Community College League of California Joint Powers · PDF file · 2017-08-31m e k...

M E K E T A I N V E S T M E N T G R O U P

B O S T O N

M A S S A C H U S E T T S

C H I C A G O

I L L I N O I S

M I A M I

F L O R I D A

P O R T L A N D

O R E G O N

S A N D I E G O

C A L I F O R N I A

L O N D O N

U N I T E D K I N G D O M

w w w . me k e t a g ro up . co m

F U N D E V A L U A T I O N R E P O R T

Community College League of California Joint Powers Authority

Coast Community College District Quarterly Review

June 30, 2017

Community College League of California

Agenda

Prepared by Meketa Investment Group

1. The World Markets in the Second Quarter of 2017

2. Executive Summary

3. Total Fund Summary

Balanced Fund

Liquidity Fund

Liquidity Plus Fund

4. Coast Community College District Performance

Fiscal Year 2017 Performance Report

2Q17 Performance Report

5. Meketa Investment Perspective

Evaluating Donald Trump’s Economic Impact

Monetary Policy and The Federal Reserve

6. Appendices

Capital Markets Outlook

Global Macroeconomic Outlook

Prior Year Market Reviews

Disclaimer, Glossary, and Notes

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The World Markets Second Quarter of 2017

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The World Markets1 Second Quarter of 2017

1 Source: Thomson Reuters.

-3.0%

-0.4%

1.4%

1.5%

2.2%

2.4%

2.5%

3.0%

3.1%

6.1%

6.3%MSCI Emerging Markets

MSCI EAFE

S&P 500

Russell 3000

Russell 2000

JPM GBI-EM Global Diversified (Local Currency)

Bloomberg Barclays High Yield

NAREIT Equity

Bloomberg Barclays Aggregate

Bloomberg Barclays U.S. TIPS

Bloomberg Commodity Index

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Index Returns1

2Q17 (%)

1 YR (%)

3 YR (%)

5 YR (%)

10 YR (%)

Domestic Equity

Russell 3000 3.0 18.5 9.1 14.6 7.3

Russell 1000 3.1 18.0 9.3 14.7 7.3

Russell 1000 Growth 4.7 20.4 11.1 15.3 8.9

Russell 1000 Value 1.3 15.5 7.4 13.9 5.6

Russell MidCap 2.7 16.5 7.7 14.7 7.7

Russell MidCap Growth 4.2 17.0 7.8 14.2 7.9

Russell MidCap Value 1.4 15.9 7.5 15.1 7.2

Russell 2000 2.5 24.6 7.4 13.7 6.9

Russell 2000 Growth 4.4 24.4 7.6 14.0 7.8

Russell 2000 Value 0.7 24.9 7.0 13.4 5.9

Foreign Equity

MSCI ACWI (ex. U.S.) 5.8 20.5 0.8 7.2 1.1

MSCI EAFE 6.1 20.3 1.1 8.7 1.0

MSCI EAFE (Local Currency) 2.7 22.1 7.0 12.5 2.0

MSCI EAFE Small Cap 8.1 23.2 5.6 12.9 3.4

MSCI Emerging Markets 6.3 23.7 1.1 4.0 1.9

MSCI Emerging Markets (Local Currency) 6.6 21.8 6.1 7.6 4.3

Fixed Income

Bloomberg Barclays Universal 1.5 0.9 2.8 2.7 4.7

Bloomberg Barclays Aggregate 1.4 -0.3 2.5 2.2 4.5

Bloomberg Barclays U.S. TIPS -0.4 -0.6 0.6 0.3 4.3

Bloomberg Barclays High Yield 2.2 12.7 4.5 6.9 7.7

JPM GBI-EM Global Diversified (Local Currency) 2.4 6.7 7.0 6.6 8.2

Other

NAREIT Equity 1.5 -1.7 8.4 9.5 6.0

Bloomberg Commodity Index -3.0 -6.5 -14.8 -9.2 -6.5

HFRI Fund of Funds 0.2 5.8 1.3 3.7 0.8


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S&P Sector Returns1

1 Source: Thomson Reuters. Represents S&P 1500 (All Cap) data.

2.4% 1.3%

-7.2%

3.9%

7.4%

4.4% 4.1% 2.6%

-7.0%

2.0% 3.0%

16.7%

2.8%

-5.1%

34.2%

13.4%

23.0%

33.8%

20.1%

-11.7%

3.0%

18.1%

-20%

-10%

0%

10%

20%

30%

40%

ConsumerDiscretionary

ConsumerStaples

Energy Financials Health Care Industrials InformationTechnology

Materials Telecom Utilities S&P 1500

Ret

urn

Second Quarter One Year

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U.S. and Developed Market Foreign Equity Rolling Three-Year Returns1


-30%

-20%

-10%

0%

10%

20%

30%

40%

1990 1993 1996 1999 2002 2005 2008 2011 2014

Russell 3000 3-Year Return MSCI EAFE 3-Year Return

9.1%

1.1%

2017

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U.S. and Emerging Market Equity Rolling Three-Year Returns1


-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1990 1993 1996 1999 2002 2005 2008 2011 2014

Russell 3000 MSCI Emerging Markets

9.1%

1.1%

2017

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Rolling Ten-Year Returns: 65% Stocks and 35% Bonds1


0%

2%

4%

6%

8%

10%

12%

14%

1998 2000 2002 2003 2005 2007 2008 2010 2012 2013 2015 2017

65% Stocks (MSCI ACWI) / 35% Bonds (Bloomberg Barclays Aggregate) 10-Year Rolling Return

1998-2017 Average = 6.8%

4.3%

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Credit Spreads vs. U.S. Treasury Bonds1, 2

1 Source: Barclays Live. 2 The median high yield spread was 5.0% from 1997-2017.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

U.S. High Yield U.S. Investment Grade Corporates U.S. Mortgage-Backed

18.3%

3.6%

High Yield Spread Average = 5.5%

1.1%

0.3%

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U.S. Real Gross Domestic Product (GDP) Growth1

1 Source: Bureau of Economic Analysis. Data is as of the second quarter of 2017 and represents the first estimate.

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

Quarterly Real GDP (Annualized) 12-Month Trailing Real GDP

2.6%(Annualized)

2.1% (12-Month Trailing)

2017

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U.S. Inflation (CPI) Trailing Twelve Months1

1 Source: Bureau of Labor Statistics. Data is non-seasonally adjusted CPI, which may be volatile in the short-term. Data is as of June 30, 2017.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

1990 1992 1995 1997 2000 2002 2005 2007 2010 2012 2015 2017

1.6%

1990-2017 Average = 2.5%

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U.S. Unemployment1

1 Source: Bureau of Labor Statistics. Data is as of June 30, 2017.

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

1981 1985 1989 1993 1997 2001 2005 2009 2013 2017

10.8%

4.4%

1980-2017 Average = 6.4%

4.4%

10.0%

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Executive Summary As of June 30, 2017

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Executive Summary


Performance for the Quarter Ended June 30, 2017

Aggregate Assets

The Total Fund’s aggregate assets were $144.0 million on June 30, 2017, down from $176.7 million at the end of the previous quarter. Net outflows totaled $36.6 million during the quarter.

Balanced Fund

The Balanced Fund was valued at $136.8 million on June 30, 2017, down from $167.2 million at the end of the previous quarter. Net outflows were $34.3 million during the quarter. The Fund returned 2.3% for the quarter compared, which was in-line with the Balanced Fund Policy Benchmark.

Liquidity Fund

The Liquidity Fund was valued at $1.0 million on June 30, 2017, which was in-line with the end of the March quarter. The Fund returned 0.3% for the quarter and slightly underperformed the 0.4% return of the Liquidity Fund Policy Benchmark.

Liquidity Plus Fund

The Liquidity Plus Fund was valued at $6.2 million, down from $8.5 million on March 31, 2017. The Fund returned 0.4% for the quarter, which was in-line with the Liquidity Plus Fund Policy Benchmark.

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Executive Summary


Active Manager Highlights

Artisan Small Cap Growth Fund

Artisan Small Cap Growth returned 5.7% for quarter and outperformed the Russell 2000 Growth by 130 basis points. Artisan continued to recover underperformance from the surprise Trump rally. The largest contribution to the quarter’s strong absolute and relative performance came from the strategy’s technology holdings.

Causeway International Value Equity

Causeway International Value Equity had a strong quarter on an absolute basis, but trailed on a relative basis. Causeway gained 5.0% for the quarter compared to the 6.1% return of the MSCI EAFE Index. The underperformance was driven by stock selection across a range of sectors.

Western Asset U.S. Core

Western Asset U.S. Core returned 1.7% for the quarter and continued to outperform the Barclays Aggregate Index which returned 1.4%. Duration positioning was the largest contributor to performance as Western continued to benefit from an overweight exposure to the long end of the yield curve.

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Total Fund Summary

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Allocation vs. Targets and PolicyCurrent

BalanceCurrent

Allocation_

Balanced Fund $136,778,683 95%Liquidity Fund $1,010,739 1%Liquidity Plus Fund $6,160,722 4%Total $143,950,144 100%

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Community College League of California Aggregate

Total FundAs of June 30, 2017


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Trailing Period Returns

Market Value($)

% ofPortfolio

3 Mo NetCash Flows

($)

QTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Total Fund 143,950,144 100.0 -36,645,676 Balanced Fund 136,778,683 95.0 -34,256,184 2.3 9.2 3.0 6.1 4.1 4.1 Jul-07

Balanced Fund Policy Benchmark 2.3 9.5 -- -- -- -- Jul-07CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 3.1 Jul-07

Liquidity Fund 1,010,739 0.7 0 0.3 -0.4 0.6 1.1 2.5 2.5 Jul-07Liquidity Fund Policy Benchmark 0.4 0.3 -- -- -- -- Jul-07CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 3.1 Jul-07

Liquidity Plus Fund 6,160,722 4.3 -2,389,491 0.4 -- -- -- -- 1.0 Dec-16Liquidity Plus Fund Policy Benchmark 0.4 -- -- -- -- 0.9 Dec-16CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 1.1 Dec-16

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Fiscal Year ReturnsFiscal 2017

(%)Fiscal 2016

(%)Fiscal 2015

(%)Fiscal 2014

(%)Fiscal 2013

(%)Fiscal 2012

(%)Fiscal 2011

(%)Fiscal 2010

(%)_

Balanced Fund 9.2 -1.9 2.1 12.7 8.9 3.0 21.1 17.0CPI - Medical Care 2.7 3.5 2.5 2.6 2.1 4.0 2.9 3.5

Liquidity Fund -0.4 -0.1 2.3 2.3 1.6 3.1 3.3 8.1CPI - Medical Care 2.7 3.5 2.5 2.6 2.1 4.0 2.9 3.5

Liquidity Plus Fund -- -- -- -- -- -- -- --CPI - Medical Care 2.7 3.5 2.5 2.6 2.1 4.0 2.9 3.5

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Calendar Year Returns2016 2015 2014 2013 2012 2011 2010 2009

_

Balanced Fund 7.7 -4.3 3.8 13.7 11.4 0.8 15.5 24.0CPI - Medical Care 4.1 2.6 3.0 2.0 3.2 3.5 3.3 3.4

Liquidity Fund 1.4 -0.7 1.9 0.0 6.2 0.8 4.0 11.5CPI - Medical Care 4.1 2.6 3.0 2.0 3.2 3.5 3.3 3.4

Liquidity Plus Fund -- -- -- -- -- -- -- --CPI - Medical Care 4.1 2.6 3.0 2.0 3.2 3.5 3.3 3.4

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Balanced Fund

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Asset Allocation on June 30, 2017Actual Actual Target

_

US Equity $55,386,326 40.5% 37.0%International Equity $13,502,408 9.9% 10.0%Natural Resources $4,633,601 3.4% 3.0%Cash & Short-Term Bonds $28 0.0% 0.0%Investment Grade Bonds $42,459,655 31.0% 34.0%TIPS $9,858,810 7.2% 8.0%High Yield Bonds $6,968,959 5.1% 5.0%Bank Loans $3,968,895 2.9% 3.0%Total $136,778,683 100.0% 100.0%

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Balanced FundAs of June 30, 2017


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Trailing Net PerformanceMarket Value

($)% of

Portfolio% of

SectorQTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Balanced Fund 136,778,683 100.0 -- 2.3 9.2 3.0 6.1 4.1 4.1 Jul-07Balanced Fund Policy Benchmark 2.3 9.5 -- -- -- -- Jul-07CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 3.1 Jul-07

Equity 73,522,335 53.8 53.8

Domestic Equity 55,386,326 40.5 75.3

Vanguard 500 Index 40,220,676 29.4 72.6 3.1 17.8 -- -- -- 12.0 Nov-15S&P 500 3.1 17.9 9.6 14.6 7.2 12.0 Nov-15

Artisan Small Cap Growth 8,129,443 5.9 14.7 5.7 20.1 -- -- -- 12.5 Nov-15Russell 2000 Growth 4.4 24.4 7.6 14.0 7.8 12.0 Nov-15

Diamond Hill Small Cap 7,036,207 5.1 12.7 1.0 13.8 2.9 12.2 6.3 10.6 Jan-01Russell 2000 Value 0.7 24.9 7.0 13.4 5.9 9.2 Jan-01

International Equity 13,502,408 9.9 18.4

Causeway International Value Equity 13,502,408 9.9 100.0 5.0 20.8 -- -- -- 6.0 Nov-15MSCI EAFE 6.1 20.3 1.1 8.7 1.0 6.8 Nov-15

Natural Resources 4,633,601 3.4 6.3

Vanguard Precious Metals & Mining 1,733,808 1.3 37.4 -1.8 -7.9 -- -- -- 25.6 Nov-15S&P Global Custom Metals and Mining Index -3.2 7.7 -5.6 -6.1 -2.6 26.1 Nov-15

