

Emerging Markets (17.9) (15.5) (19.3) (5.3) (3.6) 4.3 (2.2) (2.6) 18.2

MSCI Emerging Markets (Net)

BRIC (21.0) (14.4) (17.9) (4.9) (5.7) 4.7 (2.6) (3.3) 14.9

MSCI BRIC

Returns by Style

Value (11.8) (8.1) (12.6) 4.7 3.1 2.1 (5.4) 23.0 17.7

MSCI EAFE Value

Growth (8.7) (2.4) (4.7) 6.5 4.8 3.8 (4.4) 22.5 16.9

MSCI EAFE Growth

Large Cap (10.8) (6.3) (10.3) 4.9 3.6 2.7 (5.5) 22.4 17.2

MSCI EAFE Large Cap

Mid Cap (8.0) (1.2) (1.7) 8.6 5.7 4.1 (2.1) 24.4 18.1

MSCI EAFE Mid Cap

Small Cap (6.8) 2.6 0.3 10.2 7.3 4.7 (4.9) 29.3 20.0

MSCI EAFE Small Cap

Returns by Region

Europe (8.7) (4.7) (8.8) 6.6 4.9 3.9 (5.7) 26.0 19.9

MSCI Europe

Japan (11.7) 0.5 (1.9) 9.2 5.1 1.3 (3.7) 27.3 8.4

MSCI Japan

Pacific (ex Japan) (15.9) (15.4) (16.7) (1.9) 1.0 5.5 (0.3) 5.6 24.7

MSCI Pacific ex Japan

28

-39.3 -33.1 -25.9 -16.3 -15.5 -13.3 -12.0 -11.4 -11.2 -5.3 9.4 -18.0 -13.2 -8.3 -8.2 -6.3 -5.3 -1.4 -1.0 -0.8 0.5 5.4 -50 -40 -30 -20 -10 0 10 20 Brazil Indonesia Malaysia South Africa MSCI Em. Mkts Mexico Taiwan South Korea China India Russia Australia Spain Germany U.K. Sweden MSCI EAFE Netherlands France Switzerland Japan Italy Return (%) -33.6 -24.2 -22.7 -18.5 -18.2 -17.9 -16.4 -14.4 -11.9 -11.8 -6.7 -15.3 -11.7 -11.0 -10.9 -10.2 -10.0 -9.2 -8.8 -6.9 -6.4 -4.3 -40 -35 -30 -25 -20 -15 -10 -5 0 Brazil Indonesia China South Africa Malaysia MSCI Em. Mkts Taiwan Russia Mexico South Korea India Australia Japan Spain Germany MSCI EAFE U.K. Sweden Netherlands Switzerland France Italy Return (%)

International Country Performance (as of 9/30/15)

Source: Morningstar Direct.; MSCI Indices; Baird Analysis. All returns are reported in USD. MSCI EAFE (Developed markets) and MSCI EM (Emerging markets) are broad benchmarks representing many countries. Includes the 10 largest countries by weighting in the benchmark. See important disclosures and definitions included with this publication.

Selected Country Performance (Latest Quarter)

Selected Country Performance (Year to Date)

Developed Markets

E

m

erging Markets

29

International Economic Sector Performance (as of 9/30/15)

MSCI ACWI Ex U.S. Performance by Sector (Latest Quarter)

Sector Weighting (%) in the MSCI ACWI Ex U.S. Index

Source: Morningstar Direct; Baird Analysis. Sectors based on global industry classification standards (GICS). The MSCI ACWI Ex US Index is a benchmark designed to measure developed market and emerging market performance excluding the U.S. See important disclosures in appendix.

MSCI ACWI Ex U.S. Performance by Sector (Year to Date)

Robert W. Baird & Co.

-20.7 -20.1 -14.1 -13.3 -12.2 -11.7 -11.3 -11.3 -7.0 -6.2 -3.2 -25 -20 -15 -10 -5 0

Materials

Energy

Financials

Info. Tech.

MSCI ACWI ex US

Industrials

Cons. Disc.

Telecomm

Utilities

Health Care

Cons. Staples

Return (%) -21.5 -20.1 -10.6 -10.4 -9.2 -8.6 -7.8 -6.8 -5.4 1.2 2.3 -25 -20 -15 -10 -5 0 5

Energy

Materials

Financials

Utilities

Info. Tech.

