The Chinese Dream

October 18, 2018

Rebecca PattersonChief Investment Officer

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Past performance is no guarantee of future results. This material is provided for your general information. It does not take into account the particular investment objectives, financial situation, or needs of individual clients. This material has been prepared based on information that Bessemer Trust believes to be reliable, but Bessemer Trust makes no representation or warranty with respect to the accuracy or completeness of such information. This presentation does not include a complete description of any fund or portfolio mentioned herein and is not an offer to sell any securities. Investors should carefully consider the investment objectives, risks, charges, and expenses of each fund or portfolio before investing.

Views expressed herein are current only as of the date indicated, and are subject to change without notice. Forecasts may not be realized due to a variety of factors, including changes in economic growth, corporate profitability, geopolitical conditions, and inflation. The mention of a particular security is not intended to represent a stock-specific or other investment recommendation, and our view of these holdings may change at any time based on stock price movements, new research conclusions, or changes in risk preference. Index information is included herein to show the general trend in the securities markets during the periods indicated and is not intended to imply that any referenced portfolio is similar to the indices in either composition or volatility. Index returns are not an exact representation of any particular investment, as you cannot invest directly in an index.

Sector and industry classifications included in this presentation utilize the Global Industry Classification Standard (“GICS”). GICS is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s (“S&P”), a division of The McGraw-Hill Companies, Inc. Neither MSCI nor S&P makes any express or implied warranties or representations or shall have any liability for any direct, indirect, special, punitive, consequential, or any other damages (including lost profits) with respect to GICS data or results obtained therefrom.

Agenda

2018 Year-to-Date Performance Recap

The Chinese Dream

Other Key Market Drivers into 2019

Key Takeaways

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2013 2014 2015 2016 2017 2018 YTDBalanced Growth (70/30) Portfolio 14.8% 4.3% -1.1% 4.9% 15.2% 5.2%

Balanced Growth Index 12.6% 3.0% -1.5% 6.5% 16.8% 2.5%

Performance Summary

4

Year-to-date 2018: What has hurt Exposure to value-oriented and emerging market equity strategies Negative performance in fixed income a drag on absolute returns

Year-to-date 2018: What has helped Underweight to high-quality fixed income and overweight to information technology equity Stock selection in Bessemer global large managers, as well as external large and small/mid

cap growth managers Significant overweight to U.S. equities and dollar

Past performance is no guarantee of future results. As of September 30, 2018. The Bessemer Balanced Growth Portfolio represents the intended risk profile (70% equity, 30% fixed income) of the neutral allocation.Source: Bank of America Merrill Lynch, Barclays, Bloomberg, FactSet, J.P. Morgan, Standard & Poor’s

Higher Chinese Incomes Have Kept Population Content and Influenced Economic Drivers

5

As of 2017.Source: World Bank

$0

$2,000

$4,000

$6,000

$8,000

$10,000

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Chinese Gross National Income (GNI) Per Capita

Chinese Economy Today Driven More by Consumers than Exports

6

As of December 31, 2015, for Exports and December 31, 2016, for Services Sector.Source: Bloomberg, National Bureau of Statistics of China

Services Sector and Exports of Goods as a Percent of Nominal GDP

0%

10%

20%

30%

40%

50%

60%

1978 1983 1988 1993 1998 2003 2008 2013

Services Sector

Exports

Aging Population a Headwind for Growth

7

As of 2017. Total dependency ratio is the ratio of population aged 0-14 and 65+ per 100 population aged 15-64. Projection is calculated by the United Nations Population Division.Source: United Nations

China's Total Dependency Ratio

0

20

40

60

80

100

1950 1970 1990 2010 2030 2050 2070 2090

Rising dependency ratio shows fewer workers per retirees and children

How to Support Growth in Decades Ahead?“Made in China 2025”

8

As of February 2, 2016. Source: U.S.-China Business Council

Semiofficial Targets for Percent of Domestic Market Share of Chinese Products

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

Wide-body aircraft

Mobile phone chips

Large tractors and harvesters

High-performance medical devices

Industrial robots

New and renewable energy equipment

High-tech ship components

New energy vehicles

2020 2025

Continuing the Chinese Dream: Xi’s Plan

9

Education Public and private-sector financing

Technology “transfer”

Build R&D culture and domestic technology “know-how”

Create globally competitive tech-savvy firms

Continued growth = social stability = political stability

China’s Dream, U.S.’ Nightmare?