Vanguard Materials Index 1,611,715 1.2 34.8 2.8 21.0 -- -- -- 15.7 Nov-15MSCI US IMI Materials 25-50 NR USD 2.7 20.5 4.7 11.2 5.8 15.2 Nov-15

Vanguard Energy 1,288,079 0.9 27.8 -6.1 -1.0 -- -- -- 4.5 Nov-15MSCI ACWI Energy -4.9 0.3 -11.4 -0.9 -1.3 2.6 Nov-15




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Market Value($)

% ofPortfolio

% ofSector

QTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Investment Grade Bonds 42,459,655 31.0 31.0

Western Asset U.S. Core 21,578,823 15.8 50.8 1.7 1.4 3.5 3.4 5.2 6.0 May-00BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 5.2 May-00

Vanguard Total Bond Market Index 20,880,832 15.3 49.2 1.5 -0.4 -- -- -- 2.6 Nov-15BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 2.6 Nov-15

TIPS 9,858,810 7.2 7.2

Vanguard Inflation-Protected Securities 9,858,810 7.2 100.0 -0.4 -0.8 -- -- -- 2.7 Nov-15BBgBarc US TIPS TR -0.4 -0.6 0.6 0.3 4.3 2.8 Nov-15

High Yield Bonds 6,968,959 5.1 5.1

Westcore Flexible Income 6,968,959 5.1 100.0 2.2 9.2 5.2 6.0 4.6 6.7 May-95BBgBarc US High Yield Ba (BB) TR 2.7 9.8 5.2 6.8 8.2 8.1 May-95

Bank Loans 3,968,895 2.9 2.9

Symphony Bank Loans 3,968,895 2.9 100.0 0.4 7.9 -- -- -- 5.4 Nov-15Credit Suisse Leveraged Loans 0.8 7.5 3.5 4.8 4.2 5.9 Nov-15

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Benchmark HistoryAs of June 30, 2017

_

Balanced Fund

1/1/2016 Present 37% Russell 3000 / 34% BBgBarc US Aggregate TR / 10% MSCI EAFE / 8% BBgBarc US TIPS TR / 5% BBgBarc US High Yield Ba (BB) TR / 3% Credit Suisse Leveraged Loans/ 1% S&P Global Custom Metals and Mining Index / 1% MSCI US IMI Materials 25-50 NR USD / 1% MSCI ACWI Energy

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Liquidity Fund

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_

Cash & Short-Term Bonds $763,696 75.6% 80.0%Investment Grade Bonds $121,402 12.0% 10.0%TIPS $58,779 5.8% 5.0%High Yield Bonds $42,864 4.2% 3.0%Bank Loans $23,998 2.4% 2.0%Total $1,010,739 100.0% 100.0%

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Liquidity FundAs of June 30, 2017


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($)% of

Portfolio% of

SectorQTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Liquidity Fund 1,010,739 100.0 -- 0.3 -0.4 0.6 1.1 2.5 2.5 Jul-07Liquidity Fund Policy Benchmark 0.4 0.3 -- -- -- -- Jul-07CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 3.1 Jul-07

Fixed Income 1,010,739 100.0 100.0

Cash & Short-Term Bonds 763,696 75.6 75.6

Vanguard Short-Term Bond Index 763,696 75.6 100.0 0.2 -0.1 -- -- -- 0.5 Nov-15BBgBarc US Govt 1-3 Yr TR 0.2 -0.1 0.7 0.7 2.0 0.6 Nov-15

Investment Grade Bonds 121,402 12.0 12.0

Vanguard Total Bond Market Index 64,049 6.3 52.8 1.5 -0.4 -- -- -- 2.6 Nov-15BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 2.6 Nov-15

Western Asset U.S. Core 57,354 5.7 47.2 1.7 1.4 3.4 3.4 5.1 6.1 May-95BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 5.5 May-95

TIPS 58,779 5.8 5.8

Vanguard Inflation-Protected Securities 58,779 5.8 100.0 -0.4 -0.8 -- -- -- 2.7 Nov-15BBgBarc US TIPS TR -0.4 -0.6 0.6 0.3 4.3 2.8 Nov-15

High Yield Bonds 42,864 4.2 4.2

Westcore Flexible Income 42,864 4.2 100.0 2.2 9.2 5.2 6.0 4.6 6.7 May-95BBgBarc US High Yield Ba (BB) TR 2.7 9.8 5.2 6.8 8.2 8.1 May-95

Bank Loans 23,998 2.4 2.4

Symphony Bank Loans 23,998 2.4 100.0 0.4 7.9 -- -- -- 5.4 Nov-15Credit Suisse Leveraged Loans 0.8 7.5 3.5 4.8 4.2 5.9 Nov-15

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_

Liquidity Fund1/1/2016 Present 80% BBgBarc US Govt 1-3 Yr TR / 10% BBgBarc US Aggregate TR / 5% BBgBarc US TIPS TR / 3% BBgBarc US High Yield Ba (BB) TR / 2% Credit Suisse Leveraged Loans

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Liquidity Plus Fund

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Liquidity Plus FundAs of June 30, 2017


_

Cash & Short-Term Bonds $4,899,696 79.5% 80.0%Investment Grade Bonds $633,930 10.3% 10.0%TIPS $304,305 4.9% 5.0%High Yield Bonds $195,649 3.2% 3.0%Bank Loans $127,142 2.1% 2.0%Total $6,160,722 100.0% 100.0%

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($)% of

Portfolio% of

SectorQTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Liquidity Plus Fund 6,160,722 100.0 -- 0.4 -- -- -- -- 1.0 Dec-16Liquidity Plus Fund Policy Benchmark 0.4 -- -- -- -- 0.9 Dec-16CPI - Medical Care 0.0 2.7 2.9 2.7 3.1 1.1 Dec-16

Fixed Income 6,160,722 100.0 100.0

Investment Grade Bonds 633,930 10.3 10.3

Western Asset U.S. Core 319,073 5.2 50.3 1.7 -- -- -- -- 1.0 Nov-16BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 0.0 Nov-16

Blackrock US Total Bond 314,856 5.1 49.7 1.4 -- -- -- -- -0.1 Nov-16BBgBarc US Aggregate TR 1.4 -0.3 2.5 2.2 4.5 0.0 Nov-16

Bank Loans 127,142 2.1 2.1

Symphony Bank Loans 127,142 2.1 100.0 0.4 -- -- -- -- 3.4 Nov-16Credit Suisse Leveraged Loans 0.8 7.5 3.5 4.8 4.2 3.5 Nov-16

TIPS 304,305 4.9 4.9

Blackrock Short Term Inflation Protected Securities 304,305 4.9 100.0 -0.3 -- -- -- -- 0.0 Nov-16BBgBarc US TIPS 1-5 Yr TR -0.6 0.2 0.0 0.3 2.7 -0.1 Nov-16

High Yield Bonds 195,649 3.2 3.2

Westcore Flexible Income 195,649 3.2 100.0 2.2 -- -- -- -- 4.7 Nov-16BBgBarc US High Yield Ba (BB) TR 2.7 9.8 5.2 6.8 8.2 5.0 Nov-16

Cash & Short-Term Bonds 4,899,696 79.5 79.5

TIAA-CREF Short Term Bonds 4,899,456 79.5 100.0 0.3 -- -- -- -- 0.3 Nov-16BBgBarc US Govt 1-3 Yr TR 0.2 -0.1 0.7 0.7 2.0 0.1 Nov-16

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_

Liquidity Plus Fund12/1/2016 Present 80% BBgBarc US Govt 1-3 Yr TR / 10% BBgBarc US Aggregate TR / 5% BBgBarc US TIPS TR / 3% BBgBarc US High Yield Ba (BB) TR / 2% Credit Suisse Leveraged Loans

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Equity CharacteristicsPortfolio Index Portfolio

Q2-17 Q2-17 Q1-17Market ValueMarket Value ($M) 73.5 -- 87.8Number Of Holdings 931 2501 935

CharacteristicsWeighted Avg. Market Cap.($B) 102.4 104.7 100.3

Median Market Cap ($B) 10.9 9.4 10.6P/E Ratio 26.0 23.0 25.3Yield 1.9 2.4 1.9EPS Growth - 5 Yrs. 7.6 7.4 8.1Price to Book 4.8 3.5 4.7Beta (holdings; domestic) 1.1 1.0 1.1


Balanced Fund Equity Plan DetailAs of June 30, 2017

Asset Allocation on June 30, 2017Actual Actual

_

Artisan Small Cap Growth $8,129,443 11.1%Causeway International Value Equity $13,502,408 18.4%Diamond Hill Small Cap $7,036,207 9.6%Vanguard 500 Index $40,220,676 54.7%Vanguard Energy $1,288,079 1.8%Vanguard Materials Index $1,611,715 2.2%Vanguard Precious Metals & Mining $1,733,808 2.4%Total $73,522,335 100.0%

_

Top 10 Holdings_

APPLE 2.0%MICROSOFT 1.4%EXXON MOBIL 1.3%AMAZON.COM 1.0%State Street Institutional Liquid Reserves Fd;Inst 0.9%JOHNSON & JOHNSON 0.9%FACEBOOK CLASS A 0.9%JP MORGAN CHASE & CO. 0.9%BERKSHIRE HATHAWAY 'B' 0.9%CHEVRON 0.8%Total 11.0%

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Balanced Fund Equity Plan DetailAs of June 30, 2017

Equity Region Allocation

vs MSCI ACWI

Region Number OfAssets

% ofTotal

% ofBench % Diff

_

North America ex U.S. 48 2.7% 3.1% -0.4%United States 810 79.8% 52.5% 27.4%Europe Ex U.K. 25 7.8% 15.3% -7.6%United Kingdom 22 4.7% 5.8% -1.1%Pacific Basin Ex Japan 12 1.2% 4.0% -2.8%Japan 7 2.5% 7.8% -5.3%Emerging Markets 6 1.3% 11.2% -9.9%Other 0 0.0% 0.3% -0.3%Total 930 100.0% 100.0% 0.0%

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Fixed Income Characteristicsvs. BBgBarc US Aggregate TR

Portfolio Index PortfolioQ2-17 Q2-17 Q1-17

Fixed Income CharacteristicsYield to Maturity 3.2 2.5 3.3Average Duration 6.0 6.0 6.0Average Quality AA AA AA


_

Daily Income Mmkt Portfolio $28 0.0%Symphony Bank Loans $3,968,895 6.3%Vanguard Inflation-Protected Securities $9,858,810 15.6%Vanguard Total Bond Market Index $20,880,832 33.0%Westcore Flexible Income $6,968,959 11.0%Western Asset U.S. Core $21,578,823 34.1%Total $63,256,347 100.0%

_


Balanced Fund Fixed Income Plan DetailAs of June 30, 2017


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_

Daily Income Mmkt Portfolio $0 0.0%Symphony Bank Loans $23,998 2.4%Vanguard Inflation-Protected Securities $58,779 5.8%Vanguard Short-Term Bond Index $763,696 75.6%Vanguard Total Bond Market Index $64,049 6.3%Westcore Flexible Income $42,864 4.2%Western Asset U.S. Core $57,354 5.7%Total $1,010,739 100.0%

_



Liquidity Fund Fixed Income Plan DetailAs of June 30, 2017

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Liquidity Plus Fund Fixed Income Plan DetailAs of June 30, 2017



_

Blackrock Short Term Inflation Protected Securities $304,305 4.9%Blackrock US Total Bond $314,856 5.1%Daily Income Mmkt Portfolio $241 0.0%Symphony Bank Loans $127,142 2.1%TIAA-CREF Short Term Bonds $4,899,456 79.5%Westcore Flexible Income $195,649 3.2%Western Asset U.S. Core $319,073 5.2%Total $6,160,722 100.0%

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Vanguard 500 Index CharacteristicsPortfolio Index Portfolio




Sector DistributionEnergy 6.0 6.0 6.6Materials 2.9 2.9 2.9Industrials 10.2 10.2 10.1Consumer Discretionary 12.3 12.3 12.3Consumer Staples 9.1 9.0 9.3Health Care 14.5 14.5 13.9Financials 14.7 14.6 14.4Information Technology 22.3 22.3 22.1Telecommunication Services 2.2 2.1 2.4Utilities 3.2 3.2 3.2Real Estate 2.7 2.9 2.9

Top 10 Holdings_

APPLE 3.6%MICROSOFT 2.6%AMAZON.COM 1.9%JOHNSON & JOHNSON 1.7%FACEBOOK CLASS A 1.7%EXXON MOBIL 1.6%JP MORGAN CHASE & CO. 1.6%BERKSHIRE HATHAWAY 'B' 1.6%ALPHABET 'A' 1.3%ALPHABET 'C' 1.3%Total 18.9%

_

Account InformationAccount Name Vanguard 500 IndexAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/15Account Type US EquityBenchmark S&P 500Universe


Vanguard 500 IndexAs of June 30, 2017

Portfolio Performance Summary

QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard 500 Index 3.1 9.3 17.8 -- -- -- 12.0 Nov-15S&P 500 3.1 9.3 17.9 9.6 14.6 7.2 12.0 Nov-15

XXXXX


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QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Artisan Small Cap Growth 5.7 15.9 20.1 -- -- -- 12.5 Nov-15Russell 2000 Growth 4.4 10.0 24.4 7.6 14.0 7.8 12.0 Nov-15