MSCI ACWI Ex US

Industrials

Telecomm

Cons. Disc.

Cons. Staples

Health Care

Return (%)

Financials

25.8

Cons. Disc.

13.0

Industrials

12.7

Health Care

12.0

Cons. Staples

11.3

Materials

6.9

Telecomm

5.1

Energy

4.9

Info. Tech.

4.7

Utilities

3.8

30

-15 -10 -5 0 5 10 15 1 2 -Mo P e rf or m an ce D if fe re n ti a l ( % ) -30 -20 -10 0 10 20 30 1 2 -M o P e rf or m an ce D if fe re n ti a l ( % )

International Style Leadership

Source: Morningstar Direct. Returns based on 12-month performance, calculated monthly over the most recent 10-year period. Benchmark proxies are as follows: S&P 500 (U.S.), MSCI EAFE (Int’l), MSCI EAFE Value (Value) and MSCI EAFE Growth (Growth), MSCI EAFE (Developed markets), and MSCI EM (Emerging markets). See important disclosures and definitions included with this publication.

U.S. vs International (Rolling 12 month periods)

U.S. Outperforms

Int’l Outperforms

Developed vs Emerging Markets (Rolling 12 month periods)

Value vs Growth (Rolling 12 month periods)

Dev. Markets Outperform

Emg. Markets Outperform

Value Outperforms

Growth Outperforms

Robert W. Baird & Co.

-60 -50 -40 -30 -20 -10 0 10 20 30 12-Mo Performance Differential (%)

31

15.4

15.6

18.2

13.7

14.1

14.6

15.5

14.3

12.1

9.5

9.5

11.5

15.4

19.3

19.4

5.8

0 5 10 15 20 25 P/ E R a ti o ( T T M )

Global Stock Market Valuations (as of 9/30/15)

Source: Standards & Poor’s (S&P 500); MSCI benchmarks (country returns). All performance is measured in USD. US is measured by the S&P 500 Index, Developed International is measured by the MSCI EAFE Index, Emerging International is measured by the MSCI EM Index. P/E ratios are based on trailing 12 month earnings. See important disclosures and definitions included with this publication.

Historical P/E Ratio

Current P/E Ratio of Selected Countries

Europe

Asia-Pacific

Emerging Markets

Robert W. Baird & Co.

6 8 10 12 14 16 18 20 22

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

P/

E R

atio

(TTM)

32

Country Valuation Ranges (as of 9/30/15)

Source: Morningstar Direct. USA is represented by the S&P 500. All other countries are represented by the respective MSCI country benchmark. P/E ratios are based on trailing 12 month earnings. See important disclosures and definitions included with this publication.

Developed Markets: 7-Year P/E Valuation Range

Emerging Markets: 7-Year P/E Valuation Range

7-Year Low 7-Year High

Current

Average

LEGEND

Robert W. Baird & Co.

17.6

_16.8

15.4

18.2

15.6

13.7

16.9

14.1

14.9

16.5

19.5

17.8

14.6

15.5

14.3

12.1

0 5 10 15 20 25 P/ E R a ti o

9.5

9.5

11.8

19.3

5.8

15.6

_14.8

14.0

11.5

19.4

16.0

11.7

15.4

0 5 10 15 20 25 30 35 P/ E R a ti o

33

33

Fixed Income

34

Bond Market Snapshot (as of 9/30/15)

Source: Morningstar Direct; Barclays benchmarks. Individual security types are subsets of either the Barclays U.S. Aggregate or Municipal Bond benchmarks. Duration, measured in years, is a relative term that expresses the price sensitivity of an investment/benchmark to changes in interest rates. All else equal, the lower the duration, the less price sensitivity to interest rate changes. See important disclosures and definitions included with this publication.

Robert W. Baird & Co.