Threat from Chinese technology to U.S. companies, economy

China not following spirit/letter of international laws and best practices

Potential military applications of Chinese technology — geopolitical threat

10

U.S. Steps Have Stopped Escalation of Chinese Direct Investments

11

As of May 2018. 2018 includes cumulative total for January to May 2018. All other figures are annual. Source: Rhodium Group

Chinese Foreign Direct Investment in the U.S.

$0

$10

$20

$30

$40

$50

2000 2003 2006 2009 2012 2015 2018 YTD

Where From Here Between U.S. and China?

Trade war appears supportive for administration as election campaign strategy

Rhetoric from China suggests desire to resolve conflict and find compromise; ready to agree to one-third of U.S. demands and discuss another third

U.S. and Chinese leaders tentatively scheduled to meet at multilateral summit in November

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Chart: As of October 3, 2018. Survey Monkey online poll conducted September 28-30 of 2,291 U.S. adults.Source: Axios

0 10 20 30 40 50 60 70 80 90

Total

Republicans

Independents

Democrats

% Who Think Trade War with China Has Been Good for U.S. Jobs

% of Respondents

Sep

16

Oct

16

No

v16

Dec

16

Jan

17

Feb

17

Mar

17

Ap

r17

May

17

Jun

17

Jul1

7

Au

g17

Sep

17

Oct

17

No

v17

Dec

17

Jan

18

Feb

18

Mar

18

Ap

r18

May

18

Jun

18

Jul1

8

Au

g18

Sep

18

Global 51 52 52 53 53 53 54 53 54 54 54 54 54 54 54 54 54 55 53 54 54 55 54 54 53

U.S. 51 51 52 55 55 54 56 54 53 53 54 56 55 55 55 54 53 56 54 55 57 57 56 55 54

Eurozone 53 53 52 53 54 54 54 56 56 56 56 55 56 55 56 57 58 56 55 55 54 55 54 54 55

Japan 50 50 48 51 52 52 52 51 53 52 53 52 51 53 51 51 52 52 51 53 51 51 51 52 50

U.K. 47 53 53 55 55 56 55 53 55 56 54 53 54 56 54 54 53 55 52 53 54 55 54 54 54

Emerging Markets 51 51 51 51 51 52 52 52 52 52 53 52 52 52 52 53 54 54 53 53 53 53 53 52 52

Brazil 46 43 45 44 44 45 45 46 48 50 49 49 51 49 47 47 50 53 50 50 50 47 50 47 46

China 52 52 52 52 53 53 53 53 52 52 53 53 51 51 52 54 55 54 52 53 53 54 53 52 53

India 52 55 52 55 47 47 49 50 52 50 52 48 51 52 49 51 52 48 50 51 50 53 54 52 51

Russia 55 54 53 53 55 57 58 56 57 56 56 54 55 54 57 57 55 57 54 56 54 52 53 53 55

Sep

16

Oct

16

No

v16

Dec

16

Jan

17

Feb

17

Mar

17

Ap

r17

May

17

Jun

17

Jul1

7

Au

g17

Sep

17

Oct

17

No

v17

Dec

17

Jan

18

Feb

18

Mar

18

Ap

r18

May

18

Jun

18

Jul1

8

Au

g18

Sep

18

Global 51 52 52 53 53 53 53 53 53 53 53 53 53 54 54 55 54 54 53 54 53 53 53 53 52

U.S. 52 53 54 54 55 54 53 53 53 52 53 53 53 55 54 55 56 55 56 57 56 55 55 55 56

Canada 50 51 52 52 54 55 56 56 55 55 56 55 55 54 54 55 56 56 56 56 56 57 57 57 55

Eurozone 53 54 54 55 55 55 56 57 57 57 57 57 58 59 60 61 60 59 57 56 56 55 55 55 53