XXXXX

Top 10 Holdings_

VEEVA SYSTEMS CL.A 3.9%DEXCOM 3.8%ACUITY BRANDS 3.7%JOHN BEAN TECHNOLOGIES 3.5%PROOFPOINT 3.5%GUIDEWIRE SOFTWARE 3.4%COGNEX 3.3%TELEDYNE TECHS. 3.2%BWX TECHNOLOGIES 3.2%VISTEON 2.9%Total 34.4%

_

Account InformationAccount Name Artisan Small Cap GrowthAccount Structure Mutual FundInvestment Style ActiveInception Date 11/01/15Account Type US EquityBenchmark Russell 2000 GrowthUniverse


Artisan Small Cap GrowthAs of June 30, 2017


Artisan Small Cap Growth CharacteristicsPortfolio Index Portfolio





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QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Diamond Hill Small Cap 1.0 1.9 13.8 2.9 12.2 6.3 10.6 Jan-01Russell 2000 Value 0.7 0.5 24.9 7.0 13.4 5.9 9.2 Jan-01

XXXXX


Diamond Hill Small CapAs of June 30, 2017

Account InformationAccount Name Diamond Hill Small CapAccount Structure Mutual FundInvestment Style ActiveInception Date 1/01/01Account Type US EquityBenchmark Russell 2000 ValueUniverse

Top 10 Holdings_

State Street Institutional Liquid Reserves Fd;Inst 9.8%AVIS BUDGET GROUP 5.0%DIAMOND HILL SHORT DURATION TOTAL RETURN FUND CLASS Y 4.0%VAIL RESORTS 3.3%DST SYS. 3.2%LIVE NATION ENTM. 2.9%NAVIGATORS GROUP 2.9%ALERE 2.8%ENSTAR GROUP 2.5%ISTAR 2.5%Total 38.8%

_

Diamond Hill Small Cap CharacteristicsPortfolio Index Portfolio





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Primary Region View

Region Number OfAssets

% ofTotal

% ofBench % Diff

_

North America ex U.S. 4 6% 0% 6%United States 0 0% 0% 0%Europe Ex U.K. 22 43% 46% -4%United Kingdom 15 25% 18% 7%Pacific Basin Ex Japan 4 6% 12% -6%Japan 7 14% 23% -10%Emerging Markets 3 7% 0% 7%Other 0 0% 1% -1%Total 55 100% 100% 0%

XXXXX


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Causeway International Value Equity 5.0 13.2 20.8 -- -- -- 6.0 Nov-15MSCI EAFE 6.1 13.8 20.3 1.1 8.7 1.0 6.8 Nov-15

XXXXX


Causeway International Value EquityAs of June 30, 2017

Account InformationAccount Name Causeway International Value EquityAccount Structure Mutual FundInvestment Style ActiveInception Date 11/01/15Account Type Non-US Stock DevelopedBenchmark MSCI EAFEUniverse

Causeway International Value Equity CharacteristicsPortfolio Index Portfolio



Median Market Cap ($B) 41.5 10.2 40.8P/E Ratio 20.7 21.0 20.5Yield 3.0 3.0 3.1EPS Growth - 5 Yrs. -1.8 4.3 0.0Price to Book 2.2 2.5 2.3Beta (holdings; domestic) 1.2 1.1 1.1


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Vanguard Materials Index CharacteristicsPortfolio Portfolio

Q2-17 Q1-17Market ValueMarket Value ($M) 1.6 1.9Number Of Holdings 120 124

CharacteristicsWeighted Avg. Market Cap.($B) 28.8 27.6

Median Market Cap ($B) 3.0 2.6P/E Ratio 27.1 26.7Yield 1.8 1.8EPS Growth - 5 Yrs. 3.3 2.9Price to Book 5.7 5.6Beta (holdings; domestic) 1.4 1.4

Sector DistributionEnergy 0.0 0.0Materials 98.7 99.6Industrials 0.6 0.1Consumer Discretionary 0.0 0.0Consumer Staples 0.0 0.0Health Care 0.0 0.0Financials 0.0 0.0Information Technology 0.0 0.0Telecommunication Services 0.0 0.0Utilities 0.0 0.0Real Estate 0.0 0.0

Top 10 Holdings_

DOW CHEMICAL 9.0%E I DU PONT DE NEMOURS 8.2%MONSANTO 6.1%PRAXAIR 4.5%ECOLAB 4.1%AIR PRDS.& CHEMS. 3.7%SHERWIN-WILLIAMS 3.5%LYONDELLBASELL INDS.CL.A 3.4%PPG INDUSTRIES 3.3%INTERNATIONAL PAPER 2.6%Total 48.4%

_

Account InformationAccount Name Vanguard Materials IndexAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/15Account Type Real AssetsBenchmark MSCI US IMI Materials 25-50 NR USDUniverse


Vanguard Materials IndexAs of June 30, 2017


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Materials Index 2.8 9.2 21.0 -- -- -- 15.7 Nov-15MSCI US IMI Materials 25-50 NR USD 2.7 9.0 20.5 4.7 11.2 5.8 15.2 Nov-15

XXXXX


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Vanguard Precious Metals & Mining CharacteristicsPortfolio Portfolio



Median Market Cap ($B) 1.6 1.6P/E Ratio 36.6 43.8Yield 0.9 0.9EPS Growth - 5 Yrs. -21.1 -20.9Price to Book 2.0 2.1Beta (holdings; domestic) 1.4 1.3


Top 10 Holdings_

CASH - USD 6.6%FRANCO NEVADA (NYS) 6.0%NEWMONT MINING 5.0%B2GOLD (ASE) 4.1%RANDGOLD RES.ADS ADR 1:1 4.0%AGNICO-EAGLE MNS. (NYS) 3.7%HOCHSCHILD MINING 3.5%NEVSUN RESOURCES 3.4%ENDEAVOUR MINING 2.9%KINROSS GOLD (NYS) 2.8%Total 42.1%

_


Vanguard Precious Metals & MiningAs of June 30, 2017

Account InformationAccount Name Vanguard Precious Metals & MiningAccount Structure Mutual FundInvestment Style ActiveInception Date 11/01/15Account Type Real AssetsBenchmark S&P Global Custom Metals and Mining IndexUniverse


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Precious Metals & Mining -1.8 8.5 -7.9 -- -- -- 25.6 Nov-15S&P Global Custom Metals and Mining Index -3.2 4.3 7.7 -5.6 -6.1 -2.6 26.1 Nov-15

XXXXX


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Vanguard Energy CharacteristicsPortfolio Portfolio



Median Market Cap ($B) 2.1 2.7P/E Ratio 38.0 28.3Yield 2.8 2.6EPS Growth - 5 Yrs. -14.8 -14.8Price to Book 2.0 2.2Beta (holdings; domestic) 1.1 1.2


Top 10 Holdings_

EXXON MOBIL 22.6%CHEVRON 14.0%SCHLUMBERGER 6.5%CONOCOPHILLIPS 3.9%EOG RES. 3.7%OCCIDENTAL PTL. 3.3%PHILLIPS 66 2.8%KINDER MORGAN 2.7%HALLIBURTON 2.6%VALERO ENERGY 2.2%Total 64.3%

_


Vanguard EnergyAs of June 30, 2017

Account InformationAccount Name Vanguard EnergyAccount Structure Mutual FundInvestment Style ActiveInception Date 11/01/15Account Type Real AssetsBenchmark MSCI ACWI EnergyUniverse


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Energy -6.1 -9.9 -1.0 -- -- -- 4.5 Nov-15MSCI ACWI Energy -4.9 -8.6 0.3 -11.4 -0.9 -1.3 2.6 Nov-15

XXXXX


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Vanguard Total Bond Market IndexAs of June 30, 2017


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Total Bond Market Index 1.5 2.4 -0.4 -- -- -- 2.6 Nov-15BBgBarc US Aggregate TR 1.4 2.3 -0.3 2.5 2.2 4.5 2.6 Nov-15

XXXXX


Vanguard Total Bond Market Index Characteristicsvs. BBgBarc US Aggregate TR



Account InformationAccount Name Vanguard Total Bond Market IndexAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/15Account Type US Fixed Income Investment GradeBenchmark BBgBarc US Aggregate TRUniverse

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Account InformationAccount Name Western Asset U.S. CoreAccount Structure Mutual FundInvestment Style ActiveInception Date 5/01/00Account Type US Fixed Income Investment GradeBenchmark BBgBarc US Aggregate TRUniverse eA US Core Fixed Inc Net


Western Asset U.S. CoreAs of June 30, 2017


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Western Asset U.S. Core 1.7 3.1 1.4 3.5 3.4 5.2 6.0 May-00BBgBarc US Aggregate TR 1.4 2.3 -0.3 2.5 2.2 4.5 5.2 May-00

eA US Core Fixed Inc Net Median 1.5 2.4 0.2 2.6 2.5 4.7 5.4 May-00eA US Core Fixed Inc Net Rank 10 6 10 7 11 26 13 May-00

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Western Asset U.S. Core Characteristicsvs. BBgBarc US Aggregate TR




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Account InformationAccount Name Vanguard Inflation-Protected SecuritiesAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/15Account Type US Inflation Protected FixedBenchmark BBgBarc US TIPS TRUniverse


Vanguard Inflation-Protected SecuritiesAs of June 30, 2017


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Inflation-Protected Securities -0.4 0.9 -0.8 -- -- -- 2.7 Nov-15BBgBarc US TIPS TR -0.4 0.9 -0.6 0.6 0.3 4.3 2.8 Nov-15

XXXXX


Vanguard Inflation-Protected Securities Characteristicsvs. BBgBarc US TIPS TR


Fixed Income CharacteristicsYield to Maturity 2.3 0.4 2.3Average Duration 8.0 5.4 7.9Average Quality AAA AAA AAA

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Account InformationAccount Name Westcore Flexible IncomeAccount Structure Mutual FundInvestment Style ActiveInception Date 5/01/95Account Type US Fixed Income High YieldBenchmark BBgBarc US High Yield Ba (BB) TRUniverse


Westcore Flexible IncomeAs of June 30, 2017


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Westcore Flexible Income 2.2 4.2 9.2 5.2 6.0 4.6 6.7 May-95BBgBarc US High Yield Ba (BB) TR 2.7 4.8 9.8 5.2 6.8 8.2 8.1 May-95

XXXXX


Westcore Flexible Income Characteristicsvs. BBgBarc US High Yield Ba (BB) TR


Fixed Income CharacteristicsYield to Maturity 4.7 4.6 4.7Average Duration 3.9 4.4 4.1Average Quality BB BB BB

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Symphony Bank LoansAs of June 30, 2017

Account InformationAccount Name Symphony Bank LoansAccount Structure Mutual FundInvestment Style ActiveInception Date 11/01/15Account Type US Fixed Income OtherBenchmark Credit Suisse Leveraged LoansUniverse eA Float-Rate Bank Loan Net


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Symphony Bank Loans 0.4 1.9 7.9 -- -- -- 5.4 Nov-15Credit Suisse Leveraged Loans 0.8 2.0 7.5 3.5 4.8 4.2 5.9 Nov-15

XXXXX

Symphony Bank Loans CharacteristicsPortfolio Portfolio

Q2-17 Q1-17

Fixed Income CharacteristicsYield to Maturity 5.8 5.8Average Duration 0.4 0.5Average Quality B B

XXXXX

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QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Vanguard Short-Term Bond Index 0.2 0.4 -0.1 -- -- -- 0.5 Nov-15BBgBarc US Govt 1-3 Yr TR 0.2 0.5 -0.1 0.7 0.7 2.0 0.6 Nov-15

eA US Short Duration Fixed Inc Net Median 0.5 1.0 0.7 1.1 1.2 2.6 1.4 Nov-15eA US Short Duration Fixed Inc Net Rank 96 95 92 -- -- -- 95 Nov-15

XXXXX

Account InformationAccount Name Vanguard Short-Term Bond IndexAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/15Account Type US Fixed Income Short TermBenchmark BBgBarc US Govt 1-3 Yr TRUniverse eA US Short Duration Fixed Inc Net


Vanguard Short-Term Bond IndexAs of June 30, 2017


Vanguard Short-Term Bond Index Characteristicsvs. BBgBarc US Govt 1-3 Yr TR


Fixed Income CharacteristicsYield to Maturity 1.8 1.4 1.8Average Duration 2.8 1.9 2.8Average Quality AA AAA AA

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Blackrock US Total Bond As of June 30, 2017

Account InformationAccount Name Blackrock US Total Bond Account Structure Mutual FundInvestment Style PassiveInception Date 11/01/16Account Type US Fixed Income Investment GradeBenchmark BBgBarc US Aggregate TRUniverse


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Blackrock US Total Bond 1.4 2.2 -- -- -- -- -0.1 Nov-16BBgBarc US Aggregate TR 1.4 2.3 -0.3 2.5 2.2 4.5 0.0 Nov-16

XXXXX

Blackrock US Total Bond Characteristicsvs. BBgBarc US Aggregate TR




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Blackrock Short Term Inflation Protected SecuritiesAs of June 30, 2017

Account InformationAccount Name Blackrock Short Term Inflation Protected SecuritiesAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/16Account Type US Inflation Protected FixedBenchmark BBgBarc US TIPS 1-5 Yr TRUniverse


Blackrock Short Term Inflation Protected Securities Characteristicsvs. BBgBarc US TIPS 1-5 Yr TR


Fixed Income CharacteristicsYield to Maturity 1.6 0.0 1.6Average Duration 2.6 1.5 2.5Average Quality AAA AAA AAA


QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

Blackrock Short Term Inflation Protected Securities -0.3 0.3 -- -- -- -- 0.0 Nov-16BBgBarc US TIPS 1-5 Yr TR -0.6 0.2 0.2 0.0 0.3 2.7 -0.1 Nov-16

XXXXX

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TIAA-CREF Short Term BondsAs of June 30, 2017