Bond Types Yield (%) Duration Last Qtr YTD 1-Year 3-Year 5-Year 10-Year 2014 2013 2012 Benchmark

Broad Developed Markets

U.S. Taxable Bonds 2.1 5.5 1.2 1.1 2.9 1.7 3.1 4.6 6.0 (2.0) 4.2 Barclays US Aggregate Bond

U.S. Municipal Bonds 2.0 6.1 1.7 1.8 3.2 2.9 4.1 4.6 9.1 (2.6) 6.8 Barclays Municipal Bond

International Bonds 1.4 6.6 0.6 (4.8) (7.7) (4.0) (0.9) 3.0 (3.1) (3.1) 4.1 Barclays Glbl Agg. Bond ex US

Broad Emerging Markets

Emerging Market Bonds 5.3 6.0 (2.4) 0.3 (1.4) 1.3 4.7 6.9 4.8 (4.1) 17.9 Barclays Emerging Markets

Taxable Bond Categories

Treasuries 1.0 7.5 1.8 1.8 3.8 1.3 2.5 4.4 5.1 (2.7) 2.0 Barclays US Treasury

Agencies 1.7 4.1 1.7 1.8 3.7 1.3 2.5 4.3 4.9 (2.6) 2.0 Barclays US Government

Mortgage-Backed 2.4 3.6 1.3 1.6 3.4 2.0 3.0 4.7 6.1 (1.4) 2.6 Barclays US MBS

Inv-Grade Corporate 2.9 7.4 0.8 (0.1) 1.7 2.2 4.3 5.4 7.5 (1.5) 9.8 Barclays US Corporate IG

High Yield Corporate 6.2 4.2 (4.9) (2.5) (3.6) 3.5 5.9 7.1 2.5 7.4 15.6 BofA/ML High Yield Master II

Municipal Bond Categories

Insured 1.8 4.3 1.3 2.2 3.3 3.6 4.6 4.9 10.3 (2.0) 7.3 Barclays Municipal Insured

State GO 1.7 5.4 1.7 1.7 2.7 2.3 3.6 4.5 7.3 (2.3) 5.1 Barclays Municipal State GO

Local GO 1.9 6.2 1.8 1.6 2.9 2.7 4.0 4.8 8.5 (2.4) 6.3 Barclays Municipal Local GO

Revenue 2.2 6.5 1.7 1.9 3.5 3.1 4.5 4.7 10.1 (2.9) 7.8 Barclays Municipal Revenue

High Yield 6.4 9.6 2.0 0.0 1.2 3.7 5.9 4.8 13.8 (5.5) 18.1 Barclays High Yield Muni

Annual Returns (%) Trailing Returns (%)

35

0.6 1.6 2.0 1.6 1.7 1.8 1.6 2.0 0.8 2.0 2.1 1.6 1.9 1.8 2.1 0.0 -4 -2 0 2 4

Short-Term Intermediate Long-Term AAA AA A Baa Below Baa

(High Yield) Re tu rn (% )

QTR

YTD

0.3 1.3 2.1 2.2 1.4 _1.1 -0.6 -4.9 1.0 1.8 -2.4 0.4 1.0 _0.7 -1.1 -2.5 -6 -4 -2 0 2 4

Short-Term Intermediate Long-Term AAA AA A Baa Below Baa

(High Yield) Re tu rn (% )

QTR

YTD

Performance by Maturity and Credit Quality (as of 9/30/15)

Source: Bloomberg; Baird Analysis. Ratings are as defined by Bloomberg and represent bonds in the Barclays Aggregate Bond index (taxable bonds) and Barclays Municipal Index (municipal bonds). Short-term maturity is defined as 1-3 years, intermediate is 5-7 years for taxable and 6-8 for municipal, long-term is 10+ years for taxable and 8-12 years for municipal. See important disclosures and definitions included with this publication.

Taxable Bonds

Municipal Bonds

36

International

Bank

 

Loans

Emerging

 

Mkts

Broad 

Bond 

Market

High

 

Yield

Treasury

Mortgage

‐

Backed

Corporate

Municipal

HY

 

Municipal

0

2

4

6

8

0

2

4

6

8

10

12

Yi

e

ld

 

(%

)

10

‐

Year

 

Historical

 

Volatility

 

(Standard

 

Deviation)

Yield and Volatility Characteristics of Various Bond Types

Source: Morningstar Direct; Barclays benchmarks. Individual security types are subsets of either the Barclays U.S. Aggregate or Municipal Bond benchmarks. Bond types are represented by the following indices: Barclays Aggregate Bond (Broad Bond Market), Barclays US MBS (Mortgage-Backed), Merrill Lynch High Yield Master II (High Yield), Barclays IG Corporate (Corporate), Barclays Municipal (Municipal), Barclays US Treasury (U.S. Treasury), Barclays Global Aggregate ex USD (International), and S&P/LSTA Leveraged Loan (Bank Loans). Indices are unmanaged and are used to measure and report performance of various sectors of the market. Past performance is no guarantee of future results and diversification does not ensure against loss. Direct investment in indices is not available. See important disclosures and definitions included with this publication.