Japan 50 51 51 52 53 53 52 53 53 52 52 52 53 53 54 54 55 54 53 54 53 53 52 53 53

U.K. 56 54 53 56 55 55 54 57 56 54 55 57 56 56 58 56 55 55 55 54 54 54 54 53 54

Emerging Markets 50 51 51 51 51 51 52 51 51 51 51 52 51 51 52 52 52 52 51 51 51 51 51 51 50

Brazil 46 46 46 45 44 47 50 50 52 51 50 51 51 51 54 52 51 53 53 52 51 50 51 51 51

China 50 51 51 52 51 52 51 50 50 50 51 52 51 51 51 52 52 52 51 51 51 51 51 51 50

India 52 54 52 50 50 51 53 53 52 51 48 51 51 50 53 55 52 52 51 52 51 53 52 52 52

Mexico 52 52 51 50 51 51 52 51 51 52 51 52 53 49 52 52 53 52 52 52 51 52 52 51 52

Russia 51 52 54 54 55 53 52 51 52 50 53 52 52 51 52 52 52 50 51 51 50 50 48 49 50

Beyond China: Global Growth Still Robust, but Less Synchronized

13

As of September 30, 2018. A reading above (below) 50 indicates an expansion (contraction) in business activity.Source: Bloomberg, Markit

Global Manufacturing PMIs

Global Service PMIs

Small Business Optimism at an All-Time High

14

As of August 31, 2018.Source: Bloomberg, National Federation of Independent Business

U.S. NFIB Small Business Optimism

75

80

85

90

95

100

105

110

1985 1990 1995 2000 2005 2010 2015

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2016 2017 2018-1%

0%

1%

2%

3%

4%

5%

6%

7%

2000 2005 2010 2015

Core Inflation Rates Remain Below the 2% Target

Inflation Still Tame; Central Banks Can Go Slow

15

Left as of August 31, 2018, for Japan and U.S. and September 30, 2018, for eurozone. Right as of September 30, 2018. Key inflation rates are core CPI for Japan and eurozone and core PCE for U.S. Source: Bloomberg, Bank of Japan, European Central Bank, Eurostat, Federal Reserve, Japan Ministry of Internal Affairs and Communications, U.S. Bureau of Economic Analysis

Central Banks Maintain Low Policy Rates

Fed Funds Policy Rate

BOJ Policy Balance Rate

ECB Deposit Rate

Japan

U.S.

YoY

Eurozone

Target Rate

-250

-200

-150

-100

-50

0

50

100

150

200

250

300

1976 1984 1992 2000 2008 2016

U.S. Curve Inversion: How Important?

As of October 11, 2018. Source: Bloomberg, National Bureau of Economic Research, J.P. Morgan

Yield Curve Set to Invert Around End-2018Difference Between 10-Year and 2-Year Yields

16

bps

Recession Yield Curve Inversion

Date S&P 500

Peak Date

Months BetweenYield Curve

Inversion & S&P 500 Peak

Months Between Yield

Curve Inversion & Recession

Dec 67 Nov 68 11 25

Mar 73 Oct 73 7 9

Nov 78 Feb 80 15 14

Aug 80 Nov 80 3 11

Dec 88 Jul 90 19 19

Mar 00 Aug 00 5 12

Aug 06 Oct 07 13 16

Median 11 14

Average 10 15

-20%

-10%

0%

10%

20%

30%

40%

0%

5%

10%

15%

20%

25%

30%

2010 2012 2014 2016 2018

Balance Sheet Reduction a New Factor in the Mix

As of July 31, 2018. Global equities measured using MSCI ACWI and reflect the price level. G3 includes the European Central Bank, Bank of Japan and Federal Reserve. Source: State Street, Bloomberg, Bank of England, Bank of Japan, European Central Bank, Federal Reserve, MSCI

17

G3 Central Bank Balance Sheets (constant USD, L)

Global Equities (12-month lag, R)

Global Equities and Central Bank Balance SheetsYoY YoY

U.S. 10-Year Yield Broke Through 3% “Threshold”

18

As of October 12, 2018.Source: Bloomberg

U.S. 10-Year Government Bond Yield

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2008 2010 2012 2014 2016 2018

S&P 500: Tighter Monetary Policy = More Volatility

19

As of October 12, 2018.Source: Bloomberg

2500

2550

2600

2650

2700

2750

2800

2850

2900

2950

3000

Jan 18 Apr 18 Jul 18 Oct 18

Two Notable Corrections This YearPrice Level Year-to-Date

Important to Remember the Larger PicturePrice Level Since 1995

0

500

1000

1500

2000

2500

3000

1995 2000 2005 2010 2015

Italian Populists + ECB Policy = Trouble?