Account InformationAccount Name TIAA-CREF Short Term BondsAccount Structure Mutual FundInvestment Style PassiveInception Date 11/01/16Account Type US Fixed Income Short TermBenchmark BBgBarc US Govt 1-3 Yr TRUniverse eA US Short Duration Fixed Inc Net



QTD(%)

YTD(%)

1 Yr(%)

3 Yrs(%)

5 Yrs(%)

10 Yrs(%)

Return(%) Since

_

TIAA-CREF Short Term Bonds 0.3 0.7 -- -- -- -- 0.3 Nov-16BBgBarc US Govt 1-3 Yr TR 0.2 0.5 -0.1 0.7 0.7 2.0 0.1 Nov-16

eA US Short Duration Fixed Inc Net Median 0.5 1.0 0.7 1.1 1.2 2.6 0.5 Nov-16eA US Short Duration Fixed Inc Net Rank 82 80 -- -- -- -- 77 Nov-16

XXXXX

TIAA-CREF Short Term Bonds Characteristicsvs. BBgBarc US Govt 1-3 Yr TR


Fixed Income CharacteristicsYield to Maturity 1.3 1.4 1.3Average Duration 2.0 1.9 2.0Average Quality AA AAA AA

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Investment Expense AnalysisAs Of June 30, 2017

Name Fee Schedule Market Value Estimated Fee Value Estimated Fee

Balanced Fund $136,778,683 $482,598 0.35%Vanguard 500 Index 0.04% of Assets $40,220,676 $16,088 0.04%Artisan Small Cap Growth 1.01% of Assets $8,129,443 $82,107 1.01%Diamond Hill Small Cap 0.91% of Assets $7,036,207 $64,029 0.91%Causeway International Value Equity 0.91% of Assets $13,502,408 $122,872 0.91%Vanguard Precious Metals & Mining 0.35% of Assets $1,733,808 $6,068 0.35%Vanguard Materials Index 0.10% of Assets $1,611,715 $1,612 0.10%Vanguard Energy 0.31% of Assets $1,288,079 $3,993 0.31%Western Asset U.S. Core 0.42% of Assets $21,578,823 $90,631 0.42%Vanguard Total Bond Market Index 0.04% of Assets $20,880,832 $8,352 0.04%Vanguard Inflation-Protected Securities 0.07% of Assets $9,858,810 $6,901 0.07%Westcore Flexible Income 0.72% of Assets $6,968,959 $50,177 0.72%Symphony Bank Loans 0.75% of Assets $3,968,895 $29,767 0.75%

Liquidity Fund $1,010,739 $1,178 0.12%Vanguard Short-Term Bond Index 0.05% of Assets $763,696 $382 0.05%Vanguard Total Bond Market Index 0.04% of Assets $64,049 $26 0.04%Western Asset U.S. Core 0.42% of Assets $57,354 $241 0.42%Vanguard Inflation-Protected Securities 0.07% of Assets $58,779 $41 0.07%Westcore Flexible Income 0.72% of Assets $42,864 $309 0.72%Symphony Bank Loans 0.75% of Assets $23,998 $180 0.75%

Liquidity Plus Fund $6,160,722 $10,079 0.16%Western Asset U.S. Core 0.42% of Assets $319,073 $1,340 0.42%Blackrock US Total Bond 0.10% of Assets $314,856 $315 0.10%Symphony Bank Loans 0.75% of Assets $127,142 $954 0.75%Blackrock Short Term Inflation Protected Securities 0.06% of Assets $304,305 $183 0.06%Westcore Flexible Income 0.72% of Assets $195,649 $1,409 0.72%TIAA-CREF Short Term Bonds 0.12% of Assets $4,899,456 $5,879 0.12%

Total $143,949,875 $493,855 0.34%

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Coast Community College District Performance

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Fiscal Year 2017 Performance Report

of 194

Balanced (50% Fixed Income, 50% Equity)

Change in Portfolio - Fiscal Year 2017

Portfolio Value on 6/30/2016

Contributions

Withdrawals

Change in Market Value

Income Received

Portfolio Fees


Fiscal

2017 1 YR 3 YR 5 YR 10 YR

(%) (%) (%) (%) (%)

Coast Community College District 9.1 9.1 3.2 5.8 5.1

Policy Benchmark1 9.5 9.5 NA NA NA

CPI Medical Care (Inflation) 2.7 2.7 2.9 2.7 3.1

Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal

Year Year Year Year Year Year Year Year Year Year

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

Coast Community College District 9.1 -1.8 2.6 11.8 8.0 5.1 16.6 17.1 -11.3 -2.4

CPI Medical Care (Inflation) 2.7 3.5 2.5 2.6 2.1 4.0 2.9 3.5 3.2 4.0

CCCD Money-Weighted Return 9.1

1Policy Benchmark consists of 37% Russell 3000, 10% MSCI EAFE, 1% S&P Global Custom Metal and Mining, 1% Spliced U.S. IMI Materials 25/50, 1% MSCI ACWI Energy, 34%

Bloomberg Barclays Aggregate, 8% Bloomberg Barclays U.S. TIPS, 5% Bloomberg Barclays "BB" High Yield, and 3% CSFB Leveraged Loan

Inception Inception

Date (%)

7/1/2006 5.6

NA

3.2

Fiscal Year Performance

Since

Coast Community College District6/30/2017

Asset Allocation

65,693,627

0

(35,047,937)

4,549,639

1,490,689

(106,841)

36,579,177

Trailing Period Performance

Domestic Equity41%

International Equity10%

Natural Resources

3% Investment Grade Bonds

31%

TIPS7%High Yield

Bonds5%

Bank Loans3%


Page

61 of

194

2Q17 Performance Report

of 194

Balanced (50% Fixed Income, 50% Equity)

Change in Portfolio - 4th Quarter of Fiscal Year 2017


Contributions

Withdrawals

Change in Market Value

Income Received

Portfolio Fees


Fiscal

4Q17 YTD 1 YR 3 YR 5 YR 10 YR

(%) (%) (%) (%) (%) (%)

Coast Community College District 2.3 9.1 9.1 3.2 5.8 5.1

Policy Benchmark1 2.3 9.5 9.5 NA NA NA

CPI Medical Care (Inflation) 0.0 2.7 2.7 2.9 2.7 3.1

Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal

Year Year Year Year Year Year Year Year Year Year

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008

(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

Coast Community College District 9.1 -1.8 2.6 11.8 8.0 5.1 16.6 17.1 -11.3 -2.4

CPI Medical Care (Inflation) 2.7 3.5 2.5 2.6 2.1 4.0 2.9 3.5 3.2 4.0

1

Since

Coast Community College District6/30/2017

Asset Allocation

70,095,874

0

(35,047,937)

1,322,937

235,841

(27,538)

36,579,177

Trailing Period Performance

Policy Benchmark consists of 37% Russell 3000, 10% MSCI EAFE, 1% S&P Global Custom Metal and Mining, 1% Spliced U.S. IMI Materials 25/50, 1% MSCI ACWI Energy, 34%

Bloomberg Barclays Aggregate, 8% Bloomberg Barclays U.S. TIPS, 5% Bloomberg Barclays "BB" High Yield, and 3% CSFB Leveraged Loan

Inception Inception

Date (%)

7/1/2006 5.6

NA

3.2

Fiscal Year Performance

Domestic Equity41%

International Equity10%

Natural Resources

3% Investment Grade Bonds

31%

TIPS7%High Yield

Bonds5%

Bank Loans3%


Page

63 of

194

Meketa Investment Perspectives

of 194

Evaluating Donld Trump’s Economic Impact

of 194

Meketa Investment Group

1


Global Equity Markets

∙ Since the election, U.S. equities have rallied sharply and materially outperformed the rest of the world.

94

96

98

100

102

104

106

108

110

Gro

wth

of $

100

MSCI EAFE MSCI EM S&P 500

of 194


2


S&P 500 Sector Divergence

∙ From a sector perspective, there have been clear “winners” and “losers”.

∙ Many sectors have experienced a sharp reversal from their pre-election performance.

95

100

105

110

115

120

125

Gro

wth

of $

100

S&P Financials

S&P Biotech

S&P Utilites

S&P Consumer Staples

S&P Real Estate

Russell 2000

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3


Treasury Yield Curve

∙ The U.S. bond market has sold off in part due to expectations of pending fiscal stimulus (government spending and tax cuts) leading to higher budget deficits.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Yiel

d (%

)

12/9/2016 11/7/2016

of 194


4


Inflation Expectations

∙ Promises of fiscal stimulus have also led to rising inflation expectations.

∙ Note that this trend was already in place prior to the election.

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

Perc

enta

ge (%

)

5 Year Breakeven Inflation Rate

of 194


5


Mortgage Rates

∙ Rising interest rates are problematic for a number of different reasons.

∙ Mortgage rates have increased sharply since the election.

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4.0

4.1

Perc

enta

ge (%

)

30 Year Mortgage Rate (National Average)

of 194


6


The US Dollar

∙ The dollar has risen sharply against all major foreign currencies.

∙ This is largely in response to higher current and expected future interest rates in the U.S.

118

119

120

121

122

123

124

125

126

127

128

Broad Trade-Weighted Dollar Index

of 194


7


Emerging Markets

∙ Emerging market currencies have been particularly hard hit since the election.

∙ A rising dollar is very painful for emerging markets, as are potential trade restrictions.

62

63

64

65

66

67

68

69

70

JPM Emerging Market Currency Index

of 194


8


Timing Matters

∙ Fiscal stimulus, while promising, is more of a 2018 story.

∙ Meanwhile, interest rates are rising NOW.

∙ Inflation pressures were building anyway, and are not necessarily dependent on future stimulus.

∙ Will rising rates and a strong dollar choke off economic growth before fiscal stimulus can kick in?

98.5

99.0

99.5

100.0

100.5

101.0

101.5

GS Financial Conditions Index

of 194


9


Looking Ahead

∙ Still short on details.

∙ Markets have jumped to their own conclusions.

∙ What will move markets from here are changes to today’s expectations.

∙ Significant scope for policy disappointment/delay.

∙ Rising rates/dollar mean the economic clock is ticking.

of 194

US Economic Outlook:

Lifting the veil on a Trump economy

Gregory DacoChief US [email protected]

Follow us on Twitter: @GregDaco@OxfordEconomics

of 194

Surprising election results will shape global economy

• Trump + Republicans maintain a majority:- House of Representatives - Senate (simple majority of 51/100)

• We know “Candidate” Trump, his policy proposals and his character. But very little is known about “President” Trump.

• Steven Mnuchin (Treasury), Wilbur Ross (Commerce) indicate pragmatic approach, but rhetoric against China risks escalation.

• One of the main characteristics of a Trump presidency will be the unusually elevated uncertainty

• Unilateral executive power to take trade actions or reverse regulations but for many of his major economic proposals (fiscal, immigration, healthcare) he will need to compromise with Congress and “reconciliation” likely to be used. of 194

What will be the impact of Donald Trump?

Elevated risk of a “trial and error” presidency

• Tax cuts• More infrastructure spending• Less regulation

• Massive uncertainty• Trade protectionism• Fiscal orthodoxy (spending cuts)• Anti-immigration

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GDP growth just 1.6% in 2016…

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But economic momentum is firm…

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…and the labor market remains strong…

Nov 2016

178,000

176,000

188,000

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As we near full employment, wage growth to firm

Using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage of individuals observed 12 months apart. It is based on methodology developed the San Francisco Fed

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Business investment is weak…

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Strong $ and weak world trade weigh on exports

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Three Trump scenarios (and an infinite set of possibilities)

2017-2026 Baseline Upside Downside

Tax cuts$1 trillion

(w/ some benefits to low income families)

$2 trillion(w/ some benefits to low income families)

$500 billion(as regressive as

current proposal with 50% tax cuts for top 1%)

Infrastructure $200 billion $250 billion -

Spending offsets

$300 billion (back loaded)

$350 billion (more back loaded) $300 billion

Tax revenue offsets

+$225 billion (foreign profits)

+$500 billion (foreign profits +

repeal expenditures)+$225 billion

(foreign profits)

Uncertainty Moderate Dissipates rapidly Elevated

TradeThreats to renegotiate

agreements and implement tariffs on

only limited & targeted restrictions

Status quoElevated protectionism (45% tariff on China &

35% on Mexico

Regulation Loosened modestly Loosened widely Status quo

Immigration (via labor force) -600,000/year Status quo -1,000,000/year

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Pro-growth agenda with heightened risks

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Inflation rebounding as oil effect fading

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How will Federal Reserve respond?

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Thank you!

Gregory DacoChief US [email protected]

Follow us on Twitter: @GregDaco@OxfordEconomics

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Monetary Policy and the Federal Reserve

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Meketa Investment Group Monetary Policy & The Federal Reserve

Prepared by Meketa Investment Group 1

What is Monetary Policy?

Monetary policy is when a country’s central bank (e.g., the Federal Reserve) controls the supply of money for the purpose of supporting economic growth and stability.

This typically occurs through the raising and lowering of interest rates

Lowering interest rates can have a very stimulative effect on economic activity.

Cheaper to pay off existing debts

Cheaper to take out new loans

The “present value” effect on financial assets

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The Federal Reserve (“The Fed”)

Created in 1913 via the Federal Reserve Act.

Federal Open Market Committee (FOMC) responsible for setting monetary policy

Meet 8 times per year, 7 weeks apart

Rotating group of five voting members

Independent from the federal government (really?)

“Dual mandate”

Maximum employment

Stable prices

Other?

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The Mechanics

The Fed officially sets what is called the “Fed Funds Rate.”