The Relationship Between Yield and Volatility

37

1 2 3 4 5 6 7 8 9 10 Se p-90 Se p-91 Se p-92 Se p-93 Se p-94 Se p-95 Se p-96 Se p-97 Se p-98 Se p-99 Se p-00 Se p-01 Se p-02 Se p-03 Se p-04 Se p-05 Se p-06 Se p-07 Se p-08 Se p-09 Se p-10 Se p-11 Se p-12 Se p-13 Se p-14 Se p-15 1 0 -Y ea r U .S . T rea su ry R a te ( % ) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Yie ld ( % ) Maturity 09/30/15 Current Qtr 09/30/15 Last Year 20y r 3m o 2y r 3y r 5y r 10 yr 30 yr

U.S. Treasury Bonds

Source: U.S. Department of Treasury; Baird Analysis. See important disclosures and definitions included with this publication.

U.S. Treasury Yield Curve

Historical U.S. 10-Year Treasury Rate (since 1990)

Current U.S. Treasury Yields by Maturity

Robert W. Baird & Co.

0.00 0.08 0.64 0.92 1.37 2.06 2.87 0 1 2 3 4 3 mo 6 mo 2 yr 3 yr 5 yr 10 yr 30 yr Yie ld ( % )

38

0.0 0.1 0.3 0.6 0.9 1.4 1.8 2.1 2.5 2.9 0.1 0.2 0.4 0.6 0.8 1.3 1.7 2.1 2.9 3.2 0.1 0.3 0.6 1.0 1.4 2.2 2.8 3.5 4.8 5.2 0 1 2 3 4 5 6

3mo 6mo 1yr 2yr 3yr 5yr 7yr 10yr 20yr 30yr

Yie ld ( % ) Treasury Municipal Tax-Equivalent Yield 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Yi e ld ( % ) Maturity Treasury Municipal 20y r 3m o 6m o 5y r 10 yr 30 yr

Municipal Bonds

Source: U.S. Department of Treasury; Bloomberg. Municipal yields are based on the Barclays AAA GO Bond Index. The Tax-Equivalent Yields assumes a 39.6% federal tax rate and full exemption of those taxes. See important disclosures and definitions included with this publication.

U.S. Municipal and Treasury Yield Curves

Yield Comparisons of Treasury and Municipal Bonds

Tax Equivalent Yield

The income from many municipal bonds is exempt from federal taxes. The tax equivalent yield is the pre-tax income needed from a taxable bond to possess the same after-tax result. In this chart, a tax rate of 39.6% is assumed.

39

Corporate Bond Yields

Source: BofA/Merrill Lynch, Standard & Poor’s. Investment Grade Bonds are represented by the BofA/ML US Corporate Bond Index; High Yield Bonds are represented by the BofA/ML High Yield Master II Index. Historic default rates provided by Standard & Poor’s and encompass the period from 1/1/81 to 1/1/14. See important disclosures and definitions included with this publication.

Investment Grade Bonds: Historical Yields

High Yield Bonds: Historical Yields

Investment Grade Bonds: Current Yield & Historic Default Rate

High Yield Bonds: Current Yield & Historic Default Rate

Robert W. Baird & Co.

0 2 4 6 8 10 12

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

Ef fe ct iv e Y iel d ( % ) 0 5 10 15 20 25

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

Effe ct iv e Y ie ld ( % )

2.5

_2.3

2.6

3.5

1.3

1.6

3.1

7.3

0 10 20 30 40 50 60 70 80 90 100 0 2 4 6 8 10 12 AAA AA A BBB Av er a g e D e fa u lt R a te ( % ) Effe ct iv e Y ie ld ( % )

4.7

6.5

10.3

19.6

33.1

59.9

0 10 20 30 40 50 60 70 80 90 100 0 2 4 6 8 10 12 BB B CCC Av er ag e D e fa u lt R a te ( % ) Effe ct iv e Y ie ld ( % )

40

1348 481 132 124 83 283 88 15 25 ₁₃ (100) 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 1,500

High Yield

Corporate

MBS

Global

Agencies

S

p

read

o

ver T

re

asu

ry

B

o

n

d

(

b

p

s)

Bond Spreads

Source: Barclays, Bloomberg. The length of each bar represents the range of a particular spread relative to an appropriate Treasury benchmark over the past 10 years. The maximum and minimum spreads are capped at the 95th and 5th percentiles to account for outliers. The data point marked ‘current’ represents the most recent quarter. Past performance is not a guarantee of future results and this chart is not intended to be a valuation tool.