Left as of September 30, 2018. Right as of October 11, 2018. Sources: Bloomberg, European Central Bank

20

ECB Cumulative Government Bond Purchases by Country

Billions of Euros

Italy 10-Year Government Bond Yield

0%

1%

2%

3%

4%

5%

6%

7%

2011 2013 2015 2017

€ 29

€ 30

€ 32

€ 36

€ 57

€ 72

€ 114

€ 228

€ 257

€ 360

€ 414

€ 510

Other EU nations

Ireland

Finland

Portugal

Austria

Belgium

The Netherlands

Supranationals

Spain

Italy

France

Germany

3.60.5

-0.1-2.1 -2.7 -2.9 -3.4 -3.5

-5.6 -6.5-8.8 -8.8 -9.6 -10.9 -12.5 -13.0 -13.8 -15.4

-35.9

-49.1

-60

-50

-40

-30

-20

-10

0

10

Mexic

an P

eso

Japa

nese

Yen

Norw

egian

Kro

ne

Britis

h Pou

nd

Malay

sian R

inggit

Sing

apor

e Doll

ar

Euro

Cana

dian D

ollar

Chine

se R

enmi

nbi

South

Kor

ean W

on

Austr

alian

Doll

ar

Swed

ish K

rona

Chile

an P

eso

Indon

esian

Rup

iah

Braz

ilian R

eal

Russ

ian R

uble

Indian

Rup

ee

South

Afric

an R

and

Turki

sh Li

ra

Arge

ntine

Pes

o

Stronger Dollar, Higher U.S. Rates Have Hurt Emerging-Market Currencies

As of October 11, 2018 Source: Bloomberg

21

2018 Returns Versus U.S. DollarPercent Change

-60%

-40%

-20%

0%

20%

40%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2005 2008 2011 2014 2017

Iran Sanctions: Upside Risk for Oil Prices, Downside Risk for U.S. Consumers

22

As of September 30, 2018. Commodity prices measured using Bloomberg Commodity Index. SAAR stands for seasonally adjusted annualized rate. Source: Bloomberg, U.S. Bureau of Labor Statistics

Commodity Prices and U.S. Inflation

U.S. CPI (L)

Commodity Prices (3-month lead, R)

YoY YoY

Energy Prices and U.S. Consumption

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%0%

1%

2%

3%

4%

5%

6%

15 16 17 18

6M/6M,SAAR

6M/6MSAAR

Midterm Elections: Incumbent President’s Party Tends to Lose House Seats

23

As of 2014.Source: The Brookings Institution

Number of House Seats Won or Lost by Incumbent President's Party in Midterm Elections

-140

-120

-100

-80

-60

-40

-20

0

20

1862 1882 1902 1922 1942 1962 1982 2002

Average: -33 seats

Democrats Have 15 More Senate Seats than Republicans up for Re-Election

24

As of 2018. Total seats up for re-election includes only seats controlled by Democrats and Republicans (e.g., does not include Senate seats controlled by independents). Source: 270toWin, state election filings

Number of Democrat Minus Republican Senate Seats Up for Re-Election During Midterm Years

-15

-10

-5

0

5

10

15

20

1946 1958 1970 1982 1994 2006 2018

Median: +4 seats 15

U.S. Debt-Ceiling and Deficit Concerns Likely to Resurface in the Coming Year

25

As of August 31, 2018, for rolling 12-month sum and June 30, 2018, for percent of GDP.Source: Bloomberg, U.S. Treasury

Federal Government Budget Deficit/Surplus

-12%

-9%

-6%

-3%

0%

3%

-$1,600

-$1,400

-$1,200

-$1,000

-$800

-$600

-$400

-$200

$0

$200

$400

1968 1978 1988 1998 2008

Percent of GDP (R)