Rate at which banks lend to each other overnight

This is the only interest rate that the Fed officially “sets”

All other rates (mortgages, autos, credit cards, etc.) are determined by the market, depending on risk/maturity

While they don’t necessarily follow the Fed Funds Rate exactly, they generally move in the same direction

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Debt-Fueled Economy

This is why monetary policy is so important.

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The End of the Cycle?

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What About Inflation?

Consumer Price Inflation (CPI) fell dramatically in the early 1980’s, and has remained very subdued ever since.

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Asset Price Inflation

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The Global Financial Crisis and The Fed

There are very differing views on how the Fed acted during the Global Financial Crisis of 2008-2009.

Pro-Fed Case:

No one could have seen the crash coming

The Fed acted quickly and decisively to restore market confidence that was quickly deteriorating

In “bailing out” financial institutions, the Fed avoided a second Great Depression

The stock market has now reached new all-time highs, so clearly this was the right course of action

Anti-Fed Case:

Some people did see the crash coming, and the Fed should be held to a higher standard

They put out the fire, but they also lit the match in the first place

Bailing out everyone has led to serious “moral hazard” issues

The stock market is not reflective of the overall economy

The “lender of last resort.”

Liquidity vs. solvency

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Reaching The Limits of Interest Rate Policy

For the past 30 years, the Fed’s response to any and all economic/market problems has been to lower interest rates.

But during the Global Financial Crisis, they finally hit zero

In other words, they finally exhausted their main tool for stimulating the economy

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Quantitative Easing (“QE”)

After the Fed Funds Rate finally hit zero, and economic growth was still below target, the Fed needed to find a new method for stimulating the economy.

While short-term interest rates were effectively zero, long-term interest rates were a different story.

And long-term interest rates are what more directly impacts the economy (mortgages, auto loans, etc.)

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Quantitative Easing is the process through which the Fed “prints” money to buy Treasury bonds from banks, in an effort to stimulate lending.

There is no “new” money created, it is just an asset swap (bonds for cash)

So what’s the point?

Buying bonds increases their price, and lowers their yields (interest rates)

Rather than just hold cash, banks should want to lend it out into the economy to earn a return

But the Fed can’t force banks to lend, and it can’t force people to borrow.

Due to a lack of supply and demand for loans, the money gets “stuck” in the banking system

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Quantitative Easing also “works” through the “portfolio rebalancing effect.”

When the return on “risk free” assets is so low, it incentivizes investors to take more risk than they otherwise would

This leads to a rise in all “risky” assets, including the stock market

Is this a good thing or a bad thing?

In the short-term, it can be a very good thing

But it may just be blowing the next bubble

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The “Wealth Effect”

In theory, as the stock market goes up, people feel wealthier.

If people feel wealthier, they spend more money

This creates economic growth, which ultimately benefits everyone

But there is no historical evidence that this is actually true.

Only a very small percentage of the wealthiest Americans hold a significant amount of stocks

Potentially exacerbates income inequality issues

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Appendices

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Capital Markets Outlook1

Investors are faced with three primary issues in the near-term: 1) historically low bond yields, 2) the potential for a transition into a rising rate environment, 3) higher volatility going forward as global political, fiscal, and monetary policy uncertainty remains high.

Risk across markets measured by our Systemic Risk metric remains subdued; while this is positive in the short term, many serious medium term risks loom large.

In agreement with this measure, the widely cited VIX index which is at historical lows.

Risk environments can change quickly and caution is warranted especially given high valuations and political risk (North Korea/Brexit Negotiations/etc.).

The price of the U.S. stock market relative to ten-year average earnings has trended up after the financial crisis, and remains above its historical average (26.7x versus 20.7x).

Within U.S. Equity markets, relative valuations for companies based on both size (small vs. large cap) and value (growth vs. value) remain within a reasonable range.

Developed international and emerging market stocks are trading at lower valuations than U.S. stocks.

These valuations have remained low because of sovereign debt issues, weak economic growth in Europe, and a cyclical slowdown in emerging economies.

Both of these measures have seen sustained positive trends as the issues and economic fundamentals mentioned above have improved in recent months.

At 2.3%, the yield on the ten-year Treasury remained far below its post-WWII average of 5.9%.

As of July 4, spreads for both high yield and investment grade corporate bonds were below their respective historical averages (3.3% and 0.9%).

1 Sources: Bloomberg, U.S. Treasury, and Meketa Investment Group. Data is as of July 4, 2017.

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Systemic Risk and Volatile Market Days1

Systemic Risk, which measures risk across markets, is important because the more contagion of risk that exists between assets, the more likely it is that markets will experience volatile periods.

After a volatile start to the year, our Systemic Risk measure has returned to reasonable levels. While the number of volatile days can differ, this indicates that the next month should be in the lowest 14%.

1 Source: Meketa Investment Group, as of June 30, 2017. Volatile days are defined as the top 10 percent of realized turbulence which is a multivariate distance between asset returns.

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The U.S. Cyclically Adjusted P/E1 and Long-Term Equity Returns

One of the most powerful predictors of long-term equity returns has been the 10-Year Cyclically Adjusted Price to Earnings Ratio (CAPE).

This fundamentally driven measure is highly correlated with future returns, which are shown in the chart above using the CAPE metric on a reverse scale.

1 Source: PE data are from Robert Shiller’s website from 1927 - 1946; S&P and Bloomberg 1946 – present. S&P 500 equity returns are from Bloomberg for the entire period. Data is from December 31, 1927 to July 4, 2017.

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U.S. Equity Cyclically Adjusted P/E1

As of July 4, the 10-year cyclically adjusted P/E ratio for the S&P 500 was 26.7x, which is well above its post-WWII average of 20.7x.

Historically, a P/E ratio at this level has led to below average future returns over a 10 year horizon.

1 Source: Standard & Poor’s. Earnings figures represent the average of monthly “as reported” earnings over the previous ten years. Data is from January 31, 1946 to July 4, 2017.

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Small Cap P/E vs. Large Cap P/E1

The P/E ratio of small cap stocks (Russell 2000) relative to large cap stocks (Russell 1000) has been a consistent indicator of the relative valuation between companies based on their size.

At 99%, this relative valuation metric currently indicates that, on average, small size companies are just barely cheaper than larger size companies.

1 Source: Russell Investments. Earnings figures represent 12-month “as reported” earnings. Data is as of July 3, 2017.

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Growth P/E vs. Value P/E1

The P/E ratio of growth stocks (Russell 3000 Growth) relative to value stocks (Russell 3000 Value) was at a level of 135% as of July 3, which is slightly below its long-term average.

Of note, the long-term average was sharply influenced by the technology bubble of the late 1990s.

1 Source: Bloomberg, MSCI, and Meketa Investment Group. Earnings figures represent 12-month “as reported” earnings. Data is as of July 3, 2017.

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Developed International Equity Cyclically Adjusted P/E1

As of July 4, the CAPE ratio for the MSCI EAFE (ex-Japan) is well below the historical average.

Sovereign debt concerns and the slow pace of economic growth in Europe likely account for the low valuation levels.

1 Source: MSCI and Bloomberg. Earnings figures represent the average of monthly “as reported” earnings over the previous ten years. Data is as of July 4, 2017.

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Emerging Market Equity Cyclically Adjusted P/E1

Emerging market equities (MSCI Emerging Markets) are priced well below their (brief) historical average.

By this metric, emerging market equities are trading at a much lower valuation than U.S. equities, and at a slightly lower valuation than non-U.S. developed market equities.

1 Source: MSCI and Bloomberg. Earnings figures represent the average of monthly “as reported” earnings over the previous ten years. Data is as of July 4, 2017.

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Ten-Year Treasury Yields1

As of July 4, the ten-year treasury yield was 2.3%, which is well below the post-WWII average but above the 1.8% level of one year ago.

The path of central bank interest rates remains at the center of market focus.

The Federal Reserve and implied market forecasts differ considerably. This suggests that the market remains unconvinced about the probability and magnitude of future rate rises.

1 Source: U.S. Treasury. Data is as of July 4, 2017.

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Ten-Year Breakeven Inflation1

Breakeven (or expected) inflation, the difference between the nominal yield on a ten-year Treasury and the real yield on a ten-year TIPS, is below its long-term average.

The most recent Year over Year (YoY) inflation rate was 1.9%, indicating that the market future expectation is for inflation to be roughly in line relative to current inflation.

1 Source: U.S. Treasury and Federal Reserve. Data is as of July 4, 2017 for TIPS and Treasuries. Inflation is measured by the Consumer Price Index (CPI-U NSA) for which the most recent data point is from May 31, 2017.

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Credit Spreads1

As of July 4, credit spreads (versus U.S. Treasury bonds) for both high yield and investment grade corporate bonds were below their respective historical averages.

Last year’s market jitters have subsided considerably as can be seen especially in the high yield spread.

1 Source: Barclays Capital. High Yield is proxied by the Barclays High Yield index and Investment Grade Corporates are proxied by the Barclays U.S. Corporate Investment Grade index. Data is as of July 4, 2017.

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Core Real Estate vs. REITs1

The spread between core real estate cap rates and REIT yields was 2.3%, reaching slightly above the long-term historical average level.

REITs were yielding 4%, well below the 10.1% level of early 2009.

1 Sources: Bloomberg, Real Capital Analytics, NCREIF, and Meketa Investment Group. Core Real Estate is proxied by weighted sector transaction based indices from Real Capital Analytics and Meketa Investment Group and data is as of

May 31, 2017. REITs are proxied by the yield for the NAREIT Equity index and data is as of July 3, 2017.

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Core Real Estate Spread vs. Ten-Year Treasury1

At 3.9%, the difference between the 6.2% cap rate for core real estate and the 2.3% yield for the ten-year Treasury is slightly above its historical average.

Still, the absolute level of core real estate cap rates is near a historical low.

1 Source: Real Capital Analytics, U.S. Treasury, Bloomberg, and Meketa Investment Group. Core Real Estate is proxied by weighted sector transaction based indices from Real Capital Analytics and Meketa Investment Group and data is as of July 4,

2017. U.S. Treasury data uses the latest yield data which is as of July 4, 2017.

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REITs Dividend Yield Spread vs. Ten-Year Treasury1

As of July 3, REIT yield spreads were 1.7%. This spread represents a change of -0.8% from the previous year.

As with core real estate, the absolute level of REIT dividend yields is near a historical low.

1 Source: NAREIT, U.S. Treasury. REITs are proxied by the yield for the NAREIT Equity index. Data is as of July 3, 2017.

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Long-Term Outlook1

Based on Meketa Investment Group’s long-term expectations, only a handful of asset classes are priced to produce returns above 8% per year. All of these asset classes incorporate a high degree of volatility.

1 Twenty-year expected returns based upon Meketa Investment Group’s 2017 Annual Asset Study.

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Total Return Comparison of Barclays U.S. Aggregate Minus Barclays U.S. TIPS1

Total Return Scenario: 100 bps Rate Increase and 2% Inflation

Total Return Over Longer Holding Periods 1 Year 3 Year 5 Year 7 Year 10 Year

Barclays U.S. Aggregate -3.39% 1.11% 2.04% 2.44% 2.74%

Barclays U.S. Treasury U.S. TIPS -0.76% 2.99% 3.75% 4.09% 4.33%

1 Data is as of June 30, 2017 via Barclays, Bloomberg, and Meketa Investment Group. Scenario assumes that the rate increase happens over one year.

-100 -50 0 50 100

4.0% -3.24% -3.40% -3.68% -4.09% -4.62%

3.0% -2.24% -2.40% -2.68% -3.09% -3.62%

2.0% -1.24% -1.40% -1.68% -2.09% -2.62%

1.0% -0.24% -0.40% -0.68% -1.09% -1.62%

0.0% 0.76% 0.60% 0.32% -0.09% -0.62%

Changes In Rates (bps)

Infl

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Scen

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Total Return Given Changes in Interest Rates (bps)1

Total Return for Given Changes in Interest Rates (bps) Statistics

-100 -50 0 50 100 150 200 250 300 Duration YTW

Barclays U.S. Short Treasury (Cash) 1.3% 1.2% 1.0% 0.9% 0.7% 0.6% 0.4% 0.3% 0.1% 0.31 1.03%

Barclays U.S. Treasury 1-3 Yr. 3.6% 2.6% 1.6% 0.6% -0.3% -1.3% -2.3% -3.2% -4.2% 1.98 1.63%

Barclays U.S. Treasury Intermediate 5.9% 3.8% 1.8% -0.2% -2.1% -3.9% -5.7% -7.4% -9.1% 3.97 1.77%

Barclays U.S. Treasury Long 22.4% 12.1% 2.8% -5.5% -12.7% -19.0% -24.2% -28.5% -31.7% 17.55 2.79%

1 Data represents the expected total return from a given change in interest rates (shown in basis points) over a 12-month period assuming a parallel shift in rates. Data is as of June 30, 2017 via Barclays, Bloomberg, and Meketa Investment Group.

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Barclays U.S. Short Treasury (Cash) Barclays U.S. Treasury 1-3 Yr. Barclays U.S. Treasury Intermediate

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Global Macroeconomic Outlook June 2017

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Global Economic Outlook1

The IMF continues to forecast an increase in global growth, although the drivers have changed. Their projections for 2017 increased for Japan, Europe, and China and declined for the U.S. due to lower fiscal stimulus than previously expected. They continue to highlight risks in the medium-term including high market valuations, debt levels in China, and potential monetary tightening globally.

The IMF forecast for 2017 global growth is 3.5% and 3.6% for 2018, unchanged from their prior estimates.

In advanced economies, 2017 projections remain the same (2.0%) and declined slightly for 2018 (1.9% versus 2.0%). Lower expectations for U.S. fiscal stimulus are expected to weigh on growth, while reduced political risks should help in Europe.