Average OAS Spread: Max/Min/Avg/Current (10-Year History)

Current

Average

Robert W. Baird & Co.

High Yield

Corporate

MBS

Global

Agencies

High 1348

481

132

124

83

Average

574

178

55

60

32

Low

283

88

15

25

13

Current 630

169

31

54

17

41

Mutual Fund Over/Under Performance (Bond Funds)

Mutual Fund Style Universe: Style-specific universe of mutual funds as categorized by Morningstar. Number of funds in each category as of March 2015: 103 for Short-Term Taxable, 214 Intermediate Term, 46 for Short-Term Municipal, and 70 for Intermediate Municipal. Source: Morningstar Direct; Barclays benchmarks; Baird Analysis. See important disclosures and definitions included with this publication.

Percent of Funds Outperforming Market Benchmarks (Trailing 1 Year)

Percent of Funds Outperforming Market Benchmarks (Trailing 5 Years)

Mutual Fund Performance

Active investment managers often have a primary objective of outperforming a relevant market benchmark based on the fund’s investment style. In certain periods, active managers can find it easier or more difficult to outperform.

This chart examines four main assets classes, detailing what percentage of mutual fund managers over- or under-performed in a given period. This provides useful context when assessing mutual funds that you may own.

Robert W. Baird & Co.

20%

_15%

27%

23%

0% 25% 50% 75% 100%

Short Term Taxable

Intermediate Taxable

Short Term Municipal

Intermediate Municipal

P e rc en t o f T o ta l

% Underperform

% Outperform

82%

86%

31%

33%

0% 25% 50% 75% 100%

Short Term Taxable

Intermediate Taxable

Short Term Municipal

Intermediate Municipal

P e rc en t o f T o ta l

% Underperform

% Outperform

42

42

Appendix and Important Disclosures

43

Disclosures

Disclaimers

This is not a complete analysis of every material fact regarding any company, industry or security. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Past performance is not a guarantee of future results.

Style Definitions

Large Growth:equity securities of large capitalization companies having growth stock characteristics (high price to earnings, high return on equity and low dividend yield. Based upon the Russell 1000® Growth Index. Large Value: equity securities of large capitalization companies having value stock characteristics (low forecasted price‐to‐earnings ratio, low price‐to‐book ratio, high dividend yield). Based upon the Russell 1000® Value Index. Mid Growth: equity securities of middle capitalization companies having growth stock characteristics (high price to earnings, high return on equity and low dividend yield). Based upon the Russell Midcap® Growth Index. Mid Value:equity securities of middle capitalization companies having growth stock characteristics (high price to earnings, high return on equity and low dividend yield). Based upon the Russell Midcap® Value Index.Small Growth:equity securities of small capitalization companies having growth stock characteristics (high price to earnings, high return on equity and low dividend yield). Small capitalization stock may be subject to additional risks including illiquidity. Based upon the Russell 2000® Growth Index. Small Value:equity securities of small capitalization companies having value stock characteristics (low price‐to‐

earnings ratio, low price‐to‐book ratio, high dividend yield). Small capitalization stocks may be subject to additional risks including illiquidity. Based upon the Russell 2000® Value Index. International:a free float‐

adjusted market capitalization index that is designed to measure developed market equity performance, excluding the US & Canada, consisting of 21 developed market country indices. Based upon the MSCI EAFE Index. Satellite:these asset classes, as defined by Baird, include commodities, real estate, high yield bonds and emerging markets. Representative benchmarks are as follows: Dow Jones UBS Commodity (commodities), Dow Jones US REIT (real estate), BofA High Yield Master II (high yield), and MSCI Emerging Markets (emerging markets).Short Term Taxable:Short‐term bond portfolios invest primarily in corporate and other investment‐

grade U.S. fixed‐income issues and have durations of one to 3.5 years. Based upon the Barclays 1‐3 Year Govt/Credit Index. Intermediate Taxable:Intermediate‐term bond portfolios invest primarily in corporate and other investment‐grade U.S. fixed‐income issues and have durations of 3.5 to six years. Based upon the Barclays Intermediate Gov’t/Credit Index. Short Term Municipal:Muni national short portfolios invest in bonds issued by various state and local governments to fund public projects. These portfolios have durations of less than 4.5 years. Based upon the Barclays 3 Year Municipal Index. Intermediate Term Municipal:Muni national short portfolios invest in bonds issued by various state and local governments to fund public projects. These portfolios have durations of 4.5 to 7 years. Based upon the Barclays 7 Year Municipal Index.