Rolling 12-Month Sum (L)

Recession

$ Billions

Key Takeaways

While less synchronized, global growth still solid – too early to retreat from equities

Tighter monetary policy and other uncertainties to trigger bouts of market volatility

Impact of 2018/19 fiscal stimulus, plus defensive characteristics, keeps us biased toward U.S. equities and dollar

U.S.-China trade war impact still broadly modest but with potential to weigh more on markets and economies

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Growth 90/10 Index represents:

After 12/31/2015, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (10%)MSCI All Country World IMI (90%)

Before 1/1/2016, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (10%)S&P Global Broad Market Index (86%)Bloomberg Commodity Index (4%)

Before 1/1/2014, a composite of:S&P Global LargeCap Index (38%) [which replaced the S&P 500 Index (24%) and S&P Global ex-U.S. LargeCap Index (14%) after 11/20/11]S&P Global LargeMidCap Index (19%)S&P Global MidSmallCap Index (20%)Real Assets (7% consisting of the Bloomberg Commodity Index (5%) and Barclays Capital U.S. TIPS Index [2%])Hedge Funds (11% consisting of the S&P Global Broad Market Index (Hedged) [9%] and Barclays Capital U.S. Government Index (2%)]3 Month Treasury Bills (5%)

Balanced Growth 70/30 Index represents:

After 12/31/2015, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (30%)MSCI All Country World IMI (70%)

Before 1/1/2016, a composite of: BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (32%)S&P Global Broad Market Index (65%)Bloomberg Commodity Index (3%)

Before 1/1/2014, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (25%) [which replaced the Barclays Capital U.S. Government/Credit Index after 2/28/13]S&P Global LargeCap Index (25%) [which replaced the S&P 500 Index (15%) and S&P Global ex-U.S. LargeCap Index (10%) after 11/20/11]S&P Global LargeMidCap Index (14%)S&P Global MidSmallCap Index (14%)Real Assets (7% consisting of the Bloomberg Commodity Index [5%] and Barclays Capital U.S. TIPS Index [2%])Hedge Funds (10% consisting of the S&P Global Broad Market Index (Hedged) [7%] and Barclays Capital U.S. Government Index [3%])3 Month Treasury Bills (5%)

Balanced 55/45 Index represents:

After 12/31/2015, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (45%)MSCI All Country World IMI (55%)

Before 1/1/2016, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (46%)S&P Global Broad Market Index (51%)Bloomberg Commodity Index (3%)

Before 1/1/2014, a composite of:BofA Merrill Lynch 1-10 Year AAA-A U.S. Corporate & Government Index (39%) [which replaced the Barclays Capital U.S. Government/Credit Index after 2/28/13]S&P Global LargeCap Index (19%) [which replaced the S&P 500 Index (12%) and S&P Global ex-U.S. LargeCap Index (7%) after 11/20/11]S&P Global LargeMidCap Index (10%)S&P Global MidSmallCap Index (10%)Real Assets (7% consisting of the Bloomberg Commodity Index [5%] and Barclays Capital U.S. TIPS Index [2%])Hedge Funds (10% consisting of the S&P Global Broad Market Index (Hedged) [6%] and Barclays Capital U.S. Government Index [4%])3 Month Treasury Bills (5%)

The Bessemer Balanced Growth 70/30, Growth 90/10 and Balanced 55/45 portfolios (all excluding Hedge Funds) represent model portfolios comprised of: Large Cap Core, Large Cap Strategies, Small and Mid Cap Core, Small and Mid Cap Strategies, Strategic Opportunities, and Fixed Income. Investments cannot be made directly in these model portfolios. Portfolio components and relative weightings vary over time. Returns for the Large Cap Strategies, Small and Mid Cap Strategies, and Strategic Opportunities portfolios are after fees and expenses. Returns for the Large Cap Core and Small and Mid Cap Core portfolios and Bessemer’s Fixed Income and Municipal Bond Common Trust Funds are before fees and expenses. The results also include the reinvestment of all dividends and capital gains. Bessemer’s model portfolios included the performance of the Real Return portfolio, after fees and expenses, through its liquidation on March 17, 2015.

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