Growth is expected to increase in emerging economies to 4.6% in 2017 and to 4.8% in 2018, led by commodity importers. China is projected to have similar growth in 2017 (6.7%) as in 2016 and to slow to 6.4% in 2018, while in India growth is forecasted to increase in 2017 (7.2% versus 7.1%) and to 7.7% in 2018. Russia and Brazil are both expected to emerge from recessions this year.

Inflation expectations are trending down in the short-term and, overall, remain below the long-term averages.

Real GDP (%) Inflation (%)

IMF 2017 Forecast

IMF 2018 Forecast

Actual 10 Year Average

IMF 2017 Forecast

IMF 2018 Forecast

Actual 10 Year Average

World 3.5 3.6 3.5 3.5 3.4 3.9

U.S. 2.1 2.1 1.3 2.7 2.4 1.8

European Union 1.9 1.7 0.9 1.8 1.7 1.7

Japan 1.3 0.6 0.5 1.0 0.6 0.5

China 6.7 6.4 9.0 2.4 2.3 2.9

Emerging Markets (ex. China) 3.3 3.8 4.2 6.1 5.8 7.2

1 Source: IMF. World Economic Outlook. July update to April 2017 edition. ”Actual 10 Year Average” represents data from 2007 to 2016.

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Global Economic Outlook (continued)

We could be moving into a period of coordinated monetary tightening across central banks. Fiscal stimulus in the U.S. remains possible going forward, but its form has increasingly become uncertain. The balance of fiscal and monetary policy globally remains a key issue.

In June, the Federal Reserve increased rates for the fourth time by 0.25% to a range of 1.00% to 1.25%. One more rate increase is expected this year. It is also likely that they will begin reducing their balance sheet of Treasury and mortgage-backed securities later this year by not reinvesting maturing proceeds.

The Bank of Japan (BOJ) continues to maintain its stimulative efforts, making no changes to the scale of their asset purchase program, keeping bank deposit rates negative (-0.1%), and continuing to target a 0% yield on the 10-year government bond. They did note, though, improvements in their projections for the economy.

Improving economic conditions and recent statements by Mario Draghi have led investors to speculate that the European Central Bank (ECB) could begin reducing its bond-purchasing program next year. They have committed to continuing purchases through the end of this year and beyond, if needed, and to keeping interest rates low until their bond buying is done. Inflation levels remain below the ECB’s target though, and are projected to stay there, which could lead to continued support.

The People’s Bank of China (PBOC) left interest rates unchanged at their June meeting, despite the Fed’s recent rate increase. Their benchmark rate has remained unchanged at 4.35% since October 2015, but they surprised markets in March when they followed the Fed’s announced rate hike by increasing short- and mid-term interbank rates. Corporate debt levels, a hot property market, capital outflows, and the relationship with the new U.S. administration are key issues for the world’s second largest economy.

Several issues are of primary concern: 1) the potential for simultaneous monetary tightening globally; 2) uncertainty related to the U.S. economy and policies; 3) declining growth in China, along with uncertain fiscal and monetary policies; 4) risks related to the U.K.’s exit from the European Union.

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Macroeconomic Risk Matrix

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Macroeconomic Risk Overviews

Low Oil Prices Although oil prices significantly rallied from their bottom, they remain historically low. An extended period of low oil prices will hurt countries such as Iran, Russia, and Venezuela that depend heavily on oil export revenues. Although OPEC has extended their production cuts into 2018 to help prices, increased production from the U.S. shale industry acts as a counter force. The risk of increased geopolitical tensions also exists with depressed oil prices.

European Imbalances The crisis is rooted in structural issues in the Eurozone related to the combination of a single currency combined with 17 fiscal authorities. In the broader European Union, tensions exist, as highlighted in the U.K. referendum last year, related to policies on immigration, laws, and budgetary contributions. Additional countries leaving either group, particularly the Eurozone, could set a dangerous precedent, especially if they ultimately experience growth. The massive influx of refugees into Europe from the Middle East and North Africa exacerbates economic stress.

Potential Failure of Abenomics

Japan is engaged in a historic stimulus program, referred to as “Abenomics” to fight its decades of deflation. The plan includes monetary, fiscal, and structural components. If Japan overshoots with its policies, or dramatically changes them, it could prove disruptive to markets and growth.

Europe/Japan Aging Demographics

In Japan and Europe, birth rates have declined for decades, resulting in populations becoming older and smaller relative to the rest of the world. These demographic trends will have negative long-term impacts on GDP growth and fiscal budgets, amplifying debt problems.

Major Geopolitical Conflicts

Tensions related to North Korea’s nuclear aspirations continue to grow, with the consequences of any misstep high. The Syrian crisis remains another key issue. Since taking office, the new U.S. administration launched airstrikes on a Syrian airbase in retaliation for chemical attacks in the country. The North Korea and Syrian issues have complicated relations with China and Russia, their respective allies. Continued antiterrorist efforts against ISIS remains another unresolved issue. Although the city of Mosul in Iraq was recently taken back from ISIS, they continue to be a threat in the region and elsewhere.

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Macroeconomic Risk Overviews (continued)

China Fiscal and Monetary Policy Uncertainty

The process of transitioning from a growth model based on fixed asset investment by the government, to a model of consumption-based growth will be difficult. Similar policies as China’s decision to unexpectedly devalue their currency or to support stock prices could prove disruptive and decrease confidence in China’s government. Capital outflows remain a key issue in China. They have made some efforts to tighten regulations to stem outflows, but higher rates and growth in the U.S., and elsewhere, could add to outflow pressures. China’s abandonment of its support of the yuan, and a resulting major devaluation of the currency, could prove particularly disruptive to global markets and trade. The hot property market and the growing mountain of debt in the corporate sector remain other key risks.

Normalization of Global Monetary Policy

After the Global Financial Crisis, major central banks injected massive amounts of liquidity into the market by purchasing bonds from banks (i.e., quantitative easing). They also reduced short-term interest rates to record lows. Already the U.S. central bank has ended its bond-buying program, started to increase interest rates, and started to discuss reducing its balance sheet. Although other central banks, like Japan (BOJ) and Europe (ECB), continue to stimulate their respective economies discussions have started about reducing stimulus in the near-term. If major central banks start to tighten their policies at the same time it could lead to higher rates, less liquidity, and overall lower economic activity.

Resource Scarcity The growing world population, urbanization, and a growing middle class, particularly in emerging economies, could all lead to a scarcity of resources, including food, water, land, energy, and minerals. As demand continues to grow and supply declines, certain commodity prices may skyrocket, hurting the living standards of many and increasing the risk of geopolitical conflicts.

Rising Populist and Antitrade Sentiment

The votes last year in the U.S. (presidential election) and U.K. (“Brexit”) highlight the growing populist/antitrade sentiment. Stagnant wages, growing inequality, and the perception of jobs being lost abroad are key contributors. Reducing trade and imposing tariffs would likely lead to inflation, reduced efficiencies, and heightened tensions between countries.

High Expectations for U.S. Fiscal Stimulus

Post U.S. presidential election, hopes have been high for new policies lowering taxes, increasing infrastructure spending, and reducing regulations. Investors have placed their bets based on the assumption that these policies would come to fruition creating the potential for disappointment. The recent failed attempt to pass revised healthcare legislation illustrates that there could be some bumps with moving forward with the new administration’s agenda.

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Positive Macroeconomic Trends Matrix

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Positive Macroeconomic Trends Overviews

Low Oil Prices Although oil prices recently increased, they remain low historically. Low oil prices will likely have a positive impact on global growth, particularly for energy importers like China, Japan, and India. Consumers should benefit from lower oil prices, in the form of lower prices for gasoline and heating oil.

Growth of Emerging Markets Middle Class

In emerging economies, the size of the middle class is projected to grow significantly over the next twenty years. This growing middle class should increase consumption globally, which in turn will drive GDP growth and create jobs.

Multilateral Global Trade

Increased trade and investment, and access to foreign capital and export markets for corporations, should lead to greater global growth. The recent U.S. presidential election and the U.K.’s vote to leave the European Union illustrate growing anti-trade sentiment, which could create a headwind to trade going forward.

Improvements in Education/Healthcare

Literacy rates and average life spans have increased globally, particularly in emerging economies. Higher literacy rates will drive future growth, helping people learn new skills and improve existing skills. When people live longer, it increases incentives for long-term investments in education and training, resulting in a more productive work force and ultimately more growth.

Stabilization of Japanese and European Economies

Despite some recent talks of tightening monetary policy, the Japanese and European central banks continue their respective asset purchase programs and maintain interest rates at historic lows. Unemployment has come down in both areas and Japan has moved from deflation to inflation. Continued improvements in economic conditions in Europe and Japan could also be beneficial for global trade. U.S. investors could particularly benefit from these conditions if the dollar remains weak.

Global Fiscal Stimulus Given the slow growth globally, and the likely tightening of monetary stimulus, there could be a shift to fiscal stimulus. With interest rates still low, borrowing for infrastructure investments is affordable. If productive investment options are not available, reducing taxes is an option. Increased fiscal stimulus could help growth while reducing the reliance on monetary policy. The new U.S. administration’s proposed policies on cutting taxes and increasing spending on infrastructure could have a major impact if passed.

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Geopolitical Risks

We are in a period of heightened geopolitical tensions and uncertainties particularly related to North Korea’s nuclear objectives.

A variety of other geopolitical risks remain unresolved including:

The ongoing war in Syria, including tensions between the U.S. and Russia.

The continued threat of terrorism, including the complications it creates in Europe related to the refugee crisis.

Continued antiterrorist efforts against ISIS.

These unresolved issues have the potential to disrupt markets, economies, and trade if they flare-up. This would likely result in a flight to safe haven assets like Treasuries, U.S. dollars, and gold.

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Global Nominal Gross Domestic Product (GDP) Growth1

Global growth prior to the Global Financial Crisis, and in the period immediately following it, was much higher than current levels.

Growth is forecasted to increase slightly in the coming years, but remain below long-term averages.

1 Source: Oxford Economics. Updated July 2017. GDP data after 2016 are estimates.

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Global Monetary Policy1

Currently the U.S. central bank is alone in its tightening policies, but others have discussed pursuing a similar path going forward.

Over time, particularly since the Global Financial Crisis, major central banks have dramatically increased their balance sheets to levels close to 40% of their aggregate GDP.

Going forward, less demand from central banks for bonds could lead to higher interest rates and less demand for credit.

1 Bloomberg. Data is as of June 30, 2017.

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Major Currency Values versus the U.S. Dollar1

In the second quarter, the U.S. dollar continued its decline as the Fed maintained its slow approach to monetary tightening and the U.S. Senate picked-up the struggle with new healthcare legislation.

Developed foreign equities particularly benefited from the decline in the dollar during the quarter.

Continued signs of subdued growth, dovish monetary policy, and a stalled presidential agenda could put further pressure on the dollar.

1 Source: Federal Reserve Bank of St. Louis. Data is as of June 30, 2017.

90

95

100

105

110

115

120

125

130

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ind

ex J

anu

ary

1997

= 1

00

Trade Weighted U.S. Dollar Index

of 194



Oil1

As oil prices recovered from their recent lows, so did shale-drilling activity in the U.S., creating a form of economic stimulus.

OPEC recently agreed to extend their output cuts until 2018 in an effort to decrease supply and increase prices.

Higher prices could lead to further shale production, though, and weigh on OPEC’s objectives.

1 Bloomberg. Data is as of June 30, 2017.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

20

40

60

80

100

120

140

160

Bak

er H

ug

hes

Rig

Co

un

t

WT

I Cru

de

Pri

ce $

per

bar

rel

WTI Crude Price $ per barrel U.S. Crude & Gas Active Well Rigs

of 194



U.S. Presidential Approval Rating versus S&P 5001

U.S. equity markets continue to advance despite high valuations, signs of a stalled Trump agenda, and subdued economic growth.

Although markets have been optimistic about President Trump’s agenda, his approval rating has steadily declined.

1 Source: Bloomberg, Real Clear Politics Presidential Job Approval Average. Data is as of June 30, 2017.

38%

39%

40%

41%

42%

43%

44%

45%

46%

47%

2,250

2,300

2,350

2,400

2,450

January February March April May June

Pre

sid

enti

al A

pp

rova

l Rat

ing

S&

P 5

00

S&P 500 Weekly End Price Presidential Approval Rating

of 194



U.S. Financial Conditions1

Financial conditions in the U.S., represented by dollar strength, equity market performance, and long-term rates, have improved despite the Fed’s tightening.

High equity market valuations and increased credit demand in the low rate environment seem to be causing the Fed concern and could lead to them continuing on their tightening path, despite softening data.

1 Source: Bloomberg. Data is as of June 30, 2017.

99.2

99.4

99.6

99.8

100.0

100.2

100.4

100.6

100.8

101.0

101.2

Oct-2015 Feb-2016 Jun-2016 Oct-2016 Feb-2017 Jun-2017

Go

ldm

an S

ach

s F

inan

cial

Co

nd

itio

ns

Ind

ex

of 194



U.S. Monetary Policy1,2

Despite softening data, the U.S. Federal Reserve hiked short-term interest rates again by 0.25% in June to a range of 1.0% to 1.25% and provided insight into plans to reduce their $4.5 trillion balance sheet.

In prior cycles, the Fed reduced rates by over 5% to stimulate growth, a luxury they would not have now, if we enter another recession.

As Janet Yellen’s first term comes to an end, there have been discussions of appointing a chairperson who would use a rules based approach to policy (e.g., Taylor Rule), that is currently calling for a much higher rate.