GICS

The Global Industry Classification Standard ("GICS") is the exclusive property 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 Robert W. Baird & Co. Inc. MSCI and S&P hereby provided all information "as is" and expressly disclaim all warranties. Without limiting any of the foregoing, in no event shall MSCI or S&P have any liability.

Domestic Equity Benchmarks

S&P 500® Index:A representative sample of 500 leading companies in leading industries of the U.S. economy. Considered a large‐cap index.

Russell 3000® Growth Index:Measures the performance of those Russell 3000® Index companies with higher price‐to‐book ratios and higher forecasted growth values. An all‐cap index.

Russell 3000® Value Index:Measures the performance of those Russell 3000® Index companies with lower price to‐book ratios and lower forecasted growth values. An all‐cap index.

Russell Top 50® Index:Measures the performance of the 50 largest companies in the Russell 1000® Index, which represents approximately 40% of the total market capitalization of the Russell 1000® Index. A mega‐cap index. Russell Top 200® Index:Measures the performance of the 200 largest companies in the Russell 1000® Index, which represents approximately 68% of the total market capitalization of the Russell 1000® Index. A large‐cap index.

Russell 1000® Growth Index:Measures the performance of those Russell 1000® Index companies with higher price‐to‐book ratios and higher forecasted growth values. A large‐cap index.

Russell 1000® Value Index:Measures the performance of those Russell 1000® Index companies with lower price to‐book ratios and lower forecasted growth values. A large‐cap index.

Russell 1000® Defensive/Dynamic Index:Measures the performance of those Russell 1000® Index companies based in terms of volatility of price and earnings, leverage and return on assets. The Russell 1000® Defensive Index includes those with relative stability and less sensitivity to economic cycles. The Russell 1000® Dynamics Index includes those with less stability and greater sensitivity to economic cycles.

Russell Midcap® Index:Measures the performance of the 800 smallest companies of the Russell 1000® Index, which represents approximately 36% of the total capitalization of the Russell 1000® Index. A mid‐cap index. Russell Midcap® Growth Index: Measures the performance of those Russell Midcap® Index companies with higher price‐to‐book and higher forecasted growth values. A midcap index.

Russell Midcap® Value Index: Measures the performance of those Russell Midcap companies with lower price‐to book and lower forecasted growth values. A mid‐cap index.

Russell 2000® Index:Measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represent approximately 10% of the total market capitalization of the Russell 3000® Index. A small‐cap index.

Russell 2000® Growth Index:Measures the performance of those Russell 2000® Index companies with higher price‐to‐book ratios and higher forecasted growth values. A small‐cap index.

Russell 2000® Value Index:Measures the performance of those Russell 2000® Index companies with lower price‐

to‐book ratios and lower forecasted growth values. A small‐cap index.

Russell Microcap Index:Measures the performance of smallest 1000 companies in the Russell 2000® Index, which represents less than 3% of the total market capitalization. A micro‐cap index.

Dow Jones U.S. Real Estate: Measures the performance of Real Estate Investment Trusts (REIT) and other companies that invest directly or indirectly through development, management or ownership, including properties.

Dow Jones Industrial Average:A price‐weighted index composed of 30 actively‐traded large cap stocks. Bloomberg Commodity: Aims to provide broadly diversified representation of commodity markets and represents 20 commodities, weighted based on economic significance and market liquidity.

S&P 500® High/Low Quality Index:The S&P Quality Rankings System measures growth and stability of earnings and dividends within the S&P 500 Index. The S&P 500 High Quality Index tracks stocks identified by Standard & Poor’s as high quality (ranked A and above); The S&P 500 Low Quality Index tracks stocks identified by Standard & Poor’s as low quality (ranked B and below).

The Russell Indices are a trademark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully

before investing. This and other information is found in the prospectus or summary prospectus. For a

prospectus or summary prospectus, contact your Baird Financial Advisor. Please read the prospectus