1 Source for Monetary Policy: Bloomberg. Data is as of May 31, 2017. 2 Source for Balance Sheet: Federal Reserve Bank of St. Louis. Data is as of June 30, 2017.

-5%

0%

5%

10%

15%

20%

25%

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Recession Taylor Rule Estimate Fed Funds Rate

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mill

ions

of D

olla

rs

MBS TIPS Nominal Other

of 194



U.S. Real Gross Domestic Product (GDP) Growth1

The initial reading of second quarter GDP came in at 2.6% in the U.S., more than double the 1.2% level of the prior quarter. Over the trailing year, GDP grew at a 2.1% rate.

A rebound in consumer spending was the main driver of higher growth during the quarter.

1 Source: U.S. Bureau of Economic Analysis. Data is as of the second quarter of 2017 and represents the first estimate.

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Jun-2007 Jun-2008 Jun-2009 Jun-2010 Jun-2011 Jun-2012 Jun-2013 Jun-2014 Jun-2015 Jun-2016 Jun-2017

Personal consumption expenditures Gross private domestic investment

Net exports of goods and services Government consumption expenditures and gross investment

Gross Domestic Product

of 194



U.S. Employment & Wages1

Unemployment declined slightly in the second quarter (-0.1%) finishing at 4.4%, far below its 10% peak.

Although wages have increased from their lows, the rate of growth has recently leveled off and remains well below prior recoveries.

Despite low unemployment not leading to wage inflation, the Fed continues to tighten. We will see if they are right about wages catching-up.

1 Source: Bureau of Labor Statistics. Data is as of June 30, 2017.

0%

2%

4%

6%

8%

10%

12%

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Unemployment Rate YoY % Change in Hourly Earnings

of 194



U.S. Inflation Components1

After a recent increase, inflationary pressures slowed in the second quarter, with CPI falling from 2.4% to 1.6%.

Despite the decline in inflation, and the softening of other economic data, the Fed remains committed to moving forward with its monetary tightening, running the risk that they could overshoot.

1 Source: Bloomberg: Bureau of Labor Statistics. Data is as of June 30, 2017.

-1%

0%

1%

2%

3%

4%

5%

6%

2012 2013 2014 2015 2016 2017

Yo

Y C

han

ge

Services Housing (OER) Medical CPI

of 194



Spread Between 10-year and 2-year U.S. Treasuries1

The U.S. yield curve flattened further in the second quarter, with the ten-year Treasury yield falling from 2.39% to 2.30% and the two-year yield increasing from 1.25% to 1.38%.

If the yield curve continues to flatten, this could particularly hurt banks, a sector that has done well recently in light of talks of lower regulations.

Banks are a critical part of the economy and any headwinds to the sector could weigh on overall economic activity.

1 Source: Bloomberg. Data as of June 30, 2017.

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

10-2 Spread

of 194



Government Bond Yield Curves1

United States Japan

Italy Germany

In the U.S., the yield curve continued to flatten during the second quarter.

In Europe and Japan, large portions of the yield curves continue to have negative yields. In Japan and Germany, rates increased across the yield curve during the quarter, while in Italy there were mixed results.


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

30-Jun 31-Mar

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

30-Jun 31-Mar

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

30-Jun 31-Mar

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 30Y

30-Jun 31-Mar

of 194



Japan and Europe Economic Conditions1

The U.S. central bank has been increasing interest rates and considering reducing its balance sheet, while the European and Japanese central banks continue to maintain loose monetary policies.

Unemployment has declined from its highs in Europe and Japan, and Japan has moved from deflation to inflation.

Given improving economic conditions and a lower risk of deflation, there is speculation that we could be moving into a period of coordinated central bank tightening.

1 Source: Bloomberg. Data is as of May 31, 2017.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Infl

atio

n

Un

emp

loym

ent

EU Unemployment EU Inflation

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Infl

atio

n

Un

emp

loym

ent

Japan Unemployment Japan Inflation

of 194



Emerging Market GDP1

Growth in emerging economies remains uneven and has trended downward since 2010.

Russia and Brazil are projected to emerge from recession in 2017, while China’s economy is forecasted to continue to slow going forward. India remains a bright spot, with higher growth forecasted at a level above China.

The recent fall in the U.S. dollar, and signs of stabilization in China, has led to an increase in foreign investment in emerging markets, stronger returns for U.S. investors, and reduced the burden on countries with large dollar denominated debt.

Any signs of higher rates and economic activity in the U.S., a return to antitrade rhetoric, or heightened geopolitical tensions could reverse the flow of the recent “hot money” into emerging markets and weigh on returns.

1 Source: IMF. World Economic Outlook. July update to April 2017 edition.

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Brazil Russia India China

of 194



China Stimulus1

In addition to the recent stimulus provided by the increase in shale activity, China has also provided support.

After a difficult 2015, they attempted to slow capital outflows and stabilize the economy by launching a stimulus program comparable to the one in the Global Financial Crisis. This not only benefited their economy, but others through higher imports.

China seems to be pulling back though with the potential to create issues particularly here in the U.S. if we see the effects of the “reflation” trade wane.


0

5

10

15

20

25

30

-30

-20

-10

0

10

20

30

40

Ch

ina

M1

Gro

wth

(%

)

Ch

ina

Imp

ort

Gro

wth

(U

SD

, Yo

Y %

)China Import Growth (USD, YoY) China M1 Growth

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Summary

Four primary concerns face the global economy: 1) the potential for simultaneous monetary tightening globally; 2) uncertainty related to the U.S. economy and policies; 3) declining growth in China, along with uncertain fiscal and monetary policies; 4) risks related to the U.K.’s exit from the European Union.

Since the Global Financial Crisis, central banks world-wide have attempted to support markets and the economy through low interest rates and bond-purchasing programs (i.e., quantitative easing). Total balance sheets have close to doubled since the GFC and are near 40% of aggregate GDP. If we move into a period of a collective reduction in the global central bank balance sheet we could see higher rates, less liquidity, and overall slower economic activity.

The U.S. has experienced largely stable growth since the end of the financial crisis, but at levels below prior recoveries. Inflationary pressures increased recently, but have since subsided and other economic data has softened. In light of this, the Federal Reserve has continued to increase rates and discuss plans of reducing its balance sheet possibly to create room for easing if we hit another recession. The risk is that they could push the economy back into recession early without a lot of policy tools at their disposal.

Given China’s size and contribution to global growth, a slowing of its economy could have a meaningful impact, particularly on countries that depend on its trade. The growing debt, particularly in the corporate sector, remains a key concern. Another devaluation of the yuan could disrupt capital markets, weigh on domestic demand, and hurt countries with competing exports.

The decision of the U.K. to leave the EU further weighs on the fragile recovery in Europe. The U.K.’s negotiation of trade deals will be a key issue, with a wide range of potential outcomes. Uncertainty related to the outcome of negotiations should weigh on foreign investment and consumption. Any additional moves to leave the EU, or the Eurozone, could be disruptive to markets and growth.

of 194

Prior Year Market Reviews

of 194

Third Quarter 2016 Market Review

of 194

3rd Quarter 2016 Market Review and Current Market Conditions


The World Markets Third Quarter 2016

The World Markets Year-to-Date 2016

-3.9%

-1.2%

0.5%

1.0%

2.5%

2.7%

3.9%

4.4%

5.6%

6.4%

9.0%

9.0%Russell 2000

MSCI Emerging Markets

MSCI EAFE

Barclays High Yield

Russell 3000

S&P 500

JPM GBI-EM Global Diversified Local

HFRI Fund of Funds

Barclays U.S. TIPS

Barclays Aggregate

NAREIT Equity

Bloomberg Commodity Index-0.1%

1.7%

5.8%

7.3%

7.8%

8.2%

8.9%

11.5%

12.3%

15.1%

16.0%

17.1%JPM GBI-EM Global Diversified Local


Barclays High Yield

NAREIT Equity

Russell 2000


Russell 3000

S&P 500

Barclays U.S. TIPS

Barclays Aggregate

MSCI EAFE

HFRI Fund of Funds

of 194



Global Nominal Gross Domestic Product (GDP) Growth1

1 Source: Oxford Economics. Updated October 2016. GDP data after 2015 are estimates.

-2%

0%

2%

4%

6%

8%

10%

2000 2004 2008 2012 2016

of 194



Corporate Profits1

1 Source: Oxford Economics.

0%

2%

4%

6%

8%

10%

12%

14%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2000 2004 2008 2012 2016

Emer

ging

Mar

kets

Dev

elop

ed M

arke

ts

Developed Markets Emerging Markets

of 194




1 Source: Thomson Reuters. Data is as of September 30, 2016.

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

British Pound Mexican Peso New Turkish Lira Euro Russian Rouble Japanese Yen Brazilian Real

2015 2016

of 194




1 Source: Bureau of Labor Statistics. Data is as of September 30, 2016.

0%

2%

4%

6%

8%

10%

12%

Sep-1980 Sep-1984 Sep-1988 Sep-1992 Sep-1996 Sep-2000 Sep-2004 Sep-2008 Sep-2012 Sep-2016

Unemployment Rate YoY % Change in Hourly Earnings

of 194




1 Source: Bloomberg: Bureau of Labor Statistics. Data is as of September 30, 2016.

-1%

0%

1%

2%

3%

4%

5%

6%

2012 2013 2014 2015 2015 2016

YoY

Chan

ge

Services Housing (OER) Medical CPI

of 194



China Debt to GDP1

1 Source: Bank of International Settlements.

0%

50%

100%

150%

200%

250%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Government Household Non-financial Corporations

of 194



Key Issues

Central Bank Policies Impact of “Brexit” China’s Economy Corporate Earnings Political Uncertainties

of 194

Fourth Quarter 2016 Market Review

of 194

4th Quarter 2016 Market Review and Current Market Conditions


The World Markets1 Fourth Quarter 2016

The World Markets1 2016


-6.1%

-4.2%

-3.3%

-3.0%

-2.4%

-0.7%

1.1%

1.8%

2.7%

3.8%

4.2%

8.8%Russell 2000

Russell 3000

S&P 500


BBgBarc High Yield

HFRI Fund of Funds

MSCI EAFE

BBgBarc U.S. TIPS

BBgBarc Aggregate

NAREIT Equity


JPM GBI-EM Global Diversified Local 0.7%

1.0%

2.6%

4.7%

8.6%

9.9%

11.2%

11.8%

12.0%

12.7%

17.1%

21.3%Russell 2000

BBgBarc High Yield

Russell 3000

S&P 500



JPM GBI-EM Global Diversified Local

NAREIT Equity

BBgBarc U.S. TIPS

BBgBarc Aggregate

MSCI EAFE

HFRI Fund of Funds

of 194



Proposed Policies of the New U.S. Administration

Growth Positive Growth Negative

Lower Taxes Policy Uncertainty Infrastructure Spending Protectionist Trade

Deregulation Restrictive Immigration

Key Statistics

4Q1980 4Q2016

Fed Funds Rate 18.0% 0.75% 10-Year Treasury Yield 12.4% 2.4% Mortgage Rate 21.5% 3.8% Household Debt to Disposable Income 47.2% 78.4%1 U.S. Government Debt to GDP 31.8% 104.8%1 Productivity Growth(Output per hour) 0.8% 0.0%2 Consumer Price Index 12.5% 2.1% Personal Savings Rate 11.2% 5.5%3 Labor Force Participation Rate 63.6% 62.7% Shiller PE 9.4x 28.0x Global Trade Barriers Falling Rising

1 Represents July 2016 data. 2 Represents 3Q16 data. 3 Represents November 2016 data.

of 194



S&P Sector Returns1

1 Source: Bloomberg.

$118.12

$101.42

$101.78

$115.41

95

100

105

110

115

120

125

Gro

wth

of $

100

S&P Financials S&P Utilites S&P Consumer Staples Russell 2000

of 194



U.S. Dollar versus Major Currencies1


95

100

105

110

115

120

125

130

Broad Trade-Weighted Dollar Index

of 194



Ten-Year Treasury Yields1

1 Source: U.S. Treasury. Data is as of December 31, 2016.

of 194




1 Source: Bloomberg: Bureau of Labor Statistics. Data is as of December 31, 2016.

of 194



Key Elections in 2016/2017

Date Country Type

June 2016 United Kingdom E.U. Referendum November 2016 United States Presidential December 2016 Italy Constitutional Referendum

March 2017 Netherlands Parliamentary April 2017 France Presidential June 2017 France Parliamentary

September 2017 Germany Parliamentary TBD 2017 / 2018 Italy Parliamentary

of 194



China Fixed Asset Investment Growth1 China Producer Price Inflation (YoY)1


0

5

10

15

20

25

30

35

40

45

YoY

Gro

wth

Rat

e (%

)

China Fixed Asset Investment - State-Owned (YoY) Average

-8

-6

-4

-2

0

2

4

6

8

10

YoY

Gro

wth

Rat

e (%

)

China PPI (YoY)

of 194



Key Issues

Political / Policy Uncertainties Inflation Pressures U.S. Dollar Strength Impact of “Brexit” China’s Economy

of 194

First Quarter 2017 Market Review

of 194

1st Quarter 2017 Market Review and Current Market Conditions


The World Markets1 First Quarter of 2017


-2.3%

0.8%

1.2%

1.3%

2.0%

2.5%

2.7%

5.7%

6.1%

6.5%

7.2%


MSCI EAFE

JPM GBI-EM Global Diversified USD

S&P 500

Russell 3000

Barclays High Yield

Russell 2000

HFRI Fund of Funds

Barclays U.S. TIPS

NAREIT Equity

Barclays Aggregate


of 194




1 Source: Federal Reserve Bank of St. Louis. Data is as of March 31, 2017.

90

95

100

105

110

115

120

125

130

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Inde

x Jan

uary

1997

= 10

0 Trade Weighted U.S. Dollar Index

of 194



Oil’s Upward Pressure on Inflation Has Peaked1


-60%

-40%

-20%

0%

20%

40%

60%

80%

30

40

50

60

70

80

90

100

110

Rollin

g 12

Mon

th R

etur

n

Price

per

Bar

rel W

TI, (

$)Oil Price Rolling 12-Month Return

Forecast

of 194



Shale Recovery1


200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Rig

Coun

t

Year

-ove

r-Yea

r Cha

nge (

%)

Year-over-Year (%) Baker Hughes Oil & Gas Rig Count

of 194



Cyclical Recovery in Inflation and Economic Growth1


-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

47

49

51

53

55

57

59

CPI (

%)

ISM

Manu

fact

urin

g PMI

ISM Manufacturing PMI CPI (YoY)

Oil collapse/USD rally "Reflation"

of 194



2017 First Quarter GDP Forecast – “Hard” Versus “Soft” Data1

1 Source: Atlanta Fed, New York Fed, Bloomberg.

0.5

2.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5An

nuali

zed

Grow

th (%

)Atlanta Fed GDPNow ("Hard Data") NY Fed Nowcast ("Soft Data")

of 194



“Soft” Data Cycles1


30

35

40

45

50

55

60

65PM

IISM Manufacturing PMI

of 194



European Growth and Inflation1


48

50

52

54

56

58

60

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Germ

any P

MI

Perc

enta

ge (%

)Germany 10-Year Yield Germany Inflation Rate Germany PMI

of 194



China Stimulus1


0

5

10

15

20

25

30

-30

-20

-10

0

10

20

30

40

Chin

a M1 G

rowt

h

Chin

a Im

ports

(USD

, YoY

)China Imports (USD, YoY) China M1 Growth

of 194



Key Issues

Overextended U.S. Markets

Divergent Central Bank Policies

Rising Populism / Antitrade Sentiment

China’s Economy

of 194

Second Quarter 2017 Market Review

of 194

2nd Quarter 2017 Market Review and Current Market Conditions


The World Markets1

Second Quarter 2017 Year-to-Date 2017


-3.0%

-0.4%

1.4%

1.5%

2.2%

2.4%

2.5%

3.0%

3.1%

6.1%


MSCI EAFE

S&P 500

Russell 3000

Russell 2000


BBgBarc High Yield

NAREIT Equity

BBgBarc Aggregate

BBgBarc U.S. TIPS

Bloomberg Commodity Index -5.3%

0.9%

2.3%

2.7%

3.0%

4.9%

5.0%

5.7%

8.9%

9.3%

13.8%


MSCI EAFE

S&P 500

Russell 3000


Russell 2000

BBgBarc High Yield

HFRI Fund of Funds

NAREIT Equity

BBgBarc Aggregate

BBgBarc U.S. TIPS


of 194



Central Bank Balance Sheets1


of 194



U.S. Quarterly Real Gross Domestic Product (GDP) Growth1

U.S. Inflation2

1 Source: U.S. Bureau of Economic Analysis. Data is as of the first quarter of 2017 and represents the third estimate. 2 Source: Bloomberg: Bureau of Labor Statistics. Data is as of June 30, 2017.

-1%

0%

1%

2%

3%

4%

5%

2012 2013 2014 2015 2016 2017

Yo

Y C

han

ge

CPI

of 194




U.S. Monetary Policy2

1 Source: Bureau of Labor Statistics. Data is as of June 30, 2017. 2 Source: Bloomberg. Data is as of May 31, 2017.

-5%

0%

5%

10%

15%

20%

25%

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Recession Taylor Rule Estimate Fed Funds Rate

of 194



Prior Fed Easing Cycles1

Dates of Recent Easing Cycles

Fed Funds Rate at Start (%)

Fed Funds Rate at End (%)

Fed Funds Rate Difference (%)

9/84 – 8/86 11.75 5.88 5.87

5/89 – 9/92 9.75 3.00 6.75

12/00 – 6/03 6.50 1.00 5.50

8/07 – 12/08 5.25 0.25 5.00

Average 5.78


of 194



U.S. Financial Conditions1


99.2

99.4

99.6

99.8

100.0

100.2

100.4

100.6

100.8

101.0

101.2

Oct-2015 Feb-2016 Jun-2016 Oct-2016 Feb-2017 Jun-2017

Go

ldm

an S

ach

s F

inan

cial

Co

nd

itio

ns

Ind

ex

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Federal Reserve Balance Sheet1

1 Source: Federal Reserve Bank of St. Louis. Data is as of June 30, 2017.

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Tril

lions

of D

olla

rsMBS TIPS Nominal Other

of 194



Japanese and European Economic Conditions1

1 Source: Bloomberg. Data is as of May 31, 2017.

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017In

flat

ion

Un

emp

loym

ent

Japan Unemployment Japan Inflation

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Infl

atio

n

Un

emp

loym

ent

EU Unemployment EU Inflation

of 194



Oil1


0

200

400

600

800

1,000

1,200

1,400

1,600

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Key Issues

Potential for Coordinated Monetary Tightening

Overextended U.S. Markets

U.S. Fiscal and Monetary Policy Uncertainty

China’s Economy

Heightened Geopolitical Risks

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Disclaimer, Glossary, and Notes

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Disclaimer


The material contained in this report is confidential and may not be reproduced, disclosed, or distributed, in whole or in part, to any person or entity other than the intended recipient. The data are provided for informational purposes only, may not be complete, and cannot be relied upon for any purpose other than for discussion.

Meketa Investment Group has prepared this report on the basis of sources believed to be reliable. The data are based on matters as they are known as of the date of preparation of the report, and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available.

In general, the valuation numbers presented in this report are prepared by the custodian bank for listed securities, and by the fund manager or appropriate General Partner in the case of unlisted securities. The data used in the market comparison sections of this report are sourced from various databases. These data are continuously updated and are subject to change.

This report does not contain all the information necessary to fully evaluate the potential risks of any of the investments described herein. Because of inherent uncertainties involved in the valuations of investments that are not publicly traded, any estimated fair values shown in this report may differ significantly from the values that would have been used had a ready market for the underlying securities existed, and the differences could be material. Note that for unlisted securities the valuations may be lagged by one or more calendar quarters, or may reflect original cost.

This document may contain certain forward-looking statements, forecasts, estimates, projections, and opinions (“Forward Statements”). No representation is made or will be made that any Forward Statements will be achieved or will prove to be correct. A number of factors, in addition to any risk factors stated in this material, could cause actual future results to vary materially from the Forward Statements. No representation is given that the assumptions disclosed in this document upon which Forward Statements may be based are reasonable. There can be no assurance that the investment strategy or objective of any fund or investment will be achieved, or that the Fund will receive a return of the amount invested.

In some cases, Meketa Investment Group assists the Trustees in handling capital calls or asset transfers among investment managers. In these cases, we do not make any representations as to the managers’ use of the funds, but do confirm that the capital called or transferred is within the amounts authorized by the Trustees.

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Glossary


Credit Risk: Refers to the risk that the issuer of a fixed income security may default (i.e., the issuer will be unable to make timely principal and/or interest payments on the security.)

Duration: Measure of the sensitivity of the price of a bond to a change in its yield to maturity. Duration summarizes, in a single number, the characteristics that cause bond prices to change in response to a change in interest rates. For example, the price of a bond with a duration of three years will rise by approximately 3% for each 1% decrease in its yield to maturity. Conversely, the price will decrease 3% for each 1% increase in the bond’s yield. Price changes for two different bonds can be compared using duration. A bond with a duration of six years will exhibit twice the percentage price change of a bond with a three-year duration. The actual calculation of a bond’s duration is somewhat complicated, but the idea behind the calculation is straightforward. The first step is to measure the time interval until receipt for each cash flow (coupon and principal payments) from a bond. The second step is to compute a weighted average of these time intervals. Each time interval is measured by the present value of that cash flow. This weighted average is the duration of the bond measured in years.

Information Ratio: This statistic is a measure of the consistency of a portfolio’s performance relative to a benchmark. It is calculated by subtracting the benchmark return from the portfolio return (excess return), and dividing the resulting excess return by the standard deviation (volatility) of this excess return. A positive information ratio indicates outperformance versus the benchmark, and the higher the information ratio, the more consistent the outperformance.

Jensen’s Alpha: A measure of the average return of a portfolio or investment in excess of what is predicted by its beta or “market” risk. Portfolio Return- [Risk Free Rate+Beta*(market return-Risk Free Rate)].

Market Capitalization: For a firm, market capitalization is the total market value of outstanding common stock. For a portfolio, market capitalization is the sum of the capitalization of each company weighted by the ratio of holdings in that company to total portfolio holdings; thus it is a weighted-average capitalization. Meketa Investment Group considers the largest 65% of the broad domestic equity market as large capitalization, the next 25% of the market as medium capitalization, and the smallest 10% of stocks as small capitalization.

Market Weighted: Stocks in many indices are weighted based on the total market capitalization of the issue. Thus, the individual returns of higher market-capitalization issues will more heavily influence an index’s return than the returns of the smaller market-capitalization issues in the index.

Maturity: The date on which a loan, bond, mortgage, or other debt/security becomes due and is to be paid off.

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Glossary


Prepayment Risk: The risk that prepayments will increase (homeowners will prepay all or part of their mortgage) when mortgage interest rates decline; hence, investors’ monies will be returned to them in a lower interest rate environment. Also, the risk that prepayments will slow down when mortgage interest rates rise; hence, investors will not have as much money as previously anticipated in a higher interest rate environment. A prepayment is any payment in excess of the scheduled mortgage payment.

Price-Book Value (P/B) Ratio: The current market price of a stock divided by its book value per share. Meketa Investment Group calculates P/B as the current price divided by Compustat's quarterly common equity. Common equity includes common stock, capital surplus, retained earnings, and treasury stock adjusted for both common and nonredeemable preferred stock. Similar to high P/E stocks, stocks with high P/B’s tend to be riskier investments.

Price-Earnings (P/E) Ratio: A stock’s market price divided by its current or estimated future earnings. Lower P/E ratios often characterize stocks in low growth or mature industries, stocks in groups that have fallen out of favor, or stocks of established blue chip companies with long records of stable earnings and regular dividends. Sometimes a company that has good fundamentals may be viewed unfavorably by the market if it is an industry that is temporarily out of favor. Or a business may have experienced financial problems causing investors to be skeptical about is future. Either of these situations would result in lower relative P/E ratios. Some stocks exhibit above-average sales and earnings growth or expectations for above average growth. Consequently, investors are willing to pay more for these companies’ earnings, which results in elevated P/E ratios. In other words, investors will pay more for shares of companies whose profits, in their opinion, are expected to increase faster than average. Because future events are in no way assured, high P/E stocks tend to be riskier and more volatile investments. Meketa Investment Group calculates P/E as the current price divided by the I/B/E/S consensus of twelve-month forecast earnings per share.

Quality Rating: The rank assigned a security by such rating services as Fitch, Moody’s, and Standard & Poor’s. The rating may be determined by such factors as (1) the likelihood of fulfillment of dividend, income, and principal payment of obligations; (2) the nature and provisions of the issue; and (3) the security’s relative position in the event of liquidation of the company. Bonds assigned the top four grades (AAA, AA, A, BBB) are considered investment grade because they are eligible bank investments as determined by the controller of the currency.

Sharpe Ratio: A commonly used measure of risk-adjusted return. It is calculated by subtracting the risk free return (usually three-month Treasury bill) from the portfolio return and dividing the resulting excess return by the portfolio’s total risk level (standard deviation). The result is a measure of return per unit of total risk taken. The higher the Sharpe ratio, the better the fund’s historical risk adjusted performance.

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Glossary


Standard Deviation: A measure of the total risk of an asset or a portfolio. Standard deviation measures the dispersion of a set of numbers around a central point (e.g., the average return). If the standard deviation is small, the distribution is concentrated within a narrow range of values. For a normal distribution, about two thirds of the observations will fall within one standard deviation of the mean, and 95% of the observations will fall within two standard deviations of the mean.

STIF Account: Short-term investment fund at a custodian bank that invests in cash-equivalent instruments. It is generally used to safely invest the excess cash held by portfolio managers.

Style: The description of the type of approach and strategy utilized by an investment manager to manage funds. For example, the style for equities is determined by portfolio characteristics such as price-to-book value, price-to-earnings ratio, and dividend yield. Equity styles include growth, value, and core.

Yield to Maturity: The yield, or return, provided by a bond to its maturity date; determined by a mathematical process, usually requiring the use of a “basis book.” For example, a 5% bond pays $5 a year interest on each $100 par value. To figure its current yield, divide $5 by $95—the market price of the bond—and you get 5.26%. Assume that the same bond is due to mature in five years. On the maturity date, the issuer is pledged to pay $100 for the bond that can be bought now for $95. In other words, the bond is selling at a discount of 5% below par value. To figure yield to maturity, a simple and approximate method is to divide 5% by the five years to maturity, which equals 1% pro rata yearly. Add that 1% to the 5.26% current yield, and the yield to maturity is roughly 6.26%.

5% (discount) =

1% pro rata, plus 5.26% (current yield)

= 6.26% (yield to maturity) 5 (yrs. to maturity)

Sources: Investment Terminology, International Foundation of Employee Benefit Plans, 1999. The Handbook of Fixed Income Securities, Fabozzi, Frank J., 1991.

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Notes


The Russell Indices®, TM, SM are trademarks/service marks of the Frank Russell Company.

Throughout this report, numbers may not sum due to rounding.

Returns for periods greater than one year are annualized throughout this report.

Values shown are in millions of dollars, unless noted otherwise.

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